04-34
,;.
RESOLUTION NO. 04-34
A RESOLUTION OF THE CITY OF CLEARWATER, FLORIDA,
APPROVING THE FORM OF PGP GAS SUPPLY AGREEMENT NO.1
FOR THE PURCHASE AND SALE OF GAS AND OTHER SERVICES
AND AUTHORIZING FLORIDA GAS UTILITY TO NEGOTIATE THE
TERMS OF RELATED FINANCIAL PRODUCTS AND FINANCIAL
INSTRUMENTS RELATED TO THE PURCHASE OR PRICING OF GAS
IN ACCORDANCE WITH THE GAS SUPPLY AGREEMENT NO.1, AT
THE DIRECTION OF THE CITY'S AUTHORIZED REPRESENTATIVE AS
PROVIDED FOR HEREIN; AUTHORIZING THE EXECUTION AND
DELIVERY OF THE PGP GAS SUPPLY AGREEMENT SUBJECT TO
CONDITIONS AS SPECIFIED HEREIN; AUTHORIZING FLORIDA GAS
UTILITY TO PLEDGE THE CITY'S PAYMENT OBLIGATIONS
THEREUNDER TO SECURE THE PAYMENT OF COSTS OF PUBLIC
GAS PARTNERS, INC., AS PROVIDED IN ITS NATURAL GAS
PRODUCTION SHARING AGREEMENT, OR OTHER OBLIGATIONS
REQUIRED UNDER SUCH AGREEMENT, AND BONDS OR OTHER
OBLIGATIONS ISSUED BY FLORIDA GAS UTILITY; PROVIDING FOR
THE MAKING OF PAYMENTS PURSUANT TO SAID PGP GAS SUPPLY
AGREEMENT, AND MAKING CERTAIN COVENANTS IN
CONJUNCTION WITH SAID PAYMENTS; PROVIDING FOR THE
MAKING OF PAYMENTS PURSUANT TO SAID FINANCIAL
INSTRUMENTS AND MAKING CERTAIN COVENANTS IN
CONJUNCTION WITH SAID PAYMENTS; PROVIDING FOR THE
APPOINTMENT OF THE PROJECT PARTICIPANT REPRESENTATIVE;
PROVIDING CERTAIN OTHER AUTHORIZATIONS; PROVIDING AN
EFFECTIVE DATE; AND PROVIDING CERTAIN OTHER DETAILS
WITH RESPECT THERETO.
WHEREAS, the City of Clearwater, Florida ("Project Participant"), in its capacity
as a Member of Florida Gas Utility ("FGU") wishes to purchase a supply of natural gas
from FGU and wishes to authorize certain financial products and services relating to the
pricing and/or financing thereof, all as contemplated in the PGP Gas Supply Agreement
No.1, a proposed form of which is attached hereto as Exhibit A (the "PGP Gas Supply
Agreement"); and
WHEREAS, in order to provide the benefits of the gas supply and other services to
Project Participant and other Project Participants of FGU and in order to assure the
flexibility in pricing and other services provided by the PGP Gas Supply Agreement, it is
necessary for Project Participant to authorize and approve the form of the PGP Gas
Supply Agreement, to be revised only as to a Schedule of Project Participants,
determining the definitive number of Participants and their allocated share of risk, and
such other minor revisions as may arise, to be approved by the officers of Project
, ,
.'
Participant executing such Agreement, which duty and responsibility is delegated hereby
to such officers; and
WHEREAS, in order to take advantage of certain Financial Products as provided
in Financial Instruments and the issuance of Bonds as described in the PGP Gas Supply
Agreement, it is necessary for Project Participant to authorize the Project Participant
Representative to give the Directives provided for in the PGP Gas Supply Agreement,
binding Project Participant for the obligations set forth therein; and
WHEREAS, it is necessary for the governing body of each Project Participant to (a)
approve the form of the PGP Gas Supply Agreement and authorize its execution and
delivery by its authorized representatives, and (b) to designate the volume of Gas that it
is committed to receive (referred to in the PGP Gas Supply Agreement as its Nominated
Quantity and expressed as a percentage of the Nominated Quantities by all other Project
Participants and referred to as its "Gas Entitlement Share"), (i) which, as provided
therein, will require the purchase of the gas so nominated by each Project Participant on
a take or pay basis; (ii) which will require that in the event of a default in the purchase of
gas or other failure to pay by another Project Participant or a Member under the Natural
Gas Production Sharing Agreement for Gas Supply Pool No.1 attached as Exhibit D to
the PGP Gas Supply Agreement ("Production Agreement"), a Project Participant will be
required to "step-up" and be obligated to pay such additional amount, up to 25% of its
Gas Entitlement Share under the PGP Gas Supply Agreement, and up to 25% of FGU's
Participation Share with respect to the Production Agreement; (iii) which will authorize
the participation in derivatives under the Production Agreement, of which any
termination payment will be considered an item of Cost to be passed through as
operating expenses, to hedge the cost of gas, in the order of priority and as otherwise
provided in the Production Agreement; and (iv) which will provide for a broad definition
of Costs to include capital expenditures, which will be passed through as operating
expenses.
WHEREAS, Project Participant desires to take certain other actions and make
certain authorizations and delegations of authority with respect to the Agreements
BE IT RESOLVED BY THE CITY COUNCIL OF CLEARWATER, FLORIDA;
Section 1. Authority. This Resolution is adopted pursuant to the Constitution and
laws of the State of Florida, including, particularly, Section 163.01, Florida Statutes, and
Chapter 166, Florida Statutes.
Section 2. Definitions. Unless the context otherwise requires, all terms used
herein in capitalized form shall have the same meanings ascribed to such terms in the
Agreements or in the Production Agreement, as the case may be.
Section 3. Finding-s. It is hereby ascertained, determined and declared that
Project Participant is authorized under the authority cited above to approve the form of
the Agreements in the manner herein provided.
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Section 4. Approval of Form of PGP Gas Supply Ag-reement and Other
Agreements Authorized Thereby. The PGP Gas Supply Agreement in substantially the
form attached hereto as Exhibit A, is hereby approved, to be revised only as to a Schedule
of Project Participants, determining the definitive number of Participants and their
allocated share of risk, and such other minor revisions as may arise, to be approved and
made to such form of the PGP Gas Supply Agreement by the officers designated below
executing the same in the manner consistent with the provisions of this Resolution. The
duty and responsibility for approving modifications or amendments to the PGP Gas
Supply Agreement and negotiating and approving of any Financial Instruments
described therein and in this Resolution (the "Agreements") may be approved by the
Clearwater City Councilor delegated to the Project Participant Representative(s)
designated in paragraph 8 below, as permitted by the City of Clearwater Code of
Ordinances. Such officers are hereby authorized to deliver the Agreements, as so
negotiated, modified and amended, as executed, to FGU for its consideration and
execution.
Section 5. Particular Covenants.
A. The payments required to be made by Project Participant pursuant to the
PGP Gas Supply Agreement shall constitute an obligation of Project Participant payable
as an operating expense of Project Participant's System ("System"), to the extent legally
permissible, solely from the revenues and other available funds of Project Participant's
System, and such payments shall be made as provided in the PGP Gas Supply
Agreement and subject to the provisions thereof, to the extent such payments would
constitute operating expenses under Project Participant's indentures, bond resolutions or
other bond documents entered into in connection with the financing of Project
Participant's System.
B. If such payments are not treated as operating expenses, such payments
shall be made by such Project Participant pursuant to the provisions of Section 4(g) of
the PGP Gas Supply Agreement and shall constitute an obligation payable solely from
the revenues of Project Participant's System, which revenues are pledged therefor,
subject and subordinate to certain payments on existing obligations as provided in said
Section 4(g).
C. The provisions of the Financial Instruments creating Financial Products as
described in the PGP Gas Supply Agreement obligating Project Participant for certain
payments thereunder and to perform certain covenants will constitute obligations of
Project Participant enforceable against it in accordance with the respective terms
thereof. It is intended that payments required under such Financial Instruments will
constitute operating expenses of Project Participant's System to the extent legally
permissible, and within the meaning of Project Participant's indentures, bond resolutions
or other bond documents. If such payments do not constitute operating expenses as
provided above, such payments payable under such Financial Instruments shall
constitute obligations payable solely from revenues of the Project Participant's System,
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which revenues are hereby pledged therefor, subject and subordinate to certain payments
as provided in Section 4(g) of the PGP Gas Supply Agreement.
D. Project Participant shall not be required to make such payments from taxes
or revenues other than the revenues of Project Participant's System. The obligations of
Project Participant to make payments under the Agreements shall not constitute a debt
of Project Participant within the meaning of any constitutional or statutory provision or
limitation or a general obligation of or pledge of the full faith and credit of Project
Participant. Project Participant shall never be required under the Agreements to levy ad
valorem taxes on any real property to make said payments, and the obligations of Project
Participant thereunder shall not constitute a lien upon any tangible property owned by
or located within the boundaries or the service area of Project Participant, but shall be
payable solely from the aforementioned revenues. No obligee under the Agreements
shall ever have the power to require or compel the levy of ad valorem taxes upon any
property of Project Participant or within its boundaries or service area to make any of the
payments required to be made under the Agreements.
Section 6. System Revenues. The estimated revenues to be derived by Project
Participant from its System will be sufficient to make the payments required to be made
by Project Participant pursuant to the PGP Gas Supply Agreement, to pay all operating
expenses of Project Participant's System, and to make all payments of principal and of
interest on Project Participant's outstanding obligations for bonded or other
indebtedness. (Are we comfortable making this representation when we have not
received a forecast as to costs for gas and services under the Gas Supply Agreement?
Chuck - probably need a cost-benefit analysis on this deal as discussed at yesterdays
meeting. The Council is going to want something to look at, no?))
Section 7. Rate Covenant. Under the terms of the PGP Gas Supply Agreement,
Project Participant agrees that it will establish, impose, maintain, enforce and collect
rates, fees and charges for all services and facilities of its System sufficient to produce
revenues at the times and in the amounts required to pay all costs of the supply of Gas
and other energy or other output and other services for Project Participant's System,
including the payments to be made under the PGP Gas Supply Agreement, as well as all
other costs of operation, administration, maintenance and debt service of the System and
all other amounts payable from or constituting a lien or charge on the revenues of Project
Participant's System. (Same concern as above.)
Project Participant will provide to FGU, or its designee, annually, promptly upon
its preparation, but no later than one hundred fifty (150) days after the end of its Fiscal
Year, a copy of its annual audit and such other financial and other records, and within
such time as may be required by the PGP Gas Supply Agreement or the Production
Agreement.
Section 8. Appointment of Proiect Participant Representative. As required by
Section 28 of the PGP Gas Supply Agreement, the individual who shall serve from time
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to time as City Manager of Project Participant, or the individual who shall serve from
time to time as either the Managing Director & Executive Officer, of Clearwater Gas
System, or the Gas Program Coordinator/Gas Supply & Technology Engineer, of Project
Participant shall serve as Project Participant Representative authorized to take such
actions as are provided in Section 4 of this Resolution and in Section 28 of the PGP Gas
Supply Agreement, including the giving of instructions and Directives to FGU for the
negotiation and execution of Financial Instruments that will be legally binding upon
Project Participant, and otherwise to fulfill all duties of such representative under
Section 28 of the PGP Gas Supply Agreement. The Project Participant Representative
shall have full authority to represent and bind Project Participant for all purposes
authorized by the PGP Gas Supply Agreement, including those matters related to
Financial Instruments and Financial Products as contemplated therein, including
Section 28(b) thereof, until such Project Participant Representative shall be changed by
Project Participant and written notice of such change shall be given to FGU. FGU may
rely upon any instructions, as well as a Directive executed by the Project Participant
Representative and such action of such Project Participant Representative shall be
deemed duly authorized, executed and delivered by the Project Participant
Representative on behalf of Project Participant and shall be the legally binding obligation
of Project Participant. (again - the context and obligations (dollar amount, etc.) created
by a Directive of the Project Participant Representative will determine what party within
the City must provide approval (Department Head, City Manager, or Council).
Section 9. Assignment. Project Participant hereby authorizes the full or partial
assignment of the PGP Gas Supply Agreement or the payments to be made thereunder
by FGU to any bond trustee, Public Gas Partners, Inc., or otherwise as may be necessary
for the payment of the obligations of Public Gas Partners, Inc., for the purchase of gas or
other obligations under the PGP Gas Supply Agreement, bonds or other obligations
issued by FGU for the payment thereof.
Section 10. Authorizations Concerning Agreements.
A. Upon approval by the Clearwater City Council, the Mayor of Project
Participant shall be and is hereby authorized to execute and deliver the PGP Gas Supply
Agreement for and on behalf of Project Participant pursuant to the terms hereof, in
substantially the form attached hereto as Exhibit A (as provided for herein), and the
Financial Instruments, in such forms as shall be negotiated in the manner provided
herein, in each case, to be revised as provided for herein, and as such officers may
approve, such approval to be conclusively evidenced by the execution thereof.
B. Such officers authorized hereby are also directed to complete or approve
Appendix 1 to the PGP Gas Supply Agreement, to complete Appendix 2 to the PGP Gas
Supply Agreement, to insert the Point(s) of Delivery, to complete Exhibit B to the PGP
Gas Supply Agreement to describe Project Participant's enterprise System and gas
burning or distribution facilities, and to complete Exhibit C to the PGP Gas Supply
Agreement to list and describe Project Participant's outstanding obligations.
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. .
C. Such other officers and employees of Project Participant as may be
designated by the officers charged with the execution of the Agreements, including the
Project Participant Representative are each designated as agents in connection with the
issuance and delivery of the Agreements and are authorized and empowered, collectively
or individually, to take all action and steps and to execute all instruments, documents
and contracts on behalf of Project Participant that are necessary or desirable in
connection with the execution and delivery thereof, and which are specifically authorized
or are not inconsistent with the terms and provisions of this Resolution.
Section 11. Making Certain Commitments Regarding the Securities Exchange Act
of 1934. Project Participant shall provide to FGU, or its designees, on a timely basis and
in such form as shall be reasonably requested by either, any and all documents, releases,
financial statements and other information necessary to enable FGU to comply with any
disclosure or other reporting requirement, including but not limited to Rule 15c2-12 of
the Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934 (the "Rule"), now or hereafter imposed by the United States of America, the
State of Florida, or any political subdivision or agency of either having jurisdiction over
the issuance of any debt obligations for the acquisition of gas, by law, judicial decision,
regulation, rule or policy. Such information shall be provided by Project Participant from
time to time promptly following the occurrence of a "material event" as described in the
Rule, and as otherwise may be requested by FGU, or its designees, but in any case, no
less frequently than shall enable FGU, or the underwriters or broker/dealers of the
obligations of FGU, or such Project Participant, to comply with any such law, judicial
decision, regulation, rule or policy.
In addition to the foregoing, Project Participant will provide to FGU, or its
designee, annually, promptly upon its preparation, but no later than one hundred fifty
(150) days after the end of its Fiscal Year, a copy of its annual audit and such other
financial and other records as may be required by the issuer of any credit facility or bond
insurance policy or other security instrument securing all or any part of FGU's bonds or
other indebtedness, and otherwise as required by the Production Agreement.
Project Participant shall further enter into a continuing disclosure agreement or
other undertaking as may be reasonably required by the original purchaser of the Bonds
in order to comply with the Rule.
The foregoing shall be provided in the manner set forth in the PGP Gas Supply
Agreement.
Section 12. Validation. Counsel for Project Participant shall cooperate with FGU
and its counsel in any validation proceedings necessary to validate the Bonds and all
matters in connection therewith. (Bob?)
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.. .
Section 14. Severability. If anyone or more provisions of this Resolution should
be determined by a court of competent jurisdiction to be contrary to law, such provisions
shall be deemed to be severable from the remaining provisions hereof and shall in no way
effect the validity or enforceability of such remaining provisions.
Section 15. Repeal of Inconsistent Resolutions. All resolutions or parts of
resolutions in conflict herewith are hereby repealed.
Section 16. Effective Date. This Resolution shall become effective immediately
upon its adoption.
PASSED AND ADOPTED this 2nd day of December
,2004.
Approved as to form:
Attest:
By:
~
,: J..A-()t?.A L'Pdl/J~Jtt.1
,
Assistant City Attorney
By:
(\, .. r - (' -A
'1;'4~~ c ~..~~-
City Clerk
# 2224875_v3
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EXHIBIT A
PGP GAS SUPPLY AGREEMENT NO.1
BETWEEN
FLORIDA GAS UTILITY
AND
CITY OF CLEARWATER, FLORIDA
Dated as of November 1, 2004
TABLE OF CONTENTS
Page
SECTION 1. Definitions and Explanations ofTerms.................................................3
SECTION 2. Term of Agreement.... ..... ........... ...... ...... .... ............................ ..... ..... .... .14
SECTION 3. Gas Supply Service and Pricing........................................................... 14
SECTION 4. Method of Payment. .. ..... ........... ...... ......................................... .......... ..19
SECTION 5. Scheduling of Deliveries; Title. ............................................................22
SECTION 6. Point(s) of Delivery. ......... ............... ........... .................................. .........24
SECTION 7. Curtailment.... ...................................... ................ ........... ..... ................24
SECTION 8. Availability of Gas or Gas Entitlement Shares...................................25
SECTION 9. Insurance... .......................... ............................ .... ..... ... ..... .............. ...... 25
SECTION 10. Annual Budget; Accounting. ...............................................................25
SECTION 11. Information to be Made Available. .....................................................25
SECTION 12. Project Participant Representations and Warranties;
Covenants. ...................................................................................... 27
SECTION 13. Pledge of Payments. ......................... ......... .................................. ........30
SECTION 14. Event of Default. ... ................ ..... ................... .......... ...................... ...... 31
SECTION 15. Continuing Obligation, Right to Discontinue Service........................31
SECTION 16. Transfer of Gas Entitlement Shares Following Default.......~............31
SECTION 17. Other Default by Project Participant. ................................................33
SECTION 18. Default by FGU. ................................... ............. ...................... ............33
SECTION 19. Abandonment of Remedy. ....... .................. ................................. .........33
SECTION 20. Waiver of Default. ......... ........... ............................ ............ .............. ..... 33
SECTION 21. Relationship to and Compliance with Other Instruments. ...............34
SECTION 22. Measurement of Gas. .............................. ................................ ............34
SECTION 23. Liability of Parties. ......... ............ ...................... .......... .........................34
SECTION 24. Sale of Project Participant's Excess Gas Entitlement Share. ...........37
SECTION 25. Assignment of PGP Gas Supply Agreement; Sale of Project
Participant's System. ........................... .................................. ........38
SECTION 26. Termination or Amendment. ..............................................................40
SECTION 27. Force Majeure. ........................................... .............................~............ 41
SECTION 28. Project Participant Representative. ..................................................43
SECTION 29. Notice and Computation of Time. ......................................................43
SECTION 32. Severability.......................................................................................... 44
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Appendix 1 -
Characteristics of Financial Products
Description of System
Project Participant Outstanding Obligations
Form of Natural Gas Project Sharing Agreement
Schedule of Project Participants (Gas Entitlement Share)
for Gas Supply Pool No.1
Project Participant's Point or Points of Delivery
Form of Opinion of Counsel to Project Participant
Appendix 2 -
Appendix 3 -
PGP GAS SUPPLY AGREEMENT NO.1
This PGP GAS SUPPLY AGREEMENT NO.1 made and entered
into as of November 1, 2004, by and between FLORIDA GAS UTILITY, a
public body corporate and politic formed under the Florida Interlocal
Cooperation Act ("FGU") and the CITY OF CLEARWATER, FLORIDA, a
municipal corporation of the State of Florida ("Project Participant").
WITNESSETH:
WHEREAS, FGU was formed by Interlocal Agreement on
September 1, 1989, which was subsequently amended by the Amended
Interlocal Agreement on June 1, 1992, and thereafter amended and restated
by Amended and Restated Interlocal Agreement dated as of July 1, 1996, and
thereafter amended and restated by Second Amended and Restated Interlocal
Agreement dated as of July 27, 1999 (the "Interlocal Agreement"); and
WHEREAS, in order to take advantage of perceived opportunities
created by the restructuring of natural gas services, FGU was established
between and among several public agencies for the purpose of achieving
savings through joint services for, or which otherwise benefit, its Members;
and
WHEREAS, FGU will take or cause to be taken all steps necessary for
the acquisition of, and will undertake such contractual arrangements
necessary to secure, a suitable supply of Gas or a suitable pricing mechanism
including Financial Products, or both, under one or more Gas Production
Sharing Agreements or Financial Instruments, and will provide the Gas and
pricing mechanism and services pursuant to this Agreement and/or other
related or suitable Financial Instruments, and pursuant to agreements
similar to this Agreement and related or suitable Financial Instruments with
other Project Participants, all as hereinafter defined; and
WHEREAS, in order to enable FGU to provide its services hereunder,
to pay the Cost of Acquisition and Costs provided for herein, and issue its
Bonds to pay the Costs of Acquisition, FGU may have substantially similar
PGP Gas Supply Agreements with other Project Participants; and
WHEREAS, Article VI of the Interlocal Agreement authorizes the
Board of FGU to undertake a Special Project, and it is intended that each of
Project Participants shall become a party to substantially similar
agreements, such undertakings with respect to PGP Gas Project No.1 shall
each be treated as a Special Project.
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NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements herein contained, it is agreed by and between the parties
hereto as follows:
SECTION 1. Definitions and Explanations of Terms.
As used herein:
Aggregated Transportation Contracts shall have the meaning ascribed
to that term in Section 3(a).
Agreement shall mean this PGP Gas Supply Agreement No.1 and/or
any other related or suitable Financial Instruments that may accompany this
Agreement or be appropriate for the purposes to be achieved by this
Agreement.
Annual Budget shall mean the budget adopted by the Board of FGU
pursuant to paragraph (a) of Section 10, which itemizes the estimated Costs
for the following Contract Year, or, in the case of an amended Annual Budget
adopted by the Board or Executive Committee of FGU, during the remainder
of the Contract Year, and Project Participant's share, if any, of such Costs.
Approved Rate Tariff shall mean the tariff for the transportation of
Gas as approved by FERC or the governmental or other entity charged with
this responsibility.
Board of FGU shall mean the Board of Directors of FGU or if said
Board shall be abolished, its successor board, body, commission or agency
succeeding to the principal functions thereof or to whom the power and duties
granted or imposed by any Bond Resolution shall be given by law.
Board of PGP shall mean the Board of Directors of PGP or if said
Board shall be abolished, its successor board, body, commission or agency
succeeding to the principal functions thereof or to whom the power and duties
granted or imposed by any Bond Resolution shall be given by law.
Bond Resolution shall mean the PGP Bond Resolution or the FGU
Bond Resolution, as the case may be.
Bonds shall mean the PGP Bonds or the FGU Bonds, as the case may
be.
Commencement Date shall mean the earlier of (i) the first date on
which FGU shall make Gas available to any of Project Participants pursuant
to the Gas Production Sharing Agreement, (ii) the effective date of any
Financial Instrument entered into for the benefit of Project Participant
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pursuant to this Agreement or the Special Project authorized hereby, or (iii)
the effective date of the incurrence by FGU of any obligations under the Gas
Production Sharing Agreement.
Contract Year shall mean the twelve (12) month period commencing at
12:01 a.m. on October 1 of each year, except that the first Contract Year shall
commence on the first to occur of (i) the date which is twelve (12) months
prior to the date on which the first principal installment on any of the Bonds
is due or (ii) the Commencement Date, and shall expire at 12:01 a.m. the next
succeeding October 1.
Costs shall mean PGP Costs, FGU Costs and FGU Costs of Acquisition
and Services.
Debt Service shall mean, with respect to any period, the aggregate of
the amounts required by the Bond Resolution to be paid or deposited during
said period into any fund or account created by the Bond Resolution for the
sole purpose of paying the principal (including sinking fund installments) of,
premium, if any, and interest on all Bonds from time to time outstanding as
the same shall become due; provided, however, that Debt Service shall not
include any amount payable as principal or interest solely as a result of
acceleration of maturity of Bonds.
Default Share shall mean, as to each Project Participant on each
respective date of calculation, (i) that percentage determined by dividing such
Project Participant's annual Gas Entitlement Share as shown on Appendix 1,
as adjusted by any increased volume of Gas purchased by such Project
Participant pursuant to Section 16 and Section 17 below (but in no event
shall a Project Participant's Default Share exceed 25% of such Project
Participant's Gas Entitlement Share under this Agreement), by the aggregate
Gas Entitlement Share of all Project Participants in such year, as shown on
Appendix 1, that are not then in default with respect to any payment
obligations due hereunder; and (ii) in addition, shall expressly include those
payments required to be paid pursuant to clause (ii) of the definition of PGP
Defaulted Gas Payments.
Designee shall mean FGU as the contractually authorized agent of a
Project Participant as defined in the general terms and conditions of
Transporter's Approved Rate Tariff.
Directive shall mean an instrument, in writing, executed and delivered
by a Project Participant Representative that gives directions to FGU
hereunder, or otherwise authorizes actions by FGU hereunder, or implements
all or a part of this Agreement, and upon which FGU may rely as being duly
authorized, executed and delivered by Project Participant.
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Division shall mean a Project Participant of FGU, and the associated
Point(s) of Delivery of that Project Participant, whose transportation
entitlements have been aggregated under one transportation contract held by
FGU to which Transporter's Approved Rate Tariff applies.
FGT shall mean Florida Gas Transmission Company, and its
successors in interest.
FGU Bond Resolution shall mean a resolution providing for the
issuance of the Bonds, as may be adopted by the Board of FGU, and all
amendments and supplements thereto adopted in accordance with the
provisions thereof, and shall include any Trust Indenture providing for the
issuance of the Bonds, and other related documentation approved by the
Board ofFGU or delegated to the Executive Committee ofFGU.
