HomeMy WebLinkAboutReso 92-404 - Approve & Authorize execution of the Fuel Supply Agreement dated 09/15/92, between COR & Coast Energy Group, Inc for supply of Natural Gas & Liquified Petroleum Gas for the Redding Power Site I
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! RESOLUTION NO. ?2-
A
2A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING AND AUTHORIZING EXECUTION OF THE FUEL SUPPLY
AGREEMENT DATED SEPTEMBER 15, 1992, BETWEEN THE CITY OF
REDDING AND COAST ENERGY GROUP, INC. FOR THE SUPPLY OF
NATURAL GAS AND LIQUIFIED PETROLEUM GAS FOR THE REDDING
j POWER SITE.
WHEREAS, staff has negotiated the attached Fuel Supply
Agreement with Coast Energy Group, Inc. dated September 15, 1992,
to provide a reliable supply of natural gas and liquified
petroleum gas (LPG) for the Redding Power site; and
WHEREAS, said Agreement obligates Coast Energy Group, Inc.
to deliver natural gas to the Redding Power site based upon the
City' s needs; and
WHEREAS, to the extent Coast Energy Group, Inc. is unable to
meet the City' s natural gas requirements for any reason other
than force majeure, Coast Energy Group, Inc. will deliver LPG at
natural gas prices; and
WHEREAS, the Agreement obligates the City as more
particularly set forth in the accompanying Report to City Council
dated September 8, 1992; and
WHEREAS, funds for this request are available in the 1992
Electric Utility Project Financing; and
;a WHEREAS, the Electric Department respectfully recommends
'+ execution of said Agreement as set forth below;
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of
the City of Redding as follows:
1. That the foregoing recitals are true and correct.
a 2. That Council believes entering into a Fuel Supply
Agreement with Coast Energy Group, Inc. will benefit City N
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Electric Utility customers.
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3. That the City Council of the City of Redding hereby
approves the Fuel Supply Agreement dated September 15, 1992,
between the City of Redding and Coast Energy Group, Inc. , a true
copy of which is attached hereto and incorporated herein by
reference.
4 . That the Mayor of the City of Redding is hereby
authorized and directed to sign said Agreement on behalf of the
City of Redding; and the City Clerk is hereby authorized and
directed to attest the signature of the Mayor and to impress the
official seal of the City of Redding thereto.
5. That the Electric Utility Director or his designee is
authorized to execute and modify Exhibits B, C, D and E of said
Agreement as appropriate during the term of the Agreement.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
the City of Redding on the 15th day of September , 1992, and was
duly adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Dahl, Kehoe and Moss
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: Arness
ABSTAIN: COUNCIL MEMBERS: None
a
j CHARLIE MOSS, Mayor
City of Redding
A ST:
CONNIE STROHMAYER, y Clerk
FFOPX APPROVED:
G(-
RANDALL A. HAYi, City Attorney
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FUEL SUPPLY
AGREEMENT
BY
AND
BETWEEN
COAST ENERGY GROUP, INC. ,
As Seller,
AND
THE CITY OF REDDING,
As Buyer
September 15, 1992
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TABLE OF CONTENTS
Pacie
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - PURCHASE AND SALE OF FUEL . . . . . . . . . . . 7
2 . 1 Purchase and Sale . . . . . . . . . . . . . . . . . 7
2 .2 Notice of Purchase and Delivery . . . . . . . . . . 7
2 . 3 Delivery . . . . . . . . . . . . . . . . . . . . . 9
2 .4 Payment . . . . . . . . . . . . . . . . . . . . . . 10
2 . 5 Right to Solicit, Right to Match . . . . . . . . . 10
2 . 6 Failure to Purchase the Buyer's Minimum Take . . . 11
2 .7 Service Initiation Fee . . . . . . . . . . . . . . 11
2 . 8 Monthly Fee . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III - ADDITIONAL OBLIGATIONS OF THE SELLER . . . . . 13
3 . 1 Additional Notices . . . . . . . . . . . . . . . . 13
3 . 2 The Inventory . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV - FUEL QUALITY . . . . . . . . . . . . . . . . . . 14
4 . 1 Quality Specifications . . . . . . . . . . . . 14
4 .2 Failure to Meet Specifications . . . . . . . . . . 14
ARTICLE V - DELIVERY POINTS . . . . . . . . . . . . . . . . . 14
ARTICLE VI - METERING OF FUEL . . . . . . . . . . . . . . . . 14
6. 1 Installation and Operation . . . . . . . . . . . . 14
6.2 Periodic Verification . . . . . . . . . . . . . . . 15
6. 3 Range of Accuracy . . . . . . . . . . . . . . . . . 15
6. 4 Check Meters . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF THE SELLER 16
7 . 1 Due Organization and Good Standing . . . . . . . . 16
7. 2 Due Authorization and Execution . . . . . . . . . . 16
7. 3 Compliance With Applicable Regulations . . . . . . 17
7 . 4 Compliance With Other Instruments . . . . . . . . . 17
7 . 5 Title . . . . . . . . . . . . . . . 17
7. 6 Broker's or Finder's Fees . . . . . . . . . . . . . 18
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES OF THE BUYER 18
8 . 1 Due Organization and Good Standing . . . . . . . . 18
8 . 2 Due Authorization and Execution . . . . . . . . . . 18
8 . 3 Compliance With Applicable Regulations . . . . . . 18
8 .4 Compliance With Other Instruments . . . . . . . . . 18
8 . 5 Broker' s or Finder's Fees . . . . . . . . . . . . . 19
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TABLE OF CONTENTS
(continued)
Page
ARTICLE IX - TERM AND TERMINATION . . . . . . . . . . . . . . 19
9. 1 Term . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Events of Default . . . . . . . . . . . . . . . . . 19
9. 3 Early Termination . . . . . . . . . . . . . . . . . 20
9.4 Failure to Provide Fuel . . . . . . . . . . . . . . 20
9.5 Transfer of Inventory . . . . . . . . . . . . . . . 21
ARTICLE X - GENERAL PROVISIONS . . . . . . . . . . . . . . . 21
10. 1 Force Majeure . . . . . . . . . . . . . . . . . . 21
10. 2 Entire Agreement . . . . . . . . . . . . . . . . . 21
10. 3 Assignment . . . . . . . . . . . . . . . . . . . . 22
10. 4 Successors and Assigns . . . . . . . . . . . . . . 22
10. 5 Notices . . . . . . . . . . . . . . . . . . . . . 22
10. 6 Taxes . . . . . . . . . . . . . . . . . . . . . . 22
10.7 No Waiver . . . . . . . . . . . . . . . . . . . . 22
10.8 Severability . . . . . . . . . . . . . . . . . . . 22
10.9 Relationship Between the Parties; Insurance . . . 23
10. 10 Choice of Law . . . . . . . . . . . . . . . . . . 23
10. 11 Arbitration . . . . . . . . . . . . . . . . . . . 23
10. 12 Attorneys ' Fees . . . . . . . . . . . . . . . . . 24
10. 13 Books and Records . . . . . . . . . . . . . . . . 24
10. 14 Additional Documents . . . . . . . . . . . . . 24
10. 15 Headings . . . . . . . . . . . . . . . . . . 24
10. 16 Time of the Essence . . . . . . . . . . . . . . . 25
10. 17 Exhibits . . . . . . . . . . . . . . . . . . . . 25
EXHIBITS
EXHIBIT A - FUEL PRICE INDEX EXEMPLAR
EXHIBIT B - AGREED-UPON CARRIERS
EXHIBIT C - FORM OF NOMINATION CONFIRMATION
EXHIBIT D - FORM OF NOTICE OF BUYER'S EXPECTED FUEL REQUIREMENTS
EXHIBIT E - FORM OF NOTICE OF FUELS POSTINGS
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FUEL SUPPLY AGREEMENT
THIS FUEL SUPPLY AGREEMENT (the "Agreement") is entered into
as of September 15, 1992 by and between COAST ENERGY GROUP, INC. ,
a Delaware corporation with its principal place of business
located at 9494 Southwest Freeway, Suite 404, Houston, Texas
77074 (the "Seller") , and THE CITY OF REDDING, a municipal
corporation with its principal business address at 760 Parkview
Avenue, Redding, California, 96001-3396 (the "Buyer") . The
Seller and the Buyer are sometimes hereinafter referred to
individually as a "Party" and collectively as the "Parties" .
RECITALS
A. The Seller is in the business of, among other things,
providing fuel and fuel supply services to various consumers of
natural gas ("Gas") and liquefied petroleum gas ("LPG") .
B. The Buyer is engaged in, among other things, the
business of producing, transmitting and distributing electrical
power to its customers. In connection therewith, the Buyer is
currently in the process of developing electrical power
production facilities (the "Project") at 17120 Clear Creek Road,
Redding, California.
