<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-11156
NGC CORPORATION
(Exact name of registrant as specified in its charter)
AND EACH OF THE SUBSIDIARY GUARANTORS OF CERTAIN DEBT SECURITIES
DELAWARE 94-3248415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13430 NORTHWEST FREEWAY
HOUSTON, TEXAS 77040
(Address of principal executive offices)
(Zip Code)
(713) 507-6400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Number of shares outstanding of each of the issuer's classes of stock, as of the
latest practicable date: Common stock, $.01 par value per share, 149,802,332
shares outstanding as of November 12, 1996.
Page 1 of 29
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NGC CORPORATION
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets:
September 30, 1996 and December 31, 1995.................... 3
Condensed Consolidated Statements of Operations:
For the three months ended September 30, 1996 and 1995........ 4
For the nine months ended September 30, 1996 and 1995....... 5
Condensed Consolidated Statements of Cash Flows:
For the nine months ended September 30, 1996 and 1995....... 6
Notes to Condensed Consolidated Financial Statements.......... 7
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 23
Item 2. Changes in Securities................................ 23
Item 3. Not Applicable....................................... --
Item 4. Submission of Matters to a Vote of Security Holders.. 25
Item 5. Not Applicable....................................... --
Item 6. Exhibits and Reports on Form 8-K..................... 25
</TABLE>
Page 2 of 29
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 22,040 $ 16,266
Accounts receivable, net 704,591 562,278
Accounts receivable, affiliates 3,666 1,624
Inventories 210,277 74,263
Assets from risk management activities 78,934 88,093
Prepayments and other assets 15,866 20,415
---------- ----------
1,035,374 762,939
---------- ----------
PROPERTY, PLANT AND EQUIPMENT 1,771,326 1,013,354
Less: accumulated depreciation (105,581) (64,843)
---------- ----------
1,665,745 948,511
---------- ----------
OTHER ASSETS:
Investments in unconsolidated affiliates 134,484 62,370
Assets from risk management activities 83,219 26,380
Other assets 202,733 75,052
---------- ----------
$3,121,555 $1,875,252
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 701,039 $ 543,108
Accounts payable, affiliates 17,490 22,547
Accrued liabilities 113,209 58,736
Liabilities from risk management 65,299 81,283
activities ---------- ----------
897,037 705,674
LONG-TERM DEBT 770,494 522,764
OTHER LIABILITIES:
Liabilities from risk management 33,531 22,570
activities
Deferred income taxes 306,686 43,227
Other long-term liabilities 45,234 28,637
---------- ----------
2,052,982 1,322,872
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value,
50,000,000 shares authorized:
8,000,000 shares designated as Series 75,418 ---
A Participating Preferred Stock,
7,815,363 shares issued and
outstanding at September 30, 1996
Common stock, $0.01 par value,
300,000,000 shares authorized;
149,755,977 shares issued and
outstanding at September 30, 1996; 1,497 1,105
110,493,411 shares issued and
105,031,874 shares outstanding at
December 31, 1995
Additional paid-in capital 894,007 515,785
Retained earnings 97,651 35,490
---------- ----------
1,068,573 552,380
---------- ----------
$3,121,555 $1,875,252
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 29
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS,
EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
1996 1995
------------------- ----------
<S> <C> <C>
Revenues $1,495,482 $944,229
Cost of sales 1,413,171 887,266
---------- --------
Operating margin 82,311 56,963
Depreciation and amortization 17,496 12,828
General and administrative expenses 22,901 17,473
---------- --------
Operating income 41,914 26,662
Equity in earnings of unconsolidated
affiliates 4,298 6,616
Other income 1,021 512
Relocation costs (4,000) ---
Interest expense (10,539) (9,990)
Other expenses (840) (1,414)
---------- --------
Income before income taxes 31,854 22,386
Income tax provision 10,402 7,778
---------- --------
NET INCOME $ 21,452 $ 14,608
========== ========
NET INCOME PER SHARE:
Net income $ 21,452 $ 14,608
Less: preferred stock dividends 33 ---
---------- --------
Net income applicable to common
stockholders $ 21,419 $ 14,608
========== ========
Net income per common and common
equivalent share $0.16 $0.13
========== ========
Weighted average number of common and
common equivalent shares outstanding 135,637 117,264
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 29
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS,
EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
----------------- -----------
<S> <C> <C>
Revenues $4,305,756 $2,588,201
Cost of sales 4,081,368 2,456,353
---------- ----------
Operating margin 224,388 131,848
Depreciation and amortization 46,601 31,405
General and administrative expenses 63,514 49,328
---------- ----------
Operating income 114,273 51,115
Equity in earnings of unconsolidated
affiliates 16,956 15,779
Other income 3,615 2,009
Relocation costs (4,000) ---
Interest expense 30,317 (22,757)
Other expenses (4,828) (5,851)
Income before income taxes 95,699 40,295
Income tax provision (benefit) 30,081 (34,460)
---------- ----------
NET INCOME $ 65,618 $ 74,755
========== ==========
NET INCOME PER SHARE: PRO FORMA
Income before income taxes $ 95,699 $ 40,295
Income tax provision 30,081 13,449
---------- ----------
Net income 65,618 26,846
Less: preferred stock dividends 33 ---
---------- ----------
Net income applicable to common
stockholders $ 65,585 $ 26,846
========== ==========
Net income per common and common
equivalent share $0.53 $0.24
========== ==========
Weighted average number of common and
common equivalent shares outstanding 123,624 113,111
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 29
<PAGE>
NGC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
------------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 65,618 $ 74,755
Items not affecting cash flows from
operating activities:
Depreciation and amortization 48,101 31,405
Equity in earnings of affiliates, net (11,104) (7,202)
of cash distributions
Risk management activities (18,721) 1,550
Deferred income taxes 30,848 (34,221)
Amortization of bond premium (3,270) (2,238)
Other 5,038 2,915
Changes in assets and liabilities
resulting from operating activities:
Accounts receivable (144,151) 40,590
Inventories (61,270) (28,111)
Prepayments and other assets 4,549 (1,245)
Accounts payable 152,856 (24,287)
Accrued liabilities 24,580 17,230
Other, net (580) 1,975
--------- ---------
Net cash provided by operating 92,494 73,116
activities --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (63,995) (101,002)
Acquisition of Trident NGL Holding, --- (165,267)
Inc., net of cash acquired
Investment in unconsolidated 4,373 (17,385)
affiliates, net
Other, net 14,500 ---
--------- ---------
Net cash used in investing activities (45,122) (283,654)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 893,000 737,550
Repayments of long-term borrowings (930,687) (642,000)
Proceeds from sale of capital stock, 858 310
options and warrants
Capital contributions --- 135,000
Dividends and other distributions (4,769) (7,944)
--------- ---------
Net cash provided by (used in) (41,598) 222,916
financing activities --------- ---------
Net change in cash and cash equivalents 5,774 12,378
Cash and cash equivalents, beginning of 16,266 15,219
period --------- ---------
Cash and cash equivalents, end of period $ 22,040 $ 27,597
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 6 of 29
<PAGE>
NGC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission ("SEC"). These interim
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, as amended, for the year ended December 31, 1995, filed with the
SEC.
The financial statements include all material adjustments consisting only of
normal recurring adjustments which, in the opinion of management, were necessary
for a fair presentation of the results for the interim periods. Interim period
results are not necessarily indicative of the results for the full year. The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to develop
estimates and make assumptions that affect reported financial position and
results of operations and that impact the nature and extent of disclosure, if
any, of contingent assets and liabilities. Actual results could differ from
those estimates.
NOTE 2 -- ACQUISITION OF GAS MARKETING AND MIDSTREAM ASSETS
On August 31, 1996, NGC completed a strategic combination (the "Chevron
Combination") with Chevron U.S.A. Inc. and certain Chevron affiliates
("Chevron") pursuant to which Chevron contributed substantially all of its
midstream assets (the "Contribution"), including substantially all of the assets
comprising Warren Petroleum Company and Chevron's Natural Gas Business Unit and
an undivided interest in those assets that constitute the West Texas LPG
Pipeline, into Midstream Combination Corp. ("Midstream"), a Delaware corporation
formed for purposes of the transaction. NGC, which was formed effective March
1, 1995, pursuant to a strategic business combination between Natural Gas
Clearinghouse ("Clearinghouse") and Trident NGL Holding, Inc. was merged with
and into Midstream immediately following the Contribution and Midstream was
renamed NGC Corporation. In exchange for the Contribution, Chevron received
approximately 38.6 million shares of NGC common stock and approximately 7.8
million shares of NGC's Series A Participating Preferred Stock and NGC assumed
approximately $283 million of indebtedness. Immediately following closing of
the Chevron Combination, NGC paid approximately $128 million to Chevron and
funded such payment under its Credit Agreement. In connection with the Chevron
Combination, NGC and Chevron also entered into certain ancillary supply, sales
and service agreements with respect to natural gas, natural gas liquids and
electricity. Pursuant to these ancillary agreements, NGC has the right to,
among other things, purchase and/or market substantially all the natural gas and
natural gas liquids produced or controlled by Chevron in the United States
(except Alaska), to process substantially all of Chevron's processable United
States natural gas production in those geographic areas where it is economically
feasible for NGC to provide such service, to supply natural gas and feedstocks
to Chevron refineries and chemical plants in the United States and to
participate in existing and future opportunities to provide electricity to
Chevron's United States facilities as well as to purchase or market excess
electricity generated by those facilities. In connection with the Chevron
Combination, NGC has agreed with the Federal Trade Commission to divest its
ownership in one of three natural gas liquids fractionation facilities and to
relinquish operatorship at a second fractionation facility (NOTE 7 -- SUBSEQUENT
EVENTS).
The Chevron Combination was accounted for as an acquisition of assets under the
purchase method of accounting and the results of operations of NGC for the
three- and nine-months ended September 30, 1996, include the results of the
acquired assets effective September 1, 1996. The purchase price of
approximately $740 million inclusive of assumed indebtedness and transaction
costs, was allocated to the assets acquired and liabilities assumed based on
their estimated fair values as of September 1, 1996. NGC is assessing its
exposure to contingencies arising from the Chevron Combination which include,
among other things, litigation assumed by NGC and certain environmental issues
related to the acquired facilities. Further, NGC is analyzing potential
adjustments to the purchase price arising from the cash flow of the acquired
assets immediately prior to the effective date. Finally, the Company is in the
process of analyzing
Page 7 of 29
<PAGE>
NGC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
certain available strategic options to maximize plant
synergies occurring as a result of the Chevron Combination. Consequently, the
purchase price allocation as presented herein is considered preliminary.
Management believes that resolution of the aforementioned items will not
materially impact the purchase price allocation as presented herein.
NOTE 3 -- BUSINESS COMBINATION WITH TRIDENT NGL HOLDING, INC.
On March 14, 1995, Clearinghouse consummated a strategic business combination
(the "Trident Combination") with Trident NGL Holding, Inc. and the combined
entities were renamed NGC Corporation ("NGC" or the "Company"). The purchase
price of approximately $350 million, excluding transaction costs and liabilities
assumed, was allocated to the assets acquired and liabilities assumed based on
their estimated fair values as of March 1, 1995, the effective date of the
Trident Combination for accounting purposes. The Trident Combination was
accounted for under the purchase method of accounting and the results of
operations of Trident are included in the accompanying financial statements
effective March 1, 1995.
On February 29,1996, a determination was made with regard to the 5,461,538
contingent shares, representing shares of NGC stock to be issued to the former
owners of the partners of Clearinghouse ("Clearinghouse Owners") and the former
shareholders of Trident NGL Holding, Inc. ("Trident Shareholders") in accordance
with terms of the Trident Combination, and such shares were allocated in a ratio
of 17 percent to the Trident Shareholders and 83 percent to the Clearinghouse
Owners.
The following table reflects certain unaudited pro forma information for the
period presented as if the Trident Combination took place at the beginning of
1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPT. 30, 1995
--------------
<S> <C>
Pro forma revenues $2,667,125
==========
Pro forma net income $ 28,120
==========
Pro forma net income per share $ 0.24
==========
</TABLE>
In conjunction with the Chevron Combination, effective September 1, 1996, NGC
changed the name of Trident NGL, Inc., a wholly-owned subsidiary of NGC, to
Warren NGL, Inc. As a result, Trident NGL, Inc. is referred to throughout the
remainder of this document as "Warren NGL".
NOTE 4 -- EARNINGS PER SHARE
Net income per share is based on the weighted average number of common stock
shares outstanding plus the common stock equivalents that would arise from
conversion of the Series A Participating Preferred Shares outstanding and the
exercise of outstanding options or warrants, when dilutive. Primary and fully
diluted earnings per share are the same for all periods presented.
Pro forma income taxes reflected in the Condensed Consolidated Statement of
Operations for the nine-month period ended September 30, 1995, reflect the
incremental statutory federal and state income taxes that would have been
provided had Clearinghouse been a taxpaying entity during that period. Pro
forma net income per share is based on the weighted average number of shares of
common stock outstanding plus the common stock equivalents that would
Page 8 of 29
<PAGE>
NGC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
arise from the exercise of outstanding options or warrants, when dilutive. The
computations assume the Company was incorporated during the period presented and
gives effect to the terms of the Trident Combination.
Net income per common and common equivalent share based on reported net income
of $74.8 million for the nine-month period ended September 30, 1995, computed
using the weighted average shares outstanding for the period was $0.66 per
share. The pro forma net income per share amount of $0.24 reported in the
Condensed Consolidated Statement of Operations for the nine-months ended
September 30, 1995, reflects adjustments to reported net income for a non-
recurring deferred income tax benefit of $45.7 million recognized as a result of
the Trident Combination and the incremental pro forma statutory income tax
provision on Clearinghouse's pre-combination partnership income.
NOTE 5 -- UNCONSOLIDATED AFFILIATES
At September 30, 1996, NGC's investment in unconsolidated affiliates accounted
for by the equity method included: a 49.9 percent aggregate partnership interest
in Novagas Clearinghouse Ltd. ("NCL"), a Canadian limited partnership, a 49
percent interest in Accord Energy Limited ("Accord"), a United Kingdom limited
company, a 38.75 percent partnership interest in Gulf Coast Fractionators
("GCF"), an approximate 28 percent interest in Avoca Natural Gas Storage
("Avoca"), an approximate 25 percent interest in Cayuta Natural Gas Storage, an
approximate 25.5 percent interest in Quicktrade L.L.C., a 25 percent interest in
Midstream Barge Company, L.L.C. and a 49 percent partnership interest in West
Texas LPG Pipeline, Limited Partnership. Summarized unaudited combined income
statement information for these unconsolidated affiliates is presented in the
table below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1996 1995
------------------- -------------------
EQUITY EQUITY
TOTAL SHARE TOTAL SHARE
---------- --------- --------- ---------
($US IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues (1) $488,698 $236,769 $973,737 $480,726
======== ======== ======== ========
Operating margin (1) $ 78,525 $ 37,149 $ 55,452 $ 26,390
======== ======== ======== ========
Net income (1) $ 37,207 $ 16,956 $ 26,549 $ 15,779
======== ======== ======== ========
</TABLE>
- -----------------
(1) Includes GCF's operations from March 1, 1995 (effective date of the Trident
Combination) forward.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
APACHE ARBITRATION. On February 12, 1996, Apache Corporation ("Apache")
requested arbitration to resolve issues arising under a gas marketing contract
("Contract") with Clearinghouse pursuant to the arbitration provisions of such
Contract. On February 16, 1996, Clearinghouse responded by denying Apache's
claims and by alleging several counterclaims of its own with respect to Apache's
performance under the Contract. In connection with the arbitration proceedings,
on April 9, 1996, Apache filed a lawsuit against Clearinghouse in the 55th
Judicial District Court of Harris County, Texas ("Court"). In that lawsuit,
Apache alleges that Clearinghouse is intentionally delaying the progress of the
arbitration, and it requests relief, pursuant to the Texas General Arbitration
Act, in the form of an order appointing a third arbitrator, compelling discovery
and requiring Clearinghouse to assign certain contracts allegedly belonging to
Apache. Clearinghouse filed a response to the lawsuit on May 6, 1996, asking
that the Court dismiss Apache's application for relief or abate the suit pending
resolution of all matters by the arbitration panel according to the terms of the
Contract. Clearinghouse has also requested payment of all attorneys' fees and
other litigation expenses incurred in responding to and defending the suit. On
September 18, 1996, the arbitration panel
Page 9 of 29
<PAGE>
NGC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
granted a revised discovery schedule which moved the hearing previously
scheduled for December 1996 to April 7, 1997. In the arbitration and again in
the lawsuit, Apache claims that it is entitled to actual damages in an
undetermined amount in excess of $8 million, and punitive damages calculated by
tripling the amount of actual damages. Clearinghouse intends to vigorously
defend the Apache suit and the arbitration. NGC management believes, based on
its review of the facts and consultation with outside counsel, that the ultimate
resolution of the Apache suit will not have an adverse impact on the Company's
financial position or results of operations, and that any payments eventually
made in connection with the arbitration and/or the lawsuit will be substantially
less than the amount claimed.
AVOCA NATURAL GAS STORAGE PROJECT. On August 14, 1996, the Avoca Natural Gas
Storage Project announced that construction at the 5 billion cubic foot storage
facility had been temporarily suspended pending resolution of certain technical
issues associated with the project's brine disposal capability. NGC owns a 28
percent equity interest in this project. The project's partners have identified
several alternatives which tentatively appear to resolve the brine disposal
issue and further analysis of these alternatives by the partner group is
ongoing. NGC management believes that a viable solution to the technical issues
will be implemented and that the project will be operational by the fourth
quarter of 1998.
CANADIAN PRODUCERS CLAIM. On October 11, 1996, Pan-Alberta Gas Ltd. ("Pan-
Alberta"), a subsidiary of NCL, was named in a lawsuit filed in Alberta, Canada,
by a group of Canadian producers. The suit alleges that, since 1992, Pan-
Alberta has breached contractual, regulatory and fiduciary obligations that
resulted in the plaintiffs' being deprived of the best available prices for
their natural gas production. The suit asks for damages in an amount to be
determined at trial, punitive or exemplary damages of $5 million (in Canadian
dollars) and other costs. The plaintiffs' contend in the suit that actual
damages may exceed $50 million (in Canadian dollars). The lawsuit is in
discovery and, upon preliminary review, management believes the plaintiffs'
claims are without merit. The Company expects Pan-Alberta to vigorously defend
its position in the case and NGC's management does not expect the lawsuit to
ultimately have a material impact on NGC's results of operations or financial
position.
NOTE 7 -- SUBSEQUENT EVENTS
In October 1996, the Company agreed to sell its 80 percent interest in the Mont
Belvieu I fractionation facility to Koch Hydrocarbon Company ("Koch"), a
division of Koch Industries, Inc. The sale has an effective date of January 1,
1997, and the Company expects to recognize in the first quarter of 1997 an
approximate $4 million after-tax gain relating to the sale. The transaction with
Koch was entered into pursuant to an agreement reached by the Company with the
Federal Trade Commission ("FTC") related to the Chevron Combination and the sale
is subject to FTC approval. Management expects the FTC to approve the
transaction during the fourth quarter of 1996. In a matter related to the FTC
agreement, the Company has agreed to relinquish operatorship of the GCF
fractionation facility effective December 1, 1996. NGC will continue to retain
its 38.75 percent equity interest in GCF, the partnership which owns the
fractionator.
On October 15, 1996, the Company sold $175 million of 7 5/8 percent 30-year
Senior Debentures due October 15, 2026, pursuant to its $350 million shelf
registration. The Senior Debentures represent general unsecured obligations of
the Company and are equal in rank to NGC's existing senior debt. The Senior
Debentures are fully and unconditionally guaranteed, on a joint and several
basis, by a group of subsidiary guarantors, as defined in the indenture. The
aggregate assets, liabilities, earnings and equity of the subsidiary guarantors
is substantially equivalent to the Company's consolidated assets, liabilities,
earnings and equity. The Company also has direct and indirect subsidiaries that
are not subsidiary guarantors of the Senior Debentures. These non-guarantor
subsidiaries, both individually and in the aggregate, are inconsequential to NGC
as of and for each of the quarterly periods contained
Page 10 of 29
<PAGE>
NGC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
in this document. The net proceeds from the offering of approximately $172
million were used to retire debt outstanding under the Company's Credit
Agreement.
Page 11 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
The following discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements of NGC Corporation
included elsewhere herein and with the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 1995.
GENERAL
Company Profile
NGC is a leading North American marketer of natural gas, natural gas liquids,
crude oil and electric power and is engaged in natural gas gathering, processing
and transportation through ownership and operation of natural gas processing
plants, storage facilities and pipelines. Through joint ventures in both Canada
and the United Kingdom, the Company has expanded geographically its vision of
providing customers having multiple energy commodity needs with cost-effective
products and value-added services. Acting in the role of a large-scale
aggregator, processor, marketer and reliable supplier of multiple energy
products and services, NGC has evolved into a 'one-stop' energy commodity and
service provider.
NGC is a holding company that operates principally through its wholly-owned
subsidiaries. The Company has two primary business segments: the natural gas
and electric power marketing segment ("Marketing") and the natural gas liquids,
crude oil and gas transmission segment ("Liquids").
Recent Developments
On August 31, 1996, NGC completed the Chevron Combination pursuant to which NGC
acquired substantially all of Chevron's midstream assets, including
substantially all of the assets comprising Warren Petroleum Company and
Chevron's Natural Gas Business Unit and an undivided interest in those assets
that constitute the West Texas LPG Pipeline in exchange for approximately 38.6
million shares of NGC common stock, approximately 7.8 million shares of NGC's
Series A Participating Preferred Stock and the assumption by NGC of
approximately $283 million of indebtedness. Immediately following closing of
the Chevron Combination, NGC paid approximately $128 million to Chevron and
funded such payment under its Credit Agreement. In connection with the Chevron
Combination, NGC and Chevron also entered into certain ancillary supply, sales
and service agreements with respect to natural gas, natural gas liquids and
electricity. Pursuant to these ancillary agreements, NGC has the right to,
among other things, purchase and/or market substantially all the natural gas and
natural gas liquids produced or controlled by Chevron in the United States
(except Alaska), to process substantially all of Chevron's processable United
States natural gas production in those geographic areas where it is economically
feasible for NGC to provide such service, to supply natural gas and feedstocks
to Chevron refineries and chemical plants in the United States and to
participate in existing and future opportunities to provide electricity to
Chevron's United States facilities as well as to purchase or market excess
electricity generated by those facilities. The combination of NGC and the
assets acquired in the Chevron Combination make the combined company the leading
marketer of natural gas in North America, a leading producer of natural gas
liquids ("NGLs") in North America and the leading marketer of NGLs in North
America.
In October 1996, Chevron and Warren Petroleum Company, Limited Partnership
("Warren"), a wholly-owned subsidiary of NGC, signed a letter of intent to form
a new partnership to own, operate and expand Chevron's Venice Complex. The
Venice Complex, located 75 miles southeast of New Orleans, consists of an
offshore gathering system, a gas processing plant, a liquids fractionation
facility, an underground gas liquids storage facility and a multi-barge gas
liquids marine terminal. Under terms of the letter of intent, Warren will own
approximately one-third of the partnership interest and will retain operatorship
of the facility while assuming commercial responsibility for the facility's
business operations. Chevron will own the other two-thirds of the partnership
interest and will continue to be a major producer of supplies to the facility.
Subject to successful negotiation of a definitive partnership agreement, Chevron
and NGC expect to close the transaction by the end of 1996.
Page 12 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
As part of the terms of the letter of intent relating to the Venice Complex, the
partnership will immediately begin a capital expenditure program for the purpose
of adding additional gathering lines, expanding onshore compression and
condensate handling and constructing a new cryogenic unit which will expand the
gas processing plant's capacity to approximately 1.3 billion cubic feet per day.
Management believes, based on current estimates, that the cost of the expansion
will approximate $80 to $100 million over the next twelve months and such amount
will be funded by NGC through contributions to the partnership.
Also in October 1996, NGC and NOVA Corporation reached an agreement-in-principle
to restructure the operations of NCL, a jointly owned Canadian joint venture.
The reorganization of this joint venture will allow each company to effectively
pursue its respective core businesses in Canada. Under the agreement-in-
principle, NGC would assume full control of NCL's gas and gas liquids marketing
businesses. NGC and NOVA would each prosecute separate midstream asset
businesses in Canada, with NOVA assuming full ownership of NCL's existing
gathering and processing business. NOVA would own 100 percent of Pan-Alberta,
which is currently a subsidiary of NCL. Management anticipates that this
transaction will close during the first quarter of 1997. NGC will prosecute its
Canadian operations under the name NGC Canada, Inc.
On October 25, 1996, the Company announced that it had agreed to sell its 80
percent interest in the Mont Belvieu I fractionation facility to Koch. The sale
has an effective date of January 1, 1997, and the Company expects to recognize
an approximate $4 million after-tax gain relating to the sale in the first
quarter of 1997. The transaction with Koch was entered into pursuant to an
agreement reached by the Company with the FTC related to the Chevron Combination
and the sale is subject to FTC approval. Management expects the FTC to approve
the transaction during the fourth quarter of 1996. In a matter related to the
FTC agreement, the Company has agreed to relinquish operatorship of the GCF
fractionation facility effective December 1, 1996. NGC will continue to retain
its 38.75 percent equity interest in GCF, the partnership which owns the
fractionator.
Uncertainty of Forward-Looking Statements and Information
This quarterly report contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in this
document, words such as "anticipate", "estimate", "project", "believes" and
"expect" are intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, projected
or expected. Among the key factors that may have a direct bearing on NGC's
results of operations and financial condition are: (i) competitive practices in
the industries which NGC competes, (ii) fluctuations in energy commodity prices
which have not been hedged or which are inconsistent with NGC's open position,
if any, in its energy marketing activities, (iii) environmental liabilities to
which NGC may become subject in the future which are not covered by indemnity or
insurance, and (iv) the impact of current and future laws and governmental
regulations (particularly environmental regulations) affecting the energy
industry in general and NGC's operations in particular.
Page 13 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS
Provided below is a tabular presentation of certain domestic and international
operating and financial statistics for the Company's segments and subsegments
for the three- and nine-month periods ended September 30, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1996 (1) 1995 (1) 1996(1) 1995(1)
-------- -------- -------- --------
($ in millions)
<S> <C> <C> <C> <C>
Natural Gas and Electric Power Marketing Segment:
Operating Margin $ 19.4 $ 16.8 $ 73.8 $ 36.3
Natural Gas Marketing -
Average sales volume per day (Bcf/d) (2) 4.0 3.6 3.7 3.5
NGC's interest in operations of foreign equity investees (3) -
Average sales volume per day (Bcf/d) (4) 3.9 3.3 3.6 2.3
Electric Power Marketing -
Gross sales volumes (gigawatt hours) 3,957 1,185 8,515 2,083
Average megawatts per hour 1,792 537 1,295 318
Natural Gas Liquids, Crude Oil and Gas Transmission Segment:
Operating Margin $ 62.9 $ 40.1 $ 150.6 $ 95.5
Natural Gas Processing -
Operating margin $ 36.2 $ 21.3 $ 81.1 $ 55.2
Gross barrels processed (MBbls/d) 95.0 84.4 78.7 72.0
Net barrels processed (MBbls/d) 79.0 68.9 63.0 56.7
Fractionation (5) -
Operating margin $ 6.4 $ 5.2 $ 12.3 $ 11.8
Barrels received for fractionation (MBbls/d) 125.8 133.3 115.7 103.8
Liquids and Crude Oil Marketing -
Operating margin $ 16.6 $ 7.5 $ 43.3 $ 15.4
NGL Marketing - sales volumes (MBbls/d) 232.3 140.3 179.7 110.0
Crude Oil Marketing - sales volumes (MBbls/d) 94.9 72.7 100.2 56.0
Transmission and Other -
Operating margin $ 3.7 $ 6.1 $ 13.9 $ 13.1
- ---------------
</TABLE>
(1) The Trident Combination was accounted for under the purchase method of
accounting and the results of operations of Warren NGL are included in the
accompanying financial statements and in these operating statistics
effective March 1, 1995. The Chevron Combination was accounted for as an
acquisition of assets under the purchase method of accounting and the
results of operations attributed to the acquired assets are included in the
accompanying financial statements and in these operating statistics
effective September 1, 1996.
(2) Includes 0.1 and 0.2 Bcf/d in inter-company gas sales for the three-month
periods ended September 30, 1996 and 1995, and 0.1 Bcf/d in intercompany gas
sales for both nine-month periods ended September 30, 1996 and 1995,
respectively.
(3) Includes NCL and Accord.
(4) Includes 0.2 and 0.3 Bcf/d of inter-affiliate gas sales for the three-month
periods ended September 30, 1996 and 1995, respectively, and 0.3 Bcf/d in
both of the nine-month periods ended September 30, 1996 and 1995.
(5) Information excludes the Company's proportionate share of GCF's margin and
fractionation volumes.
THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
For the quarter ended September 30, 1996, NGC realized net income of $21.5
million, or $0.16 per share, which includes a $2.5 million after-tax charge
related to costs associated with the Company's relocation to its new
headquarters in downtown Houston, Texas. Normalized results, which exclude the
aforementioned charge, reflected
Page 14 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
net income of $24.0 million, or $0.18 per share, on total revenue of $1.5
billion compared with third quarter 1995 net income of $14.6 million, or $0.13
per share, on revenue of $944.2 million. The 64 percent increase in normalized
net income period to period reflects the contribution to NGC's financial results
of the assets acquired from Chevron accompanied by an improved pricing
environment for natural gas liquids and crude oil in the 1996 period and
increased sales volumes in principally all of the Company's lines of business.
Consolidated operating margin for the third quarter of 1996 totaled $82.3
million, a $25.3 million increase over the $57.0 million reported in the
corresponding 1995 period. Marketing contributed $19.4 million to the
consolidated margin, an improvement of $2.6 million over the third quarter 1995
margin of $16.8 million; whereas, Liquids contributed $62.9 million to the
consolidated margin compared with $40.1 million in the 1995 quarter. Operating
income totaled $41.9 million in the third quarter of 1996 compared with $26.7
million in the comparable 1995 period, an increase of $15.2 million, reflecting
the aforementioned increase in consolidated operating margin offset by increases
in both depreciation and amortization and general and administrative expenses.
The increase in depreciation and amortization expense results principally from
the continued expansion of the Company's depreciable asset base resulting from
acquisitions and capital projects completed during the four quarters in the
period ended September 30, 1996. The increased level of general and
administrative expenses resulted principally from the incremental effect of
increased overhead required to support the previously mentioned growth.
NGC's quarterly results include the Company's equity share in the earnings of
its unconsolidated affiliates which contributed an aggregate $4.3 million to
third quarter 1996 pre-tax income compared with $6.6 million in the 1995 period.
NGC's investment in its foreign joint venture affiliates, NCL and Accord,
contributed $3.2 million to 1996 earnings compared with $5.7 million in 1995.
The lower equity earnings accruing to NGC from its foreign joint venture
affiliates was primarily attributed to Accord which realized higher margins from
its marketing activities in 1995 as compared with 1996 as a result of
significant commodity price volatility in the 1995 period which allowed Accord
to extract higher margins from its gas marketing operations. The impact of the
margin differential, period to period, was partly offset by higher Accord sales
volumes in the 1996. Management expects NGC's share of Accord's fourth quarter
1996 earnings to equal or exceed 1995 amounts. Combined, the foreign joint
venture affiliates averaged 3.9 Bcf/d of gas sales during the 1996 quarter, an
increase of 0.6 Bcf/d over the average daily sales volume reported in the third
quarter of 1995. NGC's other equity investments contributed approximately $1
million to equity earnings in both periods.
Interest expense totaled $10.5 million for the quarter ended September 30, 1996,
compared with $10.0 million for the equivalent 1995 period. The increase of
$0.5 million is principally attributed to the debt assumed by NGC as part of the
Chevron Combination and the impact on interest expense of variable rates on
certain indebtedness of the Company.
The Company recognized a non-recurring charge of $4.0 million in the 1996
quarter associated with the relocation of the Company's headquarters to downtown
Houston, Texas. Otherwise, other income and expense did not materially impact
results period to period.
The Company reported an income tax provision of $10.4 million for the three-
month period ended September 30, 1996, representing an effective rate of 33
percent, which compared with an income tax provision of $7.8 million and an
effective rate of 35 percent for the equivalent 1995 period. Differences
between the aforementioned effective rates and the statutory rate of 37 percent
for each of the three-month periods ended September 30, 1996 and 1995,
respectively, include permanent differences and the effect of certain foreign
equity investments.
Page 15 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
NATURAL GAS AND ELECTRIC POWER MARKETING
Marketing's operating margin for the three-month period ended September 30,
1996, totaled $19.4 million compared with $16.8 million in the same 1995 period.
The $2.6 million improvement in the segment's operating margin was primarily a
result of increased volumes period to period as margins remained virtually flat.
Domestic gas volumes sold totaled 4.0 Bcf/d in the 1996 period as compared with
3.6 Bcf/d in the same 1995 period. Management believes that sales volumes in the
fourth quarter of 1996 will exceed volumes sold during the same 1995 period as
the full impact of the Chevron Combination will be realized during the 1996
quarter.
For the quarter ended September 30, 1996, ECI reported sales volumes of 4.0
million megawatt hours which compares with third quarter 1995 sales volumes of
1.2 million megawatt hours. Daily volumes increased three times, totaling 1,792
megawatts per hour, compared with 537 megawatts per hour during the third
quarter of 1995. ECI is continuing to pursue opportunities to broaden its
domestic marketing of electric power.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
Liquids reported a third quarter 1996 operating margin of $62.9 million,
representing an increase of $22.8 million over the same 1995 period. Key
factors behind the improved operating results include increased sales volumes in
virtually all of the segments' businesses and a significantly improved pricing
environment in the 1996 period as compared with the same period in 1995. The
addition of the Chevron assets for one month of operations in the 1996 quarter
was a contributing factor to the increased volume for the 1996 period. For
example, the Company's field and straddle facilities processed 95.0 thousand
barrels a day in the third quarter of 1996, an increase of 10.6 thousand barrels
a day from the 84.4 thousand barrels processed in the same 1995 period and NGL
liquids sales volumes increased 66 percent this quarter totalling 232.3 thousand
barrels per day in the quarter. Consistent with quarterly periods since the
second quarter of 1995, Liquids' operating margin was negatively impacted by
higher third-party fractionation fees, resulting principally from the August
1995 closure of the Lake Charles, Louisiana fractionator. For the quarter ended
September 30, 1996, volumes received for fractionation decreased slightly from
133.3 thousand barrels in 1995 to 125.8 thousand barrels due principally to the
timing of the closure of the Lake Charles fractionator in 1995 offset by the
inclusion in the 1996 quarter of one month of operations of the fractionator
acquired in the Chevron Combination. Crude oil marketing sales volumes were 31
percent higher in the 1996 period, resulting principally from an expanding
business which was largely unaffected by the Chevron Combination.
The impact of the Chevron Combination on Liquids' operating statistics was more
clearly evident when comparing September 1996 with September 1995 operating
data. For example, gas processing volumes improved 67 percent in September 1996
as compared with September 1995, fractionation volumes were 36 percent higher in
the month of September 1996 as compared with the same 1995 period and NGL
marketing sales volumes increased 143 percent period to period. Management
anticipates that sales volumes will exceed fourth quarter 1995 volumes as the
full impact of the Chevron Combination will be realized during the 1996 quarter.
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
For the nine-month period ended September 30, 1996, NGC realized normalized net
income of $68.1 million, or $0.55 per share, on total revenue of $4.3 billion
compared with normalized 1995 net income for the same period of $29.1 million,
or $0.26 per share, on total revenue of $2.6 billion. Normalized results for
1996 are exclusive of the non-
Page 16 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the Interim Periods Ended September 30, 1996 and 1995
recurring relocation charge of $2.5 million, or $0.02 per share, and 1995
normalized results are exclusive of the non-recurring income tax benefit of
$45.7 million, or $0.40 per share, related to the Trident Combination. Cash
flows from operating activities for 1996 increased to $92.5 million,
representing a $19.4 million increase on a period to period comparison.
Increases in both pretax income and operating cash flow are principally a result
of stronger margins generated by the extremely cold temperatures during the
first three months of 1996 which increased the demand for energy products and
premium services during that period, increased sales volumes resulting partly
from the incremental affect of the assets acquired from Chevron and partly from
the assets acquired in the Trident Combination and the improved pricing
environment in which the Company operated during the third quarter of 1996.
Consolidated operating margin totaled $224.4 million for the nine-months ended
September 30, 1996, compared with $131.8 million in the corresponding 1995
period, reflecting significant improvement in both the Marketing and Liquids
segments. Marketing contributed $73.8 million to the consolidated margin, an
improvement of $37.5 million over the operating margin reported in the same 1995
period. Likewise, Liquids improved its operating margin by $55.1 million,
contributing $150.6 million to the consolidated margin in the 1996 period.
Operating income was $114.3 million in the first nine months of 1996 compared
with $51.1 million for the equivalent 1995 period, an increase of $63.2 million,
reflecting the aforementioned increase in consolidated operating margin offset
by increases in both depreciation and amortization and general and
administrative expenses. Increased depreciation and amortization expense in
1996 results principally from the inclusion of Warren NGL's operations for the
entire 1996 period as opposed to only seven months in 1995 combined with the
expansion of the Company's depreciable asset base resulting from the acquisition
of the Chevron assets, other strategic acquisitions completed during the four
quarters in the period ended September 30, 1996 and capital improvements at
existing facilities. Higher general and administrative expenses resulted from
the aggregate incremental effect of the Trident Combination and the Chevron
Combination, increased overhead required to support NGC's growth during the
twelve months in the period ended September 30, 1996 and higher variable
compensation costs in 1996 as opposed to the comparable 1995 period.
NGC's nine-month results include the Company's equity share in the earnings of
its unconsolidated affiliates which contributed an aggregate $17.0 million to
year-to-date 1996 pre-tax income compared with $15.8 million for the same 1995
period. NGC's investment in its foreign joint venture affiliates, NCL and
Accord, contributed $13.9 million to equity earnings in 1996 which is comparable
to the $14.5 million accruing to NGC's interests during the first nine-months of
1995. Combined, the foreign joint venture affiliates averaged 3.6 Bcf/d of gas
sales during the 1996 period, an increase of 1.3 Bcf/d over the average sales
volume reported in the first nine-months of 1995. The 57 percent increase in
volumes sold is primarily attributed to NCL and Accord's substantial growth over
the past year and NCL's acquisition of Pan-Alberta in June 1995. The remaining
$3.1 million of 1996 equity earnings result principally from the Company's
investment in GCF, which was acquired by NGC in the Trident Combination.
Interest expense increased $7.5 million to $30.3 million for the nine-month
period ended September 30, 1996, compared with $22.8 million in the equivalent
1995 period. The increase is reflective of higher outstanding debt balances
resulting principally from debt assumed in conjunction with the Trident
Combination, which amounts were outstanding for the entire 1996 period as
opposed to only seven-months in 1995, the debt assumed as part of the Chevron
Combination which was outstanding for one month in the 1996 period and
borrowings for capital expenditures and investments in unconsolidated
affiliates. The Company benefitted in the first nine-months of 1996 from lower
average interest rates applicable to its Credit Agreement.
Page 17 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
The Company reported an income tax provision of $30.1 million on pre-tax income
of $95.7 million for the nine-month period ended September 30, 1996, an
effective rate of 31 percent. The difference between the 1996 effective rate
and the statutory rate of 37 percent is a result of an $0.8 million foreign tax
refund, permanent differences and certain foreign equity investments. In
comparison, for the nine-month period ended September 30, 1995, the Company
recognized an income tax benefit of $34.5 million on pre-tax income of $40.3
million. During the first quarter of 1995, the Company recognized a $45.7
million income tax benefit in connection with the Trident Combination. The
income tax benefit was a result of the recognition of the excess tax basis held
by certain Clearinghouse partners which can be used to reduce NGC's future
income tax liabilities. The nine-month 1995 tax provision totaled $11.2
million, exclusive of the effect of the one-time benefit, resulting in an
effective rate of 28 percent. Differences between the nine-month 1995 effective
rate and the statutory rate are attributed to pre-combination earnings of
Clearinghouse which were predominantly taxed as partnership income and the
previously mentioned permanent differences and foreign equity investments.
NATURAL GAS AND ELECTRIC POWER MARKETING
Marketing's operating margin of $73.8 million for the first nine-months of 1996
reflected both higher sales volumes and improved physical gas sales margins as
compared with the equivalent 1995 period. The improved natural gas marketing
operating results were primarily a result of the extremely cold temperatures
that blanketed much of North America during the first quarter of 1996 which
created high energy demand, a volatile pricing environment during the first
quarter of 1996 which resulted in increased demand for premium services provided
by the Company and the affect of the additional volumes acquired as a result of
the Chevron Combination. Domestic gas volumes sold increased 0.2 Bcf/d to 3.7
Bcf/d in the first nine-months of 1996 as compared with 3.5 Bcf/d in the same
1995 period.
For the nine-months ended September 30, 1996, ECI reported sales volumes of 8.5
million megawatt hours which compares with 2.1 million megawatt hours for the
same 1995 period. Daily volumes increased four times on average, totaling 1,295
megawatts per hour in 1996, compared with 318 megawatts per hour in 1995.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
Liquids reported a nine-month 1996 operating margin of $150.6 million reflecting
improvement in substantially all of the segment's businesses. The earnings
improvement is attributed to a number of factors including: (i) the acquisition
of the Chevron assets and the resultant increased sales volumes; (ii) the
acquisition of Warren NGL and the synergies realized from that merger; (iii) the
acquisition and efficient utilization of other assets such as the Ozark Gas
Transmission System and a crude oil pipeline acquired from Kerr-McGee; (iv)
improved margins in principally all of the Company's processing and marketing
operations; and (v) significantly higher crude oil marketing sales volumes and
improved sales margins period to period.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Page 18 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
NGC has historically relied upon operating cash flow and borrowings under its
credit facilities for its liquidity and capital resource requirements. As a
result of the Company's continued positive operating results, combined with the
liquidity and flexibility provided by available funds under its credit
facilities, the Company believes it will be able to meet all foreseeable cash
requirements, including working capital, capital expenditures and debt service.
OPERATING CASH FLOW
The Company's cash flow from operating activities differs from reported net
income principally as a result of adjustments for non-cash items and changes in
working capital resulting from operating activities. The increase in operating
cash flow during the first nine-months of 1996 as compared with the comparable
1995 period is principally a result of improved pre-tax earnings in 1996 and the
impact of the timing of cash receipts and payments between periods offset by
decreased cash flow in 1996 as compared with 1995 resulting from an increase in
inventories. The following describes generally the impact working capital
changes may have on the Company's operating cash flow period to period.
ACCOUNTS RECEIVABLE. Generally, the level of NGC's accounts receivable is
impacted primarily by sales volumes and prices. Given the impact of seasonal
demand factors on the Company's sales volumes and the prices of natural gas,
NGLs and crude oil, NGC's accounts receivable are typically higher in the winter
months than during the balance of the year.
INVENTORIES. The Company maintains a base level of inventory and will have
varying levels of natural gas, NGL and crude oil inventories throughout the year
due to seasonal demand and other factors. Generally, discretionary volumes are
acquired during the summer months and sold during the winter months and a
significant portion of the Company's discretionary product inventories held as
of a year-end are expected to be sold during the first quarter of the following
year. Discretionary inventory volume accumulations allow the Company to capture
peak deliverability opportunities and to take advantage of expected seasonal
price differentials. Material and supplies inventory, used primarily at the
Company's processing plants and fractionation facilities, typically turn over
more slowly than product inventory volumes.
ACCOUNTS PAYABLE. The level of the Company's trade accounts payable will
generally follow in tandem with the level of trade accounts receivable as
purchased volumes and product prices will typically fluctuate directionally with
sales volumes and prices.
OTHER WORKING CAPITAL ACCOUNTS. Other working capital accounts, which include
prepayments, other current assets and accrued liabilities, reflect expenditures
or recognition of liabilities for insurance costs, certain deposits, salaries,
taxes other than on income, certain deferred revenue accounts and other similar
items. Fluctuations in these accounts from period to period reflect changes in
facts or changes in the timing of payments or recognition of liabilities and are
not directly impacted by seasonal factors.
THE CHEVRON COMBINATION
As compensation for the assets acquired in the Chevron Combination , NGC
contributed approximately 38.6 million shares of its common stock and
approximately 7.8 million shares of its Series A Participating Preferred Stock
to Chevron and assumed approximately $283 million of debt. Immediately following
consummation of the transaction, NGC paid approximately $128 million to Chevron
and funded such payment under its Credit Agreement. As a result of the Chevron
Combination, British Gas plc, a United Kingdom company ("British Gas"), NOVA
Corporation, an
Page 19 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Alberta, Canada company ("NOVA") and Chevron each own approximately 25 percent
of the outstanding common stock of NGC.
CAPITAL EXPENDITURES, COMMITMENTS AND DIVIDEND REQUIREMENTS
The Company's business strategy has been to grow horizontally across all sectors
of the midstream energy business segment through strategic acquisitions or
construction of core operating facilities in order to capture the significant
synergies which management believes exist among these types of assets and NGC's
natural gas, electric power and NGL marketing businesses.
During the first nine months of 1996, the Company spent $64.0 million
principally on acquisitions of additional interests in gas processing
facilities, the acquisition of certain strategic businesses and on capital
improvements at existing facilities. During the period, the Company received a
$4.6 million payment from an unconsolidated affiliate representing reimbursement
of funds previously advanced to the entity. Additionally, during the period,
NGC received a $14.5 million payment from a third party representing partial
payment for certain contracts related to a processing plant.
During the first nine-months of 1995, the Company spent an aggregate $283.7
million principally for the acquisition of Warren NGL and certain pipeline
assets, other capital improvements and the contribution to NCL necessary to fund
its acquisition of Pan-Alberta. Approximately $165.3 million, exclusive of
transaction related costs, was required to consummate the tender offer related
to the Trident Combination. These funds were provided by British Gas, NOVA and
Clearinghouse. Specifically, British Gas and NOVA each contributed $67.5
million to their respective subsidiaries that participated in the Trident
Combination and Clearinghouse provided $31.9 million to fund the balance.
Clearinghouse funded the $31.9 million and certain other costs associated with
the Trident Combination through a combination of cash on hand and $25.0 million
in borrowings under its then existing credit agreement.
NGC currently declares an annual dividend of $0.05 per common share payable in
quarterly installments. During the nine-months ended September 30, 1996, the
Company paid $5.5 million in cash dividends. Prior to the Combination,
Clearinghouse made distributions primarily to enable Clearinghouse's partners to
pay tax liabilities incurred as a result of Clearinghouse generated income which
was taken into account by the Clearinghouse Owners in computing their separate
income tax liabilities. During the first nine-months of 1996, the Company
received $0.7 million from the Clearinghouse Owners related to tax advances made
by the Company prior to the Combination in amounts in excess of actual tax
liabilities. During the first nine-months of 1995, dividends and distributions
totalled $7.9 million.
CREDIT AGREEMENT
On March 14, 1995, the Company entered into the NGC Corporation Credit Agreement
("Credit Agreement"), which established a five-year $550 million revolving
credit facility. The Credit Agreement provides for letters of credit (up to
$150 million) and borrowings for working capital, capital expenditures and
general corporate purposes of up to $550 million in the aggregate. The $550
million commitment under the Credit Agreement reduces by $22.5 million each
quarter beginning in March 1998 and continuing through maturity. Generally,
borrowings under the Credit Agreement bear interest at a Eurodollar rate plus a
margin that is determined based on the Company's unsecured senior debt rating.
At September 30, 1996, such margin was 0.3 percent and the average interest rate
applicable to borrowings under the Credit Agreement approximated 6.0 percent.
The Company also incurs a commitment fee on the unused portion of the commitment
under the Credit Agreement. The fee is determined based on the Company's
unsecured debt rating and at September 30, 1996, such fee approximated 0.1
percent. During the first quarter of 1995, NGC
Page 20 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
entered into arrangements with financial institutions that effectively capped
the base Eurodollar rate on $100 million of borrowings at certain rates through
January 1998. The Credit Agreement contains certain financial covenants which
require the Company to meet certain financial position and performance tests. At
September 30, 1996, letters of credit and borrowings outstanding under the
Credit Agreement aggregated $288.4 million and unused borrowing capacity under
the Credit Agreement approximated $261.6 million. Certain amendments were made
to the Credit Agreement to accommodate the Chevron transaction.
LETTER OF CREDIT AGREEMENT
On September 1, 1996, the Company entered into a new credit agreement (the
"Letter of Credit Agreement"), which established a 364-day, $300 million letter
of credit facility. The Letter of Credit Agreement provides for the issuance of
letters of credit in support of the Company's obligation to purchase
substantially all of the natural gas produced or controlled by Chevron in the
United States (except Alaska). The Company incurs a fee which is determined
based on the Company's unsecured senior debt rating on all issued and
outstanding letters of credit under the Letter of Credit Agreement. At
September 30, 1996, such fee was 0.3 percent and letters of credit outstanding
totaled $158.3 million resulting in $141.7 million of unused capacity under the
terms of the Letter of Credit Agreement. The Company also incurs a commitment
fee on the unused portion of the commitment under the Letter of Credit
Agreement. The fee is determined based on the Company's unsecured debt rating
and at September 30, 1996, such fee was 0.06 percent per annum. The Letter of
Credit Agreement contains certain financial covenants which require the Company
to meet certain financial position and performance tests. In general, these
financial covenants are identical to those contained in the Credit Agreement.
$150 MILLION OF SENIOR NOTES
The Company has issued $150 million of 6.75% Senior Notes ("Notes") with
interest payable semiannually on June 15 and December 15 of each year, beginning
June 15, 1996. The Notes represent general unsecured obligations of the Company
and are fully and unconditionally guaranteed on a joint and several basis by
certain of the Company's wholly-owned subsidiaries ("Subsidiary Guarantors").
Upon issuance, the Notes were priced based on the then existing yield for 10-
year U.S. Treasury Notes ("Base Treasury Rate") plus a spread based principally
on the Company's credit rating. Prior to issuing the Notes, the Company entered
into two separate transactions with two separate financial institutions, the
effect of which was to lock in the Base Treasury Rate at approximately 6.2
percent on the full $150 million face value of the Notes.
Separate financial statements of each Subsidiary Guarantor have not been
provided herein because management has determined that such information would
not be material to investors as the aggregate assets, liabilities, earnings and
equity of the Subsidiary Guarantors is substantially equivalent to the Company's
consolidated assets, liabilities, earnings and equity. The Company also has
direct and indirect subsidiaries that are not Subsidiary Guarantors
(collectively "Non-guarantor Subsidiaries"). These Non-guarantor Subsidiaries,
both individually and in the aggregate, are inconsequential to NGC as of and for
each of the quarterly periods contained in this document.
$175 MILLION OF SENIOR DEBENTURES
In October 1996, NGC sold $175 million of 7.625% 30-year Senior Debentures and
utilized the net proceeds from the sale of such Debentures to repay outstanding
indebtedness under its Revolving Credit Facility. The Senior Debentures
represent general unsecured obligations of the Company and are fully and
unconditionally guaranteed, on a joint and several basis by certain of the
Company's wholly-owned subsidiaries, as defined in the indenture. The
Page 21 of 29
<PAGE>
NGC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
aggregate assets, liabilities, earnings and equity of the subsidiary guarantors
which guarantee the Senior Debentures is substantially equivalent to the
Company's consolidated assets, liabilities, earnings and equity. The Company
also has direct and indirect subsidiaries that are not subsidiary guarantors of
the Senior Debentures. These non-guarantor subsidiaries, both individually and
in the aggregate, are inconsequential to NGC as of and for each of the quarterly
periods contained in this document.
Upon issuance, the Senior Debentures were priced based on the then existing
yield for 30-year U.S. Treasury Notes plus a spread based principally on the
Company's credit rating. Prior to issuing the Debentures, the Company entered
into a transaction, the effect of which was to lock in the Base Treasury Rate at
approximately 7.0 percent on $150 million of the $175 million face value of the
Debentures.
WARREN NGL NOTES
At September 30, 1996, Warren NGL had outstanding $105 million principal amount
of 10.25% Subordinated Notes due 2003 and $65 million principal amount of 14%
Senior Subordinated Notes due 2001, with interest payable semi-annually on both
notes. Beginning in 1998, corresponding with the first call dates, the Company
may repurchase the Subordinated Notes and Senior Subordinated Notes at 104.5
percent and 107 percent of the principal amount, respectively, with such
reacquisition prices reducing as the notes mature. The indentures covering the
Subordinated Notes and Senior Subordinated Notes contain covenants that, among
other things, require Warren NGL to meet certain financial tests; limit the
amount of investments, dividends and asset sales that can be made by Warren NGL;
and restrict the ability of Warren NGL and its subsidiaries to incur additional
indebtedness, create or permit liens and engage in certain transactions.
Although Warren NGL's net assets at September 30, 1996, approximated $365
million, management does not believe that the terms of the indentures materially
restrict the ability of Warren NGL to transfer funds to the Company given that
Warren NGL is a Subsidiary Guarantor combined with the level of advances made by
NGC to Warren NGL. The unamortized premium balance associated with each of the
Subordinated Notes and Senior Subordinated Notes represents a fair value
adjustment to the aggregate principal balance of the notes recognized as part of
the Trident Combination. The unamortized premium balance of $15.8 million at
September 30, 1996, is being amortized using the interest method.
Page 22 of 29
<PAGE>
NGC CORPORATION
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On February 12, 1996, Apache Corporation ("Apache") requested arbitration to
resolve issues arising under a gas marketing contract ("Contract") with
Clearinghouse pursuant to the arbitration provisions of such Contract. On
February 16, 1996, Clearinghouse responded by denying Apache's claims and by
alleging several counterclaims of its own with respect to Apache's performance
under the Contract. In connection with the arbitration proceedings, on April 9,
1996, Apache filed a lawsuit against Clearinghouse in the 55th Judicial District
Court of Harris County, Texas ("Court"). In that lawsuit, Apache alleges that
Clearinghouse is intentionally delaying the progress of the arbitration, and it
requests relief, pursuant to the Texas General Arbitration Act, in the form of
an order appointing a third arbitrator, compelling discovery and requiring
Clearinghouse to assign certain contracts allegedly belonging to Apache.
Clearinghouse filed a response to the lawsuit on May 6, 1996, asking that the
Court dismiss Apache's application for relief or abate the suit pending
resolution of all matters by the arbitration panel according to the terms of the
Contract. Clearinghouse has also requested payment of all attorneys' fees and
other litigation expenses incurred in responding to and defending the suit. On
September 18, 1996, the arbitration panel granted a revised discovery schedule
which moved the hearing previously scheduled for December 1996 to April 7,
1997. In the arbitration and again in the lawsuit, Apache claims that it is
entitled to actual damages in an undetermined amount in excess of $8 million,
and punitive damages calculated by tripling the amount of actual damages.
Clearinghouse intends to vigorously defend the Apache suit and the arbitration.
NGC management believes, based on its review of the facts and consultation with
outside counsel, that the ultimate resolution of the Apache suit will not have
an adverse impact on the Company's financial position or results of operations,
and that any payments eventually made in connection with the arbitration and/or
the lawsuit will be substantially less than the amount claimed.
ITEM 2 - CHANGES IN SECURITIES
In connection with the Chevron Combination, the Company adopted a new
Certificate of Incorporation and Bylaws. The following provides a summary
description of the material differences in rights of NGC stockholders under the
former NGC Certificate of Incorporation and Bylaws as compared with the rights
of NGC stockholders under the NGC Certificate of Incorporation and the NGC
Bylaws adopted in connection with the Chevron Combination. See Exhibits 3.1 and
3.2 to this Form 10-Q for copies of the NGC Certificate of Incorporation and the
NGC Bylaws, respectively.
CERTIFICATE OF INCORPORATION
Authorized Capital Stock. The former NGC Certificate of Incorporation
authorized the NGC Board of Directors to issue up to 300,000,000 shares of NGC
Common Stock and up to 50,000,000 shares of NGC Preferred Stock in one or more
series with such voting powers and designations, preferences, limitations and
relative rights as may be designated by the NGC Board of Directors. The new NGC
Certificate of Incorporation authorizes the NGC Board of Directors to issue up
to 400,000,000 shares of NGC Common Stock and up to 50,000,000 shares of NGC
Preferred Stock. Further, the new NGC Certificate of Incorporation provides the
terms of the Series A Participating Preferred Stock.
Preferred Stock. The new NGC Certificate of Incorporation authorizes a total of
50,000,000 shares of preferred stock which the NGC Board of Directors may,
without further action by NGC's stockholders, from time to time, issue in one or
more series and may, at the time of issuance, determine the powers, rights,
preferences and limitations of any such series. Of the 50,000,000 shares of
preferred stock available for issuance, the new NGC Certificate of Incorporation
authorized the issuance of 8,000,000 shares of NGC Series A Participating
Preferred Stock. The issuance of shares of Series A Participating Preferred
Stock in connection with the Chevron Combination has certain effects on the
rights of holders of NGC Common Stock. Subject to certain anti-dilutive
adjustments in the event of reclassification of NGC Common Stock, the holders of
the NGC Series A Participating Preferred Stock shall be entitled to receive
dividends or distributions equal per share in amount and kind to any dividend or
distribution payable on shares of NGC Common Stock, when and as the same are
declared by the NGC Board of Directors out of any funds
Page 23 of 29
<PAGE>
legally available therefor and paid to the holders of NGC Common Stock, and no
dividend may be declared and paid on NGC Common Stock unless an identical
dividend or distribution is declared and paid concurrently on NGC Series A
Participating Preferred Stock.
In the event of any liquidation, dissolution or winding up of NGC, whether
voluntary or involuntary, no distribution shall be made to the holders of NGC
Common Stock or any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the NGC Series A Participating
Preferred Stock unless, prior thereto, the holders of the NGC Series A Preferred
Stock shall have received $1.00 per share.
At the option of the holder, each share of NGC Series A Participating Preferred
Stock may be converted, subject to certain adjustments, into one share of NGC
Common Stock (i) (a) in order to avoid dilution of the holder's percentage
ownership of the issued NGC Common Stock, provided that, with respect to
dilution resulting from the issuance of additional compensatory options as
approved by a supermajority of the NGC Board of Directors (provided Chevron
designees sit on the NGC Board of Directors), the holder would have no such
conversion right so long as its ownership of NGC Common Stock would still be
greater than 20% of the NGC Common Stock, or (b) to maintain a percentage
ownership of the issued NGC Common Stock at least equal to that of the then
largest other stockholder of NGC; (ii) if any entity other than the holder or an
affiliate of the holder makes a tender offer for NGC Common Stock and the holder
tenders the shares of the NGC Series A Participating Preferred Stock in the same
proportion as it tenders NGC Common Stock; (iii) upon approval by the
Stockholders of any merger or recapitalization proposal in which the NGC Series
A Participating Preferred Stock would be treated differently than NGC Common
Stock, and (iv) upon approval by the NGC stockholders of any (a) sale of all or
substantially all of the assets of NGC or (b) liquidation, dissolution or
winding up of NGC.
As of November 12, 1996, 149,802,332 and 7,815,363 shares of NGC Common Stock
and NGC Series A Participating Preferred Stock, respectively, were issued and
outstanding.
Restrictions on Business Activities. Under the new NGC Certificate of
Incorporation, stockholders must generally give their consent before NGC can
effect a sale of petroleum products (other than natural gas) intended for
consumption or resale in certain parts of Africa, most of Asia, Australia and
other areas of the Pacific west of the International Date Line. The vote
required to give such consent is 85% of the outstanding shares of NGC Common
Stock; provided, however, that NGC may conduct such activities if permitted
under the terms of the Scope of Business Agreement executed in connection with
the Chevron Combination. Under NGC's former Certificate of Incorporation, NGC
was entitled to engage in any type of business permitted under Delaware law.
BYLAWS
Number of Directors. The former NGC Certificate of Incorporation provided, and
the new NGC Certificate of Incorporation provides, that the number of directors
serving on the board of directors shall be fixed by, or in the manner provided
in, the former bylaws of NGC or the new bylaws of NGC, as the case may be. The
former NGC Bylaws provided that the number of directors comprising the NGC Board
of Directors would be ten. Furthermore, the Clearinghouse Owners stockholders
agreement provided that the Clearinghouse Owners would cause the NGC Board of
Directors at all times to consist of ten directors and also contained certain
other agreements of the Clearinghouse Owners with respect to the election and
removal of eight of the ten directors.
The new NGC Bylaws provide that the number of directors comprising the NGC Board
of Directors shall be 13. Furthermore, upon consummation of the Chevron
Combination, the Clearinghouse Owners stockholders agreement was terminated and
the new NGC Stockholders Agreement became effective. This agreement contains
certain agreements of BG Holding, Inc., NOVA Gas Services (U.S.), Inc. and
Chevron U.S.A. Inc. with respect to the election and removal of the 13
directors.
Vote Required for Certain Board of Director Approval. The former NGC Bylaws
provided that NGC was not permitted to take (or permit to be taken in its
capacity as a shareholder or partner or otherwise permit any of its subsidiaries
to take) certain specified actions unless approved by the affirmative vote of at
least eight directors. These actions included, among other things, (i) any
merger, consolidation or liquidation of NGC or any subsidiary or any
Page 24 of 29
<PAGE>
purchase or other acquisition of any NGC Common Stock; (ii) any sale of all or
substantially all of the assets of NGC; (iii) approving any amendment to the NGC
Certificate of Incorporation; (iv) NGC or any subsidiary entering into any line
of business that neither NGC nor any subsidiary was engaged in at the
effective time of the Trident Combination; (v) NGC or any subsidiary paying any
dividend or otherwise making any distribution to any person; (vi) NGC or any
subsidiary issuing any stock or other security or ownership interests to any
person; and (vii) NGC or any subsidiary (A) making, or committing to make, any
payment in excess of $5 million per transaction or contract (or series of
related transactions or contracts), whether as or in connection with a capital
expenditure, asset purchase, investment, rental, settlement, equity
contribution, loan, guaranty or otherwise, (B) borrowing any amount in excess of
$5 million per transaction or contract ( or series of related transactions or
contracts), (C) disposing of or otherwise transferring any assets (or related
assets) whose fair market value exceeds $5 million or (D) entering into any
contract or transaction (or series of contracts or transactions) pursuant to
which NGC or any of its subsidiaries will receive more than $5 million.
Notwithstanding the foregoing, if one or more directors gave written notice that
they intended to abstain or recuse from a vote on a matter that was subject to
such supermajority board approval because such director believed that he may
have had an interest in such matter, then such action may have been approved by
the affirmative vote of such number of directors equal to eight less that number
of directors that had given such notice. In addition, with respect to matters
involving more than $5 million but less than $20 million, other than the
issuance of stock or other ownership interests and the payment of dividends or
other distributions, such actions need not have been approved by the NGC Board
of Directors if approved by the unanimous vote of the Executive Committee.
The new NGC Bylaws contain a parallel provision that is almost identical to the
one in the former NGC Bylaws, with the following exceptions: (i) the actions
enumerated above must be approved by 11 instead of eight directors and (ii) the
thresholds have been increased from $5 million and $20 million to $10 million
and $25 million, respectively.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting (the "Special Meeting") of the stockholders of NGC was held on
August 30, 1996. The purpose of the Special Meeting was to consider and vote
upon the proposal to approve and adopt the Combination Agreement and Plan of
Merger, dated as of August 30, 1996, among NGC Corporation, Chevron U.S.A. Inc.
and its wholly-owned subsidiary, Midstream Combination Corp.
The following votes were cast with respect to the approval and adoption of the
Combination Agreement and Plan of Merger:
For: 103,082,485
Against/Withheld: 15,817
Abstentions: 4,886
Broker non-votes: 0
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following instruments and documents are included as exhibits to this
Form 10-Q.
Exhibit
Number Description
- -------- -----------
2.1 Combination Agreement and Plan of Merger, dated October 21, 1994,
among Trident NGL Holding, Inc., Natural Gas Clearinghouse, British
Gas General Partner Inc., British Gas Limited Partner Inc., British
Gas NGC L.P., NOVA NGC, Inc., Participating Employee Partners, C. L.
Watson, Inc., Stephen W. Bergstrom, Inc., Gilbert Burciaga, Inc., A.
R. Cipriani, Jr., Inc., David C. Feldman, Inc., James T. Hackett,
Inc., H. Keith Kaelber, Inc., Kenneth E. Randolph, Inc., Donald R.
Sinclair, Inc. and Jacob S. Ulrich, Inc. (1)
2.2 Combination Agreement and Plan of Merger, dated May 22, 1996, by and
between NGC Corporation, Chevron U.S.A. Inc. and Midstream Combination
Corp.(3)
Page 25 of 29
<PAGE>
+2.3 Amendment to Combination Agreement, dated as of August 29, 1996, by
and among NGC Corporation, Chevron U.S.A Inc. and Midstream
Combination Corp.
+3.1 Certificate of Incorporation of NGC Corporation.
+3.2 Bylaws of NGC Corporation
+4.1 Consent and Second Amendment to Credit Agreement, dated as of July
26, 1996, among NGC Corporation and The First National Bank of
Chicago, individually and as agent, The Chase Manhattan Bank National
Association and NationsBank of Texas, N.A., individually and as co-
agent, and certain other lenders named therein.
+4.2 Letter of Credit Facility Agreement, dated as of September 1, 1996,
by and among NGC Corporation and Canadian Imperial Bank of Commerce,
Individually and as Agent, and the Lenders named therein.
4.3 Indenture, dated as of December 11, 1995, by and among NGC
Corporation, Subsidiary Guarantors named therein and The First
National Bank of Chicago, as Trustee.(2)
+4.4 First Supplemental Indenture, dated as of August 31, 1996, by and
among NGC Corporation, Midstream Combination Corp., Subsidiary
Guarantors named therein and The First National Bank of Chicago, as
Trustee, supplementing and amending the Indenture dated as of December
11, 1995.
+4.5 Second Supplemental Indenture, dated as of October 11, 1996, by and
among NGC Corporation, Electric Clearinghouse, Inc. and The First
National Bank of Chicago, as Trustee, supplementing and amending the
Indenture dated as of December 11, 1995.
4.6 Indenture, dated September 26, 1996, among NGC Corporation, the
Subsidiary Guarantors named therein and The First National Bank of
Chicago, as Trustee.(5)
4.7 Form of 7-5/8 % Senior Debenture due October 15, 2026.(5)
+10.1 Contribution and Assumption Agreement, dated as of August 31, 1996,
among Chevron U.S.A. Inc., Chevron Pipe Line Company, Chevron Chemical
Company and Midstream Combination Corp.
10.2 Scope of Business Agreement dated May 22, 1996 between Chevron
Corporation and NGC Corporation.(4)
10.3 Stockholders Agreement, dated May 22, 1996, among BG Holdings, Inc.,
NOVA Gas Services (U.S.) Inc. and Chevron U.S.A. Inc.(4)
+10.4 Registration Rights Agreement, dated as of August 31, 1996, among
NGC Corporation, BG Holdings, Inc., NOVA Gas Services (U.S.) Inc. and
Chevron U.S.A. Inc.
+10.5 Master Alliance Agreement, dated as of September 1, 1996, among
Chevron U.S.A. Inc., Chevron Chemical Company, Chevron Pipe Line
Company, and other Chevron U.S.A. Inc. affiliates, NGC Corporation,
Natural Gas Clearinghouse, Warren Petroleum Company, Limited
Partnership, Electric Clearinghouse, Inc. and other NGC Corporation
Affiliates.
*+10.6 Natural Gas Purchase and Sale Agreement, dated as of August 30,
1996, among Chevron U.S.A. Inc. and Natural Gas Clearinghouse.
*+10.7 Master Natural Gas Processing Agreement, dated as of September 1,
1996, among Chevron U.S.A. Inc. and Warren Petroleum Company, Limited
Partnership.
*+10.8 Master Natural Gas Liquid Purchase Agreement, dated as of September
1, 1996, among Warren Petroleum Company, Limited Partnership and
Chevron U.S.A. Inc.
*+10.9 Gas Supply and Service Agreement, dated as of September 1, 1996,
among Chevron Products Company and Natural Gas Clearinghouse.
10.10 Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron U.S.A. Production Company.(4)
10.11 Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Chemical Company.(4)
10.12 Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Products Company.(4)
*+10.13 Feedstock Sale and Refinery Product Purchase Agreements, dated as of
September 1, 1996, among Chevron Products Company and Warren Petroleum
Company, Limited Partnership.
*+10.14 Refinery Product Sale Agreement (Hawaii), dated as of September 1,
1996, among Warren Petroleum Company, Limited Partnership and Chevron
Products Company.
*+10.15 Feedstock Sale and Refinery Product Master Services Agreement, dated
as of September 1, 1996, among Chevron Products Company and Warren
Petroleum, Company Limited Partnership.
Page 26 of 29
<PAGE>
*+10.16 CCC Product Sale and Purchase Agreement dated as of September 1,
1996, among Warren Petroleum Company, Limited Partnership and Chevron
Chemical Company.
*+10.17 CCC/WPC Services Agreement, dated as of September 1, 1996, among
Chevron Chemical Company and Warren Petroleum Company, Limited
Partnership.
*+10.18 Operating Agreement, dated as of September 1, 1996, among Warren
Petroleum Company, Limited Partnership and Chevron Pipe Line Company.
+10.19 Galena Park Services Agreement, dated as of September 1, 1996, among
Chevron Products Company and Midstream Combination Corp.
*10.20 Venice Complex Operating Agreement, dated as of September 1, 1996,
among Chevron U.S.A. Inc. and Warren Petroleum Company, Limited
Partnership.(4)
*10.21 Product Storage Lease and Terminal Access Agreement, dated as of
September 1, 1996, among Chevron U.S.A. Inc. and Warren Petroleum
Company, Limited Partnership.(4)
+10.22 Lone Star Swap Transaction Confirmation Term Sheet, dated as of
September 1, 1996, among Chevron U.S.A. Inc. and NGC Corporation.
*+10.23 West Texas LPG Pipeline Limited Partnership Agreement, dated as of
September 1, 1996, by and between Chevron Pipe Line Company, or an
affiliate thereof, and an affiliate of NGC Corporation.
*+10.24 West Texas LPG Pipeline Operating Agreement, dated as of September
1, 1996, by and between Chevron Pipe Line Company, or an affiliate
thereof, and the West Texas LPG Pipeline Partnership.
*+10.25 Time Charter, dated as of August 31, 1996, by and between Midstream
Barge Company, L.L.C. and Warren Petroleum Company, Limited
Partnership.
*+10.26 Limited Liability Company Agreement of Midstream Barge Company,
L.L.C., dated as of August 31, 1996, by and between Chevron U.S.A.
Inc. and Warren Petroleum Company, Limited Partnership.
- ----------------
+ Filed herewith.
* Exhibit omits certain information which the Company has filed separately with
the Commission pursuant to a confidential treatment request pursuant to Rule
406 promulgated under the Securities Act of 1933, as amended.
(1) Incorporated by reference to exhibits to the Current Report on Form 8-K of
Trident NGL Holding, Inc., Commission File No. 1-11156, dated October 21,
1994.
(2) Incorporated by reference to exhibits to the Registration Statement of NGC
Corporation on Form S-3, Registration No. 33-97368.
(3) Incorporated by reference to exhibits to the Current Report on Form 8-K of
NGC Corporation, dated May 22, 1996, Commission File No. 1-11156.
(4) Incorporated by reference to exhibits to the Registration Statement of
Midstream Combination Corp. on Form S-4, Registration No. 333-09419.
(5) Incorporated by reference to exhibits to the Current Report on Form 8-K of
NGC Corporation, dated October 16, 1996, Commission File No. 1-11156.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1996:
Current Report on Form 8-K, Commission File No. 1-11156, dated July 26, 1996,
relating to the announcement of 1996 second quarter results by NGC
Corporation.
Page 27 of 29
<PAGE>
Current Report on Form 8-K, Commission File No. 1-11156, dated August 21,
1996, relating to the execution of an agreement by NGC Corporation ("NGC")
with the staff of the Federal Trade Commission concerning NGC's divestiture of
its interests in certain fractionation assets.
Current Report on Form 8-K, Commission File No. 1-11156, dated August 31,
1996, relating to the consummation of the Chevron Combination.
Page 28 of 29
<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 and thereunto duly authorized.
NGC CORPORATION
Date: November 13, 1996 By: /s/ H. KEITH KAELBER
----------------- ---------------------
H. Keith Kaelber,
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Page 29 of 29
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
<C> <S> <C>
2.1 Combination Agreement and Plan of Merger, dated October 21, 1994, among
Trident NGL Holding, Inc., Natural Gas Clearinghouse, British Gas
General Partner Inc., British Gas Limited Partner Inc., British Gas NGC
L.P., NOVA NGC, Inc., Participating Employee Partners, C. L. Watson,
Inc., Stephen W. Bergstrom, Inc., Gilbert Burciaga, Inc., A. R.
Cipriani, Jr., Inc., David C. Feldman, Inc., James T. Hackett, Inc., H.
Keith Kaelber, Inc., Kenneth E. Randolph, Inc., Donald R. Sinclair, Inc.
and Jacob S. Ulrich, Inc. (1)
2.2 Combination Agreement and Plan of Merger, dated May 22, 1996, by and
between NGC Corporation, Chevron U.S.A. Inc. and Midstream Combination
Corp.(3)
+2.3 Amendment to Combination Agreement, dated as of August 29, 1996, by
and among NGC Corporation, Chevron U.S.A Inc. and Midstream Combination
Corp.
+3.1 Certificate of Incorporation of NGC Corporation.
+3.2 Bylaws of NGC Corporation.
+4.1 Consent and Second Amendment to Credit Agreement, dated as of July
26, 1996, among NGC Corporation and The First National Bank of Chicago,
individually and as agent, The Chase Manhattan Bank National Association
and NationsBank of Texas, N.A., individually and as co-agent, and
certain other lenders named therein.
+4.2 Letter of Credit Facility Agreement, dated as of September 1, 1996,
by and among NGC Corporation and Canadian Imperial Bank of Commerce,
Individually and as Agent, and the Lenders named therein.
4.3 Indenture, dated as of December 11, 1995, by and among NGC
Corporation, Subsidiary Guarantors named therein and The First National
Bank of Chicago, as Trustee.(2)
+4.4 First Supplemental Indenture, dated as of August 31, 1996, by and
among NGC Corporation, Midstream Combination Corp., Subsidiary
Guarantors named therein and The First National Bank of Chicago, as
Trustee, supplementing and amending the Indenture dated as of December
11, 1995.
+4.5 Second Supplemental Indenture, dated as of October 11, 1996, by and
among NGC Corporation, Electric Clearinghouse, Inc. and The First
National Bank of Chicago, as Trustee, supplementing and amending the
Indenture dated as of December 11, 1995.
</TABLE>
<PAGE>
4.6 Indenture, dated September 26, 1996, among NGC Corporation, The
Subsidiary Guarantors named therein and The First National Bank of
Chicago, as Trustee.(5)
4.7 Form of 7 5/8% Senior Debenture due October 15, 2026.(5)
+10.1 Contribution and Assumption Agreement, dated as of August 31, 1996,
among Chevron U.S.A. Inc., Chevron Pipe Line Company, Chevron Chemical
Company and Midstream Combination Corp.
10.2 Scope of Business Agreement dated May 22, 1996 between Chevron
Corporation and NGC Corporation.(4)
10.3 Stockholders Agreement, dated May 22, 1996, among BG Holdings, Inc.,
NOVA Gas Services (U.S.) Inc. and Chevron U.S.A. Inc.(4)
+10.4 Registration Rights Agreement, dated as of August 31, 1996, among NGC
Corporation, BG Holdings, Inc., NOVA Gas Services (U.S.) Inc. and
Chevron U.S.A. Inc.
+10.5 Master Alliance Agreement, dated as of September 1, 1996, among
Chevron U.S.A. Inc., Chevron Chemical Company, Chevron Pipe Line
Company, and other Chevron U.S.A. Inc. affiliates, NGC Corporation,
Natural Gas Clearinghouse, Warren Petroleum Company, Limited
Partnership, Electric Clearinghouse, Inc. and other NGC Corporation
Affiliates.
*+10.6 Natural Gas Purchase and Sale Agreement, dated as of August 30, 1996,
among Chevron U.S.A. Inc. and Natural Gas Clearinghouse.
*+10.7 Master Natural Gas Processing Agreement, dated as of September 1,
1996, among Chevron U.S.A. Inc. and Warren Petroleum Company, Limited
Partnership.
*+10.8 Master Natural Gas Liquid Purchase Agreement, dated as of September
1, 1996, among Warren Petroleum Company, Limited Partnership and Chevron
U.S.A. Inc.
*+10.9 Gas Supply and Service Agreement, dated as of September 1, 1996,
among Chevron Products Company and Natural Gas Clearinghouse.
10.10 Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron U.S.A. Production Company.(4)
10.11 Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Chemical Company.(4)
10.12 Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Products Company.(4)
*+10.13 Feedstock Sale and Refinery Product Purchase Agreement dated as of
September 1, 1996, among Chevron Products Company and Warren Petroleum
Company, Limited Partnership.
*+10.14 Refinery Product Sale Agreement (Hawaii), dated as of September 1,
1996, among Warren Petroleum Company, Limited Partnership and Chevron
Products Company.
<PAGE>
*+10.15 Feedstock Sale and Refinery Product Master Services Agreement, dated
as of September 1, 1996, among Chevron Products Company and Warren
Petroleum, Company Limited Partnership.
*+10.16 CCC Product Sale and Purchase Agreement dated as of September 1,
1996, among Warren Petroleum Company, Limited Partnership and Chevron
Chemical Company.
*+10.17 CCC/WPC Services Agreement, dated as of September 1, 1996, among
Chevron Chemical Company and Warren Petroleum Company, Limited
Partnership.
*+10.18 Operating Agreement, dated as of September 1, 1996, among Warren
Petroleum Company, Limited Partnership and Chevron Pipe Line Company.
+10.19 Galena Park Services Agreement, dated as of September 1, 1996, among
Chevron Products Company and Midstream Combination Corp.
*10.20 Venice Complex Operating Agreement, dated as of September 1, 1996,
among Chevron U.S.A. Inc. and Warren Petroleum Company, Limited
Partnership.(4)
*10.21 Product Storage Lease and Terminal Access Agreement, dated as of
September 1, 1996, among Chevron U.S.A. Inc. and Warren Petroleum
Company, Limited Partnership.(4)
+10.22 Lone Star Swap Transaction Confirmation Term Sheet, dated as of
September 1, 1996, among Chevron U.S.A. Inc. and NGC Corporation.
*+10.23 West Texas LPG Pipeline Limited Partnership Agreement, dated as of
September 1, 1996, by and between Chevron Pipe Line Company, or an
affiliate thereof, and an affiliate of NGC Corporation.
*+10.24 West Texas LPG Pipeline Operating Agreement, dated as of September 1,
1996, by and between Chevron Pipe Line Company, or an affiliate thereof,
and the West Texas LPG Pipeline Partnership.
*+10.25 Time Charter, dated as of August 31, 1996, by and between Midstream
Barge Company, L.L.C. and Warren Petroleum Company, Limited Partnership.
*+10.26 Limited Liability Company Agreement of Midstream Barge Company,
L.L.C., dated as of August 31, 1996, by and between Chevron U.S.A. Inc.
and Warren Petroleum Company, Limited Partnership.
- ------------------
+ Filed herewith.
* Exhibit omits certain information which the Company has filed separately with
the Commission pursuant to a confidential treatment request pursuant to Rule
406 promulgated under the Securities Act of 1933, as amended.
(1) Incorporated by reference to exhibits to the Current Report on Form 8-K of
Trident NGL Holding, Inc., Commission File No. 1-11156, dated October 21,
1994.
<PAGE>
(2) Incorporated by reference to exhibits to the Registration Statement of
NGC Corporation on Form S-3, Registration No. 33-97368.
(3) Incorporated by reference to exhibits to the Current Report on Form
8-K of NGC Corporation, dated May 22, 1996, Commission File No. 1-11156.
(4) Incorporated by reference to exhibits to the Registration Statement of
Midstream Combination Corp. on Form S-4, Registration No. 333-09419.
(5) Incorporated by reference to exhibits to the Current Report on Form
8-K of NGC Corporation, dated October 16, 1996, Commission File No.
1-11156.
<PAGE>
EXHIBIT 2.3
AMENDMENT
TO
COMBINATION AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO COMBINATION AGREEMENT AND PLAN OF MERGER, dated as of
August 29, 1996 (this "Agreement") is by and among NGC Corporation, a Delaware
corporation ("NGC"), Chevron U.S.A. Inc., a Pennsylvania corporation ("Chevron")
and Midstream Combination Corp., a Delaware corporation ("Newco").
WITNESSETH
WHEREAS, NGC, Chevron and Newco are parties to the Combination Agreement
and Plan of Merger, dated as of May 22, 1996 (the "Combination Agreement") which
provides for the strategic combination of NGC and substantially all of Chevron's
and certain of its affiliates' midstream assets and certain other strategic
relationships;
NOW THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the receipt and adequacy of which are hereby expressly
acknowledged, the parties hereto hereby agree as follows:
1. Capitalized terms used herein but not otherwise defined shall have the
meanings ascribed to them in the Combination Agreement.
2. Amendment to Section 2.1. Section 2.1 is deleted in its entirety and
the following new Section 2.1 is inserted in lieu thereof:
2.1 Contribution of Assets and Assumption of Liabilities. At the
Closing and immediately prior to the Effective Time (as defined herein),
Newco and the Contributing Parties will execute and deliver the
Contribution and Assumption Agreement in the form of Exhibit 2.1 hereto,
pursuant to which the Contributing Parties will contribute the Contributed
Businesses and the Contributed West Texas LPG Pipeline Business to Newco in
exchange for (A) the issuance to Chevron of 38,623,210 shares of Newco
Common Stock and 7,815,363 shares of Series A Participating Preferred
Stock, (B) the assumption by Newco of the Assumed Liabilities, including
the assumption by Newco of the Assumed Indebtedness in the amount of
$155.373 million (subject to adjustment as provided in Section 2.3); and
(C) the issuance of a promissory note to the Contributing Parties in a
principal amount of $134.457 million (the amount of which reflects the
changes set forth in Schedule 2.1(C) hereof) and in the form of Exhibit
2.1(C) hereto (the "Newco Note"), subject to adjustment as provided in
Section 2.3. The consideration to be received by the Contributing Parties
as described in this Section 2.1 is hereinafter called the "Consideration."
3. Amendment to Section 2.2(a). Paragraph (a) of Section 2.2 is deleted
in its entirety and the following new paragraph (a) of Section 2.2 is inserted
in lieu thereof:
<PAGE>
(a) Subject to the terms and conditions of this Agreement, a
certificate of merger in the form of Exhibit 2.2(a) (the "Certificate
of Merger") shall be duly prepared, executed and acknowledged by Newco,
which will be the Surviving Corporation in the Merger, and thereafter
delivered to the Secretary of State of the State of Delaware for
filing, as provided in the DGCL, as soon as practicable after NGC
stockholder approval of the Combination. The Merger shall become
effective on the date and at the time specified in the Certificate of
Merger (the "Effective Time").
4. Amendment to Section 2.3(h)(i)(B). Section 2.3(h)(i)(B) is amended to
substitute $921,865 for $952,865 (the agreed monthly adjustment for the cash
flow from the Non-Warren Businesses).
5. Amendment to Contribution and Assumption Agreement. The Contribution
and Assumption Agreement, attached to the Combination Agreement as Exhibit 2.1,
is deleted in its entirety and the Contribution and Assumption Agreement
attached hereto as Exhibit 2.1 is inserted in lieu thereof.
6. Amendment to Certificate of Merger. The Certificate of Merger,
attached to the Combination Agreement as Exhibit 2.2(a), is deleted in its
entirety and the Certificate of Merger attached hereto as Exhibit 2.2(a) is
inserted in lieu thereof.
7. Schedules. The Schedules set forth on Exhibit 6 to this Amendment
which were attached to the Combination Agreement on May 22, 1996 are hereby
deleted in their entirety and the applicable Schedules attached to Exhibit 6 to
this Amendment are inserted in lieu thereof and shall become, for all purposes,
the applicable Schedules to the Combination Agreement.
8. Waiver. With respect to the consent from The Alabama Great Southern
Railroad (the "Specified Consent"), Chevron does not presently believe that it
will be able to obtain such Specified Consent prior to the Closing, but does
believe that it will obtain such Specified Consent subsequent to the Closing.
NGC has agreed to waive its rights under Section 12.3(e) of the Combination
Agreement and to effect the Combination notwithstanding the absence of such
Specified Consent with respect to the assets affected by the Specified Consent
(the "Affected Assets"), subject to the following:
(a) During the period commencing on the Closing Date and continuing
through the date on which the Preliminary Adjustment Schedule is due
pursuant to Section 15.3 of the Combination Agreement (the "Consent
Period"), Chevron shall use its best efforts to obtain the Specified
Consent. In the event that Chevron is able to obtain the Specified Consent
during the Consent Period on terms and conditions reasonably acceptable to
Surviving Corporation or to transfer reasonably equivalent economic value
therefor that is reasonably acceptable to the Surviving Corporation, then
Chevron shall execute any supplemental conveyances as may be required, but
no further action with respect to such Specified Consent shall be required.
In the event that Chevron is unable to obtain any
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<PAGE>
such Specified Consent during the Consent Period, then the Affected Assets
shall be deemed to be a Retained Asset (and Surviving Corporation shall
promptly execute whatever reconveyance of such Affected Asset to Chevron as
may be necessary, employing the same forms of conveyance employed in the
transfer thereof to Newco), and it shall be deemed for all purposes
relevant to the Combination Agreement and the Contribution Agreement as if
such Affected Asset had constituted a Retained Asset as of the Closing and
had never been conveyed to Newco.
(b) From and after the reconveyance of the Affected Asset to Chevron,
such Affected Asset shall be deemed to be a Retained Asset within the
meaning of the Combination Agreement and subject to all applicable
provisions thereof relating to Retained Assets (including specifically, but
without limitation, Sections 2.4, 15.4 and 15.5.
The parties hereto acknowledge and agree that the waiver granted by NGC above
shall not waive any other non-compliance with the terms and conditions of the
Combination Agreement not authorized herein nor shall this Section 8 alter or
modify any other right or obligation contained in the Combination Agreement not
expressly altered or modified herein.
9. Closing Date. In accordance with Section 3.1(B) of the Combination
Agreement, the parties hereby agree that the Closing Date shall be August 31,
1996.
10. Continued Effectiveness. Except as expressly modified by this
Agreement, the provisions of the Combination Agreement shall remain in full
force and effect.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when taken together, shall be deemed to constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to Combination
Agreement and Plan of Merger to be executed this 29th day of August, 1996.
NGC CORPORATION
By:____________________________________
Printed Name:__________________________
Title:_________________________________
CHEVRON U.S.A. INC.
By:____________________________________
Printed Name:__________________________
Title:_________________________________
MIDSTREAM COMBINATION CORP.
By:____________________________________
Printed Name:__________________________
Title:_________________________________
-4-
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF MERGER
MERGING
NGC CORPORATION
WITH AND INTO
MIDSTREAM COMBINATION CORP.
PURSUANT TO SECTION 251 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The undersigned, being President of Midstream Combination Corp., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That the name of and the state of incorporation of each of the
constituent corporations in the merger is as follows:
STATE OF
NAME INCORPORATION
- ---- -------------
Midstream Combination Corp. Delaware
NGC Corporation Delaware
SECOND: That the Combination Agreement and Plan of Merger dated
as of May 22, 1996 (the "Combination Agreement"), among NGC Corporation, Chevron
U.S.A. Inc. and Midstream Combination Corp. has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with Section 251 and Section 228 (by unanimous written consent) of
the General Corporation Law of the State of Delaware.
THIRD: That Midstream Combination Corp. shall be the surviving
corporation, except that the name of the surviving corporation is hereby changed
to NGC Corporation (the "Surviving Corporation").
FOURTH: That the Certificate of Incorporation of Midstream Combination
Corp. will be the Certificate of Incorporation of the Surviving Corporation
except that Article First of the Certificate of Incorporation of the Surviving
Corporation will be amended by virtue of the Merger to provide that "The name of
the corporation is NGC Corporation (the "Corporation")."
FIFTH: That an executed copy of the Combination Agreement is on file at
the principal place of business of the Surviving Corporation at the following
address:
13430 Northwest Freeway, Suite 1200
Houston, TX 77040
1
<PAGE>
SIXTH: That a copy of the Combination Agreement will be furnished by the
Surviving Corporation, on request, and without cost, to any stockholder of any
constituent corporation.
SEVENTH: The Merger shall become effective for all purposes at 11:59 p.m.,
Houston, Texas time, on August 31, 1996 (the "Effective Time").
[The remainder of this page is intentionally left blank.]
2
<PAGE>
IN WITNESS WHEREOF, Midstream Combination Corp. has caused this Certificate
of Merger to be signed by David R. Dunn, President, this 29th day of August,
1996.
MIDSTREAM COMBINATION CORP.
________________________________
David R. Dunn
President
3
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
MIDSTREAM COMBINATION CORP.
FIRST: The name of the corporation is MIDSTREAM COMBINATION CORP. (the
"Corporation").
SECOND: The registered office of the Corporation in the State of Delaware
is located at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH:
A. Capital Stock. The total number of shares of stock which the
Corporation shall have authority to issue is 450,000,000 shares, divided into
two classes as follows: (i) 50,000,000 shares of Preferred Stock, par value
$0.01 per share ("Preferred Stock"); and (ii) 400,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and the Common Stock of
the Corporation are as follows:
B. Provisions Relating to the Preferred Stock.
1. The Preferred Stock may be issued from time to time in one or more
series, the shares of each series to have such designations and powers,
preferences, and rights, and qualifications, limitations, and restrictions
thereof as are stated and expressed herein and in the resolution or resolutions
providing for the issuance of such series adopted by the board of directors of
the Corporation as hereafter prescribed.
2. Authority is hereby expressly granted to and vested in the board
of directors of the Corporation to authorize the issuance of the Preferred Stock
from time to time in one or more series, and with respect to each such series of
the Preferred Stock, to fix and state by the resolution or
-1-
<PAGE>
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not such series is to have voting rights, full,
special, or limited, or is to be without voting rights, and whether or not
such series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other series or class of stock;
(ii) the number of shares to constitute such series and the
designations thereof;
(iii) the preferences, and relative, participating, optional, or
other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any such series;
(iv) whether or not the shares of any such series shall be
redeemable at the option of the Corporation or the holders thereof or upon
the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes,
securities, or other property), and the time or times at which, and the
terms and conditions upon which, such shares shall be redeemable and the
manner of redemption;
(v) whether or not the shares of such series shall be subject to
the operation of retirement or sinking funds to be applied to the purchase
or redemption of such shares for retirement, and, if such retirement or
sinking fund or funds are to be established, the annual amount thereof, and
the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, or a combination thereof, the
conditions upon which and the times when such dividends are payable, the
preference to or the relation to the payment of dividends payable on any
other class or classes or series of stock, whether such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the
holders of any such series shall be entitled to receive upon the voluntary
and involuntary dissolution of, or upon any distribution of the assets of,
the Corporation;
(viii) whether or not the shares of any such series, at the option
of the Corporation or the holder thereof or upon the happening of any
specified event, shall be convertible into or exchangeable for the
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<PAGE>
shares of any other class or classes or of any other series of the same or
any other class or classes of stock, securities, or other property of the
Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and provisions with respect to any
such series as may to the board of directors of the Corporation seem
advisable.
3. The shares of each series of the Preferred Stock may vary from the
shares of any other class or series thereof in any or all of the foregoing
respects. The board of directors of the Corporation may increase the number of
shares of the Preferred Stock designated for any existing series by a resolution
adding to such series authorized and unissued shares of the Preferred Stock not
designated for any other series. The board of directors of the Corporation may
decrease the number of shares of the Preferred Stock designated for any existing
series by a resolution, subtracting from such series unissued shares of the
Preferred Stock designated for such series, and the shares so subtracted shall
become authorized, unissued and undesignated shares of the Preferred Stock.
C. Provisions Relating to the Series A Participating Preferred Stock.
1. Designation and Amount. The shares of such series of Preferred Stock
shall be designated as "Series A Participating Preferred Stock" (the "Series A
Preferred"), $0.01 par value per share, and the number of shares of Preferred
Stock constituting such series shall be 8,000,000.
2. Dividends and Distribution. Subject to the provision for adjustment
hereinafter set forth, the holders of the Series A Preferred shall be entitled
to receive dividends or distributions equal per share in amount and kind to any
dividend or distribution payable on shares of Common Stock, when and as the same
are declared by the Board of Directors out of any funds legally available
therefor and paid to the holders of Common Stock, and no dividend may be
declared and paid on Common Stock unless an identical dividend or distribution
is declared and paid concurrently on Series A Preferred. If, however, at any
time after the date of original issuance of Series A Preferred, the Corporation
shall subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, and in each such case, the amount to which holders of the Series A
Preferred were entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction the numerator
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<PAGE>
of which is the number of shares of the Common Stock outstanding immediately
after such event, and the denominator of which is the number of shares of the
Common Stock outstanding immediately prior to such event. The Corporation will
have the right to issue shares of capital stock that are senior or junior to or
on a parity with the Series A Preferred with respect to dividends without the
approval or consent of the holders of Series A Preferred.
3. Voting Rights. Except as provided by law, the holders of the Series A
Preferred shall have no voting rights on any matter.
4. Redemption. The shares of the Series A Preferred shall not be
redeemable.
5. Liquidation Preference. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, no
distribution shall be made to the holders of Common Stock or any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred unless, prior thereto, the holders of the Series A
Preferred shall have received $1.00 per share. All assets of the Corporation
available for distribution after the liquidation preferences are fully met of
the Series A Preferred and any shares senior to or on a parity with the Series A
Preferred with respect to liquidation preferences shall be distributed ratably
among the holders of the Series A Preferred and Common Stock in proportion to
the number of shares of Series A Preferred and Common Stock outstanding at the
time of such liquidation, dissolution or winding up of the Corporation. The
Corporation will have the right to issue shares of capital stock that are senior
or junior to or on a parity with the Series A Preferred with respect to the
liquidation, winding-up or dissolution of the Corporation without the approval
or consent of the holders of the Series A Preferred.
6. Conversion. The Series A Preferred may be converted at the option of
the holder thereof, or shall be converted automatically without any action on
the part of the holder thereof, into shares of Common Stock, on the terms and
conditions set forth in this Section 6. For purposes of this section 6, the
term "affiliate" shall mean any corporation, partnership or other entity that is
an "affiliate" within the meaning of the regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), as such regulations
are in effect on the date hereof, and the term "Person" shall mean any
individual, firm, corporation, partnership, association, trust, joint venture,
legal entity, political subdivision or instrumentality or other organization.
(A) Right to Convert. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A
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<PAGE>
Preferred shall be convertible, at the option of the holder, at any time after
the date of issuance of such share, into one share of Common Stock as follows:
(i) To the extent necessary (a) to avoid dilution of the
holder's percentage ownership of the issued Common Stock, provided that,
with respect to dilution resulting from the issuance of additional
compensatory options as approved by not less than eighty-five percent (85%)
of the entire Board of Directors, the holder would have no such conversion
right so long as its ownership of Common Stock would still be greater than
twenty percent (20%) of the issued Common Stock, assuming for this purpose
that all shares of Common Stock subject to currently exercisable options
and warrants were issued and outstanding, or (b) to maintain a percentage
ownership of the issued Common Stock at least equal to that of the then
largest other stockholder of the Corporation;
(ii) To the extent necessary, if any Person other than the holder
of Series A Preferred or an affiliate of such holder makes a tender offer
for Common Stock and such holder desires to tender the shares of the Series
A Preferred in the same proportion as it tenders Common Stock;
(iii) Upon approval by the stockholders of the Corporation of any
merger or recapitalization proposal in which the Series A Preferred would
be treated differently than Common Stock; and
(iv) Upon approval by the Corporation's stockholders of any (a)
sale of all or substantially all of the assets of the Corporation or (b)
liquidation, dissolution or winding up of the Corporation.
(B) Automatic Conversion. Subject to the provisions for adjustment
hereinafter set forth, each share of the Series A Preferred shall be
automatically converted into one share of Common Stock upon a sale or other
transfer (by operation of law, merger or otherwise) by the holder of such shares
to any Person other than an affiliate of the holder.
(C) Conversion Rate Adjustments. The Conversion Rate of the Series A
Preferred shall be subject to adjustment as hereinafter set forth. If at any
time the Corporation shall subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares of Common Stock or combine or
reclassify the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, and in each such case, the number of shares of
Common Stock into which each share of the Series A Preferred is convertible
shall be adjusted so that
-5-
<PAGE>
the holder of each share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock which the holder of a
share of the Series A Preferred would have been entitled to receive after the
happening of any and all of the events described above had such share been
converted into Common Stock immediately prior to the happening of such event or
the record date therefor, whichever is earlier.
(D) Mechanics of Conversion. The holder of any shares of the Series A
Preferred may exercise its option to convert such shares into shares of Common
Stock by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation for that
purpose, a certificate or certificates representing the shares of the Series A
Preferred to be converted accompanied by a written notice stating that such
holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 6 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt of such
notice relating thereto and, if applicable, payment of all transfer taxes, the
Corporation shall deliver or cause to be delivered (i) certificates representing
the number of validly issued, fully paid and nonassessable shares of Common
Stock of the Corporation to which the holder of the Series A Preferred so
converted shall be entitled (and/or any other consideration to which the holders
of such shares of Common Stock would then be entitled) and (ii) if less than the
full number of shares of the Series A Preferred evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, for the number of shares evidenced by such surrendered certificate
or certificates less the number of shares converted. Such conversions shall be
deemed to have been made upon receipt by the Corporation of such notice and such
surrendered certificate or certificates representing the shares of the Series A
Preferred to be converted, so that the rights of the holder thereof shall cease
except for the right to receive Common Stock of the Corporation in accordance
herewith (and/or any other consideration to which the holders of such shares of
Common Stock would then be entitled), and such holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
D. Provisions Relating to the Common Stock.
1. Except as otherwise required by law, and subject to any special
voting rights which may be granted any series of Preferred Stock in the board of
directors resolution which
-6-
<PAGE>
creates such series, each holder of Common Stock shall be entitled to one vote
for each share of Common Stock standing in such other holder's name on the
records of the Corporation on each matter submitted to a vote of the
stockholders.
2. Subject to the rights of the holders of the Preferred Stock, the
holders of the Common Stock shall be entitled to receive when, as, and if
declared by the board of directors of the Corporation, out of funds legally
available therefor, dividends payable in cash, stock, or otherwise.
3. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock and the holders of any bonds, debentures, or other obligations
of the Corporation shall have been paid in full the amounts to which they shall
be entitled (if any), or a sum sufficient for such payment in full shall have
been set aside, the remaining net assets of the Corporation shall be distributed
pro rata to the holders of the Common Stock and the holders of Series A
Preferred in accordance with their respective rights and interest, to the
exclusion of the holders of any other series of the Preferred Stock and any
bonds, debentures, or other obligations of the Corporation.
4. Without the consent of the holders of eighty-five percent (85%)
of the outstanding Common Stock, the Corporation may (and may permit any
subsidiary of the Corporation over which it has control to) sell the following
products:
(i) crude oil;
(ii) other products usually and normally refined as petroleum products
from crude oils; and
(iii) natural gas liquids or liquefied petroleum gases;
irrespective of where such sales or products are made, only when the seller has
no actual knowledge that the sale is not for consumption or resale in one or
more of the following areas:
(i) the United States or any of its territories or possessions;
(ii) any country wholly located in the Western Hemisphere and/or
Europe or surrounded by the Mediterranean Sea;
(iii) any country all of the territory of which was formerly contained
within the Union of Soviet Socialist Republics;
(iv) any country whose territory is contained within the territories
constituting as of the date hereof the
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<PAGE>
countries known as Algeria, Angola, Benin, Burkina Faso, Cameroon, Central
African Republic, Chad, Congo, Cote D'Ivoire, Equatorial Guinea, Gabon,
Gambia, Ghana, Greenland, Guinea, Guinea Bissau, Iceland, Liberia, Libya,
Mali, Mauritania, Mongolia, Morocco, Niger, Nigeria, Rio Muni, Senegal,
Sierra Leone, Togo, Tunisia, Turkey, Western Sahara and/or Zaire;
(v) Antarctica; and
(vi) international waters;
unless (a) otherwise permitted by the terms of that certain Scope of Business
Agreement, dated May 22, 1996, between the Corporation and Chevron Corporation,
as the same may from time to time be amended in accordance with the terms
thereof, or (b) such Scope of Business Agreement is terminated pursuant to its
terms, upon which termination the provisions of this paragraph 4 shall be of no
further force and effect. A copy of such Scope of Business Agreement, as the
same may be amended, shall be available for inspection by any stockholder of the
Corporation at the principal offices of the Corporation. Except as indicated
above or as may otherwise be provided in this Certificate of Incorporation or by
Delaware law, stockholders shall have no right to approve specific business
activities of the Corporation, and the above provisions shall not otherwise
affect corporate powers and purposes as stated in Article III.
E. General.
1. Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (in any form, but not less
in value than the par value thereof) as may be fixed by the board of directors
of the Corporation, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing conditions.
Shares so issued for which the consideration shall have been paid or delivered
to the Corporation shall be deemed fully paid stock and shall not be liable to
any further call or assessment thereon, and the holders of such shares shall not
be liable for any further payments in respect of such shares.
2. The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase or otherwise acquire shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration, times
for exercise, and other terms of such options or rights; provided, however, that
the
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<PAGE>
consideration to be received (which may be in any form) for any shares of
capital stock subject thereto shall have a value not less than the par value
thereof.
FIFTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any person (as used herein "person" means any other corporation, partnership,
association, firm, trust, joint venture, other legal entity, political
subdivision, or instrumentality or other organization) in which one or more of
its directors, officers, or stockholders are directors, officers, or
stockholders, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board or committee which authorizes the
contract or transaction, or solely because his, her, or their votes are counted
for such purpose, if (i) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board of directors, a committee thereof
(to the extent permitted by applicable law), or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
SIXTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he (i) is or was a director or officer of the Corporation or
(ii) while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, to the fullest extent permitted
under the General Corporation Law of Delaware, as the same exists or may
hereafter be amended. Such right shall be a contract right and shall include
the right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the General Corporation Law of Delaware, as the
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<PAGE>
same exists or may hereafter be amended. If a claim for indemnification or
advancement of expenses hereunder is not paid in full by the Corporation within
60 days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim, and if successful in whole or in part, the claimant
shall also be entitled to be paid the expenses of prosecuting such claim. It
shall be a defense to any such action that such indemnification or advancement
of costs of defense are not permitted under the General Corporation Law of
Delaware, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its board of directors or any
committee or directors thereof, independent legal counsel, or stockholders) to
have made its determination prior to the commencement of such action that
indemnification of, or advancement of costs of defense to, the claimant is
permissible in the circumstances nor an actual determination by the Corporation
(including its board of directors or any committee or directors thereof,
independent legal counsel or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. In the
event of the death of any person having a right of indemnification under the
foregoing provisions, such right shall inure to the benefit of his heirs,
executors, administrators, and personal representatives. The rights conferred
above shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, bylaw, resolution of stockholders or
directors, agreement, or otherwise. The Company shall be required to indemnify
an indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if the initiation of such proceeding (or part thereof) by
the indemnitee was authorized by the board of directors of the Company.
The Corporation's obligation, if any, to indemnify or advance expenses to
any person who was or is serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise shall be reduced by any amount such person may collect as
indemnification or advancement from such other foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry
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<PAGE>
or investigation that could lead to such an action, suit, or proceeding.
Any repeal or amendment of this Article SIXTH shall be prospective only and
shall not affect the rights of any such director or officer or the obligations
of the Corporation with respect to any claim arising from or related to the
services of such director or officer in any of the foregoing capacities prior to
any such repeal or amendment to this Article SIXTH.
SEVENTH: The board of directors shall have the power to make, adopt,
alter, amend, and repeal from time to time the Bylaws of the Corporation and to
make from time to time new Bylaws of the Corporation (subject to the right of
the stockholders entitled to vote thereon to adopt, alter, amend, and repeal
Bylaws made by the board of directors or to make new Bylaws) to the extent and
in the manner provided in the Bylaws; provided, however, that the stockholders
of the Corporation shall be entitled to adopt, alter, amend, or repeal Bylaws
made by the board of directors or to make new Bylaws solely upon the affirmative
vote of the holders of a majority of the outstanding shares of the Common Stock.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article EIGHTH by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of
the Corporation is not personally liable as set forth in the foregoing
provisions of this Article EIGHTH, a director shall not be liable to the
Corporation or its stockholders to such further extent as permitted by any law
hereafter enacted, including without limitation any subsequent amendment to the
General Corporation Law of Delaware.
NINTH: The number of directors constituting the board of directors
shall be fixed by, or in the manner provided in, the Bylaws of the Corporation.
Each director of the Corporation shall hold office until the next annual meeting
of stockholders or until his or her successor shall have been duly elected and
qualified. Directors need not be elected by written ballot.
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<PAGE>
TENTH: The incorporator of the Corporation is Shannon M. Hernandez,
whose mailing address is 235 Montgomery Street, San Francisco, California 94104.
The power of the incorporator shall terminate upon the filing of this
Certificate of Incorporation, and the names and mailing addresses of the persons
who are to serve as directors until the first annual meeting and until their
successors are elected and qualified are:
Name Address
---- -------
R. E. Galvin 1301 McKinney St., Houston TX 77010
D. L. Paul 1301 McKinney St., Houston TX 77010
D. R. Dunn 1301 McKinney St., Houston TX 77010
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 22nd day of May, 1996.
----------------------------------
Incorporator
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<PAGE>
EXHIBIT 3.2
BYLAWS
OF
NGC CORPORATION
A Delaware Corporation
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent ........................................ 1
1.2 Other Offices ...................................................... 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting ..................................................... 1
2.2 Special Meeting .................................................... 1
2.3 Place of Meetings .................................................. 2
2.4 Notice ............................................................. 2
2.5 Voting List......................................................... 2
2.6 Quorum ............................................................. 2
2.7 Required Vote; Withdrawal of Quorum ................................ 3
2.8 Method of Voting; Proxies .......................................... 3
2.9 Record Date ........................................................ 3
2.10 Conduct of Meeting ................................................. 4
2.11 Inspectors ......................................................... 4
ARTICLE THREE: DIRECTORS
3.1 Management ......................................................... 5
3.2 Number; Term ....................................................... 5
3.3 Removal; Vacancies ................................................. 5
3.4 Meetings of Directors .............................................. 5
3.5 First Meeting ...................................................... 5
3.6 Election of Officers ............................................... 6
3.7 Regular Meetings ................................................... 6
3.8 Special Meetings ................................................... 6
3.9 Notice ............................................................. 6
3.10 Quorum; Vote Required; Actions Requiring Approval .................. 6
3.11 Procedure .......................................................... 9
3.12 Presumption of Assent .............................................. 9
3.13 Compensation ....................................................... 9
3.14 Interested Directors ............................................... 9
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<PAGE>
ARTICLE FOUR: COMMITTEES
4.1 Executive Committee................................................ 10
4.2 Other Committees .................................................. 10
4.3 Number; Qualification; Term ....................................... 10
4.4 Authority ......................................................... 10
4.5 Committee Changes ................................................. 11
4.6 Alternate Members of Committees ................................... 11
4.7 Regular Meetings .................................................. 11
4.8 Special Meetings .................................................. 11
4.9 Quorum; Majority Vote ............................................. 11
4.10 Minutes ........................................................... 11
4.11 Compensation ...................................................... 11
4.12 Responsibility .................................................... 12
ARTICLE FIVE: NOTICE
5.1 Method ............................................................ 12
5.2 Waiver ............................................................ 12
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office..................................... 12
6.2 Removal ........................................................... 13
6.3 Vacancies ......................................................... 13
6.4 Authority ......................................................... 13
6.5 Compensation ...................................................... 13
6.6 Chairman of the Board ............................................. 13
6.7 President ......................................................... 13
6.8 Vice Presidents ................................................... 14
6.9 Treasurer ......................................................... 14
6.10 Assistant Treasurer ............................................... 14
6.11 Secretary ......................................................... 14
6.12 Assistant Secretaries ............................................. 14
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares ........................................... 15
7.2 Replacement of Lost or Destroyed Certificates ..................... 15
7.3 Transfer of Shares ................................................ 15
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<PAGE>
7.4 Registered Stockholders ........................................... 15
7.5 Regulations ....................................................... 16
7.6 Legends ........................................................... 16
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Reserves .......................................................... 16
8.2 Books and Records ................................................. 16
8.3 Fiscal Year ....................................................... 16
8.4 Seal .............................................................. 16
8.5 Resignations ...................................................... 16
8.6 Securities of Other Corporations .................................. 17
8.7 Telephone Meetings ................................................ 17
8.8 Invalid Provisions ................................................ 17
8.9 Mortgages, etc. ................................................... 17
8.10 Headings .......................................................... 17
8.11 References ........................................................ 17
8.12 Amendments ........................................................ 17
iii
<PAGE>
BYLAWS
OF
NGC CORPORATION
A Delaware Corporation
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the board of directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the Corporation
shall be held each calendar year on such date and at such time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting or in a duly executed waiver of notice of such meeting. At such
meeting, the stockholders shall elect directors and transact such other business
as may be properly brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be called
by the board of directors pursuant to a resolution adopted by a majority of the
directors, by the Chairman of the Board, by the President, or by any holder or
holders of record of at least 10% of the outstanding shares of capital stock of
the Corporation then entitled to vote on any matter for which the respective
special meeting is being called (considered for this purpose as one class).
Subject to applicable law, a special meeting shall be held on such date and at
such time as shall be designated by the persons(s) calling the meeting and
stated in the notice of the meeting or in a duly executed waiver of notice of
such meeting. Only such business shall be transacted at a special meeting as may
be stated or indicated in the notice of such meeting given in accordance with
these Bylaws or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be held at any
place within or without the State of Delaware designated by the board of
directors. A
<PAGE>
2
special meeting of stockholders may be held at any place within or without the
State of Delaware designated in the notice of the meeting or a duly executed
waiver of notice of such meeting. Meetings of stockholders shall be held at the
principal office of the Corporation unless another place is designated for
meetings in the manner provided herein.
2.4 Notice. A written or printed notice stating the place, day and time of
each meeting of the stockholders and, in the case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the Chairman of the Board, the President,
the Secretary or the officer or person(s) calling the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is to be
sent by mail, it shall be directed to such stockholder at such stockholder's
address as it appears on the records of the Corporation, unless such stockholder
shall have filed with the Secretary of the Corporation a written request that
notices to such stockholder be mailed to some other address, in which case it
shall be directed to such stockholder at such other address. Notice of any
meeting of stockholders shall not be required to be given to any stockholder who
shall attend such meeting in person or by proxy and shall not, at the beginning
of such meeting, object to the transaction of any business because the meeting
is not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy.
2.5 Voting List. At least ten days before each meeting of stockholders,
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by such officer or through a transfer agent appointed by the board of directors,
shall prepare a complete list of stockholders entitled to vote thereat arranged
in alphabetical order and showing the address of each stockholder and number of
shares of capital stock registered in the name of each stockholder. For a period
of ten days prior to such meeting, such list shall be kept on file at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of meeting or a duly executed waiver of notice of such meeting or,
if not so specified, at the place where the meeting is to be held, and shall be
open to examination by any stockholder during ordinary business hours. Such list
shall be produced at such meeting and kept at the meeting at all times during
such meeting and may be inspected by any stockholder who is present.
2.6 Quorum. The holders of a majority of the voting power of the
outstanding shares of capital stock entitled to vote on a matter, present in
person or by proxy, shall constitute a quorum at any meeting of stockholders,
except as otherwise provided by law, the certificate of incorporation of the
Corporation, these Bylaws, or any rule or regulation applicable to the
Corporation or of any applicable national securities exchange. If a quorum shall
not be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy
(or, if no stockholder entitled to
<PAGE>
3
vote is present, any officer of the Corporation), may adjourn the meeting from
time to time without notice other than announcement at the meeting (unless the
board of directors, after such adjournment, fixes a new record date for the
adjourned meeting), until a quorum shall be present, in person or by proxy. At
any adjourned meeting at which a quorum shall be present, in person or by proxy,
any business may be transacted which may have been transacted at the original
meeting had a quorum been present; provided that, if the adjournment is for more
than 30 days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any
meeting, the vote of the holders of at least a majority of the voting power of
the outstanding shares of capital stock entitled to vote thereat who are
present, in person or by proxy, shall decide any questions brought before such
meeting, unless the question is one on which, by express provision of law, the
certificate of incorporation of the Corporation, these Bylaws, or any rule or
regulation applicable to the Corporation or of any applicable national
securities exchange, a different vote is required, in which cases such express
provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough shares of
capital stock to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
certificate of incorporation of the Corporation or by law, each outstanding
share of capital stock, regardless of class, shall be entitled to one vote on
each matter submitted to a vote at a meeting of stockholders. Elections of
directors need not be by written ballot. At any meeting of stockholders, every
stockholder having the right to vote may vote either in person or by proxy
executed in writing by the stockholder or by such stockholder's duly authorized
attorney-in-fact. Each such proxy shall be filed with the Secretary of
Corporation before or at the time of the meeting. No proxy shall be valid after
three years from the date of its execution, unless otherwise provided in the
proxy. If no date is stated in a proxy, such proxy shall be presumed to have
been executed on the date of the meeting at which it is to be voted. Each proxy
shall be revocable unless expressly provided therein to be irrevocable and
coupled with an interest sufficient in law to support an irrevocable power or
unless otherwise made irrevocable by law.
2.9 Record Date. For the purposes of determine stockholders entitled (a)
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (b) to receive payment of any dividend or other distribution or
allotment of any rights, or (c) to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the board
<PAGE>
4
of directors for any such determination of stockholders, such date in
any case to be not more than 60 days and not less than ten days prior to such
meeting nor more than 60 days prior to any other action. If no record date is
fixed:
(i) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date of the
adjourned meeting.
2.10 Conduct of Meeting. The Chairman of the Board, if such office has been
filed, and, if not or if the Chairman of the Board is absent or otherwise unable
to act, the President shall chair all meetings of stockholders. The Secretary
shall keep the records of each meeting of stockholders. In the absence or
inability to act of any such officer, such officer's duties shall be performed
by the officer given the authority to act for such absent or non-acting officer
under these Bylaws or by a person appointed by the meeting.
2.11 Inspectors. The board of directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his or her ability. The
inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the results
and certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting, the inspectors shall make a report in writing of
any challenge, request or matter determined by them and shall execute a
certificate of any fact
<PAGE>
5
found by them. No director or candidate for the office of director shall act as
an inspector of an election of directors. Inspectors need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation of the Corporation or these Bylaws, the board
of directors may exercise all the powers of the Corporation.
3.2 Number; Term. The number of directors constituting the board of
directors shall be thirteen. Each director shall hold office until the next
annual meeting of stockholders following his or her election, and until his or
her successor shall have been duly elected and qualified, or until his or her
earlier death, resignation or removal.
3.3 Removal; Vacancies. Any or all of the directors may be removed, with or
without cause, upon the affirmative vote or consent of the holders of a majority
of the voting power of the outstanding shares of each class of capital stock
then entitled to vote in person or by proxy at an election of such directors.
Any vacancies occurring in the board of directors caused by death, resignation,
retirement, disqualification, removal or other termination from office of any
director may be filled by the vote of at least eleven directors then in office
or by the affirmative vote, at any annual meeting or any special meeting of the
stockholders called for the purpose of filing such directorship or
directorships, of the holders of a majority of the outstanding shares of each
class of capital stock then entitled to vote in person or by proxy at an
election of such directors. Each successor director so chosen shall hold office
for the unexpired term of his or her predecessor in office.
3.4 Meetings of Directors. The directors may hold their meetings and may
have an office and keep the records of the Corporation, except as otherwise
provided by law, in such place or places within or without the State of Delaware
as the board of directors may from time to time determine or as shall be
specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.5 First Meeting. Each newly elected board of directors may hold its
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.
<PAGE>
6
3.6 Election of Officers. At the first meeting of the board of directors
after each annual meeting of stockholders at which a quorum shall be present,
the board of directors shall elect the officers of the Corporation.
3.7 Regular Meetings. Regular meetings of the board of directors shall be
held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.8 Special Meetings. Special meetings of the board of directors shall be
held whenever called by the Chairman of the Board or any two or more directors.
3.9 Notice. The Secretary shall give notice of each special meeting to
each director at least five business days before the meeting. Notice of any such
meeting need not be given to any director who, either before or after the
meeting, submits a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to him
or her. The purpose of any special meeting shall be specified in the notice or
waiver of notice of such meeting.
3.10 Quorum; Vote Required; Actions Requiring Approval. (a) Except as
provided in Section 3.10(b), at all meetings of the board of directors, seven
directors shall constitute a quorum for the transaction of business. If at any
meeting of the board of directors there is less than a quorum present, a
majority of those present or any director solely present may adjourn the meeting
from time to time without further notice. Unless the act of a greater number is
required by law, the certificate of incorporation of the Corporation or these
Bylaws, the act of a majority of the directors present at a meeting at which a
quorum is in attendance shall be the act of the board of directors.
(b) Notwithstanding anything to the contrary herein (and subject to
the provisions of Section 4.1 of these Bylaws), the Corporation shall not take
(or permit to be taken in its capacity as a shareholder or partner or otherwise
permit any Subsidiary of the Corporation to take) any of the following actions
unless approved by the affirmative vote of at least eleven directors:
(i) any sale of all or substantially all of the assets of the
Corporation or any Subsidiary;
(ii) any merger, consolidation, liquidation or dissolution of the
Corporation or any Subsidiary or any purchase or other acquisition of any common
stock or preferred stock of the Corporation;
<PAGE>
7
(iii) adopting any resolution proposing an amendment to the certificate
of incorporation of the Corporation;
(iv) the Corporation or any Subsidiary entering into any line of
business that neither the Corporation nor any Subsidiary is engaged in on
Effective Time (as such term is defined in that certain Combination Agreement
and Plan of Merger among the Corporation and certain other parties dated as of
May 22, 1996);
(v) the Corporation or any Subsidiary paying any dividend or otherwise
making any distribution to any person;
(vi) the Corporation or any Subsidiary issuing any stock or other
security or ownership interests to any person;
(vii) the Corporation or any Subsidiary engaging in any oil or gas
futures activities, or other trading activities relating to oil or gas pricing,
including, without limitation, hedging, swaps, options or speculation (such
activities referred to herein as "trading activities"), that, based on the
average oil or gas pricing during the 6 months preceding the date of such
activity, could result in exposure to loss to the Corporation in excess of
$10,000,000 as to any single transaction, other than trading activities which
offset physical transactions and are accounted for as a hedge, and in no event
shall the uncovered portion of the trading activities of the Corporation and its
subsidiaries, in the aggregate, result in an exposure to loss to the Corporation
in excess of $10,000,000;
(viii) amending or terminating any contract, commitment or employee
compensation plan if the execution of or entering into such contract, commitment
or plan was approved by the board of directors pursuant to this Section 3.10(b)
(or would have been subject to board of director approval pursuant to this
Section 3.10(b) if this Section 3.10 had been in effect at the time of execution
of or entering into such contract, commitment or plan);
(ix) approving a different method in which the Corporation keeps its
books;
(x) the commencement by the Corporation or any Subsidiary of a
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other voluntary case
or proceeding to be adjudicated a bankrupt or insolvent or the consent by it to
the entry of a decree or order for relief against it in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the
<PAGE>
8
filing by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of action in furtherance
of any such action;
(xi) the Corporation or any Subsidiary taking any action in its
capacity as a shareholder, partner, member or owner of any interest in a person
which, if taken by the Corporation itself, would require the approval of the
board of directors pursuant to this Section 3.10(b);
(xii) the Corporation or any Subsidiary (A) making, or committing to
make, any payment in excess of $10,000,000 per transaction or contract (or
series of related transaction or contracts), whether as or in connection with a
capital expenditure, asset purchase, purchase of goods or services, investment,
rental, settlement, equity contribution, loan, guaranty or otherwise, (B)
borrowing any amount in excess of $10,000,000 per transaction or contract (or
series of related transactions or contracts), (C) disposing of or otherwise
transferring any asset (or related assets) whose fair market value exceeds
$10,000,000 or (D) entering into any contract or transaction (or series of
contracts or transactions) pursuant to which the Corporation or any Subsidiary
is to receive more than $10,000,000; provided, however, if the amount in
question is in excess of $10,000,000 but less than $25,000,000, any action
referred to in (A), (B), (C) or (D) (including any such action that is also
subject to Section 3.10(b)(vii) and any other such action that is subject to any
of the other provisions of Section 3.10(b) except for the Corporation issuing
any stock or other security or ownership interests to any person or paying any
dividend or otherwise making any distribution to any person) need not be
approved as aforesaid by the board of directors if approved by the unanimous
vote of the Executive Committee;
(xiii) any change in the fiscal year of the Corporation;
(xiv) the appointment or removal of the Corporation's Chief Executive
Officer, President, Chief Financial Officer or any Senior Vice President;
(xv) the filling of any vacancy in the board of directors of the
Corporation; and
(xvi) the establishment of any committee of the board of directors of
the Corporation.
<PAGE>
9
Notwithstanding the foregoing, if one or more directors give written notice to
the Secretary that such director or directors intend to abstain pursuant to
Section 3.14 of these Bylaws on a matter that is subject to this Section
3.10(b), then in lieu of the approval otherwise required herein such action may
be approved by the affirmative vote of at least such number of directors equal
to eleven less the number of directors that have given such notice. For
purposes of these Bylaws, "Subsidiary" means (i) any corporation or other entity
a majority of the capital stock of which having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is at the time owned, directly or indirectly, with power to vote, by the
Corporation, or (ii) a partnership, joint venture or limited liability company
in which the Corporation holds, directly or indirectly, a majority interest with
respect to voting power, rights to receive distributions or report earnings, or
capital accounts, provided that none of Novagas Clearinghouse Limited
Partnership, Novagas Clearinghouse Limited, Novagas Clearinghouse Pipelines
Limited Partnership or Novagas Clearinghouse Pipelines Limited shall be deemed
to be a Subsidiary as currently constituted or as changed in connection with the
transactions contemplated by that certain Combination Agreement and Plan of
Merger dated as of May 22, 1996 among NGC Corporation, Chevron U.S.A. Inc. and
Midstream Combination Corp. and shall not be considered a Subsidiary solely by
reason of an increase in the Corporation's equity interest in any one or more of
the foregoing entities from approximately 49% to approximately 51%.
3.11 Procedure. At meetings of the board of directors, business shall be
transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of the
Corporation shall act as the secretary of each meeting of the board of directors
unless the board of directors appoints another person to act as secretary of the
meeting. The board of directors shall keep regular minutes of its proceedings
which shall be placed in the minute book of the Corporation.
3.12 Presumption of Assent. A director of the Corporation who is present at
the meeting of the board of directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his abstention or
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent or
abstention by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
<PAGE>
10
3.13 Compensation. The board of directors shall have the authority to fix
the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, however, that nothing contained
herein shall be construed to preclude any director from serving the Corporation
in any other capacity and receiving compensation therefor.
3.14 Interested Directors. A director who has an interest in a transaction
or matter within the meaning of Section 144 of the Delaware General Corporation
Law (or in which the Stockholder that nominated such director pursuant to that
certain Stockholders Agreement dated May 22, 1996 among the Corporation and
certain other persons (the "Stockholders Agreement") has an interest) that is
the subject of review or action by the board of directors shall (i) disclose
such interest to the board of directors (ii) abstain from voting with respect to
such transaction or matter and (iii) give written notice to the Secretary of the
Corporation that he or she intends to so abstain. If one or more directors give
written notice to the Secretary that such director or directors intend to
abstain pursuant to this Section 3.14 with respect to any action by the Board of
Directors, then in lieu of the approval otherwise required under these Bylaws
for such action, such action may be approved by the affirmative vote of at least
the number of directors that would otherwise have been required less the number
of directors that have given such notice.
ARTICLE FOUR: COMMITTEES
4.1 Executive Committee. The board of directors, acting by resolution
adopted by at least eleven directors, may elect from among its members an
Executive Committee of four members, which committee shall have the authority to
approve actions to the extent specified in Section 3.10(b) of these Bylaws and,
with respect to actions not subject to Section 3.10(b), any other actions that a
majority of the board of directors could approve except to the extent restricted
by law or the certificate of incorporation of the Corporation. In the event of a
vacancy, the Executive Committee shall have no authority to take any action
until such vacancy is filled.
4.2 Other Committees. In addition to the Executive Committee, the board of
directors may, by resolution adopted by at least eleven directors, designate one
or more other committees (an "Additional Committee").
4.3 Number; Qualification; Term. Each Additional Committee shall consist of
one or more directors appointed by resolution adopted by at least eleven
directors. The number of committee members may be increased or decreased from
time to time by resolution adopted by at least eleven directors. Each committee
member shall serve as such until the
<PAGE>
11
earliest of (i) the expiration of his or her term as director, (ii) his or her
resignation as a committee member or as a director, or (iii) his or her removal
as a committee member or as a director.
4.4 Authority. Each Additional Committee, to the extent expressly provided
in the resolution adopted by at least eleven directors establishing such
committee, shall have and may exercise all of the authority of the board of
directors in the management of the business and property of the Corporation
except to the extent expressly restricted by such resolution or by law, the
certificate of incorporation of the Corporation, or these Bylaws.
Notwithstanding the foregoing, no committee (other than the Executive Committee
as provided in, but only to the extent provided in, Section 3.10(b)) may approve
or authorize the actions specified in Section 3.10(b).
4.5 Committee Changes. The board of directors by resolution adopted by at
least eleven directors shall have the power at any time to fill vacancies in, to
change the membership of, and to discharge any committee.
4.6 Alternate Members of Committees. The board of directors may designate
one or more directors as alternate members of any committee.
4.7 Regular Meetings. Regular meetings of any committee may be held without
notice at such time and place as may be designated from time to time by the
committee and communicated to all members thereof.
4.8 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. The purpose of any special
meeting shall be specified in the notice or waiver of notice of such meeting.
4.9 Quorum; Majority Vote. At meetings of any committee, a majority of the
number of members designated by the board of directors shall constitute a quorum
for the transaction of business; provided, however, that the quorum for the
transaction of business by the Executive Committee shall be all members thereof.
If a quorum is not present at a meeting of any committee, a majority of the
members present may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present. The act of a
majority of the members present at any meeting at which a quorum is in
attendance shall be the act of a committee, unless the act of a greater number
is required by law, the certificate of incorporation of the Corporation, or
Section 3.10(b) or any other provision of these Bylaws.
<PAGE>
12
4.10 Minutes. Each committee shall cause minutes of its proceedings to be
prepared and shall report the same to the board of directors upon the request of
the board of directors. The minutes of the proceedings of each committee shall
be delivered to the Secretary of the Corporation for placement in the minute
books of the Corporation.
4.11 Compensation. Committee members may, by resolution of the board of
directors, be allowed a stated salary or a fixed sum and expenses of attendance,
if any, for attending any committee meetings.
4.12 Responsibility. The designation of any committee and the delegation of
authority to it shall not operate to relieve the board of directors or any
director of any responsibility imposed upon it or such director by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of the
Corporation, or these Bylaws, notice is required to be given to any committee
member, director, or stockholder and no provision is made as to how such notice
shall be given, personal notice shall not be required and any such notice may be
given (i) in writing, by mail, postage prepaid, addressed to such committee
member, director, or stockholder at his or her address as it appears on the
books or (in the case of stockholder) the stock transfer records of the
Corporation, or (ii) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice required
or permitted to be given by telegram, telex, or telefax shall be deemed to be
delivered and given at the time transmitted with all charges prepaid and
addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
<PAGE>
13
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation shall
be a Chairman of the Board, a President, a Secretary, and such other officers as
the board of directors may from time to time elect or appoint, including one or
more Vice Presidents (with each Vice President to have such descriptive title,
if any, as the board of directors shall determine) and a Treasurer. The board of
directors may also from time to time elect or appoint a Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, or Principal Accounting
Officers, each with such powers and duties as may be assigned by the board of
directors. Each officer shall hold office until his or her successor shall have
been duly elected and shall have qualified, until his or her death, or until he
or she shall resign or shall have been removed in the manner hereinafter
provided. Any two or more offices may be held by the same person. None of the
officers need be a stockholder or a director of the Corporation or a resident of
the State of Delaware, but the Chairman shall be a director.
6.2 Removal. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by
death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such duties
in the management of the Corporation as are provided in these Bylaws or as may
be determined by resolution of the board of directors not inconsistent with
these Bylaws.
6.5 Compensation. The compensation, if any, of officers and agents shall be
fixed from time to time by the board of directors or a committee of directors
appointed for such purpose by the board of directors: provided, however, that
the board of directors may delegate the power to determine the compensation of
any officer and agent (other than the officer to whom such power is delegated)
to the Chairman of the Board or the President.
6.6 Chairman of the Board. The Chairman of the Board shall, subject to the
supervision of the board of directors of the Corporation, have the general
management and control of the Corporation. Such officer shall preside at all
meetings of the stockholders and
<PAGE>
14
of the board of directors and shall have such duties as may from time to time
be assigned by the board of directors.
6.7 President. The President shall, subject to the supervision of the board
of directors of the Corporation, have general charge, management, and control of
the properties and operations of the Corporation in the ordinary course of its
business, with all such powers with respect to such properties and operations as
may be reasonably incident to such responsibilities. In the absence or inability
to act of the Chairman of the Board, the President shall exercise all of the
powers and discharge all of the duties of the Chairman of the Board. As between
the Corporation and third parties, any action taken by the President in the
performance of the duties of the Chairman of the Board shall be conclusive
evidence that the Chairman of the Board is absent or unable to act.
6.8 Vice Presidents. Each Vice President shall have such powers and duties
as may be assigned to him or her by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's funds
and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designed by the board of directors, and shall perform such other duties as may
be prescribed by the board of directors, the Chairman of the Board, or the
President.
6.10 Assistant Treasurer. Each Assistant Treasurer shall have such powers
and duties as may be assigned to him or her by the board of directors, the
Chairman of Board or the President. The Assistant Treasurer (in the order of
their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Treasurer) shall exercise that powers of the Treasurer
during that officer's absence or liability to act.
6.11 Secretary. Except as otherwise provided in these Bylaws, the Secretary
shall keep the minutes of all meetings of the board of directors and of the
stockholders in books provided for that purpose, and he or she shall attend to
the giving and service of all notices. The Secretary may sign with the Chairman
of the Board or the President or any other authorized officer of the
Corporation, in the name of the Corporation, all contracts of the
<PAGE>
15
Corporation and affix the seal of the Corporation thereto. The Secretary shall
have charge of the certificate books, transfer books, and stock papers as the
board of directors may direct, all of which shall at all reasonable times be
open to inspection by any officer of the Corporation upon application at the
office of the Corporation during business hours. The Secretary shall in general
perform all duties incident to the office of the Secretary, subject to the
control of the board of directors, the Chairman of the Board, and the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such powers
and duties as may be assigned to him or her by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Secretary) shall exercise the powers of the Secretary during
that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates representing shares of stock of
the Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or as Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent, or registrar
who has signed, or whose facsimile signature has been placed upon, a certificate
has ceased to be such officer, transfer agent, or registrar before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if he or she were such Officer, transfer agent, or registrar
at the date of issue. The certificates shall be consecutively numbered and shall
be entered in the books of the Corporation as they are issued and shall exhibit
the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of directors
may direct a new certificate or certificates to be issued in place of a
certificate or certificates theretofore issued by the Corporation and alleged to
have been lost or destroyed, upon the making of an affidavit of the fact by the
person claiming the certificate or certificates representing shares to be lost
or destroyed. When authorizing such issue of a new certificate or certificates
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such a manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that be
<PAGE>
16
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferrable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by law.
7.5 Regulations. The board of directors shall have the power and authority
to make all such rules and regulations as they may deem expedient concerning the
issue, transfer, registration and replacement of certificates for shares of
stock of the Corporation.
7.6 Legends. The board of directors shall have the power and authority to
provide that certificates representing shares of stock bear such legends as the
board of directors deems appropriate to insure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Reserves. There may be created by the board of directors out of funds
of the Corporation legally available therefor such reserve or reserves as the
directors from time to time, in their discretion, consider proper to provide for
contingencies, to equalize dividends, or to repair or maintain any property of
the Corporation, or for such other purpose as the board of directors shall
consider beneficial to the Corporation, and the board of directors shall
consider beneficial to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
8.2 Books and Records. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors and shall keep at its registered office or
principal place of business, or at the
<PAGE>
17
office of its transfer agent or registrar, a record of its stockholders, giving
the names and addresses of all stockholders and the number and class of the
shares held by each.
8.3 Fiscal Year. The fiscal year of the Corporation shall be fixed by the
board of directors.
8.4 Seal. The seal of the Corporation shall be such as from time to time
may be approved by the board of directors.
8.5 Resignations. Any director, committee member, or officer may resign by
so stating at any meeting of the board of directors or by giving written notice
to the board of directors, the Chairman of the Board, the President or the
Secretary. Such resignation shall take effect at the time specified therein or,
if no time is specified therein, immediately upon its receipt. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
8.6 Securities of Other Corporations. Except as otherwise provided in these
Bylaws or resolution of the board of directors, the Chairman of the Board, the
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy, or
consent with respect to any such securities.
8.7 Telephone Meetings. Members of the board of directors and members of a
committee of the board of directors may participate in and hold a meeting of the
board or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this section shall
continue presence in person at such meeting, except where a person participates
in the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
8.8 Invalid Provisions. If any part of these Bylaws shall be held invalid
or inoperative for any reason, the remaining parts, so far as it is possible and
reasonable, shall remain valid and operative.
8.9 Mortgages, etc. With respect to any deed, deed of trust, mortgage, or
other instrument executed by the Corporation through its duly authorized officer
or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation of the Corporation
unless the resolutions, if any, of the board of directors authorizing such
execution expressly state that such attestation is necessary.
<PAGE>
18
8.10 Headings. The headings used in these Bylaws have been inserted for
administrative convenience only and do not constitute matter to be construed in
interpretation.
8.11 References. Whenever herein the singular number is used, the same
shall include the plural here appropriate, and words of one gender should
include other genders where appropriate.
8.12 Amendments. These Bylaws may only be amended or repealed by the
affirmative vote or consent of at least eleven directors of the Corporation or
by the holders of a majority of the outstanding Common Stock.
<PAGE>
EXHIBIT 4.1
================================================================================
CONSENT AND
SECOND AMENDMENT TO
CREDIT AGREEMENT
among
NGC CORPORATION,
as the Borrower
and
THE FIRST NATIONAL BANK OF CHICAGO,
as the Agent for the Lenders,
and
THE CHASE MANHATTAN BANK
(successor by merger to
THE CHASE MANHATTAN BANK NATIONAL ASSOCIATION) and
NATIONS BANK OF TEXAS, N.A.,
as Co-Agents for the Lenders
and
THE LENDER PARTIES THERETO
Dated as of July 26, 1996
================================================================================
<PAGE>
CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT
THIS CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of July 26,
1996, is among NGC Corporation, a Delaware corporation, as Borrower (the
"Borrower"), the Lenders (hereinafter defined), The First National Bank of
Chicago, as Agent, and The Chase Manhattan Bank (successor by merger to The
Chase Manhattan Bank National Association) and NationsBank of Texas, N.A., as
Co-Agents (the "Co-Agents"). The parties hereto agree as follows:
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders, the Issuers, the Agent and the Co-
Agents have heretofore entered into a certain Credit Agreement, dated as of
March 14, 1995 (herein called the "Original Credit Agreement"); and
WHEREAS, the Original Credit Agreement has been amended by an amendment
dated October 4, 1995 (the "First Amendment", the Original Credit Agreement as
amended by the First Amendment, the "Credit Agreement"); and
WHEREAS, the Borrower has entered into that certain Combination Agreement
and Plan of Merger dated as of May 22, 1996 (hereinafter the "Newco Combination
Agreement") with Chevron U.S.A. Inc. ("CUSA") and Midstream Combination Corp.
("Newco") whereby at the closing of the transaction contemplated thereby (the
"Newco Combination") CUSA will contribute certain assets to Newco and the
Borrower will merge into Newco and upon consummation of such transactions the
separate existence of the Borrower shall cease and Newco shall be the surviving
Person and successor to the Borrower; and
WHEREAS, upon the effectiveness date of the Newco Combination, Newco will
be the surviving Person, will continue its existence as NGC Corporation and will
become the Borrower under the Credit Agreement as amended hereby; and
WHEREAS, the Borrower, the Lenders, the Issuers, the Agent and the Co-
Agents now intend to amend the Credit Agreement in certain respects as
hereinafter provided;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders, the Issuers, the Agent and the Co-
Agents hereby agree as follows:
SECTION 1. Amendments to Credit Agreement
------------------------------
A. The following definitions are added to Section 1.1 of the Credit
Agreement in alphabetical order:
"Applicable Commitment Fee" means (subject to clause (iii) of the
definition of "Applicable Rating Level") the rate per annum set forth below
opposite the Applicable Rating Level.
<TABLE>
<CAPTION>
Applicable Rating Level Applicable Commitment Fee
- ------------------------------------------------------------------------------------
<S> <C> <C>
Active Aggregate Revolving Inactive Aggregate Revolving
Commitment Commitment
- ------------------------------------------------------------------------------------
Level I 0.1000% 0.0800%
Level II 0.1250% 0.1000%
Level III 0.1500% 0.1250%
Level IV 0.2000% 0.1500%
- ------------------------------------------------------------------------------------
</TABLE>
"Applicable Margin" means on any date and with respect to each Eurodollar
Advance (subject to clause (iii) of the definition of "Applicable Rating
Level"), the applicable margin set forth below based on the Applicable Rating
Level on such date:
<TABLE>
<CAPTION>
---------------------------------
Applicable Revolving
Rating Level Facility
-------------- ----------
---------------------------------
<S> <C>
Level I 0.3000%
---------------------------------
Level II 0.3750%
---------------------------------
Level III 0.4500%
---------------------------------
Level IV 0.6500%
---------------------------------
</TABLE>
"Applicable Rating Level" means the highest level set forth below that
corresponds to a rating issued from time to time by S&P or Moody's as applicable
to the Borrower's senior unsecured long-term debt:
-2-
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------
Moody's S&P
------- ---
----------------------------------------
<S> <C> <C>
Level I =>Baa1 =>BBB+
----------------------------------------
Level II Baa2 BBB
----------------------------------------
Level III Baa3 BBB-
----------------------------------------
Level IV (Baa3 (BBB-
----------------------------------------
</TABLE>
For example, if the Moody's rating is Baa1 and the S&P rating is BBB, Level I
shall apply.
For purposes of the foregoing, (i) "=>" means a rating equal to or more
favorable than; "(" means a rating less favorable than; (ii) if ratings for the
Borrower's senior unsecured long-term debt shall not be available from S&P or
Moody's, Level IV shall be deemed applicable; (iii) if determinative ratings
shall change (other than as a result of a change in the rating system used by
any applicable Rating Agency) such that a change in Applicable Rating Level
would result, such change shall effect a change in Applicable Rating Level as of
the day on which it is first announced by the applicable Rating Agency, and any
change in the Applicable Margin or percentage used in calculating fees due
hereunder shall apply commencing on the effective date of such change and ending
on the date immediately preceding the effective date of the next such change;
and (iv) if the rating system of any of the Rating Agencies shall change prior
to the date all obligations hereunder have been paid and the Commitments
cancelled, the Borrower and the Lenders shall negotiate in good faith to amend
the references to specific ratings in this definition to reflect such changed
rating system, and pending such amendment, if no Applicable Rating Level is
otherwise determinable based upon the foregoing, the last Applicable Rating
Level shall apply.
"CUSA Assumed Debt" means the $155,373,000 aggregate principal amount of
CUSA's obligations under the CUSA Note, the payment of which was assumed by
Newco under the CUSA Assumption Agreement.
"CUSA Assumption Agreement" means the agreement dated as of the closing of
the Newco Combination pursuant to which Newco assumed CUSA's payment obligation
for the CUSA Assumed Debt.
-3-
<PAGE>
"CUSA Note" means the demand promissory note dated August 25, 1994 payable
by CUSA to Chevron Capital U.S.A. Inc.
"New Funds Amount" means the amount by which a New Lender's or an
Increasing Lender's outstanding Loans increase as of a Commitment Increase
Effective Date (without regard to any such increase as a result of Advances made
on such Commitment Increase Effective Date).
"Moody's" means Moody's Investors Service, Inc. and any successor thereto
that is a nationally-recognized rating agency.
"Newco Combination" means the merger of the Borrower into Newco pursuant to
the Newco Combination Agreement.
"Rating Agency" means either of S&P or Moody's.
"Reduction Amount" means the amount by which a Reducing Lender's or a
Partially Increasing Lender's outstanding Loans decrease as of a Commitment
Increase Effective Date (without regard to any such increase as a result of
Advances made on such Commitment Increase Effective Date).
"S&P" means Standard & Poor's Ratings Group and any successor thereto that
is a nationally-recognized rating agency.
B.1 The definition of "Aggregate Revolving Commitment" appearing in
Section 1.1 of the Credit Agreement is amended by inserting after the amount
"$550,000,000" appearing in the third line thereof the parenthetical "(or such
increased amount as may be established pursuant to Section 2.22)".
B.2 Effective upon the effectiveness of this Amendment, the definition of
"Borrower" appearing in Section 1.1 of the Credit Agreement is amended in its
entirety to the following:
"Borrower" means Newco, a Delaware corporation which it is anticipated
will be renamed NGC Corporation and its successors and assigns.
C. The definition of "British Gas" appearing in Section 1.1 of the Credit
Agreement is amended to read in its entirety as follows:
"British Gas" means British Gas plc, a corporation incorporated under
the laws of England and Wales, and its
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<PAGE>
successors and assigns, including the successors that would result from the
currently proposed restructuring."
D. The definition of "Change in Control" appearing in Section 1.1 of the
Credit Agreement is amended to read in its entirety as follows:
"Change in Control" means NOVA Corporation, British Gas, Chevron
Corporation, and/or the shareholders of the PEP Partners (as defined in the
Merger Agreement) including David C. Feldman, Inc. shall cease to own,
directly or indirectly either (i) at least 50% in the aggregate of the
outstanding shares of voting stock of the Borrower without giving effect to
any equity issues by the Borrower after the Closing Date (but after giving
effect to any equity issued by the Borrower to any one or more of NOVA
Corporation, British Gas, Chevron Corporation, the shareholders of the PEP
Partners, and their successors, including David C. Feldman, Inc., or their
respective Subsidiaries) or (ii) at least 40% in the aggregate of the
outstanding shares of voting stock of the Borrower."
E. The definition of "Consolidated EBITD" appearing in Section 1.1 of the
Credit Agreement is amended by adding the phrase "and of the Newco Combination,
respectively," in clause (c) thereof after the first time the word "Merger"
appears and before the comma (",").
F. The definition of "Scheduled Debt Service" is amended by adding the
following phrase to the end thereof before the period:
"; provided, further that for purposes of this definition, principal owing in
respect of the CUSA Assumed Debt as a result of a demand for payment thereof
being made by CUSA prior to the stated maturity thereof shall not be a
scheduled, required or mandatory principal payment of the Borrower and its
Subsidiaries".
G. The definition of "Substantial Portion" in Section 1.1 of the Credit
Agreement is amended by deleting the percentage "10%" appearing in the third
line and inserting the percentage "15%" in lieu thereof.
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<PAGE>
H. Section 2.8 of the Credit Agreement is hereby amended by deleting the
amount "$10,000,000" appearing in the fifth line thereof and inserting the
amount "$5,000,000" in lieu thereof and by adding after the phrase "three
Business Days'" appearing in the sixth line thereof the parenthetical phrase
"(or, in the case of outstanding Advances bearing interest at a Floating Rate,
one Business Day's)".
I. Article II of the Credit Agreement is amended by adding the following
Section 2.22 at the end thereof:
Section 2.22 Procedures with respect to the Aggregate Revolving
Commitment. So long as no Default or Unmatured Default has occurred and is
continuing, the Borrower may request from time to time, and subject to the terms
and conditions hereinafter set forth, that the Aggregate Revolving Commitment be
increased by giving written notice thereof to the Agent; provided, however, that
any such notice must be given no later than 60 days prior to the then Revolving
Facility Termination Date. Each such notice (a "Notice of Commitment Increase")
shall be in the form of Exhibit C-2 and specify therein:
(i) the effective date of such increase, which date (the
requested "Commitment Increase Effective Date") shall be no earlier than
five Business Days after receipt by the Agent of such notice;
(ii) the amount of the requested increase; provided, however,
that after giving effect to such requested increase, the Aggregate
Revolving Commitment shall not exceed $750,000,000;
(iii) the identity of the then Lenders, if any, which have agreed
with the Borrower to increase their respective Commitments in an amount
such that their respective Percentage after giving effect to such requested
increase will be the same or greater than their respective Percentages
prior to giving effect to such requested increase (each such then Lender
being a then "Increasing Lender"), each other Lender which has agreed to
increase its Commitment in an amount such that its Percentage after giving
effect to such a requested increase will be less than its Percentage prior
to giving
-6-
<PAGE>
effect to such requested increase (each such Lender being a "Partially
Increasing Lender") and the identity of each financial institution not
already a Lender, if any, which has agreed with the Borrower to become a
Lender to effect such requested increase in the Aggregate Revolving
Commitment (each such assignee shall be reasonably acceptable to the Agent
and each such assignee being a then "New Lender" and each Lender which has
not agreed to increase its Commitment being a "Reducing Lender"); and
(iv) the amount of the respective Commitments of the then Lenders
and such New Lenders from and after the effective date of such increase.
On or before each Commitment Increase Effective Date:
(i) the Borrower, each Increasing Lender, each Partially
Increasing Lender and each then New Lender shall execute and
deliver to the Agent for its acceptance, as to form, documentation
embodying the provisions of the Notice of Commitment Increase
relating to the increase in the Aggregate Revolving Commitment to
be effected on such Commitment Increase Effective Date; and
(ii) upon acceptance of such documentation by the Agent,
which acceptance shall not be unreasonably withheld, and so long as
no Default or Unmatured Default has occurred and is continuing,
(A) the Agent shall give prompt notice of such
acceptance to each Co-Agent and each Lender,
(B) it shall become effective, and the Aggregate
Revolving Commitment shall be increased to the amount
specified therein, on such Commitment Increase Effective
Date,
(C) the Borrower shall execute and deliver to each
then New Lender a Committed Note payable to the order of
such Lender in
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<PAGE>
the face principal amount equal to such Lenders' Commitment
and a Competitive Bid Note and
(D) the Borrower shall execute and deliver to each
Increasing Lender and each Partially Increasing Lender,
against receipt by the Borrower of such Lender's then
existing Committed Note, a new Committed Note in the face
principal amount equal to such Lenders' Commitment after
giving effect to such Commitment increase .
On each Commitment Increase Effective Date:
(i) each then New Lender and each then Increasing Lender shall,
by wire transfer of immediately available funds, deliver to the Agent such
Lenders' New Funds Amount for such Commitment Increase Effective Date,
which amount, for each such Lender, shall constitute Committed Revolving
Loans made by such Lender to the Borrower pursuant to Section 2.1 on such
Commitment Increase Effective Date; and
(ii) the Agent shall, by wire transfer of immediately available
funds, pay to each then Reducing Lender and to each Partially Increasing
Lender its Reduction Amount for such Commitment Increase Effective Date,
which amount, for each such Lender, shall constitute a prepayment by the
Borrower pursuant to Section 2.8, ratably in accordance with the respective
principal amounts thereof, of the principal amounts of all then outstanding
Committed Revolving Loans of such Lender.
Effective as of each Commitment Increase Effective Date, the Notes then or
theretofore delivered to each then New Lender, and the new Notes then or
theretofore delivered to each then Increasing Lender and each then Partially
Increasing Lender, shall evidence such Lender's ownership of its Percentage,
effective as of such Commitment Increase Effective Date, of all Loans then
outstanding. Also effective as of each Commitment Increase Effective Date, each
then New Lender and each then Increasing Lender shall be deemed to have
purchased and had transferred to it, and each then Reducing
-8-
<PAGE>
Lender and each Partially Increasing Lender shall be deemed to have sold and
transferred to such New Lenders and Increasing Lenders, such undivided interest
and participation in such Reducing Lender's and such Partially Increasing
Lender's interest and participation in all then outstanding Letters of Credit,
the obligations of the Borrower with respect thereto and any security therefor
and any guaranty pertaining thereto at any time existing as is necessary so that
such undivided interests and participations of all Lenders (including each then
New Lender) shall accord with their respective Percentages after giving effect
to the increase in the Aggregate Revolving Commitment on such Commitment
Increase Effective Date.
J. Section 6.1.3 of the Credit Agreement is amended by deleting the
amount "$50,000,000" in the fourth line thereof and inserting the amount
"$100,000,000" in lieu thereof.
K. Section 6.2.2 of the Credit Agreement is amended by deleting the
amount "$75,000,000" appearing in clause (vi) thereof and inserting the amount
"$150,000,000" in lieu thereof and by adding the following clause (xi) thereto
immediately following clause (x) thereof "(xi) Debt in respect of the facility
referred to in clause (iv)(a) of Section 6.2.8.", and by deleting the remainder
of Section 6.2.2 following that period.
L. Section 6.2.3 of the Credit Agreement is amended by adding the phrase
"or if the Borrower is not the surviving Person, the surviving Person shall
expressly assume in writing in form and substance reasonably satisfactory to the
Agent all of the liabilities and obligations of the Borrower hereunder, under
the Notes and under the other Loan Documents and provided, further the foregoing
shall not prohibit the Newco Combination" at the end of that section before the
period.
M. Section 6.2.4 of the Credit Agreement is amended by inserting at the
end thereof before the period the phrase "or; (viii) sales or other dispositions
of any ownership interest, whether in whole or in part, in any fractionators
within twelve (12) months of the consummation of the Newco Combination to comply
with requirements of governmental authorities in connection with the Newco
Combination;
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<PAGE>
provided that the parties understand and agree that any merger otherwise
permitted by Section 6.2.3 (including the Newco Combination) shall not
constitute a disposition of assets."
N. Section 6.2.8 of the Credit Agreement is amended by (a) deleting
clause (iv) in its entirety and inserting in lieu thereof the following:
"(iv) Guaranties of obligations in respect of letters of credit
(other than Letters of Credit) or Debt with respect to reimbursement of
draws (a) under a letter of credit and reimbursement facility in an amount
not to exceed $350,000,000 in the aggregate pursuant to which one or more
letters of credit will be issued in favor of CUSA to support the
obligations of the Borrower and/or any of its Subsidiaries under the
Natural Gas Purchase and Sale Agreement between the Borrower and/or any of
its Subsidiaries and CUSA and (b) in addition to the letters of credit
described in the foregoing clause (a), not to exceed in the aggregate at
any time outstanding an amount equal to the excess, if any, of (1)
$150,000,000 over (2) the Stated Amount of Letters of Credit plus
unreimbursed obligations in respect of drawings under Letters of Credit,"
and by (b) deleting the amount "$75,000,000" in clause (vii) and inserting in
lieu thereof the amount "$150,000,000".
O. Section 6.2.12 of the Credit Agreement is amended by adding to the
penultimate line of such section after the phrase "the Merger Agreement and" the
phrase "the Newco Combination Agreement together with, in each case,".
P. Section 6.3.1 of the Credit Agreement is amended by deleting the word
"cash" appearing in the fourth line thereof.
Q. Section 7.5 of the Credit Agreement is hereby amended in its entirety
to the following:
7.5 (a) Failure of any Obligor or any Subsidiary (other than any
Project Financing Subsidiary) of an Obligor to pay when due (subject to any
applicable grace period), whether by acceleration or otherwise, any Debt
(other than the Obligations and other than the Existing Trident
Subordinated Debt and other than the CUSA Assumed
-10-
<PAGE>
Debt) aggregating for all of the Obligors and their respective Subsidiaries
in excess of $40,000,000 in principal amount; (b) the default by any
Obligor or any Subsidiary (other than any Project Financing Subsidiary) of
an Obligor in the performance of any term, provision or condition contained
in any agreement under which any Debt (other than the Obligations and other
than the Existing Trident Subordinated Debt and other than the CUSA Assumed
Debt) aggregating for all of the Obligors and their respective Subsidiaries
(other than any Project Financing Subsidiary) in excess of $40,000,000 in
principal amount was created or is governed, or any other event shall occur
or condition exist, the effect of which default or other event or condition
is to permit the holder or holders of such Debt to cause such Debt to
become due prior to its stated maturity and such default, event or
condition continues for more than 30 days; provided, however, that in the
event the rights of any holder or holders of such Debt to accelerate such
Debt have been terminated by cure of such default or written waiver by the
holder of such Debt, such default shall not thereafter constitute a Default
hereunder until such time as the right of such holder or holders to
accelerate such Debt again arises; (c) any Debt (other than the Obligations
and other than the Existing Trident Subordinated Debt and other than the
CUSA Assumed Debt) of any of the Obligors or any of their respective
Subsidiaries aggregating for all of the Obligors and their respective
Subsidiaries in excess of $40,000,000 in principal amount shall be declared
to be due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the stated maturity thereof; (d) any of the
Existing Trident Subordinated Debt shall be declared to be due and payable
or required to be prepaid prior to the stated maturity thereof and shall
not be paid (or such acceleration rescinded) within 30 days of the date on
which it is required to be so paid; or (e) demand for payment shall be made
for all or any part of the CUSA Assumed Debt prior to the stated maturity
thereof and such payment shall not be made (or such demand rescinded) on or
before the earlier of (i) 30 days following such demand or (ii) the date
upon
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<PAGE>
which the holder thereof commences proceedings to collect such payment.
R. The Exhibits to the Credit Agreement are hereby amended by adding
Exhibit C-2 to such Credit Agreement as Exhibit C-2.
SECTION 2. To induce the Lenders, the Issuers, the Agent and the Co-Agents
to enter into this Amendment, the Borrower hereby reaffirms, as of the date
hereof, its representations and warranties contained in Article V of the Credit
Agreement (except to the extent such representations and warranties relate
solely to an earlier date).
SECTION 3. The effectiveness of this Amendment is conditioned upon (a)
counterparts of this Amendment being executed by the Borrower, each Lender, each
Issuer, the Agent and each Co-Agent and (b) receipt by the Agent on or before
November 30, 1996 of each of the following, each in form and substance
reasonably satisfactory to the Agent:
(i) Copies of the articles of incorporation of Newco, together
with all amendments, certified with respect to Newco by the appropriate
governmental officer in its jurisdiction of incorporation or organization,
as the case may be.
(ii) A copy of the fully executed Newco Combination Agreement
certified by an officer of Newco as being true, correct and complete
together with a certificate of an officer of Newco to the effect that the
conditions of closing set forth in Article 12 thereof have been satisfied;
(iii) A certificate of the Secretary or an Assistant Secretary of
the Borrower with respect to the resolutions in full force and effect
authorizing the execution, delivery and performance of this Amendment and
with respect to the names of its Authorized Officers authorized to sign
this Amendment together with a sample of the true signature of each such
officer;
(iv) A certificate of the Secretary or an Assistant Secretary of
Newco with respect to the resolutions, which upon consummation of the Newco
Combination will be in full
-12-
<PAGE>
force and effect authorizing the execution, delivery and performance of the
Assumption Agreement (hereinafter defined) and with respect to the names of
its Authorized Officers authorized to sign the Assumption Agreement
together with a sample of the true signature of each such officer;
(v) Favorable opinions of counsel to the Borrower including,
without limitation, opinions with respect to the due authorization,
execution and delivery of this Amendment and the legality, validity and
enforceability of this Amendment, the Credit Agreement as amended hereby,
the Assumption Agreement and the Ratification Agreement;
(vi) A duly executed Assumption Agreement substantially in the
form of Exhibit A hereto;
(vii) A duly executed Ratification Agreement substantially in the
form of Exhibit B hereto from each of the Subsidiary Guarantors (each a
"Ratification Agreement");
(viii) The merger of the Borrower into Newco shall have occurred in
accordance with the provisions of the Newco Combination Agreement; and
(ix) Such other documents as the Agent any Lender or its counsel
shall have reasonably requested.
SECTION 4. Upon the effectiveness hereof as provided in the foregoing
Section 3, this Amendment shall be deemed to be an amendment to the Credit
Agreement, and the Credit Agreement, as amended hereby, is hereby ratified,
approved and confirmed in each and every respect. All references to the Credit
Agreement in any other document, instrument, agreement or writing shall
hereafter be deemed to refer to the Credit Agreement as amended hereby.
SECTION 5. Without regard to the conditions to effectiveness provided in
the foregoing Section 3, the Issuers and each Lender hereby consent to the Newco
Combination pursuant to the terms of the Newco Combination Agreement and hereby
waive the requirements of Section 6.2.3, Section 6.2.4 and Section 6.2.12 of the
Credit Agreement to the extent and only to the extent that those provisions
would be violated as a result of the execution of the
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<PAGE>
Newco Combination Agreement or the entering into of the Newco Combination by the
Borrower, CUSA or Newco. This Section 5 shall be effective when counterparts
hereof have been signed by all of the parties hereto.
SECTION 6. [Intentionally Omitted]
SECTION 7. THIS AMENDMENT SHALL BE A CONTRACT GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF ILLINOIS. All obligations of the Borrower and rights of the
Lenders, the Issuers, the Agent and the Co-Agents expressed herein shall be in
addition to and not in limi tation of those provided by applicable law. Whenever
possible each provision of this Amendment shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Amendment shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amendment.
SECTION 8. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any party hereto may execute this Amendment by signing one or more counterparts.
SECTION 9. This Amendment shall be binding upon the Borrower and the
Lenders, the Issuers, the Agent and the Co-Agents and their respective
successors and assigns, and shall inure to the benefit of each of the Borrower,
the Lenders, the Issuers, the Agent and the Co-Agents and the successors and
assigns of any of the Lenders, the Issuers, the Agent and the Co-Agents.
SECTION 10. EACH OF THE BORROWER, THE LENDERS, THE ISSUERS, THE AGENT AND
THE CO-AGENTS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION
-14-
<PAGE>
WITH, THIS AMENDMENT OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE
BORROWER, THE LENDERS, THE ISSUERS, THE AGENT OR THE CO-AGENTS. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
LENDER ENTERING INTO THIS AMENDMENT.
SECTION 11. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT,
ANY ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, the Borrower, the Lenders, the Issuers, the Agent and
the Co-Agents have executed this Agreement as of the date first above written.
NGC CORPORATION
By:
______________________________________
Print Name:
______________________________
Title:
___________________________________
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as agent
By:
________________________________
___________________________________
Its:_______________________________
___________________________________
<PAGE>
ABN AMRO BANK, N.V.
By:________________________________
Print Name:________________________
Title:_____________________________
By:________________________________
Print Name:________________________
Title:_____________________________
BANK OF MONTREAL
By:________________________________
Print Name:________________________
Title:_____________________________
THE BANK OF NEW YORK
By:________________________________
Print Name:________________________
Title:_____________________________
THE BANK OF NOVA SCOTIA
By:________________________________
Print Name:________________________
Title:_____________________________
BANK OF SCOTLAND
By:________________________________
<PAGE>
Print Name:________________________
Title:_____________________________
ROYAL BANK OF SCOTLAND PLC
By:________________________________
Print Name:________________________
Title:_____________________________
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:________________________________
Print Name:________________________
Title:_____________________________
THE CHASE MANHATTAN BANK (successor
by merger to The Chase Manhattan Bank
National Association)
By:________________________________
Print Name:________________________
Title:_____________________________
CHRISTIANA BANK, NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
<PAGE>
CIBC INC.
By:________________________________
Print Name:________________________
Title:_____________________________
CAISSE NATIONALE DE CREDIT AGRICOLE
By:________________________________
Print Name:________________________
Title:_____________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:________________________________
Print Name:________________________
Title:_____________________________
BANK OF BOSTON
By:________________________________
Print Name:________________________
Title:_____________________________
THE FUJI BANK, LIMITED,
HOUSTON AGENCY
By:________________________________
Print Name:________________________
Title:_____________________________
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LTD.
By:________________________________
Print Name:________________________
Title:_____________________________
LTCB TRUST COMPANY
By:________________________________
Print Name:________________________
Title:_____________________________
___________________________________
MELLON BANK, N.A. (WEST)
By:________________________________
Print Name:________________________
Title:_____________________________
NATIONAL WESTMINSTER BANK PLC
(NEW YORK BRANCH)
By:________________________________
Print Name:________________________
Title:_____________________________
NATIONAL WESTMINSTER BANK PLC
(NASSAU BRANCH)
By:________________________________
Print Name:________________________
<PAGE>
Title:_____________________________
NATIONSBANK OF TEXAS, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
PNC BANK, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
ROYAL BANK OF CANADA
By:________________________________
Print Name:________________________
Title:_____________________________
SOCIETE GENERALE, SOUTHWEST AGENCY
By:________________________________
Print Name:________________________
Title:_____________________________
SOUTHWEST BANK OF TEXAS, N.A.
By:________________________________
Print Name:________________________
Title:_____________________________
<PAGE>
THE TORONTO-DOMINION BANK
By:________________________________
Print Name:________________________
Title:_____________________________
WESTDEUTSCHE LANDESBANK
By:________________________________
Print Name:________________________
Title:_____________________________
<PAGE>
EXHIBIT 4.2
================================================================================
LETTER OF CREDIT FACILITY AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
AMONG
NGC CORPORATION
AND
CANADIAN IMPERIAL BANK OF COMMERCE,
INDIVIDUALLY AND AS AGENT
AND
THE LENDERS NAMED HEREIN
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
PAGE
ARTICLE I DEFINITIONS .................................................................................. 1
1.1 Defined Terms ................................................................................ 1
1.2 Accounting Terms and Other Determinations .................................................... 18
ARTICLE II THE FACILITY ................................................................................. 19
2.1 The Loan Facility ............................................................................ 19
2.1.1 Description of Loan Facility ........................................................ 19
2.1.2 Availability of Facility ............................................................ 19
2.1.3 Advances ............................................................................ 19
2.1.4 Lender's Several Obligations ........................................................ 20
2.1.5 Types of Advances ................................................................... 20
2.2 The Letter of Credit Facility ................................................................ 20
2.2.1 Issuance of Letters of Credit ....................................................... 20
2.2.2 Aggregate Amount Available under Letters of Credit .................................. 20
2.2.3 Reimbursement of Lenders; Automatic Advances ........................................ 21
2.2.4 Lender's Several Obligations ........................................................ 21
2.2.5 Letter of Credit Fees ............................................................... 22
2.2.6 Modification of Outstanding Letters of Credit ....................................... 22
2.2.7 Verification ........................................................................ 22
2.2.8 Irrevocable Obligations and Commercial Practices ................................... 23
2.2.9 Letter of Credit Collateral Account ................................................. 24
2.3 Required Payments ............................................................................ 24
2.4 Fees ......................................................................................... 24
2.4.1 Commitment Fees ....................................................................... 24
2.4.2 Cancellation .......................................................................... 25
2.5 Minimum Amount of Each Eurodollar Advance .................................................... 25
2.6 Optional Principal Payments .................................................................. 25
2.7 Method of Selecting Types and Interest Periods for New Advances .............................. 25
2.8 Conversion and Continuation of Outstanding Advances .......................................... 26
2.9 Changes in Interest Rate, etc. ............................................................... 27
2.10 Rates Applicable After Default ............................................................... 27
2.11 Method of Payment ............................................................................ 27
2.12 Notes; Notices ............................................................................... 27
2.13 Interest Payment Dates; Interest and Fee Basis ............................................... 28
2.14 Notification of Advances, Interest Rates, Prepayments and
Commitment tions Reductions .................................................................. 28
2.15 Lending Installations .............................................................,.......... 28
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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2.16 Non-Receipt of Funds by the Agent ............................................................ 29
2.17 Withholding Tax Exemption .................................................................... 29
2.18 Maximum Interest Rate ........................................................................ 29
2.19 Agent's Fees ................................................................................. 30
2.20 Procedures for Extensions of the Facility Maturity Date ...................................... 30
2.21 Procedures with respect to Increases in the Aggregate Commitment ............................. 30
ARTICLE III CHANGE IN CIRCUMSTANCES ...................................................................... 33
3.1 Yield Protection ............................................................................. 33
3.2 Changes in Capital Adequacy Regulations ...................................................... 34
3.3 Availability of Types of Advances ............................................................ 35
3.4 Funding Indemnification ...................................................................... 35
3.5 Lender Statements; Survival of Indemnity ..................................................... 35
3.6 Replacement of Lenders ....................................................................... 36
ARTICLE IV CONDITIONS PRECEDENT ......................................................................... 37
4.1 Initial Advance and Letter of Credit ......................................................... 37
4.2 Each Advance ................................................................................. 38
ARTICLE V REPRESENTATIONS AND WARRANTIES ............................................................... 39
5.1 Corporate or Partnership Existence and Standing .............................................. 39
5.2 Authorization and Validity ................................................................... 39
5.3 No Conflict; Government Consent .............................................................. 39
5.4 Financial Statements ......................................................................... 40
5.5 Material Adverse Change ...................................................................... 40
5.6 Taxes ........................................................................................ 40
5.7 Litigation and Contingent Obligations ........................................................ 40
5.8 Subsidiaries ................................................................................. 40
5.9 ERISA ........................................................................................ 40
5.10 Accuracy of Information ...................................................................... 41
5.11 Regulation U ................................................................................. 41
5.12 Compliance With Laws ......................................................................... 41
5.13 Environmental Matters ........................................................................ 41
5.14 Ownership of Properties; Liens ............................................................... 42
5.15 Investment Company Act ....................................................................... 42
5.16 Public Utility Holding Company Act ........................................................... 42
5.17 Insurance .................................................................................... 43
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5.18 Solvency ..................................................................................... 43
5.19 Default ...................................................................................... 43
ARTICLE VI COVENANTS .................................................................................... 43
6.1 Affirmative Covenants ........................................................................ 44
6.1.1 Financial Reporting ................................................................... 44
6.1.2 Use of Proceeds ....................................................................... 45
6.1.3 Additional Subsidiary Guaranties ...................................................... 45
6.1.4 Conduct of Business ................................................................... 46
6.1.5 Taxes and Other Charges ............................................................... 46
6.1.6 Insurance ............................................................................. 46
6.1.7 Compliance with Laws .................................................................. 47
6.1.8 Maintenance of Properties ............................................................. 47
6.1.9 Inspection ............................................................................ 47
6.1.10 Maintenance of Books and Records ..................................................... 47
6.1.11 Compliance with ERISA ................................................................ 47
6.1.12 Maintenance of Credit Rating ......................................................... 48
6.2 Negative Covenants ........................................................................... 48
6.2.1 [Intentionally Omitted] .............................................................. 48
6.2.2 Debt ................................................................................. 48
6.2.3 Merger ............................................................................... 49
6.2.4 Sale of Assets ....................................................................... 49
6.2.5 Sale of Accounts ..................................................................... 50
6.2.6 Investments and Acquisitions ......................................................... 50
6.2.7 Contingent Obligations ............................................................... 52
6.2.8 Liens ................................................................................ 53
6.2.9 [Intentionally Deleted] .............................................................. 54
6.2.10 Affiliates ........................................................................... 54
6.2.11 Judgments ............................................................................ 54
6.3 Financial Covenants .......................................................................... 54
6.3.1 Net Worth ............................................................................ 54
6.3.2 Leverage Ratio ....................................................................... 54
ARTICLE VII DEFAULTS ..................................................................................... 55
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES ............................................... 57
8.1 Acceleration ................................................................................. 57
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8.2 Amendments ................................................................................... 59
8.3 Preservation of Rights ....................................................................... 60
ARTICLE IX GENERAL PROVISIONS ........................................................................... 60
9.1 Survival of Representations; Obligations ..................................................... 60
9.2 Governmental Regulation ...................................................................... 60
9.3 Taxes ........................................................................................ 60
9.4 Headings ..................................................................................... 60
9.5 Entire Agreement ............................................................................. 61
9.6 Several Obligations; Benefits of this Agreement .............................................. 61
9.7 Expenses; Indemnification of Agent and Lenders ............................................... 61
9.8 Numbers of Documents ......................................................................... 62
9.9 Severability of Provisions ................................................................... 62
9.10 Nonliability of Lenders ...................................................................... 62
9.11 CHOICE OF LAW ................................................................................ 62
9.12 CONSENT TO JURISDICTION ...................................................................... 62
9.13 WAIVER OF JURY TRIAL ......................................................................... 62
9.14 Confidential Information ..................................................................... 63
ARTICLE X THE AGENT .................................................................................... 64
10.1 Appointment and Authority of Agent ........................................................... 64
10.2 Capacity of the Agent ........................................................................ 65
10.3 No Liability of the Agent and Indemnity ...................................................... 65
10.4 Employees of Agent ........................................................................... 65
10.5 Reliance ..................................................................................... 66
10.6 Several Commitments .......................................................................... 66
10.7 Notice of Default ............................................................................ 67
10.8 Lender Credit Decision ....................................................................... 67
10.9 Successor Agent .............................................................................. 67
ARTICLE XI SETOFF; RATABLE PAYMENTS ..................................................................... 68
11.1 Setoff ....................................................................................... 68
11.2 Ratable Payments ............................................................................. 68
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ............................................ 68
12.1 Successors and Assigns ....................................................................... 68
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12.2 Participations ............................................................................... 69
12.2.1 Permitted Participants; Effect ....................................................... 69
12.2.2 Voting Rights ........................................................................ 69
12.2.3 Benefit of Setoff .................................................................... 69
12.3 Assignments .................................................................................. 70
12.3.1 Permitted Assignments ................................................................ 70
12.3.2 Effect; Effective Date ............................................................... 70
12.4 Dissemination of Information ................................................................. 71
12.5 Tax Treatment ................................................................................ 71
ARTICLE XIII NOTICES ...................................................................................... 71
13.1 Giving Notice ................................................................................ 71
13.2 Change of Address ............................................................................ 72
ARTICLE XIV COUNTERPARTS ................................................................................. 72
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SCHEDULES
EXHIBIT "A-1" FORM OF NOTE
EXHIBIT "B-1" FORM OF LETTER OF CREDIT
EXHIBIT "B-2" FORM OF LETTER OF CREDIT MODIFICATION
EXHIBIT "C" FORM OF OPINION OF BORROWER'S COUNSEL
EXHIBIT "D" COMPLIANCE CERTIFICATE
EXHIBIT "E-1" ISSUANCE REQUEST
EXHIBIT "E-2" L/C MODIFICATION NOTICE
EXHIBIT "F" ASSIGNMENT AGREEMENT
EXHIBIT "G" NOTICE OF COMMITMENT INCREASE
EXHIBIT "H-1" FORM OF GUARANTY
EXHIBIT "H-2" FORM OF TRIDENT GUARANTY
SCHEDULE "1" SUBSIDIARIES AND OTHER INVESTMENTS
SCHEDULE "2" DEBT AND LIENS
SCHEDULE "3" LITIGATION
SCHEDULE "4" TRIDENT EXISTING GUARANTIES
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LETTER OF CREDIT FACILITY AGREEMENT
This Letter of Credit Facility Agreement, dated as of September 1, 1996, is
among NGC Corporation, a Delaware corporation, as borrower, the Lenders
(hereinafter defined), and Canadian Imperial Bank of Commerce, a Delaware
corporation, as agent. The parties hereto agree as follows:
ACTICLE I
DEFINITIONS
1.1 Defined Terms.
As used in this Agreement:
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.
"Additional Guaranty" is defined in Section 6.1.3.
"Advance" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by some or all of the Lenders concurrently to the
Borrower pursuant hereto on the same Borrowing Date, at the same Rate Option
and, in the case of a Eurodollar Advance, for the same Eurodollar Interest
Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means Canadian Imperial Bank of Commerce in its capacity as agent
for the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.
<PAGE>
"Aggregate Commitment" means $300,000,000 as increased or reduced from time
to time pursuant to the terms hereof.
"Agreement" means this Letter of Credit Facility Agreement, as it may be
amended or modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied on a basis consistent with
the most recent financial statements of the Borrower and its Subsidiaries
delivered to the Lenders pursuant hereto.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Base Rate for such day and (ii) the sum of
Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Commitment Fee" means on any date (subject to clause (iv) of
the "Applicable Rating Level") the number of basis points per annum set forth on
the table below under the Applicable Rating Level on such date.
- ------------------------------------------------------------------------------
APPLICABLE
RATING
LEVEL LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- ------------------------------------------------------------------------------
BASIS POINTS 5.0 6.0 8.5 10.0 17.5
- ------------------------------------------------------------------------------
"Applicable Margin" means on any date and with respect to each Eurodollar
Advance (subject to clause (iv) of the definition of "Applicable Rating Level")
the number of basis points per annum set forth on the table below under the
Applicable Rating Level on such date.
- ------------------------------------------------------------------------------
APPLICABLE
RATING
LEVEL LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- ------------------------------------------------------------------------------
BASIS POINTS 25.0 30.0 35.0 37.5 55.0
- ------------------------------------------------------------------------------
"Applicable Rating Level" means (except as set forth below) the highest
level set forth below that corresponds to a rating issued from time to time by
S&P or Moody's as applicable to the Borrower's senior unsecured long-term debt:
2
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-------------------------------
MOODY'S S&P
-------------------------------
LEVEL I =)A3 =)A-
-------------------------------
LEVEL II (A3 & (A- &
=)BAA1 =)BBB+
-------------------------------
LEVEL III (BAA1 & (BBB+ &
=)BAA2 =)BBB
-------------------------------
LEVEL IV (BAA2 & (BBB &
=)BAA3 =)BBB-
-------------------------------
LEVEL V (BAA3 (BBB-
-------------------------------
For example, if the Moody's rating is Baa1 and the S&P rating is BBB, Level II
shall apply.
For purposes of the foregoing, (i) "=)" means a rating equal to or more
favorable than; "(" means a rating less favorable than; (ii) if neither of the
Rating Agencies have issued ratings for the Borrower's senior unsecured long-
term debt, Level V shall be deemed applicable; (iii) if both Rating Agencies
have issued ratings for the Borrower's senior unsecured long-term debt and such
ratings are more than one level apart (for example, the Moody's rating is Baa1
and the S&P rating is BBB-), the level immediately below the highest level set
forth above shall be deemed applicable (for example, if the Moody's rating is
Baa1 and the S&P rating is BBB-, Level III shall apply); (iv) if determinative
ratings shall change (other than as a result of a change in the rating system
used by any applicable Rating Agency) such that a change in Applicable Rating
Level would result, such change shall effect a change in Applicable Rating Level
as of the day on which it is first announced by the applicable Rating Agency,
and any change in the Applicable Margin or the Applicable Commitment Fee shall
apply commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change; and (v) if the
rating system of any of the Rating Agencies shall change prior to the date all
obligations hereunder have been paid and the Commitments cancelled, the Borrower
and the Lenders shall negotiate in good faith to amend the references to
specific ratings in this definition to reflect such changed rating system, and
pending such amendment, if no Applicable Rating Level is otherwise determinable
based upon the foregoing, the last Applicable Rating Level shall apply.