FGU Bonds shall mean the bonds, notes or other evidences of
indebtedness, or notes issued in anticipation of the issuance thereof, which
may be issued from time to time by FGU pursuant to the Bond Resolution to
pay any part of the FGU Cost of Acquisition of Gas, whether or not any such
issue shall be subordinated as to payment to any other issue, and shall
include refunding bonds issued in accordance with this Agreement and the
FGU Bond Resolution.
FGU Cost of Acquisition and Services shall mean all costs of acquiring,
planning, financing, pricing, transporting, storing and implementing the
supply of Gas under the Gas Production Sharing Agreement to the extent not
included in the definition of PGP Costs or FGU Costs:
(1) interest accruing in whole or in part on FGU Bonds for
such period as may reasonably be determined to be necessary in
accordance with the provisions of the FGU Bond Resolution;
(2) the deposit or deposits required to be made under the
FGU Bond Resolution from the proceeds of FGU Bonds into any fund
or account established pursuant to the FGU Bond Resolution to meet
Debt Service reserve requirements for FGU Bonds or other
requirements thereunder;
(3) the costs and expenses incurred in the issuance and sale
of the FGU Bonds, the proceeds of which have been or will be required
to be applied to one or more purposes for which FGU Bonds could be
issued, including, without limitation, bond insurance premiums, letter
of credit or other credit enhancement fees, and discounts to the
underwriters or other purchasers thereof, if any, legal, consulting and
financial costs, and amounts required to be paid under any interest
rate exchanges or swaps, cash flow exchanges, options, caps, floors or
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collars, in each case made in connection with the issuance of the FGU
Bonds;
(4) the payment of principal, premium, if any, and interest
when due (whether at the maturity of principal or at the due date of
interest or upon redemption) on notes or other evidences of
indebtedness from time to time issued in anticipation of the issuance of
FGU Bonds, the proceeds of which have been or will be required to be
applied to one or more purposes for which FGU Bonds could be issued;
(5) all federal, state and local taxes and payments in lieu of
taxes required to be paid by FGU with respect to the services rendered
pursuant to the Gas Production Sharing Agreement;
(6) all costs and expenses relating to claims or judgments
(including injury and damage claims) arising out of the acquisition or
implementation of the Project or relating to operations for which FGU
may be liable under the Gas Production Sharing Agreement or this
Agreement;
(7) all planning and development costs, engineering fees,
contractors' fees, costs of obtaining governmental or regulatory
permits, licenses and approvals, costs of real property, labor,
materials, equipment, supplies, training and testing costs, insurance
premiums, legal, consulting and financing costs, administrative and
general costs, and all other costs properly allocable to the acquisition
and implementation of the Project or relating to operations for which
FGU may incur on its own behalf, or for which FGU may be liable
under the Gas Production Sharing Agreement;
(8) (i) all other costs incurred in connection with and properly
chargeable to, the acquisition or implementation of the Project,
including any prepayment of capital or operating expenses required to
be paid by FGU under the Gas Production Sharing Agreement, and (ii)
amounts required to be paid for which FGU may be liable under the
Gas Production Sharing Agreement in respect of commodity swaps,
balancing contracts, hedging arrangements and other similar
agreements related to the supply of Gas hereunder; and Financial
Products authorized hereunder or by Financial Instruments,
implemented in accordance with FGU's obligations under the Gas
Production Sharing Agreement; and
(9) the allowance for working capital or any other reserve
requirements for which FGU is liable under the Gas Production
Sharing Agreement and for which may be required by FGU under this
6
Agreement, and all costs relating thereto, and the cost of credit
facilities or enhancements, in such amounts as FGU shall be obligated
for under the Gas Production Sharing Agreement or this Agreement.
FGU Costs shall mean, to the extent not included in the definition of
PGP Costs or FGU Cost of Acquisition and Services, all costs that are paid or
incurred by FGU directly or indirectly with respect to the purchase, pricing,
supply, storage or transportation of Gas to Project Participants under and
pursuant to the Gas Production Sharing Agreement, Financial Instruments
and costs as defined in the Gas Production Sharing Agreement that include
any and all operating and maintenance costs or other such expenditures
including contingency reserves and any ongoing requirements for capital
expenditures not included within the FGU Costs of Acquisition, to the extent
that FGU may be obligated therefor under the Gas Production Sharing
Agreement, as hereinafter provided, including without limitation, the
following items of cost:
(1) the amount required or related to the purchase of Gas for
which FGU may be liable under the Gas Production Sharing
Agreement (excluding, however, amounts that FGU shall have paid for
by the FGU Prepayment, as defined in the Gas Production Sharing
Agreement), including any amounts required to be paid under the FGU
Bond Resolution, for such Gas sold to FGU, to be paid or deposited
during such Month into any fund or account established by the FGU
Bond Resolution, for the payment of Debt Service on FGU Bonds;
(2) the amount required for the purchase of Gas for which
FGU shall be obligated for under the Gas Production Sharing
Agreement to be paid or deposited during such Month into any fund or
account established by the Gas Production Sharing Agreement or the
FGU Bond Resolution (other than funds and accounts referred to in
clause (1) above), including any amounts required to be paid or
deposited by reason of the transfer of moneys from such funds or
accounts to the funds or accounts referred to in clause (1) above;
(3) FGU's pro rata share of the fees and expenses of the
trustee, remarketing agent, credit or liquidity provider, provider of
insurance and other parties to the financing under the Gas Production
Sharing Agreement or this Agreement;
(4) the costs, as determined in accordance with the Pricing
Policy adopted by the Board ofFGU, of(i) Gas supply (to the extent not
covered through the payments described in clause (1) above) as follows:
7
(i) Gas supply purchased by Project Participant under
this Agreement pursuant to the Gas Production Sharing
Agreement, or any other instrument;
(ii) Gas transportation to the Point(s) of Delivery of the
Gas pursuant to the Transportation Contracts; and
(iii) FGU service charges for its administrative services
provided hereunder;
(iv) adjustments, and an equitably allocated portion of
all FGU's other expenses; and
(v) any additional amount which must be paid by FGU
during such Month in order to meet its requirements with
respect to any rate covenant under the FGU Bond Resolution
with respect to Debt Service coverage for the FGU Bonds, or
with respect to the Gas Production Sharing Agreement;
(5) amounts required to be paid by FGU under the Gas
Production Sharing Agreement, including FGU's share of any hedging
requirements undertaken by PGP in its own name or for FGU at its
request (subject, however, to the provisions of Section 3(f) below),
including Financial Instruments entered into in respect of Financial
Products for such purposes; unless expressly otherwise provided to the
contrary in the Financial Instrument or the Gas Production Sharing
Agreement, payments on such obligations shall be allocated to Project
Participant in accordance with the Financial Derivatives Policy
adopted from time to time by the Board of FGU;
(6) any additional amount not specified in the other items of
this definition which must be paid by FGU pursuant to the Gas
Production Sharing Agreement during such Month which are either
properly allocable to the Project or as determined in accordance with
the Pricing Policy adopted by the Board of FGU, including, without
limitation, costs imposed or permitted by any regulatory agency or
which are paid or incurred in connection with the supply of Gas or
services thereunder or the provision of services by FGU for Project
Participants;
(7) all costs and expenses (including, but not limited to, legal
fees and expenses) relating to personal injury and damage claims and
extraordinary costs, expenses or assessments required to be paid by
FGU pursuant to the Gas Production Sharing Agreement or this
Agreement, in connection with the Project, or the delivery of Gas
hereunder or thereunder;
8
(8) any reserves required by FGU to meet obligations
pursuant to the Gas Production Sharing Agreement and this
Agreement, necessary for payment of those items of costs and expenses
incurred in the delivery of services, to the extent not covered by any
preceding clause; and
(9) debt service (including principal, interest and premiums)
and all related charges on any line of credit, letter of credit, working
capital or other loans for which FGU shall be obligated pursuant to the
Gas Production Sharing Agreement. Payments on such obligations
shall be allocated to Project Participant in accordance with the Debt
Obligation Policy adopted by the Board ofFGU.
(10) Notwithstanding the foregoing, if an item of cost or
expense referred to above or any part thereof shall relate to less than
all of Project Participants (such as current transportation costs, or the
cost of replacement Gas as described in the definition of Gas) or shall
clearly not be applicable to a Project Participant, such item shall only
be included as an item of FGU Cost with respect to those Project
Participants to which such cost or expense relates.
FGU Defaulted Gas Payment shall mean all payments of Costs due
under the PGP Gas Supply Agreement that were not paid when due by a
Project Participant and shall include, without limitation, all payments made
and collection costs incurred by FGU in connection with such default;
replenishments of any withdrawals from any debt service reserve fund or any
other funds under the Bond Resolution arising from such default; fees, costs
and expenses of FGU, trustees, bond insurers, letter of credit providers and
others in connection with actions required or permitted to be taken under the
Bond Resolution (including, without limitation, the cost of preparing and
filing any material event disclosure), and attorneys fees and costs
attributable to any of the foregoing.
Financial Instrument shall mean an agreement entered into with
respect to the purchase or pricing of Gas or other services provided under this
Agreement that provides for Financial Products by and between the parties
thereto that may include FGU, or Project Participants, or both, any other
Project Participant and any third parties or counterparties; provided that a
Project Participant or Project Participant Representative is required to
authorize a Financial Instrument that obligates only such Project
Participant.
Financial Products shall mean futures contracts, commodity swaps
and hedging arrangements related to the pricing or supply of Gas or other
services provided hereunder, interest rate swaps (relating to debt used to
9
acquire or prepay the cost of Gas), in either case, whether entered into by
FGU, or by Project Participant and/or FGU, including balancing or similar
agreements or interest rate exchanges or swaps, cash flow exchanges,
options, caps, floors or collars implemented in accordance with the Financial
Derivatives Policy adopted by the Board of FGU. Such Financial Products
may consist of those products described in Exhibit A and may have
characteristics similar to those set forth in Exhibit A hereto.
Fiscal Year shall mean the twelve (12) month period commencing at
12:01 a.m. on October 1 of each year, or with respect to a Special Project, as
may be specified for that project.
Gas shall mean pipeline quality natural gas (i) supplied pursuant to
the Gas Production Sharing Agreement for PGP Gas Project No.1 which
shall be purchased with Costs related to the supply or delivery of Gas,
whether or not Gas shall be physically delivered, and (ii) any gas furnished to
replace undelivered Gas.
Gas Entitlement Share shall mean, with respect to each Project
Participant, its annual percentage of Gas required to be paid as a Cost under
the Gas Production Sharing Agreement and under this Agreement, as shown
opposite the name of such Project Participant in the Schedule of Project
Participants set forth on Appendix 1 hereto, as the same may be adjusted
from time to time in accordance with the provisions hereof.
Gas Production Sharing Agreement shall mean the Natural Gas
Production Sharing Agreement for Gas Supply Pool No.1, between FGU and
PGP dated as of November 1, 2004, for the acquisition of Gas to be delivered
hereunder to Project Participants, in substantially the form attached hereto
as Exhibit D.
Member or Members shall mean, as the context shall require, the
Members of FGU who are parties to this PGP Gas Supply Agreement and
PGP Gas Supply Agreements substantially similar to this Agreement and
who are also Project Participants under this Agreement, an initial list of such
Members of which is set forth in Appendix 1 hereto; and shall mean, as the
context shall require, a Member ofPGP.
Month shall mean a calendar month.
Nominated Quantitv shall mean the quantity of Gas in MMBtu per
day that the Project Participant has requested FGU to acquire and sell to the
Member under the terms and conditions of this Agreement each day. The
Project Participant shall establish a Nominated Quantity for the Summer
Season and a Nominated Quantity for the Winter Season. The average of the
Nominated Quantity for the Summer Season and the Nominated Quantity for
10
the Winter Season shall be referred to in this Agreement as the "Annual
Nominated Quantity" and shall be reflected on Appendix 1 hereto.
PGP shall mean Public Gas Partners, Inc., a Georgia nonprofit
corporation.
PGP Bond Resolution shall mean a resolution providing for the
issuance of the Bonds, as may be adopted by the Board of PGP, and all
amendments and supplements thereto adopted in accordance with the
provisions thereof, and shall include any Trust Indenture providing for the
issuance of the PGP Bonds, and other related documentation approved by the
Board of PGP.
PGP Bonds shall mean the bonds, notes or other evidence of
indebtedness, or notes issued in anticipation of the issuance of bonds, which
may be issued from time to time by PGP pursuant to the PGP Bond
Resolution to pay any part of the PGP Cost of Acquisition of PGP Gas,
whether or not any such issue shall be subordinated as to payment to any
other issue of bonds, and shall include refunding bonds issued in accordance
with the PGP Bond Resolution.
PGP Costs shall mean all costs that are required to be paid or incurred
by FGU, directly or indirectly, under and pursuant to the Gas Production
Sharing Agreement and shall specifically include "Costs" as defined in
Section 2.4 of the Gas Production Sharing Agreement as follows: (defined
terms shall have the meaning set forth in the Gas Production Sharing
Agreement): "'Costs' means any and all costs or other expenditures incurred
with respect to Gas Supply Pool No.1, whether they are incurred by Public
Gas Partners directly in connection with Gas Supply Pool No. 1 or are
incurred by Public Gas Partners generally or in connection with more than
one Project and are allocated to Gas Supply Pool No.1, and whether or not
they are Individual Costs, including without limitation: operating and
maintenance costs; capital expenditures; amounts payable by Public Gas
Partners with respect to any debt or other obligations of Public Gas Partners
issued or incurred to finance its acquisition of reserves or any other interests
in, or contractual rights to, natural gas and its production, including but not
limited to all costs of issuance, credit enhancement, interest rate swaps or
other arrangements (including but not limited to ongoing payments and any
termination or unwind payments), remarketing, and disclosure, all fees
relating to trustees, paying and other agents, whether initial or ongoing, and
all required reserves or deposits or other costs associated with the issuance or
incurrence of any such debt; fees and expenses paid to the Manager and any
other amounts payable by Public Gas Partners under the Services Contract;
deposits; royalties; indemnities; environmental or other fines or liabilities;
Losses; costs incurred by Public Gas Partners in its prosecution of any legal
11
claim or other action to enforce its rights or otherwise in connection with or
relating to its interests in gas properties or contractual rights acquired under
Gas Supply Pool No.1; severance, ad valorem, or similar taxes; gathering,
compression, transportation, and balancing charges and penalties or other
similar charges; fuel and lost and unaccounted for gas; ongoing payments,
termination payments, or unwind costs for hedges undertaken for the benefit
of the Members; and other costs, expenses, and charges of any kind or nature
that Public Gas Partners incurs in connection with the production,
acquisition, and delivery to the Member of the gas produced from its interests
or otherwise acquired by Public Gas Partners as part of Gas Supply Pool No.
I." Such Costs that include hedging, swaps or other similar arrangements
may have characteristics similar to those set forth for Financial Products.
Any such Costs may be allocated specifically to one Member or a subset of all
of the Members, but not to all of the Members, and shall be designated
"Individual Costs" as defined in Section 2.11 of the Gas Production Sharing
Agreement.
PGP Defaulted Gas Payments shall mean (i) all payments required to
be made by a Member under the Gas Production Sharing Agreement, which
shall be required to be paid by a Project Participant, and (ii) which shall
specifically include those payments required by Section 14.6 of the Gas
Production Sharing Agreement for a "step-up" obligation by FGU as a
Member in the amount not to exceed 25% of its Participation Share, if
another Member of PGP shall fail to take its allocation of Gas, for which
Project Participant shall be obligated to accept and pay its pro rata share of
any such step-up obligation of FGU under the Gas Production Sharing
Agreement, as a part of its Default Share. Such Project Participant's right to
Gas shall be governed by Article 14 and the related provisions of the Gas
Production Sharing Agreement.
PGP Gas Proiect No.1 shall mean the Gas to be provided pursuant to a
PGP Gas Purchase Agreement for Project Participants.
PGP Gas Supply Agreement shall mean this PGP Gas Supply
Agreement No.1 and, as appropriate, the substantially similar PGP Gas
Supply Agreements between FGU and Project Participants and any
substantially similar contract entered into by FGU in connection with any
transfer of a Project Participant's Gas Entitlement Share pursuant to Section
16, any assignment of such Gas Entitlement Share pursuant to paragraph (c)
of Section 25 or any assignment of such Gas Entitlement Share with the
consent of FGU in accordance with paragraph (a) of Section 25.
Point or Points of Delivery shall mean the point or points of delivery
specified in Appendix 2 hereto or such other point or points of delivery from
time to time agreed to between Project Participant and FGU.
12
Prepayment shall mean the lump sum prepayment required under the
Gas Production Sharing Agreement for FGU's ownership interest in the PGP
Gas, as defined in the Gas Production Sharing Agreement.
Project or PGP Gas Project No.1 shall mean the planning, financing,
acquiring and placing in operation of the Gas Production Sharing Agreement
and the delivery of services and/or Gas under that Agreement or this
Agreement, whether or not Gas is actually available for delivery.
Proiect Participants shall mean the parties, including Project
Participant, other than FGU, to this Agreement and the Agreements
substantially similar to this Agreement for which Bonds or other sources of
financing may be required for a special project for such purpose. An initial
list of Project Participants is set forth in Appendix 1 hereto and which are
Project Participants for PGP Gas Project No. 1.
Proiect Participant Representative shall mean Project Participant
Representative as defined in Section 28 hereof.
Summer Season shall mean the six months of April through
September.
System shall mean and refer to a Project Participant's enterprise
system, as more particularly described in Exhibit B hereto, which describes
those facilities that require or permit the utilization or local distribution of
gas, and any additions or improvements thereto, and all other gas utilization
or distribution enterprise systems that may be constructed or acquired by
Project Participant.
Transportation Contracts shall mean the contract or contracts for the
transportation of Gas between FGU, or FGU on behalf of Project Participant,
or contracts between Project Participant with the designation of FGU as
Project Participant's agent, and Transporter.
Transporter shall mean Florida Gas Transmission Company,
Gulfstream Natural Gas Systems, L.L.C., or any other company legally
authorized to transport Gas, and its successors in interest.
Winter Season shall mean the six months of October through March.
Words not defined herein may have the meanings ascribed to such
words in the Gas Production Sharing Agreement.
13
SECTION 2. Term of Agreement.
The provisions of this Agreement pertaining to PGP Gas Project No.1
shall become effective upon the Commencement Date with respect to any
Project Participant who shall have executed and delivered this Agreement,
and shall, unless this Agreement is terminated pursuant to Section 26 hereof,
continue until the last to occur of the following: (i) the date the principal of,
premium, if any, and interest on all Bonds have been paid in full, (ii) the date
that funds which, together with interest earnings from the investment
thereof, have been set aside in irrevocable escrow for the payment thereof, all
in accordance with the terms of the Bond Resolution, (iii) FGU shall have
received all rights and benefits under the Gas Production Sharing
Agreement, and (iv) the Gas Production Sharing Agreement shall have been
terminated and all obligations of FGU thereunder satisfied.
Notwithstanding the foregoing, if each Project Participant initially
listed on the Schedule of Project Participants, has executed and delivered its
respective Gas Supply Agreement, the subsequent determination that any
such Project Participant failed to duly and validly execute and deliver its Gas
Supply Agreement, or if any other Gas Supply Agreement, or any portion
thereof, shall be deemed invalid or unenforceable for any other reason
whatsoever, such determination shall in no way affect the commencement,
term or enforceability of this Agreement or Project Participant's obligations
hereunder.
Neither termination nor expiration of this Agreement shall affect any
accrued liability or obligation hereunder.
SECTION 3. Gas Supply Service and Pricing.
(a) Certain of Project Participants have, pursuant to separate
agreements with FGU, aggregated their firm transportation entitlements
with other Project Participants (referred to herein as the "Aggregated
Transportation Contracts") and have authorized FGU to administer that
capacity in the delivery of Gas to each Project Participant. Certain other
Project Participants have designated FGU as their agent for the utilization of
their respective gas transportation entitlements for the delivery of Gas
hereunder.
(i) FGU is hereby authorized, and shall be responsible for
utilizing those firm transportation entitlements, to the extent available
under the respective Transportation Contracts, to cause Project
Participant's Gas to be transported to Project Participant's Point(s) of
Delivery and for all operational decisions and arrangements associated
with the transportation of Gas on or upstream of Transporter's
14
pipeline, including but not limited to, transportation along pipelines
other than Transporter, selection of Point(s) of Delivery, scheduling,
balancing and dispatching of Gas on such pipelines other than
Transporter, as well as on Transporter's pipeline.
(ii) The administration of the Aggregated Transportation
Contract(s) shall be governed solely in accordance with the Pricing
Policy adopted by the Board of FGU.
(iii) It is understood that the Aggregated Transportation
Contract(s) will be operated in a manner which will preserve to each
Division, with Project Participant being a Division, a priority right to
the use of the firm transportation entitlements which would have been
assigned to it in the absence of the Aggregated Transportation
Contract(s). Only when Project Participant's capacity rights are not
required to meet the requirements of Project Participant, will they be
made available to other Divisions in accordance with the Pricing Policy
adopted by the Board of FGU. Aggregated Transportation Contract(s)
capacity not required by any Division may be temporarily relinquished
or otherwise utilized by FGU under the terms of the Approved Rate
Tariff and in accordance with the Pricing Policy adopted by the Board
of FGU.
(iv) Project Participant shall assume full responsibility for
payment of actual transportation charges, including demand charges,
incurred by the Aggregated Transportation Contract(s) for the benefit
of Project Participant. To the extent another Division or customer of
FGU may make actual use of Project Participant's transportation
rights, a reallocation of demand costs shall be made by FGU in
accordance with the Pricing Policy adopted by the Board ofFGU.
(v) Because Project Participant requirements change from
time to time, FGU will assist in acquiring and/or disposing of
transportation entitlements for Project Participant. To the extent
Project Participant and FGU agree, FGU will request an allocation of
such capacity in its own name; provided, however, that a sub-allocation
of such incremental transportation entitlement will also be made to the
requesting Project Participant's Division, which shall be binding in the
event of later withdrawals of Project Participants or entitlements, or
dissolution.
(vi) All contracts involving a substantial change in the
burdens or benefits of Project Participant entered into with
Transporter in the name of the Aggregated Transportation Contract(s)
15
for the benefit of Project Participant will be subject to approval m
advance by both FGU and Project Participant.
(vii) Project Participant may retain its Transportation
Contracts with Transporter or other pipeline supplier rather than
aggregate some or all of its transportation entitlements as provided
above. In this case, the relationship between Project Participant and
FGU shall be that of principal and agent and FGU shall in all such
cases serve as Designee. FGU shall administer the retained
transportation contracts in accordance with its terms as Designee for
Project Participant and shall serve in such capacity for the purpose of
the administration of such contracts and shall perform the services as
provided herein with respect to such Transportation Contracts, in
accordance with instructions received from Project Participant.
(viii) Project Participant will provide engineering information
and support as reasonably requested by Transporter or FGU in order
to assure appropriate design, configuration, and installation of
facilities in accordance with generally accepted industry standards
necessary to serve Project Participant's Point(s) of Delivery.
(ix) If Project Participant is temporarily or permanently
unable to utilize all or any portion of its share of the Aggregated
Transportation Contract(s), the following provisions shall apply:
(1) As provided in the Transportation Policy, FGU may
utilize that portion of Project Participant's unused capacity for
use by other FGU Project Participants or customers. These
other FGU Project Participants or customers shall reimburse
Project Participant for use of such capacity, as provided in the
Pricing Policy adopted by the Board of FGU.
(2) To the extent FGU is unable to utilize such excess
Project Participant capacity, FGU will, as permitted by the
Approved Rate Tariff and applicable FERC regulations and
agreements, assist and cooperate with Project Participant to
dispose of such excess transportation entitlement so as to avoid
or minimize any payment obligations by Project Participant to
Transporter or others.
(3) Nothing herein shall relieve Project Participant
from its obligation to reimburse FGU for costs and expenses
incurred by FGU for the released excess capacity for which FGU
is not otherwise reimbursed by third parties.
16
(x) Unless otherwise agreed to by FGU and Project
Participant, Project Participant and FGU anticipate that Transporter
and third parties will rely on FGU for all purposes connected with
servicing the transportation and purchasing. of Gas for Project
Participant on Transporter's system or otherwise, including, but not
limited to, the furnishing and receipt of information concerning daily
nominations, scheduling, balancing, Point(s) of Delivery, invoice
payment, accounting, third party transportation, and communications
with Project Participant, and that operational conditions may allow
limited time for communications concerning such matters. To
facilitate this process, and except with respect to services covered by
the Aggregated Transportation Contract(s), Project Participant agrees
to name and hereby designates FGU, or a representative of FGU, as
Project Participant's designee to perform Project Participant's
obligations with respect to nominations, scheduling and payment
under the various Transporter transportation rate schedules under
which Project Participant arranges transportation service for Gas
purchased from FGU hereunder.
(xi) Notwithstanding the foregoing, FGU's responsibilities to
arrange for transportation of Gas to Project Participant's Point(s) of
Delivery shall be limited to Project Participant's transportation
entitlements made available to FGU hereunder and Project
Participant shall ultimately be responsible for securing transportation
rights with respect to Gas to be delivered hereunder.
(xii) Project Participant agrees that, except for (i) any
obligations it may have under any other projects for which payments
for gas have been pledged for payment of debt services on any
indebtedness, such as its Gas Supply Contract dated as of November 1,
1998, (ii) any other PGP Gas, and (iii) any other contractual
obligations in existence on the date hereof as set forth on Exhibit C
hereto (collectively, "Other Gas Projects"), it will satisfy all of its gas
requirements for its System from its Other Gas Projects, including the
PGP Gas Project No.1, before it satisfies its gas requirements from
any other source.
