NATURAL GAS SALES AGREEMENT
---------------------------
THIS AGREEMENT is made and entered into this the 30th day of March,
("Contract Date") by and between BAE SYSTEMS ORDNANCE SYSTEMS INC. ("Buyer"),
and TENGASCO, INC. ("Seller").
W I T N E S S E T H:
--------------------
WHEREAS, Seller has substantial natural gas reserves in Hawkins,
Hancock, Claiborne, and surrounding counties in Tennessee, and Tengasco Pipeline
Corporation, a wholly owned subsidiary of Tengasco, Inc. desires to construct a
pipeline to deliver such natural gas to customers that will purchase natural gas
for customer's use, and for other purposes; and
WHEREAS, Seller has developed natural gas reserves and plans to produce
Natural Gas from its properties in Hawkins, Hancock, Claiborne, and surrounding
Counties in Tennessee and transport that Natural Gas through facilities to be
constructed and owned by Tengasco Pipeline Corporation; and,
WHEREAS, Buyer requires natural gas for its plant facilities ("Plant")
located in Kingsport, ▇▇▇▇▇▇▇▇ County, Tennessee; and
WHEREAS, Seller desires to sell and Buyer desires to purchase Natural
Gas;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Buyer and Seller agree as follows:
ARTICLE 1
QUANTITY
--------
1.1 VOLUME. Subject to the other provisions of this Agreement, each Day
Seller shall make available a Maximum Volume of Natural Gas. Seller is not
obligated to provide more than the Maximum Volume available on any Day. "Maximum
Volume" will be 5,000 MMBtu's per day. Buyer agrees to purchase a Minimum Volume
of gas per day. "Minimum Volume" means with respect to any Day, the lesser of i)
5,000 MMBtu's or ii) Buyer's actual requirements on such Day. Buyer and Seller
agree that the Minimum Volume and Maximum Volume to be delivered under this
Agreement are subject to availability of Seller's Natural Gas after sales are
made by Seller to ▇▇▇▇▇▇▇ Chemical Company at the maximum volume stated in the
existing contract with ▇▇▇▇▇▇▇ Chemical Company at the date of this Agreement,
which is 15,000 MMBtu's per day. Buyer and Seller further agree, subject to the
preceding sentence, that the
Maximum Volume of gas shall be delivered under this Agreement prior to the
delivery by Seller of all other volumes, if any, that may be contracted for sale
by Seller to any customer other than ▇▇▇▇▇▇▇ Chemical Company at any time during
the term of this agreement.
1.2 Buyer does not have the ability to predict its exact total Natural
Gas fuel purchase requirement on a daily basis, and, as a result, may fail to
purchase the Minimum Volume on a given Day; provided, however, Buyer shall make
a reasonable effort to purchase and receive the Minimum Volume on each Day.
1.3 Seller's reserves in Hancock, Hawkins, Claiborne, and surrounding
Counties are being developed by Seller and Seller's capability to produce
additional volumes may increase over time. Buyer may from time to time, consider
additional projects at its Plant that would utilize Natural Gas. Should Buyer's
need for Natural Gas from Seller be greater than the Maximum Volume and if
Seller has additional Natural Gas available from its Tennessee property, Buyer
and Seller may agree to increase the Maximum Volume in accordance with Buyer's
increased needs.
ARTICLE II
PRICE
-----
2.1 For the purpose of calculating the delivered price to be paid in
any Month pursuant to Section 2.2 of this Article, "Index Price" means the price
per MMBtu published in ▇▇▇▇▇▇-▇▇▇▇'▇ INSIDE F.E.R.C'S GAS MARKET REPORT ("INSIDE
FERC"), equal to the ▇▇▇▇▇ Hub price index as shown in the table labeled "Market
Center Spot Gas Prices. The published price used to determine the Index Price
for Natural Gas purchased in any Month is the first published price for
deliveries in that Month.
2.2 If the Index Price is not published for any Month, then the parties
shall negotiate, in good faith, in an attempt to agree to a substitute index
which most closely approximates the Index Price in order to calculate the price
under Section 2.3 for that Month and any succeeding Month in which the Index
Price is not published. If the parties fail to agree upon a substitute index on
or before the date payment is due for the first Month for which the Index Price
is not published, the parties shall determine a substitute index by arbitration.
The arbitration shall be by a single impartial arbitrator in accordance with the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association to the extent not in conflict with such Act. The
arbitrator shall be selected by the American Arbitration Association if the
parties are unable to agree on an arbitrator. If the parties fail to agree upon
substitute index on or before the date payment is due for any Month for which
the Index Price is not published and a substitute index has not been established
by arbitration, then Buyer shall pay Seller for all Natural Gas purchased in
that Month the price per MMBtu in effect or paid subject to adjustment during
the immediately preceding Month subject to adjustment as
2
hereinafter provided. Once the substitute index is determined by arbitration,
adjustment shall be made in the prices previously paid for any Month, for which
the Index Price was not published, to implement the substitute index.