C. The Buyer desires to acquire a reliable supply of back-
up fuel for the Project, as well as an economically competitive
supply for a portion of the fuel required to operate the Project.
To that end, the Buyer desires to purchase Gas and LPG from the
Seller and the Seller is willing to sell Gas and LPG to the
Buyer. The purpose of this Agreement is to set forth the terms
and conditions in accordance with which such purchases and sales
shall take place.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise expressly provided in this Agreement,
the following capitalized terms shall, for the purposes of this
Agreement and whether used in the singular or plural form, have
the respective meanings accorded to them in this Article I.
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"Affiliate"Affiliate" shall mean any entity which controls, is
controlled by or is under common control with either of the
Parties. For purposes of this definition, the word "control"
shall mean the right and ability to direct the management,
activities or policies of an entity regardless of the ownership
position which the controlling entity holds in the controlled
entity.
1. 2 "Aggregate Purchase Price" shall mean the Purchase
Price(s) of the type(s) of Fuel selected for delivery in a
specified month multiplied by the respective amount of the
selected type(s) of Fuel delivered during that month (measured in
MMBtu's) , which aggregate product (or sum of products, as the
case may be) the Buyer shall from time to time pay hereunder to
the Seller for all Fuel purchased from the Seller under this
Agreement during that month.
1. 3 "Btu" shall mean the measurement of the energy content
of Fuel in British thermal units as determined by common test
procedures using the higher heating value of the particular Fuel
the energy content of which is being measured.
1.4 "Business Day" shall mean any day other than a
Saturday, Sunday or any other day which is a legal holiday under
United States, California or Texas law.
1. 5 "Buyer's Expected Fuel Requirements" shall mean the
amount of Fuel (measured in MMBtu's) , the type(s) of Fuel and the
maximum delivery rate of Fuel (by type, if applicable) which the
Buyer estimates that it will require during a specified month, as
more fully set forth in the Notice of Buyer's Expected Fuel
Requirements which is provided by the Buyer to the Seller for
that month.
1. 6 "Buyer' s Minimum Take" shall mean the minimum amount of
Fuel (measured in MMBtu's) which the Buyer shall be required to
purchase from the Seller in each month of the Term, which amount
shall equal thirty percent (30%) of the Fuel used by the Buyer to
operate the Peaking Plant in its presently contemplated simple
cycle configuration during that month. Notwithstanding the
foregoing, in the event that the Buyer is obligated to purchase
during a month Optional Fuel or Take-or-Pay Fuel in an amount in
excess of thirty percent (30%) of the Fuel required to operate
the Peaking Plant in its presently contemplated simple cycle
configuration during that month, the Buyer shall continue to be
obligated to purchase such Optional Fuel and/or Take-or-Pay Fuel
but the Buyer' s purchase of such Fuel shall be credited towards
meeting its obligation to purchase the Buyer's Minimum Take for
that month. Except as otherwise specifically provided in Section
2 . 6 of this Agreement, the Buyer's Minimum Take shall not be
cumulative; i.e. , if the Buyer purchases Fuel in one month which
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is in excess of the Buyer's Minimum Take, such excess shall not
be credited against the Buyer's obligation to purchase the
Buyer's Minimum Take in any prior or subsequent month.
1.7 "Day" shall mean a period of twenty-four (24)
consecutive hours beginning and ending at midnight, local time,
at the Site.
1.8 "Effective Date" shall mean that date stated in the
written notice from the Buyer to the Seller as the date on which
the Buyer desires the delivery of Fuel to commence at the Site,
which date shall not be later than that date which is ten
(10) Business Days prior to the earlier of (i) the date on which
acceptance testing of the Peaking Plant is scheduled to commence
or (ii) the date on which the Redding Plant is first returned to
commercial operation.
1.9 "Event of Default" shall mean any Ievent described as
such in Section 9 . 2 of this Agreement.
1. 10 "Event of Force Majeure" shall mean any event
described as such in Section 10. 1 of this Agreement.
1. 11 "Fixed Charge(s) " shall mean that component of the
total monthly cost for delivery of the Fuel selected by the Buyer
which is not dependent upon the amount of Fuel purchased by the
Buyer.
1. 12 "Fuel" shall mean either Gas or LPG, or both.
1. 13 "Gas" shall mean natural gas.
1. 14 "Gas Index" shall mean the index which the Seller
shall utilize to determine the maximum Purchase Price under this
Agreement which the Seller may charge the Buyer for Gas during
the corresponding month of the Term, and shall be the sum
(expressed in dollars per MMBtu) of the following: (i) the
average of the monthly high and low California border price for
the month of delivery as reported in Inside FERC, Natural Gas
Weekly and Natural Gas Intelligence; plus (ii) the intrastate
transportation rate from the California border to the burner tip
as quoted from time to time to the Seller by the Transporter;
plus (iii) a per MMBtu price, which shall be three and one-half
cents ($0. 035) per MMBtu in the first calendar year (or portion
thereof) of the Term and which per MMBtu price shall increase in
each subsequent calendar year of the Term by an amount equal to
the prior calendar year's per MMBtu price multiplied by an annual
escalator which shall not exceed the inflation rate of the
Producer Price Index-Electricity ("PPI-Electricity") as reported
by Data Research Inc./McGraw Hill multiplied by one and one-half
(1.50) (provided, however, that at no time shall the increase
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resulting from application of the annual escalator exceed one
hundred fifty percent (150%) of the increase which occurred in
the immediately preceding calendar year) . Attached to this
Agreement as Exhibit A is a Fuel Price Index Exemplar which
illustrates the manner in which the Gas Index is to be calculated
and applied to determine the maximum Purchase Price under this
Agreement for Gas; provided, however, that the prices set forth
in Exhibit A are included for the purpose of illustration only
and are not a representation or warranty by the Seller that Fuel
shall at any time during the Term be available at such prices.
1. 15 "Inventory" shall mean the LPG stored in the Storage
Facility.
1. 16 "LPG" shall mean liquefied petroleum gas such as
propane, propane-butane mix, normal butane and field grade
butane.
1. 17 "LPG Index" shall mean the index which the Seller
shall utilize to determine the maximum Purchase Price under this
Agreement which the Seller may charge the Buyer for LPG during
the corresponding month of the Term, and shall be the sum
(expressed in dollars per MMBtu) of the following: (i) one
' hundred and ten percent (110%) of the average posting of Shell,
Chevron and Suburban (Elk Grove) for LPG in the San Francisco
metropolitan area (as stated in cents per gallon) , all as
published on the first day of the month of delivery in the Oil
Price Information Service; plus (ii) the average freight charges
(as stated in cents per gallon) of those mutually agreed-upon
carriers listed in Exhibit B to this Agreement. The Fuel Price
Index Exemplar attached to this Agreement as Exhibit A
illustrates the manner in which the LPG Index is to be calculated
and applied to determine the maximum Purchase Price under this
Agreement for LPG; provided, however, that the prices set forth
in Exhibit A are included for the purpose of illustration only
and are not a representation or warranty by the Seller that Fuel
shall at any time during the Term be available at such prices.
1. 18 "Lowest Cost Available Fuel" shall mean, for each
month of the Term, that type of Fuel which the Seller advises the
Buyer prior to the beginning of that month is available from the
Seller for delivery to the Buyer during that month in the amount
and at the maximum delivery rate requested by the Buyer at the
lowest cost to the Buyer of any Fuel available for delivery to
the Buyer during that month in the specified volume and at the
maximum delivery rate.
1. 19 "MMBtu" shall mean a unit of one million (1, 000, 000)
Btu's.
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1.20 "Nomination Confirmation" shall mean that document, a
blank form of which is attached to this Agreement as Exhibit C,
which shall be executed by the Parties during each month of the
Term (and, with respect to Optional Fuel and Take-or-Pay Fuel,
from time to time during the Term) for the purpose of confirming
the purchase by the Buyer of a specified amount at a specified
delivery rate of a particular type of Fuel at a specified
Purchase Price in accordance with paragraph (d) of Section 2 . 2 of
this Agreement. From time to time during the Term there may be
more than one Nomination Confirmation in effect between the
Parties, but each such Nomination Confirmation shall be deemed a
separate transaction under, and subject to all of the terms and
conditions of, this Agreement. A blank copy of a Nomination
Confirmation shall be appended to each Notice of Fuels Postings
which the Seller from time to time provides to the Buyer in
accordance with the terms of this Agreement.
1.21 "Notice of Buyer's Expected Fuel Requirements" shall
mean that notice, in the form attached hereto as Exhibit D, which
the Buyer shall from time to time provide to the Seller in
accordance with the terms of paragraph (b) of Section 2 . 2 of this
Agreement.