(b) FGU agrees to sell and does hereby sell and Project Participant
of PGP Gas Project No.1 does hereby agree to purchase and does hereby
purchase Project Participant's Nominated Quantity expressed as a
percentage of the Nominated Quantities of all other Project Participants
which shall be its Gas Entitlement Share pursuant to this Agreement. The
Project Participant shall designate on Appendix 1 hereto, its Summer Season
volume of Gas and its Winter Season volume of Gas. The average of the
Nominated Quantity for the Summer Season and the Nominated Quantity for
17
the Winter Season shall be referred to in this Agreement as the "Annual
Nominated Quantity." FGU shall be authorized to complete the Gas
Entitlement Share when all PGP Gas Supply Agreements have been executed
and delivered to FGU.
(c) Project Participant shall, in accordance with and subject to the
provisions of Section 4 hereof, pay FGU for its Gas Entitlement Share
periodically as billed and required, during the term of this PGP Gas Supply
Agreement, to be delivered in the Nominated Quantity as provided in
Appendix 1 hereto, an amount determined by multiplying the Costs
applicable to all Project Participants by Project Participant's applicable Gas
Entitlement Share, plus the items of cost specifically allocable to Project
Participant individually under the definition of the FGU Costs with respect
to, among other things, replacement Gas and current transportation charges,
in each case, regardless of the actual amount of Gas scheduled or tendered for
delivery or delivered, and whether or not any Gas is produced or otherwise
delivered, and regardless of any transportation actually utilized, and
regardless of any amount that may have been included in the Annual Budget
or any amendment thereto.
(d) In addition to all Project Participant's payment obligations with
respect to its respective Gas Entitlement Share, if there has been an FGU
Defaulted Gas Payment or a PGP Defaulted Gas Payment, each Project
Participant shall also pay the Default Share.
(e) If Project Participant's scheduled deliveries of Gas fluctuate
seasonally as shown on Appendix 1, FGU will manage Project Participant's
cash flow during the year so that Project Participant's cash flow requirements
with respect to payment of Costs more closely match the percentage of Gas it
receives on such seasonal basis. FGU agrees to cover such payments to the
extent of its available working capital as determined from time to time by
FGU in its sole discretion. However, notwithstanding FGU's agreement,
nothing contained herein shall relieve Project Participant of its payment
obligations otherwise required under Section 3(c) and (d) above and Section
4( d) below.
(f) FGU agrees that without the prior written consent of Project
Participant, it will not undertake or engage in any activity described in
clause (ii) of subparagraph (8) of the definition of FGU Cost of Acquisition
and Services of Section 1, or in subparagraph (5) of the definition of FGU
Costs of Section 1 of this Agreement; provided, however, that FGU is not
required to obtain such prior written consent with respect to such PGP Costs.
18
SECTION 4. Method of Payment.
In the event of any dispute as to any portion of any periodic statement,
Project Participant shall nevertheless pay the full amount of the disputed
charges when due and shall give written notice of the dispute to FGU not
later than thirty (30 ) days after the date such payment is due. Such notice
shall identify the disputed bill, state the amount in dispute and set forth a
full statement of the grounds on which such dispute is based. No adjustment
shall be considered or made for disputed charges unless notice is given as
aforesaid. FGU shall give consideration to such dispute and shall advise
Project Participant with regard to its position relative thereto within thirty
(30) days following receipt of such written notice. Upon final determination
(whether by agreement, arbitration, adjudication or otherwise) of the correct
amount, any difference between such correct amount and such full amount
shall be properly reflected in the statement next submitted to Project
Participant after such determination.
(a) As soon as possible after the execution of this Agreement, the
Executive Committee of FGU shall adopt and mail to Project Participant an
amendment to the Annual Budget for the Contract Year which begins on the
Commencement Date, and thereafter, at FGU's annual meeting each year,
the Board of FGU shall adopt and mail to Project Participant an Annual
Budget for the next ensuing Contract Year, in each case which shall provide
an estimate of Project Participant's periodic payments hereunder and serve
as a basis for Project Participant's payments hereunder for Costs for such
Contract Year. During each Contract Year, FGU may from time to time
amend the Annual Budget to take into account extraordinary receipts, credits
or costs substantially affecting the Costs. Neither the Annual Budget, nor
amendments thereto, shall be binding on FGU or affect the amount Project
Participant is obligated to pay hereunder.
(b) As soon as the billing information is available, FGU shall render
to Project Participant, by mail, courier or facsimile or other electronic
transmission, a periodic statement showing, in each case with respect to the
prior statement (i) the amount payable by Project Participant in respect of
Costs and its Default Share, (ii) the amount, if any, reasonably determined by
FGU on a periodic basis, and any amounts determined in accordance with of
this Section 4(b) on an annual basis, to be credited to or paid by Project
Participant with respect to any adjustment for actual Costs incurred during
the next preceding period or Contract Year, (iii) the credits, if any, against
Project Participant's share of Costs determined in accordance with this
Section 4(b), and (iv) any other amounts (except amounts in respect of Costs
and Default Share which are intended to be billed exclusively pursuant to
clause (i) above) payable by or credited to such Project Participant pursuant
to this Agreement or the Bond Resolution not otherwise shown; and such
19
Project Participant shall pay the total of such amounts at the times specified
below. FGU will provide a calendar of invoice and due dates at the beginning
of each fiscal year, to the extent feasible. If payment in full is not made on or
before the close of business on the due date, a delayed-payment charge on the
unpaid amount due for each day overdue may be imposed at the prime rate of
interest as published from time to time by the Wall Street Journal and in
effect in the calendar month for which the unpaid balance shall be received,
plus 2%, or the maximum rate lawfully payable by Member, whichever is
less. If said due date is a Saturday, Sunday or a holiday, the next preceding
business day shall be the last day on which payment may be made without
the addition of the delayed-payment charge. Failure by Member to pay the
full amount due by the due date may result in the discontinuance of gas
supply service by FGU as set forth in Section 15 below. All statements will
be trued up as provided in the Gas Production Sharing Agreement.
(c) On or before one hundred fifty (150) days after the end of each
Contract Year, and at such other times as it shall deem desirable, FGU will
submit to Project Participant a detailed statement of the actual aggregate
Costs and Default Share due hereunder and any adjustment thereof or credit
thereto pursuant to Section 4(b) above and Project Participant's share
thereof, and all other amounts, if any, payable by or credited to Project
Participant pursuant hereto during such Contract Year or for such number of
months as FGU deems appropriate, and adjustments of the aggregate Costs,
if any, for any prior Contract Year and any adjustment thereof or credit
thereto pursuant to Section 4(b) above, based on the annual audit of accounts
provided for in Section 10 hereof or, if for a period other than a full Contract
Year, on such other information as FGU deems reliable. If, on the basis of
the statements submitted as provided in Section 4(b) above, the actual
aggregate Costs and any adjustment thereof or credit thereto pursuant to
Section 4(b) and other amounts payable for any Contract Year exceed the
estimate thereof on the basis of which Project Participant has been billed, the
amount of such deficiency shall be divided into six, or fewer, as determined
by the Executive Committee of FGU in its sole discretion, equal installments
and added to Project Participant's periodic statement for each of the next
succeeding six or fewer months, as appropriate, as provided in Section 3(d).
If, on the basis of the statement submitted pursuant to this paragraph, the
actual aggregate Costs and any adjustment thereof or credit thereto pursuant
to Section 3(d), or other amounts payable for any Contract Year are less than
the estimate therefor on the basis of which such Project Participant has been
billed, the amount of such excess shall be divided into six, or fewer, as
determined by the Executive Committee of FGU in its sole discretion, equal
installments and credited to Project Participant's statement for each of the
next succeeding six (6) or fewer months, as appropriate. Notwithstanding the
foregoing, actual costs as compared to amounts billed by PGP will be trued up
within one hundred twenty (120) days of the end of the Fiscal Year of PGP
20
and shall be payable within sixty (60) days from receipt of invoices, all in the
manner provided by the Gas Production Sharing Agreement.
(d) The obligation of Project Participant to make payments under
this Agreement shall not be subject to any reduction, whether by offset,
counterclaim, or otherwise, and shall not be otherwise conditioned upon
performance of FGU or PGP under this Agreement, the Gas Production
Sharing Agreement or any other agreement or instrument or the validity or
enforceability of this Agreement, the Gas Production Sharing Agreement, or
any other agreement between FGU and any other Project Participant. The
obligation of Project Participant to make the payments under this Agreement
for its share of Costs and other amounts, shall constitute an obligation of
Project Participant payable as an operating expense of Project Participant's
System solely from the revenues and other available funds of the System.
(e) The obligation of Project Participant to make payments under
this Agreement shall not constitute a debt of Project Participant within the
meaning of any constitutional or statutory provision or limitation or a
general obligation of or pledge of the full faith and credit of Project
Participant, and neither Project Participant nor the State of Florida or any
agency or political subdivision thereof shall ever be obligated or compelled to
levy ad valorem taxes to make the payments provided for under this
Agreement, and the obligation of Project Participant to make payments
pursuant to this Agreement shall not give rise to or constitute a lien upon
any tangible property of Project Participant or any tangible property located
within its boundaries or service area.
(f) Notwithstanding the foregoing, if the obligations of Project
Participant to make payments under Section 4(d) of this Agreement or any
part of the obligation under any Financial Instrument, would not be legally
permissible, or would not be treated as, or otherwise be accorded the status
of, operation and maintenance payments under the provisions of Project
Participant's indentures, bond resolutions or other bond documents entered
into in connection with the financing of Project Participant's System, such
part of such obligations that are precluded such status will be incurred and
accorded the treatment in accordance with the provisions of paragraph (g)
below.
(g) Such part of such obligations for the payment of services
hereunder or under the Bonds or a Financial Instrument that is not treated
as, or otherwise accorded the status of, operation and maintenance costs of
Project Participant's System for the reasons set forth in Section 4(f) above,
shall constitute an obligation payable solely from the revenues and other
funds of Project Participant's System, which are hereby pledged for such
purpose, subject and subordinate to the following obligations of Project
21
Participant that would expressly preclude Project Participant from making
the payments required hereunder senior to such obligations (i) operation,
maintenance, renewal and replacement expenses of Project Participant's
System, (ii) bonds (as well as bond anticipation notes), notes or other
obligations for money borrowed, now outstanding or hereafter issued, for
System purposes payable from revenues of Project Participant's System, (iii)
subordinated bonds, notes or other obligations of the System payable from
revenues of Project Participant's System and senior in credit to, or subject to
a negative pledge with respect to, the obligations of the type imposed hereby,
..in each case, outstanding on the date of execution of this Agreement by
Project Participant, and (iv) payments required to be made into or from funds
established under the ordinances or resolutions authorizing bonds, notes or
other obligations referred to in clauses (ii) or (iii) hereof. All such obligations
in existence on the date hereof shall be listed on Exhibit C hereto, and all
further obligations shall be listed on an amended Exhibit C and delivered to
FGU.
(h) If at any time Project Participant has revenue bonds
outstanding payable from or secured by a pledge of net revenues of its
System, Project Participant agrees that, in connection with any financial
tests or conditions for the issuance of additional revenue bonds or other
obligations payable from and secured by a pledge of net revenues of its
System, Project Participant shall treat all payments made or estimated to be
made to FGU under this Agreement as operating expenses for purposes of
computing the amount of net revenues available for the payment of such
outstanding revenue bonds and such additional revenue bonds.
If FGU is entitled to payments under or in respect of the Gas
Production Sharing Agreement (other than payments intended to reimburse
FGU for its costs and expenses and other than payments required under any
applicable document), or the Bond Resolution to be used in accordance with
the Bond Resolution to pay Debt Service on the Bonds or other costs and
expenses of Gas Project No.1), FGU shall distribute such payments or Gas
credits to each Project Participant in proportion to its respective Gas
Entitlement Share or provide replacement Gas as requested by Project
Participant, in each case, after deducting therefrom any amounts otherwise
due by such Project Participants hereunder. FGU shall distribute such
payments or Gas credits to each Project Participant after deducting
therefrom any amounts otherwise due by such Project Participant hereunder,
all in accordance with the Pricing Policy adopted by the Board ofFGU.
SECTION 5. Scheduling of Deliveries; Title.
(a) All of the provisions of this Section 5 are subject to the
provisions of the Gas Production Sharing Agreement, and in the event of any
22
inconsistencies between this Section 5 and the prOVISIons of the Gas
Production Sharing Agreement governing scheduling, the terms of the Gas
Production Sharing Agreement shall govern.
(b) The quantity to be supplied by FGU shall be stated on a daily
basis and nominated monthly by Project Participant, as otherwise agreed to
in accordance with the provisions hereof, or with respect to Project
Participant, in accordance with its Gas Entitlement Share.
(c) It will be Project Participant's responsibility to notify FGU of
any variations in Project Participant's daily Gas usage rate. Project
Participant will provide FGU with its natural gas requirements in such a
manner to allow FGU to effectively arrange for the required Gas
transportation and associated services and as required by the Gas Production
Sharing Agreement, in a timely and cost effective manner for Project
Participant. The actual details of such daily and monthly information
requirements will be mutually agreed upon by the parties and may change
from time to time to meet varying conditions.
(d) Project Participant shall advise FGU of any change in any of the
gas requirements at Project Participant's Point(s) of Delivery as soon as is
reasonably possible to allow FGU to make necessary adjustments in other
Project Participants' or customers' gas volume nominations to avoid
imbalances and penalties and to fully comply with the Gas Production
Sharing Agreement.
(e) FGU will promptly notify Project Participant of all pipeline
operating conditions, including but not limited to operational flow orders and
alert days for which Project Participant may be subject to costs or penalties
as a result of noncompliance. If Project Participant does not fully comply
with such operational requirements, Project Participant will assume full
liability for any noncompliance.
(f) Title to the Gas transported for Project Participant with its own
transportation contracts will pass to such Project Participant upon and
concurrently with the purchase thereof by FGU from PGP. Title to Gas
purchased for transportation under the Aggregate Transportation Contracts
will pass upon delivery by FGU to Project Participant at Project Participant's
Point(s) of Delivery.
(g) Although PGP or FGU may hold title to the Gas during the
transportation process to Project Participant's Point(s) of Delivery under
paragraph (e) above, Project Participant shall bear the full risk of loss for all
such Gas during such transportation by FGU on Transporter's system or
otherwise, including but not limited to, injury, loss or damage caused by the
23
Gas during the transportation thereof and any economic or consequential
damages to Project Participant for failure to deliver Gas or otherwise.
Project Participant agrees, to the extent permitted by law, and
pro rata with other Project Participant to the extent of its Gas provided
hereunder, and/or its Gas Entitlement Share, in effect on the date of
occurrence of the event giving rise to the claim, to indemnify and hold PGP or
FGU harmless from any and all losses or damages sustained by PGP or FGU
under this Agreement, the Gas Production Sharing Agreement, or otherwise,
including any and all suits, actions, damages, losses, and expenses arising
out of adverse claims of any persons, including Project Participant, to such
Gas or the title thereto, regardless of the party responsible for its delivery, or
to royalties, taxes, license fees, or charges thereon, and from any and all
liability to any persons, including Project Participant, or for any property
damage, occasioned by PGP or FGU holding title to Gas for benefit of Project
Participant.
(h) Except as otherwise expressly stated herein, neither the
scheduling by Project Participant, nor the delivery by FGU of Gas in
quantities less than Project Participant's Gas to be purchased hereunder or
its Gas Entitlement Share, or the curtailment by FGU or the under
utilization by Project Participant of its transportation entitlements under any
other agreement with FGU or otherwise, shall relieve Project Participant of
its payment obligations under this Agreement, including those set forth in
Sections 3 and 4 hereof.
SECTION 6. Point(s) of Delivery.
Gas scheduled by Project Participant pursuant to Section 5 of this
Agreement will be delivered at Project Participant's Point or Points of
Delivery, which such party shall designate to FGU in writing. The quantity
of Gas actually delivered to Project Participant shall be adjusted to take into
account Gas used or consumed in the transportation thereof to the Points of
Delivery.
SECTION 7. Curtailment.
It is understood that, in the event of a capacity curtailment on the
Transporter's system or other transportation system used by FGU which
causes an interruption of transportation service, curtailment shall be
implemented in accordance with Transporter's currently effective curtailment
plan.
24
SECTION 8. Availability of Gas or Gas Entitlement Shares.
Except as provided otherwise by this Agreement, and subject to the
provisions of the Gas Production Sharing Agreement and any applicable
Transportation Contracts or other transportation arrangements, Project
Participant's Gas Entitlement Share, as the case may be, shall be made
available in accordance with this Agreement during the term hereof.
SECTION 9. Insurance.
FGU shall carry such insurance as shall be carried in accordance with
customary industry standards.
SECTION 10. Annual Budget; Accounting.
(a) At FGU's annual meeting each year, the Board of FGU shall
adopt an Annual Budget for the next ensuing Fiscal Year and shall deliver
the Annual Budget to each Project Participant prior to the beginning of each
Fiscal Year. During each Fiscal Year, FGU, by action of its Executive
Committee, may from time to time amend the Annual Budget.
(b) FGU agrees to keep accurate records and accounts in accordance
with generally accepted accounting principles, consistently applied. Said
accounts shall be audited annually by a firm of certified public accountants,
experienced in governmental accounting and electric and gas utility company
accounting and of suitable reputation, to be employed by FGU. A copy of
each annual audit, including all written comments and recommendations of
such accountants, shall be furnished by FGU to Project Participant not later
than one hundred fifty (150) days after the end of each Fiscal Year. Project
Participant shall have the right to audit the books and records of FGU from
time to time, upon reasonable notice, to the extent necessary to verify the
Costs and, with respect to Project Participant, payable hereunder.
SECTION 11. Information to be Made Available.
(a) Based, in each case, upon the data most recently available to
FGU pursuant to the Gas Production Sharing Agreement or Financial
Instruments, FGU will furnish or otherwise make available to Project
Participant all information related to Gas supply or pricing of Gas, which
FGU receives under the Gas Production Sharing Agreement or any Financial
Instrument and all transportation costs under the Transportation Contracts,
where available to FGU, and will prepare and issue to Project Participant
reports each quarter of the Fiscal Year on the status of the Annual Budget.
(b) Project Participant shall, upon request, furnish to FGU all such
information, certificates, certified copies of official proceedings, engineering
25
reports, feasibility reports, information relating to its system, Transportation
Contracts, financial statements, opinions of counsel (including the opinion
required by subsection (c) hereof), official statements and other documents as
FGU shall be reasonably requested to deliver pursuant to the services
provided under this Agreement.
(c) Project Participant shall at the time requested by FGU, cause an
opmlOn or opinions (i) in substantially the form attached hereto as
Appendix 3 to be delivered by one or more attorneys or firms of attorneys
satisfactory to FGU with respect to the authorization, execution and validity
of this Agreement or any Financial Instrument, as it relates to Project
Participant, and, if Project Participant shall have bonds or other obligations
outstanding secured by a pledge of revenues of its System, the legality under
the terms and conditions of the ordinance, resolution, indenture or other
contractual arrangement with the holders of such bonds, of the performance
by Project Participant of its covenants and agreements under this
Agreement, and (ii) in such other form as may be required under the Gas
Production Sharing Agreement, Financial Instrument or this Agreement and
with respect to Project Participant, the Bond Resolution or bond purchase
agreement executed in connection with the sale and delivery of the Bonds.
(d) Project Participant shall provide to FGU, or its designees, on a
timely basis and in such form as shall be reasonably requested by either, any
and all documents, releases, financial statements and other information
necessary to enable FGU to comply with any disclosure or other reporting
requirement, including but not limited to Rule 15c2-12 of the Securities and
Exchange Commission promulgated under the Securities Exchange Act of
1934 (the "Rule"), now or hereafter imposed by the United States of America,
the State of Florida, or any political subdivision or agency of either having
jurisdiction over the issuance of any debt obligations for the acquisition of
gas, by law, judicial decision, regulation, rule or policy. Such information
shall be provided by Project Participant from time to time promptly following
the occurrence of a "material event" as described in the Rule, and as
otherwise may be requested by FGU, or its designees, but in any case, no less
frequently than shall enable FGU or the underwriters or broker/dealers of
the obligations of FGU, or such Project Participant, to comply with any such
law, judicial decision, regulation, rule or policy.
In addition to the foregoing, Project Participant will provide to FGU, or
its designee, annually, promptly upon its preparation, but no later than one
hundred fifty (150) days after the end of its Fiscal Year, a copy of its annual
audit and such other financial and other records as may be required by the
issuer of any credit facility or bond insurance policy or other security
instrument securing all or any part of FGU's bonds or other indebtedness.
26
Project Participant further agrees to enter into a continuing disclosure
agreement or other undertaking as may be reasonably required by the
original purchaser of those obligations contemplated pursuant to the Bond
Resolution, in order to comply with the Rule.
SECTION 12. Project Participant Representations and Warranties;
Covenants.
(a) Additional Bonds may be sold and issued in accordance with the
provisions of the Bond Resolution at any time and from time to time (i) if, for
any reason, the proceeds derived from the sale of Bonds prior to such time
shall be insufficient for the purpose of paying Costs or (ii) to refund all or a
part of the Bonds previously issued thereunder in accordance with clause (c)
below.
(b) Any such additional Bonds shall be secured by the pledge, made
pursuant to the provisions of Section 13 hereof, of the payments required to
be made by Project Participant under Sections 3 and 4 of this Agreement and
all other payments attributable to the Project to be made in accordance with
or pursuant to any other provision of this Agreement, as such payments may
be increased, decreased and/or extended by reason of the issuance of such
additional Bonds, and such additional Bonds may be issued in amounts
sufficient to pay the full amount of such Costs referred to in clause (a) above
and to provide such reserves as may be reasonably determined to be
desirable. Any such additional Bonds issued in accordance with the
provisions of this Section 12 and secured by the pledge of payments to be
made in accordance with the provisions of this Section 12 and Section 13
hereof, may rank pari passu as to the security afforded by the provisions of
this Agreement with all Bonds theretofore issued pursuant to and secured in
accordance with the provisions of this Agreement or the Bond Resolution.
(c) In the event Costs may be reduced by the refunding of any
Bonds then outstanding or in the event it shall otherwise be advantageous to
refund any Bonds, Refunding Bonds may be issued and sold in accordance
with the Bond Resolution to be secured by the pledge, made pursuant to the
provisions of Section 13 hereof, of this Agreement and of the payments
required to be made by Project Participant under Sections 3 and 4 of this
Agreement and all other payments to be made in accordance with or
pursuant to any other provision of this Agreement. Any such Refunding
Bonds issued in accordance with the provisions of this Section 12 and secured
by the pledge of such payments may rank pari passu as to the security
afforded by the provisions of this Agreement with all Bonds theretofore
issued pursuant to and secured in accordance with the provisions of this
Agreement.
27
(d) Project Participant covenants that it will not make any sales of
its Gas Entitlement Share, or take any other action or omit to take any
action, which, if taken or omitted, would adversely affect the exclusion of
interest on the Bonds from gross income for Federal income tax purposes.
Without limiting the foregoing, because the sale of Gas from its Gas
Entitlement Share to persons other than state or local governments pursuant
to certain contracts may adversely affect the exclusion of interest from gross
income for Federal income tax purposes, Project Participant covenants that
Project Participant has entered into no contracts of more than thirty (30)
days' duration for the sale of Gas to persons other than state or local
governments except contracts provided to FGU and that no such contracts
shall be entered into unless it shall have been determined that such contracts
will not adversely affect the exclusion of interest on the Bonds from gross
income for Federal income tax purposes, of any holder thereof.
(e) Project Participant agrees (a) to maintain its System in good
repair and operating condition; (b) to cooperate with FGU in the performance
of the respective obligations of such Project Participant and FGU under this
Agreement, the Gas Production Sharing Agreement and all Financial
Instruments; and (c) to establish, levy and collect rents, rates and other
charges for the products and services provided by its System, which rents,
rates, and other charges shall be at least sufficient (i) to meet the operation
and maintenance expenses of such System, (ii) to comply with all covenants
pertaining thereto contained in, and all other provisions of, any resolution,
trust indenture, or other security agreement relating to any bonds or other
evidence of indebtedness issued or to be issued by Project Participant,
including, without limitation, all deposit requirements to pay debt service,
fund debt service and operating reserves and to pay ongoing project costs
hereunder, (iii) to generate funds sufficient to fulfill the terms of all other
contracts and agreements made by Project Participant, including, without
limitation, this Agreement and to fulfill its pro rata obligations of FGU under
the Gas Production Sharing Agreement, and Financial Instruments, and to
budget, appropriate and make all payments required hereunder in each fiscal.
year of Project Participant during the term hereof, and (iv) to pay all other
amounts payable from or constituting a lien or charge on the revenues of its
System.
(f) Project Participant further agrees that for good and valuable
consideration and for the purpose of obtaining a source of gas supply upon
favorable terms and price it will not take any action, except as permitted by
Section 25(c) hereof which, if Project Participant is a Member, will lead to its
withdrawal as a Member of FGU or if a Project Participant of PGP Gas
Project No.1 and not a Member, will lead to a withdrawal or other
termination of its status as a Project Participant during the term of this
Agreement; and that if a Member of FGU it will not vote for or otherwise
28
participate in any action to dissolve or otherwise terminate the existence of
FGU or if a Project Participant, the status of such Project, during the term of
this Agreement.
(g) Project Participant hereby represents that it has not entered
into, nor is it a party, directly or indirectly to, any contract, agreement or
understanding, whether oral or written, the provisions of which would or
might be breached by Project Participant's execution of this Agreement or the
performance by it of its obligations hereunder.