2.3 Subject to Section 2.2 and 2.5, Buyer shall pay Seller the Index
Price plus $0.05 per MMBtu for all Natural Gas delivered by Seller under this
Agreement.
2.4 Either party may propose that new pricing provisions become
effective ("Proposal Effective Date") on the commencement of the sixth (6th)
Contract Year (or the commencement of any succeeding Contract Year) by giving
written notice to the other party at least twelve (12) Months prior to the
Proposal Effective Date. If either party proposes a new pricing methodology in
the manner provided above but the parties do not agree in writing on a new
pricing methodology at least seven (7) Months before the Proposal Effective
Date, the existing pricing methodology will continue in effect but either party
may terminate this Agreement effective on the Proposal Effective Date by giving
the other party written notice of termination at least (6) Months prior to the
Proposal Effective Date. If either party proposes a new pricing methodology in
the manner provided above, and the parties agree in writing on a new pricing
methodology by the Proposal Effective Date, that pricing methodology is
effective on the Proposal Effective Date and continues in effect until a new
price becomes effective under this Agreement.
2.5 If Buyer has a competitive offer for similar volumes under similar
terms and conditions as hereunder, but at a better price, Buyer may notify
Seller of the competitive offer ("Market Price Notice"). If Buyer gives a Market
Price Notice in accordance with its rights under the foregoing provisions of
this Section, Seller will provide written notice that it either agrees to meet
such competitive offer or to release Buyer from its purchase obligations herein.
2.6 Should Seller offer to sell Natural Gas to another Buyer for
similar volumes under similar terms and conditions as hereunder but at a price
lower than the price determined by 2.3, 2.4 or 2.5, Seller shall immediately
extend such lower price to Buyer.
ARTICLE III
DELIVERY POINT
--------------
3.1 Seller shall deliver all Natural Gas quantities at the inlet side
of Buyer's meter station located at Buyer's Plant site as specified by Buyer, so
long as such site location does not unduly burden Seller, near Kingsport,
Tennessee ("Delivery Point"). Title shall transfer to Buyer at such Delivery
Point.
3.2 Buyer shall, at Buyer's sole cost and expense, install at the
Delivery Point all necessary meters, valves, fittings, controllers, pressure
control valve, knock-out
3
tanks, and telemetry as required to effect and monitor deliveries hereunder. In
addition, to provide Buyer with requested signals and real-time delivery
quantity parameters, certain check metering and electronic monitoring abilities
shall also be installed by Buyer at Buyer's expense. Buyer shall provide any
necessary surface site, easement and rights of ingress and egress that may be
required for the installation and operation of such measurement and regulation
station, as well as any and all necessary electrical power, connections and
junction boxes at a mutually agreeable location within such site. Seller shall
have the right to review and approve the station design and site preparation
scope, specifications and all construction drawings prior to initiation of any
work hereunder.
ARTICLE IV
TERM
----
4.1 Unless terminated earlier in accordance with one of the other
provisions of this Agreement, this Agreement shall become effective on the
earlier of the 30th day of March, 2001 or the date the physical pipeline
facilities and metering facilities are constructed and installed by Seller and
Buyer, and commences and continues in effect for twenty (20) consecutive
Contract Years ("Primary Term"). This Agreement is automatically extended for
successive terms of one (1) Contract Year each unless and until it is terminated
by either party at the end of the Primary Term or then end of any successive
Contract Year by giving written notice at least twelve (12) Months prior to such
termination.
ARTICLE V
NOTICES
-------
5.1 Any notice, request, demand, or statement provided for in this
Agreement must be in writing and is deemed given when actually delivered to a
party at the address indicated below for such party or, if mailed, it is deemed
given three (3) business Days after it is mailed by first class mail, postage
paid, to a party at the address indicated below for such party or, if sent by
facsimile transmission, when receipt of a legible facsimile is confirmed by such
party.
4
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BUYER: SELLER:
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ALL NOTICES NOTICES AND NOMINATIONS
----------- -----------------------
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BAE SYSTEMS ORDNANCE SYSTEMS INC. Tengasco Inc.
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▇▇▇▇▇▇▇ Army Ammunition Plant Medical Arts Bldg.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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For confirmation of facsimile receipt: For confirmation of facsimile receipt:
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(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
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STATEMENT AND PAYMENTS: STATEMENT AND PAYMENTS:
----------------------- -----------------------
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BAE Systems Ordnance Systems Inc. Tengasco, Inc.