1. 22 "Notice of Fuels Postings" shall mean the notice, in
the form attached hereto as Exhibit E, which the Seller shall
provide to the Buyer in each month of the Term in accordance with
the provisions of paragraph (c) of Section 2 .2 of this Agreement.
1. 23 "Optional Fuel" shall mean Fuel which the Seller may
from time to time offer for sale to the Buyer during any given
month after nomination of the Fuel for that month as an
alternative or supplement to the Primary Fuel selected by the
Buyer for delivery during that month. Optional Fuel may be
offered on a take-or-pay basis, and if it is offered on such a
basis it shall be treated as Take-or-Pay Fuel for purposes of
this Agreement.
1. 24 "Peaking Plant" shall mean that certain peaking power
generation facility to be constructed at the Site.
1. 25 "Primary Fuel" shall mean those Fuels for which the
Seller guarantees delivery to the Site in at least the amount and
at the delivery rate specified by the Buyer as part of the
Buyer's Expected Fuel Requirements.
1. 26 "Project" shall mean, collectively, those certain
electrical power production facilities located or to be located
at the Site. The Redding Plant and the Peaking Plant are
currently the only facilities which shall constitute the Project.
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1. 27 "Purchase Price" shall mean the per-MMBtu,
delivered-to-the-Site price for the type(s) of Fuel selected by
the Buyer which is in effect for the month of delivery, as quoted
by the Seller and adjusted from time to time in accordance with
the terms of this Agreement; provided, however, that at no time
shall the Purchase Price for Gas delivered hereunder in any month
exceed the price resulting from the application of the Gas Index
in effect for the month in which the Gas is delivered to the Site
nor shall the Purchase Price for LPG delivered hereunder in any
month exceed the price resulting from the application of the LPG
Index in effect for the month in which the LPG is delivered to
the Site, and provided further that if Gas is the type of Fuel
chosen by the Buyer for delivery in a particular month but the
Seller delivers LPG for any reason other than that the occurrence
of an Event of Force Majeure prevents the Seller from delivering
Gas, the Buyer shall pay an Aggregate Purchase Price for the LPG
based upon the Purchase Price(s) for Gas set forth in the
Nomination Confirmation(s) in effect for the month of delivery
for a like amount of Gas (measured in MMBtu's) which the Seller
would have delivered pursuant to such Nomination Confirmation(s) .
1. 28 "Redding Plant" shall mean that certain electric
generation facility currently located at the Site, as it may from
time to time be modified.
1.29 "Service Initiation Fee" shall mean the fee payable by
the Buyer to the Seller in accordance with the provisions of
Section 2.7 of this Agreement.
1. 30 "Site" shall mean that certain parcel of real property
located at 17120 Clear Creek Road, Redding, California upon which
the Project and the Storage Facility are to be located.
1. 31 "Storage Facility" shall mean that certain facility to
be constructed at the Site for the purpose of storing the
Inventory, but nothing in this Agreement shall be construed to
obligate the Seller to construct the Storage Facility for the
Buyer.
1. 32 "Take-or-Pay Fuel" shall mean that type of Fuel which
from time to time may be offered by the Seller for delivery to
the Buyer as an alternative to Primary Fuel and/or Optional Fuel
during any specified time period in accordance with a requirement
that the Buyer pay the Seller a specified minimum Aggregate
Purchase Price for a specified amount of that Fuel regardless of
whether or not the Buyer consumes all or any portion of such Fuel
during such specified time period.
1. 33 "Term" shall mean the term of this Agreement as set
forth in Section 9. 1 of this Agreement.
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1. 34 "Transporter" shall mean the entity which owns the
pipeline(s) through which the Gas purchased under this Agreement
is delivered to the Site.
1. 35 "Transporter's GT&C" shall mean the general terms and
conditions applicable to the Transporter's transportation
agreements with the Seller as the same may from time to time be
revised.
ARTICLE II
PURCHASE AND SALE OF FUEL
2 . 1 Purchase and Sale. The Seller hereby agrees that it
shall sell and deliver to the Buyer at the Site, and the Buyer
hereby agrees that it shall purchase and accept from the Seller,
at the applicable Aggregate Purchase Price, Fuel of such type(s) ,
in such amount(s) and at such maximum delivery rate(s) as the
Buyer shall from time to time advise the Seller pursuant to the
terms of this Agreement; provided, however, that the Buyer shall
in each month of the Term purchase and accept from the Seller at
least that amount of Fuel which is equal to the greater of
(i) the Buyer's Minimum Take or (ii) such amount of Take-or-Pay
Fuel (if any) which the Buyer has contracted to take during that
month.
2 .2 Notice of Purchase and Delivery.
a. At least ninety (90) Days prior to the Effective
Date, the Buyer shall notify the Seller in writing of the
Effective Date, which notice shall be irrevocable.
b. Thereafter, and not later than the first (1st)
Business Day of each calendar month of the Term, the Buyer shall
notify the Seller in writing of the Buyer's Expected Fuel
Requirements for the next succeeding calendar month by providing
the Seller with a completed Notice of Buyer's Expected Fuel
Requirements. If the Buyer fails to so notify the Seller in a
timely manner of the Buyer' s Expected Fuel Requirements for that
month, the Seller shall have no obligation under this Agreement
to furnish the Buyer with Fuel for that month. Such failure of
the Buyer to notify the Seller shall not excuse the Buyer from
its obligation under this Agreement to purchase from the Seller
the Buyer's Minimum Take for that month, but the Seller shall,
upon receipt of later notification from the Buyer that it desires
to purchase Fuel under the terms of this Agreement for that month
with respect to which the Buyer has failed to timely notify the
Seller of the Buyer's Expected Fuel Requirements, use its best
efforts to supply Fuel of the type(s) , in the amount(s) and at
the maximum delivery rate(s) as the Buyer requests.
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c. Not later than the fifth (5th) Business Day of
each calendar month of the Term, the Seller shall provide the
Buyer with a Notice of Fuels Postings based upon the Buyer's
Expected Fuel Requirements of which the Seller has been notified
in accordance with paragraph (b) of this Section 2 .2. The Notice
of Fuels Postings shall set forth: (i) the Fixed Charges and
Purchase Prices for each Primary Fuel which will be available for
delivery to the Buyer, upon demand, during the next succeeding
calendar month, and (ii) an accounting of all outstanding
obligations arising in connection with existing Optional Fuel
and/or Take-or-Pay Fuel arrangements. In no event shall the
Fixed Charges posted by the Seller for any one month with respect
to Gas exceed the transportation costs charged by the applicable
Transporter for reserving capacity on the Transporter's pipeline
system for the delivery of Gas during that month in an amount and
at a rate of delivery sufficient to permit the Project to be run
at the maximum output indicated by the Buyer in the Buyer's
Expected Fuel Requirements for the entire calendar month in which
such delivery is to occur.
d. Not later than the tenth (10th) Business Day of
each calendar month of the Term, the Buyer may notify the Seller
of the type(s) of Fuel which the Buyer desires the Seller to
deliver during the next succeeding month by providing the Seller
with an executed Nomination Confirmation. In the event that the
Buyer elects not to notify the Seller of the Buyer's choice of
type(s) of Fuel by the tenth (10th) Business Day of the month,
all Fuel delivered by the Seller during the next succeeding month
shall be the Lowest Cost Available Fuel designated in the Notice
of Fuels Postings for that month.
e. From time to time during the Term, the Seller may
notify the Buyer of the Fixed Charges, the Purchase Price(s) and
other terms and conditions applicable to the purchase by the
Buyer of Optional Fuel which may be delivered to the Buyer to
either supplement or displace Primary Fuel. Such notification
shall stipulate whether such purchase will supplement or displace
existing purchase obligations and specify a date by which both
Parties must execute a Nomination Confirmation reflecting the
terms and conditions for the purchase and sale of such Optional
Fuel.
f. From time to time during the Term, and promptly
upon the request of the Buyer, the Seller shall provide the Buyer
with an annual price, take periods and minimum/maximum amounts
for Take-or-Pay Fuel. Such annual price will be delineated by
month and shall be provided ninety (90) Days prior to the start
of each calendar year of the Term, commencing with the first
(1st) calendar year after the calendar year in which the
Effective Date occurs. In addition, upon the request of the
Buyer, the Seller shall provide the Buyer with a monthly price
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and minimum/maximum amount(s) for Take-or-Pay Fuel not less than
sixty (60) Days prior to the first Day of the subject month. In
either event, if the Buyer elects to purchase Take-or-Pay Fuel
the Buyer shall execute and return to the Seller a Nomination
Confirmation concerning the Take-or-Pay Fuel not less than forty-
five (45) Days prior to the commencement of the applicable one-
year or one-month period. The Buyer acknowledges and agrees
that, in the event that the Buyer elects to purchase Take-or-Pay
Fuel, the Buyer shall pay to the Seller the Aggregate Purchase
Price for the specified amount of such Take-or-Pay Fuel for which
the Buyer has contracted regardless of whether or not the Buyer
takes delivery of all or any portion of such Take-or-Pay Fuel.