(h) Project Participant hereby covenants that, unless and until it
shall sell all or substantially all of its System in accordance with the
provisions of Section 25(c) hereof, it will maintain its present existence as a
public body to the full extent permitted by its charter and other governing
instruments, the Constitution and laws of the State of Florida.
(i) Project Participant hereby makes the following representations
and warranties to FGU:
(1) Project Participant is a municipality, duly organized and
validly existing under the laws of the State of Florida and in good
standing under the laws of the State of Florida, and has the power and
authority to own its properties, to carryon its business as now being
conducted, and to execute, deliver, and perform this Agreement.
(2) The execution, delivery, and performance by Project
Participant of this Agreement have been duly authorized by all
necessary corporate action of Project Participant and do not and will
not require, subsequent to the execution of this Agreement by Project
Participant, any consent or approval of the governing body or any
officers of Project Participant, any consent or approval of any third
party, or any other governmental consents or approvals.
(3) This Agreement is the legal, valid, and binding obligation
of Project Participant, enforceable in accordance with its terms, except
as such enforceability may be subject to (i) the exercise of judicial
discretion in accordance with general principles of equity and (ii)
bankruptcy, insolvency, reorganization, moratorium, and other similar
laws affecting creditors' rights.
(4) There is no action, suit, proceeding, inquiry, or
investigation at law or in equity, before or by a court, a public board, or
another body, pending (i.e., as to which Project Participant has
received service of process) or, to Project Participant's knowledge,
threatened, against or affecting Project Participant (or, to Project
Participant's knowledge, any meritorious basis therefor) (i) attempting
29
to limit, enJom, or otherwise restrict or prevent Project Participant
from functioning, or contesting or questioning the existence of Project
Participant, or the titles of the present officers of Project Participant to
their offices; or (ii) wherein an unfavorable decision, ruling, or finding
would (a) materially adversely affect the existence or powers of this
Agreement or any other agreement or instrument to which Project
Participant is a party and which is used or contemplated for use in the
consummation of the transactions contemplated by this Agreement, or
(b) materially adversely affect (1) the financial condition or results of
operations of Project Participant or (2) the transactions contemplated
by this Agreement.
(5) The execution and delivery by Project Participant of this
Agreement and its compliance with its provisions will not conflict with
or constitute on Project Participant's part a violation of, breach of, or
default under (i) any of Project Participant's governing instruments,
(ii) any Constitutional provision or statute, indenture, mortgage, lease,
resolution, note agreement, or other agreement or instrument to which
Project Participant is a party or by which Project Participant is bound,
or (iii) any order, rule or regulation of any court or governmental
agency or other body having jurisdiction over Project Participant or
any of its properties.
(6) Any certificate signed by an authorized officer of Project
Participant delivered in accordance with this Agreement or the Gas
Production Sharing Agreement shall be deemed a representation and
warranty by Project Participant as to the statements made therein.
SECTION 13. Pledge of Payments.
All right, title and interest of FGU in, to and under this Agreement
and all payments required to be made by Project Participant pursuant to the
provisions of Sections 3 and 4 hereof, and all other payments to be made in
accordance with or pursuant to any other provision of this Agreement, may
be pledged and assigned, in whole or in part, for the payment of Bonds,
subject to application in accordance with the provisions of the Bond
Resolution or for other such payments required to be made by FGU pursuant
to the Gas Production Sharing Agreement or, if permitted by the Bond
Resolution or such agreement, any Financial Instrument, to secure the
payment of Bonds and any obligations of Project Participant authorized by
this Agreement, Financial Products or Costs, and Project Participant hereby
expressly acknowledges and consents thereto. In this regard, the assignment
and pledge may expressly provide for the order and priority of the pledge for
the payment of Costs and for the payment of the specified obligations of
either FGU, PGP or Project Participants.
30
SECTION 14. Event of Default.
Failure of Project Participant to make to FGU when due any of the
payments for which provision is made in this Agreement shall constitute an
immediate default on the part of Project Participant.
SECTION 15. Continuing Obligation, Right to Discontinue Service.
In the event of any default referred to in Section 14 hereof, Project
Participant shall not be relieved of its liability for payment of the amounts in
default and FGU shall have the right to recover from Project Participant any
amount in default. In enforcement of any such right of recovery, FGU may
bring any suit, action, or proceeding in law or in equity, including mandamus,
injunction, specific performance, declaratory judgment, or any combination
thereof, as may be necessary or appropriate to enforce any covenant,
agreement or obligation to make any payment for which provision is made in
or contemplated by this Agreement or Financial Instrument, against Project
Participant, and FGU may, upon five (5) days written notice to Project
Participant, cease and discontinue, either permanently or on a temporary
basis, providing all or any portion of the Gas sold hereunder or Project
Participant's Gas Entitlement Share.
SECTION 16. Transfer of Gas Entitlement Shares Following Default.
In the event of a default by Project Participant and permanent
discontinuance of service under this Agreement pursuant to Section 15, FGU
is hereby appointed the agent of Project Participant for the purpose of
disposing of Project Participant's Gas Entitlement Share and as such agent,
FGU shall proceed to dispose of the defaulting Project Participant's Gas
Entitlement Share as follows:
(a) FGU shall, as soon as possible, terminate any spot, short term
or terminable supply of Gas that Project Participant may otherwise have the
right to receive from FGU that Project Participant has not otherwise paid for.
(b) FGU shall then, with respect to long term or non-terminable
Gas, pursuant to the Gas Production Sharing Agreement and this
Agreement, offer to transfer to all other nondefaulting Project Participants, a
pro rata portion of the defaulting Project Participant's Gas Entitlement Share
which shall have been discontinued by reason of such default. Any part of
such Gas Entitlement Share of a defaulting Project Participant which shall
be declined by any nondefaulting Project Participant shall be reoffered pro
rata to the nondefaulting Project Participant which have accepted in full the
first such offer; such reoffering shall be repeated until the defaulting Project
Participant's Gas Entitlement Share has been reallocated in full or until all
nondefaulting Project Participant have declined to take any portion or
31
additional portion of the defaulting Project Participant's Gas Entitlement
Share.
(c) In the event less than all of a defaulting Project Participant's
Gas Entitlement Share shall be accepted by the other nondefaulting Project
Participants, pursuant to clause (b) above, FGU shall, to the extent permitted
by law, use its reasonable best efforts to sell the remaining portion of a
defaulting Project Participant's Gas Entitlement Share for the remaining
term of the defaulting Project Participant's PGP Gas Supply Agreement with
FGU. The purchases shall be reasonably acceptable to any credit provider
with respect to the Bonds, and the agreement for such sale shall contain such
terms and conditions as will not adversely affect the security for the Bonds
afforded by the PGP Gas Supply Agreement of such defaulting Project
Participant, including provisions for discontinuance of service upon default
and as are otherwise acceptable to FGU, and such purchases shall, in the
determination of FGU, not adversely affect the exclusion from gross income
for Federal income tax purposes of interest on the Bonds; in the event of
default and discontinuance of service under such agreement, the Gas
Entitlement Share sold pursuant to such agreement shall be offered and
transferred as provided for defaulting Project Participants in this Section 16.
(d) Any portion of the Gas Entitlement Share of a defaulting Project
Participant transferred pursuant to this Section to a nondefaulting Project
Participant in accordance with clause (c) above, shall become a part of and
shall be added to the Gas Entitlement Share of each transferee Project
Participant effective on and as the date of transfer, and the transferee Project
Participant shall be obligated to pay for its Gas Entitlement Share increased
as aforesaid, as if the Gas Entitlement Share of the transferee Project
Participant in the PGP Gas Supply Agreement with FGU had been stated
originally to increase as aforesaid on the effective date of the transfer.
(e) In the event less than all of a defaulting Project Participant's
Gas Entitlement Share shall be sold or transferred pursuant to the foregoing
clauses of this Section 16, FGU shall, to the extent permitted by law, use its
reasonable best efforts to sell the remaining portion of a defaulting Project
Participant's Gas Entitlement Share on such terms and conditions as are
acceptable to FGU.
The defaulting Project Participant shall remain liable for all payments
to be made on its part pursuant to this Agreement, except that the obligation
of the defaulting Project Participant to pay FGU shall be reduced to the
extent that payments shall be received by FGU for that portion of the
defaulting Project Participant's Gas Entitlement Share which may be
transferred or sold as provided in this Section 16.
32
Each nondefaulting Project Participant whose payments hereunder are
increased as a result of the defaulting Project Participant's (or its successor's)
failure to take its Gas Entitlement Share or to make any required payments
hereunder shall have a cause of action against such defaulting Project
Participant for the amount of damages suffered as a result of default. FGU
shall reasonably cooperate with such nondefaulting Project Participant in
any action brought against the defaulting Project Participant upon the
receipt of an indemnification agreement satisfactory to FGU of any costs and
expenses it may incur in connection with such action.
SECTION 17. Other Default by Project Participant.
In the event of any default by Project Participant under any other
covenant, agreement or obligation of this Agreement other than Section 14
hereof, which shall be governed by Sections 15 and 16 hereof, FGU may bring
any suit, action, or proceeding in law or in equity, including mandamus,
injunction, specific performance, declaratory judgment, or any combination
thereof, as may be necessary or appropriate to enforce any covenant,
agreement or obligation of this Agreement against Project Participant. Such
remedies shall be in addition to all other remedies provided for herein.
SECTION 18. Default by FGU.
In the event of any default by FGU under any covenant, agreement or
obligation of this Agreement, Project Participant's remedy for such default
shall be limited to mandamus, injunction, action for specific performance or
any other available equitable remedy designed to enforce any covenant,
obligation or agreement of FGU hereunder as may be necessary or
appropriate.
SECTION 19. Abandonment of Remedy.
In case any proceeding taken on account of any default shall have been
discontinued or abandoned for any reason, the parties to such proceedings
shall be restored to their former positions and rights hereunder, respectively,
and all rights, remedies, powers and duties of FGU and Project Participant
shall continue as though no such proceedings had been taken.
SECTION 20. Waiver of Default.
Any waiver at any time by either FGU or Project Participant of its
rights with respect to any default of the other party hereto, or with respect to
any other matter arising in connection with this Agreement, shall not be a
waiver with respect to any subsequent default, right or matter.
33
SECTION 21.
Instruments.
Relationship to and Compliance with Other
(a) It is recognized by the parties hereto that FGU, in undertaking,
or causing to be undertaken, the planning, acquisition, and supply of Gas
hereunder, may be required to comply with the applicable requirements of
the Bond Resolution, the Gas Production Sharing Agreement, the Financial
Instruments and all licenses, permits and regulatory approvals necessary
therefor, and it is therefore agreed that the performance of FGU under this
Agreement is made subject to the terms and provisions of the Bond
Resolution, the Gas Production Sharing Agreement, Financial Instruments
and all such licenses, permits and regulatory approvals.
(b) FGU covenants and agrees to use its best efforts for the benefit
of Project Participant to comply in all material respects with all terms,
conditions and covenants of the Gas Production Sharing Agreement and all
licenses, permits and regulatory approvals relating thereto. FGU shall
diligently pursue all rights and remedies set forth in the Gas Production
Sharing Agreement and Project Participant shall fully cooperate with FGU in
such endeavor, perform such obligations as may be required by Project
Participant to enable FGU to do so, and pay all of the Costs for which it shall
be obligated hereunder.
SECTION 22. Measurement of Gas.
All Gas delivered hereunder shall be metered at the Point(s) of
Delivery by meters operated by Transporter, or as the parties shall otherwise
agree.
SECTION 23. Liability of Parties.
(a) Except as otherwise herein provided, FGU and Project
Participant shall each assume full responsibility and liability for the
maintenance and operation of their respective properties and each shall, to
the extent permitted by law, indemnify and save harmless the other from all
liability and expense on account of any and all damages, claims, or actions,
including injury to or death of persons arising from any act or accident in
connection with the installation, presence, maintenance and operation of the
property and equipment of the indemnifying party and not caused by the
negligence of the other party; provided that any liability which is incurred by
FGU hereunder and not covered, or not covered sufficiently, by insurance
shall be paid solely from the revenues of FGU derived from sales of Gas and
other services under this Agreement, and any payments made by FGU, or
which FGU is obligated to make, to satisfy such liability shall become part of
Costs. The indemnification provided for herein shall include any liability or
34
obligations for which FGU is obligated to indemnify PGP pursuant to the Gas
Production Sharing Agreement.
(b) For purposes of any indemnification under this Section 23,
(1) promptly after the party seeking indemnification (the
"Indemnified Party") learns of any event or circumstance, including,
without limitation, any claim or assertion by a third party that, in the
judgment of the Indemnified Party, may give rise to a claim for
indemnification hereunder (each such claim being referred to as a
"Loss" and collectively as "Losses"), the Indemnified Party shall deliver
to the party from which indemnification is sought (the "Indemnifying
Party") a certificate (the "Certificate"), which Certificate shall:
(i) state that the Indemnified Party has incurred or
anticipates that it will incur a Loss for which such Indemnified
Party is entitled to indemnification pursuant to this Agreement;
and
(ii) specify in reasonable detail each individual item of
Loss included in the amount so stated, the date such item arose
or was incurred, the basis for any anticipated Loss or Losses and
the nature of the claim to which the Loss is related and the
computation of the amount to which such Indemnified Party
claims to be entitled hereunder;
provided, however, that any failure or delay by the Indemnified
Party in delivering a Certificate to the Indemnifying Party shall
not affect the Indemnified Party's right to indemnification under
this Section 23, except to the extent that the Indemnifying Party
is able to establish damages resulting directly from such failure
or delay.
(2) If the Indemnifying Party objects to the claim for the
indemnification by an Indemnified Party in respect of any Loss, the
Indemnifying Party shall, within thirty (30) days after receipt by the
Indemnifying Party of such Certificate, deliver to the Indemnified
Party a written notice to such effect and the Indemnifying Party and
the Indemnified Party shall, within the 30-day period beginning on the
date of receipt by the Indemnified Party of such written objection,
attempt in good faith to agree upon the rights of the respective parties
with respect to each of such claim to which the Indemnifying Party
shall have so objected. If the Indemnified Party and the Indemnifying
Party shall succeed in reaching agreement on their respective rights
with respect to any of such claims, the Indemnified Party and the
35
Indemnifying Party shall promptly prepare and sign a memorandum
setting forth such agreement.
(3) Notwithstanding any prOVISIon hereof, if any claim for
any Loss is asserted against FGU hereunder, FGU may, at its option,
assume the defense of the Indemnified Party against such claim or
may undertake any remedial action required in connection therewith
or both (including the employment of counsel, and the payment of
expenses), provided, however, that any failure or delay by the
Indemnified Party in delivering such written notification to FGU of
any such occurrence, event or circumstance, other than the filing of
any such claim, action or proceeding, shall not affect the Indemnified
Party's right to indemnification under this Section 23, except to the
extent that FGU is able to establish its damages resulting directly
from such failure or delay.
(4) Until the Indemnifying Party shall have assumed the
defense of the Indemnified Party against such claim following the
delivery of such notice, the Indemnified Party may, but shall not be
obligated to, undertake the defense of such claim on behalf of and for
the account and risk of the Indemnifying Party, and if such
Indemnified Party is entitled to indemnification under this Section 23,
all legal or other expenses reasonably incurred by the Indemnified
Party shall be borne by the Indemnifying Party.
(5) Any Indemnified Party shall have the right to employ
separate counsel in any such action or claim and to participate in the
defense thereof, but except with respect to FGU, the fees and expenses
of such counsel shall not be at the expense of the Indemnifying Party
unless (1) the Indemnifying Party shall have failed, within ten (10)
days after having been notified by the Indemnified Party of the
existence of such claim as provided in the preceding sentence, to
assume the defense of such claim or to notify the Indemnified Party in
writing that it will assume the defense of such claim, or GJ) the
employment of such counsel has been specifically authorized in writing
by the Indemnifying Party, and in each case above, FGU whether as an
Indemnifying Party or an Indemnified Party shall have the right to
assume full control of the defense of the claim or Loss in the manner
provided below.
(6) An appealable final judgment will not give rise to an
indemnification payment obligation if and only to the extent that the
Indemnifying Party diligently undertakes an appeal of such final
judgment and posts a supersedeas bond or takes other action which
prevents the execution of the final judgment pending the appeal.
36
Notwithstanding the foregoing (x) any liability or Loss incurred by
FGU hereunder shall be paid in the manner provided above from the
revenues of FGU derived from sale of Gas or other services hereunder,
as a part of the Costs; (y) FGU shall in all events, at its option, have
the right to assume the defense of any claim for any Loss whether
against the Indemnifying Party or as an Indemnified Party and shall
be entitled to be reimbursed for the full amount of any such costs of
defense including fees and expenses of counsel in trial or on appeal;
and (z) as a part of its control of the defense of any claim for Loss, FGU
shall have the full right and authority to compromise or settle any
such claim or Loss for and on behalf of and for the account and risk of
the Indemnifying Party, the Indemnified Party and/or itself.
(7) After any such claim has been filed or initiated, each
party shall make available to the other and its attorneys and
accountants all pertinent information under its control relating to such
claim which is not confidential or proprietary in nature or which is
made available under the terms of a confidentiality agreement or is
delivered or obtained under appropriate protective orders satisfactory
to such party and the parties agree to render to each other such
assistance as they may reasonably require of each other in order to
facilitate the proper and adequate defense of any such claim.
(8) In no event shall the indemnification obligations of the
Indemnifying Party under this Section 23, whether based on contract,
warranty, tort (including negligence), strict liability or otherwise,
extend to or include special, incidental, consequential or punitive
damages of any kind whatsoever, except to the extent that the
Indemnified Party is obligated to pay any of such damages to a third
party under any claim for which such indemnification is sought.
SECTION 24. Sale of Project Participant's Excess Gas Entitlement
Share.
In the event Project Participant shall determine that all or any part of
the Gas which can be supplied from Project Participant's Gas Entitlement
Share are in excess of the requirements of Project Participant, or unless at
the written request of Project Participant, FGU shall use its best efforts to
sell and transfer on behalf of such Project Participant for any period of time
all or any part of such excess Gas to such other Project Participant or Project
Participants as shall agree to take such excess Gas, at such prices as may be
agreed to, provided, however, that in the event the other Project Participants
do not agree to take the entire amount of such excess, FGU shall have the
right, to the extent permitted by law, to dispose of such excess to other
parties. If all or any portion of such excess of the Gas sold hereunder or
37
Project Participant's Gas Entitlement Share, is sold pursuant to this Section
24, Project Participant's Gas and/or Gas Entitlement Share and resulting
payments hereunder shall not be reduced, and Project Participant shall
remain liable to FGU to pay the full amount due as if such sale had not been
made; except that such liability shall be discharged to the extent that FGU
shall receive payment for such excess from the purchaser or purchasers
thereof and that any amounts received by FGU as payment for such excess
which is greater than the liability owed by Project Participant to FGU in
respect of such excess shall be promptly paid by FGU to Project Participant.
Project Participant shall not take any action or fail to take any action which
would adversely affect the exclusion from gross income for Federal income
tax purposes of interest on any tax-exempt bonds of FGU, from the gross
income of the holders thereof and/or Project Participant.
SECTION 25. Assignment of PGP Gas Supply Agreement; Sale of
Project Participant's System.
(a) This Agreement shall inure to the benefit of and shall be binding
upon the respective successors and assigns of the parties to this Agreement;
provided, however, that, except as provided in Section 16 hereof, in the event
of a default, and except for the assignment and pledge authorized by
Section 13 hereof and by paragraph (b) of this Section 25 and for the
assignments authorized by paragraph (c) of this Section 25, neither this
Agreement nor any interest herein shall be transferred or assigned by either
party hereto except with the consent in writing of the other party hereto.
(b) Project Participant acknowledges and agrees that FGU may
assign and pledge to the trustee designated in the Bond Resolution or any
party to which it may be obligated under this Agreement, the Gas Production
Sharing Agreement or under the Financial Instruments, all or any part of its
right, title, and interest in, to and under this Agreement, and all payments to
be made to FGU under the provisions of this Agreement as security for the
payment of the principal (including sinking fund installments) of, premium, if
any, and interest on Bonds, obligations thereunder, and may deliver
possession of this Agreement to an agent of such party in connection
therewith, and, upon such assignment and pledge, FGU may grant to such
party any rights and remedies herein provided to FGU, and thereupon any
reference herein to FGU shall be deemed, with the necessary changes in
detail, to include such trustee which shall be a third party beneficiary of the
covenants and agreements of Project Participant herein contained.
(c) Project Participant agrees that, except as otherwise provided
herein, it will not sell, lease, abandon or otherwise dispose of all or
substantially all of its System except upon ninety (90) days prior written
notice to FGU and, in any event, will not sell, lease, abandon or otherwise
38
dispose of the same unless the following conditions are met: (i) Project
Participant shall, subject to the terms and conditions of the Gas Production
Sharing Agreement, assign this Agreement and its rights and interest
hereunder to the purchaser or lessee of said System, if any, and any such
purchaser or lessee shall assume all obligations of Project Participant under
this Agreement and shall have the financial capacity to do so; and (ii) FGU
shall be permitted by then applicable law to sell Gas to said purchaser or
lessee, if any; and (iii) FGU shall by appropriate action determine, in its sole
discretion, that such sale, lease, abandonment or other disposition will not
adversely affect the then existing ratings on the Bonds or FGU's ability to
meet its obligations under the Gas Production Sharing Agreement or the
Bond Resolution and will not adversely affect the value of this Agreement as
security for the payment of Bonds and interest thereon or the Gas Production
Sharing Agreement, or affect the exclusion from gross income of interest on
the Bonds for federal income tax purposes or the exclusion of such interest as
to bonds or other obligations which could be issued in the future.
Notwithstanding the foregoing, but subject to the provisions of clause (iii)
above, Project Participant may sell, lease, abandon or otherwise dispose of all
or substantially all of its System and may assign this PGP Gas Supply
Agreement and its rights and interests hereunder and be relieved of its
obligations under this PGP Gas Supply Agreement upon the payment of
sufficient funds, as determined by FGU, to cause the purchase of a pro rata
part of the outstanding Bonds equal to Project Participant's then existing Gas
Entitlement Share.
(d) Project Participant, in making or accepting such assignment,
shall agree to assume any costs incurred in reporting the assignment as a
"material event" or such other event pursuant to the Rule or any successor
provision, or any law, judicial decision, regulation, rule or policy now or
hereafter imposed by the United States of America, the State of Florida, or
any political subdivision or agency of either having jurisdiction over such
matters, requiring any such reporting.
(e) Notwithstanding any other provision of this Section 25, Project
Participant agrees that it will not assign or transfer any of its rights
hereunder without first obtaining and delivering to FGU and the bond
trustee serving as such under the Bond Resolution, an opinion of counsel
nationally recognized as experts on the subject of municipal bonds and
acceptable to the Trustee and FGU, to the effect that such transfer will not
cause interest on the Bonds to be includable in gross income of the holders
thereof for federal income tax purposes.
39
SECTION 26. Termination or Amendment.
(a) This Agreement shall not be terminated by either party under
any circumstance, whether based upon the default of the other party under
this Agreement or any other instrument or otherwise except as specifically
provided in this Agreement.
(b) This Agreement shall not be terminated, amended, modified, or
otherwise altered in any manner that will adversely affect the security for
any obligations authorized by FGU afforded by the provisions of this
Agreement upon which the owners from time to time of the Bonds or PGP
shall have relied as an inducement to purchase and hold the Bonds or enter
into the Gas Production Sharing Agreement, so long as any of the Bonds or
such obligations or the obligations of the Gas Production Sharing Agreement
or Financial Instruments entered into by FGU, in its name, or on behalf of
some or all of Project Participants shall rely thereupon. So long as any of
such obligations are outstanding or until adequate provisions for the
payment thereof have been made in accordance with the provisions of the
instruments authorizing such obligations, this Agreement or Financial
Instruments, shall not be terminated, amended, modified, or otherwise
altered in any manner which will reduce the payments pledged as security for
such obligations or extend the time of such payments provided herein or
which will in any manner impair or adversely affect the rights of the owners
from time to time of such obligations.
(c) No PGP Gas Supply Agreement entered into between FGU and
another Project Participant may be. amended so as to provide terms and
conditions substantially different from those herein contained, except upon
written notice to and written consent or waiver by each of the other Project
Participants, and upon similar amendment being made to the PGP Gas
Supply Agreement of any other Project Participants requesting such
amendment after receipt by such Project Participant of notice of such
amendment. In such event, no such amendment shall cause any increase in
Costs or other increased obligations or burdens to those Project Participants
who do not sign substantially similar amendments.
(d) It is recognized by FGU and Project Participant that in the
future, conditions may arise which will cause certain of the provisions of
Sections 5, 6, 7 and 25 hereof to be inappropriate. In such event, FGU and
Project Participant agree to negotiate in good faith and amend such
provisions to reflect conditions prevailing at such times, provided that such
amendments shall not (i) adversely affect the payment of Debt Service on the
Bonds or the obligations under the Gas Production Sharing Agreement, and
(ii) in the opinion of FGU's then existing bond counsel, adversely affect the
40
exclusion of interest on the Bonds from gross income for federal income tax
purposes.
SECTION 27. Force Majeure.