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▇▇▇▇▇▇▇ Army Ammunition Plant Medical Arts Bldg.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
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Attention: Accounts Payable ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Either party may, from time to time, designate a new address as its address for
such purposes by registered or certified letter or facsimile transmission
addressed to the other party.
ARTICLE VI
FAILURE TO DELIVER
------------------
6.1 If Seller fails to fulfill its delivery quota, both on time and as
to quality or quantity, ("Seller's Deficiency") of Natural Gas that it is
obligated to make available under this Agreement, and such failure is not
excused by this Agreement or law, Buyer may, as its sole and exclusive remedy,
except for remedies under 4.3 of the General Conditions, cover Seller's
Deficiency and recover from Seller (a) any positive remainder of i) the costs
that Buyer actually and reasonably incurred to purchase Seller's Deficiency from
a third party less ii) the costs that Buyer would have paid for Seller's
Deficiency if delivered hereunder, plus (b) any reasonable and necessary
attorney's fees and court costs, incurred by Buyer in order to recover such
damages from Seller. However, in no event may Buyer recover a total amount in
excess of $0.40 for each MMBtu of Seller's Deficiency.
5
ARTICLE VII
GENERAL TERMS AND CONDITIONS
----------------------------
7.1 All the General Terms and Conditions attached as Appendix A hereto
are incorporated by this reference and made a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
BUYER:
ATTEST: BAE SYSTEMS ORDNANCE SYSTEMS INC.
By: ▇▇▇▇ ▇▇▇▇▇▇ By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ ----------------------------------
Title: Commercial Development Director
----------------------------------
SELLER:
ATTEST: TENGASCO, INC.
By: ▇▇▇▇▇ ▇▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------ ----------------------------------
Title: President
----------------------------------
6
APPENDIX A
GENERAL TERMS AND CONDITIONS
Attached hereto and made a part of, by mutual agreement of the parties,
that certain Natural Gas Sales Agreement ("Agreement") dated March 30, 2001
between TENGASCO, INC. ("Seller") and BAE SYSTEMS ORDNANCE SYSTEMS INC.
("Buyer").
ARTICLE A-1
DEFINITIONS
-----------
Except in those certain instances where the context requires another
meaning, the following terms when used in this Agreement shall have the
following meanings:
1.1 "NATURAL GAS" MEANS natural gas produced from natural gas ▇▇▇▇▇ and
natural gas produced in association with oil (casinghead gas) and/or the residue
natural gas resulting from processing both casinghead gas and Natural Gas-well
gas. Natural Gas shall mean only such Natural Gas as is being or may be produced
from ▇▇▇▇▇ of Seller in Hawkins, Hancock, Claiborne and surrounding counties,
Tennessee.
1.2 "DAY" means the period of twenty-four (24) consecutive hours
beginning at 7:00 a.m. Eastern Standard or Daylight Time on any calendar Day and
ending at 7:00 a.m. Eastern Standard Time on the calendar Day immediately
following.
1.3 "MONTH" means a period beginning at 7:00 a.m. Eastern Standard or
Daylight Time on the first Day of a calendar Month and ending at 7:00 a.m.
Eastern Standard or Daylight Time on the first Day of the calendar Month
immediately following, except that the first Month shall begin on the date of
initial deliveries of Natural Gas hereunder and shall end at 7:00 a.m. Eastern
Standard or Daylight Time on the first Day of the calendar Month immediately
following.
1.4 "CONTRACT YEAR" means a period of (12) consecutive calendar Months
beginning on the Contract Date, PROVIDED that upon termination of this
Agreement, the Contract Year then in progress shall end.
1.5 "PSIA" means pounds per square inch absolute.
1.6 "PSIG" means pounds per square inch gauge.
1.7 "MCF" means one thousand (1000) cubic feet at a pressure of
fourteen and sixty-five hundredths (14.65) psia and at a temperature of sixty
degrees (60) Fahrenheit.
1.8 "BTU" means a British thermal unit.
7
1.9 "MMBTU" means one million (1,000,000) Btu.
1.10 "HEATING VALUE" means the gross number of British Thermal Units
which would be contained in the volume of one (1) cubic foot of Natural Gas at a
temperature of sixty degrees (60) Fahrenheit, when saturated with water vapor
and under a pressure of fourteen and sixty-five hundredths (14.65) pounds per
square inch absolute and adjusted to reflect the actual water vapor content of
the Natural Gas delivered provided, however, if the water vapor content is seven
(7) pounds per million cubic feet or less, the Natural Gas shall be deemed dry.
1.11 "SELLER'S TRANSPORTER" means, with respect to any Delivery Point,
any entity other than Seller that delivers the Natural Gas sold hereunder for
Seller at such Delivery Point.