"Article" means an article of this Agreement unless another document is
specifically referenced.
3
<PAGE>
"Authorized Officer" means any of the President, the Chief Financial
Officer, the General Counsel, the Controller or the Treasurer of the Borrower.
"Authorized Representative" means any Authorized Officer or the Assistant
Treasurer of the Borrower.
"Base Rate" means, on any date, a fluctuating rate of interest per annum
equal to the rate of interest most recently established by the Agent at its
office in New York, New York as its base rate for Dollar loans in the United
States. The Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Agent in connection with extensions of credit.
Changes in the rate of interest on any Obligation determined by reference to the
Base Rate will take effect simultaneously with each change in the Base Rate.
"Base Rate Advance" means an Advance which bears interest at the Alternate
Base Rate.
"Base Rate Loan" means a Loan which bears interest at the Alternate Base
Rate.
"Borrower" means NGC Corporation, a Delaware corporation, and its
successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.7.
"British Gas" means British Gas plc, a corporation incorporated under the
laws of England and Wales, and its successors and assigns, including the
successors that would result from the currently proposed restructuring.
"Business Day" means (i) with respect to any borrowing or payment of a
Eurodollar Advance, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago and New York for the conduct of substantially all
of their commercial lending activities and on which dealings in United States
dollars are carried on in the London interbank market and (ii) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago and New York City for the conduct of substantially all of their
commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
4
<PAGE>
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person as a lessee under Capitalized Leases which would be
shown as a liability on a balance sheet of such Person prepared in accordance
with Agreement Accounting Principles.
"Change" is defined in Section 3.2.
"Change in Control" means NOVA Corporation, British Gas, Chevron
Corporation, and/or the shareholders of the PEP Partners (as defined in the
Trident MergerAgreement) including David C. Feldman, Inc. shall cease to own,
directly or indirectly either (i) at least 50% in the aggregate of the
outstanding shares of voting stock of the Borrower without giving effect to any
equity issues by the Borrower after the Closing Date (but after giving effect to
any equity issued by the Borrower to any one or more of NOVA Corporation,
British Gas, Chevron Corporation, the shareholders of the PEP Partners, and
their successors, including David C. Feldman, Inc., or their respective
Subsidiaries) or (ii) at least 40% in the aggregate of the outstanding shares of
voting stock of the Borrower.
"CIBC" means Canadian Imperial Bank of Commerce in its individual capacity,
and its successors.
"Closing Date" means September 1, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Shortfall Amount" is defined in Section 8.1(a).
"Commitment" means, for each Lender, the obligation of such Lender to issue
Letters of Credit hereunder or make Loans hereunder not exceeding the amount set
forth opposite its signature below or as set forth in any Notice of Assignment
relating to any assignment that has become effective pursuant to Section 12.3.2,
as such amount may be modified from time to time pursuant to the terms hereof.
"Commitment Increase Effective Date" is defined in Section 2.21.
"Commitment Termination Date" means the earlier to occur of (i) the
Facility Maturity Date, (ii) the date on which all of the Commitments are
terminated in full or the Commitments are reduced to zero pursuant to Section
2.4.2, and (iii) the earlier of the date of either (a) the occurrence of any
Default described in Section 8.1(a) or (b) the occurrence and continuance of any
other Default and either (1) the declaration of the Loans to be due and payable
pursuant to
5
<PAGE>
Section 8.1(b) or (2) in the absence of such declaration, the giving of notice
by the Agent to the Borrower that the Commitments have been terminated pursuant
to Section 8.1(b).
"Compliance Certificate" is defined in Section 6.1.1(iii).
"Consolidated Debt" means, as of any date of determination thereof, the
aggregate principal amount of all then outstanding Debt of the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with Agreement
Accounting Principles as of such date.
"Consolidated EBITD" shall mean, for any period, the sum of (a)
Consolidated Net Income (excluding income taxes) determined for such period;
provided that shall be excluded (i) the income (or loss) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower or any Subsidiary of
the Borrower has an interest but in which any other Person (not the Borrower or
any of its Subsidiaries) has a joint interest with respect to which the equity
method of accounting is utilized, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower, or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of the Borrower or is
merged into or consolidated with the Borrower or any of its Subsidiaries or that
Person's Properties are acquired by the Borrower or any of its Subsidiaries, and
(iii) the income of any Subsidiary of the Borrower to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement (other than the Existing Trident Indentures as in
effect on November 1, 1994), instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary, plus (b) the Interest
Expense for such period, plus (c) to the extent taken into account in
calculating Consolidated Net Income (excluding income taxes) referred to in
clause (a) of this definition, the aggregate amount of all costs and expenses
incurred as a result of the Trident Merger and of the Midstream Merger,
respectively, including, without limitation, all prepayment premiums payable on
Debt required to be prepaid as a result of the occurrence of the Trident Merger,
plus (d) depreciation, depletion and amortization expense of the Borrower and
its Subsidiaries determined for such period on a consolidated basis, plus (e)
without duplication, the amount of dividends or other distributions actually
paid to the Borrower or any of its Subsidiaries during such period to the extent
attributable to income from another period excluded pursuant to clause (i)
above; provided, however, for purposes of this definition, extraordinary gains
and losses shall be excluded from the calculation of Consolidated Net Income.
"Consolidated Interest Expense" means, for any Rolling Period, the total
interest expense, whether paid or accrued (including, without limitation, that
attributable to Capitalized Leases), of the Borrower and its Subsidiaries
determined for such period on a consolidated basis in accordance with Agreement
Accounting Principles, including, without limitation, all
6
<PAGE>
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing plus or minus net amounts paid or
payable or received or receivable pursuant to interest rate swap, exchange, cap
or similar agreements.
"Consolidated Net Income" means, for any period, the consolidated net
income of a Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with Agreement Accounting Principles.
"Consolidated Net Worth" means at any date the stockholders' equity of the
Borrower and its Subsidiaries determined on a consolidated basis in accordance
with Agreement Accounting Principles as of such date.
"Consolidated Tangible Net Worth" means at any date the stockholders'
equity of the Borrower and its Subsidiaries less their consolidated Intangible
Assets, all determined on a consolidated basis in accordance with Agreement
Accounting Principles as of such date. For purposes of this definition
"Intangible Assets" means the amount (to the extent reflected in determining
such stockholders' equity) of (a) all net write-ups (other than write-ups
resulting from foreign currency translations and write-ups of assets of a going
concern business made within twelve months after the acquisition of such
business) subsequent to December 31, 1993 in the book value of any Property
owned by the Borrower or any of its consolidated Subsidiaries and (b) all
unamortized debt discount and expense, goodwill, patents, trademarks, service
marks, trade names, copyrights, and organization or developmental expenses.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.8.
"CUSA" means Chevron U.S.A. Inc.
"CUSA Assumed Debt" means the $155,373,000 aggregate principal amount of
CUSA's obligations under the CUSA Note, the payment of which was assumed by
Midstream under the CUSA Assumption Agreement.
"CUSA Assumption Agreement" means the agreement dated as of the closing of
the for the CUSA Assumed Debt.
7
<PAGE>
"CUSA Certificate" means a certificate in the form of Annex B to the
Letters of Credit delivered by CUSA to effect a reduction in the Stated Amount
or Stated Maturity Date of, or a change in the Percentage attributable to, any
outstanding Letters of Credit.
"CUSA Note" means the demand promissory note dated August 25, 1994 payable
by CUSA to Chevron Capital U.S.A. Inc.
"Debt" means, with respect to any Person, (a) all indebtedness and other
obligations of such Person for the repayment of money borrowed, whether or not
represented by acceptances, bonds, debentures, notes, or other instruments or
securities, (b) all indebtedness and other obligations of such Person for the
deferred payment of the purchase price of any property or assets (other than
accounts payable on terms customary in the trade), (c) all Capitalized Lease
Obligations of such Person, and (d) all indebtedness and other obligations,
whether or not assumed by such Person, secured by any Lien (other than a Lien
permitted pursuant to Section 6.2.8 (other than clauses (iv), (vi) and (vii)
thereof)) on, or payable out of the proceeds of or production from, any Property
of such Person; provided, however, that in no event shall Debt described in any
of the foregoing categories (i) be duplicative of any Debt described in any
other such category, (ii) include Guaranties or (iii) include any Project
Financing that would not be shown as a liability on the financial statements of
the Borrower and its Subsidiaries on a consolidated basis.
"Default" means an event described in Article VII.
"Draw Date" is defined in Section 2.2.3.
"Environmental Laws" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules and regulations (including consent decrees and
administrative orders directed to the Borrower or any of its Subsidiaries)
relating to the protection of the environment and in effect in any and all
jurisdictions in which the Borrower or its Subsidiaries are conducting or at any
time have conducted business, or where any Property of the Borrower or any of
its Subsidiaries is located, or where any Hazardous Material generated by or
disposed of by the Borrower or any of its Subsidiaries is located, to the extent
applicable to each such business activity, Property or generation or disposal.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a Eurodollar
Rate requested by the Borrower pursuant to Section 2.1.
8
<PAGE>
"Eurodollar Base Rate" means, with respect to any Eurodollar Interest
Period for any Eurodollar Loan, the lesser of (A) the rate per annum equal to
the average of the offered quotations appearing on Telerate Page 3750 (or if
such Telerate Page shall not be available, any successor or similar service as
may be selected by the Agent and the Borrower) as of 11:00 a.m., London time,
(or as soon thereafter as practicable) on the day two Business Days prior to the
first day of such Eurodollar Interest Period for dollar deposits having a term
comparable to such Eurodollar Interest Period or (B) the maximum interest rate
permitted pursuant to Section 2.18. If none of such Telerate Page 3750 nor any
successor or similar service is available, then the "Eurodollar Base Rate" shall
mean, with respect to any Eurodollar Interest Period for any applicable
Eurodollar Loan, the lesser of (A) the rate per annum determined by the Agent to
be the average of the rates quoted by the Reference Banks at approximately 11:00
a.m., London time, (or as soon thereafter as practicable) on the day two
Business Days prior to the first day of such Eurodollar Interest Period for the
offering by such Reference Banks to leading banks in the interbank market of
U.S. dollar deposits having a term comparable to such Eurodollar Interest Period
and in an amount comparable to the principal amount of the Eurodollar Loan of
such respective Reference Bank to which such Eurodollar Interest Period relates
or (B) the maximum interest rate permitted pursuant to Section 2.18. If any
Reference Bank does not furnish a timely quotation, the Agent shall determine
the relevant interest rate on the basis of the quotation or quotations furnished
by the remaining Reference Bank or Banks. Each determination of the Eurodollar
Base Rate shall be conclusive and binding, absent manifest error.
"Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a
Eurodollar Loan, a period of one, two, three, six, or (subject to availability
by each applicable Lender) nine or twelve months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on (but exclude) the day which corresponds numerically to such
date one, two, three, six, nine or twelve months thereafter, provided, however,
that if there is no such numerically corresponding day in such next, second,
third, sixth, ninth or twelfth succeeding month, such Eurodollar Interest Period
shall end on the last Business Day of such next, second, third, sixth, ninth or
twelfth succeeding month. If a Eurodollar Interest Period would otherwise end
on a day which is not a Business Day, such Eurodollar Interest Period shall end
on the next succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new month, such Eurodollar Interest Period
shall end on the immediately preceding Business Day.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance or a
Eurodollar Loan for the relevant Eurodollar Interest Period, the sum of (i) the
quotient of (a) the Eurodollar Base Rate applicable to such Eurodollar Interest
Period, divided by (b) one minus the Reserve Requirement, if any, (expressed as
a decimal) applicable to such Eurodollar Interest Period plus
9
<PAGE>
(ii) the Applicable Margin. The Eurodollar Rate shall be rounded, if necessary,
to the next higher 1/16 of 1%.
"Existing Bank Credit Facility" means the credit facility made available to
the Borrower and its Subsidiaries pursuant to the terms of that certain Credit
Agreement dated as of March 14, 1995 as amended by amendments dated as of
October 4, 1995 and July 26, 1996 and any subsequent amendment, extension or
replacement thereof.
"Existing Trident Indentures" means each of (i) the Indenture dated to be
effective as of September 9, 1993 between Trident NGL, Inc., Issuer, and
Ameritrust Texas National Association, Trustee, for $65,000,000 14% Senior
Subordinated Notes due 2001 and (ii) the Indenture dated to be effective as of
April 15, 1993 between Trident NGL, Inc., Issuer, and the First National Bank of
Boston, Trustee, for $105,000,000 10 1/4% Subordinated Notes due 2003.
"Existing Trident Subordinated Debt" means Debt of Trident under the
Existing Trident Indentures as amended to the date hereof, and hereafter as
amended consistent with Trident's Subsidiary Guaranty.
"Facility Maturity Date" means August 28, 1997, as may be extended from
time to time pursuant to Section 2.20.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately [10:00] a.m. (New
York time) on such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Fixed Price Contract" means, as of any date of determination, a contract
(including, without limitation, physical delivery, option (whether cash or
financial), exchange, swap and futures contracts) entered into by the Borrower
or any Subsidiary of the Borrower for the purchase or sale of Natural Gas, other
than (i) such a contract which has a remaining term of thirty (30) days or less
from such date of determination, or (ii) such a contract under which the
purchase or sale price of any portion of Natural Gas delivered or to be
delivered on or after such date of determination is calculated by reference to
(a) the spot price for Natural Gas current on each date of delivery at the place
of delivery specified in such contract, (b) the spot price for Natural Gas
current on each date of delivery at a place of delivery other than the place of
delivery specified in such contract provided that such spot price is adjusted to
reflect the cost of
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transporting Natural Gas to the place of delivery specified in such contract,
(c) a basket of price indices similar to the spot price for Natural Gas current
on each date of delivery at the place of delivery, or (d) a basket of price
indices similar to the then current spot price for Natural Gas at a place of
delivery other than the place of delivery specified in such contract provided
that each such price index is adjusted to reflect the cost of transporting
Natural Gas to the place of delivery specified in such contract; provided,
however, that no Processing Supply Contract shall be considered a Fixed Price
Contract for purposes of this Agreement.
"Gas Purchase Agreement" means the Natural Gas Purchase and Sale Agreement
dated August 31, 1996 among NGC and CUSA wherein NGC and CUSA agree to the
purchase and sale of Natural Gas pursuant to the terms set forth therein.
"Guarantor" means each of NGC and Trident and any other Subsidiary (direct
or indirect) from time to time of the Borrower that delivers a Subsidiary
Guaranty pursuant to Section 6.1.3 and each of their respective successors and
assigns.
"Guaranty" means, with respect to any Person, (a) all indebtedness and
other obligations, contingent or otherwise, of such Person under or in respect
of any letter of credit issued for its own account, and (b) all indebtedness and
other obligations of such Person under any agreement, undertaking or other
arrangement by which such Person (i) assumes, guarantees, endorses (other than
the endorsement of instruments for collection in the ordinary course of
business), commits or agrees (whether or not such commitment or agreement is
contingent or subject to the occurrence of a specified event or events) to
purchase or otherwise acquire or provide funds for the payment of any obligation
or liability of any other Person or (ii) agrees to maintain the net worth,
working capital or any other financial condition of any other Person; provided,
however, in no event shall Guaranties described in any of the foregoing
categories include any Guaranties by a Project Financing Subsidiary that would
not be shown as a liability on the financial statements of the Borrower and its
Subsidiaries on a consolidated basis.
"Hazardous Material" means (a) any "hazardous substance," as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and (b) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act, as amended and (c) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material waste or substance within the meaning of
any applicable Environmental Law, all as amended or hereafter amended.
"Increasing Lender" is defined in Section 2.21.
"Indemnified Party" is defined in Section 9.7.
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"Investment" of a Person means any loan, advance (other than commission,
relocation, travel and similar loans and/or advances to officers and employees
made in the ordinary course of business), extension of credit (other than
Guaranties, accounts receivable arising in the ordinary course of business on
terms customary in the trade and prepayments made and production payments
acquired in the ordinary course of business), or contribution of capital by such
Person to any other Person or any investment in, or purchase or other
acquisition of, the stock, partnership interests, notes, debentures or other
securities of any other Person made by such Person.
"Issuance Date" means, for each Letter of Credit, the date on which such
Letter of Credit is issued hereunder.
"Issuance Request" means a credit issuance request in substantially the
form attached to this Agreement as Exhibit "E-1" hereto, with all blanks
appropriately completed and duly executed and delivered by an Authorized
Representative on behalf of the Borrower.
"Laws" means all statutes, laws, ordinances, regulations, orders, writs,
injunctions, or decrees of the United States, any state, any foreign country, or
any other Tribunal.
"L/C Modification Notice" means a letter of credit amendment request in
substantially the form attached to this Agreement as Exhibit "E-2" hereto, with
all blanks appropriately completed and duly executed and delivered by an
Authorized Representative on behalf of the Borrower.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and the lending institutions that hereafter become parties hereto
pursuant to Section 12.3.
"Lending Installation" means, with respect to a Lender, any office, branch,
subsidiary or affiliate of such Lender.
"Letter of Credit" means a letter of credit or similar instrument which is
issued in favor of CUSA pursuant to this Agreement in substantially the form of
Exhibit "B-1" hereto.
"Letter of Credit Collateral Account" has the meaning in Section 2.2.9.
"Letter of Credit Liabilities" means, at any time, with respect to Letters
of Credit then in effect, the sum of (i) the undrawn face amount of such Letters
of Credit, plus (ii) the aggregate unpaid amount, if any, of all Obligations of
the Borrower then due and payable to reimburse the Lenders in respect of
drawings under such Letters of Credit.
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"Leverage Ratio" means the ratio, expressed as a percentage, of
Consolidated Debt to the sum of Consolidated Debt plus Consolidated Net Worth.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, security interest, encumbrance or preference,
priority or other security agreement or any interest in Property to secure
payment of a debt or performance of an obligation (including, without
limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease or other title retention agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
"Loan Documents" means this Agreement, each of the Notes, each Letter of
Credit, each of the Subsidiary Guaranties, each Issuance Request, each Borrowing
Notice, the agreement with respect to fees referred to in Section 2.19, together
in each case with all exhibits, schedules and attachments thereto, and all other
agreements, documents, certificates and instruments from time to time executed
and delivered by the Borrower or any of its Subsidiaries pursuant to or in
connection with any of the foregoing.
"Loan Facility" is defined in Section 2.1.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, financial condition or results of operations of the Borrower
and its Subsidiaries taken as a whole, or (ii) the ability of the Borrower to
perform its payment obligations under any of the Loan Documents.
"Material Agreement" means any contract or agreement to which the Borrower
or any of its Subsidiaries is a party which is material to the consolidated
financial condition or operations of the Borrower and its Subsidiaries, and
includes, without limitation, the Existing Trident Indentures.
"Midstream" means Midstream Combination Corp. or its successor under the
Midstream Merger Agreement.
"Midstream Merger" means the merger of Midstream and Old NGC with Midstream
being the surviving corporation and changing its name to NGC Corporation
pursuant to the Midstream Merger Agreement.
"Midstream Merger Agreement" means the Combination Agreement and Plan of
Merger dated May 22, 1996 among Old NGC, CUSA and Midstream.
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"Moody's" means Moody's Investors Service, Inc. and any successor thereto
that is a nationally-recognized rating agency.
"Multiemployer Plan" means a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA to which the Borrower or any member of the
Controlled Group is obligated to make contributions.
"Natural Gas" means all gaseous hydrocarbons including, but not limited to
oil well gas, gas well gas, and casinghead gas but excluding any natural gas
liquids.
"New Funds Amount" means the amount by which a New Lender's or an
Increasing Lender's outstanding Loans increase as of a Commitment Increase
Effective Date (without regard to any such increase as a result of Advances made
on such Commitment Increase Effective Date).
"New Lender" is defined in Section 2.21.
"NGC" means Natural Gas Clearinghouse, a general partnership organized
under the laws of the state of Colorado.
"Notes" means, collectively, the promissory notes in substantially the form
of Exhibit "A-1" hereto, with appropriate insertions, duly executed and
delivered to the Agent by the Borrower for the account of each Lender and
payable to the order of such Lender in the amount of its Commitment, including
any amendment, modification, renewal or replacement of such promissory notes;
and "Note" means any one of the Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Notice of Commitment Increase" is defined in Section 2.21.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Agent or any Indemnified Party arising under any of the Loan
Documents.
"Obligors" means the Borrower and each Guarantor, and their successors and
assigns.
"Old NGC" means NGC Corporation, a Delaware corporation, prior to its
merger with Midstream pursuant to the Midstream Merger Agreement.
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"Out of Funds Period" means the period from and including a Draw Date to
but excluding the date a Lender provides the Agent immediately available and
freely transferable funds equal to such Lender's Percentage of the drawing under
a Letter of Credit which took place on such Draw Date.
"Partially Increasing Lender" is defined in Section 2.21.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last Business Day of each calendar quarter.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Percentage" means, with respect to each Lender, the fraction, expressed as
a percentage, (i) the numerator of which equals such Lender's Commitment and
(ii) the denominator of which equals the Aggregate Commitment.
"Permitted Liens" means any one or more of the following: (a) Liens for
taxes, assessments or other governmental charges or levies either not yet
delinquent or which are being contested in good faith by appropriate proceedings
diligently prosecuted and as to which adequate reserves shall have been set
aside in conformity with Agreement Accounting Principles, (b) deposits or
pledges to secure the payment of workers' compensation, unemployment insurance,
social security benefits or obligations arising under similar legislation, or to
secure the performance of public or statutory obligations, surety or appeal
bonds, and other obligations of a like nature incurred in the ordinary course of
business, (c) materialmen's, mechanics', workmen's, repairmen's, employees's,
landlord's, lessor's or other like Liens arising in the ordinary course of
business to secure obligations not more than 30 days past due or being contested
in good faith and as to which adequate reserves shall have been set aside in
conformity with Agreement Accounting Principles or as to which adequate bonds
shall have been obtained, (d) Liens arising under Section 9.319 of the Texas
Uniform Commercial Code or similar statutes of states other than Texas, (e)
zoning restrictions, easements, rights-of-way, restrictions, servitudes,
permits, reservations, encroachments, exceptions, conditions, covenants, and any
other restrictions on the use of real property none of which materially impairs
the use of such property by the owner of such property in the operation of its
business, (f) liens in favor of the Agent for pro rata benefit of Lenders, or to
the Lenders to secure the Obligations, (g) inchoate Liens arising under ERISA,
(h) Liens reserved in customary oil, gas and/or mineral leases for bonus or
rental payments and for compliance with the terms of such leases and Liens
reserved in customary operating agreements, farm-out and farm-in agreements,
exploration agreements, development agreements and other similar agreements for
compliance with the terms of such agreements, (i) any obligations or duties
affecting any of the Property of any Person to any
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municipality or public authority with respect to any franchise, grant, license
or permit which do not materially impair the use of such Property for the
purposes for which it is held, (j) defects, irregularities and deficiencies in
title to any Property of any Person which in the aggregate do not materially
impair the use of such Property for the purposes for which such Property is held
by the Borrower, and defects, irregularities and deficiencies in title to any
Property of the Borrower which defects, irregularities or deficiencies have been
cured by possession under applicable statutes of limitation, (k) royalties,
overriding royalties, revenue interests, net revenue interests, production
payments (other than royalties, overriding royalties, revenue interests, net
revenue interests or production payments granted or created by such Person or
any of its Subsidiaries in the ordinary course of business in connection with,
or having the effect of, the borrowing of money), advance payment obligations
(other than obligations in respect of advance payments received by such Person
or any of its Subsidiaries in connection with, or having the effect of, the
borrowing of money) and other similar burdens now existing on Properties now
owned or, as to Properties hereafter acquired, at the time of acquisition by
such Person, (l) Liens arising out of all presently existing and future division
and transfer orders, advance payment agreements, processing contracts, gas
processing plant agreements, operating agreements, gas balancing or deferred
production agreements, pooling, unitization or communitization agreements,
pipeline, gathering or transportation agreements, platform agreements, drilling
contracts, injection or repressuring agreements, cycling agreements,
construction agreements, salt water or other disposal agreements, leases or
rental agreements (but only as otherwise permitted by this Agreement), farm-out
and farm-in agreements, exploration and development agreements, and any and all
other contracts or agreements covering, arising out of, used or useful in
connection with or pertaining to the exploration, development, operation,
production, sale, use, purchase, exchange, storage, separation, dehydration,
treatment, compression, gathering, transportation, processing, improvement,
marketing, disposal or handling of any Property of a Person, provided such
agreements are entered into the ordinary course of business and contain terms
customary for such agreements in the industry, and (m) in the case of the
Borrower and its Subsidiaries, other minor liens or encumbrances none of which
interferes materially with the use of the Property affected in the ordinary
conduct of the Borrower's and/or its Subsidiaries business and which
individually or in the aggregate do not have a Material Adverse Effect.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, limited liability company, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
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"Processing Supply Contract" means any contract (including, without
limitation, physical delivery, option (whether cash or financial), exchange,
swap and futures contracts) entered into by the Borrower or any of its
Subsidiaries in the ordinary course of business for the purpose of managing the
impact of price fluctuations on natural gas supply costs related to any natural
gas processing activity conducted by the Borrower or any of its Subsidiaries.
"Project Financing" shall mean any Debt incurred to finance a project
(including any construction financing) which does not permit recourse to the
Borrower or any of its Subsidiaries (other than a Project Financing Subsidiary)
or any of their respective Property other than the Property of a Project
Financing Subsidiary.
"Project Financing Subsidiary" shall mean (i) any Subsidiary of the
Borrower or (ii) any other Person in which the Borrower owns a 50% or less
interest, in each case, whose principal purpose is to incur Project Financing or
to become an owner of interests in a Person so created to conduct the business
activities for which such Project Financing was incurred, and substantially all
the fixed assets of which Subsidiary or Person are those fixed assets being
financed (or to be financed) in whole or in part by one or more Project
Financings.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person, and includes, without limitation, stock, partnership
and limited liability company interests owned or held in any other Person by
such Person.
"Purchaser" is defined in Section 12.3.1.
"Rate Option" means the Alternate Base Rate or the Eurodollar Rate.
"Rating Agency" means either of S&P or Moody's.
"Reducing Lender" is defined in Section 2.21.
"Reduction Amount" means the amount by which a Reducing Lender's or a
Partially Increasing Lender's outstanding Loans decrease as of a Commitment
Increase Effective Date (without regard to any such increase as a result of
Advances made on such Commitment Increase Effective Date).
"Reference Banks" means each of the Agent and The First National Bank of
Chicago.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official
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interpretation of said Board of Governors relating to reserve requirements
applicable to member banks of the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Single
Employer Plan, excluding, however, such events as to which the PBGC by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event, provided, however, that
a failure to meet the minimum funding standard of Section 412 of the Code and of
Section 302 of ERISA shall be a Reportable Event regardless of the issuance of
any such waiver of the notice requirement in accordance with either Section
4043(a) of ERISA or Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 60% of
the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 60% of the sum of (i) the Letter of
Credit Liabilities and (ii) the aggregate unpaid principal amount of the
outstanding Advances.
"Reserve Requirement" means, with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement, if any, (including all basic,
supplemental, marginal and other reserves) which is imposed on Eurocurrency
liabilities (in the case of Eurodollar Advances or Eurodollar Loans). The
Reserve Requirement shall be adjusted automatically on and as of the effective
date of any change in the applicable reserve requirement.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"Rolling Period" means for each calendar quarter, such quarter and the
three preceding calendar quarters.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and any successor thereto that is a nationally-recognized
rating agency.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
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"Single Employer Plan" means a Plan that is not a Multiemployer Plan.
"Stated Amount" means the total amount of a Letter of Credit as reduced by
any drawings thereunder.
"Stated Maturity Date" means the date set forth in each Letter of Credit
issued pursuant hereto as the expiration date for such Letter of Credit;
provided, however, in no event shall the Stated Maturity Date exceed the
Facility Maturity Date.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any
partnership, association, joint venture, limited liability company or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned. Unless otherwise expressly
provided, all references herein to a "Subsidiary" shall mean a direct or
indirect Subsidiary of the Borrower.
"Subsidiary Guaranty" means (i) in the case of NGC or any Subsidiary of the
Borrower (other than Trident and its Subsidiaries) the Guaranty Agreement
substantially in the form of Exhibit "H-1" and (ii) in the case of Trident and
its Subsidiaries, the Guaranty Agreement substantially in the form of Exhibit
"H-2", as amended or modified from time to time.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which (i) represents more than 15% of the
consolidated assets of the Borrower and its Subsidiaries as shown in the
consolidated financial statements of the Borrower and its Subsidiaries most
recently delivered to the Lenders pursuant to Section 6.1.1 (or, if no such
statements have been delivered, the statements referred to in Section 5.4) or
(ii) is responsible for more than 15% of the Consolidated EBITD for the Rolling
Period ending with the calendar quarter immediately prior to the quarter in
which such determination is made.
"Transferee" is defined in Section 12.4.
"Tribunal" means any state, commonwealth, federal, foreign, territorial, or
other court or governmental department, commission, board, bureau, agency, or
instrumentality or any properly convened arbitration.
"Trident" means Trident NGL, Inc., a Delaware corporation.
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"Trident Merger" means the merger, consolidation or combination of NGC's
partners into or with Old NGC, with Old NGC being the surviving corporation
pursuant to the Trident Merger Agreement.
"Trident Merger Agreement" means the Combination Agreement and Plan of
Merger by and among NGC and Trident NGL Holding, Inc. and others dated as of
October 21, 1994.
"Type" means, with respect to any Advance, its nature as a Base Rate
Advance or a Eurodollar Advance.
"UCC" means the Uniform Commercial Code in effect from time to time in the
State of Illinois.
"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans.
"Unmatured Default" means an event or condition which but for the lapse of
time or the giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
1.2 Accounting Terms and Other Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with Agreement Accounting
Principles. The words "herein," "hereof," "hereunder," and words of similar
import refer to this Agreement as a whole and not to a particular article,
section, paragraph or other subdivision. All other terms used herein shall have
the meanings stated herein or, if not otherwise defined herein, the meanings for
such terms provided in the UCC.
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ARTICLE II
THE FACILITY
2.1 The Loan Facility.
2.1.1 Description of Loan Facility. The Lenders grant to the Borrower a
credit facility (the "Loan Facility") pursuant to which, and upon the terms and
subject to the conditions herein set out:
(i) each Lender severally agrees to make Loans in U.S. Dollars to the
Borrower in accordance with Section 2.1.3;
(ii) in no event may the sum of the aggregate principal amount of all
outstanding Loans made by a given Lender to the Borrower exceed the amount
equal to (A) such Lender's Commitment, less (B) the Stated Amount of all
outstanding Letters of Credit issued by such Lender, less (C) the
Borrower's unpaid reimbursement obligations to such Lender with respect to
the amounts paid by such Lender pursuant to Letters of Credit (which
reimbursement obligations have not been deemed to be automatic Base Rate
Advances pursuant to Section 2.2.3);
(iii) in no event may any new Advance requested by the Borrower exceed
the Borrower's reimbursement obligations to the Lenders with respect to the
amounts paid by such Lenders pursuant to Letters of Credit.
2.1.2 Availability of Facility. Subject to the terms of this Agreement,
the Loan Facility is available for borrowing from the date of this Agreement to
the Commitment Termination Date for the sole purpose of paying the Borrower's
reimbursement obligations to the Lenders with respect to the amounts paid by
such Lenders pursuant to Letters of Credit or for converting or continuing
Advances previously made.
2.1.3 Advances. Each Advance hereunder shall consist of borrowings made
from each Lender to reimburse such Lender for any funds disbursed by such Lender
pursuant to any draft drawn or demand made under any Letter of Credit issued by
such Lender pursuant hereto or to convert or continue Advances previously made.
Each new Advance made by each Lender hereunder shall be deemed to be applied by
such Lender to the reimbursement of such Lender for the amount actually
disbursed by such Lender pursuant to a draft drawn or demand made under each
Letter of Credit issued by such Lender. The Advances and all reimbursement
obligations to the Lenders with respect to the amounts paid by such Lenders
pursuant to Letters of Credit,
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which reimbursement obligations have not been repaid by the Borrower, shall be
evidenced by the Notes.
2.1.4 Lender's Several Obligations. The obligations of each Lender to
make Loans hereunder is the several (and not joint) obligation of such Lender,
and neither the Agent nor any other Lender shall have any obligation to make
Loans to the Borrower for the purpose of reimbursing such Lender for any funds
disbursed by such Lender pursuant to any draft drawn or demand made under a
Letter of Credit issued by such Lender.
2.1.5 Types of Advances. Advances may be Base Rate Advances, or
Eurodollar Advances, or a combination thereof.
2.2 The Letter of Credit Facility.
2.2.1 Issuance of Letters of Credit. Subject to the terms and conditions
of this Agreement, and provided that no Default or Unmatured Default has
occurred and is continuing and the Borrower has provided the Agent with an
Issuance Request and telephonic notice of the transmission of such Issuance
Request, each Lender severally agrees to issue one or more Letters of Credit
from time to time prior to the Commitment Termination Date for the account of
the Borrower in an amount equal to the product of (a) such Lender's Percentage,
multiplied by (b) the amount set forth in such Issuance Request; it being
understood and agreed that subject to the other terms of this Agreement the
Borrower may obtain for its account Letters of Credit on behalf of any of its
Subsidiaries. Each Letter of Credit shall be issued for the purpose of securing
the obligations of the Borrower and/or any of its Subsidiaries under the Gas
Purchase Agreement, shall have a Stated Maturity Date on or before the Facility
Maturity Date, and shall be substantially in the form of Exhibit "B-1" and all
legal and regulatory matters in respect of each Letter of Credit to be issued by
a Lender shall be reasonably satisfactory to such Lender. Each Lender will
immediately notify the Agent of the issuance of each Letter of Credit by such
Lender and immediately provide a copy of each Letter of Credit issued by such
Lender to the Agent; provided that the failure to so notify the Agent or so
provide a copy to the Agent shall not limit or impair the Borrower's Obligations
hereunder, including, without limitation, its Obligations to reimburse drawings
under or in respect of each such Letter of Credit. Subject to the terms of this
Agreement, the amount, expiry date, date of issuance and the beneficiary of each
Letter of Credit shall be as specified by the Borrower in a written Issuance
Request delivered, together with a telephonic notice of the transmission of such
Issuance Request, to the Agent (by messenger, mail or electronic transmission,
including facsimile transmission) not less than three (3) Business Days prior to
the requested date of issuance. The Letters of Credit shall not have an
expiration date later than 5:00 p.m. (New York time) on the Facility Maturity
Date.
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2.2.2 Aggregate Amount Available under Letters of Credit. The aggregate
Stated Amount of all outstanding Letters of Credit issued by a given Lender at
any one time shall not exceed such Lender's Commitment, and after the issuance
of a Letter of Credit, no Lender shall be required to issue any Letter of Credit
if, after giving effect thereto, (A) the aggregate Stated Amount of all
outstanding Letters of Credit issued by such Lender, plus (B) the Borrower's
unpaid reimbursement obligations to such Lender with respect to the amounts paid
by such Lender pursuant to Letters of Credit (which reimbursement obligations
have not been deemed to be automatic Base Rate Advances pursuant to Section
2.2.3), plus (C) the aggregate principal amount of all outstanding Loans made by
such Lender, would exceed such Lender's Commitment.
2.2.3 Reimbursement of Lenders; Automatic Advances. The Borrower hereby
irrevocably agrees that it shall provide the Agent with immediately available
and freely transferable funds in an amount equal to the amount to be paid by
each Lender upon any drawing under a Letter of Credit, and telephonic notice of
same, by 2:00 p.m. (New York time) on the date on which such drawing is to be
paid by such Lender (the "Draw Date"). Each Lender shall promptly notify the
Borrower and the Agent on the Business Day (which notices may be telephonic,
promptly confirmed by telecopy) that a draw request or demand has been made
under a Letter of Credit. If the Borrower does not request or is not eligible
for an Advance hereunder and does not otherwise provide the Lenders with funds,
in the amount and on the date necessary to settle the obligations of the Lenders
under any draft drawn or demand made under a Letter of Credit (whether at or
prior to the expiration of such Letter of Credit) issued for its account, the
Borrower will be deemed to have given a Borrowing Notice to the Agent requesting
that the Lenders make a Base Rate Advance on the date on which such drawing is
honored in an amount equal to the amount of such drawing and, to the extent
permitted by law, the Lenders shall make, and the Borrower shall accept, a Base
Rate Advance (consisting of Base Rate Loans made by the Lenders in the amount
actually disbursed by each such Lender pursuant to the Letters of Credit issued
by such Lender) in the amount actually disbursed by the Lenders pursuant to such
draft or demand. Such Base Rate Advance shall be deemed to have been made as of
the Draw Date, and the proceeds of such Base Rate Advance shall be deemed to
have been applied by each Lender to the reimbursement of such Lender for the
amount actually disbursed by such Lender pursuant to such draft or demand. If
such Base Rate Advance cannot be made or accepted pursuant to the terms hereof
and the Borrower does not provide the Agent with immediately available and
freely transferable funds in such amount, the reimbursement obligation of the
Borrower to the Lenders shall bear interest (calculated for the actual number of
days elapsed on the basis of a year consisting of 365, or when appropriate, 366
days) until paid at a rate per annum equal to the rate that would have been in
effect if a Base Rate Advance had been made by the Lender to the Borrower and,
from and after the twentieth (20th) day after the Draw Date the applicable rate
of interest shall be the Alternate Base Rate plus 2%. Notwithstanding anything
herein to the contrary, a Default shall not occur unless the Borrower fails to
repay any such reimbursement
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obligation (via Advances under the Loan Facility or otherwise) within twenty
(20) days after the Draw Date.
2.2.4 Lender's Several Obligations. The obligations of each Lender
issuing a Letter of Credit to satisfy any draft or demand made under such Letter
of Credit is the several (and not joint) obligation of such Lender, and neither
the Agent nor any other Lender shall have any obligation to reimburse the Lender
issuing such Letter of Credit for any funds disbursed by such Lender pursuant to
any draft drawn or demand made under such Letter of Credit.
2.2.5 Letter of Credit Fees. The Borrower hereby agrees to pay to the
Agent for the pro rata benefit of the Lenders, as determined by each Lender's
Percentage, a Letter of Credit participation fee equal to the Applicable Margin
per annum (calculated for the actual number of days elapsed on the basis of a
year consisting of 365, or when appropriate 366, days) on the daily average
Stated Amount of each Letter of Credit issued from and including the date issued
to and including the date of its expiration or earlier termination. The
Borrower shall pay to the Agent the Letter of Credit participation fee due with
respect to each outstanding Letter of Credit on each Payment Date in respect of
each Letter of Credit outstanding during the calendar quarter during which such
Payment Date occurs, commencing on the first Payment Date to occur after such
Letter of Credit is issued, and on the Commitment Termination Date. The Agent
shall promptly remit to each Lender its Percentage of each Letter of Credit
participation fee after its receipt by the Agent.
2.2.6 Modification of Outstanding Letters of Credit. Subject to the terms
of this Agreement (including, without limitation, those applicable to the
issuance of a new Letter of Credit), and provided that no Default or Unmatured
Default has occurred and is continuing, in lieu of delivering an Issuance
Request for additional Letters of Credits in accordance herewith, the Borrower
may from time to time modify the Stated Maturity Date or Stated Amount of
outstanding Letters of Credit by delivering to the Agent an L/C Modification
Notice, together with telephonic notice of the transmission of same, not less
than three (3) Business Days prior to the Business Day on which the Borrower
wishes such modification to be effective; provided that any such L/C
Modification Notice that seeks any reduction in the Stated Maturity Date or
Stated Amount of any outstanding Letters of Credit shall be accompanied by and
made and effective on, and only on, the terms set forth in a CUSA Certificate
delivered to the Agent with the L/C Modification Notice; and provided, further,
that each such L/C Modification Notice shall provide for a comparable
modification to the outstanding Letters of Credit of each Lender and any
proposed reduction or increase in the Stated Amount of outstanding Letters of
Credit shall apply ratably to all outstanding Letters of Credit. Each such
modification of any outstanding Letters of Credit shall be substantially in the
form of Exhibit "B-2" and all legal and regulatory matters in respect of each
such modification to be issued by a Lender shall be reasonably satisfactory to
such Lender. Each Lender will immediately notify the Agent of the issuance of
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each such modification by such Lender and immediately provide a copy of each
such modification issued by such Lender to the Agent; provided that the failure
to so notify the Agent or so provide a copy to the Agent shall not limit or
impair the Borrower's Obligations hereunder, including, without limitation, its
Obligations to reimburse drawings under or in respect of each modified Letter of
Credit. The Letters of Credit, as modified pursuant to this Section, shall not
have an expiration date later than 5:00 p.m. (New York time) on the Facility
Maturity Date.
2.2.7 Verification. Neither the Agent nor any Lender shall have any duty
to verify or make any inquiry with regard to the truth or accuracy of any
statement made in any draft or document presented to the Agent or any Lender
under any Letter of Credit, and neither the Agent nor any Lender shall have any
duty to make any inquiry into the genuineness of any signature on any such draft
or document or into the due authorization of any party to execute or present
such draft or document or to receive payment under any Letter of Credit; unless,
and to the extent, that the Borrower has provided the Agent with sufficient
funds to reimburse each Lender for any demand or draw under a Letter of Credit
issued by such Lender, and thereafter a court of competent jurisdiction
determines that the Agent or such Lender was grossly negligent (and not simply
negligent or contributorily negligent) or guilty of willful misconduct for
making such payment in which case the maximum liability of the Agent or such
Lender, as the case may be, shall not exceed the direct damages resulting
therefrom. In no event shall the Agent or any Lender be liable for punitive or
consequential damages.
2.2.8 Irrevocable Obligations and Commercial Practices. Neither the Agent
nor any Lender shall be responsible in connection with any Letter of Credit
issued hereunder for, and the obligation of the Borrower set forth in Section
2.2.3 to provide the Agent with funds to reimburse the Lenders for amounts
disbursed by each Lender pursuant to drafts or demands made under any Letter of
Credit issued shall be irrevocable, not subject to any qualification or
exception whatsoever and shall be made in accordance with the terms of this
Agreement under all circumstances and notwithstanding, (i) payment made pursuant
to any Letter of Credit despite the failure of any draft to bear any reference
or adequate reference to the Letter of Credit, or the failure of any Person to
note the amount of any drawing on the Letter of Credit; (ii) errors, omissions,
interruptions, or delays in transmission or delivery of any messages, in person,
by mail, cable, telegraph, wireless or otherwise whether or not they may be in
cipher; (iii) any use which may be made of any Letter of Credit; (iv) any acts
or omissions of any beneficiary under any Letter of Credit; (v) the form,
validity, sufficiency, or genuineness of documents, or any endorsements(s)
thereon, even if such documents should in fact prove to be in any and all
respects invalid, insufficient, fraudulent, or forged; (vi) the sufficiency or
genuineness of any messages or instructions to issue a Letter of Credit, or any
of the terms thereof, howsoever delivered or transmitted by any Obligor to the
Agent or any Lender; or (vii) the existence of any claim, setoff, defense or
other right which any Obligor may have at any time against a beneficiary named
in any Letter of Credit or any transferee of any Letter of Credit (or any
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Person for whom any such transferee may be acting), the Agent, any Lender, or
any other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including, without limitation, any underlying transactions between any Obligor
or any Affiliate of any Obligor and the beneficiary named in any Letter of
Credit) other than a defense based on the gross negligence or willful misconduct
of such Lender as determined by a court of competent jurisdiction. The happening
of any one or more of the contingencies referred to in the preceding sentence
shall not affect, impair, or prevent the vesting of any of the Agent's or any
Lender's rights or powers under this Agreement or any other Loan Documents. The
Agent or any Lender may receive, accept, or pay as complying with the terms of
any Letter of Credit, any drafts or other documents, otherwise in order, which
may be signed by, or issued to, the administrator or executor of, or the trustee
in bankruptcy of, or the receiver for any of the property of, the party in whose
name such Letter of Credit provides that any drafts or any other documents
should be drawn or issued. In furtherance and extension but not in limitation of
the foregoing provisions, it is hereby further agreed that any action, inaction,
or omission taken or suffered by the Agent or any Lender under or in connection
with any Letter of Credit or any drafts or documents referenced herein shall be
binding upon the Obligors and the Lenders and shall not place the Agent or any
Lender under any resulting liability to any Obligor or any Lender.
Notwithstanding the foregoing, to the extent that an Obligor has reimbursed the
Agent or the applicable Lender for any draw or demand under a Letter of Credit
issued for its account and thereafter a court of competent jurisdiction
determines that the Agent or such Lender did not act in good faith and in
substantial conformity with such Person's customary practices and such domestic
laws and customs or regulations as such Person deemed applicable thereto or was
guilty of gross negligence (and not simply negligence or contributory
negligence) or willful misconduct in honoring such demand or draw, the Agent or
such Lender, as the case may be, shall be liable to such Obligor for such
action, gross negligence or willful misconduct provided that in any event the
maximum liability of the Agent or such Lender, as the case may be, shall not
exceed the direct damages resulting therefrom. In no event shall the Agent or
any Lender be liable for punitive or consequential damages.
2.2.9 Letter of Credit Collateral Account. The Borrower hereby agrees
that it will, until the final expiration date of any Letter of Credit and
thereafter as long as any amount is payable to the Lenders in respect of any
Letter of Credit, maintain a special collateral account (the "Letter of Credit
Collateral Account") at the Agent's office at the address specified pursuant to
Article XIII or as otherwise directed by the Agent, in the name of the Borrower
but under the sole dominion and control of the Agent, for the benefit of the
Lenders and in which the Borrower shall have no interest other than as set forth
in Section 8.1. The Agent will invest any funds on deposit from time to time in
the Letter of Credit Collateral Account in (i) certificates of deposit having a
maturity not exceeding 30 days, (ii) short-term obligations of, or fully
guaranteed by, the United States of America, or (iii) commercial paper rated A-l
or better by S&P or P-l or
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better by Moody's. Nothing in this Section 2.2.9 shall (i) obligate the Borrower
to deposit any funds in the Letter of Credit Collateral Account, (ii) obligate
the Agent to require the Borrower to deposit any funds in the Letter of Credit
Collateral Account or (iii) limit the right of the Agent to release any funds
held in the Letter of Credit Collateral Account other than as required by
Section 8.1. The Borrower hereby grants to the Agent for the benefit of the
Lenders a security interest in the Letter of Credit Collateral Account and any
funds or investments in such account.
2.3 Required Payments. Any outstanding Advances shall be payable on the
Commitment Termination Date. All reimbursement obligations (which reimbursement
obligations have not been deemed to be automatic Base Rate Advances pursuant to
Section 2.2.3) and all other unpaid Obligations shall be paid in full by the
Borrower on demand.
2.4 Fees.
2.4.1 Commitment Fees. The Borrower hereby agrees to pay to the Agent for
the account of each Lender, ratably in the proportion that such Lender's
Commitment bears to the Aggregate Commitment, a commitment fee (calculated for
the actual number of days elapsed on the basis of a year consisting of 365, or
when appropriate 366, days) equal to the Applicable Commitment Fee on the
average daily unused amount of the Aggregate Commitment (it being understood
that the Stated Amount of all outstanding Letters of Credit is usage of the
Aggregate Commitment), payable quarterly in arrears on the third Business Day
after each Payment Date and on the Commitment Termination Date.
2.4.2 Cancellation. The Borrower may at any time after the date hereof
cancel the Aggregate Commitment, in whole, or in a minimum aggregate amount of
$15,000,000 (and in integral multiples of $5,000,000) ratably among the Lenders
upon at least three Business Days' prior written notice to the Agent, which
notice shall specify the amount of such reduction; provided, however, no such
notice of cancellation shall be effective to the extent that it would reduce the
Aggregate Commitment to an amount which would be less than the outstanding
principal amount of all Advances, plus the Stated Amount of all Letters of
Credit outstanding, plus reimbursement obligations to the Lenders with respect
to the amounts paid by such Lenders pursuant to Letters of Credit which
reimbursement obligations have not been repaid by the Borrower and have not been
deemed to be automatic Base Rate Advances pursuant to Section 2.2.3 at the time
such cancellation is to take effect. Any notice of cancellation given pursuant
to this Section 2.4.2 shall be irrevocable and permanent and shall specify the
date upon which such cancellation is to take effect. The Agent shall promptly
notify each Lender of its receipt of notice from the Borrower electing to cancel
all or a portion of the Aggregate Commitment. Each partial cancellation of the
Aggregate Commitment shall cancel each Lender's Commitment ratably in proportion
to the ratio that such Lender's Commitment bears to the Aggregate Commitment.
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2.5 Minimum Amount of Each Eurodollar Advance. Each Eurodollar Advance
shall be in the minimum amount of $10,000,000. Each Advance which fails to
satisfy the minimum requirements set forth in this Section for a Eurodollar
Advance shall be deemed a Base Rate Advance.
2.6 Optional Principal Payments. The Borrower may from time to time
pay, without penalty or premium (other than amounts payable as provided in
Section 3.4, if any, as a result of such prepayment being made other than on the
last day of a Eurodollar Interest Period with respect to any Eurodollar Advance
as provided in Section 3.4), all outstanding Advances, or, in a minimum
aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess
thereof, any portion of the outstanding Advances upon (3) three Business Days'
(or, in the case of outstanding Advances bearing interest at the Alternate Base
Rate, (1) one Business Day's) prior notice to the Agent.
2.7 Method of Selecting Types and Interest Periods for New Advances.
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Eurodollar Interest Period applicable to each Eurodollar
Advance from time to time; provided, that the Borrower will not select such
Eurodollar Interest Periods with regard to Eurodollar Loans so that more than
eight (8) Eurodollar Interest Periods with regard to Eurodollar Loans are in
effect at any time. The Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than [10:00] a.m. (New York time) at least (1) one
Business Day before the Borrowing Date of each Base Rate Advance and (3) three
Business Days before the Borrowing Date for each Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of a Eurodollar Advance, the Eurodollar Interest
Period applicable thereto.
Not later than noon (New York time) on each Borrowing Date, each Lender shall
apply its Loan made in connection with such Advance in payment of the
Obligations hereunder to reimburse such Lender for any funds disbursed by such
Lender pursuant to any draft drawn or demand made under any Letter of Credit
issued by such Lender pursuant hereto.
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2.8 Conversion and Continuation of Outstanding Advances. Base Rate
Advances shall continue as Base Rate Advances unless and until converted into
Eurodollar Advances. Each Eurodollar Advance shall continue as a Eurodollar
Advance until the end of the then applicable Eurodollar Interest Period
therefor, at which time such Eurodollar Advance shall be automatically converted
into a Base Rate Advance unless the Borrower shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end of such Eurodollar
Interest Period, such Eurodollar Advance either continue as a Eurodollar Advance
for the same or another Eurodollar Interest Period or be converted into a Base
Rate Advance. Subject to the terms of Section 2.7, the Borrower may elect from
time to time to convert all or any part of an Advance of either Type into the
other Type of Advance; provided that any conversion of any Eurodollar Advance
shall be made on, and only on, the last day of the Eurodollar Interest Period
applicable thereto. The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an Advance or each
continuation of a Eurodollar Advance not later than [10:00] a.m. (New York time)
at least (1) one Business Day, in the case of a conversion into a Base Rate
Advance, or (3) three Business Days, in the case of a conversion into or a
continuation of a Eurodollar Advance, prior to the date of the requested
continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion into or
continuation of a Eurodollar Advance, the duration of the Eurodollar
Interest Period applicable thereto.
2.9 Changes in Interest Rate, etc. Each Base Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is converted from a Eurodollar
Advance into a Base Rate Advance pursuant to Section 2.10 to but excluding the
date it becomes due or is converted into a Eurodollar Advance pursuant to
Section 2.10 hereof, at a rate per annum equal to the Alternate Base Rate for
such day. Changes in the rate of interest on that portion of any Advance
maintained as a Base Rate Advance will take effect simultaneously with each
change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest
from and including the first day of the Eurodollar Interest Period applicable
thereto to (but not including) the last day of such Eurodollar Interest Period
at the interest rate determined as applicable to such Eurodollar Advance. No
Eurodollar Interest Period may end after the Commitment Termination Date.
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2.10 Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8, during the continuance of a Default or
Unmatured Default the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. If any Advance is not paid
at maturity, whether by acceleration or otherwise, the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurodollar Advance shall bear interest for the remainder
of the applicable Eurodollar Interest Period at the rate otherwise applicable to
such Eurodollar Interest Period plus 2% per annum and (ii) each Base Rate
Advance shall bear interest at a rate per annum equal to the Alternate Base Rate
otherwise applicable to the Base Rate Advance plus 2% per annum.
2.11 Method of Payment. All payments of Obligations actually made by the
Borrower hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower, by 2:00 p.m. (New York time)
on the date when due and shall be applied ratably by the Agent among the
Lenders. Funds received after that time shall be deemed to have been received by
the Agent on the next succeeding Business Day. Each payment delivered to the
Agent for the account of any Lender shall be delivered promptly by the Agent to
such Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Agent from such Lender.
2.12 Notes; Notices. Each Lender is hereby authorized to record the
principal amount of each of its Loans and each repayment on the schedule
attached to its Notes, provided, however, that the failure to so record shall
not affect the Borrower's obligations under such Notes. The Borrower hereby
authorizes the Lenders and the Agent to extend, convert or continue Advances,
effect selections of Types of Advances and to transfer funds based on telephonic
or telecopy notices made by any person or persons the Agent or any Lender in
good faith believes to be acting on behalf of the Borrower. The Borrower agrees
to deliver promptly to the Agent a written confirmation, if such confirmation is
requested by the Agent or any Lender, of each telephonic or telecopy notice
signed by an Authorized Officer. If the written confirmation differs in any
material respect from the action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.
2.13 Interest Payment Dates; Interest and Fee Basis. Interest accrued
on each Base Rate Advance shall be payable on each Payment Date, commencing with
the first such date to
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occur after the date hereof, on any date on which the Base Rate Advance is
prepaid, whether due to acceleration or otherwise, and on the Commitment
Termination Date. Interest accrued on that portion of the outstanding principal
amount of any Base Rate Advance converted into a Eurodollar Advance on a day
other than a Payment Date shall be payable on the date of conversion. Interest
accrued on each Eurodollar Advance shall be payable on the last day of its
applicable Eurodollar Interest Period, on any date on which such Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and on the Commitment
Termination Date. Interest accrued on each Eurodollar Advance having a
Eurodollar Interest Period longer than three months shall also be payable on the
last day of each three-month interval during such Eurodollar Interest Period.
Interest on Eurodollar Advances shall be calculated for actual days elapsed on
the basis of a 360-day year. Fees payable hereunder and interest on Base Rate
Advances shall be calculated for the actual number of days elapsed on the basis
of a year consisting of 365, or where appropriate, 366 days. Interest shall be
payable for the day an Advance is made but not for the day of any payment on the
amount paid if payment is received prior to 2:00 p.m. (New York time) at the
place of payment. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
2.14 Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate. Each Reference Bank agrees to furnish timely information
for the purpose of determining the Eurodollar Rate.
2.15 Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to the Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.16 Non-Receipt of Funds by the Agent. Unless the Borrower notifies
the Agent prior to the date on which it is scheduled to make payment hereunder
to the Agent for the account of the Lenders, that it does not intend to make
such payment, the Agent may assume that such payment has been made. The Agent
may, but shall not be obligated to, make the amount of such payment available to
the intended recipient in reliance upon such assumption.
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If the Borrower has not in fact made such payment to the Agent, the recipient of
such payment shall, on demand by the Agent, repay to the Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to the
interest rate applicable to the relevant Loan.
2.17 Withholding Tax Exemption. At least five Business Days prior to the
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender (or Lending Installation) that is not incorporated under
the laws of the United States of America, or a state thereof, agrees that it
will deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender (or Lending Installation) is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes. Each Lender (or Lending Installation) which
so delivers a Form 1001 or 4224 further undertakes to deliver to each of the
Borrower and the Agent two additional copies of such form (or a successor form)
on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender (or Lending Installation) is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender (or Lending Installation) from duly completing and delivering any such
form with respect to it and such Lender (or Lending Installation) advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
2.18 Maximum Interest Rate. Nothing contained in this Agreement or the
Notes shall require any Obligor to pay interest to any Lender at a rate
exceeding the maximum rate permitted by applicable law with respect to such
Lender. This Section 2.18 is not intended to limit the rate of interest payable
for the account of any Lender to the maximum rate permitted by the laws of any
state if a higher rate is permitted with respect to such Lender by supervening
provisions of U.S. federal law and it is specifically provided that Chapter 15
of Texas Revised Civil Statutes Article 5069 (the Texas Credit Code), which
regulates certain revolving loan accounts and revolving tri-party accounts,
shall not be applicable to this Agreement, the Notes or any of the Debt arising
hereunder. If the amount of interest payable for the account of any Lender on
any interest payment date in respect of the immediately preceding interest
computation period (together with any fees or charges which would constitute
interest under applicable law)
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would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
If the amount of interest payable for the account of any Lender in respect of
any interest computation period is reduced pursuant to the third sentence of
this Section 2.18 and the amount of interest payable for its account in respect
of any subsequent interest computation period would be less than the maximum
amount permitted by applicable law to be charged by such Lender, then the amount
of interest payable for its account in respect of such subsequent interest
computation period shall be automatically increased to such maximum permissible
amount; provided that at no time shall the aggregate amount by which interest
paid for the account of any Lender has been increased pursuant to this sentence
exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to the third sentence of this Section 2.18.
2.19 Agent's Fees. In order to compensate the Agent for the cost and
expense of acting as Agent under this Agreement, the Borrower hereby agrees to
pay to the Agent the fees agreed to between the Borrower and the Agent with
respect to its activities in structuring and administering this Agreement.
2.20 Procedures for Extensions of the Facility Maturity Date. The
Facility Maturity Date may be extended for successive 364 day periods if (A)
requested by the Borrower by prior written notice to the Agent not more than 120
days nor less than 90 days prior to the then Facility Maturity Date, and (B)
such extension is consented to in writing by each of the Lenders in the exercise
of its sole and absolute discretion within 45 days after receipt by the Lenders
of the relevant request for extension. Any extension of the Facility Maturity
Date hereunder shall become effective on the then Facility Maturity Date. Upon
the extension of such Facility Maturity Date, the Facility Maturity Date shall
be automatically extended by 364 days. Anything herein to the contrary
notwithstanding, no Lender shall have any obligation whatsoever to agree to any
extension of the Facility Maturity Date at any time, and failure by a Lender to
respond or to agree as herein provided to any such request for extension shall
be deemed an election not to extend the Facility Maturity Date then in effect
and such failure shall not create or give rise to a claim or action against the
Lenders or the Agent or any of them or be deemed as having the effect of
extending a Lender's Commitment hereunder.
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2.21 Procedures with respect to Increases in the Aggregate Commitment.
So long as no Default or Unmatured Default has occurred and is continuing, the
Borrower may request from time to time, and subject to the terms and conditions
hereinafter set forth, that the Aggregate Commitment be increased by giving
written notice thereof to the Agent; provided, however, that any such notice
must be given no later than 60 days prior to the then Facility Maturity Date.
Each such notice (a "Notice of Commitment Increase") shall (w) be in the form of
Exhibit "G", (x) attach a certificate from the Borrower certifying CUSA's
approval of any New Lender, (y) specify therein:
(i) the effective date of such increase, which date (the requested
"Commitment Increase Effective Date") shall be no earlier than five (5)
Business Days after receipt by the Agent of such notice;
(ii) the amount of the requested increase; provided, however, that
after giving effect to such requested increase, the Aggregate Commitment
shall not exceed $400,000,000;
(iii) the identity of the then Lenders, if any, which have agreed
with the Borrower to increase their respective Commitments in an amount
such that their respective Percentages after giving effect to such
requested increase will be the same or greater than their respective
Percentages prior to giving effect to such requested increase (each such
then Lender being a then "Increasing Lender"), each other Lender which has
agreed to increase its Commitment in an amount such that its Percentage
after giving effect to such a requested increase will be less than its
Percentage prior to giving effect to such requested increase (each such
Lender being a "Partially Increasing Lender"), the identity of each
financial institution not already a Lender, if any, which has agreed with
the Borrower to become a Lender to effect such requested increase in the
Aggregate Commitment (each such assignee shall be reasonably acceptable to
the Agent and approved as a Lender by CUSA; each such assignee being then a
"New Lender"), and each Lender which has not agreed to increase its
Commitment (each such Lender being a "Reducing Lender");
(iv) the amount of the respective Commitments and Percentages of the
then Lenders and any New Lenders from and after the Commitment Increase
Effective Date; and
(v) the Stated Amount of all outstanding Letters of Credit that
will be needed from each then Lender and the Stated Amount of each Letter
of Credit that will need to be
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issued by any New Lenders on the Commitment Increase Effective Date as
calculated by the Borrower; and
(z) in the event any Lender's Percentage after giving effect to such a requested
increase will be different than its Percentage prior to giving effect to such
requested increase, attach a CUSA Certificate.
On or before each Commitment Increase Effective Date:
(i) the Borrower, each Increasing Lender, each Partially Increasing
Lender and each then New Lender shall execute and deliver to the Agent for
its acceptance, as to form, documentation embodying the provisions of the
Notice of Commitment Increase relating to the increase in the Aggregate
Commitment to be effected on such Commitment Increase Effective Date; and
(ii) upon acceptance of such documentation by the Agent, which
acceptance shall not be unreasonably withheld, and so long as no Default or
Unmatured Default has occurred and is continuing,
(A) the Agent shall give prompt notice of such acceptance to
each Lender,
(B) such documentation shall become effective, and the
Aggregate Commitment shall be increased to the amount specified
therein, on such Commitment Increase Effective Date,
(C) the Borrower shall execute and deliver to each New Lender a
Note payable to the order of such Lender in the face principal
amount equal to such Lenders' Commitment,
(D) the Borrower shall execute and deliver to each Increasing
Lender and each Partially Increasing Lender, against receipt by the
Borrower of such Lender's then existing Note, a new Note in the
face principal amount equal to such Lenders' Commitment after
giving effect to such Commitment increase,
(E) in the event an existing Lender's Percentage after giving
effect to such a requested increase will be different than its
Percentage prior to giving effect to such requested increase, each
such existing Lender shall either (i) issue a modification of its
outstanding Letters of Credit substantially in the form of Exhibit
"B-2", or (ii) issue a new Letter of Credit, in either case
reflecting a modification of the Stated Amount of such Lender's
outstanding Letters of
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Credit equal to the product of (x) such Lender's Percentage after
giving effect to the increase in the Aggregate Commitment scheduled
for the Commitment Increase Effective Date, multiplied by (y) the
aggregate Stated Amount of all outstanding Letters of Credit, and
(F) each New Lender shall issue a new Letter of Credit in the
Stated Amount equal to the product of (x) such Lender's Percentage
after giving effect to the increase in the Aggregate Commitment
scheduled for the Commitment Increase Effective Date, multiplied by
(y) the aggregate Stated Amount of all outstanding Letters of
Credit.
On each Commitment Increase Effective Date:
(i) if there are any outstanding Advances or any unpaid
reimbursement obligations of the Borrower with respect to amounts drawn on
any Letters of Credit (which reimbursement obligations have not been deemed
to be automatic Base Rate Advances pursuant to Section 2.2.3), each then
New Lender and each then Increasing Lender shall, by wire transfer of
immediately available funds, deliver to the Agent such Lenders' New Funds
Amount for such Commitment Increase Effective Date, which amount, for each
such Lender, shall constitute Loans made by such Lender to the Borrower
pursuant to Section 2.1 on such Commitment Increase Effective Date;
(ii) promptly after the Agent's receipt thereof, the Agent shall, by
wire transfer of immediately available funds, pay to each then Reducing
Lender and to each Partially Increasing Lender its Reduction Amount for
such Commitment Increase Effective Date, which amount, for each such
Lender, shall constitute a prepayment by the Borrower pursuant to Section
2.6, ratably in accordance with the respective principal amounts thereof,
of the principal amounts of all then outstanding Loans of such Lender; and
(iii) Each Lender will immediately notify the Agent of the issuance
of each modification of Letter of Credit or issuance of a new Letter of
Credit pursuant to this Section and immediately provide a copy of each
modification or new Letter of Credit issued by such Lender to the Agent;
provided that the failure to so notify the Agent or so provide a copy to
the Agent shall not limit or impair the Borrower's Obligations hereunder,
including, without limitation, its Obligations to reimburse drawings under
or in respect of each modified Letter of Credit or each new Letter of
Credit.
Effective as of each Commitment Increase Effective Date, the Notes then or
theretofore delivered to each then New Lender, and the new Notes then or
theretofore delivered to each then Increasing Lender and each then Partially
Increasing Lender, shall evidence such Lender's
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ownership of its Percentage, effective as of such Commitment Increase Effective
Date, of all Advances then outstanding and all unpaid reimbursement obligations
of the Borrower with respect to amounts drawn on any Letters of Credit. Also
effective as of each Commitment Increase Effective Date, each then New Lender
and each then Increasing Lender shall be deemed to have purchased and had
transferred to it, and each then Reducing Lender and each Partially Increasing
Lender shall be deemed to have sold and transferred to such New Lenders and
Increasing Lenders, such undivided interest in such Reducing Lender's and such
Partially Increasing Lender's interest in all then outstanding Obligations
hereunder and any security therefor and any guaranty pertaining thereto at any
time existing as is necessary so that such undivided interests of all Lenders
(including each then New Lender) shall accord with their respective Percentages
after giving effect to the increase in the Aggregate Commitment on such
Commitment Increase Effective Date.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection. If any change in, or introduction of, any law or
any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any interpretation
thereof, or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to
any additional tax, duty, charge or withholding on or from payments due
from the Borrower (excluding federal taxation of the overall net income of
any Lender or applicable Lending Installation), or changes the basis of
taxation of payments to any Lender in respect of its Loans or Letters of
Credit or participations therein or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurodollar Advances), or
(iii) imposes any other condition the direct result of which is to
increase the cost to any Lender or any applicable Lending Installation of
making, funding, maintaining or participating in the Loans or Letters of
Credit or reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with the Loans or Letters of Credit, or
requires any Lender or any applicable Lending Installation
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to make any payment calculated by reference to the amount of the Loans or
Letters of Credit held or interest received by it, by an amount deemed
material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender reasonably determines is attributable to making,
funding and maintaining its Loans, Letters of Credit, participations therein and
its Commitment. Any Lender claiming or reasonably anticipating any additional
amounts payable pursuant to Section 3.1(i) shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or the Agent or to change the jurisdiction of
its applicable Lending Installation or issuing office or to contest any tax
imposed if the making of such a filing or change or contesting such tax would
avoid the need for or reduce the amount of any such additional amounts that may
thereafter accrue and would not be otherwise disadvantageous to such Lender in
its opinion. The Borrower shall not be obligated to compensate any Lender
pursuant to this Section 3.1 for any amounts attributable to a period more than
90 days prior to the giving of notice by such Lender to the Borrower of its
intention to seek compensation under this Section 3.1.
3.2 Changes in Capital Adequacy Regulations. If a Lender determines
that the amount of capital required or expected to be maintained by such Lender,
any Lending Installation of such Lender, or any corporation controlling such
Lender is increased as a result of a Change, then, within 15 days of demand by
such Lender, the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender reasonably determines is attributable to
this Agreement, its Loans, its Letters of Credit or its obligation to make Loans
or issue Letters of Credit or participate in Letters of Credit hereunder (after
taking into account such Lender's policies as to capital adequacy being applied
with respect to customers similarly situated to Borrower with whom such Lender
has a contractual right to so charge such amounts). "Change" means (i) any
change after the date of this Agreement in the Risk-Based Capital Guidelines or
(ii) any adoption of or change in any other law, governmental or quasi-
governmental rule, regulation, policy, guideline, interpretation, or directive
(whether or not having the force of law) after the date of this Agreement which
affects the amount of capital required or expected to be maintained by any
Lender or any Lending Installation or issuing office or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-
based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement. The
Borrower shall not be obligated to compensate any Lender pursuant to this
Section 3.2 for any amounts attributable to a period more than 90 days prior to
the giving of
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notice by such Lender to the Borrower of its intention to seek compensation
under this Section 3.2.
3.3 Availability of Types of Advances. If any Lender determines that
maintenance of any of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, the Agent shall suspend the availability of Eurodollar
Advances and require any Eurodollar Advances to be converted into Base Rate
Advances. If the Required Lenders determine that (i) deposits of a type or
maturity appropriate to match fund Eurodollar Advances are not available, the
Agent shall suspend the availability of the Eurodollar Advances with respect to
any Eurodollar Advances made after the date of any such determination until such
time as deposits of a type or maturity appropriate to match fund Eurodollar
Advances are made available, or (ii) after giving effect to amounts payable
under Sections 3.1 and 3.2 an interest rate applicable to a Eurodollar Advance
does not accurately reflect the cost of making a Eurodollar Advance, then, if
for any reason whatsoever the provisions of Section 3.1 are inapplicable, the
Agent shall suspend the availability of Eurodollar Advances with respect to any
Eurodollar Advances made after the date of any such determination.
3.4 Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or any
Eurodollar Advance is converted to a Base Rate Advance on a date which is not
the last day of the applicable Eurodollar Interest Period or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it directly resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Eurodollar Advance.
3.5 Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation to
reduce any liability of the Borrower to such Lender under Sections 3.1 and 3.2
or to avoid the unavailability of a Eurodollar Advance under Section 3.3, so
long as such designation is not disadvantageous to such Lender in its opinion.
If any amount becomes due under Section 3.1, 3.2 or 3.4, each affected Lender
shall consult with the Borrower as to how it intends to calculate the amount due
and shall deliver a written statement of such Lender as to the amount due, if
any, under Section 3.1, 3.2 or 3.4. Such written statement shall set forth in
reasonable detail the basis for claiming such amount and calculations upon which
such Lender determined such amount and shall be final, conclusive and binding on
the Borrower in the absence of manifest error; provided that the determination
of such amount shall be made in good faith and in a manner consistent with such
Lender's standard practice and that such Lender's policies as to imposing such
increased costs are being applied with respect to customers similarly situated
to Borrower with whom such
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Lender has a contractual right to so charge such amounts. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as though each Lender funded its Eurodollar Loan through the
purchase of a deposit of the Type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement shall be payable within ten (10)
Business Days after receipt by the Borrower of the written statement. The
obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive
payment of the Obligations and termination of this Agreement.
3.6 Replacement of Lenders. If any Lender is unable to make a
Eurodollar Loan pursuant to Section 3.3, is subject to increased costs pursuant
to Section 3.1, 3.2 or 3.4, fails to designate an alternate Lending Installation
pursuant to Section 3.1 or 3.5, or is owed or reasonably anticipates being owed
additional amounts pursuant to Section 3.1 and fails to take action to the
extent required under Subsection 3.1 to avoid or reduce any such additional
amounts, the Borrower shall have the right, if no Default then exists, to
replace such Lender with another financial institution reasonably acceptable to
the Agent provided that (i) such financial institution shall unconditionally
offer in writing (with a copy to the Agent) to purchase, in accordance with
Section 12.3.2 all of such Lender's rights and obligations under this Agreement
and the Notes, without recourse or expense to, or warranty by, such Lender being
replaced for a purchase price equal to the aggregate outstanding principal
amount of the Notes payable to such Lender plus such Lender's Percentage of any
outstanding reimbursement obligations with respect to any outstanding Letters of
Credit plus any accrued but unpaid interest on such Notes and such reimbursement
obligations plus accrued but unpaid fees in respect of such Lender's commitment
hereunder to the date of such purchase on a date therein specified, (ii) the
obligations of the Borrower owing pursuant to Section 3.1, 3.2 and 3.4 to the
Lender being replaced, shall be paid in full to the Lender being replaced
concurrently with such replacement, (iii) the replacement financial institution
shall execute a Notice of Assignment pursuant to which it shall become a party
hereto as provided in Section 12.3.2 and shall pay the processing fee required
pursuant to such section, and (iv) upon compliance with the provisions for
assignment provided in Section 12.3 and the payment of amounts referred to in
clause (i), the replacement financial institution shall constitute a "Lender"
hereunder and the Lender being so replaced shall no longer constitute a "Lender"
hereunder; provided that (x) if such Lender accepts such an offer and such
financial institution fails to purchase on such specified date in accordance
with the terms of such offer, the Borrower shall continue to be obligated to pay
the increased cost, amounts, expenses and taxes under Sections 3.1, 3.2, 3.4 and
3.5 above to such Lender and (y) if such Lender fails to accept such purchase
offer, the Borrower shall not be obligated to pay such Lender such increased
cost pursuant to such sections from and after the date of such purchase offer;
provided, further that notwithstanding the foregoing, no Lender which is an
issuer of an outstanding Letter of Credit may be replaced pursuant to this
Section 3.6 while such Letter of Credit is outstanding.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1 Initial Advance and Letter of Credit. The Lenders shall not be
required to make the initial Advance hereunder and shall not be required to
issue the initial Letter of Credit unless the Borrower has furnished to the
Agent with sufficient copies for the Lenders:
(i) Copies of the articles of incorporation of each corporate
Obligor and each corporate partner of each Obligor and of the partnership
agreement of each Obligor or partner of an Obligor which is a partnership,
together with all amendments, and a certificate of good standing for each
corporate Obligor and each corporate partner of each Obligor, certified
with respect to each Obligor and each corporate partner of an Obligor by
the appropriate governmental officer in its jurisdiction of incorporation
or organization, as the case may be.
(ii) Copies, certified by the Secretary or Assistant Secretary of
each Obligor and each corporate partner of each Obligor, of its by-laws and
of its Board of Directors' resolutions (and resolutions of other bodies, if
any are deemed necessary by counsel for any Lender) authorizing the
execution of the Loan Documents to which it is a party.
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of each Obligor and each corporate partner of each
Obligor, which shall identify by name and title and bear the signature of
the officers of the Obligor or partner of the Obligor authorized to sign
the Loan Documents and to make borrowings and obtain Letters of Credit
hereunder, upon which certificate the Agent and the Lenders shall be
entitled to rely until informed of any change in writing by the Borrower.
(iv) A written opinion of (A) the General Counsel or Corporate
Counsel of the Borrower substantially in the form of Exhibit "C", each
dated the date of the initial Advance or Letter of Credit and addressed to
the Agent and the Lenders.
(v) Notes payable to the order of each of the Lenders.
(vi) Such related money transfer authorizations as the Agent may
have reasonably requested.
(vii) The Subsidiary Guaranties, duly executed on behalf of NGC, NGC
Liquids Marketing, Inc., NGC Oil Trading and Transportation, Inc., NGC
Futures, Inc.,
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Hub Services, Inc., NGC Anadarko Gathering Systems, Inc., Trident Gas
Marketing, Inc., Trident NGL Pipeline Company, Kansas Gas Supply
Corporation, Trident Acquisition Corp., NGC UK Limited, NGC Canada, Inc.,
Trident and NGC Energy Resources, Limited Partnership, Warren Petroleum
Company, Limited Partnership, WPC LP, Inc. and WTLPS, Inc.
(viii) A certificate setting forth the Borrower's insurance coverage
and insurers as of the Closing Date.
(ix) A copy of the fully executed Midstream Merger Agreement
certified by an officer of the Borrower as being true, correct and complete
together with a certificate of an officer of the Borrower to the effect
that the conditions of closing set forth in Article 12 thereof have been
satisfied.
(x) Such other documents as the Agent, any Lender or its counsel
may have reasonably requested.
4.2 Each Advance. The Lenders shall not be required to make any Advance
(other than an Advance that, after giving effect thereto and to the application
of the proceeds thereof, does not increase the aggregate amount of outstanding
Advances) and no Lender shall be obligated to issue a Letter of Credit, unless
on the applicable Borrowing Date or Issuance Date, as the case may be:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V and
the representations in Sections 11 and 15 of each of the Subsidiary
Guaranties are true and correct in all material respects as of such
Borrowing Date or Issuance Date, as the case may be, except to the extent
any such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall be true
and correct on and as of such earlier date.
Each Borrowing Notice (other than a Borrowing Notice deemed given pursuant
to Section 2.2.3) with respect to each such Advance and each Issuance Request
with respect to a Letter of Credit shall constitute a representation and
warranty by the Borrower that the conditions contained in Sections 4.2(i) and
(ii) have been satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders and the Agent that:
5.1 Corporate or Partnership Existence and Standing. Each of the
Borrower and its Subsidiaries is a corporation or partnership, as the case may
be, duly incorporated or organized, as the case may be, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization and is in good standing and has all requisite authority to conduct
its business in each jurisdiction in which its business is conducted, except
where failure to have such authority would not have a Material Adverse Effect.
5.2 Authorization and Validity. Each Obligor has the corporate or
partnership power and authority to execute and deliver the Loan Documents to
which it is a party and to perform its obligations thereunder. Except to the
extent that the failure to so qualify would not have a Material Adverse Effect,
each of the Borrower and its Subsidiaries has all requisite power, and is in all
respects duly qualified and licensed under all applicable laws to own its assets
and properties as now owned and to carry on its business as now conducted. The
execution and delivery by each Obligor of the Loan Documents to which it is a
party and the performance of its obligations thereunder have been duly
authorized by proper corporate and partnership proceedings, and the Loan
Documents constitute legal, valid and binding obligations of each Obligor party
thereto, enforceable against such Obligor in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3 No Conflict; Government Consent. Neither the execution and delivery
by the Obligors of the Loan Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on any Obligor or any of its Subsidiaries or any partner of any Obligor
or the Borrower's or any Subsidiary's or any partner's articles of
incorporation, by-laws or partnership agreement or the provisions of any
indenture, instrument or agreement to which the Borrower or any of its
Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien in, of or on the Property of the Borrower or
any Subsidiary pursuant to the terms of any such indenture, instrument or
agreement that is a Material Agreement. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in
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connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, any of the Loan Documents or, to
the extent that any such consent or other action may be required, it has been
validly procured and all waiting periods with respect thereto have expired.
5.4 Financial Statements. The March 31, 1996 consolidated financial
statements of Old NGC and its Subsidiaries heretofore delivered to the Lenders
were prepared in accordance with generally accepted accounting principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of Old NGC and its Subsidiaries
at such date and the consolidated results of their operations for the period
then ended.
5.5 Material Adverse Change. Since March 31, 1996, there has been no
change in the business, Property, financial condition or results of operations
of Old NGC and/or the Borrower and their respective Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.
5.6 Taxes. The Borrower and its Subsidiaries have filed all United
States federal tax returns and all other tax returns or reports which are
required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any of its Subsidiaries,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. No tax liens have been filed and no
claims are being asserted with respect to any such taxes. The charges, accruals
and reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate in all material respects. The
Borrower knows of no pending investigation of the Borrower or any of its
Subsidiaries by any taxing authority, nor of any pending but unassessed tax
liability which could reasonably be expected to have a Material Adverse Effect.
5.7 Litigation and Contingent Obligations. Except as set forth on
Schedule "3" hereto, there is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or, to the knowledge of any of
their officers, threatened against or affecting the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect. Other than any liability incident to such litigation, arbitration or
proceedings, the Borrower has no material contingent obligations not provided
for or disclosed in the financial statements referred to in Section 5.4. To the
knowledge of the Borrower there are no outstanding judgments individually or in
the aggregate in excess of Twenty-Five Million Dollars ($25,000,000) (net of any
insurance coverage which is reasonably expected to be paid by the insurer) which
have not been stayed, against the Borrower, any of its Subsidiaries or any of
their respective Properties.
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5.8 Subsidiaries. Schedule "1" hereto contains an accurate list of all
of the existing Subsidiaries of the Borrower on the Closing Date, setting forth
their respective jurisdictions of incorporation or organization and the
percentage of their respective capital stock or other equity owned by the
Borrower or other Subsidiaries of the Borrower. All of the issued and
outstanding shares of capital stock of such Subsidiaries which are corporations
have been duly authorized and issued and are fully paid and non-assessable.
5.9 ERISA. The Unfunded Liabilities of all Single Employer Plans do not
in the aggregate exceed $25,000,000. Neither the Borrower nor any other member
of the Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $25,000,000 in the
aggregate. Except for such matters as would not singly or in the aggregate have
or reasonably be expected to have a Material Adverse Effect, each Single
Employer Plan complies in all material respects with all applicable requirements
of law and regulations, no Reportable Event has occurred with respect to any
Single Employer Plan, except in connection with the Trident Merger, neither the
Borrower nor any other members of the Controlled Group has withdrawn from any
Multiemployer Plan with respect to which it has any unsatisfied liability or
initiated steps to do so, and except in connection with the Trident Merger, no
steps have been taken to reorganize or terminate any Single Employer Plan.
5.10 Accuracy of Information. All written factual information furnished
by the Borrower or any of its Subsidiaries on or after the Closing Date to the
Agent or any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby will be, true and accurate in all material
respects (taken as a whole) on the date as of which such information is dated,
certified or delivered and will not be incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time. In addition, any estimates or projections provided in
connection therewith will be based on information that is then currently
available and believed to be correct and on assumptions believed to be
reasonable, but the Borrower does not warrant that such estimates or projections
will ultimately prove to have been accurate.
5.11 Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder. The Borrower is not engaged principally, and does not as one of its
important activities engage, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations G, U,
or X of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any extension of credit under this Agreement will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock. Neither the Borrower
nor any Person acting on its behalf has taken or will take any action which
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could reasonably be expected to cause this Agreement or any of the Notes to
violate any of said Regulations G, U, or X, or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as now in effect or as the same may hereafter be in
effect.
5.12 Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property, except where the
failure to so comply would not have a Material Adverse Effect.
5.13 Environmental Matters. The Borrower, each of its Subsidiaries, and
their respective Properties are in compliance with all Environmental Laws except
where the failure to be in compliance could not reasonably be expected to have a
Material Adverse Effect and neither the Borrower nor any of its Subsidiaries is
subject to any liability or obligation for remedial action thereunder or in
connection therewith which could reasonably be expected to have a Material
Adverse Effect. There is no pending or, to the best of the Borrower's
knowledge, threatened investigation or inquiry by any Tribunal of the Borrower,
any of its Subsidiaries, or any of their respective Properties (i) pertaining to
any violation of any Environmental Law relating to Hazardous Materials, or (ii)
which could reasonably be expected to result in any requirement that the
Borrower or any of its Subsidiaries conduct any clean-up or remediation
activities with respect to any Hazardous Materials, which could reasonably be
expected to have a Material Adverse Effect. There are no Hazardous Materials
located on or under any of the Properties of the Borrower or any of its
Subsidiaries (other than petroleum products which are located thereon in the
ordinary course of business and in a manner which does not constitute a
violation of applicable Environmental Law) which could reasonably be expected to
have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries has caused or permitted any Hazardous Material to be disposed of on
or under or released from any of its properties which disposal or release could
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries has any knowledge of any violation of any
Environmental Law by any previous owner of any of its properties that could
reasonably be expected to have a Material Adverse Effect.
5.14 Ownership of Properties; Liens. Except as set forth on Schedule
"2" hereto, on the date of this Agreement, the Borrower and its Subsidiaries
will have marketable title or valid leasehold interests, free of all Liens other
than those permitted by Section 6.2.8, to all of the Property and assets
reflected in the financial statements described in Section 5.4, except that with
respect to properties acquired subsequent to the date hereof, the Borrower
represents only that (i) the same will be acquired only after appropriate due
diligence regarding title to the same, and (ii) the title to all such property
so acquired will be acceptable to a reasonably prudent person
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engaged in the acquisition, ownership and operation of the type of property
interest involved and subject only to defects existing as of the date of
acquisition which are not material or for which appropriate adjustments in the
cost of acquisition shall have been made.
5.15 Investment Company Act. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
5.16 Public Utility Holding Company Act. Other than Electric
Clearinghouse Inc. ("ECI"), neither the Borrower nor any Subsidiary is a
"holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended ("PUHCA"), and the rules and regulations thereunder. Electric
Clearinghouse Inc. has received a "no action letter" from the Securities and
Exchange Commission (the "SEC Letter") which ensures that no enforcement action
will be brought against Electric Clearinghouse Inc. as an "electric utility", as
such term is defined in PUHCA, by virtue of the fact that Electric Clearinghouse
Inc. engages in power marketing activities.
5.17 Insurance. As of the Closing Date, the certificate provided
pursuant to Section 4.1(x) and signed by an Authorized Representative of the
Borrower, that attests to the existence and adequacy of, and summarizes, the
property and casualty insurance program carried by the Borrower and that has
been furnished by the Borrower to the Agent and the Lenders, is complete and
accurate in all material respects.
5.18 Solvency. (i) Immediately following the issuance of any Letter of
Credit, if any, issued pursuant hereto, (a) the value of the assets of the
Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will
exceed the debts and liabilities, subordinated, contingent or otherwise, of the
Borrower and its Subsidiaries on a consolidated basis; (b) the present fair
saleable value of the property of the Borrower and the Subsidiaries on a
consolidated basis will be greater than the amount that will be required to pay
the probable liability of the Borrower and its Subsidiaries on a consolidated
basis on their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured; (c)
the Borrower and its Subsidiaries on a consolidated basis will be able to pay
their debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the Borrower and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.
(ii) The Borrower does not intend to, or to permit any of its
Subsidiaries to, and does not believe that it or any of its Subsidiaries will,
incur debts beyond its ability to pay such
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debts as they mature, taking into account the timing of and amounts of cash to
be received by it or any such Subsidiary and the timing of the amounts of cash
to be payable on or in respect of its Debt or the Debt of any such Subsidiary.
5.19 Default. Neither the Borrower nor any of its Subsidiaries is in
default under the provisions of any Material Agreement or of any instrument
evidencing any material obligation, indebtedness, or liability of the Borrower
or any of its Subsidiaries, or of any agreement relating thereto, or in default
under or in violation of any order, writ, injunction, decree, regulation, or
demand of any Tribunal, which default or violation could reasonably be expected
to have a Material Adverse Effect.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1 Affirmative Covenants.
6.1.1 Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary of the Borrower, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
furnish to the Lenders:
(i) As soon as available, and in any event within sixty (60) days
after the end of each of the first three quarterly periods of each of its
fiscal years, (i) a consolidated statement of income of the Borrower and
its Subsidiaries for such quarter and a consolidated statement of income
and a consolidated statement of cash flows of the Borrower and its
Subsidiaries for the period commencing with the beginning of the Borrower's
fiscal year to the end of such quarter, (ii) a consolidated balance sheet
of the Borrower and its Subsidiaries as of the close of business for such
quarter, (iii) consolidating statements of income of the Borrower and its
Subsidiaries for such quarter and consolidating statements of income and
consolidating statements of cash flows of the Borrower and its Subsidiaries
for the period commencing with the beginning of the Borrower's fiscal year
to the end of such quarter prepared on a business segment basis, showing
gas, liquids, electric power and corporate, or such other segments as
agreed from time to time by the Agent, as business segments, (iv)
consolidating balance sheets of the Borrower and its Subsidiaries as of the
close of business for such quarter prepared on a business segment basis,
showing gas, liquids, electric power and corporate, or such other segments
as agreed from time to time by the Agent, as business segments, and (v)
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a computation of the ratios and amounts required to be maintained by
Sections 6.3.1 and 6.3.2, all in reasonable detail, prepared in accordance
with generally accepted accounting principles and certified by an
Authorized Officer to the effect that they present fairly the financial
condition and results of the operations of the Borrower at the date and for
the period indicated therein, subject to changes resulting from year-end
audit adjustments.
(ii) As soon as available and in any event within 120 days after
the close of each of its fiscal years, an unqualified (except for
qualifications relating to changes in accounting principles or practices
reflecting changes in generally accepted principles of accounting and
required or approved by the Borrower's independent certified public
accountants) audit report certified by independent certified public
accountants, acceptable to the Agent, prepared in accordance with generally
accepted accounting principles on a consolidated basis for the Borrower and
its Subsidiaries, including a balance sheet as of the end of such period
and related statements of income, retained earnings and cash flows,
accompanied by a computation made by such accountants of the ratios and
amounts required to be maintained by Sections 6.3.1 and 6.3.2.
(iii) Together with the financial statements required hereunder, a
compliance certificate in substantially the form of Exhibit "D" hereto
signed by an Authorized Officer of the Borrower (a "Compliance
Certificate") certifying that the statements fairly present the Borrower's
financial condition and results of operations showing the calculations
necessary to determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(iv) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with respect to any
Single Employer Plan, a statement, signed by an Authorized Officer of the
Borrower, describing said Reportable Event and the action which the
Borrower proposes to take with respect thereto.
(v) Promptly after becoming aware thereof, written notice of any
litigation which could reasonably be expected to result in a judgment
against the Borrower or any of its Subsidiaries in excess of $25,000,000,
net of insurance coverage which is reasonably expected to be paid by the
insurer, or other event or condition which could reasonably be expected to
have a Material Adverse Effect.
(vi) Promptly upon the furnishing thereof to the shareholders of
the Borrower, copies of all financial statements, reports and proxy
statements so furnished.
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(vii) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which
the Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission.
(viii) Promptly, notice in writing to the Lenders of the occurrence
of any Default or Unmatured Default.
(ix) Promptly, notice in writing to the Agent of any change in the
credit rating of the Borrower's senior unsecured Debt by a Rating Agency.
(x) Such other information (including non-financial information)
as the Agent or any Lender may from time to time reasonably request.
6.1.2 Use of Proceeds. The Borrower will use the proceeds of the
Advances to pay the reimbursement obligations of the Borrower with respect to
the Letters of Credit issued pursuant hereto or to continue or convert Advances
made previously. The Borrower will not, nor will it permit any Subsidiary of
the Borrower to, use any of the proceeds of the Advances to purchase or carry
any "margin stock" (as defined in Regulation U).
6.1.3 Additional Subsidiary Guaranties. The Borrower will cause any
Subsidiary of the Borrower (other than any Project Financing Subsidiary and
other than NGC Storage, Inc.) which after the date hereof has (i) consolidated
fixed assets plus net working capital with a book value equal to or greater than
$100,000,000 as determined in a manner consistent with the most recent financial
statements provided pursuant to Section 6.1.1 or (ii) 15% or more of the
Consolidated EBITD for the calendar quarter immediately prior to the quarter in
which such determination is made (unless such Consolidated EBITD for such
Subsidiary for such quarter is less than $10,000,000 or unless such Person is
not a Subsidiary of the Borrower for the entire calendar quarter) to become a
Guarantor with respect to, and be jointly and severally liable with all other
Guarantors for, all the Obligations by executing and delivering to the Lenders a
guaranty substantially in the form of the applicable Subsidiary Guaranty except
to the extent that such Person becomes a Subsidiary of the Borrower pursuant to
an Acquisition and is subject at the time of such Acquisition to restrictions
adversely affecting its ability to enter into a Subsidiary Guaranty; provided
however, that in the event that any Subsidiary of the Borrower provides a
Guaranty with respect to any Debt of the Borrower other than the Obligations,
such Subsidiary shall also concurrently become a Guarantor with respect to, and
be jointly and severally liable with all other Guarantors for, all the
Obligations by executing and delivering to the Lenders a guaranty substantially
in the form of the applicable Subsidiary Guaranty ("Additional Guaranty") and,
in the event that any such Subsidiary no longer provides a Guaranty with respect
to such other Debt of the Borrower, so long as such Additional Guaranty
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is not otherwise required pursuant to this Section 6.1.3, the Additional
Guaranty shall concurrently terminate.
6.1.4 Conduct of Business. The Borrower will, and will cause each
Subsidiary of the Borrower to, carry on and conduct its business in
substantially the same manner and in substantially the same fields of enterprise
as it is presently conducted or contemplated and to do all things reasonably
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation or as a partnership
in its jurisdiction of organization, as the case may be, to maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted (except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect) and to keep in full force and effect
its respective existence, rights, leases, patents, and all other licenses or
rights necessary to comply with all Laws or other provisions of any Material
Agreement (except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect); provided, however, that nothing in this Section
6.1.4 shall prevent the abandonment and retirement of property used or useful in
the conduct of the business of the Borrower or any of its Subsidiaries, if, in
the reasonable opinion of the Borrower or the applicable Subsidiary of the
Borrower, such abandonment or retirement of property is in the interest of the
Borrower or such Subsidiary and not prejudicial to the Lenders.
6.1.5 Taxes and Other Charges. The Borrower will, and will cause each
Subsidiary of the Borrower to, pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property, as
well as all lawful claims for labor, materials, and supplies, which, if unpaid
could become a Lien or charge on such Property, or any part thereof, except,
with regard to any of the foregoing, which are being contested in good faith by
appropriate proceedings diligently pursued and with respect to which adequate
reserves as required by Agreement Accounting Principles have been set aside.
6.1.6 Insurance. The Borrower will, and will cause each Subsidiary of
the Borrower to, maintain with financially sound and reputable insurance
companies insurance on their Property in such amounts and covering such risks as
is consistent with prudent industry practice, and the Borrower will furnish to
the Agent or any Lender upon reasonable request full information as to the
insurance carried, including, without limitation, certificates of insurers,
brokers and agents, as to such insurance.
6.1.7 Compliance with Laws. The Borrower will, and will cause each
Subsidiary of the Borrower to, comply with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject,
including, without limitation, all Environmental Laws, and obtain, keep, and
comply with, all necessary permits, approvals, certificates and
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licenses in effect and remain in compliance therewith, except in any such case
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
6.1.8 Maintenance of Properties. The Borrower will, and will cause each
Subsidiary of the Borrower to, maintain, preserve, protect and keep its Property
in good repair, working order and condition in accordance with prudent industry
practices, and make all necessary and proper repairs, renewals and replacements
so that its business is carried on in accordance with prudent industry
practices; provided, however, that nothing in this Section 6.1.8 shall prevent
the abandonment and retirement of property used or useful in the conduct of the
business of the Borrower or any of its Subsidiaries, if, in the reasonable
opinion of the Borrower or the applicable Subsidiary, such abandonment or
retirement of property is in the interest of the Borrower or such Subsidiary and
would not have a Material Adverse Effect.
6.1.9 Inspection. The Borrower will, and will cause each Subsidiary of
the Borrower to, permit the Agent and the Lenders, by their respective
representatives and agents, to visit and inspect (so long as no Default shall
have occurred, at their own risk, cost and expense) any of the Property,
corporate books and financial records of the Borrower and each Subsidiary of the
Borrower, to audit and examine and make copies of the books of accounts and
other financial records (and after the occurrence and during the continuance of
a Default, other records) of the Borrower and each Subsidiary of the Borrower,
and to discuss the affairs, finances and accounts of the Borrower and each
Subsidiary of the Borrower with, and to be advised as to the same by, their
respective officers upon reasonable advance notice, and at such reasonable times
(during normal business hours) and intervals as the Agent and the Lenders may
designate; provided, however, that during such time as no Default has occurred
and is continuing, visits, inspections and audits by the Agent and the Lenders
shall be conducted on the same date and not more often than once during any
calendar quarter, unless otherwise agreed by the Borrower.
6.1.10 Maintenance of Books and Records. The Borrower will maintain,
and will cause each of its Subsidiaries to maintain, proper books of record and
account in which the Borrower and each of its Subsidiaries will make full, true,
and correct entries, in accordance with Agreement Accounting Principles, of all
dealings and transactions with respect to which pursuant to any Law or Agreement
Accounting Principles the Borrower is required to maintain written records in
relation to its business and activities.
6.1.11 Compliance with ERISA. The Borrower will comply, and will cause
each of its Subsidiaries to comply, with all applicable minimum funding
requirements and all other applicable requirements of ERISA except where a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
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6.1.12 Maintenance of Credit Rating. The Borrower will use reasonable
efforts to maintain a credit rating by S&P or Moody's of its senior unsecured
Debt. In the event that S&P or Moody's is not providing ratings of the
Borrower's senior unsecured Debt, the Agent may request that the Borrower
substitute another nationally recognized rating agency in lieu of S&P or
Moody's.
6.2 Negative Covenants.
6.2.1 [Intentionally Omitted]
6.2.2 Debt. The Borrower will not, nor will it permit any Subsidiary of
the Borrower to, create, incur or suffer to exist any Debt, except:
(i) The Obligations;
(ii) Debt existing on the date hereof (not otherwise permitted
pursuant to this Section 6.2.2) and included in the financial statements
referred to in Section 5.4 or in Schedule "2" hereto;
(iii) The Existing Trident Subordinated Debt;
(iv) Debt incurred under Capitalized Leases or secured by a
purchase money Lien permitted by Section 6.2.8(iv) provided that both before and
after giving effect to any incurrence of any such obligation or Debt there
exists no Default or Unmatured Default;
(v) Debt of (A) a Subsidiary of the Borrower due to the Borrower
or any other Subsidiary of the Borrower or (B) the Borrower due to any
Subsidiary of the Borrower;
(vi) To the extent not otherwise permitted by this Section 6.2.2,
Debt of Subsidiaries of the Borrower in an amount not to exceed in the aggregate
for all such Debt at any one time outstanding $150,000,000, provided, that both
before and after giving effect to any incurrence of such Debt there exists no
Default or Unmatured Default, provided further that no Subsidiary of the
Borrower shall enter into or permit to exist any agreement with respect to any
such Debt which restricts or prohibits, or which has the effect of restricting
or prohibiting the declaration or payment of dividends or other distributions or
advances by that Subsidiary to the Borrower and its other Subsidiaries;
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(vii) Project Financing;
(viii) To the extent not otherwise permitted by this Section
6.2.2, Debt of the Borrower up to an amount such that both before and after the
incurrence of such Debt there will not exist a Default or an Unmatured Default;
(ix) Debt of any Person which is outstanding at the time such
Person becomes a Subsidiary of the Borrower as a result of a permitted
Acquisition;
(x) Debt incurred in connection with the Existing Bank Credit
Facility; and
(xi) Renewals, extensions, amendments, refinancing,
rearrangements, modifications, restatements, defeasances, purchases or
supplements of any Debt referred to in Subsection 6.2.2(i) through (x), provided
that no such renewal, extension, amendment, refinancing, rearrangement,
modification, restatement or supplement shall increase the amount of the
outstanding Existing Trident Subordinated Debt.
6.2.3 Merger. The Borrower will not, nor will it permit any Subsidiary of
the Borrower to, merge or consolidate with or into any other Person, unless both
before and after giving effect to such merger or consolidation, there exists no
Default or Unmatured Default; provided that (i) if any Subsidiary of the
Borrower party to such a merger or consolidation is a Guarantor, the Subsidiary
Guaranty of such Guarantor shall remain in force and effect and (ii) if the
Borrower is a party to such a merger or consolidation, the Borrower is the
surviving Person or if the Borrower is not the surviving Person, the surviving
Person shall expressly assume in writing in form and substance reasonably
satisfactory to the Agent all of the liabilities and obligations of the Borrower
hereunder, under the Notes and under the other Loan Documents.
6.2.4 Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary of the Borrower to, lease, sell or otherwise dispose of its Property,
to any other Person except:
(i) sales of inventory, Natural Gas and other similar assets in the
ordinary course of business,
(ii) sales or other dispositions of notes receivable or accounts
receivable as permitted by Section 6.2.5,
(iii) leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its Subsidiaries previously
leased, sold or disposed of (other than Property otherwise permitted to be sold,
leased, or otherwise disposed of pursuant to this Section 6.2.4) during the
twelve-month period ending with the month in
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which any such lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the Property of the Borrower and its Subsidiaries,
provided, that for purposes of this clause (iii), the sale or other disposition
by a Subsidiary of the Borrower of stock or other equity interests in itself to
a Person other than the Borrower or one or more of its Subsidiaries shall be
considered a sale or other disposition of Property with a value equal to the
difference between (A) the product of the Borrower's direct and indirect
percentage of ownership of such Subsidiary times the book value of such
Subsidiary before such sale or other disposition minus (B) the product of the
percentage of the Borrower's direct and indirect ownership of such Subsidiary
times the sum of the book value of such Subsidiary after giving effect to such
sale or other disposition plus any assets acquired in connection with such sale
or other disposition,
(iv) sales of assets which are concurrently leased back,
(v) sales or exchanges of fixed assets which are intended to be and
are replaced within 180 days of such sale or other disposition by fixed assets
having a substantially similar or greater fair market value,
(vi) dispositions of assets which are obsolete or no longer used or
useful in the business of the Borrower or any of its Subsidiaries,
(vii) leases, sales or other dispositions of its Property by (A) the
Borrower to any of its Subsidiaries or (B) any Subsidiary of the Borrower to the
Borrower or any other Subsidiary of the Borrower, or
(viii) sales or other dispositions of any ownership interest,
whether in whole or in part, in any fractionators within twelve (12) months of
the consummation of the Midstream Merger to comply with requirements of
governmental authorities in connection with the Midstream Merger;
provided that the parties understand and agree that any merger otherwise
permitted by Section 6.2.3 (including the Midstream Merger) shall not constitute
a disposition of assets.
6.2.5 Sale of Accounts. The Borrower will not, nor will it permit any
Subsidiary to, sell or otherwise dispose of any notes receivable or accounts
receivable, with or without recourse, with an aggregate outstanding principal
amount (in the case of notes) and an aggregate outstanding face amount (in the
case of accounts receivable) in excess, for all such sales and other
dispositions on or after the date hereof of $150,000,000 at any time and from
time to time outstanding.
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6.2.6 Investments and Acquisitions. The Borrower will not, nor will it
permit any Subsidiary of the Borrower to, make or suffer to exist any
Investments, except:
(i) Short-term obligations of, or fully guaranteed by, the United
States of America.
(ii) Commercial paper rated A-l or better by S&P or P-l or better
by Moody's.
(iii) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and
surplus in excess of $100,000,000 or any Lender.
(iv) Other Investments (not otherwise permitted pursuant to this
Section 6.2.6) in existence on the date hereof and included in the financial
statements provided pursuant to Section 5.4 or in Schedule "1" hereto.
(v) Loans or advances to Trident pursuant to the Trident
Intercompany Credit Agreement.
(vi) Advances, loans, extensions of credit or capital contributions
by the Borrower or any of its Subsidiaries to or on behalf of the Borrower or
any Subsidiary or Affiliate of the Borrower (including, but not limited to, the
purchase of the Existing Trident Subordinated Debt), provided that both before
and after giving effect to any such advance, loan, extension of credit or
capital contribution, there exists no Default or Unmatured Default.
(vii) Contributions of capital to any Person, or investments in, or
purchases or other acquisitions (in accordance with Regulation U) of, the stock,
partnership interests, notes, debentures or other securities of any Person, or
any commitment for any of the foregoing.
(viii) Repurchase agreements with the Agent or any Lender, or banks
that are insured by the Federal Deposit Insurance Corporation and having a
capital and an unimpaired surplus of at least One Hundred Million Dollars
($100,000,000), and with members of the Association of Primary Dealers in United
States Government Securities, the underlying securities of which are of the type
described in (i) above, and each of which is secured at all times by obligations
of the same type that have fair market value, including accrued interest, at
least equal to the amount of such repurchase agreement, including accrued
interest.
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(ix) Obligations of any state within the United States of America,
any nonprofit corporation or any instrumentality of the foregoing, provided that
at the time of their purchase, such obligations are rated in one of the two
highest letter rating categories (e.g. in the case of S&P, either its AAA or AA
category) by a nationally recognized securities credit rating agency.
(x) Obligations issued by political subdivisions or municipalities
of any state within the United States of America, any nonprofit corporation or
any instrumentality of the foregoing, that are rated in one of the two highest
letter rating categories (e.g. in the case of S&P, either its AAA or AA
category) by a nationally recognized securities credit rating agency.
(xi) Eurodollar deposits with the overseas branch of any domestic
bank or any Lender having a capital and surplus of at least One Hundred Million
Dollars ($100,000,000) .
(xii) Participations having a term of no more than 90 days with (i)
any Lender or (ii) any financial institution, the unsecured debt of which is
rated in one of the two highest letter rating categories (e.g. in the case of
S&P, either its AAA or AA category) by a nationally recognized securities credit
rating agency, in loans made or owned by such Lender or other financial
institution to Persons which have open market commercial paper rated in either
of the two highest short-term rating categories by a nationally recognized
securities credit rating agency.
6.2.7 Contingent Obligations. The Borrower will not, nor will it permit any
Subsidiary of the Borrower to, make or suffer to exist any Guaranty, except:
(i) endorsement of instruments for deposit or collection in the
ordinary course of business,
(ii) the Subsidiary Guaranties,
(iii) Guaranties of the Existing Trident Subordinated Debt, which
Guaranties are subordinated to the Obligations in a manner satisfactory to the
Agent, acting reasonably,
(iv) to the extent not included elsewhere in this Section,
Guaranties of obligations in respect of letters of credit (other than Letters of
Credit) not to exceed in the aggregate at any time outstanding an amount equal
to the amount permitted under the
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Existing Credit Facility (whether or not such letters of credit are issued under
the Existing Credit Facility),
(v) the Trident Guaranties set forth in Schedule "4",
(vi) Guaranties of (A) Debt of the Borrower and its Subsidiaries
otherwise permitted pursuant to the terms of this Agreement and (B) other
obligations of the Borrower and its Subsidiaries (other than (1) Guaranties of
Debt of Persons other than the Borrower and its Subsidiaries, (2) Guaranties of
obligations set forth in agreements, undertakings or other arrangements by which
the Borrower and its Subsidiaries agree to maintain the net worth, working
capital or any other financial condition of any other Person, (3) Guaranties of
the type referred to in clause (a) of the definition of the term Guaranty and
not otherwise permitted by clause (iv) of this Section 6.2.7, and (4) completion
guaranties or similar assurances that a project performs as planned) of a type
normally incurred in the industry and incurred in the ordinary course of
business and
(vii) to the extent not included above, Guaranties of other
obligations (including, without limitation, agreements containing completion
guaranties or similar assurances that a project performs as planned and
excluding Guaranties of the type referred to in clause (a) of the definition of
Guaranty not otherwise permitted by clause (iv) of this Section 6.2.7) which
obligations are otherwise permitted pursuant to the terms of this Agreement not
to exceed in the aggregate $150,000,000 at any time.
6.2.8 Liens. The Borrower will not, nor will it permit any Subsidiary of
the Borrower to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:
(i) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not
materially affect the marketability of the same or interfere with the use
thereof in the business of the Borrower or its Subsidiaries;
(ii) Liens existing on the date hereof (not otherwise permitted
pursuant to this Section 6.2.8) and described in Schedule "2" hereto;
(iii) Permitted Liens;
(iv) Liens created by (a) Capitalized Leases permitted by Section
6.2.2(iv) provided that the Liens created by any such Capitalized Lease attach
only to the property
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leased to the Borrower or one of its Subsidiaries pursuant thereto, and
(b) purchase money Liens securing Debt (including such Liens securing Debt
incurred within 12 months of the date on which such Property was acquired)
permitted by Section 6.2.2 (iv) provided that all such Liens attach only to the
property purchased with the proceeds of the Debt secured thereby and (c) Liens
on receivables or notes created in connection with a receivables or notes sale
permitted by Section 6.2.5 and Liens on rights of the Borrower or any of its
Subsidiaries related to such receivables or notes which are transferred to the
purchaser of such receivables or notes in connection with such permitted sale,
provided that such Liens secure only the obligations of the Borrower or any of
its Subsidiaries in connection with such sale;
(v) Liens on cash and short-term investments (a) deposited by the
Borrower or any of its Subsidiaries in margin accounts with futures contract
brokers authorized to trade on the New York Mercantile Exchange to secure its
obligations with respect to futures contracts for the purchase or sale of
natural gas, natural gas liquids, domestic crude, Brent crude, propane, heating
oil, unleaded gasoline and/or jet fuel or (b) pledged by the Borrower or any of
its Subsidiaries to secure its obligations pursuant to one or more Fixed Price
Contracts or other such contracts with respect to other commodities or interest
rate or currency rate management contracts;
(vi) Liens on (A) Property owned by a Project Financing Subsidiary
or (B) equity interests in a Project Financing Subsidiary (including in each
case a pledge of a partnership interest, common stock or a membership interest
in a limited liability company) securing Debt incurred in connection with a
Project Financing;
(vii) Liens on Property of a Person which exist at the time such
Person becomes a Subsidiary of the Borrower as a result of a permitted
Acquisition which Liens were not granted in contemplation of such Person
becoming a Subsidiary of the Borrower; and
(viii) extensions, renewals or replacements of any Lien referred to
in Sections 6.2.8(i) through (vii), provided that the principal amount of the
Debt or obligation secured thereby is not increased and that any such extension,
renewal or replacement Lien is limited to the Property originally encumbered
thereby.
6.2.9 [Intentionally Deleted]
6.2.10 Affiliates. The Borrower will not, and will not permit any
Subsidiary of the Borrower to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make any
payment or transfer to, any Affiliate (other than the
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Borrower or any of its Subsidiaries and other than dividends to shareholders of
the Borrower) except upon terms no less favorable to the Borrower or such
Subsidiary than the Borrower or such Subsidiary would obtain in a comparable
arms-length transaction and except the transactions and payments contemplated in
and made pursuant to the Trident Merger Agreement and the Midstream Merger
Agreement together with, in each case, the other agreements attached as exhibits
thereto.
6.2.11 Judgments. The Borrower will not allow any final judgment for the
payment of money in excess of Twenty-Five Million Dollars ($25,000,000) with
respect to the Borrower or any Subsidiary of the Borrower (other than any
Project Financing Subsidiary) rendered against the Borrower or any Subsidiary of
the Borrower to remain undischarged or unbonded for a period of thirty (30) days
during which such execution shall not be effectively stayed or deferred.
6.3 Financial Covenants.
6.3.1 Net Worth. The Borrower will maintain at all times, Consolidated
Tangible Net Worth of not less than the sum of (i) $400 million, plus (ii) 50%
of each of the Borrower's Consolidated Net Income and Old NGC's Consolidated Net
Income, if positive, for each fiscal quarter ending after March 14, 1995, plus
(iii) 50% of the aggregate net proceeds of all issuances of equity securities
made by the Borrower after the Closing Date.
6.3.2 Leverage Ratio. The Borrower will not permit its Leverage Ratio to
exceed 60%.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall constitute a
Default:
7.1 Any representation or warranty made or deemed made by the Borrower or any
of its Subsidiaries to the Lenders or the Agent under or in connection with this
Agreement or any other Loan Document shall be incorrect in any material respect
on the date as of which made or deemed made.
7.2 The failure or refusal of any Obligor to (a) pay the principal of any of
the Obligations, or any part thereof, as it becomes due in accordance with the
terms of the Loan Documents, or (b) pay interest on any of the Obligations, or
any part thereof, or any other amount or fee under the terms of this Agreement
and the other Loan Documents, within five (5) Business Days after it becomes
due.
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7.3 The breach by the Borrower of any of the terms or provisions of Section
6.1.2, 6.1.9, 6.2.1, 6.2.2, 6.2.3, 6.2.4, 6.2.5, 6.2.7 or 6.2.8.
7.4 The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement or any other Loan Document or by any Obligor of any other Loan
Document and, if capable of being remedied, such breach shall remain unremedied
for 45 days after the earlier of (i) an Authorized Officer of the Borrower
obtaining knowledge of such breach, or (ii) written notice thereof being given
to the Borrower by any Lender or the Agent.
7.5 (a) Failure of any Obligor or any Subsidiary (other than any Project
Financing Subsidiary) of an Obligor to pay when due (subject to any applicable
grace period), whether by acceleration or otherwise, any Debt (other than the
Obligations and other than the Existing Trident Subordinated Debt and other than
the CUSA Assumed Debt) aggregating for all of the Obligors and their respective
Subsidiaries in excess of $40,000,000 in principal amount; (b) the default by
any Obligor or any Subsidiary (other than any Project Financing Subsidiary) of
an Obligor in the performance of any term, provision or condition contained in
any agreement under which any Debt (other than the Obligations and other than
the Existing Trident Subordinated Debt and other than the CUSA Assumed Debt)
aggregating for all of the Obligors and their respective Subsidiaries (other
than any Project Financing Subsidiary) in excess of $40,000,000 in principal
amount was created or is governed, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to permit the
holder or holders of such Debt to cause such Debt to become due prior to its
stated maturity and such default, event or condition continues for more than 30
days; provided, however, that in the event the rights of any holder or holders
of such Debt to accelerate such Debt have been terminated by cure of such
default or written waiver by the holder of such Debt, such default shall not
thereafter constitute a Default hereunder until such time as the right of such
holder or holders to accelerate such Debt again arises; (c) any Debt (other than
the Obligations and other than the Existing Trident Subordinated Debt and other
than the CUSA Assumed Debt) of any of the Obligors or any of their respective
Subsidiaries aggregating for all of the Obligors and their respective
Subsidiaries in excess of $40,000,000 in principal amount shall be declared to
be due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the stated maturity thereof; (d) any of the Existing
Trident Subordinated Debt shall be declared to be due and payable or required to
be prepaid prior to the stated maturity thereof and shall not be paid (or such
acceleration rescinded) within 30 days of the date on which it is required to be
so paid; or (e) demand for payment shall be made for all or any part of the CUSA
Assumed Debt prior to the stated maturity thereof and such payment shall not be
made (or such demand rescinded) on or before the earlier of (i) 30 days
following such demand or (ii) the date upon which the holder thereof commences
proceedings to collect such payment.
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7.6 The Borrower or any of its Subsidiaries (other than any Project Financing
Subsidiary) or any Guarantor shall (i) have an order for relief entered with
respect to it under the Federal bankruptcy laws as now or hereafter in effect,
(ii) make an assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (iv) institute any proceeding seeking an order for relief under
the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate action to authorize or effect any of the foregoing actions set forth
in this Section 7.6, (vi) not pay, or admit in writing its inability to pay, its
debts generally as they become due. or (vii) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7 Without the application, approval or consent of the Borrower or any of its
Subsidiaries (other than any Project Financing Subsidiary), or any Guarantor, a
receiver, trustee, examiner, liquidator or similar official shall be appointed
for the Borrower or such Subsidiary or such Guarantor or any Substantial Portion
of the Property of any of the foregoing, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries
(other than any Project Financing Subsidiary) or any Guarantor and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of 60 consecutive days.
7.8 The failure of the Borrower or any Subsidiary of the Borrower (other than
any Project Financing Subsidiary) to have stayed or discharged within a period
of thirty (30) days after the commencement thereof any attachment,
sequestration, or similar proceeding against any of its assets having a fair
market value of $25,000,000 or more.
7.9 Any Change in Control shall occur.
7.10 Any Subsidiary Guaranty shall fail to remain in full force or effect or
any action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Subsidiary Guaranty, or any Guarantor shall fail to
comply with any of the terms or provisions of any Subsidiary Guaranty to which
it is a party, or any Guarantor denies that it has any further liability under
any Subsidiary Guaranty to which it is a party, or gives notice to such effect
provided, however, that no termination of a Subsidiary Guaranty resulting from
the merger of one Subsidiary of the Borrower which has executed a Subsidiary
Guaranty into another Subsidiary of the Borrower which has executed a Subsidiary
Guaranty shall constitute a Default
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so long as the Subsidiary Guaranty of the corporation surviving such merger
remains in full force and effect and that any release of an Additional Guaranty
pursuant to Section 6.1.3 shall not constitute a Default.
7.11 Subsidiaries. The Borrower shall cease to own, directly or indirectly,
free and clear of Liens, at least the following percentage (or such lesser
percentage of such Person as was owned at the time such Person reached either of
the thresholds described in (i)(A) or (i)(B) below, without giving effect to
transfers made in contemplation of such Person's reaching such threshold) of the
issued and outstanding capital stock or other equity of a Guarantor, other than
as a result of the merger of such Guarantor into another Subsidiary of the
Borrower or as a result of a transfer that did not result in a Default under
this Section 7.11 at the time made: (i) 80% of a Guarantor at any time either
(A) having fixed assets and net working capital with a book value equal to or
greater than $100,000,000 or (B) contributing 15% or more of the Consolidated
EBITD for an entire calendar quarter or (ii) 51% of any Guarantor other than a
Guarantor referred to in the foregoing clause (i); provided however, that any
-------- -------
release of an Additional Guaranty pursuant to Section 6.1.3 shall not constitute
a Default.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
----------------------------------------------
8.1 Acceleration.
(a) If any Default described in Section 7.6 (other than 7.6 (ii) and other
than 7.6(v) hereof as to any of the matters in 7.6(ii) hereof) or 7.7 occurs,
(i) the obligations of the Lenders to make Loans hereunder and the obligations
of the Lenders to issue Letters of Credit shall automatically terminate and the
Obligations shall immediately become due and payable without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives and without any election or action on the part of the Agent or
any Lender and (ii) the Borrower will be and become thereby unconditionally
obligated, without the need for demand or the necessity of any act or evidence,
to deliver to the Agent, at its address specified pursuant to Article XIII, for
deposit into the Letter of Credit Collateral Account, an amount (the "Collateral
Shortfall Amount") equal to the excess, if any, of
(A) 100% of the sum of the aggregate maximum amount remaining available
to be drawn under the Letters of Credit (assuming compliance with all conditions
for drawing thereunder) issued and outstanding as of such time, over
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(B) the amount on deposit in the Letter of Credit Collateral Account at
such time that is free and clear of all rights and claims of third parties and
that has not been applied by the Lenders against the Obligations;
provided, however, that so long as no Default shall have occurred and be
continuing, if the amount on deposit in the Letter of Credit Collateral Account
exceeds the Collateral Shortfall Amount, then the Agent shall return to the
Borrower an amount of such deposit equal to such excess, and the Lenders hereby
authorize the Agent to do so.
(b) If any Default occurs and is continuing (other than a Default described in
Section 7.6(i) or 7.6(iii) through (vii) or 7.7), (i) the Required Lenders may
terminate or suspend the obligations of the Lenders to make Loans and the
obligation of the Lenders to issue Letters of Credit hereunder, or declare the
Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrower hereby expressly waives and (ii)
the Required Lenders may, upon notice delivered to the Borrower and in addition
to the continuing right to demand payment of all amounts payable under this
Agreement, make demand on the Borrower to deliver (and the Borrower will,
forthwith upon demand by the Required Lenders and without necessity of further
act or evidence, be and become thereby unconditionally obligated to deliver), to
the Agent, at its address specified pursuant to Article XIII, for deposit into
the Letter of Credit Collateral Account an amount equal to the Collateral
Shortfall Amount.
(c) If at any time while any Default is continuing, the Agent determines that
the Collateral Shortfall Amount at such time is greater than zero, the Agent may
make demand on the Borrower to deliver (and the Borrower will, forthwith upon
demand by the Agent and without necessity of further act or evidence, be and
become thereby unconditionally obligated to deliver), to the Agent as additional
funds to be deposited and held in the Letter of Credit Collateral Account an
amount equal to such Collateral Shortfall Amount at such time.
(d) The Agent may at any time or from time to time after funds are deposited
in the Letter of Credit Collateral Account, apply such funds to the payment of
the Obligations and any other amounts as shall from time to time have become due
and payable by the Borrower to the Lenders under the Loan Documents.
(e) Neither the Borrower nor any Person claiming on behalf of or through the
Borrower shall have any right to withdraw any of the funds held in the Letter of
Credit Collateral Account. After all of the Obligations have been indefeasibly
paid in full, any funds remaining in the Letter of Credit Collateral Account
shall be returned by the Agent to the Borrower or paid to whoever may be legally
entitled thereto at such time.
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(f) The Agent shall exercise reasonable care in the custody and preservation
of any funds held in the Letter of Credit Collateral Account and shall be deemed
to have exercised such care if such funds are accorded treatment substantially
equivalent to that which the Agent accords its own property, it being understood
that the Agent shall not have any responsibility for taking any necessary steps
to preserve rights against any Persons with respect to any such funds.
8.2 Amendments. Subject to the provisions of this Article VIII, the Required
Lenders (or the Agent with the consent in writing of the Required Lenders) and
the Borrower may enter into agreements (including consents and waivers)
supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Lenders or the
Borrower hereunder or waiving any Default hereunder; provided, however, that no
such supplemental agreement shall, without the consent of each Lender affected
thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate or extend the time
of payment of interest or fees thereon or any fees on any Letter of Credit.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Facility Maturity Date (including, without limitation,
as provided in Section 2.20), or reduce the amount of, or extend the payment
date for, the mandatory payments required under Section 2.3, or increase the
amount of the Commitment of any Lender hereunder, or permit the Borrower to
assign its rights under this Agreement or change the definition of Aggregate
Commitment (other than pursuant to Section 2.21).
(iv) Amend this Section 8.2.
(v) Release any Guarantor of any Obligation from its Subsidiary Guaranty
or release any Subsidiary Guaranty.
(vi) If a Default has occurred and is continuing, release any collateral
securing the Obligations.
(vii) Permit the Borrower to assign its rights or obligations under the
Loan Documents.
(viii) Amend the parenthetical phrase in the first sentence of the
definition of Eurodollar Interest Period.
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In addition, in the event of an amendment, modification or waiver of any
provision in the Existing Bank Credit Facility in accordance with the terms
thereof and the same or substantially similar provision exists in this
Agreement, then the Agent shall be deemed authorized to and will execute on
behalf of all of the Lenders a similar amendment, modification or waiver of this
Agreement without the consent or approval of the Lenders herein; provided,
however, that the consent of each Lender is required for any of the matters
described in clauses (i) through (vii) above and the consent of the Required
Lenders is required for any amendment, modification or waiver of Section 6.3.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of or modify the fee required under Section 12.3.2 without obtaining the consent
of any other party to this Agreement.
8.3 Preservation of Rights. No delay or omission of the Lenders or the Agent
to exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent specifically set forth in such writing. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full and all Commitments have terminated.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Survival of Representations; Obligations. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery of
the Notes and the making of the Loans and issuance of Letters of Credit herein
contemplated.
9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3 Taxes. Any taxes (excluding federal income taxes on the overall net
income of any Lender) or other similar assessments or charges made by any
governmental or revenue
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authority in respect of the Loan Documents shall be paid by the Borrower,
together with interest and penalties, if any.
9.4 Headings. Section headings in the Loan Documents are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of the Loan Documents.
9.5 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent, and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent, and the
Lenders relating to the subject matter thereof.
9.6 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective permitted successors and assigns.
9.7 Expenses; Indemnification of Agent and Lenders. The Borrower shall
reimburse the Agent for any reasonable costs, internal charges and out-of-pocket
expenses (including reasonable attorneys' fees and time charges of attorneys for
the Agent, which attorneys may be employees of the Agent) paid or incurred by
the Agent in connection with the preparation, negotiation, execution, delivery,
review, amendment, modification, and administra tion of the Loan Documents. The
Borrower also agrees to reimburse the Agent and the Lenders for any reasonable
costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for the Agent and the Lenders,
which attorneys may be employees of the Agent or the Lenders) paid or incurred
by the Agent or any Lender in connection with the collection and enforcement of
the Loan Documents. Neither the Agent, any Lender nor any of their respective
officers, directors, employees, or agents (each, an "Indemnified Party") shall
be liable for any action in good faith taken or omitted to be taken by such
Indemnified Party pursuant to, in connection with, or in any way related to this
Agreement or any other Loan Document including, without limitation, an
Indemnified Party's own negligence or co-negligence except to the extent such
action or omission constitutes willful misconduct or gross negligence on the
part of such Indemnified Party (or its officers, directors, employees or
authorized agents) or is adjudicated by a court of competent jurisdiction to
constitute gross negligence or willful misconduct on the part of such
Indemnified Party (or its officers, directors, employees or authorized agents).
The Borrower agrees to the fullest extent permitted by applicable Law, to
indemnify and to hold harmless each Indemnified Party from
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and against any and all losses, claims, damages, penalties, judgments, expenses
and liabilities to Persons not party to this Agreement including all actions
with respect thereto (including, without limitation, any alleged violations of
applicable federal or state securities laws committed by any Person other than
such Indemnified Party or any such loss resulting from such Indemnified Party's
negligence), and reasonable attorneys' fees and costs (including, without
limitation, all expenses of litigation and preparation therefor) which any of
them may pay or incur arising out of or in connection with this Agreement, the
other Loan Documents and the transactions contemplated hereby and thereby or the
direct or indirect application of the proceeds of any Loan or Letter of Credit,
or the performance by such Indemnified Party of its obligations hereunder and
under the other Loan Documents; provided, however, that the indemnification
provided for herein shall not apply to any such loss (i) adjudicated by a court
of competent jurisdiction to have resulted from the willful misconduct or gross
negligence of such Indemnified Party, (ii) arising out of any claim made by any
Lender against the Agent or another Lender under this Agreement or the other
Loan Documents, or (iii) arising out of any claim made by any Participant
against a Lender which does not result from a breach by any Obligor of any term
or provision of this Agreement or any other Loan Document. The obligations of
the Borrower under this Section shall survive the termination of this Agreement.
9.8 Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
9.9 Severability of Provisions. Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.10 Nonliability of Lenders. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent, nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent, nor any Lender undertakes any responsibility to
the Borrower to review or inform the Borrower of any matter in connection with
any phase of the Borrower's business or operations.
9.11 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS OF LAWS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
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9.12 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION.
9.13 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, AND EACH LENDER HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.14 Confidential Information. The Agent and each Lender agree that all
documentation and other information made available by the Borrower to the Agent
or such Lender under the terms of this Agreement shall (except to the extent
such documentation or other information is publicly available or hereafter
becomes publicly available other than by action of the Agent or such Lender, or
was theretofore known or hereinafter becomes known to the Agent or such Lender
on a nonconfidential basis independent of any disclosure thereto by the
Borrower) be held in confidence by the Agent or such Lender in accordance with
prudent banking procedures and used solely in the administration and enforcement
of the Loan Documents and Letters of Credit from time to time outstanding and in
the prosecution or defense of legal proceedings arising in connection herewith;
provided that (i) the Agent or such Lender may disclose documentation and
information to the Agent and/or to any other Lender which is a party to this
Agreement or any Affiliates thereof and (ii) the Agent or such Lender may
disclose such documentation or other information to any other bank or other
Person to which such Lender sells or proposes to make an assignment or sell a
participation in its Loans hereunder if such other bank or Person, prior to such
disclosure, agrees in writing to be bound by the terms of the confidentiality
statement customarily employed by the Agent or such Lender in connection with
such potential transfers provided that the terms of such confidentiality
statement are no less restrictive than those contained in the confidentiality
agreement executed by the Borrower and the Agent or such Lender.
Notwithstanding the foregoing, nothing contained herein shall be construed to
prevent the Agent or any Lender from (a) making disclosure of any information
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(i) if required to do so by applicable law or regulation, (ii) to any
governmental agency or regulatory body having or claiming to have authority to
regulate or oversee any aspect of the Agent's or Lender's business or that of
the Agent's or Lender's corporate parent or affiliates in connection with the
exercise of such authority or claimed authority, (iii) pursuant to any subpoena
or if otherwise compelled in connection with any litigation or administrative
proceeding, (iv) to correct any false or misleading information which may become
public concerning such Person's relationship to the Borrower, or (v) to the
extent the Agent or such Lender or its counsel deems necessary or appropriate to
enforce any remedy provided in the Loan Documents, the Notes or this Agreement
or otherwise available by law; or (b) making, on a confidential basis, such
disclosures as such Lender reasonably deems necessary or appropriate to its
legal counsel or accountants (including outside auditors). If the Agent or such
Lender is compelled to disclose such confidential information in a proceeding
requesting such disclosure, the Agent or such Lender shall seek to obtain
assurance that such confidential treatment will be accorded such information;
provided, however, the Agent or such Lender shall have no liability for the
failure to obtain such treatment. Notwithstanding anything in this Agreement to
the contrary, each Lender agrees that to the extent it acquires information from
or on behalf of the Borrower or any of its Subsidiaries that may provide a
competitive advantage with regard to the sale or purchase of commodities or
derivative products, such Lender will take all reasonable care to keep such
information confidential as to the officers, agents or employees of such Lender
or any Affiliate thereof that are involved in such Lender's or Affiliate's
commodity trading activities.
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ARTICLE X
THE AGENT
---------
10.1 Appointment and Authority of Agent. In order to expedite the various
transactions contemplated by this Agreement, each Lender hereby designates and
appoints CIBC to act as its agent hereunder, and authorizes CIBC to take such
action on its behalf under the provisions of this Agreement and to exercise such
powers and perform such duties as are expressly delegated to the Agent by the
terms of this Agreement or any other Loan Document, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement or any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or therein, or any fiduciary relationship with any Lender or any Obligor,
and no implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Should the Agent fail or refuse to take any
action requested hereunder by the Required Lenders, the Agent shall resign and
the Required Lenders shall promptly appoint a successor to the Agent hereunder.
At any time that no Person or Persons are acting as agent hereunder, the
Obligors are authorized to deal directly with each Lender for all purposes
hereunder including, without limitation, the remittances of amounts then
required to be paid hereunder and, in respect to any request or the like
purportedly delivered by the Required Lenders to the Obligors, the Obligors
shall receive written evidence thereof. The Agent is hereby expressly
authorized as agent on behalf of the Lenders, without hereby limiting any
implied authority:
(a) To receive on behalf of each Lender any payment of principal or interest
on the Advances paid to the Agent, and to promptly distribute to each Lender its
pro rata share of all payments so received;
(b) To receive all documents and items to be furnished hereunder;
(c) To act as nominee for and on behalf of all of the Lenders in and under
this Agreement and the other Loan Documents;
(d) To arrange for the means whereby the funds of the Lenders are to be made
available to the Borrower;
(e) To distribute to the Lenders information, requests, payments, prepayments,
documents, and other items received from the Obligors and others;
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(f) To execute and deliver to the Obligors and others requests, demands,
approvals, and consents received from the Lenders;
(g) To the extent permitted by this Agreement, to exercise on behalf of each
Lender all remedies of the Lenders or the Agent upon the occurrence of any
Default or Unmatured Default specified in this Agreement, to the extent
requested by the Required Lenders; and
(h) To take such other actions as may be requested by the Required Lenders,
subject to the limitations of Section 8.2.
10.2 Capacity of the Agent. With respect to its commitment to lend
hereunder and the Loans made by it and Letters of Credit issued by it, the Agent
in its capacity as a Lender and not as the Agent, shall have the same rights and
powers hereunder as the other Lenders and may exercise the same rights and power
as though it were not the Agent.
10.3 No Liability of the Agent and Indemnity. Neither the Agent, nor any
of it officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action taken or omitted to be taken by it or them
hereunder or otherwise in connection with the Loan Documents (except for its or
such Person's own willful misconduct or gross negligence in not performing a
specific administrative duty hereunder), or (ii) responsible in any manner to
any Lender for any recitals, statements, representations, or warranties made by
any Obligor or any officer thereof contained in any Loan Document or in any
certificate, report, statement, or other document referred to or provided for
in, or received by the Agent under or in connection with, any Loan Document or
for the value, validity, effectiveness, genuineness, enforceability, or
sufficiency of any Loan Document or for any failure of any Obligor to perform
its obligations under any Loan Document. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements or conditions contained in any Loan
Document, or to inspect the properties, books, or records of any Obligor. To
the extent that the Agent is not reimbursed or indemnified by the Obligors, each
of the Lenders will indemnify the Agent to the fullest extent permitted by
applicable Law pro rata based upon their respective Percentages from and against
any and all demands, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind
whatsoever which may at any time be imposed on, incurred by, or asserted against
the Agent in any way relating to or arising out of this or any other Loan
Document, or any documents contemplated by or referred to herein, or therein, or
the transactions contemplated hereby, or thereby, or any action taken or omitted
by the Agent under or in connection with any of the foregoing, including
resulting from the Agent's own negligence (and including, without limitation,
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements resulting from any violations or
alleged violation of applicable federal or state securities laws, committed by
any Person other than the
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Agent) but not gross negligence or willful misconduct. The agreements in this
Section 10.3. shall survive the termination of this Agreement.
10.4 Employees of Agent. The Agent may execute any and all duties
hereunder by or through agents or employees and shall be entitled to advice of
counsel pertaining to all matters hereunder. The Borrower has agreed to
reimburse the Agent for actual out-of-pocket expenses incurred by the Agent and
its agents in acting under this Agreement and each other Loan Document and to
pay any reasonable legal and out-of-pocket expenses incurred by the Agent in
connection with the development, preparation, negotiation, and execution of the
Loan Documents, or the enforcement of the rights of the Agent and the Lenders
thereunder. Each Lender agrees to reimburse the Agent, when applicable, in the
amount of its pro rata share based upon its Percentage of any out-of-pocket
expenses incurred for the benefit of the Lenders and not reimbursed by the
Obligors.
10.5 Reliance. The Agent shall be entitled to rely on any conversation,
notice, consent, certificate, schedule, affidavit, letter, telegram, teletype
message, statement, order, or other document believed to be genuine and correct
and to have been signed or sent by the proper Person or Persons and, in respect
of legal matters, upon an opinion of counsel selected by the Agent. The Agent
and the Obligors may deem and treat the original Lenders hereunder as the owners
of their respective pro rata shares of the Obligations for all purposes hereof
notwithstanding any assignment or transfer of any interest therein by any Lender
in accordance with the provisions of Article XII. Any request, authority, or
consent of any holder of any of the Notes shall be conclusive and binding on any
subsequent holder, transferee, or assignee of such Note. The Agent shall be
fully justified in failing or refusing to take any action hereunder or under any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any other Loan Document in accordance with a request
of the Required Lenders, or of all of the Lenders in the circumstances required
by Section 8.2, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders and their successors and
assigns. Each Lender expressly acknowledges that neither the Agent, nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Agent
hereinafter taken shall be deemed to constitute any representation or warranty
by the Agent to any Lender. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of any Obligor
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or any of its Subsidiaries which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
10.6 Several Commitments. Except as expressly provided in this Section
10.6, the obligations of the Lenders under this Agreement are several. The
default by any Lender in making its Loan in accordance with its commitment
hereunder, issuing its Letters of Credit or performing on its Letters of Credit
shall not relieve the other Lenders of their obligations hereunder. In the
event of any default by any Lender in issuing its Letters of Credit, a non-
defaulting Lender shall be obligated to issue its Percentage of the amount
requested in each Issuance Request, but shall not be obligated to issue the
amount which the defaulting Lender was required to advance hereunder. Nothing
in this Section 10.6 shall be construed as releasing, modifying, or waiving the
obligation of each Lender to issue its Percentage of the Letters of Credit
sought in each Issuance Request pursuant to the terms of this Section 10.6 and
this Agreement.
10.7 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default unless the Agent
has received notice from a Lender or an Obligor referring to this Agreement or
other relevant Loan Document, describing such Default or Unmatured Default and
stating that such notice is a "notice of default." Notwithstanding the
provisions of the immediately preceding sentence, in the event that the Agent or
any Lender knows of any Default or Unmatured Default such Person shall, as soon
as practicable, give notice of same to each other Lender. In the event that the
Agent receives such a notice, the Agent shall give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or
Unmatured Default as shall be reasonably directed by the Required Lenders;
provided that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action (unless directions from the Required Lenders are required
therefore under Article VIII), with respect to such Default or Unmatured Default
as it shall deem advisable in the best interests of the Lenders.
10.8 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
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10.9 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, such resignation to be effective
upon the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall have
the right to appoint with the consent of the Borrower which such consent shall
not be unreasonably withheld or delayed, on behalf of the Borrower and the
Lenders, a successor Agent. If no successor Agent shall have been so appointed
by the Required Lenders within thirty days after the resigning Agent's giving
notice of its intention to resign, then the resigning Agent may appoint with the
consent of the Borrower which such consent shall not be unreasonably withheld or
delayed, on behalf of the Borrower and the Lenders, a successor Agent. If the
Agent has resigned and no successor Agent has been appointed, the Lenders may
perform all the duties of the Agent hereunder and the Borrower shall make all
payments in respect of the Obligations to the applicable Lender and for all
other purposes shall deal directly with the Lenders. No successor Agent shall
be deemed to be appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank having capital
and retained earnings of at least $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Agent. Upon the effectiveness of the resignation of
the Agent, the resigning Agent shall be discharged from its duties and
obligations hereunder and under the Loan Documents. After the effectiveness of
the resignation of an Agent, the provisions of this Article X shall continue in
effect for the benefit of such Agent in respect of any actions taken or omitted
to be taken by it while it was acting as the Agent hereunder and under the other
Loan Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
------------------------
11.1 Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or not
collected or available) and any other Debt at any time held or owing by any
Lender to or for the credit or account of the Borrower may be offset and applied
toward the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans or in respect of its Letters of Credit (other
than payments received pursuant to Sections 3.1, 3.2 or 3.4) in a greater
proportion than that received by any other Lender, such Lender agrees, promptly
upon demand, to purchase a portion of the Obligations
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held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of the Obligations. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Percentage. In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------
12.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower, the
Agent and the Lenders and their respective successors and permitted assigns,
except that (i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents and (ii) any assignment by any Lender must
be made in compliance with Section 12.3. Notwithstanding clause (ii) of this
Section, any Lender may at any time, without the consent of the Borrower or the
Agent, assign all or any portion of its rights under this Agreement and its
Notes to a Federal Reserve Bank; provided, however, that no such assignment
shall release the transferor Lender from its obligations hereunder. The Agent
and the Borrower may treat the payee of any Note as the owner thereof for all
purposes hereof unless and until such payee complies with Section 12.3 in the
case of an assignment thereof. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
12.2 Participations.
12.2.1 Permitted Participants; Effect. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender under the Loan Documents.
In the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, such Lender shall remain the
holder of any such Note for all purposes under the Loan Documents, all amounts
payable by the Borrower under this Agreement shall be determined as if such
Lender had
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not sold such participating interests, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
12.2.2 Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Commitment in which such Participant has an
interest which forgives principal, interest or fees or reduces the interest rate
or fees payable with respect to any such Loan or Commitment, postpones any date
fixed for any regularly-scheduled payment of principal of, or interest or fees
on, any such Loan or Commitment, releases any Guarantor of any such Loan or
Letter of Credit or releases any substantial portion of collateral, if any,
securing any such Loan or Letter of Credit.
12.2.3 Benefit of Setoff. The Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in Section 11.1 in respect of its
participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, provided that each Lender shall retain the
right of setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in Section 11.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a Lender.
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12.3 Assignments.
12.3.1 Permitted Assignments. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents subject, in the case of assignments to a
Purchaser which is not a Lender prior to such assignment, to a minimum of
$20,000,000 or such lesser amount as may be consented to by the Borrower and the
Agent provided that any assignment by any Lender shall include a pro rata
assignment of its interest in the Aggregate Commitment. Such assignment shall
be in the form of Exhibit "F" hereto or in such other form as may be agreed to
by the Agent. The consent of the Agent and the Borrower shall be required prior
to an assignment becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate thereof; provided, however, that if a Default has
occurred and is continuing, the consent of the Borrower shall not be required;
and provided, further, that if any Letters of Credit are outstanding, then such
assignment shall not become effective until such time as the Agent has received
the following:
(A) a modification of each assigning Lender's outstanding Letters of Credit
substantially in the form of Exhibit "B-2" reflecting the Stated Amount of such
Lender's outstanding Letters of Credit after giving effect to such assignment as
equal to the product of (x) such Lender's Percentage after giving effect to such
assignment, multiplied by (y) the aggregate Stated Amount of all outstanding
Letters of Credit,
(B) a new Letter of Credit from the Purchasers in the Stated Amount equal to
the product of (x) such Purchaser's Percentage after giving effect to the
assignment, multiplied by (y) the aggregate Stated Amount of all outstanding
Letters of Credit, and
(C) a CUSA Certificate reflecting the change in the Percentages resulting from
such assignment.
The consent of the Borrower and the Agent shall not be unreasonably withheld.
12.3.2 Effect; Effective Date. Upon (i) delivery to the Agent of a notice of
assignment, substantially in the form attached as Exhibit "I" to Exhibit "F"
hereto (a "Notice of Assignment"), together with any consents and other
documents required by Section 12.3.1, and (ii) payment of a $3,500 fee to the
Agent by the applicable Purchaser for processing such assignment, such
assignment shall become effective on the effective date specified in such Notice
of Assignment. The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make
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the purchase of the Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be "plan
assets" under ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the Borrower,
the Lenders or the Agent shall be required to release the transferor Lender with
respect to the percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to
this Section 12.3.2, the transferor Lender, the Agent and the Borrower shall
make appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting their
Commitment, as adjusted pursuant to such assignment and each replaced Note shall
be returned to the Borrower marked "cancelled and replaced." Notwithstanding any
assignment hereunder, the agreements and Obligations of the Borrower contained
in Section 3.1, 3.2, 3.4 or 9.7 with respect to the transferor Lender shall
survive such assignment and be enforceable by such transferor Lender, in
accordance with the terms of this Agreement, with respect to acts and
circumstances occurring prior to such transfer. Notwithstanding any assignment
hereunder, the agreements and obligations of the transferor Lender pursuant to
Section 10.3 shall survive such assignment and be enforceable by the Agent with
respect to acts and circumstances occurring prior to such transfer.
12.4 Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries, provided
such Participant, Purchaser, Transferee or other Person has signed a
confidentiality agreement substantially similar to the provisions of Section
9.14.
12.5 Tax Treatment. If any interest in any Loan Document is transferred to
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.17.
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ARTICLE XIII
NOTICES
-------
13.1 Giving Notice. Except as otherwise permitted by Section 2.12 with
respect to Borrowing Notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by telecopy and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telecopy, shall be deemed given when
transmitted on any Business Day.
13.2 Change of Address. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XIV
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party has notified the Agent by telex or telephone, that it has taken
such action.
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this
Agreement as of the date first above written.
NGC CORPORATION
By:___________________________
Print Name:___________________
Title:________________________
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Attn: Senior Vice President and Chief
Financial Officer
Telephone No.: 713-744-1770
Telecopy No.: 713-744-5336
with a copy to:
Attn: Senior Vice President
and General Counsel
Commitments
-----------
$30,000,000 CANADIAN IMPERIAL BANK OF
COMMERCE, Individually and as Agent
By:__________________________
Print Name:__________________
Title:_______________________
Attn:________________________
Telecopy No.:________________
with a copy to:
Canadian Imperial Bank of Commerce
909 Fannin, Suite 1200
Houston, Texas 77010
Attn: Mark Wolf
<PAGE>
Telephone No.: 713-655-5226
Telecopy No.: 713-650-3727
$30,000,000 ABN AMRO BANK, N.V.
By:_________________________
Print Name:_________________
Title:______________________
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
$30,000,000 THE BANK OF BOSTON
By:_________________________
Print Name:_________________
Title:______________________
____________________________
Attn:_______________________
Telecopy No.:_______________
<PAGE>
$30,000,000 THE BANK OF MONTREAL
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
$30,000,000 THE BANK OF NOVA SCOTIA
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
$20,000,000 THE CHASE MANHATTAN BANK
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
<PAGE>
$30,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
$20,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
$30,000,000 MELLON BANK, N.A. (WEST)
By:_________________________
Print Name:_________________
Title:______________________
____________________________
<PAGE>
____________________________
Attn:_______________________
Telecopy No.:_______________
$20,000,000 NATIONSBANK OF TEXAS, N.A.
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
$30,000,000 ROYAL BANK OF CANADA
By:_________________________
Print Name:_________________
Title:______________________
____________________________
____________________________
Attn:_______________________
Telecopy No.:_______________
<PAGE>
EXHIBIT "A-1"
NOTE
$___________ September 1, 1996
NGC Corporation, a Delaware corporation (the "Borrower"), promises to
pay to the order of _____________________________________ (the "Lender") the
lesser of the principal sum of __________________________ Million Dollars or the
aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to Section 2.1 of the Letter of Credit Facility Agreement,
dated as of September 1, 1996, among the Borrower and Canadian Imperial Bank of
Commerce, individually and as Agent, and the Lenders named therein (as the same
may be amended or modified, the "Agreement") and unpaid reimbursement
obligations with respect to amounts paid by the Lender pursuant to Letters of
Credit (as defined in the Agreement) issued pursuant to Section 2.2 of the
Agreement, in lawful money of the United States in immediately available funds
at the main office of Canadian Imperial Bank of Commerce, New York, New York, as
Agent or as otherwise directed by the Agent pursuant to the terms of the
Agreement, together with interest, in like money and funds, on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay each Loan in full on the Commitment
Termination Date (as defined in the Agreement), and mandatory repayments of
principal will be made by the Borrower as set forth in the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and each draw of each Letter of Credit issued
by the Lender and the date and amount of each principal payment hereunder
provided, however, that any failure to so record shall not affect the Borrower's
obligations under any Loan Document.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Agreement, as it may be amended from time to time.
Reference is hereby made to the Agreement for a statement of the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.
Borrower and any endorser hereof waive presentment, notice of dishonor
and protest, and assent to any extension of time with respect to any payment due
under this Note and to the addition or release of any party.
NGC CORPORATION
Exhibit A-1 Page 1
<PAGE>
Exhibit A-1 Page 2
<PAGE>
SCHEDULE OF LOANS, DRAWS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF NGC CORPORATION
DATED SEPTEMBER 1, 1996
==========================================================================
Amount of Loan Maturity Principal
or Letter of of Applicable Amount Unpaid
Date Credit Draw Type Interest Rate Paid Balance
Period
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
==========================================================================
Exhibit A-1 Page 3
<PAGE>
EXHIBIT "B-1"
FORM OF LETTER OF CREDIT
[ISSUER]
_____________________
_____________________
Attention: __________
Irrevocable Letter of Credit
Date of Issue: ___________, 1996
Credit Number:
Beneficiary: Chevron U.S.A. Inc.
2005 Diamond Blvd., Room ____
Concord, CA 94520-5733
Attention:___________________
Applicant: NGC Corporation (on behalf of Natural
Gas Clearinghouse)
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Total Amount: US$ ______________
Expiry Date: _________, 1997
Percentage: ____ %
Pursuant to that certain Letter of Credit Facility Agreement dated as of
_______________, 1996 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Facility Agreement") between the Applicant,
Canadian Imperial Bank of Commerce, as agent (the "Agent"), and the Lenders
named therein, _____________________ (hereinafter called "the Bank") hereby
opens its Irrevocable Letter of Credit (the "Letter of Credit") for the account
of
Exhibit B-1 Page 1
<PAGE>
the Applicant and agrees to pay, at sight, to the Beneficiary an amount not
to exceed the above-referenced Total Amount on the terms and conditions set
forth herein. The Total Amount or the Expiry Date may be reduced and/or the
Percentage may be changed from time to time by delivering to the Agent on any
date a certificate in the form of Annex B hereto.
If the Beneficiary shall deliver to the Bank a certificate (each a "Drawing
Certificate") in the form of Annex A hereto, accompanied by a copy of a
statement (the "Statement") issued pursuant to that certain Natural Gas Purchase
and Sale Agreement dated ________, 1996 among Natural Gas Clearinghouse and the
Beneficiary (the "Gas Purchase Agreement"), then the Bank agrees to honor its
payment obligations herein by wiring such sums as shall be directed in such
Drawing Certificate, not exceeding in the aggregate the Total Amount hereof,
into the an account (the "Applicable Account") identified as follows:
______________________________
______________________________
Account No. __________________
The liability of the Bank shall not be discharged by any payment or succession
of payments hereunder, unless and until such payment or payments shall amount in
the aggregate to the Total Amount of this Letter of Credit, but in no event
shall the obligation of the Bank hereunder exceed the amount of said Total
Amount.
This Letter of Credit will expire at the close of business on the Expiry Date
unless renewed in a written agreement from the Bank.
Wire transfers to the Applicable Account pursuant to this Letter of Credit shall
be made by the Bank upon presentation, during the Bank's business hours, of a
Drawing Certificate in the form of Annex A hereto to the Bank at its office
identified above or at any other location which may be designated by the Bank in
a written notice delivered to the Beneficiary at the address identified above.
If a Drawing Certificate is delivered to the Bank at or prior to 10:00 a.m., New
York City time, on a Business Day (as hereinafter defined) and provided that
such Drawing Certificate and the documents presented in connection therewith
conform to the terms and conditions hereof, payment shall be made to the
Beneficiary not later than 2:00 p.m., New York City time, on the same Business
Day; provided that if any Drawing Certificate is delivered to the Bank after
10:00 a.m., New York City time, on a Business Day and provided that such Drawing
Certificate and the documents presented in connection therewith conform to the
terms and conditions hereof, payment shall be made to the Beneficiary not later
than 2:00 p.m., New York City time, on the
Exhibit B-1 Page 2
<PAGE>
next succeeding Business Day. As used herein, the term "Business Day" shall
mean, in each case, any day other than a Saturday, Sunday or a day on which
banking corporations (including trust companies) in the State of New York are
authorized or required by law to close.
This Letter of Credit is neither transferable nor assignable.
THIS LETTER OF CREDIT IS GOVERNED BY THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS, 1993 REVISION, INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION 500 (THE "UNIFORM CUSTOMS"), AND TO THE EXTENT NOT INCONSISTENT WITH
THE UNIFORM CUSTOMS, THIS LETTER OF CREDIT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF ILLINOIS AND SHALL, AS TO MATTERS NOT GOVERNED BY
THE UNIFORM CUSTOMS, BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
SAID STATE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
In Witness Whereof, the Bank has executed this Letter of Credit on the date set
forth above.
[BANK]
By:____________________
Name:__________________
Title:_________________
Exhibit B-1 Page 3
<PAGE>
ANNEX A
DRAWING CERTIFICATE
[DATE]
[Bank]
________________
________________
Attn: __________
Re: Irrevocable Letter of Credit No. _________ (the "Letter of Credit")
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned them in the Letter of Credit.
The undersigned, a duly authorized representative of the Beneficiary,
hereby certifies to you that:
(i) Attached hereto as Exhibit A is a true and correct copy of a
Statement issued pursuant to that certain Gas Purchase Agreement, and
$___________ (the "Unpaid Amount") of the amount shown as owing on the Statement
was not paid by the Applicant when due and remains unpaid.
(ii) You are hereby directed to wire transfer $____________ [Here
specify an amount not to exceed the Total Amount as reduced by any prior draw
requests] (the "Drawing Amount") into the Applicable Account as identified in
the Letter of Credit.
(iii) The Drawing Amount does not exceed the Total Amount as reduced
by any prior draw requests under the Letter of Credit, i.e., the Drawing Amount
does not exceed the maximum amount permitted to be drawn under the Letter of
Credit in accordance with the Letter of Credit.
(iv) The Drawing Amount equals the product of (i) the Percentage as
identified in the Letter of Credit, multiplied by (ii) the Unpaid Amount.
(v) The Beneficiary has not received any other payments under the
Letter of Credit with respect to the Unpaid Amount.
(vi) The Beneficiary has delivered a comparable drawing certificate,
dated of even date herewith, to each other bank party to the Facility Agreement,
which drawing
Exhibit B-1 Page 4
<PAGE>
certificate directs each such bank to make payment to the
Beneficiary in an amount equal to the product of (i) such bank's Percentage (as
defined in such bank's letter of credit), multiplied by (ii) the Unpaid Amount.
Exhibit B-1 Page 5
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the ____ day of _________, 199__.
BENEFICIARY:
-----------
CHEVRON U.S.A. INC.
By: _________________________________
Name:________________________________
Title:_______________________________
cc: Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attn: Marybeth Ross
Exhibit B-1 Page 6
<PAGE>
ANNEX B
CERTIFICATE REGARDING
MODIFICATIONS OF LETTERS OF CREDIT
[DATE]
Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attn: Marybeth Ross
Re: Letter of Credit Facility Agreement, dated as of September 1, 1996 (as
amended, supplemented or otherwise modified and in effect from time to
time, the "Facility Agreement"), between the NGC Corporation, Canadian
Imperial Bank of Commerce, as agent, and the Lenders named therein
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned them in the Facility Agreement.
The undersigned, a duly authorized representative of Chevron U.S.A. Inc.
(the "Beneficiary"), hereby certifies to you and the Lenders in the Facility
Agreement that:
(vii) Effective on ________________, 19__ [insert date at least three (3)
Business Days after the date of the certificate], the Beneficiary shall
thereafter deem the Total Amount, the Expiry Date and the Percentage (each as
described in the letters of credit identified below) to be adjusted as set forth
below for each of the letters of credit identified below/1/:
Expiry
Letter of Credit Percentage Date Total Amount
- -------------------------------------------------------------------------------
Irrevocable Letter of
Credit No. _________ issued
by _______________ _____% ________ $____________
- -------------------
/1/ List each of the letters of credit issued to the Beneficiary pursuant to
the Facility Agreement and complete with the information agreed to by the
Beneficiary.
Exhibit B-1 Page 7
<PAGE>
Irrevocable Letter of
Credit No. _________ issued
by _______________ _____% ________ $____________
Irrevocable Letter of
Credit No. _________ issued
by _______________ _____% ________ $____________
- --------------------------------------------------------------------------------
Total 100% $____________
(viii) The Beneficiary has the power and authority to amend each of the
letters of credit identified above in the manner described above and has not
assigned or transferred in any manner whatsoever such letters of credit or any
rights therein.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the ____ day of _________, 199__.
BENEFICIARY:
CHEVRON U.S.A. INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Exhibit B-1 Page 8
<PAGE>
EXHIBIT "B-2"
FORM OF LETTER OF CREDIT MODIFICATION
_______________, 19___
AMENDMENT #___ TO IRREVOCABLE LETTER OF CREDIT NO. ___________
Beneficiary: Chevron U.S.A. Inc.
2005 Diamond Blvd., Room ____
Concord, CA 94520-5733
Attention:___________________
Applicant: NGC Corporation (on behalf of Natural
Gas Clearinghouse)
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
THIS AMENDMENT MUST BE CONSIDERED AS PART
OF THE ABOVE MENTIONED CREDIT AND MUST BE
ATTACHED THERETO.
The above mentioned Letter of Credit is amended as follows, effective ,
19 ./1/
(1) [The Total Amount of the Letter of Credit has been [increased/reduced]/1/
by USD _____________. The Total Amount is now USD ______________________.]
- --------------
/2/ Insert the effective date of the amendment as appropriate pursuant to
the L/C Modification Notice provided by the Borrower.
/3/ Choose increased or reduced as the case may be.
Exhibit B-2 Page 1
<PAGE>
(2) [The Expiry Date of the Letter of Credit has been [extended/shortened]/1/
to ____________, 19_____.]
(3) [The Percentage applicable to the Letter of Credit has been changed to
________%.]
All other terms and conditions remain unchanged. All references to the Letter
of Credit in any other document, instrument, agreement or writing shall
hereafter be deemed to refer to the Letter of Credit as amended hereby.
Very truly yours,
[BANK]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
- --------------
/4/ Choose extended or shortened as the case may be.
Exhibit B-2 Page 2
<PAGE>
EXHIBIT "C"
FORM OF OPINION OF BORROWER'S COUNSEL
(to be provided)
Exhibit C Page 1
<PAGE>
EXHIBIT "D"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Letter of Credit Facility
Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Letter of
Credit Facility Agreement dated as of September 1, 1996 (as amended, modified,
renewed or extended from time to time, the "Agreement") among the Borrower, the
lenders party thereto and Canadian Imperial Bank of Commerce, as Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am an Authorized Officer;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit D Page 1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ____ day of ______________,
19___.
-----------------------------------
Exhibit D Page 2
<PAGE>
[SAMPLE]
SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of with
Provisions of ______ and ________ of
the Agreement
Exhibit D Page 3
<PAGE>
EXHIBIT "E-1"
(to Credit Agreement)
ISSUANCE REQUEST
To: Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attn: Marybeth Ross
WITH
COPY
TO: Canadian Imperial Bank of Commerce
909 Fannin, Suite 1200
Houston, Texas 77010
Attn: Mark Wolf
Ladies and Gentlemen:
The undersigned is an Authorized Representative of NGC Corporation, a
Delaware corporation, and is authorized to make and deliver this certificate
pursuant to that certain Letter of Credit Facility Agreement dated as of
September 1, 1996 among NGC Corporation, a Delaware corporation, each of the
entities which is a party thereto as a lender, and Canadian Imperial Bank of
Commerce, as agent for itself and the other lenders party thereto, (said Letter
of Credit Facility Agreement, as it may be amended, supplemented or otherwise
modified from time to time, is hereinafter referred to as the "Credit
Agreement"). Terms having their initial letters capitalized and not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.
Pursuant to the terms and provisions of the Credit Agreement, the
undersigned Borrower hereby certifies that all conditions to the issuance of
Letters of Credit pursuant to Section 2.2.1 of the Credit Agreement have been
met.
The undersigned Borrower hereby requests the issuance of Letters of Credit
in accordance with the Credit Agreement in substantially the form attached and
containing the following terms:
Credit Issuance Request Information
----------------------------------
Exhibit E-1 Page 1
<PAGE>
1. Beneficiary: Chevron U.S.A. Inc.
2005 Diamond Blvd., Room ____
Concord, CA 94520-5733
Attn:_________________________
2. Aggregate Stated Amount of all Letters of Credit to be issued: $________
3. Requested Date of Issuance: , 19__
4. Requested Date of Expiry: , 19__
EXECUTED THIS ____ DAY OF _______________, 19__.
NGC CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Exhibit E-1 Page 2
<PAGE>
EXHIBIT "E-2"
(to Credit Agreement)
L/C MODIFICATION NOTICE
To: Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attn: Marybeth Ross
WITH
COPY
TO: Canadian Imperial Bank of Commerce
909 Fannin, Suite 1200
Houston, Texas 77010
Attn: Mark Wolf
Ladies and Gentlemen:
The undersigned is an Authorized Representative of NGC Corporation, a
Delaware corporation, and is authorized to make and deliver this certificate
pursuant to that certain Letter of Credit Facility Agreement dated as of
September 1, 1996 among NGC Corporation, a Delaware corporation, each of the
entities which is a party thereto as a lender, and Canadian Imperial Bank of
Commerce, as agent for itself and the other lenders party thereto, (said Letter
of Credit Facility Agreement, as it may be amended, supplemented or otherwise
modified from time to time, is hereinafter referred to as the "Credit
Agreement"). Terms having their initial letters capitalized and not otherwise
defined herein shall have the meanings assigned to them in the Credit Agreement.
Pursuant to the terms and provisions of the Credit Agreement, the
undersigned Borrower hereby certifies that all conditions to the modification of
Letters of Credit pursuant to Section 2.2.6 of the Credit Agreement have been
met.
Effective on _____________________, 19____ [insert date at least three (3)
Business Days after the date of the notice], the undersigned Borrower hereby
requests the modification of the outstanding Letters of Credit identified below
in accordance with the Credit Agreement in substantially the form attached and
containing the following terms:
Exhibit E-2 Page 1
<PAGE>
New Expiry
Letter of Credit Date Stated Amount
(if applicable)
- --------------------------------------------------------------------------------
Irrevocable Letter of
Credit No. _________ issued
by _______________ __________ $____________
Irrevocable Letter of
Credit No. _________ issued
by _______________ ___________ $____________
Irrevocable Letter of
Credit No. _________ issued
by _______________ ____________ $____________
- --------------------------------------------------------------------------------
Total 100% $____________
EXECUTED THIS ____ DAY OF _______________, 19__.
NGC CORPORATION
By:
-------------------------------
Name:
------------------------------
Title:
----------------------------
Exhibit E-2 Page 2
<PAGE>
EXHIBIT "F"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
__________________________ (the "Assignor") and __________________ (the
"Assignee") is dated as of _________________, 19__. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Letter of Credit
Facility Agreement (which, as it may be amended, modified, renewed or extended
from time to time is herein called the "Credit Agreement") described in Item 1
of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans and
Letters of Credit, if the applicable Commitment has been terminated) purchased
by the Assignee hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to the Agent. Such Notice of Assignment must include any
consents, other documents and fees required to be delivered to the Agent by
Sections 12.3.1 and 12.3.2 of the Credit Agreement. In no event will the
Effective Date occur if the payments required to be made by the Assignee to the
Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the
proposed Effective Date. The Assignor will notify the Assignee of the proposed
Effective Date no later than the Business Day prior to the proposed Effective
Date. As of the Effective Date, (i) the Assignee shall have the rights and
obligations of a Lender under the Loan Documents with respect to the rights and
obligations assigned to the Assignee hereunder and (ii) the Assignor shall
relinquish its rights and be released from its corresponding obligations under
the Loan Documents (other than its obligations pursuant to Section 10.3 with
respect to acts and circumstances occurring prior to the Effective Date) with
respect to the rights and obligations assigned to the Assignee hereunder.
Exhibit F Page 1
<PAGE>
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest,
fees and reimbursement with respect to the interest assigned hereby. The
Assignee shall advance funds directly to the Agent with respect to all Loans and
reimbursement payments made on or after the Effective Date with respect to the
interest assigned hereby. [In consideration for the sale and assignment of
Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date,
an amount equal to the principal amount of the portion of all Base Rate Loans
assigned to the Assignee hereunder and (ii) with respect to each Eurodollar Loan
made by the Assignor and assigned to the Assignee hereunder which is outstanding
on the Effective Date, on the earliest of (a) the last day of the Interest
Period therefor or (b) such earlier date agreed to by the Assignor and the
Assignee or (c) the date on which any such Eurodollar Loan either becomes due
(by acceleration or otherwise) or is prepaid (the date as described in the
foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment
Date"), the Assignee shall pay the Assignor an amount equal to the principal
amount of the portion of such Eurodollar Loan assigned to the Assignee which is
outstanding on the Payment Date. If the Assignor and the Assignee agree that
the Payment Date for such Eurodollar Loan shall be the Effective Date, they
shall agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such Eurodollar Loan (the "Agreed Interest Rate")
and any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from
the Effective Date to but not including the Payment Date is not paid by the
Borrower with respect to any Eurodollar Loan sold by the Assignor to the
Assignee hereunder, the Assignee shall pay to the Assignor interest for such
period on the portion of such Eurodollar Loan sold by the Assignor to the
Assignee hereunder at the applicable rate provided by the Credit Agreement. In
the event a prepayment of any Eurodollar Loan which is existing on the Payment
Date and assigned by the Assignor to the Assignee hereunder occurs after the
Payment Date but before the end of the Interest Period applicable to such
Eurodollar Loan, the Assignee shall remit to the Assignor the excess of the loss
or cost paid by the Borrower pursuant to Section 3.4 with respect to the portion
of such Eurodollar Loan assigned to the Assignee hereunder over the amount which
would have been paid if such loss or cost was calculated based on the Agreed
Interest Rate. The Assignee will also promptly remit to the Assignor (i) any
principal payments received from the Agent with respect to Eurodollar Loans
prior to the Payment Date and (ii) any amounts of interest on Loans and fees
received from the Agent which relate to the portion of the Loans assigned to the
Assignee hereunder for periods prior to the Effective Date, in the case of Base
Rate Loans or fees, or the Payment Date, in the case of Eurodollar Loans, and
not previously paid by the Assignee to the Assignor.]* In the event that either
party hereto receives any payment to which the other party hereto is entitled
under this Assignment Agreement, then the party receiving such amount shall
promptly remit it to the other party hereto.
Exhibit F Page 2
<PAGE>
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest or commitment fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of Eurodollar Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable, which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was ___ of 1% less than the interest rate paid by the
Borrower or if the commitment fee was ___ of 1% less than the commitment fee
paid by the Borrower, as applicable. In addition, the Assignee agrees to pay
___% of the processing fee required to be paid to the Agent in connection with
this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the
Exhibit F Page 3
<PAGE>
Assignor or any other Lender and based on such documents and information at it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, (iii) appoints and
authorizes the Agent to take such action as agent on its behalf and authorizes
the Agent to exercise such powers under the Loan Documents as are delegated to
the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender, (v) agrees that its payment
instructions and notice instructions are as set forth in the attachment to
Schedule 1, (vi) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be "plan assets" under ERISA, [and (vii)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying that the Assignee is entitled to receive payments under the
Loan Documents without deduction or withholding of any United States federal
income taxes].**
**to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 12.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under [Sections 4, 5 and 8] hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.
Exhibit F Page 4
<PAGE>
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
Exhibit F Page 5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
-------------------------------------
Title:
----------------------------------
----------------------------------
----------------------------------
[NAME OF ASSIGNEE]
By:
--------------------------------------
Title:
-----------------------------------
-----------------------------------
-----------------------------------
Exhibit F Page 6
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: _____________, 19__
3. Amounts (As of Date of Item 2 above):
a. Total of Commitment
(Loans/Letter of
Credit Liabilities)* under
Credit Agreement $_____________
b. Aggregate Stated Amount of
Assignor's Letters of Credit
outstanding prior to the
the Assignment $_____________
c. Assignee's Percentage
purchased under the
Assignment Agreement** ______________%
d. Aggregate Stated Amount of
Letters of Credit to be
issued by Assignee under
the Assignment $_____________
e. Assignor's Percentage
retained under the
Assignment Agreement** ______________%
f. Aggregate Stated Amount of
Letters of Credit from
Assignor outstanding after
the Assignment $_____________
Exhibit F Page 7
<PAGE>
* If a Commitment has been terminated, insert outstanding Loans and Letter of
Credit Liabilities in place of Commitment
** Percentage taken to 10 decimal places
4. Proposed Effective Date: ----------
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
-------------------- --------------------
Title: Title:
----------------- -----------------
Exhibit F Page 8
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
Exhibit F Page 9
<PAGE>
Exhibit "I" to Assignment Agreement
NOTICE OF ASSIGNMENT
--------------------
_____________, 19___
To: Canadian Imperial Bank of Commerce
NGC Corporation
From: [Assignor]
[Assignee]
XV We refer to that certain Letter of Credit Facility Agreement, dated as
of September 1, 1996 (which, as it may be amended, supplemented, restated or
otherwise modified and in effect from time to time, is herein called the "Credit
Agreement"), as amended, among NGC Corporation (the "Company"), certain Lenders
parties thereto (each a "Lender"), including __________________ (the
"Assignor"), and Canadian Imperial Bank of Commerce, as Agent (as such, the
"Agent"). Capitalized terms used herein and in any consent delivered in
connection herewith and not otherwise defined herein or in such consent shall
have the meanings attributed to them in the Credit Agreement.
XVI This Notice of Assignment (this "Notice") is given and delivered to the
Company and the Agent pursuant to Section 12.3 of the Credit Agreement.
XVII The Assignor and ______________________ (the "Assignee") have entered
into an Assignment Agreement, dated as of ___________, 19___ (the "Assignment"),
pursuant to which, among other things, the Assignor has sold, assigned,
delegated and transferred to the Assignee, and the Assignee has purchased,
accepted and assumed from the Assignor, the percentage interest specified in
Item 3 of Schedule 1 of all outstandings, rights and obligations under the
Credit Agreement relating to the facilities listed in Item 3 of Schedule 1. The
"Effective Date" of the Assignment shall be the later of the date specified in
Item 4 of Schedule 1 or two Business Days (or such shorter period as agreed to
by the Agent) after this Notice of Assignment and any consents and other
documents required by Sections 12.3 of the Credit Agreement have been delivered
to the Agent, provided that the Effective Date shall not occur if any condition
precedent agreed to by the Assignor and the Assignee has not been satisfied.
Exhibit F Page 10
<PAGE>
XVIII The Assignor and the Assignee hereby give to the Company and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent before the date specified in Item 4 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
XIX If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause the Company to
execute and deliver new Notes or, as appropriate, replacement notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Company
upon its receipt of a new Note in the appropriate amount.
XX The Assignee advises the Agent that notice and payment instructions are
set forth in the attachment to Schedule 1.
XXI The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interest in and under the Loan Documents will not be "plan assets"
under ERISA.
XXII The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Company or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.
[ASSIGNOR]
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
[ASSIGNEE]
Exhibit F Page 11
<PAGE>
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
[Attach photocopy of Schedule I to Assignment Agreement]
Exhibit F Page 12
<PAGE>
EXHIBIT "G"
(to Credit Agreement)
NOTICE OF COMMITMENT INCREASE
Canadian Imperial Bank of Commerce
909 Fannin, Suite 1200
Houston, Texas 77010
Attn: Mark Wolf
Reference is made to the Letter of Credit Facility Agreement, dated as
September 1, 1996, among NGC Corporation, a Delaware corporation, as Borrower
(the "Borrower"), the Lenders (parties thereto), and Canadian Imperial Bank of
Commerce, as Agent (as amended, modified and supplemented to the date hereof,
the "Credit Agreement"). Capitalized terms used herein but not otherwise
defined have the meanings assigned to them in the Credit Agreement. The
undersigned hereby gives notice pursuant to Section 2.21 of the Credit Agreement
of its intent to increase the Aggregate Commitment by the amount of $ ,
effective , 19 (the "Commitment Increase Effective Date"). The
existing Lenders agreeing to increase their commitments and the assignees
agreeing to become New Lenders to effect such requested increase are identified
below.
From and after the Commitment Increase Effective Date, the respective
Commitments of the existing Lenders agreeing to increase their commitments and
the New Lenders will be as set forth below:
Stated Amount of
Outstanding Letters
Existing Lenders: Percentage:/1/ of Credit: Commitment:
% $ $
- ------------------ ---------------- ---------- -----------
% $ $
- ------------------ ---------------- ---------- -----------
% $ $
- ------------------ ---------------- ---------- -----------
- --------------
/5/ If any existing Lender's Percentage changes or if any New Lenders are
shown hereon, the Borrower should attach a CUSA Certificate.
Exhibit G Page 1
<PAGE>
% $ $
- ------------------ ---------------- ---------- -----------
% $ $
- ------------------ ---------------- ---------- -----------
% $ $
- ------------------ ---------------- ---------- -----------
% $ $
- ------------------ ---------------- ---------- ------------
Stated Amount of
Outstanding Letters
New Lenders: Percentage: of Credit: Commitment:
% $ $
- ------------------ ---------------- ---------- ------------
% $ $
- ------------------ ---------------- ---------- ------------
% $ $
- ------------------ ---------------- ---------- ------------
% $ $
- ------------------ ---------------- ---------- ------------
% $ $
- ------------------ ---------------- ---------- ------------
% $ $
- ------------------ ---------------- ---------- ------------
% $ $
- ------------------ ---------------- ---------- ------------
The undersigned Authorized Officer represents and warrants that (a)
the increase requested hereby complies with the requirements of Section 2.21 of
the Credit Agreement and (b) except [as set forth on Annex A hereto, and]/1/ to
the extent the undersigned gives notice to the Agent to the contrary prior to
5:00 p.m., (Chicago time) on the Business Day before the Commitment Increase
Effective Date, no Default or Unmatured Default exists as of the date hereof and
no Default will exist on the Commitment Increase Effective Date.
NGC CORPORATION
- --------------
/6/ If the representation and warranty in clause (b) would be incorrect, include
the material in the brackets and set forth the reasons such representation
and warranty would be incorrect on an attachment labeled Annex A.
Exhibit G Page 2
<PAGE>
By:
--------------------------------------
Name:
------------------------------------
Title:
----------------------------------
Exhibit G Page 3
<PAGE>
EXHIBIT "H-1"
(to Credit Agreement)
GUARANTY AGREEMENT
------------------
Guaranty Agreement dated as of September 1, 1996 (this "Guaranty
Agreement") executed and delivered by _____________________, a
___________________________, (the "Guarantor") in favor of Canadian Imperial
Bank of Commerce, as agent for the pro rata benefit of lenders party to that
certain Letter of Credit Facility Agreement dated as of September 1, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") among NGC Corporation, a Delaware corporation, each of the entities
which is a party thereto as a lender (the "Lenders"), and Canadian Imperial Bank
of Commerce, as agent for itself and the other lenders party thereto.
1. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Credit Agreement.
2. In order to induce the Lenders to make Loans to the Borrower and issue
Letters of Credit for the account of the Borrower, the Guarantor hereby requests
the Lenders to extend credit or to permit credit to remain outstanding under the
Credit Agreement to the Borrower as the Borrower may desire and as the Lenders
may extend or permit from time to time under the Credit Agreement, and, in
consideration of any credit granted or continued to the Borrower under the
Credit Agreement, the Guarantor hereby absolutely, irrevocably and
unconditionally guarantees prompt payment when due, whether at stated maturity,
upon acceleration or otherwise, and at all times thereafter, of any and all
existing and future obligations, indebtedness and liabilities of every kind,
nature and character, direct or indirect, absolute or contingent (including (i)
all renewals, extensions and modifications thereof, (ii) all attorneys' fees
incurred by any Lender in connection with the collection or enforcement thereof,
and (iii) all such amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. (S) 362(a) and the operation of Sections 502(b) of the United States
Bankruptcy Code, 11 U.S.C. (S)(S) 502(b) and including all amounts in respect of
indemnity by the Borrower of any Lender or the Agent), of the Borrower to any of
the Lenders or the Agent under or with respect to the Credit Agreement, any Note
issued pursuant to the Credit Agreement, any unpaid reimbursement obligations
with respect to any amounts paid by Lenders pursuant to any Letters of Credit or
any Letter of Credit issued pursuant to the Credit Agreement, including, without
limitation, all of the Obligations (the "Guaranteed Debt").
3. The Guarantor hereby waives notice of the acceptance of its guaranty
of the Guaranteed Debt set forth in this Guaranty Agreement and of the extension
or continuation of the
Exhibit H-1 Page 1
<PAGE>
Guaranteed Debt or any part thereof. The Guarantor further waives presentment,
protest, notice, demand or action on delinquency in respect of the Guaranteed
Debt or any part thereof, including any right to require any Lender or the Agent
to sue the Borrower, any other guarantor or any other Person obligated with
respect to the Guaranteed Debt or any part thereof, or otherwise to enforce
payment thereof against any collateral, if any, securing the Guaranteed Debt or
any part thereof.
4. Credit may be granted or continued from time to time by the Lenders to
the Borrower without notice to or authorization from the Guarantor regardless of
the financial or other condition of the Borrower at the time of any such grant
or continuation. Neither the Agent nor any of the Lenders shall have any
obligation to disclose or discuss with the Guarantor its assessment of the
financial condition of the Borrower.