(a) In the event that either PGP, FGU or Project Participant
("Party" or "Parties"), is rendered unable, wholly or in part, by force majeure
to carry out its obligations under this Agreement or any subsequent service
agreement between the Parties contemplated herein, other than the
obligation of Project Participant to make payments due hereunder, including
the payment of Costs and other amounts due under Sections 3 and 4, it is
agreed that with respect to PGP, the terms and provisions of the Gas
Production Sharing Agreement shall apply, and with respect to this
Agreement, upon such Party giving notice and full particulars of such force
majeure in writing to the other Party as soon as possible after the occurrence
of the cause relied on, then the obligations of the Party giving such notice
(other than the obligation to make payments due), so far as they are affected
by such force majeure, shall be suspended during the continuance of any
inability so caused but for no longer period, and such cause shall as far as
possible be remedied with all reasonable dispatch. It is further agreed that
except for the obligation to make payments due, neither FGU nor Project
Participant shall be liable to the other for any damage occasioned by force
maJeure.
(b) In the event of any nonperformance caused by any of the forces
described in clause (c) the Party affected shall within twenty-four (24) hours
promptly notify the other Party verbally, and within two (2) working days of
nonperformance provide the other Party with written confirmation of the
nature, cause, date of commencement and anticipated extent of such
nonperformance.
(c) The term "force majeure" shall have the meaning as set forth in
the Gas Production Sharing Agreement, to the extent applicable to the
parties hereto, and as employed in this Agreement shall mean acts of God,
strikes, lockouts, or other industrial disturbances, acts of the public enemy,
wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods, freezes, washouts, arrests and restraints of
governments and people, civil disturbances, explosions, breakage or accidents
to machinery or lines of pipe, the necessity for making repairs or alterations
to machinery or lines of pipe (other than regularly scheduled or routine
maintenance), freezing of wells or lines of pipe, planned or unplanned
outages, disruptions or curtailments by Transporter, Project Participant or
other parties in the transportation of the Gas, partial or entire failure of
source of supply, acts of civil or military authority (including, but not limited
to, courts or administrative or regulatory agencies), and any other similar or
41
related cause, whether or not enumerated herein, and whether caused or
occasioned by or happening on account of the act or omission of FGU or
Project Participant or any other person or concern, not reasonably within the
control of the Party claiming suspension and which by the exercise of due
diligence such Party is unable to prevent or overcome; such term shall
likewise include, without limitation;
(1) in those instances where either Party is required to obtain
servitude, rights of way grants, permits or licenses to enable such
Party to fulfill its obligations hereunder, the inability of such Party to
acquire, or the delays on the part of such Party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such
servitude, rights of way grants, permits or licenses; and
(2) in those instances where either Party is required to
furnish materials and supplies for the purpose of constructing or
maintaining facilities or is required to secure grants or permissions
from any governmental agency to enable such Party to fulfill its
obligations hereunder, the inability of such Party to acquire, or the
delays on the part of such Party in acquiring, at reasonable cost and
after the exercise of reasonable diligence, such materials and supplies,
permits and permissions.
(d) The settlement of strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty, and the above requirement that
any force majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the demands of
the opposing Party when such course is inadvisable in the discretion of the
Party having the difficulty.
(e) If a force majeure prevents or curtails PGP's or FGU's delivery
of Gas under the Gas Production Sharing Agreement, FGU shall use
reasonable efforts to locate and make available to Project Participant Gas
from an alternative source at the then prevailing prices as FGU may
reasonably determine, until the force majeure affecting the supply of Gas has
ended.
(f) Consistent with Section 4(d), a force majeure affecting the
supply of Gas or its transportation or delivery to Project Participant shall not
relieve Project Participant of its payment obligations under this Agreement
including, without limitation, its obligations under Section 3(b) and the
payment for any replacement Gas, at the then prevailing price.
42
SECTION 28. Project Participant Representative.
Project Participant shall appoint from time to time by motion or
resolution of its governing body and provide to FGU evidence thereof, and
written notice of the name, mailing address, telephone number and facsimile
transmission number of one or more employees or agents with authority to
give instructions required by this Agreement and otherwise exercise decisions
by Project Participant required under this Agreement (the "Project
Participant Representative").
(a) Project Participant Representative, or its designee as provided
below, shall represent Project Participant in giving and receiving notices and
directives regarding the routine operational decisions, which decisions may
be relied upon by FGU and shall be contractually binding upon Project
Participant.
(b) Project Participant Representative may also, if so stated,
represent Project Participant in giving and receiving notices, Directives,
taking actions or making decisions required or that may be exercisable under
this Agreement or Financial Products provided by any Financial Instrument
hereunder, in each case, for and on behalf of Project Participant. Such
Financial Products may involve those risks and have characteristics similar
to those set forth in Exhibit A hereto. The decisions of Project Participant
Representative may be relied upon by FGU and such action and the due
authorization, execution and delivery of such Directives shall be contractually
binding upon Project Participant.
(c) Project Participant Representative may from time to time
designate an operational representative to discharge its duties and
obligations as set forth in subsection (1) above.
(d) Notices and directives between Project Participant
Representative, its designee, and FGU may be transmitted orally when not
required to be in writing, provided that all such notices and directives shall
be promptly confirmed by a written notice as authorized by this Agreement.
SECTION 29. Notice and Computation of Time.
Any notice or demand under this Agreement shall be in writing, and
shall be deemed given in writing and properly given if sent by (i) telegraphic,
cable or wireless transmission (including by telecopy, facsimile, e-mail or
other electronic transmission, with appropriate hard copy being made
available) or (ii) delivery to an overnight courier or delivery service company
in a sealed prepaid wrapper, or (iii) certified mail, postage prepaid, in each
case to the number or address set forth below, or to such other number or
43
address as a party hereto may give the other by notice given in accordance
with the provisions in this section.
To FGU:
Florida Gas Utility
Attn: General Manager
4619 NW 53rd Avenue
Gainesville, Florida 32606
To Project Participant:
Clearwater Gas System
400 N. Myrtle Avenue
Clearwater, FL 33755
Attention: Mr. Brian Langille
Unless otherwise specified herein, a notice is considered effectively given
when it is received by the intended recipient, or when the intended recipient
refuses delivery. If a notice is mailed by certified mail, or sent by courier or
delivery service, to the address of the intended recipient specified above (or
such other address as the intended recipient has previously specified in a
written notice pursuant to the provisions hereof), the notice shall be
presumed to have been received or refused by the intended recipient on the
date indicated on the receipt or return invoice.
SECTION 31. Applicable Law; Construction.
This Agreement is made under and shall be governed by the laws of
the State of Florida. Headings herein are for convenience only and shall not
influence the construction hereof.
SECTION 32. Severability.
If any section, paragraph, clause or provision of this Agreement shall
be finally adjudicated by a court of competent jurisdiction to be invalid, the
remainder of this Agreement shall remain in full force and effect as though
such section, paragraph, clause or provision or any part thereof so
adjudicated to be invalid had not been included herein.
(Remainder of page intentionally left blank.)
44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their proper officers respectively, being
thereunto duly authorized, and their respective seals to be hereto affixed, as
of the day and year first above written.
FLORIDA GAS UTILITY
By:
Title:
Attest:
Title:
(Seal)
CITY OF CLEARWATER, FLORIDA
Project Participant
Countersigned:
By:
City Manager
Mayor-Commissioner
Approved as to form:
Attest:
Assistant City Attorney
City Clerk
# 2224887_ v2
45
Exhibit A
CHARACTERISTICS OF FINANCIAL PRODUCTS
1. Types of Financial Products. The General Manager of
FGU, in accordance with the Financial Derivatives Policy of FGU, may
approve, and Project Participant Representative shall approve on behalf of
Project Participant, Financial Products which may consist of one or more of
the following (including combinations thereof), without limitation:
(a) Swaps and swap options or swaptions, pursuant to which
(i) the price of a commodity is converted from a fixed price to a floating price
or from a floating price to a fixed price, or (ii) the interest rate on debt issued
to acquire or prepay the cost of Gas or interests therein may be synthetically
converted from a floating rate to a fixed rate, or a fixed rate to a floating rate
or from one floating rate to another.
(b) Options or Forwards. pursuant to which a commodity can
be purchased or sold for future delivery on an optional or committed basis
and on a physical or cash-settled basis;
(c) Caps. Floors or Collars. pursuant to which the price of a
commodity can be limited to a maximum price, a minimum price, or a range
between a maximum and a minimum price and the interest rate on debt may
be limited to a maximum rate, a minimum rate on a range between a
maximum and minimum rate;
(d) Futures Contracts or Options on Futures Contracts,
pursuant to which a commodity can be purchased or sold for future delivery
on a committed or optional basis, and on a physical or cash-settled basis,
through exchange traded and regulated transactions;
(e) Other Hedges, pursuant to which the price or price
fluctuations of a commodity, interest rates on debt used to prepay or finance
the acquisition of a commodity or interests therein, or to the creditworthiness
of a gas supplier or counterparty, can be established or mitigated, either in
whole or in part, so as to reduce risk; and
(t) Combinations, including any combination of the foregoing.
For purposes hereof, a "commodity" includes, without limitation, natural gas
of any kind (in place or delivered) and any precursor or by-product of natural
gas.
2. Terms of Financial Products. Financial Products may be (i)
established and regulated pursuant to the rules and regulations of exchanges
upon which such products trade or (ii) be documented and evidenced by
written financial contracts between the parties thereto pursuant to forms of
agreements established by industry associations, including, without
limitation, the International Swaps and Derivatives Association, Inc. (lSDA),
such as ISDA's various forms of Master Agreement (inclusive or any schedule
or supplement, credit support document, and confirmations related thereto).
3. Risks assumed in Financial Products. Inherent in Financial
Products will be a variety of risks including, without limitation, the following:
(a) Credit risks, including the risk that adverse financial
changes occur with respect to a gas supplier, a counterparty, an exchange, or
a clearinghouse (including bankruptcy) that would tend to reduce or negate
the benefit of the Financial Product.
(b) Pricing risks, including the risk of not obtaining the best
or most favorable price available for the Financial Product due to market
conditions, lack of pricing liquidity or transparency, and macroeconomic
events.
(c) Basis risks, including the risk that the Financial Product
is not a complete or effective hedge with respect to a commodity, its price or
the interest rate a purchaser may pay on its underlying debt.
(d) Termination risks, including the risk that the Financial
Product must or should be liquidated or terminated early in light of the terms
of the Financial Product, which, in turn, may result in a significant payment
by, or loss to, a party due to then current market conditions, even though the
party's actions did not cause or trigger the termination. Termination can
occur because of a number of factors, including (i) a failure of a party to
perform its obligations (whether related to payment, delivery, providing
collateral or margin, or otherwise) under the terms of a Financial Product or
some other agreement to which the Financial Product refers (which may
include the default by other Project Participants whose payments are
intended in part to make required payments under the hedge agreements),
(ii) the misrepresentation of a party to a Financial Product, (iii) cross
defaults, (iv) the bankruptcy, or decline in the creditworthiness, of a party to
a Financial Product, (v) the determination that a Financial Product is illegal
or unenforceable whether due to a change in law or regulation or otherwise,
and (vi) other factors. Following a termination, a party can be unhedged
unless it terminates the transaction or commodity being hedged or
establishes a new hedge.
(e) Operating risks, including the risk that the Financial
Product may increase costs or present new or unusual accounting, tax or
2
operating difficulties that require adaptation of existing systems, processes
and policies.
(t) Legal risks, including the risk that the Financial Product
is unenforceable (whether due to a change in law or regulation or otherwise)
or is not adequately documented to reflect the parties' agreement.
# 2224887_v2
3
Exhibit B
DESCRIPTION OF SYSTEM
The City of Clearwater, Florida was incorporated in 1923 by Chapter 9710, Special Laws of
Florida, as amended. The Clearwater Gas System (CGS) is owned and operated as an
enterprise utility by the City of Clearwater. CGS operates over 650 miles of underground
gas main and handles the supply and distribution of both natural and propane (LP) gas
throughout northern Pinellas County and western Pasco County. As a "full service" gas
utility, CGS provides gas appliance sales and service, installation of inside customer gas
piping, domestic and commercial gas equipment service, construction and maintenance of
underground gas mains and service lines, and 24 hour response to any gas emergency call
within the service area. The Clearwater Gas System is regulated for safety by the Florida
Public Service Commission and the Federal Department of Transportation.
CGS has been serving customers in the Clearwater area for over 78 years (since 1923) when
operations were begun with a manufactured gas plant operation from coal and coke. In
1959, when natural gas transmission lines were finally extended to peninsula Florida, CGS
discontinued the manufacturing of gas and began receiving piped natural gas from Florida
Gas Transmission.
Clearwater Gas System serves over 18,000 customers in a 298 square mile service territory,
which includes 17 municipalities as well as the unincorporated areas of north and central
Pinellas County and western Pasco County. The Pinellas County service territory is 181
square miles and extends generally from Ulmerton and Walsingham Roads on the South to
the Pasco County line on the North and from the Gulf of Mexico on the West to the
Hillsborough County line on the East. This includes all of the Pinellas beach communities
south to Redington Beach. The Pasco County service territory is 117 square miles and
extends from the Gulf of Mexico on the West inland about 10 miles to just West of State
Road 41 and Land 0' Lakes (generally along the right-of-way for the proposed North
Suncoast Parkway) and from the Pinellas and Hillsborough County lines on the South to
generally State Road 52 on the North.
Clearwater Gas System prides itself in being a competitive and public service-minded
utility, making economical and environmentally-friendly gas, which is made in America,
available in our community for all of the homes and businesses in our service area, with
special focus on the residential customers who make up nearly 85% of our customer base.
City of Clearwater, Florida
Statement of Revenues, Expenses, and Changes in Fund Net Assets
Proprietary Funds
For the Year Ended September 30, 2003
Operating revenues:
Sales to customers
Service charges to customers
User charges to customers
Billings to departments
Rentals
Total operating revenues
Business-type
Enterprise
Water
and Sewer Gas Solid Waste
Utility Utility Utility
$ 38,639,890 $ 28,226,159 $ 15,696,878
485,228 1 ,534,805 96,645
39,125,118 29,760,964 15,793,523
7,283,595 4,053.181 4,428,453
6,103,150 13,494,849 149
1,840,133 128,982 330,421
690,357 492,089 2,655,739
1,591,969 74,587 60,635
4,893,497
4,972,309 1 ,427,298 225,112
5,113,190 1,861,820 1,143,710
1,760,814 206,474 10,073
570,771 5,230
127 ,429 140,344 53,496
4,295
241,670 140,775 140,810
4,054,401 239,493 66,472
58,826 4,103
352,817 110,668 36,289
406,250 319,100 135,430
1,764,641
44,759 68,541 19,833
6,988,140 3.623,928 471,736
34,582,843 25,156,734 14,209,452
4,542,275 4,604,230 1,584,071
Operating expenses:
Personal services
Purchases for resale
Operating male rials and supplies
Transportation
Utility service
Dumping charges
Depreciation
Interfund administrative charges
Other current charges:
Professional fees
Advertising
Communications
Printing and binding
Insurance
Repairs and maintenance
Rentals
Miscellaneous
Data processing charges
Taxes
Provision for estimated uncollectable accounts
Total other current charges
Total operating expenses
Operating income (loss)
2
Remarks/Qualifiers
Population of Service Area
298 Pinellas 181 + Pasco 117 (42.3 mi. NE - SW)
576,669 Per 2001 PEDC Data (from 2002 PERC Summary)
Pinellas 434,200 + Pasco 142,469
Service Area in Square Miles
Dwelling Units in Service Area
257,184 Per 2001 PEDC Data= 2.24 Occupants/Unit
Pinellas 193,581 (2.24) + Pasco 63,604 (2.24)
Customers - Total (NG+LP)
Residential Firm (NG)
General Service Firm (NG)
Interruptible (NG)
Propane (LP)
14,324
18,454
2,114
14
2,002
% of Dwelling Units Using CGS NG - Overall 5.6%
Pinellas 6.5%
Clearwater 12.8%
Sept., 2004 Billings (Pin. 16,223+ Pasco 2,231)
"(Subtotal NG 16,452= Pin. 14,483 & Pasco 1,969)
"
" (Pin. 1,740 + Pasco 262/1,915 resl. & 87 coml.)
14,324 Residential Cust.!257,184 Dwelling Units
12,535 Residential Cust.!193,581 Dwelling Units
6,362 Residential Cust.! 49,674 Dwelling Units
Miles of Natural Gas Main
729.0 Sept., 2004 Actual (Pin. 645.2 & Pasco 83.8)
22.6 Sept., 2004 Actual (Pin. 22.4 & Pasco 23.5)
NG Customers/Mile of Main
% of Residential Firm Customers:
With Water Heater
With Gas Cooking
With Gas Heating
58.8% Estimated (Based on Aug.l99 Customer Survey)
53.5%
30.5%
Annual Heating Degree Days
518 10 Yr. Tampa NOAA Data thru Sept., 2004
3,703 10 Yr. Tampa NOAA Data thru Sept. 2004
Annual Cooling Degree Days
Peak Contract Demand (Dekatherms/Day)
All Time Peak Load (Dekatherms/Day)
12,000
12,380
Annual Peak Load (Dekatherms/Day)
10,645
12,147
10,941
Annual Gas Sales (NG Therms) 21,538,066
(LP Gallons) 499,977
Annual Load Factor vs. Peak 54.2%
Annual Load Factor vs. Contract 68.4%
'with relinquishment 79.8%
Average Monthly Load Factor 80.1 %
Avg. Single Family Home Consumption 273
(Therms/year)
Annual Gas Revenues (Millions) $32.6M
Employees (Actual Full-time Equivalent) 89.4
Customers Served/Authorized Employee 205.0
Revised 11/08/04
November - April
February 4, 1996 Actual (2,131 was wholesale to
TECO PGS & CGS net was 10,249)
FY 03/04 (January 10, 2004)
FY 02/03 (January 24, 2003)
FY 01/02 (March 4, 2002)
FY 03/04 Actual
FY 03/04 Actual
FY 03/04 Actual
FY 03/04 Actual
FY 91/92 Study (FY 03/04 Actual = 220 incl.
active, but dormant accounts)
FY 03/04 Actual
FY 03/04 Actual (Budget Authorized 90 FTE)
# 2224887_v2
U:\My Documents\Word\CGSGENL\FY OI-02\CGS Overview Data.doc
September, 2004 Actual
3
Exhibit C
PROJECT PARTICIPANT OUTSTANDING OBLIGATIONS
Long Term Debt
Gas System Revenue Bonds
$14,605,000 Gas System Revenue Bonds and Gas System Revenue
Refunding Bonds, Series 1997 A & Series 1997B; serial bonds due in
annual installments of $555,000 due September 1, 2005, to $785,000 due
September 1, 2013, interest at 4.375% to 5.00%; 5.25% term bonds in
the amount of $790,000 maturing September 1, 2017; and 5.30% term
bonds in the amount of $4,560,000 maturing September 1, 2027.
(Ordinance 5118-91,5665-94,6030-96; Resolution 97-54)
$8,020,000 Gas System Revenue Refunding Bonds, Series 1998; serial
bonds due in annual installments of $35,0.00 due September 1, 2005, to
$50,000 due September 1, 2012, interest at 4.00% to 4.60%; additional
serial bond annual installments ranging from $620,000 to $755,000 from
September 1, 2015 to September 1, 2019, interest at 4.75% to 4.90%;
4.70% term bonds in the amount of $645,000 maturing September 1,
2014; and 5.00% term bonds in the amount of $3,410,000 maturing on
September 1, 2023. (Ordinance 5118-91, 6188-97; Resolution 98-09)
$8,890,000 Gas System Revenue Refunding Bonds, Series 2004, serial
bonds due in annual installments of $160,000 due September 1,2005, to
$1,575,000 due September 1, 2026, interest at 2.00% to 4.375%.
(Ordinance 5118-91, 7191-03; Resolution 03-36)
# 222488Lv2
$11,345,000
$7,825,000
$8,870,000
Exhibit D
FORM OF
NATURAL GAS PRODUCTION SHARING AGREEMENT
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
NATURAL GAS PRODUCTION SHARING
AGREEMENT FOR GAS SUPPLY POOL NO.1
By and Between
PUBLIC GAS PARTNERS, INC.
And
[INSERT NAME OF MEMBER]
DATED AS OF NOVEMBER 1, 2004
HEADING
RECITALS
ARTICLE 1
Section 1.1
Section 1.2
Section 1.3
Section 1.4
Section 1.5
Section 1.6
Section 1. 7
Section 1.8
Section 1.9
Section 1.10
Section 1.11
Section 1.12
Section 1.13
ARTICLE 2
ARTICLE 3
Section 3.1
Section 3.2
ARTICLE 4
Section 4.1
Section 4.2
Section 4.3
Section 4.4
ARTICLE 5
Section 5.1
Section 5.2
Section 5.3
Section 5.4
Section 5.5
ARTICLE 6
ARTICLE 7
ARTICLE 8
ARTICLE 9
Section 9.1
Section 9.2
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
TABLE OF CONTENTS
Pa2e
.......................................................................................................... 1
CONSTRUCTION AND INTERPRETATION ..................................... 5
Recitals Incorporated........................................................................... 5
Exhibits... .......................... ..................................................................... 5
References........................ ..... ................................................................. 5
Number and Gender ......... .... ..... ... ....................... ........ .... ............ ...... .... 5
Headings................................................................................................ 5
Severability............................................................................................ 5
Resolution of Disputes, Arbitration and Mediation............................. 6
Choice of Law........ ................................................................................. 6
Venue ........ ............ ...... ....................... .............. ...... ....... ........... .............. 7
Interrelatedness of Production Sharing Agreements .......................... 7
Entirety of Agreement.. ......................................................................... 8
Preparation of Agreement.................................................................... 9
Definitions ............................................................................................. 9
DEFINITIONS...................................................................................... 9
REPRESENTATIONS AND WARRANTIES ..................................... 16
Representations and Warranties of the Member............................... 16
Representations and Warranties of Public Gas Partners.................. 20
GOVERNANCE AND OPERATIONAL STRUCTURE .....................22
Governing Body of Public Gas Partners............................................. 22
Committees.......................................... ................................................ 22
Management of Public Gas Partners' Operations and Affairs ..........23
Operating Committee For Gas Supply Pool No.1............................. 24
CHARACTER OF OBLIGATIONS......... ............ ............ .................... 25
Sale and Delivery of Gas or Cash....................................................... 25
Payment of Costs................................................................................. 26
Sharing of Costs.................................................................................. 27
True-Ups.............................................................................................. 27
Gas Supplies Held by Public Gas Partners........................................ 28
QUANTITIES...................................................................................... 29
POINTS OF DELIVERy...... ............ .......... ........... ....... ............ ........... 30
TITLE................................................................................................... 30
MEASUREMENT AND SPECIFICATIONS ..................................... 30
Measurement....................................................................................... 31
Quality Specifications......................................................................... 31
I
ARTICLE 10
ARTICLE 11
Section 11.1
Section 11.2
Section 11.3
Section 11.4
Section 11.5
Section 11.6
Section 11. 7
ARTICLE 12
Section 12.1
Section 12.2
Section 12.3
Section 12.4
Section 12.5
Section 12.6
ARTICLE 13
Section 13.1
Section 13.2
Section 13.3
Section 13.4
Section 13.5
Section 13.6
ARTICLE 14
Section 14.1
Section 14.2
Section 14.3
Section 14.4
Section 14.5
Section 14.6
Section 14.7
Section 14.8
Section 14.9
ARTICLE 15
Section 15.1
Section 15.2
Section 15.3
ARTICLE 16
ARTICLE 17
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
HEDGING........................................................................................... 31
ANNUAL BUDGET PROCESS AND PRICING OF DELIVERIES. 32
Annual Budget Process For Pool-Specific Costs ................................ 32
Annual Budget Process For Non-Pool-Specific Costs ........................ 33
Budget Amendments........................................................................... 33
Allocation of Pool-Specific Costs to the Member ................................ 33
Allocation of General Costs to the Member........................................ 33
Allocation of Individual Costs ............... .................. ............................ 34
Categories of Costs.............................................................................. 34
COMPONENTS OF MONTHLY BILLINGS .....................................35
Acquisition Costs of Supply.......... ...... ................ ................................ 35
Ongoing Capital Development Requirements.................................... 35
Gas Supply Pool No.1 Operating Costs ............................................. 36
Costs of Outside Services. ................................................................... 37
Manager Fees...................................................................................... 37
Contingency Reserves......................................................................... 38
BILLING AND PAYMENT .......................... .................. ..................... 38
Timing................. .1............................................................................... 38
Late Payment...................................................................................... 39
Disputed Amounts............................................................................... 39
Audit Rights......................................................................................... 40
Status of Payment Obligations ............................ ............. .................. 40
Nature of Payment Obligation............................................................ 42
FAILURE TO PERFORM AND DEFAULT .......................................43
Default by Public Gas Partners and Remedies ..................................43
Default by the Member .................... ..................... ..................... ......... 44
Continuing Obligation of the Member................................................ 45
Right of Public Gas Partners to Suspend Service ..............................45
Termination and Transfer of the Member's
Participation Share Following Default......................................... 46
Step- Up Requirements........................................................................ 48
Termination of the Member's Participation
Share Following Prepayment.............. ....... ............... .................... 50
Abandonment of Remedy..... ........................ .................. ..................... 51
Waiver of Default................................................................................ 51
FORCE MAJEURE ............... ....................... ................... .................... 51
Suspension of Obligations................................................................... 51
Force Majeure in the Context of This Agreement.............................. 52
Force Majeure Defined........................................................................ 53
EXCLUSIVITY AND AUTHORIZATION FOR ACQUISITIONS .... 53
SUCCESSION AND ASSIGNMENT ................................................. 55
11
Section 17.1
Section 17.2
Section 17.3
ARTICLE 18
Section 18.1
Section 18.2
Section 18.3
Section 18.4
Section 18.5
Section 18.6
ARTICLE 19
Section 19.1
Section 19.2
Section 19.3
Section 19.4
Section 19.5
Section 19.6
ARTICLE 20
Section 20.1
Section 20.2
Section 20.3
Section 20.4
Section 20.5
Section 20.6
ARTICLE 21
Section 21.1
Section 21.2
Section 21.3
ARTICLE 22
Section 22.1
Section 22.2
ARTICLE 23
Section 23.1
Section 23.2
ARTICLE 24
ARTICLE 25
ARTICLE 26
ARTICLE 27
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
Succession............................................................................................ 55
Assignment.................. ........ ................................................................ 55
Third Party Beneficiaries.................................................................... 56
SPECIAL COVENANTS ..... ......... .................. ............... ...................... 56
Rates, Fees, and Charges of the Member ...........................................56
General Tax Covenant of Public Gas Partners.................................. 57
Continued Existence of the Member .................................................. 57
Continued Existence of Public Gas Partners ..................................... 58
Covenant Not to Vary Terms of Agreements ..................................... 58
Covenant to Enforce Underlying Contracts ....................................... 58
INFORMATION TO BE PROVIDED BY THE
PARTIES TO EACH OTHER........................................................ 59
Financial Reporting by the Member................................................... 59
Other Information to Be Made Available by the Member ................. 59
Financial Reporting by Public Gas Partners ..................................... 60
Other Information to Be Made Available by Public Gas Partners.... 60
Information to Be Provided in Connection with the Member's
Prepayment.................................................................................... 61
Costs Associated With Providing Information ................................... 62
COMPONENTS OF GAS SUPPLY POOL NO.1.............................. 62
Gas Supply Pool No.1 Portfolio.......................................................... 62
Working Interests and Royalty Interests........................................... 63
Minimum Portfolio Requirements ...................................................... 63
Minimum Security for Secured Prepayments .................................... 64
Dissolution of Gas Supply Pool No.1................................................. 65
Completion of Gas Supply Pool No.1................................................. 65
FINANCING OF GAS SUPPLY POOL NO.1................................... 67
Interim Financing by Public Gas Partners ........................................67
Permanent Financing.......................................................................... 67
Failure to Make Prepayment ............................... ........ ............. .......... 68
CHANGES IN NOMINATED QUANTITY ........................................69
Reductions in Nominated Quantity.................................................... 69
Increases in Nominated Quantity...................................................... 70
TERM............. ...................................................................................... 70
Full Term............................ ................................................................. 70
Early Termination............................................................................... 71
NOTICES............................................................................................. 72
RELATIONSHIP TO AND COMPLIANCE WITH OTHER
INSTRUMENTS............................................................................ 74
LIABILITY OF PARTIES................................................................... 75
COUNTERPARTS ............................. ................. ....... ......... ................. 76
111
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHIBIT A PARTICIPANTS IN GAS SUPPLY POOL NO.1, THEIR NOMINATED
QUANTITIES, AND THEIR PARTICIPATION SHARES
EXHIBIT B RULING REQUEST SUBMITTED BY PUBLIC GAS PARTNERS,
INC. TO THE INTERNAL REVENUE SERVICE
EXHIBIT C POINTS OF DELIVERY
EXHIBIT D BREAKDOWN OF ANNUAL BUDGET BY CATEGORIES
EXHIBIT E NATURAL GAS SERVICES CONTRACT BETWEEN PUBLIC GAS
PARTNERS, INC. AND THE MUNICIPAL GAS AUTHORITY OF
GEORGIA
EXHIBIT F FORM OF OPINION OF COUNSEL TO THE MEMBER
EXHIBIT G ILLUSTRATIVE CALCULATION OF REVISED PARTICIPATION
SHARES FOLLOWING A REDUCTION IN THE MEMBER'S
NOMINATED QUANTITY
EXHIBIT H FORM OF HEDGING AND RISK MANAGEMENT POLICY
EXHIBIT I FORM OF NOTICE OF REVISED PARTICIPATION SHARES
IV
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
NATURAL GAS PRODUCTION SHARING
AGREEMENT FOR GAS SUPPLY POOL NO.1
This Natural Gas Production Sharing Agreement for Gas Supply Pool No.1
(hereinafter "Agreement") is dated as of November 1, 2004, by and between Public
Gas Partners, Inc. a Georgia nonprofit corporation and an instrumentality of its
participating governmental entities (hereinafter "Public Gas Partners"), and
,a
organized under the laws of the State/Commonwealth of
(hereinafter the "Member"). Public Gas Partners and the Member are sometimes
hereinafter referred to collectively as the "Parties" or individually as a "Party".