1.12 "BUYER'S TRANSPORTER" means, with respect to any Delivery Point,
any entity other than Buyer that receives the Natural Gas delivered hereunder
for Buyer at said Delivery Point.
1.13 "METER OPERATOR" means Seller or Seller's Transporter and Seller
shall perform or cause Seller's Transporter to perform in any duties ascribed to
the "Meter Operator".
ARTICLE A-II
MEASUREMENT AND TESTS
---------------------
2.1 The Meter Operator shall measure the quantities delivered. The
measuring equipment shall be constructed, installed and operated as follows:
2.1.1 Orifice Meters - in accordance with ANSI/API 2530, American Gas
Association Report No. 3, and any subsequent amendments,
revisions or modifications thereof.
2.1.2 Positive Meters - in accordance with American Gas Association
Measurement Committee Report No. 6, and any subsequent
amendments, revisions or modifications thereof.
2.1.3 Turbine Meters - in accordance with American Gas Association
Measurement Committee Report No. 7, and any subsequent
amendments, revisions or modifications thereof.
2.1.4 Electronic Transducers and Flow Computers - in accordance with
the applicable American Gas Association Standards including, but
not limited to American Gas Association Measurement Committee
Report Nos. 3, 5, 6 and 7, and any subsequent amendments,
revisions or modifications thereof.
8
2.2 The unit of volume for purposes of measurement shall be one (1)
cubic foot of Natural Gas at a temperature base of sixty degrees (60(degree))
Fahrenheit and at a pressure base of fourteen and sixty-five hundredths (14.65)
psia.
2.3 The Meter Operator shall use the arithmetical average of the
temperatures recorded during each Day, the factor for specific gravity
determined by a recording gravitometer or chromatographic device installed and
located at a suitable point to record representative specific gravity of the
Natural Gas being metered, and adjustments to measured Natural Gas volumes for
the effects of supercompressibility, made in accordance with accepted American
Gas Association standards, to make computations of quantity delivered under this
Agreement. Seller shall obtain appropriate carbon dioxide and nitrogen mole
fraction values for the Natural Gas delivered as may be required to compute such
supercompressibility adjustments in accordance with standard testing procedures.
2.4 The Meter Operator shall determine temperature by a recording
thermometer continuously used and installed so as to record properly the
temperature of the Natural Gas flowing through the meter.
2.5 The Meter Operator shall determine specific gravity with accuracy
to the nearest one-thousandth by taking samples of the Natural Gas at the point
of measurement at such times as may be determined to be necessary in practice by
the use of chromatographic analysis or other methods commonly used and accepted
in the industry.
2.6 The assumed atmospheric (barometric) pressure for the Delivery
Point is 14.5 PSIA.
2.7 The Meter Operator shall calculate the deviation of the Natural Gas
from Ideal Gas Laws, at the pressures, temperatures and specific gravity under
which said Natural Gas is delivered to Buyer, shall be calculated in accordance
with API 2530.
2.8 The Meter Operator shall determine the Heating Value of the Natural
Gas at the Delivery Point(s) by using a ▇▇▇▇▇▇-▇▇▇▇▇▇ or other standard type
calorimeter or by calculating the heating value from an online chromatograph or
a Natural Gas analysis of a continuous Natural Gas sample. A Party to this
Agreement that is not the Meter Operator may, at such time or times as it may
desire, determine the Heating Value of the Natural Gas using an industry
accepted method. In the event of any material variance between such test by
Meter Operator and the last or next succeeding test made by the non-operating
party, a joint test, the cost of which shall be shared equally by both parties,
will be run employing the method utilized by the Meter Operator, and the result
thereof will be controlling, effective the first day of the calendar Month
preceding such joint test. The Btu content of any volume of Natural Gas shall be
determined for all purposes, including payment, under this Agreement by
multiplying the Heating Value of the Natural Gas as determined by the last test
in accordance with this
9
Section 2.8 by the number of cubic feet contained in such volume, as determined
in accordance with Sections 2.2 and 2.3.
2.9 Except as provided in Section 2.8, the Meter Operator shall test
the quality of the Natural Gas delivered hereunder by approved standard methods
from time to time as requested by any party hereto.
2.10 The Meter Operator shall install, and maintain, at its expense,
measuring equipment, housing devices, and materials of standard manufacture. Any
party that is not the Meter Operator at a Delivery Point may install and operate
check-measuring equipment that does not interfere with the use of meter
Operator's equipment. The Meter Operator shall maintain, operate and furnish, at
its expense, testing equipment of standard manufacture.