5. The Guarantor hereby also guarantees that all of the Guaranteed Debt
will be paid strictly in accordance with the terms of the Credit Agreement and
the other Loan Documents regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such Guaranteed Debt or
the rights of any Lender or the Agent with respect thereto. The Guarantor's
guaranty of the Guaranteed Debt set forth in this Guaranty Agreement is a
guaranty of payment and not of collection, is a primary obligation of the
Guarantor and not one of surety, and the validity and enforceability of this
Guaranty Agreement and the liability of the Guarantor hereunder shall be
absolute and unconditional irrespective of, and shall not be impaired or
affected by, any of the following: (i) any extension, modification or renewal
of, or indulgence with respect to, or substitutions for, the Guaranteed Debt, or
any part thereof, or any agreement relating thereto at any time; (ii) any
failure or omission to enforce any right, power or remedy with respect to the
Guaranteed Debt, or any part thereof, or any agreement relating thereto, or any
collateral securing the Guaranteed Debt or any part thereof; (iii) any waiver of
any right, power or remedy or of any default with respect to the Guaranteed
Debt, or any part thereof, or any agreement relating thereto or with respect to
any collateral securing the Guaranteed Debt or any part thereof; (iv) any
release, surrender, compromise, settlement, waiver, subordination or
modification, with or without consideration, of any collateral securing the
Guaranteed Debt, or any part thereof, any other guaranties with respect to the
Guaranteed Debt or any part thereof, or any other obligation of any Person or
entity with respect to the Guaranteed Debt or any part thereof; (v) the
enforceability or validity of the Guaranteed Debt or any part thereof or the
genuineness, enforceability or validity of any agreement relating thereto or
with respect to any collateral securing the Guaranteed Debt or any part thereof;
(vi) the application of payments received from any source to the payment of
indebtedness other than the Guaranteed Debt, any part thereof or amounts which
are not covered by this Guaranty Agreement even though any of the Lenders might
lawfully have elected to apply such payments to any part or all of the
Guaranteed Debt or to amounts which are not covered by this Guaranty Agreement;
(vii) any change of ownership of any Obligor; (viii) the insolvency, bankruptcy
or any other change in the
Exhibit H-1 Page 2
<PAGE>
legal status of any Obligor (or the retirement, death, or dissolution of any
partner or the introduction of any further partner of any Obligor); (ix) any
change in or the imposition of any law, decree, regulation or other governmental
act which does or might impair, delay or in any way affect the validity,
enforceability or the payment when due of any of the Guaranteed Debt; (x) any
failure of any Obligor to maintain in full force, validity or effect or to
obtain or renew when required all governmental and other approvals, licenses or
consents required in connection with the Guaranteed Debt, or to take any other
action required in connection with the performance of its obligations with
respect to the Guaranteed Debt; (xi) the existence of any claim, setoff or other
rights which the Guarantor may have at any time against any Obligor in
connection with the Guaranteed Debt, the Credit Agreement or any unrelated
transaction; (xii) any other circumstance (other than a payment of the
Guaranteed Debt which is not rescinded or otherwise returned by any Lender or
the Agent upon the insolvency, bankruptcy or reorganization of any Obligor, or
otherwise) which might otherwise constitute a defense available to, or a
discharge of, any Obligor in respect of the Guaranteed Debt; or (xiii) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Guarantor in respect of its obligations under this Guaranty
Agreement, all whether or not the Guarantor shall have had notice or knowledge
of any act or omission referred to in the foregoing clauses (i) through (xiii)
of this Guaranty Agreement. It is agreed that the Guarantor's liability under
this Guaranty Agreement is several and independent of any other guaranties or
other obligations at any time in effect with respect to the Guaranteed Debt or
any part thereof and that the Guarantor's liability under this Guaranty
Agreement may be enforced regardless of the existence, validity, enforcement or
non-enforcement of any such other guaranties or other obligations or any
provision of any applicable law or regulation purporting to prohibit payment by
such Obligor of the Guaranteed Debt in the manner agreed upon in this Guaranty
Agreement.
6. In the event that acceleration of the time for payment of any of the
Guaranteed Debt is stayed, upon the insolvency, bankruptcy or reorganization of
the Borrower, or otherwise, all such amounts shall nonetheless be payable by the
Guarantor forthwith upon demand.
7. The guaranty of the Guarantor set forth in this Guaranty Agreement
shall continue in effect, notwithstanding any extensions, modifications,
renewals or indulgences with respect to, or substitution for, the Guaranteed
Debt or any part thereof, until all of the Guaranteed Debt shall have been paid
in full, all Commitments shall have terminated or expired and all of the Letters
of Credit shall have expired or been terminated in accordance with their
respective terms. The guaranty of the Guarantor set forth in this Guaranty
Agreement shall also continue to be effective or be reinstated, as the case may
be, if at any time any payment of the Guaranteed Debt, or any part thereof, is
rescinded or must otherwise be returned by any Lender or the Agent upon the
insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as
though such payment had not been made.
Exhibit H-1 Page 3
<PAGE>
8. The Guarantor hereby waives any claim, as that term is defined in the
Bankruptcy Code, that the Guarantor might now have or hereafter acquire against
the Borrower that arises from the existence or performance of the Guarantor's
obligations under its guaranty of the Guaranteed Debt set forth in this Guaranty
Agreement until the Guaranteed Debt has been paid in full.
9. The Guarantor hereby waives any benefit of the collateral, if any,
which may from time to time secure the Guaranteed Debt or any part thereof and
authorizes the Agent and the Lenders to take any action or exercise any remedy
with respect thereto, which the Agent or the Lenders in its or their sole
discretion shall determine, without notice to the Guarantor. In the event the
Agent or any Lender in its sole discretion elects to give notice of any action
with respect to the collateral, if any, securing the Guaranteed Debt or any part
thereof, ten days' written notice mailed to the Guarantor by ordinary mail at
the address shown hereon shall be deemed reasonable notice of any matters
contained in such notice.
10. It is understood that while the amount of the Guaranteed Debt is not
limited, the liability of the Guarantor under the Guaranty Agreement shall not
at any time exceed an amount equal to the lesser of (i) the Guaranteed Debt at
such time, and (ii) the Maximum Amount (as defined below). As used herein, the
"Maximum Amount" means the greater of (A) 95% of the Guarantor's Net Worth (as
defined below) as of the Closing Date, and (B) 95% of the Guarantor's largest
Net Worth determined from time to time subsequent to the Closing Date. As used
herein, the "Net Worth" of the Guarantor as of any date of determination means
the amount by which the aggregate amount of the Guarantor's assets and property
as of such date of determination are greater than the aggregate amount of the
Guarantor's debts and other obligations (excluding any portion of the Guaranteed
Debt for which the Guarantor is liable only because of its guaranty set forth in
this Guaranty Agreement) as of such date of determination, at fair valuation and
after giving effect to the inclusion and exclusion of the matters included and
excluded in determining whether a debtor is solvent according to Section 548 of
the Bankruptcy Code and the Illinois Uniform Fraudulent Transfer Act, Ill. Ann.
Stat. ch. 59, (S)101 et seq. (Smith-Hurd 1991).
11. The Guarantor represents and warrants to the Agent and each Lender as
follows:
(a) The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the states of its incorporation, is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure to so qualify would
have a Material Adverse Effect.
Exhibit H-1 Page 4
<PAGE>
(b) The Guarantor has the corporate power and authority to execute, deliver
and perform its obligations under this Guaranty Agreement and this Guaranty
Agreement constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
(c) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on the part
of the Guarantor and do not and will not violate the charter or certificate or
articles of incorporation or bylaws of the Guarantor or any law or any order of
any Tribunal and do not and will not conflict with, result in a breach of, or
constitute a default under, or result in the imposition of any Lien upon any
assets of the Guarantor pursuant to the provisions of any indenture, mortgage,
deed of trust, security agreement, franchise, permit, license, or other
instrument or agreement that is a Material Agreement to which the Guarantor or
its properties is bound.
(d) No authorization, approval, or consent of, and no filing or
registration with, any tribunal or third party is necessary for the execution,
delivery or performance by the Guarantor of this Guaranty Agreement or the
validity or enforceability thereof or to the extent that any such consent or
other action may be required it has been validly procured and all waiting
periods with respect thereto have expired.
(e) The business and prospects for success of the Borrower and the
Guarantor are interrelated and as a result (i) the improvement in the financial
condition and operations of the Borrower resulting from the Loans and Letters of
Credit made to or issued for the account of the Borrower under the Credit
Agreement will substantially benefit the business of the Guarantor and (ii) it
is desirable and in the best interests of the Guarantor that the Borrower be
able to obtain Loans and Letters of Credit under the Credit Agreement.
(f) The Guarantor and the Borrower have agreed that the Borrower will from
time to time provide various management, marketing, operational and other
consulting services to the Guarantor which are necessary for the continuation of
the Guarantor's business, and the Loans and Letters of Credit provided to the
Borrower under the Credit Agreement improve the Borrower's ability to provide
the Guarantor with management, marketing, operational and other consulting
services which are necessary for the continuation of the Guarantor's business
and therefore substantially benefit the Guarantor.
Exhibit H-1 Page 5
<PAGE>
12. The Guarantor covenants and agrees that, until all of the Guaranteed
Debt shall have been paid in full, all Commitments shall have terminated or
expired and all of the Letters of Credit shall have expired or been terminated
in accordance with their respective terms, (i) the Guarantor will comply with
all of the covenants of the Borrower set forth in Article VI of the Credit
Agreement to the extent that such covenants apply to any action of the
Guarantor, and (ii) the Guarantor will not violate any of the covenants of the
Borrower set forth in Article VI of the Credit Agreement to the extent that such
covenants limit any action of the Guarantor.
13. Each Lender shall have the right to set off and apply against the
obligations of the Guarantor under this Guaranty Agreement or the Guaranteed
Debt or both in such manner as such Person may determine, at any time after the
occurrence and during the continuance of a Default and without notice to the
Guarantor, any and all deposits (general, time or demand, provisional or final)
or other sums at any time credited by or owing from such Lender to the Guarantor
irrespective of whether or not the Agent shall have made any demand under this
Guaranty Agreement. The rights and remedies of each Lender hereunder are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which each Lender may have.
14. This Guaranty Agreement is for the benefit of the Agent, for the pro
rata benefit of the Lenders, and their successors and assigns, and in the event
of an assignment of the Guaranteed Debt, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the indebtedness so assigned,
may be transferred with such indebtedness. This Guaranty Agreement is binding
not only on the Guarantor, but on the Guarantor's successors and assigns.
15. The Guarantor recognizes that the Lenders are relying upon this
Guaranty Agreement and the undertakings of the Guarantor hereunder in making
Advances to the Borrower under the Credit Agreement, and in issuing Letters of
Credit for the account of the Borrower under the Credit Agreement and further
recognizes that the execution and delivery of this Guaranty Agreement is a
material inducement to the Lenders in continuing to make such Advances and issue
such Letters of Credit. The Guarantor hereby acknowledges that there are no
conditions other than those expressly set forth herein to the full effectiveness
of this Guaranty Agreement.
16. Any notice, consent, or other communication required or permitted to
be given under this Guaranty Agreement to the Agent or the Guarantor must be in
writing and delivered in person, by telex or by facsimile or mailed with postage
prepaid, as follows:
To the Agent: Canadian Imperial Bank of Commerce
909 Fannin, Suite 1200
Houston, Texas 77010
Exhibit H-1 Page 6
<PAGE>
Attention: Mark Wolf
Telephone No.: 713-655-5226
Telecopy No.: 713-650-3727
To the Guarantor:
-------------------------
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Attn: Chief Financial Officer
Telephone No.: 713-744-1770
Telecopy No.: 713-744-5336
with a copy to:
Attn: General Counsel
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted on any Business Day (answerback confirmed
in the case of telexes). The Guarantor and the Agent may each change the
address for service of notice upon it by a notice in writing to the other party
hereto.
17. THIS GUARANTY AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN CHICAGO, COOK COUNTY, ILLINOIS, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS AND THE
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
18. The parties hereto acknowledge and agree that this Guaranty Agreement
shall not be construed more favorably in favor of one than the other based upon
which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation and preparation of this Guaranty
Agreement.
19. The Credit Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and the Guarantor
agrees that the Agent and the Lenders may exercise any and all Rights granted to
it or them under the Credit Agreement and the other Loan Documents without
affecting the validity or enforceability of this Guaranty Agreement.
Exhibit H-1 Page 7
<PAGE>
20. In the event that any provision of this Guaranty Agreement is
irreconcilably inconsistent with any specific provision of the Credit Agreement,
the provision of the Credit Agreement shall control.
21. The Guarantor hereby represents and warrants to the Agent and the
Lenders that the Guarantor has adequate means to obtain from the Borrower on a
continuing basis information concerning the financial condition and assets of
the Borrower that the Guarantor is not relying upon the Agent or any of the
Lenders to provide (and the Agent and the Lenders shall have no duty to provide)
any such information to the Guarantor either now or in the future.
22. This Guaranty Agreement embodies the final, entire agreement of the
Guarantor, the Agent and the Lenders with respect to the Guarantor's guaranty of
the Guaranteed Indebtedness and supersedes any and all prior commitments,
agreements, representations, and understandings, whether written or oral,
relating to the subject matter hereof. This Guaranty Agreement is intended by
the Guarantor and the Agent as a final and complete expression of the terms of
the Guarantor's guaranty of the Guaranteed Indebtedness, and no course of
dealing between the Guarantor and the Agent or any Lender, no course of
performance, no trade practices, and no parol or extrinsic evidence of any
nature shall be used to supplement or modify any term of this Guaranty
Agreement.
23. THIS GUARANTY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS OF LAWS) OF THE STATE OF ILLINOIS,
BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
24. THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY
AGREEMENT OR ANY OTHER LOAN DOCUMENTS AND THE GUARANTOR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
25. THE GUARANTOR, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
Exhibit H-1 Page 8
<PAGE>
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS GUARANTY AGREEMENT, OR
THE RELATIONSHIP ESTABLISHED HEREUNDER.
Exhibit H-1 Page 9
<PAGE>
IN WITNESS WHEREOF, the Guarantor and the Agent have executed this Guaranty
Agreement as of the date first above written.
[GUARANTOR]
By: ______________________________
Name: ____________________________
Title: ___________________________
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent
By: ______________________________
Name: ____________________________
Title: ___________________________
Exhibit H-1 Page 10
<PAGE>
EXHIBIT "H-2"
(to Credit Agreement)
GUARANTY AGREEMENT
------------------
Guaranty Agreement dated as of September 1, 1996 (this "Guaranty
Agreement") executed and delivered by _________________________, a
_______________________ (the "Guarantor") in favor of Canadian Imperial Bank of
Commerce , as agent for the pro rata benefit of lenders party to that certain
Letter of Credit Facility Agreement dated as of September 1, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
among NGC Corporation, a Delaware corporation, each of the entities which is a
party thereto as a lender (the "Lenders"), and Canadian Imperial Bank of
Commerce, as agent for itself and the other lenders party thereto.
1. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Credit Agreement.
2. In order to induce the Lenders to make Loans to the Borrower and issue
Letters of Credit for the account of the Borrower, the Guarantor hereby requests
the Lenders to extend credit or to permit credit to remain outstanding under the
Credit Agreement to the Borrower as the Borrower may desire and as the Lenders
may extend or permit from time to time under the Credit Agreement, and, in
consideration of any credit granted or continued to the Borrower under the
Credit Agreement, the Guarantor hereby absolutely, irrevocably and
unconditionally guarantees prompt payment when due, whether at stated maturity,
upon acceleration or otherwise, and at all times thereafter, of any and all
existing and future obligations, indebtedness and liabilities of every kind,
nature and character, direct or indirect, absolute or contingent (including (i)
all renewals, extensions and modifications thereof, (ii) all attorneys' fees
incurred by any Lender in connection with the collection or enforcement thereof,
and (iii) all such amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. (S) 362(a) and the operation of Sections 502(b) of the United States
Bankruptcy Code, 11 U.S.C. (S)(S) 502(b) and including all amounts in respect of
indemnity by the Borrower of any Lender or the Agent), of the Borrower to any of
the Lenders or the Agent under or with respect to the Credit Agreement, any Note
issued pursuant to the Credit Agreement, or any Letter of Credit issued pursuant
to the Credit Agreement, including, without limitation, all of the Obligations
(the "Guaranteed Debt").
3. The Guarantor hereby waives notice of the acceptance of its guaranty
of the Guaranteed Debt set forth in this Guaranty Agreement and of the extension
or continuation of the Guaranteed Debt or any part thereof. The Guarantor
further waives presentment, protest, notice,
Exhibit H-2 Page 1
<PAGE>
demand or action on delinquency in respect of the Guaranteed Debt or any part
thereof, including any right to require any Lender or the Agent to sue the
Borrower, any other guarantor or any other Person obligated with respect to the
Guaranteed Debt or any part thereof, or otherwise to enforce payment thereof
against any collateral, if any, securing the Guaranteed Debt or any part
thereof.
4. Credit may be granted or continued from time to time by the Lenders to
the Borrower without notice to or authorization from the Guarantor regardless of
the financial or other condition of the Borrower at the time of any such grant
or continuation. Neither the Agent nor any of the Lenders shall have any
obligation to disclose or discuss with the Guarantor its assessment of the
financial condition of the Borrower.
5. The Guarantor hereby also guarantees that all of the Guaranteed Debt
will be paid strictly in accordance with the terms of the Credit Agreement and
the other Loan Documents regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such Guaranteed Debt or
the rights of any Lender or the Agent with respect thereto. The Guarantor's
guaranty of the Guaranteed Debt set forth in this Guaranty Agreement is a
guaranty of payment and not of collection, is a primary obligation of the
Guarantor and not one of surety, and the validity and enforceability of this
Guaranty Agreement and the liability of the Guarantor hereunder shall be
absolute and unconditional irrespective of, and shall not be impaired or
affected by, any of the following: (i) any extension, modification or renewal
of, or indulgence with respect to, or substitutions for, the Guaranteed Debt, or
any part thereof, or any agreement relating thereto at any time; (ii) any
failure or omission to enforce any right, power or remedy with respect to the
Guaranteed Debt, or any part thereof, or any agreement relating thereto, or any
collateral securing the Guaranteed Debt or any part thereof; (iii) any waiver of
any right, power or remedy or of any default with respect to the Guaranteed
Debt, or any part thereof, or any agreement relating thereto or with respect to
any collateral securing the Guaranteed Debt or any part thereof; (iv) any
release, surrender, compromise, settlement, waiver, subordination or
modification, with or without consideration, of any collateral securing the
Guaranteed Debt, or any part thereof, any other guaranties with respect to the
Guaranteed Debt or any part thereof, or any other obligation of any Person or
entity with respect to the Guaranteed Debt or any part thereof; (v) the
enforceability or validity of the Guaranteed Debt or any part thereof or the
genuineness, enforceability or validity of any agreement relating thereto or
with respect to any collateral securing the Guaranteed Debt or any part thereof;
(vi) the application of payments received from any source to the payment of
indebtedness other than the Guaranteed Debt, any part thereof or amounts which
are not covered by this Guaranty Agreement even though any of the Lenders might
lawfully have elected to apply such payments to any part or all of the
Guaranteed Debt or to amounts which are not covered by this Guaranty Agreement;
(vii) any change of ownership of any Obligor; (viii) the insolvency, bankruptcy
or any other change in the legal status of any Obligor (or the retirement,
death, or dissolution of any partner or the
Exhibit H-2 Page 2
<PAGE>
introduction of any further partner of any Obligor); (ix) any change in or the
imposition of any law, decree, regulation or other governmental act which does
or might impair, delay or in any way affect the validity, enforceability or the
payment when due of any of the Guaranteed Debt; (x) any failure of any Obligor
to maintain in full force, validity or effect or to obtain or renew when
required all governmental and other approvals, licenses or consents required in
connection with the Guaranteed Debt, or to take any other action required in
connection with the performance of its obligations with respect to the
Guaranteed Debt; (xi) the existence of any claim, setoff or other rights which
the Guarantor may have at any time against any Obligor in connection with the
Guaranteed Debt, the Credit Agreement or any unrelated transaction; (xii) any
other circumstance (other than a payment of the Guaranteed Debt which is not
rescinded or otherwise returned by any Lender or the Agent upon the insolvency,
bankruptcy or reorganization of any Obligor, or otherwise) which might otherwise
constitute a defense available to, or a discharge of, any Obligor in respect of
the Guaranteed Debt; or (xiii) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Guarantor in respect
of its obligations under this Guaranty Agreement, all whether or not the
Guarantor shall have had notice or knowledge of any act or omission referred to
in the foregoing clauses (i) through (xiii) of this Guaranty Agreement. It is
agreed that the Guarantor's liability under this Guaranty Agreement is several
and independent of any other guaranties or other obligations at any time in
effect with respect to the Guaranteed Debt or any part thereof and that the
Guarantor's liability under this Guaranty Agreement may be enforced regardless
of the existence, validity, enforcement or non-enforcement of any such other
guaranties or other obligations or any provision of any applicable law or
regulation purporting to prohibit payment by such Obligor of the Guaranteed Debt
in the manner agreed upon in this Guaranty Agreement.
6. In the event that acceleration of the time for payment of any of the
Guaranteed Debt is stayed, upon the insolvency, bankruptcy or reorganization of
the Borrower, or otherwise, all such amounts shall nonetheless be payable by the
Guarantor forthwith upon demand.
7. The guaranty of the Guarantor set forth in this Guaranty Agreement
shall continue in effect, notwithstanding any extensions, modifications,
renewals or indulgences with respect to, or substitution for, the Guaranteed
Debt or any part thereof, until all of the Guaranteed Debt shall have been paid
in full, all Commitments shall have terminated or expired and all of the Letters
of Credit shall have expired or been terminated in accordance with their
respective terms. The guaranty of the Guarantor set forth in this Guaranty
Agreement shall also continue to be effective or be reinstated, as the case may
be, if at any time any payment of the Guaranteed Debt, or any part thereof, is
rescinded or must otherwise be returned by any Lender or the Agent upon the
insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as
though such payment had not been made.
Exhibit H-2 Page 3
<PAGE>
8. The Guarantor hereby waives any claim, as that term is defined in the
Bankruptcy Code, that the Guarantor might now have or hereafter acquire against
the Borrower that arises from the existence or performance of the Guarantor's
obligations under its guaranty of the Guaranteed Debt set forth in this Guaranty
Agreement until the Guaranteed Debt has been paid in full.
9. The Guarantor hereby waives any benefit of the collateral, if any,
which may from time to time secure the Guaranteed Debt or any part thereof and
authorizes the Agent and the Lenders to take any action or exercise any remedy
with respect thereto, which the Agent or the Lenders in its or their sole
discretion shall determine, without notice to the Guarantor. In the event the
Agent or any Lender in its sole discretion elects to give notice of any action
with respect to the collateral, if any, securing the Guaranteed Debt or any part
thereof, ten days' written notice mailed to the Guarantor by ordinary mail at
the address shown hereon shall be deemed reasonable notice of any matters
contained in such notice.
10. It is understood that while the amount of the Guaranteed Debt is not
limited, the liability of the Guarantor under the Guaranty Agreement shall not
at any time exceed an amount equal to the lesser of (i) the Guaranteed Debt at
such time, and (ii) the Maximum Amount (as defined below) and (iii) the
Subordination Amount (as defined below). As used herein, the "Maximum Amount"
means the greater of (A) 95% of the Guarantor's Net Worth (as defined below) as
of the Closing Date, and (B) 95% of the Guarantor's largest Net Worth determined
from time to time subsequent to the Closing Date. As used herein, the "Net
Worth" of the Guarantor as of any date of determination means the amount by
which the aggregate amount of the Guarantor's assets and property as of such
date of determination are greater than the aggregate amount of the Guarantor's
debts and other obligations (excluding any portion of the Guaranteed Debt for
which the Guarantor is liable only because of its guaranty set forth in this
Guaranty Agreement) as of such date of determination, at fair valuation and
after giving effect to the inclusion and exclusion of the matters included and
excluded in determining whether a debtor is solvent according to Section 548 of
the Bankruptcy Code and the Illinois Uniform Fraudulent Transfer Act, Ill. Ann.
Stat. ch. 59, (S)101 et seq. (Smith-Hurd 1991). As used hereunder, the
"Subordination Amount" means the maximum amount that the Guarantor can guaranty
hereunder without violating the terms and provisions of or causing a default
under either of the Existing Trident Indentures (as defined in the Credit
Agreement).
11. The Guarantor represents and warrants to the Agent and each Lender as
follows:
(a) The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the states of its incorporation, is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such
Exhibit H-2 Page 4
<PAGE>
qualification necessary and where failure to so qualify would have a Material
Adverse Effect.
(b) The Guarantor has the corporate power and authority to execute, deliver
and perform its obligations under this Guaranty Agreement and this Guaranty
Agreement constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
(c) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement have been duly authorized by all requisite action on the part
of the Guarantor and do not and will not violate the charter or certificate or
articles of incorporation or bylaws of the Guarantor or any law or any order of
any Tribunal and do not and will not conflict with, result in a breach of, or
constitute a default under, or result in the imposition of any Lien upon any
assets of the Guarantor pursuant to the provisions of any indenture, mortgage,
deed of trust, security agreement, franchise, permit, license, or other
instrument or agreement that is a Material Agreement to which the Guarantor or
its properties is bound.
(d) No authorization, approval, or consent of, and no filing or
registration with, any tribunal or third party is necessary for the execution,
delivery or performance by the Guarantor of this Guaranty Agreement or the
validity or enforceability thereof or to the extent that any such consent or
other action may be required it has been validly procured and all waiting
periods with respect thereto have expired.
(e) The business and prospects for success of the Borrower and the
Guarantor are interrelated and as a result (i) the improvement in the financial
condition and operations of the Borrower resulting from the Loans and Letters of
Credit made to or issued for the account of the Borrower under the Credit
Agreement will substantially benefit the business of the Guarantor and (ii) it
is desirable and in the best interests of the Guarantor that the Borrower be
able to obtain Loans and Letters of Credit under the Credit Agreement.
(f) The Guarantor and the Borrower have agreed that the Borrower will from
time to time provide various management, marketing, operational and other
consulting services to the Guarantor which are necessary for the continuation of
the Guarantor's business, and the Loans and Letters of Credit provided to the
Borrower under the Credit Agreement improve the Borrower's ability to provide
the Guarantor with management,
Exhibit H-2 Page 5
<PAGE>
marketing, operational and other consulting services which are necessary for the
continuation of the Guarantor's business and therefore substantially benefit the
Guarantor.
12. The Guarantor covenants and agrees that, until all of the Guaranteed
Debt shall have been paid in full, all Commitments shall have terminated or
expired and all of the Letters of Credit shall have expired or been terminated
in accordance with their respective terms, (i) the Guarantor will comply with
all of the covenants of the Borrower set forth in Article VI of the Credit
Agreement to the extent that such covenants apply to any action of the
Guarantor, and (ii) the Guarantor will not violate any of the covenants of the
Borrower set forth in Article VI of the Credit Agreement to the extent that such
covenants limit any action of the Guarantor. The Guarantor further covenants
and agrees not to amend or modify any of the Existing Trident Indentures in any
manner which would have the effect of reducing the amount that the Guarantor can
guaranty pursuant to this Guaranty without violating the terms and provisions of
any of the Existing Trident Indentures as in effect on the date hereof.
13. Each Lender shall have the right to set off and apply against the
obligations of the Guarantor under this Guaranty Agreement or the Guaranteed
Debt or both in such manner as such Person may determine, at any time after the
occurrence and during the continuance of a Default and without notice to the
Guarantor, any and all deposits (general, time or demand, provisional or final)
or other sums at any time credited by or owing from such Lender to the Guarantor
irrespective of whether or not the Agent shall have made any demand under this
Guaranty Agreement. The rights and remedies of each Lender hereunder are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which each Lender may have.
14. This Guaranty Agreement is for the benefit of the Agent, for the pro
rata benefit of the Lenders, and their successors and assigns, and in the event
of an assignment of the Guaranteed Debt, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the indebtedness so assigned,
may be transferred with such indebtedness. This Guaranty Agreement is binding
not only on the Guarantor, but on the Guarantor's successors and assigns.
15. The Guarantor recognizes that the Lenders are relying upon this
Guaranty Agreement and the undertakings of the Guarantor hereunder in making
Advances to the Borrower under the Credit Agreement, and in issuing Letters of
Credit for the account of the Borrower under the Credit Agreement and further
recognizes that the execution and delivery of this Guaranty Agreement is a
material inducement to the Lenders in continuing to make such Advances and issue
such Letters of Credit. The Guarantor hereby acknowledges that there are no
conditions other than those expressly set forth herein to the full effectiveness
of this Guaranty Agreement.
Exhibit H-2 Page 6
<PAGE>
16. Any notice, consent, or other communication required or permitted to
be given under this Guaranty Agreement to the Agent or the Guarantor must be in
writing and delivered in person, by telex or by facsimile or mailed with postage
prepaid, as follows:
To the Agent: Canadian Imperial Bank of Commerce
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Mark Wolf
Telephone No.: 713-655-5226
Telecopy No.: 713-650-3727
To the Guarantor: __________________________________
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040
Attn: Chief Financial Officer
Telephone No.: 713-744-1770
Telecopy No.: 713-744-5336
with a copy to:
Attn: General Counsel
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted on any Business Day (answerback confirmed
in the case of telexes). The Guarantor and the Agent may each change the
address for service of notice upon it by a notice in writing to the other party
hereto.
17. THIS GUARANTY AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN CHICAGO, COOK COUNTY, ILLINOIS, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS AND THE
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
18. The parties hereto acknowledge and agree that this Guaranty Agreement
shall not be construed more favorably in favor of one than the other based upon
which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation and preparation of this Guaranty
Agreement.
Exhibit H-2 Page 7
<PAGE>
19. The Credit Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and the Guarantor
agrees that the Agent and the Lenders may exercise any and all Rights granted to
it or them under the Credit Agreement and the other Loan Documents without
affecting the validity or enforceability of this Guaranty Agreement.
20. In the event that any provision of this Guaranty Agreement is
irreconcilably inconsistent with any specific provision of the Credit Agreement,
the provision of the Credit Agreement shall control.
21. The Guarantor hereby represents and warrants to the Agent and the
Lenders that the Guarantor has adequate means to obtain from the Borrower on a
continuing basis information concerning the financial condition and assets of
the Borrower that the Guarantor is not relying upon the Agent or any of the
Lenders to provide (and the Agent and the Lenders shall have no duty to provide)
any such information to the Guarantor either now or in the future.
22. This Guaranty Agreement embodies the final, entire agreement of the
Guarantor, the Agent and the Lenders with respect to the Guarantor's guaranty of
the Guaranteed Indebtedness and supersedes any and all prior commitments,
agreements, representations, and understandings, whether written or oral,
relating to the subject matter hereof. This Guaranty Agreement is intended by
the Guarantor and the Agent as a final and complete expression of the terms of
the Guarantor's guaranty of the Guaranteed Indebtedness, and no course of
dealing between the Guarantor and the Agent or any Lender, no course of
performance, no trade practices, and no parol or extrinsic evidence of any
nature shall be used to supplement or modify any term of this Guaranty
Agreement.
23. THIS GUARANTY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS OF LAWS) OF THE STATE OF ILLINOIS,
BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
24. THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY
AGREEMENT OR ANY OTHER LOAN DOCUMENTS AND THE GUARANTOR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
Exhibit H-2 Page 8
<PAGE>
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER
JURISDICTION.
25. THE GUARANTOR, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS GUARANTY AGREEMENT, OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
Exhibit H-2 Page 9
<PAGE>
IN WITNESS WHEREOF, the Guarantor and the Agent have executed this Guaranty
Agreement as of the date first above written.
[GUARANTOR]
By: _____________________________
Name: ___________________________
Title: __________________________
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent
By: _____________________________
Name: ___________________________
Title: __________________________
Exhibit H-2 Page 10
<PAGE>
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
SCHEDULE "1"
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.2.6(iv))
Amount of Percent Jurisdiction of
Investment In Owned By Investment Ownership Organization
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
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- -----------------------------------------------------------------
Exhibit H-2 Page 11
<PAGE>
SCHEDULE "2"
DEBT AND LIENS
(See Sections 5.14, 6.2.2(ii) and 6.2.8(ii))
Property Maturity and
Debt Incurred By Debt Owed To Encumbered (If Any) Amount of Debt
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
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Schedule 2 Page 1
<PAGE>
SCHEDULE "3"
LITIGATION
(See Section 5.7)
None
Schedule 3 Page 1
<PAGE>
SCHEDULE "4"
TRIDENT EXISTING GUARANTIES
(See Section 6.2.7(v))
1. That certain "Guarantee" dated as of June 1, 1993, made by Trident NGL, Inc.,
in favor of Chemical Bank, a New York banking corporation, as agent for
certain financial institutions as lenders party to that certain "Term Loan
Agreement" dated as of June 1, 1993, among Gulf Coast Fractionators ("GCF"),
a Texas general partnership, the lenders party thereto and Chemical Bank, as
agent, regarding an $85,000,000 term loan credit facility; and pursuant to
which Trident has guaranteed a maximum amount equal to 38.75% of the amount
by which $10,000,000 exceeds the amounts paid by GCF into a Debt Service
Reserve Account.
2. Guaranty, dated as of March 14, 1995, made by Trident NGL, Inc. in favor of
The First National Bank of Chicago, as agent for the pro rata benefit of the
lenders party to that certain "Credit Agreement" dated as of March 14, 1995
among NGC Corporation, each of the lenders which is a party thereto, and The
First National Bank of Chicago, as agent for itself and the other lenders
party thereto, pursuant to which Trident has guaranteed payment when due of
any and all obligations of NGC Corporation to any of the lenders with respect
to any Note or Letter of Credit issued pursuant to the Credit Agreement.
3. Guaranty made by Trident NGL, Inc. under the Indenture, dated as of December
11, 1995 among NGC Corporation, certain Subsidiary Guarantors (including
Trident) and The First National Bank of Chicago, as Trustee, pursuant to
which Trident has guaranteed to the holders of the securities and to the
Trustee the payment when due of all principal, interest and all other amounts
payable under the Indenture.
Schedule 4 Page 1
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
NGC CORPORATION,
MIDSTREAM COMBINATION CORP.,
SUBSIDIARY GUARANTORS
NAMED HEREIN
AND
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
_______________
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 31, 1996
________________
Supplementing and Amending the Indenture
dated as of
December 11, 1995
- --------------------------------------------------------------------------------
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of August 31, 1996, is among
NGC Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
13430 Northwest Freeway, Suite 1200, Houston, Texas 77040, Midstream Combination
Corp. ("New NGC"), a Delaware corporation and a wholly-owned subsidiary of
Chevron U.S.A. Inc., the Subsidiary Guarantors (as defined hereinafter) and The
First National Bank of Chicago, a national banking association, as Trustee
(herein called the "Trustee"). Any capitalized term used in this First
Supplemental Indenture and not defined herein shall have the meaning specified
in the Original Indenture (as defined below).
RECITALS OF THE COMPANY
The Company and each of the Initial Subsidiary Guarantors heretofore have
made, executed and delivered to the Trustee an Indenture dated as of
December 11, 1995 (the "Original Indenture") to provide for the issuance from
time to time of unsecured debentures, notes or other evidences of indebtedness
of the Company (herein called the "Securities"), to be issued in one or more
series as provided in the Original Indenture.
The Company's obligations under the Original Indenture and the Securities
are guaranteed by the Subsidiary Guarantors.
The Company has duly authorized and issued a series of $150,000,000 of its
6 3/4% Senior Notes due December 15, 2005 as Securities pursuant to the Original
Indenture.
The Company has entered into a Combination Agreement and Plan of Merger,
dated as of May 22, 1996 (the "Combination Agreement") with Chevron U.S.A. Inc.,
a Pennsylvania corporation ("Chevron"), and New NGC, providing for the
contribution of certain assets by Chevron to New NGC in exchange for capital
stock of New NGC and other consideration and, immediately thereafter, the
merger of the Company with and into New NGC (the "Merger") pursuant to which New
NGC will be the surviving corporation, will be renamed "NGC Corporation" and
will assume the Company's liabilities and obligations under the Securities.
In connection with the consummation of the Merger and the Combination
Agreement, (i) Warren Petroleum Company, Limited Partnership, a newly created
Delaware limited partnership ("Warren Petroleum"), (ii) WPC LP, Inc., a newly
created Delaware corporation ("WPC"), and (iii) WTLPS, Inc., a newly created
Delaware corporation ("WTLPS"), will each become a subsidiary of New NGC and
will each become a guarantor of certain Funded Indebtedness of the Company.
Section 802 of the Original Indenture provides that upon any merger of the
Company into any other Person in accordance with Section 801 of the Original
Indenture, the successor Person into which the Company is merged shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Original Indenture with the same effect as if such successor
Person had been named as the Company therein.
Section 1505 of the Original Indenture provides that if any Subsidiary of
the Company guarantees or becomes primarily obligated with respect to any Funded
Indebtedness of the Company other than the Securities at any time subsequent to
the Issue Date, then the Company shall cause the Securities to be equally and
ratably guaranteed by such Subsidiary and cause such Subsidiary to execute and
deliver a supplemental indenture evidencing its provision of a Subsidiary
Guarantee in accordance with the terms of the Original Indenture.
<PAGE>
It is deemed necessary and desirable to supplement and amend the Original
Indenture to (i) evidence the succession of New NGC to the Company and the
assumption by New NGC of the covenants, obligations and liabilities of the
Company in the Original Indenture and the Securities as provided in Article 8 of
the Original Indenture, and (ii) to add each of Warren Petroleum, WPC and WTLPS
as a Subsidiary Guarantor as provided in Section 1505 of the Original Indenture
(the Original Indenture, as so supplemented and amended by this First
Supplemental Indenture, being sometimes referred to herein as the "Indenture").
As of the time of effectiveness of the Merger, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing.
The Company has delivered to the Trustee Officers' Certificates and an
Opinion of Counsel, stating that (i) the Merger and this First Supplemental
Indenture comply with Article Eight of the Original Indenture and that all
conditions precedent provide for in the Original Indenture relating to such
transaction have been complied with, and (ii) this First Supplemental Indenture
has been duly authorized and executed by Warren Petroleum, WPC and WTLPS and
constitutes the legal, valid, binding and enforceable obligation of Warren
Petroleum, WPC and WTLPS subject to certain exceptions regarding enforceability.
All things necessary to make this First Supplemental Indenture, to effect
the modifications of the Original Indenture provided for in this First
Supplemental Indenture, and to make the Original Indenture a valid agreement of
the Company and each of the Subsidiary Guarantors, in accordance with its terms,
have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
(together with the related Subsidiary Guarantees) by the Holders thereof, it is
mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities or of a series thereof (together with the related Subsidiary
Guarantees), as follows:
ARTICLE ONE
MODIFICATION OF THE ORIGINAL INDENTURE
SECTION 1.1 SUCCESSION OF NEW NGC. New NGC by execution of this First
Supplemental Indenture hereby agrees to assume, as of the effective time of the
Merger, the due and punctual payment of the principal of and any premium and
interest (including all additional amounts, if any, payable pursuant to Section
1004) on all the Securities and the performance or observance of every other
covenant of the Indenture on the part of the Company to be performed or
observed.
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<PAGE>
ARTICLE TWO
ADDITIONAL SUBSIDIARY GUARANTOR
SECTION 2.1. ADDITION OF WARREN PETROLEUM, WPC AND WTLPS AS SUBSIDIARY
GUARANTORS. Each of Warren Petroleum, WPC and WTLPS by execution of this First
Supplemental Indenture hereby agrees to be bound by the terms of this Indenture
as a Subsidiary Guarantor and agrees to be subject to the provisions (including
the representations and warranties) of the Indenture applicable to Subsidiary
Guarantors.
ARTICLE THREE
ADDITIONAL REPRESENTATIONS
AND COVENANTS OF THE COMPANY
AND THE SUBSIDIARY GUARANTORS
SECTION 3.1 AUTHORITY OF THE COMPANY. The Company represents and warrants
that it is duly authorized by a resolution of the Board of Directors to execute
and deliver this First Supplemental Indenture, and all corporate action on its
part required for the execution and delivery of this First Supplemental
Indenture has been duly and effectively taken.
SECTION 3.2 AUTHORITY OF THE SUBSIDIARY GUARANTORS. Each of the Subsidiary
Guarantors represents and warrants that it is duly authorized by a resolution of
its respective Board of Directors to execute and deliver this First Supplemental
Indenture, and all corporate action on the part of each required for the
execution and delivery of this First Supplemental Indenture has been duly and
effectively taken.
SECTION 3.3 RECITALS AND STATEMENTS. The Company warrants that the
recitals of fact and statements contained in this First Supplemental Indenture
are true and correct, and that the recitals of fact and statements contained in
all certificates and other documents furnished hereunder will be true and
correct.
ARTICLE FOUR
CONCERNING THE TRUSTEE
SECTION 4.1 ACCEPTANCE OF TRUSTS. The Trustee accepts the trust hereunder
and agrees to perform the same, but only upon the terms and conditions set forth
in the Original Indenture and in this First Supplemental Indenture, to all of
which the Company, Subsidiary Guarantors and the respective Holders of
Securities at any time hereafter outstanding agree by their acceptance thereof.
SECTION 4.2 RESPONSIBILITY OF TRUSTEE FOR RECITALS, ETC. The recitals and
statements contained in this First Supplemental Indenture shall be taken as the
recitals and statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this First Supplemental
Indenture, except that the Trustee is duly authorized to execute and deliver
this First Supplemental Indenture.
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<PAGE>
ARTICLE FIVE
CONCERNING NEW NGC
SECTION 5.1 AUTHORITY OF NEW NGC. New NGC represents and warrants that it
is duly authorized by a resolution of its Board of Directors to execute and
deliver this First Supplemental Indenture, and all corporate action on its part
required for the execution and delivery of this First Supplemental Indenture has
been duly and effectively taken.
SECTION 5.2 RESPONSIBILITY OF NEW NGC FOR RECITALS, ETC. The recitals and
statements contained in this First Supplemental Indenture shall be taken as the
recitals and statements of the Company, and New NGC assumes no responsibility
for the correctness of the same. New NGC makes no representations as to the
validity or sufficiency of this First Supplemental Indenture, except (i) as
provided in Section 1.1 of this First Supplemental Indenture and (ii) that New
NGC is duly authorized to execute and deliver this First Supplemental Indenture.
ARTICLE SIX
MISCELLANEOUS PROVISIONS
SECTION 6.1 RELATION TO THE INDENTURE. The provisions of this First
Supplemental Indenture shall be deemed to be effective as of the effective time
of the Merger. This First Supplemental Indenture and all the terms and
provisions herein contained shall form a part of the Indenture as fully and with
the same effect as if all such terms and provisions had been set forth in the
Original Indenture. The Original Indenture is hereby ratified and confirmed and
shall remain and continue in full force and effect in accordance with the terms
and provision thereof, as supplemented and amended by this First Supplemental
Indenture, and the Original indenture and this First Supplemental Indenture
shall be read, taken and construed together as one instrument.
SECTION 6.2 COUNTERPARTS OF FIRST SUPPLEMENTAL INDENTURE. This First
Supplemental Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 6.3 GOVERNING LAW. This First Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
COMPANY
NGC CORPORATION
By
--------------------------------------
H. Keith Kaelber
Senior Vice President
SUBSIDIARY GUARANTORS
NATURAL GAS CLEARINGHOUSE
By: NGC Corporation, its general partner
TRIDENT NGL, INC.
NGC ENERGY RESOURCES, LIMITED
PARTNERSHIP
By: NGC Energy, Inc., its general partner
NGC LIQUIDS MARKETING, INC.
NGC OIL TRADING AND TRANSPORTATION,
INC.
NGC UK LIMITED
NGC CANADA, INC.
NGC FUTURES, INC.
NGC STORAGE, INC.
HUB SERVICES, INC.
NGC ANADARKO GATHERING SYSTEMS, INC.
TRIDENT GAS MARKETING, INC.
TRIDENT NGL PIPELINE COMPANY
TRIDENT ACQUISITION CORP.
KANSAS GAS SUPPLY CORPORATION
WARREN PETROLEUM COMPANY, LIMITED
PARTNERSHIP
By: Warren Petroleum G.P., Inc., its general
partner
WTLPS, INC.
By
---------------------------------------
H. Keith Kaelber
Senior Vice President
WPC LP, INC.
By
---------------------------------------
H. Keith Kaelber
President
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<PAGE>
NEW NGC
MIDSTREAM COMBINATION CORP.
By:
--------------------------------------
Name:
Title:
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<PAGE>
TRUSTEE
THE FIRST NATIONAL BANK OF CHICAGO
By
---------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT 4.5
================================================================================
NGC CORPORATION,
ELECTRIC CLEARINGHOUSE, INC
AND
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
___________________________________________
SECOND SUPPLEMENTAL INDENTURE
Dated as of October 11, 1996
___________________________________________
Supplementing and Amending the Indenture
dated as of
December 11, 1995
================================================================================
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of October 11, 1996, is among
NGC Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
13430 Northwest Freeway, Suite 1200, Houston, Texas 77040, Electric
Clearinghouse, Inc., a Texas corporation ("ECI") and the First National Bank of
Chicago, a national banking association, as Trustee (herein called the
"Trustee"). Any capitalized term used in this Second Supplemental Indenture and
not defined herein shall have the meaning specified in the Original Indenture
(as defined below).
RECITALS OF THE COMPANY
The Company and each of the Initial Subsidiary Guarantors heretofore have
made, executed and delivered to the Trustee an Indenture dated as of December
11, 1995 (the "Original Indenture") to provide for the issuance from time to
time of unsecured debentures, notes or other evidences of indebtedness of the
Company (herein called the "Securities"), to be issued in one or more series as
provided in the Original Indenture.
Pursuant to a First Supplemental Indenture dated as of August 31, 1996 (the
"First Supplemental Indenture"), (i) Warren Petroleum Company, Limited
Partnership, a Delaware limited partnership ("Warren Petroleum"), (ii) WPC LP,
Inc., a Delaware corporation ("WPC"), and (iii) WTLPS, Inc., a Delaware
Corporation ("WTLPS"), each became an Additional Subsidiary Guarantor.
The Company's obligations under the Original Indenture and the Securities
are guaranteed by the Subsidiary Guarantors.
The Company has duly authorized and issued a series of $150,000,000 of its
6 3/4% Senior Notes due December 15, 2005 as Securities pursuant to the Original
Indenture.
ECI will become a guarantor of certain Funded Indebtedness of the Company.
Section 1505 of the Original Indenture provides that if any Subsidiary of
the Company guarantees or becomes primarily obligated with respect to any Funded
Indebtedness of the Company other than the Securities at any time subsequent to
the Issue Date, then the Company shall cause the Securities to be equally and
ratably guaranteed by such Subsidiary and cause such Subsidiary to execute and
deliver a supplemental indenture evidencing its provision of a Subsidiary
Guarantee in accordance with the terms of the Original Indenture.
It is deemed necessary and desirable to supplement and amend the Original
Indenture to add ECI as a Subsidiary Guarantor as provided in Section 1505 of
the Original Indenture (the Original Indenture, as so supplemented and amended
by the First Supplemental Indenture and this Second Supplemental Indenture,
being sometimes referred to herein as the "Indenture").
The Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, stating that this Second Supplemental Indenture has been
duly authorized and executed by ECI and constitutes the legal, valid, binding
and enforceable obligation of ECI subject to certain exceptions regarding
enforceability.
<PAGE>
All things necessary to make this Second Supplemental Indenture, and to
make the Original Indenture a valid agreement of the Company and each of the
Subsidiary Guarantors, in accordance with its terms, have been done.
In September of 1996, the names of certain Subsidiary Guarantors were
changed as follows: Trident NGL, Inc. was renamed Warren NGL, Inc.; NGC Energy
Resources, Limited Partnership was renamed Warren Energy Resources, Limited
Partnership; NGC Liquids Marketing, Inc. was renamed Warren Gas Liquids, Inc.;
Trident Gas Marketing, Inc. was renamed Warren Gas Marketing, Inc.; Trident NGL
Pipeline Company was renamed Warren NGL Pipeline Company; and Trident
Acquisition Corp. was renamed Warren Intrastate Gas Supply, Inc.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
(together with the related Subsidiary Guarantees) by the Holders thereof, it is
mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities or of a series thereof (together with the related Subsidiary
Guarantees), as follows:
ARTICLE ONE
ADDITIONAL SUBSIDIARY GUARANTOR
SECTION 1.1 ADDITION OF ECI AS A SUBSIDIARY GUARANTOR. ECI by execution
of this Second Supplemental Indenture hereby agrees to be bound by the terms of
this Indenture as a Subsidiary Guarantor and agrees to be subject to the
provisions (including the representations and warranties) of the Indenture
applicable to Subsidiary Guarantors.
ARTICLE TWO
ADDITIONAL REPRESENTATIONS
AND COVENANTS OF THE COMPANY
AND THE SUBSIDIARY GUARANTORS
SECTION 2.1 AUTHORITY OF THE COMPANY. The Company represents and warrants
that it is duly authorized by a resolution of the Board of Directors to execute
and deliver this Second Supplemental Indenture, and all corporate action on its
part required for the execution and delivery of this Second Supplemental
Indenture has been duly and effectively taken.
SECTION 2.2 AUTHORITY OF ECI. ECI represents and warrants that it is duly
authorized by a resolution of its respective Board of Directors to execute and
deliver this Second Supplemental Indenture, and all corporate action on the part
of each required for the execution and delivery of this Second Supplemental
Indenture has been duly and effectively taken.
SECTION 2.3 RECITALS AND STATEMENTS. The Company warrants that the
recitals of fact and statements contained in this Second Supplemental Indenture
are true and correct, and that the recitals of fact and statements contained in
all certificates and other documents furnished hereunder will be true and
correct.
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<PAGE>
ARTICLE THREE
CONCERNING THE TRUSTEE
SECTION 3.1 ACCEPTANCE OF TRUSTS. The Trustee accepts the trust hereunder
and agrees to perform the same, but only upon the terms and conditions set forth
in the Original Indenture, the First Supplemental Indenture and in this Second
Supplemental Indenture, to all of which the Company, Subsidiary Guarantors and
the respective Holders of Securities at any time hereafter outstanding agree by
their acceptance thereof.
SECTION 3.2 RESPONSIBILITY OF TRUSTEE FOR RECITALS, ETC. The recitals and
statements contained in this Second Supplemental Indenture shall be taken as the
recitals and statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Second Supplemental
Indenture, except that the Trustee is duly authorized to execute and deliver
this Second Supplemental Indenture.
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
SECTION 4.1 RELATION TO THE INDENTURE. The provisions of this Second
Supplemental Indenture shall be deemed to be effective immediately upon the
execution and delivery hereof. This Second Supplemental Indenture and all the
terms and provisions herein contained shall form a part of the Indenture as
fully and with the same effect as if all such terms and provisions had been set
forth in the Original Indenture. The Original Indenture is hereby ratified and
confirmed and shall remain and continue in full force and effect in accordance
with the terms and provision thereof, as supplemented and amended by the First
Supplemental Indenture and this Second Supplemental Indenture, and the Original
Indenture, the First Supplemental Indenture and this Second Supplemental
Indenture shall be read, taken and construed together as one instrument.
SECTION 4.2 COUNTERPARTS OF SECOND SUPPLEMENTAL INDENTURE. This Second
Supplemental Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 4.3 GOVERNING LAW. This Second Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
COMPANY
NGC CORPORATION
By: ----------------------------
H. Keith Kaelber
Senior Vice President
ADDITIONAL SUBSIDIARY GUARANTOR
ELECTRIC CLEARINGHOUSE, INC.
By: ----------------------------
H. Keith Kaelber
Senior Vice President
S-1
<PAGE>
TRUSTEE
THE FIRST NATIONAL BANK OF CHICAGO
By: ------------------------------
Name:
Title:
S-2
<PAGE>
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S-3
<PAGE>
EXHIBIT 10.1
CONTRIBUTION AND ASSUMPTION AGREEMENT
This CONTRIBUTION AND ASSUMPTION AGREEMENT is entered into as of August 31,
1996 by and among CHEVRON U.S.A. INC., a Pennsylvania corporation ("Chevron"),
CHEVRON PIPE LINE COMPANY, a Delaware corporation ("CPL"), CHEVRON CHEMICAL
COMPANY, a Delaware corporation ("CCC")(Chevron, CPL and CCC are hereinafter
sometimes referred to collectively as the "Contributing Parties") and MIDSTREAM
COMBINATION CORP., a Delaware corporation ("Newco").
W I T N E S S E T H:
WHEREAS, Chevron, Newco and NGC Corporation, a Delaware corporation
("NGC"), have entered into a Combination Agreement and Plan of Merger dated as
of May 22, 1996 (the "Combination Agreement"), pursuant to which the
Contributing Parties will contribute the Contributed Businesses (hereinafter
defined) and the Contributed West Texas LPG Pipeline Business (as hereinafter
defined) to Newco in exchange for shares of Common Stock and Preferred Stock of
Newco and the assumption by Newco of liabilities relating to the Contributed
Businesses, including the indebtedness described in paragraph 4 hereof, as
hereinafter in this Agreement provided;
NOW THEREFORE, in consideration of the mutual promises contained herein,
the mutual benefits to be derived for each party hereunder and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Contributing Parties and Newco hereby agree as follows:
1. Contribution of Warren Business. The Contributing Parties hereby
contribute, assign, transfer, convey and deliver to Newco the following assets,
properties, contracts and other rights, titles and interests (all such assets
and rights other than the Excluded Warren Assets described below are hereinafter
collectively referred to as the "Contributed Warren Business"):
a. Facilities. The natural gas and natural gas liquids ("NGLs")
processing facilities, NGL fractionation facilities, pipelines, gathering lines
and systems, storage facilities, terminaling facilities, transportation
facilities and other facilities relating to the purchase, sale, exchange,
gathering, processing or fractionating of natural gas and NGLs which are more
particularly described on Schedule 1A hereto, including all leases, subleases,
fee estates and leaseholds, easements, permits, access licenses, servitudes,
rights-of-way, surface leases and other real property and real property
interests related or pertaining thereto (collectively, the "Facilities");
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<PAGE>
b. Contracts. All rights in or derived from the contracts listed on
Schedule 1B hereto, including without limitation all rights to receive payment
for products sold and/or services rendered and all rights to receive goods and
services purchased pursuant to such contracts and to assert claims and take such
other actions in respect of breaches, defaults or other violations thereof and
otherwise; provided, however, that the foregoing shall not include any contracts
associated with the Excluded Warren Assets or any employment or severance
agreements or an employee benefit plan, policy, program, agreement or
arrangement of Chevron or any of its Subsidiaries or Affiliates;
c. Personal Property and Fixtures. All of the Contributing Parties'
right, title and interest in all fixtures, personal property and improvements
which are located on, used or held for use in connection with the Facilities,
including without limitation, the boilers, buildings, compression facilities,
machinery, equipment, furnishings, automobiles, trucks and other vehicles and
rolling stock, tools, telephone and telegraph lines, and other facilities and
similar property located on such Facilities which are owned or leased by Warren
Petroleum Company (other than those assets described on Schedule 1EX);
d. Inventories. All of Chevron's right, title and interest in (i) the
inventories of materials (including, without limitation, natural gas and NGLs),
raw materials, work in process and finished products of Warren Petroleum Company
("Inventory"), but excluding any such inventory relating to the Excluded Warren
Assets as identified on Schedule 1EX, and (ii) spare parts, replacement and
component parts, and office and other supplies which are used or held for use by
Chevron or any of its Subsidiaries or Affiliates in connection with the
operation of the Facilities (but excluding any such inventory related to the
Excluded Warren Assets);
e. Books and Records. All contract files, gas processing files, division
order files, abstracts, product design data, plans, blueprints, specifications,
manuals, designs, drawings, surveys, engineering reports, equipment and parts
lists, test reports, materials standards, catalogues, performance and quality
control standards, procedures and records, price lists, mailing lists,
photographs, production data, sales and purchase records, sales order files,
records, data, media materials and plates, advertising, marketing, promotional
and sales materials, files and materials relating to suppliers, vendors and
other service providers, and all other books, records, files, maps, accounting
information and records and other similar information or data in the possession
of
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<PAGE>
Chevron relating to the operation of the Facilities and Chevron's
transferable rights in the computer and automatic machinery software and
programs and source disks that are used by Warren Petroleum Company in
connection with the assets described in this Section 1 (together with all
guides, forms, manuals, tapes and other materials employed in connection
therewith); provided, however, that the foregoing shall not include any
proprietary information or manuals of Chevron Corporation or other intellectual
property retained by Chevron but licensed to Newco pursuant to an Intellectual
Property License Agreement of even date herewith;
f. Licenses and Permits. To the extent permitted by law, all of the
Contributing Parties' right, title and interest in all permits, approvals,
licenses, product registrations, safety certifications and other similar
authorizations used in the operation of the Facilities, including, without
limitation, those listed on Schedule 1F hereto;
g. Trademarks and Tradenames. All of Chevron's right, title and interest
in all common law rights and interests in the tradenames "The Warren Petroleum
Company," "Warrengas," "Warren Petroleum," or any derivation of any such name
and the design, tradenames and service marks relating to Warren Petroleum
Company other than those expressly excluded pursuant to Section 15.1 of the
Combination Agreement;
h. Rights in Warranties. All rights in, to and under all express or
implied representations, warranties, indemnities, covenants or other agreements
of third parties arising from or attributable to the assets constituting the
Contributed Warren Business;
provided, however, that the Contributed Warren Business does not include and the
Contributing Parties' shall retain all of their right, title and interest in and
to the assets, properties, rights, titles, interests and contracts relating to
Warren Petroleum Company that are not expressly described in this Section 1,
including, without limitation, the Venice Complex and the Venice Gas Gathering
Company, the lease covering Warren Petroleum Company's Tulsa, Oklahoma
headquarters and those other assets described on Schedule 1EX (collectively, the
"Excluded Warren Assets").
2. Contribution of NGBU Business. Chevron hereby contributes, assigns,
transfers, conveys and delivers to Newco the following assets, properties,
contracts and other rights, titles and interests (all such assets and rights
other than the Excluded NGBU Assets defined below are hereinafter collectively
referred to as the "Contributed NGBU Business"):
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<PAGE>
a. Contracts. All rights in or derived from the contracts listed on
Schedule 2A hereto, including without limitation all rights to receive payment
for products sold and/or services rendered and all rights to receive goods and
services purchased pursuant to such contracts and to assert claims and take such
other actions in respect of breaches, defaults or other violations thereof and
otherwise;
b. Fixed Assets. The fixtures, personal property, computer hardware and
software used by the employees of the NGBU, as are more specifically identified
on Schedule 2B hereto;
c. Book and Records. All contract files, gas marketing files, division
order files, abstracts, plans, specifications, manuals, materials standards,
catalogues, performance and quality control standards, procedures and records,
price lists, mailing lists, photographs, sales and purchase records, sales order
files, records, data, media materials and plates, advertising, marketing,
promotional and sales materials, files and materials relating to suppliers,
vendors and other service providers, and all other books, records, files, maps,
accounting information and records, and other similar information or data in the
possession of Chevron relating to the Contributed NGBU Business; provided,
however, that the foregoing shall not include any proprietary information or
manuals of Chevron Corporation or other intellectual property retained by
Chevron but licensed to Newco pursuant to an Intellectual Property License
Agreement of even date herewith;
d. Licenses and Permits. To the extent permitted by law, all permits,
approvals, licenses and other similar authorizations used in connection with the
Contributed NGBU Business including, without limitation, those listed on
Schedule 2D hereto;
e. Rights in Warranties. All rights in, to and under all express or
implied representations, warranties, indemnities, covenants or other agreements
of third parties arising from or attributable to the assets constituting the
Contributed NGBU Business;
provided, however, that the Contributed NGBU Business does not include and
Chevron shall retain all of Chevron's right, title and interest in and to the
assets, properties, rights, titles, interests, and contracts relating to the
NGBU that are not expressly described in this Section 2, including, without
limitation, the assets and contracts identified on Schedule 2EX (collectively,
the "Excluded NGBU Assets").
3. Representations. Without limiting any rights it may have under the
Combination Agreement, Chevron warrants title to
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<PAGE>
the assets comprising the Contributed Businesses (including those purported to
be conveyed by CPL and CCC) to the extent, BUT ONLY TO THE EXTENT, set forth in
the Combination Agreement, subject to the limitations and conditions regarding
the warranty of title and the remedies contained therein. EXCEPT AS SET FORTH IN
THE COMBINATION AGREEMENT, THE CONTRIBUTING PARTIES MAKE NO WARRANTIES OR
REPRESENTATIONS WHATSOEVER, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW,
WITH RESPECT TO TITLE, MAINTENANCE, REPAIR, CONDITION, DESIGN, QUALITY,
CONDITION, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, SAFETY OF EQUIPMENT, TITLE
TO PERSONAL PROPERTY, COMPLIANCE WITH GOVERNMENTAL REGULATIONS OR OTHERWISE.
4. Assumption of Indebtedness. Newco, for itself, its successors and
assigns, hereby assumes and from and after the Closing, agrees to duly and
timely pay, perform and discharge $155.373 million in certain related
indebtedness of Chevron to Chevron Capital U.S.A. Inc. (the "Assumed
Indebtedness") described in the Loan Agreement effective as of August 25, 1994
pursuant to the Assumption Agreement in substantially the form of Exhibit 4.
5. Liabilities. Without limiting its rights under the Combination
Agreement, Newco, for itself, its successors and assigns, hereby assumes from
the Contributing Parties from and after the Contribution Time and agrees to pay,
perform and discharge, and shall to the fullest extent permitted by law (but
subject to the further provisions of this paragraph 5), indemnify and hold the
Contributing Parties and their Affiliates harmless against, any and all
liabilities, obligations or claims associated with the ownership and operation
of the Contributed Businesses, whether or not such liabilities, obligations or
claims are known at the date hereof and whether or not such liabilities,
obligations or claims arise from the Contributing Parties ownership and
operation of the Contributed Businesses prior to the date hereof or from Newco's
ownership and operation of the Contributed Businesses subsequent to the date
hereof (all such liabilities, obligations or claims described below are
hereinafter referred to as the "Assumed Liabilities," and together with the
Contributed Warren Business and the Contributed NGBU Business, the "Contributed
Businesses"), including without limitation the following:
a. all liabilities, obligations or claims pursuant to the leases,
easements, permits, licenses, contracts and contract rights included in the
Contributed Warren Business and the Contributed NGBU Business;
b. all liabilities, obligations or claims arising from litigation or
arising from the ownership or operation of the Contributed Warren Business or
the Contributed NGBU Business or any assets thereof, including, without
limitation, the Facilities;
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<PAGE>
c. any and all liabilities, obligations or claims arising from the
presence or Release of Hazardous Materials (as such terms are defined in the
Combination Agreement) in or on, or migration or release from, any assets or
properties, included in the Contributed Warren Business or the Contributed NGBU
Business; and
d. any and all other liabilities, obligations or claims, contingent or
otherwise, relating to the Contributed Warren Business and the Contributed NGBU
Business (but not the Excluded Warren Assets and Excluded NGBU Assets).
This contribution is made expressly subject to all such agreements, leases,
easements and other contracts relating to the Contributed Businesses or any of
their constituent assets, including the Facilities, whether or not the same are
herein specifically identified. Notwithstanding the foregoing, the assumption
of the Assumed Liabilities shall not waive any valid defense (a "Defense") that
was available to any Contributing Party, as applicable, with respect to the
Assumed Liabilities, cause any other party to be a third party beneficiary
thereunder or otherwise enlarge any rights or remedies of any third party under
or with respect to any of the Assumed Liabilities. Upon execution and delivery
of this Agreement by the parties hereto, any Defense to the Assumed Liabilities
shall inure to the benefit of Newco or its designees and, upon consummation of
the Combination, any such Defense shall inure to the benefit of the Surviving
Corporation or its Subsidiaries or Affiliates (as applicable), in each case to
the fullest extent permissible under applicable law.
Newco will not assume and Chevron shall retain, and shall to the fullest
extent permitted by law, indemnify and hold Newco and its Affiliates harmless
against, any and all liabilities, obligations or claims associated with (i) the
offsite disposal of Hazardous Materials (as such term is defined in the
Contribution Agreement) from the operation of the Contributed Businesses prior
to the Contribution Time, (ii) underpayment of royalties on the production of
natural gas prior to the Contribution Time, (iii) the litigation described on
Schedule 5 hereto, (iv) Excluded Warren Assets and (v) Excluded NGBU Assets
(collectively, (i) through (v), the "Retained Liabilities").
6. Contributed West Texas LPG Pipeline Business. CPL hereby contributes,
assigns, transfers, conveys and delivers to Newco an undivided 49% interest in
and to those assets identified on Schedule 6 hereto (such interest collectively,
the "Contributed West Texas LPG Pipeline Business"), including all rights in, to
and under all express or implied representations, warranties, indemnities,
covenants or other agreements of third parties arising from or attributable to
the assets constituting the Contributed West Texas LPG Pipeline Business. CPL
represents that such assets are free and clear of any lien,
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<PAGE>
mortgage, security interest or other encumbrance arising by, through or under
CPL, and that such assets, when combined with the 51% interest in those assets
identified on Schedule 6 to be retained by CPL, are in all material respects
adequate for the purposes for which such assets are presently used. CPL, for
itself, its successors and assigns, hereby agrees to pay, perform and discharge,
and shall to the fullest extent permitted by law, indemnify and hold Newco, its
Affiliates and their respective successors and assigns harmless against, any and
all liabilities, obligations or claims (including, without limitation, those
arising from the presence or Release of Hazardous Materials) arising out of or
in any way associated with the Contributed West Texas LPG Pipeline Business, but
only to the extent such liabilities, obligations or claims arise out of CPL's
ownership or operation of the Contributed West Texas LPG Pipeline Business prior
to the Contribution Time, whether or not such liabilities, obligations or claims
are known as of the date hereof. Newco, for itself, its successors and assigns,
hereby agrees that from and after the Contribution Time, it shall be responsible
for, and shall to the fullest extent permitted by law, indemnify and hold CPL
and its Affiliates harmless against, any and all liabilities, obligations or
claims associated with the Contributed West Texas LPG Pipeline Business but only
to the extent such liabilities, obligations or claims arise out of the Surviving
Corporation's ownership of the Contributed West Texas LPG Pipeline Business
subsequent to the Contribution Time.
7. Consents to Assignment; Transfer Restrictions. Should any asset
included in the Contributed Businesses or the Contributed West Texas LPG
Pipeline Business be subject to a valid consent to assign or other restriction
on transfer as to which the contribution hereunder would be a breach of such
obligation or result in the forfeiture, termination or significant loss of use
of such asset, then such asset may be excluded herefrom and from the assignment
and shall be deemed not transferred unless and until any obligation to a third
party is fulfilled. The exclusion of less than all the assets included in the
Contributed Businesses and the Contributed West Texas LPG Pipeline Business
pursuant to this provision shall not affect the validity of the transfer of the
non-excluded assets.
8. Issuance of Shares; Investment. In exchange for the contribution of
the Contributed Businesses and the Contributed West Texas LPG Pipeline Business,
Newco will issue (i) 38,623,210 shares of Newco Common Stock to Chevron, (ii)
7,815,363 shares of Newco Series A Participating Preferred Stock to Chevron and
(iii) a promissory note in favor of Chevron on behalf of itself, CCC and CPL in
the amount of $138.4 million. Chevron hereby represents to Newco that it is
acquiring the shares of Common Stock and Preferred Stock of Newco for its own
account and not for the account of any other person. Chevron is acquiring such
shares for investment to continue its involvement in the combined midstream
businesses of
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<PAGE>
Chevron and NGC and not with a view to distribution or resale thereof.
9. Real Property Disclosures. In connection with the transfer of real
property constituting part of the Contributed Businesses and the Contributed
West Texas LPG Pipeline Business located in the State of Texas, the Contributing
Parties hereby affirm the disclosures set forth in Section 16.14 of the
Combination Agreement as amended by Exhibit 9 to this Agreement. Newco
represents that it is aware that the disclosures contained in Exhibit 9 may be
incomplete and agrees that Chevron may amend such disclosures from time to time
prior to the conveyance of the real property to comply with disclosure generally
applicable to the transfer of real estate in the State of Texas ("General
Disclosures"). Newco further waives any rights it may have arising out of the
incompleteness of any General Disclosure given in the Combination Agreement or
Exhibit 9 or the failure to give any additional General Disclosure required to
be given by any state or local law, statute or ordinance including, but not
limited to, Section 230.005 of the Texas Local Government Code, Section 257.004
of the Texas Transportation Code, Section 61.025 of the Texas Natural Resources
Code, Section 33.135 of the Texas Natural Resources Code and Section 49.452 of
the Texas Water Code.
10. Further Assurances. The Contributing Parties shall execute Deeds and
a Bill of Sale in the forms attached hereto as Exhibit 10(a) and Exhibit 10(b),
respectively, and made a part hereof. Chevron and Newco shall execute an
Assignment of Rights and Obligations Under Agreements, Assignment of Leases and
Intellectual Property License Agreement in the forms attached hereto as Exhibit
10(c), Exhibit 10(d) and Exhibit 10(e) and made a part hereof. The Contributing
Parties and Newco will cause to be executed and delivered from time to time at
the request of the other such other all such further instruments of conveyance,
assignments and further assurances as may be required to transfer and assign the
title of the Contributing Parties to the assets included in the Contributed
Businesses and the Contributed West Texas LPG Pipeline Business to Newco and the
Surviving Corporation and to effect the provisions of this Agreement.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that no party hereto shall assign any of its rights, duties or
privileges under this Agreement without the prior written consent of the other,
but no such consent is required for any further transfer of the Contributed
Businesses or the Contributed West Texas LPG Pipeline Business.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, as if both parties hereto
were resident and doing
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<PAGE>
business in such state, except to the extent that the law of the states in which
any of the assets are located necessarily apply to the construction of this
Agreement as it applies to the portion of the assets located in such states.
13. Headings; Terms. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meanings of the
provisions hereof. Unless otherwise indicated herein, capitalized terms shall
have the meanings set forth in the Combination Agreement.
IN WITNESS WHEREOF, Chevron, CPL, CCC and Newco have duly executed this
Agreement as of the date set forth above, but effective for all purposes as of
11:58 p.m., Houston, Texas time on August 31, 1996 (the "Contribution Time").
CHEVRON U.S.A. INC.
By --------------------------------
Title -----------------------------
CHEVRON PIPE LINE COMPANY
By --------------------------------
Title -----------------------------
CHEVRON CHEMICAL COMPANY
By --------------------------------
Title -----------------------------
MIDSTREAM COMBINATION CORP.
By --------------------------------
Title -----------------------------
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<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedules
Schedule 1A Warren Contributed Assets
Schedule 1B Warren Contracts
Schedule 1EX Warren Excluded Assets
Schedule 1F Warren Licenses and Permits
Schedule 2A NGBU Contracts
Schedule 2B NGBU Contributed Assets
Schedule 2D NGBU Licenses and Permits
Schedule 2EX NGBU Excluded Assets
Schedule 5 Chevron Retained Litigation
Schedule 6 West Texas LPG Pipeline Assets
Exhibits
Exhibit 4 Note Assumption Agreement
Exhibit 8 Real Property Disclosures
Exhibit 10(a) Deeds (fee and pipeline)
Exhibit 10(b) Bill of Sale
Exhibit 10(c) Assignment of Rights and Obligations Under Agreements
Exhibit 10(d) Assignment of Leases
Exhibit 10(e) Intellectual Property License Agreement
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<PAGE>
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as August 31,
1996, is by and among NGC Corporation, a Delaware corporation (the "Company"),
BG Holdings, Inc., a Delaware Corporation ("BG"), NOVA Gas Services (U.S.) Inc.,
a Delaware corporation ("NOVA"), and Chevron U.S.A. Inc., a Pennsylvania
corporation ("Chevron"). BG, NOVA and Chevron may hereinafter be referred to
collectively as "Stockholders".
WHEREAS, the Company has entered into (I) that certain Combination
Agreement and Plan of Merger (the "Combination Agreement") dated as of May 22,
1996 among NGC Corporation, a Delaware corporation ("Old NGC"), Chevron and the
Company (formerly known as Midstream Combination Corp.), pursuant to which Old
NGC was merged with and into the Company and the Company changed its name to
"NGC Corporation" and (ii) certain other agreements referenced therein;
WHEREAS, the Combination Agreement contemplates that Stockholders will
receive, at the Effective Time (as such term is defined in the Combination
Agreement), that number of shares of common stock, par value $.01 per share of
the Company (the "Common Stock") and of securities convertible into Common
Stock, set forth beside each stockholder's name on the signature page hereof;
and
WHEREAS, in connection with the Combination Agreement and the Merger
contemplated thereby, the Company has agreed to grant to each Stockholder
certain registration rights set forth below.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each Stockholder and the Company, the parties hereto agree as
follows:
SECTION 1.
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. The following capitalized terms shall have the
meanings ascribed to them in this Section 1.1:
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
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2
"Agreement" shall have the meaning set forth in the preamble hereto.
"BG" shall have the meaning set forth in the preamble hereto.
"BG Holder" means BG and each transferee of Registerable Common Stock
directly or indirectly (in a chain of title) from BG to whom the right to cause
one or more demand registrations under Section 2.1 has been expressly assigned
in writing directly or indirectly (in a chain of title) from BG.
"Chevron" shall have the meaning set forth in the preamble hereto.
"Chevron Holder" means Chevron and each transferee of Registrable Common
Stock directly or indirectly (in a chain of title) from Chevron to whom the
right to cause one or more demand registrations under Section 2.1 has been
expressly assigned in writing directly or indirectly (in a chain of title) from
Chevron.
"Combination Agreement" shall have the meaning set forth in the recitals
hereto.
"Common Stock" shall have the meaning set forth in the recitals hereto.
"Company" shall have the meaning set forth in the preamble hereto.
"Effective Time" shall have the meaning set forth in the Combination
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Existing Registration Rights" shall mean the registration rights provided
pursuant to Section 3.1 of and Exhibit A to the Amended and Restated
Stockholders Agreement entered into April 15, 1993 by and among Old NGC and
certain of its stockholders, a copy of which has been provided to the other
parties hereto.
"Former Trident Holders Registration Rights" shall mean the registration
rights provided pursuant to Section 4.1 of the Stockholders Agreement dated as
of October 21, 1994 among Old NGC, Hicks, Muse, Tate and Furst Incorporated, the
Major Holders (as defined therein) and the other parties thereto.
"Indemnified Party" shall have the meaning set forth in Section 8.3.
"Indemnifying Party" shall have the meaning set forth in Section 8.3.
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3
"Inspectors" shall have the meaning set forth in Section 5.1(l).
"Loss"or "Losses" shall have the meaning set forth in Section 8.1.
"Merger" shall have the meaning set forth in the Combination Agreement.
"NOVA" shall have the meaning set forth in the preamble hereto.
"NOVA Holder" means NOVA and each transferee of Registerable Common Stock
directly or indirectly (in a chain of title) from NOVA to whom the right to
cause one or more demand registrations under Section 2.1 has been expressly
assigned in writing directly or indirectly (in a chain of title) from NOVA.
"person" shall mean any business entity (including, without limitation, a
corporation, partnership (limited or general), limited liability company or
business trust) or a natural person.
"Prospectus" shall have the meaning set forth in Section 8.1.
"register" "registered" and "registration" and words of similar import
refer to a registration effected by preparing and filing with the SEC a
registration statement in compliance with the Securities Act, and the
declaration and ordering by the SEC of effectiveness of such registration
statement or document.
"Registrable Common Stock" shall mean any Common Stock of the Company held
or acquired by any Stockholder (or its permitted assigns) at or after the
Effective Time (including, without limitation, shares of Common Stock issued
upon conversion of shares of Series A Preferred Stock of the Corporation), and
any securities issued or issuable in respect of any Registrable Common Stock by
way of any stock split or stock dividend or in connection with any combination
of shares, recapitalization, merger, consolidation, reorganization or otherwise.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholders" shall have the meaning set forth in the preamble hereto.
1.2 OTHER DEFINITIONS. Other capitalized terms used herein but not
defined in Section 1.1 shall have the respective meanings ascribed to them
throughout this Agreement.
<PAGE>
4
SECTION 2
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION RIGHTS. (a) Upon receipt of a written request
from a BG Holder, a NOVA Holder or a Chevron Holder to register under the
Securities Act (whether for purposes of a public offering, an exchange offer or
otherwise) all or part of the Registrable Common Stock held by such BG Holder,
NOVA Holder, or Chevron Holder, as the case may be, the Company shall as
expeditiously as reasonably possible (but in any event not later than sixty (60)
days after receipt of such request) prepare and file, and use its best efforts
to cause to become effective as soon thereafter as practicable, a registration
statement under the Securities Act to effect the offering of such Registrable
Common Stock in the manner specified in such request.
(b) The BG Holder, the NOVA Holder or the Chevron Holder, as the case may
be, shall be entitled to select and retain one or more investment bankers or
managers reasonably acceptable to the Company in connection with any
underwritten offerings made pursuant to this Section 2.1.
(c) Subject to the terms and conditions set forth in Section 2.2, any BG
Holder, NOVA Holder or Chevron Holder may request the Company to register
Registrable Common Stock under the Securities Act pursuant to this Section 2.1
at any time and from time to time; provided, however, that neither a BG Holder,
a NOVA Holder nor a Chevron Holder may request the Company to register
Registrable Common Stock pursuant to this Section 2.1 more than once in any 365-
day period.
2.2 TERMS AND CONDITIONS OF DEMAND REGISTRATION RIGHTS. Notwithstanding
anything to the contrary contained elsewhere herein, the registration rights
granted to the BG Holders, the NOVA Holders and the Chevron Holders in Section
2.1 are expressly subject to the following terms and conditions:
(a) The BG Holders, collectively, the NOVA Holders, collectively and the
Chevron Holders, collectively, shall each only be entitled to three (3) requests
to register Registrable Common Stock under the terms of Section 2.1. A
"request" as it is used in this Section 2.2(a) shall be deemed to have occurred
only upon completion of a requested registration and the subsequent sale of
Registrable Common Stock.
(b) In no event shall the Registrable Common Stock to be offered under a
registration statement prepared and filed pursuant to Section 2.1 constitute
less than five percent (5%) of the then outstanding shares of Common Stock. For
purposes of meeting the five percent (5%) threshold of this Section 2.2(b), the
BG Holders, the NOVA Holders and the Chevron Holders may aggregate their shares
of Registrable Common Stock to be included therein.
<PAGE>
5
(c) The Company shall be entitled to defer for a reasonable period of time,
but not in excess of ninety (90) days, the filing of any registration statement
otherwise required to be prepared and filed by it under Section 2.1 if the
Company notifies the BG Holder, the NOVA Holder or the Chevron Holder, as the
case may be, within five (5) business days after such BG Holder, NOVA Holder or
Chevron Holder requested the registration under Section 2.1 that the Company (i)
is at such time conducting or about to conduct an underwritten public offering
of its securities for its own account and the Board of Directors of the Company
determines in good faith that such offering would be materially adversely
affected by such registration requested by the BG Holders, the NOVA Holders or
the Chevron Holders or (ii) would, in the opinion of its counsel, be required to
disclose in such registration statement information not otherwise then required
by law to be publicly disclosed and, in the good faith judgment of the Board of
Directors of the Company, such disclosure might adversely affect any material
business transaction or negotiation in which the Company is then engaged. If
the Company elects to defer the filing of a registration statement pursuant to
this Section 2.2(c), the BG Holder, the NOVA Holder or the Chevron Holder, as
the case may be, may withdraw its request, in writing, during the time of such
deferral and such request shall not be counted toward the limit set forth in
Section 2.2(a).
(d) Neither the BG Holders, the NOVA Holders nor the Chevron Holders shall
exercise their rights pursuant to Section 2.1 during the 60-day period
immediately following the effective date of any registration statement filed by
the Company under the Securities Act (other than on Form S-8 or another similar
form) in respect of an offering or sale of securities of the Company by or on
behalf of the Company or any other stockholder of the Company.
SECTION 3
PIGGYBACK REGISTRATION RIGHTS
3.1 PIGGYBACK REGISTRATION RIGHTS. If at any time or from time to time
the Company shall propose to register any Common Stock for public sale under the
Securities Act, the Company shall give each Stockholder prompt written notice of
the proposed registration and shall include in such registration on the same
terms and conditions as the other securities included in such registration such
number of shares of Registrable Common Stock as any Stockholder shall request
within five (5) business days after the giving of such notice; provided,
however, that the Company may at any time prior to the effectiveness of any such
registration statement, in its sole discretion and without the consent of
Stockholders, abandon the proposed offering in which a Stockholder had requested
to participate; and provided further that any Stockholder shall be entitled to
withdraw any or all of its shares of Registrable Common Stock to be included in
a registration statement under this Section 3.1 at any time prior to the date on
which the registration statement with respect to such shares of Registrable
Common Stock is
<PAGE>
6
declared effective by the SEC. The Company shall be entitled to select the
investment bankers and/or managers, if any, to be retained in connection with
any registration referred to in this Section 3.1, provided such investment
bankers and/or managers are reasonably acceptable to the Stockholders who hold a
majority of the stock held by all Stockholders who elect to participate in such
offering.
3.2 RESTRICTIONS ON PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein, the
registration rights granted to stockholders in Section 3.1 are expressly subject
to the following terms and conditions:
(a) The Company shall not be obligated to include shares of Registrable
Common Stock in an offering as contemplated by Section 3.1 if the Company is
advised in writing by the managing underwriter or underwriters of such offering
(with a copy to each Stockholder), that the success of such offering would in
its or their good faith judgment be jeopardized by such inclusion (after
consideration of all relevant factors, including without limitation, the impact
of any delay caused by including such shares); provided, however, that the
Company shall in any case be obligated to include such number of shares of
Registrable Common Stock in such offering, if any, as such underwriter or
underwriters shall determine will not jeopardize the success of such offering.
(b) The Company shall not be obligated to include any shares of Registrable
Common Stock in any registration by the Company of any Common Stock in
connection with any merger, acquisition, exchange offer, or any other business
combination, including any transaction within the scope of Rule 145 promulgated
pursuant to the Securities Act, subscription offer, dividend reinvestment plan
or stock option or other director or employee incentive or benefit plan.
(c) The Company shall use all commercially reasonable efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Common Stock requested to be included in a registration
of Company Common Stock pursuant to this Section 3 to be included on the same
terms and conditions as any similar securities included therein.
Notwithstanding the foregoing, the Company shall not be required to include any
Stockholder's Registrable Common Stock in such offering unless such Stockholder
accepts the terms of the underwriting agreement between the Company and the
managing underwriter or underwriters and otherwise complies with the provisions
of Section 8 below. If the managing underwriter or underwriters of a proposed
underwritten offering advise the Company in writing that in its or their good
faith judgment the total amount of securities, including securities requested to
be included in a registration of Company Common Stock pursuant to this Section 3
and other similar securities, to be included in such offering is
<PAGE>
7
sufficiently large to jeopardize the success of such offering, then in such
event the securities to be included in such offering shall be allocated first to
the Company and then, to the extent that any additional securities can, in the
good faith judgment of such managing Underwriter or Underwriters, be sold
without creating any such jeopardy to the success of such offering, pro rata
among each Stockholder participating in the offering based upon the number of
shares of Common Stock requested to be included in such registration by each
such holder.
(d) In the event that some but less than all of a Stockholder's shares of
Registrable Common Stock are included in an offering contemplated by a
registration statement pursuant to Section 3, such Stockholder shall execute one
or more "lockup" letters, in customary form, setting forth an agreement by such
Stockholder not to offer for sale, sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of Common Stock, or any
securities convertible into or exchangeable into or exercisable for any shares
of Common Stock, for a period of 90 days from the date such offering commences.
SECTION 4
FAVORED NATIONS, CONFLICTING RIGHTS
4.1 FAVORED NATIONS. Except as herein provided, the Company shall not
provide registration rights to any other party which, taken as a whole, are more
favorable than those provided to Stockholders hereunder, without also offering
to Stockholders such more favorable rights (other than the Former Trident
Holders Registration Rights or the Existing Registration Rights). The Company
shall give Stockholders notice within 15 days after the execution of any
agreement (including the terms thereof) between the Company and a third party
which triggers a right of Stockholders to invoke the favored nations provision
of this Section 4.
4.2 CONFLICTING RIGHTS. Notwithstanding anything to the contrary set
forth in this Agreement, or any other agreement pursuant to which the Company
hereafter grants any person registration rights, in the event any of the rights
of the Stockholders under the Agreement or such other persons under such other
agreement conflicts with or diminishes any of the rights granted to any of the
persons who are or become parties (the "Trident Parties") to the Former Trident
Holders Registration Rights or the Existing Registration Rights, the rights of
the Trident Parties shall be deemed superior to, and shall take precedence over
the rights of the Stockholders hereunder or any other persons to which the
Company has granted registration rights, and the rights of such Stockholders and
such other persons shall be subject to the rights of the parties to the Former
Trident Holders Registration Rights and the Existing Registration Rights. The
application of the rights of the Stockholders under this Agreement shall be
reduced, modified or eliminated, as reasonably necessary in order to implement
the provisions of the foregoing sentence. The Company covenants and agrees that
in the event it grants registration rights to any
<PAGE>
8
persons, the instrument granting such rights shall contain a provision similar
to this Section 4.2 ensuring the superiority of the Trident Parties' rights in
accordance with this Section 4.2.
SECTION 5
COVENANTS
5.1 COVENANTS OF THE COMPANY. In connection with any offering of shares
of Registrable Common Stock pursuant to this Agreement, the Company shall:
(a) Prepare and file with the Commission such amendments and post-effective
amendments to the registration statement as may be necessary to keep the
registration statement effective for a period of not less than 120 days, or such
shorter period which will terminate when all Registrable Common Stock covered by
such registration statement has been sold or withdrawn at the request of
participating holders of Common Stock; and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
(b) Furnish to each Stockholder and to each managing underwriter, if any,
(i) at least two (2) business days prior to filing with the SEC, any
registration statement covering shares of Registrable Common Stock, any
amendment or supplement thereto, and any prospectus used in connection
therewith, which documents will be subject to the reasonable review of such
Stockholders and such underwriter, and, with respect to a registration statement
prepared pursuant to Section 2.1, the Company shall not file any such documents
with the SEC to which any such Stockholder shall reasonably object; and (ii) a
copy of any and all transmittal letters or other correspondence with the SEC or
any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering of shares of Registrable Common Stock;
(c) Furnish to each Stockholder and each managing underwriter, if any, such
number of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents incorporated
by reference therein) and the prospectus included in such registration statement
(including each preliminary prospectus and prospectus supplement) as such
Stockholder or such underwriter may reasonably request in order to facilitate
the sale of the shares of Registrable Common Stock;
(d) After the filing of such registration statement, promptly notify each
Stockholder of any stop order issued or, to the knowledge of the Company,
threatened to be issued by the SEC and promptly take all reasonable actions to
prevent the entry of such stop order or to obtain its withdrawal if entered;
<PAGE>
9
(e) Use its commercially reasonable efforts to qualify such shares of
Registrable Common Stock for offer and sale under the securities, "blue sky" or
similar laws of such jurisdictions (including any foreign country or any
political subdivision thereof in which shares of Common Stock are then listed)
as any Stockholder or any underwriter shall reasonably request and use its
commercially reasonable efforts to obtain all appropriate registrations, permits
and consents required in connection therewith, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, or to
subject itself to taxation or to file a general consent to service of process in
any such jurisdiction;
(f) Furnish to each managing underwriter, if any, an opinion of counsel for
the Company addressed to each of them, dated as of the date of the closing of
the offering of shares of Registrable Common Stock, and a "comfort" letter or
letters signed by the Company's independent public accountants, each in
reasonable and customary form and covering such matters of the type customarily
covered by opinions or comfort letters delivered by such parties in underwritten
public offerings, and use its commercially reasonable efforts to have such
opinions and comfort letters addressed to and delivered to each stockholder;
(g) Furnish unlegended certificates representing ownership of the shares of
Registrable Common Stock being sold in such denominations as shall be requested
by a Stockholder or the managing underwriter, if any, provided such request is
made at least two (2) business days prior to the closing of the sale of such
shares;
(h) Promptly inform each Stockholder (i) in the case of any offering of
shares of Registrable Common Stock in respect of which a registration statement
is filed under the Securities Act, of the date on which such registration
statement or any post-effective amendment thereto becomes effective and, if
applicable, of the date of filing a Rule 430A prospectus (and, in the case of an
offering abroad of shares of Registrable Common Stock, of the date when any
required filing under the securities and other laws of such foreign
jurisdictions shall have been made and when the offering may be commenced in
accordance with such laws) and (ii) of any request by the SEC, any securities
exchange, government agency, self-regulatory body or other body having
jurisdiction for any amendment of or supplement to any registration statement or
preliminary prospectus or prospectus included therein or any offering memorandum
or other offering document relating to such offering;
(i) Subject to subparagraph (k) below, until the earlier of (i) such time
as all of the shares of Registrable Common Stock being offered have been
disposed of in accordance with the intended method of disposition by such
Stockholder set forth in the registration statement or other offering document
(and the expiration of any prospectus delivery requirements in connection
therewith) or (ii) the expiration of nine (9) months after such registration
statement or other offering document becomes effective (unless the offering is a
continuous offering of
<PAGE>
10
securities under Rule 415, in which case until the earliest of the date the
offering is completed and the second anniversary of such effective date), keep
effective and maintain any registration, qualification or approval obtained in
connection with the offering of the shares of Registrable Common Stock, and
amend or supplement the registration statement or prospectus or other offering
document used in connection therewith to the extent necessary in order to comply
with applicable securities laws;
(j) Use its commercially reasonable efforts to have the shares of
Registrable Common Stock listed on any domestic and foreign securities exchanges
on which the Common Stock is then listed;
(k) As promptly as practicable, notify each Stockholder at any time when a
prospectus relating to the sale of the shares of Registrable Common Stock is
required by law to be delivered in connection with sales by an underwriter or
dealer, of the occurrence of an event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading, and as promptly as
practicable make available to each Stockholder and to each managing underwriter,
if any, any such supplement or amendment; in the event the Company shall give
such notice, the Company shall extend the period during which such registration
statement shall be maintained effective as provided in Section 5.1(i) by the
number of days during the period from and including the date of the giving of
such notice to the date when the Company shall make available to each
Stockholder such supplemented or amended prospectus;
(l) Make available for inspection during the normal business hours of the
Company by any Stockholder, any underwriter participating in such offering, and
any attorney, accountant or other agent retained by any such Stockholder or any
such underwriter in connection with the sale of shares of Registrable Common
Stock (collectively, the "Inspectors"), all relevant financial and other
records, pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any such Inspector in
connection with such registration statement; provided, however, that (i) in
connection with any such inspection, any such Inspectors shall cooperate to the
extent reasonably practicable to minimize any disruption to the operation by the
Company of its business and (ii) any records, information or documents shall be
kept confidential by such Inspectors, unless (1) such records, information or
documents are in the public domain or otherwise publicly available or (2)
disclosure of such records, information or documents is required by a court or
administrative order or by applicable law (including, without limitation, the
Securities Act);
<PAGE>
11
(m) Enter into usual and customary agreements (including an underwriting
agreement in usual and customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the sale of the
Registrable Common Stock.
(n) Make "generally available to its security holders" (within the meaning
of Rule 158 of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of the 12-month period beginning with the first
day of the Company's first fiscal quarter commencing after the effective date of
the registration statement, which earnings statement shall cover said 12-month
period;
(o) If requested by the managing underwriter or underwriters or the
Stockholder, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters or any
participating Holder, as the case may be, reasonably requests to be included
therein, including, without limitation, information with respect to the number
of shares of Registrable Common Stock being sold by the Stockholder to any
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of an
underwritten offering of the Registrable Common Stock to be sold in such
offering, and promptly make all required filings of such prospectus by
supplement or post-effective amendment;
(p) As promptly as practicable after filing with the SEC of any document
which is incorporated by reference in a prospectus contained in a registration
statement, deliver a copy of such document to each Stockholder; and
(q) Take all other steps necessary to effect the registration of the
Registrable Common Stock contemplated hereby.
5.2 COVENANT OF STOCKHOLDERS. Each Stockholder agrees and covenants that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 5.1(k) hereof, such Stockholder will forthwith
discontinue disposition of Registrable Common Stock pursuant to the registration
statement covering such Registrable Common Stock until such Stockholder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 5.1(k) hereof, and, if so directed by the Company, such Stockholder will
deliver to the Company all copies, other than permanent file copies, then in
such Stockholder's possession of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice.
<PAGE>
12
SECTION 6
RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS
The Company agrees:
(a) Not to effect any public sale or distribution of any securities during
the 90-day period commencing on the effective date of a registration statement
filed pursuant to Section 2.1, except in connection with any merger,
acquisition, exchange offer, or any other business combination, including any
transaction within the scope of Rule 145 promulgated pursuant to the Securities
Act, subscription offer, dividend reimbursement plan or stock option or other
director or employee incentive or benefit plan;
(b) That any agreement entered into after the date hereof pursuant to which
the Company grants registration rights with respect to the Company's securities
shall contain a provision under which holders of such securities agree, to the
extent not inconsistent with applicable laws, not to effect any public sale or
distribution of any such securities (excluding any sale in accordance with Rule
144 under the Securities Act) during the period commencing with the effective
date of a registration statement pursuant to Section 2.1 through the 90-day
period beginning on the date that the registration statement filed pursuant to
Section 2.1 becomes effective.
SECTION 7
EXPENSES
All expenses incurred in connection with the registration of Registrable
Common Stock, including, without limitation, all filing fees, escrow fees, fees
and expenses of compliance with securities or blue sky laws (including fees and
disbursements of the Company's counsel in connection with blue sky
qualifications of the Registrable Common Stock), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed, and fees and disbursements of counsel for the Company and the reasonable
fees and disbursements of a single counsel for selling Stockholders and the
Company's independent certified public accountants (including the expenses of
any special audit or "cold comfort" letters required by or incident to such
performance) directly attributable to the registration of securities, Securities
Act liability insurance (if the Company elects to obtain such insurance) , and
the fees and expenses of any special experts or other persons retained by the
Company will be borne by the Company. The Company shall have no obligation to
pay and shall not pay any underwriting fees, discounts or commissions in
connection with any Registrable Common Stock registered pursuant to this
Agreement or any out-of-pocket expenses of the holders in connection therewith
(except as expressly contemplated by the preceding sentence).
<PAGE>
13
SECTION 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless each Stockholder, its officers, directors and agents, and will
agree to indemnify and hold harmless any underwriter of Registrable Common
stock, and each person, if any, who controls any of the foregoing persons within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (individually, a "Loss" collectively, "Losses") arising from or
caused by (x) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus relating to the
Registrable Common Stock (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (y) any violation or alleged violation by the Company of the
Securities Act, any blue sky laws, securities laws or other applicable laws of
any state in which shares of Registrable Common Stock are offered and relating
to action or inaction required of the Company in connection with such offering;
and will reimburse each such person for any legal or other out-of-pocket
expenses reasonably incurred in connection with investigating, or defending
against, any such Loss (or any proceeding in respect thereof), subject to the
provisions of Section 8.3, except that the indemnification provided for in this
Section 8.1 shall not apply to Losses that are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Stockholder expressly for use therein. Notwithstanding the foregoing,
the Company shall not be liable in any such case to the extent that any such
Loss arises out of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus if
(i) a Stockholder failed to send or deliver a copy of the prospectus included in
the relevant registration statement at the time it became effective (the
"Prospectus") with or prior to the delivery of written confirmation of the sale
of Registrable Common Stock to the person asserting such Loss or who purchased
such Registrable Common Stock which are the subject thereof if, in either case,
such delivery is required by the Securities Act and (ii) the Prospectus would
have corrected such untrue statement or omission or alleged untrue statement or
alleged omission; and the Company shall not be liable in any such case to the
extent that any such Loss arises out of, or is based upon, an untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact in the Prospectus, if such untrue statement or alleged
untrue statement or omission or alleged omission is corrected in any amendment
or supplement to the Prospectus and if, having previously been furnished by or
on behalf of the Company with copies of the Prospectus as so amended or
supplemented, a Stockholder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to
<PAGE>
14
and concurrently with the sale of Registrable Common Stock if such delivery is
required by the Securities Act.
8.2 INDEMNIFICATION BY STOCKHOLDERS. Each Stockholder agrees to indemnify
and hold harmless the Company, its officers and directors, and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
indemnity made pursuant to clause (x) of Section 8.1 above from the Company to
such Stockholder, but only with reference to information furnished in writing by
or on behalf of such Stockholder expressly for use in any registration statement
or prospectus relating to shares of Registrable Common Stock, or any amendment
or supplement thereto, or any preliminary prospectus.
8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 8.1 or
8.2, such person (the "Indemnified Party") shall promptly notify the person
against whom such indemnity may be sought (the "Indemnifying Party") in writing,
provided that the omission to so notify the Indemnifying Party will not relieve
the Indemnifying Party of any liability it may have under this Agreement or
otherwise except to the extent of any loss, damage, liability or expense arising
from such omission. The Indemnifying Party, upon the request of the Indemnified
Party, shall retain counsel reasonably satisfactory to such Indemnified Party to
represent such Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention, (ii) the Indemnifying Party shall have failed to comply with its
obligations under the preceding sentence or (iii) the Indemnified Party shall
have been advised by its counsel in writing that actual or potential differing
interests exist between the Indemnifying Party and the Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. The Indemnifying Party shall not agree to any settlement as the
result of which any remedy or relief, other than monetary damages for which the
Indemnifying Party shall be fully responsible, shall be applied to or against an
Indemnified Party without the prior written consent of such Indemnified Party.
8.4 CONTRIBUTION. If the indemnification provided for in this Section 8.4
from the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liability or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and
<PAGE>
15
Indemnified Party in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 8.3, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. No party shall be liable for contribution with respect to any action
or claim settled without its written consent, which consent shall not be
unreasonably withheld.
Notwithstanding the provisions of this Section 8.4, no Stockholder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Common Stock of such Stockholder was offered to
the public exceeds the amount of any damages which such Stockholder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission of alleged omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 8.4
were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 9
TERMINATION
This Agreement shall terminate with respect to any Stockholder upon the
earlier of (i) the first such instance as such Stockholder ceases to own any
shares of Common Stock or (ii) the first such instance after the fifth
anniversary of the Effective Time as such Stockholder ceases to own at least
five percent of the outstanding shares of Common Stock. For the purposes of
this Section 9, a Stockholder shall be deemed to own any and all Common Stock
owned by (i) such Stockholder and (ii) its Affiliates. Notwithstanding the
foregoing, the Company's and Stockholders' rights, duties and obligations under
Section 7 and Section 8 shall survive the termination of this Agreement.
<PAGE>
16
SECTION 10
AVAILABLE INFORMATION
The Company shall take such reasonable action and file such information,
documents and reports as shall be required by the SEC as a condition to the
availability of Rule 144 and Rule 144A, or any successor provisions.
SECTION 11
ASSIGNMENT OF RIGHTS
11.1 ASSIGNMENT OF RIGHTS. Subject to Section 11.2 and the provisions of
the Stockholders Agreement (in the form attached as Exhibit 3.2 to the
Combination Agreement), the Registrable Common Stock and rights of any
Stockholder under this Agreement with respect to any Registrable Common Stock
owned by such Stockholder may be assigned to any person who acquires Common
Stock from a Stockholder, except that any person who acquires such Common Stock
(x) pursuant to a public offering registered under the Securities Act, or (y)
pursuant to a transfer made in accordance with Rule 144 under the Securities Act
(or any similar successor provision) may not be assigned rights hereunder with
respect to such Common Stock. Notwithstanding the foregoing, rights to cause
one or more demand registrations under Section 2.1 may only be assigned if such
rights are expressly assigned in writing from BG, NOVA, Chevron, a BG Holder, a
NOVA Holder or a Chevron Holder. Any assignment of registration rights pursuant
to this Section 11.1 shall be effective upon receipt by the Company of written
notice from such assigning Stockholder (i) stating the name and address of any
assignee, (ii) describing the manner in which the assignee acquired Common Stock
from such Stockholder and (iii) identifying the Registrable Common Stock with
respect to which the rights under this Agreement are being assigned.
11.2 SCOPE OF ASSIGNMENT. The rights of an assignee under Section 11.1
shall be the same rights granted to the assigning Stockholder under this
Agreement, except that in no event shall the Company's obligations hereunder be
increased due to any such assignment, In connection with any such assignment,
the term "Stockholder" as used herein shall, where appropriate to assign the
rights and obligations of the assigning Stockholder hereunder to such assignee,
be deemed to refer to the assignee. After any such assignment, the assigning
Stockholder shall retain its rights under this Agreement with respect to all
other Registrable Common Stock owned by such Stockholder.
<PAGE>
17
SECTION 12
MISCELLANEOUS
12.1 PROVISION OF INFORMATION. Each Stockholder shall, and shall cause
its officers, directors, employees and agents to complete and execute all such
questionnaires as the Company shall reasonably request in connection with any
registration pursuant to this Agreement.
12.2 INJUNCTIONS. Irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with its
specified terms or were otherwise breached. Therefore, the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms of provisions
hereof in any court having jurisdiction, such remedy being in addition to any
other remedy to which they may be entitled at law or in equity.
12.3 SEVERABILITY. If any term or provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
12.4 FURTHER ASSURANCES. Subject to the specific terms of this Agreement,
each Stockholder and the Company shall make, execute, acknowledge and deliver
such other instruments and documents, and take all such other actions, as may be
reasonably required in order to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby.
12.5 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all agreements and understandings entered into prior to
the execution hereof, including the rights, if any, of the Parties hereto under
the agreements providing for the Existing Registration Rights and the Former
Trident Holders Registration Rights. This Agreement may be modified only by a
written instrument duly executed by or on behalf of (i) the Company, (ii) each
BG Holder, (iii) each NOVA Holder and (iv) each Chevron Holder. No breach of
any covenant, agreement, warranty or representation shall be deemed waived
unless expressly waived in writing by or on behalf of the party who might assert
such breach.
<PAGE>
18
12.6 COUNTERPARTS. For the convenience of the parties hereto, any number
of counterparts of this Agreement may be executed by the parties hereto, but all
such counterparts shall be deemed one and the same instrument.
12.7 NOTICES. All notices, consents, requests, demands, and other
communications hereunder shall be in writing and shall be given by hand or by
mail (return receipt requested) or sent by overnight delivery service, cable,
telegram, or facsimile transmission to the parties at the address specified
beside each party's name on the signature pages hereto or at such other address
as shall be specified by the parties by like notice.
Notice so given shall, in the case of notice so given by mail, be deemed to
be given and received on the fourth business day after posting, in the case of
notice so given by overnight delivery service, on the day after notice is
deposited with such service, and in the case of notice so given by cable,
telegram, facsimile transmission or, as the case may be, personal delivery, on
the date of actual delivery.
12.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
ANY CHOICE OF LAW PRINCIPLES WHICH MIGHT REQUIRE OR PERMIT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
12.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by and against the successors
and permitted assigns of the parties hereto. Except as provided herein, the
parties may not assign their rights under this Agreement and the Company may not
delegate its obligations under this Agreement. Any attempted assignment or
delegation prohibited hereby shall be void.
12.10 PARTIES IN INTEREST. Except as otherwise specifically provided
herein, nothing in this Agreement expressed or implied is intended or shall be
construed to confer any right or benefit upon any person, firm or corporation
other than Stockholder and the Company and their respective successors and
permitted assigns.
12.11 SHARES SUBJECT TO THIS AGREEMENT; EFFECTIVE TIME. All shares of
Registrable Common Stock owned or acquired by any Stockholder at or after the
Effective Time shall be subject to, and entitled to the benefit of this
Agreement, such rights to be effective from and after the Effective Time. This
Agreement shall be null and void and of no effect upon the termination of the
Combination Agreement in accordance with its terms.
<PAGE>
19
IN WITNESS WHEREOF, each Stockholder and the Company have caused this
Agreement to be duly executed as of the date first above written.
NGC CORPORATION
By:________________________________
Address: 13430 Northwest Freeway Name:______________________________
Houston, TX 77040 Title:_____________________________
BG HOLDINGS, INC.
Number of Shares of
Common Stock: 38,623,211
By:________________________________
Address: 1100 Louisiana, Suite 2500 Name:______________________________
Houston, TX 77002 Title:_____________________________
Telecopier: (713) 754-7785
with a copy to:
NOVA GAS SERVICES (U.S.) INC.
Number of Shares of
Common Stock: 38,623,211
Address: 690 Mechanic Street By:________________________________
Leominster, MA 01453 Name:______________________________
Attn: Dave Carpenter, Title:_____________________________
Secretary
Telecopier: (508) 840-6683
with copies to: Jack S. Mustoe
Senior Vice President and General Counsel
NOVA Corporation
801 Seventh Avenue, S.W.
Calgary, Alberta CANADA T2P 3P7
Telecopier: (403) 261-3557
<PAGE>
20
and: Alan Talkington
Orrick Herrington & Sutcliffe
400 Sansome Street
San Francisco, CA 94111
Telecopier: (415) 773-5759
CHEVRON U.S.A. INC.
Number of Shares of
Common Stock: 38,623,211
Number of Shares of Series A
Preferred Stock: 7,815,363
Address: 1301 McKinney Street By:________________________________
Houston, TX 77010 Name:______________________________
Attn: President of Chevron Title:_____________________________
U.S.A. Production Company
Telecopier:
with copies to: Harvey D. Hinman
Vice President and General Counsel
Chevron Corporation
575 Market Street
San Francisco, CA 94105
Telecopier: (415) 894-6017
and: Terry Michael Kee
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Telecopier: (415) 982-1200
<PAGE>
EXHIBIT 10.5
MASTER ALLIANCE AGREEMENT
This Master Alliance Agreement ("Alliance Agreement") is entered into
effective as of the first day of September, 1996 (the "Effective Date"), between
Chevron U.S.A. Production Company, a division of Chevron U.S.A. Inc. ("Chevron
Production"), Chevron Products Company, a division of Chevron U.S.A. Inc.
("Chevron Products"), Chevron Chemical Company ("CCC"), Chevron Pipe Line
Company ("CPL"), and Chevron Overseas Petroleum Inc. ("COPI") (collectively "the
Chevron Entities") and NGC Corporation ("NGC"), Natural Gas Clearinghouse ("NGC
Gas"), NGC Liquids Marketing, Inc., ("NGC Liquids"), NGC Oil Trading and
Transportation, Inc. ("NGC Oil"), NGC Energy Resources Ltd. Partnership ("NGC
Energy"), Trident NGL, Inc. ("Trident") Warren Petroleum Company, Limited
Partnership ("Warren"), and Electric Clearinghouse ("NGC Electric")
(collectively the "NGC Entities");
Whereas, CUSA and NGC have merged Chevron Production's midstream assets
(Warren Petroleum Company and the Natural Gas Business Unit of Chevron
Production) with assets of NGC to accomplish the parties desire to enhance and
grow the value of those assets; and
Whereas, the Chevron Entities have entered or may enter into long term
commercial arrangements with NGC Entities, under which a substantial volume of
natural gas, natural gas liquids, electricity, and possibly other energy
products (not including, however, refined petroleum products) will be sold and
certain energy-related services will be provided (such products and services
hereafter referred to as "Energy Products or Services"); and
Whereas, the parties intend that the NGC Entities and the Chevron
Entities will provide Energy Products and Services to each other under
commercially reasonable, mutually beneficial, and market-based terms and
conditions; and
Whereas, the parties intend that in administering, interpreting, and
performing such contracts for the provision of Energy Products or Services, the
parties will (a) recognize the contributions made by each party to the overall
value of the transaction in question, and share the benefits thereof in a manner
appropriately reflecting such contributions and the terms and conditions of such
contracts, and (b) act with due regard for the interests of the other party; and
Whereas, the Chevron Entities and the NGC Entities desire to establish a
long term, cooperative business relationship whereby all of the separate
contractual relations between them are maintained and administered on a mutually
beneficial basis, with due regard given to increasing efficiency, improving
products and services, expediting the resolution of disputes, and providing
other mutual benefits to all affected Entities;
Now, therefore, the parties agree as follows:
<PAGE>
A. DEFINITIONS
1. The term "Alliance" means the commercial relationship existing
between the Chevron Entities and the NGC Entities, as embodied in this Alliance
Agreement and each of the Covered Contracts.
2. The term "Chevron Entity" means any of the Chevron Entities named
above or any other Subsidiary of Chevron Corporation which may enter into a
Covered Contract with an NGC Entity and ratify this Alliance Agreement.
3. The term "Covered Contract" means any contract in existence during
the term of this Alliance Agreement between a Chevron Entity and an NGC Entity.
4. The term "Entity" means one of the parties hereto.
5. The term "NGC Entity" means any of the NGC Entities named above or
any other Subsidiary of NGC Corporation which may enter into a Covered Contract
with a Chevron Entity and ratify this Alliance Agreement.
6. The term "Subsidiary" means any company in which Chevron Corporation
or NGC owns, directly or indirectly, one hundred percent of the shares entitled
to vote at a general election of directors, or, in the case of a general or
limited partnership, one hundred percent of the partnership interest.
7. The term "Effective Date" means September 1, 1996.
B. EXECUTION OF CONTRACTS AND GENERAL INTENT
1. Existing Contracts. All Contracts entered into between Chevron
Entities and NGC Entities prior to or as of the Effective Date of this Alliance
Agreement shall be Covered Contracts subject hereto.
2. Future Contracts. Whenever any Chevron Entity requires, during the
term of this Alliance Agreement, Energy Products or Services which can be
supplied by an NGC Entity, it is the intent of this Alliance Agreement that the
Chevron Entity will contact the appropriate NGC Entity to determine whether the
NGC Entity is willing and able to supply the Energy Products or Services on a
cost-effective basis. If so, and if the Entities involved are able to negotiate
a mutually agreeable contract for the provision of the Energy Products or
Services, the resulting contract shall become a Covered Contract and shall be
subject to the principles and procedures outlined herein. Whenever any NGC
Entity requires Energy Products or Services which can be supplied by a Chevron
Entity, it is the intent of this Alliance Agreement that the NGC Entity will
contact the appropriate Chevron Entity and the same procedure will be followed.
Failure to follow the foregoing procedures in any particular case shall not be
deemed to be a breach of this Alliance Agreement, but shall be taken into
consideration by the parties in determining, for
2
<PAGE>
purposes of Section G hereof whether the Alliance is producing the mutual
benefits intended by the parties and should be extended beyond its primary term.
3. Intent of Parties. Both parties acknowledge that the purpose and
intent of this Alliance Agreement is to efficiently manage and optimize the
economic benefits of the Covered Contracts to the Chevron Entities and the NGC
Entities, to ensure that the Covered Contracts remain mutually beneficial, to
facilitate new business between Chevron Entities and NGC Entities with respect
to Energy Products or Services, to minimize disputes arising from the Covered
Contracts, and to resolve quickly and efficiently any disputes which may arise
thereunder. By entering into this Alliance Agreement, the parties also expect
that they will improve their financial results by reducing downtime and
unproductive activities, while maximizing cooperation.
C. ALLIANCE IMPROVEMENT TEAM AND PROCEDURES.
1. Appointment of Alliance Representatives. In each case where a Chevron
Entity and an NGC Entity are parties to a Covered Contract, each Entity shall
appoint at least one Alliance Representative to serve on an Alliance Improvement
Team (the "Entity-level AIT") which will perform the duties outlined below with
respect to the Covered Contract(s) between those Entities. In those cases where
the nature of the contractual relationship between the Chevron Entity and the
NGC Entity requires broader representation, each Entity may appoint more than
one Alliance Representative to serve on the Entity Level AIT. In addition, the
Entities involved may establish separate AITs (local AITs) between individual
business units or major facilities of the two Entities in order to better
facilitate management of the contractual relationship(s) between them.
2. Role of Alliance Improvement Teams. The duties of the AITs will be to:
2.1. administer the Alliance relationship(s) between the Entities,
including recommending to the appropriate Entities any amendments,
extensions, and other modifications to the Covered Contract(s) as the AITs
may deem appropriate.
2.2. establish and periodically review standards of performance for the
contractual relationship(s), as deemed appropriate by the AIT to optimize
the mutual benefits flowing from the Alliance;
2.3. determine appropriate measurements for the quality improvement
processes of the two Entities, insofar as they pertain to the Alliance
relationship, and oversee efforts for long-range process improvement
efforts between the two Entities with respect to the Covered Contract(s);
2.4. conduct regular planning, problem solving and performance review
meetings at such periodic intervals as shall be mutually agreed;
3
<PAGE>
2.5. review all significant equipment, design, and process changes
affecting the contractual relationship(s) between the two Entities;
2.6. determine and develop strategies with respect to future business
relationships between the Entities involved;
2.7. share with AITs from other Entities any best practices or other
process improvements which might be applicable to other Covered Contracts;
and
2.8. endeavor to resolve any disputes concerning the contractual
relationship(s) between the two Entities as provided in Section E hereof to
the extent such disputes are not resolved in accordance with the terms and
conditions of the Covered Contracts by the individuals responsible for the
day-to-day administration of the Covered Contracts.
3. Sharing of Information and Development Plans. Except as constrained by
business, policy, or legal considerations, Chevron Entities and NGC Entities
which are parties to Covered Contracts will share their knowledge of activities
and trends in their lines of business, and of their specific development or
expansion plans which may relate to the provision of Energy Products or Services
by one to the other. All such information shall be kept strictly confidential
and shall not be used by the receiving party except in furtherance of the mutual
objectives outlined in this Alliance Agreement.
6. Significant Performance Problems. If an unexcused failure by either
party to a Covered Contract to perform such party's obligations results in a
Material Event, as defined below, a representative of the defaulting party at no
lower than the vice-president level of management shall, upon request, provide a
briefing to and conduct direct discussions with, a representative of the non-
defaulting party at a similar management level for the purposes of evaluating
the cause of the failure, assuring that any deficient processes that contributed
to the failure are promptly addressed, ensuring that the defaulting party fully
understands the consequences of the failure to the non-defaulting party, and
committing to take appropriate steps to avoid such failures in the future. Any
unexcused failure to deliver Energy Products or Services in accordance with an
obligation in a Covered Contract which results in a shutdown or forced cutback
of a refinery unit ,chemical processing unit, or other energy consuming
facility, the involuntary shutting in of gas production, or an inability to
perform contractual obligations with third parties will be deemed to be a
Material Event for purposes of this Agreement. Nothing in this Section is
intended to relieve either party to a Covered Contract from liability for
monetary damages payable in accordance with the Covered Contract or to supersede
any other remedy that may be available under the Covered Contract, nor is
anything in this Section intended as a definition of "material breach" or
similar event for purposes of any Covered Contract.
D. CORPORATE GUARANTEES.
4
<PAGE>
1. Chevron Guarantee. In consideration of the NGC Entities' entering
into Covered Contracts with the Chevron Entities, Chevron U.S.A. Inc. hereby
unconditionally guarantees the performance of each Covered Contract by Chevron
Production, Chevron Products and any other division or subsidiary of Chevron
U.S.A. Inc. which may enter into a Covered Contract with an NGC Entity. For the
same consideration, Chevron Chemical Company, Chevron Pipe Line Company, and
Chevron Overseas Petroleum Inc. each hereby unconditionally guarantees the
performance of each Covered Contract by any of their respective divisions or
subsidiaries which may enter into a Covered Contract with an NGC Entity.
2. NGC Guarantee. In consideration of the Chevron Entities' entering
into Covered Contracts with the NGC Entities, NGC Corporation hereby
unconditionally guarantees the performance of each Covered Contract by each NGC
Entity which enters into a Covered Contract with a Chevron Entity.
3. Savings Clause. The foregoing corporate guarantees shall remain in
full force and effect for the life of each Covered Contract. Termination of
this Master Alliance Agreement shall not relieve any guarantor of its guarantee
obligations hereunder.
E. DISPUTE RESOLUTION.
1. General Procedure. Chevron Entities and NGC Entities which are
parties to a Covered Contract shall utilize the procedure set forth in this
Section E to resolve in good faith any dispute, controversy or claim related to
the Covered Contract, including any dispute over the performance, breach,
termination, interpretation, or validity of the Covered Contract. Nothing
herein is intended to limit any the parties to any Covered Contract from
resolving informally between them any controversy, claim or dispute that may
arise, and thus avoiding the necessity of presenting such matter to an AIT.
2. Submission To AIT. Any Chevron Entity or NGC Entity may request that
any dispute, controversy or claim arising under a Covered Contract be submitted
to the appropriate AIT, in accordance with such procedures as the AIT may
establish and with such explanation or documentation as the parties deem
appropriate to aid the AIT in its consideration of the issues presented. The
date the matter is first considered by the AIT as an agenda item at a regular or
special meeting of the AIT shall be referred to as the "Submission Date". The
AIT shall attempt in good faith, through the process of discussion and
negotiation, to resolve within forty-five days after the Submission Date any
dispute, controversy or claim presented to it. In those cases where affected
Entities have established local AITs between individual business units or
facilities, any dispute should first be submitted to the local AIT, but if the
dispute is not promptly resolved by the local AIT it will then be submitted to
the appropriate Entity-level AIT for resolution. The references in this Section
to "Submission Date" shall be deemed to refer to the date the issue is submitted
to the Entity-level AIT, not the earlier date when the issue was considered by a
local AIT. With respect to those Covered Contracts which contain periodic price
renegotiation provisions and a special procedure for resolving any disagreements
arising from those renegotiations, it is recognized that submission to an
Entity-level AIT may create undue delays
5
<PAGE>
and the parties may elect to proceed directly from informal negotiations at the
local AIT level to the special dispute resolution procedure in the Covered
Contract.
3. Mediation. If an Entity-level AIT cannot resolve any dispute,
controversy or claim submitted to it within forty-five days after the Submission
Date, the parties shall attempt in good faith to settle the matter by submitting
the dispute, controversy or claim to mediation within sixty days after the
Submission Date using any mediator upon which they mutually agree. If the
parties are unable to mutually agree upon a mediator within seventy five days
after the Submission Date, the case shall be referred to the Houston office of
Judicial Arbitration and Mediation Services, Inc. ("JAMS") for mediation. The
cost of the mediator will be split equally between the parties unless they agree
otherwise. As indicated in Section E.3., above, it is recognized that disputes
arising from price renegotiation provisions in the Covered Contracts may be
resolved in accordance with those provisions without first being submitted to
mediation.
4. BINDING ARBITRATION
4.1 All Disputes Arbitration. All disputes between the parties arising
under any Covered Contract and not resolved through negotiation or mediation
shall be submitted to arbitration in accordance with this Section E.4. or, if
one exists, the similar arbitration provision of the applicable Covered
Contract, and the parties hereby expressly waive all rights to have any such
disputes heard before a court of law, except the right to enforce an arbitration
award as described in Section E.4.5. Arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. (S) 1, et seq., and not by the arbitration
acts, statutes or rules of any other jurisdiction. In the event of a conflict
between the terms of this Section E.4. and the terms of an express arbitration
provision in any individual Covered Contract, the arbitration provision in the
individual Covered Contract shall control as to any disputes arising under that
contract.
4.2 Procedure. In the event the parties are unable to resolve a dispute
arising under any Covered Contract after exercising good faith efforts to do so,
either party may require that the matter be resolved through binding arbitration
by submitting a written notice to the other. The notice shall name the noticing
party's arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen days after receipt of a notice of arbitration, the
other party shall name its arbitrator by written notice and may designate any
additional issue(s) for arbitration. The two named arbitrators shall select the
third arbitrator within fifteen days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree on the selection
of the third arbitrator, either party shall be entitled to request the Senior
Judge of the United States District Court of the Southern District of Texas to
select the third arbitrator. All arbitrators shall be qualified by education or
experience within the energy industry to decide the issues presented for
arbitration. No arbitrator shall be a current or former director, officer or
employee of either party, or its affiliates; an attorney (or member of a law
firm) who has rendered legal services to either party, or its affiliates, within
the preceding three years; or an owner of any of the common stock of either
party or its affiliates.
4.3 Arbitration Hearings. The three arbitrators shall commence the
arbitration hearing within twenty-five days following the appointment of the
third arbitrator. The proceeding shall
6
<PAGE>
be held at a mutually acceptable site in Houston, Texas. If the parties are
unable to agree on a site, the arbitrators shall select a site. The arbitrators
shall have the authority to establish rules and procedures governing the
arbitration hearing. Each party shall have the opportunity to present its
evidence at the hearing. The arbitrators may call for the submission of pre-
hearing statements of position and legal authority, but no post-hearing briefs
shall be submitted. After the presentation of the evidence has concluded, each
party shall submit to the arbitration panel a final offer of its proposed
resolution of the dispute. The arbitration panel shall not have the authority to
award punitive or exemplary damages or any type of damages expressly waived in
the applicable Covered Contract, nor shall the arbitration panel have any
authority to terminate a Covered Contract unless that issue is made subject to
arbitration under the express terms of the Covered Contract. The arbitrators'
decision must be rendered within thirty days following the conclusion of the
hearing or submission of evidence, but no later than 90 days after appointment
of the third arbitrator. All evidence submitted in an arbitration proceeding,
transcripts of such proceedings, and all documents submitted by the parties in
an arbitration proceeding shall be deemed confidential information subject to
Section F below.
4.4 Arbitration Decision. The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the parties as
to the issue submitted. Each party shall bear the expense and cost of own
attorneys and witnesses, its own arbitrator and one-half of the expense and cost
of the third arbitrator.
4.5 Enforcement of Award. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The prevailing
party shall be entitled to reasonable attorneys' fees in any court proceeding
necessary to enforce or collect any award or judgment rendered by the
arbitrators.
F. CONFIDENTIALITY
Each Party agrees that it will maintain the terms of this Alliance
Agreement in strictest confidence and that it will not cause or permit
disclosure of those terms to any third party without the express written consent
of the other Parties hereto; provided, however, that such third party
restriction does not apply to affiliated companies. Disclosures otherwise
prohibited by this Section may be made by any Party () to the extent necessary
for such Party to enforce its rights hereunder against another Party, () to the
extent a Party is contractually or legally bound to disclose financial
information to a third party such as a royalty owner or partner, or () to the
extent to which a Party hereto is required to disclose all or part of this
Agreement by a statute or by a court, agency, or other governmental body
exercising jurisdiction over the subject matter hereof, by order, by regulation
or by other compulsory process (including, but not limited to, deposition,
subpoena, interrogatory, or request for production of documents).
G. TERM
This Alliance Agreement shall be effective for a primary term of ten years,
commencing on the Effective Date, and year to year thereafter until and unless
terminated by either party at
7
<PAGE>
the end of the primary term, or at the end of any annual period after the
primary term, by giving the other party not less than one hundred and eighty
days' prior written notice of termination.
H. LAWS AND REGULATIONS; EFFECT OF THIS AGREEMENT
1. This Alliance Agreement is subject to, and the parties shall comply
with, all applicable laws and regulations.
2. Notwithstanding the parties' intent to create a mutually beneficial
commercial relationship pursuant to this Alliance Agreement, nothing herein is
intended or shall be construed as preventing either party or their Subsidiaries
from entering into agreements with any third party for the sale, purchase or
provision of any product or service. In addition, it is understood and agreed
that the Alliance is a contractual relationship which the parties intend to
administer and improve in accordance with the provisions of this Alliance
Agreement. The Alliance is not a partnership, joint venture or any other type
of legal entity. All Energy Products or Services provided by one Entity to
another shall be provided by the first Entity as an independent contractor,
retaining complete and exclusive control and direction over such Entity's
personnel and operations, consistent with the business needs of the parties. No
employee or subcontractor of one Entity shall be, in any sense, an employee or
agent of, or have any authority to represent or bind, any other Entity in any
way.
I. ASSIGNMENTS PROHIBITED
This Alliance Agreement may not be assigned by any party without the prior
written consent of the other parties.
WHEREFORE, the parties have caused this Alliance Agreement to be executed
by their authorized representatives as of the date written above.
[Signatures on next page]
8
<PAGE>
SIGNATURE PAGES TO MASTER ALLIANCE AGREEMENT
between
Chevron U.S.A. Production Company, Chevron Products Company, Chevron Chemical
Company, Chevron Pipe Line Company, Chevron Overseas Petroleum Inc., NGC
Corporation, Natural Gas Clearinghouse, NGC Liquids Marketing, Inc., NGC Oil
Trading and Transportation, Inc., NGC Energy Resources Ltd. Partnership, Trident
NGL, Inc., Warren Petroleum Company, Limited Partnership, and Electric
Clearinghouse
CHEVRON U.S.A. PRODUCTION COMPANY, CHEVRON OVERSEAS PETROLEUM INC.
A DIVISION OF CHEVRON U.S.A. INC.
By ------------------------------- By --------------------------------
Title ---------------------------- Title -----------------------------
CHEVRON PRODUCTS COMPANY, NGC CORPORATION
A DIVISION OF CHEVRON U.S.A. INC.
By: ------------------------------- By --------------------------------
Title: ---------------------------- Title -----------------------------
CHEVRON CHEMICAL COMPANY NATURAL GAS CLEARINGHOUSE
By: ------------------------------- By --------------------------------
Title: ---------------------------- Title -----------------------------
CHEVRON PIPE LINE COMPANY ELECTRIC CLEARINGHOUSE
By: ------------------------------- By --------------------------------
Title: ---------------------------- Title: ----------------------------
9
<PAGE>
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
By: -------------------------------
Title: ----------------------------
NGC LIQUIDS MARKETING, INC.
By: -------------------------------
Title: ----------------------------
NGC OIL TRADING AND TRANSPORTATION, INC.
By: -------------------------------
Title: ----------------------------
NGC ENERGY RESOURCES LTD. PARTNERSHIP
By: -------------------------------
Title: ----------------------------
TRIDENT NGL, INC.
By: -------------------------------
Title: ----------------------------
10
<PAGE>
Exhibit 10.6
NATURAL GAS PURCHASE AND SALE AGREEMENT
BETWEEN
CHEVRON U.S.A. INC.
AND
NATURAL GAS CLEARINGHOUSE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
I. DEFINITIONS..................................................... 1
II. COMMITMENT OF GAS AND OBLIGATIONS TO PURCHASE................... 2
2.1 Committed Gas ............................................. 2
2.1.1 Pre-Effective Date Commitment....................... 3
2.1.2 Post-Effective Date Commitment...................... 3
2.1.3 Addition of New Sources of Committed Gas............ 3
2.1.4 Lease Use Gas....................................... 3
2.1.5 Non-Operated Wells.................................. 5
2.1.6 Non-Conventional Gas................................ 5
2.1.7 Farmout Acreage..................................... 6
2.2 Availability Reports....................................... 6
2.2.1 Revision of Availability Report..................... 7
2.2.2 NGC Information..................................... 7
2.3 Right to Control Production and Curtailment................ 7
2.4 Dedicated Contracts........................................ 8
2.5 Right to Process........................................... 8
2.5.1 Accounting and Billing Procedures................... 9
2.5.2 Offshore Condensate................................. 9
2.5.3 Documentation of Charges............................ 9
III. TRANSPORTATION AND PENALTIES.................................... 9
3.1 Upstream Gathering and Transportation Agreements........... 9
3.2 Transporter's Tariff....................................... 10
3.3 Imbalance Charges.......................................... 10
3.3.1 Underdeliveries - Cash-Out Costs.................... 11
3.3.2 Overdeliveries - Cash-Out Costs..................... 11
3.3.3 Imbalance Trading................................... 12
3.4 Operational Flow Orders.................................... 12
3.5 Operational Balancing Agreements........................... 12
IV. COMMODITY PRICE................................................. 13
4.1 First of the Month Commodity Price......................... 13
4.2 Description of Sources of Supply........................... 13
4.3 Split Connect Committed Gas................................ 14
4.4 Split Connect Committed Gas Price.......................... 14
4.4.1 Effect of Capacity Constraints...................... 15
4.4.2 Measurement Capacity Constraints.................... 15
4.5 Firm Market Split Connect Committed Gas.................... 16
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
4.6 Downstream Released Firm Transportation............... ..... 16
4.7 Mid-Month Increases........................................ 16
4.8 Mid-Month Decreases...,,,,,................................ 18
4.9 Commodity Price of Curtailed Sources of Supply............. 20
4.10 Locked Price Option........................................ 20
4.10.1 Request for Locked Price........................... 21
4.10.2 Procedures......................................... 21
4.10.3 Locked Quantities.................................. 22
4.10.4 Irrevocability..................................... 22
4.10.5 Availability of Committed Gas...................... 22
4.10.6 Failure to Deliver Committed Gas................... 22
4.10.7 Cessation of Futures Trading....................... 23
4.11 NGC's Failure to Purchase Committed Gas................... 23
V. TITLE AND RESPONSIBILITY........................................ 24
5.1 CUSA Responsibility........................................ 24
5.2 NGC Responsibility......................................... 25
VI. QUALITY, MEASUREMENT AND TESTS.................................. 25
6.1 Quality Specifications..................................... 25
6.2 Volume and Heating Value................................... 25
6.3 Test Data and Charts....................................... 25
VII. ACCOUNTING, BILLING AND PAYMENT................................. 25
7.1 Statements................................................. 25
7.2 Payment.................................................... 26
7.3 Failure to Pay............................................. 26
7.4 Two Year Limit on Adjustments.............................. 27
7.5 Audit...................................................... 27
7.6 Accounting Information..................................... 27
7.7 Setoff..................................................... 27
7.8 Letter of Credit........................................... 28
VIII. DISCLAIMER AND WARRANTY......................................... 28
8.1 Warranty................................................... 28
8.2 Disclaimer................................................. 28
IX. FORCE MAJEURE................................................... 28
9.1 Suspension of Obligations.................................. 28
9.2 Force Majeure Defined...................................... 29
X. TERM............................................................ 29
10.1 Term...................................................... 29
10.2 Early Termination......................................... 30
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
XI. RENEGOTIATION, PRICE REDETERMINATION AND ARBITRATION............ 31
11.1 Renegotiation and Price Redeterminations.................. 31
11.2 Limits on Arbitration..................................... 31
11.3 Price Redetermination..................................... 31
11.3.1 Scope of Price Redetermination.................... 32
11.3.2 Price Redetermination Procedure................... 32
11.3.3 Arbitration of Price Redetermination.............. 33
11.3.4 Effective Date.................................... 34
11.4 Substitution of Published Index Prices.................... 34
11.5 Unavailability of Published Index Prices.................. 34
11.6 Dispute Resolution - Other Price Issues................... 34
11.7 Arbitration After the Fifth Anniversary................... 35
11.8 Renegotiation of the Premium.............................. 35
11.9 All Disputes Arbitration.................................. 35
11.10 Procedure................................................. 35
11.11 Arbitration Hearings...................................... 36
11.12 Arbitration Decision...................................... 36
XII. GOVERNMENTAL REGULATIONS AND AUTHORIZATIONS..................... 36
12.1 Application of Law and Regulation......................... 36
12.2 Authorization and Regulatory Filings...................... 37
XIII. NOTICES......................................................... 37
13.1 Procedure................................................. 37
XIV. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY CUSA.............. 38
14.1 Non-Assignability......................................... 38
14.2 Transfer of Interest...................................... 38
XV. MISCELLANEOUS................................................... 39
15.1 Waiver.................................................... 39
15.2 Entire Agreement.......................................... 39
15.3 Choice of Law............................................. 39
15.4 Confidentiality........................................... 39
15.5 Limitation of Damages..................................... 39
15.6 Severability.............................................. 39
</TABLE>
EXHIBIT A Sources of Supply, Delivery Points, Published Index Prices, and Index
Price Adjustments
EXHIBIT B Pre-Effective Date Commitments
EXHIBIT C Upstream Gathering and Transportation Agreements
EXHIBIT D Firm Market Split Connect Committed Gas
EXHIBIT E Price Lock Confirmation
EXHIBIT F Letter of Credit
<PAGE>
"Pages where confidential treatment has been requested are stamped
Confidential Treatment Requested. The redacted material has been separately
filed with the Commission, the appropriate section has been marked at the
appropriate place and in the margin with a star (*)."
NATURAL GAS PURCHASE AND SALE AGREEMENT
This Natural Gas Purchase and Sale Agreement is made and entered into this
_____ day of August, 1996, but effective as of the 1st day of September, 1996
("Effective Date"), between CHEVRON U.S.A. INC., a Pennsylvania corporation
("CUSA"), and NATURAL GAS CLEARINGHOUSE, a Colorado general partnership ("NGC"),
both CUSA and NGC sometimes referred to collectively as "Parties" or singularly
as "Party".
RECITALS
1. CUSA is the owner and producer of natural gas and desires to sell
natural gas to NGC; and
2. NGC is a marketer of natural gas, provides products and services
associated with the production, transportation and marketing of
natural gas, and desires to purchase natural gas from CUSA;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, CUSA and NGC agree as follows:
I. DEFINITIONS
"Agreement" means the provisions of this document as it may be amended from
time to time.
"Alliance Agreement" means that certain Master Alliance Agreement dated as
of September 1, 1996, executed by CUSA and NGC among other parties.
"Btu" (British Thermal Unit) means the amount of heat energy required to
raise the temperature of one pound of water from fifty-nine degrees
Fahrenheit (59EF) to sixty degrees Fahrenheit (60EF), as determined on a
dry basis.
"Business Day" means a day on which commercial banks are open for business
in Houston, Texas.
"Day" means that period of 24 consecutive hours beginning and ending at
8:00 a.m. Central Time, or such other time as may be specified in the
FERC Gas Tariff, or the equivalent, of a pipeline transporting gas subject
to this Agreement.
<PAGE>
"Delivery Point" means the point at which title of gas delivered under this
Agreement passes from CUSA to NGC.
"Effective Date" means September 1, 1996.
"FERC" means the Federal Energy Regulatory Commission or any successor
government authority.
"gas" or "natural gas" means the effluent vapor stream in its natural state
produced from wells, including all hydrocarbon and nonhydrocarbon
constituents and including casinghead gas produced with crude oil, and
residue gas resulting from the processing of gas well gas or casinghead
gas.
"MMBtu" means one million (1,000,000) Btu.
"Month" means the period commencing at 8:00 a.m. Central Time on the first
Day of a calendar month and ending at 8:00 a.m. Central Time on the first
Day of the immediately following calendar month.
"Source of Supply" means the wells, common field point, field, or similar
designation used by CUSA to describe sources of gas supply subject to this
Agreement.
"Transporter" means the pipeline receiving the gas for the account of Buyer
immediately downstream of a delivery point.
II. COMMITMENT OF GAS AND OBLIGATION TO PURCHASE
2.1 Committed Gas. During the term of this Agreement, CUSA agrees to sell
to NGC and NGC agrees to purchase from CUSA under the terms of this
Agreement all Committed Gas. Subject to the terms and conditions of
this Agreement, CUSA's obligation to sell one hundred percent (100%)
of the Committed Gas and NGC's obligation to purchase one hundred
percent (100%) of the Committed Gas made available by CUSA are firm
obligations. Committed Gas is defined as all gas produced and owned
or controlled by CUSA during the term of this Agreement, except gas
------
that is dedicated to a Pre-Effective Date Commitment, gas dedicated to
a Post-Effective Date Commitment, gas reserved by CUSA for Lease Use,
gas produced from non-conventional sources of supply, and gas produced
from acreage farmed out by CUSA to a third party. Committed Gas
includes, without limitation, gas produced from wells in existence on
the Effective Date, wells drilled or recompleted subsequent to the
Effective Date and make up gas accruing to, and capable of being
delivered by, CUSA after the Effective Date as a result of production
or pipeline imbalances regardless of whether the imbalances
-2-
<PAGE>
occurred before or after the Effective Date.
2.1.1 Pre-Effective Date Commitment. Exhibit B to this Agreement
describes wells, oil, gas and mineral leases, gas reserves, or
producing properties however characterized that are not subject
to this Agreement because the gas produced from such properties
is dedicated to the contractual arrangements described in
Exhibit B ("Pre-Effective Date Commitment"). Gas subject to a
Pre-Effective Date Commitment shall become Committed Gas at
such time as the gas may be sold and delivered to NGC as a
result of termination or cancellation of the Pre-Effective Date
Commitment or other release of the gas from the Commitment.
2.1.2 Post-Effective Date Commitment. For purposes of this
Agreement, a Post-Effective Date Commitment is defined as an
instance where (i) CUSA acquires well(s), oil, gas and mineral
leases, gas reserves, or producing properties however
characterized ("Subsequently Acquired Properties") subsequent
to the Effective Date; and (ii) contractual arrangements in
place at the time of CUSA's acquisition prohibit CUSA from
selling all or a portion of the gas produced from the
Subsequently Acquired Property to NGC under this Agreement. Gas
subject to a Post-Effective Date Commitment shall become
Committed Gas at such time as the gas may be sold and delivered
to NGC as a result of a termination or cancellation of the
Post-Effective Date Commitment or other release of the gas from
the commitment. CUSA agrees to exercise reasonable efforts to
terminate any Post-Effective Date Commitment at the earliest
opportunity in accordance with the terms and conditions of the
commitment if, in the reasonable judgment of CUSA, such
termination will not result in adverse economic consequences to
CUSA.
2.1.3 Addition of New Sources of Committed Gas. In the event CUSA
acquires or develops new sources of Committed Gas or enhances
the productive capability of existing Sources of Supply, CUSA
shall exercise reasonable efforts to give NGC notice as soon as
possible of the new sources and increased production, including
an estimate of the date of initial deliveries or increased
production of Committed Gas to NGC. In addition, CUSA and NGC
will cooperate in the development of a joint strategy to market
Committed Gas from a new Source of Supply.
2.1.4 Lease Use Gas. CUSA retains the right to use gas produced from
wells in which CUSA has an interest for purposes of the
operation of such wells, or the operation of other wells, in
quantities deemed necessary by CUSA acting as a prudent
operator. For purposes of this Agreement, the Lease Use of gas
includes, without limitation, gas lift, pressure
-3-
<PAGE>
maintenance, enhanced recovery, equipment fuel, delivery to a
third party for purposes of clearing a positive joint venture
partner imbalance incurred by CUSA, satisfying in-kind royalty
obligations to the extent such obligations require CUSA to
deliver royalty gas to a third party, and delivery of gas to a
third party in consideration of the delivery by that third
party to CUSA of equivalent (although not always equal)
quantities of gas at a different location. Lease Use Gas
utilized by CUSA in connection with the operation of a well
located on the lease producing such Lease Use Gas, or a well
located on a different lease in instances where gathering or
transportation downstream of the applicable Delivery Point is
not required to transport the Lease Use Gas to the different
lease, will not appear in an Availability Report, as defined in
Section 2.2 below. Lease Use Gas utilized by CUSA in connection
with the operation of a well in which CUSA has an interest
located on a lease other than the lease producing such Lease
Use Gas, and requiring gathering or transportation downstream
of the applicable Delivery Point, will: (i) not constitute
Committed Gas but will appear in an Availability Report as a
separate category specifically designated as Lease Use Gas;
(ii) be purchased by NGC at the applicable First of the Month
Commodity Price, as defined in Section 4.1 below; (iii) be
transported by NGC to the location designated by CUSA; and (iv)
be resold to CUSA at the same First of the Month Commodity
Price, plus any incremental costs associated with
transportation of such Lease Use Gas to the point designated by
CUSA. In addition to the categories of Lease Use Gas described
above in this Section 2.1.4, CUSA and NGC acknowledge that CUSA
shall have the right from time to time during the term of this
Agreement to supply gas from a Source of Supply to a third
party for emergency use in the operation of a well in which
CUSA has no interest. For purposes of this Section 2.1.4 such
emergency use is intended to apply in an instance where a third
party requires an immediate short term (typically no more than
seven Days) supply of gas for purposes of restoring or
maintaining the productive capacity of a well. Typically
gathering or transportation downstream of the applicable
Delivery Point is not required to transport the emergency use
gas to the third party well; however the Parties acknowledge
that such gathering or transportation may be required in
isolated instances, in which cases CUSA will pay the gathering
or transportation charges. In the event CUSA determines to
supply emergency use gas to a third party in accordance with
this Section 2.1.4, the applicable Availability Report will
designate the quantity of such emergency use gas as a separate
entry and set forth the estimated duration of CUSA's delivery
of the emergency use to the third party. Should NGC conclude
that CUSA's delivery of emergency use gas to a third party may
have an adverse
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of NGC's ability to serve NGC's markets, the Parties will
confer in an attempt to mitigate any such potential adverse
impact. Nothing in this Section 2.1.4 shall authorize CUSA to
deliver gas to a third party for purposes of pressure
maintenance or enhanced recovery. Once gas has been designated
as Committed Gas on an Availability Report for any Month, CUSA
shall not subsequently reduce the quantity of Committed Gas
designated for delivery in that Month by declaring any portion
of such Committed Gas to be Lease Use Gas.
2.1.5 Non-Operated Wells. NGC and CUSA acknowledge that CUSA has
interests in wells operated by third parties and that from time
to time NGC and CUSA may determine that it is more efficient to
sell gas attributable to CUSA's interest in such wells to third
parties, including, without limitation, the operator of a well.
In addition to gas produced from non-operated wells, CUSA
produces casinghead gas from CUSA operated wells and sells such
gas to third parties. This gas shall be treated as gas produced
from non-operated wells for purposes of determining whether or
not such gas will be Committed Gas under this Agreement. In
respect to instances where, as of the Effective Date, CUSA
sells gas produced from a non-operated well to a third party,
CUSA and NGC will evaluate each such sale and determine whether
to continue the sale to the third party or to declare the gas
Committed Gas subject to this Agreement. CUSA and NGC
acknowledge that their evaluation will not be complete on the
Effective Date. The Parties will complete the evaluation within
one year of the Effective Date, or within such other period
agreed upon by the Parties. If during the term of this
Agreement CUSA deems it advisable to sell gas produced from a
non-operated well to a third party, CUSA will give notice to
NGC and the Parties will determine whether to sell the gas to a
third party or declare the gas Committed Gas under this
Agreement. In the event CUSA and NGC are unable to agree on
whether the gas will be sold to a third party or to NGC under
this Agreement, and in the event the quantity of gas at issue
is less than 200 MMBtu per Day, CUSA may sell the gas to a
third party. In the event the quantity of gas at issue is more
than 200 MMBtu per Day, on average over the preceding three
Months, NGC may declare the gas Committed Gas under this
Agreement. Notwithstanding the foregoing, CUSA shall be
entitled to continue the sale to the third party at its option
if CUSA concludes in its reasonable judgment that the
termination of the sale will result in adverse economic
consequences to CUSA.
2.1.6 Non-Conventional Gas. For purposes of this Agreement, "Non-
Conventional Gas" means gas which is (a) produced from Devonian
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shales, coal seams, or tight gas sands, defined as very low
permeability sandstones ( 0.1 millidarcies or less, as measured
using sound engineering practices) and (b) administered within
CUSA by CUSA's Non-Conventional Gas Business Team or its
successor. Non-Conventional Gas shall not be Committed Gas
subject to this Agreement and CUSA shall not be obligated to
sell such Non-Conventional Gas to NGC, nor shall NGC be
obligated to purchase such gas from CUSA. Notwithstanding the
foregoing, upon NGC's request, made not more frequently than
once each six Months, NGC and CUSA shall evaluate CUSA's
portfolio of Non-Conventional Gas and determine whether or not
any quantity of such Non-Conventional Gas is suitable for
treatment as Committed Gas subject to this Agreement. If the
Parties are unable to agree on the treatment of any quantity of
Non-Conventional Gas, it shall remain Non-Conventional Gas.
2.1.7 Farmout Acreage. During the term of this Agreement CUSA shall
be entitled to farmout to a third party undeveloped acreage
covered by an oil, gas and mineral lease or mineral fee
interest held by CUSA in the event CUSA, acting as a prudent
operator, determines that such a farmout is in the best
interests of CUSA. In the event of such a farmout, CUSA will
exercise reasonable efforts to (i) retain a call on gas
produced from the acreage subject to the farmout, provided that
such a call does not diminish the return to CUSA when compared
to the return in the absence of the call; or (ii) minimize the
period of time elapsing before CUSA is entitled to take and
market its proportionate share of the gas produced from the
farmout acreage. Gas produced from farmout acreage shall not be
Committed Gas under this Agreement until such time that CUSA is
entitled to take and market such gas.
2.2 Availability Reports. In each Month during the term of this
Agreement, CUSA shall submit to NGC an Availability Report setting
forth CUSA's best estimate of the quantity of Committed Gas that CUSA
will deliver to NGC from each Source of Supply during the following
Month. If the quantity of Committed Gas available for delivery from a
Source of Supply is expressed as a single monthly quantity, and unless
the Availability Report states otherwise, it shall be presumed that
such quantity will be delivered at a relatively constant daily rate of
flow throughout the Month. Except as provided below in this Section
2.2, the Availability Report shall be delivered to NGC no later than
the tenth Business Day before the first Day of the Month of delivery.
It shall identify the estimated quantity of Committed Gas that will be
produced from each Source of Supply and the estimated quantity that
will be delivered at each Delivery Point. The quantity of Committed
Gas set forth in the Availability Report in effect at 8:00 a.m. on the
second Business Day before the Day
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nominations to the applicable Transporter are due will form the basis
of the quantity of Committed Gas nominated by NGC for first Day of the
Month delivery into that Transporter. CUSA shall exercise reasonable
efforts to submit the Availability Report applicable to a Source of
Supply operated by a third party no later than the tenth Business Day
before the first Day of the Month of delivery, and shall, in any
event, submit the Availability Report as soon as possible. However, in
the event such an Availability Report is submitted later than 8:00
a.m. on the second Business Day before the Day nominations to the
applicable Transporter are due, the Committed Gas set forth on the
Availability Report will be treated as Incremental Committed Gas under
Section 4.7 below. To the fullest extent possible, taking into account
the information systems capabilities of CUSA and NGC, the Availability
Report will be delivered via Electronic Data Interchange ("EDI") in a
format permitting the downloading of data directly into NGC's systems.
In the event the delivery of the Availability Report via EDI is not
possible beginning on the Effective Date, the Parties will strive to
develop the systems required to implement the electronic delivery of
the Availability Report, provided CUSA and NGC are in agreement in
respect to the expenditure of funds required to develop the systems.
CUSA and NGC will each have gas control personnel accessible twenty-
four hours a Day seven Days a week. Nothing in this Section 2.2 or in
Section 2.2.1 below, shall require CUSA to deliver information via EDI
if such information can be delivered to NGC faster or more efficiently
by telephone followed by facsimile confirmation.
2.2.1 Revision of the Availability Report. Following submission of
the initial Availability Report, CUSA shall revise the
Availability Report to reflect changes to CUSA's estimated
quantities of Committed Gas (if the revision is submitted prior
to the beginning of the Month of delivery) or changes in actual
quantities of Committed Gas (if the revision is submitted
during the Month of delivery). The revisions shall also be
delivered to NGC via EDI and shall be delivered as soon as
commercially possible in order to permit NGC to submit revised
pipeline nominations and to make any market adjustments that
may be required, but in no event later than one hour before the
pipeline nomination deadline of the pipeline immediately
downstream of the Delivery Point.
2.2.2 NGC Information. In respect to instances where CUSA is a
Delivery Point operator, and Committed Gas flows through that
point, and upon CUSA's request, NGC will exercise reasonable
efforts to provide CUSA with information required by CUSA in
its role as point operator, including, without limitation,
NGC's downstream transportation contract number, the identity
of the downstream shipper, and, in the event NGC purchases gas
flowing through that point from other suppliers, the
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quantity of gas purchased from each such supplier. The Parties
acknowledge that the purpose of this Section 2.2.2 is not to
require NGC to furnish information that CUSA would otherwise be
able to collect on its own, but rather to obligate NGC to use
reasonable efforts to furnish information not readily
accessible to CUSA.
2.3 Right to Control Production and Curtailment. CUSA reserves the right,
acting as a prudent operator, to limit, curtail or shut-in production
(collectively referred to as "curtail or curtailment") of Committed
Gas from any well or wells if it determines that curtailment is
warranted as a result of any mechanical, engineering, legal, title, or
other field or well condition. CUSA also reserves the right to
curtail production of Committed Gas from any well or wells if it
concludes such action is warranted due to prevailing market prices for
natural gas. In the event CUSA desires to curtail production of
Committed Gas, CUSA shall give NGC written notice of such action no
later than the tenth Business Day before the first Day of the Month of
delivery. CUSA's notice shall set forth the quantity of Committed Gas
to be curtailed, the Source of Supply and Delivery Point(s) affected
and the estimated duration of the curtailment. CUSA shall not curtail
the production of Committed Gas if the Gas has been designated in
CUSA's Availability Report as available for delivery to NGC unless
such curtailment is the result of an event of force majeure as defined
in Article IX below. Any curtailment of Committed Gas after such gas
has been designated as available in the absence of an event of force
majeure may subject CUSA to Deficiency Keep Whole Payments pursuant to
Section 4.8 below. CUSA shall be entitled to reduce the period of
curtailment by submitting a revised Availability Report in accordance
with Section 2.2.1 above.
2.4 Dedicated Contracts. Notwithstanding anything in Section 2.3 above to
the contrary, CUSA shall not be entitled to curtail production of
Committed Gas as a result of prevailing market prices to the extent
Committed Gas has been dedicated for delivery to a customer of NGC
under a gas purchase and sale agreement designated a "Dedicated
Contract" by NGC and CUSA unless CUSA and NGC agree on an alternate
source of Committed Gas to meet the requirements of the Dedicated
Contract during the period of curtailment. Contracts eligible for
designation as a Dedicated Contract will be gas purchase and sale
agreements that NGC proposes to execute as seller after the Effective
Date and which will require the dedication of Committed Gas produced
from a specific Source(s) of Supply to that contract. NGC shall give
CUSA written notice of NGC's desire to designate a Dedicated Contract,
which notice shall set forth the quantity of Committed Gas dedicated,
the Source of Supply and Delivery Point affected and the duration of
the dedication. CUSA's agreement to the designation of a contract as
a Dedicated Contract shall not be construed to
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be a warranty or guaranty by CUSA that a given Source of Supply will
produce Committed Gas in quantities sufficient to meet the
requirements of a Dedicated Contract.
2.5 Right to Process. CUSA hereby reserves the right to process all or
any portion of the Committed Gas deliverable to NGC under this
Agreement for the removal of all or any constituents other than
methane. Such processing rights may be exercised either before or, if
the Transporter allows, after delivery of the Committed Gas to NGC.
When CUSA is exercising its right to process the Committed Gas (and
such right may be exercised at any time and from time to time during
the term of this Agreement), title to the liquefiable hydrocarbons and
other constituents removed or consumed during processing shall not
pass to NGC, but shall remain at all times in CUSA. NGC and CUSA
agree that they will cooperate in good faith to facilitate the
exercise of Seller's processing right, including, without limitation,
taking the actions described in the remainder of this Section 2.5.
2.5.1 Accounting and Billing Procedures. When and if CUSA elects to
exercise its processing rights, NGC and CUSA will establish
reasonable accounting and billing procedures so that (i) NGC
will pay only for the quantities of residue Committed Gas
remaining after processing and (ii) all charges of the
Transporter will be equitably allocated between NGC and CUSA,
with CUSA paying all costs attributable to the exercise of its
processing rights and NGC paying all costs attributable to the
Committed Gas purchased by it.
2.5.2 Offshore Condensate. It is understood that CUSA's gas wells
may produce liquid hydrocarbons (condensate) along with the gas
well Committed Gas to be delivered under this Agreement. To the
extent that any Delivery Point provided for in this Agreement
is located on an offshore platform, and if Transporter allows,
NGC agrees that CUSA may inject condensate into the gas stream
delivered hereunder for transportation and redelivery to CUSA
at a separation facility located onshore. CUSA agrees to bear,
or reimburse NGC for, all charges of the Transporter
attributable to the injection, transportation, and redelivery
of CUSA's condensate.
2.5.3 Documentation of Charges. NGC shall furnish CUSA with
documentation establishing the actual charges incurred by NGC
and borne by CUSA under Sections 2.5.1 and 2.5.2. Such
documentation shall reflect the method of allocation of such
charges between NGC and CUSA. Upon agreement of the Parties,
amounts paid by NGC and borne by CUSA under Sections 2.5.1 and
2.5.2 may be netted against amounts
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NGC is obligated to pay CUSA for Committed Gas delivered
under this Agreement.
III. TRANSPORTATION AND PENALTIES
3.1 Upstream Gathering and Transportation Agreements. Exhibit C to this
Agreement contains a list of all upstream gathering and transportation
service agreements associated with the delivery of Committed Gas to
the Delivery Points. The Parties shall revise the list during the
term of this Agreement to reflect the addition or deletion of
gathering and transportation service agreements. CUSA shall be
responsible for arranging, nominating and paying for, all upstream
transportation and gathering services (and associated charges)
necessary for CUSA to deliver Committed Gas to the Delivery Point(s),
with the following exception. In respect to any upstream gathering or
transportation service agreement managed by CUSA's Natural Gas
Business Unit as of the Effective Date, CUSA shall have the option to
shift responsibility for the management and operation of such service
agreements to NGC as of the Effective Date (or effective as of a later
date if CUSA does not exercise its option on or before the Effective
Date). CUSA will use reasonable efforts to exercise its option on or
before the Effective Date, however the Parties recognize that time
constraints may preclude the completion of such action by such date.
The Parties agree to execute any agreements they deem necessary to
implement the shifting of such responsibility to NGC. Management and
operation of such service agreements will include, without limitation,
nominations, confirmations and the payment of invoices. Amounts paid
by NGC to an upstream gatherer or transporter will be netted against
amounts NGC is obligated to pay CUSA for Committed Gas delivered under
this Agreement. Notwithstanding the foregoing, upon agreement of the
Parties, in respect to any payments to an upstream gatherer or
transporter, CUSA shall reimburse NGC for one hundred percent (100%)
of all payments made by NGC to such upstream gatherer or transporter
prior to the date NGC is required to make such payments to the
gatherer or transporter provided that NGC furnishes CUSA a copy of the
invoice no later than ten Days prior to the payment due date. If NGC
furnishes a copy of the invoice later than the tenth Day before the
payment due date, CUSA shall exercise reasonable efforts to reimburse
NGC prior to the payment due date, but shall in any event reimburse
NGC no later than the close of business on the tenth Day following
CUSA's receipt of the invoice. In the event CUSA requests NGC's
assistance in obtaining a new upstream gathering or transportation
rate during the term of this Agreement, such assistance will be
furnished pursuant to an agreement addressing, among other items, the
allocation between CUSA and NGC of any cost saving associated with new
rates.
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3.2 Transporter's Tariff. The rules, guidelines, and policies of the
pipeline immediately downstream of the Delivery Point ("Transporter")
shall define and set forth the manner in which the Committed Gas
purchased and sold under this Agreement is measured and transported.
CUSA and NGC recognize that the receipt and delivery into
Transporter's pipeline facilities of Committed Gas purchased and sold
under this Agreement shall be subject to the operational procedures of
Transporter as well as the terms of Transporter's transportation
service agreement(s) with NGC, if any, addressing operational
procedures.
3.3 Imbalance Charges. The terms and conditions of Transporter's FERC Gas
Tariff (or equivalent state-approved tariff) addressing penalties,
scheduling fees, cash-out costs or similar charges attributable to
underdeliveries or overdeliveries of gas into the pipeline
(collectively "Imbalance Charges") shall be used for purposes of
calculating Imbalance Charges under this Agreement. Imbalance Charges
under this Agreement will be assessed on a transporter-by-transporter
basis using the applicable terms of Transporter's FERC Gas Tariff and
as if CUSA is the shipper and NGC is the transporter. In instances of
split connect Committed Gas, as defined in Section 4.3 below, the
tariff of the pipeline downstream of the Delivery Point associated
with the Published Index Price selected by CUSA shall be used for
purposes of this Section 3.3 If an Imbalance Charge is assessed under
this Agreement, then CUSA shall pay to NGC an amount calculated in
accordance with the applicable terms of Transporter's FERC Gas Tariff.
For purposes of this Agreement, an underdelivery is defined as an
instance where the monthly quantity of Committed Gas delivered to a
given Delivery Point is less than the monthly quantity of Committed
Gas designated for delivery at that Delivery Point in CUSA's
Availability Report as changed throughout the Month by timely
revisions of the Availability Report in accordance with Section 2.2.1
above. An overdelivery is defined as an instance where the monthly
quantity of Committed Gas delivered to a given Delivery Point is
greater than the monthly quantity of Committed Gas designated for
delivery at that Delivery Point in CUSA's Availability Report as
changed throughout the Month by timely revisions of the Availability
Report in accordance with Section 2.2.1 above. In the event the
applicable Transporter requires balancing on a daily basis, the
definitions of underdelivery and overdelivery shall be modified to
reflect daily balancing as opposed to monthly balancing.
Overdeliveries by CUSA into a transporter at one Delivery Point will
be netted against underdeliveries into that transporter at a different
Delivery Point to the extent permitted under that transporter's FERC
Gas Tariff. Underdeliveries by CUSA on one transporter will not be
netted against overdeliveries by CUSA to a different transporter
absent the Parties' consent and underdeliveries or overdeliveries by
CUSA will not be netted against overdeliveries or underdeliveries by
other NGC suppliers of gas.
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3.3.1 Underdeliveries - Cash-Out Costs. In the event (i) of net
underdeliveries by CUSA in any Month in respect to a given
Transporter; (ii) that Transporter's per MMBtu cash-out prices
(in the case of tiered cash-out prices the cash-out price
associated with the level of CUSA's net underdeliveries in each
tier) is higher than the appropriate Published Index Price; and
(iii) CUSA would be required to pay cash-out costs to
Transporter under Transporter's FERC Gas Tariff if CUSA was the
shipper and NGC was the transporter, CUSA shall pay NGC an
amount equal to the quantity of the underdelivery, expressed in
MMBtu, multiplied by the difference between the per MMBtu cash-
out price and the Published Index Price.
3.3.2 Overdeliveries - Cash-Out Costs. In the event (i) of net
overdeliveries by CUSA in any Month in respect to a given
Transporter; and (ii) that Transporter would be required to
purchase the overdelivered quantity of gas at the cash-out
prices (in the case of tiered cash-out prices the cash-out
price associated with the level of CUSA's net overdeliveries in
each tier) under Transporter's FERC Gas Tariff if CUSA was the
shipper and NGC was the transporter, the First of the Month
Commodity Price of the overdelivered quantity of Gas shall be
calculated using the lesser of the Published Index Price or the
cash-out price.
3.3.3 Imbalance Trading. In the event of net underdeliveries or
overdeliveries by CUSA in any Month and notwithstanding the
absence of an actual net underdelivery or overdelivery assessed
by Transporter, NGC will exercise best efforts to mitigate the
adverse consequences of the net underdeliveries or
overdeliveries through imbalance trading, or the equivalent,
opportunities set forth in the FERC Gas Tariff of the
applicable Transporter. NGC and CUSA acknowledge that net
underdeliveries or overdeliveries by CUSA calculated in
accordance with this Agreement may or may not result in a
corresponding actual net underdelivery or overdelivery assessed
by Transporter pursuant to its FERC Gas Tariff.
3.4 Operational Flow Orders. CUSA and NGC recognize that Transporter may
be authorized to issue Operational Flow Orders ("OFOs"), or the
equivalent, under the General Terms and Conditions of Transporter's
FERC Gas Tariff, or any successor provision. CUSA and NGC also
recognize that Transporter may issue an OFO that obligates CUSA or NGC
to take action that may be contrary to the terms of this Agreement,
including, without limitation, the delivery and taking of gas in
quantities contrary to those set forth in Availability Reports and
prior nominations. CUSA and NGC agree to use their best efforts to
prevent the issuance of such an OFO. In the event an OFO is issued,
CUSA and NGC
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agree that compliance with any duly authorized OFO will not constitute
a violation of this Agreement, provided that: (i) the Party receiving
an OFO notify the other Party as soon as possible, and (ii) the
Parties use their best efforts to minimize the operational and
economic consequences of compliance with the OFO by all means at their
disposal. In the event an OFO can be construed as calling for the
shutting-in of CUSA production, the Parties will cooperate to take
steps alternative to a shut-in to the extent such alternative steps
may be taken without causing a different NGC firm supplier to bear a
disproportionate share of adverse consequences flowing from the OFO.
Nothing in this Section 3.4 shall be construed to require CUSA to bear
adverse economic consequences under an OFO issued as a result of
overdeliveries by a third party supplier of gas to NGC or deficient
takes by an NGC market, and not as a result of any act or omission by
CUSA.
3.5 Operational Balancing Agreements. The Parties agree to use their best
efforts to maintain an operational balancing agreement, or the
equivalent ("OBA"), at each point of delivery into a transporting
pipeline or at such other points the Parties deem advisable. In
respect to any point at which an OBA is not in effect, upon CUSA's
request, NGC will assume the responsibility for negotiating and
implementing an OBA on terms and conditions acceptable to CUSA and
NGC.
IV. COMMODITY PRICE
4.1 First of the Month Commodity Price. The commodity price paid by NGC
to CUSA for each MMBtu of Committed Gas delivered to NGC shall be
based on prevailing index prices reported in commercial publications,
will change each Month, and will vary by Source of Supply and Delivery
Point. The "First of the Month Commodity Price" of Committed Gas
produced from a given Source of Supply shall be the index price
reported in the first issue of the designated commercial publication
published in the Month of delivery in the designated table, heading
and entry in that table ("Published Index Price"), plus or minus
adjustments applicable to that Source of Supply, including, without
limitation, deduction of gathering and transportation charges
(collectively "Index Price Adjustments"), and the premium, if any (the
"Premium"). Prior to delivery of Committed Gas under this Agreement,
CUSA and NGC shall agree on (i) the Published Index Price that will
form the basis of the First of the Month Commodity Price of the
Committed Gas delivered to the applicable Delivery Point; (ii) the
Index Price Adjustments, if any, to the published index price
necessary to arrive at the First of the Month Commodity Price; and
(iii) the
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Premium, if any. The substitution of a new Published Index Price (or a
change in the table, heading and entry) or a modification of the Index
Price Adjustment also requires the agreement of CUSA and NGC. Although
the Parties will strive to reduce agreements substituting a new
Published Index Price or modifying an Index Price Adjustment to
writing, the Parties recognize that market conditions may require
prompt action. Consequently, oral agreements substituting a new
Published Index Price or modifying an Index Price Adjustment will be
effective until reduced to writing. The Parties agree to exercise best
efforts to reduce such oral agreements to writing within thirty Days
of reaching agreement. The First of the Month Commodity Price shall be
calculated each Month during the term of this Agreement and shall
remain in effect during the entire Month unless the Parties agree to
change the First of the Month Commodity Price during the course of the
Month.
4.2 Description of Sources of Supply. The Sources of Supply, Delivery
Points, Published Index Price, and Index Price Adjustments effective
as of the Effective Date are set forth in Exhibit A to this Agreement.
The Parties expect that Exhibit A will be agreed upon and made a part
of this Agreement on or around the Effective Date and the absence of
Exhibit A at the time this Agreement is executed by the Parties and
thereafter shall not affect the enforceability of this Agreement. New
Sources of Supply or Delivery Point(s), and the associated Published
Index Price and Index Price Adjustments that CUSA and NGC have agreed
upon shall be set forth in a notice prepared by NGC and furnished to
CUSA. The Parties may from time to time, but are not required to,
amend Exhibit A to reflect the information contained in such notice,
and the failure to so amend Exhibit A shall not affect CUSA's
obligation to deliver, and NGC's obligation to purchase, Committed
Gas.
4.1 Split Connect Committed Gas. In the event Committed Gas produced
from a Source of Supply is capable of being delivered into more than
one pipeline system ("split connect Committed Gas"), CUSA shall select
the Published Index Price and Index Price Adjustments applicable to
such split connect Committed Gas. Except as provided below in this
Section, and absent agreement of the Parties to the contrary, the
selection of a Published Index Price and Index Price Adjustments
applicable to a given source of split connect Committed Gas will
remain in effect for a period of no less than five full Months or
seven full Months, as the case may be as set below. CUSA will make its
selection for a succeeding period no later than thirty Days prior to
the first Day of the new period. The five Month period will run from
November 1 through March 31 and the seven Month period will run from
April 1 through October 31. The period in effect as of the Effective
Date will be less than seven full Months and will run through October
31, 1996. Notwithstanding the foregoing, certain Sources of Supply
producing split connect Committed Gas will not be subject to the
selection described above in this Section 4.3. The Published
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Index Price(s) and Index Adjustments applicable to such Sources of
Supply have been selected by CUSA and NGC and shall remain in place
for the period designated by the Parties and shall not be changed
during the designated period absent the consent of CUSA and NGC. Such
Sources of Supply will be designed in Exhibit A-1 as "Fixed Selection
Split Connect."
4.4 Split Connect Committed Gas Price. Except as to (i) Fixed Selection
Split Connect Sources of Supply set forth in Exhibit A to this
Agreement, (ii) as provided in Section 4.5 below, and (iii) split
connect Committed Gas subject to a Locked Price in accordance with
Section 4.10 below, in respect to each Source of Supply producing
split connect Committed Gas, the First of the Month Commodity Price
paid by NGC to CUSA for each MMBtu of split connect Committed Gas
delivered by CUSA to NGC during a given Month will be adjusted in the
* following instance. REDACTED In the event the Highest Commodity
* Price exceeds the Selected Commodity Price by more than REDACTED per
MMBtu, the First of the Month Commodity Price shall be increased by an
* amount equal to REDACTED of such excess above the Selected Commodity
Price. In the event the Highest Commodity Price exceeds the Selected
* Commodity Price by REDACTED or less, the First of the Month Commodity
Price shall not be increased.
4.4.1 Effect of Capacity Constraints. Notwithstanding Section 4.4
above, the quantity of split connect Committed Gas subject to
the First of the Month Commodity Price adjustment during any
Month will take into account capacity constraints, which will
be defined by NGC's ability to deliver the split connect
Committed Gas into the pipeline system associated with the
Highest Commodity Price. If NGC is unable to nominate, or would
have been unable to nominate had it attempted to nominate,
* REDACTED of the split connect Committed Gas designated in
CUSA's Availability Report for delivery on the first Day of the
Month into the pipeline system associated with the Highest
Commodity Price, the quantity of split connect Committed Gas
subject to the First of the Month Commodity Price adjustment
* will be calculated by REDACTED. NGC's ability to nominate
REDACTED of the split connect Committed Gas will be determined
as of the applicable pipeline's confirmation of first Day of
the Month quantities of gas.
4.4.2 Measurement of Capacity Constraints. In all instances covered
by Section 4.4 above, NGC's ability to nominate Committed
Gas for delivery
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
into a pipeline system associated with the Highest Commodity
Price shall be evaluated by reference to instances where CUSA
and NGC have agreed that capacity constraints exist, pipeline
announcements of constraints or curtailments, however
characterized and communicated, and by NGC's efforts to
nominate Committed Gas for delivery into the applicable
pipeline. If NGC exercises reasonable efforts to nominate gas
on the pipeline associated with the Highest Commodity Price,
* and is unable to nominate REDACTED of the split connect
Committed Gas due to a lack of available capacity, a capacity
constraint will be deemed to exist to the extent of NGC's
inability. NGC shall exercise reasonable efforts to create and
retain a written record, such as notes of telephone
conversations, of NGC's efforts to nominate Committed Gas for
delivery into a pipeline system associated with the Highest
Commodity Price, provided, however, that NGC's failure to
create and retain such a written record shall not preclude NGC
from claiming the existence of a capacity constraint.
4.5 Firm Market Split Connect Committed Gas. Notwithstanding Section 4.4,
in the Months of December, January and February during the period
beginning with December 1996 and continuing through February 1998, the
First of the Month Commodity Price of split connect Committed Gas
delivered to firm market customers under certain natural gas purchase
and sale agreements, however characterized, calling for deliveries at
primary receipt points ( "Firm Market Split Connect Committed Gas"),
which firm natural gas purchase and sale agreements, corresponding
primary receipt points and affected quantities of gas are described in
Exhibit D to this Agreement, shall not be adjusted in accordance with
* Section 4.4 above. REDACTED
4.6 Downstream Released Firm Transportation. In the event (i) NGC is the
replacement shipper under a firm transportation service agreement
released by CUSA to NGC and covering transportation upstream of the
point at which the applicable Published Index Price is determined;
(ii) such firm transportation service agreement expires or is subject
to termination by NGC or CUSA during the term of this Agreement; and
(iii) an alternate Published Index Price is available at a point
upstream of the point at which the then current Published Index Price
is determined, the following procedure shall apply. NGC shall enter
into negotiations with the Transporter for the purpose of obtaining
the rate applicable to the rollover, extension or renewal, as the case
may be, of the firm transportation service agreement. CUSA shall have
the option to approve the new rate, in which case the firm
transportation service agreement will be
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extended or renewed and the Published Index Price shall remain the
same and the Adjustment attributable to the firm transportation
service agreement will equal the new rate, or not approve the new
rate, in which case the point at which the Published Index Price is
determined shall move upstream to the appropriate point. In the latter
case, NGC shall be entitled to enter into the new firm transportation
service agreement at a rate equal to or higher than the rate CUSA
elected not to approve. In the event CUSA elects not to approve the
new rate, the foregoing procedure shall not apply to subsequent
instances where a firm transportation service agreement expires or is
subject to termination.
4.7 Mid-Month Increases. In the event (i) CUSA increases the quantity of
Committed Gas delivered to NGC on any Day at a given Delivery Point to
a level in excess of one hundred five percent (105%) of the quantity
of Committed Gas designated for delivery by CUSA in the Availability
Report in effect at 8:00 a.m. on the second Business Day before the
date on which nominations for delivery on the first Day of the Month
of delivery are due ("First of the Month Committed Gas"); (ii)
notifies NGC of such increase no later than one hour prior to the
pipeline nomination deadline applicable to the Day on which the
increase will be implemented; and (iii) does not in its notice
specifically state that such increase is for the purpose of offsetting
underdeliveries incurred by CUSA at the applicable Delivery Point
earlier that month, the commodity price per MMBtu for the quantity in
excess of one hundred five percent (105%) of the First of the Month
Committed Gas ("Incremental Committed Gas") shall be determined as
follows. The "Incremental Gas Commodity Price" of Incremental
Committed Gas shall be determined on a Delivery Point by Delivery
Point basis, and therefore any increases in the quantity of Committed
Gas delivered to a given Delivery Point will not be netted against a
decrease at a different Delivery Point unless the Committed Gas
delivered at different Delivery Points is delivered into a single pool
such that an increase at one Delivery Point and a corresponding
decrease at the second Delivery Point can be netted to arrive at the
quantity of Committed Gas delivered into the pool on the applicable
Day, in which case deliveries at all such Delivery Points will be
netted for purposes of this Section 4.7. CUSA will give notice to NGC
of any increase in the delivery of Committed Gas in a revised
Availability Report as soon as commercially possible, but in no event
later than one hour prior to the nomination deadline of the pipeline
immediately downstream of the Delivery Point. The Incremental Gas
Commodity Price shall be based on the Gas Daily Index Price. The "Gas
Daily Index Price" shall be the "Daily Midpoint" price published in
the issue of Gas Daily reporting prices of Gas flowing on the Day on
---------
which Incremental Committed Gas is delivered to NGC under this
Agreement in the table titled "Daily Price Survey" under the heading
and entry applicable to the downstream pipeline and the Delivery Point
where CUSA delivers the Incremental Committed Gas. The Gas Daily Index
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Price corresponding to each Published Index Price, including any
adjustment required to make the two prices comparable, is set forth in
Exhibit A to this Agreement. For purposes of determining which issue
of Gas Daily reports the range of prices applicable to the Day of
---------
delivery, the instructions published by Gas Daily in the paragraph
---------
appearing under the heading "Daily Price Survey" will be used. In the
event Gas Daily does not report prices applicable to a Day on which
---------
Incremental Committed Gas is delivered to NGC, then the issue of Gas
---
Daily reporting prices applicable to the closest subsequent Day shall
-----
be used. The same Index Price Adjustments and Premiums used to
calculate the First of the Month Commodity Price pursuant to Section
4.1 above shall be used to calculate the Incremental Gas Commodity
Price if the Gas Daily Index Price covers a geographical location
comparable to that covered by the Published Index Price. The
Incremental Gas Commodity Price will be based on the Gas Daily Index
Price applicable to the Day of delivery and will therefore vary Day-
by-Day. Notwithstanding the foregoing, in the event that the parties
agree that Gas Daily does not report prices applicable to any Delivery
---------
Point, the Parties shall select an alternate index price, which
alternate index price shall be treated as the Gas Daily Index Price
for all purposes under this Agreement. For purposes of calculating
the Incremental Gas Commodity Price of Incremental split connect
Committed Gas subject to commodity price adjustment in accordance with
Section 4.4 above, Incremental split connect Committed Gas will be
deemed to be delivered into the pipeline system associated with the
Highest Commodity Price. Capacity constraints, as defined and measured
in Sections 4.4.1 and 4.4.2 above shall be taken into account in
determining the quantity of Incremental split connect Committed Gas
that is deemed to be delivered into the pipeline system associated
with the Highest Index Price. For example, if only fifty percent
(50%) of the split connect Committed Gas designated in CUSA's
Availability Report for delivery on the first Day of the Month can be
nominated for delivery into the pipeline system associated with the
Highest Commodity Price, it shall be presumed that no Incremental
split connect Committed Gas can be delivered into the pipeline system
associated with the Highest Commodity Price and therefore the
Incremental Gas Commodity Price shall be based on the Selected
Commodity Price. In the event CUSA increases the quantity of Committed
Gas delivered to NGC on any Day (x) without prior notice; (y) with
notice given later than one hour before Transporter's nomination
deadline; or (z) notifies NGC that the increase is for the purpose of
offsetting underdeliveries incurred by CUSA at the applicable Delivery
Point earlier that Month, such Committed Gas shall not be treated as
Incremental Committed Gas, but shall be treated as an overdelivery of
Committed Gas for purposes of calculating imbalance charges in
accordance with Section 3.3 above.
4.8 Mid-Month Decreases. In the event (i) CUSA decreases the quantity of
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Committed Gas delivered to NGC on any Day at a given Delivery Point to
a level below ninety-five percent (95%) of the quantity of Committed
Gas designated for delivery by CUSA in the Availability Report in
effect at 8:00 a.m. on the second Business Day before the date on
which nominations for delivery on the first Day of the Month of
delivery are due, including instances where CUSA is required to
decrease the quantity of Committed Gas in response to a Transporter's
instructions, ("First of the Month Committed Gas"); (ii) notifies NGC
of such decrease no later than one hour prior to the pipeline
nomination deadline applicable to the Day on which the decrease will
be implemented; (iii) does not in its notice specifically state that
such decrease is for the purpose of offsetting overdeliveries incurred
by CUSA at the applicable Delivery Point earlier that Month; (iv) the
applicable Gas Daily Index Price is higher than the corresponding
First of the Month Commodity Price (whether calculated using the
Published Index Price or the Locked Price), and (v) such reduction is
not the result of an event of force majeure or an OFO, CUSA shall pay
to NGC an amount calculated as follows (the "Deficiency Keep Whole
Payment"). If on the Day that CUSA's deliveries of Committed Gas fall
below ninety-five percent (95%) of First of the Month Committed Gas,
the Gas Daily Index Price, as defined in Section 4.7 above, applicable
to the Delivery Point (as adjusted by the Index Price Adjustments
applicable to the Delivery Point and the Premium) is higher than the
First of the Month Commodity Price calculated under Section 4.1 above,
the difference will be the "Deficiency Cost". The Deficiency Cost
shall be multiplied by a number equal to the difference between
ninety-five percent (95%) of the first of the month nominated quantity
and the quantity of Committed Gas actually delivered by CUSA on that
Day, and the product shall be the Deficiency Keep Whole Payment.
Notwithstanding the foregoing, in the event any portion of the
Committed Gas that is not delivered by CUSA is subject to a Locked
Price in accordance with Section 4.10 below, the Deficiency Cost and
the Deficiency Keep Whole Payment attributable to the quantities
subject to the Locked Price shall be determined by subtracting the
higher of (a) the First of the Month Commodity Price calculated using
the Locked Price, or (b) the First of Month Commodity Price calculated
using the Published Index Price that would have been used in the
absence of the Locked Price, from the Gas Daily Index Price. No
Deficiency Keep Whole Payment shall be payable in the event the Gas
Daily Index Price is lower than the First of the Month Commodity
Price. The Deficiency Keep Whole Payment shall be determined on a
Delivery Point-by-Delivery Point basis, and therefore any decrease in
the quantity of Committed Gas delivered to a given Delivery Point will
not be netted against a increase at a different Delivery Point unless
the Committed Gas delivered at different Delivery Points is delivered
into a single pool such that an increase at one Delivery Point and a
corresponding decrease at the second Delivery Point can be netted to
arrive at the quantity of Committed Gas delivered into the pool on the
applicable Day, in which case deliveries at all
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<PAGE>
such Delivery Points will be netted for purposes of this Section 4.8.