RECITALS
WHEREAS, Public Gas Partners is a nonprofit corporation organized and
established under the provisions of the Georgia Nonprofit Corporation Code,
O.C.G.A. Section 14-3-101, et seq., as amended, the purpose of which is to acquire
and manage reliable and economic natural gas supplies, through the acquisition of
interests in natural gas producing properties and other long-term sources of natural
gas supplies, for participating joint action agencies and large public natural gas and
power systems; and
WHEREAS, it is intended that Public Gas Partners be an organization
exempt from federal income taxation as a governmental entity and that Public Gas
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
Partners will satisfy the requirements necessary to be considered a governmental
instrumentality under the Internal Revenue Code of 1986,26 U.S.C. ~ 1, et al. (the
"Code");
WHEREAS, the Member is a
which provides
service to
; and
WHEREAS, Public Gas Partners and the Member, together with Other
Members (as defined in this Agreement), have engaged in discussions regarding the
value and benefits that could be provided to the Member and Other Members
through the joint action of public gas entities and public electric entities in pooling
their talents, expertise, and resources to acquire and manage long-term gas
supplies needed as an essential component of their operations for the benefit of
their member distribution systems and/or the consumers they serve; and
WHEREAS, the Member on or before April 30, 2004, executed a Letter Of
Intent and submitted a non-binding nomination of the quantity of natural gas
deliverability that it anticipated requesting Public Gas Partners to acquire for sale
to the Member through a portfolio of gas supply transactions making up a pool of
supply acquisitions; and
WHEREAS, the Letter Of Intent provided that the relationship between
Public Gas Partners and the Member, as well as between Public Gas Partners and
all Other Members, would be formalized in an agreement under which the non-
binding nomination submitted in conjunction with the Letter Of Intent would be
2
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
replaced by a contractual level of requested deliverability that Public Gas Partners
would be charged with obtaining for sale to the Member; and
WHEREAS, Public Gas Partners has entered or intends to enter into a
Natural Gas Services Contract with the Municipal Gas Authority of Georgia, one of
the Members, pursuant to which the Municipal Gas Authority of Georgia shall serve
as the Manager of Public Gas Partners for an initial term of five years as was also
contemplated in the Letter Of Intent; and
WHEREAS, the Member has worked collectively with Other Members to
draft the Articles of Incorporation and Bylaws of Public Gas Partners, this
Agreement, and the Natural Gas Services Contract, which all together realize the
purpose of the Letter Of Intent; and
WHEREAS, Public Gas Partners and the Member have agreed that Public
Gas Partners shall undertake a program of supply acquisitions that is intended to
include the acquisition of interests in gas reserves and gas prepayments, and that
Public Gas Partners shall take, hold and retain title to such interests, and shall
initially finance the purchase of such interests; and
WHEREAS, Public Gas Partners and the Member have agreed that Public
Gas Partners shall sell to the Member the Member's share of available production
from such interests or contractual rights under the terms and conditions set forth in
this Agreement; and
3
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
WHEREAS, Public Gas Partners and the Member have agreed that the
Member shall be unconditionally obligated to pay its share of costs associated with
all aspects of the program undertaken by Public Gas Partners to acquire and
manage Gas Supply Pool No.1 to fulfill the Nominated Quantities of the Member
and Other Members; and
WHEREAS, Public Gas Partners and the Member have also agreed that the
Member shall bear its proportionate share of all costs and shall receive its
proportionate share of all benefits associated with Gas Supply Pool No.1; and
WHEREAS, Public Gas Partners and the Member have further agreed that
the Member shall make a lump sum advance payment for its proportionate share of
the gas produced from or delivered pursuant to Gas Supply Pool No.1 at such time
as Public Gas Partners may notify the Member such prepayment is due, and the
Member shall make such payment from the proceeds of its permanent financing or
other funds available to the Member in connection with such Gas Supply Pool No.1
under the terms and conditions set forth in this Agreement; and
WHEREAS, Public Gas Partners and the Member have further agreed that
the effectiveness of this Agreement is contingent upon the execution of Production
Sharing Agreements by the Member and Other Members for aggregate Annual
Nominated Quantities of not less than 50,000 MMBtu per day.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth in this Agreement and for other good and valuable consideration, the
4
DRAFT #8 -9/21/04
PRMLEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
receipt and sufficiency of which are hereby acknowledged, Public Gas Partners and
the Member agree as follows:
ARTICLE 1
CONSTRUCTION AND INTERPRETATION
1.1 Recitals Incorporated. Each of the clauses set forth in the Recitals
above is incorporated into and made a part of this Agreement by this reference.
1.2 Exhibits. Each of the Exhibits to this Agreement is incorporated into
and made a part of this Agreement by this reference.
1.3 References. References to Articles, Sections, and Exhibits in this
Agreement are to the articles, sections, and exhibits of this Agreement.
1.4 Number and Gender. Unless the context plainly indicates otherwise,
the use of the singular in this Agreement incorporates the plural and vice versa,
and the use of the male, female, or neutral gender incorporates the others.
1.5 Headings. The headings used throughout this Agreement are inserted
for reference purposes only and shall not be construed or considered in interpreting
the terms and provisions of any Section or Article of this Agreement or the
Agreement as a whole.
1.6 Severability. If any Article, Section, term or provision of this
Agreement is declared by a court of competent jurisdiction to be illegal,
unenforceable, or void, this Agreement shall continue in full force and effect without
said Article, Section, term or provision; provided, however, that if such severability
5
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
materially changes the economic benefits of this Agreement to either Party, the
Parties shall negotiate in good faith and attempt to agree to an equitable
adjustment to the provisions of this Agreement to replicate to the best of their
ability the economic benefits of this Agreement to both Parties.
1.7 Resolution of Disputes. Arbitration and Mediation. Notwithstanding
any other provision of this Agreement to the contrary, the Parties by mutual
agreement may agree to mediate or arbitrate any dispute that arises under this
Agreement. In the event that a dispute arises between Public Gas Partners and the
Member under this Agreement, the Parties agree that they shall pursue a process to
attempt to resolve the dispute as follows: first, the dispute shall be discussed by the
Parties at the staff level; if the dispute has not been resolved within 15 days of the
initiation of discussions, the Parties shall next schedule a face-to-face meeting to
include their chief executive officers at a mutually agreeable location, to take place
in not more than 15 days; if the dispute has not been resolved within 15 days
following such meeting, either Party may proceed to have the matter adjudicated, or
the Parties together may agree to pursue mediation or non-binding arbitration of
the dispute, or binding arbitration of the dispute.
1.8 Choice of Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of Georgia, without regard to any conflict of
laws provisions, provided that the capacity, power and authority of the Member to
enter into this Agreement and any matter relating to the interpretation or
6
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
enforceability of any ordinance, resolution, agreement or other instrument adopted
or otherwise entered into by the Member authorizing, securing or otherwise relating
to its obligations under this Agreement, heretofore or hereafter adopted or assumed,
shall be governed by and construed in accordance with the laws of the
State/Commonwealth of
1.9 Venue. The Parties agree that venue shall lie in federal district court
in Atlanta, Georgia.
1.10 Interrelatedness of Production Sharing Agreements. This Agreement
is substantially identical to the agreements between Public Gas Partners and each
of the Other Members that are participating in Gas Supply Pool No.1 except for the
provisions relating to the identification of the parties, individual commercial terms
such as Nominated Quantities and Points of Delivery, and certain legal matters
applicable to each of the Members such as state law and the terms of underlying
contractual arrangements with Participating Utilities. The participants in Gas
Supply Pool No. 1 are listed in Exhibit A. This Agreement may not be amended
except upon the unanimous agreement of Public Gas Partners, the Member, and
each of the Other Members, and then only upon the concurrent execution of a
substantially identical written amendment to the Production Sharing Agreements
between Public Gas Partners and each of the Other Members; provided, however,
that Exhibit A shall be amended from time to time without such agreement to
conform to changes resulting from the addition of new Members as discussed in
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Sections 4.4(c) and 22.2 (listing of new participants and Nominated Quantities) and
to conform to other changes provided for in Article 14 (defaults), Section 17.2
(assignments), Section 21.3 (failure to make Prepayment), Section 22.1 (reduction in
Nominated Quantity). and Section 23.2 (early termination), or otherwise in this
Agreement; Exhibit C may be amended by agreement of the Parties; and Exhibit E
may be amended by agreement between Public Gas Partners and the Municipal Gas
Authority of Georgia. Except for such amendments as described in the foregoing
proviso, Public Gas Partners agrees that if either Party proposes an amendment to
this Agreement, Public Gas Partners shall provide written notice of such proposed
amendment to each of the Other Members within five days of sending or receiving
such proposed amendment. If Public Gas Partners or one of the Other Members
proposes an amendment to the Production Sharing Agreement between Public Gas
Partners and such Other Member for Gas Supply Pool No.1, Public Gas Partners
shall provide written notice of such proposed amendment to the Member within five
days of sending or receiving such proposed amendment.
1.11 Entirety of Agreement. This Agreement constitutes the entire
agreement between Public Gas Partners and the Member with respect to the
purchase and sale of gas produced or delivered from Public Gas Partners' interests
in Gas Supply Pool No. 1. All prior negotiations and understandings, whether oral
or in writing (including without limitation the Letter Of Intent referenced in the
Recitals to this Agreement), are superceded by this Agreement. No modification of
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the terms and provisions of this Agreement shall be or become effective except by
the execution by the Parties of a written amendment.
1.12 Preparation of Agreement. The Parties have jointly drafted this
Agreement and it shall be deemed to be their joint work product and shall not be
construed against either Party by reason of its preparation.
1.13 Definitions. Unless another definition is expressly stated in this
Agreement, the terms set forth in Article 2 shall have the meaning there set forth
whenever they are used in this Agreement.
ARTICLE 2
DEFINITIONS
2.1 "Annual Nominated Quantity" is defined in Section 2.17.
2.2 "Board of Directors" means the Board of Directors of Public Gas
Partners, as described in Article 5.
2.3 "British thermal unit" or "Btu" means the amount of energy required
to raise the temperature of one pound of pure water one degree Fahrenheit (10 F) at
sixty degrees Fahrenheit (600 F) under standard atmospheric and gravitational
conditions.
2.4 "Costs" means any and all costs or other expenditures incurred with
respect to Gas Supply Pool No.1, whether they are incurred by Public Gas Partners
directly in connection with Gas Supply Pool No.1 or are incurred by Public Gas
Partners generally or in connection with more than one Project and are allocated to
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Gas Supply Pool No.1, and whether or not they are Individual Costs, including
without limitation: operating and maintenance costs; capital expenditures;
amounts payable by Public Gas Partners with respect to any debt or other
obligations of Public Gas Partners issued or incurred to finance its acquisition of
reserves or any other interests in, or contractual rights to, natural gas and its
production, including but not limited to all costs of issuance, credit enhancement,
interest rate swaps or other arrangements (including but not limited to ongoing
payments and any termination or unwind payments), remarketing, and disclosure,
all fees relating to trustees, paying and other agents, whether initial or ongoing,
and all required reserves or deposits or other costs associated with the issuance or
incurrence of any such debt; fees and expenses paid to the Manager and any other
amounts payable by Public Gas Partners under the Services Contract; deposits;
royalties; indemnities; environmental or other fines or liabilities; Losses; costs
incurred by Public Gas Partners in its prosecution of any legal claim or other action
to enforce its rights or otherwise in connection with or relating to its interests in gas
properties or contractual rights acquired under Gas Supply Pool No.1; severance,
ad valorem, or similar taxes; gathering, compression, transportation, and balancing
charges and penalties or other similar charges; fuel and lost and unaccounted for
gas; ongoing payments, termination payments, or unwind costs for hedges
undertaken for the benefit of the Members; and other costs, expenses, and charges
of any kind or nature that Public Gas Partners incurs in connection with the
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production, acquisition, and delivery to the Member of the gas produced from its
interests or otherwise acquired by Public Gas Partners as part of Gas Supply Pool
No. 1.
2.5 "Cubic foot" means the amount of gas required to fill a cubic foot of
space when the gas is at an absolute pressure of 14.73 pounds per square inch and
at a temperature of sixty degrees Fahrenheit (600 F).
2.6 "FERC" means the Federal Energy Regulatory Commission and any
successor thereto, including without limitation an Executive Branch agency of the
federal government, an independent regulatory commission, or a Legislative Branch
agency of the United States Congress.
2.7 "Force Majeure" has the meaning set forth in Section 15.3.
2.8 "Gas" means all natural gas, coal seam gas, coalbed methane, shale
gas, casinghead gas, and associated gaseous hydrocarbons, including liquids and
liquefiables, and any mixture of hydrocarbons or of hydrocarbons and non-
combustible gases and associated liquids, consisting essentially of methane and
conforming to the quality specifications applicable at the Point of Delivery.
2.9 "Gas Supply Pool No.1" means the gas supply acquisition projects and
transactions consummated by Public Gas Partners to meet the initial Nominated
Quantities of the Member and Other Members participating in the first portfolio of
long-term natural gas supplies acquired by Public Gas Partners, together with the
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management activities undertaken and conducted by Public Gas Partners in
connection with such portfolio.
2.10 "Gas Tariff' means the interstate pipeline tariff filed by a "natural gas
company" as defined in the Natural Gas Act (15 U.S.C. ~ 717 et seq.) pursuant to
FERC regulations and approved by FERC, as it may be amended from time to time.
2.11 "Individual Costs" means any and all Costs that are allocated by the
Operating Committee specifically to the Member or to a subset of all of the
Members, but not to all of the Members, including without limitation costs
associated with commodity swaps or other hedging agreements entered into by
Public Gas Partners in its name for the benefit of and at the request of one or more
but not all of the Members.
2.12 "Losses" means any and all costs of the defense of any action brought
against or defended by Public Gas Partners in connection with its operations or
relating to its interests in gas properties or contractual rights acquired under Gas
Supply Pool No.1, including but not limited to all suits, judgments, claims,
demands, causes of action, costs, and expenses arising out of or in any way
connected to claims with respect to title, environmental liability, or otherwise
relating to gas prior to its delivery to the Member under this Agreement.
2.13 "Manager" means the entity selected by Public Gas Partners to
manage the day-to-day and ongoing operations of Public Gas Partners, which
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initially shall be the Municipal Gas Authority of Georgia, and any and all
successors thereto.
2.14 "Mer' means 1,000 cubic feet of gas.
2.15 "Members" means the Member and the Other Members. All of the
Members participating in Gas Supply Pool No.1 are listed in Exhibit A.
2.16 "MMBtu" means 1,000,000 Btus. One MMBtu also equals one
dekatherm.
2.17 "Nominated Quantity" means the quantity in MMBtu per day that the
Member has requested Public Gas Partners to acquire and sell to the Member
under the terms and conditions of this Agreement each day. The Member shall
establish a Nominated Quantity for the Summer Season and a Nominated Quantity
for the Winter Season. The average of the Nominated Quantity for the Summer
Season and the Nominated Quantity for the Winter Season shall be referred to in
this Agreement as the "Annual Nominated Quantity". Each of the Other Members
shall likewise have its own Nominated Quantity set for the Summer Season and the
Winter Season, respectively, averaged as its Annual Nominated Quantity. The sum
of all such quantities shall be referred to in this Agreement as the "Nominated
Quantities for the Winter Season", the "Nominated Quantities for the Summer
Season", and the "Annual Nominated Quantities", as applicable. The Nominated
Quantities of all Members are set forth in Exhibit A.
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2.18 "Operating Committee" means the Operating Committee for Gas
Supply PoolNo. 1 as described in Article 4.
2.19 "Other Members" means other joint action agencies and large public
gas and power systems that have joined Public Gas Partners as members, that are
participants in Gas Supply Pool No.1, and that have executed agreements
substantially identical to this Agreement with Public Gas Partners covering
participation in Gas Supply Pool No. 1. The Other Members participating in Gas
Supply Pool No.1 are listed in Exhibit A.
2.20 "Participating Utility" means those local government units that own
and operate municipal gas and/or electric utility systems that have entered into
contracts for the purchase of gas or electricity at wholesale from the Member.
2.21 "Participation Share" means the Member's percentage share of Gas
Supply Pool No.1, including its benefits and burdens. Participation Share is an
annual percentage which shall equal to the Member's Annual Nominated Quantity
as a percentage of the total Annual Nominated Quantities of all Members
participating in Gas Supply Pool No. 1. The Participation Share of the Member and
the Participation Shares of all Other Members are shown in Exhibit A.
2.22 "Point of Delivery" means the tailgate of the Sabine Pipe Line
Company's Henry Hub near Henry, Louisiana, or such other successor point or
points as may be established by mutual agreement of the Parties.
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2.23 "Prepayment" means the lump sum advance payment that the Member
shall be obligated to make to Public Gas Partners as provided in Section 21.2, in an
amount and on a date certain to be set by Public Gas Partners, as determined by
the Operating Committee, following due notice as described in this Agreement, for
the delivery of the Member's Participation Share of all or a portion of available gas
produced or otherwise acquired by Public Gas Partners in Gas Supply Pool No. 1.
2.24 "Production Sharing Agreements" means this Agreement and all of the
Natural Gas Production Sharing Agreements, dated the date hereof, between Public
Gas Partners and the Members, all of which are uniform in all material respects in
terms, conditions, and provisions, with the exception of the Nominated Quantity,
Participation Share, and Point of Delivery for each of the Members.
2.25 "Project" means any undertaking of Public Gas Partners designated as
a "Project" by its Board of Directors.
2.26 "Seasonal Nominations" means the Member's Nominated Quantities
for the Summer Season and the Winter Season, respectively. The Member's
Seasonal Nominations shall initially be equal to the Member's Nominated Quantity
during each month of the Summer Season and the Winter Season, as applicable, as
a percentage of the total Nominated Quantities during such Summer Season and
Winter Season of all Members participating in Gas Supply Pool No. 1. The
Seasonal Nominations of the Member at the initiation of Gas Supply Pool No. 1 and
the Seasonal Nominations of all Other Members are shown in Exhibit A.
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2.27 "Services Contract" means the Natural Gas Services Contract between
Public Gas Partners and the Manager, a copy of which is set forth in Exhibit E.
2.28 "Summer Season" means the six months of April through September.
2.29 "Summer Share" means the Member's Nominated Quantity for the
Summer Season as a percentage of the total Nominated Quantities for the Summer
Season of all Members.
2.30 "Winter Season" the six months of October through March.
2.31 ''Winter Share" means the Member's Nominated Quantity for the
Winter Season as a percentage of the total Nominated Quantities for the Winter
Season of all Members.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Member. The Member hereby
makes the following representations and warranties to Public Gas Partners:
(1)
The Member is a
, duly
organized and validly existing under the laws of the State/Commonwealth of
and in good standing under the laws of the State/Commonwealth of
, and has the power and authority to own its properties, to carry on
its business as now being conducted, and to execute, deliver, and perform this
Agreement.
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(2) The execution, delivery, and performance by the Member of this
Agreement have been duly authorized by all necessary corporate action of the
Member and do not and will not require, subsequent to the execution of this
Agreement by the Member, any consent or approval of the governing body or any
officers of the Member, any consent or approval of any third party, or any other
governmental consents or approvals, except for such continuing actions by the
governing body of the Member as may be required under the provisions of the
Articles and Bylaws and except for such ongoing approvals and actions by the
Member as are contemplated by this Agreement.
(3) This Agreement is the legal, valid, and binding obligation of the
Member, enforceable in accordance with its terms, except as such enforceability
may be subject to (i) the exercise of judicial discretion in accordance with general
principles of equity, (ii) bankruptcy, insolvency, reorganization, moratorium, and
other similar laws affecting creditors' rights, and (iii) the valid exercise of the
sovereign police powers of the State/Commonwealth of
and the
constitutional powers of the United States of America.
(4) There is no action, suit, proceeding, inquiry, or investigation at
law or in equity, before or by a court, a public board, or another body, pending (i.e.,
as to which the Member has received service of process) or, to the Member's
knowledge, threatened, against or affecting the Member (or, to the Member's
knowledge, any meritorious basis therefor) (i) attempting to limit, enjoin, or
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otherwise restrict or prevent the Member from functioning, or contesting or
questioning the existence of the Member, or the titles of the present officers of the
Member to their offices; or (ii) wherein an unfavorable decision, ruling, or finding
would (a) materially adversely affect the validity or enforceability of this Agreement
or any other agreement or instrument to which the Member is a party and which is
used or contemplated for use in the consummation of the transactions contemplated
by this Agreement, or (b) materially adversely affect (1) the financial condition or
results of operations of the Member or (2) the transactions contemplated by this
Agreement.
(5) The execution and delivery by the Member of this Agreement
and the Member's compliance with its provisions will not conflict with or constitute
on the Member's part a violation of, breach of, or default under (i) any of the
Member's governing instruments, (ii) any Constitutional provision or statute,
indenture, mortgage, lease, resolution, note agreement, or other agreement or
instrument to which the Member is a party or by which the Member is bound, or
(iii) any order, rule or regulation of any court or governmental agency or other body
having jurisdiction over the Member or any of its properties.
(6) Any certificate signed by an authorized officer of the Member
delivered to Public Gas Partners shall be deemed a representation and warranty by
the Member to Public Gas Partners as to the statements made therein.
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(7) The Member has provided an unqualified opinion of counsel in
substantially the form set forth in Exhibit F.