2.11 The Meter Operator shall test the accuracy of its measuring and
testing equipment at necessary intervals, and at least approximately every
thirty (30) Days. The Meter Operator shall give notice of the time and nature of
each test to the other party sufficiently in advance to permit the other party
to have a representative present. The Meter Operator shall test measuring and
testing equipment by reasonable means and methods in the presence of
representatives of both Seller and Buyer, if present. If the non-operating party
fails to have a representative present after proper notice, the Meter Operator
shall provide the results of such tests of equipment and/or Natural Gas quality
to the non-operating party but the results of such tests shall nevertheless be
considered accurate until the next test. All tests shall be made at the Meter
Operator's expense, except that the non-operating party shall bear the expense
of tests made at its request if the inaccuracy found is one percent (1%) or
less.
2.12 If at any time any of the measuring or testing equipment is found
to be out of service, or registering inaccurately in any percentage, the Meter
Operator shall adjust it at once to read accurately within the limits prescribed
by the manufacturer. If such equipment is out of service, or inaccurate by an
amount exceeding one percent (1%) at a reading corresponding to the average rate
of flow for the period since the last preceding test, the previous reading of
such equipment is disregarded for any period definitely known or agreed upon, or
if not so known or agreed upon, for a period of sixteen (16) Days or one-half
(1/2) of the elapsed time since the last test, whichever is shorter. The
quantity of Natural Gas delivered during such period shall be estimated by:
a) Using the data recorded by any check-measuring equipment if
installed and accurately registering; or
b) if not installed or registering accurately, by correcting the
error if the percentage of error is ascertainable by
calibration, test or mathematical calculation; or
10
c) If neither such method is feasible, by estimating the
quantity, or quality, delivered based upon deliveries under
similar conditions during a period when the equipment was
registering accurately.
No corrections shall be made for recorded inaccuracies of one percent (1%) or
less.
2.13 Each party has the right to inspect equipment installed or
furnished by the other, and the charts and other measurement or testing data of
the other, at all times during business hours, but the reading, calibration and
adjustment of such equipment and changing of charts shall be done only by the
party furnishing such equipment. Each party shall preserve all original test
data, charts and other similar records in such party's possession for a period
of at least two (2) years.
ARTICLE A-III
DELIVERY PRESSURE
-----------------
3.1 Seller shall deliver the Natural Gas to Buyer at a pressure
sufficient to effect delivery into the facilities of Buyer, up to five hundred
(500) psig, with a minimum pressure of two hundred (200) psig, controlled to
plus or minus 10 psig of that pressure. Buyer will take the Natural Gas at the
pressure of delivery and thereafter regulate and control such pressure as may be
required for its own usage.
ARTICLE A-IV
QUALITY
-------
4.1 Seller shall cause the Natural Gas quantities to be delivered to
Buyer under this Agreement at the Delivery Point to be free of gum, gum-forming
constituents, and other liquid or solid matter that may become separated from
the Natural Gas during transportation, and to conform to the following
specifications:
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a) Dust, rust and other solids None
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b) Carbon Dioxide Not more than 2.0% by volume
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c) Oxygen Not more than 0.5% by volume
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d) Hydrogen Sulfide Not more than 0.25 grains per 100 cubic
feet
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e) Total Sulfur Not more than 2.0 grains per 100 cubic
feet
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f) Free Water None
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g) Heating Value Not less than 970 Btu per cubic foot
and less than one (1) percent variation
within any 30 minute period
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h) Temperature Not less than 40 F nor more than 120 F.
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i) Water Vapor Not more than 7 lbs. Per million cubic
feet
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j) Nitrogen Not more than 5% by volume, and to be
reduced as provided in Section 4.2
below
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k) Isopentane and heavier Not more than 4/10 of 1 gallon per Mcf
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11
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Hydrocarbon
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l) Total Nonhydrocarbons Not more than 5% by volume
(Nonhydrocarbons shall include, but not
be limited to, hydrogen sulfide,
sulfur, carbon dioxide, oxygen, and
nitrogen)
--------------------------------------------------------------------------------
In the event Seller is unable to meet these quality specifications, Seller shall
notify Buyer and if Buyer refuses to accept such off quality Natural Gas, Seller
shall immediately stop delivery of off quality Natural Gas into the pipeline,
and take whatever steps are necessary to resume delivery of Natural Gas meeting
these quality specifications.
4.2 [omitted]
4.3 If any Natural Gas tendered under this Agreement fails to meet the
applicable quality specifications as provided above in Sections 4.1, Buyer may
refuse to accept such Natural Gas. If Buyer refuses any such Natural Gas because
it fails to meet the applicable quality specifications set forth in Sections
4.1, Buyer must give Seller written notice ("Quality Notice") within five (5)
Days of such refusal of the particular specifications that Seller or Seller's
Transporter has failed to meet. If Seller or Seller's Transporter fails to
correct the cause of any failure to meet the applicable quality specifications
within the thirty (30) Days ("Correction Period") immediately following Seller's
receipt of any Quality Notice, and such failure is not excused by law or the
provisions of the Agreement, Buyer may by additional notice immediately suspend
purchase of any volume of Natural Gas hereunder for an additional period not
less than 90 days ("Suspension Period") during which ▇▇▇▇ ▇▇▇▇▇▇ may continue to
correct the cause of any failure to meet the applicable quality specifications.