Monthly purchases of Take-or-Pay Fuel will not be credited
against the Buyer's Minimum Take in future months but will on a
unit-by-unit basis supersede the Buyer's purchase obligation for
other Fuel for the month in which the Take-or-Pay Fuel is
delivered.
g. Notwithstanding any other provision of this
Agreement to the contrary, all notices under this Section 2 . 2
shall be given by telephonic facsimile transmission unless
otherwise mutually agreed upon by both Parties.
2 .3 Delivery.
a. In the event that the Buyer has nominated Gas as
the Primary Fuel for a given month, the Seller shall, within one
(1) hour of its receipt by telephonic facsimile transmission of
the Buyer's demand to commence delivery of Gas, deliver to the
Buyer Gas in up to the maximum amount and maximum delivery rate
designated by the Buyer in the Nomination Confirmation in effect
for the month in which delivery is to occur. In the event that
the Buyer has nominated LPG as the Primary Fuel for a given
month, the Seller shall, promptly upon its receipt of telephonic
facsimile transmission of the Buyer's demand to commence delivery
of LPG, deliver to the Buyer LPG in up to the maximum amount and
the maximum delivery rate designated by the Buyer in the
Nomination Confirmation in effect for the month in which delivery
is to occur. The Seller's obligation hereunder to deliver Gas
shall be contingent upon and subject to deliverability by the
Transporters' pipeline facilities and the respective
Transporter's GT&C's in effect at the time of delivery; provided,
however, that if the Buyer elects Gas as the Primary Fuel, it
shall be the Seller' s obligation to reserve on the Buyer's behalf
and at the Buyer's expense adequate capacity on the Transporters'
pipeline(s) to insure delivery of Gas at the rate and in the
amount specified by the Buyer in the Nomination Confirmation in
effect for that month. In the event that Gas cannot be delivered
on the Transporters' pipeline(s) for any reason other than the
occurrence of an Event of Force Majeure, the Seller shall
automatically deliver to the Buyer an equivalent amount of LPG
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fueL1-14.agt-4456sn 9
(measured in MMBtu's) and the Buyer shall pay an Aggregate
Purchase Price for such LPG based upon the Purchase Price(s) for
Gas set forth in the Nomination Confirmation(s) in effect for the
month of delivery for a like amount of Gas (measured in MMBtu's)
which the Seller would have delivered pursuant to such Nomination
Confirmation(s) . Except as provided in Section 2 .8 of this
Agreement, and except as to Take-or-Pay Fuel not accepted by the
Buyer, in no event shall the Buyer be liable for any Fixed
Charges relating to Primary Fuel in any month in which the Seller
does not deliver Primary Fuel to the Buyer.
b. In the event that there is outstanding any
obligation on the part of the Buyer to take Optional Fuel or
Take-or-Pay Fuel, the Buyer shall promptly notify the Seller to
deliver such Optional Fuel or Take-or-Pay Fuel in lieu of the
Primary Fuel to be delivered in accordance with paragraph (a) of
this Section 2 . 3 . In the event that the Buyer fails to notify
the Seller of the Buyer's choice of Fuel, the Seller shall
deliver to the Buyer the Lowest Cost Available Fuel, whether
Primary Fuel, Optional Fuel or Take-or-Pay Fuel.
2 .4 Payment. Within the first ten (10) Days of each
calendar month during the Term, the Seller shall furnish the
Buyer with a statement setting forth all amounts due and owing as
of the end of the prior calendar month under the terms of this
Agreement. The statement shall specify the types and amounts of
Fuel delivered as well as the amounts of Optional Fuel and/or
Take-or-Pay Fuel which the Buyer was obligated to take but did
not take, the Purchase Price and the Aggregate Purchase Price of
such Fuel (s) , the Fixed Charges incurred in connection with the
delivery of such Fuel (s) and all other applicable costs
(including but not limited to the monthly fee described in
Section 3 .2 of this Agreement) . The Buyer shall pay all
undisputed amounts set forth on such statement within ten (10)
Business Days of receipt of the statement. Such payment shall be
made by wire transfer to the account of the Seller as follows (or
to such other account as the Seller may from time to time notify
the Buyer in writing) :
Bank of America
ABA #121000358
101 Park Center Plaza
San Jose, CA 95115
Account to credit: Coast Gas, Inc.
Account Number: 14872-02470
.2 . 5 Right to Solicit, Right to Match. The Buyer shall have
a right to solicit bona fide offers from third parties for the
supply of Fuel for the Project at any time during the Term;
provided, however, that the Seller shall have the right at all
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fueL1-14.agt-4456sn 10
times during the Term to match any bona fide offer, the terms of
which are acceptable to the Buyer, from any such third party to
provide Fuel for the Project for a period of one (1) month or
less. The Buyer shall promptly furnish the Seller with written
notification of all particulars of each such bona fide offer and
shall afford the Seller the same period of time in which to make
an election to match the offer as the third party affords the
Buyer to accept the offer. In the event that the Seller elects
not to match such bona fide offer, the Buyer shall be free to
purchase Fuel from such third party without penalty hereunder;
provided, however, that the Buyer shall remain obligated under
any and all outstanding Optional Fuel and Take-or-Pay Fuel
arrangements then in effect and shall also remain obligated to
purchase the Buyer's Minimum Take from the Seller. If the Seller
does elect to match such bona fide offer, the Buyer shall be
obligated to purchase Fuel from the Seller upon substantially the
same terms as those which constitute the bona fide offer of the
third party. For purposes of this Section 2 .5, "substantially
the same terms" shall mean that all material terms of the sale by
the Seller shall be substantially identical to the terms of the
third party's bona fide offer, and the Buyer shall have the right
to demand adequate assurances from the Seller, as provided under
the California Commercial Code, that the Seller can perform its
obligations under such terms in a timely manner.
2 . 6 Failure to Purchase the Buyer's Minimum Take. In the
event that the Buyer fails in any calendar month during the Term
to purchase from the Seller the Buyer's Minimum Take for that
calendar month, the resulting shortfall shall be computed and
carried over from month-to-month until the end of the third (3rd)
calendar month following the calendar month in which such
shortfall occurred. If by the end of such third calendar month
the Buyer has not purchased Fuel of any type in an amount in
excess of the Buyer's Minimum Take which is equal to or in excess
of such shortfall, the Buyer shall pay to the Seller at that time
an amount equal to the product of the amount of the shortfall
(less the amount of any Fuel purchased by the Buyer in excess of
the Buyer's Minimum Take in all other months of the 3-month
period following the calendar month in which such shortfall
occurred) multiplied by the applicable Purchase Price for the
month in which the shortfall occurred of the type of Fuel
selected by the Buyer for delivery in that month (if the Buyer
selected a type of Fuel for delivery in that month) or the Lowest
Cost Available Fuel (if the Buyer failed to select a type of Fuel
for delivery in that month) .
2 . 7 Service Initiation Fee. In addition to the Aggregate
Purchase Price, the monthly fee described in Section 2 .8 of this
Agreement and any and all other amounts required to be paid by
the Buyer under the terms of this Agreement, the Buyer shall pay
to the Seller a Service Initiation Fee in the sum of Two Hundred
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fueL1-14.agt-4456sn 1 1
Forty Thousand and No/100 Dollars ($240, 000. 00) . The Service
Initiation Fee shall be deemed to have been earned by the Seller
upon the execution of this Agreement by both Parties, and shall
be due and payable as follows: (i) One Hundred Twenty Thousand
and No/100 Dollars ($120, 000. 00) upon execution of this
Agreement; and (ii) One Hundred Twenty Thousand and No/100
Dollars ($120, 000. 00) upon the Buyer' s giving notice of the
Effective Date as required by paragraph 2 .2 (a) of this Agreement.
2.8 Monthly Fee. The Buyer shall pay to the Seller, in
addition to the Aggregate Purchase Price and the Service
Initiation Fee, a fee for each calendar month of the Term
commencing with the month in which construction of the Storage
Facility is completed. For purposes of this Agreement,
construction of the Storage Facility shall be deemed to be
completed when the Storage Facility is accepted by the Buyer from
the entity which has constructed the Storage Facility. The
monthly fee for each calendar month of the first twelve months
after completion of construction of the Storage Facility shall be
Nine Thousand Dollars ($9, 000) ; provided, however, that for the
month in which construction of the Storage Facility is completed
said fee shall be prorated for the actual number of Days elapsed
from the Day on which completion occurs through the end of said
calendar month. In each succeeding twelve-month period of the
Term, the monthly fee shall be increased to an amount equal to
the sum of the monthly fee in effect during the immediately
preceding twelve-month period plus the product of the monthly fee
in effect during said preceding twelve-month period multiplied by
the inflation rate for PPI-Electricity for that preceding twelve-
month period as reported by Data Research, Inc./McGraw Hill.