A Deficiency Keep Whole Payment shall be calculated in respect to each
Day that CUSA's deliveries fall below ninety-five percent (95%) of the
quantity of Committed Gas nominated for delivery on the first Day of
the Month of delivery and shall be based on the Gas Daily Index Price
applicable to that Day. In the event Gas Daily does not report prices
---------
applicable to a Day on which deliveries of Committed Gas are reduced,
then the issue of Gas Daily reporting prices applicable to the closest
---------
subsequent Day shall be used. For purposes of calculating the total
amount of Deficiency Keep Whole Payments due in any Month, a decrease
in the quantity of Committed Gas delivered by CUSA on any given Day
shall not be netted against an increase in the quantity of Committed
Gas delivered by CUSA on a different Day. Deficiency Keep Whole
Payments shall be paid in accordance with Article VII below. For
purposes of calculating the Deficiency Cost, if any, associated with a
decrease in the delivery of split connect Committed Gas subject to
commodity price adjustment in accordance with Section 4.4 above, the
decrease in delivery of split connect Committed Gas will be allocated
to the pipeline system associated with the Highest Index Price.
Capacity Constraints, as defined and measured in Sections 4.4.1 and
4.4.2 above, shall be taken into account in determining the allocation
of a decrease in the delivery of split connect Committed Gas to the
pipeline system associated with the Highest Commodity Price. For
example, if only fifty percent (50%) of the split connect Committed
Gas designated in CUSA's Availability Report for delivery on the first
Day of the Month can be nominated for delivery into the pipeline
system associated with the Highest Commodity Price, then fifty percent
(50%) of a decrease in the delivery of split connect Committed Gas
will be allocated to that pipeline system for purposes of calculating
the Deficiency Cost. In the event CUSA decreases the quantity of
Committed Gas delivered to NGC on any Day (x) without prior notice;
(y) with notice given later than one hour before Transporter's
nomination deadline; or (z) notifies NGC that the decrease is for the
purpose of offsetting overdeliveries incurred by CUSA at the
applicable Delivery Point earlier that Month, such decrease shall not
be treated as a mid-month decrease for purposes of this Section 4.8,
but shall be treated as an underdelivery of Committed Gas for purposes
of calculating imbalance charges in accordance with Section 3.3 above.
Notwithstanding the foregoing, no Deficiency Keep Whole Payments under
this Agreement shall be payable in respect to decreases in deliveries
of Committed Gas to Delivery Points subject to the "Stranded Capacity
Valuation Adjustment" set forth in Section 3 of that certain
"Transportation Assignment and Valuation Agreement" effective
September 1, 1996, executed by CUSA and NGC and decreases in the
delivery of Committed Gas at those Delivery Points shall be governed
by the terms of that agreement.
4.9 Commodity Price of Curtailed Sources of Supply. Notwithstanding
anything
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<PAGE>
in this Article IV to the contrary, in the event CUSA exercises its
right under Section 2.3 above to curtail production of Committed Gas
from a Source of Supply as a result of any mechanical, engineering,
legal, title or other field or well condition, and the period of
curtailment set forth in CUSA's Availability Report lasts less than
the entire Month, the Commodity Price of the Committed Gas subject to
CUSA's notice of curtailment that is produced and delivered by CUSA
shall be the Incremental Gas Commodity Price, as determined under
Section 4.7 above. To the extent less than one hundred percent of
Committed Gas produced from a given Source of Supply is subject to
CUSA's notice of curtailment, the Committed Gas not affected by CUSA's
notice of curtailment shall be priced at the First of the Month
Commodity Price as determined under Section 4.1 above, or at the
Incremental Gas Commodity Price if the Incremental Gas Commodity Price
is applicable in accordance with Section 4.7.
4.10 Locked Price Option. For purposes of calculating the First of the
Month Commodity Price of Committed Gas produced from a given Source of
Supply, and in lieu of a Published Index Price designated in Exhibit A
to this Agreement, CUSA may request that a fixed price (the "Locked
Price") be substituted for the Published Index Price for a period as
short as one Month or as long as twelve Months. In the event a Locked
Price is substituted for the Published Index Price, the First of the
Month Commodity Price of the Committed Gas subject to the Locked Price
shall be calculated as set forth in Section 4.1 above except that the
Locked Price shall be substituted for the Published Index Price. The
Index Price Adjustments and Premiums used to calculate the First of
the Month Commodity Price of Committed Gas shall not be affected by
the substitution of a Locked Price. The Parties acknowledge that a
Locked Price will be based on New York Mercantile Exchange (or other
exchange selected by NGC) posting for the natural gas futures contract
applicable to the Month(s) selected by CUSA and prevailing at the time
of CUSA's request for a Locked Price plus a basis differential
adjustment required to equate the posted price with an imputed price
at the applicable Delivery Point.
4.10.1 Request for a Locked Price. CUSA may request a quote of a
Locked Price by telephone on any Business Day, between the
hours of 8:30 a.m. and 2:00 p.m., local Houston, Texas time, up
to and including the seventh Business Day prior to the
beginning of a Month to which the Locked Price shall apply.
CUSA's request shall identify the Source(s) of Supply subject
to the request for a Locked Price, the Month(s) for which CUSA
requests a Locked Price and the quantity of Committed Gas
delivered from the applicable Source of Supply that will be
subject to the Locked Price. CUSA and NGC acknowledge and agree
that all telephone conversations between the Parties relating
to a Locked Price
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<PAGE>
may be recorded by NGC or CUSA, or both, for
purposes of establishing the terms and conditions associated
with a Locked Price. CUSA and NGC also agree that the taped
conversation may be used to establish the terms and conditions
associated with a Locked Price in the event the Parties are
unable to agree on such terms and conditions subsequent to the
conversation in question.
4.10.2 Procedures. As soon as possible after CUSA's telephonic
request, but in any event within twenty-four hours (excluding
weekends and holidays), NGC shall determine if it is able to
offer a Locked Price and, if it is able, the per MMBtu Locked
Price and shall notify CUSA of such price. NGC's notice shall
be addressed to the person(s) identified in Section XIII below,
and shall separately state the basis differential component of
the Locked Price. If CUSA accepts the Locked Price, including
the basis differential, then NGC shall forward to CUSA a "Price
Lock Confirmation", similar to the form attached hereto as
Exhibit E, specifying the terms to which the Parties have
agreed. Such Price Lock Confirmation shall be forwarded to CUSA
as soon as possible following CUSA's acceptance of the Locked
Price. The terms set forth in the Price Lock Confirmation shall
be binding upon the Parties unless CUSA notifies NGC in writing
that CUSA disputes one or more of the terms set forth in said
Price Lock Confirmation within forty-eight hours, exclusive of
weekends and CUSA holidays, of CUSA's receipt of the Price Lock
Confirmation. Any terms which remain undisputed after
expiration of said period shall be binding on the Parties, and
the Parties shall work together in good faith to resolve any
disputes as expeditiously as possible.
4.10.3 Locked Quantities. CUSA may request that all, or any portion
of, the Committed Gas available for delivery from a Source of
Supply during the Month(s) designated by CUSA be subject to a
Locked Price, provided that CUSA's request shall designate a
specific quantity of Committed Gas. NGC shall be entitled to
decline to offer a Locked Price at its sole discretion. In the
event a Locked Price has been established for a portion of the
Committed Gas available for delivery from a Source of Supply
for a given period, CUSA shall be entitled to make one or more
additional requests for a Locked Price on all or any portion of
the remaining Committed Gas available for delivery from that
Source of Supply during the designated period.
4.10.4 Irrevocability. Unless CUSA and NGC agree otherwise, a Locked
Price shall remain effective for the entire period designated
in the Price Lock Confirmation and shall not be increased or
decreased. In the event
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<PAGE>
the Locked Price applies to split connect Committed Gas, the
periodic selection of the Published Index Price and Index Price
Adjustments forming the basis of the First of the Month
Commodity Price in accordance with Section 4.3 shall not apply
in respect to such split connect Committed Gas until it is no
longer subject to the Locked Price.
4.10.5 Availability of Committed Gas. CUSA shall make available and
deliver one hundred percent of Committed Gas subject to a
Locked Price. CUSA shall not be entitled to curtail production
and delivery of Committed Gas subject to a Locked Price
pursuant to Section 2.3 above. Curtailment of Committed Gas
subject to a Locked Price is permitted under this Agreement
only in the event of an event of force majeure declared in
accordance with Article IX below. If CUSA and NGC establish a
Locked Price for less than one hundred percent (100%) of the
Committed Gas available for delivery from a Source of Supply,
or establish more than one Locked Price for Committed Gas
available for delivery from a Source of Supply, the first
Committed Gas delivered on each Day and during the applicable
Month shall be deemed to be subject to the first Locked Price
established, followed by quantities of Committed Gas subject to
additional Locked Prices in the order established, followed by
quantities of Committed Gas not subject to a Locked Price.
4.10.6 Failure to Deliver Committed Gas. If during any Month CUSA
fails to deliver quantities of Committed Gas subject to a
Locked Price, and such failure is not the result of an event of
force majeure or NGC's failure to perform its obligations under
this Agreement, CUSA shall pay to NGC an amount calculated as
follows. The quantity of Committed Gas subject to a Locked
Price made available and delivered by CUSA during that Month
shall be subtracted from the quantity of Committed Gas subject
to a Locked Price and the result shall be multiplied by the
difference between the Locked Price and the settlement price of
the natural gas futures contract on NYMEX (or other applicable
exchange) for the Month in which CUSA fails to deliver
Committed Gas subject to a Locked Price plus or minus the basis
differential set forth in the Price Lock Confirmation. In
addition, in the event NGC has entered into a financial
instrument, including, without limitation, an over-the-counter
basis swap, for purposes of hedging the risk associated with
the basis differential component of the Locked Price, CUSA
shall reimburse NGC one hundred percent (100%) of the actual
losses incurred by NGC under such financial instrument to the
extent such losses result from CUSA's failure to deliver
Committed Gas subject to a Locked Price. NGC shall exercise its
best efforts to minimize such losses (including for example
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<PAGE>
the early termination of financial instruments if NGC
reasonably believes at the time of termination that early
termination may minimize such losses). CUSA's obligation to
deliver Committed Gas subject to a Locked Price is a monthly
obligation and not a daily obligation and therefore for
purposes of this Section 4.10.6 CUSA shall have complied with
its obligation to deliver quantities of Committed Gas subject
to a Locked Price if it delivers such quantities during the
course of the Month. However, for purposes of calculation of
Deficiency Keep Whole Payments in accordance with Section 4.8
above, decreases in the delivery of Committed Gas subject to a
Locked Price on any Day shall be taken into account.
4.10.7 Cessation of Futures Trading. If natural gas futures
contracts cease to be traded on the New York Mercantile
Exchange or on any other mercantile exchange acceptable to NGC
in its sole discretion, then after such cessation NGC shall be
relieved of any and all obligation to establish Locked Prices
hereunder.
4.11 NGC's Failure to Purchase Committed Gas. If NGC fails in any Month
to purchase at least ninety five percent (95%) of the quantity of
Committed Gas designated for delivery on CUSA's Availability Report
(as adjusted during the Month) from each Source of Supply ("Availed
Quantity"), and to the extent that such failure is not the result of
force majeure, an OFO, or CUSA's failure to make Committed Gas
available, NGC shall pay to CUSA, as liquidated damages, an amount
calculated as follows:
(a) If NGC has purchased at least ninety percent (90%), but less than
ninety five percent (95%) of the Availed Quantity for the Source
of Supply, the liquidated damages shall be equal to ten percent
(10%) of the First of the Month Commodity Price applicable to
that Source of Supply, multiplied by the difference between
ninety five percent (95%) of the Availed Quantity and the lesser
quantity of Committed Gas actually purchased by NGC in such Month
from the Source of Supply. For purposes of this Section 4.11, in
instances where Committed Gas from different Sources of Supply
are delivered into a single pool, the calculation of the
percentage of Committed Gas purchased by NGC shall be based on
NGC's purchases from the entire pool and the Availed Quantity
applicable to the entire pool.
(b) If NGC has purchased less than ninety percent (90%) of the
Availed Quantity for the Source of Supply, the liquidated Damages
shall be equal to the sum of (i) ten percent (10%) of the First
of the Month Commodity Price applicable to that Source of Supply,
multiplied by five percent
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<PAGE>
(5%) of the Availed Quantity; and (ii) twenty percent (20%) of
the First of the Month Commodity Price applicable to that Source
of Supply, multiplied by the difference between ninety percent
(90%) of the Availed Quantity and the lesser quantity of
Committed Gas actually purchased by NGC.
V. TITLE AND RESPONSIBILITY
5.1 CUSA Responsibility. Title to Committed Gas delivered by CUSA to NGC
shall pass to NGC at the Delivery Points. The price for Committed Gas
delivered under this Agreement is inclusive of all production,
severance, ad valorem, or similar taxes levied on the production or
transportation of the Committed Gas prior to its delivery to or for
the account of NGC at the Delivery Point(s). All charges, royalties,
lease burdens, expenses, fees, taxes, damages, injuries, and other
costs incurred in or attributable to production and transfer,
transportation (except as otherwise agreed by the Parties), and
handling of Committed Gas delivered in accordance with this Agreement
prior to delivery to NGC at the Delivery Point(s) shall be the
exclusive responsibility of CUSA, as between the Parties. CUSA shall
indemnify, defend, and hold harmless NGC from all such charges,
royalties, expenses, fees, taxes, damages, injuries, and other costs.
In the event NGC is required by law to collect any such taxes, and
CUSA claims an exemption from the taxes, CUSA shall, upon NGC's
request, furnish NGC with a copy of CUSA's exemption certificate.
5.2 NGC Responsibility. All charges, expenses, fees, taxes, damages,
injuries, and other costs incurred in or attributable to the purchase
and transfer, transportation, and handling of the Committed Gas
delivered in accordance with this Agreement from and after delivery of
Committed Gas at the Delivery Point(s) shall be the exclusive
responsibility of NGC, as between the Parties. NGC shall indemnify,
defend, and hold harmless CUSA from all such charges, expenses, fees,
taxes, damages, injuries, and other costs. In the event CUSA is
required by law to collect any such taxes, and NGC claims an exemption
from the taxes, NGC shall, upon CUSA's request, furnish CUSA with a
copy of NGC's exemption certificate.
VI. QUALITY, MEASUREMENT AND TESTS
6.1 Quality Specifications. NGC agrees to purchase Committed Gas
delivered by CUSA to the Delivery Point(s) meeting the quality and
pressure specifications set forth in the filed tariff of the pipeline
immediately downstream of the Delivery Point's ("Transporter"). If
Committed Gas delivered by CUSA to the Delivery Point(s) is rejected
by Transporter for failure to meet its quality specifications, NGC
shall be relieved of the obligation to purchase such Committed Gas.
To the extent that Transporter accepts Committed Gas
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<PAGE>
tendered by CUSA for NGC's account at the Delivery Point(s), CUSA
shall be deemed to have complied with the quality specifications of
this Agreement.
6.2 Volume and Heating Value. NGC and CUSA agree that the volume and
heating value of Committed Gas sold and delivered under this Agreement
will be measured at or near the Delivery Point(s) by Transporter,
using equipment owned or controlled by, and measuring procedures
employed by, Transporter. The measurements made by Transporter shall
be accepted by NGC and CUSA (subject to adjustment if prior
measurements are determined to be inaccurate or incomplete), provided,
however, the measuring equipment and procedures used must conform to
Transporter's filed tariffs and to generally recognized industry
standards.
6.3 Test Data and Charts. CUSA and NGC shall preserve all original test
data, charts and other similar records in a Party's possession for a
period of at least three years.
VII. ACCOUNTING, BILLING AND PAYMENT
7.1 Statements. On or before the twentieth Day of the Month following the
Month of delivery, NGC will furnish CUSA the following information
concerning the Month of delivery: the quantity of Committed Gas and
Incremental Committed Gas delivered under this Agreement at each
Delivery Point; First of the Month Commodity Prices; Incremental Gas
Commodity Prices; Deficiency Keep Whole Payments; Imbalance Charges;
and the total amounts payable by NGC and CUSA. If the actual total
volumes of Committed Gas delivered under this Agreement are not
available by the date of the statement, estimated volumes or prices
shall be used and adjustments shall be made on the following Month's
billing, or as soon as available. CUSA shall provide NGC copies of
pipeline allocation statements CUSA receives from applicable pipelines
as soon as such statements become available. NGC's statement shall
also show the total amount of any Deficiency Keep Whole Payments and
Imbalance Charges payable by CUSA to NGC, which amount shall be
deducted from the amount payable by NGC to CUSA for Committed Gas
delivered during the Month. The statement furnished by NGC to CUSA
shall be exchanged via EDI to the extent possible. NGC will also
furnish a separate statement to each CUSA profit center showing the
information applicable to that profit center alone. If the accuracy
of any statement or the sufficiency of any payment is questioned by
CUSA, CUSA shall provide written notice of its question. If it is
subsequently determined that NGC underpaid CUSA, NGC shall pay
interest on such amounts from the date of CUSA's notice computed at a
rate equal to the Base Rate in effect from time to time published by
the First National Bank of Chicago plus two percent.
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<PAGE>
7.2 Payment. No later than the last Business Day of each calendar Month,
NGC shall pay CUSA, by wire transfer of funds into an account
designated by CUSA, all amounts due under this Agreement for Committed
Gas delivered during the previous Month.
7.3 Failure to Pay. In the event NGC fails to make timely payment of
amounts reflected on NGC's statement, NGC shall pay CUSA interest on
all amounts past due computed from the date the payment was due at the
rate set forth in Section 7.1 above. In addition, if NGC fails to pay
any amount due CUSA under this Agreement within five Business Days
after the due date, except for any amount which is disputed by NGC in
good faith, CUSA shall have the right upon written notice to NGC to
(i) suspend any further deliveries of Committed Gas until all
undisputed amounts due have been paid with interest at the rate
specified in Section 7.1, and (ii) provide notice to NGC that this
Agreement shall terminate if the payment default has not been cured
within five Days after the date such written notice is given. During
the period of any such suspension of deliveries, and until any payment
default is cured as provided above, CUSA shall have the right, but not
the obligation, to sell all or any portion of the Committed Gas to
third parties, and in such event NGC shall pay to CUSA as liquidated
damages an amount equal to the difference between a lower price
received by CUSA in the sale of such Committed Gas to third parties
and the commodity price CUSA would have received from NGC under this
Agreement multiplied by the quantity of Committed Gas sold by CUSA to
third parties.
7.4 Two Year Limit on Adjustments. No retroactive adjustments may be made
for any overcharge or undercharge after a period ending twenty-four
Months from the end of the calendar year in which the gas forming the
basis of the overcharge or undercharge was delivered or not delivered,
as the case may be. Any payment with respect to a retroactive
adjustment shall include an amount equal to interest on all amounts
past due from the date of the initial payment at the rate set forth in
Section 7.1 above, except in instances where neither Party knew or
could have known that the overcharge or undercharge occurred or
instances of reallocations of gas by a transporting pipeline, in which
cases interest shall run from the date of demand for payment.
7.5 Audit. Each Party shall have the right to audit the books and records
of the other Party at any time during reasonable business hours during
the term of this Agreement and for a period of two years after its
termination to the extent necessary to determine compliance by the
other Party with the terms of this Agreement, but such audit rights
shall be limited to auditing such books and records for the then
current and four preceding years. The audited Party shall make its
books and records available to the auditing Party. Notwithstanding
the foregoing, in the event a governmental body asserts a claim, or
conducts an
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audit, against a Party arising from the purchase or sale of Committed
Gas and that Party determines in its reasonable judgment that its
response to such claim requires or would benefit from an audit of
books and records of the other Party, such audit may be conducted
during the term of this Agreement and for a period ending on the tenth
anniversary of the event or payment forming the basis of the third
party claim. In order to accommodate such third party audits, CUSA and
NGC will maintain the appropriate books and records for a period not
less than ten years. Each Party shall also have access to the books
and records of the other Party for purposes of responding to claims,
or requests for audits, asserted by a non-governmental third party and
arising from the purchase or sale of Committed Gas.
7.6 Accounting Information. CUSA and NGC will exercise reasonable efforts
to provide each other with data required by their respective
accounting departments to close out books for each Month as soon as
possible. CUSA and NGC will exercise reasonable efforts to provide
such data no later than the fifth Business Day of the Month following
the Month being closed out.
7.7 Setoff. All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the defaulting Party) failure
to make payment of undisputed amounts on the due date, the other Party
(the non-defaulting Party) may, at its option and in its discretion,
setoff against any amounts owed to the defaulting Party any amounts
owed by the defaulting Party under this Agreement or otherwise. The
obligations of the non-defaulting Party and the defaulting Party under
this Agreement in respect of such amounts shall be deemed satisfied
and discharged to the extent of any such setoff. The non-defaulting
Party will give the defaulting Party notice of any setoff made under
this Section 7.7 as soon as practicable after the setoff is made
provided that failure to give such notice shall not offset the
validity of the setoff.
7.8 Letter of Credit. NGC shall furnish to CUSA prior to the Effective
Date an executed irrevocable standby letter of credit issued by a bank
acceptable to CUSA in an amount calculated in accordance with Exhibit
F to this Agreement. The letter of credit shall be satisfactory in
form and substance to CUSA and the issuing bank or banks. Subsequent
to the Effective Date, NGC shall maintain, or cause to be maintained,
the letter(s) of credit in accordance with the requirements and
procedures set forth in Exhibit F. NGC's obligation to furnish the
executed standby letter of credit prior to the Effective Date shall be
a condition precedent to CUSA's obligations to perform under this
Agreement. NGC's failure to maintain, or cause to be maintained, the
letter(s) of credit in effect at any time during the term of this
Agreement in accordance with the requirements and procedures set forth
in Exhibit F shall be deemed to be a material breach of this
Agreement. In addition to any other rights and remedies
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CUSA may have under this Agreement, in the event NGC fails to
maintain, or cause to be maintained, the letter(s) of credit in effect
at any time during the term of this Agreement and such failure
continues for a period of more than five consecutive Days, CUSA shall
have the right upon written notice to NGC to suspend any further
deliveries of Committed Gas until NGC furnishes the letter(s) of
credit in accordance with the requirements and procedures set forth in
Exhibit F.
VIII. DISCLAIMER AND WARRANTY
8.1 Warranty. CUSA hereby warrants title to all gas sold by CUSA under
this Agreement and the right to sell the same free from adverse
claims of third parties, and except as provided in Section 8.2, CUSA
agrees to hold NGC harmless from such claims.
8.2 Disclaimer. EXCEPT AS PROVIDED IN SECTION 8.1, CUSA MAKES NO
EXPRESS OR IMPLIED WARRANTY TO NGC UNDER THE UNIFORM COMMERCIAL CODE
OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
IX. FORCE MAJEURE
9.1 Suspension of Obligations. If either CUSA or NGC is rendered unable,
by reason of an event of force majeure, to perform, wholly or in part,
any obligation or commitment set forth in this Agreement, except for
the payment of monies owed, then upon that Party's giving notice (the
initial notice may be oral notice followed by written notice) and full
particulars of the event of force majeure, then the obligations of
both parties under this Agreement shall be suspended, except for the
payment of amounts owed under this Agreement, to the extent and for
the period of the event.
9.2 Force Majeure Defined. The term "force majeure" means an event that
(i) was not within the control of the Party claiming its occurrence;
and (ii) could not have been prevented or avoided by such Party
through the exercise of due diligence. Events of force majeure
include, without limitation by enumeration, acts of God; lightning,
hurricanes or storms, hurricane or storm warnings which in CUSA's
judgment require and result in the precautionary shut-down or
evacuation of production facilities; earthquakes, epidemics, fires,
floods, landslides, washouts, freezing of wells or lines of pipe used
to supply Committed Gas under this Agreement and other similar severe
natural calamities; acts of public enemy; wars; blockades;
insurrections; riots; civil
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disturbances and arrests; strikes, lockouts or other industrial
disturbances; explosions, breakage, accidents to wells, equipment,
facilities or lines of pipe used to enable CUSA to deliver or NGC to
receive Committed Gas under this Agreement; events of force majeure
declared by transporting pipelines; imposition by a regulatory agent,
court or other governmental authority having jurisdiction of binding
laws, conditions, limitations, orders, rules or regulations that
prevent or prohibit either Party from performing, provided such
governmental action has been resisted in good faith by all reasonable
legal means; or any other cause of a similar type. The Parties
recognize that NGC is not required by this Agreement to utilize firm
transportation to receive Committed Gas from CUSA at each Delivery
Point, but it is the intent of both Parties that transportation or
sales arrangements downstream of the Delivery Points be made by NGC in
such a manner that the possibility of a curtailment of Committed Gas
due to curtailment of interruptible transportation or recall of
acquired transportation be minimized. In addition to the foregoing
events of force majeure, the loss, interruption or curtailment
(collectively "curtailment") of transportation downstream of a
Delivery Point shall constitute an event of force majeure provided
that NGC exercises reasonable efforts to arrange alternative
transportation, or the resumption of the curtailed transportation
arrangements, as soon as possible following its discovery of the
curtailment of downstream transportation. In that event, NGC will
consult with CUSA and endeavor to agree upon a plan of action to avoid
further curtailment of Committed Gas from that Delivery Point.
X. TERM
10.1 Term. This Agreement shall remain in full force and effect for an
initial term of ten years from the Effective Date, and for additional
five year terms thereafter unless terminated by either Party by giving
written notice of termination no later than sixty Days prior to the
last Day in the then-effective term.
10.2 Early Termination. Notwithstanding Section 10.1, either Party may
terminate this Agreement as follows:
(a) In the event of a material breach of this Agreement by either
Party, the non-breaching Party may terminate this Agreement upon
sixty days' prior written notice to the breaching Party (which
notice shall specify in detail the nature of the breach and the
steps necessary to cure the breach), unless the breaching Party,
within thirty days after receipt of the non-breaching Party's
notice, cures the breach and agrees in writing to indemnify the
non-breaching Party against all direct damages arising from the
breach (such damages to be determined by agreement of the
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Parties, or in the event the Parties are unable to agree, by
arbitration in accordance with Section XII below). For purposes
of this Section, a material breach shall be any failure to
perform under this Agreement which is not excused by force
majeure and which exposes the non-breaching Party to economic
loss in an amount which the breaching Party cannot reasonably be
expected to pay in money damages. Notwithstanding the foregoing,
NGC's unexcused failure to receive and purchase CUSA's available
Committed Gas produced from a specific Source of Supply, which
failure results in the shut-in of a CUSA-operated well(s) for a
period of five or more consecutive days, or which failure results
in the shut-in of one or more CUSA-operated well(s) for a
cumulative period of at least twenty days (which need not be
consecutive) in any calendar year shall be conclusively deemed to
be a material breach of this Agreement. For purposes of the
preceding sentence a shut-in of a well shall be deemed to begin
on the first Business Day following NGC's receipt of CUSA's
notice of a shut-in, which notice shall be effective if delivered
orally, followed by written confirmation, and shall be deemed to
end on the earlier of (i) the resumption of production or (ii)
5:00 p.m. on the Day CUSA receives NGC's notice of the resumption
of purchases if such notice is received prior to 1:00 p.m. or
8:00 a.m. on the next Day if CUSA receives NGC's notice after
1:00 p.m. For purposes of quantifying NGC's right to cure in the
event of a material breach due to a shut-in, CUSA's direct
damages on each Day of the shut-in are deemed to be an amount
calculated by multiplying the (x) the quantity of Committed Gas
shut-in times (y) the First of the Month Commodity Price
applicable to such Committed Gas. In the event NGC pays such
amount to CUSA, the quantity of Committed Gas shut-in and forming
the basis of such amount shall be deemed to be purchased for
purposes of Section 4.11 above, and in instances where NGC pays
amounts to CUSA pursuant to Section 4.11 prior to the payment of
amounts pursuant to this Section 10.2, the payment pursuant to
Section 4.11 shall be reduced to the extent required by this
Section 10.2. If one Party alleges a material breach under this
Section and the other Party disputes that allegation, the matter
shall be submitted to arbitration in accordance with Section XII
below and the non-breaching Party's termination notice shall be
suspended pending the decision of the arbitrators. If the
arbitrators conclude that a material breach has occurred, the
termination notice shall become effective thirty days after
issuance of the arbitrators' written decision.
(b) A Party may terminate this Agreement in the event the other Party
(the Affected Party) is: (i) dissolved (other than pursuant to a
consolidation,
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acquisition, amalgamation, merger, or other reorganization not
arising from bankruptcy or insolvency proceedings); or (ii)
institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under
any bankruptcy or insolvency law or similar law affecting
creditors' rights, or a petition is presented for its winding up
a liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding or
petition results in a judgment of insolvency or bankruptcy or the
entry of an order for its winding up or liquidation.
XI. RENEGOTIATION, PRICE REDETERMINATION AND ARBITRATION
11.1 Renegotiation and Price Redetermination. During the term of this
Agreement, CUSA and NGC will have the right to request that the terms
and conditions of this Agreement be renegotiated and that the various
pricing mechanisms be redetermined. This Article XI establishes the
procedures applicable to such renegotiations and redeterminations.
11.2 Limits On Arbitration. Nothing in this Article XI shall be construed
to limit a Party's ability to present issues for discussion under the
Alliance Agreement. However, this Article XI shall limit CUSA and
NGC's rights to institute the renegotiation or price redetermination
process and invoke arbitration under this Agreement or pursuant to
the Alliance Agreement and the Parties agree that no other provision
of this Agreement or of the Alliance Agreement shall be construed to
supersede or modify the limitations on arbitration contained in this
Article XI.
11.3 Price Redetermination. It is the intent of CUSA and NGC that the
First of the Month Commodity Price and the Incremental Gas Commodity
Price of Committed Gas delivered at a given Delivery Point under this
Agreement reflect the prevailing fair market value of spot gas at
that Delivery Point. CUSA and NGC agree that the Published Index
Prices designated in Exhibit A and corresponding Gas Daily Index
Prices represent an accurate measure of the fair market value of spot
gas because those index prices reflect surveys of prices paid in
actual transactions between willing buyers and sellers under no
compulsion to buy or sell. In the event CUSA or NGC believes in good
faith that the Published Index Prices or the corresponding Gas Daily
Index Prices, or both, no longer represent an accurate measure of the
fair market value of spot gas, that Party may seek a price
redetermination in accordance with the following procedure.
11.3.1 Scope of Price Redetermination. Price redeterminations
pursuant to this Section 11.3 are limited to replacing one or
more of the Published
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Index Prices or Gas Daily Index Prices with a different
measure of the fair market value of spot gas that is not based
on prices reported in a commercial publication. This Section
11.3 does not apply in instances where: (i) CUSA desires to
select a different index price for purposes of calculating the
First of the Month Commodity Price for split connect Committed
Gas during the six month period designated in accordance with
Section 4.3 above; (ii) CUSA or NGC desires to replace a
Published Index Price or a Gas Daily Index Price with a
different Published Index Price or Gas Daily Index Price; or
(iii) where CUSA or NGC desires to modify or amend the Index
Price Adjustments necessary to arrive at a First of the Month
Commodity Price or Incremental Gas Commodity Price.
11.3.2 Price Redetermination Procedure. In the event CUSA or NGC
seeks a price redetermination pursuant to this Section 11.3,
such Party (the "initiating Party") may notify the other Party
(the "non-initiating Party") in writing, specifying the
Published Index Price(s) or Gas Daily Index Price(s) at issue
and describing (i) the proposed replacement measure of the
fair market value of spot gas at the location; and (ii) the
proposed effective date of the replacement measure of fair
market value. If the non-initiating Party agrees with the
replacement measure of the fair market value of spot gas and
its effective date, Exhibit A shall be amended to reflect the
replacement and its effective date. If the non-initiating
Party does not agree with the proposed replacement measure of
the fair market value of spot gas or its effective date, then
within thirty days after delivery of the initiating Party's
initial notice each Party shall designate a representative
with authority to negotiate and agree upon a replacement
measure of the fair market value of spot gas. The
representatives shall then meet and attempt in good faith to
reach agreement. If the representatives have not reached
agreement within sixty days after delivery of the initiating
Party's initial notice, then the initiating Party may elect to
have the issue resolved by binding arbitration in accordance
with Section 11.3.3 below. If a replacement measure of the
fair market value of spot gas is established, either by
agreement of the Parties or through arbitration, such
replacement measure of the fair market value of spot gas shall
be reflected in an appropriate amendment to Exhibit "A". A
Party receiving a price redetermination request under this
Section 11.3 may respond by requesting a replacement measure
of the fair market value of spot gas at any other applicable
location(s) in accordance with the procedure set forth in this
Section 11.3.2. To the extent feasible, both the initial
request and any responsive request shall be addressed in the
same negotiating sessions and/or arbitration so as to minimize
the
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administrative cost of resolving all pricing issues.
Notwithstanding anything in this Section to the contrary, in
the event a replacement measure of the fair market value of
spot gas is determined by arbitration, the Party invoking the
arbitration (or Parties if both Parties invoked the
arbitration) shall not be entitled to invoke arbitration
pursuant to this Section 11.3.2 during a period of twelve full
Months following the date of the arbitration award.
11.3.3 Arbitration of Price Redetermination. If any price
redetermination is presented for arbitration under this
Section 11.3, the Parties shall follow the arbitration
procedure outlined in Sections 11.7 through 11.12 below,
except as follows: In any arbitration under this Section 11.3,
each Party shall submit to the arbitration panel such Party's
proposed measure of the fair market value of spot gas at the
applicable location. The arbitrators shall select from the two
proposals the one which they feel most closely reflects the
fair market value of spot gas at the applicable location as
evidenced by prices paid by willing buyers and sellers under
no compulsion to buy or sell and, in the case of the
replacement of a Published Index Price, pursuant to contracts
providing for a one month obligation to buy and sell spot gas.
Any Premium that may be payable under this Agreement shall not
be taken into consideration by the arbitrators in their
deliberations. The arbitrators must select the proposal of one
of the Parties and may not average the two proposals or
otherwise craft an alternative proposal. The arbitrators, in
the absence of unusual extenuating circumstances, shall be
required to render their decision in writing within ten
Business days after the conclusion of the arbitration
proceeding. The cost of any arbitration under this Section
11.3 shall be borne as follows:
(i) Each Party shall bear the costs of its own attorneys,
witnesses and representatives; and
(ii) The remaining costs of the arbitration, including the
fees of all arbitrators, the costs of securing a location
for the arbitration, and any similar costs, shall be
borne equally by the Parties.
11.3.4 Effective Date. The effective date of any replacement measure
of the fair market value of spot gas selected by arbitration
shall be the first day of the month following the month in
which the arbitrators' decision is rendered.
11.4 Substitution of Published Index Prices. At any time during the term
of this Agreement, in the event (i) CUSA or NGC believes in good faith
that a
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Published Index Price or Gas Daily Index Price does not reflect
the fair market value of spot gas at the applicable location; (ii)
also believes in good faith that a different index price in the same
commercial publication or in a different commercial publication does
reflect such fair market value; and (iii) the Parties have been unable
to reach agreement on an amendment to Exhibit A as contemplated in
Section 4.1 above, the Party requesting the substitution of a new
index price shall be entitled to present the issue to arbitration in
accordance with the procedure established in Section 11.3 above. In
the event a new Published Index Price at a specific location is
determined by arbitration, neither Party shall be entitled to invoke
arbitration for the purpose of selecting a new Published Index Price
at that location during a period of twelve full Months following the
date of the arbitration award. The same limitation shall apply if a
new Gas Daily Index Price at a given location is determined by
arbitration. This Section 11.4 does not apply to instances where CUSA
desires to change the Published Index Price selected in respect to
split connect Committed Gas pursuant to Section 4.3 above. In such
instances, if the Parties are unable to agree on a change, the
selected Published Index Price shall remain in place for the full six
Month period.
11.5 Unavailability of Published Index Prices. If at any time during the
term of this Agreement a Published Index Price or Gas Daily Price is
no longer published and in the event CUSA and NGC are unable to agree
on a replacement index price, either Party may submit the issue to
arbitration in accordance with the procedure established in Section
11.3 above, with the following modifications. There shall be no limit
on the number of times a Party may invoke arbitration. The effective
date of the replacement Published Index Price or Gas Daily Index Price
shall be the Day after the previous index price became unavailable and
the arbitrators shall make their award retroactive to such date.
During the pendency of the Parties' attempt to agree on a replacement
Published Index Price or Gas Daily Price and the subsequent
arbitration proceeding, the commodity price of the Committed Gas
affected by the unavailability of the index price shall be based on
the last available Published Index Price or Gas Daily Price. The
amounts paid by NGC to CUSA during such period shall be adjusted to
reflect the retroactive implementation of the replacement index price.
11.6 Dispute Resolution - Other Price Issues. In the event the Parties
are unable to agree on any factor required to calculate the commodity
price of Committed Gas that will be produced from a new source of
supply, or are unable to agree on the Index Price Adjustments
applicable to Committed Gas from an existing Source of Supply, the
issue shall be eligible for arbitration in accordance with Sections
11.9 through 11.12 below.
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11.7 Arbitration After the Fifth Anniversary. In addition to the
arbitration of price redetermination issues under Sections 11.4
through 11.6 above, following the fifth anniversary of this
Agreement, CUSA and NGC shall have the right to request a
renegotiation of any term or condition of this Agreement and to
invoke arbitration in accordance with Sections 11.9 through 11.12
below if the Parties are unable to reach agreement in respect to such
a request. The limitation contained in this Section 11.7 shall not
apply to disputes between CUSA and NGC relating to the construction
or interpretation of this Agreement or to the performance of the
Parties under this Agreement, which disputes may be presented to
arbitration at any time during the term of this Agreement in
accordance with Sections 11.9 through 11.12 below.
11.8 Renegotiation of the Premium. Neither CUSA nor NGC shall be entitled
to request a renegotiation of the Premium paid in accordance with
Article IV above and to invoke arbitration in the event the Parties
are unable to agree prior to the fifth anniversary of this Agreement.
11.9 All Disputes Arbitration. All unresolved disputes between the
Parties (i) arising under this Agreement and relating to the
construction and interpretation of this Agreement or the Parties'
performance under this Agreement; or (ii) arising from renegotiation
or price redetermination under this Article XI shall be submitted to
binding arbitration in accordance with this Article XI. Neither Party
shall have the right to litigate such disputes in state or federal
court. Arbitration shall be governed by the Federal Arbitration Act,
9 U.S.C. ' 1, et seq., and will not be governed by the arbitration
acts, statutes or rules of any other jurisdiction.
11.10 Procedure. In the event the Parties are unable to resolve a dispute
arising under this Agreement after exercising good faith efforts to
resolve the dispute, either Party may request arbitration by
submitting a written notice to the other. The notice shall name the
noticing Party's arbitrator and shall contain a statement of the
issue(s) presented for arbitration. Within fifteen (15) Days of
receipt of a notice of arbitration, the other Party shall name its
arbitrator by written notice and may designate any additional
issue(s) for arbitration. The two named arbitrators shall select the
third arbitrator within fifteen (15) Days after the date on which the
second arbitrator was named. Should the two arbitrators fail to agree
on the selection of the third arbitrator, either Party shall be
entitled to request the Senior Judge of the United States District
Court of the Southern District of Texas to select the third
arbitrator. All arbitrators shall be qualified by education or
experience within the natural gas industry to decide the issues
presented for arbitration. No arbitrator shall be: a current or
former director, officer or employee of either Party, or its
affiliates; an attorney (or member of a law firm) who has rendered
legal services to either Party, or its
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affiliates, within the preceding three years; or an owner of any of
the common stock of either Party, its affiliates or direct
competitors.
11.11 Arbitration Hearings. The three arbitrators shall commence the
arbitration hearing within twenty-five (25) Days following the
appointment of the third arbitrator. The proceeding shall be held at
a mutually acceptable site. If the Parties are unable to agree on a
site, the arbitrators shall select a site. The arbitrators shall have
the authority to establish rules and procedures governing the
arbitration hearing. Each Party shall have the opportunity to present
its evidence at the hearing. The arbitrators may call for the
submission of pre-hearing statements of position and legal authority,
but no post-hearing briefs shall be submitted. After the presentation
of the evidence has concluded, each Party shall submit to the
arbitration panel a final offer of its proposed resolution of the
dispute. In the event the dispute presented to the arbitration panel
involves (i) a price redetermination pursuant to Sections 11.3
through 11.6 above; (ii) a renegotiation of the Premium pursuant to
Section 11.8 above; or (iii) a claim by one or both Parties for an
award of damages, expenses or costs of any nature, a majority of the
arbitrators shall approve the final offer of one Party without
modification, and reject the offer of the other Party. In the event
the dispute presented to the arbitration panel involves issues other
than those defined in the preceding sentence, the arbitration panel
shall be authorized to render an award that departs from the offers
of both Parties. The arbitration panel shall not have the authority
to award punitive, exemplary, consequential or incidental damages.
The arbitrators' decision must be rendered within thirty (30) Days
following the conclusion of the hearing or submission of evidence.
All evidence submitted in an arbitration proceeding, transcripts of
such proceedings, and all documents submitted by the Parties in an
arbitration proceeding shall be deemed confidential information
subject to Section 15.4 below.
11.12 Arbitration Decision. The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the
Parties as to the issue submitted. Each Party shall bear the expense
and cost of its arbitrator and one-half of the expense and cost of
the third arbitrator.
XII. GOVERNMENTAL REGULATIONS AND AUTHORIZATIONS
12.1 Application of Law and Regulation. This Agreement shall be subject
to all valid and applicable laws of the United States and to the
applicable valid rules, regulations or orders of any regulatory agency
or governmental authority having jurisdiction, and the Parties shall
be entitled to regard all applicable laws, rules and regulations
(federal, state or local) as valid and may act in accordance with them
until such time as they may be declared invalid by final judgment of a
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court of competent jurisdiction and such judgment is not subject to
appeal.
12.2 Authorization and Regulatory Filings. Upon execution of this
Agreement, each Party agrees to seek such government certificates,
permits, licenses and authorizations which, in its sole discretion, it
deems necessary to perform its obligations under this Agreement.
During the term of this Agreement, each Party shall make all filings
required by any regulatory bodies having jurisdiction over the
activities covered by this Agreement and upon request of the other
Party shall promptly provide copies of such to the other Party.
Neither Party will knowingly enter into agreements nor undertake any
activities or filings that would interfere with or frustrate the other
Party's efforts to obtain the necessary regulatory approvals to
fulfill its obligations under this Agreement.
XIII. NOTICES
13.1 Procedure. Except as provided in this Agreement, all notices,
requests, demands, statements, and other communications under this
Agreement shall be in writing and shall be deemed given on the date
thereof if delivered personally, or by telecopy. If mailed by
certified or registered mail, postage prepaid, return receipt
requested, such notice shall be deemed given three Days after the
date of mailing. All notices shall be delivered or transmitted to
the Parties, their successors in interest or their assignees at the
following addresses, or at such other addresses as the Parties may
designate by written notice in the manner aforesaid:
CUSA:
Notices and Correspondence:
Chevron U.S.A. Inc.
P.O. Box 2100
Houston, TX 77252
Attn: Midstream Business Unit Alliance Manager (CPDN)
Telephone: (713) 754-2437 or 754-4518
Fax: (713) 754-2536
Invoices and Statements:
Chevron U.S.A. Inc.
P.O. Box J
Concord, CA 94524
Attn: Section 980
Telephone: (510) 827-7382
Fax: (510) 680-3472
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NGC:
Notices and Correspondence:
Natural Gas Clearinghouse
13430 Northwest Freeway
Suite 1200
Houston, TX 77040
Attention: Contract Administration (Molly Cook)
Telephone: (713) 507-3713
Fax: (713) 507-6834
Invoices and Statements:
Natural Gas Clearinghouse
13430 Northwest Freeway
Suite 1200
Houston, TX 77040
Attn: Gas Accounting
Telephone: (713) 507-3701
Fax: (713) 507-3787
XIV. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY CUSA
14.1 Non-Assignability. Except as provided in Section 14.2 below, neither
this Agreement nor any obligation of a Party under this Agreement are
assignable without the express written consent of the other, which
consent may be withheld in its sole discretion for any reason, except
to wholly owned subsidiaries and affiliates, in which case the
assigning entity shall not be relieved of responsibility for any of
its obligations under this Agreement.
14.2 Transfer of Interest. CUSA shall have the right to convey a Source
of Supply to a non-affiliated entity. In the event of such a
conveyance, and at CUSA's option, the affected Source of Supply shall
either remain subject to this Agreement and gas produced from that
Source of Supply shall be Committed Gas for all purposes under this
Agreement or shall remain Committed Gas pursuant to a separate
agreement executed by NGC and CUSA's successor in interest and
containing terms and conditions substantially identical to this
Agreement. In the event CUSA elects to convey the Source of Supply
subject to this Agreement, the documents evidencing the conveyance of
the Source of Supply shall specifically identify this Agreement and
obligate CUSA's successor in interest to ratify and adopt this
Agreement insofar as it applies to the Source of Supply acquired by
CUSA's successor in interest. In the event CUSA elects to require its
successor in interest to execute an agreement substantially identical
to this Agreement, such agreement shall be executed contemporaneously
with the documents evidencing the conveyance of the Source of Supply.
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Notwithstanding the foregoing, CUSA shall have the right to convey a
Source of Supply to a non-affiliated entity free and clear of this
Agreement if the Source of Supply, when combined with any other
Source of Supply contemporaneously conveyed to the non-affiliated
entity, produced an average of 200 MMBtu per Day, or less, over the
six month period ending ninety Days prior to the Effective Date of
the conveyance.
XV. MISCELLANEOUS
15.1 Waiver. No waiver by either CUSA or NGC of any default of the other
under this Agreement shall operate as a waiver of any future default,
whether of like or different character or nature.
15.2 Entire Agreement. This Agreement constitutes the entire agreement of
the Parties, and is intended to be a final, complete, integrated and
exclusive expression of their agreement and its terms. Except as
otherwise provided in this Agreement, this Agreement shall not be
modified or amended except by a written instrument executed by the
Parties.
15.3 Choice of Law. THIS AGREEMENT SHALL BE SUBJECT TO, AND INTERPRETED
IN ACCORDANCE WITH, THE INTERNAL LAWS, BUT NOT THE LAWS REGARDING
CHOICE OF LAW, OF THE STATE OF TEXAS.
15.4 Confidentiality. Each Party agrees that the terms of this Agreement
and any information provided under this Agreement shall be kept
confidential by it and shall not be disclosed to any third Party
without first obtaining the written consent of the other, which
consent shall not be unreasonably withheld. In addition, any
information designated as confidential by one Party and provided to
the other during the term of any agreement shall be kept confidential
by the receiving Party and shall not be disclosed to any third party
for a period of three years from the date of receipt without first
obtaining the written consent of the other, which consent shall not
be unreasonably withheld. This Section shall not prevent a Party from
making any disclosure required by law, regulation or SEC disclosure
rules (in such case, the disclosing Party shall notify the non-
disclosing Party as soon as practicable of the pendency, nature and
content of the planned disclosure) or from disclosing any information
which is already in the public domain.
15.5 Limitation of Damages. In no event shall either Party be liable for
punitive, exemplary, consequential or incidental damages arising from
any breach or default under this Agreement, indemnification under
this Agreement or from any act or omission under or in connection
with this Agreement.
-40-
<PAGE>
15.6 Severability. If any provision of this Agreement is determined to be
invalid, illegal or otherwise unenforceable for any reason by a court
of competent jurisdiction, the remaining terms and conditions of this
Agreement shall remain in full force and effect to the fullest extent
permitted by law. In such an event, the Parties agree to make a good
faith effort to replace the affected provisions.
IN WITNESS WHEREOF, this Agreement is executed on the _____ day of August,
1996.
CHEVRON U.S.A. INC. NATURAL GAS CLEARINGHOUSE
__________________________ ____________________________________
By: By:
Title: Title:
-41-
<PAGE>
EXHIBIT A
SOURCES OF SUPPLY, DELIVERY POINTS, PUBLISHED INDEX
PRICES, AND INDEX PRICE ADJUSTMENTS
<PAGE>
EXHIBIT B
POST-EFFECTIVE DATE COMMITMENTS
<PAGE>
EXHIBIT C
UPSTREAM GATHERING AND TRANSPORTATION AGREEMENTS
<PAGE>
EXHIBIT D
FIRM MARKET SPLIT CONNECT COMMITTED GAS
<PAGE>
EXHIBIT "E"
[Date]
Price Lock Confirmation
Natural Gas Purchase and Sale Agreement
NGC Contract No. ______________
Chevron U.S.A. Inc.
[Address]
Gentlemen:
In accordance with that certain Natural Gas Purchase and Sale Agreement dated
effective ______________ by and between Chevron U.S.A. Inc., as Seller, and
Natural Gas Clearinghouse, as Buyer, which agreement is incorporated herein and
made a part hereof, Buyer hereby confirms establishment of the following "Locked
Price" and "Locked Quantities" as previously discussed and agreed orally:
Date of Parties' Oral Agreement:_____________________________________
Month of Delivery:___________________________________________________
Source of Supply:____________________________________________________
Delivery Point:______________________________________________________
Locked Quantities (MMBtus/day):______________________________________
Locked Price ($/MMBtu):______________________________________________
Basis Differential Adjustment ($/MMBtu):_____________________________
This Price Lock Confirmation is binding upon the Parties unless Seller notifies
Buyer of a dispute with all or a portion hereof 48 hours (exclusive of weekends
and Chevron holidays) after Seller's receipt hereof.
Very truly yours,
NATURAL GAS CLEARINGHOUSE
By:_________________________________________
Trading Representative
<PAGE>
Date:______________________________________
<PAGE>
EXHIBIT F Letter of Credit
<PAGE>
EXHIBIT "F"
LETTER OF CREDIT
1. CALCULATION OF FACE AMOUNT
After CUSA submits its Availability Report applicable to the first Month of
deliveries of Committed Gas under this Agreement and prior to the Effective
Date, NGC shall furnish to CUSA one or more irrevocable standby letters of
credit (referred to in this Exhibit F as "LC" regardless of whether one or more
LCs are posted), and shall subsequently maintain the LC in effect, in a form
similar to the form attached hereto as Exhibit "F-1" and acceptable to CUSA and
the issuing bank or banks, from a bank or banks acceptable to CUSA and in an
aggregate amount calculated as follows:
! The face amount of the LC furnished prior to the Effective Date shall
equal ([65 x eV x eRP] minus $80,000,000) x 25%. Thereafter, and until the
twentieth Day of the second Month of deliveries of Committed Gas under the
Agreement, the face amount of the LC shall be increased to the following
face amounts according to the following schedule:
(i) no later than the fifteenth Day after the Effective Date - ([65 x
eV x eRP] minus $80,000,000) x 50%;
(ii) no later than the thirtieth Day after the Effective Date - ([65 x
eV x eRP] minus $80,000,000) x 75%; and
(iii) no later than the forty-fifth Day after the Effective Date -
([65 x eV x eRP] minus $80,000,000) x 100%.
The LC posted by NGC no later than the forty-fifth Day following the
Effective Date in the face amount of ([65 x eV x eRP] minus $80,000,000) x
100% is hereafter referred to as the "Initial LC".
! Following the twentieth Day of the second Month of deliveries of
Committed Gas and in subsequent Months the face amount of the LC to be
posted by NGC shall equal the aggregate face amount of the Initial LC plus
or minus A.
Where:
V shall equal the average daily volume of Committed Gas designated for
delivery by CUSA to NGC in CUSA's initial Availability Report submitted in
accordance with Section 2.2 of the Agreement and applicable to the Month in
which the aggregate face amount of the LC is calculated.
<PAGE>
eV shall equal the average daily volume of Committed Gas designated for
delivery by CUSA to NGC in CUSA's initial Availability Report applicable to
the first Month of deliveries of Committed Gas under this Agreement.
RP shall mean the Reference Price
eRP shall mean the estimated Reference Price
Reference Price shall equal the volume weighted average First of the Month
Commodity Price of Committed Gas to be delivered by CUSA to NGC at the
Delivery Points designated in the applicable initial Availability Report
during the Month in which the aggregate face amount of the LC is
calculated. For purposes of calculating the volume weighted average First
of the Month Commodity Price, the average daily volume of Committed Gas
designated for delivery at each Delivery Point by CUSA to NGC in CUSA's
initial Availability Report applicable to the Month in which the aggregate
face amount of the LC is calculated will be used for weighing purposes.
estimated Reference Price shall equal the volume weighted average imputed
First of the Month Commodity Price of Committed Gas that will be delivered
by CUSA to NGC during the first Month of deliveries of Committed Gas under
this Agreement at the Delivery Points designated in the applicable initial
Availability Report. For purposes of calculating the volume weighted
average imputed First of the Month Commodity Price: (i) the average daily
volume of Committed Gas designated for delivery at each Delivery Point by
CUSA to NGC in CUSA's initial Availability Report applicable to the first
Month of deliveries of Committed Gas under this Agreement will be used for
weighing purposes; and (ii) the Published Index Prices applicable to the
Month preceding the first Month of deliveries under this Agreement and the
applicable Index Price Adjustments and Premiums, if any, set forth in
Exhibit A to the Agreement will be used to arrive at the imputed First of
the Month Commodity Price
X shall equal the total net dollar amount NGC is obligated to pay CUSA in
accordance with the terms of the Agreement as reflected in the applicable
statement furnished by NGC to CUSA in accordance with Section 7.1 of the
Agreement.
A shall equal (i) the result of subtracting the aggregate face amount of
the Initial LC from [X plus (35 x V x RP) minus $80,000,000] if [X plus (35
x V x RP) minus $80,000,000] is greater than the aggregate face amount of
the Initial LC or (ii) the result of subtracting [X plus (35 x V x RP)
minus $80,000,000] from the aggregate face amount of the Initial LC if the
aggregate face amount of the Initial LC is greater than [X plus (35 x V x
RP) minus $80,000,000]. Notwithstanding the foregoing, A shall equal zero
if the result of the calculation set forth in (i) or (ii), as the case may
be, is not greater than $30,000,000. If the difference resulting from the
calculation set forth in (i) is greater than $30,000,000, the difference
shall be added to the aggregate
<PAGE>
face amount of the Initial LC to arrive at the aggregate face amount of the
LC to be posted in accordance with the procedures set forth below. If the
difference resulting from the calculation set forth in (ii) is greater than
$30,000,000, the difference shall be subtracted from the aggregate face
amount of the Initial LC to arrive at the adjusted aggregate face amount of
the LC to be posted in accordance with the procedures set forth below.
2. PROCEDURES
The aggregate face amount of the Initial LC shall not be subject to
adjustment until the twentieth Day of the second Month of deliveries of
Committed Gas under this Agreement. Beginning on the twentieth Day of the
second Month and on the twentieth Day of each succeeding Month during the
term of this Agreement, the aggregate face amount of the LC shall be
calculated in accordance with the formula set forth above. If an
adjustment in the aggregate face amount of the LC is required, within five
Business Days following the twentieth Day of the Month NGC shall at its
sole option either: (a) authorize the issuing bank or banks to amend the
aggregate face amount of the LC to reflect the proper adjustment; (b)
deliver a replacement standby LC in an aggregate face amount determined in
accordance with the formula set forth above; or (c) deliver an additional
LC in a face amount that, when added to the aggregate face amount of any
LC(s) in effect at that time, equals the face amount determined in
accordance with the formula set forth above. Upon receipt of a replacement
LC complying with the requirements of this Exhibit F, CUSA shall return any
superseded LC(s) to the issuing bank(s) for cancellation.
<PAGE>
EXHIBIT 10.1
"Pages where confidential treatment has been requested are stamped `Confidential
Treatment Requested. The redacted material has been separately filed with the
Commission,' the appropriate section has been marked at the appropriate place
and in the margin with a star (*)."
Master Natural Gas Processing Agreement
This Master Natural Gas Processing Agreement ("Master Processing
Agreement") is entered into as of the 1st day of September 1996, between Chevron
U.S.A. Production Company, a division of Chevron U.S.A. Inc., a Pennsylvania
corporation ("Chevron") and Warren Petroleum Company, Limited Partnership, a
Delaware limited partnership ("WPC").
Whereas, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and CUSA's Natural Gas Business Unit to a newly formed corporation into which
NGC would then be merged; and
Whereas, immediately subsequent to the Merger, the gas gathering,
processing, and other midstream assets of Warren will be transferred to WPC; and
Whereas, WPC will own and operate natural gas processing plants and
will be a major marketer of natural gas liquids; and
Whereas, a significant proportion of Chevron's natural gas production
has historically been processed in, and is currently connected to, Warren
Plants; and
Whereas, Chevron and WPC desire to establish a long term, cooperative,
commercial relationship whereby substantially all of Chevron's Processable U.S.
natural gas production will be processed by WPC in those geographic areas where
WPC currently has processing facilities and in other areas where it is
economically practical for WPC to acquire or install facilities to process
Chevron's gas, along with other, third party gas that may be available for
processing in any such facilities;
Now, therefore, the parties agree as follows:
A. DEFINITIONS
1. "Affiliate" when referring to any party means a corporation or
other entity which controls such party, is controlled by such party, or is under
common control with such party. An entity shall be deemed to be "controlled" by
another for purposes of this provision if the controlling entity owns at least
fifty-one percent of the voting stock of the controlled entity.
2. "Ancillary Services" means gathering, field compression,
dehydration, treating, and plant compression, as needed to receive, process, and
redeliver natural gas and natural gas liquid
<PAGE>
products which, after processing, will meet the quality specifications of the
pipeline or other transporter receiving the gas or products at the tailgate of
the processing plant.
3. "Chevron Interest" means any mineral fee or oil and gas leasehold
interest owned or controlled by Chevron, including any rights Chevron may have
to process gas owned by third parties, but only to the extent and for the period
authorized in the instrument creating such rights.
4. "Chevron Plant" means a processing plant owned (entirely or in
part) by Chevron as of the Effective Date and not included in the Merger,
including any such plants in which Chevron is a joint owner with others.
5. "Committed Area" means the geographic area defined as such in each
individual Processing Agreement between Chevron and WPC covering processing at a
particular WPC Field Plant.
6. "Effective Date" means September 1, 1996.
7. "Merger" means the combination of certain businesses and assets of
Chevron with similar businesses and assets of NGC Corporation, as set forth in
the Combination Agreement and Plan of Merger dated as of May 22, 1996.
8. "Pre-Merger Warren Plant" means a natural gas processing plant
owned (in whole or in part) by Warren Petroleum Company, a division of Chevron,
prior to the Merger.
9. "Processable Gas" means natural gas which (a) must be processed to
meet pipeline quality specifications, or (b) contains liquid or liquefiable
hydrocarbons in sufficient concentrations to make processing economically
practical to both parties. Notwithstanding the foregoing, Chevron shall not
seek to exclude any gas from the category of "Processable Gas" on the grounds
that processing such gas is not economically practical in order to have such gas
processed in a Third Party Plant.
10. "Processing" means removal of liquid and liquefiable hydrocarbons
from a stream of natural gas flowing through a natural gas processing plant.
11. "Third Party Plant" means a natural gas processing plant which is
not a Chevron Plant and in which neither WPC nor any Affiliate of WPC owns an
interest.
12. "WPC Field Plant" means a natural gas processing plant currently,
or in the future, owned (entirely or in part) by WPC or any of its Affiliates,
which is located in or near a field where natural gas is produced, and which is
connected to a gathering system which delivers the gas to the processing plant.
Notwithstanding the fact that it might otherwise fall within the foregoing
definition, a processing plant which was constructed primarily to receive and
process gas produced from wells situated in the Gulf of Mexico shall not be
deemed to be a WPC Field Plant.
2
<PAGE>
13. "WPC Straddle Plant" means a Straddle Plant currently, or in the
future, owned entirely by WPC or any of its Affiliates.
14. "Joint Venture Straddle Plant" means a Straddle Plant which is
either (a) owned by WPC and others, or (b) owned by Chevron and operated and/or
managed by WPC or any of its Affiliates, and which is, in either case, subject
to the terms of a plant construction and operating agreement or similar
document.
15. "Straddle Plant" means a natural gas processing plant which is
located on an interstate or intrastate natural gas pipeline, and which processes
all or a portion of the gas flowing through the pipeline on which the processing
plant is located. Notwithstanding the fact that it might not otherwise fall
precisely within the foregoing definition, a processing plant which was
constructed primarily to receive and process gas produced from wells situated in
the Gulf of Mexico shall be deemed to be a Straddle Plant.
B. EXECUTION OF CONTRACTS AND GENERAL INTENT
1. Chevron's Obligations.
---------------------
(a) Existing Field Plants. Effective on the Effective Date, Chevron
---------------------
shall cause its individual business units to enter into Natural Gas Processing
Agreements with WPC, under which Chevron Interests connected to Pre-Merger
Warren Field Plants as of the Effective Date shall be committed to WPC for
processing for the life of the Chevron Interests. Each of the Pre-Merger Warren
Field Plants and the commercial terms applicable to the Chevron Interests
committed to each plant for processing are listed on Exhibit "A" hereto.
Notwithstanding the foregoing, if any part of a Chevron Interest is, as of the
Effective Date, subject to a prior commitment which prevents the gas
attributable to such Chevron Interest from being processed in a WPC Field Plant,
then such part of the Chevron Interest shall not be deemed to be included in the
Committed Area until such prior commitment expires or is terminated.
(b) Existing Straddle Plants. In the case of gas produced from
------------------------
Chevron Interests in the Gulf of Mexico area and not processed in a Chevron
Plant, Chevron shall cause its individual business units to enter into one or
more Natural Gas Processing Agreements with WPC, under which gas from those
Chevron Interests shall be committed to WPC for processing. The commercial
terms applicable to each Straddle Plant in which gas from the Chevron Interests
in the Gulf of Mexico area will be processed are listed on Exhibit "A" hereto.
Such Natural Gas Processing Agreement(s) shall remain in effect for a term co-
extensive with the term of that certain Natural Gas Purchase and Sale Agreement
dated as of September 1, 1996, between Chevron and Natural Gas Clearinghouse
(the "Master Gas Sale Agreement"); provided, however, that to the extent that
WPC's ownership in a Joint Venture Straddle Plant is dependent upon the
continued commitment to that plant of the gas and/or processing rights
associated with specific Chevron Interests, such Chevron Interests shall remain
committed to the applicable Joint Venture Straddle Plant, and the Natural Gas
Processing Agreement applicable to such Chevron Interests shall remain in effect
for the life of those Chevron Interests, whether processed in such Joint Venture
3
<PAGE>
Straddle Plant or a Third Party Straddle Plant. All Chevron Interests not
directly required to maintain WPC's Straddle Plant ownership shall be released
from the Natural Gas Processing Agreement between Chevron and WPC if requested
in writing by Chevron after termination of this Master Processing Agreement.
Notwithstanding the foregoing, nothing herein shall be construed as a release of
any Chevron Interest from any dedication to a particular Joint Venture Straddle
Plant which may exist pursuant to a construction and operating agreement or
other applicable contract.
(c) Future Arrangements. In addition to the foregoing, the parties
-------------------
intend that substantially all of Chevron's Processable Gas in the lower 48
continental United States be processed or caused to be processed by WPC, except
for those situations where (1) contractual commitments existing as of the date
of this Master Processing Agreement require that the gas be processed elsewhere
(in which case the gas will become subject to this Master Processing Agreement,
without further action by either party, upon expiration of the existing
contractual commitments), (2) the gas is currently or can hereafter be processed
in a Chevron Plant, (3) WPC has no suitable processing facilities in the
vicinity and either does not desire to install facilities or is not able to do
so in a manner that delivers to Chevron economic benefits comparable to
Chevron's other processing options, or (4) WPC, after full disclosure by Chevron
of the circumstances and consultation between Chevron and WPC, is unable to
offer Chevron terms that are as favorable as those available to Chevron from a
Third Party Plant and Chevron elects to have its gas processed in the Third
Party Plant.
2. WPC's Obligations. WPC shall enter into Natural Gas Processing
-----------------
Agreements with Chevron, as described above, and will provide such Ancillary
Services as Chevron may reasonably request; provided, however that WPC will not
be required, without additional mutually agreeable compensation, to install
equipment to provide Ancillary Services at plants where such services are not
currently being provided. In those cases where Chevron's Processable gas is not
committed to a WPC Plant and cannot efficiently be processed in a WPC Plant, WPC
shall, if requested by Chevron, provide Chevron consultation and assistance in
arranging for the connection of such gas to a Third Party Plant; provided that
in doing so WPC shall incur no liability to Chevron. WPC shall perform all of
its obligations in a manner which is consistent with the intent of this Master
Processing Agreement and which will support Chevron's production activities to
the maximum extent that is commercially reasonable and practical.
3. Intent of Parties. Both parties acknowledge that the purpose of
-----------------
this Master Processing Agreement is to provide for the processing of Chevron's
gas in WPC's plants under terms that are fair and equitable for both parties.
By entering into this Master Processing Agreement and the related individual
Natural Gas Processing Agreements, the parties expect to improve the process of
connecting new wells to gathering systems and plants, to obtain mutual benefits
and efficiency through cooperative sharing of measurement data, and to improve
their financial results by reducing downtime and unproductive activities while
maximizing cooperation and sharing of essential information. To the extent that
the parties have the current capability to transfer data via electronic means,
or can agree on an allocation of any costs of installing such capability that
the parties agree will be mutually beneficial, the parties shall endeavor to
establish the necessary systems and procedures to facilitate such electronic
transfers of data.
4
<PAGE>
4. Ancillary Services Provided By Chevron. Nothing in this Master
--------------------------------------
Processing Agreement shall prevent Chevron from installing and operating, or
causing third parties to do so, any facilities needed to provide Ancillary
Services in support of Chevron's production operations when WPC is not obligated
to provide such services to Chevron under this Master Processing Agreement or
another agreement, and Chevron has elected not to request WPC to provide those
services or, having made such a request, Chevron declines to pay the
compensation required by WPC.
C. PROCEDURES
1. Sharing of Development and Other Plans. Chevron's local operating
--------------------------------------
units shall keep the appropriate WPC personnel apprised of Chevron's future
exploration and development plans, and shall share such information as may
reasonably be required to assist WPC in expediting the connection of any new
wells drilled by Chevron in the vicinity of WPC Plants. WPC shall advise
Chevron, as early as possible, of any plans for its processing plants (such as
dispositions, expansions, contractions, shut-downs, major overhauls, or other
projects) which may significantly affect Chevron's production operations. Each
party shall keep all such information strictly confidential and shall make no
use of such information except for the purposes of this Master Processing
Agreement. In connection with the foregoing, Chevron and WPC agree to cause
their local representatives to establish exploration, production and processing
alliance improvement teams (the "EPP Alliance Teams") to perform the duties
outlined below. The EPP Alliance Teams shall be comprised of members from both
Chevron and WPC. Chevron and WPC each shall bear their own costs and expenses
associated with the EPP Alliance Teams and their activities. The duties of the
EPP Alliance Teams will include, but will not be limited to, the following:
(a) administering and coordinating the routine business of the EPP
Alliance Team;
(b) determining and developing strategies with respect to EPP
Alliance Team activities;
(c) establishing and periodically reviewing standards of performance
for the contractual relationship between Chevron and WPC;
(d) participating in periodic exploration and production meetings to
discuss and coordinate the exploration and production activities
of Chevron with the well connection and processing activities of
WPC;
(e) reviewing all significant drilling, development and exploration
plans in order to develop reasonable and cost effective plans for
well connections and processing the gas that may result from such
drilling, development and exploration activities;
5
<PAGE>
(f) conducting regularly scheduled planning, problem solving, and
performance review meetings;
(g) reviewing all significant equipment, design and process changes
affecting the contractual relationship(s) between Chevron and
WPC; and
(h) developing recommendations and procedures for making the parties'
performance hereunder more efficient and cost-effective.
2. Connection of New Wells In Committed Areas -- WPC Field Plants.
--------------------------------------------------------------
Whenever Chevron has within the Committed Area associated with a WPC Field Plant
a new well capable of producing Processable gas, Chevron shall notify WPC of the
location, estimated volume and quality of production, and Chevron's desired
connection date for such well, and other information reasonably requested by WPC
to evaluate the proposed connection. If, based on that information, WPC
believes it can economically connect the well to its gathering system at WPC's
expense and process the gas from such well in accordance with the terms of the
existing Natural Gas Processing Agreement, WPC shall use every reasonable effort
to do so by Chevron's desired connection date. If WPC concludes it cannot
economically connect the well under the existing terms of the applicable Natural
Gas Processing Agreement and the parties cannot agree upon terms under which the
well can be connected, then WPC shall, upon request by Chevron, (a) provide
Chevron consultation and assistance in arranging for the connection of such gas
to a Third Party Plant, and (b) release from dedication the well and such
acreage around the well as Chevron may reasonably require in order to obtain a
third party connection. In doing so, Chevron will attempt to limit the extent
of any dedication to the Third Party Plant to the minimum term and acreage
consistent with the reasonable requirements of the third party processor. If a
previous third party processing commitment of an existing well within the
Committed Area expires or can be terminated by Chevron, Chevron shall notify WPC
and the above connection procedure shall apply, except that Chevron shall not be
obligated to agree to the connection of such a well to WPC's Plant if doing so
would result in an economic disadvantage to Chevron.
3. Connection of Other New Wells -- WPC Field Plants. Whenever Chevron
-------------------------------------------------
has in the vicinity of a WPC Field Plant, but outside of the Committed Area
associated with that plant, a well capable of producing Processable Gas which
could be connected to the WPC Field Plant, Chevron shall notify WPC of the
location, estimated volume and quality of production, Chevron's desired
connection date for such well, and other information reasonably requested by WPC
to evaluate the proposed connection. The parties shall then cooperate in good
faith to determine the terms, reflective of fair market value, under which such
well would be dedicated to WPC for processing. If the parties are unable to
agree on such terms, or if they conclude that processing the gas from the new
well in a Third Party Plant would be advisable, then WPC shall, upon request by
Chevron, provide Chevron consultation and assistance in arranging for the
connection of such gas to a Third Party Plant. In that case, Chevron will
attempt to limit the extent of any dedication to the Third Party Plant to the
minimum term and acreage consistent with the reasonable requirements of the
third party processor.
4. Delivery of Chevron Gas To WPC Straddle Plants or Joint Venture
---------------------------------------------------------------
Straddle Plants. Except to the extent required by existing contracts, such as
- ---------------
the applicable Plant
6
<PAGE>
Construction and Operating Agreements, Chevron will not be required by this
Master Processing Agreement to commit Chevron Interests for processing in WPC
Straddle Plants or Joint Venture Straddle Plants, it being recognized that
changing marketing arrangements for the gas may result in the gas being
processed from time to time in different plants on different pipelines.
Nevertheless, it is the intent of the parties that Chevron enter into one or
more Natural Gas Processing Agreements with WPC for the processing of Chevron's
Processable Gas in the WPC Straddle Plants or Joint Venture Straddle Plants to
which the Chevron gas can flow and that such gas be processed in the WPC
Straddle Plants or Joint Venture Straddle Plants whenever the then current gas
marketing arrangements, plant economics, and the applicable Plant Construction
and Operating Agreement(s) so permit. Chevron recognizes that processing in some
Joint Venture Straddle Plants may require long term commitment of specific
acreage or leases (as required by applicable Plant Construction and Operating
Agreements or other agreements) in order to obtain the most favorable processing
terms. In those cases, Chevron will make such long term commitments; provided
that, in the absence of mutual agreement to the contrary, such commitments shall
be limited to periods when the gas is being marketed on the pipeline on which
the applicable straddle plant is located.
5. Notification of New Opportunities. Whenever Chevron has or expects to
---------------------------------
have Processable Gas available for processing in an area not currently served by
a WPC Plant, Chevron shall notify WPC and provide all necessary information to
permit WPC to evaluate whether it desires to construct a new plant to process
such gas. If WPC desires to submit a proposal, it shall do so in an expeditious
manner that will not unduly delay the development and connection of Chevron's
gas. If WPC elects not to submit a proposal, or if Chevron and WPC are unable
to reach agreement on all relevant terms, Chevron may proceed to commit the gas
to a Third Party Plant, so long as Chevron does not offer such third party terms
more favorable than those offered WPC.
6. Accounting and Allocation Procedures; Residue Avails Reports;
-------------------------------------------------------------
Electronic Data Interchange. All processed gas will be accounted for and
- ---------------------------
allocated by WPC in accordance with the accounting and allocation procedures
applicable at each plant, as such procedures may be revised from time to time in
accordance with industry practice. WPC shall provide monthly gas availability
reports and periodic gas availability updates to Chevron's residue purchaser in
accordance with reasonable instructions from Chevron and as needed to comply
with Chevron's Natural Gas Purchase and Sale Agreement. The parties shall also
make a good faith effort to exchange measurement and accounting data
electronically, on a real-time basis where practical, in order to reduce
paperwork, more efficiently monitor field operations, and speed the flow of
essential information between them; provided that neither party shall be
required to make capital investments or modify its existing systems or software
in the absence of mutual agreement on systems and cost sharing.
7. Settlement Terms. Each individual Natural Gas Processing Agreement
----------------
shall contain settlement terms and other relevant terms applicable to that
agreement, which terms shall be reflective of market conditions in the
applicable geographic area as of the date of such agreements. If the term of the
Natural Gas Processing Agreement is greater than ten years, then either party
shall have the right, at ten year intervals, to require a renegotiation of such
settlement
7
<PAGE>
"Confidential Treatment Requested.
The redacted material has been separately
filed with the Commission."
terms. Such a renegotiation shall be requested in writing by the party
desiring renegotiation at least 180 days before the end of the most recent ten
year period, to be effective on the first day of the ensuing ten year period.
In any such renegotiation, the parties will seek to arrive at settlement terms
which are similar, as of the date of the renegotiation, to the terms that each
party could expect to obtain in a freely negotiated processing agreement
providing for a commitment of significant quantities of gas for a term of at
least ten years. If the parties are unable to reach agreement on such terms,
the matter will be resolved by arbitration in accordance with the procedures
set forth in the applicable Natural Gas Processing Agreement.
8. Establishment of Goals and Standards of Performance. The parties
---------------------------------------------------
agree that there are common standards of performance (e.g., meter accuracy,
line pressure, runtime, unaccounted for Btu's, fuel consumption, etc.) that
are important to their respective operations. In furtherance of the intent of
this Master Processing Agreement, the parties agree to jointly establish, and
periodically review and revise as needed, appropriate standards and a process
to monitor and optimize performance against those standards for the mutual
benefit of the parties. Unless otherwise agreed with respect to individual WPC
Plants, each WPC Plant shall provide Chevron each month an allocation
statement showing total gas processed, total gas processed by component, total
liquids recovered by component, plant and gathering system fuel consumption on
a Btu basis, lost and unaccounted for gas, and total residue deliveries in Mcf
and MMBtu.
D. TERM
1. This Master Processing Agreement shall be effective for a primary
* term of REDACTED, commencing September 1, 1996, and year to year thereafter
until and unless terminated by either party at the end of the primary term, or
at the end of any annual period after the primary term, by giving the other
party not less than twelve months' prior written notice of termination.
Notwithstanding the foregoing, if the Master Gas Sale Agreement terminates
prior to this Master Processing Agreement, this Master Gas Processing
Agreement shall cease to apply to gas from Chevron Interests in the Gulf of
Mexico area on the date the Master Gas Sale Agreement terminates.
2. This Master Processing Agreement may be terminated by either party,
upon thirty (30) Days written notice to the other party, after it has been
determined through the alternative dispute resolution procedures referenced in
paragraph F below that such other party has materially defaulted on its
obligations hereunder (it being understood that, for purposes of the
foregoing, "materially defaulted" shall mean that the arbitrators have
determined that (i) as a result of such default the objectives of this
Agreement (as expressed herein and in the Master Alliance Agreement of even
date herewith by and among Chevron, WPC and others) are not being met and
8
<PAGE>
(ii) the defaulting party, after notice and a reasonable opportunity to cure,
failed to take the steps necessary to accomplish such objectives.
E. ASSIGNMENTS PROHIBITED
1. This Master Processing Agreement may not be assigned by either party
without the prior written consent of the other; provided that either party may
assign this Master Processing Agreement to an Affiliate (in which case the
assigning party shall remain ultimately responsible for performance hereof by
its Affiliate).
2. Assignment of any individual Natural Gas Processing Agreement
entered into pursuant to this Master Processing Agreement shall be governed by
the applicable terms of such individual agreement.
3. It is understood and agreed that Chevron's commitment of gas to
WPC for processing pursuant to any individual Natural Gas Processing Agreement
shall not be limited to a specific WPC Plant, even though the Plant in which the
gas will initially be processed may be specified in such agreement, and WPC
shall have the right to cause such gas to be processed in any Plant, whether or
not owned by WPC or its Affiliates, but in a manner consistent with the terms of
the applicable Natural Gas Processing Agreement. WPC, in its sole discretion,
shall have the right to consolidate plants and facilities, shut down plants and
facilities, and process Chevron's gas in any plant that it desires, so long as
Chevron is not disadvantaged, economically or by materially increased
administrative burdens, as a result of such decisions by WPC.
F. MASTER ALLIANCE AGREEMENT
This Master Processing Agreement is subject to, and shall be construed
in accordance with, the Master Alliance Agreement dated as of September 1, 1996,
between Chevron, WPC, and certain of their Affiliates. Any disputes arising
under this Master Processing Agreement shall be resolved exclusively as provided
in the Master Alliance Agreement.
WHEREFORE, the parties have caused this Master Processing Agreement to
be executed by their authorized representatives as of the date written above.
CHEVRON U.S.A. PRODUCTION COMPANY,
a division of CHEVRON U.S.A. INC.
By: ___________________________________
Title: ________________________________
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP,
a Delaware limited partnership
9
<PAGE>
By Warren Petroleum G.P., Inc., its General Partner
By: __________________________________
Title: _________________________________
10
<PAGE>
GAS PROCESSING AGREEMENTS
SETTLEMENT TERMS
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
REDACTED
1
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
WICKETT GROUP
REDACTED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
METER LEASE FIELD
- -----------------------------------------------------------------------
<S> <C> <C>
448 ESTES, W A 12 TB WARD-ESTES, NORTH
36 ESTES, W A 44 TB H.S.A.
324 ESTES, W A 58 H.S.A.
70 ESTES, W A 61 H.S.A.
65 ESTES, W A 75 & 76 H.S.A.
325 ESTES, W A 78 H.S.A.
151 ESTES. W A 98 H.S.A.
11 HSA 5 SAT TO 23 TB WARD-ESTES, NORTH
28 HSA 9 TB WARD-ESTES, NORTH
14 HSA 23 TB WARD-ESTES, NORTH
17 HSA 51 TB WARD-ESTES, NORTH
193 HSA 156 BTY WARD-ESTES, NORTH
34 HSA 515 TB H.S.A
123 HSA 529 H.S.A.
95 HSA 541 H.S.A.
38 HSA 545 TB WARD-ESTES, NORTH
71 HSA 617 H.S.A.
126 HSA 866 WARD-ESTES, NORTH
471 HSA 1035 TB
472 HSA 1035 TB VRU
469 HSA 1042 TB WAGON WHEEL
470 HSA 1042 TB VRU
474 HSA 1071
433 HSA 1077 WARD-ESTES, NORTH
171 HSA 1120 BTY WAGON WHEEL
506 HSA 1545 H.S.A.
476 HSA 268 TB
35 HSA 272 (560&596) MASTER H.S.A.
473 HSA 274
486 HSA 276 TB
477 HSA 283 & 450 AUX
478 HSA 298 TB
468 HSA 370 TB
475 HSA 544 SAT 268
215 MARSTON, E J D #1 H.S.A.
184 O'BRIEN, G W #10 TB WARD-ESTES, NORTH
489 O'BRIEN, G W #1105 H.S.A.
4 OBrien, G W Master meter
- -----------------------------------------------------------------------
</TABLE>
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Quito Group
REDACTED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
METER LEASE FIELD
- -----------------------------------------------------------------------
<S> <C> <C>
404 BARBER, W T #1 TB WAHA, NORTH
411 CLEVELAND, R #1 WAHA
480 ESTES, E W 112 AUX
479 ESTES, E W 133 AUX
483 ESTES, E W 16 TB
484 ESTES, E W 166 TB
482 ESTES, E W 3 TB
481 ESTES, E W 45 TB
408 FROST, J #5 TB WAHA, WEST
405 LIGON, S E #1 TB WAHA
409 MCCALL, JACK O #1 TB WAHA, WEST
431 MCDANIEL, LOIS #1 QUITO, EAST
160 STATE "XV" #1 BTY BLOCK 17, SOUTHEAST
403 TREES, J C ESTATE "A" #1 TB WAHA, NORTH
407 TREES, J C ESTATE "B" #2 TB WAHA, WEST
450 TREES, J C ESTATE #4 WAHA, WEST
455 TREES, J C ESTATE ETAL #2 WAHA, WEST
457 TREES, J C ESTATE ETAL #5 WAHA, WEST
456 TREES, J C ETAL #8 WAHA, WEST
449 UNIVERSITY 18-29 #1 QUITO, EAST
425 UNIVERSITY 18-29 #10 QUITO, EAST
165 UNIVERSITY 18-29 #2 TB WAR-WINK, SOUTH
237 UNIVERSITY 18-29 #2 TB WAR-WINK, SOUTH
423 UNIVERSITY 18-29 #4 QUITO, EAST
417 UNIVERSITY 18-29 #6 QUITO, EAST
426 UNIVERSITY 18-29 #8 QUITO, EAST
428 UNIVERSITY 18-30 #2 QUITO, EAST
424 UNIVERSITY 18-30 #3 QUITO, EAST
420 UNIVERSITY 18-31 #2 WAR-WINK, SOUTH
421 UNIVERSITY 18-31 #3 QUITO, EAST
422 UNIVERSITY 18-31 #4 QUITO, EAST
418 UNIVERSITY 18-31 #6 QUITO, EAST
419 UNIVERSITY 18-31 #7 QUITO, EAST
439 WALKER, P ETAL #2L QUITO, EAST
427 WALKER, P ETAL #4 QUITO, EAST
439 WALKER, P ETAL #5 QUITO, EAST
439 WALKER, P ETAL #6 QUITO, EAST
213 WRISTEN BROS 76 BAT SAND HILLS, WEST
- -----------------------------------------------------------------------
</TABLE>
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
SHALLOW-WORSHAM GROUP
REDACTED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
METER LEASE FIELD
- -----------------------------------------------------------------------
<S> <C> <C>
491 Anthony, H F #1 TB WORSHAM-BAYER
494 BARCLAY DEAN #3 WORSHAM
493 CLEVELAND, R TR B #2&6 WORSHAM
496 CLEVELAND, R TR B #3 & 4 WORSHAM
495 CLEVELAND, R TR B #8 WORSHAM-BAYER
497 CLEVELAND, R TR B #9 WORSHAM-BAYER
492 HORRY CDP WORSHAM
504 LIGON, S E STATE #3 WORSHAM-BAYER
503 LIGON, S E STATE #7 WORSHAM-BAYER
501 LIGON, S E STATE #8 WORSHAM, EAST
502 LIGON, S E STATE #9 WORSHAM, EAST
500 STATE SCHOOL BD ZZ #1 & 5 WORSHAM
499 STATE SCHOOL BD ZZ #2 & #4 WORSHAM
498 ZEEK, L W ETAL #1 WORSHAM
- -----------------------------------------------------------------------
</TABLE>
<PAGE>
GULF OF MEXICO NGL PRICING FORMULA
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
REDACTED
Page 1
<PAGE>
EXHIBIT 10.8
"Pages where confidential treatment has been requested are stamped Confidential
Treatment Requested. The redacted material has been separately filed with the
Commission; the appropriate section has been marked at the appropriate place
and in the margin with a star (*)."
MASTER NATURAL GAS LIQUIDS
--------------------------
PURCHASE AGREEMENT
------------------
THIS MASTER NATURAL GAS LIQUIDS PURCHASE AGREEMENT (the "Agreement") is
made and entered into effective the 1st day of September, 1996, by and between
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership
with offices at 13430 Northwest Freeway, Suite 1200, Houston, TX 77040-6095
(hereinafter referred to as "WPC"), and CHEVRON U.S.A. INC., a Pennsylvania
corporation with offices at 1301 McKinney Street, Houston, TX 77010.
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA"), and NGC Corporation ("NGC"), have
entered into certain agreements ( the "Merger Agreements") pursuant to which
CUSA would contribute certain gas gathering, processing and other midstream
assets and related liabilities of CUSA's Warren Petroleum Company division
("Warren") and natural gas business unit division to a corporation to be formed
which NGC would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously purchased from CUSA all of the NGL's and certain
Offspec NGL's (as such terms are defined in Article I below) produced at certain
gas processing plants in which CUSA owns an interest and both CUSA and WPC
desire that such relationship continue;
WHEREAS, CUSA has quantities of NGL's available for sale from certain gas
processing plants and fractionation plants that it desires to sell to WPC, and
WPC desires to purchase such NGL's from CUSA;
WHEREAS, CUSA and WPC acknowledge that the purpose of this Agreement is to
provide for the marketing of CUSA's NGLs processed and/or fractionated in CUSA's
plants, in third-party plants and WPC's plants (excluding such NGLs produced in
WPC's Gulf Coast area straddle plants which are covered by a separate agreement
between CUSA and WPC dated of even date herewith) under terms that are fair and
equitable for both parties. By entering into this Agreement, the parties expect
to improve the process of selling and marketing NGLs to obtain benefits and
efficiency through cooperative sharing of production, plant, and other relevant
information that can be shared between the parties, and to improve their
financial results by
1
<PAGE>
reducing demurrage and unproductive activities while maximizing cooperation and
sharing of essential information; and
NOW, THEREFORE, in consideration of the premises and for the mutual benefit
of the parties as well as for other good and valuable consideration, WPC and
CUSA agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 As used in this Agreement, the following terms shall have the
following meanings:
Accounting Period shall mean a period of one (1) Month commencing at 12:01
-----------------
a.m. local time on the first Day of a calendar Month and ending at 12:01
a.m. local time on the first Day of the next succeeding Month.
Affiliate shall mean any Person that directly or indirectly through one or
---------
more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term "control" (including the terms
"controlled by" or "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership, by
contract, or otherwise. Any Person shall be deemed to be an Affiliate of
any specified Person if such Person owns 50% or more of the voting
securities of the specified Person, if the specified Person owns 50% or
more of the voting securities of such Person, or if 50% or more of the
voting securities of the specified Person and such Person are under common
control.
Alternate Index shall have the meaning specified in Section 5.3
---------------
hereinafter.
Arbitration Notice shall have the meaning specified in Section 13.1(d)
------------------
hereinafter.
Bankruptcy Event shall mean the occurrence of one or more of the following
----------------
events with respect to a Party: (A) the entry of a decree or order for
relief against a Party by a court of competent jurisdiction in any
involuntary case brought against a Party under any bankruptcy insolvency or
other similar law (collectively, "Debtor Relief Laws") generally affecting
the rights of creditors and relief of debtors now or hereafter in effect,
(B) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or other similar agent under applicable Debtor
Relief Laws for a Party or for any substantial part of its assets or
property, (C) the ordering of the winding up or liquidation of a Party's
affairs, (D) the filing of a petition in any such involuntary bankruptcy
case, which petition remains undismissed for a period of 180 Days or which
is not dismissed or suspended pursuant to Section 305 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law), (E) the commencement by a Party of a voluntary case under
any applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by
2
<PAGE>
a Party to the entry of an order for relief in an involuntary case under
any such law or to the appointment of or the taking of possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar agent under any applicable Debtor Relief Laws for a Party or for
any substantial part of its assets or property, or (G) the making by a
Party of any general assignment for the benefit of its creditors.
Barrel shall mean forty-two (42) U. S. Gallons.
------
Base Rate shall mean the lesser of (i) two percent (2%) above the per annum
---------
rate of interest announced from time to time as the "prime rate" for
commercial loans by First National Bank of Chicago, as such "prime rate"
may change from time to time, or (ii) the maximum applicable non-usurious
rate of interest.
Business Day shall mean a Day on which Federal Reserve member banks in New
------------
York City are open for business.
Component(s) shall mean the individual hydrocarbon constituents of Raw NGL
------------
Mix, including, but not limited to, Propane, Normal Butane, Isobutane,
Natural Gasoline and Ethane.
Conway T&F Costs shall mean the Transportation Costs or Pipeline
----------------
Transportation Costs, as applicable depending on the most economical mode
of transportation used or that would be used at and from the Delivery Point
to Conway, Kansas, and the fractionation fee incurred or that would be
incurred at Conway, Kansas, including any loss allowance imposed at the
fractionator.
Day or Daily shall mean a twenty-four (24) hour period commencing 12:01
------------
a.m. local time and extending until 12:01 a.m. local time on the following
Day.
Delivery Point(s) shall have the meaning specified in Section 6.2
-----------------
hereinafter.
Effective Date shall mean September 1, 1996.
--------------
Ethane shall mean a liquid hydrocarbon stream which meets the
------
specifications set forth in Exhibit "A".
Fractionated NGLs shall mean liquid hydrocarbons fractionated from Raw NGL
-----------------
Mix, including, but not limited to, Propane, Normal Butane, Isobutane,
Natural Gasoline and Ethane.
Gallon shall mean the unit of volume used for the purpose of measurement of
------
liquid. One (1) U.S. liquid Gallon contains two hundred thirty-one (231)
cubic inches when the liquid is at a temperature of sixty degrees
Fahrenheit (60/ F) and at the vapor pressure of the
3
<PAGE>
"The Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
liquid being measured.
Isobutane shall mean a liquid hydrocarbon stream which meets the
---------
specifications set forth in Exhibit "A".
Month or Monthly shall mean a period commencing at 12:01 a.m. local time on
----------------
the first Day of a calendar Month and extending until 12:01 a.m. local time
on the first Day of the next succeeding calendar Month.
Mixed Butane shall mean a liquid hydrocarbon stream which meets the
------------
specifications set forth in Exhibit "A".
Mont Belvieu T&F Costs shall mean Pipeline Transportation Costs to Mont
----------------------
Belvieu, a loss allowance no greater than that charged to an unaffiliated
third Person (currently, 0.25%), and a per Gallon fractionation fee
calculated as follows:
(i) [REDACTED X (Prior Calendar Quarter
Average Inside FERC Houston Ship
Channel/Beaumont Texas Index for Large
* Packages only - REDACTED) /
* REDACTED ] + REDACTED
or
* (ii) REDACTED per Gallon, whichever is greater
Natural Gasoline shall mean a liquid hydrocarbon stream which meets the
----------------
specifications set forth in Exhibit "A".
Netback Price shall mean the price obtained by WPC in an arm's length sale
-------------
of NGLs to a third Person who is not an Affiliate of WPC less
Transportation Costs and/or T&F Costs that are reasonably incurred in
connection therewith.
WPC Deficiency Quantity shall have the meaning specified in Section 14.1
-----------------------
hereinafter.
New Taxes shall mean any Taxes enacted and effective after the Effective
---------
Date, including that portion of any Taxes or New Taxes that constitutes an
increase either in rate or breadth of coverage.
NGL shall mean Raw NGL Mix, if delivered to WPC from a gas processing
---
plant, or Fractionated NGLs, if delivered to WPC from a fractionator.
4
<PAGE>
Normal Butane shall mean a liquid hydrocarbon stream which meets the
-------------
specifications set forth in Exhibit "A".
Offspec NGLs shall have the meaning specified in Section 7.1 hereinafter.
------------
Party shall mean individually either CUSA or WPC (including their
-----
respective successors and permitted assigns); collectively, the "Parties."
-------
Person shall mean any individual, corporation, partnership, limited
------
liability company, association, joint venture, trust, or other organization
of any nature or kind.
Pipeline Transportation Costs shall mean all costs and expenses reasonably
-----------------------------
incurred by WPC in connection with the transportation of NGLs by pipeline
or the costs and expenses that would have been incurred if such NGL's were
actually transported by pipeline to the applicable location specified in
Section 5.1. In those situations when it is necessary to transport NGLs by
truck or rail cars to a pipeline receipt point, such costs shall be
included as part of the applicable Pipeline Transportation Costs. It is
understood and agreed that Pipeline Transportation Costs shall not include
any portion of WPC's general and administrative costs and expenses.
Propane shall mean a liquid hydrocarbon stream which meets the
-------
specifications set forth in Exhibit "A".
Raw NGL Mix shall mean the mixed liquid hydrocarbon stream produced at a
-----------
gas processing plant and delivered to WPC at the Delivery Point at the
tailgate of said plant.
Taxes shall mean any and all ad valorem, property, occupation, severance,
-----
production, extraction, first use, conservation, Btu or energy, gathering,
transport, pipeline, utility, gross receipts, gas or oil revenue, gas or
oil import, privilege, sales, use, consumption, excise, lease, transaction,
environmental, and other taxes, governmental charges, duties, licenses,
fees, permits, and assessments.
T&F Costs shall mean all Transportation Costs and the costs and expenses
---------
incurred in connection with the receipt and fractionation of NGLs received
by WPC from CUSA or that would have been incurred if fractionated,
including any loss allowance imposed at the applicable fractionator.
Transportation Costs shall mean all costs and expenses reasonably incurred
--------------------
in connection with the transportation of NGL(s) hereunder, including,
without limitation, rail car, barges, and truck costs, NGL losses that
occur during transportation for reasons other than the negligence or
willful misconduct of WPC and all costs and expenses reasonably incurred in
loading, unloading, transporting, terminaling, storing (if required), and
handling such NGLs. With respect to barges, trucks and any other modes of
transportation owned by WPC or its Affiliates, the applicable
Transportation Costs shall not exceed the
5
<PAGE>
fair market value of the use of such modes of transportation in
transporting NGLs hereunder. It is understood and agreed that
Transportation Costs shall not include any portion of WPC's general and
administrative costs and expenses.
Year shall mean a period of twelve (12) consecutive Months commencing from
----
the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meanings indicated throughout this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 CUSA hereby represents and warrants to WPC that on and as of the date
hereof:
(a) It has all requisite corporate power and authority to carry on
the business in which it is engaged and to perform its respective
obligations under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action;
(c) It has all the requisite corporate power and authority to enter
into this Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which CUSA or its
properties are bound or, to its knowledge, any material laws
applicable to CUSA; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency, and other laws generally affecting creditor's rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
2.2 WPC hereby represents and warrants to CUSA that on and as of the date
hereof:
(a) It has all requisite power and authority to carry on the business
in which it is engaged and to perform its respective obligations
under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite partnership action;
6
<PAGE>
"The Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
(c) It has all the requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any material laws
applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency, and other laws generally affecting creditor's
rights and general principles of equity (whether applied in a
proceeding in a court of law or equity).
ARTICLE III
TERM
----
3.1 Unless otherwise provided herein, this Agreement shall remain in
* full force and effect for a period of REDACTED from the Effective Date hereof
and shall continue from Year to Year thereafter unless terminated by either
* Party hereto at the end of such REDACTED Year period or any Yearly anniversary
thereafter by giving the other Party at least ninety (90) Days, but not more
than one hundred twenty (120) Days, advance written notice of its intention to
so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be
terminated as follows:
(a) By the non-defaulting Party, upon thirty (30) Days written
notice to the other Party, after it has been determined through
the alternative dispute resolution procedures of Article XIII
that a Material Default has occurred in the performance of a
Party's obligations hereunder (it being understood that, for
purposes of the foregoing, "Material Default" shall mean that
the arbitrators have determined that (i) in consequence of such
default, the objectives of this Agreement (as expressed in the
Master Alliance Agreement of even date herewith by and among
CUSA, WPC and others) are not being met and (ii) the defaulting
Party failed to take the steps necessary to accomplish such
objectives);
(b) In the event either Party is dissolved (unless the successor to
such dissolved Party or its assets is an Affiliate of CUSA or
WPC Parent.);
7
<PAGE>
"The Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
(c) If a Bankruptcy Event occurs with respect to either Party; or
(d) By CUSA as provided in Section 11.2 hereinafter.
3.3 Upon the termination of this Agreement, any monies due and owing
either Party shall be paid to the other Party pursuant to the terms hereof and
any refunds due either Party shall be made at the earliest possible time, and
in any event no later than sixty (60) Days after the expiration or termination
of this Agreement. All audit rights shall survive for the period prescribed by
Section 11.6.
3.4 Termination of this Agreement hereunder shall be cumulative of any
other rights or remedies that the terminating Party may have in connection
with such termination, including, but not limited to, damages and injunctive
relief.
ARTICLE IV
QUANTITY
--------
4.1 During the term of this Agreement, unless WPC is excused from
purchasing NGLs, or CUSA is excused from selling NGLs pursuant to the terms
and provisions hereof, CUSA agrees to sell to WPC, and WPC agrees to purchase
from CUSA, all of CUSA's right title and interest in the NGL's produced at the
processing or fractionation plants (the "Plants") listed in Exhibits "B", "C",
"D", "E" and "F" which are attached hereto and made a part hereof, and any
other processing or fractionation plants not listed in said Exhibits, subject
to contractual obligations existing as of the Effective Date which may prevent
CUSA from providing such NGLs. However, when such contractual obligations
terminate, such NGLs shall automatically be covered hereunder. CUSA agrees to
notify WPC at least thirty (30) Days prior to the Day on which such
contractual obligations terminate.
4.2 The Parties shall use every reasonable effort to deliver and
receive, as applicable, NGLs on a ratable Daily basis.
ARTICLE V
PRICE
-----
5.1 Except as otherwise provided herein, WPC shall pay CUSA for the NGLs
* purchased hereunder (i) a price equal to REDACTED as quoted by the Oil Price
Information Service ("OPIS") for Mont Belvieu, Texas (Non-TET) for the Month
in which NGLs are delivered to WPC, less Mont Belvieu T&F Costs, for the
volumes of NGLs delivered to WPC at the applicable Delivery Point at the
tailgate of the Plants listed in Exhibit "B" which is attached hereto and made
* a part hereof, (ii) a price equal to REDACTED as quoted by OPIS for Group
8
<PAGE>
"The Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
140 (Conway, Kansas) for the Month in which NGLs are delivered to WPC, less
Conway T&F Costs, for the volumes of NGLs delivered to WPC at the applicable
Delivery Point at the tailgate of the Plants listed in Exhibit "C" which is
* attached hereto and made a part hereof (iii) a price equal REDACTED as quoted
by OPIS for Mont Belvieu, Texas (Non-TET) for the Month in which NGLs are
delivered to WPC, less Mont Belvieu T&F Costs, plus the T&F Costs paid by CUSA
to a third Person to fractionate Raw NGL Mix into Fractionated NGLs for the
volumes of NGLs delivered to WPC at the applicable Delivery Point at the
tailgate of the Plants listed in Exhibit "D" which is attached hereto and made
* a part hereof, (iv) REDACTED percent of the Netback Price for the volumes of
NGLs delivered to WPC at the applicable Delivery Point at the tailgate of the
Plants listed in Exhibit "E" which is attached hereto and made a part hereof,
and (v) the price for each NGL delivered to WPC at the Delivery Point at the
tailgate of the Venice Fractionator as set forth in Exhibit "F" which is
attached hereto and made a part hereof. WPC shall use every reasonable effort
to obtain the highest Netback Price for NGLs. Notwithstanding the foregoing,
it is understood and agreed that WPC's share of the Netback Price received
* from the disposition of NGLs (i.e., REDACTED as set forth in (iv) above),
* shall never be less than REDACTED per Gallon of each NGL delivered to WPC at
the Delivery Point. The Parties recognize and acknowledge that during any
given Month, NGLs delivered to WPC may be sold to WPC under different pricing
scenarios as set forth in (i) through (iv) above, depending on the particular
market for such NGLs as set forth in Exhibits "B", "C", "D" and "E".
5.2 With respect to the Raw NGL Mix delivered by or on behalf of CUSA to
WPC, the price set forth in Section 5.1 above shall be based on the Components
contained in the Raw NGL Mix delivered to WPC at the tailgate of the
applicable processing Plant.
5.3 If for any reason the OPIS index for a particular NGL should cease
to be published, the Parties agree promptly and in good faith to negotiate a
mutually satisfactory Alternate Index or substitute methodology for
calculating the price for such NGL (the "Alternate Index"). If, on or before
thirty (30) Days after the index used to determine the price ceases to be
published, the Parties are unable to agree on an Alternate Index upon which to
base the calculation of the price, the Parties shall submit such determination
to arbitration in accordance with the provisions of Article XIII hereinafter,
which arbitration procedure will determine the Alternate Index. From the date
on which the index price used to determine the price for a particular NGL
ceases to be available until the Alternate Index is determined, the price for
such NGL shall be the average of the prices in effect (or that would have been
in effect) during the twelve (12) Months preceding the Month in which the
index upon which the price was based ceased to be available, which price shall
be effective until the effective date of the Alternate Index determined as set
forth in this Section 5.3. Upon the determination of an Alternate Index, the
price will be adjusted retroactively to the date on which the index upon which
the price previously was based ceased to be available, plus interest thereon
at the Base Rate.
* 5.4 Every REDACTED after the Effective Date of this Agreement, either
Party shall
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have the option to open this Agreement solely for the purpose of renegotiating
the pricing provisions hereof. To exercise such option, a Party at least ninety
(90) Days before the expiration of such five (5) Year period must provide to the
other Party written notification (the "Renegotiation Notice") of its desire to
renegotiate the price for the NGLs sold and purchased hereunder. If, after
negotiating in good faith for a period of ninety (90) Days following the date of
the Renegotiation Notice, the Parties are unable to agree upon a mutually
acceptable price for such NGL(s), the matter shall be submitted to the
alternative dispute resolution procedures as provided in Article XIII hereof.
During the period while negotiations are ongoing until (i) a new price is agreed
to or (ii) a new price is established as provided herein, the price for the NGL
sold and purchased hereunder shall be determined in accordance with the pricing
formula that was applicable immediately prior to the date of the Renegotiation
Notice. If a new price is established under this Section 5.4, whether by
renegotiation, arbitration, or otherwise, such new price shall be effective as
of, and shall, if necessary, be made retroactive to, the first Day of the
applicable five (5) Year period immediately following the Renegotiation Notice,
plus interest thereon at the Base Rate.
5.5 Annually, during the term hereof, either Party shall have the option
to open this Agreement solely for the purpose of renegotiating the pricing/basis
differentials for the Venice plant as set forth in Exhibit F. To exercise such
option, a Party at least ninety (90) Days prior to the anniversary of the
Effective Date must provide to the other Party written notification (the
"Renegotiation Notice") of its desire to renegotiate the pricing/basis
differentials for the NGLs produced at the Venice plant and sold and purchased
hereunder. If, after negotiating in good faith for a period of ninety (90) Days
following the date of the Renegotiation Notice, the Parties are unable to agree
upon mutually acceptable pricing/basis differentials for such NGL(s), the matter
shall be submitted to the alternative dispute resolution procedures as provided
in Article XIII hereof. During the period while negotiations are ongoing until
(i) new pricing/basis differentials are agreed to or (ii) pricing/basis
differentials are established as provided herein, the pricing/basis
differentials for the NGLs produced at the Venice plant and sold and purchased
hereunder shall be determined in accordance with the pricing/basis differentials
that were applicable immediately prior to the date of the Renegotiation Notice.
If new pricing/basis differentials are established under this Section 5.5,
whether by renegotiation, arbitration, or otherwise, such pricing/basis
differentials shall be effective as of, and shall, if necessary, be made
retroactive to, the first Day of the applicable annual period immediately
following the Renegotiation Notice, plus interest thereon at the Base Rate.
5.6 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CUSA and WPC shall meet to renegotiate in good faith such burdensome terms and
provisions so as to make them fair and equitable. Such renegotiations shall
occur within thirty (30) Days of the date of the non-requesting Party's receipt
of such written request for such renegotiations. If the parties are unable to
agree on new provisions to replace such burdensome terms and provisions within
ninety (90) Days of the non-requesting Party's receipt of such written request,
the matter shall be submitted to the
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alternative dispute resolution procedures set forth in Article XIII hereof. It
is understood and agreed that the rights granted in this Section 5.6 can only be
used by a Party to commence good faith renegotiations once during each Year
during the term hereof. If new provisions are agreed upon under this Section
5.6, whether by renegotiation, arbitration, or otherwise, such new provisions
shall be effective as of, and shall, if necessary, be made retroactive to, the
date on which the notice commencing renegotiations under this Section 5.6 was
given, plus interest thereon at the Base Rate.
5.7 For any NGLs produced at a processing or fractionation plant not
listed in the Exhibits attached hereto (a "Non-Listed Plant"), the purchase
price for such NGLs shall either be based on the prices set forth in Section 5.1
above or mutually agreed to by the Parties, as applicable. If such Non-Listed
Plant is located in the general geographic location as a facility listed in the
Exhibits attached hereto (a "Listed Facility"), the pricing provisions
applicable to the Listed Facility as set forth in Section 5.1 above shall apply.
If a Non-Listed Plant is not in the same geographic location as a Listed
Facility, the purchase price for the NGLs produced at such Non-Listed Plant
shall be mutually agreed to by the parties. If after negotiating in good faith
the parties are unable to agree on a mutually acceptable price for such NGLs,
upon the request of either Party, the matter shall be submitted to the
alternative dispute resolution procedures as set forth in Article XIII hereof.
ARTICLE VI
DELIVERIES
----------
6.1 The NGLs to be sold by CUSA hereunder shall be delivered by CUSA (or
at CUSA's direction) to WPC or to WPC's designated representative for the
account of WPC, at the Delivery Points (as defined in Section 6.2).
6.2 The point(s) of delivery for NGLs sold and delivered hereunder
(hereinafter the "Delivery Point(s)") shall be determined as follows:
(a) In the event delivery is to be to or from a pipeline, the
Delivery Point shall be located, and delivery of NGLs shall be
deemed to occur, at the point at which such NGLs pass the
pipeline meter. If pipeline delivery is by in-line inventory
transfer, delivery shall be deemed to occur on the date and time
that the relevant pipeline carrier advises CUSA and WPC, by
product transfer order, book transfer, or letter of transfer,
that NGLs shall be transferred to CUSA's account, and the
Delivery Point shall be the location of the NGLs in the pipeline
of the pipeline carrier on the Day and time that such in-line
transfer of NGLs is deemed to occur. The parties hereto
understand and agree that WPC has no control over the operations
of the pipeline carrier and therefore cannot control when NGLs
are transferred to WPC's account by the pipeline carrier will, in
fact, occur.
(b) In the event delivery is to be by or into a rail car, truck, or
barge owned,
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operated, leased, or hired by WPC, the Delivery Point shall be
located, and delivery of NGLs shall be deemed to occur, at the
point at which the NGLs pass from the flange connecting the
loading facility to WPC's owned, operated, leased, or hired rail
car, truck, or barge whether said rail car, truck, or barge is
loaded by CUSA or WPC directly or on behalf of CUSA or WPC
through CUSA's or WPC's agent.
(c) For the Venice, Louisiana facility, the Delivery Point shall be
located at the flange immediately downstream of the product
meters which measure the NGLs produced at the Venice
fractionator.
6.3 Title to and risk of loss (other than those losses described in
Section 6.4 (e) hereinafter) associated with the NGLs delivered hereunder shall
pass from CUSA to WPC upon the commencement of the delivery of such NGLs at the
Delivery Points. Nothing contained in this Section 6.3 shall in any way affect
WPC's rights as set forth in Article VII or CUSA's indemnity set forth in
Section 7.2 hereinafter. Except as otherwise provided in Section 7.2
hereinafter, WPC shall indemnify and save CUSA harmless against any claims for
damages and losses arising from injuries to persons or property attributable to
the NGLs delivered hereunder after delivery thereof has been made to WPC;
conversely, CUSA shall indemnify and hold WPC harmless against any claims for
damages and losses arising from injuries to persons or property attributable to
the NGLs prior to delivery. In addition, each of the parties (WPC and CUSA)
hereto shall indemnify and hold the other harmless from any losses and damages
arising out of the operations conducted hereunder by such indemnifying party to
the extent resulting from the negligent acts or willful misconduct of such
indemnifying party, its agents or its employees.
6.4 The following rules shall be applicable to the transportation and
loading of NGLs at the Delivery Point(s) situated at facilities neither owned
nor operated by WPC:
(a) The loading of NGLs at the applicable Delivery Point(s) shall be
performed in accordance with schedules mutually agreed to by the
parties.
(b) If rail cars subject to payment of demurrage or any other similar
charges to a third Person not affiliated with either Party are
used to transport NGLs from the Delivery Point, CUSA agrees to
load or cause to be loaded and start the relevant cars on the
return trip in accordance with the detention policy of the owner
or operator of such rail car equipment and CUSA further agrees to
pay any and all such charges that may be due thereunder.
(c) CUSA shall be liable for the payment of invoices from the
railroad for demurrage and hazardous materials storage charges
incurred by WPC as the prepaid shipper due to CUSA's inability to
receive a rail car and/or have a rail car placed on CUSA's
siding.
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(d) Rail cars shall not be diverted while in transit except upon
prior written authorization of WPC. Any charge incurred by WPC
for the diversion of rail car(s) by CUSA shall be for the account
of CUSA.
(e) If WPC's owned or leased trucks are used to transport NGLs from
the Delivery Point, CUSA agrees to load such trucks upon arrival
at the Delivery Point, and CUSA's failure to do so shall render
CUSA liable to WPC for damages incurred as a result of such
delay. Notwithstanding the foregoing, CUSA shall have the right
to refuse to load any truck that fails to meet Department of
Transportation or other applicable laws, rules, regulations or
standards.
(f) For NGLs purchased hereunder (other than in the situation when a
Netback Price is paid which will be based on actual volumes
sold), CUSA will be liable for all tank car shortages claimed by
WPC in excess of one percent (1%) of the net Gallons reflected on
the bill of lading and acknowledged by the railroad agent's
signature prior to unloading; provided, however, that such
shortages, if any, are reported in writing to CUSA within twenty-
four (24) hours after delivery by the carrier and prior to the
unloading of the shipment in which the relevant shortage occurs.
WPC shall ask CUSA for permission to unload, and CUSA, at its
expense, shall have the right to inspect each car at its
destination within forty-eight (48) hours after receipt of
written notice of such shortage. All demurrage charges arising
from the failure of CUSA to release the car for unloading within
such forty-eight (48) hour period shall be paid by CUSA.
Similarly, CUSA shall be liable for all truck shortages claimed
by WPC in excess of three percent (3%) of the net Gallons
reflected on the bill of lading; provided, however, that such
shortages, if any, are noted on the delivery ticket and
acknowledged by the truck driver's signature prior to unloading.
The failure of WPC to observe this provision or any action by WPC
which impedes identification of an alleged defect shall operate
as a waiver of WPC's rights to make any such claim.
Notwithstanding the foregoing, if the detention and/or demurrage
charges set forth above are insufficient to cover any such charges
paid by WPC to such third Person not affiliated with WPC, CUSA shall
reimburse WPC for such amounts.
6.5 Notwithstanding anything contained herein to the contrary, CUSA shall
be allowed to consolidate its deliveries of NGLs behind one or more Delivery
Points so long as (i) sufficient notice is provided WPC and (ii) such
consolidation does not result in an economic or operational hardship on WPC.
ARTICLE VII
QUALITY
-------
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7.1 All NGLs sold by CUSA and purchased by WPC hereunder shall meet the
specifications set forth in Exhibit "A", attached hereto and made a part hereof.
WPC shall have the right to reject any NGLs which fails to meet such quality
specifications ("Offspec NGL"). All costs associated with the return and/or
disposal of Offspec NGL shall be borne by CUSA. Notwithstanding the foregoing,
WPC shall not have the right to reject Offspec NGLs produced at and delivered
from a processing or fractionation plant owned and/or operated by WPC.
7.2 Should the NGLs delivered hereunder to WPC, or to WPC's designated
representative for the account of WPC, fail at any time to conform to the
specifications set forth in Exhibit A, either Party shall notify the other Party
of any such failure, and CUSA immediately shall undertake and diligently pursue
such acts as may be necessary to correct such failure so as to deliver NGLs
conforming to the specifications set forth above; but nothing contained in this
Article VII or any other part of this Agreement shall be construed to affect
WPC's right, at any time and from time to time, to reject any NGL not conforming
to said specifications and to refuse or suspend receipt until it is established
to WPC's reasonable satisfaction that subsequent deliveries of NGLs will conform
to said specifications. The term of this Agreement shall not be extended by the
length of time of any period or periods when deliveries have been rejected,
refused, or suspended as provided for herein. Notwithstanding the foregoing,
the knowing acceptance by WPC of Offspec NGL shall constitute a waiver by WPC
of any and all other rights and remedies available to WPC under this Agreement
or otherwise with respect to CUSA's tender of such Offspec NGL, and all risk of
loss, damage or liability arising out of WPC's ownership, control , possession,
or use of such Offspec NGLs shall pass to and be borne by WPC. If it is
subsequently determined that WPC unknowingly accepted Offspec NGLs, the Parties
will mutually agree upon a discounted price for such Offspec NGLs to reflect
their diminution in value, if any, from NGLs meeting the specifications hereof.
If the Parties are unable to agree on a mutually acceptable discount price for
such Offspec NGLs, the matter shall be subjected to the alternative dispute
resolution procedures set forth in Article XIII hereof. CUSA agrees to
INDEMNIFY and HOLD HARMLESS WPC, its Affiliates, and their respective officers,
directors, employees, agents, and contractors, from all actual losses, costs,
expenses, claims (including, without limitation, personal injury or property
damage claims), damages, and causes of action, including, without limitation,
reasonable attorneys' fees and costs of court (collectively, the "Losses")
incurred by WPC, such Persons, or such Affiliates arising out of, or in any way
associated with, the delivery to WPC of NGLs that fail to meet the
specifications set forth in Exhibit A which are unknowingly accepted by WPC.
Notwithstanding the foregoing, WPC shall not be entitled to a discounted price
for any Offspec NGLs produced at and delivered from a processing or
fractionation plant owned and/or operated by WPC if, immediately prior to the
Effective Date of this Agreement, such WPC owned or operated plant was
producing, or if not then producing, was capable of producing, NGLs that met the
applicable specifications as set forth in Exhibit A.
7.3 From time to time during the term hereof, WPC may request CUSA to
provide certain NGLs that exceed the normal specifications as set forth in
Exhibit A ("Purity NGLs"). The Parties acknowledge that providing such Purity
NGLs will be to the mutual benefit of both
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Parties and that neither Party should suffer an economic loss as a result
thereof.
ARTICLE VIII
WARRANTY OF TITLE
-----------------
8.1 CUSA warrants title to all NGLs sold and delivered by it to WPC, and
further warrants that CUSA has the right to sell such NGLs and that such NGLs
meet the quality specifications as set forth herein and are free from all liens,
mortgages, security interests, encumbrances and adverse claims or other charges.
CUSA shall be responsible for paying all royalties, production payments,
payments to other working interest owners, overriding royalties, taxes, license
fees or other charges on the NGLs (other than taxes, license fees or other
charges applicable to WPC's share of the NGLs) and CUSA agrees to and does
hereby indemnify and save WPC (including its directors, officers, employees,
agents, representatives, affiliates and subsidiaries) harmless from and against
any and all claims, suits, causes of action, debts, accounts, damages, losses,
costs and expenses (including reasonable attorney's fees) arising out of or in
any way connected with (i) any adverse title and/or warranty claims to the NGLs,
or (ii) the payment of royalties, overriding royalties, production payments and
payments to other working interest owners, if any. THERE ARE, HOWEVER, NO OTHER
WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
CONFORMITY TO MODELS OR SAMPLES, OR OTHERWISE, AND ALL SUCH WARRANTIES ARE
HEREBY EXPRESSLY DISCLAIMED BY CUSA AND EXCLUDED FROM THIS AGREEMENT.
ARTICLE IX
TAXES
-----
9.1 CUSA shall be liable for and shall pay, or cause to be paid, or
reimburse WPC, if WPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the NGLs sold hereunder upstream of the Delivery
Point(s). If WPC is required to remit such Tax, the amount thereof shall be
deducted from any sums becoming due to CUSA hereunder and shall be itemized on
the statement provided by WPC in accordance with Section 11.1. WPC shall be
liable for and shall pay, cause to be paid, or reimburse CUSA, if CUSA has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
NGLs hereunder at and downstream of the Delivery Point(s) including any Taxes
imposed or collected by a taxing authority with jurisdiction over WPC, provided,
however, when laws, ordinances or regulations permit or impose upon CUSA the
obligation to collect or pay Taxes applicable to the sale and/or delivery of NGL
hereunder at the Delivery Point, CUSA shall collect all such Taxes from WPC,
which shall be in addition to the applicable Price, and remit the same to the
appropriate governmental authority, unless WPC furnishes a certificate of
exemption. CUSA SHALL INDEMNIFY, DEFEND, AND HOLD WPC HARMLESS FROM AND AGAINST
ANY LIABILITY WITH RESPECT TO THE TAXES FOR WHICH CUSA IS LIABLE AND WPC SHALL
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INDEMNIFY, DEFEND, AND HOLD CUSA HARMLESS FROM AND AGAINST ANY LIABILITY WITH
RESPECT TO THE TAXES FOR WHICH WPC IS LIABLE.
9.2 Each Party will notify the other of the enactment of any New Taxes as
promptly as practical after it obtains knowledge thereof. It is understood and
agreed that the enactment of any material New Taxes shall constitute a hardship
under the provisions of Section 5.5 above.
9.3 To claim an exemption from payment of a Tax, a Party shall provide a
certificate of exemption or other reasonably satisfactory evidence of exemption
from any Tax, and each Party agrees to cooperate with the other Party in
obtaining any such exemption. In addition, WPC has provided CUSA with, and CUSA
acknowledges receipt of, the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986).
ARTICLE X
MEASUREMENT AND ANALYSES
------------------------
10.1 On all deliveries into or out of rail cars, the quantity shall be
determined by official tank car capacity tables or slip tube gauges in
accordance with Gas Processors Association ("GPA") Publication 8162, latest
---------------------------------------------------
revision. On all deliveries into or out of truck equipment, quantities shall be
determined by meter, rotary gauge, weighing, or other measuring devices that
meet industry standards, in accordance with GPA Publications 8162 and 8186,
-------------------------------
latest revision. On all deliveries into or out of pipelines, quantities shall
be determined by pipeline meter in accordance with the America Petroleum
Institute ("API") Manual of Petroleum Measurement Standards. For raw make
mixtures, volumes of the component products shall be determined (where
practical) on a mass (pound) measurement basis in accordance with the latest
edition of GPA Publications 8173 and 8182. On all deliveries into or out of
-------------------------------
shore tanks, quantities shall be determined either meter or gauge from a static
tank in accordance with the API Manual of Petroleum Measurement Standards and
based upon the practice of the relevant terminal. All quantities shall be
corrected to standard conditions of sixty degrees Fahrenheit (60/F) and
equilibrium vapor pressure in accordance with the API Manual of Petroleum
Measurement Standards, Chapter 14, Section B. The quantity and quality of NGLs
covered by this Agreement shall be measured according to the current versions of
the applicable standards of API and the American Society for Testing Materials,
if available. Each Party shall be entitled to have its representatives present
during all loadings, unloadings, tests, and measurements involving NGLs
delivered hereunder. If the parties cannot agree on measurement or quality
tests results, the measurements and quality tests required to determine the
volume of receipts or shipments or the conformity of the NGLs delivered to the
specifications set forth herein shall be made by an independent inspector
selected jointly by the parties, the cost of which shall be shared equally by
the Parties.
ARTICLE XI
BILLING AND PAYMENT
-------------------
11.1 By not later than thirty (30) Days following the Month NGLs are
produced in a
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gas processing or fractionation plant owned and/or operated by WPC, except for
the Venice Plant, or fifteen (15) Business Days after WPC's receipt of the
Operator's Statement for all other plants, including the Venice Plant, setting
forth the required volume information, or ten (10) Days following the end of the
Month in which NGLs are sold in the situation where a Netback Price is
applicable, WPC shall provide CUSA with a statement setting forth the price or
Netback Price, as applicable, of such NGLs, the amount due CUSA for such NGLs,
and such other information and detail as may be mutually agreeable to the
Parties, along with payment for such NGLs, which shall be remitted by wire
transfer of funds into an account designated by CUSA. If the Day on which any
payment is due is not a Business Day, then the relevant payment shall be due
upon the immediately preceding Business Day, except if such payment due date is
a Sunday or Monday, then the relevant payment shall be due upon the immediately
succeeding Business Day.
11.2 If either Party should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such accrued
interest shall be added to the amount reflected as being owed hereunder by
either WPC or CUSA, as the case may be, on the next invoice or by separate
invoice. In addition, if WPC fails to pay any amount due, as reflected in WPC's
statement, within ten (10) Days after the due date, or if WPC fails to provide a
statement as required by Section 11.1 above, CUSA shall have the right, upon
written notice to WPC, to (i) suspend any further deliveries of NGLs until such
statement has been provided and all amounts due have been paid with interest at
the rate specified in Section 11.1, and (ii) to provide notice to WPC that this
Agreement shall terminate if such statement is not provided and the payment
default has not been cured within sixty (60 ) Days after the date such written
notice is received by WPC.
11.3 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of the good faith dispute,
the withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance
with the alternative dispute resolution procedures of Article XIII. The
performance of both Parties under this Agreement shall continue pending the
outcome of such procedures. If it is subsequently determined, whether by mutual
agreement of the Parties or otherwise, that the withholding Party is required to
pay all or any portion of the disputed amounts to the other Party, the
withholding Party, in addition to paying over such amounts, shall also pay
interest accrued on such amounts from the original due date until paid, at the
Base Rate.
11.4 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the NGL invoice or statement forming the basis of the overcharge
or undercharge was delivered or not delivered, as the case may be, unless a
claim for such adjustment shall have been presented prior to the end of such
period. Any payment with respect to a retroactive adjustment shall include an
amount equal
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to interest on all amounts past due from the date of the initial payment at the
Base Rate, except in instances where neither Party knew or could have known that
the overcharge or undercharge occurred, in which case interest shall run from
the date of demand for payment.
11.5 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
11.6 ALL DISPUTES ARISING UNDER THIS ARTICLE XI THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XIII HEREOF. TO THE EXTENT THAT
ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND
ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
11.7 All payments will be made without set off or counterclaim; provided,
however, that upon a Party's (the "defaulting Party") failure to make payment of
undisputed amounts on the due date, the other Party (the "non-defaulting Party")
may, at its option and in its sole discretion, set off against any amounts owed
to the defaulting Party, any amounts owed by the defaulting Party under this
Agreement or otherwise. The obligations of the non-defaulting Party and the
defaulting Party under this Agreement in respect of such amounts shall be deemed
satisfied and discharged to the extent of any such set off. The non-defaulting
Party will give the defaulting Party notice of any set off made under this
Section 11.7 as soon as practicable after the set off is made, provided that
failure to give such notice shall in no way affect the validity of the set off.
ARTICLE XII
FORCE MAJEURE
-------------
12.1 In the event either Party is rendered unable, wholly or in part, by
Force Majeure to carry out its obligations under this Agreement, other than the
obligation to make payment of money due hereunder, it is agreed that upon such
Party's giving notice and reasonably full particulars of such Force Majeure in
writing to the other Party after the occurrence of the cause relied on, then the
obligations of the Party giving such notice, so far as and to the extent that
they are affected by such Force Majeure, shall be suspended during the
continuance of any inability so caused, but for no longer period, and such cause
shall so far as possible be remedied with all reasonable dispatch. This
Agreement shall not be terminated by reason of any such cause, but
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shall remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
12.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of a gas processing plant or other related facilities, floods, washouts, arrests
or restraints of the government, either federal or state, civil or military,
civil disturbances, explosions, sabotage, breakage or accident to equipment,
machinery or lines of pipe, freezing of machinery, equipment, wells, or lines of
pipe, electric power shortages, failure of pipelines or carriers to transport,
partial or entire failure of wells, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules, orders, laws or
governmental authorities (both federal, state and local), temporary cleaning or
testing of facilities (including, but not limited to, scheduled gas processing
facility turnarounds and shutdowns for safety maintenance), shutdowns due to
explosion or other extraordinary incident, or any other causes, whether of the
kind herein enumerated or otherwise, and which are not within the control of the
Party claiming suspension and which such Party is unable to overcome by the
exercise of due diligence. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The
term "Force Majeure" shall also include any event of Force Majeure occurring
with respect to the facilities or services of either CUSA's or WPC's third Party
suppliers or customers delivering or receiving any product, fuel, feedstock, or
other substance necessary to the performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third Party suppliers or customers as a result of an event of Force Majeure.
ARTICLE XIII
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
-----------------------------------------
13.1 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not limited to,
any disputes concerning the interpretation of the terms and provisions hereof,
shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to resolve any
disputes, controversy or claim arising out of or relating to this
Agreement.
(b) Should the Parties directly involved in any dispute, controversy
or claim be unable to resolve same within a reasonable period of
time, such dispute, controversy or claim shall be submitted to
the senior executives of the Parties (the "Senior Executives")
with such explanation or documentation
19
<PAGE>
as the Parties deem appropriate to aid the Senior Executives in
their consideration of the issues presented. The date the matter
is first submitted to the Senior Executives shall be referred to
as the "Submission Date." The Senior Executives shall attempt in
good faith, through the process of discussion and negotiation, to
resolve any dispute, controversy, or claim presented to it within
forty-five (45) Days after the Submission Date.
(c) If the Senior Executives cannot so resolve any dispute,
controversy, or claim submitted to it within forty-five (45) Days
after the Submission Date, the Parties shall attempt in good
faith to settle the matter by submitting the dispute, controversy
or claim to mediation within sixty (60) Days after the Submission
Date using any mediator upon which they mutually agree. If the
Parties are unable to mutually agree upon a mediator within
seventy-five (75) Days after the Submission Date, the case shall
be referred for mediation to the office of Judicial Arbitration
and Mediation Services, Inc. ("JAMS") in Houston, Texas. The cost
of the mediator will be split equally between the Parties unless
they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) Days of the initiation of
such procedure, or if either Party will not participate in such
mediation, either Party may request that the matter be resolved
through arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. ' 1 et seq., and will not be governed by the
arbitration acts, statutes, or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing Party's arbitrator
and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen (15) Days of receipt of an
Arbitration Notice, the other Party shall name its arbitrator by
written notice to the other and may designate any additional
issue(s) for arbitration. The two named arbitrators shall select
the third arbitrator within fifteen (15) Days after the date on
which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience within
the natural gas or natural gas liquids industry to decide the
issues presented for arbitration. No arbitrator shall be: a
current or former director, officer, or employee of either Party
or its Affiliates; an attorney (or member of a law firm) who has
rendered legal services to either Party or its Affiliates within
the preceding three Years; or an owner of any of the common stock
of either Party, or its Affiliates.
20
<PAGE>
(f) The three arbitrators shall commence the arbitration proceedings
within twenty-five (25) Days following the appointment of the
third arbitrator. The arbitration proceedings shall be held at a
mutually acceptable site and if the Parties are unable to agree
on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each Party
shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of pre-
hearing statements of position and legal authority, but no post-
hearing briefs shall be submitted. The arbitration panel shall
not have the authority to award (i) punitive or exemplary damages
or (ii) consequential damages, except as expressly provided
herein. The arbitrators' decision must be rendered within thirty
(30) Days following the conclusion of the hearing or submission
of evidence, but no later than ninety (90) Days after appointment
of the third arbitrator. With respect to disputes regarding
price or any redetermination thereof under Article V or the
selection of an Alternate Index under Section 5.3, each Party
shall submit to the arbitration panel a final offer of its
proposed resolution of the dispute. A majority of the
arbitrators shall approve the final offer of one Party without
modification, and reject the offer of the other Party.
(g) The decision of the arbitrators or a majority of them, shall be
in writing and shall be final and binding upon the Parties as to
the issue(s) submitted. The cost of the hearing shall be shared
equally by the Parties, and each Party shall be responsible for
its own expenses and those of its counsel or other
representatives. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and
further agrees that a final determination in any such arbitration
proceeding shall be conclusive and binding upon each Party.
Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The prevailing Party
shall be entitled to recover reasonable attorneys' fees and court
costs in any court proceeding relating to the enforcement or
collection of any award or judgment rendered by the arbitration
panel under this agreement.
(h) All deadlines specified herein may be extended by mutual written
agreement of the Parties. The procedures specified herein shall
be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to this
Agreement; provided, however, that a Party may seek a preliminary
injunction or other preliminary judicial relief if in its
judgment such action is necessary to avoid irreparable damage.
Despite such action, the Parties will continue to participate in
good faith in the procedures specified herein. All applicable
statutes of limitation, including, without limitation,
contractual limitation periods provided for in
21
<PAGE>
this Agreement, shall be tolled while the procedures specified in
this Section are pending. The Parties will take all actions, if
any, necessary to effectuate the tolling of any applicable
statutes of limitation.
ARTICLE XIV
LIMITATION OF DAMAGES
---------------------
14.1 Unless performance is excused by another provision of this Agreement,
if WPC fails to accept delivery of all quantities of NGLs tendered by CUSA that
WPC is obligated to receive during the term of this Agreement, WPC shall pay to
CUSA, within ten (10) Days after WPC's receipt of CUSA's invoice therefor, an
amount equal to the sum of the following amounts: (a) the arithmetic product
obtained by multiplying (i) the difference between the quantity of NGLs actually
accepted by WPC and the quantity of NGLs tendered by CUSA (the "WPC Deficiency
Quantity") by (ii) the positive difference, if any, obtained by subtracting from
the price that WPC would have otherwise paid as provided herein, an amount
derived from (1) the price obtained by CUSA in an arms-length sale to a third
party of a quantity of NGLs equal to the WPC Deficiency Quantity, less (2)
incremental transportation and storage costs incurred by CUSA; plus (b) an
----
amount, as liquidated damages, equal to one quarter of one cent per Gallon
($0.0025/Gallon) multiplied by the WPC Deficiency Quantity to cover CUSA's
administrative and operational costs and expenses.
14.2 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES
SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY
SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY,
EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE WAIVED. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF
THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY PROVISION HEREOF)
FOR PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT AS EXPRESSLY
PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES.
THE PRECEDING SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE OBLIGATION OF
EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST CLAIMS ASSERTED BY
THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD PARTY CLAIMS FOR
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, BUT EXCLUDING CLAIMS FOR SUCH
DAMAGES UNDER ARTICLE IX. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE
PURSUANT TO ANY
22
<PAGE>
PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE LIQUIDATED
DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE APPROXIMATION OF THE
AMOUNT OF SUCH DAMAGES.
ARTICLE XV
MISCELLANEOUS
-------------
15.1 This Agreement and the operations hereunder shall be subject to the
valid and applicable federal and state laws and the valid and applicable orders,
laws, local ordinances, rules, and regulations of any local, state or federal
authority having jurisdiction, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such order, laws, rules, or
regulations in any forum having jurisdiction in the premises. If any provision
of this Agreement is held to be illegal, invalid, or unenforceable under the
present or future laws effective during the term of this Agreement, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
15.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND PERFORMED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
15.3 This Agreement, including, without limitation, all exhibits hereto,
integrates the entire understanding between the Parties with respect to the
subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CUSA or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided. No waiver shall be effective
unless made in writing and signed by the Party to be charged with such wavier.
23
<PAGE>
15.4 The terms, covenants and conditions of this Agreement shall inure to
and be binding upon the parties hereto and their successors and permitted
assigns; provided, however, that neither Party may assign this Agreement in
whole or in part without the prior written consent of the other Party, which
consent shall not be unreasonably withheld, and provided further, that either
Party may assign its rights hereunder to any Affiliate without the approval of
the other Party, but any such assignment shall in no way relieve or release such
assigning Party from any obligations hereunder, whether accrued or unaccrued,
unless agreed to in writing by the non-assigning Party; further provided that
each Party may, for collateral purposes, mortgage, pledge, encumber or grant a
security interest in or a lien on its interest in this Agreement and/or its
rights hereunder to any commercial bank, trustee or other Person acting on
behalf of any such commercial bank without the consent of the other Party. Any
transfer or assignment in violation of this Section shall be void.
15.5 With the other documents required hereunder, CUSA shall provide to
WPC a Material Safety Data Sheet for each NGL delivered hereunder. WPC
acknowledges that there may be hazards associated with the loading, unloading,
transporting, handling, or use of the NGL sold hereunder, which may require
that warning be communicated to or other precautionary action taken with all
Persons handling, coming into contact with, or in any way concerned with the
NGLs sold hereunder. WPC assumes as to its employees, independent contractors,
and subsequent purchasers of the NGLs sold hereunder all responsibility for all
such necessary warnings or other precautionary measures relating to hazards to
Person and property associated with the NGLs sold hereunder and, furthermore,
WPC shall defend at its own expense, indemnify fully and hold harmless CUSA and
its parents, subsidiaries and Affiliates and its and their agents, officers,
directors, employees, representatives, successors and assigns from and against
any and all liabilities; losses; damages; demands; claims; penalties; fines;
actions; suits; legal, administrative or arbitration or alternative dispute
resolution proceedings; judgments, orders, directives, injunctions, decrees or
awards of any jurisdiction; costs and expenses (including, but not limited to,
reasonable attorneys' fees and related costs) arising out of or in any manner
related to WPC's failure to provide necessary warnings or other precautionary
measures in connection with the NGLs sold hereunder.
15.7 Except as otherwise provided herein, each Party reserves to itself
all rights, set-offs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
15.8 (a) Each Party agrees that it will maintain this Agreement, all
terms and conditions of this Agreement, and all other
Confidential Information (as hereinafter defined) in strictest
confidence, and that it will not cause or permit disclosure of
Confidential Information to any third Person without the express
written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Section
15.8 may be made by either Party: (i) to the extent necessary
for such Party to enforce its rights hereunder against the other
Party; (ii) to the extent a Party is contractually or legally
bound to disclose information to a third Person
24
<PAGE>
(such as a shareholder or commercial lender); (iii) only to the
extent to which a Party hereto is required to disclose all or
part of this Agreement by a statute or by the order of a court,
agency, or other governmental body exercising jurisdiction over
the subject matter hereof, by order, by regulations, or by other
compulsory process (including, but not limited to, deposition,
subpoena, interrogatory, or request for production of documents);
(iv) to the extent required by the applicable regulations of a
securities or commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the provisions of
this Section). "Confidential Information" shall mean any
information, proprietary to either Party and maintained by it in
confidence or as a trade secret, including, without limitation,
business plans and strategies, proprietary software, financial
statements, customer or client lists, personnel records, analysis
of general energy market conditions, sales, transportation, and
service contracts and the commercial terms thereof, relationships
with current and potential business partners, supplies customers,
service providers and financial sources, data base contents and
valuable information of a like nature relating to the business of
such Party. It is understood and agreed that Confidential
Information shall not include information of a Party that (w)
becomes generally available to the public at the time of
disclosure to the other Party, or (x) after the time of
disclosure to the other Party, was generally made available to
the public without breach of this Agreement, or (y) the Person
receiving the information can show was rightfully in its
possession at the time of disclosure, or (z) was rightfully
acquired by the recipient from third Persons who did not
themselves obtain such information under a confidentiality or
other similar agreement with the Party whose information was
disclosed.
(b) If either Party is or becomes aware of a fact, obligation, or
circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Section 15.8, it
shall so notify the other Party promptly and shall provide
documentation or an explanation of such disclosure as soon as it
is available. Each Party further agrees to cooperate to the
fullest extent in seeking confidential status to protect any
Confidential Information so disclosed.
(c) The Parties hereto acknowledge that independent legal counsel,
certified public accountants, or other consultants or independent
contractors of a Party (collectively, "Outside Consultants") may,
from time to time, be provided with a copy of this Agreement if,
in the judgment of the disclosing Party, the information
contained in this Agreement is necessary to the performance of
such Outside Consultants' duties. Accordingly, the Parties agree
that such disclosure does not require consent by the other Party,
provided that any such Outside Consultants agree to be bound by
the
25
<PAGE>
provisions of this Section 15.8.
(d) Each Party will be deemed solely responsible and liable for the
actions of its employees, Outside Consultants, officers, and
agents for maintaining the confidentiality commitments of this
Section 15.8, but will be required in that regard only to
exercise such care in maintaining the confidentiality of the
Confidential Information as such Party normally exercises in
preserving the confidentiality of its other commercially
sensitive information.
15.9 Nothing contained in this Agreement shall be construed to create an
association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
15.10 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this
Agreement;
(b) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions; and
(d) the plural shall be deemed to include the singular and vice
versa, as applicable.
15.11 EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY
OF ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY CONSENTS
TO THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT HEREBY
REPRESENTS AND WARRANTS TO THE OTHER PARTY THAT (i) SUCH PARTY'S LEGAL COUNSEL
WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER
PARTY OR BY AN AGENT OF SUCH OTHER PARTY, AND (ii) NEITHER PARTY EXECUTING THIS
AGREEMENT IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.12 Any notice or other communication provided for in this Agreement or
any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand; or, if sent by
26
<PAGE>
mail, upon deposit in the United States mail, either U.S. Express Mail,
registered mail, or certified mail, with all postage fully prepaid; or, if sent
by courier, by delivery to a bonded courier with charges paid in accordance with
the customary arrangements established by such courier, in each case addressed
to the parties at the following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager
NGL Marketing
Telephone: (713) 507-3715
Telecopy: (713) 507-6408
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
If to CUSA:
Notices and Correspondence
--------------------------
Chevron U.S.A. Inc.
P.O. Box 2100
Houston TX 77252
Attention: Midstream Business Unit -
Alliance Manager (CPDN)
Phone: (713) 754-2437
Fax: (713) 754-2536
Statements
----------
Chevron U.S.A. Inc.
P. O. Box J
Concord CA. 94524
Attention: Section 980
Telephone: (510) 827-7382
Telecopy: (510) 680-4372
Payments Shall Be Made By Wire Transfer To:
------------------------------------------
27
<PAGE>
Chevron U.S.A. Production Company
Account No.5951704
First National Bank of Chicago B Chicago, IL
ABA Ref. No. 071 000 013
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the Day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
15.13 No director, employee, or agent of either Party shall give or
receive any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement. Any mutually agreeable
representative(s) authorized by either Party may audit the applicable records of
the other Party solely for the purpose of determining whether there has been
compliance with this section, but no more often than once during each Year
during the term hereof.
15.14 Each Party shall provide the other Party with such reports as may be
mutually agreeable to both Parties. Each Party shall maintain such records and
accounts as may be necessary to the performance of its respective duties and
obligations hereunder, in accordance with good business practices.
15.15 This Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever, it being the intention of the Parties that no
third Person shall be deemed a third Party beneficiary of this Agreement.
15.16 Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to each of them, in
order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the Day
and Year first above written.
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
By: Warren Petroleum G. P., Inc., its General
Partner
28
<PAGE>
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
CHEVRON U.S.A. INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
29
<PAGE>
EXHIBIT A
Attached to and made a part of that certain
Master Natural Gas Liquids Purchase
Agreement between Warren Petroleum
Company, Limited Partnership and Chevron U.
S. A. Inc.
INDEX OF THE SPECIFICATIONS
-----------------------------
FOR NGLS PURCHASED BY WPC
-------------------------
<TABLE>
<CAPTION>
Number Name Page
- ------ ---- ----
<S> <C> <C>
S-100 Demethanized Raw Product - Pipelined 30
S-101 Demethanized Raw Product - Trucked 32
S-103 Deethanized Raw Product 34
S-104 Propane-Butane Mix 36
S-105 Butane-Natural Gasoline 38
S-200 80-20 Ethane-Propane Mix 40
S-202 Purity Ethane 41
S-300 Propane 42
S-400 Normal Butane 44
S-401 Isobutane 45
S-402 Mixed Butanes 46
S-500 Normal Pentane 47
S-501 Isopentane 48
S-600 Natural Gasoline 49
S-601 Hexanes Plus 50
</TABLE>
<PAGE>
DEMETHANIZED RAW PRODUCT
PIPELINE SPECIFICATION
S-100
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for any
demethanized raw material of natural gas liquids received by WPC for delivery
into a Pipeline System.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume Predominantly Ethane, Propane, Butanes
& Natural Gasoline (Pentanes & Heavier) GPA 2177
Methane & Ethylene 2.0 of Ethane
Ethylene 1.0 of Ethane
Propylene 5.0 of Propane
Butylene 1.0 of Butanes ASTM D-2163
2. Corrosion
---------
Copper Strip @ 100/F (Invalid if 1-b ASTM D-1838
additive or inhibitor is used.)
Corrosion Additive or Inhibitor, PPM by Weight 1 Applicable Industry
3. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
4. Carbon Dioxide
--------------
PPM by Weight in Liquid 1000 GPA 2177
5. Dryness No Free Water Visual
-------
6. Pentanes & Heavier No Color Visual Using White Cup Method
------------------
Perform the Saybolt color test after weathering
sample to 70/F if white cup indicates possible color.
Color
-----
Saybolt No. Plus 25 ASTM D-156
Distillation
------------
End Point, /F 375 ASTM D-216
7. Vapor Pressure
--------------
WPC reserves the right to limit the amount of product having a vapor pressure above four-hundred (400) psia at 85/F
delivered at any point for injection into a pipeline to the extent necessary to ensure that the vapor pressure of the composite
stream transported in the pipeline does not exceed four-hundred (400) psia at 85/F. Vapor pressure shall be determined by ASTM
Method D-1267 with an 85/F constant temperature bath.
8. Deleterious Substances (PPM by Weight in Liquid)
------------------------------------------------
COS 1
Ammonia 1
Fluorides 1
</TABLE>
Product Accounting
- ------------------
For accounting purposes, methane and ethylene shall be considered ethane,
propylene shall be considered propane, and butylenes shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
Tariff Specifications
- ---------------------
Products delivered to WPC shall also meet any individual requirements of the
applicable Pipeline Company's published tariff product
<PAGE>
specifications in effect at time of delivery if the individual tariff
specification is more stringent than that of WPC.
Methanol
- --------
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
DEMETHANIZED RAW PRODUCT
TRUCK TRANSPORT SPECIFICATION
S-101
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for any
demethanized raw material of natural gas liquids transported by insulated tank
trucks for receipt by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume Predominantly Ethane, Propane
Butanes & Natural Gasoline
(Pentanes & Heavier) GPA 2177
Methane & Ethylene 2.0 of Ethane
Ethylene 1.0 of Ethane
Propylene 5.0 of Propane ASTM D-2163
Butylene 1.0 of Butanes
2. Product Vapor Pressure 275 psig ASTM D-1267
----------------------
3. Loading Temperature
-------------------
Minimum Product Loading
Temperature, /F 0
4. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
5. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
6. Carbon Dioxide
--------------
PPM by Weight in Liquid 1000 GPA 2177
7. Dryness No Free Water Visual
-------
8. Pentanes & Heavier No Color Visual using white
------------------ cup method
Perform the Saybolt color test
after weathering sample to 70/F
if white cup indicates possible
color.
Color
-----
Saybolt No. Plus 25 ASTM D-156
Distillation
------------
End Point, /F 375 ASTM D-216
9. Odorization
-----------
This product shall not be odorized.
10. Deleterious Substances (PPM by Weight in Liquid)
------------------------------------------------
COS 1
Ammonia 1
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Fluorides 1
</TABLE>
Product Accounting
- ------------------
For accounting purposes, methane and ethylene shall be considered ethane,
propylene shall be considered propane, and butylenes shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
Methanol
- --------
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
DEETHANIZED RAW PRODUCT
TRUCK TRANSPORT SPECIFICATION
S-103
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for any
deethanized raw material of natural gas liquids transported by tank trucks for
receipt by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume Predominantly Propane, Butanes &
Natural Gasoline (Pentanes & Heavier) GPA 2177
Ethane and Ethylene As limited by other
Components & Vapor
Pressure
Propylene 5.0 of Propane ASTM D-2163
Butylene 1.0 of Butanes
2. Vapor Pressure
--------------
Psig @ 100/F 240 ASTM D-1267
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.).
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
5. Carbon Dioxide
--------------
PPM by Weight in Liquid 1000 GPA 2177
6. Dryness No Free Water Visual
-------
7. Pentanes & Heavier No Color Visual using White
------------------ Cup Method
Perform the Saybolt color test
after weathering sample to 70/F
if white cup indicates possible
color.
Color
-----
Saybolt No. Plus 25 ASTM D-156
Distillation
------------
End Point, /F 375 ASTM D-216
8. Odorization
-----------
This product shall not be odorized.
9. Deleterious Substances (PPM by Weight in Liquid)
------------------------------------------------
COS 1
Ammonia 1
Fluorides 1
</TABLE>
<PAGE>
Product Accounting
- ------------------
For accounting purposes, ethylene shall be considered ethane, propylene shall be
considered propane and butylenes shall be considered normal butane within the
above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
Methanol
- --------
Shippers should reduce methanol levels to the lowest practical level. Injection
rates above the minimum are expensive and wasteful and methanol can destroy
catalyst beds in downstream operations.
<PAGE>
PROPANE-BUTANE MIXTURE
SPECIFICATION
S-104
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for
propane-butane mixtures received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume Predominantly Propane, Isobutane &
Normal Butane
Ethane 2.0 of Propane ASTM D-2597
Propylene 1.0 of Propane ASTM D-2163
Butylene 1.0 of Isobutane
Pentanes & Heavier 2.0 of Butanes
2. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry Practices
3. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
4. Volatile Residue
----------------
95% Evaporated, Temperature, /F +36 ASTM D-1837
5. Dryness No Free Water Visual
-------
6. Carbonyl Sulfide
----------------
PPM by Weight in Liquid 2 Field - Length of
(Field test invalid if Stain Tube
C4+ exceeds 1.0 LV%) Lab - UOP 212 or UOP 791
Lab-Gas Chromatography with
Flame Photometric Detector
7. Hydrogen Sulfide
----------------
PPM by Weight in Liquid 1 Field - Length of Stain Tube.
(Lab test required if field Lab - Gas Chromatography
test is positive.) with Flame Photometric
Detector
The following tests are optional, depending upon product source:
----------------------------------------------------------------
8. Ammonia (PPM by Weight in Liquid)
---------------------------------
PPM by Weight in Liquid 1 Field - Length of Stain Tube
Lab - UOP 430
9. Fluorides (PPM by Weight in Liquid)
-----------------------------------
PPM by Weight in Liquid as 1 Field - Length of
Monatomic Fluorine Stain Tube
Lab-UOP 619-83
10. Pentanes & Heavier No Color Visual using white cup
------------------ method
(For C5+ > 2% LV)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Perform the following Saybolt color test
after weathering sample to 70/F if white
cup indicates possible color.
Color
-----
Saybolt No. Plus 25 ASTM D-156
Distillation
------------
End Point, /F 375 ASTM D-216
</TABLE>
Product Accounting
- ------------------
For accounting purposes, ethane and propylene shall be considered propane,
butylenes shall be considered normal butane, and pentanes and heavier shall be
considered normal butane within the above listed specification limits. Any
excess of these hydrocarbon components above the specification limits shall not
be accounted for.
NOTE: The test method for Item 4 is not necessary if an adequate compositional
- -----
analysis is available which indicates compliance with this requirement.
<PAGE>
BUTANE-NATURAL GASOLINE MIXTURE
SPECIFICATION
S-105
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for butane-
natural gasoline mixtures received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition Predominantly Isobutane, ASTM E-260
----------- Normal Butane & Natural
Percent by Liquid Volume Gasoline (Pentanes &
Heavier) GPA 2177
ASTM D2597
Propane 3.0 of Isobutane
Butylene 1.0 of Isobutane
2. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or Applicable Industry
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
or Gas Chromatography
with Flame Photometric
Detection
4. Dryness No Free Water Visual
-------
5. Ammonia
-------
PPM by Weight in Liquid 1 Field - Length of
Stain Tube
LaB - UOP 430
6. Hydrogen Sulfide
----------------
PPM by Weight in Liquid 1 Field - Length of
(Lab test required if field Stain Tube
test is positive) Lab - Gas Chromatography
with Flame Photometric
Detection
7. Pentanes & Heavier No Color Visual using
------------------
(Only if C5+ > 2 LV%) White Cup Method
Perform the Saybolt color test
after weathering sample to 70/F
if white cup test indicates
possible color.
Color
-----
Saybolt No. Plus 25 ASTM D-156
Distillation
------------
End Point, /F 375 ASTM D-216
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
8. Fluorides
---------
PPM by weight in liquid 1
</TABLE>
Product Accounting
- ------------------
For accounting purposes, propane shall be considered isobutane and butylenes
shall be considered normal butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
ETHANE-PROPANE
80-20 MIXTURE
SPECIFICATION
S-200
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for ethane-
propane 80-20 mixtures received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Methane (Percent of Ethane) 2.0 GPA 2177
Ethylene (Percent of Ethane) 1.0
Methane, Ethane & Ethylene 78.0 82.0
Propane, Propylene & Butanes 18.0 22.0 ASTM D-2163
Propylene 1.0
Butanes 0.8
2. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. Total Sulfur
------------
PPM by Weight in Liquid 120 ASTM D-3246
4. Dryness No Free Water Visual
-------
5. Carbon Dioxide
--------------
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
Product Accounting
- ------------------
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
PURITY ETHANE
SPECIFICATION
S-202
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for purity ethane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Methane 3.0 GPA-2177
Ethane 95.0 100.0
Ethylene 1.0
Heavier than Ethane 3.5 ASTM D-2163
Propylene 1.0
2. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. Total Sulfur
------------
PPM by Weight in Liquid 30 ASTM D-3246
4. Dryness No Free Water Visual
-------
5. Carbon Dioxide
--------------
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
Product Accounting
- ------------------
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
<PAGE>
PROPANE
SPECIFICATION
S-300
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for propane
received by WPC. This product meets the requirement of the GPA HD-5 propane
specification.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume Ethane As limited by other
components & vapor
pressure.
Propane 90.0 100
Propylene 5.0 ASTM D-2163
Butanes & Heavier 2.5
2. Vapor Pressure
--------------
Psig @ 100/F 208 ASTM D-1267
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.) Corrosion
Additive or Inhibitor, PPM by Weight 1 Applicable Industry Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 120 ASTM D-3246
5. Hydrogen Sulfide
----------------
PPM by Weight in Liquid 1 Field - Length of Stain Tube
(Lab test required if field test is positive.) Lab Chromatography with
Flame Photometric Detector
6. Carbonyl Sulfide
----------------
PPM by Weight in Liquid 2 Field-Length of
(Field test invalid if C\\4\\+ exceeds Stain Tube
1.0 LV%) (Lab test required if Lab-UOP 212 or UOP 791
field test is positive.) Lab-Gas Chromatography with
Flame Photometric Detector
7. Non-Volatile Residue
--------------------
a) Milliliters @ 100/F 0.05 ASTM D-2158
b) Oil Stain Pass
The following tests are optional, depending upon the product source:
- --------------------------------------------------------------------
8. Dryness
-------
Freeze Valve, Seconds 60 (Note 2) ASTM D-2713
9. Volatile Residue
----------------
95% Evaporated-Temperature, /F -37 ASTM D-1837
10. Ammonia
-------
PPM by Weight in Liquid 1 Field-Length of
Stain Tube
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Lab - UOP 430
11. Fluorides
---------
PPM by Weight in Liquid as 5 Field-Length of Stain Tube
Monatomic Fluorine Lab-UOP-619-83
12. Other Deleterious Substances (PPM by Weight in Liquid)
------------------------------------------------------
Includes but not limited to 1 Gas chromatography with flame
(Isoprene, Butadiene, Vinyl ionization or electron
Chloride, glycol, amine, caustic) capture detection or other
industry accepted methods
</TABLE>
NOTES: (1) The test methods for items 2 and 7 are not necessary if a
- ------
compositional analysis is available which indicates compliance with
these requirements.
(2) The addition of methanol in the distribution system should be on a
spot basis and must not exceed a rate of 5 gallons per 10,000
gallons of product.
<PAGE>
NORMAL BUTANE
SPECIFICATION
S-400
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for normal butane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Isobutane and Lighter 5.0 ASTM D-2163
Butylene (Percent of N.Butane) 1.0
N. Butane & Butylene 95.0 100 GPA 2165
Pentanes & Heavier 2.0
2. Vapor Pressure
--------------
Psig @ 100/F 50 ASTM D-1267
3. Corrosion
---------
Copper Strip @100/F 1-b ASTM D-1838
(Invalid if additive
or inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 140 ASTM D-3246
5. Volatile Residue
----------------
95% Evaporated-Temperature, /F +36 ASTM D-1837
6. Dryness No Free Water Visual
-------
</TABLE>
NOTE: The test methods for Items 2 and 5 are not necessary if a compositional
- -----
analysis indicates compliance with these requirements.
<PAGE>
ISOBUTANE
SPECIFICATION
S-401
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for isobutane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Propane, Propylene and Lighter 3.0 ASTM D-2163
Isobutane 96.0 100
Butylene, Normal Butane
& Heavier 4.0
2. Vapor Pressure
--------------
Psig @ 100/F 62 ASTM D-1267
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 140 ASTM D-3246
5. Volatile Residue
----------------
95% Evaporated-Temperature /F +16 ASTM D-1837
6. Dryness No Free Water Visual
-------
</TABLE>
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
- -----
compositional analysis is available which indicates compliance with
these requirements.
<PAGE>
MIXED BUTANES
SPECIFICATION
S-402
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for commercial
butane received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition Predominately Isobutane ASTM E-260
-----------
Percent by Liquid Volume & Normal Butane
Propane 3.0 of Isobutane ASTM D-2163
Butylene 1.0 of Isobutane
Pentanes & Heavier 2.0 of Butanes
2. Vapor Pressure
--------------
Psig @ 100/F 70 ASTM D-1267
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM 1 Applicable Industry
Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 140 ASTM D-3246
5. Volatile Residue
----------------
95% Evaporated, Temperature, /F +36 ASTM D-1837
6. Dryness No Free Water Visual
-------
7. Butadiene
---------
Percent by Liquid Volume 0.5 Gas Chromatography
</TABLE>
Product Accounting
- ------------------
For Accounting purposes, propane shall be considered isobutane, butylenes shall
be considered normal butane, and pentanes and heavier shall be considered normal
butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
NOTE: The test methods for Items 2 and 5 are not necessary if an adequate
- -----
compositional analysis is available which indicates compliance with
these requirements.
<PAGE>
NORMAL PENTANE
SPECIFICATION
S-500
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for normal
pentane received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Isopentane & Lighter 5.0 GPA 2165
Normal Pentane 90 100 ASTM D-2597
Heavier than Normal Pentane 7.0
2. Vapor Pressure
--------------
Psi @ 100/F, Reid 17 ASTM D-323
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Dryness No Free Water Visual
-------
5. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
or Gas Chromatography
with Flame Photometric
Detection
</TABLE>
<PAGE>
ISOPENTANE
SPECIFICATION
S-501
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for isopentane
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition
-----------
Percent by Liquid Volume ASTM E-260
Normal Butane & Lighter 5.5 ASTM D-2597
Isopentane 94.0 100 GPA 2165
Neopentane 2.0
Normal Pentane & Heavier 4.0
2. Vapor Pressure
--------------
Psi @ 100/F, Reid 22 ASTM D-323
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Dryness No Free Water VISUAL
-------
5. Total Sulfur
------------
PPM by Weight in Liquid 150 ASTM D-3246
or Gas Chromatography
with Flame Photometric
Detection
</TABLE>
<PAGE>
NATURAL GASOLINE
SPECIFICATION
S-600
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for natural
gasoline received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Butanes & Lighter 3.0 GPA 2165
Pentanes & Heavier 97 100
2. Vapor Pressure
--------------
Psi @ 100/F, Reid 16 ASTM D-323
3. Corrosion
---------
Copper Strip @ 104/F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Doctor Test Negative GPA 1138
-----------
5. Dryness No Free Water Visual
-------
6. Color plus 25 No Color Field White Cup Method
----- Lab-ASTM D-156
7. Distillation
------------
End Point, /F 375 ASTM D-216
</TABLE>
NOTE: The test methods for Items 2 and 7 are not necessary if an adequate
- -----
compositional analysis is available which indicates compliance with
these requirements.
An RVP of 16 Psi as set forth in Item 2 will be acceptable as long as
the state and federal laws, rules and regulations allow for same. If the
allowed RVP changes, these specifications shall change accordingly.
<PAGE>
HEXANES PLUS
SPECIFICATION
S-601
Effective Date: 3/1/96
Product characteristics with test methods are herein specified for hexanes plus
received by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------------- ------- ------- -------------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Normal Pentane and Lighter 5.0
Heavier than Normal Pentane 95.0 100 GPA 2165
2. Vapor Pressure
--------------
Psi @ 100/F, Reid 8 ASTM D-323
3. Corrosion
---------
Copper Strip @ 100/F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
4. Dryness No Free Water VISUAL
-------
5. Distillation Endpoint 375/F ASTM D-216
---------------------
</TABLE>
<PAGE>
EXHIBIT B
Attached to and made a part of that certain Master Natural
Gas Liquids Purchase Agreement between Warren Petroleum
Company, Limited Partnership and Chevron U. S. A. Inc.
CUSA NGL SALES TO WPC
<TABLE>
<CAPTION>
===========================================================================
STATE PLANT MARKET
===========================================================================
<S> <C> <C>
Wyoming Carter Creek Gas Plant Mapco Pipeline
- ---------------------------------------------------------------------------
Wyoming Whitney Canyon Gas Plant Mapco Pipeline
- ---------------------------------------------------------------------------
Wyoming Enron Fractionator/Millis Terminal Mapco Pipeline
- ---------------------------------------------------------------------------
Utah Anschutz Ranch Gas Plant Mapco Pipeline
- ---------------------------------------------------------------------------
Colorado Rangely/Weber SU Gas Plant Mapco Pipeline
- ---------------------------------------------------------------------------
New Mexico Eunice Gas Plant (operated by a third Person) Pipeline
- ---------------------------------------------------------------------------
New Mexico Monument Gas Plant Pipeline
- ---------------------------------------------------------------------------
New Mexico Eunice Gas Plant (operated by WPC) Pipeline
- ---------------------------------------------------------------------------
New Mexico Saunders V/B Gas Plant Pipeline
- ---------------------------------------------------------------------------
Texas Goldsmith Gas Plant Pipeline
- ---------------------------------------------------------------------------
Texas Headlee Gas Plant Pipeline
- ---------------------------------------------------------------------------
Texas Monahans Gas Plant Pipeline
- ---------------------------------------------------------------------------
Texas Sand Hills Gas Plant Pipeline
- ---------------------------------------------------------------------------
Texas Moore's Orchard Gas Plant Pipeline
- ---------------------------------------------------------------------------
Texas Sherman Gas Plant Pipeline
===========================================================================
</TABLE>
<PAGE>
EXHIBIT C
Attached to and made a part of that certain
Master Natural Gas Liquids Purchase
Agreement between Warren Petroleum
Company, Limited Partnership and Chevron U.
S. A. Inc
CUSA NGL SALES TO WPC
<TABLE>
<CAPTION>
========================================
STATE PLANT MARKET
========================================
<S> <C> <C>
Oklahoma Comanche Tap Pipeline
- ----------------------------------------
Oklahoma Leedey Gas Plant Pipeline
- ----------------------------------------
Texas Canadian Gas Plant Pipeline
========================================
</TABLE>
<PAGE>
EXHIBIT D
Attached to and made a part of that certain
Master Natural Gas Liquids Purchase
Agreement between Warren Petroleum
Company, Limited Partnership and Chevron U.
S. A. Inc
CUSA NGL SALES TO WPC
<TABLE>
<CAPTION>
============================================================
STATE PLANT MARKET
============================================================
<S> <C> <C>
Wyoming Enron Fractionator/Millis Terminal Local Storage
============================================================
</TABLE>
<PAGE>
EXHIBIT E
Attached to and made a part of that certain
Master Natural Gas Liquids Purchase
Agreement between Warren Petroleum
Company, Limited Partnership and Chevron U.
S. A. Inc
CUSA NGL SALES TO WPC
<TABLE>
<CAPTION>
=============================================================
STATE PLANT MARKET
=============================================================
<S> <C> <C>
Wyoming Enron Fractionator/Millis Terminal Local Sales
- -------------------------------------------------------------
Wyoming Opal Gas Plant Local Sales
- -------------------------------------------------------------
Colorado West Frac Fractionating Plant Local Sales
- -------------------------------------------------------------
Texas Sherman Gas Plant Local Sales
- -------------------------------------------------------------
California McKittrick Gas Plant Local Sales
- -------------------------------------------------------------
California Taft 1C Gas Plant Local Sales
- -------------------------------------------------------------
California Four Star Gas Plant Local Sales
- -------------------------------------------------------------
California Elks Hills Gas Plant Local Sales
- -------------------------------------------------------------
California Kettlemen hills Gas Plant Local Sales
- -------------------------------------------------------------
California Gaviota Gas Plant Local Sales
- -------------------------------------------------------------
California N. Coles Levee Gas Plant Local Sales
=============================================================
</TABLE>
Notwithstanding the provisions of Section 5.1 (iv) of the Agreement, if NGLs
produced from any of the California or Wyoming Plants listed above are directly
sold to a refinery owned by CUSA or any of its Affiliates as of the date hereof,
the price payable to CUSA by WPC for such NGLs shall be as follows:
1. With respect to the NGLs produced at the California Plants listed above, if
the NGLs are sold to the Richmond Refinery, the price shall be equal the
average of the Daily high and low prices of each NGL as quoted by the OPIS
for the San Francisco Bay Area on the last posted working week during the
Month immediately preceding the Month in which the NGLs are delivered to
the refinery, less Transportation and/or T&F Costs, if applicable;
<PAGE>
2. With respect to the NGLs produced at the California Plants listed above, if
the NGLs are delivered into Lonestar for the El Segundo Refinery, the price
shall be equal the average of the Daily high and low prices of each NGL as
quoted by the OPIS for Los Angeles on the last posted working week during
the Month immediately preceding the Month in which the NGLs are delivered
to Lonestar for the refinery, less Transportation and/or T&F Costs, if
applicable; and
3. With respect to the NGLs produced at the Wyoming Plants listed above, if
the NGLs are sold to the Salt Lake City Refinery, the price shall be equal
the average of the Daily high and low prices of each NGL as quoted by the
OPIS for Mont Belvieu, Texas (Non-TET) on the last five (5) Business Days
of the Month immediately preceding the Month in which the NGLs are
delivered to the refinery, less five ($0.05) cents per gallon and less
fractionation costs, if applicable.
With respect to the NGLs sold as set forth above, CUSA agrees to pay to WPC a
marketing fee equal to five percent (5%) of the price determined in accordance
with 1, 2 or 3 above, as applicable. The pricing/basis differentials set forth
in 3 above shall be subject to the same annual renegotiation option applicable
to the Venice Plant as set forth in Section 5.5 of the Agreement.
<PAGE>
"Confidential Treatment Requested. The redacted material has been
separately filed with the Commission."
* REDACTED
<PAGE>
EXHIBIT 10.9
Pages where confidential treatment has been requested are stamped "Confidential
Treatment Requested. The redacted material has been separately filed with the
Commission", the appropriate section has been marked at the appropriate place
and in the margin with a (*).
GAS SUPPLY AND SERVICE AGREEMENT
BETWEEN
CHEVRON PRODUCTS COMPANY
(PERTH AMBOY ASPHALT PLANT)
AS "BUYER"
AND
NATURAL GAS CLEARINGHOUSE
AS "SELLER"
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS................................................... 1
ARTICLE 2. QUANTITY; NOMINATIONS......................................... 2
ARTICLE 3. FAILURE TO PERFORM............................................ 3
ARTICLE 4. TRANSPORTATION................................................ 4
ARTICLE 5. QUALITY....................................................... 6
ARTICLE 6. DELIVERY AND PRESSURE; TITLE AND CONTROL; LIABILITY........... 6
ARTICLE 7. MEASUREMENT................................................... 7
ARTICLE 8. COMMODITY CHARGE.............................................. 7
ARTICLE 9. BILLING AND PAYMENT........................................... 10
ARTICLE 10. TAXES......................................................... 12
ARTICLE 11. LAWS AND REGULATION........................................... 12
ARTICLE 12. FORCE MAJEURE................................................. 12
ARTICLE 13. WARRANTY OF TITLE AND ROYALTIES............................... 13
ARTICLE 14. TERM.......................................................... 13
ARTICLE 15. CONFIDENTIALITY............................................... 13
ARTICLE 16. ARBITRATION................................................... 14
ARTICLE 17. MISCELLANEOUS................................................. 15
<PAGE>
GAS SUPPLY AND SERVICE AGREEMENT
THIS AGREEMENT is made and entered into as of September 1, 1996 (the
"Effective Date"), by and between CHEVRON PRODUCTS COMPANY, a division of
Chevron U.S.A. Inc., a Pennsylvania corporation, herein referred to as "Buyer",
and NATURAL GAS CLEARINGHOUSE, a Colorado general partnership, herein referred
to as "Seller".
WITNESSETH
WHEREAS, Buyer requires a firm but flexible supply of natural gas for use
in Buyer's Perth Amboy Asphalt Plant in Middlesex County, New Jersey, and Seller
desires to sell such gas to Buyer on a firm basis as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
For the purpose of this Agreement, the following definitions are
applicable:
1.1. The term "Agreement" means this agreement, including all exhibits
attached hereto and all amendments hereof that may be made from time to time.
1.2. The term "Btu" means British thermal unit, and is the quantity of
heat required to raise the temperature of 1 pound of water from 58.5 to 59.5
Fahrenheit.
1.3. The term "Business Day" means any day on which commercial banks in
Houston, Texas, are open for general business.
1.4. The term "Contract Year" means the 12-month period from September 1
of each year through August 31 of the succeeding year during the term hereof.
1.5. The term "day" means a period of 24 consecutive hours, coinciding
with the gas day of Tetco.
1.6. The term "Facility" means Buyer's Perth Amboy Asphalt Plant in
Middlesex County, New Jersey.
1.7. The term "FERC" means the Federal Energy Regulatory Commission or
successor agency.
1.8. The term "gas" means natural gas to be made available by Seller and
taken by Buyer under the terms of this Agreement.
<PAGE>
1.9. The term "Locked Price" means the price per MMBtu to be paid by
Buyer, in lieu of the otherwise applicable Commodity Charge, for Locked
Quantities of gas purchased hereunder. A Locked Price shall be determined in
accordance with Section 8.5. hereof.
1.10. The term "Locked Quantities" means quantities of gas to be sold by
Seller and purchased by Buyer during any month during the term hereof, as to
which a Locked Price has been established.
1.11. The term "MMBtu" means 1,000,000 British thermal units.
1.12. The term "month" means the period beginning on the first day of a
calendar month and ending on the first day of the next succeeding month.
1.13. The term "Party" or "Parties" means Seller and/or Buyer under this
Agreement.
1.14. The term "Delivery Point" means either (a) the interconnect between
Tetco and the Facility.
1.15. The terms "Transporter" and "Tetco" mean Texas Eastern Transmission
Company.
1.16. The term "Unlocked Quantities" means quantities of gas as to which no
Locked Price has been established.
1.17. The term "Maximum Contract Quantity" or "MCQ" means 10,000 MMBtu per
day of gas.
1.18. The term "Daily Baseload Quantity" or "DBQ" means the quantity of gas
(in MMBtu per day) nominated as such by Buyer at least 48 hours prior to the
first of the month nomination deadline for transportation on Texas Eastern
Transmission Company. In the absence of written agreement to the contrary, the
DBQ shall never exceed the MCQ.
ARTICLE 2.
QUANTITY; NOMINATIONS
2.1. SELLER'S OBLIGATION. On each day during the term hereof, Seller will
make available at the Delivery Point, if nominated by Buyer as provided herein,
the full natural gas requirements of the Facility (including any requirements
for gas supplies which Buyer will provide to other facilities located on or near
the Facility property and which are related to or in support of the operation of
the Facility, whether owned by an affiliate of Buyer or a third party), up to
but not to exceed the Maximum Contract Quantity.
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<PAGE>
2.2. BUYER'S OBLIGATION. On each day during the term hereof, Buyer shall
take from Seller, if made available at the Delivery Point, the full natural gas
requirements of the Facility. This provision shall not, however, prevent Buyer
from acquiring gas or alternate fuels from third parties when necessary to
mitigate its damages from Seller's non-delivery as described in Section 3.1.
2.3. PURCHASE NOMINATIONS. By the 20th day of each month or five Business
Days prior to Texas Eastern's first of the month nomination deadline, whichever
is earlier, Buyer shall provide Seller a non-binding, good-faith estimate of the
quantities of gas which the Facility expects to require on each day of the
subsequent month. At least 48 hours before Texas Eastern's first of the month
nomination deadline, Buyer shall advise Seller of the Daily Baseload Quantity
which Buyer elects for the upcoming month, using a form similar to that attached
hereto as Exhibit "A". Thereafter, any daily nomination changes which Buyer
desires to make after its first of the month nomination shall be transmitted to
Seller at least two hours prior to Texas Eastern's nomination deadline for the
day on which the change is to be effective. Seller agrees to use its best
efforts to accept and implement nominations after the deadlines stated above,
subject to the requirements and willingness of the applicable Transporter.
Buyer's and Seller's representatives shall exchange information as necessary to
ensure that Seller is aware, to the maximum extent practicable, of the actual
gas requirements of the Facility for each day.
ARTICLE 3.
FAILURE TO PERFORM
3.1. SELLER'S FAILURE TO MAKE GAS AVAILABLE. If Seller fails, in whole or
in part, to make available to Buyer's Facility the full quantity of gas
nominated by Buyer on any day, and if such failure is not excused by an event of
force majeure, Buyer shall be entitled to recover liquidated damages for such
failure in an amount equal to the shortfall in delivery, multiplied by Buyer's
cost per MMBtu of cover supplies, including natural gas, vaporized propane, or
other alternate fuels, less the Commodity Charge which would have been payable
but for the failure to deliver. Seller agrees to pay Buyer any liquidated
damages to which Buyer is entitled under this Section 3.1. on or before the
10th day after Seller receives a written calculation of the amount of such
liquidated damages from Buyer. Buyer shall use reasonable efforts to notify
Seller prior to obtaining replacement supplies and to obtain any replacement
supplies at the lowest reasonable price, but it is understood that Buyer's
Facility does not employ full time gas supply management personnel and the only
practical source of cover may be vaporization of propane, other alternative
fuels, or unauthorized overrun gas from the Transporter's system.
3.2. BUYER'S FAILURE TO PURCHASE GAS. If Buyer fails on any day, to
purchase the full quantity of gas nominated by Buyer on any day, as set forth in
Section 2.3., and if such failure is not excused by an event of force majeure
or Seller's failure to make gas available, Seller shall be entitled to recover
liquidated damages for such failure in
3
<PAGE>
an amount equal to the purchase deficiency multiplied by the amount, if any, by
which the Commodity Charge which would have been payable hereunder exceeds the
price per MMBtu received by Seller in an alternate sale of the deficient
quantity. Buyer agrees to pay Seller any liquidated damages to which Seller is
entitled under this Section 3.2. on or before the 10th day after Buyer receives
a written calculation of the amount of such liquidated damages from Buyer.
Seller shall use reasonable efforts to obtain the highest price reasonably
available in any such alternate sale.
3.3. TERMINATION RIGHTS UPON MATERIAL DEFAULT. If Seller fails to make
available to Buyer's Facility at least 95% of the full quantity of gas nominated
by Buyer on any three consecutive days after notice to Seller that a default has
occurred, or on five or more days (following notice in each case), which need
not be consecutive, in any calendar year, and if such failure is not excused by
an event of force majeure, Buyer shall have the right to terminate this
Agreement by giving Seller at least thirty days prior written notice of
termination. Any notice of termination under this Section must be given within
thirty days after occurrence of the event(s) on which the termination is based.
Neither Party shall have any liability to the other under this Agreement
following any termination of this Agreement pursuant to this Section, except for
payment of amounts accruing prior to such termination.
3.4. NO SPECIAL DAMAGES. THE REMEDIES SPECIFIED IN SECTIONS 3.1., 3.2.,
and 3.3. ABOVE, AND SECTION 8.5.5. BELOW, SHALL BE THE SOLE AND EXCLUSIVE
REMEDIES FOR SELLER'S FAILURE TO DELIVER GAS ACCORDING TO THIS AGREEMENT. THE
PRICING AND BALANCING PROVISIONS OF THIS AGREEMENT ARE INTENDED AS SELLER'S
EXCLUSIVE REMEDIES FOR ANY FAILURE BY BUYER TO PURCHASE NOMINATED QUANTITIES OF
GAS UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY BREACH OR ALLEGED
BREACH OF THIS AGREEMENT.
3.5. NO THIRD PARTY BENEFICIARIES. It is specifically agreed that there
are no third party beneficiaries to this Agreement, and that this Agreement
shall not impart any rights enforceable by any person, firm, organization, or
corporation not a Party hereto.
ARTICLE 4.
TRANSPORTATION
4.1. TRANSPORTATION GUIDELINES. The rules, guidelines, operational
procedures and policies of the Transporter(s), as they may be changed from time
to time, shall define and control the manner in which gas delivered and sold
under this Agreement is transported. Seller and Buyer each agree to provide to
the other, in as prompt a manner as reasonable, all information necessary to
permit scheduling pursuant to such requirements.
4
<PAGE>
4.2. TRANSPORTATION IMBALANCES.
4.2.1. General. If Seller delivers to the Transporter or Buyer takes
at the Delivery Point(s) a quantity of gas not equal to the quantity nominated
and confirmed for transportation, a "Transportation Imbalance" may occur. Upon
notification by the other Party or Transporter that a Transportation Imbalance
exists, each Party will exercise due diligence to correct the Transportation
Imbalance, subject to any restrictions imposed by Transporter(s). Buyer and
Seller agree to use due diligence to prevent or diminish any occurrences of
Transportation Imbalances, and to minimize any resulting imbalance penalties
through the use of imbalance trading or netting procedures, or other methods
offered by the Transporter. Adjustments to transportation nominations made
pursuant to this paragraph shall not modify or impair the Parties' obligations
or remedies as set forth in Article 3.
4.2.2. Imbalance Cashouts. The Transporter's tariff or applicable
contracts may contain provisions under which, in the event of Transportation
Imbalances related to the gas sold and purchased hereunder, a Party to this
Agreement may be required to purchase net imbalance quantities from the
Transporter, or to sell net imbalance quantities to the Transporter, at prices
determined pursuant to the Transporter's tariff or the applicable contract (such
purchases and/or sales being referred to herein as "cash-outs"). If one Party
hereto is required by the Transporter to cash out an imbalance caused by the
other Party's failure to deliver or receive the quantity of gas nominated and
confirmed for transportation, the Party whose act or omission caused the
Transportation Imbalance shall reimburse the other Party for the penalty
component of the cash-out price. For purposes of this Agreement, the penalty
component of a cash-out price shall be the amount by which the price at which a
Party is required to buy the cashed-out quantity exceeds the Commodity Charge
effective when the imbalance accrued, or the amount by which the Commodity
Charge in effect when the imbalance accrued exceeds the price at which a Party
is required to sell the cashed-out quantity. Due to the possibility of graduated
penalties in the Transporter's tariff, several different penalty components may
apply to portions of a Transportation Imbalance. Once determined, any penalty
components of cash-out prices shall be multiplied by the quantities cashed out
to which such penalties are applicable.
4.2.3. Other Transportation Penalties. Seller shall hold Buyer
harmless from all costs and penalties in addition to those described in Section
4.2.2. which may be assessed by Transporter(s) as a result of over-delivery or
under-delivery of gas caused by Seller. Buyer shall hold Seller harmless from
all costs and penalties in addition to those described in Section 4.2.2. which
may be assessed by Transporter(s) as a result of over-takes or under-takes of
gas caused by Buyer.