If the correction is not made by the end of the Suspension Period, Buyer may
terminate this Agreement, at any time in the thirty (30) Days immediately
following the end of the Suspension Period, upon written notice to Seller.
4.4 If any Natural Gas tendered under this Agreement fails to meet
applicable quality specifications as provided above in Sections 4.1 on five
separate occasions within any six (6) month period, Buyer may, upon thirty (30)
days written notice, terminate this Agreement.
ARTICLE A-V
PAYMENTS
--------
5.1 After delivery of Natural Gas has commenced, Seller shall, on or
before the twentieth (20th) Day of each Month, ("Invoice Month"), render to
Buyer a statement showing the quantity of Natural Gas sold at the Delivery Point
in the immediately preceding Month ("Production Month") and the amount owed
Seller. Buyer shall provide or cause to be provided any information that may be
necessary in order to permit Seller to render statements in accordance with this
Section 5.1. Buyer shall pay Seller on or before the 15th Day of each Month
following the Invoice Month, for all Natural Gas
12
delivered hereunder during the preceding Production Month, PROVIDED, if
presentation of said statement is delayed after the twentieth (20th) of the
Month, then the time for payment shall be extended until (25) Days after receipt
of such statement by Buyer. Should Buyer question, in good faith, any portion of
Seller's statement, then Buyer may withhold payment, if applicable, for the
amount in question if Buyer gives Seller written notice of the reason it
questions that amount on or before the date it would otherwise be due. Buyer
shall, however, make timely payment of the portion of the invoice amount not in
question. The parties agree to meet, if necessary, to resolve any questions and,
upon resolution, any additional amounts owned by Buyer to Seller shall be
promptly paid.
5.2 Each party is entitled, at any and all reasonable times, to examine
the books and records of the other, to the extent necessary to verify the
accuracy of any statement, charge, computation or demand made under this
Agreement.
ARTICLE A-VI
TAXES
-----
6.1 Seller shall pay or cause to be paid the royalties and taxes
lawfully levied on Seller, and applicable to the Natural Gas produced,
transported and delivered hereunder prior to its delivery to Buyer or Buyer's
designee. Buyer shall pay all taxes lawfully levied on Buyer applicable to such
Natural Gas after delivery to Buyer or Buyer's designee. Each Party shall
indemnify, defend and hold harmless the other Party for any Claims for Taxes for
which such Party is responsible hereunder. Upon request, a Party shall provide a
certificate of exemption or other evidence of exemption from any Tax and each
Party agrees to cooperate with the other in obtaining an exemption and
minimizing Taxes payable in respect of all Transactions.
ARTICLE A-VII
WARRANTIES, LIABILITIES AND REMEDIES
------------------------------------
7.1 Seller warrants title to all Natural Gas delivered by it, that it
has the right to sell the same, and that such Natural Gas is free from valid
liens and valid adverse claims of every kind.
7.2 Title to the Natural Gas sold and delivered hereunder shall pass to
Buyer at the Delivery Point. As between the parties hereto, Seller shall be in
control and possession of the Natural Gas and responsible for any cost, loss,
liability, damage and/or injury to or death of any persons (including, without
limitation, reasonable attorney fees) occurring until same shall have been
delivered at the Delivery Point, after which delivery Buyer shall be deemed to
be in exclusive control and possession thereof and shall be responsible for any
cost, loss, liability, damage and/or injury to or death of any persons
(including, without limitation, reasonable attorney's fees) caused thereby,
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except for unknown or unknowable defects in the Natural Gas which cause in whole
or in part damage, injury, or loss.
SELLER SHALL INDEMNIFY, DEFEND, AND HOLD HARMLESS BUYER, ITS SUCCESSORS, AND
ASSIGNS AS WELL AS ITS OFFICERS, EMPLOYEES, AND AGENTS (COLLECTIVELY THE
"INDEMNITIES") FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, CAUSES OF
ACTION, FINES, PENALTIES, SUITS, LIABILITIES, AND JUDGEMENTS OF EVERY KIND AND
CHARACTER, INCLUDING ALL EXPENSES OF LITIGATION, COURT COSTS, AND REASONABLE
ATTORNEY'S FEES, FOR ANY INJURY TO OR DEATH OF ANY PERSON, AND FOR ANY DAMAGE TO
ANY PROPERTY, WHICH RESULTS FROM OR IN CONNECTION WITH THE NATURAL GAS BEFORE
ITS RECEIPT AT THE DELIVERY POINT REGARDLESS OF WHETHER ANY SUCH INJURIES,
DEATH, OR DAMAGES ARE CAUSED OR ALLEGEDLY CAUSED BY THE JOINT, CONCURRING OR
SOLE NEGLIGENCE, OR STRICT LIABILITY OF (i) BUYER AND SELLER, (ii) BUYER AND ANY
OTHER PERSON OR ENTITY, OR (iii) BUYER OR ANY OTHER ENTITY OR COMBINATION OF
ENTITIES.