Notwithstanding the foregoing, to the extent that the Buyer
purchases Fuel from the Seller in any calendar month in excess of
the Buyer's Minimum Take for that month, the monthly fee for that
month shall be evenly prorated in inverse proportion to such
excess so that the Buyer shall pay the entire monthly fee in a
calendar month during which the Buyer purchases from the Seller
no Fuel in excess of the Buyer's Minimum Take and no monthly fee
in a calendar month during which the Buyer purchases from the
Seller one hundred percent (100%) of its Fuel requirements for
the Peaking Plant. In addition to and concurrently with the
payment of the monthly fee, the Buyer shall pay to the Seller all
costs of parts and labor in excess of routine day-to-day costs
and expenses incurred by the Seller in operating and maintaining
the Storage Facility. The monthly fee and all such costs for
each month shall be included on the corresponding monthly
statement described in Section 2 .4 of this Agreement.
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fue11-14.a9t-4456sn 12
ARTICLE III
ADDITIONAL OBLIGATIONS OF THE SELLER
3 . 1 Additional Notices. The Seller shall provide the Buyer
with an 18-month forecast of projected Fuel costs, delineated by
month, at least two (2) months prior to the start of each
consecutive 18-month period of the Term. In addition, the Seller
shall provide the Buyer with forecasts of quarterly projected
Fuel costs not less than forty-five (45) Days prior to the start
of each calendar quarter of the Term. No such forecast shall be
regarded as a firm commitment by the Seller to provide Fuel at
the prices forecast nor a warranty that Fuel shall be available
for such periods or at such prices. All forecast prices shall
include all costs associated with delivering the Fuel to the
Project.
3 .2 The Inventory
a. Except as otherwise provided in this Section 3 . 2,
at all times during the Term the Seller shall maintain an
Inventory of Two Hundred Forty Thousand (240, 000) gallons of LPG
at the Storage Facility, in such mix of types of LPG as the Buyer
shall from time to time request; provided, however, that at no
time shall the Seller be required to replace a type of LPG stored
in the Inventory for the purpose of complying with the Buyer's
request for a particular mix of types of LPG. The Seller shall
own all LPG contained in the Inventory until such time as the LPG
is delivered to the Buyer at the delivery point(s) described in
Article V of this Agreement in accordance with the provisions of
Section 2 .3 of this Agreement. The Seller shall have a period of
six (6) months, commencing on the Effective Date, in which to
deliver the initial 240, 000 gallons of LPG to the Storage
Facility for the purpose of establishing the Inventory.
Thereafter, the Seller shall, promptly upon receipt of demand
from the Buyer to deliver LPG from the Inventory to the Project,
begin to replace all LPG so delivered. Notwithstanding the
foregoing, the Seller shall not be required to commence delivery
of such replacement LPG to the Storage Facility prior to the
expiration of the twelve-hour period commencing upon the Seller' s
receipt of such demand from the Buyer, but the Seller shall
deliver LPG at a rate sufficient to replenish the 240, 000 gallons
of LPG held in the Inventory within twenty-four hours after
receipt of such demand from the Buyer.
b. The Seller shall operate and maintain the Storage
Facility for the benefit of the Buyer at all times during the
Term, using due diligence to ensure that the Storage Facility is
operated and maintained in accordance with generally accepted
industry standards and practices and with the terms of this
Section 3 .2, so that LPG shall at all times be available to the
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fueL1-14.agt-4456sn 13
Buyer upon demand at a maximum delivery rate of Fourteen Thousand
Five Hundred (14, 500) gallons of LPG per hour.
ARTICLE IV
FUEL QUALITY
4. 1 Quality Specifications. All Gas to be delivered
hereunder by the Seller to the Buyer shall be of a quality which
meets the Transporter's standard specifications for pipeline Gas.
All LPG to be delivered hereunder by the Seller to the Buyer
shall meet or exceed the then-current specifications applicable
to the type of LPG delivered as is from time to time published by
the Natural Gas Producers Association.
4. 2 Failure to Meet Specifications. Should any Fuel at any
time fail to conform with the specifications required by
Section 4. 1 of this Agreement, the Buyer may refuse to accept
delivery of such nonconforming Fuel, in which event the Seller
shall promptly procure replacement Fuel for delivery to the
Buyer, in quantities sufficient to satisfy the specified purchase
requirements of the Buyer, which meets said specifications.
ARTICLE V
DELIVERY POINTS
The delivery point(s) for all Gas shall be the supply side
of the meter(s) which connect the Project to the Transporter's
Gas delivery system. The delivery point(s) for all LPG shall be
the supply side of the meter(s) located on the pipeline(s) which
connect the Project with the Storage Facility. Title to and
ownership of the Fuel delivered hereunder shall pass to and vest
in the Buyer at the delivery points. The Seller shall be solely
liable and responsible for the Fuel prior to the time of delivery
to the Buyer, and the Buyer shall be solely liable and
responsible for the Fuel thereafter.
ARTICLE VI
METERING OF FUEL
6. 1 Installation and Operation. At such time as the
Project and the Storage Facility are constructed, there shall be
installed at each delivery point suitable solid-state Fuel flow
telemetering equipment for the measuring of the quantities of
Fuel delivered hereunder to the Buyer, all in accordance with the
specifications prescribed in Gas Measurement Committee Report
No. 3, dated April, 1955, of the Natural Gas Department of the
American Gas Association, as said Report may from time to time be
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fueL1-14.agt-4456sn 14
updated. The Buyer shall maintain and operate all such
telemetering equipment; provided, however, that as to any
telemetering equipment connected to the Transporter's pipeline
which the Transporter operates and maintains, the Seller and the
Buyer shall cooperate to cause the Transporter to maintain and
operate such telemetering equipment in a manner which is mutually
agreeable to the Transporter and the Parties, and to keep the
telemetering equipment and its maintenance records accessible at
all reasonable times for inspection and examination by the Buyer
and the Seller.
6. 2 Periodic Verification. From time to time and at least
once in each three (3) month period of the Term, at as near equal
intervals as is practicable, the accuracy of all metering
equipment described in Section 6. 1 of this Agreement shall be
verified by and at the expense of the Buyer and the Seller
equally. If either Party or the Transporter shall at any time
provide notice that it desires a special test of any such
metering equipment, the Party or Parties receiving such
notification shall cooperate, and shall take such actions as are
within the Parties' respective powers to cause the Transporter to
cooperate, to secure an immediate verification of the accuracy of
such metering equipment and joint observation of any adjustments
thereto. If upon such test the metering equipment shall be found
to be registering correctly, the cost of such test shall be
charged to the entity requesting that such test be conducted;
otherwise, the cost of such test shall be borne entirely by that
entity which is responsible for maintaining and operating the
tested equipment. Each Party shall receive notice of the times
of all tests in order that it may have a representative present
at each such test. The reading, calibration and adjustment of
the metering equipment shall be done only by the entity charged
with maintaining the respective equipment.
6. 3 Range of Accuracy. If any test results in a finding
that the metering equipment is inaccurate but less than two
percent (2%) erroneous, previous readings of such equipment shall
be considered correct in computing deliveries of Fuel hereunder.
If any test results in a finding that the metering equipment is
two percent (2%) or more erroneous, the previous readings of such
metering equipment shall be corrected at the rate of such
inaccuracy for any period which is definitely known or agreed
upon, but with respect to such period as is not definitely known
or agreed upon then for a period extending back one half (1/2) of
the time elapsed since the date of the last calibration.
Following any tests, metering equipment found to be inaccurate
shall be restored as soon as practicable to a condition as close
as possible to absolute accuracy by the entity charged with
maintaining the respective equipment. If for any reason any
metering equipment is out of service or out of repair so that the
amount of Fuel delivered cannot be estimated or computed from the
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fueL1-14.agt-4456sn 15
•
reading thereof, the amount of Fuel delivered during the period
that such metering equipment is out of service or out of repair
shall be estimated and agreed upon by the Parties on the basis of
the best data available, using whichever of the following methods
is most feasible:
(i) Correcting the error if the percentage of
error is ascertainable by calibration tests or
mathematical calculation;
(ii) Using readings from the Seller's check
meter, if such check meter has been installed and is
accurately registering; or
(iii) Estimating the quantity of deliveries based
upon deliveries during preceding periods under similar
conditions when the metering equipment was registering
accurately.
6. 4 Check Meters. The Seller may, at its option and
expense, install and operate check meters, but all measurements
of Fuel for the purposes of this Agreement shall be by the
Buyer's or the Transporter' s metering equipment, as the case may
be, except as hereinabove specifically provided to the contrary.