4.2.4. Minimization of Penalties. If any costs or penalties
associated with the transportation of gas are anticipated, the Party becoming
aware that such costs or penalties may be assessed or incurred shall inform the
other Party promptly after the Party becomes aware, followed by notice in
writing. Each Party shall then promptly cooperate in good faith with the other
Party to minimize or eliminate, if possible, such
5
<PAGE>
costs or penalties. The Parties shall cooperate with each other and with the
Transporter to verify delivery and receipt of the Nominated Purchase Quantity on
a timely basis.
4.3. UPSTREAM TRANSPORTATION. Seller shall be responsible for
transportation to the Delivery Point(s) and payment of all transportation
charges relating thereto. Buyer shall be responsible for any transportation from
the Delivery Point(s) and payment of all transportation charges relating
thereto.
ARTICLE 5.
QUALITY
5.1. SPECIFICATIONS OF TRANSPORTER. All gas delivered hereunder shall
conform to the quality specifications set forth in the transportation agreement
and/or FERC-approved tariff of the Transporter delivering the gas at the
Delivery Point. Seller's tender of gas which does not meet such quality
specifications shall be deemed a failure to deliver gas for purposes of Article
3. hereof unless the tender of off-spec gas is caused by an event of force
majeure.
5.2. TESTING. Buyer shall have the right to be represented and to
participate in all tests of gas delivered hereunder. Upon request by Buyer, not
more often than once a month, Seller shall cause the Transporter delivering gas
at the Facility to provide Buyer's representative at the Facility a Certificate
of Analysis showing the composition and content of the gas at the Delivery
Point.
ARTICLE 6.
DELIVERY AND PRESSURE; TITLE AND CONTROL; LIABILITY
6.1. DELIVERY AND PRESSURE. All gas to be sold and purchased hereunder
shall be delivered to Buyer at the Delivery Point at the pressure maintained in
the facilities of the Transporter from time to time.
6.2. TITLE AND CONTROL. Title to the gas delivered hereunder shall pass to
and vest in Buyer at the Delivery Point. Seller shall be deemed to be in
exclusive control and possession of said gas prior to the time of delivery to
Buyer, and Buyer shall be deemed to be in exclusive control and possession of
said gas thereafter.
6.3. LIABILITY. The Party deemed to be in control and possession of the
gas sold hereunder shall be responsible for and shall indemnify, defend and hold
the other Party harmless with respect to any losses, claims, liabilities or
damages arising therefrom when such gas is deemed to be in that Party's control
and possession.
6
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
ARTICLE 7.
MEASUREMENT
The unit of volume for measurement of gas delivered hereunder shall be 1
cubic foot of gas. The sales unit of the gas shall be one MMBtu, determined on
a dry basis. All measurements of gas delivered and sold hereunder shall be in
accordance with the provisions of the tariff of the Transporter, insofar as such
tariff applies at the Delivery Point.
ARTICLE 8.
COMMODITY CHARGE
8.1. CALCULATION OF COMMODITY CHARGE. For each MMBtu of gas delivered to
Buyer by Seller at the Delivery Point, Buyer shall pay Seller a "Commodity
Charge" calculated as follows:
8.1.1. For all gas nominated and delivered hereunder on any day up to
the Daily Baseload Quantity, the Commodity Charge shall be Seller's actual
* and reasonable cost of acquiring the gas, plus REDACTED per MMBtu. (The
Parties intend that the portion of the Commodity Charge determined in this
Section by reference to Seller's acquisition cost be replaced by a
published index price at such time as the Parties agree that a suitable
published index price exists. In that event, this Section shall be amended
accordingly.)
8.1.2. For the quantity of gas, if any, delivered on any day pursuant
to Buyer's nomination which is in excess of the Daily Baseload Quantity,
the Commodity Charge shall be the midpoint of the range of prices quoted
for gas flowing on that day in the publication "Gas Daily" under "Daily
* Price Survey" for Tetco's M-3 Zone, plus REDACTED per MMBtu.
8.2. SWING DOWN ADJUSTMENTS. On any day when Buyer nominates less than the
Daily Baseload Quantity, a swing-down adjustment shall apply. The swing-down
adjustment shall be calculated as follows. If Buyer nominates less than the
Daily Baseload Quantity on any day, the midpoint of the range of prices quoted
for gas flowing on that day in the publication "Gas Daily" under "Daily Price
Survey" for Tetco's M-3 Zone shall be subtracted from the Commodity Charge
provided for in Section 8.1.1., and the result shall be multiplied by the
difference between the Daily Baseload Quantity and the quantity nominated for
that day. If the resulting amount is a negative number, that amount shall be
credited to Buyer on the monthly invoice for that month's deliveries. If the
resulting amount is a positive number, that amount shall be charged to Buyer on
the monthly invoice for that month's deliveries.
7
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8.3. NON-PUBLICATION OF INDEX. If any index required for establishing the
Commodity Charge is not published in the applicable publication, or if
significant changes in the marketplace render the current index unsatisfactory
for determining the Commodity Charge, then, in the absence of mutual agreement
to the contrary, a replacement index shall be determined by binding arbitration
in accordance with Article 16. hereof. In any such arbitration, each Party
shall submit its proposal for the replacement index and the arbitrators will be
charged to select from the two proposals the one which best reflects the market
price of gas delivered to the Facility under all of the terms and conditions of
this Agreement. Pending determination of a new index, whether by agreement or
arbitration, the last available index shall be used, subject to retroactive
adjustment after the new index is determined.
8.4. PRICE RENEGOTIATION. Beginning two years after the Effective Date,
either Party may request renegotiation of the Commodity Charge payable under
this Agreement if such Party believes in good faith that the current methodology
does not reflect the fair market value of gas delivered to the Delivery Points
under similar contractual terms. If either Party requests renegotiation pursuant
to this Section 8.4., the Parties shall meet and attempt in good faith to reach
agreement on a different formula for calculation of the Commodity Charge. In any
such price renegotiation, and in any arbitration resulting from a price
renegotiation, the following principles will be applied. The Parties agree, for
purposes of any arbitration which may be requested, that the Commodity Charge is
intended to fairly compensate Seller for the gas supplied under this Agreement
and the related services being provided by Seller, to allow Seller a reasonable
opportunity to fully recover its costs of providing such gas and services, and
to provide Seller a reasonable profit for the efforts expended by it, taking
into consideration the assets placed by Buyer at Seller's disposal and the
opportunities those assets offer. In addition, the Parties acknowledge that (a)
the Commodity Charge is designed primarily to allocate to Buyer the risk of
daily and monthly changes in the commodity price of natural gas, and to
compensate Seller for its services in obtaining, delivering and otherwise
managing the gas supply for the Facility, and (b) Seller's liability for non-
performance under this Agreement is limited to Buyer's cost of cover. Therefore,
evidence of Seller's costs of providing the services called for under this
Agreement will be given greater weight than evidence of charges or fees under
other agreements in which the seller bears a greater portion of the risk of
commodity price fluctuations or a greater potential liability for non-
performance. If the Parties are unable to reach agreement within 60 days after
delivery of the request for renegotiation, then upon 30 days prior written
notice, either Party may require that the issue(s) be submitted to binding
arbitration in accordance with Article 16. In any such arbitration, each Party
shall submit a detailed proposal for calculation of the Commodity Charge and the
arbitrators will be charged to select from the two proposals the one which best
reflects the fair market value of gas delivered to the Facility under all of the
terms and conditions of this Agreement, including the principles stated in this
Section 8.4. If the Commodity Charge is redetermined by arbitration as
provided above, then neither Party shall have the right to again have such
issue(s) submitted to arbitration for at least twelve months following the
decision of the arbitrators.
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8.5. LOCKED PRICE. Subject to the terms set forth herein, in lieu of
paying the applicable Commodity Charge hereunder, Buyer may lock the price of
all or a portion of the gas to be purchased during any of the 12 months
immediately following the date of Buyer's request to lock price (insofar as such
months are during the term hereof), by notifying one of Seller's authorized
representatives by telephone of Buyer's desire to lock price on such gas. If
Buyer opts for such a Locked Price and the Commodity Charge otherwise payable is
based in part upon a published index, or other base amount, plus a monetary
adjustment, the Locked Price so established shall replace the index or base
amount as to Locked Quantities affected by such Locked Price, but the monetary
adjustment shall still be applied to such Locked Quantities.
8.5.1. Timing for Requesting Locked Price; Recording of
Conversations. Buyer may request quote of a Locked Price for gas to be delivered
hereunder by telephone on any Business Day, between the hours of 8:30 a.m. and
2:00 p.m., local Houston, Texas time, up to and including the 7th Business Day
prior to the beginning of the month to which the Locked Price shall apply. The
Parties acknowledge and agree that all telephone conversations between them
relating to a Locked Price may by recorded by either Party, or both, for
purposes of establishing the terms and conditions associated with the Locked
Price. The Parties also agree that the taped conversation may be used to prove
the terms and conditions associated with a Locked Price if the Parties
subsequently disagree on such terms and conditions.
8.5.2. Procedures. As soon as possible after Buyer's telephonic
request, but in any event within 24 hours (excluding weekends and holidays),
Seller shall determine the price per MMBtu at which it is willing and able to
lock price and shall notify Buyer's authorized representative of such price. The
Locked Price will be based on the NYMEX (or other exchange selected by Seller)
posting for the natural gas futures contract applicable to the month(s)
requested by Buyer and prevailing at the time of Buyer's request for a Locked
Price, plus a basis differential adjustment to equate the posted price with an
imputed price at the applicable Delivery Point. If Buyer accepts such Locked
Price, then Seller shall forward to Buyer a "Price Lock Confirmation", similar
to the form attached hereto as Exhibit "B", which specifies the terms to which
the Parties have agreed. Said Price Lock Confirmation shall be forwarded to
Buyer prior to the end of the month in which deliveries are to be made. The
terms set forth in the Price Lock Confirmation shall be binding upon the Parties
unless Buyer notifies Seller in writing that Buyer disputes one or more of the
terms set forth in said Price Lock Confirmation within 48 hours, exclusive of
weekends and Chevron holidays, after Buyer receives the same. Any terms which
remain undisputed after expiration of said period shall be binding on the
Parties, and the Parties shall work together in good faith to resolve any
disputes as expeditiously as possible.
8.5.3. Multiple Price Locks. Buyer may request and establish a
Locked Price on gas quantities for a particular month more than once, so long as
Buyer meets the requirements of this Section 8.5. with regard to timing. Seller
at its option may include all Locked Prices and Locked Quantities in one Price
Lock Confirmation for any applicable month.
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8.5.4. Irrevocability; Nominations; Allocation. Once a Locked Price
has been established for a delivery month hereunder, the Locked Price shall be
irrevocable as to the affected Locked Quantities, and shall not thereafter be
subject to change. Additionally, for any month as to which a Locked Price has
been established, Buyer shall be obligated to nominate and take a quantity of
gas not less than the Locked Quantities then in effect. If Buyer elects to
establish a Locked Price for less than all of the gas to be delivered in any
applicable month, and/or if Buyer and Seller have established more than one
Locked Price for different Locked Quantities, the first gas delivered during
said month shall be the first Locked Quantities established, followed by any
additional Locked Quantities in the order they were established, followed by any
Unlocked Quantities of gas.
8.5.5. Failure to Purchase Locked Quantities. If Buyer fails to
purchase the full quantity of gas subject to a Locked Price in any month, then,
to the extent such failure is not the result of force majeure or Seller's
failure to make the gas available, Buyer shall pay Seller liquidated damages
calculated as follows. The unexcused deficient purchase quantity of gas subject
to a Locked Price shall be multiplied by the difference between the Locked Price
and the settlement price of the natural gas futures contract on NYMEX (or other
applicable exchange) for the Month in which the deficiency occurred, plus or
minus the basis differential set forth in the Price Lock Confirmation. In
addition, if Seller has entered into a financial instrument, including, without
limitation, an over-the-counter basis swap, for purposes of hedging the risk
associated with the basis differential component of the Locked Price, Buyer
shall reimburse Seller one hundred percent (100%) of the actual losses incurred
by Seller under such financial instrument to the extent such losses result from
Buyer's unexcused failure to purchase gas subject to a Locked Price. Seller
shall exercise its best efforts to minimize such losses (including for example
the early termination of financial instruments if Seller reasonably believes at
the time of termination that early termination may minimize such losses).
Buyer's obligation to purchase gas subject to a Locked Price is a monthly
obligation and not a daily obligation and therefore for purposes of this Section
Buyer shall have compiled with its obligation to purchase quantities of gas
subject to a Locked Price if it purchases such quantities during the course of
the Month.
8.5.6. Cessation of Futures Trading. If natural gas futures
contracts cease to be traded on the New York Mercantile Exchange or on any other
mercantile exchange acceptable to Seller in its sole discretion, then after such
cessation Seller shall be relieved of any and all obligation to establish Locked
Prices hereunder.
ARTICLE 9.
BILLING AND PAYMENT
9.1. BILLING AND PAYMENT. Not later than the 15th day of each month,
Seller shall provide Buyer an invoice (which may be transmitted by electronic
facsimile) setting forth the quantities of gas delivered at the Delivery Point
during the preceding month, the amount due therefor and any other charges,
credits or adjustments due
10
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under the terms hereof. If actual quantities are not available by the time
Seller prepares its invoice, Seller may invoice based on the quantities
nominated and confirmed for transportation, subject to appropriate adjustments
to actual quantities when available. Buyer shall make payment by wire transfer
by the 25th day of the month following the delivery month, or within 10 Days
after receipt of Seller's invoice, whichever is later; provided, however, that
payments which would be due on a Saturday or bank holiday shall be due on the
last preceding Business Day, unless the bank holiday falls on a Monday. Payments
otherwise due on Sunday or on a Monday bank holiday shall be due on the first
succeeding Business Day.
9.2. BILLING DISPUTES. If a dispute arises as to the amount payable in any
invoice rendered hereunder, Buyer shall nevertheless pay when due the amount not
in dispute under such invoice. Such payment shall not be deemed to be a waiver
of the right by Buyer to recoup any overpayment, nor shall acceptance of any
payment be deemed to be a waiver by Seller of any underpayment. If Buyer fails
to forward the entire undisputed amount due to Seller when same is due, interest
on the unpaid portion shall accrue at a rate equal to 2% above the prime rate
charged by Wells Fargo Bank, San Francisco, from time to time, or the maximum
legal rate, whichever is the lesser, compounded daily from the date such payment
is due until the same is paid. If Buyer's failure to pay the undisputed portion
of any invoice rendered hereunder continues beyond five days after the due date
of such invoice, then Seller, in addition to all other legal remedies available
to it, shall have the right and option upon written notice to Buyer to (a)
suspend further deliveries of gas until such default shall have been cured, and
(b) terminate this Agreement if the payment default is not cured within five
days after such written notice is given.
9.3. NOTICE OF DISPUTE. If Buyer withholds payment of any disputed amount
as authorized herein, Buyer shall within 15 days after the due date of the
disputed invoice submit to Seller a written explanation of the dispute and any
available supporting documentation. The Parties shall then cooperate in good
faith to resolve such dispute as expeditiously as possible, and the portion, if
any, of such disputed amount eventually determined to be due shall bear interest
at the rate stated in Section 9.2. from the original due date until the date
actually paid.
9.4. AUDIT. Each Party shall have the right at its own expense to examine
and audit at any reasonable time the books, records and charts of the other to
the extent necessary to verify the accuracy of any statements or charges made
under or pursuant to any of the provisions of this Agreement. Upon request,
Buyer shall also make available to Seller for audit purposes any relevant
records of the Transporter to which Buyer has access. A formal audit of accounts
shall not be made more often than once each Contract Year. Any inaccuracy will
be promptly corrected when discovered; provided, however, that neither Party
shall be required to maintain books, records or charts for a period of more than
2 Contract Years following the end of the Contract Year to which they are
applicable. Neither Party shall have any right to question or contest any charge
or credit if the matter is not called to the attention of the other Party in
writing within 2 years of the end of the Contract Year in question.
11
<PAGE>
ARTICLE 10.
TAXES
The price for gas delivered hereunder is inclusive of all production,
severance, ad valorem, or similar taxes levied on the production or
transportation of the gas prior to its delivery to or for the account of Buyer
at the Delivery Point, and all such taxes shall be borne and paid exclusively by
Seller. The price does not include any Federal, Indian, State or local sale,
use, consumption, or similar taxes of whatever designation which may now or
hereafter be imposed on the transfer of title or possession of the gas to or for
the account of Buyer, or on Buyer's subsequent use or disposition thereof. Any
such taxes shall be paid by Buyer directly to the taxing authority unless Seller
is required by law to collect and remit such taxes, in which case Buyer shall
reimburse Seller for all amounts so paid. If Buyer claims exemption from any
such taxes, Buyer shall provide Seller a tax exemption certificate or other
appropriate documentation thereof.
ARTICLE 11.
LAWS AND REGULATION
This Agreement is subject to all valid laws, orders, rules and/or
regulations of any and all duly constituted governmental authorities, Federal,
State or local, to the extent such laws, regulations, and orders are applicable
and effective from time to time.
ARTICLE 12.
FORCE MAJEURE
12.1. SUSPENSION OF OBLIGATIONS. If either Party hereto is rendered unable,
wholly or in part, by force majeure to carry out its obligations under this
Agreement, other than to make payment for gas delivered hereunder, then upon
such Party's giving notice and full particulars of such force majeure in writing
to the other Party as soon as practicable after the occurrence of the cause
relied on, the obligations of the Party giving such notice, so far as they are
affected by such force majeure, shall be suspended during the continuance of any
inability so caused but for no longer period, and such cause shall as far as
possible be remedied with all reasonable dispatch.
12.2. DEFINITION OF FORCE MAJEURE. The term "force majeure" as employed
herein means acts of God, strikes, lockouts, or other industrial disturbances,
acts of the public enemy, wars, blockades, insurrections, riots, epidemics,
landslides, lightning, hurricanes or storms, hurricane or storm warnings which
result in the precautionary shut-down or evacuation of production facilities,
earthquakes, fires, floods, washouts, arrest and restraints of governments and
people, civil disturbances, explosions, breakage or accidents to machinery,
equipment, or lines of pipe, freezing of wells or lines of pipe, interruption or
curtailment of transportation by the Transporter (but only interruption or
curtailment of firm transportation if the gas is subject to a Locked Price under
Section 8.5.), partial or entire failure of wells, and any other cause beyond
the
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<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
reasonable control of the Party affected which renders that Party unable to
carry out its obligations under this Agreement. The settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and the above requirement that any force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of strikes or
lockouts by acceding to the demands of opposing Party when such course is
inadvisable in the discretion of the Party having the difficulty. A failure to
perform by a supplier of gas to Seller shall constitute force majeure under this
Agreement only to the extent that such failure was caused by force majeure as
defined herein.
ARTICLE 13.
WARRANTY OF TITLE AND ROYALTIES
13.1. TITLE. Seller hereby warrants title to the gas sold by it hereunder
and its right to sell the same and warrants that all such gas shall be delivered
by Seller free from all liens, encumbrances and adverse claims, including, but
not limited to liens to secure payment of production taxes, severance taxes and
other taxes.
13.2. ROYALTIES AND OTHER CHARGES. Seller shall pay or cause to be paid all
royalties and other sums due on the gathering and handling of the gas prior to
its delivery to Buyer. Seller shall indemnify and save Buyer harmless from and
against all suits, actions, damages, costs and expenses arising from or out of
any breach of this provision.
ARTICLE 14.
TERM
This Agreement shall commence on the Effective Date and shall continue in
force and effect, unless terminated earlier under the provisions hereof, for
* a primary term of REDACTED, and year to year thereafter until and unless
terminated by either Party upon prior written notice delivered not less than
ninety days prior to the end of the primary term or any annual renewal term
thereafter.
ARTICLE 15.
CONFIDENTIALITY
15.1. CONFIDENTIALITY. Each Party agrees that it will maintain the
commercial terms of this Agreement in strictest confidence and that it will not
cause or permit disclosure of those terms to any third party without the express
written consent of the other Party hereto; provided, however, that such third
party restriction does not apply to
13
<PAGE>
affiliated companies. Disclosures otherwise prohibited by this Article 15. may
be made by either Party (1) to the extent necessary for such Party to enforce
its rights hereunder against the other Party, (2) to the extent a Party is
contractually or legally bound to disclose financial information to a third
party such as a royalty owner or partner, or (3) only to the extent to which a
Party hereto is required to disclose all or part of this Agreement by a statute
or by a court, agency, or other governmental body exercising jurisdiction over
the subject matter hereof, by order, by regulation or by other compulsory
process (including, but not limited to, deposition, subpoena, interrogatory, or
request for production of documents).
15.2. NOTIFICATION OF DISCLOSURE. If either Party is or becomes aware of a
fact, obligation or circumstance that has resulted or may result in a disclosure
authorized in Section 15.1., it shall so notify the other Party promptly and
shall provide documentation or an explanation of the disclosure as soon as it is
available. Each Party further agrees to cooperate to the fullest extent in
seeking confidential status to protect any material so disclosed.
15.3. DISCLOSURE TO CONSULTANTS OR COUNSEL. The Parties hereto acknowledge
that consultants or legal counsel may, from time to time, be provided with a
copy of this Agreement and agree that such disclosure does not require consent
by the other Party, provided that such consultants or counsel are obligated to
abide by the terms and conditions of this Article 15.
ARTICLE 16.
ARBITRATION
16.1. ALL DISPUTES ARBITRATION. All disputes between the Parties arising
under this Agreement shall be submitted to arbitration in accordance with this
Article 16., and the Parties hereby expressly waive all rights to have any such
disputes heard before a court of law, except the right to enforce an arbitration
award as described in Section 16.5. Arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. (S) 1, et seq., and not by the arbitration
acts, statutes or rules of any other jurisdiction.
16.2. PROCEDURE. In the event the Parties are unable to resolve a dispute
arising under this Agreement after exercising good faith efforts to do so,
either Party may require that the matter be resolved through binding arbitration
by submitting a written notice to the other. The notice shall name the noticing
Party's arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen days after receipt of a notice of arbitration, the
other Party shall name its arbitrator by written notice and may designate any
additional issue(s) for arbitration. The two named arbitrators shall select the
third arbitrator within fifteen days after the date on which the second
arbitrator was named. Should the two arbitrators fail to agree on the selection
of the third arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court of the Southern District of Texas to
select the third arbitrator. All arbitrators shall be qualified by education or
experience within the energy industry to decide the issues presented for
arbitration. No arbitrator shall be a
14
<PAGE>
current or former director, officer or employee of either Party, or its
affiliates; an attorney (or member of a law firm) who has rendered legal
services to either Party, or its affiliates, within the preceding three years;
or an owner of any of the common stock of either Party or its affiliates.
16.3. ARBITRATION HEARINGS. The three arbitrators shall commence the
arbitration hearing within twenty-five days following the appointment of the
third arbitrator. The proceeding shall be held at a mutually acceptable site in
Houston, Texas. If the Parties are unable to agree on a site, the arbitrators
shall select a site. The arbitrators shall have the authority to establish
rules and procedures governing the arbitration hearing. Each Party shall have
the opportunity to present its evidence at the hearing. The arbitrators may
call for the submission of pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be submitted. After the
presentation of the evidence has concluded, each Party shall submit to the
arbitration panel a final offer of its proposed resolution of the dispute. The
arbitration panel shall not have the authority to award incidental (except as
specifically provided herein), consequential, special, punitive or exemplary
damages. In addition, if the issue under consideration is limited to a
determination of an amount of money owed by one Party to the other, the
arbitration panel shall be charged to select from the two proposals the one
which the panel finds to be the most reasonable and consistent with the terms
and conditions of this Agreement, and the arbitration panel shall not average
the Parties' proposals or otherwise craft its own remedy. The arbitrators'
decision must be rendered within thirty days following the conclusion of the
hearing or submission of evidence, but no later than 90 days after appointment
of the third arbitrator. All evidence submitted in an arbitration proceeding,
transcripts of such proceedings, and all documents submitted by the Parties in
an arbitration proceeding shall be deemed confidential information subject to
Article 15., above.
16.4. ARBITRATION DECISION. The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the Parties as
to the issue submitted. Each Party shall bear the expense and cost of own
attorneys and witnesses, its own arbitrator and one-half of the expense and cost
of the third arbitrator.
16.5. ENFORCEMENT OF AWARD. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The prevailing
Party shall be entitled to reasonable attorneys' fees in any court proceeding
brought to enforce or collect any award or judgment rendered by the arbitrators.
ARTICLE 17.
MISCELLANEOUS
17.1. WAIVERS. No waiver by either Seller or Buyer of any default of the
other under this Agreement shall operate as a waiver of future default, whether
of like or different character nature.
15
<PAGE>
17.2. BINDING NATURE; ASSIGNMENT AS SECURITY. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns, or the
heirs, administrators, or executors of the Parties hereto. Either Party hereto
may assign its right, title and interest in, to and under this Agreement,
including without limitation, any and all renewals, extensions, amendments,
and/or supplements herein to any individual, bank, trustee, company or
corporation as security for any notices, bonds or other obligations or
securities of such assignor; provided, however, that no such assignment shall in
any way operate to enlarge, alter or change any obligation of the other Party
hereto.
17.3. ASSIGNMENT. Seller and Buyer reserve the right to assign this
Agreement in its entirety to any of their affiliates; however, ultimate
responsibility for performance hereunder shall remain with the respective Party
hereto. Except provided in the foregoing sentence, this Agreement may not be
assigned by either Party without the prior written consent of the other Party,
which shall not unreasonably be withheld. Notwithstanding the foregoing, either
Party shall have the right to condition such Party's consent to an assignment of
this Agreement to an unaffiliated third party on the agreement of the assignee
to a renegotiation of the terms of this Agreement within one year after the
effective date of the assignment.
17.4. FACILITY SHUTDOWN OR DOWNSIZING. If Buyer, during the term of this
Agreement, shuts down the Facility entirely, Buyer may terminate this Agreement
without liability upon not less than ninety days' prior written notice to
Seller. If Buyer reduces operation of the Facility so as to significantly reduce
the Facility's gas requirements, Buyer shall have the right, upon similar notice
to Seller, to reduce any applicable minimum daily quantity to correspond to such
reduced requirements. Nothing in this Section shall relieve Buyer from its
obligations with respect to quantities of gas for which a Locked Price has been
established in accordance with Section 8.5.
17.5. NOTICES. Any notice, request, demand, or statement, provided for in
this Agreement, except as otherwise herein provided, may be given in writing,
delivered in person or by United States Mail, to the Parties hereto at the
addresses shown below or at such other addresses as may hereafter be furnished
to the other Party in writing:
BUYER: Notices, and Correspondence:
Chevron Products Company
1200 State Street
Perth Amboy, NJ 08861
Attention: Mike Coyle
Telephone: (908) 738-2207
Telecopy: (908) 738-2028
16
<PAGE>
with a copy to:
Chevron Products Company
P.O. Box 2100
Houston, TX 77252
Attn: Scott Sederberg
Telecopy: (713) 754754-2536
Invoices and Statements:
Chevron Products Company
1200 State Street
Perth Amboy, NJ 08861
Attention: Mike Coyle
Telephone: (908) 738-2207
Telecopy: (908) 738-2028
SELLER: Correspondence and Notices:
Natural Gas Clearinghouse
13430 Northwest Freeway, Suite 1200
Houston, TX 77040-6095
Attention: Contract Administration, Molly Cook
Telephone: 713-507-3713
Telecopy: 713-507-6834
Payments Shall Be Made By Wire Transfer To:
Natural Gas Clearinghouse
Account No. 55-53911
First National Bank of Chicago--Chicago, IL
ABA Ref. No. 071000013
Any notice initially delivered by telecopy shall be confirmed by
regular mail within 1 week after transmission of the telecopy, but an
inadvertent failure to confirm by regular mail shall not impact the
effectiveness of the telecopied notice.
17.6. CHOICE OF LAW. Except as provided in Article 16., all disputes
directly or indirectly arising from or connected with this Agreement shall be
resolved in accordance with the laws of the State of Texas; however, conflict-
of-laws provisions that would require application of the law of some other state
shall be disregarded in their entirety.
17.7. MODIFICATIONS. No modification of the terms and provisions of this
Agreement shall be or become effective except pursuant to and upon the due and
mutual execution of an appropriate supplemental written contract by the Parties
hereto.
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<PAGE>
17.8. CONFLICTS OF INTEREST. No director, employee, or agent of either
Party shall give or receive any commission, fee, rebate, gift, or entertainment
of significant cost or value in connection with this Agreement. Any mutually
agreeable representative(s) authorized by either Party may audit the applicable
records of the other Party solely for the purpose of determining whether there
has been compliance with this paragraph.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals, each of which shall constitute and be an original contract.
SELLER:
NATURAL GAS CLEARINGHOUSE
By
---------------------------------------
Title
------------------------------------
BUYER:
CHEVRON PRODUCTS COMPANY
a division of Chevron U.S.A. Inc.
By
---------------------------------------
Title
------------------------------------
Signature Page To Gas Supply and Service Agreement effective as of September 1,
1996, between Natural Gas Clearinghouse as Seller, and Chevron Products Company,
as Buyer.
18
<PAGE>
EXHIBIT "A"
To Gas Supply and Service Agreement effective as of September 1, 1996,
between Natural Gas Clearinghouse as Seller, and Chevron Products Company,
as Buyer.
FORM FOR PURCHASE NOMINATIONS
[Date]
Nomination of Gas
[Month, Year]
Contract No._____________________________
Natural Gas Clearinghouse
Attention Gas Control
Gentlemen:
Chevron Products Company hereby nominates the following quantities of gas for
purchase during the month indicated above, in accordance with the terms of the
captioned contract, at the following receipt points:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Effective Date Quantity
of Nomination: (MMbtus/day) Delivery Point
--------------------------
<S> <C> <C>
Current New
Nomination Nomination
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
Very truly yours,
CHEVRON PRODUCTS COMPANY
By
---------------------------------------
Title
------------------------------------
<PAGE>
EXHIBIT "B"
[Date]
Price Lock Confirmation
Gas Purchase Agreement
Our Contract No.__________________
Chevron Products Company
[Address]
Gentlemen:
In accordance with that certain Gas Purchase Agreement effective as of September
1, 1996, by and between Chevron Products Company, a division of Chevron U.S.A.
Inc., as Buyer, and Natural Gas Clearinghouse, as Seller, which agreement is
incorporated herein and made a part hereof, Seller hereby confirms establishment
of the following "Locked Price" and "Locked Quantities" as previously discussed
and agreed orally:
Date of Parties' Oral Agreement:________________________________________________
Month of Delivery Affected:_____________________________________________________
Locked Quantities (MMBtus/day):_________________________________________________
Locked Price ($/MMBtu):_________________________________________________________
Basis Differential Adjustment ($/MMBtu):________________________________________
Remaining Unlocked Quantities (MMBtus/day):_____________________________________
This Sales Confirmation is binding upon the Parties unless Buyer notifies Seller
of a dispute with all or a portion hereof 48 hours (exclusive of weekends and
Chevron holidays) after Buyer's receipt hereof.
Very truly yours,
Natural Gas Clearinghouse
By
---------------------------------------
Trading Representative
Date
-------------------------------------
Approval & Execution:
Review: CA T/M/TR
------------- ---------
<PAGE>
The following agreements, in accordance with Instruction 2 of Item 601, are
substantially identical in all material respects to the agreement filed as
Exhibit 10.9 to the Registration Statement:
1. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Oak Point).
2. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Orange Plant).
3. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Cedar Bayou
Plant).
4. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Pascagoula
Refinery).
5. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Salt Lake City
Refinery).
6. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (El Segundo
Refinery).
7. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Richmond
Refinery).
8. Gas Supply and Service Agreement, dated as of September 1, 1996, among
Chevron Products Company and Natural Gas Clearinghouse (Richmond
Refinery).
The following is a list of material details in which such agreements differ from
Exhibit 10.9:
1. The calculation of the commodity charge differs slightly depending on the
delivery method.
2. The location of each of the refineries is different.
<PAGE>
EXHIBIT 10.13
"Pages where confidential treatment has been requested are stamped
Confidential Treatment Requested. The redacted material has been separately
filed with the Commission; the appropriate section has
been marked at the appropriate place and in the margin with a star (*)."
FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
This FEEDSTOCK AND REFINERY PRODUCT MASTER SERVICES AGREEMENT (the "Agreement")
is made and entered into effective this 1st day of September, 1996, by and
between Chevron Products Company, a Division of Chevron U.S.A. Inc., a
Pennsylvania corporation (hereinafter referred to as "CPC") and Warren Petroleum
Company, Limited Partnership, a Delaware limited partnership (hereinafter
referred to as "WPC").
WHEREAS, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have entered
into certain agreements (the "Merger Agreements") pursuant to which CUSA would
contribute certain gas gathering, processing, and other midstream assets and
related liabilities of CUSA's Warren Petroleum Company division ("Warren") and
natural gas business unit division to a corporation to be formed which NGC would
then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering, processing and
other midstream assets and related liabilities of Warren will be transferred to
WPC;
WHEREAS, Warren previously sold to CPC and CPC purchased from Warren all of
CPC's Feedstock needs and Warren previously purchased from CPC and CPC sold to
Warren all of the Refinery Products and certain Offspec Refinery Products
produced at CPC's Refineries (hereinafter defined) and both CPC and WPC desire
that such relationship continue;
WHEREAS, Warren previously provided certain services to CPC and CPC provided
certain services to Warren, in connection with (a) Warren's sale to CPC of
Feedstock and (b) Warren's purchase from CPC of Refinery Products and certain
Offspec Products produced at CPC's refineries (collectively, the "Refineries",
and each, a "Refinery");
WHEREAS, contemporaneously with the consummation of the Merger Agreements, CPC
and WPC have entered into certain Feedstock Sale and Refinery Product Purchase
Agreements with each of the Refineries (as such Agreements may be amended from
time to time, the "Feedstock Agreements"), pursuant to which WPC shall sell
Feedstock to CPC and WPC shall purchase Refinery Products and certain Offspec
Refinery Products produced by the Refineries;
WHEREAS, CPC desires WPC to perform certain services described on EXHIBITS A-1,
A-2, A-3 AND A-4 attached hereto ("WPC Services"), and WPC desires CPC to
perform certain services
1
<PAGE>
described on EXHIBITS B-1, B-1A and B-2 attached hereto ("CPC Services"; WPC
Services and CPC Services being collectively referred to as "Services");
WHEREAS, CPC desires that WPC maintain the same level of service that was
previously provided to it by Warren and WPC desires to continue such level of
service; and
WHEREAS, WPC and CPC desire to perform such Services for each other in
accordance with and subject to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and for the mutual benefit of
the Parties, as well as for other good and valuable consideration, WPC and CPC
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used herein, the following terms shall have the
following meanings:
"AAR" means American Association of Railroads.
"Agreement" means this Agreement, including all Exhibits and the Schedule
attached hereto and all amendments hereof that may be made from time to time.
"Affiliate" means any Person that directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified. The term "control" (including the terms "controlled by" or
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through ownership, by contract, or otherwise. Any Person shall
be deemed to be an Affiliate of any specified Person if such Person owns fifty
percent (50%) or more of the voting securities of the specified Person, if the
specified Person owns fifty percent (50%) or more of the voting securities of
such Person, or if fifty percent (50%) or more of the voting securities of the
specified Person and such Person are under common control.
"Bankruptcy Event" means the occurrence of one or more of the following events
with respect to a Party: (A) the entry of a decree or order for relief against a
Party by a court of competent jurisdiction in any involuntary case brought
against a Party under any bankruptcy, insolvency or other similar law
(collectively, "Debtor Relief Laws") generally affecting the rights of creditors
and relief of debtors now or hereafter in effect; (B) the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar agent under applicable Debtor Relief Laws for a Party or for any
substantial part of its assets or property; (C) the ordering of the winding up
or liquidation of a Party's affairs; (D) the filing of a petition in any such
involuntary bankruptcy case, which petition remains undismissed for a period of
180 Days or which is not dismissed or suspended pursuant to Section 305 of the
Federal Bankruptcy Code (or any
2
<PAGE>
corresponding provision of any future United States bankruptcy law); (E) the
commencement by a Party of a voluntary case under any applicable Debtor Relief
Law now or hereafter in effect; (F) the consent by a Party to the entry of an
order for relief in an involuntary case under any such law or to the appointment
of or the taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable Debtor
Relief Laws for a Party or for any substantial part of its assets or property;
or (G) the making by a Party of any general assignment for the benefit of its
creditors.
"Base Rate" means the lesser of (i) two percent (2%) above the per annum rate of
interest announced from time to time as the "prime rate" for commercial loans by
First National Bank of Chicago, as such "prime rate" may change from time to
time, or (ii) the maximum applicable non-usurious rate of interest.
"BLS" means CPC's Bill of Lading System, including all enhancements and
replacements thereof.
"Business Day" means a Day on which Federal Reserve member banks in New York
City are open for business.
"Butane Cars" means pressure rail cars assigned from time to time to CPC's
1052 (Butane) fleet.
"CLM" means Car Location Message.
"CPC Cars" means the LPG Cars and all other rail cars owned or Leased by CPC
from time to time.
"CPC Databases" means BLS, CPS, RAS and RMS, including all enhancements and
replacements of any of them.
"CPS" means Chevron Products Systems, including all enhancements and
replacements thereof.
"Day" or "Daily" means a twenty-four (24) hour period commencing at 12:01 a.m.
local time and extending until 12:01 a.m. local time on the following Day.
"Disposition" means the assignment, sale, transfer, or other disposition of a
Refinery to a Transferee.
"DOT" means the United States Department of Transportation and any successor
agency thereof.
"Effective Date" means September 1, 1996.
3
<PAGE>
"Emergency Use Rights" means CPC's rights, exercisable only in situations
reasonably believed by CPC to be emergencies (excluding planned Refinery
turnarounds), to temporarily use Propane Cars that are within the Refinery
premises in accordance with the terms of this Agreement.
"Feedstock" shall have the meaning given such term in the Feedstock Agreement
for the applicable Refinery.
"Feedstock Products" means Feedstock and Offspec Feedstock.
"FIS" means TP&S's Freight Information Services group.
"Force Majeure" shall have the meaning given such term in Section 10.2.
"GAAP" means generally accepted accounting principles, as in effect from time
to time.
"Gallon" means the unit volume used for the purpose of measurement of liquid.
One (1) U.S. liquid gallon contains two hundred thirty-one (231) cubic inches
when the liquid is at a temperature of sixty degrees Fahrenheit (600 degrees F)
and at the vapor pressure of the liquid being measured.
"Isobutane" shall have the meaning given such term in the Feedstock Agreement
for the applicable Refinery.
"Isomerization Agreement" means the Isomerization Agreement dated as of July 14,
1995 between Warren and Lone Star Gas Liquids Processing, Inc.
"Lease" means, with respect to a rail car (including, but not limited to, the
LPG Cars), a time charter arrangement between the owner of the rail car and the
Person entitled to use such rail car, a lease in which the owner of the rail car
retains legal and beneficial title to such rail car, or any other contractual
arrangement of similar effect.
"LPG Cars" means pressure rail cars assigned from time to time to CPC's 1030
(Propane) and 1052 (Butane) fleets, but does not include the twenty eight (28)
rail cars assigned to the Pascagoula Refinery and included in CPC'c 1026 fleet
as of the date hereof.
"Mixed Butanes" shall have the meaning given such term in the Feedstock
Agreement for the applicable Refinery.
"Month" or "Monthly" means a period commencing at 12:01 a.m. local time on the
first Day of a calendar month and extending until 12:01 a.m. local time on the
first Day of the next succeeding calendar month.
4
<PAGE>
"WPC Locations" means locations where WPC personnel have access, through
computer terminals or otherwise, to any of the CPC Databases.
"Offspec Feedstock" shall have the meaning given such term in the Feedstock
Agreement for the applicable Refinery.
"Offspec Refinery Products" and "Type A Offspec Refinery Products" shall have
the meanings given such terms in the Feedstock Agreement for the applicable
Refinery.
"Operating Committee" shall have the meaning given such term in Section 8.1.
"Party" means individually either CPC or WPC (including their respective
successors and permitted assigns); collectively, the "Parties."
"Person" means any individual, corporation, partnership, limited liability
company, association, joint venture, trust, or other organization of any nature
or kind.
"Products" means Feedstock, Offspec Feedstock, Refinery Products and Type A
Offspec Refinery Products.
"Propane Cars" means pressure rail cars assigned from time to time to CPC's 1030
(Propane) fleet.
"RAS" means CPC's Rail Car Accounting System, including all enhancements and
replacements thereof.
"Refinery" and "Refineries" shall have the meanings set forth in the recitals to
this Agreement and shall refer to the Refineries in the following locations: El
Paso, Texas; El Segundo, California; Hawaii; Pascagoula, Mississippi; Richmond,
California; and Salt Lake City, Utah.
"Refinery Products" shall have the meaning given such term in the Feedstock
Agreements for the applicable Refinery.
"RELAM" refers to a third Person, unaffiliated with either Party, that provides
mileage credit auditing services.
"RMS" means CPC's Rail Car Management System, including all enhancements and
replacements thereof.
"T&F Costs" means all Transportation Costs and all costs and expenses reasonably
incurred in connection with the receipt, fractionation and sale or resale of
Refinery Products received by WPC from CPC. It is understood and agreed that
any fractionation costs that are incurred at a facility owned and/or controlled
by WPC or any of its Affiliates shall not exceed the lesser of (i)
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
the fair market value for such fractionation services or (ii) the fees charged
by WPC or its Affiliates to CUSA in connection with the fractionation of natural
gas liquids (other than Refinery Products) owned by CUSA and purchased by WPC.
"TP&S" shall have the meaning given such term in Section 8.1.
"Third Party LPG" means liquefied petroleum gas transported by WPC for its own
account or the account of its Affiliates or for third Persons not Affiliated
with CPC.
"Transferee" means a third Person who acquires a Refinery pursuant to a
Disposition, and who is not an Affiliate of either Party.
"Transportation Costs" means all costs and expenses reasonably incurred in
connection with the transportation of Feedstock(s) and/or Refinery Product(s)
hereunder, including, without limitation, rail car, barges and truck costs,
Feedstock and/or Refinery Product losses that occur during transportation for
reasons other than the negligence or willful misconduct of WPC and all costs and
expenses reasonably incurred in loading, unloading, transporting, terminaling,
storing (if required) and handling such Feedstock(s) and/or Refinery Products.
It is understood and agreed that Transportation Costs shall not include any
portion of WPC's general and administrative costs and expenses, but will include
amounts paid by WPC to CPC in connection with the Propane Cars owned or Leased
by CPC but operated by WPC in connection with the Services rendered by WPC to
CPC pursuant to this Agreement. With respect to barges and trucks owned by WPC
or its Affiliates, the applicable Transportation Costs shall not exceed the fair
market value of the use of such barges and trucks in transporting Feedstocks
and/or Refinery Products hereunder.
"UMLER" means the Uniform Machine Language Equipment Register, a database
provided by the AAR in connection with the monitoring of rail car mileage credit
rating records.
"Year" means a period of twelve (12) consecutive months commencing from the
Effective Date.
1.2 OTHER DEFINITIONS. Other terms may be defined elsewhere in the text of
this Agreement (including but not limited to the Exhibits hereto) and shall have
the meanings indicated throughout this Agreement.
ARTICLE 2
TERM
2.1 GENERALLY. Unless otherwise provided herein, this Agreement shall remain
* in full force and effect for a period of REDACTED Years from the Effective
Date hereof and shall continue from Year to Year thereafter unless terminated
* by either Party hereto at the end of such REDACTED Year period or any Yearly
anniversary thereafter by giving the other Party at least
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ninety (90) Days, but not more than one hundred and eighty (180) Days, advance
written notice of its intention to so terminate. Notwithstanding the
foregoing, it is understood and agreed that shorter terms may be applicable to
certain Services described in Exhibit A and Exhibit B (as such terms are
hereafter defined), as more particularly set forth in such Exhibits.
2.2 TERMINATION. Notwithstanding Section 2.1 above, this Agreement may be
terminated as follows:
(a) By the non-defaulting Party, upon thirty (30) Days written notice to the
other Party, after it has been determined through the alternative dispute
resolution procedures of Article 11 that a Material Default has occurred in
the Performance of a Party's obligations hereunder (it being understood
that, for purposes of the foregoing, "Material Default" shall mean that the
arbitrators have determined that (i) in consequence of such Default, the
objectives of this Agreement (as expressed in the Master Alliance Agreement
of even date herewith by and among CUSA, CPC, WPC and others) are not being
met and (ii) the defaulting Party failed to take the steps necessary to
accomplish such objectives);
(b) By a Party, in the event the other Party is dissolved (unless the successor
to such dissolved Party or its assets is an Affiliate of CPC or WPC);
(c) By a Party, if a Bankruptcy Event occurs with respect to the other Party;
or
(d) By either Party, with respect to each Refinery, if either Party has
terminated the Feedstock Agreement applicable to such Refinery in
accordance with the terms and provisions thereof.
In the event the Refinery is sold to a third Person not affiliated with CPC, the
reference to the Master Alliance Agreement set forth in Section 2.2(a), above,
shall be inapplicable.
2.3 CLOSURE OF REFINERY. It is agreed and understood that CPC, in its sole
discretion, may permanently close any Refinery at any time during the term of
this Agreement. Upon such permanent closure, CPC and WPC shall be relieved of
any further obligations under this Agreement with regard to such Refinery, if
CPC has provided WPC with written notice of such closure at least one hundred
and eighty (180) Days prior to the date of such closure.
2.4 PARTIAL TERMINATION OF AGREEMENT. Except as otherwise provided in this
Agreement, this Agreement shall terminate as to any Refinery (a) that has
terminated its Feedstock Agreement with WPC in accordance with the terms and
provisions thereof or (b) that has been the subject of a Disposition. Except as
otherwise provided in this Agreement, the Parties' obligations hereunder shall
terminate as to the Refinery affected by such termination or Disposition subject
to the provisions of Sections 2.5, (i) in the case of termination of its
Feedstock Agreement with a Refinery, upon the effective date of such termination
and (ii) in the case of a Disposition, upon the consummation of such
Disposition.
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2.5 POST-TERMINATION ITEMS. Upon the termination of this Agreement, any monies
due and owing either Party shall be paid to the other Party pursuant to the
terms hereof and any refunds due either Party shall be made at the earliest
possible time, and, in any event, no later than sixty (60) Days after the
expiration or termination of this Agreement. All audit rights shall survive for
the period prescribed by Section 7.2(g).
2.6 REMEDIES CUMULATIVE. Termination of this Agreement hereunder shall be
cumulative of any other rights or remedies that the terminating Party may have
in connection with such termination (subject to any limitations set forth
herein), including, but not limited to, damages and injunctive relief.
ARTICLE 3
SERVICES
3.1 AGREEMENT TO PROVIDE SERVICES.
(a) WPC shall perform the WPC Services described on Exhibits A-1 through A-4
attached hereto (such Exhibits being collectively sometimes hereinafter
referred to as "Exhibit A"), and CPC shall perform the CPC Services
described on Exhibits B-1 and B-2 attached hereto (such Exhibits, together
with Exhibit B-1a, being collectively sometimes hereinafter referred to as
"Exhibit B"), all such Services to be provided subject to and in accordance
with the terms and provisions of this Agreement.
(b) To request Services not generally described in Exhibit A or Exhibit B, the
Party desiring such additional services ("Non-Exhibit Services") shall
complete a Request for Services (the "Request for Services" or "RFS"),
substantially in the form attached hereto as "Exhibit C," describing with
specificity the scope and type of Non-Exhibit Services to be performed, and
the fee to be paid for them. The RFS shall be binding when signed by both
Parties. If there is a conflict between the terms of this Agreement and
the terms of the RFS, the terms of the RFS shall control.
(c) In connection with the rendering of Services that relate to transportation
(including, without limitation, the transportation of Products), it is
understood and agreed that the Party providing such Services shall provide
rail car, motor vehicle or other transportation equipment that (i) complies
with the requirements of all applicable federal and state statutes, all
applicable local government ordinances and all applicable rules,
regulations orders and other mandatory directives of any applicable
federal, state or local tribunal or agency (including but not limited to
those of the U.S. Department of Transportation) and (ii) is safe, complete
and efficient for the performance of such Party's obligations under this
Agreement.
3.2 RELATIONSHIP BETWEEN THE PARTIES.
(a) The relationship between the Parties is purely contractual. Nothing set
forth herein shall constitute, or be construed as creating, an employment
relationship, a partnership, a
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joint venture, a relationship of lessor and lessee or bailor and bailee, or
any other kind of relationship or association between the Parties. Except
as otherwise expressly provided herein, neither Party hereto has any
authority, expressed or implied, to bind or to incur liabilities on behalf
or in the name of, the other Party.
(b) All Services to be provided by either Party under this Agreement may be
furnished by any officer, employee or contractor of such Party. Each Party
shall devote such time in providing its respective Services hereunder as is
reasonably necessary to fully provide the same. Each Party shall use
qualified and properly trained personnel as are necessary to perform the
Services in accordance with the terms of this Agreement and in compliance
with applicable law.
(c) The Parties agree to cooperate with each other in effectuating the purposes
of this Agreement. Without limiting the generality of the foregoing, (i)
the Parties shall promptly notify each other of any matter, or the
occurrence of any event, which matter or event could reasonably be expected
to materially and adversely affect the Services provided hereunder and (ii)
the Party for whom Services are being provided shall give the Party
providing Services all information necessary for such Party to perform the
Services required of it under this Agreement.
3.3 LICENSE FOR WPC USE OF CPC SOFTWARE AND DATABASES.
The Parties acknowledge that performance of the WPC Services will require CPC to
give WPC limited access to, and a limited right to use, the CPC Databases so
that WPC can perform its obligations and exercise its rights under this
Agreement. Accordingly, CPC does hereby grant WPC a non-exclusive license for
such access and use in respect of the CPC Databases for the term of this
Agreement, subject in all respects to the terms of this Section 3.3 and the
other terms and conditions of this Agreement. The rights granted herein to WPC
pertaining to the CPC Databases are subject to the terms and provisions of
Exhibit D attached hereto and made a part hereof which sets forth the
conditions of WPC's access to and right to use the CPC Databases. Without
limiting or modifying the generality of the foregoing, WPC's access to the CPC
Databases shall also be limited in accordance with the "Other Provisions"
section of Exhibit B-1.
3.4 AUTHORIZATION OF WPC's USE AND OPERATION OF CPC RAIL CARS; GRANT OF
OPERATING RIGHTS. The Parties acknowledge that the performance of the WPC
Services will (i) require CPC to give WPC the rights to use, operate, schedule,
dispatch and generally control the LPG Cars in accordance with and subject to
the terms of this Agreement (such rights to be referred to as the "Operating
Rights"), (ii) require the Parties to designate, from time to time and for the
purposes hereinafter set forth, such LPG Cars as either Butane Cars or Propane
Cars, with such designations to vary from time to time according to the use of
such LPG Cars and (iii) require the Parties to allocate depreciation, operating
costs and other costs and expenses among the LPG Cars generally and between
Propane Cars and Butane Cars, depending on the relevant business circumstances.
Accordingly, in connection with the foregoing and related matters, the Parties
agree as follows:
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(a) CPC hereby assigns the Operating Rights to WPC, subject to (i) the terms
and conditions of all Leases applicable to the LPG Cars, (ii) minor
encumbrances that, individually and in the aggregate, do not and will not
materially affect WPC's use of the Operating Rights, (iii) CPC's right,
exercisable in its sole discretion, to use Butane Cars while situated on
Refinery premises at any time and (iv) the terms and conditions of this
Agreement, including, but not limited to, CPC's Emergency Use Rights (the
matters in clauses (i) , (ii), (iii) and (iv) being herein referred to as
the "Permitted Encumbrances");
(b) the Parties, in consultation with the Operating Committee, shall designate
the LPG Cars as either Butane Cars or Propane Cars, and shall allocate
depreciation, operating costs and other costs and expenses among the LPG
Cars generally and between Propane Cars and Butane Cars, in accordance with
and subject to the terms of Exhibit B-1 and Exhibit B-1a, respectively, to
which reference is made for all relevant purposes hereunder;
(c) the WPC Services to be provided in connection with this grant of the
Operating Rights, together with the fees to be paid for such WPC Services
and all other pertinent information with respect thereto, are set forth in
Exhibits A-1 through A-4, to which reference is made for all relevant
purposes hereunder;
(d) the CPC Services to be provided in connection with the LPG Cars, together
with the fees to be paid for such CPC Services and all other pertinent
information with respect thereto, are set forth in Exhibits B-1, B-1a and
B-2, to which reference is made for all relevant purposes hereunder;
(e) CPC may exercise its Emergency Use Rights at any time by giving WPC oral
notice regarding the existence of an emergency, and if the LPG Cars
situated on Refinery premises are insufficient to handle such emergency,
WPC shall assist CPC in securing additional LPG Cars. In the event CPC
exercises its Emergency Use Rights, (i) WPC's obligations under the
applicable Feedstock Agreements shall be suspended insofar as WPC's ability
to perform such obligations are materially and adversely affected by the
exercise of CPC's Emergency Use Rights and (ii) CPC shall reimburse WPC for
all reasonable costs, expenses and penalties incurred by WPC in connection
with, arising out of, or directly resulting from CPC's exercise of such
Emergency Use Rights;
(f) CPC represents, warrants and covenants as follows that:
(i) (A) with respect to LPG Cars that CPC Leases, CPC has or will have the right
to transfer the Operating Rights to WPC in accordance with the terms of this
Agreement, subject to any applicable third Person consents required under the
Leases; (B) with respect to LPG Cars that CPC owns, it will (1) maintain and
defend its right, title and interest in such LPG Cars, subject to the Permitted
Encumbrances, subject further to CPC's right to contest in good faith and by
appropriate means any claims by third Persons affecting CPC's right, title and
interest in such LPG Cars, and (2) not assign any interest in such LPG Cars
except as provided in Section 12.3,
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and (C) with respect to LPG Cars that CPC Leases, it will (1) timely pay all
amounts due from CPC under the Leases applicable to the LPG Cars and otherwise
comply with such Leases in all material respects, (2) maintain such Leases in
full force and effect, the foregoing being subject only to CPC's right to
contest in good faith and by appropriate means any disputes arising under such
Leases and (3) not assign any of its interest under the Leases except as
provided in Section 12.3; and
(ii) it will exercise every reasonable effort to ensure that each LPG Car
departing from any Refinery shall be properly coded to reflect whether such
departing LPG Car is a Propane Car or a Butane Car;
(iii) it will exercise every reasonable effort to ensure that each LPG Car
within the Refinery premises that is used by CPC for Refinery purposes shall be
properly coded as a Butane Car; and
(iv) EXCEPT AS EXPLICITLY SET FORTH IN THIS SECTION 3.4(F), THERE ARE NO OTHER
WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY PATENT,
TRADEMARK, COPYRIGHT OR OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED BY CPC AND EXCLUDED FROM THIS AGREEMENT.
(g) WPC represents, warrants and covenants as follows that:
(i) it has or, by the Effective Date, will have all material governmental
consents, licenses and approvals necessary to exercise the Operating Rights and
generally to perform Services using the LPG Cars in accordance with the
applicable terms and conditions of this Agreement;
(ii) it will (A) maintain its right, title and interest in the Operating Rights,
subject to the terms of this Agreement and subject further to WPC's right to
contest in good faith and by appropriate means any claims by third Persons
affecting WPC's right, title and interest in the Operating Rights, (B) COMPLY IN
ALL MATERIAL RESPECTS WITH THE APPLICABLE TERMS OF LEASES APPLICABLE TO THE LPG
CARS AND INDEMNIFY AND HOLD CPC HARMLESS FROM AND AGAINST ALL COSTS, LIABILITIES
AND EXPENSES ARISING OUT OF, OR IN ANY WAY ASSOCIATED WITH, WPC'S USE OF ANY LPG
CAR FOR PURPOSES OTHER THAN THOSE CONTEMPLATED BY THE APPLICABLE LEASE,
INCLUDING BUT NOT LIMITED TO CLEANING AND INSPECTION COSTS AND ADDITIONAL RENTAL
FEES FOR SUCH LPG CAR AND/OR FOR OTHER RAIL CARS OR OTHER EQUIPMENT REQUIRED TO
BE LEASED OR PURCHASED AS A RESULT OF SUCH USE BY WPC and (C) not assign any of
its interest in the Operating Rights except as provided in Section 12.3, or as
provided in any applicable Lease; and
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(iii) it will exercise every reasonable effort to ensure that each LPG Car
departing from a location other than a Refinery shall be properly coded to
reflect whether such departing LPG Car is a Propane Car or a Butane Car,
including, but not limited to, coding as a Propane Car each LPG Car moving Third
Party LPG on behalf of WPC to a location other than a Refinery, whether or not
Propane is being transported.
(h) (i) This Section 3.4(h) establishes the term of the Operating Rights
granted by CPC to WPC hereunder and the respective rights and obligations of the
Parties regarding the LPG Cars upon the termination of such Operating Rights.
(ii) The Operating Rights with respect to all LPG Cars, other than the WPC LPG
Cars (hereinafter defined), shall terminate and revert to CPC at the end of the
Primary Term (hereinafter defined). Notwithstanding the foregoing, CPC shall
transfer the WPC LPG Cars to WPC in accordance with the terms and provisions of
this Section 3.4(h). "WPC LPG Cars" means a number of LPG Cars equal to the
number of LPG Cars, averaged over the twelve (12) Month period ending the Month
before the Month in which the Primary Term ends, engaged by WPC in carrying
Third Party LPG for itself or for WPC customers other than CPC (such activity
being hereinafter referred to as "WPC Third-Person Carriage") during such twelve
(12) Month period. "Primary Term" shall mean ten (10) Years from the Effective
Date, and any extensions mutually agreed to in writing by the Parties.
(iii) If WPC terminates this Agreement before the end of the Primary Term in
accordance with Section 2.2 because of CPC's Material Default, CPC's dissolution
(subject, however, to the provisions of Section 2.2(b)) or the occurrence of a
Bankruptcy Event with respect to CPC, then:
(1) WPC's Operating Rights shall terminate and revert to CPC as to a number of
Butane Cars equal to the average number of all Butane Cars in the LPG Car
fleet over the twelve (12) Month period ending the Month before the Month
in which WPC terminates this Agreement;
(2) WPC shall retain the exclusive Operating Rights to a number of Propane Cars
equal to the average number of all Propane Cars in the LPG Car fleet over
the twelve (12) Month period ending the Month before the Month in which WPC
terminates this Agreement, until the end of the Primary Term, and CPC shall
have no rights whatsoever to such Propane Cars until the end of the Primary
Term, including, but not limited to, any Emergency Use Rights, the right to
use such Propane Cars to carry Products to and from all Refineries subject
to this Agreement (such activity being hereinafter referred to as "Refinery
Service") or for any other purpose whatsoever; and
(3) at the end of the Primary Term, (a) at WPC's option, exercised in
accordance with Section 3.4(h)(vii)(7), CPC shall transfer to WPC a number
of LPG Cars equal to the number of LPG Cars, averaged over the twelve (12)
Month period ending the Month before the
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Month in which the Primary Term expires, engaged in WPC Third-Person
Carriage during such twelve (12) Month period and (b) WPC's Operating
Rights in the remaining LPG Cars shall terminate and revert to CPC.
(iv) If CPC terminates this Agreement before the end of the Primary Term in
accordance with Section 2.2 because of WPC's Material Default, WPC's
dissolution (subject, however, to the provisions of Section 2.2(b)), or the
occurrence of a Bankruptcy Event with respect to WPC, then WPC's Operating
Rights shall terminate and revert to CPC as to all LPG Cars, including but
not limited to LPG Cars engaged in WPC Third-Person Carriage.
(v) If there is a partial termination of this Agreement pursuant to Section 2.4
before the end of the Primary Term, then:
(1) if such termination is due to termination of a Feedstock Agreement between
WPC and a Refinery based on CPC's Material Default thereunder, then, at the
time of such partial termination, (a) WPC's Operating Rights shall
terminate and revert to CPC as to a number of Butane Cars equal to the
number of Butane Cars, averaged over the twelve (12) Month period ending
the Month before the Month in which such partial termination occurred,
engaged in Refinery Service for such Refinery covered by such terminated
Feedstock Agreement during such twelve (12) Month period, and (b) WPC shall
retain the exclusive Operating Rights to a number of Propane Cars equal to
the number of Propane Cars, averaged over the twelve (12) Month period
ending the Month before the Month in which such partial termination
occurred, engaged in Refinery Service and WPC Third-Person Carriage during
such twelve (12) Month period, and CPC shall have no rights whatsoever to
such Propane Cars until the end of the Primary Term, including, but not
limited to, any Emergency Use Rights, the right to use such Propane Cars
for Refinery Service or for any other purpose whatsoever;
(2) except as otherwise provided in this Section 3.4(h)(v), if such termination
occurs in connection with the consummation of the Disposition of a Refinery
and the assignment by CPC to the Transferee of the Feedstock Agreement
associated with such Refinery, then WPC shall retain its Operating Rights
as to all LPG Cars until the end of the Primary Term (it being understood
that if such Feedstock Agreement is not assigned in connection with such
Disposition, then, at the time of such partial termination, WPC's Operating
Rights shall terminate and revert to CPC as to a number of LPG Cars equal
to the number of LPG Cars, averaged over the twelve (12) Month period
ending the Month before the Month in which such Disposition was
consummated, engaged in Refinery Service for such Refinery);
(3) if such termination is due to termination of a Feedstock Agreement between
WPC and a Refinery based on WPC's Material Default thereunder (including
but not limited to the occurrence of a Refinery Closure Event, as defined
in such Feedstock Agreement), then, at the time of such partial
termination, WPC's Operating Rights shall terminate and revert to CPC as to
a number of LPG Cars equal to the number of LPG Cars, averaged over the
twelve (12) Month period ending the Month before the Month in which such
partial termination occurred,
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engaged in Refinery Service for such Refinery covered by such terminated
Feedstock Agreement during such twelve (12) Month period and WPC shall
retain its Operating Rights as to all other LPG Cars until the end of the
Primary Term; and
(4) at the end of the Primary Term, (a) at WPC's option, exercised in
accordance with Section 3.4(h)(vii)(7), CPC shall transfer the WPC LPG Cars
to WPC, and (b) WPC's Operating Rights in the remaining LPG Cars shall
terminate and revert to CPC.
(vi) If, in connection with the Disposition of a Refinery, the Feedstock
Agreement for such Refinery is assigned to the Transferee, CPC agrees that
it will use every reasonable effort to maintain during the Primary Term a
number of LPG Cars in the LPG Car fleet equal to the average number of LPG
Cars that were in the LPG Car fleet over the twelve (12) Month period
ending the Month before the Month the Disposition of such Refinery and the
assignment of the associated Feedstock Agreement were consummated.
(vii) It is understood and agreed that, with respect to all transfers of LPG
Cars and/or the termination of Operating Rights under this Section 3.4:
(1) all such transfers shall be consummated as soon as practicable, but in no
event later than sixty (60) Days after the end of the Primary Term;
(2) in cases where WPC's Operating Rights are being terminated, WPC shall
return the LPG Cars in WPC's possession that are affected by such
termination as soon as practicable, but in no event later than sixty (60)
Days after the termination of WPC's Operating Rights in such LPG Cars;
(3) LPG Cars transferred to WPC shall reflect, as nearly as practicable, (a)
the proportion of CPC-owned and CPC-Leased LPG Cars at the time of such
transfer and (b) the age distribution of all LPG Cars owned by CPC at the
time of the transfer;
(4) all transfers of LPG Cars to WPC shall be made without warranty other than
warranties of the type given by CPC in Section 3.4(f)(i), subject to the
disclaimers set forth in Section 3.4(f)(iv), and, with respect to the
Leased LPG Cars, subject to the Leases applicable to such LPG Cars;
(5) CPC shall have no obligation to provide Services to LPG Cars which have
been transferred to WPC in accordance with this Section 3.4(h) or as to
which WPC's Operating Rights have terminated;
(6) where CPC transfers LPG Cars owned by CPC to WPC, such transfers shall be
accompanied by payment to CPC, in immediately available funds, of an amount
necessary, after taking into account prior capital cost recovery payments
by WPC, to yield CPC a seven percent (7%) return on capital. An example of
the foregoing which embodies the intent of
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the Parties is attached hereto as Schedule 3.4(h). WPC shall pay such
amount simultaneously with the transfer of such LPG Cars; and
(7) in connection with the exercise of WPC's option to cause CPC to transfer to
WPC LPG Cars in accordance with Sections 3.4(h)(iii)(3) or 3.4(h)(v)(4),
WPC shall exercise such option in either event by providing CPC with
written notice to such effect, which notice shall be received by CPC not
less than 45 Days before the end of the Primary Term. The transfer of WPC
LPG Cars pursuant to the exercise of such option shall take place in
accordance with and subject to the terms and provisions of this Section
3.4(h)(vii). Time is of the essence in connection with the exercise of
WPC's option under this Section 3.4(h), and WPC shall be deemed to have
waived such option under this Section 3.4(h) if it does not timely deliver
written notice to CPC exercising such option in accordance with this
Section 3.4(h)(vii)(7). If WPC fails to exercise its option in accordance
with this Section 3.4(h)(vii)(7), WPC's Operating Rights in such LPG Cars
shall terminate and revert to CPC at the end of the Primary Term in
accordance with Section 3.4(h)(ii).
ARTICLE 4
STANDARD OF PERFORMANCE AND CARE
4.1 WPC Standard of Performance. WPC shall perform the WPC Services and shall
require all of its employees and any agents or subcontractors furnishing WPC
Services, to exercise reasonable care and diligence in providing WPC Services to
CPC.
4.2 CPC Standard of Performance. CPC shall perform the CPC Services and shall
require all of its employees and any agents or subcontractors furnishing CPC
Services to exercise reasonable care and diligence in providing CPC Services to
WPC.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of CPC. CPC hereby represents and warrants
to WPC that on and as of the date hereof:
(a) It has all requisite power and authority to carry on the business in which
it is engaged and to perform its respective obligations under this
Agreement;
(b) The execution and delivery of this Agreement have been duly authorized and
approved by all requisite corporate action;
(c) It has all requisite power and authority to enter into this Agreement and
perform its obligations hereunder;
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(d) The execution and delivery of this Agreement does not, and consummation of
the transactions contemplated herein will not, violate any of the material
provisions of its organizational documents, any material agreement pursuant
to which CPC or its properties are bound or, to its knowledge, any material
laws applicable to CPC; and
(e) This Agreement is valid, binding, and enforceable against it in accordance
with its terms, subject to bankruptcy, moratorium, insolvency and other
laws generally affecting creditors' rights and general principles of equity
(whether applied in a proceeding in a court of law or equity).
5.2 REPRESENTATIONS AND WARRANTIES OF WPC. WPC hereby represents and warrants
to CPC that on and as of the date hereof:
(a) It has all requisite power and authority to carry on the business in which
it is engaged and to perform its respective obligations under this
Agreement;
(b) The execution and delivery of this Agreement have been duly authorized and
approved by all requisite partnership action;
(c) It has all requisite power and authority to enter into this Agreement and
perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and consummation of
the transactions contemplated herein will not, violate any of the material
provisions of its organizational documents, any material agreement pursuant
to which WPC or its properties are bound or, to its knowledge, any material
laws applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable against it in accordance
with its terms, subject to bankruptcy, moratorium, insolvency and other
laws generally affecting creditors' rights and general principles of equity
(whether applied in a proceeding in a court of law or equity).
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ARTICLE 6
INDEMNIFICATION
6.1 WPC'S INDEMNITY. WPC AGREES TO INDEMNIFY AND HOLD HARMLESS CPC, ITS
AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
CONTRACTORS (COLLECTIVELY, THE "CPC INDEMNIFIED PERSONS"), FROM ALL ACTUAL
LOSSES, COSTS, EXPENSES, CLAIMS (INCLUDING, WITHOUT LIMITATION, PERSONAL INJURY
OR PROPERTY DAMAGE CLAIMS), DAMAGES AND CAUSES OF ACTION, INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES AND COSTS OF COURT (COLLECTIVELY, THE
"LOSSES") INCURRED BY THE CPC INDEMNIFIED PERSONS, OR ANY OF THEM, AND PAID TO
THIRD PERSONS RESULTING FROM THE NEGLIGENCE, DISHONESTY, WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF WPC (INCLUDING, WITHOUT LIMITATION, ITS OFFICERS, EMPLOYEES,
AGENTS, CONTRACTORS AND AFFILIATES) OR WPC'S BREACH OF THIS AGREEMENT IN
CONNECTION WITH THE PERFORMANCE OF WPC'S OBLIGATIONS UNDER THIS AGREEMENT.
6.2 CPC'S INDEMNITY. CPC AGREES TO INDEMNIFY AND HOLD HARMLESS WPC, ITS
AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
CONTRACTORS (COLLECTIVELY, THE "WPC INDEMNIFIED PERSONS"), FROM ALL ACTUAL
LOSSES, COSTS, EXPENSES, CLAIMS (INCLUDING, WITHOUT LIMITATION, PERSONAL INJURY
OR PROPERTY DAMAGE CLAIMS), DAMAGES AND CAUSES OF ACTION, INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES AND COSTS OF COURT (COLLECTIVELY, THE
"LOSSES") INCURRED BY THE WPC INDEMNIFIED PERSONS, OR ANY OF THEM, AND PAID TO
THIRD PERSONS RESULTING FROM THE NEGLIGENCE, DISHONESTY, WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF CPC (INCLUDING, WITHOUT LIMITATION, ITS OFFICERS, EMPLOYEES,
AGENTS, CONTRACTORS AND AFFILIATES) OR CPC'S BREACH OF THIS AGREEMENT IN
CONNECTION WITH THE PERFORMANCE OF CPC'S OBLIGATIONS UNDER THIS AGREEMENT.
ARTICLE 7
FEES
7.1 COMPENSATION.
(a) WPC COMPENSATION. As compensation for the WPC Services under this
Agreement, CPC shall pay WPC the respective amounts set forth on Exhibits
A-1 through A-4, as applicable, unless a different amount has been agreed
upon in writing by WPC and CPC. Compensation for Non-Exhibit Services
performed by WPC shall be determined in accordance with the applicable RFS.
WPC's compensation shall be paid in accordance with the billing and payment
procedures set forth in Section 7.2.
(b) CPC COMPENSATION. As compensation for the CPC Services under this
Agreement, WPC shall pay CPC the respective amounts set forth on Exhibits
B-1, B-1a or B-2, as applicable, unless a different amount has been agreed
upon in writing by WPC and CPC. Compensation for Non-Exhibit services
performed by WPC shall be determined in accordance with the applicable RFS.
CPC's compensation shall be paid in accordance with the billing and payment
procedures set forth in Section 7.2.
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(c) PERIODIC FEE REDETERMINATION. Every Year after the Effective Date of this
Agreement, either Party shall have the option to open this Agreement solely
for the purpose of renegotiating the fees to be paid for Services rendered
hereunder. To exercise such option, a Party at least ninety (90) Days
before the expiration of such one (1) Year period must provide to the other
Party written notification (the "Renegotiation Notice") of its desire to
renegotiate fees for any or all Services rendered hereunder. In any such
renegotiations, the Parties shall continue to recognize that the fees to be
paid for Services rendered hereunder must reflect the fair market value of
comparable Services provided and received by third Persons who are not
Affiliates of either Party in the area(s) where such Services are being
provided. If, after negotiating in good faith for a period of ninety (90)
Days following the date of the Renegotiation Notice, the Parties are unable
to agree upon a mutually satisfactory fee for the Services in question, the
matter shall be submitted to the alternative dispute resolution procedures
as provided in Article 11 hereof. During the period while such
negotiations or dispute resolution procedures are ongoing until (i) a new
fee is agreed to or (ii) a new fee is established as provided herein, the
fee for the Services in question shall be determined in accordance with the
fee arrangement that was applicable immediately prior to the date of the
Renegotiation Notice. If a new fee is established under this Section
7.1(c), whether by renegotiation, arbitration, or otherwise, such new fee
shall be effective as of, and shall, if necessary, be made retroactive to
the first Day of the applicable one (1) Year period immediately following
the Renegotiation Notice, plus interest thereon at the Base Rate.
(d) HARDSHIP REDETERMINATION. In the event conditions change such that this
Agreement causes, or could reasonably be expected to cause, a material long
term economic or operational hardship to either Party, upon the written
request of either Party, CPC and WPC shall meet to renegotiate in good
faith such burdensome terms and provisions so as to make them fair and
equitable. Such renegotiations shall occur within thirty (30) Days of the
date of the non-requesting Party's receipt of such written request for such
renegotiations. If the Parties are unable to agree on new provisions to
replace such burdensome terms and provisions within ninety (90) Days of the
non-requesting Party's receipt of such written request, the matter shall be
submitted to the alternative dispute resolution procedures set forth in
Article 11 hereof. It is understood and agreed that the rights granted in
this Section 7.1(d) can only be used by a Party to commence good faith
renegotiations once during each Year during the term hereof. If new
provisions are agreed upon under this Section 7.1(d), whether by
renegotiation, arbitration, or otherwise, such new provisions shall be
effective as of, and shall, if necessary, be made retroactive to, the date
on which the notice commencing renegotiations under this Section 7.1(d) was
given, plus interest thereon at the Base Rate. The retroactivity
provisions of the preceding grammatical sentence shall apply only to
economic provisions, and, without limiting or modifying the foregoing, it
is understood and agreed that such retroactivity provisions shall not apply
to operational provisions.
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7.2 BILLING AND PAYMENT.
(a) After rendering Services hereunder, the Party rendering such Services shall
submit an invoice to the other Party by facsimile transmission describing
such Services with reasonable specificity, the amounts due in respect of
such Services and such other information and detail as may be mutually
agreeable to the Parties. By not later than ten (10) Days after the other
Party's receipt of such invoice, such other Party shall pay the Party
delivering the invoice all amounts due for Services rendered in immediately
available funds via wire transfer (or other mutually agreeable manner) into
an account designated by the invoicing Party. If the Day on which any
payment is due is not a Business Day, then the relevant payment shall be
due upon the immediately preceding Business Day, except if such payment due
date is a Sunday or Monday, then the relevant payment shall be due upon the
immediately succeeding Business Day.
(b) If CPC or WPC should fail to remit any amounts in full when due as required
hereunder, or if any adjustments are made under this Agreement, including,
without limitation, adjustments as the result of the conclusion of any
audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment
should have been made hereunder until paid in full at the Base Rate. All
such accrued interest shall be added to the amount reflected as being owed
hereunder by either CPC or WPC, as the case may be, on the next invoice or
by separate invoice.
(c) If a good-faith dispute arises as to the amount payable in any statement,
the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of such good-faith
dispute, the withholding Party shall provide the other Party with written
notice of its reasons for withholding payment, and shall simultaneously
place the disputed amount into an escrow account at a mutually acceptable
commercial bank, pending resolution of the dispute. Any such dispute shall
be resolved in accordance with the alternative dispute resolution
procedures set forth in Article 11. The performance of both Parties under
this Agreement shall continue pending the outcome of such procedures. If
it is subsequently determined, whether by mutual agreement of the Parties
or otherwise, that the withholding Party is required to pay all or any
portion of the disputed amounts to the other Party, the withholding Party,
in addition to paying over such amounts, shall also pay interest accrued on
such amounts from the original due date until paid, at the Base Rate.
(d) No retroactive adjustments may be made for any overcharge or under-charge
after a period ending twenty-four (24) Months from the end of the Month in
which the invoice for the Services forming the basis of the overcharge or
undercharge was rendered or not rendered, as the case may be, unless a
claim for such adjustment shall have been presented prior to the end of
such period. Any payment with respect to a retroactive adjustment shall
include an amount equal to interest on all amounts past due, from the date
such amounts should have been paid until the date of their payment, at the
Base Rate, except in instances where neither Party knew or could have known
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that the overcharge or undercharge occurred, in which case interest on such
amounts shall accrue at the Base Rate from the date of demand for payment
until such amounts are paid.
(e) Either Party, upon notice in writing to the other, shall have the right at
reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make
claim upon the other Party for all discrepancies disclosed by said audit
within twenty-four (24) Months of the rendition of any statement or invoice
forming the basis of such claim. Such audit shall be conducted by the
auditing Party's representative or auditor at the auditing Party's expense.
(f) All payments will be made without setoff or counterclaim; provided,
however, that upon a Party's (the defaulting Party) failure to make payment
of undisputed amounts on the due date, the other Party (the non-defaulting
Party) may, at its option and in its discretion, setoff against any amounts
owed to the defaulting Party any amounts owed by the defaulting Party under
this Agreement or otherwise. The obligations of the non-defaulting Party
and the defaulting Party under this Agreement in respect of such amounts
shall be deemed satisfied and discharged to the extent of any such setoff.
The non-defaulting Party will give the defaulting Party notice of any
setoff made under this Section 7.2(f) as soon as practicable after the
setoff is made provided that failure to give such notice shall not offset
the validity of the setoff.
(g) ALL DISPUTES ARISING UNDER THIS ARTICLE 7 THAT ARE NOT OTHERWISE RESOLVED
AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE RESOLUTION
PROCEDURES AS SET FORTH IN ARTICLE 11 HEREOF. TO THE EXTENT THAT ANY SUCH
UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT
CAUSING THE DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN
DISCOVERED, THE PARTY ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO
HAVE WAIVED ANY SUCH CLAIM AND ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
ARTICLE 8
OPERATING COMMITTEE
8.1 GENERALLY. For each of the Services rendered hereunder, CPC and WPC agree
to establish an Operating Committee ("Operating Committee") for each Refinery
receiving Services to perform the duties outlined below. The Operating
Committee shall be composed of members from both CPC and WPC, and, where
appropriate, shall include a representative of CPC's Transportation Planning and
Services ("TP&S") group. Duties of the Operating Committee will include, but
will not be limited to, the following:
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(a) administering and coordinating the routine business of the Operating
Committee, which will include the planning, coordinating, and scheduling of
Services;
(b) determining and developing strategies with respect to Operating Committee
activities;
(c) developing, communicating, and monitoring mutually agreed to standards of
performance for Services;
(d) reviewing all significant equipment, design, process, and operating changes
affecting Services;
(e) conducting regularly scheduled planning, problem solving, and expense
review meetings pertaining to Services;
(f) participating in the alternative dispute resolution procedures as set forth
in Article 11 hereafter; and
(g) developing procedures for making the Parties' performance of Services more
efficient and cost-effective.
ARTICLE 9
CONFIDENTIALITY
9.1 Confidentiality. Each Party agrees that it will maintain this Agreement,
all terms and conditions of this Agreement and all other Confidential
Information (as hereinafter defined) in strictest confidence and that it will
not cause or permit disclosure of Confidential Information to any third Person
without the express written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Article 9 may be made by
either Party: (i) to the extent necessary for such Party to enforce its rights
hereunder against the other Party; (ii) to the extent a Party is contractually
or legally bound to disclose information to a third Person (such as a
shareholder, a commercial lender or a Transferee or a prospective Transferee of
any Refinery); (iii) only to the extent to which a Party hereto is required to
disclose all or part of this Agreement by a statute or by the order of a court,
agency, or other governmental body exercising jurisdiction over the subject
matter hereof, by order, by regulations, or by other compulsory process
(including, but not limited to, deposition, subpoena, interrogatory, or request
for production of documents); (iv) to the extent required by the applicable
regulations of a securities or commodities exchange; or (v) to an Affiliate (but
only if such Affiliate agrees to be bound by the provisions of this Article 9).
"Confidential Information" shall mean any information proprietary to either
Party and maintained by it in confidence or as a trade secret, including,
without limitation, business plans and strategies, proprietary software,
financial statements, customer or client lists, personnel records, analysis of
general energy market conditions, sales, transportation and service contracts
and the commercial terms thereof, relationships with current and potential
business partners, suppliers, customers,
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service providers and financial sources, data base contents (including but not
limited to the CPC Databases) and valuable information of a like nature relating
to the business of such Party. It is understood and agreed that Confidential
Information shall not include information of a Party that (w) becomes generally
available to the public at the time of disclosure to the other Party, or (x)
after the time of disclosure to the other Party, was generally made available to
the public without breach of this Agreement, or (y) the Person receiving the
information can show was rightfully in its possession at the time of disclosure
or (z) was rightfully acquired by the recipient from third Persons who did not
themselves obtain such information under a confidentiality or other similar
agreement with the Party whose information was disclosed.
9.2 NOTIFICATION OF DISCLOSURE. If either Party is or becomes aware of a fact,
obligation, or circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Article 9, it shall so notify the
other Party promptly and shall provide documentation or an explanation of such
disclosure as soon as it is available. Each Party further agrees to cooperate
to the fullest extent in seeking confidential status to protect any Confidential
Information so disclosed.
9.3 DISCLOSURE TO COUNSEL. The Parties hereto acknowledge that independent
legal counsel, certified public accountants or other consultants or independent
contractors of a Party (collectively, "Outside Consultants") may, from time to
time, be provided with a copy of this Agreement if, in the judgment of the
disclosing Party, the information contained in this Agreement is necessary to
the performance of such Outside Consultants' duties. Accordingly, the Parties
agree that such disclosure does not require consent by the other Party, provided
that any such Outside Consultants agree to be bound by the provisions of this
Article 9.
9.4 RESPONSIBILITY FOR CONFIDENTIALITY. Each Party will be deemed solely
responsible and liable for the actions of its employees, Outside Consultants,
officers and agents for maintaining the confidentiality commitments of this
Article 9, but will be required in that regard only to exercise such care in
maintaining the confidentiality of the Confidential Information as such Party
normally exercises in preserving the confidentiality of its other commercially
sensitive information.
ARTICLE 10
FORCE MAJEURE
10.1 In the event either Party is rendered unable, wholly or in part, by Force
Majeure to carry out its obligations under this Agreement, it is agreed that
upon such Party's giving notice and reasonably full particulars of such Force
Majeure in writing to the other Party after the occurrence of the cause relied
on, then the obligations of the Party giving such notice, so far as and to the
extent that they are affected by such Force Majeure, shall be suspended during
the continuance of any inability so caused, but for no longer period, and such
cause shall so far as possible be remedied with all reasonable dispatch. This
Agreement shall not be terminated by reason of any such cause, but shall remain
in full force and effect, and this Agreement shall not be extended regardless of
such curtailment or cessation.
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10.2 The term "Force Majeure" as used herein shall mean acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, tornadoes, hurricanes, or storms, tornado, hurricane, or storm warnings
which in any Parties' judgment require the precautionary shutdown of a Refinery
or any operating units thereof, or modes of transportation used by WPC to
perform its Services hereunder, floods, washouts, arrests or restraints of the
government, either federal or state, civil or military, civil disturbances,
explosions, sabotage, breakage or accident to equipment, machinery or lines of
pipe, freezing of machinery, equipment or lines of pipe, electric power
shortages, inability of any Party to obtain necessary permits and/or permissions
due to existing or future rules, orders, laws or governmental authorities (both
federal, state and local), shutdowns of a Refinery or any operating units
thereof or modes of transportation used by WPC to perform its Services hereunder
due to explosion or other extraordinary incident, or any other causes, whether
of the kind herein enumerated or otherwise, which were not reasonably
foreseeable on the Effective Date, and which are not within the control of the
Party claiming suspension and which such Party is unable to overcome by the
exercise of due diligence. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The
term "Force Majeure" shall also include any such event occurring with respect to
the facilities or services of either CPC's or WPC's third Party suppliers or
customers delivering or receiving any product, fuel, feedstock, or other
substance necessary to the performance of such Party's obligations, and shall
also include curtailment or interruption of deliveries or service by such third
Party suppliers or customers as a result of another event of Force Majeure.
ARTICLE 11
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
11.1 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not limited to,
any disputes concerning the interpretation of the terms and provisions hereof,
shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to resolve any disputes,
controversy or claim arising out of or relating to this Agreement.
(b) Should the Parties directly involved in any dispute, controversy or claim
be unable to resolve same within a reasonable period of time, such dispute,
controversy or claim shall be submitted to the Operating Committee with
such explanation or documentation as the Parties deem appropriate to aid
the Operating Committee in their consideration of the issues presented.
The date the matter is first submitted to the Operating Committee shall be
referred to as the "Submission Date." The Operating Committee
representatives shall attempt in good faith, through
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the process of discussion and negotiation, to resolve any dispute,
controversy, or claim presented to it within forty-five (45) Days after the
Submission Date.
(c) If the Operating Committee representatives cannot so resolve any dispute,
controversy, or claim submitted to it within forty-five (45) Days after the
Submission Date, the Parties shall attempt in good faith to settle the
matter by submitting the dispute, controversy or claim to mediation within
sixty (60) Days after the submission date using any mediator upon which
they mutually agree. If the Parties are unable to mutually agree upon a
mediator within seventy-five (75) Days after the Submission Date, the case
shall be referred for mediation to the office of Judicial Arbitration and
Mediation Services, Inc. ("JAMS") in Houston, Texas. The cost of the
mediator will be split equally between the Parties unless they agree
otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid mediation
procedure within thirty (30) Days of the initiation of such procedure, or
if either Party will not participate in such mediation, either Party may
request that the matter be resolved through arbitration by submitting a
written notice (the "Arbitration Notice") to the other. Any arbitration
that is conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. (S) 1 et seq., and will not be governed by the arbitration
acts, statutes or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing Party's arbitrator and shall
contain a statement of the issue(s) presented for arbitration. Within
fifteen (15) Days of receipt of an Arbitration Notice, the other Party
shall name its arbitrator by written notice to the other and may designate
any additional issue(s) for arbitration. The two named arbitrators shall
select the third arbitrator within fifteen (15) Days after the date on
which the second arbitrator is named. Should the two arbitrators fail to
agree on the selection of the third arbitrator, either Party shall be
entitled to request the Senior Judge of the United States District Court
for the Southern District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience within the
liquefied petroleum gas, natural gas liquids, or petroleum refining
industry to decide the issues presented for arbitration. No arbitrator
shall be: a current or former director, officer or employee of either
Party, or its Affiliates; an attorney (or member of a law firm) who has
rendered legal services to either Party, or its Affiliates, within the
preceding three (3) Years; or an owner of any of the common stock of either
Party or its Affiliates.
(f) The three arbitrators shall commence the arbitration proceedings within
twenty-five (25) Days following the appointment of the third arbitrator.
The arbitration proceedings shall be held at a mutually acceptable site and
if the Parties are unable to agree on a site, the arbitrators shall select
the site. The arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each Party shall have
the opportunity to present its evidence at the hearing. The arbitrators
may call for the submission of pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be submitted. The arbitration
panel shall not have the authority to award punitive, exemplary or
consequential damages. The arbitrators' decision must be rendered within
thirty (30) Days following the conclusion of the hearing or submission of
evidence, but no later than ninety (90) Days after the
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appointment of the third arbitrator. With respect to disputes regarding the
value of transferred LPG Cars under Section 3.4(h)(vii) or fee
redeterminations under Article 7, each Party shall submit to the
arbitration panel a final offer of its proposed resolution of the dispute.
A majority of the arbitrators shall approve the final offer of one Party
without modification, and reject the offer of the other Party.
(g) The decision of the arbitrators or a majority of them, shall be in writing
and shall be final and binding upon the Parties as to the issue(s)
submitted. The cost of the hearing shall be shared equally by the Parties,
and each Party shall be responsible for its own expenses and those of its
counsel or other representatives. Each Party hereby irrevocably waives, to
the fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and further
agrees that a final determination in any such arbitration proceedings shall
be conclusive and binding upon each Party. Judgment on the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
The prevailing Party shall be entitled to recover reasonable attorneys'
fees and court costs in any court proceeding relating to the enforcement or
collection of any award or judgment rendered by the arbitration panel under
this Agreement.
(h) All deadlines specified herein may be extended by mutual written agreement
of the Parties. The procedures specified herein shall be the sole and
exclusive procedures for the resolution of disputes between the Parties
arising out of or relating to this Agreement; provided, however, that a
Party may seek a preliminary injunction or other preliminary judicial
relief if in its judgment such action is necessary to avoid irreparable
damage. Despite such action, the Parties will continue to participate in
good faith in the procedures specified herein. All applicable statutes of
limitation, including, without limitation, contractual limitation periods
provided for in this Agreement shall be tolled while the procedures
specified in this Section 11 are pending. The Parties will take all
actions, if any, necessary to effectuate the tolling of any applicable
statutes of limitation.
ARTICLE 12
MISCELLANEOUS
12.1 INTEGRATION, AMENDMENTS, AND WAIVER. This Agreement, including, without
limitation, all exhibits hereto, integrates the entire understanding between the
Parties with respect to the subject matter covered and supersedes all prior
understandings, drafts, discussions, or statements, whether oral or in writing,
expressed or implied, dealing with the same subject matter. This Agreement may
not be amended or modified in any manner except by a written document signed by
both Parties that expressly amends this Agreement. No waiver by CPC or WPC of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver unless expressly provided. No waiver
shall be effective unless made in writing and signed by the Party to be charged
with such waiver. Notwithstanding the foregoing, however, if there is a conflict
between this Agreement and a RFS, the RFS shall control.
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12.2 INDEPENDENT RELATIONSHIP. Nothing contained in this Agreement shall be
construed to create an association, trust, partnership, or joint venture or
impose a trust or partnership duty, obligation, or liability on or with regard
to either Party.
12.3 BINDING NATURE; ASSIGNMENT AS SECURITY. Except as provided in this
Section 12.3, neither Party may assign all or any part of its rights or
obligations under this Agreement without the prior written consent of the other
Party, such consent to be granted at the sole discretion of the other Party,
except that (i) either Party may assign its rights hereunder to any Affiliate of
such Party without the approval of the other Party (but such assignment shall in
no way relieve or release the assigning Party from any obligations hereunder,
whether accrued or unaccrued, unless consented to in writing by the non-
assigning Party, such consent to be granted at the sole discretion of such
Party) and (ii) either Party may, for collateral purposes, mortgage, pledge,
encumber or grant a security interest in or a lien on its interest in this
Agreement and/or its rights hereunder to any commercial bank, trustee or other
Person acting on behalf of any such commercial bank, but only with the prior
consent of the other Party, such consent not to be unreasonably withheld. Any
transfer or assignment in violation of this Section 12.3 shall be void.
12.4 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF
LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
12.5 CONFLICTS OF INTEREST. No director, employee, or agent of either Party
shall give or receive any commission, fee, rebate, gift, or entertainment of
significant cost or value in connection with this Agreement.
12.6 REPORTS AND RECORD KEEPING. Each Party shall provide the other Party with
such reports as may be mutually agreeable to both Parties. Each Party shall
maintain such records and accounts as may be necessary to the performance of its
respective duties and obligations hereunder, in accordance with good business
practices.
12.7 REMEDIES.
(a) FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
REMEDIES OR DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS
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EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO
DIRECT ACTUAL DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER
REMEDIES OR DAMAGES ARE WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT (INCLUDING,
WITHOUT LIMITATION, ANY INDEMNITY PROVISION HEREOF) FOR CONSEQUENTIAL,
INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
UNDER ANY PROVISION OF THIS AGREEMENT FOR INCIDENTAL DAMAGES. TO THE
EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO ANY PROVISION OF THIS
AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE LIQUIDATED DAMAGES, THE
PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE APPROXIMATION OF
THE AMOUNT OF SUCH DAMAGES.
(b) Except as otherwise provided herein, each Party reserves to itself all
rights, setoffs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement
or as otherwise provided by law.
12.8 NO THIRD PARTY BENEFICIARIES. This Agreement is for the sole benefit of
the Parties and their respective successors and permitted assigns, and shall not
inure to the benefit of any other Person whomsoever, it being the intention of
the Parties that no Person shall be deemed a third Party beneficiary of this
Agreement.
12.9 NOTICES. Any notice or other communication provided for in this Agreement
or any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand, or if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail, or certified
mail, with all postage fully prepaid, or if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the Parties at the
following addresses:
If to CPC: Chevron Products Company
To the Refinery Manager for each Refinery receiving the Services
at issue and in need of notice herein, at the addresses set
forth in the applicable Feedstock Agreements.
In addition, for matters involving LPG Car Services:
Chevron Products Company
Manager, Rail Transportation Services
575 Lennon Lane
27
<PAGE>
Section 515
Walnut Creek, California 94589
Telephone: 510/977-7177
Facsimile: 510/977-7066
In all situations, with a copy to:
Vice President and General Counsel
Chevron Products Company
575 Market Street, Suite 2182
San Francisco, California 94105-2854
Telephone: (415) 894-3232
Facsimile: (415) 894-5489
If to WPC: Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager - NGL Marketing
Telephone: 713/507-3725
Facsimile: 713/507-6834
with a copy to:
Vice President and General Counsel
Warren Petroleum Company, Limited Partnership
13430 Northwest Freeway - Suite 1200
Houston, Texas 77040-6095
Telephone: 713/507-3725
Facsimile: 713/507-6834
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U.S. Mail, whether by U.S. Express
Mail, registered mail, or certified mail, or by overnight courier shall be
deemed to have been received by the close of the second Business Day after the
Day upon which it was sent, or such earlier time as is confirmed orally or in
writing by the receiving Party. Any Party may change its address or facsimile
number by giving notice of such change in accordance with the terms of this
Section 12.9.
12.10 Government Regulation. This Agreement and the operations hereunder shall
be subject to the valid and applicable federal and state laws and the valid and
applicable orders, laws, local ordinances, rules, and regulations of any local,
state or federal authority having jurisdiction, but nothing contained herein
shall be construed as a waiver of any right to question or contest any
28
<PAGE>
such order, laws, local ordinances, rules, or regulations in any forum having
jurisdiction in the premises.
12.11 Safe Practices. Both Parties acknowledge that they are familiar with,
and shall take all steps necessary to inform, warn and familiarize their
respective employees, agents, customers and contractors who may be affected by
the provision or receipt of Services of all hazard and proper safety procedures
pertaining thereto.
12.12 Construction of Agreement. IN CONSTRUING THIS AGREEMENT, THE FOLLOWING
PRINCIPLES SHALL BE FOLLOWED:
(a) no consideration shall be given to the fact or presumption that one Party
had a greater or lesser hand in drafting this Agreement;
(b) examples shall not be construed to limit, expressly or by implication, the
matter they illustrate;
(c) the word "includes" and its syntactical variants mean "includes, but is not
limited to" and corresponding syntactical variant expressions; and
(d) the plural shall be deemed to include the singular and vice versa, as
applicable; and
(e) captions used in this Agreement are for the Parties' convenience only, and
shall not be used in its construction or interpretation.
12.13 Severability. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under the present or future laws effective during the
term of this Agreement, (i) such provision will be fully severable, (ii) this
Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement, and (iii)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid, or unenforceable provision or
by its severance from this Agreement. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision, there will be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and may be legal, valid and
enforceable. If a provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, the foregoing event shall not affect the
validity or enforceability in that jurisdiction of any other provision of this
Agreement nor the validity or enforceability in other jurisdictions of that or
any other provision of this Agreement.
12.14 Further Assurances. Each Party shall take such acts and execute and
deliver such documents in form and substance reasonably satisfactory to each of
them, in order to effectuate the
29
<PAGE>
purposes of this Agreement. This Section 12.14 neither limits nor modifies the
rights and obligations of the Parties to cooperate in accordance with the terms
of Section 3.2(c).
12.15 WAIVER OF CONSUMER RIGHTS. EACH PARTY EXECUTING THIS AGREEMENT AS A
BUYER OR SELLER HEREBY WAIVES ITS RESPECTIVE RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, EACH PARTY EXECUTING THIS
AGREEMENT VOLUNTARILY CONSENTS TO THIS WAIVER. IN ADDITION, EACH PARTY
EXECUTING THIS AGREEMENT HEREBY REPRESENTS AND WARRANTS THAT (I) SUCH PARTY'S
LEGAL COUNSEL WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED
BY THE OTHER PARTY EXECUTING THIS AGREEMENT OR BY AN AGENT OF SUCH OTHER PARTY
SELLER, AND (II) NEITHER PARTY EXECUTING THIS AGREEMENT IS IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION.
12.16 Insurance. Each Party agrees to carry insurance of the types and in the
amounts mutually agreed to by the Parties. Either Party may elect to self-
insure for all or any portion of such coverages without the consent of the other
Party.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the Day and
Year first above written.
CHEVRON PRODUCTS COMPANY WARREN PETROLEUM COMPANY,
a Division of Chevron U.S.A. Inc. LIMITED PARTNERSHIP
By: WARREN PETROLEUM G.P., INC.
By: __________________________ By: ____________________________
Name: ________________________ Name: __________________________
Title: _______________________ Title: _________________________
30
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A-1 WPC Transportation Services
Exhibit A-2 WPC Feedstock Products Storage Services
Exhibit A-3 WPC Isomerization Services
Exhibit A-4 WPC Feedstock Products Transfer Services
Exhibit B-1 CPC Rail Transportation Services
Exhibit B-1a Fee for CPC Rail Services
Exhibit B-2 CPC Freight Audit and Payment Services
Exhibit C Request for Services
Exhibit D WPC Acknowledgment of Security Procedures and Conditions
Schedule 3.4(h) Illustration of LPG Car Payment Under Section 3.4(h)(vii)(6)
31
<PAGE>
EXHIBIT A-1
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC TRANSPORTATION SERVICES
SCOPE OF SERVICES: WPC shall perform all Services reasonably requested in
connection with the transportation of Products. In general, WPC will be
required under Exhibits A-1 through A-4 to:
1. Determine the availability of modes of transportation for such Products;
2. Secure the availability of trucks, barges, pipelines or other modes of
transportation (excluding rail cars);
3. Dispatch, on a Daily basis, the foregoing modes of transportation for such
Products;
4. Trace and track LPG Cars, trucks, barges or other modes of transporting
Products; and
5. Negotiate commercially reasonable freight rates for LPG Cars, trucks, barges
and other modes of transporting Products.
In addition, WPC shall perform the Services more particularly described in Parts
I, II and III of this Exhibit.
Part I -- LPG Car Operation Services
------------------------------------
1. Through the use of the RMS, track the actual movements of all LPG Cars.
2. Generate and review reports from the RMS to monitor all rail activities,
including providing reports to shipping locations and receiving locations.
3. In consultation with CPC, schedule LPG Cars to be in place to meet
Refinery needs.
4. Plan and coordinate LPG Car fleet sizing requirements.
5. Resolve scheduling and dispatching problems of LPG Cars in transit.
32
<PAGE>
6. Coordinate the scheduling of LPG Cars into maintenance shops for required
inspections.
7. Work with Refineries, Refinery customers and TP&S maintenance specialists on
handling LPG Cars that need maintenance in addition to required inspections.
8. Maintain rail tariff, rate files and associated data bases and provide
reports on rail tariffs and rates to such CPC personnel as are necessary to
perform the Services as set forth in Exhibits B-1, B-1a and B-2.
9. Attend DOT and AAR hazardous material seminars and training sessions.
10. Review all DOT/AAR publications for changes in regulations that would
affect the shipping of LPG Cars or any other regulation that might affect the
LPG Cars.
11. Assist in training CPC personnel in preparing and shipping LPG Cars in
accordance with all applicable DOT and AAR regulations.
12. Work with all government and industry groups on issues regarding
odorization of Propane in LPG Cars.
13. Assist in developing and communicating quality standards for all Products
that are shipped by CPC.
14. Maintain an Emergency Response Procedure in accordance with applicable
law.
15. Enter orders into CPS for Products shipped from each Refinery.
Part II -- Commercial Truck Operation Services
----------------------------------------------
1. Review third Person carrier insurance coverage for compliance with CPC and
DOT policies.
2. Review third Person carrier Motor Carrier Safety rating for compliance with
CPC and DOT policies.
3. Have third Person carrier complete Motor Carrier Safety Survey.
33
<PAGE>
4. Have third Person carrier complete Chemical Manufacturers Association
Highway Carrier Assessment Protocol.
5. Work with all government and industry groups on issues regarding odorization
of Propane in trucks.
6. Provide freight rate or other pertinent information to FIS.
7. Assist in resolving freight bill problems.
8. Conduct on-site safety audits of third Person carriers.
9. Perform DOT/SFH reviews on all common carrier trucks used by CPC.
10. Enter orders into CPS for truck shipments of Products shipped from the
Refineries.
Part III -- Barge Operation Services
------------------------------------
1. Monitor all regulatory developments applicable to barges and the movement of
Products on barges, including issues regarding the odorization of Propane.
2. Perform compliance reviews for all marine terminals and transport operations
pertinent to the transportation of Products.
3. Develop emergency response and spill plans for facilities to comply with
applicable federal, state and local requirements.
4. Maintain training programs that comply with federal HAZMAT regulations.
FEES: The consideration for WPC providing the transportation Services set forth
in Exhibit A-1 in connection with the transportation of Feedstocks and Refinery
Products as provided in the Feedstock Agreements is included in the pricing
provisions of each Feedstock Agreement. In addition, the fees for
transportation Services set forth herein are included in the fees set forth in
Exhibits A-2, A-3 and A-4.
34
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
EXHIBIT A-2
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC FEEDSTOCK PRODUCTS STORAGE SERVICES
SCOPE OF SERVICES: WPC will perform all Services reasonably requested in
connection with the storage of Feedstock Products, including but not limited to:
1. Negotiating, in consultation with CPC, commercially reasonable leases or
other contractual arrangements for the storage of Feedstock Products;
2. Consulting with the Refineries in connection with the management of
Feedstock Products inventories including accounting for volumes of Feedstock
Products moved into and out of storage facilities; and
3. Any other Services mutually agreed to in writing by the Parties.
* REDACTED
35
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
EXHIBIT A-3
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC ISOMERIZATION SERVICES
SCOPE OF ISOMERIZATION SERVICES: WPC will perform all Services reasonably
requested in connection with the isomerization and general processing of Mixed
Butanes into Isobutane, including but not limited to:
1. Negotiating, in consultation with CPC, (i) commercially reasonably
relationships with third Persons providing services (including, without
limitation, storage services) with respect to isomerization and general
processing of Mixed Butanes into Isobutane and (ii) planning and accounting for
Daily movements of Mixed Butanes and Isobutane into and out of the Refineries
and relevant isomerization facilities (such Refineries and facilities being
collectively called the "Locations") according to their Daily Mixed Butanes and
Isobutane requirements;
2. Arranging for storage of Mixed Butanes and Isobutane at the Locations; and
3. Any other Services mutually agreed to in writing by the Parties.
* REDACTED
36
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
EXHIBIT A-4
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WPC FEEDSTOCK PRODUCTS TRANSFER SERVICES
SCOPE OF SERVICES: WPC will perform all Services reasonably requested in order
to effectuate the transfer of Feedstock Products between the Refineries,
including but not limited to:
1. Scheduling movement of Feedstock Products between Refineries;
2. Determining the availability of LPG Cars for the transportation of such
Feedstock Products ;
3. Securing the availability of trucks, barges, pipelines and other related
equipment for such transportation;
4. Daily dispatching of LPG Cars and other means of transporting Feedstock
Products;
5. Negotiating commercially reasonable freight rates for LPG Cars and other
means of transporting Feedstock Products; and
6. Any other Services mutually agreed to in writing by the Parties.
* REDACTED
37
<PAGE>
EXHIBIT B-1
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
CPC RAIL TRANSPORTATION SERVICES
SCOPE OF SERVICES: CPC will perform the following Services in connection with
WPC's rail transportation of Products and Third-Party LPG:
1. Providing WPC with access to CPC's car tracking data systems currently used
(or planned) at mutually agreeable Refinery locations and WPC locations, subject
to the limitations set forth below in this Exhibit B-1 and any and all
limitations in the applicable Database Agreements;
2. Managing and operating RMS, BLS and RAS components of the CPC Databases;
3. Managing accounting for the LPG Cars;
4. Using commercially reasonable efforts to: (i) provide rail car capacity as
requested by WPC for transportation Services; (ii) administer Leases; (iii)
negotiate (in consultation with WPC) new Lease(s) or the purchase of LPG Cars,
subject to the provisions of Exhibit B-1a; and (iv) process Lease rental
payments;
5. Providing the following maintenance services for LPG Cars:
(a) oversee shop work to ensure the use of appropriate repair
practices and procedures;
(b) coordinate LPG Car maintenance schedules with WPC;
(c) develop planned maintenance activity schedules for LPG Cars in
consultation with WPC;
(d) contract with maintenance shops and others for required LPG Car
maintenance work;
(e) review LPG Car maintenance invoices for appropriateness and
process them for payment; and
38
<PAGE>
(f) manage the response to government-mandated rail car maintenance
programs for all LPG Cars, including coordinating and reporting
routine DOT compliance maintenance and testing activities (such
as, for example, safety valve and tank testing);
6. Providing a reasonable number of WPC personnel or contractors with training
on applicable CPC Databases (to the extent permitted under license agreements
applicable to such Databases) to permit such WPC personnel or contractors to
perform car tracking and scheduling functions;
7. Supervising and monitoring the following accounting functions with respect
to the LPG Cars:
(a) processing and payment of pertinent LPG Car-related invoices;
(b) processing of certain LPG Car-related receivables, including but
not limited to LPG Car mileage credits;
(c) providing to CPC and WPC pertinent tax reporting information, as
needed;
(d) processing LPG Car mileage equalization invoices;
(e) distributing and allocating costs among LPG Cars in accordance
with Exhibit B-1a; and
(f) summary reporting to WPC of pertinent accounting information
relating to the LPG Cars;
8. Updating UMLER, including the review of car mileage credit rating records to
ensure proper payment of credits due and making routine contacts with AAR
personnel regarding the foregoing and related matters;
9. Monitoring and participating in DOT and AAR related legislative and other
public affairs activities to gauge impact on CPC and WPC operations hereunder;
10. Procuring CLM services and car mileage credit auditing services on
commercially reasonable terms;
11. Overseeing activities intended to enhance and update the CPC Databases;
and
12. Any other Services mutually agreed to in writing by the Parties.
39
<PAGE>
OTHER PROVISIONS: It is understood and agreed that (a) WPC's access to the
Databases shall not include tracking systems for CPC Cars
other than the LPG Cars, and (b) CPC shall have no
obligation under any circumstances to add WPC-owned or WPC-
Leased rail cars to the CPC Databases, or to provide any
Services with respect to such rail cars. CPC may take all
steps reasonably necessary, consistent with the foregoing,
to ensure the integrity of the CPC Databases (including but
not limited to its car tracking data systems) for all CPC
Cars. Any incremental costs or expenses that are approved
by WPC in writing prior to incurring same and attributable
to providing WPC with access to CPC's car tracking data
systems or other CPC Databases (including but not limited to
amounts reasonably incurred in amending applicable license
agreements and increased fees and cost reimbursements
payable under such agreements) shall be borne solely by WPC.
FEES: Calculated in accordance with the procedures set forth in Exhibit B-1a.
NOTICES: Notices to CPC in respect of CPC Services hereunder shall be given in
accordance with and subject to Section 12.9 of the Agreement to:
Chevron Products Company
Transportation Planning and Services Group
575 Lennon Lane
Section 515
Walnut Creek, California 94598
Attention: Manager, Rail Transportation Services
Telephone: 510/977-7177
Facsimile: 510/977-7066
With a copy to:
Vice President and General Counsel
Chevron Products Company
575 Market Street, Suite 2182
San Francisco, California 94105-2854
Telephone: 415/894-3232
Facsimile: 415/894-5489
40
<PAGE>
EXHIBIT B-1A
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
FEE FOR CPC RAIL SERVICES
-------------------------
LEASE COSTS
- -----------
LPG Car Lease costs (including, but not limited to, rentals and tax and other
cost reimbursements to the owner of an LPG Car) are payable Monthly in advance.
These costs are paid by CPC on receipt of invoice, according to Lease terms.
Detailed cost information on these Lease payments is retained in RAS on an LPG
Car-by-LPG Car basis. Costs are assigned to and payable by WPC in the following
Month for Propane Cars. Determination of Propane Car Lease costs allocable to
WPC shall be made in accordance with Note 1 below.
MAINTENANCE/REPAIR COSTS
- ------------------------
LPG Car maintenance expense is payable to contract shops and railroads depending
on actual work performed. These costs are paid by CPC on receipt of invoice,
according to contract terms. Maintenance cost information is retained in RAS on
an LPG Car-by-LPG Car basis. Costs will be charged to WPC for Propane Cars on a
Monthly basis. (*See Note 1 below.)
MATERIAL SUPPLY COSTS
- ---------------------
Material purchase costs which are not a part of normally scheduled maintenance
activities (such as, for example, special purchases or purchases in advance) are
accrued in this category. Invoices for material supply are paid by CPC
according to invoice terms. Material supply cost information is retained in RAS
on an LPG Car-by-LPG Car basis or fleet user code basis when appropriate. Costs
in this category will be allocated to WPC if special material purchases are
requested by WPC, or if Propane Cars have required special material purchases.
(*See Note 1 below.)
INFORMATION SERVICES COSTS
- --------------------------
Fees paid to contractors who supply CLM and car mileage data are retained in RAS
on a distributed basis. The costs are divided equally among all CPC Cars. A
pro rata portion of these costs will be charged to WPC based on the ratio of
Propane Cars to all CPC Cars. (*See Note 1 below.)
MILEAGE EQUALIZATION COSTS
- --------------------------
Mileage equalization charges are received from the AAR for all rail cars owned
by CPC and from each lessor for all rail cars Leased by CPC. These costs are
divided among all CPC Cars based on their calculated share of excess empty trip
miles (defined as all empty miles in excess of 106% of loaded miles). This
calculation is done each calendar year by TP&S for all CPC Cars using actual
route mileage and shipment information in the CPC Databases. Invoices for
mileage equalization are usually received in the third or fourth quarter for the
preceding calendar year and are processed
41
<PAGE>
on receipt. Mileage equalization charges for WPC's account will be based on
WPC's actual Propane Car shipment activity and its calculated share of excess
empty miles.
INSPECTION FEES
- ---------------
Contract fees paid for mileage credit auditing services (provided by RELAM) are
paid by CPC and captured in RAS on a distributed basis as Inspection Fees. The
costs are divided among all CPC Cars according to the number of CPC Cars
assigned to each fleet with an equal share charged per CPC Car. A pro rata
portion of these costs will be allocated to WPC for Propane Cars. (*See Note 1
below.)
PROPERTY TAX COSTS
- ------------------
Rail car property taxes applicable to the LPG Cars shall be paid each calendar
year by the CUSA tax group. These tax payments are accrued monthly by the tax
group and are charged to TP&S through the CPC Databases. The accruals are
captured on a pro rata basis in RAS based on an approximation of the current
value. During the first quarter of each calendar year, detailed state-by-state
mileage reports are issued by TP&S. These reports are used by the CUSA tax
department to determine actual tax liabilities and payments to the various
government entities. The actual payments are then used to adjust the current
calendar year accruals for estimated tax payments. A pro rata portion of these
costs will be allocated to WPC for Propane Cars. (*See Note 1 below.)
DEPRECIATION EXPENSES
- ---------------------
Depreciation expenses for LPG Cars owned by CPC are charged to TP&S and are
captured on an LPG Car-by-LPG Car basis. These LPG Car-specific costs will be
allocated to WPC for Propane Cars. Depreciation costs are calculated on CPC's
standard calculation for assets of this class. (*See Note 2 below).
GENERAL & ADMINISTRATIVE EXPENSES
- ---------------------------------
General and administrative expenses ("G&A") include (but are not limited to)
labor and burden, office expense, travel, miscellaneous expense, and computer
systems charges for LPG Car administration. G&A is divided equally among all
CPC Cars. As of March 1, 1996, there were approximately 2000 CPC Cars. A
portion of G&A is charged Monthly to WPC based on the number of CPC Cars that
are Propane Cars. (*See Note 1 and Note 3 below.) G&A statements are generated
and billed internally by CPC, and will be allocated to WPC on an equivalent
basis to other internal customers served by TP&S.
MILEAGE CREDITS
- ---------------
Mileage credits (also referred to as "car hire credits") received are captured
in RAS on a CPC Car-by-CPC Car basis. (*See Note 1 below.) These credits shall
be rebated to WPC for CPC Cars that are Propane Cars. Due to delays in
processing mileage data by the AAR, mileage credits are paid three (3) Months in
arrears. RELAM is currently used for auditing mileage credit payments to ensure
that credits are received when due. RELAM's fee is based on a percentage of
actual
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<PAGE>
underpayments recovered. No reverse audit is presently performed - i.e., if
mileage credits are overpaid, there is no mechanism for detecting the
overpayment. If CPC is billed for overpayment of mileage credits, WPC will be
responsible for rebating the full amount of the overpayment attributable to
Propane Cars after receipt, in accordance with the billing procedures set forth
in Article 7 of the Agreement. (*See Note 1 below.)
*NOTES
- ------
1. (a) Allocation of costs among LPG Cars shall be made according to the
allocation of LPG Cars between Butane Cars and Propane Cars, as such cars
are assigned in the CPC Databases pursuant to WPC or Refinery coding, as
applicable, according to the actual assignment of LPG cars on the last Day
of the applicable Month unless specifically noted otherwise. It is
understood and agreed that all costs allocable to LPG Cars engaged in WPC
Third-Person Carriage shall be borne solely by WPC. The Parties
acknowledge that CPC is currently in the process of updating and enhancing
the CPC Databases, and as soon as reasonably possible CPC and WPC agree (i)
to establish, by not later than the Effective Date, a method reasonably
satisfactory to the Parties to ensure that costs allocable to WPC Third-
Person Carriage are not borne by CPC (such method being called the "Cost
Allocation Method"), and (ii) to establish a method reasonably satisfactory
to the Parties to allocate costs among LPG Cars on the basis of such Cars'
actual usage for Butane Car purposes, Propane Car purposes or WPC Third-
Person Carriage, as applicable (such method of cost allocation to be
referred to as the "Usage Method"), and shall exercise commercially
reasonable efforts to agree upon a method for measuring and providing each
Party with accurate information regarding the actual usage of each LPG Car.
Without limiting the generality of any other provision of this Agreement
(including, but not limited to, Sections 3.2 and 12.14), the Parties agree
to take such acts (including, but not limited to, providing all reasonably
necessary personnel and funds) and to execute and deliver such documents
(including but not limited to any amendments to this Agreement) reasonably
necessary to evidence and confirm the adoption of a Cost Allocation Method
and a Usage Method that is commercially reasonable and otherwise mutually
satisfactory to the Parties.
(b) The applicable calendar month shall correspond to the Month in which
pertinent invoices or receivables are processed. With respect to such a
Month, the RAS close normally occurs on the 18th Business Day of the next
Month; items after such Day shall be processed in the following Month.
2. Depreciation for CPC-owned LPG Cars is billed at the established rate
according to GAAP. A substantial number of LPG Cars will be retired at the
mandatory 40 year age within the next six calendar years. Replacement of
these LPG Cars will be made in consultation with WPC; however, CPC reserves
the right to determine whether CPC should make this replacement through
capital investment. Other options would include Leasing replacement LPG
Cars from third Persons. In the event CPC elects (after consultation with
WPC) to
43
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
purchase replacement LPG Cars, the expenses charged to WPC will include a
reasonable capital cost recovery factor for each such LPG Car. Failure of
the Parties to agree upon a capital cost recovery factor for any such LPG
Car within 30 Days after CPC begins negotiations with WPC regarding such
factor shall be submitted to the alternative dispute resolution procedures
in Article 11. For purposes of determining whether a capital cost recovery
factor is "reasonable" for purposes of the foregoing, the Parties agree
that such factors shall not exceed the cost payable for a long term lease
of a comparable LPG Car.
3. * G&A allocation to Propane Cars will be the lesser of (a) REDACTED per LPG
* Car per Year (billed at REDACTED per LPG Car per Month) or (b) actual
G&A, as determined under this Exhibit B-1a. Beginning on the last to
occur of (x) January 1, 1997, or (y) the Month following the Month in
which the updated and enhanced CPC Databases, modified in accordance with
Note 1 above, have begun commercial operation, and for the remaining term
of this Agreement, G&A allocation to Propane Cars shall be determined in
accordance with "General and Administrative Expenses" above.
44
<PAGE>
EXHIBIT B-2
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
CPC FREIGHT AUDIT AND PAYMENT SERVICES
SCOPE OF SERVICES: CPC will perform the following Services for WPC related to
the processing, pre-audit and payment of WPC's commercial rail, truck and air
freight invoices, including the following:
1. Data management of WPC's billing and audit information, including:
(a) capture invoice data electronically or manually, as appropriate;
(b) controlling and improving WPC carrier billing practices;
(c) maintaining and monitoring minimum billing requirements;
(d) developing Electronic Data Interface ("EDI")/Electronic Funds
Transfer ("EFT") partnerships with carriers;
(e) maintaining contract and tariff rates charged by WPC's carriers
for purposes of pre-auditing and validation that carrier invoiced
charges are correct;
(f) providing WPC with electronic B/L interfaces that are necessary
if WPC desires to use EDI;
(g) providing WPC with data repositories and archives; and
(h) maintaining control table and all other data in system-useable
form relating to WPC's arrangements with its carriers.
2. Financial controls over WPC's carrier expenses, including:
(a) automated ledger coding;
(b) validating invoices for duplicates, terms, rates and extensions;
(c) resolving billing disputes with carriers; and
45
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
(d) performing accounts payable interfacing needed to distribute
freight expense to WPC's cost centers.
3. Providing WPC with general information Services related to carrier billing
and audits, including:
(a) making CPC's client/server and database related to WPC's
commercial freight activity and expense accessible to WPC for
purposes of both routine and customized reporting;
(b) providing a reasonable number of WPC employees or contractors
with training in use of CPC's carrier audit and billing
information management system; and
(c) managing a systems environment that makes detailed commercial
freight expense information available to WPC.
4. WPC shall comply with all applicable reasonable funding requirements
established by CPC.
* REDACTED
TERM: Month-to-Month, terminable by either Party's giving not less than 60
Days' written notice to the other Party.
OTHER PROVISIONS: WPC shall provide CPC with copies of all contracts with
carriers.
NOTICES: Notices to CPC in respect of CPC Services hereunder shall be given in
accordance with and subject to Section 12.9 of the Agreement to:
Chevron Products Company
Supervisor, Freight Information Services
P. O. Box 4120
Concord, California 94524
Telephone: 510/680-3101
Facsimile: 510/680-3212
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With a copy to:
Vice President and General Counsel
Chevron Products Company
575 Market Street, Suite 2182
San Francisco, California 94105-2854
Telephone: 415/894-3232
Facsimile: 415/894-5489
47
<PAGE>
EXHIBIT C
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
FORM OF WORK ORDER
REQUEST FOR SERVICES
--------------------
This REQUEST FOR SERVICES (the "RFS") dated ____________, 1996, is made and
entered into by and between Chevron Products Company, a division of CUSA U.S.A.
Inc., a Pennsylvania corporation (hereinafter referred to as "CPC") and Warren
Petroleum Company, Limited Partnership, a Delaware limited partnership
(hereinafter referred to as "WPC"). This RFS has been executed and delivered in
connection with that certain Feedstock and Refinery Product Master Services
Agreement dated effective as of September 1, 1996 between CPC and WPC (the
"MSA"). Capitalized terms not defined in this RFS have the meanings given them
in the MSA.
For the mutual covenants and obligations set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, WPC and CPC agree as follows:
1. Services. The [WPC/CPC] Non-Exhibit Services to be rendered pursuant to
this RFS are described in Annex 1, which is attached hereto and incorporated
herein for all purposes.
2. Place of Performance: The [WPC/CPC] Non-Exhibit Services shall be performed
or delivered at the following location(s): _____________________________.
3. Date of Commencement and Completion of the Services. The [WPC/CPC] Non-
Exhibit Services shall begin on ____________________, proceeding diligently,
until all Services have been completed, which date of completion shall be no
later than ________________________.
4. Price or Rate. The price or rate for Non-Exhibit Services performed or
delivered under this RFS (unless otherwise indicated, inclusive of any and all
labor costs and any and all third-Party costs, fees, prices, rates and rentals
of any kind) are described in Annex 1, which is attached hereto and incorporated
herein for all purposes. The Party providing the Services acknowledges and
agrees that if the prices or rates quoted are on a lump sum basis, such Party
shall not be entitled to the entire lump sum amount unless and until all of the
Services have been completed.
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<PAGE>
5. Relationship of RFS to MSA. Except as specifically amended by this RFS, (i)
the terms and provisions of the MSA shall govern the rights and obligations of
the Parties hereto and (ii) the provisions of the MSA, including, without
limitation, the insurance and indemnity obligations of the Parties set forth
therein, are incorporated herein for all purposes. Notwithstanding the
foregoing, if a term or provision of the MSA conflicts with a term or provision
of this RFS, this RFS shall control.
WITNESS THE EXECUTION HEREOF as of the date first hereinabove referenced.
CHEVRON PRODUCTS COMPANY
a Division of Chevron U.S.A. Inc.
By: __________________________
Name: ________________________
Title: _______________________
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: WARREN PETROLEUM G.P., INC.
By: __________________________
Name: ________________________
Title: _______________________
49
<PAGE>
EXHIBIT D
TO FEEDSTOCK AND REFINERY PRODUCT
MASTER SERVICES AGREEMENT
WARREN PETROLEUM COMPANY ACKNOWLEDGMENT OF
CHEVRON PRODUCTS COMPANY COMPUTING SECURITY
PROCEDURES AND CONDITIONS
As a user who will be granted, or have, limited access to certain Chevron
Products Company Databases ("CPC Databases") Warren Petroleum Company, Limited
Partnership ("WPC"), a Delaware limited partnership, with an office address at
13430 Northwest Freeway, Suite 1200, Houston, Texas 77040, hereby acknowledges
that and agrees to the conditions set forth herein regarding its access to and
right to use the CPC Databases.
1. For the purpose of this Acknowledgment, the term "Network" shall mean
facilities and services for the transmission of data and information. The term
"System" shall mean a collection of electro-mechanical devices that work
together to store, retrieve and manipulate data and information under control of
a sequence of instruction steps known as a program which includes computers
described as host, control, mini computers, distributed computer environments,
personal computers and workstations.
2. General. WPC will be given certain Userid(s) (the "Userid") and will
thereby be granted access to certain CPC Databases, namely the Bill of Lading
System (BLS), Chevron Products Systems (CPS), Rail Car Accounting System (RAS)
and Rail Car Management System (RMS) for the uses and purposes as set forth in
(i) the Feedstock and Refinery Product Master Services Agreement (the "Master
Services Agreement"), (ii) the Feedstock Sale and Refinery Product Purchase
Agreements and (iii) the Refinery Product Purchase Agreement of even date
herewith between CPC and WPC (the Contracts.). Accordingly, WPC:
(a) will not use or access the CPC Databases for its own use or for any use
other than the uses and purposes as set forth in the Contracts;
(b) understands that the Userids are granted to it for its exclusive use in
connection with the uses and purposes as set forth in the Contracts, is not
to be shared with, or used by, any other user, and may be revoked by CPC
upon termination of the Contracts or for a material violation of the
provisions of this Acknowledgment;
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<PAGE>
(c) will adhere to applicable CPC regulations and procedures governing
computing security as provided herein;
(d) acknowledges that the access authority granted to WPC herein does not in
and of itself constitute System access authority and WPC will not access
data on Systems in the Network, other than those for which it has
specifically been granted access without the express written authorization
of CPC;
(e) shall not gain, or attempt to gain, access to any third-party Systems from
the CPC Databases, unless authorized by CPC;
(f) shall not gain, or attempt to gain, access to any of the CPC Databases from
any third-party Systems, unless authorized by CPC;
(g) shall treat any passwords to the CPC Databases as confidential
information;
(h) will not attempt unauthorized access to the CPC Databases or knowingly
install a virus on a CPC Database or Network;
(i) will maintain its PC workstation devices which allow access to CPC
Databases in locked areas; and
(j) acknowledges that if CPC elects to permanently cease using any of the CPC
Databases, upon ninety (90) days advance written notice to WPC, CPC shall
have the right to cease providing such CPC Database service to WPC upon the
later to occur of (i) cessation of such ninety (90) day period or (ii) the
date CPC permanently ceases to use such CPC Database. In such event, CPC
and WPC will consult with each other to explore other commercially
reasonable alternatives that may be available to provide the same or
similar Database services.
3. CPS
(a) WPC's access to CPS will be restricted to specific CPS functions and
information previously used by Warren Petroleum Company immediately prior
to the date hereof and which are necessary to the performance of the
Contracts.
(b) To the extent it becomes necessary for CPC to modify CPS to restrict WPC's
access to information and functions as set forth in the preceding
subparagraph, WPC and CPC shall mutually agree upon whether such costs
should be incurred and any such costs shall be shared equally by WPC and
CPC.
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(c) The parties hereto acknowledge that Warren Petroleum Company has never been
charged for its use of CPS and, in the future, will not be charged for same
as long as the type and amount of WPC's use of such database system is
consistent with the previous practices of Warren Petroleum Company. In the
event the type and amount of WPC's use of CPS exceeds the previous
activities of Warren Petroleum Company, the Operating Committee will
determine the fair and reasonable rates that WPC should pay for such excess
use.
(d) WPC will not require CPC to provide advance notification of any changes to
CPS unless such changes will materially affect WPC's access to CPS and/or
the functions and information to which WPC needs to carry on its business.
(e) WPC and CPC acknowledge that any changes to CPS specific to WPC's needs
will be mutually agreed to by the parties.
(f) To the extent WPC requires CPS training, such training will be conducted on
CPC's premises and will be for WPC's account.
4. WPC will adhere to CPC's password guidelines for Systems to which it is
issued Userids, a copy of which is attached hereto as Attachment 1.
5. WPC Employees.
(a) WPC will notify CPC of its employees who will be direct users of the CPC
Databases (including specific names, locations and telephone numbers) prior
to any such employee being granted access to any CPC Database;
(b) WPC will cause all of its employees who will be direct users of the CPC
Databases to read this Acknowledgment and otherwise be familiar with the
terms and conditions set forth herein prior to being granted access to any
CPC Database;
(c) WPC will notify CPC of any changes in users within ten (10) working days
of the changes.
6. Confidentiality of CPC Information. Any information or data relating to the
CPC Databases to which WPC may have access is confidential and proprietary to
CPC, and will be subject to the confidentiality provisions of the Contracts.
7. Confidentiality of WPC Information. Any information or data inputted into
the CPC Databases by WPC is confidential and proprietary to WPC, and will be
subject to the confidentiality provisions of the Contracts.
52
<PAGE>
8. Software. In connection with the uses and purposes as set forth in the
Contracts, WPC may need to use and have access to: (a) third-party software
licensed to CPC; and (b) if applicable, CPC proprietary software which CPC will
make available to WPC in connection therewith (hereinafter referred to
collectively as the "Software").
WPC will:
(a) use the software only for the purposes set forth herein and/or in
connection with the Contracts;
(b) not copy the Software, except for authorized back-ups;
(c) treat the Software as confidential information subject to the same
obligations as those set forth in the Contracts; and
(d) upon termination of the Contracts , return the Software to CPC, if
applicable.
9. Intellectual Property Laws and Contract Restrictions. WPC will comply with
all contractual restrictions disclosed to it by CPC as well as all copyright and
other intellectual property laws applicable to its access to the CPC Databases.
10. Consequences of Misuse or Misappropriation of CPC Confidential Information.
WPC recognizes that any misuse or misappropriation of the CPC Databases and/or
confidential information and/or data obtained therefrom could result in
termination of access to the CPC Databases.
11. Banner. WPC will adhere to all online banners utilized in connection with
the CPC Databases.
12. Monitoring. Persons using the CPC Databases may have their use monitored
and recorded. All persons, by using these Databases, expressly consent to such
monitoring and recording.
13. This Acknowledgment is subject in all respects to the Master Services
Agreement of even date herewith between CPC and WPC. Any conflicts between this
Acknowledgment and the Master Services Agreement shall be resolved in accordance
with the terms and provisions of the Master Services Agreement.
53
<PAGE>
ANNEX 1 TO REQUEST FOR SERVICES
54
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
SCHEDULE 3.4 (H)
* REDACTED
55
<PAGE>
The following agreements, in accordance with Instruction 2 of Item 601, are
substantially identical in all material respects to the agreement filed as
Exhibit 10.13 to the Registration Statement:
1. Feedstock Sale and Refinery Product Purchase Agreement dated as of
September 1, 1996, among Chevron Products Company and Warren Petroleum
Company Limited Partnership (El Segundo).
2. Feedstock Sale and Refinery Product Purchase Agreement dated as of
September 1, 1996, among Chevron Products Company and Warren Petroleum
Company Limited Partnership (Pascagoula).
3. Feedstock Sale and Refinery Product Purchase Agreement dated as of
September 1, 1996, among Chevron Products Company and Warren Petroleum
Company Limited Partnership (Richmond).
4. Feedstock Sale and Refinery Product Purchase Agreement dated as of
September 1, 1996, among Chevron Products Company and Warren Petroleum
Company Limited Partnership (Salt Lake City).
The following is a list of material details in which such agreements differ from
Exhibit 10.54:
1. The pricing terms for each of the agreements differs slightly depending on
the product sold.
2. The location of the pipe line facilities through which the product is
transported is different for each agreement.
3. The location of the plant covered by each agreement is different.
<PAGE>
EXHIBIT 10.14
"PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE
STAMPED "CONFIDENTIAL TREATMENT REQUESTED. THE
REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION;
THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND IN THE MARGIN WITH A STAR (*)."
Hawaii
REFINERY PRODUCT SALE AGREEMENT
-------------------------------
THIS REFINERY PRODUCT SALE AGREEMENT (the "Agreement") is made and
entered into effective the 1st day of September, 1996, by and between WARREN
PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership with
offices at 13430 Northwest Freeway, Suite 1200, Houston, Texas 77040-6095
(hereinafter referred to as "WPC"), and CHEVRON PRODUCTS COMPANY, A DIVISION OF
CHEVRON U.S.A. INC., a Pennsylvania corporation with offices at 91-480 Malakole
Street, Kapolei, Hawaii (hereinafter referred to as "CPC").
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and natural gas business unit division to a corporation to be formed which NGC
would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously purchased from CPC and CPC sold to Warren
all of the Refinery Products and certain Offspec Refinery Products produced at
CPC's Refinery and both CPC and WPC desire that such relationship continue;
WHEREAS, CPC has quantities of Refinery Products available for sale
from its Refinery (as defined in Article I, below) that it desires to sell to
WPC, and WPC desires to purchase such Refinery Products from CPC; and
WHEREAS, CPC desires that WPC maintain the same level of service that
was previously provided to it by Warren and WPC desires to continue such level
of service.
NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the parties as well as for other good and valuable consideration, WPC
and CPC agree as follows:
ARTICLE I
DEFINITIONS
-----------
<PAGE>
1.1 As used in this Agreement, the following terms shall have the following
meanings:
Accounting Period shall mean a period of one (1) Month commencing at 12:01
a.m. local time on the first Day of a calendar Month and ending at 12:01
a.m. local time on the first Day of the next succeeding Month.
Affiliate shall mean any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term "control" (including the terms
"controlled by" or "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership, by
contract, or otherwise. Any Person shall be deemed to be an Affiliate of
any specified Person if such Person owns fifty percent (50%) or more of the
voting securities of the specified Person, if the specified Person owns
fifty percent (50%) or more of the voting securities of such Person, or if
fifty percent (50%) or more of the voting securities of the specified
Person and such Person are under common control.
Arbitration Notice shall have the meaning specified in Section 13.1(d)
hereinafter.
Bankruptcy Event shall mean the occurrence of one or more of the following
events with respect to a Party: (A) the entry of a decree or order for
relief against a Party by a court of competent jurisdiction in any
involuntary case brought against a Party under any bankruptcy insolvency or
other similar law (collectively, "Debtor Relief Laws") generally affecting
the rights of creditors and relief of debtors now or hereafter in effect,
(B) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or other similar agent under applicable Debtor
Relief Laws for a Party or for any substantial part of its assets or
property, (C) the ordering of the winding up or liquidation of a Party's
affairs, (D) the filing of a petition in any such involuntary bankruptcy
case, which petition remains undismissed for a period of 180 Days or which
is not dismissed or suspended pursuant to Section 305 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law), (E) the commencement by a Party of a voluntary case under
any applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an involuntary
case under any such law or to the appointment of or the taking of
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar agent under any applicable Debtor Relief Laws
for a Party or for any substantial part of its assets or property, or (G)
the making by a Party of any general assignment for the benefit of its
creditors.
Barrel shall mean forty-two (42) U. S. Gallons.
Base Rate shall mean the lesser of (i) two percent (2%) above the per annum
rate of interest announced from time to time as the "prime rate" for
commercial loans by First
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<PAGE>
National Bank of Chicago, as such "prime rate" may change from time to
time, or (ii) the maximum applicable non-usurious rate of interest.
Business Day shall mean a Day on which Federal Reserve member banks in New
York City are open for business.
Day or Daily shall mean a twenty-four (24) hour period commencing 12:01
a.m. local time and extending until 12:01 a.m. local time on the following
Day.
Delivery Point(s) shall have the meaning specified in Section 6.2
hereinafter.
Effective Date shall mean September 1, 1996.
Force Majeure shall have the meaning specified in Section 12.2 hereinafter.
Gallon shall mean the unit of volume used for the purpose of measurement of
liquid. One (1) U.S. liquid Gallon contains two hundred thirty-one (231)
cubic inches when the liquid is at a temperature of sixty degrees
Fahrenheit (60 degrees F) and at the vapor pressure of the liquid being
measured.
Month or Monthly shall mean a period commencing at 12:01 a.m. local time on
the first Day of a calendar Month and extending until 12:01 a.m. local time
on the first Day of the next succeeding calendar Month.
Netback Price shall mean the price obtained by WPC in an arm's length sale
of Refinery Products to a third Person who is not an Affiliate of WPC less
Transportation Costs that are reasonably incurred in connection therewith.
New Taxes shall mean any Taxes enacted and effective after the Effective
Date, including that portion of any Taxes or New Taxes that constitutes an
increase either in rate or breadth of coverage.
Offspec Refinery Products shall have the meaning specified in Section 7.1
hereinafter.
Party shall mean individually either CPC or WPC (including their respective
successors and permitted assigns); collectively, the "Parties."
Person shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other organization
of any nature or kind.
Propane shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
Refinery shall mean the refinery owned by CPC and situated in Hawaii.
3
<PAGE>
Refinery Products shall mean Propane and those other light end streams
identified on Exhibit "A" and produced from the Refinery.
Taxes shall mean any and all ad valorem, property, occupation, severance,
production, extraction, first use, conservation, Btu or energy, gathering,
transport, pipeline, utility, gross receipts, gas or oil revenue, gas or
oil import, privilege, sales, use, consumption, excise, lease, transaction,
environmental, and other taxes, governmental charges, duties, licenses,
fees, permits, and assessments.
Transportation Costs shall mean all costs and expenses reasonably incurred
in connection with the transportation of Refinery Product(s) hereunder,
including, without limitation, rail car, barges, and truck costs, Refinery
Product losses that occur during transportation for reasons other than the
negligence or willful misconduct of WPC and all costs and expenses
reasonably incurred in loading, unloading, transporting, terminaling,
storing (if required), and handling such Refinery Products. It is
understood and agreed that Transportation Costs shall not include any
portion of WPC's general and administrative costs and expenses.
Year shall mean a period of twelve (12) consecutive Months commencing from
the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the
text of this Agreement and shall have the meanings indicated throughout this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 CPC hereby represents and warrants to WPC that on and as of the
date hereof:
(a) It has all requisite power and authority to carry on the business
in which it is engaged and to perform its respective obligations
under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action;
(c) It has all requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which CPC or its
properties are bound or, to its knowledge, any material laws
applicable to CPC; and
4
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency, and other laws generally affecting creditors' rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
2.2 WPC hereby represents and warrants to CPC that on and as of the date
hereof:
(a) It has all requisite power and authority to carry on the business
in which it is engaged and to perform its respective obligations
under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite partnership action;
(c) It has all requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any material laws
applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency, and other laws generally affecting creditors' rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
ARTICLE III
TERM
----
3.1 Unless otherwise provided herein, this Agreement shall remain in
* full force and effect for a period of REDACTED Years from the Effective Date
hereof and shall continue from Year to Year thereafter unless terminated by
* either Party hereto at the end of such least REDACTED Year period or any
Yearly anniversary thereafter by giving the other Party at ninety (90) Days,
but not more than one hundred eighty (180) Days, advance written notice of its
intention to so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be
terminated as follows:
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<PAGE>
(a) By the non-defaulting Party, upon thirty (30) Days written notice
to the other Party, after it has been determined through the
alternative dispute resolution procedures of Article XIII that a
Material Default has occurred in the performance of a Party's
obligations hereunder (it being understood that, for purposes of
the foregoing, "Material Default" shall mean that the arbitrators
have determined that (i) in consequence of such default, the
objectives of this Agreement (as expressed in the Master Alliance
Agreement of even date herewith by and among CUSA, WPC and
others) are not being met and (ii) the defaulting Party failed to
take the steps necessary to accomplish such objectives);
(b) By a Party, in the event the other Party is dissolved (unless the
successor to such dissolved Party or its assets is an Affiliate
of CUSA or WPC.); or
(c) By a Party, if a Bankruptcy Event occurs with respect to the
other Party.
In the event the Refinery is sold to a third Person not affiliated
with CPC, the reference to the Master Alliance Agreement set forth in Section
3.2(a), above, shall be inapplicable.
3.3 It is agreed and understood that CPC, in its sole discretion, may
permanently close the Refinery at any time during the term of this Agreement.
Upon such permanent closure, CPC and WPC shall be relieved of any further
obligations under this Agreement, if CPC has provided WPC with written notice of
such closure at least one hundred and eighty (180) Days prior to the date of
such closure.
3.4 Upon the termination of this Agreement, any monies due and owing
either Party shall be paid to the other Party pursuant to the terms hereof and
any refunds due either Party shall be made at the earliest possible time, and in
any event no later than sixty (60) Days after the expiration or termination of
this Agreement. All audit rights shall survive for the period prescribed by
Section 11.7.
3.5 Termination of this Agreement hereunder shall be cumulative of
any other rights or remedies that the terminating Party may have in connection
with such termination, including, but not limited to, damages and injunctive
relief.
ARTICLE IV
QUANTITY
--------
4.1 Subject to the terms and provisions hereof, WPC agrees to
purchase from CPC and CPC agrees to sell to WPC all Refinery Products.
4.2 Solely for planning purposes, on the first Business Day of each
Month during the term of this Agreement, CPC shall provide WPC with a three (3)
Month rolling estimate
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<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
of the volumes of Refinery Products that it will have available for sale. The
Parties shall use every reasonable effort to deliver and receive, as applicable,
Refinery Products on a ratable Daily basis.
ARTICLE V
PRICE
-----
5.1 Except as otherwise provided herein, WPC shall pay CPC for the
* Refinery Products purchased hereunder REDACTED of the Netback Price. WPC shall
use every reasonable effort to obtain the highest Netback Price for Refinery
Products. Notwithstanding the foregoing, it is understood and agreed that
WPC's share of the Netback Price received from the disposition of Refinery
* Products (i.e., REDACTED), shall never be less than REDACTED per Gallon of the
Refinery Products delivered to WPC at the Delivery Point.
5.2 Every five (5) Years after the Effective Date of this Agreement,
either Party shall have the option to open this Agreement solely for the purpose
of renegotiating the pricing provisions hereof. To exercise such option, a
Party at least ninety (90) Days before the expiration of such five (5) Year
period must provide to the other Party written notification (the "Renegotiation
Notice") of its desire to renegotiate the price for the Refinery Products sold
and purchased hereunder. In any such renegotiations, the Parties shall continue
to recognize that the price for Refinery Products must reflect market prices for
Refinery Products in Hawaii. If, after negotiating in good faith for a period
of ninety (90) Days following the date of the Renegotiation Notice, the Parties
are unable to agree upon a mutually acceptable price for such Refinery
Product(s), the matter shall be submitted to the alternative dispute resolution
procedures as provided in Article XIII hereof. During the period while
negotiations are ongoing until (i) a new price is agreed to or (ii) a new price
is established as provided herein, the price for the Refinery Product sold and
purchased hereunder shall be determined in accordance with the pricing formula
that was applicable immediately prior to the date of the Renegotiation Notice.
If a new price is established under this Section 5.2, whether by renegotiation,
arbitration, or otherwise, such new price shall be effective as of, and shall,
if necessary, be made retroactive to, the first Day of the applicable five (5)
Year period immediately following the Renegotiation Notice, plus interest
thereon at the Base Rate.
5.3 In the event conditions change such that this Agreement causes,
or could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CPC and WPC shall meet to renegotiate in good faith such burdensome terms and
provisions so as to make them fair and equitable. Such renegotiations shall
occur within thirty (30) Days of the date of the non-requesting Party's receipt
of such written request for such renegotiations. If the parties are unable to
agree on new provisions to replace such burdensome terms and provisions within
ninety (90) Days of the non-requesting Party's receipt of such written request,
the matter shall be submitted to the alternative dispute resolution procedures
set forth in Article XIII hereof. It is
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<PAGE>
understood and agreed that the rights granted in this Section 5.3 can only be
used by a Party to commence good faith renegotiations once during each Year
during the term hereof. If new provisions are agreed upon under this Section
5.3, whether by renegotiation, arbitration, or otherwise, such new provisions
shall be effective as of, and shall, if necessary, be made retroactive to, the
date on which the notice commencing renegotiations under this Section 5.3 was
given, plus interest thereon at the Base Rate.
ARTICLE VI
DELIVERIES
----------
6.1 The Refinery Products to be sold hereunder by CPC to WPC shall be
delivered by CPC at the Delivery Points in Section 6.2.
6.2 The point(s) of delivery for Refinery Product sold and delivered
hereunder (hereinafter the "Delivery Point(s)") shall be determined as follows:
(a) In the event delivery is to be to or from a pipeline, the
Delivery Point shall be located, and delivery of Refinery Product
shall be deemed to occur, at the point at which Refinery Product
passes the pipeline meter. If pipeline delivery is by in-line
inventory transfer, delivery shall be deemed to occur on the date
and time that the relevant pipeline carrier advises CPC and WPC,
by product transfer order, book transfer, or letter of transfer,
that Refinery Product shall be transferred to CPC's account, and
the Delivery Point shall be the location of the Refinery Product
in the pipeline of the pipeline carrier on the Day and time that
such in-line transfer of Refinery Product is deemed to occur. The
Parties hereto understand and agree that WPC has no control over
the operations of the pipeline carrier and therefore cannot
control when Refinery Product transfer to WPC's account by the
pipeline carrier will, in fact, occur.
(b) In the event delivery is to be by a rail car, truck, or barge
whether owned, operated, leased, or hired by WPC or CPC, the
Delivery Point shall be located, and delivery of Refinery Product
shall be deemed to occur, (i) at the point at which the Refinery
Product passes through the flange connecting the rail car, truck,
or barge which is used to receive the Refinery Product, as long
as such rail car, truck, or barge is immediately released by the
Refinery to WPC for transport, or (ii) if the rail car, truck, or
barge is not immediately released to WPC for transport, at the
point at which such rail car, truck, or barge is released to WPC
for transport, whichever is later.
6.3 Title to and risk of loss associated with the Refinery Products
delivered hereunder shall pass from CPC to WPC upon the commencement of the
delivery of such Refinery Products at the Delivery Points, unless such Refinery
Products are rejected in accordance with Article VII. WPC shall be responsible
for all risk of loss, damage, or liability to the extent that any such loss,
liability, or damage arises from acts or omissions
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occurring after the commencement of physical delivery of the Refinery Product at
and downstream of the Delivery Point(s), unless such Refinery Products are
rejected in accordance with Article VII.
6.4 The following rules shall be applicable to the transportation and
loading of Refinery Products at the Delivery Point:
(a) If rail cars subject to payment of demurrage or any other similar
charges to a third Person not affiliated with either Party are
used to transport Refinery Products from the Delivery Point, CPC
agrees to load and start the relevant cars on the return trip in
accordance with the detention policy of the owner or operator of
such rail car equipment and CPC further agrees to pay any and all
such charges that may be due thereunder.
(b) CPC shall be liable for the payment of invoices from the railroad
for demurrage and hazardous materials storage charges incurred by
WPC as the prepaid shipper due to CPC's inability to receive a
rail car and/or have a rail car placed on CPC's siding; and
(c) Rail cars shall not be diverted while in transit except upon
prior written authorization of WPC. Any charge incurred by WPC
for the diversion of rail cars by CPC shall be for the account of
CPC.
(d) If WPC's owned or leased trucks are used to transport Refinery
Products from the Delivery Point, CPC agrees to load immediately
upon arrival at the Delivery Point, and CPC's failure to do so
shall render CPC liable to WPC for damages incurred as a result
of such delay.
(e) For Refinery Products purchased hereunder, CPC will be liable for
all rail car shortages claimed by WPC in excess of one percent
(1%) of the net Gallons reflected on the bill of lading and
acknowledged by the railroad agent's signature prior to
unloading; provided, however, that such shortages, if any, are
reported in writing to CPC within twenty-four (24) hours after
delivery by the carrier and prior to the unloading of the
shipment in which the relevant shortage occurs. WPC shall ask
CPC for permission to unload, and CPC, at its expense, shall have
the right to inspect each car at its destination within forty-
eight (48) hours after receipt of written notice of such
shortage. All demurrage charges arising from the failure of CPC
to release the car for unloading within such forty-eight (48)
hour period shall be paid by CPC. Similarly, CPC shall be liable
for all truck shortages claimed by WPC in excess of three percent
(3%) of the net Gallons reflected on the bill of lading;
provided, however, that such shortages, if any, are noted on the
delivery ticket and acknowledged by the truck driver's signature
prior to unloading. The
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failure of WPC to observe this provision or any action by WPC
which impedes identification of an alleged defect shall operate
as a waiver of WPC's rights to make any such claim.
Notwithstanding the foregoing, if the detention and/or demurrage charges
set forth above are insufficient to cover any such charges paid by WPC to
such third Person not affiliated with WPC, CPC shall reimburse WPC for such
amounts.
6.5 If, CPC uses a rail car, truck, or barge leased by WPC for purposes
other than those contemplated by WPC's lease, CPC shall be responsible for, and
agrees to indemnify and hold WPC harmless from and against, all costs,
liabilities, and expenses arising out of, or in any way associated with, CPC's
use of such equipment, including, but not limited to, cleaning and inspection
costs and additional rental fees for such equipment and/or for other equipment
required to be leased as a result of CPC's use.
ARTICLE VII
QUALITY
-------
7.1 All Refinery Products sold by CPC and purchased by WPC hereunder shall
meet the specifications set forth in Exhibit A, attached hereto and made a part
hereof. WPC shall have the right to reject any Refinery Product which fails to
meet such quality specifications ("Offspec Refinery Product"). All costs
associated with the return and/or disposal of Offspec Refinery Product shall be
borne by CPC.
7.2 Should the Refinery Products delivered hereunder to WPC, or to WPC's
designated representative for the account of WPC, fail at any time to conform to
the specifications set forth in Exhibit A, either Party shall notify the other
Party of any such failure, and CPC immediately shall undertake and diligently
pursue such acts as may be necessary to correct such failure, including
treatment to the extent such treatment is economical in CPC's opinion, so as to
deliver Refinery Product conforming to the specifications set forth above; but
nothing contained in this Article VII or any other part of this Agreement shall
be construed to affect WPC's right, at any time and from time to time, to reject
any Refinery Product not conforming to said specifications and to refuse or
suspend receipt until it is established to WPC's reasonable satisfaction that
subsequent deliveries of Refinery Product will conform to said specifications.
The term of this Agreement shall not be extended by the length of time of any
period or periods when deliveries have been rejected, refused, or suspended as
provided for herein. Notwithstanding the foregoing, the knowing acceptance by
WPC of any Offspec Refinery Product shall constitute a waiver by WPC of any and
all other rights and remedies available to WPC under this Agreement or otherwise
with respect to CPC's tender of such Offspec Refinery Product, and all risk of
loss, damage or liability arising out of WPC's ownership, control , possession,
or use of such Offspec Refinery Product shall pass to and be borne by WPC. If
it is subsequently determined that WPC unknowingly accepted Offspec Refinery
Products, the Parties will mutually agree upon a discounted price for such
Offspec Refinery Products to reflect their diminution in value from Refinery
Products meeting the specifications hereof. If the Parties are unable to agree
on a
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mutually acceptable discount price for such Offspec Refinery Products, the
matter shall be subjected to the alternative dispute resolution procedures set
forth in Article XIII hereunder. CPC agrees to INDEMNIFY and HOLD HARMLESS WPC,
its Affiliates, and their respective officers, directors, employees, agents, and
contractors, from all actual losses, costs, expenses, claims (including, without
limitation, personal injury or property damage claims), damages, and causes of
action, including, without limitation, reasonable attorneys' fees and costs of
court (collectively, the "Losses") incurred by WPC, such Persons, or such
Affiliates arising out of, or in any way associated with, the delivery to WPC of
Propane that fails to meet the specifications set forth in Exhibit A and is
unknowingly accepted by WPC.
ARTICLE VIII
WARRANTY OF TITLE
-----------------
8.1 CPC warrants title to all Refinery Products sold and delivered by it
to WPC, and further warrants that CPC has the right to sell such Refinery
Products and that such Refinery Products meet the quality specifications as set
forth herein and are free from all liens, claims or other charges. THERE ARE,
HOWEVER, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY
PATENT, TRADEMARK, COPYRIGHT, OR OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED BY CPC AND EXCLUDED FROM THIS AGREEMENT.
ARTICLE IX
TAXES
-----
9.1 CPC shall be liable for and shall pay, or cause to be paid, or
reimburse WPC, if WPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the Refinery Product sold hereunder upstream of the
Delivery Point(s). If WPC is required to remit such Tax, the amount thereof
shall be deducted from any sums becoming due to CPC hereunder. WPC shall be
liable for and shall pay, cause to be paid, or reimburse CPC, if CPC has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
Refinery Product hereunder at and downstream of the Delivery Point(s) including
any Taxes imposed or collected by a taxing authority with jurisdiction over WPC,
provided, however, when laws, ordinances or regulations permit or impose upon
CPC the obligation to collect or pay Taxes applicable to the sale and/or
delivery of Refinery Product hereunder at the Delivery Point, CPC shall collect
all such Taxes from WPC, which shall be in addition to the applicable Price, and
remit the same to the appropriate governmental authority, unless WPC furnishes a
certificate of exemption. CPC SHALL INDEMNIFY, DEFEND, AND HOLD WPC HARMLESS
FROM AND AGAINST ANY LIABILITY WITH RESPECT TO THE TAXES FOR WHICH CPC IS
LIABLE.
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9.2 To claim an exemption from payment of a Tax, a Party shall provide a
certificate of exemption or other reasonably satisfactory evidence of exemption
from any Tax, and each Party agrees to cooperate with the other Party in
obtaining any such exemption. In addition, WPC has provided CPC with, and CPC
acknowledges receipt of, the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986).
ARTICLE X
MEASUREMENT AND ANALYSES
------------------------
10.1 On all deliveries into or out of rail cars, the quantity shall be
determined by official tank car capacity tables or slip tube gauges in
accordance with Gas Processors Association ("GPA") Publication 8162, latest
revision. On all deliveries into or out of truck equipment, quantities shall be
determined by meter, rotary gauge or weighing, in accordance with GPA
Publications 8162 and 8186, latest revision. On all deliveries into or out of
pipelines, quantities shall be determined by pipeline meter in accordance with
the America Petroleum Institute ("API") Manual of Petroleum Measurement
Standards. For raw make mixtures, volumes of the component products shall be
determined (where practical) on a mass (pound) measurement basis in accordance
with the latest edition of GPA Publications 8173 and 8182. On all deliveries
into or out of shore tanks, quantities shall be determined either meter or gauge
from a static tank in accordance with the API Manual of Petroleum Measurement
Standards and based upon the practice of the relevant terminal. All quantities
shall be corrected to standard conditions of sixty degrees Fahrenheit (60
degrees F) and equilibrium vapor pressure in accordance with the API Manual of
Petroleum Measurement Standards, Chapter 14, Section B. The quantity and quality
of Refinery Product covered by this Agreement shall be measured according to the
current versions of the applicable standards of API and the American Society for
Testing Materials, if available. Each Party shall be entitled to have its
representatives present during all loadings, unloadings, tests, and measurements
involving Refinery Product delivered hereunder. If the Parties cannot agree on
measurement or quality tests results, the measurements and quality tests
required to determine the volume of receipts or shipments or the conformity of
the Refinery Product delivered to the specifications set forth herein shall be
made by an independent inspector selected jointly by the Parties, the cost of
which shall be shared equally by the Parties.
ARTICLE XI
BILLING AND PAYMENT
-------------------
11.1 After delivery of Refinery Products hereunder, CPC shall submit a
statement to WPC by facsimile transmission setting forth the quantity of each
Refinery Product delivered to WPC. By not later than thirty (30) Days after the
receipt of CPC's statement, WPC shall provide CPC with a statement setting forth
the price or Netback Price, as applicable, of such Refinery Products, the amount
due CPC for such Refinery Products, and such other information and detail as may
be mutually agreeable to the Parties, along with payment for such Refinery
Products, which shall be remitted by wire transfer of funds into an account
designated by CPC. If the Day on which any payment is due is not a Business
Day, then the relevant payment shall be due upon the immediately preceding
Business Day, except if such
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payment due date is a Sunday or Monday, then the relevant payment shall be due
upon the immediately succeeding Business Day.
11.2 If CPC or WPC should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such
accrued interest shall be added to the amount reflected as being owed hereunder
by either CPC or WPC, as the case may be, on the next invoice or by separate
invoice.
11.3 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of the good faith dispute,
the withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance
with the alternative dispute resolution procedures of Article XIII. The
performance of both Parties under this Agreement shall continue pending the
outcome of such procedures. If it is subsequently determined, whether by mutual
agreement of the Parties or otherwise, that the withholding Party is required to
pay all or any portion of the disputed amounts to the other Party, the
withholding Party, in addition to paying over such amounts, shall also pay
interest accrued on such amounts from the original due date until paid, at the
Base Rate.
11.4 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the Refinery Product invoice or statement forming the basis of
the overcharge or undercharge was delivered or not delivered, as the case may
be, unless a claim for such adjustment shall have been presented prior to the
end of such period. Any payment with respect to a retroactive adjustment shall
include an amount equal to interest on all amounts past due from the date of the
initial payment at the Base Rate, except in instances where neither Party knew
or could have known that the overcharge or undercharge occurred, in which case
interest shall run from the date of demand for payment.
11.5 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
11.6 All payments will be made without setoff or counterclaim; provided,
however, that upon a Party's (the defaulting Party) failure to make payment of
undisputed amounts on the due date, the other Party (the non-defaulting Party)
may, at its option and in its discretion, setoff
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against any amounts owed to the defaulting Party any amounts owed by the
defaulting Party under this Agreement or otherwise. The obligations of the non-
defaulting Party and the defaulting Party under this Agreement in respect of
such amounts shall be deemed satisfied and discharged to the extent of any such
setoff. The non-defaulting Party will give the defaulting Party notice of any
setoff made under this Section 11.6 as soon as practicable after the setoff is
made provided that failure to give such notice shall not offset the validity of
the setoff.
11.7 ALL DISPUTES ARISING UNDER THIS ARTICLE XI THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XIII HEREOF. TO THE EXTENT THAT
ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND
ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
ARTICLE XII
FORCE MAJEURE
-------------
12.1 In the event either Party is rendered unable, wholly or in part, by
Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
12.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of the Refinery or any operating units thereof, or modes of transportation used
by WPC to transport Refinery Products, floods, washouts, arrests or restraints
of the government, either federal or state, civil or military, civil
disturbances, explosions, sabotage, breakage or accident to equipment, machinery
or lines of pipe, freezing of machinery, equipment or lines of pipe, electric
power shortages, inability of any Party to obtain necessary permits and/or
permissions due to existing or future rules, orders, laws or governmental
authorities (both federal, state and local), shutdowns of the Refinery or any
operating units thereof or modes of transportation used by WPC to transport
Refinery Products from the Refinery, due to explosion or other extraordinary
incident, or any other causes, whether of the kind herein enumerated or
otherwise, which were not reasonably foreseeable on
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the Effective Date, and which are not within the control of the Party claiming
suspension and which such Party is unable to overcome by the exercise of due
diligence. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The term
"Force Majeure" shall also include any event of Force Majeure occurring with
respect to the facilities or services of either CPC's or WPC's third Party
suppliers or customers delivering or receiving any product, fuel, feedstock, or
other substance necessary to the performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third Party suppliers or customers as a result of an event of Force Majeure.
ARTICLE XIII
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
-----------------------------------------
13.1 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not limited to,
any disputes concerning the interpretation of the terms and provisions hereof,
shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to resolve any
disputes, controversy or claim arising out of or relating to this
Agreement.
(b) Should the Parties directly involved in any dispute, controversy
or claim be unable to resolve same within a reasonable period of
time, such dispute, controversy or claim shall be submitted to
the senior executives of the Parties (the "Senior Executives")
with such explanation or documentation as the Parties deem
appropriate to aid the Senior Executives in their consideration
of the issues presented. The date the matter is first submitted
to the Senior Executives shall be referred to as the "Submission
Date." The Senior Executives shall attempt in good faith,
through the process of discussion and negotiation, to resolve any
dispute, controversy, or claim presented to it within forty-five
(45) Days after the Submission Date.
(c) If the Senior Executives cannot so resolve any dispute,
controversy, or claim submitted to it within forty-five (45) Days
after the Submission Date, the Parties shall attempt in good
faith to settle the matter by submitting the dispute, controversy
or claim to mediation within sixty (60) Days after the Submission
Date using any mediator upon which they mutually agree. If the
Parties are unable to mutually agree upon a mediator within
seventy-five (75) Days after the Submission Date, the case shall
be referred for mediation to the office of Judicial Arbitration
and Mediation Services, Inc. ("JAMS") in Houston, Texas. The cost
of
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the mediator will be split equally between the Parties unless
they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) Days of the initiation of
such procedure, or if either Party will not participate in such
mediation, either Party may request that the matter be resolved
through arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. (S) 1 et seq., and will not be governed by the
arbitration acts, statutes, or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing Party's arbitrator
and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen (15) Days of receipt of an
Arbitration Notice, the other Party shall name its arbitrator by
written notice to the other and may designate any additional
issue(s) for arbitration. The two named arbitrators shall select
the third arbitrator within fifteen (15) Days after the date on
which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience within
the liquefied petroleum gas, natural gas liquids, or petroleum
refining industry to decide the issues presented for arbitration.
No arbitrator shall be: a current or former director, officer,
or employee of either Party or its Affiliates; an attorney (or
member of a law firm) who has rendered legal services to either
Party or its Affiliates within the preceding three Years; or an
owner of any of the common stock of either Party, or its
Affiliates.
(f) The three arbitrators shall commence the arbitration proceedings
within twenty-five (25) Days following the appointment of the
third arbitrator. The arbitration proceedings shall be held at a
mutually acceptable site and if the Parties are unable to agree
on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each Party
shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of pre-
hearing statements of position and legal authority, but no post-
hearing briefs shall be submitted. The arbitration panel shall
not have the authority to award (i) punitive or exemplary damages
or (ii) consequential damages, except as expressly provided
herein. The arbitrators' decision must be rendered within thirty
(30) Days following the conclusion of the hearing or submission
of evidence, but no later than ninety (90) Days after appointment
of the
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third arbitrator. With respect to disputes regarding price or any
redeterminations thereof under Article V, each Party shall submit
to the arbitration panel a final offer of its proposed resolution
of the dispute. A majority of the arbitrators shall approve the
final offer of one Party without modification, and reject the
offer of the other Party.
(g) The decision of the arbitrators or a majority of them, shall be
in writing and shall be final and binding upon the Parties as to
the issue(s) submitted. The cost of the hearing shall be shared
equally by the Parties, and each Party shall be responsible for
its own expenses and those of its counsel or other
representatives. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and
further agrees that a final determination in any such arbitration
proceeding shall be conclusive and binding upon each Party.
Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The prevailing Party
shall be entitled to recover reasonable attorneys' fees and court
costs in any court proceeding relating to the enforcement or
collection of any award or judgment rendered by the arbitration
panel under this agreement.
(h) All deadlines specified herein may be extended by mutual written
agreement of the Parties. The procedures specified herein shall
be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to this
Agreement; provided, however, that a Party may seek a preliminary
injunction or other preliminary judicial relief if in its
judgment such action is necessary to avoid irreparable damage.
Despite such action, the Parties will continue to participate in
good faith in the procedures specified herein. All applicable
statutes of limitation, including, without limitation,
contractual limitation periods provided for in this Agreement,
shall be tolled while the procedures specified in this Section
are pending. The Parties will take all actions, if any,
necessary to effectuate the tolling of any applicable statutes of
limitation.
ARTICLE XIV
LIMITATION OF DAMAGES
---------------------
14.1 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES
SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY
SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN, THE OBLIGOR'S LIABILITY
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SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, EXCLUDING LOST PROFITS, AND SUCH
DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL
OTHER REMEDIES OR DAMAGES ARE WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT (INCLUDING, WITHOUT
LIMITATION, ANY INDEMNITY PROVISION HEREOF) FOR PUNITIVE OR EXEMPLARY DAMAGES IN
TORT OR CONTRACT. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT FOR
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES. THE PRECEDING SENTENCE SHALL NOT
BE CONSTRUED AS LIMITING THE OBLIGATION OF EITHER PARTY HEREUNDER TO INDEMNIFY
THE OTHER PARTY AGAINST CLAIMS ASSERTED BY THIRD PARTIES, INCLUDING, BUT NOT
LIMITED TO, THIRD PARTY CLAIMS FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT
DAMAGES, BUT EXCLUDING CLAIMS FOR SUCH DAMAGES UNDER ARTICLE IX. TO THE EXTENT
ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO ANY PROVISION OF THIS AGREEMENT IS
AGREED BY THE PARTIES TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE
THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT
CONSTITUTES A REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
ARTICLE XV
MISCELLANEOUS
-------------
15.1 This Agreement and the operations hereunder shall be subject to the
valid and applicable federal and state laws and the valid and applicable orders,
laws, local ordinances, rules, and regulations of any local, state or federal
authority having jurisdiction, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such order, laws, rules, or
regulations in any forum having jurisdiction in the premises. If any provision
of this Agreement is held to be illegal, invalid, or unenforceable under the
present or future laws effective during the term of this Agreement, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
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15.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT OF
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND PERFORMED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION
OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF TEXAS.
15.3 This Agreement, including, without limitation, all exhibits hereto,
integrates the entire understanding between the Parties with respect to the
subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CPC or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided. No waiver shall be effective
unless made in writing and signed by the Party to be charged with such wavier.
15.4 The terms, covenants, and conditions of this Agreement shall inure to
and be binding upon the Parties and their respective successors and permitted
assigns, including, but not limited to, any and all subsequent owners of the
Refinery, but (i) neither Party may assign all or any part of its rights under
this Agreement without the prior written consent of the other Party, such
consent not to be unreasonably withheld, (ii) either Party may assign its rights
hereunder to any Affiliate of such Party without the approval of the other Party
(but such assignment shall in no way relieve or release the assigning Party from
any obligations hereunder, whether accrued or unaccrued, unless agreed to in
writing by the non assigning Party and (iii) either Party may, for collateral
purposes, mortgage, pledge, encumber, or grant a security interest in or a lien
on its interest in this Agreement and/or its rights hereunder to any commercial
bank, trustee, or other Person acting on behalf of any such commercial bank, but
only with the prior written consent of the other Party, such consent not to be
unreasonably withheld. Any transfer or assignment in violation of this Section
15.4 shall be void.
15.5 With the other documents required hereunder, CPC shall provide to WPC
a Material Safety Data Sheet for each Refinery Product delivered hereunder. WPC
acknowledges that there may be hazards associated with the loading, unloading,
transporting, handling, or use of the Refinery Product sold hereunder, which may
require that warning be communicated to or other precautionary action taken with
all Persons handling, coming into contact with, or in any way concerned with the
Refinery Product sold hereunder. WPC assumes as to its employees, independent
contractors, and subsequent purchasers of the Refinery Product sold hereunder
all responsibility for all such necessary warnings or other precautionary
measures relating to hazards to Person and property associated with the Refinery
Product and, furthermore, WPC shall defend at its own expense, indemnify fully
and hold harmless CPC and its parents, subsidiaries and Affiliates and its and
their agents, officers, directors, employees, representatives, successors and
assigns from and against any and all
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liabilities; losses; damages; demands; claims; penalties; fines; actions; suits;
legal, administrative or arbitration or alternative dispute resolution
proceedings; judgments, orders, directives, injunctions, decrees or awards of
any jurisdiction; costs and expenses (including, but not limited to, attorneys'
fees and related costs) arising out of or in any manner related to WPC's failure
to provide necessary warnings or other precautionary measures in connection with
the Refinery Product sold hereunder.
15.6 Except as otherwise provided herein, each Party reserves to itself all
rights, set-offs, counterclaims, and other remedies and/or defenses which such
Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
15.7 (a) Each Party agrees that it will maintain this Agreement, all
terms and conditions of this Agreement, and all other
Confidential Information (as hereinafter defined) in strictest
confidence, and that it will not cause or permit disclosure of
Confidential Information to any third Person without the express
written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Section
15.7 may be made by either Party: (i) to the extent necessary
for such Party to enforce its rights hereunder against the other
Party; (ii) to the extent a Party is contractually or legally
bound to disclose information to a third Person (such as a
shareholder or commercial lender); (iii) only to the extent to
which a Party hereto is required to disclose all or part of this
Agreement by a statute or by the order of a court, agency, or
other governmental body exercising jurisdiction over the subject
matter hereof, by order, by regulations, or by other compulsory
process (including, but not limited to, deposition, subpoena,
interrogatory, or request for production of documents); (iv) to
the extent required by the applicable regulations of a securities
or commodities exchange; or (v) to an Affiliate (but only if such
Affiliate agrees to be bound by the provisions of this Section).
In addition to the foregoing, CPC may disclose the terms of this
Agreement to any prospective purchaser of the Refinery.
"Confidential Information" shall mean any information,
proprietary to either Party and maintained by it in confidence or
as a trade secret, including, without limitation, business plans
and strategies, proprietary software, financial statements,
customer or client lists, personnel records, analysis of general
energy market conditions, sales, transportation, and service
contracts and the commercial terms thereof, relationships with
current and potential business partners, suppliers, customers,
service providers and financial sources, data base contents and
valuable information of a like nature relating to the business of
such Party. It is understood and agreed that Confidential
Information shall not include information of a Party that (w)
becomes generally available to the public at the time of
disclosure to the other Party, or (x) after the time of
disclosure to the other Party, was generally made available to
the public without breach of this Agreement,
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or (y) the Person receiving the information can show was
rightfully in its possession at the time of disclosure, or (z)
was rightfully acquired by the recipient from third Persons who
did not themselves obtain such information under a
confidentiality or other similar agreement with the Party whose
information was disclosed.
(b) If either Party is or becomes aware of a fact, obligation, or
circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Section 15.7, it
shall so notify the other Party promptly and shall provide
documentation or an explanation of such disclosure as soon as it
is available. Each Party further agrees to cooperate to the
fullest extent in seeking confidential status to protect any
Confidential Information so disclosed.
(c) The Parties hereto acknowledge that independent legal counsel,
certified public accountants, or other consultants or independent
contractors of a Party (collectively, "Outside Consultants") may,
from time to time, be provided with a copy of this Agreement if,
in the judgment of the disclosing Party, the information
contained in this Agreement is necessary to the performance of
such Outside Consultants' duties. Accordingly, the Parties agree
that such disclosure does not require consent by the other Party,
provided that any such Outside Consultants agree to be bound by
the provisions of this Section 15.7.
(d) Each Party will be deemed solely responsible and liable for the
actions of its employees, Outside Consultants, officers, and
agents for maintaining the confidentiality commitments of this
Section 15.7, but will be required in that regard only to
exercise such care in maintaining the confidentiality of the
Confidential Information as such Party normally exercises in
preserving the confidentiality of its other commercially
sensitive information.
15.8 Nothing contained in this Agreement shall be construed to create
an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
15.9 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this
Agreement;
(b) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
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(c) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions; and
(d) the plural shall be deemed to include the singular and vice versa, as
applicable.
15.10 EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS
RESPECTIVE RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY
CONSENTS TO THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT
HEREBY REPRESENTS AND WARRANTS TO THE OTHER PARTY THAT (I) SUCH PARTY'S LEGAL
COUNSEL WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE
OTHER PARTY OR BY AN AGENT OF SUCH OTHER PARTY, AND (II) NEITHER PARTY EXECUTING
THIS AGREEMENT IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.11 Any notice or other communication provided for in this
Agreement or any notice which either Party may desire to give to the other shall
be in writing and shall be deemed to have been properly given if and when sent
by facsimile transmission, delivered by hand; or, if sent by mail, upon deposit
in the United States mail, either U.S. Express Mail, registered mail, or
certified mail, with all postage fully prepaid; or, if sent by courier, by
delivery to a bonded courier with charges paid in accordance with the customary
arrangements established by such courier, in each case addressed to the parties
at the following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Phone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
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Telecopy: (713) 507-6834
If to CPC: CHEVRON PRODUCTS COMPANY
91-480 Malakole Street,
Kapolei, Hawaii 96707-1807
Attention: Refinery Manager
Telephone: (808) 682-2215
Telecopy: (808) 682-2214
with a copy to:
Vice President & General Counsel
CHEVRON PRODUCTS COMPANY
575 Market Street - Suite 2182
San Francisco, California 94105-2854
Telephone: (415) 894-3232
Telecopy: (415) 894-5489
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the Day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
15.12 No director, employee, or agent of either Party shall give or
receive any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement.
15.13 Each Party shall provide the other Party with such reports as
may be mutually agreeable to both Parties. Each Party shall maintain such
records and accounts as may be necessary to the performance of its respective
duties and obligations hereunder, in accordance with good business practices.
15.14 This Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever, it being the intention of the Parties that no
third Person shall be deemed a third Party beneficiary of this Agreement.
15.15 Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to each of them, in
order to effectuate the purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the Day and Year first above written.
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G.P., INC.
By: _____________________________
Name: _____________________________
Title: _____________________________
CHEVRON PRODUCTS COMPANY,
a division of CHEVRON U.S.A. INC.
By: _______________________________
Name: _____________________________
Title: _____________________________
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EXHIBIT 10.15
"Pages where confidential treatment has been
requested are stamped Confidential Treatment Request.
The redacted material has been separately filed with the
Commission; the appropriate section has been marked
at the appropriate place and in the margin with a star (*)."
El Paso
FEEDSTOCK SALE AND REFINERY
---------------------------
PRODUCT PURCHASE AGREEMENT
--------------------------
THIS FEEDSTOCK SALE AND REFINERY PRODUCT PURCHASE AGREEMENT (the
"Agreement") is made and entered into effective the 1st day of September, 1996,
by and between WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited
partnership with offices at 13430 Northwest Freeway, Suite 1200, Houston, TX
77040-6095 (hereinafter referred to as "WPC"), and CHEVRON PRODUCTS COMPANY, A
DIVISION OF CHEVRON U.S.A. INC., a Pennsylvania corporation with offices at 6501
Trowbridge, El Paso, Texas 79905 (hereinafter referred to as "CPC").
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA") and NGC Corporation ("NGC") have
entered into certain agreements (the "Merger Agreements") pursuant to which CUSA
would contribute certain gas gathering, processing, and other midstream assets
and related liabilities of CUSA's Warren Petroleum Company division ("Warren")
and natural gas business unit division to a corporation to be formed which NGC
would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously sold to CPC and CPC purchased from Warren
all of CPC's Feedstock needs and Warren previously purchased from CPC and CPC
sold to Warren all of the Refinery Products and certain Offspec Refinery
Products produced at CPC's Refinery and both CPC and WPC desire that such
relationship continue;
WHEREAS, WPC desires to sell to CPC, and CPC desires to purchase from
WPC quantities of Feedstocks;
WHEREAS, CPC has quantities of Refinery Products available for sale
from its Refinery (as defined in Article I, below) that it desires to sell to
WPC, and WPC desires to purchase such Refinery Products from CPC; and
WHEREAS, CPC desires that WPC maintain the same level of service that
was previously provided to it by Warren and WPC desires to continue such level
of service.
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NOW, THEREFORE, in consideration of the premises and for the mutual
benefit of the parties as well as for other good and valuable consideration, WPC
and CPC agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 As used in this Agreement, the following terms shall have the following
meanings:
Accounting Period shall mean a period of one (1) Month commencing at 12:01
a.m. local time on the first Day of a calendar Month and ending at 12:01
a.m. local time on the first Day of the next succeeding Month.
Affiliate shall mean any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. The term "control" (including the terms
"controlled by" or "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership, by
contract, or otherwise. Any Person shall be deemed to be an Affiliate of
any specified Person if such Person owns fifty percent (50%) or more of the
voting securities of the specified Person, if the specified Person owns
fifty percent (50%) or more of the voting securities of such Person, or if
fifty percent (50%) or more of the voting securities of the specified
Person and such Person are under common control.
Alternate Index shall have the meaning specified in Section 5.3
hereinafter.
Arbitration Notice shall have the meaning specified in Section 13.1(d)
hereinafter.
Bankruptcy Event shall mean the occurrence of one or more of the following
events with respect to a Party: (A) the entry of a decree or order for
relief against a Party by a court of competent jurisdiction in any
involuntary case brought against a Party under any bankruptcy insolvency or
other similar law (collectively, "Debtor Relief Laws") generally affecting
the rights of creditors and relief of debtors now or hereafter in effect,
(B) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or other similar agent under applicable Debtor
Relief Laws for a Party or for any substantial part of its assets or
property, (C) the ordering of the winding up or liquidation of a Party's
affairs, (D) the filing of a petition in any such involuntary bankruptcy
case, which petition remains undismissed for a period of 180 Days or which
is not dismissed or suspended pursuant to Section 305 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law), (E) the commencement by a Party of a voluntary case under
any applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an involuntary
case under any such law or to the appointment of or the taking of
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possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar agent under any applicable Debtor Relief Laws
for a Party or for any substantial part of its assets or property, or (G)
the making by a Party of any general assignment for the benefit of its
creditors.
Barrel shall mean forty-two (42) U. S. Gallons.
Base Rate shall mean the lesser of (i) two percent (2%) above the per annum
rate of interest announced from time to time as the "prime rate" for
commercial loans by First National Bank of Chicago, as such "prime rate"
may change from time to time, or (ii) the maximum applicable non-usurious
rate of interest.
Business Day shall mean a Day on which Federal Reserve member banks in New
York City are open for business.
Contract Quantity means, for any Delivery Month, a quantity of Feedstocks
nominated by CPC that (a) is not less than ninety-five percent (95%) of the
Nominated Volumes nor (b) more than one hundred and five percent (105%) of
the Nominated Volumes. By way of illustration, if the Nominated Volumes for
a Delivery Month equal 100, then the Contract Quantity shall be not less
than ninety-five (95) nor more than one hundred and five (105).
CPC Deficiency Quantity shall have the meaning specified in Section 4.7
hereinafter.
Day or Daily shall mean a twenty-four (24) hour period commencing 12:01
a.m. local time and extending until 12:01 a.m. local time on the following
Day.
Delivery Month shall mean the Month in which Feedstocks are to be delivered
to CPC based on CPC's nominations.
Delivery Point(s) shall have the meaning specified in Section 6.2
hereinafter.