BUYER SHALL INDEMNIFY, DEFEND, AND HOLD HARMLESS SELLER, ITS SUCCESSORS, AND
ASSIGNS AS WELL AS ITS OFFICERS, EMPLOYEES, AND AGENTS (COLLECTIVELY THE
"INDEMNITIES") FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, CAUSES OF
ACTION, FINES, PENALTIES, SUITS, LIABILITIES, AND JUDGEMENTS OF EVERY KIND AND
CHARACTER, INCLUDING ALL EXPENSES OF LITIGATION, COURT COSTS, AND REASONABLE
ATTORNEY'S FEES, FOR ANY INJURY TO OR DEATH OF ANY PERSON, AND FOR ANY DAMAGE TO
ANY PROPERTY, WHICH RESULTS FROM OR IN CONNECTION WITH THE NATURAL GAS AFTER ITS
RECEIPT AT THE DELIVERY POINT, REGARDLESS OF WHETHER ANY SUCH INJURIES, DEATH,
OR DAMAGES ARE CAUSED OR ALLEGEDLY CAUSED BY THE JOINT, CONCURRING OR SOLE
NEGLIGENCE, OR STRICT LIABILITY OF (i) SELLER AND BUYER, (ii) SELLER AND ANY
OTHER PERSON OR ENTITY, OR (iii) SELLER OR ANY OTHER ENTITY OR COMBINATION OF
ENTITIES.
7.3 Unless either Party is limited to a different sole and exclusive
remedy by the other provisions of this Agreement, either Party's sole and
exclusive remedy for any breach by the other Party of any obligation, covenant,
representation, or warranty is only the recovery of actual damages for any
direct economic losses to the extent recoverable under applicable law.
Notwithstanding any other provision to the contrary or the invalidity or
unenforceability of any sole and exclusive remedy or other provision of this
Agreement, neither Party is entitled to recover (in contract, tort, equity, or
otherwise) any incidental, special, punitive or consequential damages which
arise out of or relate to this Agreement or in connection with the performance
or breach thereof, and any right to recover any of said damages is hereby waived
and released.
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ARTICLE A-VIII
FORCE MAJEURE
-------------
8.1 In the event either Party is rendered unable, wholly or in part, by
Force Majeure to carry out its obligations under this Agreement, except for the
obligations to make payments hereunder, it is agreed that, on such Party's
giving notice and reasonably full particulars of such Force Majeure, orally as
soon as practical and followed in writing or by electronic transmission, to the
other Party within a reasonable time after the occurrence of the Force Majeure
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 Force Majeure shall, so
far as possible, be remedied with all reasonable dispatch. The term "Force
Majeure" shall mean, for purposes of this Agreement, acts of God, strikes,
lockouts, or industrial disputes, interruptions by government or court orders,
present and future valid orders of any governmental authority, inability to
secure or delay in securing easements, rights-of-way, materials (including those
occasioned by reason of allocations promulgated by authorized governmental
agencies), washouts, explosions, breakage, accident, repairs, alterations or
freezing of pipelines, or other equipment, the termination or interruption by
others of Natural Gas supplies or any other cause, whether of the kind herein
enumerated or otherwise, which is not reasonably within the control of the party
claiming Force Majeure. The foregoing enumerated and other causes of Force
Majeure shall constitute "Force Majeure" regardless of whether or not they are
foreseeable. The Force Majeure shall, so far as possible, be remedied with all
reasonable dispatch. The settlement of strikes or lockouts or industrial
disputes or disturbances 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, lockouts, or industrial disputes or disturbances, or the settlement or
negotiation by Seller of purchase or transportation contracts, by acceding to
the demands of any opposing party therein when such course is inadvisable in the
discretion of the party having the difficulty. In no event shall any curtailment
of obligations hereunder due to these Force Majeure conditions exceed the extent
of the shortages caused by the Force Majeure condition.