Such check meters and equipment shall be so installed as not to
interfere with the operation of the metering equipment to be
installed and maintained by the Buyer or the Transporter, as the
case may be, at or near the delivery points.
' ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as
I
follows:
7. 1 Due Organization and Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; has all requisite power
and authority to own, operate and lease its own properties and
assets and to carry on its businesses as currently conducted; and
is duly qualified to do business as a foreign corporation and is
in good standing in every jurisdiction in which the nature of its
business or the location its properties owned or leased makes
such qualification necessary.
7 . 2 Due Authorization and Execution. The Seller has full
legal power and authority, and has taken all requisite corporate
actions, necessary for the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby. The Seller is not subject to any charter,
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fueL1-14.a9t-4456sn 16
• i
agreement, instrument, order or decree of any court or
governmental body which would prohibit or prevent the
consummation of the transactions contemplated hereby. This
Agreement, when duly executed and delivered by the Seller, shall
constitute a valid and binding obligation of the Seller,
enforceable in accordance with its terms except as limited by
bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors ' rights
generally and principles of equity.
7 . 3 Compliance With Applicable Regulations. The Seller has
not been notified of the violation of any, and the Seller and all
businesses currently conducted by it which are relevant to the
performance by it of its obligations under this Agreement are in
compliance with all, federal, state and local laws, statutes,
ordinances, rules and regulations. The Seller has obtained and
maintains in effect all licenses, permits, franchises and other
governmental authorizations necessary for the operation of its
businesses as currently conducted and the performance of its
obligations as contemplated hereby.
7.4 Compliance With Other Instruments. The Seller is not
in violation in any material respect of the terms of any license,
commitment, agreement, instrument or other arrangement to which
it is party or by which it is bound or to which any of its
properties or assets is subject, or any provision of any
judgment, writ, decree, order, arbitration award, statute, rule
or governmental regulation applicable to it, which violation
would render it unable to fully and timely perform each and every
one of its obligations under this Agreement. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated herein by the Seller will not:
(i) violate or result in any violation of, or be in conflict with
or constitute a default under, any such provision, agreement,
instrument or other arrangement, or be an event which, with a
lapse of time or action by a third party (or both) , could result
in a default, breach or violation thereof; (ii) result in the
acceleration of, or permit any party to terminate or accelerate
the performance provided by the terms of, any such agreement,
instrument or other arrangement to which the Seller is a party or
by which it is bound or to which any of its properties is
subject; (iii) result in the creation or imposition of any lien,
charge or other encumbrance upon any asset or property of the
Seller; or (iv) violate or conflict with any other restriction of
any kind or character to which the Seller or any of its
properties or assets may be subject.
7.5 Title. The Seller holds good title to the Fuel to be
sold by it hereunder and has the right to sell the same, and the
Seller warrants that all such Fuel is owned by the Seller free
from all liens, encumbrances and adverse claims.
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fuel1-14.agt-4456sn 17
7. 6 Broker' s or Finder's Fees. The Purchase Price includes
all broker's and finder's fees, if any, which the Seller is
obligated to pay, and the Buyer shall have no obligation
hereunder to pay any broker's or finder's fees incurred by the
Seller which are not included in the Purchase Price.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller
as follows:
8. 1 Due Organization and Good Standing. The Buyer is a
municipal corporation duly organized and validly existing in
accordance with the laws of the State of California, and has all
requisite power and authority to own, operate and lease its own
properties and assets and carry on its businesses as currently
conducted.
8.2 Due Authorization and Execution. The Buyer has full
legal power and authority, and has taken all requisite corporate
actions, necessary for the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby. The Buyer is not subject to any charter,
agreement, instrument or order or decree of any court or
governmental body which would prohibit or prevent the
consummation of the transactions contemplated hereby. This
Agreement, when duly executed and delivered by the Buyer, shall
constitute a valid and binding obligation of the Buyer,
enforceable in accordance with its terms except as limited by
bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights
generally and principles of equity.
8. 3 Compliance With Applicable Regulations. The Buyer has
not been notified of the violation of any, and the Buyer and all
businesses currently conducted by it which are relevant to the
performance by it of its obligations under this Agreement are in
compliance with all, federal, state and local laws, statutes,
ordinances, rules and regulations. The Buyer has obtained and
maintains in effect all licenses, permits, franchises and other
governmental authorizations necessary for the operation of its
businesses as currently conducted and the performance of its
obligations as contemplated hereby.
8 .4 Compliance With Other Instruments. The Buyer is not in
violation in any material respect of the terms of any license,
commitment, agreement, instrument or other arrangement to which
it is party or by which it is bound or to which any of its
properties or assets is subject, or any provision of any
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fueL1-14.agt-4456sn 18
judgment, writ, decree, order, arbitration award, statute, rule
or governmental regulation applicable to it, which violation
would render it unable to fully and timely perform each and every
one of its obligations under this Agreement. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated herein and therein by the Buyer
will not: (i) violate or result in any violation of, or be in
conflict with or constitute a default under, any such provision,
agreement, instrument or other arrangement, or be an event which,
with a lapse of time or action by a third party (or both) , could
result in a default, breach or violation thereof; (ii) result in
the acceleration of, or permit any party to terminate or
accelerate the performance provided by the terms of, any such
agreement, instrument or other arrangement to which the Buyer is
a party or by which it is bound or to which any of its properties
is subject; (iii) result in the creation or imposition of any
lien, charge or other encumbrance upon any asset or property of
the Buyer; or (iv) violate or conflict with any other restriction
of any kind or character to which the Buyer or any of its
properties or assets may be subject.
8 .5 Broker's or Finder's Fees. The. Buyer has not incurred
nor will it incur, directly or indirectly, any liability for any
broker's or finder's fees or agent's commissions or any similar
charges in connection with this Agreement or any transaction
contemplated hereby, and the Buyer hereby agrees to hold the
Seller harmless with respect to any such fees, commissions or
expenses that may be claimed by any such person.
ARTICLE IX
TERM AND TERMINATION
9. 1 Term. The Term of this Agreement shall commence on the
date first set forth above and shall expire on the date which is
thirty (30) years after the Effective Date, unless earlier
terminated in accordance with the provisions of this Article IX.
9.2 Events of Default. The occurrence of any of the
following events shall constitute an Event of Default under this
Agreement and the non-defaulting Party shall have the right,
after the occurrence of an such event and the passage of all
applicable cure periods without cure having been effected, to
terminate this Agreement forthwith:
a. The failure of the defaulting Party to pay any
sums due hereunder and the expiration of a period of thirty
(30) Days, commencing on the date that the non-defaulting
Party provides the defaulting Party with written notice of
such failure, without the defaulting Party having effected a
cure; or
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fueL1-14.agt-4456sn 19
b. The dissolution or liquidation of, or
discontinuance of business operations by, the defaulting
Party; or
C. The failure of the defaulting Party to remedy its
breach of or default under any provision of this Agreement,
other than a failure to pay any sums due hereunder to the
non-defaulting Party, and the expiration of a period of
sixty (60) Days, commencing on the date that the non-
defaulting Party provides the defaulting Party with written
notice specifying in detail the nature of such default,
without the defaulting Party having effected a cure;
provided, however, that if such default is of a nature that
it cannot be cured within such 60-Day period, then the
failure of the defaulting Party to commence a cure within
such 60-Day period and proceed diligently thereafter to
effect a cure.
9 . 3 Early Termination. Except for termination resulting
from the occurrence of an Event of Default, neither Party shall
terminate this Agreement before the fifth (5th) anniversary of
the Effective Date. Thereafter, either Party may terminate this
Agreement by giving the other Party ninety (90) Days ' prior
written notice; provided, however, that if the Buyer is the Party
electing to terminate this Agreement, the Buyer shall pay to the
Seller on the effective date of such termination, in addition to
all other sums then owing to the Seller, a sum equal to the
product of seventeen and one-half cents ($0. 175) multiplied by
the aggregate number of MMBtu's furnished to the Buyer by the
Seller during the twelve month period immediately preceding the
month in which the termination is effective multiplied by a
percentage, which percentage shall be one hundred percent (100%)
if the effective date of such termination occurs during the sixth
(6th) year after the Effective Date and which percentage shall
decline by ten percent (10%) for each subsequent year thereafter
until the percentage reaches zero percent (0. 00%) on the Day
after the fifteenth (15th) anniversary of the Effective Date.
Each Party shall forthwith pay to the other Party all sums owing
by it under the terms of this Agreement upon the effective date
of termination or the expiration of the Term, as the case may be.