Effective Date shall mean September 1, 1996.
Emergency Supplies shall mean any Feedstocks or volumes of a particular
Feedstock that CPC may need during a particular Month above the Nominated
Volumes applicable during such Month.
Feedstock shall mean Isobutane, Normal Butane, Mixed Butane, and any other
Feedstocks mutually agreed to in writing by the Parties. Feedstock shall
also mean, where applicable (but excluding Articles IV and V hereunder),
Offspec Feedstock, but such will in no way prevent, preclude, or otherwise
affect the right of CPC to reject Offspec Feedstock in accordance with
Section 7.3 hereinafter.
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
Force Majeure shall have the meaning specified in Section 12.2 hereinafter.
Gallon shall mean the unit of volume used for the purpose of measurement of
liquid. One (1) U.S. liquid Gallon contains two hundred thirty-one (231)
cubic inches when the liquid is at a temperature of sixty degrees
Fahrenheit (60 degrees F) and at the vapor pressure of the liquid being
measured.
Isobutane shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
Keep Whole Acquisition Price shall mean the price paid by WPC to acquire
Feedstocks for resale to CPC plus all Transportation Costs incurred in
* connection therewith plus REDACTED per Gallon. If WPC uses Feedstock that
is owned and stored by WPC to satisfy the Feedstock needs of the Refinery
in the situation where a Keep Whole Acquisition Price is applicable, the
"price paid by WPC to acquire Feedstock for resale to CPC" as used above
* shall be REDACTED as quoted by OPIS for Mont Belvieu, Texas (Non-TET) on
the Day the transportation of the Feedstock to CPC commences. For the
purpose of this Agreement, transportation of Feedstock shall be deemed to
have commenced on the Day (i) the loading of the Feedstock onto trucks,
rail cars, or barges initially commences or (ii) the delivery of such
Feedstock into the transporting pipeline commences. In obtaining Feedstock
for CPC in the situation where a Keep Whole Acquisition Price is
applicable, WPC will use every reasonable effort to purchase such Feedstock
at the lowest possible spot price taking into consideration the location of
the Refinery, the prior notice given by CPC to WPC and other factors beyond
WPC's control.
Keep Whole Disposition Amount shall have the meaning specified in Section
4.7 hereinafter.
Month or Monthly shall mean a period commencing at 12:01 a.m. local time on
the first Day of a calendar Month and extending until 12:01 a.m. local time
on the first Day of the next succeeding calendar Month.
Mixed Butane shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
Netback Price shall mean the price obtained by WPC in an arm's length sale
of Refinery Products to a third Person who is not an Affiliate of WPC less
Transportation Costs and/or T&F Costs that are reasonably incurred in
connection therewith.
WPC Deficiency Amount shall have the meaning specified in Section 14.1
hereinafter.
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WPC Deficiency Quantity shall have the meaning specified in Section 14.1
hereinafter.
New Taxes shall mean any Taxes enacted and effective after the Effective
Date, including that portion of any Taxes or New Taxes that constitutes an
increase either in rate or breadth of coverage.
Nominated Volumes shall have the meaning specified in Section 4.3
hereinafter.
Normal Butane shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "A".
Offspec Feedstocks shall have the meaning specified in Section 7.1
hereinafter.
Offspec Refinery Products shall have the meaning specified in Section 7.2
hereinafter.
Party shall mean individually either CPC or WPC (including their respective
successors and permitted assigns); collectively, the "Parties."
Person shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other organization
of any nature or kind.
PP Mix shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "B".
Propane shall mean a liquid hydrocarbon stream which meets the
specifications set forth in Exhibit "B".
Refinery shall mean the refinery owned by CPC and situated in El Paso,
Texas.
Refinery Products shall mean Propane, PP Mix, Normal Butane, Mixed Butane,
and those other light end streams identified on Exhibit "B" and produced
from the Refinery. Refinery Products shall also mean, where applicable
(but excluding Articles IV and V hereunder), Type A Offspec Refinery
Products, but such will in no way prevent, preclude, or otherwise affect
the right of WPC to reject Type A Offspec Refinery Products in accordance
with Section 7.4 hereinafter.
Taxes shall mean any and all ad valorem, property, occupation, severance,
production, extraction, first use, conservation, Btu or energy, gathering,
transport, pipeline, utility, gross receipts, gas or oil revenue, gas or
oil import, privilege, sales, use, consumption, excise, lease, transaction,
environmental, and other taxes, governmental charges, duties, licenses,
fees, permits, and assessments.
T&F Costs shall mean all Transportation Costs and all costs and expenses
reasonably incurred in connection with the receipt, fractionation and sale
or resale of Refinery Products received by WPC from CPC. It is understood
and agreed that any fractionation costs that are incurred at a
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<PAGE>
facility owned and/or controlled by WPC or any of its Affiliates shall not
exceed the lesser of (i) the fair market value for such fractionation
services or (ii) the fees charged by WPC or its Affiliates to CUSA in
connection with the fractionation of natural gas liquids (other than
Refinery Products) owned by CUSA and purchased by WPC.
Transportation Costs shall mean all costs and expenses reasonably incurred
in connection with the transportation of Feedstock(s) and/or Refinery
Product(s) hereunder, including, without limitation, rail car, barges, and
truck costs, Feedstock and/or Refinery Product losses that occur during
transportation for reasons other than the negligence or willful misconduct
of WPC and all costs and expenses reasonably incurred in loading,
unloading, transporting, terminaling, storing (if required), and handling
such Feedstock(s) and/or Refinery Products. It is understood and agreed
that Transportation Costs shall not include any portion of WPC's general
and administrative costs and expenses, but will include amounts paid by WPC
to CPC in connection with the Propane rail cars owned or leased by CPC but
operated by WPC in connection with the services rendered by WPC to CPC
pursuant to the Feedstock and Refinery Products Master Services Agreement
of even date herewith between CPC and WPC. With respect to barges and
trucks owned by WPC or its Affiliates, the applicable Transportation Costs
shall not exceed the fair market value of the use of such barges and trucks
in transporting Feedstocks and/or Refinery Products hereunder. When WPC
purchases Feedstocks for resale to the Refinery at a delivered price (i.e.,
which includes the price for such Feedstock and Transportation Costs), the
Transportation Costs charged to CPC shall not exceed the fair market value
for such transportation services, which shall be determined with reference
to transportation services rendered to non-affiliated third Persons that
are comparable in time, quality, distance transported and type of Feedstock
transported.
Type A Offspec Refinery Product shall have the meaning specified in Section
7.2 hereinafter.
Type B Offspec Refinery Product shall have the meaning specified in Section
7.2 hereinafter.
Year shall mean a period of twelve (12) consecutive Months commencing from
the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meanings indicated throughout this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 CPC hereby represents and warrants to WPC that on and as of the date
hereof:
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(a) It has all requisite power and authority to carry on the business
in which it is engaged and to perform its respective obligations
under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action;
(c) It has all requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which CPC or its
properties are bound or, to its knowledge, any material laws
applicable to CPC; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency, and other laws generally affecting creditors' rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
2.2 WPC hereby represents and warrants to CPC that on and as of the date
hereof:
(a) It has all requisite power and authority to carry on the business
in which it is engaged and to perform its respective obligations
under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite partnership action;
(c) It has all requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any material laws
applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency, and other laws generally affecting creditors' rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
ARTICLE III
TERM
----
3.1 Unless otherwise provided herein, this Agreement shall remain in
* full force and effect for a period of REDACTED Years from the Effective Date
hereof and shall continue from Year to Year thereafter unless terminated by
* either Party hereto at the end of such REDACTED Year period or any Yearly
anniversary thereafter by giving the other Party at least ninety (90) Days,
but not more than one hundred eighty (180) Days, advance written notice of its
intention to so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be terminated as
follows:
(a) By the non-defaulting Party, upon thirty (30) Days written notice
to the other Party, after it has been determined through the
alternative dispute resolution procedures of Article XIII that a
Material Default has occurred in the performance of a Party's
obligations hereunder (it being understood that, for purposes of
the foregoing, "Material Default" shall mean that the arbitrators
have determined that (i) in consequence of such default, the
objectives of this Agreement (as expressed in the Master Alliance
Agreement of even date herewith by and among CUSA, CPC, WPC and
others) are not being met and (ii) the defaulting Party failed to
take the steps necessary to accomplish such objectives);
(b) By a Party, in the event the other Party is dissolved (unless the
successor to such dissolved Party or its assets is an Affiliate
of CPC or WPC);
(c) By a Party, if a Bankruptcy Event occurs with respect to the
other Party; or
(d) By CPC, upon the occurrence of a Refinery Closure Event as
provided in Section 3.3.
In the event the Refinery is sold to a third Person not affiliated with CPC, the
reference to the Master Alliance Agreement set forth in Section 3.2(a), above,
shall be inapplicable.
3.3 A Refinery Closure Event (as hereinafter defined) shall be presumed to
be a Material Default, and the provisions of this Section 3.3 shall apply,
notwithstanding any other provisions of this Agreement to the contrary
(including but not limited to the provisions of Section 3.2 and the alternative
dispute resolution provisions of Article XIII). Within fifteen (15) Days after
the receipt by WPC of written notice that a Refinery Closure Event has
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occurred, senior executives of both Parties shall meet in person and attempt in
good faith, through the process of discussion and negotiation, to resolve all
disputes and claims arising from the Refinery Closure Event. If, within fifteen
(15) Days after such meeting, such senior executives cannot so resolve all such
disputes and claims, either Party shall have the right to submit such disputes
and claims to arbitration. The Party exercising such right shall submit an
Arbitration Notice to the other Party in accordance with Section 13.1(d) within
sixty (60) Days after the date of the initial meeting of the Parties' senior
executives. Unless the Parties otherwise agree in writing, the failure of either
Party to make such submission within such sixty (60) Days period shall waive all
rights of both Parties in respect of such disputes and claims arising from such
Refinery Closure Event. It is understood and agreed that the provisions of
Sections 13.1(a) through 13.1(c) shall not apply to any dispute arising from a
Refinery Closure Event. If the arbitrators determine that a Refinery Closure
Event has occurred, CPC shall have the right to terminate this Agreement upon
thirty (30) Days written notice to WPC. "Refinery Closure Event" shall mean a
shutdown of the Refinery or any operating unit thereof for more than twenty-four
(24) consecutive hours that occurs more than one time during any twelve (12)
Month period as a result of WPC's unexcused failure to deliver Feedstock or
purchase Refinery Products in accordance with this Agreement.
3.4 It is agreed and understood that CPC, in its sole discretion, may
permanently close the Refinery at any time during the term of this Agreement.
Upon such permanent closure, CPC and WPC shall be relieved of any further
obligations under this Agreement, if CPC has provided WPC with written notice of
such closure at least one hundred and eighty (180) Days prior to the date of
such closure.
3.5 Upon the termination of this Agreement, any monies due and owing
either Party shall be paid to the other Party pursuant to the terms hereof and
any refunds due either Party shall be made at the earliest possible time, and in
any event no later than sixty (60) Days after the expiration or termination of
this Agreement. All audit rights shall survive for the period prescribed by
Section 11.8.
3.6 Termination of this Agreement hereunder shall be cumulative of any
other rights or remedies that the terminating Party may have in connection with
such termination, including, but not limited to, damages and injunctive relief.
ARTICLE IV
QUANTITY AND FEEDSTOCK NOMINATIONS
----------------------------------
4.1 During the term of this Agreement, unless WPC is excused from
supplying Feedstock, or CPC is excused from purchasing Feedstock pursuant to the
terms and provisions hereof, WPC agrees to sell, or cause to be sold, to CPC,
and CPC agrees to purchase from WPC, the Nominated Volumes of each Feedstock
nominated by CPC. All Feedstock sold by WPC and delivered to CPC shall be used
solely by CPC as feedstock or fuel in the Refinery. Unless mutually agreed to
by the Parties, CPC's nominations, and WPC's obligation to sell, shall not
exceed (i) four thousand five hundred Barrels per Day (4,500 BPD) of Isobutane
and (ii) two thousand Barrels per Day (2,000 BPD) of Normal Butane or Mixed
Butane (the
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Required Volumes). Every six (6) Months after the Effective Date, CPC and WPC
shall meet to discuss the appropriate levels of Required Volumes, after which
CPC shall have the right to make reasonable adjustments to said Required Volumes
as necessary and appropriate after taking into consideration CPC's good faith
estimate of the volumes that will be needed during the subsequent six (6) Month
period. However, WPC shall have no obligation to sell volumes in excess of the
previously established Required Volumes until ninety (90) Days after its receipt
of written notice from CPC of any such adjustment. During any Delivery Month in
no event shall (i) WPC be obligated to sell more than the Nominated Volumes and
(ii) CPC be obligated to purchase more than ninety-five percent (95%) of the
Nominated Volumes. To the extent that Section 2.306 of the Texas Business and
Commerce Code, or any provision of any other law with similar provisions
(collectively, "Output Contract Laws") are held to apply to this Agreement and
the transactions hereby contemplated, the Parties agree that, so long as the
Contract Quantity does not exceed the Required Volumes, such Contract Quantity
shall not be deemed unreasonably disproportionate to any stated estimate or to
any normal or otherwise comparable prior requirements of CPC. Notwithstanding
the foregoing, if CPC needs Emergency Supplies of Feedstock(s), WPC will use
every reasonable effort to obtain such Feedstocks on behalf of CPC, but will
have no liability to CPC if, through WPC's exercise of every reasonable effort,
it is unable to supply such Emergency Supplies. In addition to any applicable
Transportation Costs reasonably incurred in connection therewith, all out of
pocket costs and expenses reasonably incurred by WPC in obtaining and delivering
Emergency Supplies of Feedstocks in excess of one hundred and five percent
(105%) of the Nominated Volumes shall be paid by CPC or, as applicable,
reimbursed to WPC by CPC through the billing and payment procedures of Article
XI.
4.2 Subject to the terms and provisions hereof, including, without
limitation, the provisions respecting the Required Volumes set forth in Section
4.1, above, CPC agrees to purchase from WPC and WPC agrees to sell to CPC, one
hundred percent (100%) of CPC's Feedstock requirements. However, in the event
WPC is unable to provide Feedstocks in excess of the Nominated Volumes or
Required Volumes, as applicable, CPC shall have the right to purchase from third
Persons volumes in excess of such Nominated Volumes or Required Volumes. In
addition, WPC agrees to purchase from CPC and CPC agrees to sell to WPC all
Refinery Products. The foregoing, however, shall not be construed as limiting
CPC's right to transfer, from time to time, Feedstocks and Refinery Products (i)
from the Refinery to one or more other refineries owned by CPC as of the
Effective Date (such refineries being collectively called the "Refineries"), or
(ii) to the Refinery from one or more of the Refineries.
4.3 Solely for planning purposes, CPC shall provide WPC with a three (3)
Month rolling estimate of Feedstock volume needs and expected Refinery Product
availability on the first Business Day of each Month during the term of this
Agreement. In addition, CPC shall nominate to WPC by the first Business Day of
the prior Month all volumes of each Feedstock to be purchased by CPC each Day
during the next succeeding Month (the "Nominated Volumes"). No later than the
tenth Day of the Month immediately preceding the Delivery Month, CPC shall have
the right to increase the Nominated Volumes for each Feedstock to be purchased
in the immediately succeeding Delivery Month. If CPC increases the Nominated
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Volumes after the tenth (10th) Day of the Month prior to the Delivery Month so
as to exceed the Contract Quantity, such excess shall be deemed Emergency
Supplies.
4.4 To minimize the costs and expenses associated with Emergency Supplies
and variances between Nominated Volumes and the volumes of Feedstock actually
taken, CPC and WPC agree to establish a scheduling committee (the "Scheduling
Committee") to perform the duties as outlined below. The Scheduling Committee
shall be comprised of members from both CPC and WPC and where appropriate, shall
include a representative of CPC's Transportation Planning & Services Group (also
referred to as "TP&S"). CPC and WPC each shall bear their own costs and
expenses associated with the Scheduling Committee and its activities. The
duties of the Scheduling Committee will include, but will not be limited to, the
following:
(a) administering and coordinating the routine business of the
Scheduling Committee including forecasting, planning, and
scheduling of Feedstock and Refinery Product deliveries and
movements;
(b) determining and developing strategies with respect to Scheduling
Committee activities;
(c) developing, monitoring, and communicating mutually agreed to
standards of performance;
(d) monitoring the nomination procedures, deliveries of Feedstocks
and Refinery Products, and adjustments to Required Volumes;
(e) reviewing all significant equipment, design, process, and
operating changes affecting the volumes of Feedstocks needed by
the Refinery and/or the volumes of Refinery Products produced at
the Refinery;
(f) conducting regularly scheduled planning, problem solving, and
expense review meetings;
(g) participating in the alternative dispute resolution procedures
and set forth in Article XIII hereinafter;
(h) developing procedures for handling Offspec Feedstock and Offspec
Refinery Products; and
(i) developing procedures for making the Parties' performance
hereunder more efficient and cost-effective.
4.5 The Parties shall use every reasonable effort to nominate, deliver,
and receive, as applicable, Feedstock and Refinery Products on a ratable Daily
basis; however, variations between the volumes nominated, taken, or delivered
may occur. The Scheduling Committee shall meet periodically to allocate between
the Parties, on a fair and equitable basis, any costs
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and expenses resulting from Monthly variations in excess of those permitted in
determining the Contract Quantity, including, but not limited to, storage costs
for Feedstocks and Refinery Products, rail, tank car, or barge rental costs,
demurrage charges, and any other costs and expenses incurred in connection with
such Monthly variations. If the Scheduling Committee cannot agree on a fair and
equitable allocation of expenses within forty-five (45) Days after the
Submission Date (as defined in Section 13.1(b)), the dispute resolution
provisions of Article XIII shall apply. In addition to the foregoing, CPC shall
pay to WPC the Keep Whole Acquisition Price for Emergency Supplies, but only to
the extent such Emergency Supplies exceed one hundred and five percent (105%) of
the Nominated Volumes.
4.6 With respect to any CPC Deficiency Quantity (as defined in Section
4.7) which exceeds five percent (5%) of the Nominated Volumes, CPC agrees to pay
to WPC the arithmetic product of (i) such CPC Deficiency Quantity in excess of
five percent (5%) of the Nominated Volumes and (ii) one (1) cent per Gallon.
CPC shall pay such amount in accordance with Article XI. In addition, any Keep
Whole Disposition Amount (as defined in Section 4.7) payable in connection with
such CPC Deficiency Quantity in excess of five percent (5%) of the Nominated
Volumes shall be determined in accordance with Section 4.7 and shall be paid by
CPC or WPC, as applicable, in accordance with Article XI.
4.7 (a) Keep Whole Disposition Amount shall mean the following:
-----------------------------
KWDA=[(A-B) x (C-D)] + E
where
KWDA = the Keep Whole Disposition Amount;
A-B = the CPC Deficiency Quantity;
C-D = the Price Differential; and
E = either the Third Party Costs or the Storage Costs,
as applicable.
For purposes of the foregoing, the variables and terms set forth
below have the following meanings:
A = the total Nominated Volumes for each Feedstock
nominated by CPC for delivery during the applicable
Delivery Month that are available by WPC for delivery
to CPC, minus the total quantities of each Feedstock
that CPC is excused from purchasing hereunder during
the applicable Delivery Month;
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B = the quantities of each Feedstock actually accepted by
CPC during the applicable Delivery Month;
C = the price per Gallon of each Feedstock payable by CPC
to WPC for the applicable Delivery Month in accordance
with Section 5.1 (the "Contract Price");
D = either (i) if WPC sells the CPC Deficiency Quantity,
the price per Gallon obtained by WPC for such CPC
Deficiency Quantity in an arm's length sale made during
such Delivery Month to a third Person who is not an
Affiliate of WPC, or (ii) if WPC stores the CPC
Deficiency Quantity, a price per Gallon equal to the
Monthly average, during the applicable Delivery Month,
of the Daily high and low prices per Gallon quoted by
OPIS for Mont Belvieu, Texas (Non-TET) for each
Feedstock for which there is a CPC Deficiency Quantity
during such Delivery Month ((i) or (ii), as applicable,
being herein called the "Alternate Price").
"Third Party Costs" shall mean, if WPC sells the CPC
Deficiency Quantity, all Transportation Costs and
fractionation costs, if applicable, reasonably incurred by
WPC in connection with the sale of the CPC Deficiency
Quantity (without duplication of any Transportation Costs or
fractionation costs previously paid by CPC under Section
4.5).
"Storage Costs" shall mean, if WPC stores the CPC Deficiency
Quantity, Transportation Costs and fractionation costs, if
applicable, reasonably incurred by WPC to and at the storage
facility of the CPC Deficiency Quantity (without duplication
of any Transportation Costs or fractionation costs
previously paid by CPC under Section 4.5), which
Transportation Costs and fractionation costs shall not
exceed the Transportation Costs and fractionation costs, if
applicable, reasonably incurred in connection with such CPC
Deficiency Quantity if it were transported to and at Mont
Belvieu, Texas.
(b) If the Alternate Price exceeds the Contract Price by more than
one (1) cent ($0.01) per Gallon, the amount computed in
accordance with the first grammatical sentence of Section 4.6
shall not be paid, and instead WPC shall pay CPC, in accordance
with Article XI, an amount calculated as follows:
[[(D-C) - $0.01/Gallon] x (A-B)] - E]
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
(c) It is understood and agreed that the CPC Deficiency Quantity
shall always be equal to or greater than zero (0) and shall never
exceed the Nominated Volumes for the applicable Delivery Month.
(d) In disposing of Feedstock in a situation where a Keep Whole
Disposition Amount is applicable, WPC shall use every reasonable
effort to dispose of same at the highest possible spot purchase
price, taking into consideration the location of the Refinery,
the prior notice given by CPC to WPC, and other factors beyond
WPC's control.
ARTICLE V
PRICE
-----
5.1 Except as otherwise provided herein, CPC shall pay WPC for the
* Feedstock(s) purchased hereunder a price equal to REDACTED as quoted by the
Oil Price Information Service ("OPIS") for Mont Belvieu, Texas (Non-TET) on
the last five (5) Business Days of the Month prior to the Delivery Month plus
* Transportation Costs plus REDACTED per Gallon.
5.2 Except as otherwise provided herein, WPC shall pay CPC for the
* Refinery Products purchased hereunder REDACTED (the "Netback Percentage") of
(i) the Netback Price, if such Refinery Products are immediately sold by WPC,
or (ii) a price equal to the Monthly average of the Daily high and low prices
of each Refinery Product delivered during the Delivery Month as quoted by OPIS
for Mont Belvieu, Texas (Non-TET), less Transportation Costs or T&F Costs to
and at Mont Belvieu, Texas, if such Refinery Products are stored by WPC for
its own account during the applicable Delivery Month. WPC shall use every
reasonable effort to obtain the highest Netback Price for Refinery Products.
Notwithstanding the foregoing, it is understood and agreed that WPC's share of
* the Netback Price received from the disposition of Refinery Products (i.e.,
* REDACTED), shall never be less than REDACTED per Gallon of the Refinery
Products delivered to WPC at the Delivery Point. WPC agrees to use
commercially reasonable efforts to maximize the value to CPC in connection
with the disposition of Refinery Products.
5.3 With respect to any Mixed Butanes or other mixed Feedstocks or
Refinery Products delivered hereunder, the price paid shall be based on the
primary components of each Feedstock or Refinery Product which meet the
specifications set forth in Exhibits A or B, as applicable, contained in such
Mixed Butanes or other mixed Feedstocks or Refinery Products.
5.4 If for any reason the OPIS index for a particular Feedstock or
Refinery Product should cease to be published, the Parties agree promptly and in
good faith to negotiate a mutually satisfactory Alternate Index or substitute
methodology for calculating the price for
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such Feedstock or Refinery Product (the "Alternate Index"). If, on or before
thirty (30) Days after the index used to determine the price ceases to be
published, the Parties are unable to agree on an Alternate Index upon which to
base the calculation of the price, the Parties shall submit such determination
to the alternative dispute resolution procedures in accordance with the
provisions of Article XIII hereinafter, which alternative dispute resolution
procedures will determine the Alternate Index. From the date on which the index
price used to determine the price for a particular Feedstock or Refinery Product
ceases to be available until the Alternate Index is determined, the price for
such Feedstock or Refinery Product shall be the average of the prices in effect
(or that would have been in effect) during the twelve (12) Months preceding the
Month in which the index upon which the price was based ceased to be available,
which price shall be effective until the effective date of the Alternate Index
determined as set forth in this Section 5.4. Upon the determination of an
Alternate Index, the price will be adjusted retroactively to the date on which
the index upon which the price previously was based ceased to be available, plus
interest thereon at the Base Rate.
5.5 Every five (5) Years after the Effective Date of this Agreement,
either Party shall have the option to open this Agreement solely for the purpose
of renegotiating the pricing provisions hereof. To exercise such option, a
Party at least ninety (90) Days before the expiration of such five (5) Year
period must provide to the other Party written notification (the "Renegotiation
Notice") of its desire to renegotiate the price for the Feedstocks or Refinery
Products sold and purchased hereunder. In any such renegotiations, the Parties
shall continue to recognize that the price for Feedstocks and/or Refinery
Products must reflect market prices for Feedstocks and/or Refinery Products in
El Paso, Texas. If, after negotiating in good faith for a period of ninety (90)
Days following the date of the Renegotiation Notice, the Parties are unable to
agree upon a mutually acceptable price for such Feedstock(s) or Refinery
Product(s), the matter shall be submitted to the alternative dispute resolution
procedures as provided in Article XIII hereof. During the period while
negotiations are ongoing until (i) a new price is agreed to or (ii) a new price
is established as provided herein, the price for the Feedstock or the Refinery
Product sold and purchased hereunder shall be determined in accordance with the
pricing formula that was applicable immediately prior to the date of the
Renegotiation Notice. If a new price is established under this Section 5.5,
whether by renegotiation, arbitration, or otherwise, such new price shall be
effective as of, and shall, if necessary, be made retroactive to, the first Day
of the applicable five (5) Year period immediately following the Renegotiation
Notice, plus interest thereon at the Base Rate.
5.6 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CPC and WPC shall meet to renegotiate in good faith such burdensome terms and
provisions so as to make them fair and equitable. Such renegotiations shall
occur within thirty (30) Days of the date of the non-requesting Party's receipt
of such written request for such renegotiations. If the parties are unable to
agree on new provisions to replace such burdensome terms and provisions within
ninety (90) Days of the non-requesting Party's receipt of such written request,
the matter shall be submitted to the alternative dispute resolution procedures
set forth in Article XIII hereof. It is understood and agreed that the rights
granted in this Section 5.6 can only be used by a Party to
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commence good faith renegotiations once during each Year during the term hereof.
If new provisions are agreed upon under this Section 5.6, whether by
renegotiation, arbitration, or otherwise, such new provisions shall be effective
as of, and shall, if necessary, be made retroactive to, the date on which the
notice commencing renegotiations under this Section 5.6 was given, plus interest
thereon at the Base Rate.
ARTICLE VI
DELIVERIES
----------
6.1 The Feedstock to be sold by WPC hereunder shall be delivered by WPC
(or at WPC's direction) to CPC or to CPC's designated representative for the
account of CPC, at the Delivery Points (as defined in Section 6.2). The
Refinery Products to be sold hereunder by CPC to WPC shall be delivered by CPC
at the Delivery Points in Section 6.2.
6.2 The point(s) of delivery for Feedstock and Refinery Product sold and
delivered hereunder (hereinafter the "Delivery Point(s)") shall be determined as
follows:
(a) In the event delivery is to be to or from a pipeline, the Delivery
Point shall be located, and delivery of Feedstock or Refinery Product
shall be deemed to occur, at the point at which Feedstock or Refinery
Product passes the pipeline meter. If pipeline delivery is by in-line
inventory transfer, delivery shall be deemed to occur on the date and
time that the relevant pipeline carrier advises CPC and WPC, by
product transfer order, book transfer, or letter of transfer, that
Feedstock or Refinery Product shall be transferred to CPC's account,
and the Delivery Point shall be the location of the Feedstock or
Refinery Product in the pipeline of the pipeline carrier on the Day
and time that such in-line transfer of Feedstock or Refinery Product
is deemed to occur. The Parties hereto understand and agree that WPC
has no control over the operations of the pipeline carrier and
therefore cannot control when Feedstock transfer to CPC's account or
Refinery Product transfer to WPC's account by the pipeline carrier
will, in fact, occur.
(b) In the event delivery is to be by a rail car, truck, or barge whether
owned, operated, leased, or hired by WPC or CPC, the Delivery Point
shall be located, and delivery of Feedstock or Refinery Product shall
be deemed to occur, (i) at the point at which the Feedstock or
Refinery Product passes through the flange connecting the WPC's or
CPC's owned, operated, leased, or hired rail car, truck, or barge that
is used to deliver the Feedstock to the Refinery, to the receiving
facility equipment of CPC or WPC, whether said rail car, truck, or
barge is unloaded by CPC or WPC directly or on behalf of CPC or WPC
through CPC's or WPC's agent or (ii) at the point at which the rail
car, truck, or barge which is used to deliver the Feedstock is
constructively placed and/or spotted on arrival at or near the
Refinery and available for delivery, whichever is earlier.
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(c) In the event delivery is to be by a rail car, truck, or barge whether
owned, operated, leased, or hired by WPC or CPC, the Delivery Point
shall be located, and delivery of Refinery Product shall be deemed to
occur, (i) at the point at which the Refinery Product passes through
the flange connecting the rail car, truck, or barge which is used to
receive the Refinery Product, as long as such rail car, truck, or
barge is immediately released by the Refinery to WPC for transport, or
(ii) if the rail car, truck, or barge is not immediately released to
WPC for transport, at the point at which such rail car, truck, or
barge is released to WPC for transport, whichever is later.
(d) In the event delivery is into or from a storage facility, except as
provided below in this Section 6.1, the Delivery Point shall be
located, and delivery of Feedstock shall be deemed to occur, at the
point at which the Feedstock passes the flange between the delivering
or receiving line of the storage facility and the receiving or
delivering equipment, as applicable. If delivery is by in-storage
transfer, delivery of Feedstock shall be deemed to occur on the date
and time that the operator of the storage facility advises WPC and CPC
by product transfer order, book transfer, or letter of transfer, that
Feedstock shall be transferred to CPC's account, and the Delivery
Point shall be the storage facility in which the Feedstock is then
located; provided, however, that in the case of an in-storage transfer
of Feedstock located in a storage facility wholly owned by WPC or
leased by WPC and in which CPC owns no interest (leased or otherwise),
for purposes of determining when possession and control of the
Feedstock in storage and the risk of loss, damage, and liability
associated therewith passes from WPC to CPC the Delivery Point shall
be the point at which the Feedstock passes the discharge flange of
WPC's owned or leased storage facility connecting the delivering line
to the receiving line. To the extent that WPC does not operate the
storage facility, the parties hereto understand and agree that WPC
cannot control when the Feedstock transfer to CPC's account by the
storage facility will, in fact, occur.
6.3 Title to and risk of loss associated with the Feedstocks delivered
hereunder shall pass from WPC to CPC upon the commencement of the delivery of
such Feedstocks at the Delivery Point unless such Feedstock is rejected in
accordance with Article VII. CPC shall be responsible for all risk of loss,
damage, or liability to the extent that any such loss, liability, or damage
arises from acts or omissions occurring after the commencement of physical
delivery of the Feedstock at and downstream of the Delivery Point(s), unless
such Feedstock is rejected in accordance with Article VII. In the event
delivery of the Feedstock sold hereunder is by in-storage transfer of Feedstock,
title to the Feedstock shall pass from WPC to CPC at the point in time when such
in-storage transfer shall be deemed to have occurred as provided in Section 6.2,
above.
6.4 Except as hereinafter provided, title to and risk of loss associated
with the Refinery Products delivered hereunder shall pass from CPC to WPC upon
the commencement of the delivery of such Refinery Products at the Delivery
Points, unless such Refinery Products
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are rejected in accordance with Article VII. WPC shall be responsible for all
risk of loss, damage, or liability to the extent that any such loss, liability,
or damage arises from acts or omissions occurring after the commencement of
physical delivery of the Refinery Product at and downstream of the Delivery
Point(s), unless such Refinery Products are rejected in accordance with Article
VII. Except for Type A Offspec Refinery Products knowingly accepted, title to
and risk of loss associated with Offspec Refinery Products delivered hereunder
shall remain with CPC until such Offspec Refinery Products meet the
specifications set forth in Section 7.2 hereinafter. Notwithstanding the
foregoing, CPC shall be responsible for all risk of loss, damage, or liability
to the extent such loss, liability, or damage arises from or is in any way
related to the existence of carbonyl sulfide ("COS") in the Propane delivered
hereunder equal to or in excess of two parts per million (2 ppm) and WPC shall
be responsible for any such risk of loss to the extent such loss, liability, or
damage arises from or is in any way related to the existence of COS in such
Propane in an amount less than two parts per million (2 ppm).
6.5 The following rules shall be applicable to the transportation,
loading, and unloading of Feedstocks or Refinery Products at the Delivery Point:
(a) If rail cars subject to payment of demurrage or any other similar
charges to a third Person not affiliated with either Party are
used to deliver Feedstock to the Delivery Point or to transport
Refinery Products from the Delivery Point, CPC agrees to unload
or load, as the case may be, and start the relevant cars on the
return trip in accordance with the detention policy of the owner
or operator of such rail car equipment and CPC further agrees to
pay any and all such charges that may be due thereunder.
(b) CPC shall be liable for the payment of invoices from the
railroad for demurrage and hazardous materials storage charges
incurred by WPC as the prepaid shipper due to CPC's inability to
receive a rail car and/or have a rail car placed on CPC's siding;
and
(c) Rail cars shall not be diverted while in transit except upon
prior written authorization of WPC. Any charge incurred by WPC
for the diversion of rail cars by CPC shall be for the account of
CPC.
(d) If WPC's owned or leased trucks are used to deliver Feedstock to
the Delivery Point or to transport Refinery Products from the
Delivery Point, CPC agrees to unload or load, as the case may be,
immediately upon arrival at the Delivery Point, and CPC's failure
to do so shall render CPC liable to WPC for damages incurred as a
result of such delay.
(e) For Feedstock sold hereunder, WPC will be liable for all rail car
shortages claimed by CPC in excess of one percent (1%) of the net
Gallons reflected on the bill of lading and acknowledged by the
railroad agent's signature prior to unloading; provided, however,
that such shortages, if any, are reported in writing to WPC
within twenty-four
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(24) hours after delivery by the carrier and prior to the
unloading of the shipment in which the relevant shortage occurs.
CPC shall ask WPC for permission to unload, and WPC, at its
expense, shall have the right to inspect each car at its
destination within forty-eight (48) hours after receipt of
written notice of such shortage. All demurrage charges arising
from the failure of WPC to release the car for unloading within
such forty-eight (48) hour period shall be paid by WPC.
Similarly, WPC shall be liable for all truck shortages claimed by
CPC in excess of three percent (3%) of the net Gallons reflected
on the bill of lading; provided, however, that such shortages, if
any, are noted on the delivery ticket and acknowledged by the
truck driver's signature prior to unloading. The failure of CPC
to observe this provision or any action by CPC which impedes
identification of an alleged defect shall operate as a waiver of
CPC's rights to make any such claim.
(f) For Refinery Products purchased hereunder, CPC will be liable for
all rail car shortages claimed by WPC in excess of one percent
(1%) of the net Gallons reflected on the bill of lading and
acknowledged by the railroad agent's signature prior to
unloading; provided, however, that such shortages, if any, are
reported in writing to CPC within twenty-four (24) hours after
delivery by the carrier and prior to the unloading of the
shipment in which the relevant shortage occurs. WPC shall ask
CPC for permission to unload, and CPC, at its expense, shall have
the right to inspect each car at its destination within forty-
eight (48) hours after receipt of written notice of such
shortage. All demurrage charges arising from the failure of CPC
to release the car for unloading within such forty-eight (48)
hour period shall be paid by CPC. Similarly, CPC shall be liable
for all truck shortages claimed by WPC in excess of three percent
(3%) of the net Gallons reflected on the bill of lading;
provided, however, that such shortages, if any, are noted on the
delivery ticket and acknowledged by the truck driver's signature
prior to unloading. The failure of WPC to observe this provision
or any action by WPC which impedes identification of an alleged
defect shall operate as a waiver of WPC's rights to make any such
claim.
Notwithstanding the foregoing, if the detention and/or demurrage charges set
forth above are insufficient to cover any such charges paid by WPC to such third
Person not affiliated with WPC, CPC shall reimburse WPC for such amounts.
6.6 If, CPC uses a rail car, truck, or barge leased by WPC for purposes
other than those contemplated by WPC's lease, CPC shall be responsible for, and
agrees to indemnify and hold WPC harmless from and against, all costs,
liabilities, and expenses arising out of, or in any way associated with, CPC's
use of such equipment, including, but not limited to, cleaning and inspection
costs and additional rental fees for such equipment and/or for other equipment
required to be leased as a result of CPC's use.
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ARTICLE VII
QUALITY
-------
7.1 All Feedstocks sold by WPC and purchased by CPC hereunder shall meet
the specifications set forth in Exhibit A, attached hereto and made a part
hereof. CPC shall have the right to reject Feedstock which fails to meet such
quality specifications ("Offspec Feedstock"). All costs associated with the
return of Offspec Feedstock shall be borne by WPC.
7.2 All Refinery Products sold by CPC and purchased by WPC hereunder shall
meet the specifications set forth in Exhibit B, attached hereto and made a part
hereof. WPC shall have the right to reject any Refinery Product which fails to
meet such quality specifications ("Offspec Refinery Product"). All Offspec
Refinery Products shall be deemed to be either Type A Offspec Refinery Products
or Type B Offspec Refinery Products. "Type A Offspec Refinery Products" are
Offspec Refinery Products of sufficient quality to permit them to be sold to a
third Person not Affiliated with CPC or WPC at a discount off the price provided
for Refinery Products in Article V. "Type B Offspec Refinery Products" are
Offspec Refinery Products that are not of sufficient quality to permit them to
be sold to a third Person not Affiliated with CPC or WPC at a discount off the
price provided for Refinery Products in Article V. All costs associated with
the return and/or disposal of Offspec Refinery Products shall be borne by CPC.
7.3 Should the Feedstock delivered hereunder to CPC, or to CPC's
designated representative for the account of CPC, fail at any time to conform to
the specifications set forth in Exhibit A, either Party shall notify the other
Party of any such failure, and WPC immediately shall undertake and diligently
pursue such acts as may be necessary to correct such failure, including
treatment to the extent such treatment is economical in WPC's opinion, so as to
deliver Feedstock conforming to the specifications set forth above; but nothing
contained in this Article VII or any other part of this Agreement shall be
construed to affect CPC's right, at any time and from time to time, to reject
any Feedstock not conforming to said specifications and to refuse or suspend
receipt until it is established to CPC's reasonable satisfaction that subsequent
deliveries of Feedstock will conform to said specifications. The term of this
Agreement shall not be extended by the length of time of any period or periods
when deliveries have been rejected, refused, or suspended as provided for
herein. Notwithstanding the foregoing, the knowing acceptance by CPC of any
Offspec Feedstock shall constitute a waiver by CPC of any and all other rights
and remedies available to CPC under this Agreement or otherwise with respect to
WPC's tender of such Offspec Feedstock and all risk of loss, damage, or
liability arising out of CPC's ownership, control, possession, or use of such
Offspec Feedstock shall pass to and be borne by CPC. If it is subsequently
determined that CPC unknowingly accepted Offspec Feedstock, the Parties will
mutually agree upon a discounted price for such Offspec Feedstock to reflect its
diminution in value from Feedstock meeting the specifications hereof. If the
Parties are unable to agree on a mutually acceptable discount price for such
Offspec Feedstock, the matter shall be subjected to the alternative dispute
resolution procedures set forth in Article XIII hereinafter.
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7.4 Should the Refinery Products delivered hereunder to WPC, or to WPC's
designated representative for the account of WPC, fail at any time to conform to
the specifications set forth in Exhibit B, either Party shall notify the other
Party of any such failure, and CPC immediately shall undertake and diligently
pursue such acts as may be necessary to correct such failure, including
treatment to the extent such treatment is economical in CPC's opinion, so as to
deliver Refinery Product conforming to the specifications set forth above; but
nothing contained in this Article VII or any other part of this Agreement shall
be construed to affect WPC's right, at any time and from time to time, to reject
any Refinery Product not conforming to said specifications and to refuse or
suspend receipt until it is established to WPC's reasonable satisfaction that
subsequent deliveries of Refinery Product will conform to said specifications.
The term of this Agreement shall not be extended by the length of time of any
period or periods when deliveries have been rejected, refused, or suspended as
provided for herein. Notwithstanding the foregoing, the knowing acceptance by
WPC of any Type A Offspec Refinery Product shall constitute a waiver by WPC of
any and all other rights and remedies available to WPC under this Agreement or
otherwise with respect to CPC's tender of such Type A Offspec Refinery Product,
and all risk of loss, damage or liability arising out of WPC's ownership,
control , possession, or use of such Type A Offspec Refinery Product shall pass
to and be borne by WPC. If it is subsequently determined that WPC unknowingly
accepted Type A Offspec Refinery Products, the Parties will mutually agree upon
a discounted price for such Type A Offspec Refinery Products to reflect their
diminution in value from Refinery Products meeting the specifications hereof.
If the Parties are unable to agree on a mutually acceptable discount price for
such Offspec Refinery Products, the matter shall be subjected to the alternative
dispute resolution procedures set forth in Article XIII hereunder. CPC agrees
to INDEMNIFY and HOLD HARMLESS WPC, its Affiliates, and their respective
officers, directors, employees, agents, and contractors, from all actual losses,
costs, expenses, claims (including, without limitation, personal injury or
property damage claims), damages, and causes of action, including, without
limitation, reasonable attorneys' fees and costs of court (collectively, the
"Losses") incurred by WPC, such Persons, or such Affiliates arising out of, or
in any way associated with, the delivery to WPC of Propane that fails to meet
the specifications set forth in Exhibit B and is unknowingly accepted by WPC.
ARTICLE VIII
WARRANTY OF TITLE
-----------------
8.1 WPC warrants title to all Feedstocks sold and delivered by it to CPC,
and further warrants that WPC has the right to sell such Feedstocks and that
such Feedstocks meet the quality specifications as set forth herein and are free
from all liens, claims, or other charges. THERE ARE, HOWEVER, NO OTHER
WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY PATENT,
TRADEMARK, COPYRIGHT, OR OTHERWISE,
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AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY WPC AND EXCLUDED FROM
THIS AGREEMENT.
8.2 CPC warrants title to all Refinery Products sold and delivered by it
to WPC, and further warrants that CPC has the right to sell such Refinery
Products and that such Refinery Products meet the quality specifications as set
forth herein and are free from all liens, claims or other charges. THERE ARE,
HOWEVER, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR AGAINST INFRINGEMENT OF ANY
PATENT, TRADEMARK, COPYRIGHT, OR OTHERWISE, AND ALL SUCH WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED BY CPC AND EXCLUDED FROM THIS AGREEMENT.
ARTICLE IX
TAXES
-----
9.1 WPC shall be liable for and shall pay, or cause to be paid, or
reimburse CPC, if CPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the Feedstock sold hereunder upstream of the
Delivery Point(s). If CPC is required to remit such Tax, the amount thereof
shall be deducted from any sums becoming due to WPC hereunder. CPC shall be
liable for and shall pay, cause to be paid, or reimburse WPC, if WPC has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
Feedstock hereunder at and downstream of the Delivery Point(s) including any
Taxes imposed or collected by a taxing authority with jurisdiction over CPC,
provided, however, when laws, ordinances or regulations permit or impose upon
WPC the obligation to collect or pay Taxes applicable to the sale and/or
delivery of Feedstock hereunder at the Delivery Point, WPC shall collect all
such Taxes from CPC, which shall be in addition to the applicable Price, and
remit the same to the appropriate governmental authority, unless CPC furnishes a
certificate of exemption. WPC SHALL INDEMNIFY, DEFEND, AND HOLD CPC HARMLESS
FROM AND AGAINST ANY LIABILITY WITH RESPECT TO THE TAXES FOR WHICH WPC IS
LIABLE.
9.2 CPC shall be liable for and shall pay, or cause to be paid, or
reimburse WPC, if WPC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include, without limitation, Taxes imposed under Sections
4611, 4612, 4661, 4662, 4771, and 4772 and successor sections of the Internal
Revenue Code) applicable to the Refinery Product sold hereunder upstream of the
Delivery Point(s). If WPC is required to remit such Tax, the amount thereof
shall be deducted from any sums becoming due to CPC hereunder. WPC shall be
liable for and shall pay, cause to be paid, or reimburse CPC, if CPC has paid,
all environmental Taxes and all Taxes applicable to the sale and/or delivery of
Refinery Product hereunder at and downstream of the Delivery Point(s) including
any Taxes imposed or collected by a taxing authority with jurisdiction over WPC,
provided, however, when laws,
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ordinances or regulations permit or impose upon CPC the obligation to collect or
pay Taxes applicable to the sale and/or delivery of Refinery Product hereunder
at the Delivery Point, CPC shall collect all such Taxes from WPC, which shall be
in addition to the applicable Price, and remit the same to the appropriate
governmental authority, unless WPC furnishes a certificate of exemption. CPC
SHALL INDEMNIFY, DEFEND, AND HOLD WPC HARMLESS FROM AND AGAINST ANY LIABILITY
WITH RESPECT TO THE TAXES FOR WHICH CPC IS LIABLE.
9.3 While this Agreement remains in effect, CPC shall pay to WPC on
demand, from time to time, all amounts necessary to compensate WPC for any New
Taxes incurred by WPC after the Effective Date of this Agreement applicable to
the sale and/or delivery of Feedstock at and downstream of the Delivery
Point(s), and CPC SHALL INDEMNIFY, DEFEND, AND HOLD WPC FREE AND HARMLESS FROM
AND AGAINST ANY LIABILITY WITH RESPECT TO ALL SUCH NEW TAXES. WPC will notify
CPC of the enactment of any New Taxes as promptly as practical after it obtains
knowledge thereof. WPC will furnish CPC with a statement setting forth the
basis and amount of each request by WPC for compensation under this Section 9.3.
It is understood and agreed that the enactment of any material New Taxes shall
constitute a hardship under the provisions of Section 5.6, above.
9.4 To claim an exemption from payment of a Tax, a Party shall provide a
certificate of exemption or other reasonably satisfactory evidence of exemption
from any Tax, and each Party agrees to cooperate with the other Party in
obtaining any such exemption. In addition, WPC has provided CPC with, and CPC
acknowledges receipt of, the disclosure statement from WPC (as set forth in
Section 4101 of the Internal Revenue Code of 1986).
ARTICLE X
MEASUREMENT AND ANALYSES
------------------------
10.1 On all deliveries into or out of rail cars, the quantity shall be
determined by official tank car capacity tables or slip tube gauges in
accordance with Gas Processors Association ("GPA") Publication 8162, latest
revision. On all deliveries into or out of truck equipment, quantities shall be
determined by meter, rotary gauge or weighing, in accordance with GPA
Publications 8162 and 8186, latest revision. On all deliveries into or out of
pipelines, quantities shall be determined by pipeline meter in accordance with
the America Petroleum Institute ("API") Manual of Petroleum Measurement
Standards. For raw make mixtures, volumes of the component products shall be
determined (where practical) on a mass (pound) measurement basis in accordance
with the latest edition of GPA Publications 8173 and 8182. On all deliveries
into or out of shore tanks, quantities shall be determined either meter or gauge
from a static tank in accordance with the API Manual of Petroleum Measurement
Standards and based upon the practice of the relevant terminal. All quantities
shall be corrected to standard conditions of sixty degrees Fahrenheit (60
degrees F) and equilibrium vapor pressure in accordance with the API Manual of
Petroleum Measurement Standards, Chapter 14, Section B. The quantity and quality
of Feedstock and Refinery Product covered by this Agreement shall be measured
according to the current versions of the applicable standards of
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API and the American Society for Testing Materials, if available. Each Party
shall be entitled to have its representatives present during all loadings,
unloadings, tests, and measurements involving Feedstock or Refinery Product
delivered hereunder. If the Parties cannot agree on measurement or quality tests
results, the measurements and quality tests required to determine the volume of
receipts or shipments or the conformity of the Feedstock or Refinery Product
delivered to the specifications set forth herein shall be made by an independent
inspector selected jointly by the Parties, the cost of which shall be shared
equally by the Parties.
ARTICLE XI
BILLING AND PAYMENT
-------------------
11.1 After delivery of Feedstock(s) hereunder, WPC shall submit an invoice
to CPC by facsimile transmission setting forth the quantity of each Feedstock
delivered, the price for such Feedstock, the amount due hereunder for such
quantities, and such other information and detail as may be mutually agreeable
to the Parties. CPC shall remit by wire transfer of funds, into an account
designated by WPC, any amounts due no later than ten (10) Days after CPC's
receipt of WPC's invoice. If the Day on which any payment is due is not a
Business Day, then the relevant payment shall be due upon the immediately
preceding Business Day, except if such payment due date is a Sunday or Monday,
then the relevant payment shall be due upon the immediately succeeding Business
Day.
11.2 After delivery of Refinery Products hereunder, CPC shall submit a
statement to WPC by facsimile transmission setting forth the quantity of each
Refinery Product delivered to WPC. By not later than thirty (30) Days after the
receipt of CPC's statement, WPC shall provide CPC with a statement setting forth
the price or Netback Price, as applicable, of such Refinery Products, the amount
due CPC for such Refinery Products, and such other information and detail as may
be mutually agreeable to the Parties, along with payment for such Refinery
Products, which shall be remitted by wire transfer of funds into an account
designated by CPC. If the Day on which any payment is due is not a Business
Day, then the relevant payment shall be due upon the immediately preceding
Business Day, except if such payment due date is a Sunday or Monday, then the
relevant payment shall be due upon the immediately succeeding Business Day.
11.3 If CPC or WPC should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such
accrued interest shall be added to the amount reflected as being owed hereunder
by either CPC or WPC, as the case may be, on the next invoice or by separate
invoice.
11.4 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of such good faith dispute,
the withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the
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disputed amount into an escrow account at a mutually acceptable commercial bank,
pending resolution of the dispute. Any such dispute shall be resolved in
accordance with the alternative dispute resolution procedures of Article XIII.
The performance of both Parties under this Agreement shall continue pending the
outcome of such procedures. If it is subsequently determined, whether by mutual
agreement of the Parties or otherwise, that the withholding Party is required to
pay all or any portion of the disputed amounts to the other Party, the
withholding Party, in addition to paying over such amounts, shall also pay
interest accrued on such amounts from the original due date until paid, at the
Base Rate.
11.5 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the Feedstock or Refinery Product invoice or statement forming
the basis of the overcharge or undercharge was delivered or not delivered, as
the case may be, unless a claim for such adjustment shall have been presented
prior to the end of such period. Any payment with respect to a retroactive
adjustment shall include an amount equal to interest on all amounts past due
from the date of the initial payment at the Base Rate, except in instances where
neither Party knew or could have known that the overcharge or undercharge
occurred, in which case interest shall run from the date of demand for payment.
11.6 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
11.7 All payments will be made without setoff or counterclaim; provided,
however, that upon a Party's (the defaulting Party) failure to make payment of
undisputed amounts on the due date, the other Party (the non-defaulting Party)
may, at its option and in its discretion, setoff against any amounts owed to the
defaulting Party any amounts owed by the defaulting Party under this Agreement
or otherwise. The obligations of the non-defaulting Party and the defaulting
Party under this Agreement in respect of such amounts shall be deemed satisfied
and discharged to the extent of any such setoff. The non-defaulting Party will
give the defaulting Party notice of any setoff made under this Section 11.7 as
soon as practicable after the setoff is made provided that failure to give such
notice shall not offset the validity of the setoff.
11.8 ALL DISPUTES ARISING UNDER THIS ARTICLE XI THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XIII HEREOF. TO THE EXTENT THAT
ANY SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE
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DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND ALL RIGHTS HEREUNDER WITH RESPECT
THERETO.
ARTICLE XII
FORCE MAJEURE
-------------
12.1 In the event either Party is rendered unable, wholly or in part, by
Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation.
12.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of the Refinery or any operating units thereof, or modes of transportation used
by WPC to supply Feedstocks to the Refinery, or transport Refinery Products from
the Refinery, floods, washouts, arrests or restraints of the government, either
federal or state, civil or military, civil disturbances, explosions, sabotage,
breakage or accident to equipment, machinery or lines of pipe, freezing of
machinery, equipment or lines of pipe, electric power shortages, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), shutdowns of the Refinery or any operating units thereof or modes of
transportation used by WPC to supply Feedstocks to the Refinery, or transport
Refinery Products from the Refinery, due to explosion or other extraordinary
incident, or any other causes, whether of the kind herein enumerated or
otherwise, which were not reasonably foreseeable on the Effective Date, and
which are not within the control of the Party claiming suspension and which such
Party is unable to overcome by the exercise of due diligence. It is understood
and agreed that the settlement of strikes or lockouts shall be entirely within
the discretion of the Party having the difficulty, and that the above
requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of opposing parties when such course is inadvisable in the
discretion of the Party having difficulty. The term "Force Majeure" shall also
include any event of Force Majeure occurring with respect to the facilities or
services of either CPC's or WPC's third Party suppliers or customers delivering
or receiving any product, fuel, feedstock, or other substance necessary to the
performance of such Party's obligations, and shall also include curtailment or
interruption of deliveries or service by such third Party suppliers or customers
as a result of an event of Force Majeure. It is expressly agreed by the Parties
that neither (i) CPC's inability economically to use Feedstock purchased under
this Agreement nor (ii) WPC's ability to sell Feedstock to a market at a more
advantageous price shall constitute an event of Force Majeure.
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ARTICLE XIII
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
-----------------------------------------
13.1 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not limited to,
any disputes concerning the interpretation of the terms and provisions hereof,
shall be resolved through the use of the following procedures:
(a) The Parties will initially attempt in good faith to resolve any
disputes, controversy or claim arising out of or relating to this
Agreement.
(b) Should the Parties directly involved in any dispute, controversy
or claim be unable to resolve same within a reasonable period of
time, such dispute, controversy or claim shall be submitted to
the Scheduling Committee with such explanation or documentation
as the Parties deem appropriate to aid the Scheduling Committee
in their consideration of the issues presented. The date the
matter is first submitted to the Scheduling Committee shall be
referred to as the "Submission Date." The Scheduling Committee
representatives shall attempt in good faith, through the process
of discussion and negotiation, to resolve any dispute,
controversy, or claim presented to it within forty-five (45) Days
after the Submission Date.
(c) If the Scheduling Committee representatives cannot so resolve any
dispute, controversy, or claim submitted to it within forty-five
(45) Days after the Submission Date, the Parties shall attempt in
good faith to settle the matter by submitting the dispute,
controversy or claim to mediation within sixty (60) Days after
the Submission Date using any mediator upon which they mutually
agree. If the Parties are unable to mutually agree upon a
mediator within seventy-five (75) Days after the Submission Date,
the case shall be referred for mediation to the office of
Judicial Arbitration and Mediation Services, Inc. ("JAMS") in
Houston, Texas. The cost of the mediator will be split equally
between the Parties unless they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) Days of the initiation of
such procedure, or if either Party will not participate in such
mediation, either Party may request that the matter be resolved
through arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. (S) 1 et seq., and will not be governed by the
arbitration acts, statutes, or rules of any other jurisdiction.
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(e) The Arbitration Notice shall name the noticing Party's arbitrator
and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen (15) Days of receipt of an
Arbitration Notice, the other Party shall name its arbitrator by
written notice to the other and may designate any additional
issue(s) for arbitration. The two named arbitrators shall select
the third arbitrator within fifteen (15) Days after the date on
which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience within
the liquefied petroleum gas, natural gas liquids, or petroleum
refining industry to decide the issues presented for arbitration.
No arbitrator shall be: a current or former director, officer,
or employee of either Party or its Affiliates; an attorney (or
member of a law firm) who has rendered legal services to either
Party or its Affiliates within the preceding three Years; or an
owner of any of the common stock of either Party, or its
Affiliates.
(f) The three arbitrators shall commence the arbitration proceedings
within twenty-five (25) Days following the appointment of the
third arbitrator. The arbitration proceedings shall be held at a
mutually acceptable site and if the Parties are unable to agree
on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and
procedures governing the arbitration proceedings. Each Party
shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of pre-
hearing statements of position and legal authority, but no post-
hearing briefs shall be submitted. The arbitration panel shall
not have the authority to award (i) punitive or exemplary damages
or (ii) consequential damages, except as expressly provided
herein. The arbitrators' decision must be rendered within thirty
(30) Days following the conclusion of the hearing or submission
of evidence, but no later than ninety (90) Days after appointment
of the third arbitrator. With respect to disputes regarding
price or any redeterminations thereof under Article V or the
selection of an Alternate Index under Section 5.3, each Party
shall submit to the arbitration panel a final offer of its
proposed resolution of the dispute. A majority of the
arbitrators shall approve the final offer of one Party without
modification, and reject the offer of the other Party.
(g) The decision of the arbitrators or a majority of them, shall be
in writing and shall be final and binding upon the Parties as to
the issue(s) submitted. The cost of the hearing shall be shared
equally by the Parties, and each Party shall be responsible for
its own expenses and those of its counsel or other
representatives. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection
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it may have to the arbitrability of any such disputes,
controversies or claims and further agrees that a final
determination in any such arbitration proceeding shall be
conclusive and binding upon each Party. Judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The prevailing Party shall be entitled to
recover reasonable attorneys' fees and court costs in any court
proceeding relating to the enforcement or collection of any award
or judgment rendered by the arbitration panel under this
Agreement.
(h) All deadlines specified herein may be extended by mutual written
agreement of the Parties. The procedures specified herein shall
be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to this
Agreement; provided, however, that a Party may seek a preliminary
injunction or other preliminary judicial relief if in its
judgment such action is necessary to avoid irreparable damage.
Despite such action, the Parties will continue to participate in
good faith in the procedures specified herein. All applicable
statutes of limitation, including, without limitation,
contractual limitation periods provided for in this Agreement,
shall be tolled while the procedures specified in this Section
are pending. The Parties will take all actions, if any,
necessary to effectuate the tolling of any applicable statutes of
limitation.
ARTICLE XIV
LIMITATION OF DAMAGES
---------------------
14.1 Unless performance is excused by another provision of this Agreement,
if WPC fails to deliver the Nominated Volumes of Feedstock during a Delivery
Month during the term of this Agreement, WPC shall pay CPC the WPC Deficiency
Amount. "WPC Deficiency Amount" shall mean the following:
[(F-G) x (H-I)] + J + K
where
F-G = the WPC Deficiency Quantity which shall always be equal to or
greater than zero (0);
H-I = the CPC Alternate Price which shall never be less than zero
(0);
J = the costs reasonably incurred by CPC in replacing the WPC
Deficiency Quantity pursuant to an arm's length purchase of
such WPC Deficiency Quantity from a third Person, including,
but not limited to, CPC's transportation and storage costs;
and
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K = CPC's administrative and operational costs associated with
the WPC Deficiency Quantity, which shall equal
[$0.0025/Gallon X (F-G)], and which shall constitute
liquidated damages hereunder.
For purposes of the foregoing, the variables and terms set forth below
have the following meanings:
F = the total Nominated Volumes for each Feedstock nominated by
CPC for delivery during the applicable Delivery Month, minus
the total quantities of each Feedstock that WPC is excused
from delivering hereunder during the applicable Delivery
Month;
G = the quantities of each Feedstock actually delivered by WPC
during the applicable Delivery Month;
H = the price obtained by CPC for the WPC Deficiency Quantity in
an arm's length purchase of such WPC Deficiency Quantity
from a third Person; and
I = the price of each Feedstock payable by CPC to WPC for the
applicable Delivery Month in accordance with Section 5.1.
14.2 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES
SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY
SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY,
EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE WAIVED. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF
THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ANY INDEMNITY PROVISION HEREOF)
FOR PUNITIVE OR EXEMPLARY DAMAGES IN TORT OR CONTRACT. EXCEPT AS EXPRESSLY
PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES.
THE PRECEDING SENTENCE SHALL NOT BE CONSTRUED AS LIMITING THE OBLIGATION OF
EITHER PARTY HEREUNDER TO INDEMNIFY THE OTHER PARTY AGAINST CLAIMS ASSERTED BY
THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD PARTY CLAIMS FOR
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, BUT EXCLUDING CLAIMS FOR SUCH
DAMAGES UNDER ARTICLE IX. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE
PURSUANT TO
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ANY PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE
LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A REASONABLE
APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.
ARTICLE XV
MISCELLANEOUS
-------------
15.1 This Agreement and the operations hereunder shall be subject to the
valid and applicable federal and state laws and the valid and applicable orders,
laws, local ordinances, rules, and regulations of any local, state or federal
authority having jurisdiction, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such order, laws, rules, or
regulations in any forum having jurisdiction in the premises. If any provision
of this Agreement is held to be illegal, invalid, or unenforceable under the
present or future laws effective during the term of this Agreement, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
15.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT OF
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND PERFORMED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION
OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF TEXAS.
15.3 This Agreement, including, without limitation, all exhibits hereto,
integrates the entire understanding between the Parties with respect to the
subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CPC or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly
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provided. No waiver shall be effective unless made in writing and signed by the
Party to be charged with such wavier.
15.4 (a) Subject in all respects to Section 15.4(b), the terms, covenants,
and conditions of this Agreement shall inure to and be binding
upon the Parties and their respective successors and permitted
assigns, including, but not limited to, any and all subsequent
owners of the Refinery, but (i) neither Party may assign all or
any part of its rights under this Agreement without the prior
written consent of the other Party, such consent not to be
unreasonably withheld, (ii) either Party may assign its rights
hereunder to any Affiliate of such Party without the approval of
the other Party (but such assignment shall in no way relieve or
release the assigning Party from any obligations hereunder,
whether accrued or unaccrued, unless agreed to in writing by the
non assigning Party and (iii) either Party may, for collateral
purposes, mortgage, pledge, encumber, or grant a security
interest in or a lien on its interest in this Agreement and/or
its rights hereunder to any commercial bank, trustee, or other
Person acting on behalf of any such commercial bank, but only
with the prior written consent of the other Party, such consent
not to be unreasonably withheld. Any transfer or assignment in
violation of this Section 15.4 shall be void.
(b) It is understood and agreed that CPC may assign all (but not less
than all) its rights under this Agreement in connection with the
assignment, sale, transfer, or other disposition (collectively, a
"Disposition") of the Refinery to a third Person who is not an
Affiliate of either Party (such third Person being herein called
the "Transferee"), but only with the prior written consent of
WPC, such consent not to be unreasonably withheld. CPC shall
provide WPC with written notice of the Disposition prior to its
consummation, including in such notice the name of the proposed
Transferee. Within thirty (30) Days after WPC's receipt of such
notice, WPC shall deliver to CPC a written notice (the
"Assignment Notice") that (i) WPC consents to the assignment of
this Agreement to the proposed Transferee or (ii) WPC does not
consent to such assignment, together with a statement of WPC's
reasons for withholding its consent If WPC fails to deliver such
Assignment Notice within such thirty (30) Day period, WPC shall
be deemed to have consented to such assignment. If WPC consents
to such assignment, the Transferee shall assume all obligations
of CPC under this Agreement upon consummation of the Disposition,
and CPC shall have no further liability hereunder.
If WPC withholds its consent hereunder, then, within thirty (30)
Days after CPC's receipt of WPC's Assignment Notice, either Party
may
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<PAGE>
terminate this Agreement, effective upon consummation of the
Disposition.
15.5 With the other documents required hereunder, WPC shall provide to CPC
a Material Safety Data Sheet for each Feedstock delivered hereunder. CPC
acknowledges that there may be hazards associated with the loading, unloading,
transporting, handling or use of the Feedstock sold hereunder, which may require
that warning be communicated to or other precautionary action taken with all
Persons handling, coming into contact with, or in any way concerned with the
Feedstock sold hereunder. CPC assumes as to its employees, independent
contractors, and subsequent purchasers of the Feedstock sold hereunder all
responsibility for all such necessary warnings or other precautionary measures
relating to hazards to person and property associated with the Feedstock sold
hereunder and, furthermore, CPC shall defend at its own expense, indemnify fully
and hold harmless WPC and its parents, subsidiaries and Affiliates and its and
their agents, officers, directors, employees, representatives, successors and
assigns from and against any and all liabilities; losses; damages; demands;
claims; penalties; fines; actions; suits; legal, administrative or arbitration
or alternative dispute resolution proceedings; judgments, orders, directives,
injunctions, decrees or awards of any jurisdiction; costs, and expenses
(including, but not limited to, attorneys' fees and related costs) arising out
of or in any manner related to CPC's failure to provide necessary warnings or
other precautionary measures in connection with the Feedstock sold hereunder.
15.6 With the other documents required hereunder, CPC shall provide to WPC
a Material Safety Data Sheet for each Refinery Product and Type A Offspec
Refinery Product delivered hereunder. WPC acknowledges that there may be
hazards associated with the loading, unloading, transporting, handling, or use
of the Refinery Product and Type A Offspec Refinery Product sold hereunder,
which may require that warning be communicated to or other precautionary action
taken with all Persons handling, coming into contact with, or in any way
concerned with the Refinery Product and Type A Offspec Refinery Product sold
hereunder. WPC assumes as to its employees, independent contractors, and
subsequent purchasers of the Refinery Product and Type A Offspec Refinery
Product sold hereunder all responsibility for all such necessary warnings or
other precautionary measures relating to hazards to Person and property
associated with the Refinery Product and Type A Offspec Refinery Product sold
hereunder and, furthermore, WPC shall defend at its own expense, indemnify fully
and hold harmless CPC and its parents, subsidiaries and Affiliates and its and
their agents, officers, directors, employees, representatives, successors and
assigns from and against any and all liabilities; losses; damages; demands;
claims; penalties; fines; actions; suits; legal, administrative or arbitration
or alternative dispute resolution proceedings; judgments, orders, directives,
injunctions, decrees or awards of any jurisdiction; costs and expenses
(including, but not limited to, attorneys' fees and related costs) arising out
of or in any manner related to WPC's failure to provide necessary warnings or
other precautionary measures in connection with the Refinery Product and Type A
Offspec Refinery Product sold hereunder.
15.7 Except as otherwise provided herein, each Party reserves to itself all
rights, set-offs, counterclaims, and other remedies and/or defenses which such
Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
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15.8 (a) Each Party agrees that it will maintain this Agreement, all terms
and conditions of this Agreement, and all other Confidential
Information (as hereinafter defined) in strictest confidence, and
that it will not cause or permit disclosure of Confidential
Information to any third Person without the express written
consent of the other Party hereto. Disclosures of Confidential
Information otherwise prohibited by this Section 15.8 may be made
by either Party: (i) to the extent necessary for such Party to
enforce its rights hereunder against the other Party; (ii) to the
extent a Party is contractually or legally bound to disclose
information to a third Person (such as a shareholder or
commercial lender); (iii) only to the extent to which a Party
hereto is required to disclose all or part of this Agreement by a
statute or by the order of a court, agency, or other governmental
body exercising jurisdiction over the subject matter hereof, by
order, by regulations, or by other compulsory process (including,
but not limited to, deposition, subpoena, interrogatory, or
request for production of documents); (iv) to the extent required
by the applicable regulations of a securities or commodities
exchange; or (v) to an Affiliate (but only if such Affiliate
agrees to be bound by the provisions of this Section). In
addition to the foregoing, CPC may disclose the terms of this
Agreement to any prospective purchaser of the Refinery.
"Confidential Information" shall mean any information,
proprietary to either Party and maintained by it in confidence or
as a trade secret, including, without limitation, business plans
and strategies, proprietary software, financial statements,
customer or client lists, personnel records, analysis of general
energy market conditions, sales, transportation, and service
contracts and the commercial terms thereof, relationships with
current and potential business partners, suppliers, customers,
service providers and financial sources, data base contents and
valuable information of a like nature relating to the business of
such Party. It is understood and agreed that Confidential
Information shall not include information of a Party that (w)
becomes generally available to the public at the time of
disclosure to the other Party, or (x) after the time of
disclosure to the other Party, was generally made available to
the public without breach of this Agreement, or (y) the Person
receiving the information can show was rightfully in its
possession at the time of disclosure, or (z) was rightfully
acquired by the recipient from third Persons who did not
themselves obtain such information under a confidentiality or
other similar agreement with the Party whose information was
disclosed.
(b) If either Party is or becomes aware of a fact, obligation, or
circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Section 15.8, it
shall so notify the other Party promptly and shall provide
documentation or an explanation of
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<PAGE>
such disclosure as soon as it is available. Each Party further
agrees to cooperate to the fullest extent in seeking confidential
status to protect any Confidential Information so disclosed.
(c) The Parties hereto acknowledge that independent legal counsel,
certified public accountants, or other consultants or independent
contractors of a Party (collectively, "Outside Consultants") may,
from time to time, be provided with a copy of this Agreement if,
in the judgment of the disclosing Party, the information
contained in this Agreement is necessary to the performance of
such Outside Consultants' duties. Accordingly, the Parties agree
that such disclosure does not require consent by the other Party,
provided that any such Outside Consultants agree to be bound by
the provisions of this Section 15.8.
(d) Each Party will be deemed solely responsible and liable for the
actions of its employees, Outside Consultants, officers, and
agents for maintaining the confidentiality commitments of this
Section 15.8, but will be required in that regard only to
exercise such care in maintaining the confidentiality of the
Confidential Information as such Party normally exercises in
preserving the confidentiality of its other commercially
sensitive information.
15.9 Nothing contained in this Agreement shall be construed to create an
association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either Party.
15.10 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this
Agreement;
(b) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions; and
(d) the plural shall be deemed to include the singular and vice
versa, as applicable.
15.11 EACH PARTY EXECUTING THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS, IF ANY, UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY
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<PAGE>
OF ITS OWN SELECTION, EACH PARTY EXECUTING THIS AGREEMENT VOLUNTARILY CONSENTS
TO THIS WAIVER. IN ADDITION, EACH PARTY EXECUTING THIS AGREEMENT HEREBY
REPRESENTS AND WARRANTS TO THE OTHER PARTY THAT (I) SUCH PARTY'S LEGAL COUNSEL
WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY THE OTHER
PARTY OR BY AN AGENT OF SUCH OTHER PARTY, AND (II) NEITHER PARTY EXECUTING THIS
AGREEMENT IS IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
15.12 Any notice or other communication provided for in this Agreement or
any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand; or, if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail, or certified
mail, with all postage fully prepaid; or, if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the parties at the
following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Telephone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
If to CPC: CHEVRON PRODUCTS COMPANY
6501 Trowbridge
El Paso, Texas 79905
Attention: Refinery Manager
Phone: (915) 775-3411
Telecopy: (713) 775-5568
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<PAGE>
with a copy to:
Vice President & General Counsel
CHEVRON PRODUCTS COMPANY
575 Market Street - Suite 2182
San Francisco, California 94105-2854
Telephone: (415) 894-3232
Telecopy: (415) 894-5489
or at such other address as either Party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving Party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the Day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
15.13 No director, employee, or agent of either Party shall give or
receive any commission, fee, rebate, gift, or entertainment of significant cost
or value in connection with this Agreement.
15.14 Each Party shall provide the other Party with such reports as may be
mutually agreeable to both Parties. Each Party shall maintain such records and
accounts as may be necessary to the performance of its respective duties and
obligations hereunder, in accordance with good business practices.
15.15 This Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever, it being the intention of the Parties that no
third Person shall be deemed a third Party beneficiary of this Agreement.
15.16 Each Party shall take such acts and execute and deliver such
documents in form and substance reasonably satisfactory to each of them, in
order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the Day
and Year first above written.
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<PAGE>
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G. P., INC.
By: ______________________________
Name: _____________________________
Title: ___________________________
CHEVRON PRODUCTS COMPANY,
a division of CHEVRON U.S.A. INC.
By: ______________________________
Name: _____________________________
Title: ___________________________
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<PAGE>
EXHIBIT 10.16
"Pages where confidential treatment has been requested are stamped
Confidential Treatment Requested. The redacted material has been
marked at the appropriate place and in the margin with a star (*)."
CCC PRODUCT SALE AND PURCHASE AGREEMENT
---------------------------------------
THIS PRODUCT SALE AND PURCHASE AGREEMENT (the "Agreement") is made and
entered into effective as of the 1st day of September, 1996, by and between
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership
with offices at 13430 Northwest Freeway, Suite 1200, Houston, TX 77040-6095
(hereinafter referred to as "WPC"), and CHEVRON CHEMICAL COMPANY, a Delaware
corporation with offices at 1301 McKinney Street, Houston, TX 77010 (hereinafter
referred to as "CCC").
WITNESSETH:
WHEREAS, Chevron U.S.A. Inc. ("CUSA"), and NGC Corporation ("NGC"), have
entered into certain agreements ( the "Merger Agreements") pursuant to which
CUSA would contribute certain gas gathering, processing and other midstream
assets and related liabilities of CUSA's Warren Petroleum Company division
("Warren") and natural gas business unit division to a corporation to be formed
which NGC would then be merged into (the "Merger");
WHEREAS, immediately subsequent to the Merger, the gas gathering,
processing and other midstream assets and related liabilities of Warren will be
transferred to WPC;
WHEREAS, Warren previously sold to CCC and CCC purchased from Warren all of
CCC's Product and, from time to time, Offspec Product needs and both CCC and WPC
desire that such relationship continue; and
WHEREAS, WPC has quantities of Products (as defined in Article I below)
available for sale from certain of its facilities located in Mont Belvieu,
Texas, that it desires to sell to CCC, and CCC desires to purchase such Products
from WPC.
NOW, THEREFORE, in consideration of the premises and for the mutual benefit
of the parties as well as for other good and valuable consideration, WPC and CCC
agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 As used in this Agreement, the following terms shall be given the
following meanings:
Additional Volumes shall have the meaning specified in Section 6.1
hereinafter.
Affiliate shall mean any Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person
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specified. The term "control" (including the terms "controlled by" or
"under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership, by contract, or otherwise.
Any Person shall be deemed to be an Affiliate of any specified Person if
such Person owns 50% or more of the voting securities of the specified
Person, if the specified Person owns 50% or more of the voting securities
of such Person, or if 50% or more of the voting securities of the specified
Person and such Person are under common control.
Alternate Index shall have the meaning specified in Section 5.2
hereinafter.
Arbitration Notice shall have the meaning specified in Section 15.1(d)
hereinafter.
Bankruptcy Event shall mean the occurrence of one or more of the following
events with respect to a Party: (A) the entry of a decree or order for
relief against a Party by a court of competent jurisdiction in any
involuntary case brought against a Party under any bankruptcy insolvency or
other similar law (collectively, "Debtor Relief Laws") generally affecting
the rights of creditors and relief of debtors now or hereafter in effect,
(B) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar agent under applicable Debtor Relief
Laws for a Party or for any substantial part of its assets or property, (C)
the ordering of the winding up or liquidation of a Party's affairs, (D) the
filing of a petition in any such involuntary bankruptcy case, which
petition remains undismissed for a period of 180 Days or which is not
dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy
Code (or any corresponding provision of any future United States bankruptcy
law), (E) the commencement by a Party of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, (F) the consent by
a Party to the entry of an order for relief in an involuntary case under
any such law or to the appointment of or the taking of possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar agent under any applicable Debtor Relief Laws for a Party or for
any substantial part of its assets or property, or (G) the making by a
Party of any general assignment for the benefit of its creditors.
Barrel shall mean forty-two (42) U. S. Gallons.
Base Rate shall mean the lesser of (i) two percent (2%) above the per annum
rate of interest announced from time to time as the "prime rate" for
commercial loans by First National Bank of Chicago, as such "prime rate"
may change from time to time, or (ii) the maximum applicable non-usurious
rate of interest.
Base Volumes shall mean the minimum Daily volume of Products that CCC will
agree to
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<PAGE>
purchase and WPC will agree to sell and deliver each Month during each
Delivery Period.
Business Day shall mean a Day on which Federal Reserve member banks in New
York City are open for business.
CCC's Facilities shall mean CCC's Port Arthur chemical plant situated in
Port Arthur, Texas, and Cedar Bayou chemical plant situated in Baytown,
Texas.
Day or Daily shall mean a twenty-four (24) hour period commencing 7:00 a.m.
local time and extending until 6:59 a.m. local time on the following Day.
Delivery Month shall mean the Month in which Product(s) are to be delivered
to CCC as provided herein.
Delivery Period shall mean a two Month period commencing on the first Day
of January, March, May, July, September and November of each Year.
Delivery Point(s) shall have the meaning specified in Section 7.2
hereinafter.
Effective Date shall mean September 1, 1996.
EP Mix shall mean a liquid hydrocarbon stream containing a mixture of
ethane and propane in the proportions of 80% ethane and 20% propane and
other associated compounds which meets the specifications set forth in
Exhibit "A".
Gallon shall mean the unit of volume used for the purpose of measurement of
liquid. One (1) U.S. liquid gallon contains two hundred thirty-one (231)
cubic inches when the liquid is at a temperature of sixty degrees
Fahrenheit (60EF) and at the vapor pressure of the liquid being measured.
Inventory Account shall have the meaning specified in Section 10.1
hereinafter.
Month or Monthly shall mean a period commencing at 7:00 a.m. local time on
the first Day of a calendar month and extending until 6:59 a.m. local time
on the first Day of the next succeeding calendar month.
Natural Gasoline shall mean a liquid hydrocarbon stream containing natural
gasoline and other associated compounds which meets the specifications set
forth in Exhibit "A".
New Taxes shall mean any Taxes enacted and effective after the Effective
Date, including that portion of any Taxes or New Taxes that constitutes an
increase either in rate or breadth of coverage.
Normal Butane shall mean normal butane which meets the specifications set
forth in
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Exhibit "A".
Offspec Product shall have the meaning specified in Section 8.1
hereinafter.
Other Feedstocks shall have the meaning specified in Section 4.4
hereinafter.
Party shall mean individually either CCC or WPC (including their respective
successors and permitted assigns); collectively, the "Parties."
Person shall mean any individual, corporation, partnership, limited
liability company, association, joint venture, trust, or other organization
of any nature or kind.
Product shall mean EP Mix, Propane, Normal Butane and Natural Gasoline as
defined herein.
Propane shall mean a liquid hydrocarbon stream containing propane,
incidental hydrocarbons and other associated compounds which meets the
specifications set forth in Exhibit "A".
Required Inventory shall have the meaning specified in Section 10.2
hereinafter.
Renegotiation Notice shall have the meaning specified in Section 5.3
hereinafter.
Storage Facility shall mean the underground liquid hydrocarbon storage
facility located in Mont Belvieu, Texas owned and operated by WPC and being
the same storage facility previously owned and operated by Warren.
Taxes shall mean any and all ad valorem, property, occupation, severance,
production, extraction, first use, conservation, Btu or energy, gathering,
transport, pipeline, utility, gross receipts, gas or oil revenue, gas or
oil import, privilege, sales, use, consumption, excise, lease, transaction,
environmental, and other taxes, governmental charges, duties, licenses,
fees, permits and assessments.
Year shall mean a period of twelve (12) consecutive Months commencing from
the Effective Date.
1.2 Other Definitions. Other terms may be defined elsewhere in the text
of this Agreement and shall have the meanings indicated throughout this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 CCC hereby represents and warrants to WPC that on and as of the date
hereof:
(a) It is duly formed and validly existing and in good standing under
the laws
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<PAGE>
of the state or jurisdiction of formation, with all requisite
corporate power and authority to carry on the business in which
it is engaged and to perform its respective obligations under
this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite corporate action;
(c) It has all the requisite corporate power and authority to enter
into this Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which CCC or its
properties are bound or, to its knowledge, any material laws
applicable to CCC; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency and other laws generally affecting creditor's rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
2.2 WPC hereby represents and warrants to CCC that on and as of the date
hereof:
(a) It is duly formed and validly existing under the laws of the
state or jurisdiction of formation, with all requisite power and
authority to carry on the business in which it is engaged and to
perform its respective obligations under this Agreement;
(b) The execution and delivery of this Agreement have been duly
authorized and approved by all requisite partnership action;
(c) It has all the requisite power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement does not, and
consummation of the transactions contemplated herein will not,
violate any of the material provisions of its organizational
documents, any material agreement pursuant to which WPC or its
properties are bound or, to its knowledge, any material laws
applicable to WPC; and
(e) This Agreement is valid, binding, and enforceable against it in
accordance with its terms, subject to bankruptcy, moratorium,
insolvency and other laws generally affecting creditor's rights
and general principles of equity (whether applied in a proceeding
in a court of law or equity).
5
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
ARTICLE III
TERM
----
3.1 Unless otherwise provided herein, this Agreement shall remain in full
* force and effect for a period of REDACTED from the Effective Date hereof and
shall continue from year to year thereafter unless terminated by either Party
* hereto at the end of such REDACTED period or any yearly anniversary thereafter
by giving the other Party at least two years advance written notice of its
intention to so terminate.
3.2 Notwithstanding Section 3.1 above, this Agreement may be terminated as
follows:
(a) By the non-defaulting Party, upon thirty (30) Days written notice
to the other Party, after it has been determined through the
alternative dispute resolution procedures of Article XV that a
Material Default has occurred in the performance of a Party's
obligations hereunder (it being understood that, for purposes of
the foregoing, "Material Default" shall mean that the arbitrators
have determined that (i) in consequence of such default, the
objectives of this Agreement (as expressed in the Master Alliance
Agreement of even date herewith by and among CCC, WPC and others)
are not being met and (ii) the defaulting Party failed to take
the steps necessary to accomplish such objectives);
(b) In the event either Party is dissolved (unless the successor to
such dissolved Party or its assets is an Affiliate of CCC or WPC)
or;
(c) If a Bankruptcy Event occurs with respect to either Party.
ARTICLE IV
QUANTITY
--------
4.1 WPC agrees to sell to CCC, and CCC agrees to purchase from WPC on each
day during the term hereof, the Base Volumes as determined and nominated by CCC
in accordance with the procedures set forth in Article VI hereinafter. In
addition, CCC further agrees to purchase from WPC and WPC agrees to use its best
efforts to sell and deliver to CCC one hundred percent (100%) of CCC's
Additional Volume needs. It is understood and agreed that all costs and
expenses incurred by WPC in obtaining such Additional Volumes for sale and
delivery to CCC in excess of such costs and expenses that are normally incurred
by WPC in satisfying CCC's Base Volume needs shall be shared by WPC and CCC on
an equal basis. Prior to incurring any such costs and expenses, WPC will advise
CCC as to its estimate of such costs and will not incur such costs until
approved by CCC. If CCC is unwilling to pay for its share of such costs, WPC
shall be released from any obligation to supply such Additional Volumes to CCC.
6
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
4.2 The Parties hereto recognize that currently, and without spending
additional capital, CCC has no other method to obtain the supply of Product
other than through WPC's equipment and facilities. The Parties further
recognize that it is intended that WPC be CCC's sole supplier and a preferred
customer of WPC. Accordingly, WPC agrees that it will advise CCC daily as to
the availability of Products for sale and will work with CCC to manage CCC's
Product supply needs.
4.3 It is understood and agreed that certain Offspec Product(s) and/or
other opportunistic chemical feedstocks ("Other Feedstocks") may, by mutual
agreement of the parties, intentionally be sold and purchased hereunder. In
such event, the price, specifications and terms of delivery for such Offspec
Product(s) or Other Feedstocks shall be mutually agreed to by the parties prior
to the delivery of same.
4.4 The parties hereto recognize and acknowledge that during the term
hereof it may be more economical to both CCC and WPC to import Products, Offspec
Products and/or Other Feedstocks than to purchase same from the Mont Belvieu
market. If such Products are purchased by WPC for resell to CCC, the price for
such imported Products, Offspec Products and/or Other Feedstocks will be
mutually agreed to by the parties prior to importing same. It is understood and
agreed that nothing contained in this Article IV is intended to preclude CCC
from obtaining supplies of Products, Offspec Products or Other Feedstocks from
sources outside of the United States as long as the dock and/or other
terminalling facilities owned by WPC or its Affiliates are used to off-load
and/or receive such other Products, Offspec Products or Other Feedstocks at
mutually agreeable rates that are fair and commercially reasonable.
ARTICLE V
PRICE
-----
5.1 Except as otherwise provided herein, CCC shall pay WPC for (i) the
* Base Volumes purchased hereunder, a price equal to REDACTED as quoted by the
Oil Price Information Service ("OPIS") for Mont Belvieu, Texas (Non-TET), and
(ii) any Additional Volumes purchased hereunder, a price mutually agreed to by
the Parties, and if the Parties are unable to agree upon a price, a price
* equal REDACTED as quoted by OPIS for Mont Belvieu, Texas (Non-TET) for the
period of time (Days) during each Delivery Month such Additional Volumes are
delivered to CCC. In addition to the foregoing, for all Products delivered
hereunder (including the Base Volumes and the Additional Volumes), CCC shall
* pay to WPC a delivery fee (the "Delivery Fee") equal to REDACTED per Barrel.
For all purposes hereof, delivery of Products shall be deemed to occur at the
point where title and risk of loss passes to CCC as provided herein.
5.2 If for any reason the OPIS price for a particular Product should cease
to be published, the parties agree promptly and in good faith to negotiate a
mutually satisfactory
7
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
alternate index or substitute methodology for calculating the Price for such
Product (the "Alternate Index"). If, on or before thirty (30) Days after the
index used to determine the Price ceases to be available, the parties are unable
to agree on an Alternate Index or substitute methodology upon which to base the
calculation of the Price, the parties shall submit such determination to the
alternative dispute resolution procedures set forth in Article XV hereinafter,
which alternative dispute resolution procedures will determine the Alternate
Index. From the date on which the index price used to determine the Price for a
particular Product ceases to be available until the Alternate Index is
determined, the Price for such Product shall be the average of the Prices in
effect (or that would have been in effect) during the twelve (12) Months
preceding the Month in which the index upon which the Price was based ceased to
be available, which price shall be effective until the effective date of the
Alternate Index determined as set forth in this Section 5.2. Upon the
determination of an Alternate Index, the Price will be adjusted retroactively to
the date on which the index upon which the Price previously was based ceased to
be available.
* 5.3 Every REDACTED after the Effective Date of this Agreement, the parties
shall have the option to open this Agreement solely for the purpose of
renegotiating the pricing provisions hereof. To exercise such option, a party
at least ninety (90) days before the expiration of such five (5) year period
must provide to the other party written notification (the "Renegotiation
Notice") of its desire to renegotiate the price for the Product sold and
purchased hereunder. In any such renegotiations, the parties shall continue to
recognize that the price for Product must reflect the prevailing market value of
spot sales and purchases of Product(s) in Mont Belvieu, Texas. If, after
negotiating in good faith for a period of ninety (90) days following the date of
the Renegotiation Notice, the parties are unable to agree upon a mutually
acceptable price for such Product(s), the matter shall be submitted to the
alternative dispute resolution procedures as set forth in Article XV hereof.
During the period while negotiations are ongoing until (i) a new price is agreed
to or (ii) a new price is established by the alternative dispute resolution
procedures as provided herein, the price for the Product(s) sold and purchased
hereunder shall be determined in accordance with the pricing formula that was
applicable immediately prior to the date of the Renegotiation Notice. If a new
price is agreed to or is established through the alternative dispute resolution
procedures as provided above, this Agreement shall be amended to reflect such
new price.
5.4 In the event conditions change such that this Agreement causes, or
could reasonably be expected to cause, a material long term economic or
operational hardship to either Party, upon the written request of either Party,
CCC and WPC shall meet to renegotiate such burdensome terms and provisions so as
to make them fair and equitable. Such renegotiations shall commence within
thirty (30) days of the written request for such renegotiations. If the parties
are unable to agree on new provisions to replace such burdensome terms and
provisions within ninety (90) days of the non-requesting party's receipt of such
written request, the matter shall be submitted to the alternative dispute
resolution procedures set forth in Article XV hereof. It is
8
<PAGE>
understood and agreed that, unless mutually agreed to by the Parties, the rights
granted in this Section 5.4 can only be used by a Party to commence good faith
renegotiations once during each year during the term hereof. If new provisions
are agreed upon under this Section 5.4, whether by renegotiation, mediation,
arbitration or otherwise, such new provisions shall be effective as of, and
shall, if necessary, be made retroactive to, the date on which the notice
commencing renegotiations under this Section 5.4 was given.
5.5 If, at any time during the term of this Agreement, WPC enters into an
agreement having a term of one year or more with another chemical company to
sell Products and provide the same or similar services at WPC's Mont Belvieu
facilities as WPC provides to CCC as provided herein, WPC agrees to provide the
same overall economic package to CCC.
ARTICLE VI
NOMINATIONS
-----------
6.1 On the first Business Day of the Month immediately preceding each
Delivery Period, CCC shall nominate in writing to WPC the Base Volumes to be
purchased by CCC on each Day during such Delivery Period. If prior to or during
a Delivery Month CCC needs volumes of Product in excess of the Base Volumes
("Additional Volumes"), as soon as reasonably possible prior to the Day CCC
desires for the delivery of such Additional Volumes to commence, CCC shall
request that such Additional Volumes be supplied by WPC. Such request may be
verbal if immediately followed in writing by facsimile transmission.
6.2 Daily and Monthly variations between the Base Volumes nominated by CCC
to be purchased and the volumes taken by CCC shall, as appropriate, be added to
or subtracted from CCC's Inventory Account if, at the time, CCC has sufficient
volumes above the Required Inventory levels in its Inventory Account. If there
does not exist sufficient volumes in CCC's Inventory Account to allow for such
minor Daily and Monthly variations, any such increases in the volumes of Product
required by CCC shall be deemed Additional Volumes and, if available, shall be
purchased from WPC at a price equal to the average of the daily high and low
prices of each Product as quoted by OPIS for Mont Belvieu, Texas (Non-TET) on
the Business Day such minor variations occurred, if on a Business Day, or the
next succeeding Business Day thereafter if not on a Business Day.
6.3 CCC shall advise WPC as soon as reasonably possible of any unscheduled
turnarounds at CCC's Facilities and shall give WPC at least twenty four (24)
hours notice prior to the startup of such Facilities following a scheduled or
unscheduled turnaround.
6.4 To minimize the costs and expenses associated with (i) variances
between the volumes of Base Volumes nominated and the volumes actually taken and
(ii) obtaining the volumes of other Products requested by CCC, CCC and WPC agree
to establish a scheduling committee (the "Scheduling Committee") to perform the
duties as outlined below. The Scheduling Committee shall be comprised of
members from both CCC and WPC. CCC and WPC each shall bear their own costs and
expenses associated with the Scheduling Committee and its
9
<PAGE>
activities. The duties of the Scheduling Committee will include, but will not be
limited to, the following:
(a) administering and coordinating the routine business of the
Scheduling Committee including forecasting, planning and
scheduling of Product deliveries and movements;
(b) determining and developing strategies with respect to Scheduling
Committee activities;
(c) developing, monitoring and communicating mutually agreed to
standards of performance;
(d) monitoring the nomination procedures and deliveries of Products;
(e) reviewing all significant equipment, design, process and
operating changes affecting the volumes of Products needed by
CCC's Facilities;
(f) conducting regularly scheduled planning, problem solving and
expense review meetings;
(g) participating in the alternative dispute resolution procedures
and set forth in Article XV hereinafter;
(h) forecasting the availability of Products, Offspec Products and/or
Other Products and CCC's anticipated needs for same; and
(i) aiding in the development of feedstock inventory plans and cost
risk management programs to assist CCC in lowering its feedstock
costs and assist CCC in optimizing the flexibility of CCC's
Facilities.
6.5 Solely for planning purposes in connection with the management of the
brine supply at WPC's Storage Facility, CCC shall provide to WPC a six (6) Month
rolling estimate of the total inventory of non-LPG feedstocks that CCC will
expect to be stored in WPC's Storage Facility. For the purpose of this Section
6.5, "non-LPG feedstocks" shall mean Ethylene, Propylene, PP Mix, Naphtha and
other chemical feedstocks.
ARTICLE VII
DELIVERIES
----------
7.1 The Product to be sold and purchased hereunder shall be delivered by
WPC to CCC or to CCC's designated representative for the account of CCC, at the
point(s) of delivery specified herein. Except as otherwise provided herein, all
Products sold and delivered hereunder shall be used solely by CCC as feedstock
or fuel at CCC's Facilities.
10
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
7.2 The point(s) of delivery for Product sold and delivered hereunder
(hereinafter the "Delivery Point(s)") shall be at WPC's Storage Facility and the
delivery of Product shall be deemed to occur (i) at the point at which Product
passes into the pipeline connected to WPC's Storage Facility and designated by
CCC, with respect to Product physically delivered to CCC, and/or (ii) on the
date WPC advises CCC by product transfer order, book transfer, or letter of
transfer, that Product was transferred to CCC's Inventory Account, with respect
to in-storage transfers and Required Inventory purchases by CCC from WPC,
7.3 For all deliveries of Product from WPC's Storage Facility into a
pipeline designated by CCC, WPC shall operate and maintain equipment to ensure
that the delivery pressure shall be sufficient to allow the Product to enter at
the applicable Delivery Point at the then prevailing operating pressure and flow
rates required therein, which pressure and flow rates shall vary from time to
time, but will not be more than the Maximum Operating Pressure or less than the
Minimum Operating Pressure as set forth in the table below, nor greater than the
flow rates for each Product as set forth below:
(a) Pipeline(s) Delivering Products on CCC's behalf to Port Arthur:
<TABLE>
<CAPTION>
PRODUCT MINIMUM MAXIMUM MAXIMUM FLOW
OPERATING OPERATING RATE
PRESSURE PRESSURE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
* EP Mix * 900 psig 1220 psig REDACTED
- --------------------------------------------------------------------------------
</TABLE>
* Shall also apply to blends of Ethane and Propane ranging from an
80/20 mix to a 60/40 mix.
11
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
(b) Pipeline(s) Delivering Products on CCC's behalf to Cedar Bayou:
<TABLE>
<CAPTION>
PRODUCT MINIMUM MAXIMUM MAXIMUM FLOW
OPERATING OPERATING RATE **
PRESSURE PRESSURE
-------------------------------------------------------------------------------
<S> <C> <C> <C>
*Purity Ethane 550 psig 1440 psig REDACTED
-------------------------------------------------------------------------------
*EP Mix 550 psig 1440 psig REDACTED
-------------------------------------------------------------------------------
*Propane 550 psig 1440 psig REDACTED
-------------------------------------------------------------------------------
*All Grades of Butane 550 psig 1440 psig REDACTED
-------------------------------------------------------------------------------
*Natural Gasoline 550 psig 1440 psig REDACTED
-------------------------------------------------------------------------------
</TABLE>
* ** WPC shall not be required to deliver more than REDACTED Barrels
per Day of Product, whether combined or as a single Product.
If CCC's Product needs increase due to expansion or otherwise such that CCC will
require increased flow or delivery rates, upon mutual agreement of the Parties
concerning the reimbursement or sharing of the costs and expenses (if any)
associated with the increase in the flow or delivery rates, the Maximum Flow
Rates as set forth above will be amended. If the Parties are unable to agree on
the reimbursement or sharing of such costs and expenses, the matter shall be
submitted to the alternative dispute resolution procedures as set forth in
Article XV hereof.
7.4 Title to and risk of loss associated with the Products sold and
purchased hereunder shall pass from WPC to CCC upon the commencement of the
delivery of such Product at the Delivery Point or when the Product is deemed to
have been delivered as provided in Section 7.2 above. CCC shall be responsible
for all risk of loss, damage or liability to the extent that any such loss,
liability or damage arises from acts or omissions occurring after the
commencement of physical delivery of the Product at and downstream of the
Delivery Point(s), except for any negligent acts of WPC, its employees, agents
or subcontractors that occur downstream of the Delivery Point(s), and WPC shall
be responsible for all risk of loss, damage or liability to the extent that any
such loss, liability or damage arises from acts or omissions occurring prior to
the commencement of physical delivery of the Product upstream of the
12
<PAGE>
Delivery Point(s), except for any negligent acts of CCC, its employees, agents
or subcontractors that occur upstream of the Delivery Point(s). In the event
delivery of the Product sold hereunder is by in-storage transfer of Product, all
risk of loss, damage or liability shall pass from WPC to CCC at the point in
time when such in-storage transfer shall be deemed to have occurred as provided
in Section 7.2 above, except for any such losses, damages and liabilities that
are caused by the negligence of WPC, its employees, agents or subcontractors.
ARTICLE VIII
QUALITY
-------
8.1 Except as otherwise provided herein, all Products sold and purchased
hereunder shall meet the specifications set forth in Exhibit A, attached hereto
and made a part hereof. CCC shall have the right to reject Product which fails
to meet such quality specifications (hereinafter referred to as "Offspec
Product").
8.2 Should the Product delivered hereunder to CCC, or to CCC's designated
representative for the account of CCC, fail at any time to conform to the
specifications set forth in Exhibit A, each party shall notify the other as soon
as practicable after becoming aware that the Product fails to meet such
specifications, and WPC immediately shall undertake and diligently pursue such
acts as may be necessary to correct such failure so as to deliver Product
conforming to the specifications set forth above; but nothing contained in this
Article VIII or any other part of this Agreement shall be construed to affect
CCC's right, at any time and from time to time, to reject any Product not
conforming to said specifications.
8.3 The term of this Agreement shall not be extended by the length of time
of any period or periods when deliveries have been rejected, refused or
suspended by CCC as provided for herein. Notwithstanding the provisions of
Section 8.2 above, if (i) after being given the opportunity to treat and/or
fractionate such Offspec Product, WPC elects not to treat and/or fractionate
same and CCC elects to accept such Offspec Product, or (ii) CCC unknowingly
accepts Offspec Product, the parties will mutually agree upon a discounted price
to be paid by CCC to WPC for such Offspec Product. In no event shall the
discounted price paid by CCC be less than (y) the price for such specification
Product as set forth in Article V, less $0.022 per Gallon or (z) the price for
such specification Product, less the decrease in the yield value solely caused
by such Offspec Product, whichever is higher.
8.4 Notwithstanding the specifications of EP Mix set forth in Exhibit A,
WPC agrees to use all reasonable efforts to (i) notify CCC when the methanol
levels in the EP Mix being delivered to CCC exceeds eighty parts per million (80
ppm) (ii) deliver to CCC EP Mix containing less than 80 ppm of methanol, but
will have no liability to CCC for failing to do so after exercising such
reasonable efforts.
ARTICLE IX
WARRANTY
--------
9.1 WPC warrants title to all Products sold and delivered by it to CCC, and
further
13
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
warrants that WPC has the right to sell such Products and that such Products
meet the quality specifications as set forth herein and is free from all liens,
claims or other charges. UNLESS OTHERWISE PROVIDED IN THIS AGREEMENT, THERE
ARE, NO OTHER WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, CONFORMITY TO MODELS OR SAMPLES, OR OTHERWISE, AND ALL SUCH
WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY WPC AND EXCLUDED FROM THIS
AGREEMENT.
ARTICLE X
STORAGE SERVICES
----------------
10.1 Upon execution of this Agreement, CCC shall be deemed to have entered
into a Storage Agreement with WPC, effective as of the Effective Date, pursuant
to the terms and provisions set forth in Exhibit "B" attached hereto and made a
part hereof, pursuant to which CCC will lease Product storage capacity at WPC's
Storage Facility (the "Inventory Account").
10.2 Each Month during the term hereof, CCC shall maintain in its Inventory
Account the following volumes of inventory of each Product included in the Base
Volumes applicable during the Delivery Period (the "Required Inventory") based
on CCC's Delivery Period nominations:
<TABLE>
<CAPTION>
MONTHS REQUIRED INVENTORY
--------------------------------------------
<S> <C>
REDACTED
* May through October
--------------------------------------------
* November through April REDACTED
--------------------------------------------
</TABLE>
If at any time during a Delivery Month, CCC fails and or refuses to maintain the
Required Inventory for each Product, WPC will have the right, but not the
obligation, to sell such volumes of Product(s) to CCC at a mutually agreed upon
price or, if the parties are unable to agree upon a mutually acceptable price,
at a price equal to the average of the daily high and low prices of each Product
as quoted by OPIS for Mont Belvieu, Texas (Non-TET) on the Day the volumes of
such Product(s) were reduced below the Required Inventory level, if such Day is
a Business Day, or the next succeeding Business Day if such Day is not a
Business Day.
10.3 Upon CCC's request, WPC will either purchase from CCC volumes of
Product(s) in CCC's Inventory Account at a mutually agreed upon price, or sell
such Product(s) on CCC's behalf at a mutually agreed upon price or, if the
parties are unable to agree upon a mutually acceptable price, at a price equal
to the average of the daily high and low prices of each Product
14
<PAGE>
as quoted by OPIS for Mont Belvieu, Texas (Non-TET) for the two Business Days
following the Day such request is received by WPC.
ARTICLE XI
TAXES
-----
11.1 WPC shall be liable for and shall pay, or cause to be paid, or
reimburse CCC, if CCC has paid, all Taxes (other than environmental Taxes, which
environmental Taxes include without limitation, Taxes imposed under Section
4611, 4612, 4661, 4662, 4771 and 4772 and successor sections of the Internal
Revenue Code) applicable to the Product sold hereunder upstream of the Delivery
Point(s). If CCC is required to remit such Tax, the amount thereof shall be
deducted from any sums becoming due to WPC hereunder. CCC shall be liable for
and shall pay, cause to be paid, or reimburse WPC, if WPC has paid, all
environmental Taxes and all Taxes applicable to the sale and/or delivery of
Product hereunder at and downstream of the Delivery Point(s) including any Taxes
imposed or collected by a taxing authority with jurisdiction over CCC, provided,
however, when laws, ordinances or regulations permit or impose upon WPC the
obligation to collect or pay Taxes applicable to the sale and/or delivery of
Product hereunder at the Delivery Point, WPC shall collect all such taxes from
CCC, which shall be in addition to the applicable Price, and remit the same to
the appropriate governmental authority, unless CCC furnishes a certificate of
exemption. WPC and CCC shall indemnify, defend, and hold the other harmless
from and against any liability with respect to the Taxes for which the other
party is liable.
11.2 While this Agreement remains in effect, CCC shall pay to WPC on
demand, from time to time, all amounts necessary to compensate WPC for any New
Taxes incurred by WPC after the Effective Date of this Agreement applicable to
the sale and/or delivery of Product at and downstream of the Delivery Point(s),
and CCC shall indemnify, defend, and hold WPC free and harmless from and against
any liability with respect to all such New Taxes. WPC will notify CCC of the
enactment of any New Taxes as promptly as practical after it obtains knowledge
thereof. WPC will furnish CCC with a statement setting forth the basis and
amount of each request by WPC for compensation under this Section 11.2.
11.3 To claim an exemption from payment of a Tax, a party shall provide a
certificate of exemption or other reasonably satisfactory evidence of exemption
from any Tax, and each party agrees to cooperate with the other party in
obtaining any such exemption. In addition, CCC acknowledges receipt of the
disclosure statement from WPC (as set forth in Section 4101 of the Internal
Revenue Code of 1986) or is knowledgeable of the contents thereof.
ARTICLE XII
MEASUREMENT AND ANALYSES
------------------------
12.1 On all deliveries into or out of pipelines, quantities shall be
determined by pipeline meter in accordance with the America Petroleum Institute
("API") Manual of Petroleum Measurement Standards. For ethane and EP Mix,
volumes of such Products shall be determined (where practical) on a mass (pound)
measurement basis in accordance with the latest edition of
15
<PAGE>
GPA Publications 8173 and 8182. For all other Products, the volumes shall be
determined on a volumetric basis. All quantities shall be corrected to standard
conditions of 60 degrees Fahrenheit and equilibrium vapor pressure in accordance
with the API Manual of Petroleum Measurement Standards, Chapter 14, Section B.
The quantity and quality of Products covered by this Agreement shall be measured
according to the current versions of the applicable standards of API and the
American Society for Testing Materials, if available. Each Party shall be
entitled to have its representatives present during all loadings, unloadings,
tests and measurements involving Products delivered hereunder. If the parties
cannot agree on measurement or quality tests results, the measurements and
quality tests required to determine the volume of receipts or shipments or the
conformity of the Products delivered to the specifications set forth herein
shall be made by an independent inspector selected jointly by the parties, the
cost of which shall be shared equally by the parties.
ARTICLE XIII
BILLING AND PAYMENT
-------------------
13.1 Each Month during the term hereof, WPC shall submit an invoice to CCC
by facsimile transmission setting forth the quantity of each Product delivered
during the immediately preceding Delivery Month, the price for such Product, the
amount due hereunder for such quantities, and such other information and detail
as may be mutually agreeable to the Parties. CCC shall remit by wire transfer
of funds, into an account designated by WPC, any amounts due no later than ten
(10) Days after CCC's receipt of WPC's invoice. If the Day on which any payment
is due is not a Business Day, then the relevant payment shall be due upon the
immediately preceding Business Day, except if such payment due date is a Sunday
or Monday, then the relevant payment shall be due upon the immediately
succeeding Business Day.
13.2 If CCC or WPC should fail to remit any amounts in full when due as
required hereunder, or if any adjustments are made under this Agreement,
including, without limitation, adjustments as the result of the conclusion of
any audits or as a result of the resolution of a billing dispute, interest on
the unpaid portion shall accrue from the date upon which such payment should
have been made hereunder until paid in full at the Base Rate. All such accrued
interest shall be added to the amount reflected as being owed hereunder by
either CCC or WPC, as the case may be, on the next invoice or by separate
invoice.
13.3 If a good faith dispute arises as to the amount payable in any
statement, the amount not in dispute shall be paid. If either Party elects to
withhold any payment otherwise due as a consequence of a good faith dispute, the
withholding Party shall provide the other Party with written notice of its
reasons for withholding payment, and shall simultaneously place the disputed
amount into an escrow account at a mutually acceptable commercial bank, pending
resolution of the dispute. Any such dispute shall be resolved in accordance
with the alternative dispute resolution procedures of Article XV. The
performance of both Parties under this Agreement shall continue pending the
outcome of such procedures. If it is subsequently determined, whether by mutual
agreement of the Parties or otherwise, that the withholding Party is required to
pay all or any portion of the disputed amounts to the other Party, the
withholding Party, in addition to
16
<PAGE>
paying over such amounts, shall also pay interest accrued on such amounts from
the original due date until paid, at the Base Rate.
13.4 No retroactive adjustments may be made for any overcharge or
undercharge after a period ending twenty-four (24) Months from the end of the
Month in which the invoice or statement forming the basis of the overcharge or
undercharge was delivered or not delivered, as the case may be, unless a claim
for such adjustment shall have been presented prior to the end of such period.
Any payment with respect to a retroactive adjustment shall include an amount
equal to interest on all amounts past due from the date of the initial payment
at the Base Rate, except in instances where neither Party knew or could have
known that the overcharge or undercharge occurred, in which case interest shall
run from the date of demand for payment. Each Party shall maintain true and
complete records relating to this Agreement and shall retain all such records
for a minimum period of twenty-four Months after the end of the Month in which
Products are delivered.
13.5 Either Party, upon notice in writing to the other, shall have the
right at reasonable hours to audit the accounts and records relating to the
accounting or billing under the provisions of any article hereof; provided,
however, that the auditing Party must take written exception to and make claim
upon the other Party for all discrepancies disclosed by said audit within
twenty-four (24) Months of the rendition of any statement or invoice forming the
basis of such claim. Such audit shall be conducted by the auditing Party's
representative or auditor at the auditing Party's expense.
13.7 ALL DISPUTES ARISING UNDER THIS ARTICLE XIII THAT ARE NOT OTHERWISE
RESOLVED AS PROVIDED HEREIN SHALL BE SUBMITTED TO THE ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES AS SET FORTH IN ARTICLE XV HEREOF. TO THE EXTENT THAT ANY
SUCH UNRESOLVED DISPUTE HAS NOT BEEN SUBMITTED TO SUCH ALTERNATIVE DISPUTE
RESOLUTION PROCEDURES WITHIN TWENTY-FIVE (25) MONTHS AFTER THE EVENT CAUSING THE
DISPUTE IS DISCOVERED OR REASONABLY SHOULD HAVE BEEN DISCOVERED, THE PARTY
ASSERTING THE CLAIM IN DISPUTE SHALL BE DEEMED TO HAVE WAIVED ANY SUCH CLAIM AND
ALL RIGHTS HEREUNDER WITH RESPECT THERETO.
13.8 All payments will be made without setoff or counterclaim; provided,
however, that upon a Party's (the "defaulting Party") failure to make payment of
undisputed amounts on the due date, the other Party (the "non-defaulting Party")
may, at its option and in its sole discretion, setoff against any amounts owed
to the defaulting Party, any amounts owed by the defaulting Party under this
Agreement or otherwise. The obligations of the non-defaulting Party and the
defaulting Party under this Agreement in respect of such amounts shall be deemed
satisfied and discharged to the extent of any such setoff. The non-defaulting
Party will give the defaulting Party notice of any setoff made under this
Section 13.8 as soon as practicable after the setoff is made, provided that
failure to give such notice shall in no way affect the validity of the setoff.
17
<PAGE>
ARTICLE XIV
FORCE MAJEURE
-------------
14.1 In the event either Party is rendered unable, wholly or in part, by
Force Majeure to carry out its obligations under this Agreement, it is agreed
that upon such Party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other Party after the occurrence of the cause
relied on, then the obligations of the Party giving such notice, so far as and
to the extent that they are affected by such Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period, and
such cause shall so far as possible be remedied with all reasonable dispatch.
This Agreement shall not be terminated by reason of any such cause, but shall
remain in full force and effect, and this Agreement shall not be extended
regardless of such curtailment or cessation. If an event of Force Majeure
results in substantial interference with a Party's performance hereunder and
such condition continues for six (6) consecutive Months or longer, the other
Party shall have the right to terminate this Agreement upon sixty (60) Days
written notice to the other.
14.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of either Party's facilities or any operating units thereof, floods, washouts,
arrests or restraints of the government, either federal or state, civil or
military, civil disturbances, explosions, sabotage, breakage or accident to
equipment, machinery or lines of pipe, freezing of machinery, equipment or lines
of pipe, electric power shortages, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules, orders, laws or
governmental authorities (both federal, state and local), shutdowns due to
explosion or other extraordinary incident, or any other causes, whether of the
kind herein enumerated or otherwise, which were not reasonably foreseeable on
the Effective Date, and which are not within the control of the Party claiming
suspension and which such Party is unable to overcome by the exercise of due
diligence. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The
term "Force Majeure" shall also include any event of Force Majeure occurring
with respect to the facilities or services of either CCC's or WPC's third Party
suppliers or customers delivering or receiving any product, fuel, feedstock, or
other substance necessary to the performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third Party suppliers or customers as a result of an event of Force Majeure. It
is expressly agreed by the Parties that neither (i) CCC's inability economically
to use Feedstock purchased under this Agreement nor (ii) WPC's ability to sell
Feedstock to a market at a more advantageous price shall constitute an event of
Force Majeure.
18
<PAGE>
ARTICLE XV
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
-----------------------------------------
15.1 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or performance hereof, including, but not limited to,
any disputes concerning the interpretation of the terms and provisions hereof,
shall be resolved through the use of the following procedures or any other
procedures mutually agreed to in writing by the Parties:
(a) The parties will initially attempt in good faith to resolve any
disputes, controversy or claim arising out of or relating to this
Agreement.
(b) Should the Parties directly involved in any dispute, controversy
or claim be unable to resolve same within a reasonable period of
time, such dispute, controversy or claim shall be submitted to
the Scheduling Committee with such explanation or documentation
as the Parties deem appropriate to aid the Scheduling Committee
in their consideration of the issues presented. The date the
matter is first submitted to the Scheduling Committee shall be
referred to as the "Submission Date." The Scheduling Committee
representatives shall attempt in good faith, through the process
of discussion and negotiation, to resolve any dispute,
controversy, or claim presented to it within forty-five (45) days
after the Submission Date.
(c) If the Scheduling Committee representatives cannot so resolve any
dispute, controversy, or claim submitted to it within forty-five
(45) days after the Submission Date, the Parties shall attempt in
good faith to settle the matter by submitting the dispute,
controversy or claim to mediation within sixty (60) days after
the Submission Date using any mediator upon which they mutually
agree. If the Parties are unable to mutually agree upon a
mediator within seventy-five (75) days after the Submission Date,
the case shall be referred for mediation to the office of
Judicial Arbitration and Mediation Services, Inc. ("JAMS") in
Houston, Texas. The cost of the mediator will be split equally
between the Parties unless they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) days of the initiation of
such procedure, or if either Party will not participate in such
mediation, either Party may request that the matter be resolved
through arbitration by submitting a written notice (the
"Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration
Act, 9 U.S.C. (S) 1 et seq., and will not be governed by the
arbitration acts, statutes or rules of any other jurisdiction.
(e) The Arbitration Notice shall name the noticing Party's arbitrator
and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen
19
<PAGE>
(15) Days of receipt of an Arbitration Notice, the other Party
shall name its arbitrator by written notice to the other and may
designate any additional issue(s) for arbitration. The two named
arbitrators shall select the third arbitrator within fifteen (15)
Days after the date on which the second arbitrator was named.
Should the two arbitrators fail to agree on the selection of the
third arbitrator, either Party shall be entitled to request the
Senior Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. All arbitrators
shall be qualified by education or experience within the natural
gas, liquefied petroleum gas, natural gas liquids or chemical
industry to decide the issues presented for arbitration. No
arbitrator shall be: a current or former director, officer or
employee of either Party, or its affiliates; an attorney (or
member of a law firm) who has rendered legal services to either
Party, or its affiliates, within the preceding three years; or an
owner of any of the common stock of either Party or its
Affiliates.
(f) The three arbitrators shall commence the arbitration proceedings
within twenty-five (25) Days following the appointment of the
third arbitrator. The arbitration proceedings shall be held in
Houston, Texas at a mutually acceptable site. The arbitrators
shall have the authority to establish rules and procedures
governing the arbitration proceedings. Each Party shall have the
opportunity to present its evidence at the hearing. The
arbitrators may call for the submission of pre-hearing statements
of position and legal authority, but no post-hearing briefs shall
be submitted. After the presentation of the evidence has
concluded, each Party shall submit to the arbitration panel a
final offer of its proposed resolution of the dispute. A
majority of the arbitrators shall approve the final offer of one
Party without modification, and reject the offer of the other
Party. The arbitration panel shall not have the authority to
award punitive, exemplary or consequential damages. The
arbitrators' decision must be rendered within thirty (30) Days
following the conclusion of the hearing or submission of
evidence, but no later than 90 Days after appointment of the
third arbitrator.
(g) The decision of the arbitrators or a majority of them, shall be
in writing and shall be final and binding upon the Parties as to
the issue(s) submitted. The cost of the hearing shall be shared
equally by the parties, and each Party shall be responsible for
its own expenses and those of its counsel or other
representatives. Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may have to the
arbitrability of any such disputes, controversies or claims and
further agrees that a final determination in any such arbitration
proceeding shall be conclusive and binding upon each Party.
Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The prevailing Party
shall be entitled to recover reasonable attorneys' fees and court
costs
20
<PAGE>
in any court proceeding relating to the enforcement or collection
of any award or judgment rendered by the arbitration panel under
this agreement.
(h) All deadlines specified herein may be extended by mutual
agreement of the Parties. The procedures specified herein shall
be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to this
Agreement; provided, however, that a Party may seek a preliminary
injunction or other preliminary judicial relief if in its
judgment such action is necessary to avoid irreparable damage.
Despite such action, the Parties will continue to participate in
good faith in the procedures specified herein. All applicable
statutes of limitation, including without limitation, contractual
limitation periods provided for in this Agreement, shall be
tolled while the procedures specified in this Section are
pending. The parties will take all actions, if any, necessary to
effectuate the tolling of any applicable statutes of limitation.
ARTICLE XVI
LIMITATION OF DAMAGES
---------------------
16.1 FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGES IS PROVIDED IN THIS AGREEMENT, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES
SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND THE OBLIGOR'S LIABILITY
SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY,
EXCLUDING LOST PROFITS, AND SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES ARE WAIVED. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF
THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT
DAMAGES IN TORT, CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. TO THE
EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO ANY PROVISION OF THIS
AGREEMENT IS AGREED BY THE PARTIES TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT
SUCH PAYMENT CONSTITUTES A REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH
DAMAGES.
ARTICLE XVII
MISCELLANEOUS
-------------
17.1 This Agreement and the operations hereunder shall be subject to the
valid and
21
<PAGE>
applicable federal and state laws and the valid and applicable orders, laws,
local ordinances, rules, and regulations of any local, state or federal
authority having jurisdiction, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such order, laws, rules, or
regulations in any forum having jurisdiction in the premises. If any provision
of this Agreement is held to be illegal, invalid, or unenforceable under the
present or future laws effective during the term of this Agreement, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision similar in terms to such illegal, invalid, or unenforceable provision
as may be possible and as may be legal, valid, and enforceable. If a provision
of this Agreement is or becomes illegal, invalid, or unenforceable in any
jurisdiction, the foregoing event shall not affect the validity or
enforceability in that jurisdiction of any other provision of this Agreement nor
the validity or enforceability in other jurisdictions of that or any other
provision of this Agreement.
17.2 THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND PERFORMED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
17.3 This Agreement, including, without limitation, all exhibits hereto,
integrates the entire understanding between the Parties with respect to the
subject matter covered and supersedes all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by both Parties that
expressly amends this Agreement. No waiver by CCC or WPC of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided. No waiver shall be effective
unless made in writing and signed by the Party to be charged with such wavier.
17.4 The terms, covenants and conditions of this Agreement shall inure to
and be binding upon the parties hereto and their successors and permitted
assigns; provided, however, that neither Party may assign, mortgage, pledge,
encumber or grant a security interest in or a lien on its interest in this
Agreement and/or its rights hereunder in whole or in part without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld, and provided further, that either Party may assign its rights
hereunder to any Affiliate without the approval of the other Party, but any such
assignment shall in no way relieve or release such assigning Party from any
obligations hereunder, whether accrued or unaccrued, unless agreed to in
writing by the non-assigning Party.
22
<PAGE>
17.5 With the other documents required hereunder, WPC shall provide to CCC
a Material Safety Data Sheet ("MSDS") for each Product delivered hereunder, and
CCC may rely on the information set forth in WPC's MSDS form relating to such
Products. The foregoing shall not apply to any Other Feedstocks or Offspec
Products that CCC requests be handled by WPC. CCC and WPC acknowledge that
there may be hazards associated with the loading, unloading, transporting,
handling or use of the Product sold hereunder, which may require that warning be
communicated to or other precautionary action taken with all persons handling,
coming into contact with, or in any way concerned with the Product sold
hereunder. CCC assumes as to its employees, independent contractors, and
subsequent purchasers of the Product sold hereunder all responsibility for all
such necessary warnings or other precautionary measures relating to hazards to
person and property associated with the Product sold hereunder and, furthermore,
CCC shall defend at its own expense, indemnify fully and hold harmless WPC and
its parents, subsidiaries and affiliates and its and their agents, officers,
directors, employees, representatives, successors and assigns from and against
any and all liabilities; losses; damages; demands; claims; penalties; fines;
actions; suits; legal, administrative or arbitration or alternative dispute
resolution proceedings; judgments, orders, directives, injunctions, decrees or
awards of any jurisdiction; costs and expenses (including, but not limited to,
attorneys' fees and related costs) arising out of or in any manner related to
CCC's failure to provide necessary warnings or other precautionary measures in
connection with the Product sold hereunder as provided above.
17.6 Except as otherwise provided herein, each Party reserves to itself
all rights, set-offs, counterclaims, and other remedies and/or defenses which
such Party is or may be entitled to arising from or out of this Agreement or as
otherwise provided by law.
17.7 (a) Each Party agrees that it will maintain this Agreement, all
terms and conditions of this Agreement, and all other
Confidential Information (as hereinafter defined) in strictest
confidence, and that it will not cause or permit disclosure of
Confidential Information to any third Person without the express
written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Section
17.7 may be made by either Party: (i) to the extent necessary
for such Party to enforce its rights hereunder against the other
Party; (ii) to the extent a Party is contractually or legally
bound to disclose information to a third Person (such as a
shareholder or commercial lender); (iii) only to the extent to
which a Party hereto is required to disclose all or part of this
Agreement by a statute or by the order of a court, agency, or
other governmental body exercising jurisdiction over the subject
matter hereof, by order, by regulations, or by other compulsory
process (including, but not limited to, deposition, subpoena,
interrogatory, or request for production of documents); (iv) to
the extent required by the applicable regulations of a securities
or commodities exchange; or (v) to an Affiliate (but only if such
Affiliate agrees to be bound by the provisions of this Section).
"Confidential Information" shall mean any information,
proprietary to either
23
<PAGE>
Party and maintained by it in confidence or as a trade secret,
including, without limitation, business plans and strategies,
proprietary software, financial statements, customer or client
lists, personnel records, analysis of general energy market
conditions, sales, transportation, and service contracts and the
commercial terms thereof, relationships with current and
potential business partners, supplies customers, service
providers and financial sources, data base contents and valuable
information of a like nature relating to the business of such
Party. It is understood and agreed that Confidential Information
shall not include information of a Party that (w) becomes
generally available to the public at the time of disclosure to
the other Party, or (x) after the time of disclosure to the other
Party, was generally made available to the public without breach
of this Agreement, or (y) the Person receiving the information
can show was rightfully in its possession at the time of
disclosure, or (z) was rightfully acquired by the recipient from
third Persons who did not themselves obtain such information
under a confidentiality or other similar agreement with the Party
whose information was disclosed.
(b) If either Party is or becomes aware of a fact, obligation, or
circumstance that has resulted or may result in a disclosure of
Confidential Information authorized by this Section 17.7, it
shall so notify the other Party promptly and shall provide
documentation or an explanation of such disclosure as soon as it
is available. Each Party further agrees to cooperate to the
fullest extent in seeking confidential status to protect any
Confidential Information so disclosed.
(c) The Parties hereto acknowledge that independent legal counsel,
certified public accountants, or other consultants or independent
contractors of a Party (collectively, "Outside Consultants") may,
from time to time, be provided with a copy of this Agreement if,
in the judgment of the disclosing Party, the information
contained in this Agreement is necessary to the performance of
such Outside Consultants' duties. Accordingly, the Parties agree
that such disclosure does not require consent by the other Party,
provided that any such Outside Consultants agree to be bound by
the provisions of this Section 17.7.
(d) Each Party will be deemed solely responsible and liable for the
actions of its employees, Outside Consultants, officers, and
agents for maintaining the confidentiality commitments of this
Section 17.7, but will be required in that regard only to
exercise such care in maintaining the confidentiality of the
Confidential Information as such Party normally exercises in
preserving the confidentiality of its other commercially
sensitive information.
17.8 Nothing contained in this Agreement shall be construed to create an
association,
24
<PAGE>
trust, partnership, or joint venture or impose a trust or partnership duty,
obligation, or liability on or with regard to either Party.
17.9 In construing this Agreement, the following principles shall be
followed:
(a) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this
Agreement;
(b) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(c) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions; and
(d) the plural shall be deemed to include the singular and vice
versa, as applicable.
17.10 Any notice or other communication provided for in this Agreement or
any notice which either Party may desire to give to the other shall be in
writing and shall be deemed to have been properly given if and when sent by
facsimile transmission, delivered by hand, or if sent by mail, upon deposit in
the United States mail, either U.S. Express Mail, registered mail or certified
mail, with all postage fully prepaid, or if sent by courier, by delivery to a
bonded courier with charges paid in accordance with the customary arrangements
established by such courier, in each case addressed to the parties at the
following addresses:
If to WPC: WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President and General Manager -
NGL Marketing
Phone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040-6095
Phone: (713) 507-3725
25
<PAGE>
Telecopy: (713) 507-6834
If to CCC: CHEVRON CHEMICAL COMPANY
P. O. Box 3766
Houston, TX 77253
1301 McKinney Street
Houston, TX 77010
Attention: Vice President & General Manager -
U.S. Chemical Division
Telecopy: (713) 754-3077
with a copy to:
CHEVRON CHEMICAL COMPANY
P. O. Box 3725
Houston, TX 77253
1301 McKinney Street
Houston, TX 77010
Attention: Associate General Counsel
Phone: (713) 754-3319
Telecopy: (713) 754-3377
or at such other address as either party shall designate by written notice to
the other. A notice sent by facsimile shall be deemed to have been received by
the close of the Business Day following the Day on which it was transmitted and
confirmed by transmission report or such earlier time as confirmed orally or in
writing by the receiving party. Notice by U. S. Mail, whether by U. S. Express
Mail, registered mail or certified mail, or by overnight courier shall be deemed
to have been received by the close of the second Business Day after the day upon
which it was sent, or such earlier time as is confirmed orally or in writing by
the receiving party. Any party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the Day
and year first above written.
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
BY: WARREN PETROLEUM G. P., INC.,
ITS GENERAL PARTNER
By: ____________________________________
26
<PAGE>
Name: ____________________________________
Title: ____________________________________
CHEVRON CHEMICAL COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
27
<PAGE>
EXHIBIT A
ATTACHED TO AND MADE A PART OF THAT CERTAIN CCC PRODUCT SALE AND
PURCHASE AGREEMENT BETWEEN WARREN PETROLEUM COMPANY, LIMITED
PARTNERSHIP AND CHEVRON CHEMICAL COMPANY
ETHANE-PROPANE
80-20 MIXTURE
SPECIFICATION
S-200
Product characteristics with test methods are herein specified for ethane-
propane 80-20 mixtures received or delivered by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Methane (Percent of Ethane) 2.0% GPA 2177
Ethylene (Percent of Ethane) 1.0%
Methane, Ethane & Ethylene 78.0% 82.0%
Propane, Propylene & Butanes 18.0% 22.0% ASTM D-2597
Propylene 1.0%
Butanes 0.8%
2. Corrosion
---------
Copper Strip @ 100EF 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
3. Total Sulfur
------------
PPM by Weight in Liquid 120 ASTM D-3246
4. Dryness No Free Water Visual
-------
5. Carbon Dioxide
--------------
PPM by Weight in Liquid 1,000 GPA 2177
</TABLE>
Product Accounting
- ------------------
For accounting purposes, methane and ethylene shall be considered ethane,
propylene and butanes shall be considered propane within the above listed
specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
28
<PAGE>
HD-5 PROPANE FUEL
SPECIFICATION
S-300
Product characteristics with test methods are herein specified for HD-5 propane
fuel received or delivered by WPC. This product meets the requirement of the
GPA HD-5 propane specification.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume As limited by other
Ethane components & GPA 2177
vapor pressure.
Propane 90.0% 100.0%
Propylene 5.0% ASTM D-2597
Butanes & Heavier 2.5%
2. Vapor Pressure
--------------
Psig @ 100EF 208 ASTM D-1267 (Note 1)
3. Corrosion
---------
Copper Strip @ 100EF 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 120 ASTM D-3246
5. Hydrogen Sulfide
----------------
PPM by Weight in Liquid 1 Field - Length of
(Lab test required if field Stain Tube
test is positive.) Lab-Gas Chromatography
with Flame Photometric
Detector
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6. Carbonyl Sulfide
----------------
PPM by Weight in Liquid 2 Field-Length of
(Field test invalid if Stain Tube
C + exceeds 1.0 IV%) Lab-UOP 212
4 UOP 791
(Lab test required if field Lab-Gas Chromatography
test is positive.) with Flame Photometric
Detector
7. Non-Volatile Residue
--------------------
a) Milliliters @ 100 (Degrees) F 0.05 ASTM D-2158 (Note 1)
b) Oil Stain Pass
The following tests are optional, depending upon the product source
- --------------------------------------------------------------------
8. Dryness
-------
Freeze Valve, Seconds 60 60 ASTM D-2713
9. Volatile Residue
----------------
95% Evaporated-Temperature, (Degrees)F -37 ASTM D-1837
10. Ammonia
-------
PPM by Weight in Liquid 1 Field-Length of
Stain Tube
Lab-UOP 430
11. Fluorides
---------
PPM by Weight in Liquid as 5 Field-Length of
Monatomic Flourine Stain Tube
Lab-UOP-619-83 or OI
Analytical or Equal
12. Other Deleterious Substances PPM by Weight in Liquid
----------------------------------------------------
(Includes, but is not limited to, 1 Gas chromatography
Isoprene, Butadiene, with flame ionization
Vinyl Chloride, glycol, or electron capture
amine, caustic) detection or other
industry accepted methods
</TABLE>
NOTE: (1) The test methods for items 2 and 7 are not necessary if a
compositional analysis is available which indicates compliance with these
requirements.
30
<PAGE>
NORMAL BUTANE
SPECIFICATION
S-400
Product characteristics with test methods are herein specified for normal butane
received or delivered by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Isobutanes and Lighter 5.0% ASTM D-2597
Butylene (Percent of N. Butane) 1.0%
N. Butane & Butylene 95.0% 100% GPA 2165
Pentanes & Heavier 2.0%
2. Vapor Pressure
--------------
Psig @ 100(Degrees)F 50 ASTM D-1267 (Note 1)
3. Corrosion
---------
Copper Strip @ 100(Degrees)F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
4. Total Sulfur
------------
PPM by Weight in Liquid 140 ASTM D-3246
5. Volatile Residue
-----------------------
95% Evaporated-Temperature, (Degrees) F +36 ASTM D-1837 (Note 1)
6. Dryness No Free Water Visual
-------
</TABLE>
NOTE: (1) The test methods for items 2 and 5 are not necessary if a
compositional analysis indicates compliance with these requirements.
31
<PAGE>
NATURAL GASOLINE
SPECIFICATION
S-600
Product characteristics with test methods are herein specified for natural
gasoline received or delivered by WPC.
<TABLE>
<CAPTION>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ------------------------- ------- ------- ---------------
<S> <C> <C> <C>
1. Composition ASTM E-260
-----------
Percent by Liquid Volume
Butanes & Lighter 3.0% GPA 2165
Butanes & Lighter 97% 100%
2. Vapor Pressure
--------------
Psig @ 100(Degrees)F, Reid 14 ASTM D-323 (Note 1)
3. Corrosion
---------
Copper Strip @ 104(Degrees)F 1-b ASTM D-130
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPMW 1 Applicable Industry
Practices
4. Doctor Test Negative GPA 1138
------------
5. Dryness No Free Water Visual (Note 1)
-------
6. Color No Color Field White Cup Method
-----
Saybolt No. Plus 25 Lab-ASTM D-156
7. Distillation
------------
End Point, (Degrees)F 375 ASTM D-216
</TABLE>
NOTE: (1) The test methods for items 2 and 7 are not necessary if an adequate
compositional analysis is available which indicates compliance with these
requirements .
32
<PAGE>
"Confidential Treatment Request.
The redacted material has been
separately filed with the Commission."
EXHIBIT B
Attached to and made a part of that certain
CCC Product Sale and Purchase Agreement
between Warren Petroleum Company, Limited
Partnership and Chevron Chemical Company
PRODUCT STORAGE AGREEMENT
This Storage Agreement shall constitute our mutual agreement to lease
certain Product storage space facilities owned or controlled by WPC.
1. LESSEE: Chevron Chemical Company
2. TERM: Coterminous with the term of the Master Product
Sale and Purchase Agreement to which this
Storage Agreement is attached.
3. PRODUCTS: 80/20 E/P Mix, Propane, Normal Butane, Natural
Gasoline and other Products as mutually agreed
to by the Parties.
* 4. LEASE VOLUME: REDACTED barrels per Year. For the first Year
during the term hereof, the volume leased shall
* be REDACTED Barrels. Annually, during the term
hereof, CCC shall have the right to change the
volumes leased hereunder within the limits set
forth above, upon thirty (30) Days advanced
written notice to WPC prior to each anniversary
of the Effective Date. CCC shall be allowed one
free turn for the volume leased each Year during
the term hereof.
* 5. LEASE RATE: REDACTED per Barrel per Year for volumes up to
* and including REDACTED Barrels, REDACTED per
* Barrel per Year for volumes exceeding REDACTED
* Barrels up to and including REDACTED Barrels,
* and REDACTED per Barrel per Year for volumes
* exceeding REDACTED Barrels up to and including
* REDACTED Barrels. Additional storage space may
be leased during a Year for three Months at a
* time at a Lease Rate of REDACTED per Barrel per
three Month period.
* 7. EXCESS STORAGE: REDACTED per barrel based on month end inventory
in excess of leased volume. To the extent
practicable, WPC and CCC shall
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
agree on excess storage amount prior to storing.
* 8. RETURN PERCENTAGE: REDACTED on all volumes of Product redelivered,
excluding EP Mix. For EP Mix, the return
* percentage will be REDACTED on all volumes
* redelivered up to REDACTED Barrels per Day and
* REDACTED on all volumes redelivered in excess of
* REDACTED Barrels per Day.
9. PAYMENT TERMS: Ten (10) days after receipt of invoice.
10. RE-OPENER: This Storage Agreement shall be subject to the
provisions of Sections 5.3 and 5.4 of the
Agreement to which this Exhibit is attached.
<PAGE>
EXHIBIT 10.17
Pages where confidential treatment has been
requested are stamped 'Confidential Treatment Requested.
The redacted material has been separately filed
with the Commission,' the appropriate section has
been marked at the appropriate place
and in the margin with a star (*).
CCC/WPC SERVICES AGREEMENT
BETWEEN
CHEVRON CHEMICAL COMPANY
AND
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
<PAGE>
CCC/WPC SERVICES AGREEMENT
TABLE OF CONTENTS
-------------------
1.0 DEFINITIONS......................................... 1
2.0 SCOPE OF SERVICES................................... 3
2.1 WPC Services................................... 3
Exhibit A - WPC Services................................. 3
A-1 Motor Carrier Transportation............... 3
A-2 Ship Terminalling.......................... 3
A-3 Warrengas Terminalling..................... 3
A-4 Mont Belvieu Terminalling.................. 3
A-5 Barge Transportation....................... 3
2.2 CCC Services................................... 3
Exhibit B - CCC Services................................. 4
B-1 Export Refrigeration Equipment............. 4
B-2 Port Arthur Terminalling Services.......... 4
B-3 Feedstock Pipeline Service................. 4
2.3 Management of Services...................... 4
2.4 Maintenance of Service Units and Facility... 4
2.5 New, Modified and Terminated Services....... 4
2.6 WPC Terminated Services..................... 5
2.7 Responsible Care(R)......................... 5
3.0 ADJUSTMENTS......................................... 6
3.1 Operating Adjustments....................... 6
3.2 Unit Shutdowns.............................. 6
3.3 Hardship.................................... 6
4.0 ALLIANCE IMPROVEMENT TEAM........................... 7
4.1 AIT Organization............................ 7
4.2 AIT Scope of Duties......................... 7
4.3 Planning and Budget Procedure............... 8
4.4 Information Sharing......................... 8
5.0 TERM AND TERMINATION................................ 9
5.1 Term........................................ 9
5.2 Default Procedure........................... 9
5.3 Access and Use Beyond Term.................. 9
6.0 BILLING AND PAYMENT................................. 10
6.1 Procedure................................... 10
6.2 Setoff...................................... 10
7.0 WARRANTIES AND LIABILITIES.......................... 10
7.1 Limitation of Warranties.................... 10
7.2 Limitation of Liability..................... 10
7.3 Indemnity................................... 11
8.0 CONFIDENTIALITY................................... 12
9.0 TAXES............................................. 12
10.0 FORCE MAJEURE..................................... 12
11.0 NOTICES........................................... 14
12.0 CONFLICT OF INTEREST.............................. 15
13.0 RIGHT TO AUDIT.................................... 15
14.0 INSURANCE......................................... 15
14.1 Insurance Required................................ 15
14.2 Policy Endorsements............................... 16
14.3 Evidence of Insurance............................. 16
15.0 ASSIGNMENT........................................ 16
16.0 DISPUTE RESOLUTION................................ 16
16.1 General Procedure.......................... 16
16.2 Submission to AIT.......................... 17
16.3 Mediation.................................. 17
16.4 Binding Arbitration........................ 17
17.0 COVENANTS RUNNING WITH THE LAND................... 19
18.0 FACILITY TRANSFER RESTRICTIONS.................... 19
19.0 COMPLIANCE AND AFFIRMATIVE ACTION................. 19
20.0 GENERAL TERMS..................................... 20
20.1 Integration, Amendments and Waiver......... 20
20.2 Independent Contractors.................... 20
20.3 Governing Law.............................. 20
20.4 Unenforceability........................... 20
20.5 Third-Party Beneficiaries.................. 20
20.6 Drug, Alcohol and Random Security Search... 20
20.7 Title to Products.......................... 20
i
<PAGE>
CCC/WPC SERVICES AGREEMENT
This Agreement is effective SEPTEMBER 1, 1996 ("Agreement") by and between
Chevron Chemical Company, a Delaware corporation ("CCC") and Warren Petroleum
Company, Limited Partnership, a Delaware limited partnership ("WPC").
WHEREAS, CCC's affiliate, Chevron U.S.A., Inc., ("CUSA"), and NGC Corporation,
("NGC") have entered into certain agreements (the "Merger Agreements") pursuant
to which CUSA would contribute certain gas gathering, processing and other
midstream assets and related liabilities of CUSA's Warren Petroleum Company
division ("Warren") and natural gas business unit division to a corporation to
be formed which NGC would then be merged into (the "Merger"); and
WHEREAS, immediately subsequent to the Merger, the gas gathering, processing and
other midstream assets and related liabilities of Warren will be transferred to
WPC; and
WHEREAS, CCC and WPC desire to work together to develop a relationship sometimes
hereinafter called an alliance ("Alliance") with the goal of creating a
comprehensive, mutually satisfactory, long-term relationship to fulfill
commercial needs previously performed by and between CCC and Warren to operate
facilities previously owned and operated by each party.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereafter set forth, the Parties agree as follows:
1.0 DEFINITIONS.
The terms used in this Agreement shall have the following meanings:
1.1 "Affiliate" shall mean any Person that directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified. The term "control" (including the terms "controlled
by" or "under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership, by contract, or otherwise. Any
Person shall be deemed to be an Affiliate of any specified Person if such Person
owns fifty percent (50%) or more of the voting securities of such Person, or if
fifty (50%) or more of the voting securities of the specified Person and such
Person are under common control.
1.2 "Bankruptcy Event" shall mean the occurrence of one or more of the
following events with respect to a Party: (A) the entry of a decree or
<PAGE>
order for relief against a Party by a court of competent jurisdiction in any
involuntary case brought against a Party under any bankruptcy insolvency or
other similar law (collectively, "Debtor Relief Laws") generally affecting the
rights of creditors and relief of debtors now or hereafter in effect, (B) the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar agent under applicable Debtor Relief Laws for a
Party or for any substantial part of its assets or property, (C) the ordering of
the winding up or liquidation of a Party's affairs, (D) the filing of a petition
in any such involuntary bankruptcy case, which petition remains undismissed for
a period of 180 Days or which is not dismissed or suspended pursuant to Section
305 of the Federal Bankruptcy Code (or any corresponding provision of any future
United States bankruptcy law), (E) the commencement by a Party of a voluntary
case under any applicable Debtor Relief Law now or hereafter in effect, (F) the
consent by a Party to the entry of an order for relief in an involuntary case
under any such law or to the appointment of or the taking of position by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar agent under any applicable Debtor Relief Laws for a Party or for any
substantial part of its assets or property, or (G) the making by a part of any
general assignment for the benefit of its creditors.
1.3 "Business Day" shall mean any day on which commercial banks in Houston,
Texas are open for general business.
1.4 "Cedar Bayou Plant" or "CB" shall mean CCC's chemical plant located on I-
10, Baytown, Texas.
1.5 "Fannett Terminal" or "FT" shall mean Clark Refining & Marketing, Inc.'s
terminal located at Fannett.
1.6 "Mont Belvieu Terminal" or "MBT" shall mean WPC's liquid hydrocarbon salt
dome storage terminal located in Mont Belvieu, Texas.
1.7 "Party" means individually either CCC or WPC (including their respective
successors and permitted assigns); collectively, the "Parties."
1.8 "Pascagoula Refinery" or "PR" shall mean Chevron U.S.A. Inc's refinery
located in Pascagoula, Mississippi.
1.9 "Person" means any individual, corporation, partnership, limited
partnership, limited liability company, association, joint venture, trust, or
other organization of any nature or kind.
2
<PAGE>
1.10 "Port Arthur Plant" shall mean CCC's facilities within Clark Refinery &
Marketing, Inc.'s Port Arthur, Texas refinery.
1.11 "Port Arthur Terminal" or "PAT" shall mean CCC's barge loading and
unloading facility at Port Arthur, Texas.
1.12 "Warrengas Terminal" or "WG" shall mean WPC's storage and marine facility
located in Galena Park, Texas.
2.0 SCOPE OF SERVICES.
2.1 WPC Services. During the term of this Agreement, WPC shall provide and
CCC shall pay for services described in the Exhibits attached and identified
below, ("WPC Services"). Except as expressly stated otherwise, WPC Services
shall be provided in accordance with the terms and conditions hereof and the
Exhibits. From time to time, the Parties may mutually agree to the addition,
deletion or modification of WPC Services by amending this Agreement and its
Exhibits. The WPC Services included on the date of this Agreement are more
particularly described in the following Exhibits:
Exhibit A - WPC Services
Exhibit Service Location
- --------------- --------------------------------- --------------
A-1 Motor Carrier Transportation CB
A-2 Ship Terminalling WG
A-3 Warrengas Terminalling WG
A-4 Mont Belvieu Terminalling MBT
A-5 Barge Transportation PR, PAT, WG
2.2 CCC Services. During the term of this Agreement, CCC shall provide and
WPC shall pay for services described in the Exhibits attached and identified
below, ("CCC Services"). Except as expressly stated otherwise, CCC Services
shall be provided in accordance with the terms and conditions hereof and the
Exhibits. From time to time, the Parties may mutually agree to the addition,
deletion or modification of CCC Services by amending this Agreement and its
Exhibits. The CCC
3
<PAGE>
Services included on the date of this Agreement are more
particularly described in the following Exhibits:
4
<PAGE>
Exhibit B - CCC Services
Exhibit Service Location
- --------- --------------------------------- --------
B-1 Export Refrigeration Equipment WG
B-2 Port Arthur Terminalling Services PAT
B-3 Feedstock Pipeline Service MBT, FT
2.3 Management of Services. Unless otherwise set forth in an Exhibit, the
Party providing a Service shall at all times have sole authority to manage,
direct and control each Service. Each Party shall, insofar as is reasonably
practicable, operate and maintain its facilities and systems, as the case may
be, in a manner that will avoid or minimize the likelihood of a disturbance
originating from its system which might cause impairment of the Services. WPC
and CCC shall promptly notify each other of any matter, notification or
occurrence of any event which could reasonably be expected to have the potential
to materially affect the Services. Each Party shall at all times comply with all
laws, ordinances, rules and regulations related to its Services, and obey all
rules and procedures established by the other Party while on the other Party's
premises whether leased or owned. Upon reasonable request for health and safety
reasons, CCC may require that WPC remove from CCC's owned or leased premises any
personnel or equipment used to provide WPC Services, and upon reasonable request
for health and safety reasons, WPC may require that CCC remove from WPC's owned
or leased premises any personnel or equipment used to provide CCC Services.
2.4 Maintenance of Service Units and Facility. Each Party shall maintain
all fixtures and equipment in all units and facilities used to provide and
deliver Services, or to receive Services, in accordance with maintenance
standards observed by such Party in its maintenance of similar active units or
facilities of comparable age and service it owns and operates in the State of
Texas; provided such standard shall at a minimum comply with such Party's
respective industry standard.
2.5 New, Modified and Terminated Services. Each Party may offer the other
Party the opportunity of providing new or modified services as operational
requirements arise. The Party receiving the offer to provide new or modified
services shall not unreasonably reject such offer. Additionally, as operational
needs for a Service cease, a Party may
5
<PAGE>
terminate a Service or a portion of the Service upon reasonable notice.
Notwithstanding the Parties intent to create a mutually beneficial commercial
relationship pursuant to this Agreement and unless otherwise provided in the
Exhibits, nothing in this Agreement shall be construed as preventing either
Party from entering into agreements with other Parties for the sale or purchase
of Services.
2.6 WPC Terminated Services. In the event Services under any Exhibit cease
to be provided for any reason other than at the end of the Term hereof or any
other reason as set forth in Section 5 hereof, the Party that originally
provided such Services (the "Service Provider") shall, subject to the Service
Provider's primary use, allow the other Party access to and the right to use any
and all required brine systems, equipment, units or other property, real or
personal, reasonably necessary to allow such other Party to obtain the benefit
of the Services previously provided by the Service Provider. All expenses and
costs related to the access and use of such systems or property by the other
Party shall be mutually agreed to by the Parties.
2.7 Responsible Care.(R)
-----------------
(a) CCC is fully committed to and shall abide by the principles of
Responsible Care(R) as espoused by the Chemical Manufacturers
Association.
(b) The Parties hereto acknowledge the importance of handling
chemical materials in a manner that will ensure the safety of
people and the protection of the environment. It is agreed that
they will use, handle, store, transport and dispose of chemical
materials in accordance with all applicable laws and regulations.
A delivering or receiving Party (in either case, herein referred
to as the "Notifying Party") shall have the right to suspend
delivery or receipt of a chemical material upon written notice to
the other Party (herein referred to as the "Notified Party") if
in the Notifying Party's reasonable judgment the Notified Party
is not complying with all such applicable laws and regulations.
Delivery or receipt of chemical material will recommence at the
time when the Notifying Party in its reasonable judgment is
satisfied that the Notified Party is in conformance with all such
applicable laws and regulations. If the Notified Party is unable
or unwilling to meet such requirements within ninety (90) days of
receipt of the Notifying Party's written notice that the
Notifying Party is suspending delivery or receipt of such
chemical materials, the
6
<PAGE>
Notifying Party shall have the right to terminate or cause to
have terminated that portion of this Agreement relating to such
chemical material.
(c) Subject to mutually agreeable times and formats, each of the
delivering and receiving Parties agrees to allow the other Party
access to its facilities from time to time to perform an on site
review to assess compliance by the other with all such applicable
laws and regulations.
3.0 ADJUSTMENTS.
3.1 Operating Adjustments. Each Party agrees to modify the terms in the
Exhibits when and to the extent that the other Party significantly changes the
operation of its facilities under this Agreement. In the event of any
operational changes, the affected Party shall be notified as soon as reasonably
possible. The Party providing Services shall, subject to the other provisions of
this Agreement, use reasonable effort to accommodate the Party needing Services
and the Parties shall cooperate to effectuate the intent of this Section. The
fees charged by the Party providing Services for Services that were changed to
accommodate the other Party shall be mutually agreed by the Parties.
3.2 Unit Shutdowns. Neither Party shall be obligated to provide or receive
Services during maintenance shutdowns of any unit to which production or use of
such Services relate, whether planned or unplanned. The AIT shall meet each year
to determine the shutdown schedule for each unit covered by this Agreement for
the following year and shall reasonably cooperate with each other in attempting
to schedule planned outages to minimize adverse impacts on each Party. At least
sixty (60) days prior to a planned shutdown, or as soon as practicable for an
unplanned shutdown, the Party shutting down a unit shall notify the other Party
of the date, anticipated duration and identification of any unit or units that
are being shutdown that will affect the ability of a Party to provide or receive
Services.
3.3 Hardship. In the event conditions change such that this Agreement
causes an economic or operational hardship to either Party, upon the written
request of either Party, CCC and WPC shall meet to renegotiate in good faith for
fairness and equity such burdensome terms and provisions. Such renegotiations
shall commence within thirty (30) days from the receipt of the written request
for such renegotiations. If the Parties are unable to agree on a resolution to
such burdensome terms
7
<PAGE>
and provisions within ninety (90) days of the non-requesting Party's receipt of
such written request, the matter shall be submitted to the dispute resolution
procedures set forth in Section 16.
4.0 ALLIANCE IMPROVEMENT TEAM.
4.1 AIT Organization. CCC and WPC agree to establish an Alliance
Improvement Team (the "AIT") to perform the duties outlined below. The AIT will
have members from both CCC and WPC. CCC and WPC shall each bear their own costs
for the AIT and AIT activities. CCC and WPC will each choose a team leader from
its own organization. These two individuals will co-chair the AIT. Each Alliance
team leader will name an alternate team leader in the event the designated
Alliance team leader is unavailable. The AIT may appoint subcommittees for
specific activities. CCC and WPC may each appoint additional members to serve on
the AIT or such subcommittees at its own expense.
4.2 AIT Scope of Duties. The duties of the AIT will be to:
(a) administer and coordinate the routine business of the Alliance
including forecasting, planning, operational, environmental,
safety, maintenance, technical and scheduling issues;
(b) determine and develop strategies with respect to Alliance
activities;
(c) develop, monitor and communicate mutually agreed to standards of
performance that serve to define each Party's contribution to the
Alliance;
(d) monitor the quality of the Services provided by each Party;
(e) review all significant equipment, design, process, and operating
changes affecting the Services;
(f) conduct regularly scheduled planning, problem solving and expense
review meetings at such periodic intervals as shall be mutually
agreed;
(g) develop Unit Shut-Down schedules pursuant to Section 3.2;
8
<PAGE>
(h) resolve disputes between the Parties in accordance with the
procedures set forth in Section 16.0;
(i) oversee efforts for long-range process improvement efforts
between CCC and WPC;
(j) review annual storage well workover requirements at Mont Belvieu
Terminal, plan the workover schedule and recommend to the Parties
commercial lease terms, if CCC is required to lease a well(s)
from WPC in order to meet the well workover plan;
(k) unless unduly burdensome on WPC, plan the supply of Services in a
manner to assist CCC in maintaining its ISO 9000 certification;
and
(l) review and approve required budgets identified in Section 4.3 for
both operating expenses and capital expenses.
4.3 Planning and Budget Procedure. The Parties shall provide each other (a)
a three-year forecast in September of every year; and (b) a three-month forecast
fifteen (15) days prior to the first day of each month with respect to the
Services that will be needed. Each Party shall make good faith forecasts for the
Services it needs under this Agreement; provided, however, that such forecasts
are for the purposes of planning and scheduling and shall not be binding on
either Party. The Parties shall also meet on a regular basis to communicate
short term operational plans. In addition, the Parties shall meet in September
of each year to review and approve operating budgets for (i) the Mont Belvieu
Terminal (excluding budget items not related to any Services); (ii)
ethylene/propylene export unit and (iii) the ethylene import unit. Such budgets
shall contain specific detail for each line item. WPC and CCC shall promptly
notify each other of any matter, notification or occurrence of any event which
could reasonably be expected to have the potential to exceed a budgeted item by
$10,000.00 or 25%, whichever is greater. Neither Party shall commit or expend
any amounts constituting capital expenses without the other Party's prior
approval. WPC shall not without CCC's prior approval, commit or expend any
single expense request, not constituting a capital expense, which will result in
an estimated charge to CCC in excess of $25,000.00, except in cases of emergency
as hereinafter described, or unless the expense is included in the approved
annual budget. In cases of emergency, WPC may, without obtaining approval of
CCC, proceed with maintenance or repair work necessary to restore the units or
equipment to operating conditions, or to
9
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed wth the Commission
minimize damage, or protect the public safety without regard to the limitations
set forth above. However, it is also understood that every reasonable effort
will be made by WPC to notify CCC at the earliest possible convenience of such
emergencies and expenditures.
4.4 Information Sharing. CCC and WPC will share their knowledge of
activities and trends in their lines of business which may relate to the
provision of Services pursuant to this Agreement, but specifically acknowledge
that such sharing of knowledge is subject to and limited by business, policy and
legal considerations as determined by the disclosing Party.
5.0 TERM AND TERMINATION.
5.1 Term. Unless otherwise provided herein, including any Exhibit, this
* Agreement shall remain in full force and effect for a period of REDACTED
years from the Effective Date hereof and shall continue from year to year
thereafter unless and until terminated by either Party at the end of such
* REDACTED year period or any yearly anniversary thereafter by giving the
other Party two years advance written notice of its intention to so
terminate; provided that WPC and CCC shall have the right to terminate
Services in any Exhibit at any time (i) upon ninety (90) days advance
written notice in the event CCC terminates a major portion of its operations
that necessitate the need for the Service at its Cedar Bayou Plant, Port
Arthur Plant or Port Arthur Terminal, (ii) WPC terminates a major portion of
its operations related to the specific Services at its Mont Belvieu Terminal
or Warrengas Terminal, or (iii) the occurrence of a Bankruptcy Event. WPC
and CCC shall have the right to terminate Services provided in any or all of
the Exhibits in the event that WPC shall not be permitted to operate or must
otherwise divest its interest in the Mont Belvieu Terminal due to
governmental or regulatory restrictions.
5.2 Default Procedure. This Agreement may be terminated by either Party
upon thirty (30) days written notice to the other Party, after it has been
determined through the dispute resolution procedures set forth in Section 16
that the other Party has materially defaulted on its obligations hereunder (it
being understood that, for purposes of the foregoing, "materially defaulted"
shall mean that the arbitrators have determined that (i) in consequence of such
default, the objectives of this Agreement
10
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed wth the Commission
(as expressed herein and in the Master Alliance Agreement of even date herewith
by and among Chevron, WPC and others) are not being met and (ii) the defaulting
Party, after notice and a reasonable opportunity to cure, failed to take the
steps necessary to accomplish such objectives.
5.3 Access and Use Beyond Term. The Parties acknowledge that CCC has two
(2) current contractual agreements with two (2) third Parties requiring the
need for export refrigeration Services set forth in parts of Exhibits A-2,
* A-3, A-4 and B-1 that extend beyond the REDACTED term set forth in Section
5.1. In the event that WPC is unable or unwilling to continue to provide
such export Services, WPC shall grant CCC access and use of facilities at
Warrengas Terminal and Mont Belvieu Terminal at a reasonable cost to allow
CCC to perform such Services itself.
6.0 BILLING AND PAYMENT.
6.1 Procedure. Unless otherwise provided in the Exhibits, the Parties shall
prepare each month a composite invoice for all Services rendered. The total
amount for all Services rendered and received shall be paid to WPC or CCC, as
the case may be, within ten (10) days after the date of receipt of each month's
invoice. If any of the price indices or publications referenced in this
Agreement cease to be published or if such indices or publications are changed
substantially in their method of measurement, the Parties shall substitute by
mutual agreement other indices or publications that, as closely as practical,
reflects the changes that such indices or publications measured immediately
prior to the change.
6.2 Setoff. All payments will be made without setoff or counterclaim;
provided, however, that upon a Party's (the defaulting Party) failure to make
payment of undisputed amounts on the due date, the other Party (the non-
defaulting Party) may, at its option and in its discretion, setoff against any
amounts owed to the defaulting Party any amounts owed by the defaulting Party
under this Agreement or otherwise. The obligations of the non-defaulting Party
and the defaulting Party under this Agreement in respect of such amounts shall
be deemed satisfied and discharged to the extent of any such setoff. The non-
defaulting Party will give the defaulting Party notice of any setoff made under
this
11
<PAGE>
Section 6.2 as soon as practicable after the setoff is made provided that
failure to give such notice shall not offset the validity of the setoff.
7.0 WARRANTIES AND LIABILITIES.
7.1 Limitation of Warranties. All Services shall (i) conform to all
requirements and specifications set forth in the applicable exhibit; (ii) shall
meet the generally accepted and prudent practices of the industry for such
Services; and (iii) be performed by qualified personnel in a lawful, safe,
timely and cost effective manner. All fixtures and equipment used to provide
Services shall be maintained in good operating condition and operated and
maintained in compliance with all applicable federal, state and local laws,
rules and regulations.
7.2 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES, CONTINGENT
OR PUNITIVE, INCLUDING, WITHOUT LIMITATION, LOST PROFITS INCURRED OR CLAIMED BY
THE OTHER PARTY.
7.3 Indemnity.
(a) The Party providing Services under each exhibit shall defend,
indemnify and hold harmless the other Party, its affiliates and
subsidiaries, and the officers, directors, employees and agents
of any of them (each an "Indemnitee") from and against any and
all loss, damage, injury, liability and claims thereof for injury
to or death of any person (except as provided in Section 7.3(b)
for its employees or employees of one of its contractors) or for
loss of or damage to property resulting from such Party's
performance of or failure to perform such Services. Such
indemnity shall apply whether or not an Indemnitee was or is
claimed to be passively, concurrently or actively negligent, and
regardless of whether liability without fault is imposed or
sought to be imposed on one or more of the Indemnities. This
Indemnity shall not apply to the extent that it is void or
otherwise unenforceable under applicable law in effect on or
validly retroactive to the date of this Agreement, and shall not
apply where such loss, damage, injury, liability or claim is the
result of the sole negligence or willful misconduct of an
Indemnitee.
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(b) CCC shall defend, indemnify and hold harmless WPC from and
against any and all claims relating to this Agreement for injury
to or death of an employee or representative of CCC or its
subcontractors, whether or not WPC, its employees or
representatives are claimed to be passively, concurrently or
actively negligent, and regardless of whether liability without
fault is imposed or sought to be imposed; provided this indemnity
shall not apply when such injury or death is the result of the
sole negligence or willful misconduct of WPC, its employees or
representatives.
WPC shall defend, indemnify and hold harmless CCC from and
against any and all claims relating to this Agreement for injury
to or death of an employee or representative of WPC or its
subcontractors, whether or not CCC, its employees or
representatives are claimed to be passively, concurrently or
actively negligent, and regardless of whether liability without
fault is imposed or sought to be imposed; provided this indemnity
shall not apply when such injury or death is the result of the
sole negligence or willful misconduct of CCC, its employees or
representatives.
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8.0 CONFIDENTIALITY.
During the performance of this Agreement, each Party ("Recipient") may gain
access to or possession of information belonging to the other Party ("Owner")
that is confidential (a "disclosure"). Recipient shall use such information only
for the purpose disclosed and shall use its commercially reasonable efforts to
avoid other use or disclosure of such information unless required by law or
governmental agency or consented to by its Owner, which consent shall not be
unreasonably withheld. Confidential information shall include business,
technical, personnel and other information designated as confidential, but shall
not include information that is or becomes publicly known without fault of the
Recipient, was known to Recipient or its predecessor from a source independent
of the Owner and recorded in writing prior to disclosure, was independently
developed by the Recipient, or was received by the Recipient or its predecessor
from a source independent of the Owner prior to its disclosure. All confidential
information shall be returned to its Owner upon request.
9.0 TAXES.
Any sales, use, transfer or similar taxes, now or hereafter imposed, levied
or assessed by any governmental authority directly upon the Services herein
provided for or the transfer pursuant to the terms of this Agreement of any
related materials that are the subject matter of this Agreement, shall, if
collectible or payable by the Party providing Services ("Supplier"), be paid by
the Party receiving such Services ("Recipient) on demand by the Supplier. If the
Recipient claims exemption from any of the aforesaid taxes, then the Recipient
shall furnish the Supplier with a properly completed exemption certificate. If
the Recipient holds a Texas direct payment permit, it shall issue to the
Supplier a properly completed direct payment exemption certificate and
thereafter hold harmless and indemnify the Supplier for any sales or use taxes
assessed against the Supplier by any taxing authority in respect to any taxable
sales, including the amounts of any penalties, interest and reasonable
attorneys' fees. Notwithstanding the foregoing, this Section shall not apply to
(a) income, franchise or similar taxes levied on or measured by a Party's net
income; (b) personal property taxes levied on or measured by the value of any
related materials that are the subject matter of this Agreement, to the extent
such taxes are applicable or allocable to periods in which the Supplier had
title to such related materials which were taxed.
10.0 FORCE MAJEURE.
10.1 If either Party is rendered unable, wholly or in part, by Force
Majeure to carry out its obligations under this Agreement, is agreed that upon
such
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<PAGE>
Party's giving notice and reasonably full particulars of such Force Majeure
in writing to the other Party after the occurrence of the cause relied on, then
the obligations of the Party giving such notice, so far as to the extent that
they are affected by such Force Majeure, shall be suspended during the
continuance of any inability so caused, but for no longer period, and such cause
shall so far as possible be remedied with all reasonable dispatch. Except as
stated below, this Agreement shall not be terminated by reason of any such
cause, but shall remain in full force and effect and this Agreement shall not be
extended regardless of such curtailment or cessation. If any such cause results
in substantial interference with a Party's performance of Services and such
condition continues for six (6) months or longer, the other Party may terminate
the affected Exhibit upon sixty (60) days prior written notice. The Party not
declaring Force Majeure shall have the option to extent the Agreement for any
periods of Force Majeure.
10.2 The term "Force Majeure" as used herein shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornados, hurricanes, or storms, tornado, hurricane, or
storm warnings which in any Parties' judgment require the precautionary shutdown
of either Party's facilities or any operating units thereof, floods, washouts,
arrests or restraints of the government, either federal or state, civil or
military, civil disturbances, explosions, sabotage, breakage or accident to
equipment, machinery or lines of pipe, freezing of machinery, equipment or lines
of pipe, electric power shortages, inability of any Party to obtain necessary
permits and/or permissions due to existing or future rules, orders, laws or
governmental authorities (both federal, state and local), shutdowns due to
explosion or other extraordinary incident, or any other causes, whether of kind
herein enumerated or otherwise, which were not reasonably foreseeable on the
effective date of this Agreement, and which are not within the control of the
Party claiming suspension and which such Party is unable to overcome by the
exercise of due diligence. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing parties when such
course is inadvisable in the discretion of the Party having difficulty. The term
Force Majeure shall also include any event of Force Majeure occurring with
respect to the facilities or services of either CCC's or WPC's third party
suppliers or customers delivering or receiving any product, fuel,
15
<PAGE>
feedstock or other substance necessary to the performance of such Party's
obligations, and shall also include the curtailment or interruption of
deliveries or service by such third party suppliers or customers as a result of
an event of Force Majeure. It is expressly agreed by the Parties that neither
(i) CCC's inability economically to use Feedstock purchased under this Agreement
nor (ii) WPC's ability to sell Feedstock to a market at a more advantageous
price shall constitute an event of Force Majeure.
11.0 NOTICES.
Any notice required or permitted hereunder shall be in writing and shall be
deemed to be given if delivered personally; delivery by certified mail, postage
prepaid; delivered by a recognized overnight commercial carrier or telecopied
with receipt acknowledged to the following addresses:
If to WPC: WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13430 Northwest, Suite 1200
Houston, Texas 77040-6095
Attention: Vice President & General Manager - NGL Marketing
Telephone: (713) 507-6408
Telecopy: (713) 507-3715
with a copy to:
Vice President & General Counsel
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13450 Northwest Freeway, Suite 1200
Houston, Texas 77040-6095
Telephone: (713) 507-3725
Telecopy: (713) 507-6834
If to CCC: CHEVRON CHEMICAL COMPANY
P. O. Box 3766
Houston, Texas 77253
1301 McKinney
Houston, Texas 77010
Attention: Vice President & General Manager-
U.S. Chemical Division
Telecopy: (713) 754-3077
With a copy to:
CHEVRON CHEMICAL COMPANY
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<PAGE>
P. O. Box 3725
Houston, Texas 77253
1301 McKinney
Houston, Texas 77010
Attention: Associate General Counsel
Telecopy: (713) 754-3377
Either Party may change its notice address by notifying the other of such
change, which shall be effective fifteen (15) days after the giving of such
notice.
12.0 CONFLICT OF INTEREST.
Neither Party shall give any director, employee or representative of the
other Party any commission, fee, rebate, gift or entertainment of significant
cost or value in connection with this Agreement, or enter into any other
business arrangement with any director, employee or representative of the other,
without prior written notification to the other Party. Any representative(s)
authorized by either Party may cause an audit of any and all records of the
other Party as necessary and proper to verify that there has been compliance
with this Section.
13.0 RIGHT TO AUDIT.
Each Party shall maintain true and complete records related to the
Services and shall retain all such records for a minimum period of twenty-four
(24) months after the end of the month in which Services are performed. Either
Party, upon notice in writing to the other, shall have the right, at reasonable
hours, to audit the accounts and records relating to the accounting or billing
under the provisions of any article hereof. Except as set forth below for
matters related to CCC's third party agreements, the auditing party must make
written exception to and make a claim upon the other Party for all discrepancies
disclosed by the audit within twenty-four (24) months of the rendition of any
statement or invoice forming the basis of such claim. The requirement to make
written exceptions within said twenty-four (24) month period shall not apply to
CCC for Services relating to the third party agreements identified in Section
5.3, the time periods for which will be governed by the terms and provisions of
such third party agreements. Such audit shall be conducted by the auditing
Party's representative or auditor at the auditing Party's expense.
14.0 INSURANCE.
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14.1 Insurance Required. CCC shall maintain during the term of this
Agreement insurance specified in Section 14.1(a) and otherwise shall maintain a
policy of self-insurance for performance under this Agreement. WPC shall
maintain during the term of this Agreement insurance specified in Section
14.1(a), (b) and (c) unless it elects to self-insure for all or any portion of
the coverage in Section 14.1(b) and (c), which it may do upon delivery of
written notice to CCC.
(a) Workers' Compensation and Employers' Liability Insurance as
prescribed by applicable law, including insurance covering
liability under the Longshoremen's and Harbor Worker's Act, the
Jones Act and the Outer Continental Shelf and Land Act, if
applicable;
(b) Comprehensive or Commercial General Liability (Bodily Injury and
Property Damage) with contractual liability insurance to cover
liability assumed under this Agreement. The limits of liability
of such insurance shall not be less than $1,000,000 combined
single limit per occurrence; and
(c) Automobile Bodily Injury and Property Damage Liability Insurance,
covering non-owned and hired automobiles, the limits of which
shall not be less than $250,000 per person/$500,000 per
occurrence for Bodily Injury and $100,000 per occurrence for
Property Damage. This insurance shall extend to automobiles used
by a Party's personnel, agents or subcontractors in performance
of Services under this Agreement.
14.2 Policy Endorsements. The insurance under this Section shall provide
that a Party will receive thirty (30) days written notice prior to the
cancellation or material change of the insurance. The insurance specified under
Section 14.1(a) shall contain a waiver of subrogation against the indemnitees,
and the insurance provided under Section 14.1(b) and (c) shall name the other
Party as additional insured with respect to performance under this Agreement.
14.3 Evidence of Insurance. Each Party shall, before commencing work,
provide the other Party with certificates or other documentary evidence of the
above insurance, satisfactory to such Party.
15.0 ASSIGNMENT.
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Neither Party shall voluntarily assign its rights nor delegate its duties
under this Agreement or an Exhibit, nor any part of such rights or duties
except to an Affiliate, without prior written consent of the other Party.
16.0 DISPUTE RESOLUTION.
16.1 General Procedure. CCC and WPC agree to utilize the procedure set
forth in this Section to resolve in good faith any dispute, controversy or claim
related to this Agreement, including any dispute over the performance, breach,
termination, interpretation, or validity of this Agreement. Nothing herein is
intended to limit the Parties from resolving informally between them any
controversy, claim or dispute that may arise and thus avoiding the necessity of
presenting such matter to the AIT.
16.2 Submission to AIT. The dispute, controversy, or claim shall first be
submitted to one representative chosen by each Party's AIT with such explanation
or documentation as the Parties deem appropriate to aid such representatives in
their consideration of the issues presented. The date the matter is first
submitted to the AIT shall be referred to as the "Submission Date." The AIT
representatives shall attempt in good faith, through the process of discussion
and negotiation, to resolve any dispute, controversy, or claim presented to it
within forty-five (45) days after the Submission Date.
16.3 Mediation. If the AIT cannot so resolve any dispute, controversy, or
claim submitted to it within forty-five (45) days after the Submission Date, the
Parties shall attempt in good faith to settle the matter by submitting the
dispute, controversy or claim to mediation within sixty (60) days after the
Submission Date using any mediator upon which they mutually agree. If the
Parties are unable to mutually agree upon a mediator within seventy-five (75)
days after the Submission Date, the case shall be referred for mediation to the
office of Judicial Arbitration and Mediation Services, Inc. ("JAMS") that is in
closest proximity to Houston, claim or controversy arose. The cost of the
mediation will be split equally between the Parties unless they agree otherwise
in writing.
16.4 Binding Arbitration.
(a) All Disputes Arbitration. All disputes between the Parties
arising under this Agreement and not resolved through negotiation
or mediation shall be submitted to arbitration in accordance with
this
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<PAGE>
Section 16.0 and the Parties hereby expressly waive all rights to
have any such disputes heard before a court of law, except the
right to enforce an arbitration award as described in Section
16.4 (e). Arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. (S) 1, et seq., and not by the
arbitration acts, statutes or rules of any other jurisdiction.
(b) Procedure. In the event the Parties are unable to resolve a
dispute arising under this Agreement after exercising good faith
efforts to do so, either Party may require that the matter be
resolved through binding arbitration by submitting a written
notice to the other. The notice shall name the noticing Party's
arbitrator and shall contain a statement of the issue(s)
presented for arbitration. Within fifteen (15) days after
receipt of a notice of arbitration, the other Party shall name
its arbitrator by written notice and may designate any additional
issue(s) for arbitration. The two named arbitrators shall select
the third arbitrator within fifteen (15) days after the date on
which the second arbitrator was named. Should the two
arbitrators fail to agree on the selection of the third
arbitrator, either Party shall be entitled to request the Senior
Judge of the United States District Court of the Southern
District of Texas to select the third arbitrator. All
arbitrators shall be qualified by education or experience within
the energy industry to decide the issues presented for
arbitration. No arbitrator shall be a current or former
director, officer or employee of either Party or its Affiliates;
an attorney (or member of a law firm) who has rendered legal
services to either Party or its Affiliates, within the preceding
three (3) years; or an owner of any of the common stock of either
Party or its Affiliates.
(c) Arbitration Hearings. The three arbitrators shall commence the
arbitration hearing within twenty-five (25) days following the
appointment of the third arbitrator. The proceeding shall be
held at a mutually acceptable site in Houston, Texas. If the
Parties are unable to agree on a site, the arbitrators shall
select a site. The arbitrators shall have the authority to
establish rules and procedures governing the arbitration hearing.
Each Party shall have the opportunity to present its evidence at
the hearing. The arbitrators may call for the submission of pre-
hearing statements of position and legal authority, but no post-
hearing briefs shall be submitted. With respect to disputes
regarding price, fees, rates, indices or any redetermination,
each Party shall submit to the arbitration panel a final offer of
its proposed resolution of the
20
<PAGE>
dispute and a majority of the arbitrators shall approve the final
offer of one Party without modification, and reject the offer of
the other Party. The arbitration panel shall not have the
authority to award punitive or exemplary damages or any type of
damages expressly waived in this Agreement. The arbitrators'
decision must be rendered within thirty (30) days following the
conclusion of the hearing or submission of evidence, but no later
than ninety (90) days after appointment of the third arbitrator.
All evidence submitted in an arbitration proceeding, transcripts
of such proceedings, and all documents submitted by the Parties
in an arbitration proceeding shall be deemed confidential
information subject to Section 8.0.
(d) Arbitration Decision. The decision of the arbitrators or a
majority of them, shall be in writing and shall be final and
binding upon the Parties as to the issue submitted. Each Party
shall bear the expense and cost of its own attorneys and
witnesses, its own arbitrator and one-half of the expense and
cost of the third arbitrator.
(e) Enforcement of Award. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. The
prevailing Party shall be entitled to reasonable attorneys' fees
in any court proceeding necessary to enforce or collect any award
or judgment rendered by the arbitrators.
17.0 COVENANTS RUNNING WITH THE LAND.
The covenants and agreements contained in this Agreement touch and concern
the land on which the Mont Belvieu Terminal and Warrengas Terminal are located,
and both the benefits and burdens thereof shall run with such land, and shall be
binding upon, and inure to the benefit of, the future owners and lessees
thereof.
18.0 FACILITY TRANSFER RESTRICTIONS.
In the event WPC desires to sell or otherwise transfer its interest in
certain assets ("Offered Interest") situated in the Mont Belvieu and/or Galena
Park area which includes either or both of the Mont Belvieu Terminal or the
Warrengas Terminal, WPC shall first notify CCC and enter into good faith
negotiations with CCC to sell the Offered Interest. If the parties are unable to
agree upon terms of sale or transfer of the Offered Interest after good faith
negotiations, WPC
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shall have the right to sell or otherwise transfer the Offered Interest to a
third party.
19.0 COMPLIANCE AND AFFIRMATIVE ACTION.
To the extent applicable to this Agreement, both Parties shall comply with
the following clauses contained in the Code of Federal Regulations and
incorporated herein by reference: 48 C.F.R. 52.203-6 (Subcontractor Sales to
Government); 48 C.F.R. 52.219-8, 52.219-9 (Utilization of Small and Small
Disadvantaged Business Concerns); 48 C.F.R. 52.222-26 (Equal Opportunity); 48
C.F.R. 52.222-36 (Handicapped Workers); 48 C.F.R. 52.223-2 (Clean Air and
Water); and 48 C.F.R. 52-223-3 (Hazardous Material Identification and Material
Safety Data). Unless previously provided, if the value of this Agreement exceeds
$10,000, both Parties shall provide to the other Party a Certificate of Non-
segregated Facilities. Both Parties agree and covenant that none of its
employees,or employees of its subcontractors, who provide services to either
Party pursuant to this Agreement are or will be unauthorized aliens as defined
in the Immigration Reform and Control Act of 1986.
20.0 GENERAL TERMS.
20.1 Integration, Amendments and Waiver. This Agreement, integrates the
entire understanding between the Parties with aspect to the subject matter
covered. It supersedes all prior understandings, drafts, discussions or
statements, whether oral or in writing, expressed or implied, dealing with the
same subject matter. It may not be amended or modified in any manner except by a
written agreement signed by both Parties. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision (whether or not similar) nor shall such waiver constitute a continuing
waiver unless expressly provided.
20.2 Independent Contractors. The Parties shall perform all Services under
this Agreement as independent contractors. Nothing contained in this Agreement
shall be construed to create an association, trust, partnership or joint venture
or impose a trust or partnership duty, obligation or liability on or with regard
to either Party.
20.3 Governing Law. Any questions concerning the interpretation and
enforcement of this Agreement shall be governed by the laws of the State of
Texas without regard to its conflicts of law provisions.
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20.4 Unenforceability. If any section or provision of this Agreement or any
exhibit shall be determined to be invalid by applicable law, then for such
period of time that same is invalid, it shall be deemed to be deleted from this
Agreement and the remaining portions of this Agreement shall remain in full
force and effect.
20.5 Third-Party Beneficiaries. There are no intended third Party
beneficiaries to this Agreement and nothing in this Agreement shall entitle any
person other than CCC or WPC and their respective successors and assigns
permitted hereby to any claim, cause of action, remedy or right of any kind.
20.6 Drug, Alcohol and Random Security Search. In performing Services under
this Agreement, each Party agrees to abide by and require all of its employees
and contractor's to abide by the other Party's drug, alcohol and random security
search policy.
20.7 Title to Products. Title to all products shall at all times remain
with the Party requesting Services and such Party shall have the right at all
times to remove such products and/or transfer title and possession to others.
The Party having custody of any products waives any warehousemen or materialmen
liens related to the products.
20.8 Recording. WPC shall execute in recordable form a memorandum or
extract of this Agreement necessary to permit CCC to effectuate its interest
under Sections 5.3, 17 and 18.
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- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their
duly authorized representatives as of the date first set forth above.