(8) [This representation would be included in the
agreements between PGP and its joint action agency Members. It would
not be applicable to the Agreements between PGP and distribution system
members (such as The Southeast Alabama Gas District).] [In addition, the
following language is to be included in the Production Sharing Agreement
between PGP and FMP A. It is intended by FMP A to be substitute text for
this Section 3.1 (h): The Member is entering into this Agreement on behalf of and
for the benefit of its All-Requirements Power Supply Project. To the extent not paid
from the Prepayment, all Costs and Individual Costs payable by the Member under
this Agreement constitute Operation and Maintenance Expenses under the AlI-
Requirements Power Supply Project Revenue Bond Resolution and may properly be
included in rates to be charged to Project Participants in the All-Requirements
Power Supply Project. The contracts between the Member and Project Participants
in the All-Requirements Power Supply Project contain a covenant requiring the
Project Participant to charge rates sufficient to pay all amounts due under such
contract.] The Member has executed a contract with each of its Participating
Utilities which (i) provides for the sale or utilization of the Gas attributable to the
Member's Participation Share in Gas Supply Pool No.1, (ii) contains purchase and
payment obligations of such Participating Utility that enable the Member to pay
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timely all of its obligations to Public Gas Partners under this Agreement, including
but not limited to a provision that the amounts billed by the Member to the
Participating Utility shall be treated as operating and maintenance expenses of or a
lien on the revenues of the Participating Utility's gas or electric distribution system,
and (iii) includes provisions under which the Participating Utility covenants to
charge and collect rates and fees sufficient at all times and in all respects to enable
such Participating Utility to meet its obligations to the Member under such contract
and all other amounts payable out of such revenues.
3.2 Representations and Warranties of Public Gas Partners. Public Gas
Partners hereby makes the following representations and warranties to the
Member:
(a) Public Gas Partners (i) is a nonprofit corporation duly created
and validly existing and in good standing under the laws of the State of Georgia, (ii)
expects to be considered an instrumentality of the Members under the Internal
Revenue Code, (iii) expects to be tax-exempt under Section 115 of the Internal
Revenue Code, (iv) will act consistently with such status, and (v) has the corporate
power and authority to enter into and perform this Agreement.
(b) The execution, delivery, and performance by Public Gas
Partners of this Agreement have been duly authorized by its Board of Directors and
do not and will not require, subsequent to the execution of this Agreement by Public
Gas Partners, any consent or approval of the Board of Directors or any officers of
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Public Gas Partners, any consent or approval of any third party, or any other
governmental consents or approvals.
(c) This Agreement is the legal, valid, and binding obligation of
Public Gas Partners, enforceable in accordance with its terms, except as such
enforceability may be subject to (i) the exercise of judicial discretion in accordance
with general principles of equity and (ii) bankruptcy, insolvency, reorganization,
moratorium, and other similar laws affecting creditors' rights.
(d) There is no action, suit, proceeding, inquiry, or investigation at
law or in equity, before or by a court, a public board, or another body, pending (i.e.,
as to which Public Gas Partners has received service of process) or, to Public Gas
Partners' knowledge, threatened against or affecting Public Gas Partners (or to
Public Gas Partners' knowledge, any meritorious basis therefor) (i) attempting to
limit, enjoin, or otherwise restrict or prevent Public Gas Partners from functioning,
or contesting or questioning its existence or the titles of its present officers to their
offices, or (ii) wherein an unfavorable decision, ruling, or finding would (a)
materially adversely affect the existence or powers of this Agreement or any other
agreement or instrument to which Public Gas Partners is a party and which is used
or contemplated for use in the consummation of the transactions contemplated by
this Agreement or (b) materially adversely affect (1) the financial condition or
results of operations of Public Gas Partners or (2) the transactions contemplated by
this Agreement.
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(e) The execution and delivery by Public Gas Partners of this
Agreement and Public Gas Partners' compliance with its provisions will not conflict
with or constitute on Public Gas Partners' part a violation of, breach of, or default
under (i) any of the governing instruments of Public Gas Partners, (ii) any
constitutional provision, statute, indenture, mortgage, lease, resolution, note
agreement, or other agreement or instrument to which Public Gas Partners is a
party or by which Public Gas Partners is bound, or (iii) any order, rule, or
regulation of any court or governmental agency or body having jurisdiction over
Public Gas Partners or any of its properties.
(f) Any certificate signed by an authorized officer of Public Gas
Partners delivered to the Member shall be deemed a representation and warranty
by Public Gas Partners to the Member as to the statements therein.
ARTICLE 4
GOVERNANCE AND OPERATIONAL STRUCTURE
4.1 Governing Body of Public Gas Partners. Public Gas Partners shall be
governed by a Board of Directors, as prescribed by its Articles of Incorporation and
Bylaws.
4.2 Committees. The operations of Gas Supply Pool No.1 shall be
governed by the Operating Committee in accordance with the Articles of
Incorporation and Bylaws and as further described in Section 4.4. In addition, the
Board of Directors pursuant to the Bylaws may establish other committees of the
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Board whose responsibility shall be focused on particular substantive areas within
the Board's areas of responsibility.
4.3 Management of Public Gas Partners' Operations and Affairs. Public
Gas Partners shall be operated and managed by the Manager under the terms of
the Services Contract. If the Services Contract with the Manager is not extended or
is otherwise replaced, Public Gas Partners shall establish or enter into replacement
management arrangements to continue the management and operation of Gas
Supply Pool No.1 and Public Gas Partners' operations and affairs generally, in
accordance with agreements or other actions entered into or taken by the Board of
Directors. In the event that tax-exempt obligations have been issued by Public Gas
Partners or any Member with respect to Gas Supply Pool No.1 or any Prepayment,
any replacement management arrangement shall be entered into with another
governmental unit or shall be a "qualified management contract" under applicable
Internal Revenue Service guidelines.
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4.4 Operating Committee For Gas Supply Pool No. 1.
(a) Authority. The Board of Directors shall permanently delegate to
the Operating Committee the authority to make all decisions concerning the
management and operation of Gas Supply Pool No.1, except for the following, the
authority for which, in addition to the specific reserved authority set forth in
Sections 5.1(b) and 5.l(c) of the Bylaws, shall be reserved to the Board of Directors:
decisions with respect to litigation; decisions to issue bonds or other means of
financing; decisions to initiate or intervene in proceedings before the FERC or other
state or federal regulatory bodies or courts; and decisions affecting more than one
Project as delineated in the Bylaws.
(b) Structure. The Operating Committee shall consist of at least
one and not more than two representatives of the Member and of each of the Other
Members. If the Member or any of the Other Members appoints two
representatives to the Operating Committee, only one such representative (i) shall
be counted for purposes of determining whether a quorum of the Operating
Committee is present and (ii) shall be entitled to vote on matters before the
Operating Committee. Such representatives shall be named and designated by the
Member and each of the Other Members, respectively, and shall be appointed by the
Board of Directors as provided in the Bylaws. In this way, the Member and each of
the Other Members, through a committee of the Board of Directors, shall govern
Gas Supply Pool No. 1.
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(c) Quorum and Voting. Two-thirds of the members of the
Operating Committee shall constitute a quorum for the transaction of business. A
vote of a majority of the Operating Committee members present shall be necessary
for action in all matters before the Operating Committee, except as follows: any
Operating Committee member may call for weighted voting in accordance with the
terms of Section 6.7(b) of the Bylaws or any successor provision thereto, or, in the
event that the Bylaws are hereafter amended to eliminate weighted voting, any
Operating Committee member may call for weighted voting under the procedure for
weighted voting set forth in the Bylaws and the effective date of this Agreement
following a decision to undertake a particular transaction as a component of Gas
Supply Pool No.1, and a unanimous vote of all Operating Committee members is
necessary to add a new Member of Public Gas Partners to Gas Supply Pool No. 1.
ARTICLE 5
CHARACTER OF OBLIGATIONS
5.1 Sale and Delivery of Gas or Cash. Public Gas Partners shall each day
during the term of this Agreement sell and deliver and the Member shall purchase
and receive its Summer Share or Winter Share, as applicable, of the Gas produced
or otherwise delivered from Public Gas Partners' interests in Gas Supply Pool No.1
for the Summer Season or the Winter Season, as applicable. The Parties
acknowledge and agree that Public Gas Partners may receive cash from the sale of
Gas produced from its interests in Gas Supply Pool No.1 from time to time, and
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that as a result the Member may receive its applicable Summer Share or Winter
Share of such cash received by Public Gas Partners in lieu of physical supply.
Public Gas Partners will deliver physical Gas to the Member as all or part of the
Member's Participation Share of Gas produced or otherwise delivered from Public
Gas Partners' interests comprising Gas Supply Pool No.1 if such Gas or
arrangements with respect thereto are available, and cash if such physical Gas or
arrangements are not available.
5.2 Payment of Costs. The Member shall be billed by and shall pay to
Public Gas Partners its Participation Share of all Costs not billed as Individual
Costs, plus 100% of all Individual Costs allocated to it and not paid as part of its
Participation Share of Costs, without regard to the quantity of Gas produced or
delivered from Gas Supply Pool No.1 or any limitation set forth in Article 6 on the
Member's obligation to take physical Gas, and whether or not any Gas is produced
or otherwise delivered from Gas Supply Pool No. 1 during any month or period of
months during the term of this Agreement. The Member's bills will be adjusted
during each month of the Summer Season and Winter Season, as applicable, such
that the Member pays its proportionate share corresponding with the Member's
Seasonal Nominations. Public Gas Partners shall develop an average cost per
MMBtu of Gas delivered for purposes of passing through Costs to all Members
participating in Gas Supply Pool No.1, with such average cost trued-up to actuals
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at such times as may be determined by the Operating Committee but not less
frequently than annually.
5.3 Sharing of Costs. The Member's initial proportionate entitlement to
Gas and proportionate share of Costs for purposes of Article 5 and for all other
purposes under this Agreement is determined by its Participation Share. The
Parties acknowledge and agree that the Member's Participation Share may change
based on other provisions of this Agreement, including without limitation the
addition of one or more new Members to Gas Supply Pool No. 1 pursuant to Section
4.4(c) and the Bylaws or a reduction in Nomination Quantities by the Member or by
Other Members to the level of quantities already acquired by Public Gas Partners
at any point in time pursuant to Article 22.
5.4 True-Ups. The Participation Share is an annual percentage, reflecting
the intent of this Agreement that the Member shall share in the benefits and
burdens of Gas Supply Pool No. 1 on the basis of its relative Annual Nominated
Quantity as a percentage of the total Annual Nominated Quantities of all of the
Members, notwithstanding the delivery of Gas in accordance with Seasonal
Nominations and the billing of Costs based on an average cost per MMBtu
determined through the annual budget process, all as provided in this Agreement.
Accordingly, it is the intent of the Parties that the annual true-up to actuals
described in Section 5.2 shall be made pursuant to policies and standards
established by the Operating Committee (which shall also review and approve the
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annual true-up amounts to be paid to or by the Members) to ensure that the
Member and each of the Other Members receives its fair share of the value of Gas
Supply Pool No.1 and pays its fair share of the Costs of Gas Supply Pool No.1 as
defined by its Participation Share.
5.5 Gas Supplies Held by Public Gas Partners. Public Gas Partners shall
own and hold the entirety of the Gas supplies in Gas Supply Pool No.1 subject to its
obligation to deliver to the Member its Summer Share and Winter Share, as
applicable, of the Gas produced from or otherwise obtained as part of Gas Supply
Pool No.1, including but not limited to Gas produced or otherwise obtained after
retirement of the short-term bonds to be issued or other method of interim financing
to be obtained by Public Gas Partners for the acquisition of all or any component of
Gas Supply Pool No.1 and after the retirement of any bonds or other obligations
issued by the Member to finance the Prepayment for Gas supplies purchased by the
Member from Public Gas Partners for delivery from Gas Supply Pool No. 1.
Without limiting the generality of the foregoing, in the event Public Gas Partners
sells all or any portion of its ownership interests in the reserves or other
components of Gas Supply Pool No.1 during the term of this Agreement and
determines that all or a portion of the proceeds of such sale shall not (i) be used to
buy replacement properties or other supplies, (ii) be reinvested in production, or (iii)
be held in cash reserves, the Member shall realize its Participation Share of any
such proceeds not so used in the net benefit (or costs) of such sale.
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ARTICLE 6
QUANTITIES
Public Gas Partners shall sell to the Member and the Member shall purchase
from Public Gas Partners the Member's Summer Share or Winter Share of the
production or other Gas supplies obtained by and available from Public Gas
Partners in Gas Supply Pool No.1 each day during the term of this Agreement, up
to 100% of the Nominated Quantity. The Parties acknowledge and agree that the
Seasonal Nominations embodied in this Agreement are intended to bring together
the Members' seasonally complementary loads and that Public Gas Partners may
determine to meet the Annual Nominated Quantities of the Members through the
acquisition of Gas supplies designed to meet the peak season Nominated Quantities,
or through the acquisition of Gas Supplies designed to meet the Members' annual
average day quantities, or through some other means, as recommended by the
Operating Committee. For example, if Public Gas Partners determines to meet the
Annual Nominated Quantities of the Members through the acquisition oflong-term
Gas supplies in accordance with the annual average day nominations of the
Members, Public Gas Partners in its discretion may meet the Members' aggregate
Seasonal Nominations by selling a portion of its supplies into the market during the
valley season and purchasing a portion of its supplies from the market during the
peak season so as to effect a seasonal exchange of quantities. Public Gas Partners
may sell production or other Gas supplies obtained or controlled by Public Gas
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Partners in Gas Supply Pool No.1 in excess of 100% of total Nominated Quantities
to Members under separate agreements or to third parties. The agreement of the
Member contained in this Article 6 to take its applicable share of Gas supplies up to
100% of the Nominated Quantity shall not limit its obligation to pay its
Participation Share of all Costs not billed as Individual Costs plus all Individual
Costs billed to it, as provided in Section 5.2.
ARTICLE 7
POINTS OF DELIVERY
The gas purchased and sold under this Agreement shall be delivered by
Public Gas Partners to the Member at the Point of Delivery, or at such other points
as Public Gas Partners and the Member shall mutually agree upon from time to
time, as specifically described in Exhibit C.
ARTICLE 8
TITLE
Title to the gas delivered under this Agreement shall pass from Public Gas
Partners to and vest in the Member at the Point of Delivery. As between the
Parties, Public Gas Partners shall be deemed to be in exclusive control and
possession of gas to be delivered under this Agreement prior to the time of its
delivery to the Member, and the Member shall be deemed to be in exclusive control
and possession of gas delivered under this Agreement thereafter.
ARTICLE 9
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MEASUREMENT AND SPECIFICATIONS
9.1 Measurement. Gas sold under this Agreement shall be measured
through existing measurement facilities at the Point of Delivery. The unit of
volume for measurement of gas delivered under this Agreement shall be one cubic
foot of gas at a base temperature of sixty degrees Fahrenheit (600 F) at an absolute
pressure of 14.73 pounds per square inch. The sales unit of the gas shall be one
MMBtu. The conversion from Mcf to MMBtu shall be performed according to the
Btu content of the gas as determined by the operator of the measurement
equipment at the Point of Delivery on a dry basis.
9.2 Quality Specifications. All gas delivered under this Agreement shall
be merchantable and shall conform to the minimum quality specifications and
heating value specified in the FERC Gas Tariffs of the interstate pipelines
interconnecting at the Point of Delivery.
ARTICLE 10
HEDGING
The Parties acknowledge and agree that they may enter into alternate price
agreements (commodity swaps, options, etc.) with third party counterparties to
hedge commodity price risks related to purchase, sale, production or storage from
Gas Supply Pool No.1, or may enter into financial derivatives transactions to hedge
interest rate risks associated with the financing thereof, and that such alternate
price agreements and financial derivatives transactions may be undertaken by
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Public Gas Partners in its own name, by Public Gas Partners for the Member and
Other Members participating in Gas Supply Pool No.1 at their request, or in a
combination thereof. Any such alternate price agreements shall be used only for
purposes of price risk management and any such financial derivatives transactions
shall be used only for purposes of managing debt service on outstanding borrowings
and debt of Public Gas Partners. Any such agreements and transactions
undertaken by Public Gas Partners in its own name or for the Member or Other
Members at their request may be allocated and billed as Individual Costs as
determined by the Operating Committee at the time such agreements and
transactions are entered into, and may only be undertaken in accordance with
hedging and risk management policies established by the Operating Committee.
The initial hedging and risk management policy shall be substantially in the form
set forth in Exhibit H. The Operating Committee shall have the right to amend the
policy from time to time.
ARTICLE 11
ANNUAL BUDGET PROCESS AND PRICING OF DELIVERIES
11.1 Annual Budget Process For Pool-Specific Costs. Public Gas Partners
shall prepare a budget annually for all Costs of Public Gas Partners that it
identifies as being directly related to Gas Supply Pool No. 1. Such budget shall be
reviewed and considered by the Operating Committee, and following approval of the
Operating Committee shall be presented by the Operating Committee to the Board
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of Directors by no later than 60 days before the beginning of each fiscal year of
Public Gas Partners.
11.2 Annual Budget Process For Non-Pool-Specific Costs. Public Gas
Partners may establish one or more additional Projects during the term of this
Agreement. Public Gas Partners will incur costs and expenses that may
appropriately be directly assigned to such additional gas supply pool or pools or
other Projects and not to Gas Supply Pool No.1, or that, while not directly
assignable, appropriately should be allocated among gas supply pools or other
Projects, including Gas Supply Pool No. 1. Before the beginning of each fiscal year,
Public Gas Partners shall prepare and approve a budget for Gas Supply Pool No.1
that includes all Costs that are not directly assigned to Gas Supply Pool No.1 but
are allocated to Gas Supply Pool No. 1.
11.3 Budget Amendments. The annual budgets described in Sections 11.1
and 11.2 may be amended from time to time during the fiscal year by requisite
action of the Board of Directors.
11.4 Allocation of Pool-Specific Costs to the Member. The Member shall
bear its Participation Share of the Costs assigned and allocated to Gas Supply Pool
No.1 as described in Section 11.1 and billed in accordance with Section 5.2.
11.5 Allocation of General Costs to the Member. The Member shall bear its
Participation Share of all general Costs of Public Gas Partners that are not directly
assigned to Gas Supply Pool No.1 but rather are allocated to Gas Supply Pool No.1
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and to one or more other gas supply pools or other Projects as described in Section
11.2 and billed in accordance with Section 5.2.
11.6 Allocation of Individual Costs. The Member shall pay all Individual
Costs allocated to it by the Operating Committee and shall pay its proportionate
share of all Individual Costs allocated by the Operating Committee to it and one or
more of the Other Members but not all of the Members, as such Individual Costs are
billed in accordance with Section 5.2.
11.7 Categories of Costs. The annual budget will include Costs in the
following categories: acquisition costs; developmental costs; operating costs; outside
services costs; administrative fees; and other costs. A breakdown of the types of
costs and expenses included in each of those categories is set forth in Exhibit D.
The compilation of the budgeted Costs in each of those categories will result in the
calculation of an average cost of gas per MMBtu. Public Gas Partners will develop
an average cost per MMBtu for the purpose of billing the Member for its
Participation Share of Costs (other than Individual Costs) in a manner consistent
with the Member's Seasonal Nominations as provided in Section 5.2. Individual
Costs shall be billed separately in a manner established by the Operating
Committee. The average cost per MMBtu may include amounts designed to fund or
maintain cash reserves determined necessary and reasonable by the Operating
Committee. Public Gas Partners shall perform a true-up of actual Costs incurred as
compared to amounts billed to all Members within 120 days of the end of each fiscal
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year, in a manner consistent with Section 5.4. Any amount due from the Member
as a result of the true-up shall be due and payable within 60 days from receipt of
invoice from Public Gas Partners. Any amount owed to the Member as a result of
the true-up shall be credited on the next invoice from Public Gas Partners.
ARTICLE 12
COMPONENTS OF MONTHLY BILLINGS
12.1 Acquisition Costs of Supply. During the period when interim financing
obtained by Public Gas Partners is in effect, the monthly bill from Public Gas
Partners to the Member shall include an amount representing the Member's
Participation Share of all Costs associated with such interim financing. After the
Member has made its Prepayment to Public Gas Partners in accordance with the
notice provided by Public Gas Partners as described in Section 21.2, the monthly
bill from Public Gas Partners to the Member shall no longer contain an element for
Public Gas Partners' interim financing costs, except for any residual expenses or
other interim financing costs that may remain payable.
12.2 Ongoing Capital Development Requirements. The Parties
acknowledge and agree that the acquisition of interests in gas reserves by Public
Gas Partners will carry with it ongoing requirements for capital development
expenditures that will be incurred from time to time. The Member shall be
responsible for paying its Participation Share of all such capital expenditures,
which constitute Costs as defined in this Agreement. The Parties contemplate that
35
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the permanent debt structuring put in place by the Member when it makes its
Prepayment to Public Gas Partners as provided in Section 21.2 may include an
amount for up to three years of estimated capital expenditures as projected by
Public Gas Partners. In addition and otherwise, Public Gas Partners shall build
capital reserves in amounts recommended by the Operating Committee and
included in each annual budget for Gas Supply Pool No.1 approved by the Board of
Directors in accordance with the Bylaws, which shall be funded through Public Gas
Partners' monthly billings to the Member and the Other Members. In addition, the
Parties acknowledge that Public Gas Partners may retain cash from the sale of gas
owned by Public Gas Partners in accordance with policies approved by the
Operating Committee or the Board of Directors, as applicable. Furthermore, the
Parties contemplate that Public Gas Partners may realize proceeds from the sale of
liquids extracted from gas volumes owned by Public Gas Partners. Such amounts
may be retained by Public Gas Partners to meet ongoing capital requirements.
12.3 Gas Supply Pool No.1 Operating Costs. Costs incurred by Public Gas
Partners in operating and maintaining Gas Supply Pool No.1 shall be estimated
annually by the Operating Committee and included in the annual budget approved
by the Board of Directors in accordance with the procedures set forth in Article 11
and the Bylaws. Such projected annual operating and maintenance Costs shall be
billed in monthly increments as part of the monthly billings by Public Gas Partners
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to the Member consistent with the Member's Seasonal Nominations as provided in
Section 5.2.
12.4 Costs of Outside Services. The Parties acknowledge and agree that
Public Gas Partners may incur ongoing and occasional expenses for professional
and other outside services of reservoir engineers, other engineers, accountants,
auditors, attorneys, consultants and others. Such Costs shall be billed to the
Member in accordance with its Participation Share as provided in Section 5.2 as a
component of the monthly billing to the Member.
12.5 Manag-er Fees. The Parties agree that the Manager shall perform the
primary business functions of Public Gas Partners under the Services Contract for
an initial term of five years beginning on the effective date of this Agreement for a
monthly fee as defined in the Services Contract; provided, however, that the
Manager shall not begin to charge a monthly fee until such time as Public Gas
Partners has completed the first supply transaction in Gas Supply Pool No.1. For
so long as the Services Contract is in effect, Public Gas Partners shall include in its
monthly billing to the Member an amount representing the Member's share of such
fees, as follows: (i) the fixed component of the Manager's monthly fee shall be billed
to the Member in accordance with its Participation Share; and (ii) the variable
component of the Manager's monthly fee shall be billed to the Member in
accordance with each MMBtu of gas delivered by Public Gas Partners to the
Member for such month. Following the termination of the Services Contract
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(including any extension of the initial term thereof), any administrative and
management fees paid to a Manager, or any administrative and management Costs
incurred by Public Gas Partners if there is no longer a Manager, shall be included
in the annual budget process described in Sections 11.1 and 11.2 and the Bylaws.
12.6 Conting-ency Reserves. Public Gas Partners shall include target
amounts to be deposited into a contingency reserve account held by Public Gas
Partners in the annual budget approved by the Board of Directors. Such target
amounts shall be billed monthly to the Member in accordance with the Member's
Participation Share and consistent with Section 5.2. Upon the recommendation of
the Operating Committee, the amount of such contingency reserve may be amended
by the Board of Directors, which may direct that any additional reserve amounts
shall be collected through billings to the Member and Other Members over a period
of time of not less than three months.
ARTICLE 13
BILLING AND PAYMENT
13.1 Timing-. On or before the 15th day of each calendar month, Public Gas
Partners shall bill the Member for gas delivered and services rendered during the
preceding calendar month in accordance with Section 5.2. On or before the 25th day
of each calendar month or within 10 days after the date of the billing statement,
whichever is later, the Member shall make payment of the amount due for gas
delivered, services rendered, reimbursement for Costs, and fees owed under this
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Agreement and attributable to service during the preceding calendar month in
accordance with Section 5.2. Payment shall be made by wire transfer to Public Gas
Partners' account number asset forth in Article 24.
13.2 Late Payment. If the Member fails to pay an amount when due,
interest shall accrue from the date when due until paid at a rate equal to 200 basis
points above the prime rate published in The Wall Street Journal, (on the date of
this Agreement, under the heading "Money Rates" and the sub-heading
"Commercial Paper", and described as: "The base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks"), or such successor publication as may
be approved by the Operating Committee, but in no event at a rate greater than
permitted by applicable law.
13.3 Disputed Amounts. If the Member disputes the appropriateness of any
charge or calculation in any billing statement from Public Gas Partners, the
Member shall notify Public Gas Partners within the time provided for payment of
the existence of and basis for such dispute and shall pay all amounts billed by
Public Gas Partners under this Agreement, including any amounts in dispute. In
no event may the Member withhold or offset any payment owed to Public Gas
Partners under this Agreement. If it is ultimately determined that the Member did
not owe the disputed amount, whether by agreement or by a final order of a court of
competent jurisdiction which is not subject to appeal, or because any right to appeal
,
has been waived or the Parties have irrevocably agreed not to appeal, Public Gas
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Partners shall pay the Member that amount plus interest calculated in accordance
with Section 13.2. Either Party may bring legal action concerning payment of any
amounts due under this Agreement.