9 .4 Failure to Provide Fuel. Notwithstanding any other
provision of this Agreement to the contrary, the Buyer's only
remedy for the Seller's failure to deliver Fuel as required
hereunder shall be payment from the Seller of a sum equal to the
difference between the Aggregate Purchase Price which the Buyer
would have paid to the Seller for such Fuel had it been delivered
by the Seller and the aggregate of all costs incurred by the
Buyer in obtaining a like quantity of substitute Fuel (measured
in MMBtu's) . The Buyer's costs for obtaining such substitute
Fuel shall include all purchase and transportation costs without
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fueL1-14.agt-4456sn 2 0
regard to whether or not such costs are reasonable; provided,
however, that the Buyer shall take all actions reasonable under
the circumstances to minimize the costs incurred by it in
obtaining such substitute Fuel and provided further, that the
Seller shall not be obligated to pay those costs incurred by the
Buyer which are in excess of what would be considered reasonable
costs under the circumstances where such excess costs are
attributable to the Buyer' s receiving additional benefits over
and above the mere acquisition of substitute Fuel.
9.5 Transfer of Inventory. At the expiration of the Term
or at such time as this Agreement is earlier terminated for any
reason other than default by the Buyer, the Seller shall transfer
to the Buyer without charge title to the LPG held in the
Inventory at the time of such expiration or earlier termination.
ARTICLE X
GENERAL PROVISIONS
10. 1 Force Maieure. Neither Party shall be deemed to be in
default as a result of its failure to perform an obligation to be
performed by it under this Agreement, other than a failure to pay
any monies due and owing hereunder, if said failure is occasioned
by the occurrence of any of the following events (an "Event of
Force Majeure") : war, fire, tsunami, flood, earthquake,
interruption of transportation, embargo, accident, explosion,
inability to procure supplies or production facilities,
governmental regulations or restrictions, labor troubles or any
other event beyond the control of the affected Party which the
affected Party could not have reasonably been expected to avoid
by the exercise of due diligence and foresight. A Party
asserting the excuse of Force Majeure shall use due diligence to
cure as promptly as possible its inability to fulfill its
obligations under this Agreement. Notwithstanding the foregoing,
the occurrence of an Event of Force Majeure shall not excuse the
Buyer from its obligations under this Agreement to accept and to
pay for Optional Fuel and Take-or-Pay Fuel if the Buyer has
elected to purchase such Fuel and if the Seller is not likewise
excused as a result of the occurrence of the same Event of Force
Majeure from its obligations to any third party to acquire such
Fuel for delivery to the Buyer. The Seller shall use its best
efforts to notify the Buyer in advance if the Seller will be so
excused, but the Seller's failure to so notify the Buyer shall
not excuse the Buyer from its obligations should the Seller not
in fact be likewise so excused.
10. 2 Entire Agreement. This Agreement constitutes the
entire agreement and understanding between the Parties as to the
subject matter hereof and merges all prior discussions and
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fueL1-14.agt-4456sn 2 1
agreements between them. This Agreement may only be amended in a
writing signed by the duly-authorized representatives of the
Parties.
10. 3 Assignment. Neither Party may assign any of it rights
or delegate any of its duties hereunder without the prior written
consent thereto of the other Party, which consent shall not be
unreasonably withheld; provided, however, that each Party may
freely assign any or all of its rights hereunder to any Affiliate
of that Party without the consent of the other Party.
10.4 Successors and Assigns. Subject to Section 10. 3
hereof, this Agreement and the rights and privileges hereunder of
the Parties shall bind and inure to the benefit of the assigns
and the successors-in-interest of both of the Parties hereto.
10.5 Notices. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed given if
delivered personally or if sent by one Party to the other by
electronic facsimile transmission or by registered or certified
mail, postage prepaid, addressed to the Party to be notified at
the address of that Party stated on the first page of this
Agreement or such other address as the Party to be notified from
time to time has advised the sending Party in accordance with the
terms of this Section 10. 5. Notice shall be deemed effective
upon the earlier of (i) actual receipt or (ii) delivery at the
stated address of the Party to be notified.
10. 6 Taxes. The Buyer shall pay all taxes and assessments
imposed by any and all taxing authorities with respect to its
purchases of Fuel hereunder; provided, however, that the Buyer
shall not be obligated to pay any taxes which are not included in
the Purchase Price which is quoted by the Seller from time to
time hereunder except those taxes and assessments which are
imposed by the State of California or any political subdivision
thereof.
10.7 No Waiver. Any failure by either Party to enforce at
any time any of the provisions, including without limitation the
termination provisions, of this Agreement shall not be construed
to be a waiver of such provision(s) or of the right of such Party
thereafter to enforce such provision(s) .
10.8 Severability. All provisions of this Agreement shall
be considered as separate covenants and conditions, and in the
event that any one shall be held illegal, invalid or
unenforceable, all of the other provisions hereof shall remain in
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fueL1-14.agt-4456sn 2 2
full force and effect as if the illegal, invalid or unenforceable
provision(s) were not a part hereof.
10.9 Relationship Between the Parties; Insurance. The
relationship between the Seller and the Buyer shall be that of a
seller and buyer. Neither Party shall have the power, either
express or implied, to make any promise, warranty or
representation on behalf of the other or to bind the other in any
manner, and in no event shall the Seller and the Buyer be
considered partners, joint venturers or agent and principal.
Each Party shall employ its own personnel and shall be
responsible for them and their acts and in no way shall either
Party be liable to the other for any losses, injuries, damages or
the like occasioned by the activities of that Party in connection
with this Agreement, except as is otherwise provided for herein.
Furthermore, each Party shall be solely responsible for, and
hereby indemnifies and holds the other harmless from and against,
any and all loss, liability, claims, damages and lawsuits arising
out of the acts or omissions of that Party and its employees,
servants or agents with respect to third parties, except as is
otherwise provided for herein. Each Party shall carry adequate
liability and property insurance at its own expense to cover such
risks and, if requested by the other, shall deliver to the other
reasonably satisfactory evidence of such insurance. In addition,
the Seller shall insure the LPG held in the Inventory and the
Buyer shall insure the Storage Facility, all such insurance to
cover against such risks as are customarily insured against in
the industry with coverage in such amounts as are sufficient to
protect against reasonably foreseeable losses.
10. 10 Choice of Law. This Agreement has been entered into
under the laws of the State of California and the Parties agree
that this Agreement shall be interpreted and all disputes arising
hereunder shall be resolved in accordance with California law,
without regard to the conflicts of law principles thereof.
10. 11 Arbitration. Any dispute, controversy or claim
arising out of or relating to this Agreement, or the breach,
termination or validity hereof, shall (if it is not settled by
the mutual agreement of the Parties) be resolved by arbitration
conducted by three (3) arbitrators (who are to be selected as
provided in this Section 10. 11) in accordance with the rules of
the American Arbitration Association in effect at the date on
which such arbitration is to commence. Each Party shall select
one arbitrator and the two arbitrators so selected shall choose
the third arbitrator or, if the two arbitrators cannot agree on a
third arbitrator, the third arbitrator shall be selected by the
American Arbitration Association. In the event that one Party
fails to choose an arbitrator within thirty (30) Days after the
other Party has chosen an arbitrator, the American Arbitration
Association shall choose an arbitrator for the Party that has
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fueL1-14.agt-4456sn 23
failed to do so. The place of arbitration shall be Sacramento,
California. Judgment on any award may be entered by any court of
competent jurisdiction, or application may be made to such a
court for judicial acceptance of the award and any appropriate
order, including enforcement thereof.
10. 12 Attorneys' Fees. In the event of a dispute between
the Parties, the prevailing Party (as determined by the
arbitrators) shall receive, separate and apart from any other
judgment, decree or award, a judgment or award for the reasonable
costs and attorneys ' fees incurred by that Party in connection
with such dispute. If an Event of Default occurs hereunder, the
non-defaulting Party shall be entitled to the reasonable costs
and attorneys ' fees incurred by it in enforcing its rights under
this Agreement, regardless of whether arbitration occurs.
10. 13 Books and Records. Each Party shall be given limited
access to the books and records of the other Party, the Buyer to
the books and records of the Seller for the sole purpose of
verifying the costs to be passed through to the Buyer under this
Agreement for the maintenance of the Storage Facility and the
Seller to the books and records of the Buyer for the sole purpose
of verifying that the Buyer is purchasing the Buyer's Minimum
Take and, if it is not, the magnitude of each and every
shortfall. All books and records of a Party shall be made
available to the other Party or its designated agent at the
respective principal place of business of the Party to which the
books and records belong during that Party's normal business
hours. The Party inspecting such books and records shall bear
all reasonable copying costs. Each Party shall keep all
information about the other Party which is disclosed by an
inspection of the other Party's books and records confidential at
all times during the Term and for a period of two (2) years
thereafter, and shall not disclose such information to any other
entity except upon the legitimate demand of any governmental or
regulatory authority. All copies of books and records shall be
promptly returned to the Party to which such books and records
belong at the expiration of the Term or the earlier termination
of this Agreement, as the case may be.