WARREN PETROLEUM COMPANY, CHEVRON CHEMICAL COMPANY
LIMITED PARTNERSHIP
By: WARREN PETROLEUM G.P., INC.
Sole General Partner
By: By:
---------------------------------- ---------------------------
Title: Title:
------------------------------- ------------------------
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EXHIBIT A-1
Motor Carrier Transportation
1.0 Scope of Services.
1.1 WPC agrees to provide motor vehicle equipment which meets all U.S.
Department of Transportation standards and is safe, complete and efficient for
the performance of its transportation obligations under this Agreement. WPC
agrees to accept CCC's shipments of products at the locations identified in
Section 2.0 and upon receipt of the such products, WPC will transport such
products with reasonable dispatch and deliver them in like good order and
condition to the location designated by CCC and will provide specialized
transportation services as mutually agreed between WPC and CCC.
1.2 The parties agree that the transportation provided under the terms of
this Agreement is on a non-exclusive basis and WPC may commingle CCC's freight
with other freight received from customers not party to this Agreement so long
as commingling does not affect product quality or product value. CCC is not
precluded from using the services of other carriers under this Agreement.
1.3 All obligations to tender shipment or ship products shall be on a non-
exclusive basis and the Parties are not obligated to tender a shipment or ship
products unless mutually agreed.
1.4 WPC authorized CCC or its authorized agent to reposition trailers
assigned to CCC facilities for the purpose of loading and unloading provided CCC
shall be responsible for any liability related to such repositioning and will
indemnify and hold harmless WPC, its Affiliates and the officers, directors,
employees and agents of any of them from and against any and all loss, damage,
injury, liability and claims for injury to or death of any person or for loss or
damage to property resulting from the repositioning of trailers by CCC.
1.5 WPC is responsible for filing, when applicable, a copy of this
Agreement with the appropriate regulatory agencies within the period of time
provided by law.
2.0 Product and Volume.
-1-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Chevron shall tender to WPC a series of shipments which constitute a
portion of its estimated requirements as set forth below:
<TABLE>
<CAPTION>
Product Origin Estimated Volume
- --------------------- ----------------- ----------------
<S> <C> <C>
Lime St. Genevieve, MO 0 - 22 MMLBS
Butane CB-Baytown, TX 0 - 4 MMLBS
HAD CB-Baytown, TX 0 - 2 MMGAL
Naphtha CB-Baytown, TX 0 - 120 MMLBS
Polyethylene CB-Baytown, TX 0 - 41 MMLBS
Wax CB-Baytown, TX 0 - 55 MMLBS
Light Petroleum Oil CB-Baytown, TX 0 - 3.6 MMGAL
</TABLE>
3.0 Rates.
* 3.1 CCC shall pay WPC a flat rate of REDACTED for all truck load
shipments of lime product from St. Genevieve, Missouri to Belle Chasse,
Louisiana (Oak Point).
3.2 WPC shall transport products, other than lime, at WPC rates shown based
upon mileage between origins and destinations as provided in Appendix A. Rates
include pump and hose charges. Tank cleaning charges will be invoiced to CCC at
WPC's cost.
3.3 This Agreement applies to prepaid shipments originating at, and collect
shipments destined to the facilities or customers of CCC. This Agreement will
also apply to third-party shipments in which CCC is responsible for the freight
charges.
3.4 CCC will make payment of invoices submitted by WPC to CCC within thirty
(30) days of receipt. Invoices shall be accompanied by substantiating
documentation reflecting the service provided and the charges therefor. The
provisions of Ex Parte Order No. MC-1 of the Interstate Commerce Commission are
not part of this Agreement.
The provisions of this Agreement shall apply on shipments returned to the
original shipping point by a reverse route, including those shipments
-2-
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
refused or rejected, and the rates shall be no higher than the rates for
outbound movement.
* 3.5 Demurrage shall accrue at a rate of REDACTED per fifteen (15) minutes
or a fraction thereof after two (2) hours free time for loading or
unloading, unless amended for a specific load.
4.0 Rate Adjustments.
WPC has the right to change at any time the price or freight allowance
specified herein, provided WPC has given CCC at least thirty (30) days written
notice of such change prior to the effective date of such change. CCC's failure
to serve WPC with written notice of objection shall be considered acceptance of
such change. If such written notice of objection is served by CCC, WPC has the
option to continue to provide Services hereunder at the same fee and terms as
were in effect at the time WPC gave notice of such change and thereafter resolve
the issue by the dispute resolution provisions in Section 16.
5.0 Term.
* The Services covered in this Exhibit shall be effective for REDACTED from
the effective date of this Agreement and shall continue in effect thereafter
unless and until canceled by either Party by giving the other Party one
hundred eighty (180) days advance written notice of the termination date.
6.0 Emergency Response.
WPC agrees that it has, or is developing, a written emergency response plan
and procedure. The plan takes into account the nature of the materials to be
shipped under this contract. WPC has provided, or will provide, a copy of WPC's
emergency response plan to CCC upon request.
7.0 Risk of Loss.
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by WPC, its employees, contractors or
agents which shall be the responsibility of WPC.
-3-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
EXHIBIT A-2
Ship Terminalling
8.0 Scope of Services.
WPC shall operate, maintain and provide qualified personnel for the dock
facilities at the Warrengas Terminal and coordinate the scheduling for CCC
shipment of the following products and other products, upon mutual
agreement, as follows:
Product Estimated Annual Volume
------- -----------------------
Ethylene Imports (C=2) 0 - 800 MMLBS
Ethylene Exports (C=2) 0 - 200 MMLBS
Propylene Exports (C=3) 0 - 200 MMLBS
Naphtha/Condensate Imports 0 - 5 MMBBLS
9.0 Hours of Operation.
Upon reasonable notice, WPC will provide Services at the dock facilities 24
hours a day, 7 days a week, including holidays, for the receipt and/or delivery
of products.
10.0 Fees.
10.1 Ethylene Import (C=2). Unloading fees for ethylene imports and
transfer into CCC's ethylene pipeline will consist of the following components:
* REDACTED
--------
* Total Throughput REDACTED
---------------- --------
* O - 110 MMLBS/year REDACTED
* 110 - 220 MMLBS/year REDACTED
* 220 - 330 MMLBS/year REDACTED
* Over 330 MMLBS/year REDACTED
-4-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Repair and maintenance expenses shall be at cost as set forth in the ethylene
import unit budget.
10.2 Ethylene Export (C=2) and Propylene Export (C=3). Loading fees for
ethylene and propylene exports from CCC's ethylene and propylene pipe lines
shall consist of the following components:
* (a) Monthly charge of REDACTED.
(b) Electrical expenses and repair and maintenance expenses at cost
as set forth in the required Ethylene/Propylene Export unit
budget.
* (c) Berth charge of REDACTED per hour. This berth charge shall not
apply to vessels that are undergoing conditioning.
10.3 Naphtha/Condensate Imports. Unloading of naphtha imports and
delivery by WPC pipeline into CCC's designated well at Mont Belvieu's
* Terminal shall be charged a fee of REDACTED.
11.0 Fee Adjustments.
11.1 The Base Rates in Section 3.1 shall be adjusted by the following
factors:
(a) Electrical Factor. .05 c/lb of the Base Rate is electrical power
related and will be escalated at the beginning of each calendar
quarter to reflect actual unit electrical power costs to the
Warrengas Terminal for the previous quarter. The base for fourth
quarter 1988 will be 6c per kilowatt hour (kwh). (Example: if
unit power costs at the Terminal in the first quarter 1990 are
12c/kwh, the payments in Section 3.1 will reflect an added cost
of 0.05c/lb for second quarter 1990.)
(b) Fuel Factor. .05 c/lb of the Base Rate is fuel gas related and
will be escalated at the beginning of each calendar quarter to
reflect actual unit fuel gas costs to the Warrengas Terminal for
the previous quarter. The base for fourth quarter 1988 will be
$1.50/million British Thermal Unit (MBTU). (example: if unit
fuel gas costs at the Terminal in first quarter 1990 are
$3.00/MBTU,
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the payments in Section 3.1 will reflect an added cost of
0.05c/lb for second quarter 1990.)
(c) Inflation Factor. The Base Rate except for the 0.1c./lb portion
of the Base Rate identified in Sections 4.1(a) and 4.1(b) shall
be escalated at the beginning of each year to reflect the change
in the Non-Farm Business Implicit Price Deflator (NFBIPD)
published by the U.S. Department of Labor (i.e. the costs for
1995 for the first 55 million pounds will be increased by
0.004c/lb if the 12-month average of the NFBIPD increases by one
percent (1%) from 1988 to 1994).
11.2 The monthly charges in Section 3.2 (a) and (c) shall be adjusted on
January 1 of each year, using the Houston Consumer Price Index (CPI) as compared
to the base index on January 1, 1996. The fee and adjustments in Section 3.2
and 4.2 shall be changed to a commercial based fee within the first six (6)
months of this Agreement.
11.3 For the fees specified in Section 3.3, each party shall have the right
to request a change in the fee at any time during the term covered by this
Agreement, provided it gives the other party at least 90 days written notice of
such change. The failure of the notified party to serve the other party with
written notice of objection thirty (30) days prior to the effective date shall
be considered acceptance of such change. If written notice of objection is
served, the notifying party shall have the right to continue to provide Services
under this Exhibit at the same price and terms in effect at the time it gave
notice of the requested change or resolve the issue by the dispute resolution
provision in Section 16.
12.0 Risk of Loss.
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by WPC, its employees, contractors or
agents which shall be the responsibility of WPC.
13.0 Demurrage.
Each Party shall be responsible for its demurrage, except for claims
attributable to the other Party's, or its employee's contractor's or agent's
negligent acts or omissions or for encroachment by the other Party on the
loading or unloading schedule as provided for in Section 7.0.
14.0 Scheduling.
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The Parties agree that CCC shall have access to Dock 1 for up to 70% dock
utilization on a monthly basis. Scheduling for ship movement of products shall
be made through the logistics specialist at WPC's Warrengas Terminal. WPC shall
load and unload vessels at the docks in order of their scheduled arrival.
Neither Party shall be restricted to its utilization percentage if the other
Party is not using Dock 1. Breadth interference between Docks 1 and 2 shall be
taken into account when either Party schedules activity for Docks 1 and 2.
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Exhibit A-3
Warrengas Terminalling
15.0 Scope of Services.
15.1 WPC shall provide transfer, storage and other terminalling services at
the Warrengas Terminal including barge, truck and pipeline receipt and delivery.
WPC shall operate for the benefit of both parties the flare system including the
processing of relief gasses and liquids.
15.2 WPC shall operate, maintain and provide qualified personnel for the
tank storage and dock facilities at the Warrengas Terminal to service CCC's
shipment requirements estimated as follows:
Product Estimated Annual Volume
------- -----------------------
Propane - Propylene Mix (PPmix) 0 - 1.0 MMBBLS
Crude Butadiene (CC4) 0 - 1.5 MMBBLS
Crude Isoprene (C5) 0 - 500 M BBLS
Heavy Aromatic Distillate (HAD) 0 - 550 M BBLS
Ethylene (C=2) (Truck Unloading) 0 - 4000 MT
15.3 WPC shall provide access to and permit Chevron Pipeline Company
("CPL") to use the flare system and will supply instrumentation air,
electricity, and any other utilities reasonably required by the Chevron Pipeline
Company pipeline system within the Warrengas Terminal.
16.0 Hours of Operation.
Upon reasonable notice to WPC, the tank storage and dock facilities shall
remain operational twenty-four (24) hours a day, seven (7) days a week,
including holidays, for the receipt and/or delivery of products.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
17.0 Fees.
17.1 Propane - Propylene Mix. Unloading PPmix from barges and
transporting by pipeline by WPC to a well owned or leased by CCC at Mont
* Belvieu Terminal shall be charged at a fee of REDACTED.
17.2 Crude Butadiene Transporting CC4 from CCC's Cedar Bayou Plant by WPC
pipeline to Warrengas Terminal, storage in a dedicated tank (currently
designated as Tank 58) and loading product onto barges shall be charged at a
* fee of REDACTED.
17.3 Crude Isoprene. Transporting C5 from CCC's Cedar Bayou Plant by WPC
pipeline to Warrengas Terminal, storage and loading product onto barge, tank
trucks or into pipeline at a fee to be agreed upon by the parties in good
faith negotiation as such may be required in the future.
17.4 Heavy Aromatic Distillate. Transporting from CCC's Cedar Bayou
Plant by pipeline and re-delivery of HAD to the GATX Terminal shall be
* charged at a fee of REDACTED.
17.5 Ethylene Receipts (C=2. Receipt and unloading of tank trucks
* and transfer to CCC pipeline at a fee of REDACTED.
17.6 Flare System. WPC shall pay for all costs associated with the normal
operation and maintenance of the flare system and associated relief systems,
except for repair and maintenance associated with the ethylene and propylene
flare piping associated with dock 1 equipment which shall be paid for by CCC.
17.7 Chevron Pipeline System. There shall be no separate charges for
Services provided under Section 1.3 so long as CPL's use of the flare system
and instrumentation air, electricity and other utilities is nominal. In the
event CPL's use is more than nominal, the Parties shall agree upon associated
costs and fees.
18.0 Fee Adjustments.
18.1 Each party shall have the right to request a change in the fees in
Section 3.0 at any time during the term covered by this Agreement, provided
it
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gives the other party at least ninety (90) days written notice of such change.
The failure of the notified party to serve the other party with written notice
of objection thirty (30) days prior to the effective date shall be considered
acceptance of such change. If written notice of objection is served, the
notifying party shall have the right to continue to provide Services under this
Agreement at the same fee and terms in effect at the time it gave notice of the
requested change and thereafter resolve the issue by the dispute resolution
provision in Section 16.
19.0 Storage Tanks.
19.1 WPC will operate and maintain storage tanks 58, 59, 60 and W-20 for
designated CCC product storage of CC4 and C5 products.
19.2 WPC shall be responsible for obtaining and maintaining all operating
permits required for the tanks.
19.3 Tanks 58, 59, 60 and W-20 (or in the alternative to W-20, Tanks W-1
or W-2, if mutually agreed to by the Parties) shall be dedicated exclusively to
CCC products so long as CCC has requirements for C5 and CC4 or similar product
through put, provided, CCC shall have exclusive use of W-20 for C5 service until
December 31, 1996. CCC agrees to release the tanks for WPC's use when it no
longer has any requirements for C5 and CC4 or similar product throughput, but
shall retain an option to reinstate such use of any or all of the tanks upon one
(1) year's prior written notice to WPC.
19.4 CCC shall have the option to obtain mutually agreed upon storage
service at Warrengas Terminal for HAD storage, HPG storage or other product
storage for CCC's future terminalling requirements at Warrengas Terminal.
20.0 Risk of Loss.
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by WPC, its employees, contractors or
agents which shall be the responsibility of WPC.
21.0 Scheduling.
All pipeline movements from Cedar Bayou to Warrengas Terminal shall be
scheduled through the WPC dispatching office at Mont Belvieu Terminal. All
truck, pipeline or marine movements into or out of Warrengas Terminal shall be
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scheduled through the WPC logistics specialists at Warrengas Terminal. CCC and
WPC shall make dock reservations on a first come/first serve basis and WPC shall
provide a dock schedule to CCC every Business Day.
22.0 Demurrage.
Each Party shall be responsible for its demurrage, except for claims
attributable to the other Party's, or its employee's, contractor's or agent's
negligent acts or omissions or for encroachment by the other Party on the
loading or unloading schedule as provided for in Section 7.0.
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Exhibit A-4
Mont Belvieu Terminalling
23.0 Scope of Services.
23.1 WPC shall provide transfer, storage and other terminalling services
at the Mont Belvieu Terminal including rail, truck and pipeline receipt and
delivery of CCC's products, other than LPG feedstocks which are covered under
another agreement. WPC shall operate six (6) storage wells for CCC activities,
the tank car rack and CCC pipeline connections at Mont Belvieu Terminal. WPC
shall operate and maintain for the benefit of both parties the flare system used
for the processing of relief gasses and liquids.
23.2 WPC shall provide access to and permit Chevron Pipeline Company
("CPL") to use the flare system and will supply instrumentation air, electricity
and any other utilities reasonably required by the Chevron Pipeline Company
pipeline system within the Mont Belvieu Terminal.
23.3 WPC shall provide necessary improvements at the Mont Belvieu Terminal
to support CCC's 3 QTR 97 Port Arthur Plant Expansion ("Mont Belvieu
Improvements"). Improvements include, per mutually agreed to scope of work for
the project, in-terminal piping changes, installation of mainline pumps and
metering facilities. The expansion requires 30 MBPD of incremental EP supply (in
blends ranging from 80/20 to 60/40). The total supply of EP to Port Arthur will
be approximately 55 MBPD post start-up.
24.0 Fees.
CCC shall pay fees to WPC for all directly attributable expenses to
dedicated facilities (e.g., CCC well workover cost) plus a portion of the cost
of facilities that are operated for the benefit of both WPC and CCC consisting
of the following:
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
24.1 Mont Belvieu Salaries, Wages and Benefits.
Allocation %
WPC Chemicals
-------- ---------
* Managers and Staff REDACTED REDACTED
* Mechanics REDACTED REDACTED
* Technicians and Engineers REDACTED REDACTED
* Clerical REDACTED REDACTED
* Operations REDACTED REDACTED
* Contract REDACTED REDACTED
24.2 Travel and Expense Accounts, Schools and Other Personnel Costs.
When applicable, expenses shall be charged to party requiring the
expenditure. Travel to and from schools shall be charged on the same percentages
as the individual's salary is charged.
24.3 Water, Consumable Supplies, Personal Services, Communications, Work
Contracts, Security, Repairs and Maintenance.
Expenses that are for the exclusive benefit of CCC or its wells and
equipment shall be charged to CCC. Expenses at Mont Belvieu Terminal for the
brine system, security, roads and other joint benefit facilities shall be
allocated based on the number of wells owned or leased by the parties.
* Expenses for the truck dock shall be allocated REDACTED to CCC and REDACTED
to WPC.
24.4 Fuel and Power.
At WPC's cost, CCC shall be charged for fuel and power consumed in
operating their dedicated equipment. Also, at WPC's cost, CCC shall be allocated
fuel and power expense for brine pumps, tank car rack, air system, lighting or
other joint benefit facilities based on horsepower involved or the number of
wells owned or leased by the parties, as appropriate.
24.5 Intangible Overhead.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
* Base fee of REDACTED M/YR.
24.6 Flare System.
All direct costs associated with the operation and maintenance of the
Flare System and associated relief systems shall be allocated on the basis of
well count.
24.7 Chevron Pipeline System.
There shall be no separate charges for services provided under Section 1.2
so long as CPL's use of the flare system and instrumentation air, electricity
and other utilities is nominal. In the event CPL's use is more than nominal, the
Parties shall agree upon associated costs or fees.
24.8 Improvements for Port Arthur Plant Expansion.
* Based upon estimated cost of REDACTED for the Mont Belvieu Improvements,
CCC shall pay to WPC the following fees after start-up of Mont Belvieu
Improvements:
* (a) Throughput fee of REDACTED.
* (b) Additional fee of REDACTED for the first five (5) years of
operation invoiced monthly at a rate expressed in cents per
barrel of throughput. This rate shall be set at the beginning of
each year of operation and shall be revised as necessary during
each year to correspond to the estimated throughput remaining for
such year so that the total payment for each year of operation
shall equal $1 MM. Any imbalances in payments shall be
reconciled at the end of each year.
This fee shall be adjusted in the event the estimated cost of the
project changes.
25.0 Engineering, Design and Construction Services.
Engineering, design and construction services will be provided in
accordance with the annual budget of the Alliance Improvement Team and the
allocation of
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
services will be on a project by project basis according to resources, timing
and complexity of any project.
26.0 Price Adjustments.
26.1 The percentage allocation rates and budget for the fees in Sections
2.1 and 2.3 shall be made or adjusted by mutual agreement, as part of the annual
planning process and, if the parties are unable to agree, by the dispute
resolution provision under Section 16.
26.2 The intangible overhead rate under Section 2.6 shall be adjusted on
January 1 of each year beginning January 1, 1997 using the Houston Consumer
Price Index as compared to the base index of 140.9 for December, 1995.
27.0 Option to Reasonably Expand Operations.
Subject to availability and WPC's use of the Mont Belvieu Terminal, CCC
shall have an option to reasonably expand its operations and facilities at the
Mont Belvieu Terminal, including pipeline additions and easements through the
terminal at locations mutually acceptable to WPC and CCC, and lease additional
storage space from WPC at mutually agreeable terms and conditions locations.
28.0 Pipeline Access.
Upon reasonable request, CCC shall have a non-exclusive right of access to
pipelines and operating equipment in the Mont Belvieu Terminal for the movement
of non-LPG products into CCC wells from sources such as the Koch-Sterling,
Citgo-Lakemont pipelines or future identified third parties satisfying
requirements of CCC.
This pipeline access shall be scheduled through Mont Belvieu Terminal
* dispatching and CCC shall pay WPC a handling fee of REDACTED.
29.0 Temporary Storage.
Upon reasonable notice, WPC agrees to provide to CCC temporary well
storage for PPmix and Naphtha during any periods of time that CCC may reasonably
require for maintenance or workover on its wells. CCC shall pay WPC a fee for
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such temporary storage equal to the spot short term commercial rate for storage.
30.0 Risk of Loss.
CCC shall retain risk of loss for all of its products except for loss
relating to negligent acts or omissions by WPC, its employees, contractors or
agents which shall be the responsibility of WPC.
31.0 Demurrage.
Each Party shall be responsible for its demurrage except for claims
attributable to the other Party, or its employee's, contractor's or agent's
negligent acts or omissions.
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Exhibit A-5
Barge Transportation
1.0 Scope of Services.
1.1 WPC shall provide barge transportation services to CCC for the
transport of propane-propylene mix ("Product") from the Pascagoula Refinery to
the Port Arthur Terminal or Warrengas Terminal as designated by CCC. WPC shall
provide the Natchez and Comanche, nominal 30 MBBL barges, to perform such
service and will use all reasonable efforts to provide other barges as may be
necessary to transport Product. WPC shall have the right to substitute barges
for the Natchez and Comanche for commercial reasons provided such substituted
service does not adversely affect CCC, including, but not limited to, effects
increasing costs, modifying operating requirements or causing the loss of
Product heel on a barge. In addition, WPC shall have the right to substitute
barges for the Natchez and Comanche as may be required for repair, maintenance
and governmental regulation.
1.2 CCC and WPC shall notify each other of any shutdowns, downtime,
maintenance or other planned or scheduled events that may disrupt the need for
or the ability to provide barge transportation services.
1.3 WPC shall use all reasonable efforts to make available such additional
barges from its own fleet that are needed to transport CCC Product so long as
WPC's commercial operations are not economically adversely affected. In the
event such additional barges are not available from WPC's fleet, WPC shall
charter, with prior notice to and consent from CCC, such additional barges as
may be necessary to transport CCC Product.
1.4 WPC shall have no obligation to replace or repair either the Natchez or
Comanche in the event one or both of them are damaged beyond economical repair
or go beyond their useful life. If either the Natchez or Comanche are
significantly damaged requiring substantial repair other than normal repair, WPC
shall have the right to invoke the hardship provisions of Section 3.3 of the
Services Agreement.
1.5 No barges shall be tendered to CCC (i) that transported a last known
cargo other than propane, propylene, isobutane, normal butane or mixtures of
such products, or (ii) known by WPC to contain an excess heel. Prior to arrival
at Pascagoula Refinery, WPC shall notify CCC of the
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last known cargo of all barges that transported a cargo other than Product. If
WPC satisfies the above conditions, WPC shall have no liability for
contamination resulting from the heel in such barges.
1.6 WPC shall tender the Natchez and Comanche with tanks sufficiently clean
and suitable for loading Products and to prevent contamination of Product. No
backhauls shall be made on the Natchez or Comanche other than propane or
Product. WPC shall compensate CCC for the loss of any heel in the barge
resulting from such backhaul.
1.7 The obligations to allow access for WPC terminated services under
Section 2.6 of this Service Agreement shall not apply to this Exhibit.
2.0 Product and Volume.
2.1 CCC agrees to tender and WPC agrees to transport up to 6.5 MBBLS per
day on a yearly average basis of propane-propylene mix ("Product(s)") from the
Pascagoula Refinery to the Port Arthur Terminal or Warrengas Terminal. WPC shall
use all reasonable efforts to transport volumes of Product in excess of 6.5
MBBLS.
2.2 In the event CCC's liftings average less than 2.25 MBBLS per day for a
full calendar year, CCC shall have the option to terminate the payment of the
deficiency fee under Section 3.5 by giving WPC written notice at any time on or
before January 31 of the following year specifying the termination date of the
fee that shall be at least 30 days after the date of the notice but before the
end of that calendar year. Upon receipt of such notice by WPC, WPC's obligation
to transport Product shall be reduced to 3.25 MBBLS per day and WPC shall have
the option to terminate this Exhibit by giving CCC written notice on or before
30 days after receipt of CCC's notice of WPC's election to terminate this
Exhibit, which shall be effective on the date specified by CCC as the
termination date for the deficiency fee.
3.0 Rates.
3.1 For all large tows (nominal 30 BBL barges) owned by or under long term
charter to WPC, CCC shall pay WPC 4.69 cpg for all shipments to Port Arthur
Terminal and 5.35 cpg for all shipments to Warrengas Terminal.
3.2 For all small tows (less than nominal 30 BBL barges) owned by or under
long term charter to WPC, CCC shall pay WPC 5.33 cpg for all
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shipments to Port Arthur Terminal and 6.16 cpg for all shipments to Warrengas
Terminal.
3.3 For barges other than those owned by or under a long term charter to
WPC, if WPC charters barges from a third party to satisfy CCC's needs, CCC shall
pay WPC actual cost (including, without limitation, tankerman charges, flaring
costs if necessary, port fees and time charter fees) plus six percent (6%).
3.4 CCC shall pay for all tankerman's charges for unloading at the Port
Arthur Terminal.
3.5 Unless caused by Force Majeure, if CCC's average daily liftings are
less than 5.5 MBBLS per day for a calendar quarter, CCC shall pay WPC a
deficiency fee based on the following:
Actual Lifting ("X" in MBBL/day) Deficiency Fee
-------------------------------- --------------
X ) 5.5 0
-
2.25 (Pounds) ( X ( 5.5 (5.5-X) x 4.69 cpg
-
X ( 2.25 (2.25 x 2.76 cpg)
+(2.25-X) x 4.69 cpg
X = 0 5.5 x 2.76 cpg
The deficiency fee shall be offset by all charter revenue generated
and any credit for WPC use based upon a rate agreed to by the parties.
3.6 In the event WPC provides substituted barges for the Natchez or
Comanche, CCC shall pay for barge service at the rates set forth in
Section 3.1. If barges are substituted due to repair, maintenance or
governmental regulation, WPC shall not be liable to CCC for loss of
Product heel.
4.0 Rate Adjustment.
4.1 The rate specified in Sections 3.1 and 3.2 shall be adjusted on
January 1 of each year beginning January 1, 1997 based upon the rate
adjustment formulas specified in Sections 4.2 and 4.3 using a base
rate of January 1, 1996. Temporary economic hardship that
significantly impacts expenses not associated with normal operating
conditions such
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as major lock delays, barge sinking in the Intercostal Canal or major
weather problems may be addressed by the effected party under Section
3.3 of the Services Agreement.
4.2 The rates in Section 3.1 shall be calculated in accordance with the
following formula:
Rate (cpg) =[(2xTUG+BR30+2xBR16)x(TRIPTIME)+2(PF+TK)]x100
----------------------------------------------
(2)x(27360 BBLS)x(42gal/BBL)
Where:
TUG = The day rate for the 1200 HP tug. The January 1, 1996 rate is
$2,073/day including insurance, fuel and Inland Waterway Fuel Use Tax
of 23 cpg effective 1/1/94. (1/1/96 - $2,073)
BR30 = Term lease rate for a 30 MBBL barge, plus incremental costs
associated with a fully found barge charter. (1/1/96 - $2,744)
BR16 = Term lease for a 16 MBBL barge, plus incremental operating
costs associated with a fully found barge charter. (1/1/96 - $1,644)
PF = Pascagoula port fee of $137.50/barge effective 5/1/95. Add
$10/barge for shipments to Warrengas Terminal. (1/1/96 - $138)
TK = Tankerman charge at Pascagoula for first 8 hours. (1/1/96 -
$289)
TRIPTIME = 10.5 days for shipments to Port Arthur Terminal and 12 days
for shipments to Warrengas Terminal.
The rate is based on a ninety percent (90%) load of 27,360 BBLS for the
Natchez and Comanche.
4.3 The rates in Section 3.2 shall be calculated in accordance with the
following formula:
Rate (cpg) =[(TUG+BR16)x(TRIPTIME)+PF+TK]x100
---------------------------------
(14400 BBLS)x(42 gal/BBL)
TUG = The day rate for the 800 HP tug. This includes increases due to
insurance, fuel and the Inland Waterway Fuel Use Tax of 23.4 cpg
effective 1/1/94. (1/1/96 - $1,702)
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BR16 = Term lease for a 16 MBBL large plus incremental operating costs
associated with a fully found barge charter. (1/1/96 - $1,644)
PF = Pascagoula port fee of $137.50/barge effective 5/1/95. Add
$10/barge for shipments to Warrengas Terminal. (1/1/96 - $138)
TK = Tankerman charge at Pascagoula for first 8 hours. (1/1/96 -
$289)
TRIPTIME = 9.5 days for shipments to Port Arthur Terminal and 11 days
for shipments to Warrengas Terminal.
The rate is based on a ninety percent (90%) load of 14,400 BBLS.
4.4 Every two (2) years after the Effective Date of the Services
Agreement, the parties shall have the option to open this Exhibit
solely for the purpose of renegotiating the rate formulas set forth in
Sections 4.2 and 4.3. To exercise such option, a party at least
ninety (90) days before the expiration of such two (2) year period
must provide to the other party written notification of its desire to
renegotiate the formulas. If, after negotiating in good faith for a
period of ninety (90) days following the date of the renegotiation
notice, the parties are unable to agree upon a new formula, the matter
shall be resolved in accordance with the dispute resolution procedure
in Section 16.0 of the Services Agreement. During the period while
negotiations are ongoing the formulas that were in effect on the date
of the renegotiation notice shall continue to apply until new formulas
are determined. If a new formula is agreed to or established through
the dispute resolution procedures, the fee for such services shall be
adjusted retroactively to the expiration date of the prior two (2)
year period.
5.0 Term.
Notwithstanding the provisions specified in Section 5.0 of this Services
Agreement, the services covered in this Exhibit shall terminate (i)
effective August 31, 1998 in the event WPC does not exercise its call
option as specified in Section 8.2 of that certain Limited Liability
Company Agreement between Chevron U.S.A., Inc. and Warren Petroleum
Company, Limited Partnership, (ii) upon damage beyond economic repair or
expiration of the useful life of the barges Natchez or Comanche or (iii) as
provided in Section 2.2 of this Exhibit.
6.0 Lifting Schedule.
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On or before the 15th day of each month CCC shall notify WPC of its
nomination for Product volume to be lifted during the following month. The
two (2) day lifting window shall be finalized three (3) days prior to the
beginning of the proposed two (2) day window unless otherwise agreed. WPC
shall notify CCC daily of the position of the barges in service and the
estimated time of arrival for barges at the loading and discharge ports.
7.0 Risk of Loss.
CCC shall retain risk of loss for all of its Products except for loss
relating to gross negligence or wilful misconduct by WPC, its employees,
contractors or agents which shall be the responsibility of WPC.
8.0 Demurrage.
8.1 Laytime allowed for loading at the Pascagoula Refinery shall be 24
hours and for unloading at the Port Arthur Terminal shall be 30 hours.
Laytime shall commence at the time of barge arrival, if the barge
arrives within the two (2) day lifting window, at the beginning of the
lifting window if the barge arrives earlier than the agreed window, or
ten (10) hours after arrival if the barge arrives later than the
agreed window. Laytime for either the Natchez or Comanche shall not
commence until at least sixty (60) hours after the commencement of a
Product lifting from the other barge. There shall be no demurrage for
laytime at Warrengas Terminal.
8.2 Demurrage shall be paid at a rate of $210/hour for tows under Section
3.1, and $149/hour for tows under Section 3.2, provided a claim with
an invoice and supporting documentation is made within ninety (90)
days from the date of completion of discharge of the Product. All
invoices for demurrage shall include supporting documentation
consisting of barge logs and time calculations.
9.0 Barge Condition.
All barges furnished for shipments shall be seaworthy, properly manned,
equipped and in good working condition for the voyage. All barges
furnished by WPC are subject to CCC's prior approval and CCC shall have the
right to refuse to load any barge if CCC determines that the barge is not
seaworthy, staunch, tight, properly manned, or the barge is not otherwise
suitable or in good working condition. Approval of any barge shall not be
unreasonably withheld.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Exhibit B-1
Export Refrigeration Equipment
32.0 Scope of Services.
CCC shall provide WPC access to its export refrigeration equipment at the
Warrengas Terminal for WPC's use in loading WPC or WPC's customers
products. WPC shall operate the export refrigeration equipment for all
product shipments.
33.0 Quantity
To the extent the export refrigeration equipment is available for shipments
other than ethylene, it shall be available for WPC's requirements to
refrigerate products estimated at 0-3 MMBBLS/year.
34.0 Fee.
WPC shall pay CCC 1.0 cpg for a throughput of fully refrigerated propane
* and REDACTED for any other refrigerated product (e.g. semi-refrigerated
propane; fully refrigerated butane).
35.0 Fee Adjustment.
Each party shall have the right to request a change in the fee at any time
during the term covered by this Agreement, provided it gives the other
party at least ninety (90) days written notice of such change. The
failure of the notified party to serve the other party with written notice
of objection thirty (30) days prior to the effective date shall be
considered acceptance of such change. If written notice of objection is
served, the notifying party shall have the right to continue under this
Agreement at the same fee and terms in effect at the time it gave notice of
the requested change or resolve the issue by the dispute resolution
provision in Section 16.
36.0 Hours of Operation.
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Subject to scheduling priorities under Section 7.0, the export
refrigeration equipment shall be available to WPC twenty-four (24) hours a
day, seven (7) days a week, including holidays, for the refrigeration of
WPC's products.
37.0 Maintenance.
WPC shall maintain and perform all repairs on the export refrigeration
equipment. CCC shall pay for all maintenance and repairs under $25,000 and
WPC and CCC shall share the cost of all third party labor, repairs and
maintenance in excess of $25,000 by allocation agreed to by the parties
based upon mutually agreed factors including but not limited to historical
usage and causation of specific repair.
38.0 Scheduling.
CCC shall have first priority on scheduling the use of export refrigeration
equipment. Scheduling the use of such equipment for all other uses shall
be mutually agreed to by the Parties and shall be scheduled through WPC's
logistic specialists.
-24-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Exhibit B-2
Port Arthur Terminalling Services
39.0 Scope of Services.
CCC shall provide product transfer services at the Port Arthur Terminal
consisting of loading and unloading of barges of isobutane, normal butane,
refinery butane and other products mutually agreed upon by the parties and
transferring product by pipeline to Clark Refinery, Port Arthur, Texas.
The transfer services shall be for WPC requirements for back-up or
emergency service to normal pipeline delivery from WPC to the Clark
Refinery.
40.0 Quantity.
CCC agrees to provide transfer services for WPC requirements of
approximately 0-3000 BBLS/day.
41.0 Hours of Operation.
Upon reasonable notice, CCC will provide Services at the dock
facilities 24 hours a day, 7 days a week, including holidays, for the
receipt and/or delivery of products.
42.0 Fees.
* WPC shall pay CCC REDACTED for the unloading and transferring
services.
43.0 Price Adjustment
Each party shall have the right to request a change in the fee at any
time during the term covered by this Agreement, provided it gives the other
party at least ninety (90) days written notice of such change. The failure
of the notified party to serve the other party with written notice of
objection thirty (30) days prior to the effective date shall be considered
acceptance of such change. If written notice of objection is served, the
notifying party shall have the right to continue under this Agreement at
the same fee and terms in effect at the time it
-25-
<PAGE>
gave notice of the requested change or resolve the issue by the dispute
resolution provision in Section 16.
44.0 Termination.
CCC may terminate the Services relating to this Exhibit in the event of a
termination of CCC's right to lease the Port Arthur Terminal. WPC may
terminate the Services relating to this Exhibit in the event of termination
of that certain agreement between WPC, as assignee of Chevron U.S.A. Inc.
and Clark Refining & Marketing, Inc.
45.0 Risk of Loss.
WPC shall retain risk of loss for all of its product except for loss
relating to the negligent acts or omissions by CCC, its employees,
contractors or agents, which shall be the responsibility of CCC.
46.0 Scheduling.
All requests for Services at the Port Arthur Terminal shall be scheduled
through CCC's feedstock supply representative.
-26-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Exhibit B-3
Feedstock Pipeline Service
47.0 Scope of Services.
CCC shall ship by CCC's pipelines between the Mont Belvieu Terminal and
Clark's Fannett Terminal, WPC's requirements for isobutane and butane
products and other products mutually agreed upon by the parties.
<TABLE>
<CAPTION>
<S> <C> <C>
48.0 Quantity.
Product Estimated Volume Destination
------- ---------------- -----------
Isobutane 1.2 MM BBLS/year MBT to FT
Refinery Butane 700 M BBL/year FT to MBT
49.0 Fees.
</TABLE>
* WPC shall pay CCC REDACTED for isobutane shipments. All refinery butane
shipments shall be paid by Clark Refinery under separate contract between
Clark Refinery and CCC.
50.0 Fee Adjustment.
Each party shall have the right to request a change in the fee at any time
during the term covered by this Agreement, provided it gives the other
party at least ninety (90) days written notice of such change. The failure
of the notified party to serve the other party with written notice of
objection thirty (30) days prior to the effective date shall be considered
acceptance of such change. If written notice of objection is served, the
notifying party shall have the right to continue under this Agreement at
the same fee and terms in effect at the time it gave notice of the
requested change or resolve the issue by the dispute resolution provision
in Section 16.
51.0 Risk of Loss.
-27-
<PAGE>
WPC shall retain risk of loss for all of its product except for loss
relating to the negligent acts or omissions by CCC, its employees,
contractors or agents, which shall be the responsibility of CCC.
-28-
<PAGE>
EXHIBIT 10.18
"Pages where confidential treatment has been requested are stamped
`Confidential Treatment Requested. The redacted material has been separately
filed with the Commission,' the appropriate section has been marked at the
appropriate place and in the margin with a star (*)."
OPERATING AGREEMENT
BETWEEN
WEST TEXAS LPG PIPELINE LIMITED PARTNERSHIP
AND
CHEVRON PIPE LINE COMPANY
THIS AGREEMENT is made and entered into as of September 1, 1996 by and between
West Texas LPG Pipeline Limited Partnership, a Texas limited partnership
(hereinafter referred to as "Company"), and Chevron Pipe Line Company, a
Delaware Corporation (hereinafter referred to as "Operator").
WHEREAS, Company is the owner of certain LPG pipeline facilities ("Facilities")
more particularly identified in Attachment II and Attachment III; and
WHEREAS, Company does not have a working staff to operate the Facilities and
desires to engage Operator in these respects;
NOW, THEREFORE, in the consideration of the premises and mutual covenants
contained in this Agreement, Company and Operator agree as follows:
Section 1. Definitions
-----------
As used in this Agreement, the following words and terms shall have the meanings
set forth:
(a) "Accounting Procedure" means the accounting procedure set forth in
Attachment I, hereof.
(b) "AFE" means an approval for expenditure in the form approved by Company.
(c) "Affiliate" means with respect to any Person, (i) any other Person which
beneficially owns, directly or indirectly, 50% or more of such Person's stock or
50% or more of the ownership interest entitled to vote in such Person or (ii)
any other Person as to which 50% or more of the voting stock or 50% or more of
the ownership interest entitled to vote therein, is beneficially owned, directly
or indirectly, either by such Person or by an Affiliate of such Person as
defined in the preceding clause (i).
(d) "Agreement" means this Operating Agreement together with all Attachments.
<PAGE>
(e) "Capital Commitment Budget" means the capital budget as further described
in Section 5A. of this Agreement.
(f) "Capital Expenditure Forecast" means the capital expenditure forecast as
further described in Section 5B. of this Agreement.
(g) "Cash Operating Costs" means amounts payable to Operator under Section 3 of
this Agreement.
(h) "Confidential Information" means any information relating to the identity
of shippers using the Facilities, the nature, kind, quantity, destination or
consignee or routing of Products using the Facilities, or any other information
which is in writing and has been labeled by Company as confidential.
Confidential Information shall not include any information which is acquired by
Operator in the course of its activities outside of the scope of this Agreement
or which becomes part of the public knowledge or literature without breach of
this Agreement.
(i) "Costs" means all costs charged to the Company as provided in the
Accounting Procedure.
(j) "Expenditure Authorities" means the expenditure authorities described in
Section 6. of this Agreement.
(k) "Facilities" means the facilities identified in Attachment II and
Attachment III hereto.
(l) "Force Majeure" means an occurrence not within the control of the party and
which by the exercise of reasonable efforts such party is unable to prevent or
overcome, and shall include, but not be limited to, acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, hurricanes, storm warnings requiring evacuation
of facilities, arrests or restraints of the government, either federal or state,
civil or military, civil disturbances, explosions, sabotage, breakage or
accident to equipment, machinery or lines of pipe, extreme heat or cold weather,
freezing of machinery, equipment or lines of pipe, electric power shortages,
inability of any Party to obtain necessary materials and supplies, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), temporary cleaning or testing of facilities, temporary failure of
supply, or any other causes, whether of the kind herein enumerated or otherwise,
which were not reasonably foreseeable on the effective date of this Agreement,
and which are not within the control of the Party claiming suspension and which
such Party is unable to overcome by the exercise of due diligence. The term
"Force Majeure" shall also include those instances in which either Party hereto
is required to furnish materials and supplies for the purpose of constructing
and maintaining facilities or is required to secure permits or permission from
any governmental agency to enable such Party to acquire, or the delays on the
part of such Party in acquiring, at reasonable cost and after the exercise of
due diligence, such materials and supplies, permits and permissions. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty, and that the
above requirement that any
2
<PAGE>
Force Majeure shall be remedied with all reasonable dispatch shall not require
the settlement of strikes or lockouts by acceding to the demands of opposing
parties when such course is inadvisable in the discretion of the Party having
difficulty. The term "Force Majeure" shall also include any such event occurring
with respect to the facilities or services of either Operator's or Company's
third-party suppliers or customers delivering or receiving any product, fuel,
feedstock, or other substance necessary to the continuous operation of either
Party's plants or facilities or performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third-party suppliers or customers as a result of (i) another event of Force
Majeure or (ii) a breach by such third-party under the applicable agreement(s).
(m) "GAAP" means generally accepted accounting principles.
(n) "Insurance Manual Rates" means the published insurance industry recognized
computations of standard accepted insurance rates.
(o) "LPG" means liquefied petroleum gas or petroleum products, namely, natural
gasoline, ethane, propane, isobutane, normal butane, and pentanes or mixtures
thereof, recovered from gasoline recovery plants and gas recycling plants.
(p) "Major Maintenance Budget" means the major maintenance budget as further
described in Section 5C. of this Agreement.
(q) "Operating Expense Budget" means the operating expense forecast as further
described in Section 5D. of this Agreement.
(r) "Operator" means Chevron Pipe Line Company acting in its capacity as
operator of Facilities hereunder.
(s) "Parties" or "Party" means the Operator and/or Company.
(t) "Partnership Committee" means the managing unit of Company.
(u) "Person" means any individual, partnership, association, trust, corporation
or other entity.
(v) "Products" means, without restriction, natural gas liquids, LPG or products
derived from LPG.
(w) "Year" means a calendar year.
Section 2. Operations
----------
Operator, on behalf of Company, agrees to operate, maintain and repair the
Facilities, and any modifications or improvements thereof, and to perform any
other duties as may be requested by Company in a good and workmanlike manner
and, in the absence of specific instructions from
3
<PAGE>
Company, shall have the right and duty to act in accordance with its best
judgment as a reasonable and prudent operator would do under the same or similar
circumstances. Company does hereby authorize and empower Operator, on behalf of
Company, to do and perform or cause to be done and performed by others any and
all acts and things which Operator shall, in the exercise of its discretion and
best judgment, deem necessary or advisable for the operation, maintenance, and
repair of such Facilities in accordance with the Expenditure Authorities as set
forth in Section 6, to the end that the Facilities may be used in a safe,
efficient and economical manner for receipt, delivery, measurement and
transportation of Products. Without limiting the foregoing, subject to the
limits otherwise set forth in this Agreement, Operator shall specifically
perform the following acts on behalf of Company:
A. perform such mechanical activities as may be required to receive,
deliver, transport and/or otherwise handle Products tendered to and
accepted into the Facilities.
B. submit to Company recommended budgets and other information as set
forth in Section 5. hereof.
C. purchase or cause to be purchased for and in the name of Company
materials, supplies and services necessary for the operation of the
Facilities in accordance with the budgets approved by Company (or as
otherwise approved under this Agreement);
D. maintain surveillance of the Facilities, conduct assessment, and
periodically inspect the Facilities for damage or other conditions
which could affect the safe, efficient and economical operation of the
Facilities, perform such repairs to the Facilities as requested by
Company or as may from time to time be required and prepare
appropriate reports that document such activities;
E. act as representative for Company in contacts with government agencies
relating to the physical operation, maintenance and repair of the
Facilities, where required by audits, laws, rules, regulations,
orders, permit conditions, or right-of-way agreements;
F. prepare, maintain and implement operating manuals, monitoring
programs, contingency plans and training programs satisfying all
applicable laws, rules, regulations, orders and any other requirements
of governmental authorities together with such other operating
procedures or manuals as Company may require;
G. prepare custody transfer tickets, and other appropriate accounting
materials to document custody transfer and receipt of Products, and
sample and measure Products received and delivered to verify quality
and quantity as operations may require;
4
<PAGE>
H. provide Product shipments scheduling and 24-hour continuous monitoring
and control of pipeline flows for safe and efficient operations;
I. file, store and maintain in a manner such that they shall be available
for periodic inspection by Company all as-built drawings or
descriptions of the Facilities, construction and maintenance records,
inspection and testing records, operating procedures and manuals,
custody transfer documents, and such other records (all collectively
"records") as may be necessary or appropriate to the operation,
maintenance and repair of Facilities, or required by applicable laws,
rules, regulations, orders and any other requirements of governmental
authorities, or requested by Company. All of such records shall remain
the property of Company;
J. prepare and file all tariffs subject to approval of Company;
K. collect all tariffs, fees or other amounts derived from the operation
of the Facility, keep correct complete, and accurate accounts of all
receipts and disbursements made on the Company's behalf, and deposit
all moneys or other valuable effects in the name and to the credit of
Company in such depository banks, trust companies, savings and loan
associations or other similar institutions as may be designated by
Company, keep individual Book Capital Accounts for each partner of
Company, prepare partnership income tax returns for approval and
filing by Company, recommend for approval by the Company amounts of
cash distributions that should be made to the partners of Company, and
preparation of any other financial accounts or statements that may be
required by Company;
L. upon request, attend meetings of the Partnership Committee of Company,
or, whenever otherwise required by Company, prepare and distribute
reports of all financial transactions involving the Company hereunder
and other reports reasonably requested by Company or any partner of
Company, but only to the extent that Operator is legally authorized to
do so;
M. make all statutory and regulatory filings required of the Company,
including without limitation, all permit applications, and filings
with the Federal Energy Regulatory Commission, Texas Railroad
Commission and any other state Public Utilities Commissions,
Department of Transportation, or other regulatory agencies having
jurisdiction over Company;
N. sign all checks, drafts, or orders for the payment of Costs authorized
pursuant to this Agreement;
O. facilitate the financing and investments including the issuance of
commercial paper in accordance with the policies set forth by the
Company;
P. administer the Facilities' regulatory, financial, contractual and
legal affairs to the extent such administration is authorized by
Company; and
5
<PAGE>
Q. provide equipment, materials and services as legally required or as
Company may from time to time request, for discharge prevention and
response for Products and/or hazardous substances. These services
shall include, but not be limited to, preparation, submission, and
finalization of discharge prevention and/or contingency plans for
Products and/or hazardous substances, and preparation for, prevention
of, response to and/or cleaning up of any discharge or threatened
discharge of Products and/or hazardous substances. Without limiting
the foregoing, Operator shall serve as response action contractor for
Company;
R. obtain rights-of-way, make renewal payments and do such other tasks as
may required to maintain rights-of-way.
S. supervise the construction of any expansions, modifications, or
extensions of the Facilities that are approved by Company;
T. provide engineering services that may be necessary in operating,
expanding or modifying the Facilities as approved by Company; and
U. keep the Facilities free and clear of all material liens and
encumbrances not otherwise authorized by Company.
V. pay and discharge promptly all costs and expenses reasonably incurred
in operating the Facility.
Operator agrees to perform all services hereunder in a manner consistent with
the usual and customary practices, codes and standards in the pipeline industry
(including specifically the Federal Energy Regulatory Commission, the Texas
Railroad Commission and state Public Utilities Commissions as well as applicable
Department of Transportation and American National Standards Institute) and in
accordance with all valid and applicable laws, rules, regulations, orders and
any other requirements of governmental authorities. Operator in its capacity as
Operator pursuant to this Agreement, shall assume no other liability to Company
except in the case of Operator's own gross negligence or willful misconduct.
Notwithstanding the foregoing, the gross negligence standard shall apply only to
the operations performed hereunder and shall not apply to any actions, inactions
or negligence of the Operator in connection with the operation of any pipeline
other than Facilities. Operator shall furnish or arrange for the necessary
personnel to efficiently perform such services. None of such personnel shall be
employees or agents of Company, statutory or otherwise.
Section 3. Payment for Operator Services
-----------------------------
A. Company shall pay and Operator shall receive as full and complete
compensation for the performance of Operator's services as Operator
hereunder, the sum of the amounts becoming due (hereinafter referred
to as "Cash Operating Costs") as
6
<PAGE>
described and authorized in Attachment I, Accounting Procedure.
Company shall make payment in the time and manner specified herein.
B. Within the month immediately following the previous month of service,
Operator shall invoice Company for the actual Cash Operating Costs for
the immediately prior month. Company shall pay to Operator the amount
of such invoice, payable upon receipt.
Section 4. Accounting
----------
A. Operator shall keep and maintain proper and complete books and
accounts, in the name of Company, in conformity and consistent with
GAAP utilizing the principles and practices generally employed in
regulated oil pipeline accounting unless any regulatory agency with
jurisdiction over the System or the Partnership shall rule otherwise;
and shall furnish monthly financial statements and such other reports,
statistics and statements as Company or any partner of Company may
reasonably from time to time request.
B. Operator shall maintain accurate accounts of all expenditures and
liabilities incurred by it in operating, maintaining and repairing the
Facilities and shall render a monthly statement to Company and each
partner of the Company of all such expenditures and liabilities. The
failure to include any item in the current monthly statement rendered
for the month in which the same was incurred or expended shall not
preclude such item from being brought forward and included in any
subsequent monthly statement. All books, records and accounts shall be
open to inspection and audit by Company or Company's authorized
representatives at all reasonable times during business hours.
C. Operator shall establish a separate bank account(s) on behalf of
Company and all revenues received in the operation of the Facilities
shall be deposited in the name and to the credit of Company. All
interest or other benefits generated by this account shall accrue to
the benefit of Company. Operator shall not commingle any of its funds
in the account established hereunder.
Section 5. Budgets and Forecasts
---------------------
On or before November 1 of each year, Operator shall prepare and submit to the
Partnership Committee of Company for review, approval, or modification the
following annual budgets and forecasts:
A. Capital Commitment Budget
7
<PAGE>
The Capital Commitment Budget shall consist of an itemization of
commitments for each capital project equal to or in excess of $50,000
(large projects) and a combined total of all Items less than $50,000
(small projects) for the following calendar year.
B. Capital Expenditure Forecast
The Capital Expenditure Forecast shall identify separately all
expenditures for capital items from prior budgets which are not yet
complete and all capital items anticipated to be approved in the
pending budget. Large projects shall be listed individually and small
projects may be combined. The forecast shall indicate expenditures by
quarter for the following calendar year and indicate any appropriate
carryover in subsequent years.
C. Major Maintenance Budget
The Major Maintenance Budget shall consist of an itemization of each
maintenance project equal to or in excess of $50,000 (large projects)
and a combined total of all items less than $50,000 each (small
projects) for the following calendar year.
D. Operating Expense Budget
The Operating Expense Budget shall identify for the following calendar
year the expected Operating Expenses including Direct Costs,
Management Fee, and Major Maintenance items.
E. Volume Forecast
All volumes expected to be handled through the Facilities shall be
identified for the following calendar year.
Company may at any time supplement or amend the budgets and forecasts as
necessary to carry out the purposes of this Agreement.
Section 6. Expenditure Authorities__
-------------------------
A. Projects or Expenses not Exceeding $50,000
The Operator shall have the authority to make expenditures for any
individual capital project, major maintenance project or operating
expense not exceeding $50,000 to the extent that Operator deems such
expenditures necessary and appropriate for the operation or
maintenance of the Facilities. The sum of any such expenditures may
not, during any Year, exceed the amounts indicated for all such
8
<PAGE>
projects or expenses in the budget which have been approved by Company
for that Year.
B. Projects or Expenses in Excess of $50,000
The Operator shall have the authority to make expenditures for any
individual capital project, major maintenance project or operating
expense in excess of $50,000 if such project or expense was
specifically identified in an approved budget or Company has approved
an AFE for the project. The amount of the Operator's authority under
this subsection may be overrun by the greater of 10% or $10,000
without seeking prior approval by Company; provided, however that such
overrun does not cause any of the Capital Expenditure Forecast, Major
Maintenance Forecast or Operating Expense Forecast approved by the
Company to be exceeded.
C. Settlement of Claims
Operator shall have authority to make expenditures in settlement of
claims, demands and litigation resulting from or arising out of
operations of Facilities up to $25,000 for each such claim. Operator
shall notify Company and each partner of Company immediately of any
claim, demand or suit, and if the amount required for full settlement
exceeds the above specified amount, Operator shall notify the Company
and each partner of Company and the Company shall determine how to
further handle the claim, demand or suit.
D. Taxes
The Operator shall have the authority to make expenditures for, and
shall be entitled to receive full and complete compensation from
Company for, Taxes as described in Section 2.A.8 of "Cash Operating
Costs" in Attachment I, Accounting Procedure. Such authority to make
expenditures for, and entitlement to receive full and complete
compensation for, Taxes, shall be true whether or not the expenditure
is within an approved budget or the action has prior approval of
Company.
E. Operation In Lieu of An Approved Budget
In the event Company fails to deliver to the Operator on or before
December 31 an approved budget for the ensuing year, the previous
year's budget shall remain in effect until an approved budget is
delivered. Notwithstanding the foregoing, the Operator may take such
actions and make such expenditures as may be deemed necessary, under
laws, rules, regulations, orders or good industry practices, in
9
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
order to continue the orderly conduct of the business of Company
hereunder and to preserve and maintain the Facilities. In the event
that any such expenditure was not specifically approved in an earlier
budget or otherwise approved by the Company, Operator's authority
shall be limited to a maximum of $500,000 for any one expenditure and
a total maximum of $ 1,000,000 for all such expenditures in any one
year. In the event of such operation without an approved budget, the
Operator shall, on a monthly basis, give telephone notice or otherwise
contact Company and each partner of Company as soon as practicable and
advise it of the circumstances of such operation without an approved
budget, the actions taken or proposed and the expenditures made,
incurred, committed, or proposed. All expenditures made pursuant to
this Section 6.E. shall be treated as Cash Operating Costs hereunder.
Nothing in this Section 6.E. shall in any way restrict the Operator's
authority as set forth in Section 6.F.
F. Emergencies
In an emergency, the Operator may take such actions and make such
expenditures as may be deemed necessary, under laws, rules,
regulations, orders or good industry practices, in order to cure such
emergency. This shall be true whether or not the expenditure is within
an approved budget or the action has prior approval of Company. In the
event of such an emergency, the Operator shall give telephone notice
or otherwise contact Company as soon as practicable and advise it of
the circumstances of such emergency, the actions taken or proposed and
the expenditures made, incurred, committed, or proposed. All
expenditures made pursuant to this Section 6.F. shall be treated as
Cash Operating Costs hereunder.
Section 7. Term
----
This Agreement shall take effect as of the day and year first above written
* and shall continue for a term of REDACTED and continue thereafter until
canceled on 180 days prior written notice by either Party which such notice
may be given for any reason or no reason in the sole discretion of either
Party; provided, however, in the event that Company has not selected a
replacement operator who is ready and capable of assuming the operation of
Facilities at the end of such notice period, Operator shall continue to
operate the Facilities hereunder for such period until a replacement operator
is selected who is ready and capable of assuming the operation of Facilities
but such continuation by Operator shall not extend beyond 180 days following
the end of the notice period. Company shall have the right to terminate this
Agreement if Operator ceases to own a majority of the interest in the Company.
Upon termination of this Agreement, Company shall pay Operator the amounts
chargeable to Company hereunder as of the date of termination which have not
already been paid by Company; Company shall also reimburse Operator for the full
amount of any obligations or commitments Operator has made in the interest of
performing the services hereunder in accordance with the annual budget and any
approved projects which were not paid by Company prior to the date of
10
<PAGE>
such termination or, if agreeable to Operator, Company may assume such
obligations or commitments. Upon termination of this Agreement, Operator shall
turn over to Company all records, data, and information in Operator's possession
pertaining to operations hereunder, as well as materials, equipment, facilities,
and operating supplies on hand which had been purchased by Company or in its
name. Termination of this Agreement shall not affect the rights and privileges
or duties, liabilities and obligations of either Party which arose or accrued
prior to the date of termination.
Section 8. Insurance
---------
Operator shall procure and maintain all insurance required by applicable law or
regulation for operation of the Facilities, including but not limited to
Workers' Compensation and Employer's Liability Insurance in accordance with all
applicable state, federal, and maritime laws. Where permitted, Operator may
fulfill its Workers' Compensation obligations by approved self-insurance and
shall charge Company its actual costs of self-insurance which shall not exceed
Insurance Manual Rates applicable to such operations in the place where the same
are performed. The Operator shall procure and maintain in effect such types and
amounts of insurance as Company shall determine to be necessary to cover loss or
damage to the Facilities. No other insurance shall be carried by Operator for
the account of Company without prior approval from Company.
Section 9. Indemnity
---------
Company ("Indemnitor") shall indemnify and save harmless Operator, its
affiliates, agents and employees ("Indemnitees") in its or their role as
Operator from and against any and all loss, damage, injury, liability, expense
(including attorney's fees), and claims thereof which arise from any injury to
or death of a person, including third parties, Indemnitor, its agents,
contractors or subcontractors, or employees, but excluding Indemnitees, from
loss of or damage to property or from penalties imposed or proceedings brought
by government agencies, resulting directly or indirectly from any operations
under or pursuant to this Agreement, including, but not limited to, the use of
equipment provided by others. The indemnity provided by Indemnitor shall remain
in full force and effect regardless of the passive, active or concurrent
negligence of, and regardless of whether liability without fault is imposed or
sought to be imposed on, one or more of the Indemnitees. However, such indemnity
shall not be given effect to the extent that such indemnity is void or otherwise
unenforceable under applicable law in effect or validly retroactive to the date
of the Agreement. Further excepted from such indemnity shall be any such loss,
damage, injury, liability or claim which is the result of the gross negligence
or willful misconduct of an Indemnitee. Operator shall give Company immediate
notice of any suit brought against Operator with respect to which Company is or
may be obligated to indemnify Operator hereunder.
Operator shall indemnify and save harmless Company, its affiliates, agents and
employees in its or their role as owner of Facilities from and against all loss,
damage, injury, liability, expense (including attorney's fees), and claims
thereof which arise from any injury to or death of a person, including third
parties, Operator's agents, contractors, subcontractors, or employees, or from
11
<PAGE>
loss of or damage to property of Operator or Operator's agents, contractors,
subcontractors or employees resulting directly or indirectly from any operations
under or pursuant to this Agreement. The indemnity provided by Operator shall
remain in full force and effect regardless of the passive, active or concurrent
negligence of, and regardless of whether liability without fault is imposed or
sought to be imposed on Company. However, such indemnity shall not be given
effect to the extent that such indemnity is void or otherwise unenforceable
under applicable law in effect or validly retroactive to the date of this
Agreement. Further excepted from such indemnity shall be any such loss, damage,
injury, liability or claim which is the result of the gross negligence or
willful misconduct of Company. Company shall give Operator immediate notice of
any suit brought against Company with respect to which Operator is or may be
obligated to indemnify Company hereunder.
Section 10. Confidentiality
---------------
A. Each Party agrees that it will maintain this Agreement, all terms and
conditions of this Agreement and all other Confidential Information (as
hereinafter defined) in strictest confidence and that it will not cause or
permit disclosure of Confidential Information to any third Party without
the express written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Section 10 may be
made by either Party; (i) to the extent necessary for such Party to enforce
its rights hereunder against the other Party; (ii) to the extent a Party is
contractually or legally bound to disclose financial information to a third
Party (such as a shareholder or commercial lender); (iii) only to the
extent to which a Party hereto is required to disclose all or part of this
Agreement by a statute or by the order of a Court, agency, or other
governmental body exercising jurisdiction over the subject matter hereof,
by order, by regulations, or by other compulsory process (including, but
not limited to, deposition, subpoena, interrogatory, or request for
production of documents); (iv) to the extent required by the applicable
regulations of a securities or commodities exchange; or (v) to an Affiliate
(but only if such Affiliate agrees to be bound by the provisions of this
Section 10). "Confidential Information" shall mean any information
proprietary to either Party and maintained by it in confidence or as a
trade secret, including, without limitation, business plans and strategies,
proprietary software, financing statements, customer or client lists,
personnel records, analysis of general energy market conditions, sales,
transportation and service contracts and the commercial terms thereof,
relationships with current and potential business partners, supplies
customers, service providers and financial sources, data base contents and
valuable information of a like nature relating to the business of such
Party. It is understood and agreed that Confidential Information shall not
include information of a Party that (i) was generally available to the
public at the time of disclosure to the other Party, (ii) after the time of
disclosure to the other Party, becomes generally available to the public,
(iii) the Party receiving the information can know that the information was
in its possession at the time of disclosure, or (iv) was rightfully
acquired by the recipient from third Persons who did not themselves obtain
such information under a confidentiality or other similar agreement with
the disclosing Party.
12
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B. If either Party is or becomes aware of a fact, obligation, or circumstance
that has resulted or may result in a disclosure of Confidential Information
authorized by this Section 10, it shall so notify the other Party promptly
and shall provide documentation or an explanation of such disclosure as
soon as it is available. Each Party further agrees to cooperate to the
fullest extent in seeking confidential status to protect any Confidential
Information so disclosed.
C. The Parties hereto acknowledge that independent legal counsel may, from
time to time, be provided with a copy of this Agreement and agree that such
disclosure does not require consent by the other Party, provided that such
counsel agrees to be bound by the provisions of this Section 10.
D. Each Party will be deemed solely responsible and liable for the actions of
its employees, independent contractors, officers, agents and Affiliates for
maintaining the confidentiality commitments of this Section 10, but will be
required in that regard only to exercise such care in maintaining the
confidentiality of the Confidential Information as such Party normally
exercises in preserving the confidentiality of its other commercially
sensitive information.
Section 11. Force Majeure
-------------
A delay in or failure of performance of either Party hereto shall not constitute
default, nor shall either Party be held liable for loss or damage arising from
such delay or failure to the extent such delay, failure, loss or damage is
caused by Force Majeure.
The Party claiming Force Majeure as an excuse for delay in or failure of
performance shall immediately notify the other Party of the event and any steps
being taken to remove the impediment to performance.
Force Majeure shall not prevent either Party from terminating this Agreement
under Section 7.
Section 12. Assignment
----------
This Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the Parties hereto; provided, however, that such
Agreement and the obligations of the Parties hereunder shall not be assignable
by either Party hereto without the express prior written consent of the other
Parties hereto, except that any Party may assign this Agreement without consent,
including the performance thereof, in whole or in part to (i) an Affiliate of
the Party or the Party's shareholders; (ii) the successor of all or
substantially all of the Party's business and assets; or (iii) a corporation
which such Party may merge or be consolidated into. An assignment hereunder
shall not be effective unless and until the assignee agrees to be bound by all
the terms and conditions of this Agreement. Further, no assignment hereunder
shall relieve the assignor of any duties, liabilities or obligations accruing
hereunder before the effective date of the assignment.
13
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Any assignments prohibited hereunder shall be void. This Agreement shall not be
assignable by operation of law and shall not become an asset in any bankruptcy
or receivership proceedings. The consent requirement set forth in this Section
12 shall apply to a sale or assignment of a controlling interest in an Affiliate
to whom a Party's interest has been assigned.
Section 13. Notices
-------
Any notice, request, consent, approval or other similar communication of a
routine nature required or permitted under this Agreement shall be in writing
(including facsimile) and shall be deemed to have been properly given or
delivered to a Party when delivered personally to the person designated below to
receive such communication for each Party or when sent by telegram or United
States mail with postage prepaid and properly addressed to the Party to whom
given. Any such notice or other communication sent or mailed shall be deemed
given at the time it is received by the office of the individual to whom sent.
For purposes hereof the proper addresses of the Parties (unless otherwise
designated in writing which each Party may do from time to time) shall be as
follows:
If to Company:
West Texas LPG Pipeline Limited Partnership
Attention: Chairman of the Partnership Committee
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
Fax: (713) 363-7214
with a copy to:
WTLPS, Inc.
Attention: President
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
If to Operator:
Chevron Pipe Line Company
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
Attention: Corridor Team Leader
Section 14. Governing Law
-------------
The validity, nature, obligations, effect and construction of this Agreement
shall be governed by the laws of the State of Texas without giving effect to any
choice or conflict of law provision or
14
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rule that would cause the application of the laws of any other jurisdiction
other than the State of Texas.
Section 15. Attachments
-----------
Attachment I, Attachment II, and Attachment III attached hereto are incorporated
in and made a part of this Agreement. In the event of any inconsistency between
the Attachments and this Agreement, the Agreement shall control.
Section 16. Gifts Prohibited
----------------
The Parties shall maintain complete and accurate records in connection with any
commission, fee, rebate, gift or entertainment of significant cost or value in
connection with the performance of this Agreement and all transactions related
thereto for at least twenty-four months from the date of invoice to Company and
Operator. No director, officer, employee or agent of any Party hereto shall give
or receive any commission, fee, rebate, gift or entertainment of significant
cost or value in connection with the performance of this Agreement.
Section 17. Federal Compliance
------------------
A. Insofar as applicable hereto, each Party hereto shall comply with
Executive Order No. I1246, as amended by Executive Order No. I1375,
and the rules and regulations issued thereunder, to ensure that
applicants are employed, and that employees are treated during
employment without regard to their race, creed, color, sex or national
origin. Also, if applicable, each Party hereto shall comply with all
provisions of the Vietnam Era Veterans' Readjustment Assistance Act of
1974 and the rules and regulations issued thereunder, including 41
C.F.R., Chapter 60, Part 60-250. Each Party hereto shall also, if
applicable, comply with all provisions of the Rehabilitation Act of
1973, and the rules and regulations issued thereunder including 41
C.F.R., Chapter 60, Part 60-74. Operator agrees and covenants that
none of its employees or employees of its subcontractors who provide
services to Company pursuant to this Agreement are unauthorized aliens
as defined in the Immigration Reform and Control Act of 1986. All
acts, orders, rules and regulations hereinabove referred to are hereby
incorporated by reference unless this Agreement is excepted by
appropriate federal law, rules, regulations or orders.
B. Company and Operator shall comply with all laws and regulations
applicable to Company and Operator relating to Facilities hereunder,
including but not limited to any regulations of the United States
Department of Transportation applicable to
15
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facilities operated by Company that are connected to or a part of
Facilities hereunder.
Section 18. Section Headings
----------------
The headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
Section 19. Waiver
------
No waiver by either Party of any breach of any of the terms and conditions
contained in this Agreement shall be construed as a waiver of any subsequent
breach of the same or any other terms or conditions.
Section 20. Entire Agreement
----------------
This Agreement and its Exhibits constitute the sole and entire Agreement among
the Parties pertaining to the subject matter hereof. Effective as of the
commencement of the term hereof, this Agreement supersedes and cancels any and
all other prior or contemporaneous oral or written agreements or understandings
between or assumed by the Parties or any of them with respect to the foregoing
matters or any part thereof. No amendment to this Agreement shall be effective
unless in writing and executed by a duly authorized representative of each
Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first above written.
COMPANY, OPERATOR,
WEST TEXAS LPG PIPELINE CHEVRON PIPE LINE COMPANY
LIMITED PARTNERSHIP
By: By:
----------------------------- --------------------------------
Its: Its:
----------------------------- --------------------------------
16
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ATTACHMENT I
OPERATING AGREEMENT
ACCOUNTING PROCEDURE
1. Definitions
-----------
Unless defined otherwise below, terms used in this Accounting Procedure
shall have the same meaning as defined in the Agreement.
"Management Fee" means the management fees referenced in Section 2.B. of
this Attachment.
"Person" means any individual, partnership, association, trust,
corporation, government authority or other entity.
"Personal Expenses" means travel expenses and other reasonable reimbursable
expenses of Operator's employees in the operation and maintenance of
Facilities and in any other activities required of the Operator pursuant to
this Agreement; and such expenses of employees of Operator's Affiliate(s)
when such Affiliates perform activities pursuant to this Agreement.
2. Cash Operating Costs
--------------------
A. Direct Costs
------------
Operator shall charge Company with the following items but only to the
extent such charges are incurred in the operation and maintenance of
Facilities and in any other activities required of the Operator
pursuant to the Agreement and then, only that portion thereof that is
attributable to work and/or time allocated on a proportional basis to
the Facilities if the work performed can in any way benefit pipelines
operated by Operator other than the Facilities:
1. Labor and Benefits
------------------
a. Salaries and wages of Operator's employees (or employees of
Operator's Affiliate) directly assigned to the operation,
support and
17
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
maintenance of Facilities, including that portion of such
employees' time related to ancillary activities such as
training required by Operator, and in any other activities
required of the Operator pursuant to the Agreement.
b. Overhead related to direct labor salaries and wages, to be
* calculated as REDACTED of the amount provided for in A.1.a.
above.
c. Operator's cost of all payroll taxes, and benefits and
allowances and any other payment paid or contributed by the
Operator which is measured by Operator's employees'
compensation; the above to include without limitation
F.I.C.A., Operator's cost of holiday, vacation, sickness and
disability and other customary allowances, Operator's
current costs of established plans for employees' group life
insurance, hospitalization, retirement, stock purchase, and
other benefit plans of a like nature. Such costs will be
charged on a percentage assessment rate on the amount of
salaries and wages chargeable to the Company under Paragraph
1.a. of this Section. The percentage assessment rate shall
be based on the Operator's actual cost experience.
2. Employee Expenses
-----------------
a. Reasonable Personal Expenses of those employees whose
salaries and wages are chargeable to the Company under
Paragraph 1.a. of this Section, and for which expenses the
employees are reimbursed under the Operator's usual
practices.
3. Customer Service Center
-----------------------
The allocated share attributable to the West Texas LPG Pipeline
of Operator's cost for its Customer Service Center, including but
not limited to:
a. Labor and benefits of Operator's employees directly assigned
to the operation and support of Facilities, following the
methodology in Sections 2.A.1.a. and 2.A.1.c.
18
<PAGE>
b. An allocation of depreciation for Customer Service Center
capitalized costs of facility and equipment used in the
scheduling of shipments and 24-hour continuous monitoring
and control of pipeline flows for the Facilities.
c. An allocation of other Customer Service Center costs,
including support personnel and other expenses, required for
support of the Facilities.
4. Materials and Supplies
----------------------
Material purchased by Operator for use in the operation and
maintenance of Facilities shall be charged to the Company at the
price paid by Operator after deduction of all discounts received.
Material furnished by Operator from its stocks or inventory shall
be charged in accordance with the accounting guidelines
established by COPAS (Council of Petroleum Accountants Societies
of North America). Cost of warehousing and handling material
shall be chargeable to the Company. The accumulation of surplus
stocks shall be avoided, and if surplus stocks are accumulated,
such stocks shall be timely disposed of. Proceeds from such
disposition shall be credited to the Company at the time they are
received by Operator. Operator does not warrant the material
furnished. In the case of material found to be defective, or
returned to a vendor or the Operator for any other reason,
Operator shall credit the Company when adjustment is received by
Operator.
5. Contracts and Services
----------------------
The cost of contracts and subcontracts, contract services
(including those for technical personnel), professional
consultants, equipment, and utilities employed in the operation
and maintenance of the Facilities under the general direction of
Operator.
6. Equipment Furnished by Operator
-------------------------------
a. Use of equipment owned by Operator at the lower of (1) rates
commensurate with costs of ownership and operation. Such
rates shall include costs of maintenance, repairs, other
operating expense, insurance, taxes, and depreciation, or
(2) commercial rates prevailing in the geographic area of
the Company Facilities as published in Petroleum Motor
Transport Association rate schedules.
19
<PAGE>
b. Whenever requested, Operator shall inform Company of the
rates it proposes to charge.
7. Legal Expenses
--------------
Expenses of investigating litigation or claims incurred in or
resulting from the operation and maintenance of Facilities under
the Agreement; provided, however that no direct charge for
services of Operator's legal staff or fees or expense of
attorneys shall be made unless previously agreed to by Company.
All other legal expense incurred by Operator hereunder is
considered to covered by the overhead provisions of Section 2.B.
below, unless otherwise agreed to by Company.
8. Taxes
-----
All taxes of every kind and nature assessed or levied upon, or in
connection with the Company operations, property or Facilities
and which have been paid for the benefit of Company, excluding
any income or franchise taxes.
9. Insurance
---------
In accordance with Section 8 of the Agreement, net premiums paid
for insurance required by law or by the Company to be carried for
operation, maintenance and repair of Facilities and for the
protection of the Company.
10. Communications
--------------
Costs of purchasing, leasing, installing, operating, and
maintaining communications equipment and services necessary for
the conduct of Facilities' operation and maintenance.
11. Utilities
---------
Costs incurred for electricity and other utilities necessary for
the operations hereunder.
12. Ecological and Environmental
----------------------------
Costs incurred for the benefit of the Company as a result of
statutory regulation for archeological and geophysical surveys
relative to the identification and protection of cultural
resources, or other ecological surveys as may be required by
regulatory authority. Also, costs to provide or have available
pollution containment and removal equipment, plus costs of actual
control, cleanup and resulting responsibilities of oil spills as
required by applicable laws and regulations.
20
<PAGE>
13. Permits and Rights-of-Way
-------------------------
Costs incurred in obtaining or maintaining permits, licenses,
leases, certificates, rights-of-way, easements, and other similar
items necessary for the operation or maintenance of the
Facilities.
14. Dismantling, Removal, and Restorative Costs
-------------------------------------------
Costs incurred for dismantling, removal, and restoration of
Company property to the extent such costs are incurred.
15. Rentals
-------
Rentals paid by Operator for the benefit of the Company in the
conduct of Facilities' operation and maintenance.
16. Discounts and Allowances
------------------------
Operator shall take advantage of and credit to the Company all
cash and trade discounts, freight allowances and equalization,
annual volume and other allowances, credits, salvages,
commissions, insurance discount dividends and retrospective
premium adjustments, and other such items which accrue.
17. Other Expenditures
------------------
Any other expenditures directly attributable to Facilities'
operation and maintenance not covered and dealt with in the
foregoing provisions of this Section 2.A., and which are incurred
by the Operator in the necessary and proper conduct of
Facilities' operation and maintenance, and which are:
(a) within the scope of the Agreement; and
(b) are included in the approved operating budget.
B. Management Fee
--------------
The purpose of this Section 2.B. is to provide for the reimbursement
of Operator's overhead in conjunction with services rendered. Operator
shall charge the Company as follows to cover any portion of costs and
expenses resulting from the performance of services for Facilities not
otherwise chargeable under Section 2.A. herein:
21
<PAGE>
"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
1. Operator's Management Fee
-------------------------
* Operator shall receive REDACTED as an annual charge billed monthly,
hereinafter referred to as "Operator's Management Fee" to cover all of
Operator's overhead and indirect costs incurred in the performance of
services for the Facilities. Such Operator's management duties
hereunder shall not be subcontracted by Operator to any other entity,
without prior approval of Company. The Operator's Management Fee shall
be adjusted annually by a calculated amount based upon the Producers
Price Index (excluding the Fuels And Related Products And Power
component) in effect on October 1 with a base year of October 1, 1997.
Such adjusted amount shall be effective beginning January 1 of each
ensuing year, starting for the calendar year 1998.
22
<PAGE>
ATTACHMENT II
PIPELINE FACILITIES
I) PIPELINE: There is about 1,950 miles of various sizes of pipe ranging from
2" TO 14", 0.156 Gr B to 0.365 X 46 w.t., and 1957 - 1992 vintage. The
lateral lines are up to 8" and the trunk portion is all 10" and 14".
II) BOOSTER STATIONS: There are 18 pump stations, 24 pump and electric motor
units and associated electrical switchgear and control equipment. Total
horsepower is 28,200. Pumps are all horizontal centrifugal type.
III) COAHOMA FACILITY: There are 2 - 1,000 horsepower pump units with
centrifugal pumps and electric motors. It is an 80 acre site with three
storage wells(nominal 300,000 Bbls), two brine pits (nominal 350,000 Bbls
capacity), and all associated piping and electrical equipment.
** Of the 19 booster stations (including Coahoma), 13 are on separately
identifiable property.
IV) METER STATIONS: There are about 62 receipt, custody transfer meter
stations of which about 54 are at plant sites. There are another 18 check
meter locations with a total of 34 meter runs. Each facility generally
includes turbine meter runs, instrumentation, and equipment buildings.
V) MISCELLANEOUS:
* Sending and receiving swab trap facilities (22 on the trunk line alone).
* Portable meter provers
* Spare parts inventory
23
<PAGE>
ATTACHMENT III
MAP OF FACILITIES
24
<PAGE>
EXHIBIT 10.19
GALENA PARK SERVICES AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of September 1, 1996, by
and between Chevron Products Company ("CHEVRON PRODUCTS"), a division of Chevron
U.S.A. Inc., a Pennsylvania corporation ("CUSA") and Warren Petroleum Company,
Limited Partnership, a Delaware limited partnership ("WARREN LP"), (each a
"Party" and collectively the "Parties")
WHEREAS, CUSA and NGC Corporation ("NGC") have entered into certain agreements
(the "Merger Agreements") pursuant to which CUSA would contribute certain gas
gathering, processing, and other midstream assets and related liabilities of
CUSA's Warren Petroleum Company division ("Warren") and CUSA's Natural Gas
Business Unit to a newly formed corporation into which NGC would then be merged;
and
WHEREAS, immediately subsequent to the Merger, the gas gathering, processing,
and other midstream assets of Warren will be transferred to WARREN LP; and
WHEREAS, one such asset is the Warrengas Terminal described more specifically on
Exhibit 12 attached hereto and made a part hereof ("Warrengas"); and
WHEREAS, after the merger, CHEVRON PRODUCTS will own and operate the Galena Park
Light Products Terminal described more specifically on Exhibit 13 attached
hereto and made a part hereof ("Terminal") and WARREN LP will own and operate
Warrengas; and
WHEREAS, CHEVRON PRODUCTS wishes WARREN LP to perform certain services detailed
on Exhibits 1-11 hereto ("WARREN LP Services"), and WARREN LP wishes CHEVRON
PRODUCTS to perform certain services detailed on Exhibit 5 attached hereto
("CHEVRON PRODUCTS Services")(WARREN LP Services and CHEVRON PRODUCTS Services
described on the attached Exhibits shall be referred to individually as a
"Service" and collectively as "Services"); and
WHEREAS, WARREN LP and CHEVRON PRODUCTS wish to perform such Services for each
other in accordance with the terms of this Agreement; and
WHEREAS, WARREN LP and CHEVRON PRODUCTS intend that the scope and quality of
each Service shall remain substantially the same as it was prior to this
Agreement; and
<PAGE>
WHEREAS, CHEVRON PRODUCTS and WARREN LP desire to work together to develop a
relationship with the goal of creating a comprehensive, mutually satisfactory,
long-term relationship to fulfill commercial needs previously performed by and
among CUSA's Chevron Products Company, Warren Petroleum Company and Natural Gas
Business Unit and to operate facilities previously operated by such CUSA
business units;
NOW, THEREFORE, for the mutual benefit of the Parties and in consideration of
the mutual covenants and agreements hereafter set forth, and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1.0 SERVICES.
1.1 WARREN LP Services. During the term of this Agreement, WARREN LP shall
provide and CHEVRON PRODUCTS shall pay for the Services generally
described in Exhibits 1 through 11 attached hereto. Except as
expressly stated otherwise, such Services shall be provided in
accordance with the terms and conditions hereof and of the Exhibits.
WARREN LP shall not provide Services hereunder for operation of any
facility other than the Terminal. From time to time, the Parties may
mutually agree to the addition, deletion or modification of the
Services provided by WARREN LP by amending this Agreement and its
Exhibits, which shall be incorporated herein by reference. The WARREN
LP Services included on the date of this Agreement are more
particularly described in the following Exhibits:
1: Emergency Response Services
2: Dock Services
3: Security Services
4: Communication Services
5: Flare System Services
6: Potable Water Services
7: Natural Gas Services
8: Electric Services
9: Mowing and Weed Control Services
10: Road Repair Services
11: Fencing and Security Lights Services
1.2 CHEVRON PRODUCTS Services. During the term of this Agreement, CHEVRON
PRODUCTS shall provide and WARREN LP shall pay for the Services
described in Exhibit 5 attached hereto. Except as expressly stated
otherwise, such Services shall be provided in accordance with the
terms and conditions hereof
2
<PAGE>
and of the Exhibits. Services provided by Chevron shall not be made
available hereunder for operation of any facility other than
Warrengas. From time to time, the Parties may mutually agree to the
addition, deletion or modification of Services by amending this
Agreement and its Exhibits, which shall be incorporated herein by
reference.
1.3 Performance of Services. The Party providing a Service ("Providing
Party") to the other Party ("Receiving Party) shall provide such
Service in accordance with the requirements set forth in this
Agreement and in the applicable Exhibit. Except as otherwise set forth
herein or in an Exhibit, Providing Party shall at all times have sole
authority to manage, direct and control the performance of any Service
and the resources used to provide it; provided, however, that such
Service must meet the warranties set forth herein.
1.4 Access. Each Party shall obey all rules established by the other Party
while on the other Party's premises, shall comply with all reasonable
conditions imposed by or requests made by the other Party, and shall
remove any personnel or equipment used to provide Services from the
other Party's premises upon the other Party's reasonable request. Each
Party shall permit the other Party's employees reasonable access to
its property for the purpose of providing all Services required under
this Agreement.
1.5 Maintenance of Facilities. Each Party shall, insofar as is
commercially reasonable and practicable, operate and maintain the
Terminal or Warrengas systems, as the case may be, in a manner that
will avoid or minimize the likelihood of a disturbance originating
from its system which might cause impairment of the Services. The
Providing Party shall maintain all fixtures and equipment in all
facilities used to provide and deliver Services in accordance with the
standards observed by such Providing Party in its maintenance of
similar other United States facilities it owns or operates.
1.6 Compliance with Law. The Providing Party shall at all times comply
with all laws, ordinances, rules and regulations related to the
Services. Except as expressly provided in this Agreement, the
Providing Party shall give all required notices, shall procure and
maintain all necessary governmental permits, licenses and inspections
necessary for
3
<PAGE>
its performance of this Agreement, and shall pay all charges and fees
in connection therewith.
1.7 Notification of Certain Matters. During the term of this Agreement,
CHEVRON PRODUCTS and WARREN LP shall promptly notify each other of any
matter or the occurrence of any event which could reasonably be
expected to have the potential to effect materially the Services
provided hereunder.
1.8 Representatives. CHEVRON PRODUCTS and WARREN LP shall each appoint a
representative (its "Authorized Representative") who shall act as a
liaison to manage all aspects of its performance of this Agreement,
including, without limitation, operational, environmental, safety,
maintenance, technical and scheduling issues. The Authorized
Representatives shall have no power to amend this Agreement either in
writing or by informal agreement except as provided in Section 17.0 of
this Agreement. The Authorized Representatives shall meet on an "ad
hoc" basis and may delegate any specific duty or authority under this
Agreement. Any subsequent change of the Authorized Representative
shall be effective only upon written notice.
1.9 Metering Upgrades. WARREN LP shall be responsible for upgrading or
installing replacement meters required to measure the Services, and
CHEVRON PRODUCTS shall reimburse WARREN LP's capital and maintenance
costs associated with any such upgrade or installation. WARREN LP
shall receive written approval from CHEVRON PRODUCTS in advance of any
material upgrade or replacement of meters to the extent WARREN LP will
demand reimbursement from CHEVRON PRODUCTS.
2.0 ADJUSTMENTS.
2.1 Fees. The Parties have agreed to use fixed fees equal to the Parties'
best estimate of operating expenses actually incurred with respect to
the Services provided under Exhibits 1, 3, 9, and 11 of this
Agreement, and may agree to use such fixed fees with respect to
services added to this Agreement in the future. On January 1 of each
year of this Agreement, commencing on January 1, 1997, any such fixed
fees shall be adjusted using the Consumer Price Index for all Urban
Consumers - Houston Area, published bimonthly on even numbered months
by the U.S. Department of Labor, Bureau of
4
<PAGE>
Labor Statistics, as compared to the base index of 140.9 on January 1,
1996. If such indices are no longer published or are changed
substantially in their method of measurement, then there shall be
substituted by mutual agreement of the parties another index that as
closely as practicable reflects the changes that such tables currently
measure. The adjusted fees shall go into effect the first day of the
month following the first month of publication for the year and shall
remain in effect until the first day of the month following the first
month of publication for the following year.
2.2 Operating Adjustments. Other than with respect to adjustments in fees,
which are discussed elsewhere in the Agreement, each Party agrees to
modify the Exhibits hereto when and to the extent that the other Party
significantly changes its Galena Park operations; provided, however,
that such modification does not have a net negative economic or
operational impact upon the other Party. In the event of any such
plant operation changes, the Receiving Party shall be notified as soon
as reasonably possible, the Providing Party shall, subject to the
other provisions of this Agreement, use commercially reasonable
efforts to accommodate the Receiving Party; and the parties shall
cooperate to effectuate the intent of this Section.
2.3 Shut-Downs. Except in the case of shutdowns effected solely for
economic reasons, neither Party shall be obligated to deliver or
receive Services during scheduled or unscheduled maintenance shutdowns
of any facility to which production or use of such Services relates.
During shutdowns effected solely for economic reasons, each Party
shall continue to fulfill its obligations to the extent of the
Services requirements needed by the other Party to continue its normal
operations without negative economic or operations impact, subject to
the termination rights of each Party under Section 4 below.
2.4 Hardships. In the event conditions change so that this Agreement
causes an economic or operational hardship to either Party, such Party
may request a redetermination of any provision hereunder by giving
written notice to the other Party. The Parties shall then meet within
thirty (30) days to try in good faith to determine a revised provision
based upon principles of fairness and equity; provided, however,
5
<PAGE>
that neither Party shall be obligated to change the then existing
provision unless agreed to in writing.
3.0 WARRANTIES.
3.1 General Warranty. The Providing Party warrants that the Services shall
meet the respective requirements set forth in this Agreement and its
Exhibits in all material respects and shall meet the practices the
Providing Party generally uses to provide similar services at other
United States facilities that it owns and operates. THE PROVIDING
PARTY DOES NOT MAKE, AND EXPRESSLY DISCLAIMS, AND THE RECEIVING PARTY
EXPRESSLY WAIVES, ANY OTHER WARRANTIES WHATSOEVER (EXCEPT THOSE
WARRANTIES SET FORTH IN THE EXHIBITS), INCLUDING (WITHOUT LIMITATION)
ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
REGARDLESS WHETHER ORAL OR WRITTEN, EXPRESSED OR IMPLIED, OR ALLEGEDLY
ARISING FROM ANY USAGE OF ANY TRADE OR ANY COURSE OF DEALING.
3.2 Third-Party Suppliers. The Providing Party hereby assigns any
assignable warranties made by third-party suppliers for the Services
supplied by it under this Agreement. The Providing Party shall
cooperate with the Receiving Party in claims made by the Receiving
Party against any third-party supplier, regardless of the warranty
rights of any Party. The Receiving Party hereby releases the Providing
Party from claims arising from a breach of such third-party
warranties.
3.3 Duty to Warn of Product Hazards. Both Parties acknowledge that they
are familiar with, and shall take all steps necessary to inform, warn
and familiarize their employees, agents, customers and contractors who
may be affected by the provision or receipt of Services of all hazards
and proper safety procedures pertaining thereto. Each Party agrees to
provide the other Party with hazardous communication information,
including MSDS sheets, on an ongoing basis.
3.4 Limitation Of Warranty Liability. In no event shall either WARREN LP
or CHEVRON PRODUCTS be liable to the other for any incidental,
consequential or punitive damages arising out of any breach of the
foregoing warranties, even if it has been advised of the possibility
of such damages, except to the extent such damages are caused by its
willful misconduct.
4.0 TERMINATION.
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4.1 Generally. This Agreement shall terminate upon termination of all of
its Exhibits. Each Exhibit other than Exhibit 2 - Dock Services shall
continue until terminated as follows:
(a) by mutual agreement;
(b) by either Party upon eighteen (18) months' written notice if such
Party intends to abandon or permanently cease all operations of
the Terminal or Warrengas, as the case may be, or any material
part thereof related to such Exhibit or the Services provided
pursuant thereto;
(c) upon thirty days' written notice by the Receiving Party; or
(d) upon eighteen (18) months' written notice by the Providing Party.
Exhibit 2 - Dock Services shall be terminated only by mutual agreement
or upon thirty days' written notice by CHEVRON PRODUCTS.
4.2 Safety Suspension. Each Party (a "Suspending Party") reserves the
right to suspend its obligations under this Agreement, without
prejudice to any other power, right or remedy it may have if the
Receiving Party conducts its operations hereunder in a manner which
the Suspending Party reasonably believes jeopardizes the safety of its
property or personnel, provided that the suspension shall be limited
to a period of time reasonably necessary for the protection of the
property and personnel of the Suspending Party.
5.0 PAYMENT.
Invoices shall be sent on or before the 16th day of each month for Services
supplied during the prior month. The payment due date for invoices
submitted under this Agreement shall be thirty (30) days after issuance of
the invoice. If a legitimate dispute exists with respect to any payment
claimed due, the claimed payment shall be paid within the time frame set
forth above pending resolution of such dispute in accordance with Section
16, and upon such resolution any disallowed portion of any such payment
shall be refunded without interest.
6.0 INDEMNITY.
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6.1 PERSONAL INJURY OR DEATH. EACH PARTY (THE "INDEMNIFYING PARTY") SHALL
DEFEND, INDEMNIFY, AND HOLD HARMLESS THE OTHER PARTY AND ITS
AFFILIATES, AND THEIR OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, FROM
AND AGAINST ANY CLAIM, LIABILITY, LOSS, DAMAGE, OR EXPENSE (INCLUDING
ATTORNEYS' FEES) ARISING OUT OF THE FOLLOWING:
(A) ANY PERSONAL INJURY OR DEATH CAUSED BY THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFYING PARTY, ITS AFFILIATES OR THEIR
EMPLOYEES OR AGENTS;
(B) EXCEPT TO THE EXTENT TO WHICH PARAGRAPH (A) APPLIES TO ANY MATTER,
ANY PERSONAL INJURY OR DEATH TO AN EMPLOYEE OF THE INDEMNIFYING PARTY
OR ITS CONTRACTORS, SUBCONTRACTORS OR VENDORS;
(C) EXCEPT TO THE EXTENT WHICH PARAGRAPH (A) OR (B) APPLIES TO ANY
MATTER, ANY PERSONAL INJURY OR DEATH TO ANY PERSON WHILE PHYSICALLY
PRESENT ON THE PREMISES OF THE INDEMNIFYING PARTY;
THE FOREGOING INDEMNITY SHALL APPLY WHETHER OR NOT AN INDEMNIFIED
PARTY WAS OR IS ALLEGED TO BE ACTIVELY, PASSIVELY, SOLELY OR
CONCURRENTLY NEGLIGENT, AND WHETHER OR NOT LIABILITY WITHOUT FAULT IS
SOUGHT TO BE IMPOSED ON ANY PARTY.
6.2 PROPERTY DAMAGE OR LOSS. THE INDEMNIFYING PARTY SHALL BE RESPONSIBLE
FOR, AND SHALL DEFEND, INDEMNIFY, AND HOLD HARMLESS THE OTHER PARTY
AND ITS AFFILIATES, AND THEIR OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS, FROM AND AGAINST ANY CLAIM, LIABILITY, LOSS, DAMAGE, OR
EXPENSE (INCLUDING ATTORNEY'S FEES) ARISING OUT OF ANY PROPERTY DAMAGE
CAUSED BY THE ACTION OF THE INDEMNIFYING PARTY, ITS AFFILIATES OR
THEIR EMPLOYEES OR AGENTS.
6.3 WARRANTY INDEMNITY. THE PROVIDING PARTY SHALL DEFEND, INDEMNIFY AND
HOLD HARMLESS THE OTHER PARTY, ITS AFFILIATES AND SUBSIDIARIES, AND
THE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS OF ANY OF THEM (EACH AN
"INDEMNITEE") FROM AND AGAINST ANY AND ALL LOSS, DAMAGE, INJURY,
LIABILITY AND CLAIMS THEREOF FOR INJURY TO OR DEATH OF ANY PERSON
RESULTING FROM SUCH PARTY'S PERFORMANCE OF OR FAILURE TO PERFORM SUCH
SERVICES IN VIOLATION OF THE WARRANTIES CONTAINED HEREIN. SUCH
INDEMNITY SHALL APPLY WHETHER OR NOT AN INDEMNITEE WAS
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OR IS CLAIMED TO BE PASSIVELY, CONCURRENTLY OR ACTIVELY NEGLIGENT, AND
REGARDLESS OF WHETHER LIABILITY WITHOUT FAULT IS IMPOSED OR SOUGHT TO
BE IMPOSED ON ONE OR MORE OF THE INDEMNITEES. THIS INDEMNITY SHALL NOT
APPLY TO THE EXTENT THAT IT IS VOID OR OTHERWISE UNENFORCEABLE UNDER
APPLICABLE LAW IN EFFECT ON OR VALIDLY RETROACTIVE TO THE DATE OF THIS
AGREEMENT, AND SHALL NOT APPLY WHERE SUCH LOSS, DAMAGE, INJURY,
LIABILITY OR CLAIM IS THE RESULT OF THE SOLE NEGLIGENCE OR WILLFUL
MISCONDUCT OF AN INDEMNITEE.
7.0 IMPROVEMENTS.
7.1 Regulatory or Operating Improvements. Both Parties recognize that in
order to meet future regulatory or operational requirements, capital
or maintenance improvements to the systems used to provide Services
hereunder may be necessary. Such improvements could require future
research and development costs and capital expenditures. In the event
that regulatory or operational requirements require capital or
maintenance improvements to the systems in order to provide Services
hereunder, then the Parties shall negotiate in good faith to develop
an agreement to allocate, if appropriate, such costs between the
Parties on a fair and equitable basis; provided, however, that the
Party receiving Services shall be entitled to elect not to receive
such Services in its sole discretion rather than to contribute to such
capital or maintenance improvements.
7.2 Discretionary Improvements. Both Parties further recognize that either
Party may desire similar improvements for other reasons such as its
anticipated needs. The other Party agrees to consider any such
proposal, but is under no legal or equitable obligation with respect
thereto.
8.0 REGULATION.
It is not the intent of the Parties to enter into an Agreement that will
subject a Providing Party to regulation under state or federal law as a
public utility (i.e., obligated by law to provide services or products to
any third party other than Receiving Party and its Affiliates). In the
event that either (i) there is any modification (or change in government
interpretation) of any applicable law or regulation, or (ii) any notice or
proceeding is sent or commenced by any government authority such that this
Agreement or any Exhibit to this Agreement subjects or is alleged by such
authority to subject Providing Party to public utility
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regulation, then WARREN LP and CHEVRON PRODUCTS shall restructure the
provision of Services under the applicable Exhibit, through negotiations
conducted in good faith, in a manner that will not subject Providing Party
to such regulation. Pending such restructuring, nothing in this Agreement
shall require Providing Party to become subject to such public utility
regulation, and Providing Party may suspend provision of the affected
Services if and to the extent necessary to not be subject to such
regulation. In the event that Providing Party is subjected to fines or
costs or otherwise incurs costs as a result of Providing Party's being
subject to such regulation, Providing Party shall promptly notify Receiving
Party thereof after Providing Party has received notice of any prospective
or actual fine and prior to paying any fine or cost and provide Receiving
Party an opportunity to verify the requirement for the applicable amount.
One-half of the amount of all such fines or costs incurred by Providing
Party shall be promptly reimbursed to Providing Party by Receiving Party.
9.0 CONFIDENTIALITY.
During the performance of this Agreement, each Party ("Recipient") may gain
access or possession of information belonging to the other Party ("Owner")
that is confidential (a "Disclosure"). Recipient shall use such information
only for the purpose disclosed and shall use its commercially reasonable
efforts to avoid other use or disclosure of such information unless
required by law or governmental agency (in which case Recipient shall
provide Owner with as much advance notice as possible of the legal or
governmental requirement for disclosure, and thereafter reasonably
cooperate with Owner's attempts to avoid or minimize the required
disclosure or to maintain the confidential nature of the information;
provided, however, that all costs associated with such efforts shall be
borne by Owner) or consented to by Owner, which consent shall not be
unreasonably withheld. Confidential information shall include business,
technical, personnel and other information designated as confidential, but
shall not include information that is or becomes publicly known without
fault of the Recipient, was known to Recipient and recorded in a writing
prior to Disclosure, was independently developed by the Recipient, or was
received by Recipient prior to its Disclosure. All confidential information
shall be returned to its Owner upon request.
10.0 TAXES.
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Any sales, use, transfer or similar taxes, now or hereafter imposed,
levied or assessed by any governmental authority directly upon the
provision of the Services shall, if collectible or payable by the
Providing Party, be paid by the Receiving Party on demand by the Providing
Party. If the Receiving Party claims exemption from any of the aforesaid
taxes, then it shall furnish the Providing Party with a properly completed
exemption certificate. On items which are to be resold, the Receiving
Party shall furnish the Providing Party with a properly executed resale
certificate. If the Receiving Party holds a Texas direct payment permit,
it shall issue to the Providing Party a properly completed direct payment
exemption certificate and thereafter hold harmless and indemnify the
Providing Party for any sales or use taxes assessed against the Providing
Party by any taxing authority in respect to any taxable sales, including
the amounts of any penalties, interest and reasonable attorneys' fees.
Notwithstanding the foregoing, this Section shall not apply to income,
franchise or similar taxes levied on or measured by a Party's net income.
11.0 FORCE MAJEURE.
11.1 Neither Party shall be in breach of its obligations hereunder
(except for the obligation to pay money due or alleged to be due
hereunder) to the extent that performance is prevented or delayed as
a result of any cause beyond its reasonable control, including,
without limitation: (i) labor disturbances, whether or not involving
the employees of the Party concerned or otherwise, and whether or
not the disturbance could be settled by acceding to the demands of a
labor group; (ii) compliance with a request or order of a person
acting or purporting to act on behalf of any government or
government department or agency (including but not limited to EPA or
OSHA); (iii) shortage in raw material, transportation, power, or
manufacturing capacity, or (iv) unscheduled downtime due to
unexpected events, such as equipment failure; provided, however,
that the suspension of performance shall be of no greater scope and
of no longer duration than is required, that the non-performing
Party shall give the other Party notice of the particulars of the
contingency as soon as possible, confirmed in writing within five
(5) business days of its occurrence, and that the non-performing
Party shall use commercially reasonable efforts to reduce the scope
and duration of the contingency or to mitigate its effects.
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11.2 Whenever performance is so affected by such a contingency,
performance shall be reduced in a manner which fairly apportions the
consequences of the contingency among all customers (including
affiliates). Providing Party shall not be required to make purchases
from third parties in order to comply with this Section, but may do
so in its sole discretion.
11.3 Performance will be excused as provided above even though the
occurrence of the contingency in question may have been foreseen or
foreseeable at the time of contracting or subsequently become
foreseeable, except to the extent that, having foreseen the
occurrence of the contingency, a Party fails to take action to avoid
or minimize the scope or effect of the event.
11.4 Performance suspended by the provisions of this Section need not be
made up later.
11.5 The provision of this Section shall apply to any casualty loss or
other accidental destruction to its facilities. Neither Party shall
be obligated to rebuild following casualty loss or other accidental
destruction to its facilities.
12.0 NOTICES.
Any notice required or permitted hereunder shall be deemed to be given if
delivered personally; five days after depositing the notice in certified
mail, postage prepaid; or telecopied with receipt acknowledged and with a
confirming copy sent by a nationally recognized overnight commercial
courier to the following addresses:
The address for CHEVRON PRODUCTS shall be:
12523 American Petroleum Road
P.O. Box 505
Galena Park, TX 77547
(713) 453-6618 (facsimile number)
Attn: Terminal Manager
The address for WARREN LP shall be:
[WARREN LP]
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----------------------------------------------------
----------------------------------------------------
---------------------------------- (facsimile number)
Attn: ---------------------------------------------
Either Party may change its notice address by notifying the other in writing of
such change, which shall be effective fifteen (15) days after the giving of such
notice.
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13.0 CONFLICT OF INTEREST.
Neither Party shall give any director, employee or representative of the
other Party any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement, or enter into
any other business arrangement with any director, employee or
representative of the other, without prior written notification to the
other Party. Any representative(s) authorized by either Party may cause an
audit of any and all records of the other Party as necessary and proper to
verify that there has been compliance with this Section.
14.0 RIGHT TO AUDIT.
Each Receiving Party may from time to time, but not more often than
annually, make an audit of all records of the other and its subcontractors
and vendors, to the extent the Providing Party has such right and can
assign or transfer it, in connection with all costs upon which prices
under this Agreement are based. Such audit may also cover the Party's
procedures and controls with respect to such costs. Upon completion of
this audit, any compensation due hereunder as shown by the audit shall be
paid, except that the Providing Party may contest the audit findings by
providing written notice to the Receiving Party. In such case, the dispute
shall be resolved in accordance with Section 16.0 of this Agreement. Any
amount by which the total payment exceeds the amount due as shown by the
audit shall be returned. Any amount not audited within two years from the
date payment was made shall be deemed correct and accepted and shall not
be subject to further audit or refund obligations.
15.0 ASSIGNMENT.
Neither Party shall voluntarily assign its rights nor delegate its duties
under this Agreement, nor any part of such rights or duties, whether
directly or indirectly, without the prior written consent of the other
Party except as follows:
(a) either Party shall have the right to assign its rights under this
Agreement to an Affiliate without the consent of the other Party.
(b) CHEVRON PRODUCTS' rights and obligations under this Agreement shall
automatically and without further act be assigned to and assumed by
any subsequent purchaser of the Terminal without the consent of
WARREN LP.
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(c) WARREN LP's rights and obligations under this Agreement shall
automatically and without further act be assigned to and assumed by
any subsequent purchaser of Warrengas without the consent of CHEVRON
PRODUCTS.
An assignment of rights and delegation of obligations hereunder shall
become effective upon delivery to the other Party of a properly executed
assignment and assumption agreement evidencing the assignment and
delegation.
16.0 DISPUTES.
In the event a dispute arises with respect to this Agreement, the parties
shall endeavor in good faith to resolve the dispute. Such endeavors shall
include referral of the dispute to the Authorized Representatives and, if
not resolved there, to an appropriate vice president of each Party. In
addition, each Party agrees to consider the use of mediation, arbitration
and other alternative dispute resolution methods. Any dispute or claim
arising out of or relating to this Agreement (including without limitation
claims for breach or violation of this Agreement) which has not otherwise
been resolved shall be referred to and finally resolved by binding
arbitration in Houston, Texas. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association and by a single arbitrator. No arbitration award
shall provide for the award of punitive damages. Any arbitration award
shall be subject to the limitations of liability set forth in this
Agreement. Judgment on any arbitration award may be entered in any court
of appropriate jurisdiction.
17.0 INTEGRATION, AMENDMENTS AND WAIVER.
This Agreement integrates the entire understanding between the parties
with respect to the subject matter covered. It supersedes all prior and
contemporaneous understandings, drafts, discussions or statements, whether
oral or in writing, expressed or implied, dealing with the same subject
matter. It may not be amended or modified in any manner including, without
limitation, a course of performance or course of dealing between the
Parties, except by a written agreement signed by both Parties which
expressly amends this Agreement. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided.
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18.0 INDEPENDENT RELATIONSHIP.
Nothing contained in this Agreement shall be construed to create an
association, trust, partnership or joint venture or impose a trust or
partnership duty, obligation or liability on or with regard to either
Party.
19.0 GOVERNING LAW.
Any questions concerning the interpretation and enforcement of this
Agreement shall be governed by the laws of the State of Texas, without
regard for provisions concerning choice of law.
20.0 UNENFORCEABILITY.
If any section or provision of this Agreement or any exhibit shall be
determined to be invalid by applicable law, then for such period of time
that same is invalid, it shall be deemed to be deleted from this Agreement
and rewritten as a valid and enforceable provision that comes as close as
possible to the meaning of the invalid or unenforceable provision. The
remaining portions of this Agreement shall remain in full force and
effect.
21.0 THIRD-PARTY BENEFICIARIES.
There are no intended third party beneficiaries to the Agreement and
nothing in this Agreement shall entitle any person other than CHEVRON
PRODUCTS or WARREN LP and their respective successors and assigns
permitted hereby to any claim, cause of action, remedy or right of any
kind.
WARREN LP CHEVRON PRODUCTS COMPANY, A DIVISION
OF CHEVRON U.S.A. INC.
By: ----------------------------- By: --------------------------------
Title: -------------------------- Title: -----------------------------
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EXHIBIT 1
EMERGENCY RESPONSE SERVICES
1.0 DEFINITIONS.
1.1 "Emergency Response Equipment" shall mean the Fire Water System,
qualified emergency response personnel, encapsulated suits, hazardous
release equipment, oil spill containment booms and deployment equipment,
extinguishers, hose carts, SCBA equipment, and other equipment necessary or
desirable to respond to emergencies occurring at the Terminal.
1.2 "Fire Water" shall mean the raw water that has been pumped by
equipment maintained and operated by WARREN LP from the Houston Ship
Channel into the Fire Water System to a nominal pressure of 150 psig.
1.3 "Fire Water System" means an underground piping and distribution
system, hydrants, fire monitors, tank deluge system, water cannons, the
supervisory and control systems, the six Fire Water pumps, and related
equipment for the purpose of delivering Fire Water throughout the Terminal.
1.4 "Hydrocarbon Leak Detection System" means a system maintained by
WARREN LP to detect the release of hydrocarbon in the CHEVRON PRODUCTS tank
field, including the central operations computer and applicable software.
1.5 "Joint Emergency Response Plan" shall mean the plan prepared by
CHEVRON PRODUCTS and WARREN LP and approved by the United States Coast
Guard and the Texas General Land Office, for the purpose of defining and
describing incident response operations associated with spills of CHEVRON
PRODUCTS product which could enter the water at Warrengas or the Terminal.
2.0 SCOPE OF SERVICES. WARREN LP shall:
(a) provide all Services reasonably necessary to respond to emergencies at
the Terminal as required under the Joint Emergency Response Plan;
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(b) maintain and operate the Emergency Response Equipment in accordance
with the warranty set forth in the body of this Agreement;
(c) supply CHEVRON PRODUCTS with Fire Water through the Fire Water System
for fire control and other purposes;
(d) maintain those portions of the Fire Water System not on the Terminal
Property and conduct weekly performance tests of the entire Fire Water
System;
(e) inspect, maintain, test, repair and continuously monitor the
Hydrocarbon Leak Detection System;
(f) maintain all Emergency Response Equipment in accordance with the
manufacturer's service schedule and repair it in accordance with
recommended practices; and
(g) maintain membership in CCA and CIMA organizations to secure and provide
assistance during emergency response incidents involving the Terminal.
3.0 Emergency Response Organization.
WARREN LP shall provide, or cause to be provided, an organization of
qualified emergency response personnel. CHEVRON PRODUCTS shall have
representatives on the response organization. The response organization
shall:
(a) provide or cause to be provided all Services reasonably necessary to
respond to emergencies at the Terminal as required under the Joint
Emergency Response Plan;
(b) respond to alarms and other emergency calls in accordance with the
procedures set forth in the Joint Emergency Response Plan;
(c) respond to medical emergencies, hazardous releases and rescue
situations as detailed in the Joint Emergency Response Plan;
(d) conduct regularly scheduled emergency drills; and
(e) maintain membership in the CCA and CIMA organizations and regularly
participate in incident preparation drills/planning exercises.
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CHEVRON PRODUCTS shall participate in all emergency response drills related
to the Terminal. CHEVRON PRODUCTS' participation in any other emergency
response drill or organization shall be voluntary. Emergency response
personnel shall be allowed entry into both facilities.
4.0 FEES.
CHEVRON PRODUCTS shall pay WARREN LP the total sum of $17,700 a year for
the provision of Emergency Response Services, subject to Sections 7.1 and
7.2 of this Agreement relating to improvement. $2,700.00 of this amount
represents CHEVRON PRODUCTS' portion of membership dues in CCA and CIMA.
CHEVRON PRODUCTS will continue to bear twenty percent of the cost of
membership in such organizations. Therefore, this portion of the fee shall
increase in conjunction with the increase of membership dues in such
organizations rather than in accordance with the procedures contained in
Section 2.1 of this Agreement. In the event WARREN LP responds to an
actual emergency for CHEVRON PRODUCTS, all direct costs incurred by WARREN
LP for equipment, supplies, and contract labor related to such response
shall be paid by CHEVRON PRODUCTS. Any direct costs incurred by WARREN LP
to repair the Hydrocarbon Leak Detection System on the Terminal property
shall be borne by CHEVRON PRODUCTS.
5.0 ADDITIONAL TERMS AND CONDITIONS.
Each Party (the "Releasing Party") hereby releases the other Party from any
liability whatsoever, arising in connection with the other Party's
performance of emergency response services hereunder in response to alarms
and other emergency calls to premises or facilities operating primarily for
the benefit of the Releasing Party; provided, however, such release shall
not apply to the willful misconduct of the other Party.
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EXHIBIT 2
DOCK SERVICES
1.0 SCOPE OF SERVICES.
WARREN LP shall operate, maintain and provide qualified personnel for the
dock facilities at Galena Park and coordinate the scheduling at docks 2 and
3 for all CHEVRON PRODUCTS' offloading requirements, including but not
limited to performing the following:
(a) The dock facilities shall remain open for the offloading of barges at
all times at CHEVRON PRODUCTS' request, upon CHEVRON PRODUCTS' adherence to
the Scheduling Procedure contained in Section 2.0 of this Exhibit.
(b) WARREN LP shall maintain a spill prevention control and containment
plan and shall coordinate with CHEVRON PRODUCTS with respect to the
implementation of the Joint Emergency Response Plan.
(c) WARREN LP shall coordinate vessel activities of docks 2 and 3 to
include coordinating the arrival of barges, arranging berthing, receiving
barges for discharge, connecting unloading systems, furnishing qualified
dock personnel, participating in pre-transfer conferences, monitoring dock
facilities during discharge, and releasing barges.
(d) CHEVRON PRODUCTS shall be responsible for hiring independent
inspectors. WARREN LP shall notify Chevron and Chevron's inspectors of
barge arrival.
(e) WARREN LP shall maintain the #2 and #3 dock facilities in a condition
suitable to meet CHEVRON PRODUCTS' shipping requirements for the
performance of this Agreement.
(f) WARREN LP shall maintain two CHEVRON PRODUCTS-owned active product
transfer pipelines connecting docks two and three to the Terminal for Avgas
and Motor fuels, and associated valving. WARREN LP shall obtain written
approval from CHEVRON PRODUCTS prior to performing repairs to such
pipelines for which CHEVRON PRODUCTS will be billed. WARREN LP shall notify
CHEVRON PRODUCTS before testing or performing maintenance on such
pipelines. WARREN LP shall perform annual USCG hydrotesting and VOC
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monitoring. WARREN LP shall maintain applicable documentation and provide
copies to CHEVRON PRODUCTS upon request.
WARREN LP shall have no obligation to provide CHEVRON PRODUCTS with barges
under this Agreement. All CHEVRON PRODUCTS barges offloaded at the docks
shall be in compliance with all applicable rules and regulations.
2.0 SCHEDULING PROCEDURE.
CHEVRON PRODUCTS' Logistics and Trading Group ("L and T Group") will
provide notice to the Logistics Specialist at Warrengas as far in advance
as possible, but not less than 48 hours, of a forty-eight (48) hour window
for the arrival of each CHEVRON PRODUCTS barge at the WARREN LP docks (the
"Preliminary Arrival Window"). No longer than four hours after receipt of
CHEVRON PRODUCTS' Preliminary Arrival Window nomination, WARREN LP shall
advise CHEVRON PRODUCTS of the availability of dock space in the
Preliminary Arrival Window requested by CHEVRON PRODUCTS. If dock space is
unavailable in the Preliminary Arrival Window, WARREN LP shall notify
CHEVRON PRODUCTS of the first available arrival time. However, it is the
intent of the Parties that all possible actions should be taken to minimize
CHEVRON PRODUCTS demurrage assuming CHEVRON PRODUCTS has provided WARREN LP
with the requisite forty-eight (48) hour advance notice. CHEVRON PRODUCTS
shall continue to update WARREN LP regarding the progress of the CHEVRON
PRODUCTS vessel and any information indicating that the vessel will arrive
outside of the Preliminary Arrival Window as soon as CHEVRON PRODUCTS
obtains such information. Within twenty-four hours prior to the beginning
of the Preliminary Arrival Window, CHEVRON PRODUCTS' L and T Group shall
coordinate with WARREN LP to establish a Final Arrival Time.
3.0 DEMURRAGE. Each Party shall coordinate with the other Party to minimize
demurrage to the extent possible. WARREN LP will make all reasonable
efforts to accommodate arriving Chevron vessels within the Preliminary
Arrival Window requested by Chevron. Once a Final Arrival Time has been
mutually established, demurrage to Chevron resulting from unavailability of
dock space at the Final Arrival Time or within four hours thereafter shall
be for WARREN LP's account. Demurrage charges on the CHEVRON PRODUCTS
vessel resulting from the delayed arrival of a CHEVRON PRODUCTS vessel by
more than four hours shall be for CHEVRON PRODUCTS' account. WARREN LP
shall make reasonable efforts to minimize demurrage charges for CHEVRON
PRODUCTS barges arriving outside of the Final Arrival Time window, but
shall not have any demurrage exposure to
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CHEVRON PRODUCTS in such instances. WARREN LP shall not be responsible to
CHEVRON PRODUCTS for demurrage due to delays related to operations problems
with respect to product pumping or shore tankage and receipt of product.
4.0 FEES. CHEVRON PRODUCTS shall compensate WARREN LP One-half cent per gallon
of product unloaded for performing the Dock Services based on the shore
tank receiving gauge. CHEVRON PRODUCTS shall reimburse WARREN LP for direct
costs incurred by WARREN LP for the repair and maintenance of CHEVRON
PRODUCTS' dock product transfer pipelines.
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EXHIBIT 3
SECURITY SERVICES
1.0 SCOPE OF SERVICES. WARREN LP shall provide security services to protect
Terminal personnel and property. This shall include after-hours monitoring
of the facility by WARREN LP personnel, access screening per CHEVRON
PRODUCTS instruction, monitoring and controlling the traffic flow into and
out of the Terminal, notifying CHEVRON PRODUCTS of any emergencies and
providing support in such situations, serving as a staging area for
emergency response equipment, and closely controlling access to the
Terminal.
2.0 FEES.
CHEVRON PRODUCTS shall compensate WARREN LP a total of $20,000 a year for
the provision of Security Services.
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EXHIBIT 4
COMMUNICATIONS SERVICES
1.0 DEFINITION.
"Radio System" shall mean the radio antenna, computers, repeater stations,
mobile units, and base stations (but not including handsets) used by WARREN
LP and CHEVRON PRODUCTS for communication within and between the Terminal
and Warrengas and used in connection with the WARREN LP 800 Mhz FCC
license.
2.0 SCOPE OF SERVICES.
WARREN LP shall maintain and operate the Radio System and the applicable
FCC license, and shall provide service to CHEVRON PRODUCTS. CHEVRON
PRODUCTS shall procure the radios. CHEVRON PRODUCTS currently uses 9
radios. WARREN LP shall allow CHEVRON PRODUCTS to increase its number of
radios if the Radio System can accommodate the increase. CHEVRON PRODUCTS'
use of WARREN LP's Radio System shall be limited to the business purposes
of CHEVRON PRODUCTS and its Affiliates.
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EXHIBIT 5
FLARE SYSTEM SERVICES
1.0 DEFINITIONS.
1.1 "High Pressure Flare System" shall mean the Warrengas flare (North)
and associated system including the knockout tank.
1.2 "Low Pressure Flare System" shall mean the Terminal flare (South) and
associated system including the knockout tank and the flare manifold for
tanks W-17 through W-21.
2.0 SCOPE OF SERVICES. CHEVRON PRODUCTS shall operate and maintain for the
benefit of both parties the Low Pressure Flare System.
WARREN LP shall operate and maintain for the benefit of both parties the
High Pressure Flare System.
WARREN LP shall provide electricity and natural gas to both the High
Pressure Flare System and the Low Pressure Flare System free of charge.
3.0 OPERATING RULES. The parties shall adhere to the Operating Procedure
entitled "Switching to Chevron Flare System." Neither Party shall perform
work on either system without the approval of the other Party. The Party
operating each respective system shall obtain and maintain any and all
permits required by any governmental authority relating to such system.
Liability for repair and replacement of the Flare Systems shall be governed
by Sections 3.0 and 6.0 of this Agreement.
25
<PAGE>
EXHIBIT 6
POTABLE WATER SERVICES
1.0 DEFINITIONS. The terms used in this exhibit shall have the following
meanings:
1.1 "Potable Water" shall mean drinking water purchased from the City of
Houston and supplied to CHEVRON PRODUCTS at a minimum of 40 PSIG.
1.2 "PSIG" shall mean pounds per square inch gauge.
1.3 "Potable Water Facility" shall mean facilities used to deliver Potable
Water to CHEVRON PRODUCTS from the City of Houston water main.
2.0 SCOPE OF SERVICES.
2.1 WARREN LP agrees to supply the Terminal's requirements of Potable Water
for the term of this agreement.
2.2 WARREN LP shall be responsible for the operation and maintenance of the
entire Potable Water Facility.
3.0 METERING.
CHEVRON PRODUCTS' Potable Water usage shall be measured by a meter located
on the 3 inch water line by which Potable Water is provided to CHEVRON
PRODUCTS.
WARREN LP shall inspect, test, and calibrate such meter at least once per
year, as agreed by the parties, and any inaccuracy disclosed by such test
shall be promptly corrected. Either Party shall have the right to have the
meter tested at any time at its expense. The Authorized Representative of
each Party shall be afforded a reasonable opportunity to be present at all
meter inspections and tests. If at any time a meter device is found
inaccurate by more than 1%, an adjustment shall be made to compensate for
the effect of such inaccuracy on any unpaid invoice.
If at any time the meter should fail to register or its registration should
be so erratic as to be meaningless, the quantities such meter was intended
to record shall be determined
26
<PAGE>
based on the previous representative monthly average usage per day.
4.0 RATES.
WARREN LP shall read the CHEVRON PRODUCTS meter on a monthly basis and
shall bill CHEVRON PRODUCTS for the amount of water used by CHEVRON
PRODUCTS at the same rate that WARREN LP is billed by the City of Houston.
27
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EXHIBIT 7
NATURAL GAS SERVICES
1.0 DEFINITIONS. The terms used in this exhibit shall have the following
meanings:
1.1 "Natural Gas" shall mean natural gas supplied by WARREN LP to CHEVRON
PRODUCTS to heat the shop and office facilities at the Terminal.
1.2 "Natural Gas Facility" shall mean facilities used to distribute Natural
Gas to the Terminal.
2.0 SCOPE OF SERVICES.
2.1 WARREN LP agrees to supply the Terminal's requirements of Natural Gas
for the term of this agreement.
2.2 WARREN LP shall be responsible for the operation and maintenance of the
entire Natural Gas Facility.
3.0 METERING.
CHEVRON PRODUCTS' Natural Gas usage shall be measured by a meter located on
the one-inch supply line by which WARREN LP supplies gas to CHEVRON
PRODUCTS. WARREN LP shall inspect, test, and calibrate such meter at least
once per year, as agreed by the parties, and any inaccuracy disclosed by
such test shall be promptly corrected. Either Party shall have the right to
have the meter tested at any time at its expense. The Authorized
Representative of each Party shall be afforded a reasonable opportunity to
be present at all meter inspections and tests. If at any time a meter
device is found inaccurate by more than 1%, an adjustment shall be made to
compensate for the effect of such inaccuracy on any unpaid invoice.
If at any time the meter should fail to register or its registration should
be so erratic as to be meaningless, the quantities such meter was intended
to record shall be determined based on the previous representative monthly
average usage per day.
4.0 RATES.
28
<PAGE>
WARREN LP shall read the CHEVRON PRODUCTS meter on a monthly basis and
shall bill CHEVRON PRODUCTS for the amount of Natural Gas used by CHEVRON
PRODUCTS at WARREN LP's cost .
29
<PAGE>
EXHIBIT 8
ELECTRIC SERVICES
1.0 DEFINITIONS. The terms used in this exhibit shall have the following
meanings:
1.1 "Electric Facility" shall mean facilities used to transmit or
distribute electricity to the Terminal.
1.2 "Electric Service" shall mean the supply of Energy by WARREN LP to
CHEVRON PRODUCTS at the Terminal under this Agreement.
1.3 "Energy" shall mean electric energy expressed in kilowatt-hours
delivered by WARREN LP to CHEVRON PRODUCTS.
1.4 "Forced Outage" shall mean any outage that fully or partially curtails
the electric output of the Electric Facility, other than an outage caused
by a Force Majeure event or scheduled maintenance.
1.5 "HLP" shall mean Houston Lighting and Power.
1.6 "KW" shall mean one kilowatt (1000 watts) of electricity.
1.7 "KWH" shall mean one kilowatt-hour of electricity.
1.8 "Metering Facility" shall mean that meter located at the power
distribution building, and associated equipment necessary for measuring
Energy deliveries by WARREN LP to CHEVRON PRODUCTS at the Terminal and for
determining CHEVRON PRODUCTS' payments to WARREN LP.
2.0 SCOPE OF SERVICES.
2.1 WARREN LP shall supply to CHEVRON PRODUCTS and CHEVRON PRODUCTS shall
take and pay for the full electrical requirements of the Terminal for the
term of this Agreement.
2.2 WARREN LP shall be responsible for the operation and maintenance of the
Electric Facility outside of the Terminal Property.
30
<PAGE>
2.3 WARREN LP shall provide Energy free of charge to CHEVRON PRODUCTS for
CHEVRON PRODUCTS' operation of its tank farm lighting, security lighting,
cathodic protection, sewage plant, flare, and lift pump station.
3.0 METERING. WARREN LP shall inspect, test, and calibrate the Metering
Facilities at least once per year, as agreed by the parties, and any
inaccuracy disclosed by such test shall be promptly corrected. Either Party
shall have the right to have the meter tested at any time at its expense.
The Authorized Representative of each Party shall be afforded a reasonable
opportunity to be present at all meter inspections and tests. If at any
time a meter device is found inaccurate by more than 1%, an adjustment
shall be made to compensate for the effect of such inaccuracy on any unpaid
invoice.
If at any time the meter should fail to register or its registration should
be so erratic as to be meaningless, the quantities such meter was intended
to record shall be determined based on the previous representative monthly
average usage per day.
4.0 FORCED OUTAGES. In the event of a Forced Outage, WARREN LP shall make all
reasonable efforts to restore the full Electric Service to any affected
area as soon as reasonably possible.
5.0 Rates. CHEVRON PRODUCTS shall reimburse WARREN LP for the total KWH of
Energy measured to CHEVRON PRODUCTS through the CHEVRON PRODUCTS meter at
the rate charged to WARREN LP by HLP for such Energy. CHEVRON PRODUCTS
shall also reimburse WARREN LP for a percentage of the allocable facility
or base charges based on actual consumption.
31
<PAGE>
EXHIBIT 9
MOWING AND WEED CONTROL SERVICES
1.0 Scope of Services. WARREN LP shall provide all services necessary to
maintain the grounds of the Terminal including, without limitation, mowing
the grass on a weekly basis or as seasonably required and performing weed
control as seasonably required. CHEVRON PRODUCTS shall be responsible for
landscaping in the vicinity of the CHEVRON PRODUCTS office.
2.0 Fees. CHEVRON PRODUCTS shall compensate WARREN LP $13,000 per year.
32
<PAGE>
EXHIBIT 10
ROAD REPAIR SERVICES
1.0 Scope of Services. WARREN LP shall maintain and repair that portion of
American Petroleum Road between Federal Road and the entrance to the
Terminal.
2.0 Fees. CHEVRON PRODUCTS shall reimburse WARREN LP for twenty percent of
the direct repair and maintenance costs incurred by WARREN LP.
33
<PAGE>
EXHIBIT 11
FENCING AND SECURITY LIGHTS SERVICES
1.0 Scope of Services. WARREN LP shall maintain and promptly repair all
fencing throughout and surrounding Warrengas and the Terminal. WARREN LP
shall maintain and repair all security lighting throughout the property
other than that located at the Terminal.
2.0 Fees. CHEVRON PRODUCTS shall compensate WARREN LP $3,000 per year.
34
<PAGE>
EXHIBIT 12
DESCRIPTION OF WARRENGAS
35
<PAGE>
EXHIBIT 13
DESCRIPTION OF THE TERMINAL
36
<PAGE>
Exhibit 10.22
CONFIRMATION
COMMODITY SWAP
CASH SETTLED
DATE: SEPTEMBER 1, 1996
TO: CHEVRON U.S.A. INC. ("CHEVRON")
ATTN: MIDSTREAM BUSINESS UNIT ALLIANCE MANAGER (CPDN)
FROM: NATURAL GAS CLEARINGHOUSE ("NGC")
The purpose of this document is to confirm the terms and conditions of the
Transaction entered into by NGC and Chevron on the trade date specified below.
This document constitutes a "Confirmation" as defined in the Master Agreement
specified below. This Confirmation supplements, forms a part of and is subject
to the Master Agreement dated as of February 1, 1993 executed by NGC and
Chevron. The terms and conditions of the Master Agreement govern this
Confirmation except as specifically provided below.
The terms and conditions of the Transaction relating to this Confirmation are as
follows:
COMMODITY: NATURAL GAS
NOTIONAL QUANTITY PER EXCEPT AS PROVIDED IN PARAGRAPH 4.
CALCULATION PERIOD: OF "OTHER CONDITIONS" BELOW, THE MONTHLY
QUANTITY OF NATURAL GAS DELIVERED BY CHEVRON TO
LONE STAR GAS COMPANY ("LONE STAR") FOR
CHEVRON'S ACCOUNT PURSUANT TO THAT CERTAIN GAS
PURCHASE AGREEMENT DATED JULY 27 1955, AS
AMENDED, BETWEEN CHEVRON'S PREDECESSOR, STANDARD
OIL COMPANY OF TEXAS, AS SELLER, AND LONE STAR,
AS BUYER (THE "LONE STAR CONTRACT"), LESS THIRTY
SIX PERCENT (36%) OF THE MONTHLY QUANTITY OF
NATURAL GAS PRODUCED FROM AND ATTRIBUTABLE TO
CHEVRON'S OWNERSHIP INTEREST IN WELLS LOCATED ON
THE ACREAGE DEDICATED TO THE LONE STAR CONTRACT
("CHEVRON'S OWN PRODUCTION") AND DELIVERED BY
CHEVRON TO LONE STAR PURSUANT TO THE LONE STAR
CONTRACT. THE NOTIONAL QUANTITY SHALL INCLUDE
SIXTY FOUR PERCENT (64%) OF THE NATURAL GAS
DELIVERED BY CHEVRON
1
<PAGE>
PURSUANT TO THE LONE STAR CONTRACT FROM
CHEVRON'S OWN PRODUCTION AND ONE HUNDRED PERCENT
(100%) OF TH NATURAL GAS PURCHASED BY CHEVRON
FROM THIRD PARTIES ("THIRD PARTY PRODUCTION")
AND DELIVERED TO LONE STAR PURSUANT TO THE LONE
STAR CONTRACT, BUT SHALL NOT INCLUDE ANY
QUANTITIES OF NATURAL GAS DELIVERED T LONE STAR
UNDER THE LONE STAR CONTRACT FOR WHICH CHEVRON
DOES NOT RECEIVE PAYMENT, INCLUDING, BUT NOT
LIMITED TO, QUANTITIES DELIVERED UNDER THE LONE
STAR CONTRACT BY PARTIES WHICH PRIOR TO MAY 17,
1996, ACQUIRED FROM CHEVRON PROPERTIES OR
INTERESTS IN PROPERTIES SUBJECT TO THE LONE STAR
CONTRACT.
TRADE DATE: SEPTEMBER 1, 1996
EFFECTIVE DATE: SEPTEMBER 1, 1996
TERMINATION DATE: FIRST DAY OF THE MONTH FOLLOWING TERMINATION OF
LONE STAR CONTRACT
CALCULATION PERIOD(S): EACH CALENDAR MONTH DURING THE TERM OF THE LONE
STAR CONTRACT
PAYMENT DATE: ON OR BEFORE THE LAST DAY OF THE MONTH
FOLLOWING PHYSICAL DELIVERY OF NATURAL GAS UNDER
THE LONE STAR CONTRACT
FIXED AMOUNT DETAILS:
FIXED PRICE PAYER: CHEVRON
FIXED AMOUNT: THE PRICE PAID BY LONE STAR TO CHEVRON DURING
THE CALCULATION PERIOD FOR NATURAL GAS DELIVERED
PURSUANT TO THE LONE STAR CONTRACT. A COPY OF
THE PRICING PROVISION OF THE LONE STAR CONTRACT
IS ATTACHED HERETO AS EXHIBIT "A".
FLOATING AMOUNT DETAILS:
FLOATING PRICE PAYER: NGC
FLOATING AMOUNT: THE INDEX PRICE REPORTED IN THE FIRST ISSUE OF
INSIDE F.E.R.C.'S GAS MARKET REPORT PUBLISHED
DURING THE CALCULATION PERIOD IN THE TABLE
TITLED "DELIVERED SPOT-GAS PRICES" UNDER THE
HEADING "HOUSTON SHIP CHANNEL/BEAUMONT, TEXAS -
INDEX (LARGE PACKAGES ONLY) MINUS $0.15 PER
MMBTU.
2
<PAGE>
OTHER CONDITIONS: 1. IF DURING ANY CALCULATION PERIOD CHEVRON
DELIVERS NATURAL GAS TO LONE STAR PURSUANT TO
THE LONE STAR CONTRACT, BUT LONE STAR FAILS TO
PAY CHEVRON FOR ALL OF SUCH NATURAL GAS, THE
NOTIONAL QUANTITY APPLICABLE TO THAT CALCULATION
PERIOD SHALL BE REDUCED BY A QUANTITY EQUAL TO
THE QUANTITY DELIVERED BY CHEVRON TO LONE STAR
BUT NOT PAID FOR BY LONE STAR. IF LONE STAR
SUBSEQUENTLY PAYS FOR SUCH NATURAL GAS, THE
NOTIONAL QUANTITY APPLICABLE TO THE CALCULATION
PERIOD DURING WHICH THE NATURAL GAS WAS
DELIVERED BY CHEVRON TO LONE STAR SHALL BE
RETROACTIVELY INCREASED TO REFLECT THE
QUANTITIES PAID FOR, AND APPROPRIATE ADJUSTMENTS
IN PAYMENTS DUE UNDER THIS TRANSACTION SHALL BE
MADE WITHIN TEN DAYS. CHEVRON AGREES TO
DILIGENTLY PURSUE PAYMENT IN SUCH INSTANCES.
2. IF DURING ANY CALCULATION PERIOD CHEVRON
DELIVERS NATURAL GAS TO LONE STAR PURSUANT TO
THE LONE STAR CONTRACT AND LONE STAR PAYS
CHEVRON FOR SUCH NATURAL GAS AT A PRICE LOWER
THAN THAT PROVIDED FOR IN THE LONE STAR
CONTRACT, THE FIXED AMOUNT APPLICABLE TO THAT
CALCULATION PERIOD SHALL BE THE AMOUNT ACTUALLY
PAID BY LONE STAR. IF LONE STAR SUBSEQUENTLY
PAYS THE ADDITIONAL AMOUNT DUE FOR SUCH NATURAL
GAS, THE FIXED AMOUNT APPLICABLE TO THE
CALCULATION PERIOD DURING WHICH THE NATURAL GAS
WAS DELIVERED BY CHEVRON TO LONE STAR SHALL BE
RETROACTIVELY INCREASED TO REFLECT THE FULL
PRICE PAID BY LONE STAR, AND APPROPRIATE
ADJUSTMENTS IN PAYMENTS UNDER THIS TRANSACTION
SHALL BE MADE WITHIN TEN DAYS. CHEVRON AGREES TO
DILIGENTLY PURSUE FULL PAYMENT FROM LONE STAR IN
SUCH INSTANCES.
3. CHEVRON AGREES THAT IT WILL NOT, WITHOUT
NGC'S PRIOR WRITTEN CONSENT, AMEND OR MODIFY THE
LONE STAR CONTRACT AFTER MAY 17, 1996, IN ANY
MANNER WHICH WOULD AFFECT THE AMOUNTS PAYABLE BY
EITHER CHEVRON OR NGC UNDER THIS TRANSACTION. IN
ADDITION, CHEVRON AGREES THAT IT WILL NOT, AFTER
MAY 17, 1996, SELL, FARMOUT, OR OTHERWISE
DISPOSE OF ANY PROPERTY OR INTEREST IN PROPERTY
SUBJECT TO THE LONE STAR CONTRACT WITHOUT
RESERVING AND EXERCISING A CALL ON NATURAL GAS
PRODUCTION WHICH WILL ALLOW CHEVRON TO CONTINUE
TO SELL NATURAL GAS FROM SUCH PROPERTY OR
INTEREST TO LONE STAR UNDER THE LONE STAR
CONTRACT. NOTHING HEREIN SHALL PREVENT CHEVRON,
ACTING AS A PRUDENT OPERATOR, FROM RELEASING,
CEASING TO OPERATE, OR ABANDONING ANY LEASE OR
PROPERTY SUBJECT TO THE LONE STAR CONTRACT IF,
IN CHEVRON'S SOLE DISCRETION, CONTINUING TO
OPERATE SUCH LEASE OR PROPERTY WOULD BE
UNECONOMICAL FOR CHEVRON.
3
<PAGE>
4. IN THE EVENT WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP ("WARREN") SELLS THE SHERMAN
PLANT AND EXERCISES ITS OPTION UNDER THAT
CERTAIN GAS PROCESSING AGREEMENT DATED AS OF
SEPTEMBER 1, 1996, BETWEEN CHEVRON AND WARREN,
TO REDUCE THE PROCESSING FEE AS PROVIDED IN
SECTION 2.3 OF THAT AGREEMENT, THE NOTIONAL
QUANTITY PER CALCULATION PERIOD UNDER THIS
CONFIRMATION, AND THE TRANSACTION FORMING THE
BASIS OF THIS CONFIRMATION, SHALL AUTOMATICALLY
CHANGE TO ONE HUNDRED PERCENT (100%) OF
CHEVRON'S OWN PRODUCTION AND ONE HUNDRED PERCENT
(100%) OF THIRD PARTY PRODUCTION DELIVERED BY
CHEVRON TO LONE STAR FOR CHEVRON'S ACCOUNT EACH
MONTH PURSUANT TO THE LONE STAR CONTRACT, LESS
ANY QUANTITIES OF NATURAL GAS DELIVERED TO LONE
STAR UNDER THE LONE STAR CONTRACT FOR WHICH
CHEVRON DOES NOT RECEIVE PAYMENT, INCLUDING, BUT
NOT LIMITED TO, QUANTITIES DELIVERED UNDER THE
LONE STAR CONTRACT BY PARTIES WHICH, PRIOR TO
MAY 17, 1996, ACQUIRED FROM CHEVRON PROPERTIES
OR INTERESTS IN PROPERTIES SUBJECT TO THE LONE
STAR CONTRACT.
If this Confirmation correctly sets forth the terms of the Transaction
specified above, please so indicate by signing below and sending this
Confirmation (or a copy) to us.
If this Confirmation contains any error, please notify NGC
immediately. Failure to Notify NGC of an error in this Confirmation or failure
to accept this Confirmation as provided in Master Agreement-Schedule Part 4(e)
after receipt by Chevron shall result in this Confirmation being deemed binding
as sent as set forth in the Master Agreement.
Sincerely,
Natural Gas Clearinghouse
By:
---------------------------
Name:
Title:
AGREED TO AND ACCEPTED
- ----------------------------
By: Chevron U.S.A. Inc.
Name:
Title:
Date:
4
<PAGE>
EXHIBIT 10.23
PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE STAMPED
`CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION,' THE APPROPRIATE SECTION HAS
BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH A STAR (*).
WEST TEXAS LPG PIPELINE
LIMITED PARTNERSHIP AGREEMENT
<PAGE>
WEST TEXAS LPG PIPELINE
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
1. Definitions
2. Creation of Partnership; Name
3. Principal Office
4. Duration of the Partnership
5. Purposes
6. Partnership Property
6.1 Contribution of Existing Property
6.2 Title to Property
6.3 Assumption of Rights and Obligations Applicable to System
7. Warranties of Partners
8. Management
8.1 Partnership Committee
8.2 Officials of the Partnership Committee and Terms of Service
Thereon
8.3 General Provisions Regarding the Partnership Committee
8.4 Meetings of the Partnership Committee
8.5 Authority of the Partnership Committee
8.6 Voting
8.7 No Management by Individual Partners
9. Book Capital Accounts and Capital Contributions
9.1 Book Capital Accounts of the Partners
9.2 Capital Contributions
10. Distributions
10.1 Allocation
10.2 Distributions
12. Audit
13. Partner's Covenant Against Encumbrances and Attachments
<PAGE>
14. Limitation on Partner's Liabilities Regarding Partnership
Contracts
15. Cross Indemnification
15.1 Indemnity
15.2 Reimbursement
15.3 Sharing of Uncovered Losses
16. Tax Provisions
16.1 Status of Partnership
16.2 Tax Returns, Proceedings and Elections
16.3 Tax Definitions
16.4 Tax Allocations
17. Transfer of Ownership Interests
17.1 Limitation on Assignments
17.2 Permitted Transfers
17.3 Transfers to Affiliates
17.4 Limitation on Dispositions to Avoid Termination
17.5 Relative Liabilities of Old and New Partners
18. Extensions to and Expansion of the System
19. Default by Partners
19.1 Failure to Make Contributions
19.2 Expulsion of Partners
19.3 Treatment of Book Capital Account of Expelled Partner
19.4 Other Obligations of Expelled Partner
20. Dissolution and Winding Up of the Partnership
20.1 Dissolution
20.2 Continuance of Business After Dissolution
20.3 Liquidation of the Partnership
20.4 Winding Up of the Partnership
21. Further Assurance
22. Waiver
23. Independent Conduct
24. Applicable Law
25. Subject to Applicable Law
<PAGE>
26. Severability
27. Headings
28. Binding Effect
29. Benefits of Agreement Restricted to Parties
30. Counterparts
31. Entire Agreement
32. Amendment
33. Notices
EXHIBIT A - Ownership Percentages
EXHIBIT B - Map of the System
EXHIBIT C - Financial Responsibility Requirements
EXHIBIT D - Enabling Agreement
EXHIBIT E - Tax Matters
<PAGE>
WEST TEXAS LPG PIPELINE
LIMITED PARTNERSHIP AGREEMENT
THIS IS AN AGREEMENT, dated as of September 1, 1996, between WTLPS, Inc.,
a Delaware corporation (hereinafter "WTLPS"), WPC LP, Inc., a Delaware
corporation (hereinafter "WPCLP"), Chevron Raven Ridge Pipe Line Company, a
Delaware corporation (hereinafter "CRR"), and Chevron Pipe Line Company, a
Delaware corporation (hereinafter "CPL").
WHEREAS, the Partners desire to create a Limited Partnership to own a
common carrier pipeline system for the transportation of LPG from various points
in New Mexico and Texas to various points in Texas.
THEREFORE, the Partners hereby agree as follows:
1. Definitions
As used in this Agreement the following words and terms shall have
the meanings set forth below.
1.1 "Act" means the Texas Revised Limited Partnership Act, as set
forth in R.C.S., Art. 6132a-1, as amended from time to time.
1.2 "Affiliate" means, with respect to any Person, (i) any other
Person which beneficially owns, directly or indirectly, 50% or more of such
Person's stock or 50% or more of the ownership interest entitled to vote in such
Person, or (ii) any other Personas to which 50% or more of the voting stock or
50% or more of the ownership interest entitled to vote therein, is beneficially
owned, directly or indirectly, either by such Person or by an Affiliate of such
Person as defined in the preceding clause (i).
<PAGE>
1.3 "Agreement" means this West Texas LPG Pipeline Limited
Partnership Agreement.
1.4 "Book Capital Account" means the account described in Section
9.1.
1.5 "Business Day" means a day on which the Federal Reserve Bank in
New York City is open for business.
1.6 "Calendar Year" means a year beginning on the first day of
January and ending on the thirty-first day of December, except that for the
first year of operation, the Calendar Year shall begin on the date on which the
Partnership is established and end on December 31, 1996.
1.7 "CPL" means Chevron Pipe Line Company.
1.8 "CRR" means Chevron Raven Ridge Pipe Line Company.
1.9 "Credit Worthy Affiliate" means an Affiliate of a potential new
Partner, which meets the Financial Responsibility Requirements set forth in
Exhibit C and which has executed an Enabling Agreement as set forth in Exhibit
D.
1.10 "Current Liabilities" means the current liabilities described in
Section 18.3.
1.11 "Dissolving Partner" or "Dissolving Partners" means the Partner
or Partners who cause a dissolution of the Partnership as described in Article
19.
1.12 "Distributable Cash" means the gross cash proceeds from
Partnership operations (including sales and dispositions of property in the
ordinary course of business) less the portion thereof used to pay or establish
reasonable reserves approved by the Partnership Committee for all Partnership
expenses, Guaranteed Payments, debt payments, capital improvements, replacements
and contingencies, all as determined by the Partnership Committee. Distributable
Cash shall not be reduced by depreciation, amortization, cost recovery
deductions or
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<PAGE>
similar allowances, but shall be increased by any reductions of cash reserves
previously established.
1.13 "Effective Date" means the date on which this Agreement is
executed by all of the parties listed first above.
1.14 "Enabling Agreement" means the agreement attached hereto as
Exhibit D.
1.15 "Fiscal Year" means the fiscal year of the Partnership as
designated in Article 11, except that for the first year of operation, the
Fiscal Year shall begin on the date on which the Partnership is established and
end on December 31, 1996.
1.16 "GAAP" means generally accepted accounting principles.
1.17 "General Partner" means WTLPS, CPL, or any Person who hereafter
becomes a General Partner by succession of interest hereunder, or by change of
classification under the provisions of Section 8.8.
1.18 "Indemnifying Partner" means each Partner undertaking the
indemnity obligations described in Sections 15.1 and 15.2.
1.19 "LPG" means liquefied petroleum gas or Petroleum Products.
1.20 "Limited Partner" means WPCLP, CRR, or any Person who hereafter
becomes a Limited Partner by succession of interest hereunder or by change of
classification under the provisions of Section 8.8.
1.21 "Member" means a Partner's designated representative on the
Partnership Committee.
1.22 "WTLPS" means WTLPS, Inc..
1.23 "WPCLP" means WPC LP, Inc..
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<PAGE>
1.24 "Non-Current Liabilities" means the non-current liabilities
described in Section 19.3.
1.25 "Operating Agreement" means the agreement for the operation of
the System.
1.26 "Operator" means the Person designated as the operator of the
System in the Operating Agreement.
1.27 "Ownership Interest" means the respective ownership percentage
of a Partner in the Partnership as set forth in Exhibit A hereto, as amended
from time to time.
1.28 "Partner" means any party to this Agreement, including any
Person who may hereafter become a party to this Agreement.
1.29 "Partnership" means the West Texas LPG Pipeline System Limited
Partnership.
1.30 "Partnership Committee" means the committee designated to manage
the affairs of the Partnership in Section 8.1(a) of this Agreement.
1.31 "Person" means any individual, partnership, association, trust,
corporation or other entity.
1.32 "Partnership Property" means all property acquired by the
Partnership by contribution, purchase or otherwise.
1.33 "Petroleum Products" means natural gasoline, ethane, propane,
isobutane, normal butane, and pentane or mixtures thereof, recovered from
gasoline recovery plants and gas recycling plants as defined from time to time
by the Gas Processors Association.
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<PAGE>
1.34 "Proposed Transferee" means a Person to whom a Transferring
Partner intends to transfer all or a portion of its Ownership Interest in the
Partnership.
1.35 "Purchase Agreement" means an agreement between a Transferring
Partner and a Proposed Transferee as described in Section 17.2(a).
1.36 "Related Company" means an Affiliate of a Partner which acquires
all or a portion of a Partner's Ownership Interest in the Partnership.
1.37 "Remaining Partners" means all Partners other than a
Transferring Partner.
1.38 "System" means the pipeline system described in Article 5 and
depicted on Exhibit B attached hereto, and any additions or modifications made
thereto after this Agreement becomes effective.
1.39 "Transfer Document" means the document or instrument evidencing
the transfer of an interest in the Partnership Property to the Partnership;
1.40 "Transferring Partner" means a Partner who transfers all or a
portion of its Ownership Interest in the Partnership pursuant to Article 17.
2. Creation of Partnership; Name
The Partners hereby create a limited partnership under the provisions
of the Act, with CPL and WTLPS being the initial General Partners, and WPCLP and
CRR being the initial Limited Partners, and with each Partner initially owning
that percentage of the total Ownership Interests in the Partnership set forth in
Exhibit A attached hereto. Said Ownership Interests shall be amended from time
to time to reflect assignments and transfers of a Partner's Ownership Interest
in the Partnership as provided for herein. At all times, the sum of all
Partners' Ownership
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<PAGE>
Interests shall total 100 percent. The name of the Partnership shall be West
Texas LPG Pipeline Limited Partnership.
3. Principal Office
The principal office of the Partnership shall be maintained at 1400
Woodloch Forest Drive, The Woodlands, Texas 77380 or at such other address as
agreed by the Partnership Committee.
4. Duration of the Partnership
The Partnership shall commence as of the Effective Date and shall
terminate, unless sooner terminated pursuant to this Agreement or extended by
agreement of the Partners, on December 31, 2046. This Agreement shall terminate
when the Partnership has been wound up and liquidated, all assets of the
Partnership have been distributed or disposed of, and all liabilities and
obligations of the Partnership (and of each Partner as they relate to the
Partnership) have been fully discharged, satisfied or provided for as provided
in Article 20.
5. Purposes
The Partnership is created for the purposes of: (a) owning the System
for the common carrier transportation of LPG from various points in New Mexico
and Texas to various points in Texas as depicted on the attached Exhibit B, as
it may be amended from time to time; (b) causing the System to be operated,
maintained, repaired and, if appropriate in the judgment of and directed by the
Partnership Committee, expanded, extended, changed in direction or use,
replaced, removed
-6-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
or abandoned in place; (c) causing any facilities, property or property
rights, equipment, or services related to or required in connection with any
of the above described activities to be procured, constructed, operated,
maintained, repaired, replaced, sold, disposed of, removed, or abandoned in
place; (d) any other purposes related to and necessary or appropriate in the
judgment of the Partnership Committee to implement any of the foregoing; and
(e) any other legal purpose unanimously approved by the Partners.
6. Partnership Property
6.1 Contribution of Existing Property. The initial contributions of
each Partner to the Partnership shall be their respective shares of undivided
interests in and to the property described elsewhere in this Agreement as the
Partnership Property; and CPL and CRR shall pay to the Partnership (in
proportion to their respective Ownership Interest) the entire initial working
* capital needed to operate the System in the amount of REDACTED; provided,
however, in the event WTLPS or WPCLP withdraws from the Partnership, other
than as a result of an assignment to an Affiliate as provided herein, at such
time of withdrawal, WTLPS or WPCLP, as the case may be, shall reimburse CPL
and CRR for its share of such initial contribution of working capital. Should
WTLPS or WPCLP dispose of a portion of its Ownership Interest in the
Partnership, at such time of disposition, WTLPS or WPCLP shall reimburse CPL
and CRR for the proportionate share of the initial contribution of working
capital equal to the percentage of Ownership Interest disposed.
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6.2 Title to Property. The title to all Partnership Property shall be
held in the name of the Partnership unless otherwise approved by the Partnership
Committee; provided, however, licenses, permits, easements and rights-of-way
necessary for the operation of the System may be held in the name of the
Operator who will act as agent on behalf of the Partnership.
6.3 Assumption of Rights and Obligations Applicable to System. The
Partnership shall be bound by the terms of that certain Rate Case Settlement
Agreement approved by the Federal Energy Regulatory Commission on April 30,
1996, Docket No. IS94-32-000 relating to the System and applicable to CPL or
CRR subsequent to the Effective Date of the Partnership Agreement but shall not
assume any reimbursement obligations arising out of the Rate Case Settlement
Agreement covering time periods prior to the Effective Date. The Partnership
shall adopt the tariffs for the System in effect on the Effective Date of this
Agreement.
7. Warranties of Partners
7.1 Organization
(a) Each Partner, upon becoming a party to this Agreement, represents,
warrants and agrees that:
(b) It is a corporation duly incorporated, validly existing, and in
good standing under the laws of its jurisdiction of incorporation;
(c) It will not voluntarily cause a dissolution or termination of the
Partnership by failure to maintain its corporate existence or by any other act
or omission to act;
(d) The execution, delivery and performance of this Agreement have
been duly authorized, and this Agreement, when executed and delivered, will be
valid and binding on it; and
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(e) The execution and delivery of this Agreement does not contravene
any provision of, or constitute a default under, any relevant material
indenture, mortgage or other agreement binding on such Partner or any valid
order of any court, commission or governmental agency to which such Partner is
subject.
8. Management
8.1 Partnership Committee
8.1(a) Composition of the Committee. The Partnership shall be
managed by a Partnership Committee composed of one Member representing each
Partner. Each Partner shall designate its Member of the Partnership Committee,
whose vote shall be based on that Partner's Ownership Interest. The Members of
the Partnership Committee shall be designated by the Partners by notice to each
other immediately after the Effective Date, and the Members shall serve until
their successors' designations shall become effective. A person may be
designated by more than one Partner as a Member to represent each such Partner
and such Member shall be regarded as representing more than one Partner for
purposes of a required quorum under Section 8.4.
8.1(b) Replacement of Committee Members. If any Member of the
Partnership Committee dies, resigns, or becomes incapacitated, the Partner which
designated such Member shall designate his or her successor, the term of such
successor to commence immediately, and any Partner may withdraw the designation
of the Member of the Partnership Committee which it designated and designate a
replacement (whose term shall commence immediately) at any time, with or without
cause, by giving notice of the withdrawal and replacement to the other Members
of the Partnership Committee.
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8.1(c) Changes in the Voting Interest of Committee Members Due to
Changes in Ownership. In the event of any changes in the relative Ownership
Interests of the Partners in the Partnership effective during the course of a
Calendar Year, the vote of each Member of the Partnership Committee shall
reflect such change effective upon the receipt of notice by the Partnership that
a change in the Ownership Interests of the Partners has occurred.
8.1(d) Special Legal and Regulatory Obligations of Member. All
Members of the Partnership Committee are under a special legal obligation to
protect confidential information, including but not limited to shipper
information, against disclosure or against use by the Partner or any other party
for any purpose other than the direct business of the Partnership. Each Partner
shall be obligated to take such steps as are necessary to ensure that such
confidential information is not disclosed or used otherwise than as allowed by
law. No Member shall be allowed to participate in any business of the
Partnership in the event that such participation would compromise the
Partnership's obligation to safeguard such information.
8.2 Officials of the Partnership Committee and Terms of Service Thereon
8.2(a) Election of-Partnership Officials. The Partnership Committee
shall elect a Chairman and one or more Vice-Chairmen from among those Members
designated by a General Partner and a Secretary and a Treasurer, who need not be
Members, immediately after being created and thereafter at its first meeting
during each Calendar Year. Each Chairman, Vice-Chairman, Secretary and Treasurer
shall serve until his or her successor is elected and qualified or until his or
her earlier resignation, removal by vote of the Partnership Committee, or, in
the case of the Chairman or Vice-Chairmen, his or her earlier departure from
membership in the Partnership Committee, or in the event that the General
Partner that designated such Member ceases to be a General Partner hereunder.
An individual may hold more than one office.
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8.2(b) Duties of the Chairman. The Chairman shall preside over all
meetings of the Partnership Committee, shall call regular meetings of the
Partnership Committee, may call special meetings of the Partnership Committee
and shall have other duties as specified elsewhere in this Agreement.
8.2(c) Duties of the Vice-Chairman. The Vice-Chairman present with
the longest continuous service as such shall preside over meetings of the
Partnership Committee in the absence of the Chairman, and in the event the
Chairmanship becomes vacant, the Vice Chairman with the longest continuous
service as such shall serve as Chairman until a new Chairman is elected.
8.2(d) Duties of the Secretary. The Secretary shall record minutes
of the Partnership Committee meetings, shall give notice of regular and special
meetings of the Partnership Committee when directed to do so pursuant to Section
8.4 hereof, and shall accept and notify all Partnership Committee Members of any
resignations of Partnership Committee Members or Partnership officials (other
than his own resignation which shall be accepted by the Chairman). The Secretary
shall also cause the Partnership to comply with requirements under the Assumed
Business or Professional Name Act of the Business and Commerce Code of the State
of Texas.
8.2(e) Duties of the Treasurer. The Treasurer shall have general
supervision of the funds, securities, notes, drafts, acceptances, and other
commercial paper and evidences of indebtedness of the Partnership and shall
insure that funds belonging to the Partnership are kept on deposit in such
banking institutions or invested in securities as the Partnership Committee may
from time to time direct. The Treasurer shall insure that accurate accounting
records are kept, and shall render statements of income and of financial
position of the
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Partnership to the Partnership Committee and each Partner at any time upon
reasonable request. The Treasurer shall perform other duties commonly incident
to such office.
8.3 General Provisions Regarding the Partnership Committee.
8.3(a) Additional Authority. The Chairman, Vice-Chairmen, Secretary
or Treasurer and the incumbents of any other similar positions which the
Partnership Committee may elect to create, may be given other duties either of a
general or specific nature by the Partnership Committee, but, in the absence of
any such grant of authority, shall not be deemed to have any inherent authority
to act for the Partnership except as specifically set forth above or elsewhere
in this Agreement.
8.3(b) Compensation. The officials of the Partnership shall receive
no compensation from the Partnership. All costs of each Member of the
Partnership Committee arising out of his attendance at Partnership Committee
meetings or conduct of Partnership business shall be borne by the Partner he
represents. The Partnership shall indemnify and save harmless the Members of
the Partnership Committee and the officials of the Partnership against all
actions, claims, demands, costs and liabilities arising out of the acts (or
failure to act) of any such Members and officials in good faith within the scope
of their authority in the course of the Partnership's business, and such Persons
shall not be liable for any obligations, liabilities or commitments incurred by
or on behalf of the Partnership as a result of any such acts or failure to act.
8.3(c) Insurance. To the extent that such insurance is commercially
available, the Partnership Committee may authorize the Operator to purchase and
maintain insurance on behalf of any Person who is or was a Member of the
Partnership Committee, or an
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official of the Partnership, or who is or was serving at the request of the
Partnership as agent of the Partnership, against any liability asserted against
or incurred by him in any such capacity, or arising out of his status as such,
whether or not the Partnership would have the power to indemnify him against
such liability under the provisions of the preceding Section 8.3(b).
8.4 Meetings of the Partnership Committee. The Partnership Committee
may hold meetings either within or without the State of Texas. Regular meetings
of the Partnership Committee shall be held not less frequently than once each
calendar quarter at such times and places as the Partnership Committee
determines. Special meetings of the Partnership Committee may be called by the
Chairman of the Partnership Committee on ten (10) Business Days notice to each
Member of the Partnership Committee and shall be called by the Chairman or
Secretary of the Partnership Committee on like notice upon request of any Member
of the Partnership Committee representing at least forty nine percent (49%) of
the Ownership Interests. Meetings of the Partnership Committee may be held by
conference telephone call on two (2) Business Days notice. Each notice of a
meeting or conference call shall state the time and place of the meeting or the
conference call and the purpose or purposes thereof. Unless otherwise waived in
writing by all Members of the Partnership Committee, only matters included in
the notice of the meeting or conference call can be considered for a vote by the
Partnership Committee. Any requirements of notice will be deemed waived by any
Member of the Partnership Committee who attends a Partnership Committee meeting
or participates in a conference call unless such Member attends or participates
solely to protest the lack of proper notice. Any requirement of notice may be
waived by any Member in writing, which waiver or waivers shall be attached by
the Secretary of the Partnership Committee to the minutes of the meeting of the
Partnership Committee for which such waiver is effective. Provided that proper
notice is either given or duly waived by all
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Members of the Partnership Committee, the presence of at least two (2) Members
of the Partnership Committee representing each of the General Partners, and
representing at least fifty-one percent (51%) of the Ownership Interests shall
be sufficient to constitute a quorum for the transaction of business. The
Partnership Committee may act by the unanimous written consent of all Members of
the Partnership Committee (which may be signed in counterpart) in lieu of
holding a meeting; such unanimous written consent shall be effective when filed
with the Secretary of the Partnership Committee. Notice to Members of the
Partnership Committee shall be as provided in Article 32 hereof.
8.5 Voting of the Partnership Committee - Simple Majority. The
operation and maintenance of the System shall be performed by the Operator
pursuant to the Operating Agreement to be approved by the Partnership Committee.
The Partnership Committee shall have authority to oversee the operations of
Operator as provided in the Operating Agreement and, except as such authority
may be limited under the terms of this Agreement, the Partnership Committee
shall have full power and authority to manage the entire business and affairs of
the System. Without limiting the generality of the foregoing, on a simple
majority vote of the Member(s) representing fifty one percent (51%) of the
Ownership Interest, the Partnership Committee is authorized to:
(a) Oversee the activities of the Operator,
(b) Designate, in writing, agents authorized to act on behalf of
the Partnership, whose designations may be either specific or general; provided,
that the Partnership Committee may not authorize any agent to act with greater
authority on behalf of the Partnership than the Partnership Committee itself
has,
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(c) Undertake contractual commitments in the ordinary course of
business,
(d) Acquire, sell, lease or otherwise dispose of real and
personal property in the ordinary course of business,
(e) Elect Partnership Committee officials,
(f) Establish, amend and cause the filing of tariffs,
(g) Give notice of default to a defaulting Partner,
(h) Expel a defaulting Partner as provided in Section 19.2, or
(i) Perform or authorize any other act on behalf of the
Partnership not specifically delegated to the Operator.
8.6 Voting of the Partnership - Supermajority. Without limiting
the generality of the foregoing section, on a vote of Members representing a
minimum of sixty-seven percent (67%) of the Ownership Interest, the Partnership
Committee is authorized to:
(a) Acquire, encumber, sell, lease, or otherwise dispose of all
or substantially all of the real and personal property assets of the
Partnership;
(b) Terminate the business or dissolve the Partnership or
appoint a liquidating trustee other than the Operator;
(c) Expand the capacity of the System or extend the System as
provided in Article 18,
(d) Authorize the use of the System for transportation of
substances other than LPG,
(e) Authorize cash distributions in a manner other than as set
forth in Section 10 or amend the provisions of Section 10,
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(f) Consider, revise, approve and reject operating and capital
budgets and AFEs recommended by the Operator as provided in the Operating
Agreement,
(g) Authorize the creation of an Audit and other subcommittees
to advise the Partnership Committee,
(h) Appoint or change the Operator,
(i) Authorize, or refuse to authorize, the Operator to settle
claims brought against the Partnership recommended by the Operator in amounts
greater than $50,000 or the filing of lawsuits the Operator proposes the
Partnership bring against third parties, other than routine debt collection
actions,
(j) Change the provisions of Section 16 and Exhibit E,
(k) Borrow money or obtain any advance or credit in any form
(other than trade credit) or make a loan or advance or give credit, other than
normal trade credit,
(l) Give any guarantee or indemnity or security in respect of any
liabilities or obligations of any person other than the Partnership ,
(m) Amend the Partnership,
(n) Create or dispose of any subsidiary of the Partnership or
any interest therein,
(o) Enter into any partnership, joint venture or profit sharing
agreement or arrangement,
(p) Enter into any material contract or arrangement outside of
the ordinary course of business,
(q) Factor or assign any of the Partnership's accounts,
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(r) Except as otherwise provided herein, do or permit or suffer
to be done any act or thing whereby the Partnership may be wound up, liquidated
or dissolved (whether voluntarily or compulsorily),
(s) Acquire or make any investment in another company,
partnership or business,
(t) Change the nature or scope of the Partnership's business or
commence any new business not being ancillary or incidental to the Partnership's
business,
(u) Make any claim, disclaimer, surrender, election of consent
of a material nature for tax purposes,
(v) Require the Partners to make any additional capital
contributions,
(w) Resolve audit disputes,
(x) Appoint a liquidating trustee, or
(y) Change of classification of a General Partner to a Limited
Partner, or of a Limited Partner to a General Partner or interest thereof.
8.7 No Management by Individual Partners. All acts of management of
the Partnership shall be taken by the Partnership Committee, acting pursuant to
this Agreement, by agents duly authorized in writing by the Partnership
Committee or by the Operator acting pursuant to the Operating Agreement. No
individual Partner or Member of the Partnership Committee shall act or purport
to act as an agent of or otherwise on behalf of the Partnership unless, and then
only to the extent, authorized in writing to do so by the Partnership Committee.
Limited Partners shall not participate in the management or control of the
business except as otherwise permitted by the Act.
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8.8 Change of Classification of Partnership Interest. No change in
classification hereunder of any Ownership Interest of a General Partner to a
classification of a Limited Partner, nor any change in classification of any
Ownership Interest of a Limited Partner to a classification of a General Partner
shall be effective hereunder unless such change in classification or designation
shall have first been approved by a vote of the Members under Section 8.6 (y)
above and such change complies with the requirements of the Act.
9. Book Capital Accounts and Capital Contributions
9.1 Book Capital Accounts of the Partners. The Partnership shall
maintain individual Book Capital Accounts for each Partner for financial
accounting purposes. Each Partner's Book Capital Account shall include its
initial capital contributions (a) increased by (i) any additional capital
contributions made by such Partner and (ii) its Ownership Interest in
Partnership income, and (b) decreased by (i) its Ownership Interest in
Partnership losses, (ii) any distributions of Distributable Cash to such Partner
and (iii) the agreed value of any distributions of property made to such Partner
net of any liabilities assumed by such Partner or to which such property is
subject.
9.2 Capital Contributions. Each Partner agrees to contribute any
amount of additional capital specified by the Partnership Committee to fulfill
the purposes, as they may be amended, for which the Partnership is created.
When, subject to the foregoing, the Partnership Committee shall determine
additional capital funds are required from the Partners, it shall specify the
amount to be contributed by each Partner, which amount shall be in proportion to
the Ownership Interest of that Partner in the Partnership, but which shall also
take into account relative amounts then in that Partner's Book Capital Account
to the end that the additional amount to be paid, plus the existing balance in
that Partner's Book Capital Account, shall result in
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a balance in exact proportion to that Partner's Ownership Interest in the
Partnership. Prior to any call for capital contributions, the aggregate loss of
any Partner's profits and losses shall be deducted from that Partner's Book
Capital Account and the aggregate gain of any Partner's profits and losses shall
be added to that Partner's Book Capital Account before the calculation is made
to determine the amount of additional capital required from each Partner.
10. Distributions of Distributable Cash
10.1 Allocation. Any profits and/or losses of the Partnership shall
be shared among the Partners in accordance with their Ownership Interests at the
time such profits and losses are accrued.
10.2 Distributions. Unless otherwise approved by a vote of the
Partners under Section 8.6 (e), the Operator shall distribute to the Partners
Distributable Cash as follows: within thirty days after the end of each calendar
month there shall be distributed in cash to the Partners allocated in accordance
with their Ownership Interest all cash available for distribution, taking into
account the cash account as of the end of the month and any cash activity from
the end of the month to the date of distribution less the reasonable working
capital needs to operate the System.
11. Accounting
The books and records of the Partnership shall be maintained by the
Operator and shall be open to inspection at all reasonable times to any Partner.
Such books shall be maintained in accordance with GAAP utilizing the principles
and practices generally employed in regulated oil pipeline accounting unless any
regulatory agency with jurisdiction over the System or the Partnership shall
rule otherwise. Unaudited financial statements for the Partnership shall be
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prepared and distributed to each Partner and to the Partnership Committee
Members not less often than quarterly; however, income statements shall be
provided monthly. Complete financial statements shall be prepared annually which
shall be audited and certified by independent certified public accountants
selected by the Partnership Committee. The Fiscal Year for the Partnership shall
commence January 1 and end December 31 of each year, except that for the first
year of operation, the Fiscal Year shall begin on the Effective Date and end on
December 31, 1996.
12. Audit
Any Partner, at its sole expense, may audit the Partnership books of
account by giving ten (10) Business Days notice to the Partnership Committee,
the Operator and all other Partners, but the Partnership Committee may decline
to permit more than one (1) such audit to be conducted in any six-month period.
Such audit shall be at the reasonable convenience of the Partner, the Operator
and the Partnership Committee, shall be open for participation by all Partners
and shall be restricted to books of account for the preceding two (2) Fiscal
Years. All audit exceptions shall be resolved in a timely manner. Any audit
exception not resolved within ninety (90) days after the release of the audit
report will become an agenda item at the next Partnership Committee meeting and
shall be resolved at that time. Amounts owed as determined by an audit shall be
paid with interest at the base rate in effect from time to time published by the
First National Bank of Chicago plus two percent. Should the Partnership
Committee fail or be unable to resolve any such audit disputes, the matter shall
be submitted to the dispute resolution procedures set forth in Section 21
hereinafter.
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13. Partner's Covenant Against Encumbrances and Attachments
No Partner shall mortgage, lease, assign, pledge or otherwise encumber
or create a security interest in its Ownership Interest for the benefit of any
creditor of that Partner during the term hereof or permit its Ownership Interest
to be attached or levied upon as a result of any such separate debt of that
Partner unless the security interest documents effecting such rights are
approved by the Partners, which approval shall not be unreasonably withheld;
provided that a Partner may sell all or part of its Ownership Interest, subject
to Article 17 hereof. In the event that the holder of any mortgage, lease,
assignment, pledge or other encumbrance or other security interest in an
Ownership Interest of a Partner exercising its rights hereunder seeks to
exercise foreclosure under such security, the transaction shall be deemed a
transfer of ownership subject to the terms of Section 17 below and the Remaining
Partners may exercise rights of purchase as provided therein.
14. Limitation on Partner's Liabilities Regarding Partnership Contracts
Unless approved by the Partnership Committee, the Partnership or its
authorized agents or representatives shall not enter into any contract, lease,
sublease, note, deed of trust or other obligation unless there is contained
therein an appropriate provision limiting the claims of all parties to such
instruments and other beneficiaries thereunder to the assets of the Partnership
and expressly waiving any rights of such parties and other beneficiaries to
proceed against the Partners individually.
15. Cross Indemnification
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15.1 Indemnity. Each Partner (in each case the "Indemnifying
Partner") shall indemnify and hold all other Partners and, in the case of
Sections 15.1 and 15.2 hereof, the Partnership, harmless from:
(a) Any losses or claims resulting from any act or omission
of such Indemnifying Partner in breach of this Agreement;
(b) Any claim by any third party arising out of the
intentional, willful, or grossly negligent act of such Indemnifying Partner
related directly or indirectly to the Partnership; and
(c) Any judgment against any other Partner arising solely
because of the Indemnifying Partner's liability for Partnership debts under the
laws of the State of Texas (and not because of any other act of the Partner
seeking indemnity), to the extent that the Partner claiming indemnity has borne
greater than its proportionate share of the judgment actually paid.
15.2 Reimbursement. Except as otherwise specifically provided in
this Agreement, all expense, loss, damage, liability or claims (together with
all costs incurred in connection therewith) shall be borne, shared and paid by
the Partners hereto on the basis of their respective Ownership Interests. In the
event any Partner is required for any reason, other than as specified in this
Agreement, to pay a disproportionate share of any obligations of the
Partnership, all other Partners who have not paid their proportionate share
agree to reimburse that Partner to the extent necessary to place the resulting
loss of each Partner into direct proportion to its Ownership Interest. The
provisions of this Article 15 shall survive termination of this Agreement and of
the Partnership.
15.3 Sharing of Uncovered Losses. Should the Partnership incur
losses which are either greater than the amount of, or not covered by any
insurance coverage carried by the
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Partnership, and which are the obligation of the Partnership and not that of
individual Partners, the Partners agree to share such losses in proportion to
their Ownership Interests; provided, however, nothing herein shall be construed
as a waiver of the limitation of liability to third parties afforded limited
partners under the Act.
16. Tax Provisions
16.1 Status of Partnership. The Partners intend that, pursuant to
the provisions of Subchapter K of Chapter 1 of Subtitle A of the Code, the
Partnership will be treated as a Partnership for federal, state, and local
income tax purposes, and each Partner agrees not to elect to be excluded from
the application of all or any part of Subchapter K of the Code or any
corresponding provisions of state or local law.
16.2 Tax Returns, Proceedings and Elections. Tax returns,
proceedings and elections shall be governed by the provisions of Exhibit E
attached. The provisions of Exhibit E may be amended from time to time by vote
of the Partnership Committee as provided in Section 8.6 (j).
16.3 Tax Definitions.
16.3(a) "Adjusted Federal Income Tax Capital Account Deficit"
(Adjusted FIT Capital Account Deficit) means, with respect to any Partner, the
deficit balance in such Partner's FIT Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such FIT Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this Agreement or
pursuant to
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Regulations Sections 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections 1.704-
2(g)(1) or 1.704-2(i)(5); and
(ii) Debit to such FIT Capital Account the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
l(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted FIT Capital Account Deficit is
intended to comply with the provisions of Regulations Section 1.704-
l(b)(2)(ii)(d) and shall be interpreted consistently therewith.
16.3(b) "Code" means the Internal Revenue Code of 1986, as
amended.
16.3(c) "Depreciation" means, for each Fiscal Year or other
period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes, as described in Treasury
Regulations Section 1.704-1(b)(2)(iv)(g), at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Partners.
16.3(d) "Federal Income Tax Capital Account" (FIT Capital
Account) means, with respect to any and each Partner, the FIT Capital Account
maintained for such Person in accordance with Regulation Section 1.704-
l(b)(2)(iv) and the following provisions:
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(i) To each Partner's FIT Capital Account there shall be
credited such Partner's FIT Capital Contributions, such Partner's distributive
share of Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 16.4(b) or Section 16.4(c) hereof, and
the amount of any Partnership liabilities assumed by such Partner or which are
secured by any Partnership Property distributed to such Partner; and
(ii) To each Partner's FIT Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any Partnership Property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Losses and any items in the nature of expenses
or losses that are specially allocated pursuant to Section 16.4(b) or Section
16.4(c) hereof, and the amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by such Person to
the Partnership.
(iii) In determining the amount of any liability for purposes
of subparagraphs (i) and (ii) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and Regulations.
16.3(e) "Federal Income Tax Capital Contribution" (FIT Capital
Contribution) means, with respect to any Partner, the amount of money and the
initial Gross Asset Value of any property (other than money) contributed as
capital and not as a project loan to the Partnership by such Partner pursuant to
this Agreement. The principal amount of a promissory note which is not readily
traded on an established securities market and which is contributed to the
Partnership by the maker of the note shall not be included in the FIT Capital
Account of any Partner until the Partnership makes a taxable distribution of the
note or until (and to the extent) principal payments are made on the note, all
in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
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16.3(f) "Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership (or deemed contributed to the Partnership following a
Code Section 708(b)(1)(B) termination) shall be the gross fair market value of
such asset as determined by the contributing Partner and the Partnership
Committee;
(ii) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Partnership Committee, as of the following times: (a) the acquisition of an
additional Ownership Interest by any new or existing Partner in exchange for
more than a de minimis FIT Capital Contribution; (b) the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
Property as consideration for an Ownership Interest; and (c) the liquidation of
the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market value of such asset on
the date of distribution; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining FIT
Capital Accounts pursuant to Regulations Section 1.704-l(b)(2)(iv)(m) and
16.4(b)(viii) hereof; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subparagraph (iv) to the extent the Partnership
Committee determines that an adjustment to subparagraph (ii) hereof is necessary
or appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv). If the
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Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (i), (ii) or (iv) hereof, such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Profits and Losses.
16.3(g) "Guaranteed Payment" means a payment by the Partnership to a
Partner as provided under Regulations Section 1.707-1(c). Such payment is to be
determined without regard to the income of the Partnership and is considered as
made to a Partner who is not acting in its capacity as a Partner.
16.3(h) "Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b). The amount of Nonrecourse Deductions for a
Partnership Fiscal Year is determined in accordance with Regulations Section
1.704-2(c) and equals the net increase in Partnership Minimum Gain during the
year, reduced (but not below zero) by the aggregate distributions made during
the year of proceeds of a Nonrecourse Liability that are allocable to an
increase in Partnership Minimum Gain; provided that increases in Partnership
Minimum Gain resulting from conversions, refinancing, or other changes to a debt
instrument described in Regulations Section 1.704-2(g)(3) shall not generate
Nonrecourse Deductions.
16.3(i) "Nonrecourse Liabilities" has the meaning set forth in
Regulations Section 1.752-1(a)(2) or 1.704-2(b)(3).
16.3(j) "Partner Nonrecourse Debt" or "Partner Nonrecourse Liability"
as set forth in Regulations Section 1.704-2(b)(4), means any Partnership
liability to the extent that the liability is nonrecourse for purposes of
Regulations Section 1.1001-2, and a Partner (or related person within the
meaning of Regulations Section 1.752-4(b)) bears the economic risk of loss
within the meaning of Regulations Section 1.754-2.
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16.3(k) "Partner Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Partner Nonrecourse Debt, determined in accordance with
Regulations Sections 1.704-2(i)(2) and 1.704-2(i)(3).
16.3(l) "Partner Nonrecourse Deductions", as set forth in Regulations
Section 1.704-2(i)(2) and 1.704-2(i)(3), means for any Partnership taxable year,
the net increase during the year in Partner Nonrecourse Debt Minimum Gain,
reduced (but not below zero) by proceeds of the liability distributed during the
year to the Partner bearing the economic risk of loss for the liability that is
both attributable to the liability and allocable to an increase in the Partner
Nonrecourse Debt Minimum Gain.