ARTICLE A-IX
GOVERNMENTAL RULES, REGULATIONS AND AUTHORIZATIONS
--------------------------------------------------
9.1 This Agreement is subject to all valid applicable State, Local, and
Federal laws, orders, directives, rules and regulations of any governmental
authority having jurisdiction. Each party has the right to question the validity
and applicability of any such laws, orders, directives, rules and regulations
and the jurisdiction of any governmental authority. Neither Buyer nor Seller
shall institute any proceeding before any governmental authority seeking to
obtain sales or service from Seller except as expressly provided under the
provisions of this Agreement. If the sums due Seller under this Agreement are
now or become subject to rate regulation by any
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governmental authority, it is stipulated and agreed (i) that any price, rate or
fee that Seller is or hereafter becomes entitled to collect in accordance with
this Agreement, is just and reasonable, fair and equitable and not preferential
or discriminatory, and (ii) that no price, rate or fee that Seller is or
hereafter becomes entitled to collect in accordance with this Agreement, shall
constitute an increase or change in rates.
9.2 If at any time while this Agreement is in effect, any governmental
authority takes any action as to either party ("Affected Party") or any
transporter of the Affected Party whereby the sale or purchase of Natural Gas
under this Agreement, or transportation or other handling (including, without
limitation, compression or treating), of the Natural Gas sold under this
Agreement is proscribed or subjected to terms, conditions, regulations,
restraints, taxes, price or rate controls that are, in the Affected Party's good
faith opinion, unduly burdensome to the Affected Party, the Affected Party may
thereafter terminate this Agreement by giving at least ninety (90) Days prior
written notice to the other party, provided the Affected Party terminates all of
the Affected Party's other contracts, which are similarly affected by the
government action, to the extent the Affected Party has the right to terminate
such other contracts under a clause that is similar to this clause.
9.3 Buyer shall, upon Seller's request, consent to the granting of any
governmental approval that may be required, in order for Seller a) to abandon
any and all facilities and services arising out of or in connection with this
Agreement, if this Agreement is terminated in accordance with its provisions, or
b) to charge and collect any price, rate, charge, or fee that Seller is entitled
to receive under this Agreement.
9.4 Seller warrants that it complies with governmental acquisition
rules, natural gas exploration and transport rules, and Public Service Authority
rules and Buyer is entitled to rely fully on Seller's compliance with these
rules.
ARTICLE A-X
ASSIGNMENT
----------
10.1 The provisions of this Agreement are binding upon and inure to the
benefit of the successors, assigns, and legal representatives of the parties
hereto. Subject to the other provisions of this Section, this Agreement may not
be assigned, in whole or in part, without the prior written consent of the other
party, which consent can not be unreasonably withheld.
ARTICLE A-XI
OTHER TERMS AND CONDITIONS
--------------------------
11.1 WAIVER. No waiver, by either Seller or Buyer, of any default of
the other under this Agreement operates as a waiver of any other default,
whether of like or different character or nature.
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11.2 HEADINGS. The headings used throughout this Agreement are inserted
for reference purposes only, and are not to be construed or taken into account
in interpreting the provisions of any Article, nor to be deemed in any way to
supplement, modify or explain the effects of any provision.
11.3 MODIFICATION. No amendment, release, waiver or other modification
of this Agreement is effective unless made in writing and executed by duly
authorized representatives of both parties.
11.4 INTEGRATION. This Agreement is the final, complete, and exclusive
statement of the agreement between the parties.
11.5 NO THIRD PARTY BENEFICIARIES. Nothing contained in this Agreement
shall confer any rights, as a third party beneficiary or otherwise, upon any
entity other than Buyer, Seller and their successors and assigns.
11.6 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement does not invalidate or affect the enforceability of any
provision of this Agreement.
11.7 PREPARATION. This Agreement was prepared by all parties to it and
not by any party to the exclusion of the other parties. Neither Seller nor Buyer
had an unfair advantage during the negotiation of this Agreement.
11.8 APPLICABLE LAW. AS TO ALL MATTERS OF CONSTRUCTION AND
INTERPRETATION, THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES IS
GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE. VENUE AND SOLE JURISDICTION FOR
ANY LITIGATION UNDER THIS AGREEMENT SHALL BE IN ▇▇▇▇▇▇▇▇ COUNTY, TENNESSEE.
11.9 CONFIDENTIALITY. Neither party shall disclose the provisions of
this Agreement to any person except to the extent disclosure is required by any
governmental authority, financing entity, or reasonably necessary for the
performance and enforcement of this Agreement without the prior written consent
of the other party. Seller agrees to have its employees execute individual
secrecy agreements that, at a minimum, include the terms found in this
Agreement.
11.10 RELATIONSHIP OF PARTIES. Neither this Agreement nor the
performance of this Agreement creates, expressly, impliedly or otherwise, a
fiduciary relationship or any other special relationship between Buyer and
Seller. All the duties owed by one party to the other in connection with this
Agreement are solely contractual in nature and these duties do not arise in tort
or sound in tort.
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