10. 14 Additional Documents. Each of the Parties agrees
that it shall in a timely manner execute and deliver, or cause to
be executed and delivered, to or for the benefit of the other
Party such additional instruments and other documents as may be
necessary or desirable to consummate the transactions
contemplated by this Agreement, including but not limited to all
Notices of Buyer' s Expected Fuel Requirements, Notices of Fuels
Postings and Nomination Confirmations.
10. 15 Headings. The captions and headings of the different
articles and sections of this Agreement are inserted for
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fueL1-14.agt-4456sn 2 4
r
convenience of reference only and are not to be taken as part of
this Agreement or to control or affect the meaning or
construction of the same.
10. 16 Time of the Essence. Time is of the essence with
respect to the performance by each Party of its respective
obligations under this Agreement.
10. 17 Exhibits. The attached Exhibits A-E have been
included for the purpose of example and may be changed from time
to time upon the mutual agreement of the Parties.
Notwithstanding the foregoing, the Parties intend that the forms
of notice set forth in Exhibits C-E will be utilized by the
appropriate Party for the intended purposes of such notices in
the attached form until so changed.
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed by its duly authorized representative as
of the date and year first written above.
THE SELLER: THE BUYER:
COAST ENERGY GROUP, INC. , a T]HE CITY OF REDDING, a
Delaware corporation municipal corporation
Its irector �Mus ness Development Its
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fueL1-14.agt-4456sn 25
EXHIBIT A
FUEL PRICE
INDEX EXEMPLAR
I. EXEMPLAR FOR GAS INDEX
Postings by Publication:
High Low Average
Inside FERC $1.700 $1.700 $1.700
Natural Gas Week $1. 800 $1.870 $1. 835
Natural Gas
Intelligence $1.700 $1.410 $1. 705
Average Cost of Gas to
California Border: $1.747
Intrastate Transport
Charge: $1. 450
Maximum Seller's Fee: $0. 035
Cost to the Buyer: $3 .232/MMBtu
II. EXEMPLAR FOR LPG INDEX
Postings by Supplier (dollars/gal. ) :
Shell $0.270
Chevron $0.270
Suburban $0. 270
Average of Postings (dollars/gal. ) : $0.270
Maximum Seller's Fee (10% of Average
of Postings) : $0. 027
Freight Charge (dollars/gal. ) :
Pacific Energy $0. 0730
Tippin $0. 0638
Coast Gas, Inc. $0. 0638
Amerigas/P.T. I. $0. 0638
Average Freight Charge (dollars/gal. ) : $0. 0661
Total Charge (dollars/gal. ) : $0. 363
Conversion Factor ( . 0915 MMBtu/gal. ) : _ 0. 0915
Cost to the Buyer: $3 .967/MMBtu
NOTE: THE FOREGOING HAS BEEN INCLUDED FOR THE PURPOSE OF
EXAMPLE ONLY AND DOES NOT CONSTITUTE, NOR SHALL IT BE
DEEMED TO CONSTITUTE, A REPRESENTATION OR WARRANTY ON
THE PART OF THE SELLER AS TO THE AVAILABILITY OF FUEL
AT A SPECIFIC PURCHASE PRICE.
EXHIBIT B
AGREED-UPON CARRIERS
1. Pacific Energy
2 . Tippin
3 . Coast Gas, Inc.
4 . Amerigas/P.T.I.
EXHIBIT C
FORM OF
NOMINATION CONFIRMATION
19
VIA FACSIMILE
Coast Energy Group, Inc.
9494 Southwest Freeway, Suite 404
Houston, TX 77074
Attn:
Re: Purchase of Fuel
Gentlemen:
Reference is made to that certain document entitled "Fuel
Supply Agreement" (the "Agreement") dated as of September 15,
1992 , between the City of Redding as Buyer and Coast Energy
Group, Inc. as Seller. The general terms of the Agreement are
incorporated by reference into this Confirmation and made a part
of it.
Pursuant to the Agreement, the Buyer hereby notifies the
Seller of the Buyer's desire to purchase Fuel in accordance with
the Agreement and the following specific terms:
1. PRIMARY FUEL
Fixed Charges (if any) : $
Purchase Period:
Type of Fuel:
Purchase Price:
Maximum Amount of Fuel (in MMBtu's) :
Maximum Delivery Rate:
2 . OPTIONAL FUEL and/or TAKE-OR- PAY FUEL
[Terms and conditions will be developed on a case-by-case
basis. ]
Very truly yours,
THE CITY OF REDDING,
a municipal corporation
By:
Its
Accepted and Agreed to:
COAST ENERGY GROUP, INC. ,
a Delaware corporation
By:
Its
Dated:
2
EXHIBIT D
FORM OF
NOTICE OF BUYER'S
EXPECTED FUEL REQUIREMENTS
19
VIA FACSIMILE
Coast Energy Group, Inc.
9494 Southwest Freeway, Suite 404
Houston, TX 77074
Attn:
Re: Purchase of Fuel
Gentlemen:
Reference is made to that certain document entitled "Fuel
Supply Agreement" (the "Agreement") dated as of September 15,
1992 , between the City of Redding as Buyer and Coast Energy
Group, Inc. as Seller. The general terms of the Agreement are
incorporated by reference into this Notice and made a part of it.
Pursuant to the Agreement, the Buyer hereby notifies the
Seller of the Buyer's Expected Fuel Requirements for the calendar
month indicated below in accordance with terms of the Agreement:
Calendar Month:
Type(s) of Fuel:
Maximum Amount of Fuel (in MMBtu's) :
Maximum Delivery Rate(s) :
We look forward to receiving your Notice of Fuels Postings
predicated upon the foregoing information.
Very truly yours,
THE CITY OF REDDING,
a municipal corporation
By:
Its
EXHIBIT E
FORM OF
NOTICE OF FUELS POSTINGS
19
VIA FACSIMILE
The City of Redding
760 Parkview Avenue
Redding, CA 96001
Attn:
Dear Sir or Madam:
Pursuant to Section 2 . 2 of that certain Fuel Supply
Agreement between the City of Redding as Buyer and Coast Energy
Group, Inc. as Seller dated as of September 15, 1992 , the Buyer
must select for the next succeeding calendar month one of the
options listed below for the delivery and purchase of any amount
of Primary Fuel to be delivered to the Site, up to the amount
specified by the Buyer as the Buyer's Expected Fuel Requirements
for the calendar month, for the Purchase Price and Fixed Charge
set forth below. If the Buyer fails to make a selection within
five (5) Business Days of receipt of this notice the Buyer shall
be deemed to have chosen the Lowest Cost Available Fuel set forth
below.
DELIVERIES FOR THE MONTH OF
(Insert Month)
BUYER'S EXPECTED FUEL REQUIREMENTS: MMBtu's
1. Gas:
a. First MMBtu' s:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu's
b. Next MMBtu' s:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu's
•
/ 1
C. Next MMBtu' s:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu's
d. All additional MMBtu's:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu' s
2 . LPG:
a. First MMBtu' s:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu' s
b. Next MMBtu's:
(i) Fixed Charge: $
(ii) Purchase Price: $_ /MMBtu's
C. Next MMBtu' s:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu's
d. All additional MMBtu's:
(i) Fixed Charge: $
(ii) Purchase Price: $ /MMBtu' s
THE LOWEST COST AVAILABLE FUEL IS
OUTSTANDING OPTIONAL FUEL AND/OR TAKE-OR-PAY FUEL OBLIGATIONS:
The Seller and the Buyer have previously agreed to Optional
Fuel and/or Take-or-Pay Fuel arrangements. As of the first
Business Day of this month, outstanding obligations of those
arrangements are as follows:
2
c r '
a
1. Outstanding obligation dated
a. Remaining fuel: MMBtu's
b. Remaining fuel must be used or paid for by
C. Force Majeure relief ❑ is/ ❑ is not (check one)
applicable.
2 . Outstanding obligation dated
a. Remaining fuel: MMBtu's
b. Remaining fuel must be used or paid for by
C. Force Majeure relief ❑ is/ ❑ is not (check one)
applicable.
3 . Outstanding obligation dated
a. Remaining fuel: MMBtu's
b. Remaining fuel must be used or paid for by
C. Force Majeure relief ❑ is/ ❑ is not (check one)
applicable.
Please indicate your choice of Primary Fuel on the attached
Nomination Confirmation and return the Nomination Confirmation to
the attention of the undersigned by telephonic facsimile
transmission within the next five (5) Business Days.
Very truly yours,
COAST ENERGY GROUP, INC. , a
Delaware corporation
By:
Its
3