16.3(m) "Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2) and 1.704-2(d).
16.3(n) "Profits and Losses" means, for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(i) Any income described in Code Section 705(a)(1)(B) of the
Partnership that is exempt from federal income tax and not otherwise taken into
account in computing Profits and Losses pursuant to this definition shall be
added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations
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Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this definition, shall be subtracted from such
taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
Property is adjusted pursuant to subparagraph (ii) or subparagraph (iii) of the
definition of Gross Asset Value, the amount of such adjustments shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Profits and Losses;
(iv) Gain or loss resulting from any disposition of
Partnership Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax basis
of such property may differ from its Gross Asset Value.
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or other
period, computed in accordance with the definition of Depreciation; and
(vi) Notwithstanding any other provisions of this definition,
any items which are specially allocated pursuant to Section 16.4(b) or Section
16.4(c) shall not be taken into account in computing Profits or Losses.
16.3(o) "Regulations" means the Income Tax Regulations promulgated
under the Code as amended from time to time, including the corresponding
provisions of any succeeding regulations.
16.3(p) "Tax Matters Partner" means the Partner so designated pursuant
to Exhibit E hereof.
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16.4 Tax Allocations.
16.4(a) Allocation of Profits and Losses.
(i) Allocation of Profits. After first giving effect to
the Regulatory Allocations set forth in Section 16.4(b), and the Special
Allocations in Section 16.4(c), Profits for each Fiscal Year of the Partnership
shall be allocated to the Partners in proportion to their respective Ownership
Interests as reflected in Exhibit A.
(ii) Allocation of Losses. After first giving effect to
the Regulatory Allocations set forth in Section 16.4(b), and the Special
Allocations in Section 16.4(c), Losses for each Fiscal Year of the Partnership
shall be allocated to the Partners in proportion to their respective Ownership
Interests as reflected in Exhibit A.
16.4(b) Regulatory Allocations. The following special allocations
shall be made for the purpose of complying with Code Section 704(b) and the
Regulations thereunder in the following order:
(i) Minimum Gain Charge Back. Except as otherwise provided in
Regulations Section 1.704-2(f), and notwithstanding any other provision of this
Article 16, if there is a net decrease in Partnership Minimum Gain during any
Partnership Fiscal Year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary subsequent years)
equal to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations Section 1.704-2(g); provided that a
Partner shall not be subject to this Section 16.4(b)(i) to the extent that an
exception is provided by Regulations Sections 1.704-2(f)(2), (3) and (4), and
any Revenue Rulings issued pursuant to those Regulations. Any Partnership
Minimum Gain allocated pursuant to this Section 16.4(b)(i) shall consist of
first, gains recognized from the disposition of Partnership Property subject to
one
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or more Partnership Nonrecourse Liabilities, and second, if necessary, a pro
rata portion of the Partnership's other items of income or gain for that year.
This Section 16.4(b)(i) is intended to comply with the minimum gain charge back
requirement in Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith. The FIT Capital Accounts of the Partners will be
restated pursuant to Regulation Section 1.704-1(b)(2)(iv)(f) in connection with
a termination of the Partnership under Code Section 708(b)(1)(B).
(ii) Partner Nonrecourse Debt Minimum Gain Charge Back. Except as
otherwise provided in Regulations Section 1.704-2(i)(4), and notwithstanding any
other provision of this Article 16 except Section 16.4(b)(i), if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership Fiscal Year, each Partner who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt (determined in accordance with Regulations Section 1.704-
2(i)(5)) as of the beginning of the year shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
equal to such Partner's share of the net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt determined in
accordance with Regulations Section 1.704-2(i). A Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain shall be determined in
accordance with Regulations Section 1.704-2(i)(5); provided that a Partner shall
not be subject to this Section 16.4(b)(ii) to the extent that an exception is
provided by Regulations Section 1.704-2(i)(4) and any Revenue Rulings issued
thereunder. Any Partner Nonrecourse Debt Minimum Gain allocated pursuant to this
Section 16.4(b)(ii) shall consist of first,' gains recognized from the
disposition of Partnership Property subject to the Partner Nonrecourse Debt, and
second, if necessary, a pro rata portion of the Partnership's other items of
income or gain for
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that year. This Section 16.4(b)(ii) is intended to comply with the minimum gain
charge back requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
shall, solely for tax purposes, be allocated among the Partners so as to take
into account any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with the definition of Gross Asset Value) including, but
not limited to, special allocations to a contributing Partner that are required
under Code Section 704(c) to be made upon distribution of such property to any
of the non-contributing Partners. In the event of a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Partners will be deemed
to receive an undivided interest in each item of the Partnership Property and
thereafter, will be deemed to contribute an undivided interest in each such
item; and items of Partnership income, gain, loss and deduction attributable to
each deemed contributed undivided interest as to which the Partners have
different tax basis for the same undivided interest, shall be allocated to each
Partner in proportion to its tax basis in such undivided interest until such
variation amount is eliminated, and if such allocations are not in accordance
with Code Section 704(c), curative allocations shall be made to achieve this
result as quickly as possible. In the event the Gross Asset Value of any
Partnership Property is adjusted pursuant to subparagraph (ii) of the definition
of Gross Asset Value, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Regulations
thereunder. Any elections or other decisions relating to such allocations shall
be made
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by the Partnership Committee in any manner that reasonably reflects the purpose
and intention of the Agreement; provided, however, the Partnership shall select
the remedial method of allocation provided under Section 1.704-3(d) of the
Regulations. Allocations pursuant to this Section 16.4(b)(iii) are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing any Partner's Book Capital Account or share
of Profits, Losses, other items, or distributions pursuant to any provision of
this Agreement.
(iv) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted FIT Capital Account
Deficit of such Partner created by such adjustments, allocations or
distributions as quickly as possible, provided that an allocation pursuant to
this Section 16.4(b)(iv) shall be made if and only to the extent that such
Partner would have an Adjusted FIT Capital Account Deficit after all other
allocations provided for in this Article 16 have been tentatively made as if
this Section 16.4(b)(iv) were not in the Agreement.
(v) Gross Income Allocation. In the event any Partner
has a deficit FIT Capital Account at the end of any Partnership Fiscal Year that
is in excess of the sum of (A) the amount such Partner is obligated to restore
pursuant to the terms of this Agreement or otherwise, and (B) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Partner shall be specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 16.4(b)(iv) shall be made
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if, and only to the extent that, such Partner would have a deficit FIT Capital
Account in excess of such sum after all other allocations provided for in this
Article 16 have been tentatively made as if Section 16.4(b)(iii) and this
Section 16.4(b)(v) were not in the Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for
any Fiscal Year or other period shall be allocated to the Partners in proportion
to their respective Ownership Interests.
(vii) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-2(h).
(viii) Section 754 Adjustment. To the extent an
adjustment to the adjusted tax basis of any Partnership Property pursuant to
Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining FIT
Capital Accounts, the amount of such adjustment to the FIT Capital Accounts
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Partners in a manner consistent with
the manner in which their FIT Capital Accounts are required to be adjusted
pursuant to such section of the Regulations.
16.4(c) Special Allocations.
(i) Allocation of Inherent Gain. If during the term of
the Partnership, the FIT Capital Accounts of the Partners are not restated
pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), then except as required by
the Regulatory Allocations, gain on disposition of the Partnership's assets as
of the date of this Agreement and their adjusted tax basis
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as of such date shall be allocated to the Partners in proportion to their
Ownership Interests. The FIT Capital Accounts of the Partners will be restated
pursuant to Regulations Section 1.704-1(b)(2)(f) in connection with a
termination of the Partnership under code Section 708(b)(1)(B).
(ii) Curative Allocations. The allocations set forth in
Section 16.4(b)(iv), (v) and (viii) (the "Regulatory Allocations") are intended
to comply with certain requirements of Regulations Section 1.704-1(b).
Notwithstanding any other provision of this Article 16 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating other Profits, Losses and items of income, gains, loss deduction
among the Partners so that, to the extent possible, the net amount of such
allocations of other Profits, Losses, and other items and the Regulatory
Allocations to the Partners shall be equal to the net amount that would have
been allocated to them if the Regulatory Allocations had not occurred.
Allocations made pursuant to this Section 16.4(c)(ii) are hereby authorized by
the Partnership Committee and shall be for the purpose of minimizing the
economic distortions that might otherwise result from the application of the
Regulatory Allocations.
(iii) Deduction or Loss Attributable to FIT Capital
Contributions. Except as required by the
Regulatory Allocations, all items of deduction or loss attributable to a
Partner's FIT Capital Contribution to the Partnership shall be allocated to the
contributing Partner in accordance with the Partner's Ownership Interest.
16.4(d) Other Allocation Rules.
(i) Upon liquidation of the Partnership (or any
Partner's Ownership Interest) liquidating distributions shall be made in all
cases in accordance with the positive FIT
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Capital Account balances of the Partners, as determined after taking into
account all capital account adjustments for the Partnership taxable year during
which the liquidation occurs, consistent with the rules set forth in Regulations
Section 1.704-l(b)(2).
(ii) The provisions of this Article 16 are intended to
comply with Code Section 704 and the Regulations thereunder.
(iii) For purposes of determining the profits, losses,
or any other items allocable to any period, profits, losses, and any such other
items shall be determined on a daily, monthly, or other basis, as determined by
the Partnership Committee using any permissible methods under Code Section 706
and the Regulations thereunder.
(iv) Except as otherwise provided in this Agreement, all
items of Partnership income, gain, loss, deduction, and any other allocations
not otherwise provided for shall be divided among the Partners in the same
proportions as they share profits or losses, as the case may be, for the year.
(v) If any Ownership Interest is sold, assigned or
transferred during any accounting period, Profits, Losses, each item thereof and
all other items attributable to the transferred Ownership Interest for such
period shall be divided and allocated between the transferor and the transferee
by taking into account their varying interests during the period in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Partnership Committee. All distributions on or before the date of such
transfer shall be made to the transferor and all distributions thereafter shall
be made to the transferee.
(vi) For purposes of Regulations Section 1.752-3(1)(3),
the Partners agree that nonrecourse liabilities of the Partnership in excess of
the sum of (A) the amount of Partnership Minimum Gain, and (B) the total amount
of built-in gain (as described in
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Regulations Section 1.752-3(a)(2)), shall be allocated among the Partners in
accordance with their respective ownership Interests.
17. Transfer of Ownership Interests
17.1 Limitation on Assignments. No Partner shall assign its
Ownership Interest or its rights to share in the profits of the Partnership if
the fact of such assignment or any of the provisions in such assignment would
materially diminish the creditworthiness of the Partnership.
17.2 Permitted Transfers. No Partner shall sell, assign, transfer,
encumber, or otherwise dispose of all or any portion of its Ownership Interest
in the Partnership unless it shall have obtained the written consent of all
other Partners or shall have complied with the provisions of this Article 17.
Subject to the foregoing, a Partner (herein the "Transferring Partner") may
dispose of all or any part of its Ownership Interest in the Partnership provided
that such proposed sale is not made as part of a transaction involving the sale
of any item other than such interest unless the market value of such Ownership
Interest can be separately identified and demonstrated by complying with the
following procedure:
(a) The Transferring Partner shall give written notice (the
"Disposition Notice") to each other Partner hereto (the "Remaining Partners")
not less than forty-five (45) days prior to the effective date of such
disposition, stating the interest to be sold and the price and terms of sale and
identifying the proposed transferee (herein the "Proposed Transferee"). Such
notice, to be effective, shall be accompanied by an agreement executed by the
Transferring Partner and the Proposed Transferee (the "Purchase Agreement")
containing all the material terms and conditions of the proposed sale, which
agreement demonstrates that completion of the sale is contingent only upon (i)
the non-exercise of rights of first refusal under this Article 17, (ii) the
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obtaining of any required government approvals and (iii) the satisfaction of a
standard due diligence review, including such items as title, environmental, and
certain other specifically itemized defects. The Remaining Partners shall then
have first options to purchase all such Ownership Interest on the same terms as
in the Purchase Agreement in the proportion which their Ownership Interest bears
to the Ownership Interests of all Remaining Partners, and those desiring to do
so shall exercise such options by giving written notice thereof to the
Transferring partner and all other Remaining Partners within thirty (30) days
after the notice described above is given. Any Ownership Interest as to which
such first options are not exercised shall be deemed re-offered to the Remaining
Partners who exercised their first options, and such Partners shall, for a
period of ten (10) days from the expiration of the thirty (30) day period, have
second options to purchase the same (at the same price, on the same terms, and
by notice as stated above delivered within the ten (10) day period) in the
proportion that their Ownership Interest bears to the Ownership Interests of all
Partners exercising their first options or in such proportions as they may
mutually agree upon. Any Ownership Interest not elected to be purchased during
the ten (10) day period shall remain under option to those Remaining Partners
who have exercised both the first and second options, to be purchased
proportionately as stated above or in such other manner as such Remaining
Partners may mutually agree upon, but notice of election to purchase all of the
Ownership Interest originally offered must be given to the Transferring Partner
and the Remaining Partners within forty-five (45) days from the notice of offer
given by the Transferring Partner. If elections to purchase all of the offered
Ownership Interest have been made within the forty-five (45) day period, those
Partners electing to purchase shall be irrevocably obligated to promptly deposit
with the Secretary of the Partnership certified checks in favor of the
Transferring Partner for the purchase price of the Ownership Interest so
purchased who shall distribute the checks to
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the Transferring Partner upon receipt of checks evidencing one hundred percent
(100%) of the offered Ownership Interest. If notices of elections to purchase
less than all of the offered Ownership Interest have been given at the
expiration of the forty-five (45) day period, the Transferring Partner may
complete the sale of all of the offered Ownership Interest to the Proposed
Transferee, subject to the compliance with Section 17.2(b), on the same terms as
contained in the Purchase Agreement, at any time within one hundred twenty (120)
days thereafter. If the sale to the Proposed Transferee is not completed within
the one hundred twenty (120) day period, all of the Ownership Interest
originally offered shall again become subject to the foregoing restrictions in
this Section 17.2(a).
(b) At the time written notice is given to each Partner of a proposed
sale in accordance with Section 17.2(a), the Transferring Partner shall include
with such notice information sufficient to demonstrate to the other Partners
that the Proposed Transferee has adequate financial capability to fulfill the
obligations of a Partner hereunder as set forth in Exhibit C, which such
Proposed Transferee will assume in the event of such transfer. The period of
evaluation of the Proposed Transferee shall run concurrently with the period of
the first option being offered pursuant to Section 17.2(a). Within thirty (30)
days of the notice of proposed sale, each of the other Partners shall deliver to
all the other Partners its reasonable and good faith opinion as to whether the
adequate financial capability of the Proposed Transferee has been demonstrated.
If any Partner fails to deliver such an opinion, it shall be deemed to have
determined that the adequate financial capability of the Proposed Transferee has
been demonstrated. During such thirty (30) day consideration period, any Partner
may request of the Transferring Partner, and the Transferring Partner shall
provide, such supplemental information
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concerning the Proposed Transferee as may be reasonably necessary for the
requesting Partner to make such evaluation.
(c) If the transfer of the offered Ownership Interest to the Proposed
Transferee is to be completed, after compliance with the conditions set forth in
Sections 17.2(a) and (b), the Transferring Partner shall have the right to
transfer to the Proposed Transferee the Ownership Interest in the Partnership
specified in the notice referred to above and upon such transfer shall, subject
to this Article 17, be relieved of all its obligations and liabilities under
this Agreement arising after (but not before) the effective date of such
transfer, but only to the extent that such obligations and liabilities arise out
of or are connected with the Ownership Interest so transferred; provided that,
if a Partner or Partners having an aggregate ownership Interest in excess of
forty percent (40%) give notice under the terms of Section 17.2(b) that the
Proposed Transferee does not meet the requirements of Section 17.2(b), the
Transferring Partner shall be liable for all of the obligations and liabilities
of its Proposed Transferee under this Agreement, as hereafter amended (including
any liabilities for breach of this Agreement); provided, further, that, in such
event, the Transferring Partner shall be liable for the Proposed Transferee's
obligations and liabilities hereunder until such time as the Proposed Transferee
demonstrates to the Partnership Committee that it has adequate financial
capability to fulfill the obligations of a Partner and only to the extent that
such obligations and liabilities:
(1) arise out of, or are connected with, the Ownership
Interest transferred to such transferee by the Transferring Partner, and
(2) arise under this Agreement as it exists on the date
of any such transfer and as it may thereafter be amended or supplemented, but
such amendments or supplements shall not in any material way increase or
adversely affect any of the obligations or
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
liabilities hereunder of such Transferring Partner as they exist on the date
of such transfer or extend the term of this Agreement past December 31,
2046. Any Transferring Partner who retains liability hereunder shall be
given copies of all notices (simultaneously with its Proposed Transferee)
concerning any obligations due and owing hereunder from its Proposed
Transferee. As a condition precedent to any person becoming a Partner, such
Proposed Transferee shall expressly assume the obligations of this Agreement
by executing and delivering one (or, at the request of the Partnership,
more) counterpart of this Agreement to each Partner and shall execute such
other documents as the other Partnership Committee may reasonably request
relating to assumption of the Transferring Partner's obligations and
liabilities concerning the Partnership.
(d) Notwithstanding any provision in this Section 17 to the contrary,
in the event WTLPS or WPCLP elect to transfer all or any portion of its
Ownership Interest to a Proposed Transferee other than an Affiliate of WTLPS
or WPCLP on or before August 15, 1997; CPL or CRR shall have the right to
* purchase such interest from WTLPS or WPCLP at a price equal to REDACTED per
percent of Ownership Interest in the Partnership. In the event WTLPS or
WPCLP elect to transfer all or any portion of its Ownership Interest on or
between August 16, 1997, and December 31, 1999; CPL or CRR shall have the
right but not the obligation to purchase such interest from WTLPS or WPCLP
* at a price equal to the higher of (i) REDACTED per percent of Ownership
Interest in the Partnership, plus WTLPS's or WPCLP's share, as the case may
be, of Incremental Revenue Capital Contributions (as hereinafter defined)
proportionate to the percent of Ownership Interest being tendered to CPL or
CRR for any Incremental Revenue
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Capital Contributions made subsequent to the date hereof, but only to the
extent that the incremental cash flow derived from said Incremental Revenue
Capital Contributions has not returned to WTLPS or WPCLP the full amount of
such capital contribution, or (ii) the dollar value of such Ownership
* Interests obtained by multiplying the number REDACTED the immediately
preceding twelve (12) months EBITDA of the Partnership commencing from the
month immediately preceding the month in which the Disposition Notice is
made, less Actual Incremental Revenue Capital Contribution EBITDA (as
hereinafter defined) the result of which is multiplied by the percentage
Ownership Interest being tendered to CPL or CRR, and then adding to this
product WTLPS's or WPCLP's share of Incremental Revenue Capital Contributions
proportionate to the percent of Ownership Interest being tendered to CPL or
CRR made within the twelve (12) months immediately preceding the month in
which the Disposition Notice is delivered. For the purpose of this Section
17.2(d), (i) "EBITDA" shall mean earnings before interest, taxes,
depreciation and amortization, and (ii) "Incremental Revenue Capital
Contributions" shall mean capital contributions to the Company which are
intended to ultimately fund activities which add incremental earnings to the
Partnership, but excluding any contributions necessary to maintain the
ongoing operations of the Partnership Property. The determination as to
whether a contribution is an Incremental Revenue Capital Contribution shall
be made by the Partnership Committee, the determination of which will be
included in the request for such contribution that is sent to each Partner.
Such request shall also include a projection of incremental revenue to be
derived from the activities funded by such capital contribution, with a
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projected time schedule or other means to track actual revenue derived from this
contribution. "Actual Incremental Revenue Capital Contribution EBITDA" shall
mean actual EBITDA generated from Incremental Revenue Capital Contributions made
during the immediately preceding twelve (12) month period. The rights granted in
this Section 17.2 (d) must be exercised by CPL or CRR by sending written notice
(the "Election Notice") to WTLPS or WPCLP of its election to purchase WTLPS's or
WPCLP's Ownership Interest within a period of thirty (30) days following its
receipt of the Disposition Notice from WTLPS or WPCLP. In the event CPL or CRR
fails to exercise its right to purchase WTLPS's or WPCLP's interest by sending
the Election Notice within the required time period or fails to close on the
acquisition of such interest within ninety (90) days following WTLPS's or
WPCLP's receipt of the Election Notice (if received by WTLPS or WPCLP within the
required thirty (30) day period), WTLPS or WPCLP shall have the right to
transfer such interest at any price that it is able to obtain as long as the
transfer occurs within a period of eight (8) months following the date of the
Disposition Notice. In the event CPL or CRR elects to exercise its rights to
purchase as set forth in this Section 17.2(d), as additional consideration for
the purchase, CPL or CRR shall release WTLPS or WPCLP from its obligation to
reimburse CPL or CRR for the initial working capital as set forth in Section
6.1, but only as to that portion of WTLPS's or WPCLP's Ownership Interest that
is acquired by CPL or CRR. This provision shall bind any Transferee of WTLPS or
WTLPS pursuant to Section 17.3, below, mutatis mutandis.
17.3 Transfers to Affiliates
17.3(a) General. Except as described in Section 17.3(b) there shall
be no restrictions on the disposition of all or any part of a Partner's
Ownership Interest in the Partnership to an Affiliate if such Affiliate
expressly assumes the obligations of this Agreement by
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executing and delivering one (or at the request of the Partnership, more)
counterpart of this Agreement to each other Partner and shall execute such other
documents as the other Partners may reasonably request relating to the
Transferring Partner's obligations and liabilities concerning the Partnership.
17.3(b) Restrictions. Except as permitted by Section 17.3(c), no
Partner or Related Company shall sell, assign, transfer, or otherwise dispose of
its controlling interest in its Related Company voluntarily or by operation of
law, except to a company wholly owned, directly or indirectly, by such Partner
or an Affiliate of the Partner, unless it shall have obtained the written
consent of all the other Partners or shall have complied with the procedures set
out below. Subject to the foregoing, any Partner ("Selling Partner") may sell
its controlling interest in a Related Company provided that such proposed sale
is not made as a part of a transaction involving the sale of any item other than
such interest, unless the market value of such controlling interest can be
separately identified and demonstrated and the Related Company has no assets
other than its Ownership Interest in the Partnership, by giving written notice
to each other Partner ("Remaining Partners") not less than forty-five (45) days
prior to the effective date of such disposition, stating the interest to be sold
and the price and terms of sale and identifying the proposed transferee (herein
the "Proposed Transferee"). Such notice, to be effective, shall be accompanied
by an agreement executed by the Selling Partner and the Proposed Transferee (the
"Purchase Agreement") containing all the terms and conditions of the proposed
sale, which agreement demonstrates that completion of the sale is contingent
only upon (i) the non-exercise of rights of first refusal under this Section
17.3(b), (ii) the obtaining of any required government approvals and (iii) the
satisfaction of a standard due diligence review, including such items as title,
environmental, and certain other specifically itemized defects. The Remaining
Partners shall then
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have first options to purchase all such interests on the same terms as in the
Purchase Agreement in the proportion which their then-existing Ownership
Interest in the Partnership bears to the Ownership Interest of all Remaining
Partners and those desiring to do so shall exercise such options by giving
written notice thereof to the Selling Partner and all other Remaining Partners
within thirty (30) days after the notice described above is given. Any interest
as to which such first options are not exercised shall be deemed re-offered to
the Remaining Partners who exercised their first options, and such Remaining
Partners shall, for a period of ten (10) days from the expiration of the thirty
(30) day period, have second options to purchase the same (at the same price, on
the same terms, and by notice as stated above delivered within the ten (10) day
period) in the proportion which each Partner's then-existing Ownership Interest
in the Partnership bears to the ownership Interests of all Partners exercising
their first options or in such proportions as they may mutually agree upon. Any
interest not elected to be purchased during the ten (10) day period shall remain
under option to those Remaining Partners who have exercised both the first and
second options, to be purchased proportionately as stated above or in such other
manner as such Remaining Partners may mutually agree upon, but notice of
election to purchase all of the interest originally offered must be given to the
Selling Partner and the Remaining Partners within forty-five (45) days from the
notice of offer given by the Selling Partner. If elections to purchase all of
the offered interest have been made within the forty-five (45) day period, those
Partners electing to purchase shall be irrevocably obligated to execute
agreements in the form of the Purchase Agreement with the Selling Partner and
promptly thereafter pay the purchase price to the Selling Partner for their
proportionate share of stock of the Related Company. If notices of elections to
purchase less than all of the offered interest have been given at the expiration
of the forty-five (45) day period, the Selling Partner may complete the sale of
all of the offered interest to the Proposed
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Transferee on the same terms as contained in the Purchase Agreement, at any time
within one-hundred twenty (120) days thereafter. If the sale to the Proposed
Transferee is not completed within the one-hundred twenty (120) day period, all
of the interest originally offered shall again become subject to the sale
restrictions in this Section 17.3(b).
17.3(c) Non-application of Section 17.3(b) Restrictions. The
restrictions in Section 17.3(b), above, shall not apply to a transfer of an
interest in a Related Company if, at the time the transfer is consummated, any
one (or more) of the' following criteria is met:
(i) The proposed purchaser of the interest in the
Related Company is an Affiliate of the Selling Partner; or
(ii) The Related Company owns, in addition to its
ownership Interest in the Partnership, assets with a fair market value of at
least $50 million; or
(iii) The proposed purchaser of the interest in the
Related Company purchases from the Selling Partner or one or more Affiliates of
the Selling Partner, concurrently with its purchase of the Related Company,
other assets with a fair market value in excess of $50 million.
If a Selling Partner desires to make a transfer permitted by this
Section 17.3(c), it shall send a notice of such transfer to each Remaining
Partner at least seven (7) days before the effective date of such transfer along
with a certificate signed by the President or Chief Financial Officer of the
Selling Partner certifying facts which affirmatively show that the transfer
meets the requirements of subparagraph "(i)", "(ii)" or "(iii)" above.
17.4 Limitation on Dispositions to Avoid Termination.
Notwithstanding anything in this Agreement to the contrary, a Partner shall have
the right to effect a disposition of its Ownership Interest, with consent of the
other Partners, such consent not to be unreasonably
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withheld, to any Person or entity that, so long as when aggregated with the
total of all other dispositions of ownership Interests within the preceding
twelve (12) months, said disposition does not result in the Partnership being
considered to have terminated within the meaning of Section 708(b)(1)(B) of the
Code. Any Partner transferring all or any portion of its Ownership Interest
shall promptly notify the Tax Matters Partner of such transfer.
17.5 Relative Liabilities of Old and New Partners.
Partners shall be liable as to other Partners for Partnership debts
and obligations in proportion to their relative Ownership Interests in the
Partnership.
18. Extensions to and Expansion of the System
18.1 Extensions to the System. From time to time the Partnership
will consider extensions to the System for the purpose of connecting new sources
of LPG. The Partnership may fund such extensions if economically viable. Funding
for such projects will be approved by the Partnership Committee pursuant to
Section 8.6(c).
18.2 Expansions. From time to time the Partnership will consider
expansions to the System for the purpose of increasing the capacity of the
system or portions thereof. The Partnership may fund such expansions if
economically viable. Funding for such projects will be approved by the
Partnership Committee pursuant to Section 8.6(c).
Any Partner may propose such expansions at any time with a
written request to the Partnership Committee. The expansion proposal shall
include a good faith presentation of the forecasted volumes which warrant the
expansion , an estimate of the construction costs and the estimated time to
complete the project. The Operator may be requested
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to provide assistance and information needed for the preparation of the
proposal. Additionally, the Operator will be asked to coordinate the project
once approved.
19. Default by Partners
19.1 Failure to Make Contributions. Capital contributions not made
when due shall bear interest at the lower of (i) two percent (2%) plus the prime
rate of interest charged by the Chase Manhattan Bank (N.A.) at the time the
contribution was due, or (ii) the maximum legal rate of interest. While any
Partner is in material default hereunder in any of its obligations to make
capital contributions, such Partner shall have:
(a) No right to vote as a Partner and its Member on the
Partnership Committee shall have no right to vote (and the requirements for
passage or approval of items and for quorums shall be modified as necessary),
(b) No right to receive any portion of any distributions made by
the Partnership, and
(c) A continuing duty to pay its share of all future capital
contributions called for by the Partnership pursuant to this Agreement.
19.2 Expulsion of Partners. In the event any Partner commits a
material default of its obligations under this Agreement and fails to commence
reasonable steps to remedy the default within sixty (60) days after its receipt
of written notice specifying in reasonable detail the default and the reasonable
actions that must be taken to cure such default, which notice shall be prepared
and sent at the direction of the Partnership Committee, (which, for all
determinations under this Article 19, shall exclude the Ownership Interest of
the Partner in default) or becomes bankrupt or otherwise enters into a
proceeding for general relief from its creditors, the Partners not in default
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may, in addition to any other remedy they may have by law or in equity, by vote
of the Partnership Committee as provided in Section 8.5(n), expel the defaulting
Partner effective as of any future date they specify.
19.3 Treatment of Book Capital Account of Expelled Partner. Any
Partner so expelled shall, within a reasonable period determined by the
Partnership which may include installment payments over five (5) years after the
date the expulsion becomes effective, be paid the positive balance, if any, in
its Book Capital Account after: (a) closing out its profits and losses (as
determined under GAAP) for Book Capital Account purposes; and (b) further
subtracting from its Book Capital Account the expelled Partner's or its
Affiliate's share of any then existing liabilities of the Partnership, whether
or not then due and owing, and any actual damages suffered by the Partnership
and other Partners by reason of the default. If the balance in the expelled
Partner's Book Capital Account is positive after the closing out of its profits
and losses and the subtraction of its (or its Affiliate's) share of then due and
owing liabilities of the Partnership, as well as the payment of any damages
(which subtracted items are herein referred to as "Current Liabilities"), but
such balance is less than the total of such former Partner's (or its
Affiliate's) share of any other potential existing Partnership liabilities which
are not then due and owing (herein "Non-Current Liabilities"), the Partnership
shall retain such part of the expelled Partner's Book Capital Account as is
equal to the amount of the expelled Partner's share of such Non-Current
Liabilities, until all such liabilities are paid in full. Such retained moneys
may be invested and reinvested as the Partnership deems appropriate and shall
constitute a security interest in the possession of the Partnership to secure
the payment of such Non-Current Liabilities of the expelled Partner, and such
expelled Partner agrees that such security interest in its Book Capital Account
shall pass to the Partnership and the Partnership shall take possession thereof
for the
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purpose of obtaining perfection of such security interest on the earlier of the
date of its expulsion or the date the expelled Partner enters voluntary
bankruptcy proceedings of any type or becomes bankrupt. The Partnership shall
apply all amounts retained from the expelled Partner's Book Capital Account
(including any interest earned thereon) to the payment of such Non-Current
Liabilities to the extent that such payments would have constituted a proper
charge against the Book Capital Account of such expelled Partner had it not been
expelled. At the time that all Non-Current Liabilities of the Partner shall have
been paid in full, the Partnership shall refund to the expelled Partner any
funds remaining on deposit with the Partnership from such Partner's Book Capital
Account.
19.4 Other Obligations of Expelled Partner. From the date of its
expulsion, the expelled Partner shall have no Ownership Interest in the
Partnership and shall not share in its profits and losses. Such expelled Partner
shall, however, be and remain directly liable for payment of (in addition to and
after application of any moneys retained by the Partnership from its Book
Capital Account) its Partnership share of any Current Liabilities and Non-
Current Liabilities that existed as of the date of such Partner's expulsion
until such liabilities are paid in full, and shall remain fully responsible for
any obligations it may have incurred pursuant to Article 15.
20. Dissolution and Winding Up of the Partnership
20.1 Dissolution. The dissolution of the Partnership shall be caused
only by the following events:
(a) The written consent of all Partners to dissolve the
Partnership.
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(b) The withdrawal (other than pursuant to a sale or other
disposition by a Partner of its Ownership Interest as authorized herein),
expulsion, dissolution or bankruptcy of any Partner or bankruptcy of the
Partnership.
(c) The sale by the Partnership of all or substantially all of
its assets.
(d) By any event which makes it unlawful for the business of the
Partnership to be carried on or for the Partners to carry it on in partnership.
(e) By expiration of the Partnership term as provided in Article
4.
(f) By court decree of dissolution as provided by the Act.
Each Partner covenants and agrees that it will not cause a dissolution of
the Partnership, directly or indirectly by (i) bankruptcy, (ii) being expelled
pursuant to Section 19.2 of this Agreement, (iii) withdrawal from the
Partnership, (iv) in the case of a partnership or a corporation, the taking of
any voluntary action or inaction to dissolve itself, or (v) breaching any other
material provision of this Agreement. It is understood that should any Partner
or Partners dissolve the Partnership in contravention of this provision, that
Partner or Partners shall be liable to the other Partners for damages for
wrongful dissolution. Such Partner also irrevocably waives any right it may have
under Texas law to be paid the value of its Ownership Interest.
For the purposes of this Section 20.1, a bankruptcy occurs whenever (a) an
entity makes an assignment for the benefit of all or substantially all of its
creditors or applies for the appointment of a trustee, liquidator or receiver of
any substantial part of its assets, or commences any proceeding relating to
itself under any bankruptcy, reorganization or similar laws (including the
Federal Bankruptcy Code of 1978, Title 11 of the United States Code and any
state insolvency act), or any such application is filed or proceeding is
commenced against such entity and such entity indicates its consent thereto; or
(b) an order, judgment or decree is entered by any
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court of competent jurisdiction, appointing a trustee, liquidator or receiver
for an entity or for all or a substantial part of such entity's assets and such
order, judgment or decree shall continue unstayed and in effect for any period
of one hundred eighty (180) consecutive days.
20.2 Continuance of Business After Dissolution. In the event the
Partnership is ever dissolved as a result of the withdrawal, bankruptcy,
dissolution, legal incompetency, expulsion or a default or other act in
contravention of this Agreement by one or more (but less than all) of the
Partners (hereinafter referred to as the "Dissolving Partner" or "Dissolving
Partners"), then the remaining Partner or Partners agree to continue the
business of the Partnership and to form a new Partnership under the terms of
this Agreement for the purpose of continuing the business. The resulting new
Partnership will be owned by all Partners other than any Dissolving Partner in
the same relative proportion as their previous Ownership Interests. However,
such Partners other than any Dissolving Partner may, by unanimous agreement,
accept a new Partner or Partners to take the place of the Dissolving Partner or
Dissolving Partners.
20.3 Liquidation of the Partnership. Upon the dissolution of the
Partnership under circumstances in which the business is not continued as
provided in Section 20.2, no further business shall be conducted by the
Partnership, except for the taking of such action as shall be necessary for the
winding up of its business and affairs, the liquidation of its assets and/or the
distribution of its assets to the Partners. Unless otherwise decided by the
Partnership Committee, the Operator shall be the liquidating trustee for the
Partnership. The winding up and liquidation of the Partnership shall consist of
the sale of the properties of the Partnership, at the conclusion of which the
Partnership shall terminate.
20.4 Winding Up of the Partnership. Upon the dissolution of the
Partnership, the proceeds from the liquidation of the assets of the Partnership
and collection of the receivables of
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the Partnership together with assets distributed in kind, to the extent
sufficient, shall be applied and distributed in the following order of priority:
(a) To the payment and discharge of all of the Partnership's
debts and liabilities and the expenses of liquidation;
(b) To the creation of any reserves that the liquidating trustee
and Operator deem necessary for any contingent or unforeseen liabilities or
obligations of the Partnership;
(c) To the payment and discharge of all of the Partnership's
debts and liabilities owing to Partners, but if the amount available for payment
is insufficient, then pro rata in accordance with the amounts of these debts and
liabilities; and
(d) To the Partners with positive F.I.T. Capital Accounts in
accordance with the ratio of their F.I.T. Capital Accounts.
21. Alternative Dispute Resolution Procedures.
Any dispute, controversy or claim arising out of or relating to this
Partnership Agreement, or the breach of performance hereof, including but not
limited to, any disputes concerning the interpretation of the terms and
provisions hereof, but excluding any matter which is within the exclusive
jurisdiction of, and is decided by, a regulatory agency having jurisdiction over
the Partnership with respect to such matter, shall be resolved through the use
of the following procedures or any other procedures mutually agreed to in
writing by each of the Partners:
(a) The parties will initially attempt in good faith to resolve any
disputes, controversy or claim arising out of or relating to this Agreement.
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(b) Should the parties directly involved in any dispute, controversy
or claim be unable to resolve same within a reasonable period of time, such
dispute, controversy or claim shall be submitted to the Partnership Committee
with such explanation or documentation as the Parties deem appropriate to aid
the Partnership Committee in their consideration of the issues presented. The
date the matter is first submitted to the Partnership Committee shall be
referred to as the "Submission Date." The Partnership Committee representatives
shall attempt in good faith, through the process of discussion and negotiation,
to resolve any dispute, controversy, or claim presented to it within forty-five
(45) days after the Submission Date.
(c) If the Partnership Committee representatives cannot so resolve
any dispute, controversy, or claim submitted to it within forty-five (45) days
after the Submission Date, the Parties shall attempt in good faith to settle the
matter by submitting the dispute, controversy or claim to mediation within sixty
(60) days after the Submission Date using any mediator upon which they mutually
agree. If the Parties are unable to mutually agree upon a mediator within
seventy-five (75) days after the Submission Date, the case shall be referred for
mediation to the office of Judicial Arbitration and Mediation Services, Inc.
("JAMS") in Houston, Texas. The cost of the mediator will be split equally
between the Parties to the controversy unless they agree otherwise in writing.
(d) If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) days of the initiation of such procedure,
or if either Partner will not participate in such mediation, either Partner may
request that the matter be resolved through arbitration by submitting a written
notice (the "Arbitration Notice") to the other. Any arbitration that is
conducted hereunder shall be governed by the Federal Arbitration Act, 9 U.S.C.
(S) 1 et seq., and will not be governed by the arbitration acts, statutes or
rules of any other jurisdiction.
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(e) The Arbitration Notice shall name the noticing Partner's
arbitrator and shall contain a statement of the issue(s) presented for
arbitration. Within fifteen (15) Days of receipt of an Arbitration Notice, the
other Partner shall name its arbitrator by written notice to the other and may
designate any additional issue(s) for arbitration. The two named arbitrators
shall elect the third arbitrator within fifteen (15) Days after the date on
which the second arbitrator was named. Should the two arbitrators fail to agree
on the selection of the third arbitrator, either Partner shall be entitled to
request the Senior Judge of the United States District Court for the Southern
District of Texas to select the third arbitrator. All arbitrators shall be
qualified by education or experience within the regulated oil or liquid
petroleum gas pipeline industry to decide the issues presented for arbitration.
No arbitrator shall be a current or former director, officer or employee of
either Partner, or its affiliates; an attorney (or member of a law firm) who has
rendered legal services to any Partner, or its affiliates, within the preceding
three years; or an owner of any of the common stock of either Partner or its
Affiliates.
(f) The three arbitrators shall commence the arbitration proceedings
within twenty-five (25) days following the appointment of the third arbitrator.
The arbitration proceedings shall be held in Houston, Texas at a mutually
acceptable site. The arbitrators shall have the authority to establish rules
and procedures governing the arbitration proceedings. Each Partner shall have
the opportunity to present its evidence at the hearing. The arbitrators may
call for the submission of pre-hearing statements of position and legal
authority, but no post-hearing briefs shall be submitted. After the
presentation of the evidence has concluded, each Partner shall submit to the
arbitration panel a final offer of its proposed resolution of the dispute. If
the issue under consideration is limited to a determination of an amount of
money owed by one Partner to the other, the arbitration panel shall be charged
to select from the two proposals the one which
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the panel finds to be the most reasonable and consistent with the terms and
conditions of this Agreement, and the arbitration panel shall not average the
Parties' proposals or otherwise craft its own remedy. The arbitration panel
shall not have the authority to award punitive, exemplary or consequential
damages. The arbitrators' decision must be rendered within thirty (30) days
following the conclusion of the hearing or submission of the evidence, but no
later than 90 days after appointment of the third arbitrator.
(g) The decision of the arbitrators or a majority of them, shall be
in writing and shall be final and binding upon the Parties as to the issue(s)
submitted. The cost of the hearing shall be shared equally by the Parties, and
each Partner shall be responsible for its own expenses and those of its counsel
or other representatives. Each Partner hereby irrevocably waives, to the
fullest extent permitted by law, any objection it may have to the arbitrability
of any such disputes, controversies or claims and further agrees that a final
determination in any such arbitration proceeding shall be conclusive and binding
upon each Partner. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The prevailing Partner shall
be entitled to recover reasonable attorneys' fees and court costs in any court
proceeding relating to the enforcement or collection of any award or judgment
rendered by the arbitration panel under this Agreement.
(h) All deadlines specified herein may be extended by mutual
agreement of the Parties. The procedures specified herein shall be the sole and
exclusive procedures for the resolution of disputes between the Parties arising
out of or relating to this Agreement; provided, however, that a Partner may seek
a preliminary injunction or other preliminary judicial relief if in its judgment
such action is necessary to avoid irreparable damage. Despite such action, the
Parties will continue in good faith in the procedures specified herein. All
applicable statutes of
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limitation, including without limitation, contractual limitation periods
provided for in this Agreement, shall be tolled while the procedures specified
in this Section are pending. The Parties will take all actions, if any,
necessary to effectuate the tolling of any applicable statutes of limitation.
22. Further Assurance
Each of the Partners agrees to execute and deliver all such other
additional instruments and documents and to do such other acts and things as may
be necessary more fully to effectuate this Agreement and the Partnership created
hereby and to carry on the business of the Partnership in accordance with this
Agreement.
23. Waiver
No waiver by any Partner of the performance of any provision,
condition or requirement herein shall be deemed to be a waiver of, or in any
manner release the other Partners from, performance of any other provision,
condition or requirement herein; nor be deemed to be a waiver of, or in any
manner release the other Partners from future performance of the same provision,
condition, or requirement; nor shall any delay or omission of any Partner to
exercise any right hereunder in any manner impair the exercise of any such right
or any like right accruing to it thereafter.
24. Independent Conduct
Each of the Partners and their respective Affiliates reserve and
retain the right to engage in all businesses and activities of any kind
whatsoever (regardless of whether the same may be in competition with the
business and activities of the Partnership), and to acquire and own
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all assets however acquired and wherever situated, and to receive compensation
or profit therefrom, for their own respective accounts and without in any manner
being obligated to disclose such business and activities or assets or
compensation or profit to the other Partners or to the Partnership.
25. Applicable Law
THIS AGREEMENT, OTHER DOCUMENTS EXECUTED AND DELIVERED PURSUANT
HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES WITH RESPECT TO THIS
AGREEMENT, SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE
OF TEXAS WITHOUT REGARD TO RULES CONCERNING CONFLICTS OF LAW.
26. Subject to Applicable Law
This Agreement and the obligations of the Partners hereunder are
subject to all applicable laws, rules, court decisions, orders and regulations
of governmental authorities having jurisdiction.
27. Severability
Any provision of this Agreement prohibited by applicable law shall
be invalid to the extent of such prohibition unless it is determined by the
Partnership Committee, in accordance with Section 8.6, that such prohibition
invalidates the purposes or intent of this Agreement.
28. Headings
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The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
29. Binding Effect
This Agreement and the covenants, obligations, undertakings, rights
and benefits shall be binding on and inure to the benefit of the respective
successors and assigns of the Partners, except to the extent of any contrary
provision in this Agreement.
30. Benefits of Agreement Restricted to Parties
Nothing in this Agreement, expressed or implied, shall give or be
construed to give any Person, other than the parties hereto and their successors
and assigns, any legal or equitable right, remedy or claim under or in respect
to this Agreement or under any covenant, conditions or provisions contained
herein; and all such covenants, conditions and provisions shall be for the sole
benefit of the parties hereto.
31. Counterparts
The Partners may execute the Agreement in two or more counterparts,
which shall, in the aggregate, be signed by all of the Partners; each
counterpart shall be deemed an original instrument as against any Partner who
has signed it.
32. Entire Agreement
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This Agreement constitutes the entire agreement between the
Partners concerning the subject matter hereof and the same supersedes any prior
understanding or written or oral agreements relative to said matter.
33. Amendment
This Agreement may be amended only by agreement in writing of all
the Partners.
34. Notices
All notices required or permitted under this Agreement to be given
to any Partner or the Partnership shall be in writing and shall be deemed given
when personally delivered to the individual or individuals designated in writing
by that Partner or, for notices to the Partnership, to the Secretary of the
Partnership Committee; when sent by telex or facsimile; or five (5) days after
being mailed, postage prepaid, certified or registered, return receipt requested
and addressed as specified in writing by that Partner or, for notices to the
Partnership, to the Secretary of the Partnership Committee; provided, that, in
the case of notices which are mailed and which require the party or parties
being given notice to take action within a specified time period, the party
giving notice shall make a good faith effort to contact the party or parties
being given notice by telephone during the five (5) day period following mailing
to advise them of the mailing of the notice. The persons initially designated by
each Partner for receipt of notice and the address for such notice is shown on
the execution page of this Agreement next to each Partner's signature.
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Such designated person or address may be changed by a Partner by proper notice
to all other Partners and the Secretary of the Partnership Committee.
ACCEPTED and AGREED to on the date above written.
WTLPS, Inc.
WTLPS, Inc.'s Address for Notices:
By:_______________________
Title: President WTLPS, Inc.
Attention: President
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
Phone: 713-507-________
Fax: 713-507-6808
with a copy to:
WTLPS, Inc.
Attention: Vice President & General Counsel
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
Phone: 713-507-3725
Fax: 713-507-6834
WPC LP, Inc.
WPCLP, Inc.'s Address for Notices:
By:______________________
Title: President WTLPS, Inc.
Attention: President
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
Phone: 713-507-________
Fax: 713-507-6808
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with a copy to:
WTLPS, Inc.
Attention: Vice President & General Counsel
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
Phone: 713-507-3725
Fax: 713-507-6834
Chevron Pipe Line Company Chevron Pipe Line Company's
Address for Notices
By:_______________________
Title: CHEVRON PIPE LINE COMPANY
Attention: W. E. Erwin
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
PHONE: 713-363-5449
FAX: 713-363-7214
Chevron Raven Ridge Pipe Line Chevron Raven Ridge Pipe Line Company's
Company Address for Notices
By:_______________________
Title: CHEVRON PIPE LINE COMPANY
Attention: W. E. Erwin
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
PHONE: 713-363-5449
FAX: 713-363-7214
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EXHIBIT A
OWNERSHIP INTERESTS
<TABLE>
<CAPTION>
Partner Type of Partnership Interest Ownership Interest
- ------- ---------------------------- -----------------
<S> <C> <C>
WTLPS, Inc. General Partner 00.49%
Chevron Pipe Line Company General Partner 00.51%
WPC LP, INC. Limited Partner 48.51%
Chevron Raven Ridge Pipe Line Company Limited Partner 50.49%
</TABLE>
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EXHIBIT B
MAP OF THE SYSTEM
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EXHIBIT C
FINANCIAL RESPONSIBILITY REQUIREMENTS
Each potential new Partner in the West Texas LPG Pipeline Limited Partnership
must demonstrate adequate financial responsibility itself or through a Credit
Worthy Affiliate. Such credit worthiness may be demonstrated by satisfying one
of the four methods of meeting financial responsibility described below.
Method I
The Partner or its Affiliate has senior unsecured debt outstanding which is
rated by:
(a) Moody's Investors Services Baa3 or better, and
(b) Standard and Poors BBB or better
Method II
If a Partner or its Affiliate fails to meet the above test, then the
following criteria will be applied to the Partner's or its Affiliate's financial
statements:
1. Debt/Capital less than or equal to 55%; or
2. Debt/EBITDA less than or equal to 3.5; or
3. Net worth greater than or equal to $250 million; or
4. Current assets/current liabilities greater than or equal to 1.0.
If the Partner or Affiliate meets any one of the above criteria, then such
Partner or Affiliate shall be deemed to have adequate financial capability to
fulfill the obligations of a Partner.
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EXHIBIT D
ENABLING AGREEMENT
This Agreement, dated as of _____________, 199__, among WTLPS, Inc., a Delaware
corporation; WPC LP, Inc., a Delaware corporation; Chevron Pipe Line Company, a
Delaware corporation; Chevron Raven Ridge Pipe Line Company, a Delaware
corporation (hereinafter collectively the "Owners") and_________, a_____________
corporation (hereinafter "C"), is made with reference to the following facts and
circumstances.
____________________, a______________ corporation ("X"), a wholly owned
subsidiary of C will become an Partner in the West Texas LPG Pipeline Limited
Partnership (the "Partnership") by executing the West Texas LPG Pipeline Limited
Partnership Agreement (the "Partnership Agreement ").
The parties desire to set forth the commitment of X to the Owners.
NOW THEREFORE, the parties agree as follows:
1. C will cause and enable X to comply at all times with the terms
and conditions of the Partnership Agreement, as it may be amended from time to
time. In the event X breaches the Partnership Agreement, C shall indemnify and
hold harmless the Owners for all costs, losses, damages and expenses caused by
such breach.
2. This Enabling Agreement is executed solely for the benefit of the
Owners and the Partnership and no other party shall have any rights hereunder.
3. This Enabling Agreement shall remain in effect so long as the
Partnership Agreement is in effect.
4. This Enabling Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of such
counterparts shall together constitute but one document.
EXECUTED as of the date first above stated.
WTLPS, Inc. Chevron Pipe Line Company
By: By:
----------------------- --------------------------
Title: Title:
--------------------- ------------------------
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WPC LP, Inc. Chevron Raven Ridge Pipe Line Company
By: By:
----------------------- ---------------------------
Title: Title:
-------------------- ------------------------
"C"
By:
-----------------------
Title:
--------------------
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EXHIBIT E
TAX MATTERS
1. Tax Returns, Proceedings and Elections. Tax returns, proceedings, and
elections shall be governed by the provisions of this Exhibit E as it may be
amended from time to time by a vote of the Partnership Committee.
(a) Chevron Pipeline Company is designated the tax matters Partner
("TMP") as defined in Section 6231(a)(7) of the Code. The designation of TMP
shall be effective only for operations conducted by the Partners pursuant to
this Agreement.
(b) The TMP shall cause to be prepared all necessary federal, state,
and local Partnership income, excise, and property tax returns and, except for
excise taxes, furnish a copy of the proposed return to the Partners for their
review not later than one month prior to the due date, including extensions, for
filing such returns. The TMP shall timely file such returns and shall provide
the Partners with schedules which are consistent with the treatment of all items
on those returns. The TMP agrees to use its best efforts in the preparation and
filing of such tax returns but, in doing so, shall incur no liability to any
Partner with respect to such returns or any elections relating thereto.
(c) The Partners shall furnish the TMP with such information as it may
reasonably request to aid in the preparation of the Partnership returns and
which will permit it to provide the Internal Revenue Service with sufficient
information so that proper notice can be mailed-to such Partners as provided in
Section 6223 of the Code.
(d) To the extent and in the manner provided by treasury regulations,
the TMP shall keep each Partner informed of all administrative
and judicial proceedings for the adjustment of Partnership items (as defined in
Section 6231(a)(3) of the Code) at the Partnership level.
(e) If an administrative proceeding contemplated under Section 6223 of
the Code has begun, the Partners shall notify the TMP of their treatment of any
Partnership Item on their federal income tax return in a manner which is or may
be inconsistent with the treatment of that item on the Partnership return.
(f) The TMP shall not enter into any extension of the period of
limitations as provided under Section 6229 of the Code without the prior written
consent of the Partners.
(g) Any Partner who enters into a settlement agreement with the
Secretary of the Treasury with respect to Partnership Items shall notify the
other Partners of such settlement agreement.
(h) The TMP shall not bind other Partners to a settlement agreement
without getting the concurrence, in writing, of the Partners which will be bound
by such agreement.
(i) The TMP shall notify all Partners of any intention to file a
petition with a court for a readjustment of any Partnership Items. Such notice
shall be given within a reasonable time so that the Partners may participate in
choosing the forum for the filing of any petition. This provision shall not
apply to any Partner who does not have an interest in the outcome. Whether a
Partner has an interest in the outcome will be determined using the standard in
Section 6226(d) of the Code. Further, the TMP or other Partner who had brought
the action under Section 6226 of
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the Code, shall provide other Partners with notice of any intention to seek
review of a determination by any court under that Section.
(j) No Partner may file a request for an administrative adjustment of
Partnership Items for any Partnership taxable year pursuant to Section 6227 of
the Code without first notifying all other Partners. If the other Partners agree
with the requested adjustment, the TMP shall file the request for administrative
adjustment on behalf of the Partnership.
(k) If any part of an administrative adjustment request filed by a
Partner is not allowed by the Internal Revenue Service, the Partner filing such
request shall seek the concurrence of other Partners with regard to the filing
of a petition with a court and with regard to seeking review of the
determination by any court in the same manner as provided in Section l(i) of
this Exhibit.
(l) The TMP and other Partners shall use their best efforts to comply
with the responsibilities as outlined here and in Sections 6222 through 6233 of
the Code but shall incur no liability to any other Partner for failure to
fulfill such responsibilities.
(m) The provisions of this Exhibit E shall survive the termination of
the Partnership or the termination of any Partner's interest in the Partnership
and shall remain binding on the Partners for a period of time necessary to
resolve with the Internal Revenue Service of the Department of the Treasury any
and all matters regarding the federal income taxation of the Tax Partnership and
any applicable state income tax matters.
2. Elections. The parties agree that the TMP is directed to make the
following elections on behalf of the Partnership in the appropriate returns of
the Partnership prepared pursuant to Section 1 above:
(a) To adopt the accrual method of accounting;
(b) To compute the allowance for depreciation or cost recovery using
the shortest permissible life and most rapid recovery method permitted under the
Code;
(c) To elect the Calendar Year as the Fiscal Year of the Partnership;
(d) To elect in a timely manner pursuant to Secion 266 of the Code
and the Treasury Regulations thereunder to charge to the capital account with
respect to the property acquired or constructed by the Partners under this
Agreement all taxes and carrying charges including interest on indebtedness,
which may be capitalized thereunder;
(e) To elect to amortize all organization costs of the Partnership
under Section 709 of the Code; and
(f) To make such other elections as the Partnership Committee may
direct.
3. Section 754 Election. Upon the transfer of an interest in the
Partnership, the Partnership shall make an election pursuant to Section 754 of
the Code to adjust the basis of Partnership Property.
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EXHIBIT 10.24
PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE STAMPED
'CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE COMMISSION,' THE APPROPRIATE SECTION HAS BEEN MARKED AT THE
APPROPRIATE PLACE AND IN THE MARGIN WITH A STAR (*).
OPERATING AGREEMENT
BETWEEN
WEST TEXAS LPG PIPELINE LIMITED PARTNERSHIP
AND
CHEVRON PIPE LINE COMPANY
THIS AGREEMENT is made and entered into as of September 1, 1996 by and between
West Texas LPG Pipeline Limited Partnership, a Texas limited partnership
(hereinafter referred to as "Company"), and Chevron Pipe Line Company, a
Delaware Corporation (hereinafter referred to as "Operator").
WHEREAS, Company is the owner of certain LPG pipeline facilities ("Facilities")
more particularly identified in Attachment II and Attachment III; and
WHEREAS, Company does not have a working staff to operate the Facilities and
desires to engage Operator in these respects;
NOW, THEREFORE, in the consideration of the premises and mutual covenants
contained in this Agreement, Company and Operator agree as follows:
Section 1. Definitions
As used in this Agreement, the following words and terms shall have the meanings
set forth:
(a) "Accounting Procedure" means the accounting procedure set forth in
Attachment I, hereof.
(b) "AFE" means an approval for expenditure in the form approved by Company.
(c) "Affiliate" means with respect to any Person, (i) any other Person which
beneficially owns, directly or indirectly, 50% or more of such Person's stock or
50% or more of the ownership interest entitled to vote in such Person or (ii)
any other Person as to which 50% or more of the voting stock or 50% or more of
the ownership interest entitled to vote therein, is beneficially owned, directly
or indirectly, either by such Person or by an Affiliate of such Person as
defined in the preceding clause (i).
<PAGE>
(d) "Agreement" means this Operating Agreement together with all Attachments.
(e) "Capital Commitment Budget" means the capital budget as further described
in Section 5A. of this Agreement.
(f) "Capital Expenditure Forecast" means the capital expenditure forecast as
further described in Section 5B. of this Agreement.
(g) "Cash Operating Costs" means amounts payable to Operator under Section 3 of
this Agreement.
(h) "Confidential Information" means any information relating to the identity
of shippers using the Facilities, the nature, kind, quantity, destination or
consignee or routing of Products using the Facilities, or any other information
which is in writing and has been labeled by Company as confidential.
Confidential Information shall not include any information which is acquired by
Operator in the course of its activities outside of the scope of this Agreement
or which becomes part of the public knowledge or literature without breach of
this Agreement.
(i) "Costs" means all costs charged to the Company as provided in the
Accounting Procedure.
(j) "Expenditure Authorities" means the expenditure authorities described in
Section 6. of this Agreement.
(k) "Facilities" means the facilities identified in Attachment II and
Attachment III hereto.
(l) "Force Majeure" means an occurrence not within the control of the party and
which by the exercise of reasonable efforts such party is unable to prevent or
overcome, and shall include, but not be limited to, acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, hurricanes, storm warnings requiring evacuation
of facilities, arrests or restraints of the government, either federal or state,
civil or military, civil disturbances, explosions, sabotage, breakage or
accident to equipment, machinery or lines of pipe, extreme heat or cold weather,
freezing of machinery, equipment or lines of pipe, electric power shortages,
inability of any Party to obtain necessary materials and supplies, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), temporary cleaning or testing of facilities, temporary failure of
supply, or any other causes, whether of the kind herein enumerated or otherwise,
which were not reasonably foreseeable on the effective date of this Agreement,
and which are not within the control of the Party claiming suspension and which
such Party is unable to overcome by the exercise of due diligence. The term
"Force Majeure" shall also include those instances in which either Party hereto
is required to furnish materials and supplies for the purpose of constructing
and maintaining facilities or is required to secure permits or permission from
any governmental agency to enable such Party to acquire, or the delays on the
part of such Party in acquiring, at reasonable cost and after the exercise of
due diligence, such materials and supplies, permits and permissions. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely
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within the discretion of the Party having the difficulty, and that the above
requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of opposing parties when such course is inadvisable in the
discretion of the Party having difficulty. The term "Force Majeure" shall also
include any such event occurring with respect to the facilities or services of
either Operator's or Company's third-party suppliers or customers delivering or
receiving any product, fuel, feedstock, or other substance necessary to the
continuous operation of either Party's plants or facilities or performance of
such Party's obligations, and shall also include curtailment or interruption of
deliveries or service by such third-party suppliers or customers as a result of
(i) another event of Force Majeure or (ii) a breach by such third-party under
the applicable agreement(s).
(m) "GAAP" means generally accepted accounting principles.
(n) "Insurance Manual Rates" means the published insurance industry recognized
computations of standard accepted insurance rates.
(o) "LPG" means liquefied petroleum gas or petroleum products, namely, natural
gasoline, ethane, propane, isobutane, normal butane, and pentanes or mixtures
thereof, recovered from gasoline recovery plants and gas recycling plants.
(p) "Major Maintenance Budget" means the major maintenance budget as further
described in Section 5C. of this Agreement.
(q) "Operating Expense Budget" means the operating expense forecast as further
described in Section 5D. of this Agreement.
(r) "Operator" means Chevron Pipe Line Company acting in its capacity as
operator of Facilities hereunder.
(s) "Parties" or "Party" means the Operator and/or Company.
(t) "Partnership Committee" means the managing unit of Company.
(u) "Person" means any individual, partnership, association, trust, corporation
or other entity.
(v) "Products" means, without restriction, natural gas liquids, LPG or products
derived from LPG.
(w) "Year" means a calendar year.
Section 2. Operations
Operator, on behalf of Company, agrees to operate, maintain and repair the
Facilities, and any modifications or improvements thereof, and to perform any
other duties as may be requested by
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Company in a good and workmanlike manner and, in the absence of specific
instructions from Company, shall have the right and duty to act in accordance
with its best judgment as a reasonable and prudent operator would do under the
same or similar circumstances. Company does hereby authorize and empower
Operator, on behalf of Company, to do and perform or cause to be done and
performed by others any and all acts and things which Operator shall, in the
exercise of its discretion and best judgment, deem necessary or advisable for
the operation, maintenance, and repair of such Facilities in accordance with the
Expenditure Authorities as set forth in Section 6, to the end that the
Facilities may be used in a safe, efficient and economical manner for receipt,
delivery, measurement and transportation of Products. Without limiting the
foregoing, subject to the limits otherwise set forth in this Agreement, Operator
shall specifically perform the following acts on behalf of Company:
A. perform such mechanical activities as may be required to receive,
deliver, transport and/or otherwise handle Products tendered to and
accepted into the Facilities.
B. submit to Company recommended budgets and other information as set
forth in Section 5. hereof.
C. purchase or cause to be purchased for and in the name of Company
materials, supplies and services necessary for the operation of the
Facilities in accordance with the budgets approved by Company (or as
otherwise approved under this Agreement);
D. maintain surveillance of the Facilities, conduct assessment, and
periodically inspect the Facilities for damage or other conditions
which could affect the safe, efficient and economical operation of the
Facilities, perform such repairs to the Facilities as requested by
Company or as may from time to time be required and prepare
appropriate reports that document such activities;
E. act as representative for Company in contacts with government agencies
relating to the physical operation, maintenance and repair of the
Facilities, where required by audits, laws, rules, regulations,
orders, permit conditions, or right-of-way agreements;
F. prepare, maintain and implement operating manuals, monitoring
programs, contingency plans and training programs satisfying all
applicable laws, rules, regulations, orders and any other requirements
of governmental authorities together with such other operating
procedures or manuals as Company may require;
G. prepare custody transfer tickets, and other appropriate accounting
materials to document custody transfer and receipt of Products, and
sample and measure Products received and delivered to verify quality
and quantity as operations may require;
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<PAGE>
H. provide Product shipments scheduling and 24-hour continuous monitoring
and control of pipeline flows for safe and efficient operations;
I. file, store and maintain in a manner such that they shall be available
for periodic inspection by Company all as-built drawings or
descriptions of the Facilities, construction and maintenance records,
inspection and testing records, operating procedures and manuals,
custody transfer documents, and such other records (all collectively
"records") as may be necessary or appropriate to the operation,
maintenance and repair of Facilities, or required by applicable laws,
rules, regulations, orders and any other requirements of governmental
authorities, or requested by Company. All of such records shall remain
the property of Company;
J. prepare and file all tariffs subject to approval of Company;
K. collect all tariffs, fees or other amounts derived from the operation
of the Facility, keep correct complete, and accurate accounts of all
receipts and disbursements made on the Company's behalf, and deposit
all moneys or other valuable effects in the name and to the credit of
Company in such depository banks, trust companies, savings and loan
associations or other similar institutions as may be designated by
Company, keep individual Book Capital Accounts for each partner of
Company, prepare partnership income tax returns for approval and
filing by Company, recommend for approval by the Company amounts of
cash distributions that should be made to the partners of Company, and
preparation of any other financial accounts or statements that may be
required by Company;
L. upon request, attend meetings of the Partnership Committee of Company,
or, whenever otherwise required by Company, prepare and distribute
reports of all financial transactions involving the Company hereunder
and other reports reasonably requested by Company or any partner of
Company, but only to the extent that Operator is legally authorized to
do so;
M. make all statutory and regulatory filings required of the Company,
including without limitation, all permit applications, and filings
with the Federal Energy Regulatory Commission, Texas Railroad
Commission and any other state Public Utilities Commissions,
Department of Transportation, or other regulatory agencies having
jurisdiction over Company;
N. sign all checks, drafts, or orders for the payment of Costs authorized
pursuant to this Agreement;
O. facilitate the financing and investments including the issuance of
commercial paper in accordance with the policies set forth by the
Company;
P. administer the Facilities' regulatory, financial, contractual and
legal affairs to the extent such administration is authorized by
Company; and
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Q. provide equipment, materials and services as legally required or as
Company may from time to time request, for discharge prevention and
response for Products and/or hazardous substances. These services
shall include, but not be limited to, preparation, submission, and
finalization of discharge prevention and/or contingency plans for
Products and/or hazardous substances, and preparation for, prevention
of, response to and/or cleaning up of any discharge or threatened
discharge of Products and/or hazardous substances. Without limiting
the foregoing, Operator shall serve as response action contractor for
Company;
R. obtain rights-of-way, make renewal payments and do such other tasks as
may required to maintain rights-of-way.
S. supervise the construction of any expansions, modifications, or
extensions of the Facilities that are approved by Company;
T. provide engineering services that may be necessary in operating,
expanding or modifying the Facilities as approved by Company; and
U. keep the Facilities free and clear of all material liens and
encumbrances not otherwise authorized by Company.
V. pay and discharge promptly all costs and expenses reasonably incurred
in operating the Facility.
Operator agrees to perform all services hereunder in a manner consistent with
the usual and customary practices, codes and standards in the pipeline industry
(including specifically the Federal Energy Regulatory Commission, the Texas
Railroad Commission and state Public Utilities Commissions as well as applicable
Department of Transportation and American National Standards Institute) and in
accordance with all valid and applicable laws, rules, regulations, orders and
any other requirements of governmental authorities. Operator in its capacity as
Operator pursuant to this Agreement, shall assume no other liability to Company
except in the case of Operator's own gross negligence or willful misconduct.
Notwithstanding the foregoing, the gross negligence standard shall apply only to
the operations performed hereunder and shall not apply to any actions, inactions
or negligence of the Operator in connection with the operation of any pipeline
other than Facilities. Operator shall furnish or arrange for the necessary
personnel to efficiently perform such services. None of such personnel shall be
employees or agents of Company, statutory or otherwise.
Section 3. Payment for Operator Services
A. Company shall pay and Operator shall receive as full and complete
compensation for the performance of Operator's services as Operator
hereunder, the sum of the amounts becoming due (hereinafter referred
to as "Cash Operating Costs") as
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<PAGE>
described and authorized in Attachment I, Accounting Procedure.
Company shall make payment in the time and manner specified herein.
B. Within the month immediately following the previous month of service,
Operator shall invoice Company for the actual Cash Operating Costs for
the immediately prior month. Company shall pay to Operator the amount
of such invoice, payable upon receipt.
Section 4. Accounting
A. Operator shall keep and maintain proper and complete books and
accounts, in the name of Company, in conformity and consistent with
GAAP utilizing the principles and practices generally employed in
regulated oil pipeline accounting unless any regulatory agency with
jurisdiction over the System or the Partnership shall rule otherwise;
and shall furnish monthly financial statements and such other reports,
statistics and statements as Company or any partner of Company may
reasonably from time to time request.
B. Operator shall maintain accurate accounts of all expenditures and
liabilities incurred by it in operating, maintaining and repairing the
Facilities and shall render a monthly statement to Company and each
partner of the Company of all such expenditures and liabilities. The
failure to include any item in the current monthly statement rendered
for the month in which the same was incurred or expended shall not
preclude such item from being brought forward and included in any
subsequent monthly statement. All books, records and accounts shall be
open to inspection and audit by Company or Company's authorized
representatives at all reasonable times during business hours.
C. Operator shall establish a separate bank account(s) on behalf of
Company and all revenues received in the operation of the Facilities
shall be deposited in the name and to the credit of Company. All
interest or other benefits generated by this account shall accrue to
the benefit of Company. Operator shall not commingle any of its funds
in the account established hereunder.
Section 5. Budgets and Forecasts
On or before November 1 of each year, Operator shall prepare and submit to the
Partnership Committee of Company for review, approval, or modification the
following annual budgets and forecasts:
A. Capital Commitment Budget
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The Capital Commitment Budget shall consist of an itemization of
commitments for each capital project equal to or in excess of $50,000
(large projects) and a combined total of all Items less than $50,000
(small projects) for the following calendar year.
B. Capital Expenditure Forecast
The Capital Expenditure Forecast shall identify separately all
expenditures for capital items from prior budgets which are not yet
complete and all capital items anticipated to be approved in the
pending budget. Large projects shall be listed individually and small
projects may be combined. The forecast shall indicate expenditures by
quarter for the following calendar year and indicate any appropriate
carryover in subsequent years.
C. Major Maintenance Budget
The Major Maintenance Budget shall consist of an itemization of each
maintenance project equal to or in excess of $50,000 (large projects)
and a combined total of all items less than $50,000 each (small
projects) for the following calendar year.
D. Operating Expense Budget
The Operating Expense Budget shall identify for the following calendar
year the expected Operating Expenses including Direct Costs,
Management Fee, and Major Maintenance items.
E. Volume Forecast
All volumes expected to be handled through the Facilities shall be
identified for the following calendar year.
Company may at any time supplement or amend the budgets and forecasts as
necessary to carry out the purposes of this Agreement.
Section 6. Expenditure Authorities
A. Projects or Expenses not Exceeding $50,000
The Operator shall have the authority to make expenditures for any
individual capital project, major maintenance project or operating
expense not exceeding $50,000 to the extent that Operator deems such
expenditures necessary and appropriate for the operation or
maintenance of the Facilities. The sum of any such expenditures may
not, during any Year, exceed the amounts indicated for all such
8
<PAGE>
projects or expenses in the budget which have been approved by Company
for that Year.
B. Projects or Expenses in Excess of $50,000
The Operator shall have the authority to make expenditures for any
individual capital project, major maintenance project or operating
expense in excess of $50,000 if such project or expense was
specifically identified in an approved budget or Company has approved
an AFE for the project. The amount of the Operator's authority under
this subsection may be overrun by the greater of 10% or $10,000
without seeking prior approval by Company; provided, however that such
overrun does not cause any of the Capital Expenditure Forecast, Major
Maintenance Forecast or Operating Expense Forecast approved by the
Company to be exceeded.
C. Settlement of Claims
Operator shall have authority to make expenditures in settlement of
claims, demands and litigation resulting from or arising out of
operations of Facilities up to $25,000 for each such claim. Operator
shall notify Company and each partner of Company immediately of any
claim, demand or suit, and if the amount required for full settlement
exceeds the above specified amount, Operator shall notify the Company
and each partner of Company and the Company shall determine how to
further handle the claim, demand or suit.
D. Taxes
The Operator shall have the authority to make expenditures for, and
shall be entitled to receive full and complete compensation from
Company for, Taxes as described in Section 2.A.8 of "Cash Operating
Costs" in Attachment I, Accounting Procedure. Such authority to make
expenditures for, and entitlement to receive full and complete
compensation for, Taxes, shall be true whether or not the expenditure
is within an approved budget or the action has prior approval of
Company.
E. Operation In Lieu of An Approved Budget
In the event Company fails to deliver to the Operator on or before
December 31 an approved budget for the ensuing year, the previous
year's budget shall remain in effect until an approved budget is
delivered. Notwithstanding the foregoing, the Operator may take such
actions and make such expenditures as may be deemed necessary, under
laws, rules, regulations, orders or good industry practices, in order
to continue the orderly conduct of the business of Company hereunder
and to preserve and maintain the Facilities. In the event that any
such expenditure was not specifically approved in an earlier budget or
otherwise approved by the
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
Company, Operator's authority shall be limited to a maximum of
$500,000 for any one expenditure and a total maximum of $ 1,000,000
for all such expenditures in any one year. In the event of such
operation without an approved budget, the Operator shall, on a monthly
basis, give telephone notice or otherwise contact Company and each
partner of Company as soon as practicable and advise it of the
circumstances of such operation without an approved budget, the
actions taken or proposed and the expenditures made, incurred,
committed, or proposed. All expenditures made pursuant to this Section
6.E. shall be treated as Cash Operating Costs hereunder. Nothing in
this Section 6.E. shall in any way restrict the Operator's authority
as set forth in Section 6.F.
F. Emergencies
In an emergency, the Operator may take such actions and make such
expenditures as may be deemed necessary, under laws, rules,
regulations, orders or good industry practices, in order to cure such
emergency. This shall be true whether or not the expenditure is within
an approved budget or the action has prior approval of Company. In the
event of such an emergency, the Operator shall give telephone notice
or otherwise contact Company as soon as practicable and advise it of
the circumstances of such emergency, the actions taken or proposed and
the expenditures made, incurred, committed, or proposed. All
expenditures made pursuant to this Section 6.F. shall be treated as
Cash Operating Costs hereunder.
Section 7. Term
----
This Agreement shall take effect as of the day and year first above written
* and shall continue for a term of REDACTED and continue thereafter until
canceled on 180 days prior written notice by either Party which such notice
may be given for any reason or no reason in the sole discretion of either
Party; provided, however, in the event that Company has not selected a
replacement operator who is ready and capable of assuming the operation of
Facilities at the end of such notice period, Operator shall continue to
operate the Facilities hereunder for such period until a replacement operator
is selected who is ready and capable of assuming the operation of Facilities
but such continuation by Operator shall not extend beyond 180 days following
the end of the notice period. Company shall have the right to terminate this
Agreement if Operator ceases to own a majority of the interest in the Company.
Upon termination of this Agreement, Company shall pay Operator the amounts
chargeable to Company hereunder as of the date of termination which have not
already been paid by Company; Company shall also reimburse Operator for the full
amount of any obligations or commitments
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Operator has made in the interest of performing the services hereunder in
accordance with the annual budget and any approved projects which were not paid
by Company prior to the date of such termination or, if agreeable to Operator,
Company may assume such obligations or commitments. Upon termination of this
Agreement, Operator shall turn over to Company all records, data, and
information in Operator's possession pertaining to operations hereunder, as well
as materials, equipment, facilities, and operating supplies on hand which had
been purchased by Company or in its name. Termination of this Agreement shall
not affect the rights and privileges or duties, liabilities and obligations of
either Party which arose or accrued prior to the date of termination.
Section 8. Insurance
Operator shall procure and maintain all insurance required by applicable law or
regulation for operation of the Facilities, including but not limited to
Workers' Compensation and Employer's Liability Insurance in accordance with all
applicable state, federal, and maritime laws. Where permitted, Operator may
fulfill its Workers' Compensation obligations by approved self-insurance and
shall charge Company its actual costs of self-insurance which shall not exceed
Insurance Manual Rates applicable to such operations in the place where the same
are performed. The Operator shall procure and maintain in effect such types and
amounts of insurance as Company shall determine to be necessary to cover loss or
damage to the Facilities. No other insurance shall be carried by Operator for
the account of Company without prior approval from Company.
Section 9. Indemnity
Company ("Indemnitor") shall indemnify and save harmless Operator, its
affiliates, agents and employees ("Indemnitees") in its or their role as
Operator from and against any and all loss, damage, injury, liability, expense
(including attorney's fees), and claims thereof which arise from any injury to
or death of a person, including third parties, Indemnitor, its agents,
contractors or subcontractors, or employees, but excluding Indemnitees, from
loss of or damage to property or from penalties imposed or proceedings brought
by government agencies, resulting directly or indirectly from any operations
under or pursuant to this Agreement, including, but not limited to, the use of
equipment provided by others. The indemnity provided by Indemnitor shall remain
in full force and effect regardless of the passive, active or concurrent
negligence of, and regardless of whether liability without fault is imposed or
sought to be imposed on, one or more of the Indemnitees. However, such indemnity
shall not be given effect to the extent that such indemnity is void or otherwise
unenforceable under applicable law in effect or validly retroactive to the date
of the Agreement. Further excepted from such indemnity shall be any such loss,
damage, injury, liability or claim which is the result of the gross negligence
or willful misconduct of an Indemnitee. Operator shall give Company immediate
notice of any suit brought against Operator with respect to which Company is or
may be obligated to indemnify Operator hereunder.
Operator shall indemnify and save harmless Company, its affiliates, agents and
employees in its or their role as owner of Facilities from and against all loss,
damage, injury, liability, expense
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(including attorney's fees), and claims thereof which arise from any injury to
or death of a person, including third parties, Operator's agents, contractors,
subcontractors, or employees, or from loss of or damage to property of Operator
or Operator's agents, contractors, subcontractors or employees resulting
directly or indirectly from any operations under or pursuant to this Agreement.
The indemnity provided by Operator shall remain in full force and effect
regardless of the passive, active or concurrent negligence of, and regardless of
whether liability without fault is imposed or sought to be imposed on Company.
However, such indemnity shall not be given effect to the extent that such
indemnity is void or otherwise unenforceable under applicable law in effect or
validly retroactive to the date of this Agreement. Further excepted from such
indemnity shall be any such loss, damage, injury, liability or claim which is
the result of the gross negligence or willful misconduct of Company. Company
shall give Operator immediate notice of any suit brought against Company with
respect to which Operator is or may be obligated to indemnify Company hereunder.
Section 10. Confidentiality
A. Each Party agrees that it will maintain this Agreement, all terms and
conditions of this Agreement and all other Confidential Information (as
hereinafter defined) in strictest confidence and that it will not cause or
permit disclosure of Confidential Information to any third Party without
the express written consent of the other Party hereto. Disclosures of
Confidential Information otherwise prohibited by this Section 10 may be
made by either Party; (i) to the extent necessary for such Party to enforce
its rights hereunder against the other Party; (ii) to the extent a Party is
contractually or legally bound to disclose financial information to a third
Party (such as a shareholder or commercial lender); (iii) only to the
extent to which a Party hereto is required to disclose all or part of this
Agreement by a statute or by the order of a Court, agency, or other
governmental body exercising jurisdiction over the subject matter hereof,
by order, by regulations, or by other compulsory process (including, but
not limited to, deposition, subpoena, interrogatory, or request for
production of documents); (iv) to the extent required by the applicable
regulations of a securities or commodities exchange; or (v) to an Affiliate
(but only if such Affiliate agrees to be bound by the provisions of this
Section 10). "Confidential Information" shall mean any information
proprietary to either Party and maintained by it in confidence or as a
trade secret, including, without limitation, business plans and strategies,
proprietary software, financing statements, customer or client lists,
personnel records, analysis of general energy market conditions, sales,
transportation and service contracts and the commercial terms thereof,
relationships with current and potential business partners, supplies
customers, service providers and financial sources, data base contents and
valuable information of a like nature relating to the business of such
Party. It is understood and agreed that Confidential Information shall not
include information of a Party that (i) was generally available to the
public at the time of disclosure to the other Party, (ii) after the time of
disclosure to the other Party, becomes generally available to the public,
(iii) the Party receiving the information can know that the information was
in its possession at the time of disclosure, or (iv) was rightfully
acquired by the recipient from
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third Persons who did not themselves obtain such information under a
confidentiality or other similar agreement with the disclosing Party.
B. If either Party is or becomes aware of a fact, obligation, or circumstance
that has resulted or may result in a disclosure of Confidential Information
authorized by this Section 10, it shall so notify the other Party promptly
and shall provide documentation or an explanation of such disclosure as
soon as it is available. Each Party further agrees to cooperate to the
fullest extent in seeking confidential status to protect any Confidential
Information so disclosed.
C. The Parties hereto acknowledge that independent legal counsel may, from
time to time, be provided with a copy of this Agreement and agree that such
disclosure does not require consent by the other Party, provided that such
counsel agrees to be bound by the provisions of this Section 10.
D. Each Party will be deemed solely responsible and liable for the actions of
its employees, independent contractors, officers, agents and Affiliates for
maintaining the confidentiality commitments of this Section 10, but will be
required in that regard only to exercise such care in maintaining the
confidentiality of the Confidential Information as such Party normally
exercises in preserving the confidentiality of its other commercially
sensitive information.
Section 11. Force Majeure
A delay in or failure of performance of either Party hereto shall not constitute
default, nor shall either Party be held liable for loss or damage arising from
such delay or failure to the extent such delay, failure, loss or damage is
caused by Force Majeure.
The Party claiming Force Majeure as an excuse for delay in or failure of
performance shall immediately notify the other Party of the event and any steps
being taken to remove the impediment to performance.
Force Majeure shall not prevent either Party from terminating this Agreement
under Section 7.
Section 12. Assignment
This Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the Parties hereto; provided, however, that such
Agreement and the obligations of the Parties hereunder shall not be assignable
by either Party hereto without the express prior written consent of the other
Parties hereto, except that any Party may assign this Agreement without consent,
including the performance thereof, in whole or in part to (i) an Affiliate of
the Party or the Party's shareholders; (ii) the successor of all or
substantially all of the Party's business and assets; or (iii) a corporation
which such Party may merge or be consolidated into. An assignment hereunder
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shall not be effective unless and until the assignee agrees to be bound by all
the terms and conditions of this Agreement. Further, no assignment hereunder
shall relieve the assignor of any duties, liabilities or obligations accruing
hereunder before the effective date of the assignment. Any assignments
prohibited hereunder shall be void. This Agreement shall not be assignable by
operation of law and shall not become an asset in any bankruptcy or receivership
proceedings. The consent requirement set forth in this Section 12 shall apply
to a sale or assignment of a controlling interest in an Affiliate to whom a
Party's interest has been assigned.
Section 13. Notices
Any notice, request, consent, approval or other similar communication of a
routine nature required or permitted under this Agreement shall be in writing
(including facsimile) and shall be deemed to have been properly given or
delivered to a Party when delivered personally to the person designated below to
receive such communication for each Party or when sent by telegram or United
States mail with postage prepaid and properly addressed to the Party to whom
given. Any such notice or other communication sent or mailed shall be deemed
given at the time it is received by the office of the individual to whom sent.
For purposes hereof the proper addresses of the Parties (unless otherwise
designated in writing which each Party may do from time to time) shall be as
follows:
If to Company:
West Texas LPG Pipeline Limited Partnership
Attention: Chairman of the Partnership Committee
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
Fax: (713) 363-7214
with a copy to:
WTLPS, Inc.
Attention: President
13430 Northwest Freeway
Suite 1200
Houston, Texas 77040
If to Operator:
Chevron Pipe Line Company
1400 Woodloch Forest Drive
The Woodlands, Texas 77380
Attention: Corridor Team Leader
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Section 14. Governing Law
The validity, nature, obligations, effect and construction of this Agreement
shall be governed by the laws of the State of Texas without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any other jurisdiction other than the State of Texas.
Section 15. Attachments
Attachment I, Attachment II, and Attachment III attached hereto are incorporated
in and made a part of this Agreement. In the event of any inconsistency between
the Attachments and this Agreement, the Agreement shall control.
Section 16. Gifts Prohibited
The Parties shall maintain complete and accurate records in connection with any
commission, fee, rebate, gift or entertainment of significant cost or value in
connection with the performance of this Agreement and all transactions related
thereto for at least twenty-four months from the date of invoice to Company and
Operator. No director, officer, employee or agent of any Party hereto shall give
or receive any commission, fee, rebate, gift or entertainment of significant
cost or value in connection with the performance of this Agreement.
Section 17. Federal Compliance
A. Insofar as applicable hereto, each Party hereto shall comply with
Executive Order No. I1246, as amended by Executive Order No. I1375,
and the rules and regulations issued thereunder, to ensure that
applicants are employed, and that employees are treated during
employment without regard to their race, creed, color, sex or national
origin. Also, if applicable, each Party hereto shall comply with all
provisions of the Vietnam Era Veterans' Readjustment Assistance Act of
1974 and the rules and regulations issued thereunder, including 41
C.F.R., Chapter 60, Part 60-250. Each Party hereto shall also, if
applicable, comply with all provisions of the Rehabilitation Act of
1973, and the rules and regulations issued thereunder including 41
C.F.R., Chapter 60, Part 60-74. Operator agrees and covenants that
none of its employees or employees of its subcontractors who provide
services to Company pursuant to this Agreement are unauthorized aliens
as defined in the Immigration Reform and Control Act of 1986. All
acts, orders, rules and regulations hereinabove referred to are hereby
incorporated by reference unless this Agreement is excepted by
appropriate federal law, rules, regulations or orders.
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B. Company and Operator shall comply with all laws and regulations
applicable to Company and Operator relating to Facilities hereunder,
including but not limited to any regulations of the United States
Department of Transportation applicable to facilities operated by
Company that are connected to or a part of Facilities hereunder.
Section 18. Section Headings
The headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
Section 19. Waiver
No waiver by either Party of any breach of any of the terms and conditions
contained in this Agreement shall be construed as a waiver of any subsequent
breach of the same or any other terms or conditions.
Section 20. Entire Agreement
This Agreement and its Exhibits constitute the sole and entire Agreement among
the Parties pertaining to the subject matter hereof. Effective as of the
commencement of the term hereof, this Agreement supersedes and cancels any and
all other prior or contemporaneous oral or written agreements or understandings
between or assumed by the Parties or any of them with respect to the foregoing
matters or any part thereof. No amendment to this Agreement shall be effective
unless in writing and executed by a duly authorized representative of each
Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first above written.
COMPANY, OPERATOR,
WEST TEXAS LPG PIPELINE CHEVRON PIPE LINE COMPANY
LIMITED PARTNERSHIP
By: By:
---------------------------- ------------------------------
Its: Its:
---------------------------- ------------------------------
16
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ATTACHMENT I
OPERATING AGREEMENT
ACCOUNTING PROCEDURE
1. Definitions
Unless defined otherwise below, terms used in this Accounting Procedure
shall have the same meaning as defined in the Agreement.
"Management Fee" means the management fees referenced in Section 2.B. of
this Attachment.
"Person" means any individual, partnership, association, trust,
corporation, government authority or other entity.
"Personal Expenses" means travel expenses and other reasonable reimbursable
expenses of Operator's employees in the operation and maintenance of
Facilities and in any other activities required of the Operator pursuant to
this Agreement; and such expenses of employees of Operator's Affiliate(s)
when such Affiliates perform activities pursuant to this Agreement.
2. Cash Operating Costs
A. Direct Costs
Operator shall charge Company with the following items but only to the
extent such charges are incurred in the operation and maintenance of
Facilities and in any other activities required of the Operator
pursuant to the Agreement and then, only that portion thereof that is
attributable to work and/or time allocated on a proportional basis to
the Facilities if the work performed can in any way benefit pipelines
operated by Operator other than the Facilities:
1. Labor and Benefits
a. Salaries and wages of Operator's employees (or employees of
Operator's Affiliate) directly assigned to the operation,
support and maintenance of Facilities, including that
portion of such employees' time related to ancillary
activities such as training required by Operator, and in any
other activities required of the Operator pursuant to the
Agreement.
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
b. Overhead related to direct labor salaries and wages, to be
* calculated as REDACTED of the amount provided for in A.1.a.
above.
c. Operator's cost of all payroll taxes, and benefits and
allowances and any other payment paid or contributed by the
Operator which is measured by Operator's employees'
compensation; the above to include without limitation
F.I.C.A., Operator's cost of holiday, vacation, sickness and
disability and other customary allowances, Operator's
current costs of established plans for employees' group life
insurance, hospitalization, retirement, stock purchase, and
other benefit plans of a like nature. Such costs will be
charged on a percentage assessment rate on the amount of
salaries and wages chargeable to the Company under Paragraph
1.a. of this Section. The percentage assessment rate shall
be based on the Operator's actual cost experience.
2. Employee Expenses
a. Reasonable Personal Expenses of those employees whose
salaries and wages are chargeable to the Company under
Paragraph 1.a. of this Section, and for which expenses the
employees are reimbursed under the Operator's usual
practices.
3. Customer Service Center
The allocated share attributable to the West Texas LPG Pipeline
of Operator's cost for its Customer Service Center, including but
not limited to:
a. Labor and benefits of Operator's employees directly assigned
to the operation and support of Facilities, following the
methodology in Sections 2.A.1.a. and 2.A.1.c.
b. An allocation of depreciation for Customer Service Center
capitalized costs of facility and equipment used in the
scheduling of shipments and 24-hour continuous monitoring
and control of pipeline flows for the Facilities.
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<PAGE>
c. An allocation of other Customer Service Center costs,
including support personnel and other expenses, required for
support of the Facilities.
4. Materials and Supplies
Material purchased by Operator for use in the operation and
maintenance of Facilities shall be charged to the Company at the
price paid by Operator after deduction of all discounts received.
Material furnished by Operator from its stocks or inventory shall
be charged in accordance with the accounting guidelines
established by COPAS (Council of Petroleum Accountants Societies
of North America). Cost of warehousing and handling material
shall be chargeable to the Company. The accumulation of surplus
stocks shall be avoided, and if surplus stocks are accumulated,
such stocks shall be timely disposed of. Proceeds from such
disposition shall be credited to the Company at the time they are
received by Operator. Operator does not warrant the material
furnished. In the case of material found to be defective, or
returned to a vendor or the Operator for any other reason,
Operator shall credit the Company when adjustment is received by
Operator.
5. Contracts and Services
The cost of contracts and subcontracts, contract services
(including those for technical personnel), professional
consultants, equipment, and utilities employed in the operation
and maintenance of the Facilities under the general direction of
Operator.
6. Equipment Furnished by Operator
a. Use of equipment owned by Operator at the lower of (1) rates
commensurate with costs of ownership and operation. Such
rates shall include costs of maintenance, repairs, other
operating expense, insurance, taxes, and depreciation, or
(2) commercial rates prevailing in the geographic area of
the Company Facilities as published in Petroleum Motor
Transport Association rate schedules.
b. Whenever requested, Operator shall inform Company of the
rates it proposes to charge.
7. Legal Expenses
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Expenses of investigating litigation or claims incurred in or
resulting from the operation and maintenance of Facilities under
the Agreement; provided, however that no direct charge for
services of Operator's legal staff or fees or expense of
attorneys shall be made unless previously agreed to by Company.
All other legal expense incurred by Operator hereunder is
considered to covered by the overhead provisions of Section 2.B.
below, unless otherwise agreed to by Company.
8. Taxes
All taxes of every kind and nature assessed or levied upon, or in
connection with the Company operations, property or Facilities
and which have been paid for the benefit of Company, excluding
any income or franchise taxes.
9. Insurance
In accordance with Section 8 of the Agreement, net premiums paid
for insurance required by law or by the Company to be carried for
operation, maintenance and repair of Facilities and for the
protection of the Company.
10. Communications
Costs of purchasing, leasing, installing, operating, and
maintaining communications equipment and services necessary for
the conduct of Facilities' operation and maintenance.
11. Utilities
Costs incurred for electricity and other utilities necessary for
the operations hereunder.
12. Ecological and Environmental
Costs incurred for the benefit of the Company as a result of
statutory regulation for archeological and geophysical surveys
relative to the identification and protection of cultural
resources, or other ecological surveys as may be required by
regulatory authority. Also, costs to provide or have available
pollution containment and removal equipment, plus costs of actual
control, cleanup and resulting responsibilities of oil spills as
required by applicable laws and regulations.
13. Permits and Rights-of-Way
20
<PAGE>
Costs incurred in obtaining or maintaining permits, licenses,
leases, certificates, rights-of-way, easements, and other similar
items necessary for the operation or maintenance of the
Facilities.
14. Dismantling, Removal, and Restorative Costs
Costs incurred for dismantling, removal, and restoration of
Company property to the extent such costs are incurred.
15. Rentals
Rentals paid by Operator for the benefit of the Company in the
conduct of Facilities' operation and maintenance.
16. Discounts and Allowances
Operator shall take advantage of and credit to the Company all
cash and trade discounts, freight allowances and equalization,
annual volume and other allowances, credits, salvages,
commissions, insurance discount dividends and retrospective
premium adjustments, and other such items which accrue.
17. Other Expenditures
Any other expenditures directly attributable to Facilities'
operation and maintenance not covered and dealt with in the
foregoing provisions of this Section 2.A., and which are incurred
by the Operator in the necessary and proper conduct of
Facilities' operation and maintenance, and which are:
(a) within the scope of the Agreement; and
(b) are included in the approved operating budget.
B. Management Fee
The purpose of this Section 2.B. is to provide for the reimbursement
of Operator's overhead in conjunction with services rendered. Operator
shall charge the Company as follows to cover any portion of costs and
expenses resulting from the performance of services for Facilities not
otherwise chargeable under Section 2.A. herein:
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"Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission."
1. Operator's Management Fee
* Operator shall receive REDACTED as an annual charge billed
monthly, hereinafter referred to as "Operator's Management Fee"
to cover all of Operator's overhead and indirect costs incurred
in the performance of services for the Facilities. Such
Operator's management duties hereunder shall not be subcontracted
by Operator to any other entity, without prior approval of
Company. The Operator's Management Fee shall be adjusted annually
by a calculated amount based upon the Producers Price Index
(excluding the Fuels And Related Products And Power component) in
effect on October 1 with a base year of October 1, 1997. Such
adjusted amount shall be effective beginning January 1 of each
ensuing year, starting for the calendar year 1998.
22
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ATTACHMENT II
PIPELINE FACILITIES
I) PIPELINE: There is about 1,950 miles of various sizes of pipe ranging from
2" TO 14", 0.156 GR B TO 0.365 X 46 w.t., and 1957 - 1992 vintage. The
lateral lines are up to 8" and the trunk portion is all 10" and 14".
II) BOOSTER STATIONS: There are 18 pump stations, 24 pump and electric motor
units and associated electrical switchgear and control equipment. Total
horsepower is 28,200. Pumps are all horizontal centrifugal type.
III) COAHOMA FACILITY: There are 2 - 1,000 horsepower pump units with
centrifugal pumps and electric motors. It is an 80 acre site with three
storage wells (nominal 300,000 Bbls), two brine pits (nominal 350,000 Bbls
capacity), and all associated piping and electrical equipment.
** Of the 19 booster stations (including Coahoma), 13 are on separately
identifiable property.
IV) METER STATIONS: There are about 62 receipt, custody transfer meter
stations of which about 54 are at plant sites. There are another 18 check
meter locations with a total of 34 meter runs. Each facility generally
includes turbine meter runs, instrumentation, and equipment buildings.
V) MISCELLANEOUS:
* Sending and receiving swab trap facilities (22 on the trunk line alone).
* Portable meter provers
* Spare parts inventory
23
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ATTACHMENT III
MAP OF FACILITIES
24
<PAGE>
Exhibit 10.25
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Pages where confidential treatment has been requested are stamped
'Confidential Treatment Requested. The redacted material has been separately
filed with the Commission,' the appropriate section has been
marked at the appropriate place and in the margin with a star (*).
TIME CHARTER
IT IS AS OF THIS 31st day of August 1996 mutually agreed by and between
MIDSTREAM BARGE COMPANY, L.L.C., a limited liability company organized and
existing under the laws of Delaware ("Owner"), as owner of those certain U.S.-
flag barges set forth in Exhibit A attached hereto (the "Barges"), and WARREN
PETROLEUM COMPANY, LIMITED PARTNERSHIP, a limited partnership organized and
existing under the laws of Delaware ("Charterer"), that Owner lets and Charterer
hires the use and service of the Barges for the period and on the terms and
conditions hereinafter set forth.
1. CONDITION OF BARGES. UPON DELIVERY, THE BARGES SHALL BE:
(a) fit, in the manner currently operated, for the carriage of
cargoes, including propane, propylene, normal butane, isobutane, pentanes and
mixtures thereof (hereinafter "Cargoes");
(b) tight, staunch, strong, in good order and condition, fit for the
service, with their machinery, hull and cargo installation, including gauging
and other equipment suitable for measuring the level and temperature of Cargoes
loaded on board the Barges in the manner currently operated; and
(c) of the description set out in Exhibit A attached hereto.
2. TERM AND TERMINATION. (a) This Charter Party shall commence upon the
* date hereof and shall remain in full force and effect for REDACTED unless
terminated by the mutual consent of Owner and Charterer. Termination of this
Charter Party shall not release or discharge any obligation hereunder that has
accrued prior to the effective date of such termination.
(b) Except as otherwise provided in Section 13, even though Charterer
shall be deprived of or limited in use of the Barges in any respect or for any
length of time, whether or not by reason of some act, omission or breach on the
part of a third party, whether or not resulting from accident and whether or not
without fault on the part of Charterer, Charterer shall continue to make all
payments of charter hire required under this Charter Party without interruption
or abatement.
(c) Charterer undertakes to arrange the Barges' trading so as to
permit redelivery of same to Owner on or prior to the expiration of the term
hereof. Charterer shall not commence loading for any voyage unless it is
reasonably anticipated that such voyage shall allow redelivery of the Barges
pursuant to Section 10 hereof on or prior to the expiration of the term hereof.
However, should the Barges be sent on a final voyage reasonably calculated to
allow redelivery pursuant to Section 10 hereof within such time period, and the
voyage is prolonged for reasons outside Charterer's control, Charterer shall
have the use of the Barges at the rate and on the conditions of this Charter
Party for such extended time as may be required for completion of the round trip
voyage and redelivery pursuant to Section 10 hereof.
3. DELIVERY. The use and services of the Barges shall be placed at the
disposal of Charterer whereis upon commencement of this Charter Party. Charter
hire shall commence upon delivery of the Barges
<PAGE>
on August 31, 1996, and Barges shall be in all respects ready to perform this
Charter Party.
4. TRADE LIMITS. (A) The Barges shall be employed within their technical
capabilities for work in the Gulf of Mexico, inland waterways, lakes, bays,
coastal areas and sounds of the United States, but always in lawful trades for
the Cargoes. It is expressly understood that the Barges shall be moored in
ports or places to lie safely, always afloat at any time of tide. Charterer
undertakes not to employ the Barges or suffer the Barges to be employed
otherwise than in conformity with the terms of the instruments of insurance.
(b) The use of sea-going tug/barge combinations outside of the United
States domestic trade shall be subject to the prior approval of Owner.
5. EMPLOYMENT. (a) The whole reach and burthen of the Barges, including
lawful deck capacity, shall be at Charterer's disposal for the carriage of the
Cargoes in bulk, subject to Coast Guard regulations, the characteristics of the
Barges, and Classification Society recommendations.
(b) No Cargoes shall be shipped in a manner that would be injurious to
the Barges, nor shall any voyage be undertaken that would involve risk of
seizure or capture, or substantial risk of penalty imposed by the U.S.
government. Without prejudice to the foregoing, any damage to the Barges caused
by the shipment of Cargoes in such a manner as aforesaid shall be at Charterer's
risk and expense.
(c) Charterer shall have the right to direct the movement of the
Barges, provide third party product transportation and retain the revenues
derived therefrom.
(d) Charterer must comply with the applicable barge standards of the
Responsible Carrier Program adopted by The American Waterways Operators on
December 7, 1994, as amended.
6. OWNER'S RESPONSIBILITIES. (a) Owner shall maintain the Barges, their
machinery, appurtenances and spare parts in a good state of repair, in efficient
operating condition, with unexpired classification, and otherwise in accordance
with good commercial maintenance practice. Owner shall take immediate steps to
have the necessary repairs done within a reasonable time.
(b) During the term of this Charter Party, the Barges shall be kept
insured by Owner at its expense against war, hull, and protection and indemnity
risks, including wreck removal, in the amounts set out in Exhibit B attached
hereto. Further, Owner shall at all times maintain pollution coverage under the
Barges' Protection and Indemnity Insurance in an amount not less than that
customarily placed for vessels of similar size, type and age. Such insurance
policies shall be in the name of the Owner and shall name Charterer as an
additional assured, as their interests may appear. Owner shall comply with the
U.S. Oil Pollution Act of 1990, U.S. Federal Water Pollution Control Act of 1972
as amended, and any rules and/or regulations issued thereunder, and any other
international, federal or state requirements that may apply to the transport of
these Cargoes.
(c) Owner shall only be responsible for delay in delivery of the
Barges, for delay during the term of this Charter Party and for loss or damage
to Cargoes onboard, if such delay or loss has been caused by want of due
diligence on the part of Owner in making the Barges seaworthy and fitted for the
voyage or any other act or omission or default of Owner. Except to the extent
covered by Owner's insurance, Owner shall not be responsible in any other case
nor for damage or delay whatsoever and howsoever caused, even if caused by the
neglect or default of its servants. Owner shall not be liable for loss or
damage arising or resulting from strikes, lock-outs or stoppage or restraint of
labor whether partial or general.
(d) Any provision of this Charter Party to the contrary
notwithstanding, Owner shall have the benefit of all limitations of and
exemptions from liability accorded to the owners or chartered owners of Barges
by any statute or rule of law for the time being in force. Nothing in this
Charter Party shall operate
2
<PAGE>
to limit or deprive Owner of any such statutory exemption from or limitation of
liability on the theory of personal contract or otherwise.
7. CHARTERER'S RESPONSIBILITIES. (a) Charterer shall provide and pay for
all port charges, towing, tankerman charges, pilotages (whether compulsory or
not), tug-assistance, dock and other dues and charges, also all dock, harbor and
tonnage dues at the ports of delivery and redelivery, agency fees, commissions,
expenses of loading and unloading Cargoes, delivery of Cargoes, including
special ropes, hawsers and chains required by the custom of the port for
mooring, and all other charges and expenses whatsoever other than those payable
by Owner hereunder.
(b) Charterer shall arrange and contract for any tankermen, towage,
pilotage or like service required, including without limitation, those services
listed in Section 7(a) above, and shall be solely liable for any loss or damage
resulting from actions or omissions related to such contract.
(c) Charterer shall utilize each of the Barges so that, as required
from time to time, a particular Barge is positioned so as to be located at a
designated port for inspection at a certain time. The required inspections
shall be scheduled for a mutually agreed time so as not to materially interfere
with Charterer's operations.
(d) Unless such loss or damage results from an act or omission of
Owner, Charterer shall indemnify and hold Owner harmless from (i) all loss and
damage suffered by third parties, including bodily injuries and death, caused by
the Barges and/or their equipment during the period of charter hire; (ii) all
loss of or damage to Cargoes, howsoever caused, or for damage caused by the
Cargoes, including bodily injuries and death; (iii) any sums whatsoever in
consequence of the Barges becoming a wreck or obstruction to navigation; and
(iv) all pollution damage that may result from the operation of the Barges.
(e) In the event that any act or negligence of Charterer shall vitiate
any of the insurances herein provided, Charterer shall indemnify Owner against
all claims and demands that would otherwise have been covered by such insurance.
Charterer undertakes to indemnify and hold Owner harmless against any and all
claims, liabilities, losses, damages, and expenses of every character
whatsoever, including reasonable attorney fees, arising from such loss or
damage.
(f) Charterer shall indemnify and hold Owner harmless from any loss or
damage to third parties resulting from loading or discharging Cargoes hereunder.
Charterer shall have right of recourse against any third parties responsible for
the damage.
(g) Charterer agrees that it will immediately undertake to contain,
cleanup and remove any Cargoes caused to be spilled, leaked, poured, emitted,
emptied or dumped from the Barges into or upon the water or adjoining shoreline,
all charges for which are to be paid by Charterer. Charterer agrees to
indemnify Owner for any and all loss or damage to third parties resulting from
such incident.
(h) Charterer agrees to procure appropriate charterer's liability
insurance in an amount customary for the industry. Charterer shall name Owner
as an additional assured on its charterer's liability insurance policy.
8. INVENTORIES AND CONSUMABLE OIL AND STORES. A complete inventory of the
Barges' entire equipment, outfit, appliances and of all consumable stores on
board the Barges shall be made on delivery and again on redelivery. Charterer
and Owner shall respectively at the time of delivery and redelivery take over
all lubricating oils, water, paints, oils, ropes and other consumable stores
onboard the Barges at the then current market prices at the ports of delivery
and redelivery respectively.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
9. CHARTER HIRE. (a) Charterer shall pay basic charter hire for the use
* of the Barges at the rate of U.S. REDACTED per month, based on the cost budget
attached hereto as Exhibit C. Charter hire shall commence from the hour (est)
and date that the Barges are delivered and placed at Charterer's disposal in
accordance with Section 3 hereof, and shall continue until the hour (est) and
date that the Barges are redelivered to Owner in accordance with Section 10
hereof.
(b) The time charter rate established in Section 9(a) shall be
reviewed and adjusted quarterly, with Charterer paying supplemental charter
hire to the extent that the actual costs exceed the established rate. At the
time of termination of the Charter Party, if charter hire paid exceeds actual
costs, excess charter hire paid shall be reimbursed to Charterer.
* (c) Basic charter hire shall be paid monthly REDACTED during the
Charter Period. Owner shall invoice Charterer for supplemental charter hire,
which shall be due and payable within ten (10) business days from the date of
receipt of the invoice.
(d) If at the time a payment of charter hire becomes due, and
Charterer estimates that the remaining period to redelivery is less than a
calendar month, said payment shall be made for such length of time as Owner or
its agents and Charterer or its agents may agree upon as the estimated time to
redelivery, less disbursements arranged by Charterer for Owner's account. Upon
redelivery of the Barges in the manner provided by Section 10 hereof, Owner
shall submit to Charterer a final invoice that shall reflect a charge or
credit, as appropriate, for any difference between the estimated charter hire
and the actual charter hire due hereunder, as well as charges for any other
amounts due from Charterer to Owner hereunder, and credits for any amounts due
from Owner to Charterer. Any charter hire paid in advance and not earned shall
be refundable and payable by Owner to Charterer.
(e) If Charterer shall default in the punctual and regular payment of
amounts due hereunder, Owner may demand in writing (facsimile, telegram or
telex) that Charterer make payment of said amounts within ten (10) business
days of receipt of notification from Owner, failing which Owner shall have the
right to withdraw the Barges without prejudice to any claim Owner may have
against Charterer under this Charter Party. Further, so long as the charter
hire remains unpaid, Owner shall be entitled to suspend its performance
hereunder and shall have no responsibility whatsoever for the consequences
thereof. Charter hire shall continue to accrue during any such period of
suspension, and any extra expenses resulting from such suspension shall be for
Charterer's account.
(f) Charterer shall be entitled to deduct from the payments of charter
hire due hereunder, any disbursements made by Charterer for Owner's account,
and any advances made by Charterer to Owner's agent.
(g) All payments from Charterer to Owner shall be paid in U.S. dollars
* REDACTED.
10. TIME OF REDELIVERY/PORT OF REDELIVERY. The Barges shall be
redelivered to Owner upon the expiration of this Charter Party in the same good
order as when delivered to Charterer, fair wear and tear excepted. The port of
redelivery shall be mutually agreed by the parties.
11. FORCE MAJEURE. Neither the Barges, their Owner, nor Charterer shall,
unless otherwise in this Charter Party expressly provided, be liable for any
loss or damage or delay or failure in performance
4
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
hereunder arising or resulting from any of the following: act of God; act of
war; seizure under legal process; quarantine restrictions; strikes, lockouts,
stoppage or restraint of labor, picketing, boycott or other labor disturbances
or interruptions from whatever cause, whether partial or general; riots and
civil commotions; arrest or restraint of princes, rulers, or people; act of
public enemies, pirates or assailing thieves; or acts of governments; provided
that such damage, delay or failure arises from causes outside the control of the
relevant party hereto.
12. ADVANCES. Charterer or its agents shall advance, if required,
necessary funds for ordinary disbursements for the Barges' account at any
* port, charging only interest at REDACTED per annum, any such advances to be
deducted from hire.
13. LOSS OF BARGES. Should a Barge be lost, or become a constructive or
compromised total loss, or be requisitioned for title, hire shall cease at noon
on the day of its loss, constructive or compromised total loss, or requisition,
and if missing, from noon on the date when last heard of, and any hire paid in
advance and not earned shall be returned to Charterer. If the Barge is missing
at the time when hire becomes payable, payment shall be suspended until the
Barge is reported safe.
14. REQUISITION. Should a Barge be requisitioned by the U.S. government
during the period of this Charter Party, the Barge shall be off-hire during the
period of such requisition, and any hire paid by the government in respect of
such requisition period shall be for Owner's account. Any such requisition
period shall count as part of the Charter Period.
15. LIENS. Owner shall have a lien upon all Cargoes carried hereunder and
upon all freights, for any amount due to Owner under this Charter Party, which
lien shall continue after delivery of the Cargoes into the possession of
Charterer, but shall not continue into the hands of a third party once the Cargo
leaves Charterer's possession. Charterer shall have a lien on the Barges for
all amounts paid in advance hereunder and not earned and for any payments made
by Charterer on the Owner's behalf as provided herein.
16. SALVAGE. Subject to the provisions of Section 11, all time lost, and
all legal and other expenses (excluding any damage to a Barge) incurred, in
saving or attempting to save life or property shall be borne equally by Owner
and Charterer. All salvage and proceeds from derelicts shall be divided equally
between Owner and Charterer. Charterer shall be bound by all measures taken by
Owner in order to secure payment of salvage and to fix its amount.
17. WAR RISKS. (a) For the purpose of this Section, the words "war
risks" shall include any war (whether actual or threatened), act of war, civil
war, hostilities, revolution, rebellion, civil commotion, warlike operations,
the laying of mines (whether actual or reported), acts of piracy, acts of
terrorists, acts of hostility or malicious damage, blockades, by any person,
body, terrorist or political group, or the government of any state whatsoever,
which, in the reasonable judgment of Owner, may be dangerous or are likely to be
or to become dangerous to a Barge or its Cargoes.
(b) The Barges, unless the written consent of Owner be first obtained,
shall not be ordered to or required to continue to or through, any port, place,
area or zone (whether of land or sea), or any waterway or canal, where it
appears that the Barges, or their cargo, in the reasonable judgment of Owner,
may be, or are likely to be, exposed to war risks.
5
<PAGE>
(c) If the insurers of the war risks insurance should require payment
of premiums and/or calls because, pursuant to Charterer's orders, a Barge is
within, or is due to enter and remain within, any area or areas that are
specified by such insurers as being subject to additional premiums because of
war risks, then such premiums and/or calls shall be reimbursed by Charterer to
Owner at the same time as the next payment of charter hire is due.
18. GENERAL AVERAGE. General average contributions shall be payable
according to York/Antwerp Rules, 1974, as amended. Charter hire shall not
contribute to general average. Charterer shall use every reasonable effort to
ensure that all bills of lading issued for Cargoes carried onboard the Barges
include the foregoing clause.
19. NEW JASON CLAUSE. In the event of accident, danger, damage or
disaster before or after the commencement of the voyage, resulting from any
cause whatsoever, whether due to negligence or not, for which, or for the
consequences of which, Owner is not responsible by statute, contract or
otherwise, the cargoes, shippers, consignees or owners of the Cargoes shall
contribute with Owner in general average to the payment of any sacrifices,
losses or expenses of a general average nature that may be made or incurred and
shall pay salvage and special charges incurred in respect of the Cargoes.
If a salving ship is owned or operated by Owner, salvage shall be paid for
as fully as if the said salving ship or ships belonged to strangers. Such
deposit as Owner or its agents may deem sufficient to cover the estimated
contribution of the Cargoes and any salvage and special charges thereon shall,
if required, be made by the Cargoes, shippers, consignees or owners of the
cargoes to Owner before delivery.
Charterer shall use every reasonable effort to ensure that all bills of
lading issued for Cargoes carried onboard the Barges include the foregoing
clause.
20. BOTH-TO-BLAME COLLISION CLAUSE. If a Barge covered by the terms and
provisions hereof comes into collision with another ship as a result of the
negligence of the other ship and any act, neglect or default of Owner in the
management of such Barge, the owners of the Cargoes carried in such Barge shall
indemnify Owner against all loss or liability to the other or non-carrying ship
or its owners in so far as such loss or liability represents loss of, or damage
to, or any claim whatsoever of the owners of said Cargoes, paid or payable by
the other or non-carrying ship or its owners to the owners of said Cargoes and
set-off, recouped or recovered by the other or non-carrying ship or its owners
as part of their claim against the carrying Barge or Owner. The foregoing
provision shall also apply where the owners, operators, or those in charge of
any ships or objects other than, or in addition to, the colliding ships or
objects are at fault in respect of a collision or contact.
Charterer shall use every reasonable effort to ensure that all bills of
lading issued for Cargoes carried onboard the Barges include the foregoing
clause.
21. BILLS OF LADING. Bills of lading issued hereunder shall have effect
subject to the provisions of the Carriage of Goods by Sea Act of the United
States, approved April 16, 1936, except that if any bill of lading is issued at
a place where any other act, ordinance or legislation gives statutory effect of
the International Convention for the Unification of Certain Rules relating to
Bills of Lading at Brussels, August 1974, then the bill of lading shall have
effect subject to the provisions of such act, ordinance or legislation. The
applicable act, ordinance or legislation (hereinafter called the "act") shall be
deemed to be incorporated in the bills of lading issued hereunder and nothing
therein contained shall be deemed a surrender by the Owner or carrier of any of
their rights or immunities or an increase of any of their responsibilities or
liabilities under the act. If any terms of the bills of lading issued hereunder
be repugnant to the act to any extent, such term shall be void to that extent
but no further.
6
<PAGE>
22. DEMISE. Nothing in this Charter Party shall be construed as a demise
of the Barges to Charterer.
23. PRELOADING SURVEY. In the event a loading port survey is required by
the rules of the Barges' classification society, the cost of such survey shall
be for Charterer's account.
24. COMPLIANCE WITH LAWS AND REGULATIONS. Owner and Charterer agree to
abide by all federal, state and local laws and regulations during the period
covered by this Charter Party.
25. LAW AND ARBITRATION. (a) This Charter Party shall be governed by the
General Maritime Law of the United States of America and, to the extent not
inconsistent therewith, the laws of the State of Texas.
(b) Any controversy or claim arising out of or relating to this
Charter Party, or the breach thereof, shall be referred to and finally resolved
by arbitration in the State of Texas, in accordance with the Maritime
Arbitration Rules of the Society of Maritime Arbitrators, and judgment on the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The arbitration award may grant any remedy or relief
deemed by the arbitrator(s) to be just and equitable, including specific
performance of this Agreement.
26. NO LIENS. Charterer shall not suffer, nor permit to be continued, any
lien or encumbrance on the barges incurred by them or their agents, other than
liens arising in the ordinary course of Charterer's business for supplies and
necessaries provided to the Barges for which payment is not yet due.
27. CHANGE OF OWNERSHIP. Owner's rights and obligations under this
Charter Party are not transferable by sale or assignment without Charterer's
consent. In the event that the Barges are sold without Charterer's consent, in
addition to its other rights, Charterer may, in its absolute discretion,
terminate this Charter Party, whereupon Owner shall reimburse Charterer for any
hire paid in advance and not earned, for any sums to which Charterer is entitled
under this Charter Party, and for any damages that Charterer may sustain.
28. ASSIGNMENT. Charterer may not assign its rights and obligations
hereunder without the express written consent of Owner, which consent shall not
be unreasonably withheld.
29. AMENDMENT. This Charter Party may be amended or supplemented at any
time only by written instrument executed by both parties hereto.
30. SEVERABILITY. The provisions of this Charter Party shall be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the remainder of this Charter Party or
any valid clause of any invalid portion.
31. CONSEQUENTIAL LOSS. Except as elsewhere provided in this Charter
Party, neither party shall be responsible for any consequential loss, howsoever
caused, including but not limited to damage or decline in the market value of
the Barges or Cargoes during delays, loss of profit or loss of business
opportunities in respect of any claim that the one may have against the other.
32. CONFLICT OF INTEREST. No director, employee or agent of either party
shall give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Charter Party. An independent
public accounting firm mutually acceptable to Owner and Charterer may, at either
party's request and expense, audit any and all records of both parties for the
sole purpose of determining
7
<PAGE>
whether there has been compliance with this Section 32. Any such audit shall be
conducted at any reasonable time or times during the term of this Charter Party
and during a period of two years after its termination. No information obtained
during such audit shall be disclosed unless it relates to such conflict of
interest.
33. AUDIT. Each party and its duly authorized representative(s) shall
have access to the accounting records and other documents maintained by the
other party which relate to this Charter Party, and shall have the right to
audit such records at any reasonable time or times during the term of this
Charter Party and within two years after termination of this Charter Party.
34. CONFIDENTIALITY. The parties hereto mutually agree to keep the terms
and conditions of this Charter Party strictly confidential unless both parties
consent to disclosure of such confidential information, which consent will not
be unreasonably withheld. In the event that disclosure of the terms and
conditions hereof is required by law or any government agency, the party making
such disclosure shall promptly notify the other party of the legal requirement
and the nature and extent of the legally compelled disclosure. Thereafter, both
parties shall cooperate and take all available steps to maintain, to the
greatest degree possible, the continued confidentiality of this Charter Party.
35. NOTICE. All notices, consents, requests, demands, offers, reports and
other communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given (i) when received if delivered in
person, or (ii) when sent by facsimile transmission to the number set forth
below or to such changed number as such party may have fixed by notice, and
acknowledged by an appropriate facsimile receipt:
(a) If to MIDSTREAM BARGE COMPANY, L.L.C. to:
MIDSTREAM BARGE COMPANY, L.L.C.
1301 McKinney
Houston, TX 77010
Attention: President
Facsimile: (713) 754-5149
with a copy to:
CHEVRON U.S.A. PRODUCTION COMPANY
(a division of Chevron U.S.A. Inc.)
1301 McKinney
Houston, TX 77010
Attention: Vice President & General Counsel
Facsimile: (713) 754-3366
(b) If to WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP to:
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, TX 77040
Attention: President
Facsimile: (713) 507-6808
with a copy to:
8
<PAGE>
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, TX 77040
Attention: Vice President & General Counsel
Facsimile: (713) 507-6834
provided, that (x) any notice of change of address or facsimile number shall be
effective only when received, and (y) a copy of any notice given by facsimile
shall also be confirmed by mail to the address as provided above.
36. NO THIRD PARTY BENEFICIARY. This Charter Party is made solely and
specifically among and for the benefit of the parties and their respective
successors and permitted assigns and no other persons shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on account
of this Charter Party as a third party beneficiary or otherwise.
37. ENTIRE AGREEMENT. This Charter Party, together with any attached
Exhibits, contains the entire agreement between the parties hereto with respect
to the transactions contemplated herein, and supersedes all prior agreements,
arrangements and understandings, oral or written, between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Charter Party on
the date first above written.
Executed at MIDSTREAM BARGE COMPANY, L.L.C.
__________________
By: _______________________________
Name:
Title:
Executed at WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
By: Warren Petroleum G.P., Inc., its general partner
___________________
By: _______________________________
Name:
Title:
9
<PAGE>
EXHIBIT 10.26
------------------------------------
LIMITED LIABILITY COMPANY AGREEMENT
of
MIDSTREAM BARGE COMPANY, L.L.C.
a Delaware Limited Liability Company
by and between
CHEVRON U.S.A. INC.
and
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
-----------------------------------
August 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1.- DEFINITIONS .............................................. 1
1.1 Definition of Terms ....................................... 1
1.2 Number and Gender ......................................... 4
ARTICLE 2.- ORGANIZATION, PURPOSE AND TERM ........................... 4
2.1 Formation ................................................. 4
2.2 Name ...................................................... 4
2.3 Registered Office; Registered Agent ....................... 4
2.4 Term ...................................................... 5
2.5 Purposes .................................................. 5
2.6 Title to Products Transported ............................. 5
2.2.7 No State Law Partnership .................................. 5
2.8 Members ................................................... 5
2.9 Liability to Third Parties ................................ 5
2.10 Withdrawal ................................................ 5
2.11 Admission of Additional Members ........................... 5
2.12 Other Activities of the Members ........................... 5
2.13 Barge Standards ........................................... 5
ARTICLE 3. - REPRESENTATIONS, WARRANTIES AND COVENANTS ................ 6
3.1 By Members ................................................ 6
3.2 By CUSA ................................................... 6
3.3 By NEW WARREN ............................................. 6
ARTICLE 4. - CAPITAL CONTRIBUTIONS .................................... 7
4.1 Capital Contributions ..................................... 7
4.2 Additional Capital Contributions .......................... 7
4.3 Return of Capital ......................................... 7
4.4 No Interest on Capital Contributions ...................... 7
4.5 Capital Accounts .......................................... 7
4.6 Liability Limited to Capital Contributions ................ 8
ARTICLE 5. - ADVANCES ................................................. 8
5.1 Advances Not Capital Contributions ........................ 8
5.2 Repayments of Advances .................................... 8
ARTICLE 6. - DISTRIBUTIONS OF CASH AND
ALLOCATIONS OF PROFITS AND LOSSES ............. 8
6.1 Distributions ............................................. 8
6.2 Net Profits or Net Losses ................................. 8
6.3 Allocations of Net Profits and Net Losses ................. 9
6.4 Tax Allocations: Section 704(c) .......................... 9
6.5 Authority to Vary Allocations ............................. 9
6.6 Withholding and Payments on Behalf of a Member ............ 10
ARTICLE 7. - MANAGEMENT ............................................... 10
7.1 Management ................................................ 10
<PAGE>
7.2 Management Committee .......................................... 10
7.3 Appointment, Removal and Replacement .......................... 10
7.4 Meetings, Quorum, Vote, Etc. .................................. 11
7.5 Compensation .................................................. 11
7.6 Delegation of Authority and Duties; Officers .................. 11
7.7 Liability of Management Committee Representatives ............. 13
7.8 Books and Records ............................................. 13
7.9 Budget ........................................................ 14
7.10 Bank Accounts ................................................. 14
7.11 Member Approval for Certain Actions ........................... 14
7.12 Insurance ..................................................... 15
ARTICLE 8. - TRANSFERS OF INTERESTS IN THE COMPANY ......................... 15
8.1 Limitations on Transfers ...................................... 15
8.2 NEW WARREN Option ............................................. 15
8.3 CUSA Option ................................................... 16
8.4 Agreement by Transferee ....................................... 16
ARTICLE 9. - DISSOLUTION ................................................... 16
9.1 Events of Dissolution ......................................... 16
9.2 Termination and Winding Up of the Company ..................... 17
9.3 Accounting .................................................... 18
9.4 Bankruptcy of a Member ........................................ 18
9.5 Defaulting Member ............................................. 18
ARTICLE 10.- TAXES, ETC. ................................................... 19
10.1 Sole Responsibility ........................................... 19
10.2 Reports ....................................................... 19
10.3 Supplemental and Interim Reports .............................. 19
10.4 Tax Elections ................................................. 19
10.5 Consistent Reporting .......................................... 20
10.6 Tax Matters Partner ........................................... 20
ARTICLE 11.- GENERAL PROVISIONS ............................................ 21
11.1 Indemnification ............................................... 21
11.2 Successors and Assigns ........................................ 21
11.3 Notices ....................................................... 21
11.5 Entire Agreement .............................................. 22
11.6 Severability .................................................. 22
11.7 Counterparts .................................................. 23
11.8 Additional Documents and Acts ................................. 23
11.9 No Third Party Beneficiary .................................... 23
11.10 Governing Law ................................................. 23
11.11 Waiver......................................................... 23
11.12 Confidentiality ............................................... 23
SIGNATURES/PROPORTIONATE INTERESTS ......................................... 23
<PAGE>
EXHIBIT A - List of Barges
EXHIBIT B - Description of Maintenance Facility
<PAGE>
"Pages where confidential treatment has been requested are stamped
Confidential Treatment Requested. The redacted material has been
separately filed with the Commission; the appropriate section has been
marked at the appropriate place and in the margin with a star (*).
LIMITED LIABILITY COMPANY AGREEMENT
OF
MIDSTREAM BARGE COMPANY, L.L.C.
LIMITED LIABILITY COMPANY AGREEMENT dated August 31, 1996, by and
between CHEVRON U.S.A. INC., a Pennsylvania corporation ("CUSA"), and WARREN
PETROLEUM COMPANY, LIMITED PARTNERSHIP, a Delaware limited partnership ("NEW
WARREN").
WITNESSETH:
WHEREAS, CUSA, NGC Corporation ("NGC") and Midstream Combination Corp.
("Newco") have entered into an agreement providing for a strategic combination
of NGC with substantially all of the assets of the Warren Petroleum Division and
the natural gas business unit of CUSA.
WHEREAS, NGC and CUSA have agreed to the formation of a limited
liability company named MIDSTREAM BARGE COMPANY, L.L.C. (the "Company") pursuant
to the Delaware Limited Liability Company Act for the purpose of acquiring
twenty-one (21) liquid petroleum gas barges to be operated in the U.S. coastwise
trade, a maintenance facility leasehold and related improvements and equipment
(the "Barge Assets");
WHEREAS, prior to the combination, CUSA will transfer an undivided
twenty-five percent (25%) interest in the Barge Assets to Newco;
WHEREAS, CUSA and NGC or its subsidiary will then jointly transfer their
undivided interests in the Barge Assets to the Company, representing their
respective Capital Contributions;
WHEREAS, the Company will be owned seventy-five percent (75%) by CUSA
and twenty-five percent (25%) by NEW WARREN and will in all other respects
qualify to own the Barge Assets, including without limitation, the twenty-one
(21) liquid petroleum gas barges (the "Barges") and operate them in the
coastwise trade; and
WHEREAS, the Company will time charter the Barges to NEW WARREN;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE 1. - DEFINITIONS
1.1 Definition of Terms. When used in this Agreement, the following
terms shall have the meanings set forth in this Section 1.1:
"Act" means the Delaware Limited Liability Company Act, 6 Del. C.
Section 18-101 et seq., as
<PAGE>
the same may be amended from time to time.
"Agreement" or "Limited Liability Company Agreement" means this Limited
Liability Company Agreement as the same may be further amended, modified,
supplemented or restated from time to time, as the context requires.
"Bankrupt" or "Bankruptcy" means, when used with reference to any
Person, (i) the entry of a decree or order by a court of competent jurisdiction
adjudging such Person as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of such Person under the Federal Bankruptcy Code, as amended, or any
other federal, state or foreign law relating to bankruptcy or insolvency, or
appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of such Person or of all, or a substantial part of, the
property of such Person, ordering the winding-up or liquidation of the affairs
of such Person, which decree or order shall remain unstayed and in effect for a
period of 30 consecutive days, or (ii) the institution by such Person of a
proceeding to be adjudged bankrupt or insolvent, or the consent by such Person
to the institution of a bankruptcy or insolvency proceeding against such Person,
or the filing by such Person of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal, state or foreign law relating to relief from claims of
creditors, or the consent by such Person to the filing of any such petition or
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or
other similar official of such Person, or of all or a substantial part of the
property of such Person, or the making by such Person of any assignment for the
benefit of creditors, or the admission by such Person of its inability to pay
its debts generally as they come due, or the commission by such Person of an
"act of bankruptcy" (as defined in the Federal Bankruptcy Code), or the taking
of any corporate or other action by such Person in furtherance of any such
action; provided, in any event, that the bankrupt Member's Interest in the
Company is subject to the bankruptcy or liquidation proceedings and is not
exempt from creditors.
"Bankrupt Member" has the meaning set forth in Section 9.4.
"Barge Assets" means the (i) twenty-one (21) liquid petroleum gas barges
identified in Exhibit A to the Limited Liability Company Agreement to be
operated in the U.S. coastwise trade, and (ii) a maintenance facility leasehold
and related improvements and equipment as described in Exhibit B to this Limited
Liability Company Agreement.
"Barges" means the 21 barges identified in Exhibit A to this Limited
Liability Company Agreement.
"Capital Account" means an account established and maintained for each
Member pursuant to Section 4.5.
"Capital Contributions" means the total amount of cash or assets that a
Person contributes to the Company as capital in that Person's capacity as a
Member pursuant to this Agreement.
"Certificate of Formation" has the meaning set forth in Section 2.1.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, and any
corresponding provision of prior or succeeding law.
"Company" means MIDSTREAM BARGE COMPANY, L.L.C., the Delaware limited
liability
2
<PAGE>
company formed under this Agreement.
"Default Date" has the meaning set forth in Section 9.5(c).
"Defaulting Member" has the meaning set forth in Section 9.5(a).
"Distributable Cash" has the meaning set forth in Section 6.1.
"Events of Dissolution" has the meaning set forth in Section 9.1(b).
"Expenses" means all expenses of the Company whether or not such
expenses are deductible for United States federal income tax purposes.
"Fiscal Year" means the calendar year.
"CUSA Management Committee Representatives" has the meaning set forth
in Section 7.2.
"Indemnified Party" has the meaning set forth in Section 11.1.
"Management Committee" has the meaning set forth in Section 7.2.
"Member" means each of CUSA and NEW WARREN, and any Person who, at the
time of reference thereto, has been admitted to the Company as a Member in
accordance with this Agreement and shall have the same meaning as the term
"member" under the Act, but shall not include any Person who has ceased to be a
Member of the Company.
"Net Losses" has the meaning set forth in Section 6.2.
"Net Profits" has the meaning set forth in Section 6.2.
"New Allocation" has the meaning set forth in Section 6.5.
"Non-Bankrupt Member" has the meaning set forth in Section 9.4.
"Non-Defaulting Member" has the meaning set forth in Section 9.5(c).
"Officers" has the meaning set forth in Section 7.6.
"Person" means any natural person, partnership, corporation, limited
liability company, trust, estate, association, custodian or nominee or any other
individual or entity in its own or any representative capacity.
"Proportionate Interest" means, in relation to either Member, its
proportionate interest in the Company, as may be modified under this Agreement,
as set forth opposite such Member's name on the signature page.
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
regulations may be amended from time to time.
"Reserves" means such reasonable nonexcessive amounts set aside by the
Management Committee to provide for the Company's future Expenses, debt
payments, capital expenditures and contingent liabilities.
"Tax Matters Partner" has the meaning set forth in Section 10.6.
"Time Charter" means the time charter between the Company and NEW WARREN
for the U.S.-flag barges set forth in Exhibit A attached hereto.
"United States Citizen" or "U.S. Citizen" means a United States citizen
as that term is defined in and interpreted under the Shipping Act, 1916, as
amended, and the Merchant Marine Act, 1920, as amended.
1.2 Number and Gender. As the context requires, all words used herein in
the singular number shall extend to and include the plural, all words used in
the plural number shall extend to and include the singular, and all words used
in any gender shall extend to and include the other gender or be neutral.
ARTICLE 2. - ORGANIZATION, PURPOSE AND TERM
2.1 Formation. A Certificate of Formation for the Company was filed with
the Secretary of State the State of Delaware, and the Company was formed as a
Delaware limited liability company, on August 7, 1996.
2.2 Name. The name of the Company is "MIDSTREAM BARGE COMPANY, L.L.C."
and all Company business shall be conducted in that name or such other names
that comply with applicable law as the Members may from time to time designate.
2.3 Registered Office; Registered Agent. The registered office of the
Company required by the Act to be maintained in the State of Delaware shall be
the office of the initial registered agent named in the Certificate of Formation
or such other office as the Management Committee may designate from time to time
in the manner provided by law. The registered agent of the Company in the State
of Delaware shall be the initial registered agent named in the Certificate of
Formation or such other person or persons as the Management Committee may
designate from time to time in the manner provided by law. In the event the
registered agent ceases to act as such for any reason or the registered office
shall change, the Management Committee shall promptly designate a replacement
registered agent or file a notice of change of address as the case may be. If
the Management Committee shall fail within thirty (30) days to designate a
replacement registered agent or change of address of the registered office, any
Member may designate a replacement registered agent or file a notice of change
of address.
2.4 Term. The Company was formed on August 7, 1996, and shall expire
* REDACTED unless earlier dissolved in accordance with this Agreement REDACTED.
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2.5 Purposes. The purposes of the Company are:
(a) to acquire barges, including the Barges identified in Exhibit A;
(b) to manage, own and operate those Barges in the United States
coastwise trade; and
(c) to do any and all acts or things that may be incidental or necessary
to the activities set forth in subsections (a) and (b) above as may be
permitted under Delaware law; provided, however, that the business of the
Company shall not be extended beyond the matters described herein without the
unanimous vote of the Members.
2.6 Title to Products Transported. At no time will the Company take
title to any products that are transported by its Barges unless agreed to in
writing by both Members.
2.7 No State Law Partnership. The Members intend that the Company not be
a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member be a partner of, or a joint venturer with, any other
Member for any purpose, other than for U.S. federal and state tax purposes, and
this Agreement shall not be construed to suggest otherwise.
2.8 Members. The Members of the Company are CUSA and NEW WARREN, each of
which shall be admitted to the Company as a Member effective upon formation of
the Company.
2.9 Liability to Third Parties. No Member shall be liable for the debts,
obligations or liabilities of the Company, including under a judgment, decree or
order of a court.
2.10 Withdrawal. A Member shall not have the right or power to withdraw
or resign from the Company as a Member without the unanimous written consent of
all other Members.
2.11 Admission of Additional Members. Additional Persons may be admitted
as Members of the Company only upon the unanimous written consent of the
existing Members and subject to this Agreement being amended to reflect the
admission of such additional Persons.
2.12 Other Activities of the Members. The Members recognize and
acknowledge that each Member is involved in other business activities and shall
devote to the Company only such time as is reasonably necessary to conduct the
business and affairs of the Company. Except as otherwise set forth below, any
Member or any Person affiliated with any Member may participate in other
business activities, whether or not any such activities are competitive with the
business of the Company. Unless unanimously approved by the Members, no Officer,
Management Committee Representative or employee of the Company, so long as such
individuals remain in such capacity, shall participate in business activities in
competition with the business of the Company.
2.13 Barge Standards. The Time Charter will provide that NEW WARREN and
the Company will comply with the applicable barge standards of the Responsible
Carrier Program adopted by The American Waterways Operators on December 7, 1994,
as amended.
ARTICLE 3. - REPRESENTATIONS, WARRANTIES AND COVENANTS
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3.1 By Members. Each Member represents and warrants on its behalf to and
for the benefit of the other Member and the Company that:
(a) it is a legal entity established, duly organized and in good
standing under the laws of its jurisdiction of formation;
(b) the execution, delivery and performance of this Agreement and any
instrument or agreement required to be executed, delivered or performed by it
hereunder (i) are within its powers, (ii) have been duly authorized and are not
in conflict with its organizational documents or of any other instruments or
agreements to which it is bound, and (iii) the person or persons executing this
Agreement or any such other instrument or agreement on its behalf has been fully
authorized to do so;
(c) there is no law, rule or regulation, nor is there any judgment,
decree or order of any court or governmental authority binding on it, nor is
there any agreement to which it is bound that would be contravened by the
execution, delivery or performance of this Agreement;
(d) this Agreement is its legal, valid and binding obligation,
enforceable against it in accordance with its terms except as limited by
Bankruptcy, insolvency or other similar laws (regardless of whether enforcement
is sought in a court of law or equity);
(e) any necessary permits, licenses and approvals required under the
laws of the place of its formation and its principal place of business for the
execution, delivery and performance of this Agreement by it, have been properly
obtained and are presently in full force and effect; and
(f) it understands that the interests in the Company being acquired
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the laws of any other jurisdiction,
and, to the extent that the sale of the interests in the Company pursuant to
this Agreement is subject to the Securities Act or such other laws, such
interests in the Company are being sold in reliance upon an exemption from such
registration; it will not sell or transfer any of its interest in the Company in
violation of applicable federal or state securities laws, and, to the extent
that such transfer is subject to the Securities Act or state securities laws,
without registration under the Securities Act and applicable state securities
laws or an exemption from such registration; and it is acquiring its interest in
the Company (i) for its own account and not on behalf of other persons, and (ii)
for investment purposes only, and not with a view to resale or distribution
thereof.
3.2 By CUSA. CUSA hereby represents, warrants and covenants to NEW
WARREN that CUSA is, and shall at all times remain during the term of this
Agreement, a United States Citizen qualified to operate vessels in the United
States coastwise trade.
3.3 By NEW WARREN. NEW WARREN hereby represents, warrants and covenants
to CUSA that NEW WARREN is, and shall at all times remain during the term of
this Agreement, a limited partnership eligible to document a vessel under the
requirements of 46 U.S.C. Chapter 121 -- Documentation of Vessels.
ARTICLE 4. -- CAPITAL CONTRIBUTIONS
4.1 Capital Contributions. Each of the Members shall make Capital
Contributions to the capital of the Company as follows:
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(a) CUSA shall contribute all of its right, title and interest in the
Barge Assets, CUSA's interest amounting to an undivided seventy-five percent
(75%) interest in the Barge Assets;
(b) NEW WARREN will contribute all of its right, title and interest in
the Barge Assets, NEW WARREN's interest amounting to an undivided twenty-five
percent (25%) interest in the Barge Assets.
4.2 Additional Capital Contributions. Except as otherwise required under
applicable law or by Section 5.1, (i) each Member's interest is nonassessable,
and a Member shall not be required to make additional Capital Contributions to
the Company, and (ii) no Member shall have the right or shall be permitted to
make additional Capital Contributions to the Company unless all Members consent
to such additional Capital Contribution.
4.3 Return of Capital. No Member shall have the right to demand or
receive the return of any Capital Contributions to the Company.
4.4 No Interest on Capital Contributions. Except as otherwise expressly
provided herein, no Member shall receive any interest on its Capital
Contributions to the Company or its Capital Account, notwithstanding any
disproportion therein as between any Members.
4.5 Capital Accounts. (a) Subject to Section 4.5(b), a Capital Account
shall be maintained by the Company, acting through the Management Committee, for
each Member and shall be increased by (i) the amount of the Member's Capital
Contributions to the Company, and (ii) the Members allocable share of Net
Profits determined in accordance with Article 6, and shall be decreased by (x)
the Member's allocable share of Net Losses determined in accordance with Article
6, and (y) the amount or value of any distributions to the Member pursuant to
Article 6 whether in the form of cash or property (net of any liabilities
assumed by the Member in conjunction with such distribution). Upon a
distribution of property other than cash to any Member, the value of such
property shall be restated on the books of the Company at its fair market value
immediately prior to such distribution and the Capital Account of each Member
shall be restated to reflect such adjustment, determined as if the Company had
sold such asset for its fair market value and the resulting gain or loss had
been charged or credited to the Members' Capital Accounts as provided herein.
Following such adjustment to the Members' books, the Capital Accounts of the
Members receiving the distribution(s) shall be adjusted to reflect the amount of
distribution. Loans to the Company by any Member shall not be considered Capital
Contributions. Furthermore, in the event of a termination of the Company for tax
purposes under Section 708(b)(1)(B) of the Code, the deemed distributions to the
Member shall be calculated in accordance with their Proportionate Interests and,
thereafter, the Capital Account of each Member shall be maintained as set forth
above.
(b) This Section 4.5 is intended to satisfy the requirements of Section
704(b) of the Code and Regulations Section 1.704-1(b)(2)(iv) and shall be so
construed and, if necessary, modified, to cause the allocation of profits,
losses, income gain and credit under Article 10, to have substantial economic
effect under such sections of the Code and Regulations, and in the event of any
conflict between the provisions of this Section 4.5 and such Regulation, the
Regulations shall control.
(c) In the event any interest in the Company is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates
7
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
to the transferred interest and the Company's books shall be closed so that Net
Profits, Net Losses, credits and distributions can be attributed to the Members
based on their interests in the Company when items were actually received, paid
or incurred.
(d) Except as otherwise provided herein, no Member shall be entitled to
withdraw all or any portion of its Capital Contribution or receive interest on
its contributed capital or Capital Account.
4.6 Liability Limited to Capital Contributions. The liability of each
Member shall be limited to its Capital Contributions. Except as provided in
Section 4.1, neither of the Members shall have any further personal liability to
contribute money to the Company or with respect to any liability or obligation
of the Company.
ARTICLE 5. -- ADVANCES
5.1 Advances Not Capital Contributions. If either Member advances funds
to the Company, other than as a contribution to capital pursuant to this
Agreement, the amount of such advance shall not be deemed a Capital Contribution
unless the Members unanimously and expressly agree otherwise. The amount of any
such advance shall be a debt due from the Company to such Member and, except as
otherwise expressly provided in Section 5.2 or elsewhere in this Agreement or as
agreed at the time such funds are advanced, shall be repaid upon demand to such
Member with interest at a rate of six percent (6%) per annum.
5.2 Repayments of Advances. All advances specified in this Article 5 and
other debt due from the Company to the Members shall be paid by the Company to
the respective Members, subject to any agreement to the contrary entered into in
connection with the making of the relevant advance and unless otherwise provided
herein, in proportion to the Members' Proportionate Interests.
ARTICLE 6. -- DISTRIBUTIONS OF CASH AND
ALLOCATIONS OF PROFITS AND LOSSES
6.1 Distributions. Except as provided in Article 9, the Management
Committee shall distribute to the Members from time to time the amount of all
Distributable Cash. Distributable Cash shall be defined as and limited to the
excess of charter hire revenues over Company cash operating costs, but shall
* not exceed REDACTED in any year. Any Distributable Cash shall be distributed
subject to Section 18-607 of the Act to the Members ratably in accordance with
each Member's Proportionate Interest.
6.2 Net Profits or Net Losses. "Net Profits" and "Net Losses" mean, for
each Fiscal Year of the Company, an amount equal to the Company's taxable income
or loss for such year determined in accordance with Code Section 703(a) plus any
non-taxable income and reduced by any non-deductible expenses and capital
expenditures. For this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss.
6.3 Allocations of Net Profits and Net Losses. The Net Profits and Net
Losses of the
8
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Company shall be allocated to the Members ratably in accordance with each
Member's Proportionate Interest.
6.4 Tax Allocations: Section 704(c). If any Company asset has a book value
different than its adjusted tax basis to the Company for federal income tax
purposes (whether by reason of the contribution of such property to the Company,
the revaluation of such property hereunder or otherwise) allocations of income,
gain, loss, deduction, credit and tax preference under this Section 6.4 with
respect to such asset shall take account of any variation between the adjusted
tax basis of such asset for federal income tax purposes and its book value in
the manner prescribed by Section 704(c) of the Code or the principles set forth
in 1.704-1(b)(2)(iv)(g) of the Regulations, as the case may be, using the
remedial allocation method set forth in 1.704-3(d) of the Regulations.
6.5 Authority to Vary Allocations. (a) It is the intent of the Members that
each Member's allocable share of Net Profit and Net Losses (or items thereof)
shall be determined and allocated in accordance with this Article 6 except to
the extent such allocations would not comply with Section 704(b) of the Code. In
order to preserve and protect the determinations and allocations provided for in
this Article 6, the Management Committee, upon the advice of the Company's tax
counsel, is hereby authorized and directed to allocate Net Profits and Net
Losses (or items thereof) arising in any year in a manner different than
otherwise provided for in this Article 6, but only to the extent that the
allocation of Net Profits and Net Losses (or items thereof) in the manner
provided for in this Article 6 would otherwise be inconsistent with Section
704(b) of the Code. Any allocation made pursuant to this Section 6.5 shall be
done only in accordance with the standards and procedures set forth in this
Section 6.5 and shall be deemed to be a complete substitute for any allocation
otherwise provided for in this Article 6 and no amendment of this Agreement
shall be required.
(b) In making any allocation (the "New Allocation") under this Section 6.5,
the Management Committee is authorized to act only after having been advised in
writing (a copy of which shall be furnished to each Member) by the Company's tax
counsel that, under Section 704(b) of the Code and the Regulations thereunder:
(i) the New Allocation is required; and
(ii) the New Allocation is the minimum modification of the allocations
otherwise provided for in this Article 6 necessary in order to assure that,
either in the then current year or in any preceding year, each Member's
allocable share of Net Profits and Net Losses (or items thereof) is determined
and allocated in accordance with Section 704(b) of the Code and the Regulations
thereunder.
(c) If the Management Committee is required by this Section 6.5 to make any
New Allocation in a manner less favorable to a Member than is otherwise provided
for in this Article 6, then the Management Committee is authorized and directed,
insofar as it is advised by the Company's tax counsel that it is permitted by
Section 704(b) of the Code, to allocate Net Profits and Net Losses (or items
thereof) arising in later years in such manner so as to bring the allocations to
such Member as nearly as possible to the allocations otherwise contemplated by
this Article 6.
(d) New Allocations made by the Management Committee under this Section 6.5
shall be deemed to be made pursuant to the fiduciary obligations of the
Management Committee to the Company and the Members.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
6.6 Withholding and Payments on Behalf of a Member. The Management
Committee is hereby authorized to withhold from distributions, or to make
payments on behalf of a Member in its capacity as such, all amounts that the
Management Committee is required by law to withhold or pay on behalf of such
Member (including federal and state income tax withholding, state personal
property taxes and state unincorporated business taxes). All amounts withheld by
the Company from distributions or paid by the Company on behalf of a Member
pursuant to the foregoing sentence shall be deemed to have been distributed to
the Member otherwise entitled to receive the amount so withheld or on whose
behalf the amount was paid. Each Member shall indemnify the Company for the
entire amount withheld or paid on behalf of such Member (including interest,
penalties and related expenses, provided that the Company shall bear any
interest, penalties and related expenses, to the extent attributable to the
Company's negligence) and, except as otherwise provided herein, shall hold the
Company harmless from any liability with respect thereto.
ARTICLE 7.--MANAGEMENT
7.1 Management. Except as otherwise provided herein, the management of the
Company shall be vested in the Members of the Company in proportion to their
respective Proportionate Interests and the decision of the Members having an
* aggregate Proportionate Interest of REDACTED or more shall be controlling.
7.2 Management Committee. Except for decisions or actions requiring the
approval of the Members as provided in Section 7.11 of this Agreement or by
non-waivable provisions of the Act or applicable law, (i) the powers of the
Company shall be exercised by or under the authority of, and the business and
affairs of the Company shall be managed under the direction of the Management
Committee comprised of four individuals, each of whom shall be a United States
Citizen, three of which shall be appointed by CUSA (the "CUSA Management
Committee Representatives"), and one of which shall be appointed by NEW WARREN
(the ""NEW WARREN Management Committee Representative"), and (ii) the Management
Committee may make all decisions and take all actions for the Company as in its
sole discretion it deems necessary or appropriate to carry out the purposes for
which the Company is being formed under this Agreement and to further the
interests of the Members of the Company, including, without limitation, the
following:
* REDACTED
(b) setting aside Reserves, opening and maintaining bank and investment
accounts and arrangements, drawing checks and other orders for the payment of
money, and designating individuals with authority to sign or give instructions
with respect to those accounts and arrangements; and
(c) collecting sums due to the Company.
7.3 Appointment, Removal and Replacement. In exercise of their respective
rights and powers hereunder, CUSA hereby appoints each of D. R. Dunn, M. L.
Lege, and P. R. Breber, as its CUSA Management Committee Representatives and NEW
WARREN hereby appoints Stephen A.
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Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
Furbacher as its NEW WARREN Management Committee Representative. CUSA and NEW
WARREN shall have full authority unilaterally to remove and replace their
respective representatives to the Management Committee, with or without cause,
for the purpose of any meeting of the Management Committee.
7.4 Meetings, Quorum, Vote, Etc. (a) Regular meetings of the Management
Committee may be held upon at least ten (10) days notice to all representatives
of the Management Committee at such time and place as shall from time to time be
determined by resolution of the Management Committee. Special meetings of the
Management Committee may be called by any Management Committee representative on
not less than two (2) business days notice to the other representatives of the
Management Committee, delivered personally or by facsimile and confirmed by
telephone. A waiver of notice signed by the person entitled to notice will be
equivalent to the giving of notice. The business transacted at a meeting will be
limited to the purposes stated in the notice of the meeting unless otherwise
approved by all Management Committee representatives. At all properly noticed
meetings of the Management Committee, the presence of a majority of the
Management Committee representatives shall constitute a quorum for the
transaction of business.
(b) Management Committee representatives may participate in a meeting of
the Management Committee by means of conference call or any similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
provision shall constitute presence in person at such meeting.
(c) Except as otherwise provided herein, all decisions to be made and
* actions to be taken by the Management Committee shall be determined REDACTED
Management Committee representatives.
(d) Any action which may be taken at a meeting of the Management Committee
may be taken without a meeting if a consent in writing, setting forth the action
so taken, is signed by all of the Management Committee representatives.
7.5 Compensation. (a) Representatives of the Management Committee shall not
receive any salary for their services to the Company. Members may be reimbursed
by the Company for expenses (including travel expenses) as may be incurred by
the Management Committee representatives in the performance of their duties
hereunder (including attendance at meetings of the Management Committee) to the
extent that such expenses are not accounted for in the cost budget prepared
under the Time Charter.
(b) If services are provided to the Company by CUSA employees, such
services shall be reimbursed by the Company on the basis of actual time plus
reasonable expenses to the extent that such services are not accounted for in
the cost budget prepared under the Time Charter.
7.6 Delegation of Authority and Duties; Officers. (a) The Management
Committee may appoint and elect (as well as remove or replace with or without
cause) a President, a Vice President, a Treasurer and a Secretary (collectively
the "Officers"), provided that no person employed by or associated
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or affiliated with NEW WARREN can act on behalf of the Company in the absence of
the President. The compensation, if any, of the Officers shall be set by the
Management Committee.
(b) The President, who shall be a U.S. citizen, shall be responsible for
the day-to-day management of the Company. The initial President shall be D. R.
Dunn. Subject to the control and direction of the Management Committee and
subject always to the Company budget prepared pursuant to Section 7.9, the
President shall have the power to act, in the name and on behalf of the Company,
to do all things reasonably necessary for the performance of the Company's
operations; provided, however, that the President shall not have the power to
take any of the actions described in Section 7.11 of this Agreement without the
approval of the Members required thereunder; and provided further that, without
first having obtained the prior written direction and approval of the Management
Committee or except in the case of an emergency, the President shall not have
the power to (i) amend, terminate or otherwise change any lease, contract or
other agreement that has been approved by the Management Committee, (ii) bid any
job or enter into any contract for an amount reasonably expected to exceed
$100,000, or (iii) enter into any contract or other agreement in the name of
the Company that calls for expenditures by the Company in excess of $100,000 or
contemplates revenues to the Company of greater than $100,000. The President
shall keep the Management Committee fully informed of all developments relating
to the business of the Company and shall meet with the Management Committee from
time to time at the request of the Management Committee. The President shall
also prepare or cause to be prepared for distribution to the representatives of
the Management Committee such written reports as the Management Committee may
from time to time reasonably request.
(c) The Vice President shall perform such duties and may exercise such
powers as may be permitted by this Agreement and as may, from time to time, be
assigned to the Vice President by the Management Committee or the President, to
the extent the President is delegated such power and duties as provided herein.
(d) The Secretary, who shall be a U.S. citizen, or the Secretary's
delegate, shall act as secretary of all meetings of the Members of the Company
and of the Management Committee unless otherwise decided by the attendees, and
keep the minutes which shall be filed in the minute books of the Company
provided for that purpose; shall see that all notices required to be given by
the Company or the Management Committee are duly given and served; shall have
charge of the books, records and papers of the Company relating to its
organization and management as a limited liability company (which books, records
and papers shall be kept at the offices of CUSA) and shall see that the reports,
statements and other documents required by law are properly kept and filed; and
shall, in general, perform all the duties as from time to time may be assigned
by the Management Committee or by the President.
(e) The Treasurer shall have charge and custody of, and be responsible for,
all funds, securities and notes of the Company; receive and give receipts for
moneys due and payable to the Company from any sources whatsoever; deposit all
such moneys in the name of the Company in such banks, trust companies or other
depositaries as shall be selected by the Management Committee against proper
vouchers, cause such funds to be disbursed by checks or drafts on the authorized
depositaries of the Company signed in such manner as shall be determined by the
Management Committee and be responsible for the accuracy of the amounts of all
moneys so disbursed; regularly enter or cause to be entered in books to be kept
by the Treasurer or under the Treasurer's direction full and adequate account of
all moneys received or paid by the Treasurer for the account of the Company;
have the right to require from time to time, reports or statements giving such
information as he may desire with respect to any and all financial
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transactions of the Company from the Officers or agents transacting the same;
render to the President or the Management Committee whenever the President or
the Management Committee, respectively, shall so require, an account of the
financial condition of the Company and of all transactions as Treasurer; exhibit
at all reasonable times the books of account and other records to any of the
representatives of the Management Committee or of any Member upon request at the
office of the Company where such books and records are kept; shall be
responsible for coordinating the preparation of all tax returns required to be
filed by the Company; and, in general, perform all other duties commonly
incident to the office of Treasurer; and shall perform other such duties as from
time to time may be assigned thereto by the Management Committee or by the
President. The Treasurer shall have no responsibility for any obligation or duty
described above to the extent the Management Committee determines that such
obligation or duty should be assigned or delegated to any other Person.
(f) In addition, the Management Committee may, from time to time as it
deems advisable and by unanimous consent, delegate to one or more persons
(inclusive of any representative of the Management Committee) such authority and
duties as the Management Committee is granted under this Agreement and not made
subject to the approval of the Members by this Agreement, and the Management
Committee shall assign in writing titles (including, without limitation, Vice
President, Assistant Secretary and Assistant Treasurer) to any such person;
provided, that no person who is not a U.S. Citizen or who is employed by or
associated or affiliated with NEW WARREN may be delegated any authority or
duties that in any way relate to the exercise of authority or performance of
duties associated with the functions of the President nor can such person act on
behalf of the Company in the absence of the President. Unless the Management
Committee decides otherwise, if the title of any person authorized to act on
behalf of the Company under this Section 7.6 is one commonly used for officers
of a business corporation formed under the Delaware General Corporation Law, the
assignment of such title shall constitute the delegation to such person of the
authority and duties that are normally associated with that office, subject to
any specific delegation of, or restriction on, authority and duties made
pursuant to this Section 7.6. Any number of titles may be held by the same
person. Any delegation pursuant to this Section 7.6(f) may be revoked at any
time by the Management Committee.
(g) Unless authorized to do so by this Agreement or by the Management
Committee, no Member, single Management Committee representative, Officer, agent
or employee of the Company shall have any power or authority to bind the Company
in any way, to pledge its credit, or to render it liable pecuniarily for any
purpose. However, the Company may act by an attorney-in-fact authorized by the
Management Committee.
7.7 Liability of Management Committee Representatives. (a) No Management
Committee representative or Officer shall be personally liable for the debts and
obligations of the Company.
(b) No Management Committee representative or Officer shall be liable,
responsible or accountable in damages or otherwise to the Company or any Member
for any action taken or failure to act (even if such action or failure to act
constituted the simple negligence of that Management Committee representative)
on behalf of the Company within the scope of the authority conferred on the
Management Committee by this Agreement or by law, unless such act or failure to
act constituted gross negligence or was performed or omitted willfully or
intentionally in bad faith.
7.8 Books and Records. The Company shall maintain separate books and
accounting records in accordance with generally accepted accounting principles
and accounting policies. Such books and
13
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
records shall be open for inspection and/or audit by the Members at all
reasonable times at such place as the Management Committee shall designate.
7.9 Budget. The Management Committee will prepare a Company budget for
operation during each year of the term of this Agreement. Such budget will be
prepared and submitted by the Management Committee to the Members for adoption
no later than two weeks prior to the beginning of each Fiscal Year for the
immediately subsequent Fiscal Year, except for the first Fiscal Year of the
Company, for which the initial budget shall be approved by the Members prior to
the effective date of this Agreement. In the event the Members fail to approve
the annual budget on or before December 31 of each year during the term hereof,
the previous year's budget shall remain in effect until an annual budget is
approved by the Members. Notwithstanding the foregoing, the Company may take
such actions and make such expenditures as may be deemed necessary under laws,
rules, regulations, orders or good industry practice, in order to continue the
orderly conduct of the business of the Company and to preserve and maintain the
Barges. The Management Committee shall also prepare quarterly forecasts and
budget revisions as necessary throughout the term of this Agreement.
7.10 Bank Accounts. All funds of the Company shall be deposited to the
account of the Company in an account to be established at such bank or banks as
the Management Committee may designate. Checks may be drawn on said account or
accounts by signature or signatures of such persons as may be agreed upon by the
Management Committee. The Company may also maintain payroll or other accounts at
such bank or at such branch as the Management Committee may designate, and
checks may be drawn on such accounts by signature or signatures (or facsimile
thereof) of such persons as may be agreed upon the Management Committee.
7.11 Member Approval for Certain Actions. Except as otherwise provided in
this Agreement, the unanimous approval of the Members of the Company shall be
required for the following actions, which are beyond the normal conduct of the
Company's business:
(a) entering into or materially modifying any contract or other
agreement, including the Time Charter between the Company and NEW WARREN,
with Member or an affiliate of any Member;
(b) entering into, amending, modifying or terminating any agreement
between the Company and any Person other than a Member with a term in excess
* of six (6) months or involving aggregate consideration in excess of REDACTED
over the term of the agreement;
(c) entering into, amending, modifying or terminating any contract or
commitment to acquire or transfer any asset, the fair market value or
aggregate consideration (including assumed actual and contingent
* liabilities) of which exceeds REDACTED:
(d) approving distribution of Company property to any Member.
-14-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
(e) the filing of a petition as a debtor in a United States Bankruptcy
Court or taking any material affirmative act that would result in the
Company's Bankruptcy;
(f) the sale of all or substantially all of the Companys assets;
(g) changing the purpose or character of the business of the Company;
(h) borrowing money in an aggregate principal amount in excess of
* REDACTED (except for borrowings which are utilized for capital expenditure
on the Barges) or making any guarantees (except by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business);
(i) making any loans unrelated to the ownership or operations of the
Barges, or making any investment in any Person;
* (j) making any capital expenditure in excess of REDACTED
(k) any merger, consolidation or combination of the Company; or
(l) forming any subsidiary or establishing any branch office.
7.12 Insurance. During the term of this Agreement, the Barges shall be
kept insured by the Company at its expense against war, hull, and protection and
indemnity risks, including wreck removal. Further, the Company shall at all
times maintain pollution coverage under the Barges' Protection and Indemnity
cover in an amount not less than that customarily placed for vessels of similar
size, type and age. The Company shall comply with the U.S. Oil Pollution Act of
1990, U.S. Federal Water Pollution Control Act of 1972, as amended, and any
rules and regulations issued thereunder, and any other international, federal or
state requirements that may apply.
ARTICLE 8.--TRANSFERS OF INTEREST IN THE COMPANY
8.1 Limitations on Transfers. Except as provided in this Article 8,
neither NEW WARREN nor CUSA shall sell, pledge, assign, transfer or otherwise
dispose of or encumber its interest in the Company during the term of this
Agreement without the written consent of the other, which consent may be granted
or withheld by such party in its sole discretion.
* REDACTED
8.4 Agreement by Transferee. If a Member sells, assigns or otherwise
transfers its interest in the Company in accordance with this Article 8, the
transferee shall become a substitute Member and shall be entitled to all of the
rights, powers and benefits of a Member upon agreeing in writing to be subject
to and bound by all of the provisions of this Agreement. Upon transfer of a
Member's entire interest in the Company, such Member (the "Withdrawing Member")
shall be deemed to have withdrawn as a Member
-15-
<PAGE>
and shall have no further rights or obligations as a Member hereunder, except
those obligations set forth under Section 11.12, Confidentiality.
ARTICLE 9.--DISSOLUTION
9.1 Events of Dissolution. (a) Neither Member shall have the right to
terminate this Agreement or dissolve the Company by such Member's expressed will
or by withdrawal without the prior written consent of the other Member, which
consent the other Member may grant or withhold in its sole discretion.
(b) The Company will be dissolved upon the first to occur of any of the
following (such events collectively called "Events of Dissolution");
(1) the expiration of the term set forth in Section 2.4;
(2) the unanimous agreement of the Members to dissolve the Company;
(3) the Bankruptcy of either Member;
(4) the filing by either Member of a certificate of dissolution of such
Member;
(5)the withdrawal of either Member without the prior written consent of
the other Member;
(6) a material breach of this Agreement by a Member, including the
failure to pay a Capital Contribution when due in accordance with Article 4,
and such Member fails to remedy such breach within 15 days after written
receipt of notice from the other Member of such breach;
(7) an event which makes it unlawful for the Company to carry on
business;
(8) the sale or disposition of all or substantially all of the
Company's assets and properties; and
(9) the occurrence of any other event that results in the dissolution
of the Company under the Act.
9.2 Termination and Winding Up of the Company. (a) If the Company is
dissolved, an accounting of the Company's assets, liabilities and operations
through the last day of the month in which the dissolution occurred shall be
made, and the affairs of the Company shall be wound up and terminated. The
Management Committee, by unanimous consent, will appoint one or more persons
to serve as the liquidating trustee of the Company; provided, however, the
Management Committee representative(s) appointed by a Defaulting Member shall
not participate in appointment the liquidating trustee. The liquidating trustee
shall be responsible for winding up and terminating the affairs of the Company
and will determine all matters in connection therewith (including, without
limitation, the arrangements to be made with creditors, to what extent and under
what terms the assets of the Company are to be sold, and the amount or necessity
of cash reserves to cover contingent liabilities) as the liquidating trustee
deems advisable and proper; provided, however, that all decisions of the
liquidating trustee will be made in
-16-
<PAGE>
Confidential Treatment Requested.
The redacted material has been
separately filed with the Commission.
accordance with the fiduciary duty owed by the liquidating trustee to the
Company and to each of the Members. The assets of the Company will be applied
and distributed in the following order:
(1) first, to the payment and discharge of all of the Company's debts
and liabilities to creditors other than the Members, in the order provided by
applicable law, and the expenses of liquidation;
(2) second, to the payment and discharge of all of the Company's debts
and liabilities to the Members;
(3) third, to the setting up of such reserves as the liquidating trustee
may deem reasonably necessary for any contingent or unforeseen liabilities of
the Company, provided that any such reserve shall be paid over by the
liquidating trustee to an escrow agent who is not affiliated with any Member,
with instructions to discharge any of the aforementioned liabilities or
obligations and, at the expiration of such reasonable period as the liquidating
trustee shall provide, to distribute any balance then remaining in the manner
hereinafter provided;
(4) fourth, to the Members to the extent of and in proportion with their
respective positive Capital Accounts, after giving effect to all contributions,
distributions and allocations for all periods; and
(5) fifth, the remainder, if any, to the Members in proportion to their
respective Proportionate Interest as in effect at the moment of the event giving
rise to such dissolution.
In the event of a distribution of assets in kind, the assets shall be deemed
distributed as if they had been sold immediately prior to their distribution for
their fair market value, and the amount of the distribution will be the fair
market value (net of liabilities) of the assets distributed.
(b) After all of the assets of the Company have been distributed, the
Members shall cause a certificate of cancellation for the Company to be filed
with the Secretary of State of the State of Delaware in accordance with Section
18/203 of the Act.
9.3 Accounting. The liquidating trustee will provide the Members with a
proper accounting of the assets, liabilities and operations of the Company
through the last day of the month in which the final liquidating distribution
occurs.
* 9.4 Bankruptcy of a Member. (a) Subject to the REDACTED rights set forth
in Sections 8.2 and 8.3 above, in the event of the Bankruptcy of either Member,
the Non-Bankrupt Member shall have the option (exercisable by giving notice to
such Bankrupt Member within 45 days after the Company receives notice of the
event giving rise to this option) to purchase all (but not less than all) of the
Bankrupt Member's interest in the Company at a price that represents the fair
market value of the Bankrupt Member's interest in the Company.
(b) The price for the interest of the Bankrupt Member purchased by the
Non-Bankrupt
17
<PAGE>
Member shall be payable in cash upon receipt of a proper written assignment of
such interest to the Non-Bankrupt Member.
9.5 Defaulting Member. (a) Either Member (the "Defaulting Member")
causing a dissolution pursuant to Sections 9.1(b)(4), (5) or (6), without the
prior written consent of the other Member, shall have breached this Agreement
and the other Member shall have the right to damages for such breach and any
distributions to which the Defaulting Member would have been entitled shall be
reduced by such damages that are determined by a court of competent jurisdiction
to be owed by the Defaulting Member and paid instead to the other Member.
(b) The Defaulting Member and its Management Committee representative(s)
shall have no rights under this Agreement to participate in the Management
Committee or otherwise participate in the Company's performance.
(c) The Defaulting Member shall be deemed as of the date of the Event of
Dissolution ("Default Date") to have (i) offered to the Member not in default
(the "Non-Defaulting Member"), the opportunity to purchase all (but not less
than all) of the Defaulting Members interest in the Company at a price that
represents the fair market value of the Defaulting Members interest in the
Company and (ii) waived all rights or claims it may have against the Company.
The Non-Defaulting Member shall have 30 days to accept, in full and not in part,
such offer. Upon notification to the Defaulting Member by the Non-Defaulting
Member of its acceptance of the deemed offer and the tender by the Non-
Defaulting Member to the Defaulting Member of immediately available funds equal
to the offer price, the Defaulting Member shall be deemed to have transferred
its interest in the Company to the Non-Defaulting Member and shall cease to have
any rights of a Member under this Agreement, but without prejudice to any right
of the Non-Defaulting Member to damages from the Defaulting Member. If within
the aforementioned 30 day period, the Non-Defaulting Member fails to notify the
Defaulting Member of the Non-Defaulting Member's desire to exercise its right to
purchase the Defaulting Member's interest in the Company, then the Members shall
be deemed to have consented to the dissolution and liquidation of the Company.
ARTICLE 10. -- TAXES, ETC.
10.1 Sole Responsibility. Each Member of the Company shall be solely
responsible for and shall pay its own taxes, licenses and fees of any nature and
shall indemnify the other Member therefrom.
10.2 Reports. The Management Committee shall cause the Company to send
to each Person who was a Member at any time during the preceding Fiscal Year.
(a) Within 90 days following the end of each Fiscal Year, a Company
balance sheet as of the end of such Fiscal Year, Company statements of income,
cash flows, changes in Members equity and changes in Members' Capital Accounts
for such Fiscal Year, each of which shall be prepared in accordance with
generally accepted accounting principles consistently applied.
(b) Within 150 days following the end of each Fiscal year, (i) a report
containing a reconciliation between the financial information contained in the
annual report and the information received for federal and state income tax
returns, and (ii) an Information Form K-1 providing sufficient
18
<PAGE>
information to enable such Person to complete on a proper and timely basis its
federal and state income tax returns.
10.3 Supplemental and Interim Reports. In addition to providing the annual
information required by Section 10.2, the Management Committee shall timely
provide to Members any other information or reports reasonably necessary for (a)
the preparation of any tax returns which must be filed by such Member, including
information necessary for estimating and paying estimated taxes under Code
Section 6654(c)(2) or 6655(c)(2), as applicable, or corresponding provisions of
other tax laws, or (b) compliance with other laws and regulations. The
Management Committee shall also supply to Members in a timely manner all reports
or other documents received from time to time by the Company related to any
insurance the Company is required to carry pursuant to this Agreement and any
material agreements to which the Company is a party. Each Member shall have the
right to require the Company to supply it, from time to time, with such other
reports as in its reasonable discretion would allow it to monitor the Company's
business activities.
10.4 Tax Elections. The Company shall make the election referred to in Code
Section 754 and the Regulations issued thereunder upon the request of any Member
in connection with a transfer of the Member's interest in the Company and upon
the written consent of a majority in interest of the Members. The Management
Committee shall timely make or revoke all elections, and take all tax reporting
positions, necessary or desirable for the Company and to maximize the tax
benefits to the Members, including making elections under Code Section 168 (to
maximize depreciation deductions), Code Section 195 (to amortize start up
expenditures) and Code Section 709 (to amortize organizational expenditures). No
election shall be made by any Member to have the Company excluded from the
application of any provision of Subchapter K of the Code or any equivalent tax
provision in any other tax jurisdiction.
10.5 Consistent Reporting. Each Member shall, on the Member's tax returns,
treat each partnership item (as defined in Code Section 6231(a)(3)) in a manner
consistent with the treatment of the item on the Company's return in all
respects, including the amount, timing and characterization of the item. No
Member shall file a request for an administrative adjustment of partnership
items for any Company taxable year under Code Section 6227 if such request would
cause the Member's treatment of the item to be inconsistent with the treatment
of the item on the Company's return. If any Member desires such a request for
administrative adjustment, and if all Members consent to the requested
adjustment (which consent shall not be unreasonably withheld), then the
Management Committee shall file the request for administrative adjustment on
behalf of the Company.
10.6 Tax Matters Partner. (a) CUSA shall be the 'Tax Matters Partner' for
purposes of Code (S)(S)6621 and 6231 and the regulations promulgated thereunder.
Copies of all notices received by the Tax Matters Partner shall promptly be sent
to the other Member. All returns, filings and other correspondence to be
submitted to any taxing authority shall be furnished to the Management Committee
for review and approval at least fifteen (15) days prior to the date on which
such matters are required to be filed or otherwise submitted, unless a shorter
period of review is necessitated by circumstances.
(b) The Tax Matters Partner is authorized and required to represent the
Company in connection with all examinations of the Company's tax returns by tax
authorities, including resulting administrative and judicial proceedings to
contest any proposed adjustments. The Tax Matters Partner shall keep the Members
informed on a timely basis of all material developments with respect to the
examination of the Company's returns, any proposed adjustments to such returns
(either by tax authorities
19
<PAGE>
or by the Company), and any administrative or judicial proceedings with respect
to such adjustments. The Tax Matters Partner's duty to keep the Members informed
of material developments under this Section 10.6 shall include, but not be
limited to, the duty to provide the Members with copies of all correspondence
and other information and documents filed with or received from tax authorities,
and to inform the Members of the matters described in Regulation Section
1.6223(g)-1T. Where such correspondence or documents are voluminous, they may be
made available to the Members for inspection and copying at a reasonable time
and place. The Tax Matters Partner shall consult in good faith with any Member
at such Member's request regarding the handling of any tax examinations and
subsequent appeals. Each Member of the Company shall have the right to
participate in all administrative and judicial proceedings involving the tax
matters of the Company.
(c) The Tax Matters Partner shall not enter into any agreement extending
the period of limitations on assessments as provided under Code Section 6229 or
similar provisions of other applicable laws without first obtaining the prior
written consent of all Members, which consent will not be unreasonably withheld.
(d) The Tax Matters Partner shall not enter into any settlement agreement
with respect to the tax treatment of items without the prior written consent of
the other Member, which consent shall not be unreasonably withheld.
(e) The provisions of this Section 10.6 shall survive the dissolution or
termination of the Company and the termination of any Member's interest in the
Company and shall remain binding for a period of time necessary to resolve all
tax matters with applicable taxing authorities.
ARTICLE 11.--GENERAL PROVISIONS
11.1 Indemnification. To the fullest extent permitted by law, the Company
hereby agrees to indemnify each Member, each Management Committee
representative, and each Officer of the Company, and their respective agents,
partners, directors, officers, employees and controlling persons (individually,
as "Indemnified Party"), and to save and hold each harmless from and in respect
of all losses, damages, liabilities, fees, costs and expenses incurred by such
Indemnified Party in its capacity as a Member, Management Committee
representative, Officer of the Company, or agent, partner, director, officer,
employee or controlling person thereof in connection with or resulting from any
claim, action or demand against an Indemnified Party, including reasonable
attorneys' fees, that arise out of or in any way relate to the Company, its
properties, business or affairs, including amounts paid in settlement or
compromise of any such claim, action or demand; provided that this indemnity
shall not extend to conduct of the person seeking indemnification constituting a
breach of duty to the Company or acts of gross negligence, fraud or willful
misconduct or as to any disputes between the Members or between any Member and
the Company. Reasonable costs and expenses incurred in investigating or
defending any such claim, action or demand or otherwise shall be advanced by the
Company.
11.2 Successors and Assigns. Subject to the provisions of this Agreement
relating to transferability, this Agreement shall inure to the benefit of and be
binding upon the Members and their respective successors, trustees, assigns,
receivers and legal representatives.
11.3 Notices. All notices, consents, requests, demands, offers, reports and
other communications required or permitted to be given hereunder shall be in
writing and shall be deemed to
20
<PAGE>
have been given (i) when received if delivered in person, or (ii) when sent by
facsimile transmission to the number set forth below or to such changed number
as such party may have fixed by notice, and acknowledged by an appropriate
facsimile receipt, or (iii) if sent by mail, upon deposit in the United States
mail, either U.S. Express Mail, registered mail or certified mail, with all
postage fully prepaid, or (iv) if sent by courier, by delivery to a bonded
courier with charges paid in accordance with the customary arrangements
established by such courier, in each case in (iii) and (iv) above addressed to
the parties at the following addresses:
(a) If to the Company, to:
MIDSTREAM BARGE COMPANY, L.L.C.
1301 McKinney
Houston, TX 77010
Attention: President
Facsimile: (713) 754-5149
-21-
<PAGE>
(b) If to CUSA, to:
CHEVRON U.S.A. PRODUCTION COMPANY
(a division of Chevron U.S.A. Inc.)
1301 McKinney
Houston, TX 77010
Attention: Vice President & General Counsel
Facsimile: (713) 754-3366
(c) If to NEW WARREN, to:
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, TX 77040
Attention: President
Facsimile: (713) 507-6808
with a copy to:
WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
13430 Northwest Freeway
Suite 1200
Houston, TX 77040
Attention: Vice President & General Counsel
Facsimile: (713) 507-6834
provided that (x) any notice of change of address or facsimile number shall be
effective only when received, and (y) a copy of any notice given by facsimile
shall also be confirmed by mail to the addresses provided above.
11.4 Headings. The headings in the Articles and Sections of this
Agreement are inserted for convenience of reference only and shall not affect or
be deemed to affect the meaning of any provision of this Agreement.
11.5 Entire Agreement. This Agreement, the Certificate of Formation and
the Time Charter constitute the full and entire agreement of the Members with
respect to the transactions contemplated herein. Nothing contained in any prior
or contemporaneous letters, correspondence or other communications between the
Members shall have any effect upon the rights or liabilities of the Members. No
modifications of this Agreement shall be effective or binding unless in writing
and executed by all Members.
11.6 Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the remainder of this Agreement or any
valid clause of any invalid portion.
11.7 Counterparts. This Agreement may be executed in multiple
counterparts, each of which
-22-
<PAGE>
will be deemed an original but all of which will constitute one and the same
instrument.
11.8 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions and conditions of this Agreement and the transactions
contemplated hereby.
11.9 No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties and their respective
successors and permitted assigns and no other persons shall have any rights,
interest or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
11.10 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without giving
effect to principles of conflicts of laws.
11.11 Waiver. No waiver by the Company or any Member of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver unless expressly provided. No waiver shall be effective
unless made in writing and signed by the party to be charged with such waiver.
11.12 Confidentiality. The parties hereto mutually agree to keep the
terms and conditions of this Agreement and the Time Charter strictly
confidential unless both Members consent to disclosure of such confidential
information, which consent will not be unreasonably withheld. In the event that
disclosure of the terms and conditions hereof is required by law or any
government agency, the party making such disclosure shall promptly notify the
other party of the legal requirement and the nature and extent of the legally
compelled disclosure. Thereafter, both parties shall cooperate and take all
available steps to maintain, to the greatest degree possible, the continued
confidentiality of this Agreement.
IN WITNESS WHEREOF, the Members have caused this Limited Liability Company
Agreement to be executed by their authorized officers on the day and year first
above written.
Proportionate Interests Member:
Seventy-Five Percent (75%) CHEVRON U.S.A. INC.
By:
--------------------------
Name:
Title:
Twenty-Five Percent (25%) WARREN PETROLEUM COMPANY, LIMITED PARTNERSHIP
By: Warren Petroleum G.P., Inc., its General
Partner
By:
---------------------------
Name:
Title:
-23-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,040,000
<SECURITIES> 0
<RECEIVABLES> 708,257,000
<ALLOWANCES> 0
<INVENTORY> 210,277,000
<CURRENT-ASSETS> 1,035,374,000
<PP&E> 1,771,326,000
<DEPRECIATION> (105,581,000)
<TOTAL-ASSETS> 3,121,555,000
<CURRENT-LIABILITIES> 718,524,000
<BONDS> 0
0
75,418,000
<COMMON> 1,497,000
<OTHER-SE> 991,658,000
<TOTAL-LIABILITY-AND-EQUITY> 1,068,573,000
<SALES> 4,305,756,000
<TOTAL-REVENUES> 4,305,756,000
<CGS> 4,081,368,000
<TOTAL-COSTS> 110,115,000
<OTHER-EXPENSES> 8,828,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,317,000
<INCOME-PRETAX> 95,699,000
<INCOME-TAX> 30,081,000
<INCOME-CONTINUING> 65,618,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,618,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