13.4 Audit Rig-hts. Each Party shall have the right, at its own expense, to
examine and audit at any reasonable time the books, records, measurement data,
and charts of the other Party to the extent necessary to verify the accuracy of any
statement or charges made under or pursuant to this Agreement. Any inaccuracy
discovered shall be corrected by the next month's billing. Neither Party shall be
required to maintain books, records, measurement data, or charts for a period of
more than three years, except as otherwise required by law. Neither Party shall
have a right to question or contest any charge or credit if the other Party is not
notified in writing within two years of the date of the charge or credit in question.
13.5 Status of Payment Obligations. The obligation of the Member to make
payments to Public Gas Partners under this Agreement is a several obligation and
not a joint obligation with that of any of the Other Members. [One or the other of
the following provisions in (i) or (ii) will be included in the Agreement
based upon the status of the Member as a joint action agency or
distribution system.]
(9) The obligation of the Member to make such payments (other
than any termination or unwind payments associated with an interest rate
swap, commodity hedge, or like agreement) shall constitute an operating
40
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expense of the Member's municipal utility system payable solely from the
revenues and other available funds of such system as a cost of purchased
natural gas. Termination or unwind payments associated with an interest
rate swap, commodity hedge, or like agreement shall be payable after any
bonds or other debt obligations of the Member having a first lien on the net
revenues of the Member's system, or as required by the instruments securing
such bonds or other debt obligations. The Member is authorized and
empowered by applicable law to recover the amounts payable by it under this
Agreement through rates and charges established by the Member and
collected from its utility customers; or
(ii) The Member has entered into project-based or requirements
contracts with its Participating Utilities providing for the sale or utilization
of the Gas supply from its Participation Share in Gas Supply Pool No.1 and
for the collection by the Member from such Participating Utilities of revenues
sufficient to enable the Member to pay timely all Costs and all Individual
Costs payable by it to Public Gas Partners under this Agreement. The
Member covenants and agrees that its obligation to make payments to Public
Gas Partners under this Agreement (other than any termination or unwind
payments associated with an interest rate swap, commodity hedge, or like
agreement) shall be paid solely from such revenues as an operating expense
of the Member as a cost of purchased natural gas. Termination or unwind
41
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payments associated with an interest rate swap, commodity hedge, or like
agreement shall be payable after any bonds or other debt obligations of the
Member having a first lien on the net revenues of the Member's system, or as
required by the instruments securing such bonds or other debt obligations.
Such payments shall be made whether or not Gas Supply Pool No.1 or any portion
thereof is acquired, completed, operable, or operating and notwithstanding the
suspension, interruption, interference, reduction or curtailment of deliveries of Gas
under this Agreement for any reason whatsoever, in whole or in part. The
obligation of the Member to make such payments is absolute and unconditional,
shall not be subject to any reduction, whether by offset, counterclaim, or otherwise,
and shall not be conditioned upon the performance by Public Gas Partners under
this Agreement or any other agreement or instrument.
13.6 Nature ofPavment Obligation. The obligation of the Member to make
payments under this Agreement shall not constitute a debt of the Member within
the meaning of any constitutional or statutory provision or limitation or a general
obligation of or pledge of the full faith and credit of the Member, and neither the
Member nor the State/Commonwealth of
or any agency or political
subdivision thereof shall ever be obligated or compelled to levy ad valorem taxes to
make the payments provided for under this Agreement, and the obligation of the
Member to make payments pursuant to this Agreement shall not give rise to or
42
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constitute a lien upon any tangible property of the Member or any tangible property
located within its boundaries or service area.
ARTICLE 14
FAILURE TO PERFORM AND DEFAULT
14.1 Default by Public Gas Partners and Remedies. Public Gas Partners
shall be in default of its obligations under this Agreement (i) if it fails to make a
payment as and when provided for in this Agreement, (ii) if it fails to deliver to the
Member its Summer Share or Winter Share, as applicable, of Gas that is produced
or otherwise delivered from Gas Supply Pool No.1, or (iii) if it breaches any
covenant, agreement or obligation on its part contained in this Agreement. Public
Gas Partners is not obligated to deliver any specific quantity of Gas, but rather is
obligated to deliver the Member's Summer Share or Winter Share, as applicable, of
such Gas as is available at a given point in time. In the event Public Gas Partners
defaults in its obligation to make a payment as and when provided for in this
Agreement, Public Gas Partners shall have five business days after notice to cure
such default. Public Gas Partners shall pay interest at the same rate as is
described in Section 13.2 from the date when payment is due until payment is
made. In the enforcement of its right of recovery, the Member may bring any suit,
action, or proceeding at law or in equity, including mandamus and action for specific
performance, as may be necessary or appropriate to enforce such payment
obligation. In the event of any default by Public Gas Partners in its delivery
43
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obligations to the Member or under any other covenant, agreement or obligation on
its part contained in this Agreement, the Member's sole remedy for such default
shall be limited to mandamus, injunction, action for specific performance, or any
other available equitable remedy as may be necessary or appropriate to enforce
such covenant, agreement or obligation. In no event may the Member withhold or
offset any payment owed to Public Gas Partners under this Agreement.
14.2 Default bv the Member. Each of the following shall constitute a
default by the Member under this Agreement:
(a) failure of the Member to make to Public Gas Partners any of the
payments (other than a Prepayment under Section 21.2) for which provision is
made in this Agreement within five business days after the due date of any such
payment; or
(b) failure by the Member to observe any of the covenants,
agreements, or obligations on its part contained in this Agreement and failure to
remedy the same for a period of 30 days after written notice specifying such failure
and requiring it to be remedied shall have been given by Public Gas Partners; or
(c) bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings, including without limitation proceedings under Title 11,
Chapter 9, United States Code, or other proceedings for relief under any federal or
state bankruptcy law or similar law for the relief of debtors, are instituted by or
44
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(c) Quorum and Voting-. Two-thirds of the members of the
Operating Committee shall constitute a quorum for the transaction of business. A
vote of a majority of the Operating Committee members present shall be necessary
for action in all matters before the Operating Committee, except as follows: any
Operating Committee member may call for weighted voting in accordance with the
terms of Section 6.7(b) of the Bylaws or any successor provision thereto, or, in the
event that the Bylaws are hereafter amended to eliminate weighted voting, any
Operating Committee member may call for weighted voting under the procedure for
weighted voting set forth in the Bylaws and the effective date of this Agreement
following a decision to undertake a particular transaction as a component of Gas
Supply Pool No.1, and a unanimous vote of all Operating Committee members is
necessary to add a new Member of Public Gas Partners to Gas Supply Pool No.1.
ARTICLE 5
CHARACTER OF OBLIGATIONS
5.1 Sale and Delivery of Gas or Cash. Public Gas Partners shall each day
during the term of this Agreement sell and deliver and the Member shall purchase
and receive its Summer Share or Winter Share, as applicable, of the Gas produced
or otherwise delivered from Public Gas Partners' interests in Gas Supply Pool No. 1
for the Summer Season or the Winter Season, as applicable. The Parties
acknowledge and agree that Public Gas Partners may receive cash from the sale of
Gas produced from its interests in Gas Supply Pool No.1 from time to time, and
25
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that as a result the Member may receive its applicable Summer Share or Winter
Share of such cash received by Public Gas Partners in lieu of physical supply.
Public Gas Partners will deliver physical Gas to the Member as all or part of the
Member's Participation Share of Gas produced or otherwise delivered from Public
Gas Partners' interests comprising Gas Supply Pool No.1 if such Gas or
arrangements with respect thereto are available, and cash if such physical Gas or
arrangements are not available.
5.2 Payment of Costs. The Member shall be billed by and shall pay to
Public Gas Partners its Participation Share of all Costs not billed as Individual
Costs, plus 100% of all Individual Costs allocated to it and not paid as part of its
Participation Share of Costs, without regard to the quantity of Gas produced or
delivered from Gas Supply Pool No.1 or any limitation set forth in Article 6 on the
Member's obligation to take physical Gas, and whether or not any Gas is produced
or otherwise delivered from Gas Supply Pool No.1 during any month or period of
months during the term of this Agreement. The Member's bills will be adjusted
during each month of the Summer Season and Winter Season, as applicable, such
that the Member pays its proportionate share corresponding with the Member's
Seasonal Nominations. Public Gas Partners shall develop an average cost per
MMBtu of Gas delivered for purposes of passing through Costs to all Members
participating in Gas Supply Pool No.1, with such average cost trued-up to actuals
26
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at such times as may be determined by the Operating Committee but not less
frequently than annually.
5.3 Sharing- of Costs. The Member's initial proportionate entitlement to
Gas and proportionate share of Costs for purposes of Article 5 and for all other
purposes under this Agreement is determined by its Participation Share. The
Parties acknowledge and agree that the Member's Participation Share may change
based on other provisions of this Agreement, including without limitation the
addition of one or more new Members to Gas Supply Pool No.1 pursuant to Section
4.4(c) and the Bylaws or a reduction in Nomination Quantities by the Member or by
Other Members to the level of quantities already acquired by Public Gas Partners
at any point in time pursuant to Article 22.
5.4 True-Ups. The Participation Share is an annual percentage, reflecting
the intent of this Agreement that the Member shall share in the benefits and
burdens of Gas Supply Pool No.1 on the basis of its relative Annual Nominated
Quantity as a percentage of the total Annual Nominated Quantities of all of the
Members, notwithstanding the delivery of Gas in accordance with Seasonal
Nominations and the billing of Costs based on an average cost per MMBtu
determined through the annual budget process, all as provided in this Agreement.
Accordingly, it is the intent of the Parties that the annual true-up to actuals
described in Section 5.2 shall be made pursuant to policies and standards
established by the Operating Committee (which shall also review and approve the
27
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annual true-up amounts to be paid to or by the Members) to ensure that the
Member and each of the Other Members receives its fair share of the value of Gas
Supply Pool No.1 and pays its fair share of the Costs of Gas Supply Pool No.1 as
defined by its Participation Share.
5.5 Gas Supplies Held bv Public Gas Partners. Public Gas Partners shall
own and hold the entirety of the Gas supplies in Gas Supply Pool No.1 subject to its
obligation to deliver to the Member its Summer Share and Winter Share, as
applicable, of the Gas produced from or otherwise obtained as part of Gas Supply
Pool No.1, including but not limited to Gas produced or otherwise obtained after
retirement of the short-term bonds to be issued or other method of interim financing
to be obtained by Public Gas Partners for the acquisition of all or any component of
Gas Supply Pool No.1 and after the retirement of any bonds or other obligations
issued by the Member to finance the Prepayment for Gas supplies purchased by the
Member from Public Gas Partners for delivery from Gas Supply Pool No.1.
Without limiting the generality of the foregoing, in the event Public Gas Partners
sells all or any portion of its ownership interests in the reserves or other
components of Gas Supply Pool No.1 during the term of this Agreement and
determines that all or a portion of the proceeds of such sale shall not (i) be used to
buy replacement properties or other supplies, (ii) be reinvested in production, or (iii)
be held in cash reserves, the Member shall realize its Participation Share of any
such proceeds not so used in the net benefit (or costs) of such sale.
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ARTICLE 6
QUANTITIES
Public Gas Partners shall sell to the Member and the Member shall purchase
from Public Gas Partners the Member's Summer Share or Winter Share of the
production or other Gas supplies obtained by and available from Public Gas
Partners in Gas Supply Pool No.1 each day during the term of this Agreement, up
to 100% of the Nominated Quantity. The Parties acknowledge and agree that the
Seasonal Nominations embodied in this Agreement are intended to bring together
the Members' seasonally complementary loads and that Public Gas Partners may
determine to meet the Annual Nominated Quantities of the Members through the
acquisition of Gas supplies designed to meet the peak season Nominated Quantities,
or through the acquisition of Gas Supplies designed to meet the Members' annual
average day quantities, or through some other means, as recommended by the
Operating Committee. For example, if Public Gas Partners determines to meet the
Annual Nominated Quantities of the Members through the acquisition of long-term
Gas supplies in accordance with the annual average day nominations of the
Members, Public Gas Partners in its discretion may meet the Members' aggregate
Seasonal Nominations by selling a portion of its supplies into the market during the
valley season and purchasing a portion of its supplies from the market during the
peak season so as to effect a seasonal exchange of quantities. Public Gas Partners
may sell production or other Gas supplies obtained or controlled by Public Gas
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Partners in Gas Supply Pool No.1 in excess of 100% of total Nominated Quantities
to Members under separate agreements or to third parties. The agreement of the
Member contained in this Article 6 to take its applicable share of Gas supplies up to
100% of the Nominated Quantity shall not limit its obligation to pay its
Participation Share of all Costs not billed as Individual Costs plus all Individual
Costs billed to it, as provided in Section 5.2.
ARTICLE 7
POINTS OF DELIVERY
The gas purchased and sold under this Agreement shall be delivered by
Public Gas Partners to the Member at the Point of Delivery, or at such other points
as Public Gas Partners and the Member shall mutually agree upon from time to
time, as specifically described in Exhibit C.
ARTICLE 8
TITLE
Title to the gas delivered under this Agreement shall pass from Public Gas
Partners to and vest in the Member at the Point of Delivery. As between the
Parties, Public Gas Partners shall be deemed to be in exclusive control and
possession of gas to be delivered under this Agreement prior to the time of its
delivery to the Member, and the Member shall be deemed to be in exclusive control
and possession of gas delivered under this Agreement thereafter.
ARTICLE 9
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MEASUREMENT AND SPECIFICATIONS
9.1 Measurement. Gas sold under this Agreement shall be measured
through existing measurement facilities at the Point of Delivery. The unit of
volume for measurement of gas delivered under this Agreement shall be one cubic
foot of gas at a base temperature of sixty degrees Fahrenheit (600 F) at an absolute
pressure of 14.73 pounds per square inch. The sales unit of the gas shall be one
MMBtu. The conversion from Mcf to MMBtu shall be performed according to the
Btu content of the gas as determined by the operator of the measurement
equipment at the Point of Delivery on a dry basis.
9.2 Quality Specifications. All gas delivered under this Agreement shall
be merchantable and shall conform to the minimum quality specifications and
heating value specified in the FERC Gas Tariffs of the interstate pipelines
interconnecting at the Point of Delivery.
ARTICLE 10
HEDGING
The Parties acknowledge and agree that they may enter into alternate price
agreements (commodity swaps, options, etc.) with third party counterparties to
hedge commodity price risks related to purchase, sale, production or storage from
Gas Supply Pool No.1, or may enter into financial derivatives transactions to hedge
interest rate risks associated with the financing thereof, and that such alternate
price agreements and financial derivatives transactions may be undertaken by
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Public Gas Partners in its own name, by Public Gas Partners for the Member and
Other Members participating in Gas Supply Pool No.1 at their request, or in a
combination thereof. Any such alternate price agreements shall be used only for
purposes of price risk management and any such financial derivatives transactions
shall be used only for purposes of managing debt service on outstanding borrowings
and debt of Public Gas Partners. Any such agreements and transactions
undertaken by Public Gas Partners in its own name or for the Member or Other
Members at their request may be allocated and billed as Individual Costs as
determined by the Operating Committee at the time such agreements and
transactions are entered into, and may only be undertaken in accordance with
hedging and risk management policies established by the Operating Committee.
The initial hedging and risk management policy shall be substantially in the form
set forth in Exhibit H. The Operating Committee shall have the right to amend the
policy from time to time.
ARTICLE 11
ANNUAL BUDGET PROCESS AND PRICING OF DELIVERIES
11.1 Annual Budg-et Process For Pool-Specific Costs. Public Gas Partners
shall prepare a budget annually for all Costs of Public Gas Partners that it
identifies as being directly related to Gas Supply Pool No.1. Such budget shall be
reviewed and considered by the Operating Committee, and following approval of the
Operating Committee shall be presented by the Operating Committee to the Board
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of Directors by no later than 60 days before the beginning of each fiscal year of
Public Gas Partners.
11.2 Annual Budg-et Process For Non-Pool-Specific Costs. Public Gas
Partners may establish one or more additional Projects during the term of this
Agreement. Public Gas Partners will incur costs and expenses that may
appropriately be directly assigned to such additional gas supply pool or pools or
other Projects and not to Gas Supply Pool No.1, or that, while not directly
assignable, appropriately should be allocated among gas supply pools or other
Projects, including Gas Supply Pool No.1. Before the beginning of each fiscal year,
Public Gas Partners shall prepare and approve a budget for Gas Supply Pool No.1
that includes all Costs that are not directly assigned to Gas Supply Pool No.1 but
are allocated to Gas Supply Pool No.1.
11.3 Budg-et Amendments. The annual budgets described in Sections 11.1
and 11.2 may be amended from time to time during the fiscal year by requisite
action of the Board of Directors.
11.4 Allocation of Pool-Specific Costs to the Member. The Member shall
bear its Participation Share of the Costs assigned and allocated to Gas Supply Pool
No.1 as described in Section 11.1 and billed in accordance with Section 5.2.
11.5 Allocation of General Costs to the Member. The Member shall bear its
Participation Share of all general Costs of Public Gas Partners that are not directly
assigned to Gas Supply Pool No.1 but rather are allocated to Gas Supply Pool No.1
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and to one or more other gas supply pools or other Projects as described in Section
11.2 and billed in accordance with Section 5.2.
11.6 Allocation of Individual Costs. The Member shall pay all Individual
Costs allocated to it by the Operating Committee and shall pay its proportionate
share of all Individual Costs allocated by the Operating Committee to it and one or
more of the Other Members but not all of the Members, as such Individual Costs are
billed in accordance with Section 5.2.
11.7 Categ-ories of Costs. The annual budget will include Costs in the
following categories: acquisition costs; developmental costs; operating costs; outside
services costs; administrative fees; and other costs. A breakdown of the types of
costs and expenses included in each of those categories is set forth in Exhibit D.
The compilation of the budgeted Costs in each of those categories will result in the
calculation of an average cost of gas per MMBtu. Public Gas Partners will develop
an average cost per MMBtu for the purpose of billing the Member for its
Participation Share of Costs (other than Individual Costs) in a manner consistent
with the Member's Seasonal Nominations as provided in Section 5.2. Individual
Costs shall be billed separately in a manner established by the Operating
Committee. The average cost per MMBtu may include amounts designed to fund or
maintain cash reserves determined necessary and reasonable by the Operating
Committee. Public Gas Partners shall perform a true-up of actual Costs incurred as
compared to amounts billed to all Members within 120 days of the end of each fiscal
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year, in a manner consistent with Section 5.4. Any amount due from the Member
as a result of the true-up shall be due and payable within 60 days from receipt of
invoice from Public Gas Partners. Any amount owed to the Member as a result of
the true-up shall be credited on the next invoice from Public Gas Partners.
ARTICLE 12
COMPONENTS OF MONTHLY BILLINGS
12.1 Acquisition Costs of Supply. During the period when interim financing
obtained by Public Gas Partners is in effect, the monthly bill from Public Gas
Partners to the Member shall include an amount representing the Member's
Participation Share of all Costs associated with such interim financing. After the
Member has made its Prepayment to Public Gas Partners in accordance with the
notice provided by Public Gas Partners as described in Section 21.2, the monthly
bill from Public Gas Partners to the Member shall no longer contain an element for
Public Gas Partners' interim financing costs, except for any residual expenses or
other interim financing costs that may remain payable.
12.2 Ongoing- Capital Development Requirements. The Parties
acknowledge and agree that the acquisition of interests in gas reserves by Public
Gas Partners will carry with it ongoing requirements for capital development
expenditures that will be incurred from time to time. The Member shall be
responsible for paying its Participation Share of all such capital expenditures,
which constitute Costs as defined in this Agreement. The Parties contemplate that
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the permanent debt structuring put in place by the Member when it makes its
Prepayment to Public Gas Partners as provided in Section 21.2 may include an
amount for up to three years of estimated capital expenditures as projected by
Public Gas Partners. In addition and otherwise, Public Gas Partners shall build
capital reserves in amounts recommended by the Operating Committee and
included in each annual budget for Gas Supply Pool No.1 approved by the Board of
Directors in accordance with the Bylaws, which shall be funded through Public Gas
Partners' monthly billings to the Member and the Other Members. In addition, the
Parties acknowledge that Public Gas Partners may retain cash from the sale of gas
owned by Public Gas Partners in accordance with policies approved by the
Operating Committee or the Board of Directors, as applicable. Furthermore, the
Parties contemplate that Public Gas Partners may realize proceeds from the sale of
liquids extracted from gas volumes owned by Public Gas Partners. Such amounts
may be retained by Public Gas Partners to meet ongoing capital requirements.
12.3 Gas Supply Pool No.1 Operating- Costs. Costs incurred by Public Gas
Partners in operating and maintaining Gas Supply Pool No.1 shall be estimated
annually by the Operating Committee and included in the annual budget approved
by the Board of Directors in accordance with the procedures set forth in Article 11
and the Bylaws. Such projected annual operating and maintenance Costs shall be
billed in monthly increments as part of the monthly billings by Public Gas Partners
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to the Member consistent with the Member's Seasonal Nominations as provided in
Section 5.2.
12.4 Costs of Outside Services. The Parties acknowledge and agree that
Public Gas Partners may incur ongoing and occasional expenses for professional
and other outside services of reservoir engineers, other engineers, accountants,
auditors, attorneys, consultants and others. Such Costs shall be billed to the
Member in accordance with its Participation Share as provided in Section 5.2 as a
component of the monthly billing to the Member.
12.5 Manag-er Fees. The Parties agree that the Manager shall perform the
primary business functions of Public Gas Partners under the Services Contract for
an initial term of five years beginning on the effective date of this Agreement for a
monthly fee as defined in the Services Contract; provided, however, that the
Manager shall not begin to charge a monthly fee until such time as Public Gas
Partners has completed the first supply transaction in Gas Supply Pool No.1. For
so long as the Services Contract is in effect, Public Gas Partners shall include in its
monthly billing to the Member an amount representing the Member's share of such
fees, as follows: (i) the fixed component of the Manager's monthly fee shall be billed
to the Member in accordance with its Participation Share; and (ii) the variable
component of the Manager's monthly fee shall be billed to the Member in
accordance with each MMBtu of gas delivered by Public Gas Partners to the
Member for such month. Following the termination of the Services Contract
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(including any extension of the initial term thereof), any administrative and
management fees paid to a Manager, or any administrative and management Costs
incurred by Public Gas Partners if there is no longer a Manager, shall be included
in the annual budget process described in Sections 11.1 and 11.2 and the Bylaws.
12.6 Contingency Reserves. Public Gas Partners shall include target
amounts to be deposited into a contingency reserve account held by Public Gas
Partners in the annual budget approved by the Board of Directors. Such target
amounts shall be billed monthly to the Member in accordance with the Member's
Participation Share and consistent with Section 5.2. Upon the recommendation of
the Operating Committee, the amount of such contingency reserve may be amended
by the Board of Directors, which may direct that any additional reserve amounts
shall be collected through billings to the Member and Other Members over a period
of time of not less than three months.
ARTICLE 13
BILLING AND PAYMENT
13.1 Timing. On or before the 15th day of each calendar month, Public Gas
Partners shall bill the Member for gas delivered and services rendered during the
preceding calendar month in accordance with Section 5.2. On or before the 25th day
of each calendar month or within 10 days after the date of the billing statement,
whichever is later, the Member shall make payment of the amount due for gas
delivered, services rendered, reimbursement for Costs, and fees owed under this
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Agreement and attributable to service during the preceding calendar month in
accordance with Section 5.2. Payment shall be made by wire transfer to Public Gas
Partners' account number asset forth in Article 24.
13.2 Late Payment. If the Member fails to pay an amount when due,
interest shall accrue from the date when due until paid at a rate equal to 200 basis
points above the prime rate published in The Wall Street Journal, (on the date of
this Agreement, under the heading "Money Rates" and the sub-heading
"Commercial Paper", and described as: "The base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks"), or such successor publication as may
be approved by the Operating Committee, but in no event at a rate greater than
permitted by applicable law.
13.3 Disputed Amounts. If the Member disputes the appropriateness of any
charge or calculation in any billing statement from Public Gas Partners, the
Member shall notify Public Gas Partners within the time provided for payment of
the existence of and basis for such dispute and shall pay all amounts billed by
Public Gas Partners under this Agreement, including any amounts in dispute. In
no event may the Member withhold or offset any payment owed to Public Gas
Partners under this Agreement. If it is ultimately determined that the Member did
not owe the disputed amount, whether by agreement or by a final order of a court of
competent jurisdiction which is not subject to appeal, or because any right to appeal
has been waived or the Parties have irrevocably agreed not to appeal, Public Gas
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Partners shall pay the Member that amount plus interest calculated in accordance
with Section 13.2. Either Party may bring legal action concerning payment of any
amounts due under this Agreement.
13.4 Audit Rig-hts. Each Party shall have the right, at its own expense, to
examine and audit at any reasonable time the books, records, measurement data,
and charts of the other Party to the extent necessary to verify the accuracy of any
statement or charges made under or pursuant to this Agreement. Any inaccuracy
discovered shall be corrected by the next month's billing. Neither Party shall be
required to maintain books, records, measurement data, or charts for a period of
more than three years, except as otherwise required by law. Neither Party shall
have a right to question or contest any charge or credit if the other Party is not
notified in writing within two years of the date of the charge or credit in question.
13.5 Status of Payment Obligations. The obligation of the Member to make
payments to Public Gas Partners under this Agreement is a several obligation and
not a joint obligation with that of any of the Other Members. [One or the other of
the following provisions in (i) or (ii) will be included in the Agreement
based upon the status of the Member as a joint action agency or
distribution system.]
(9) The obligation of the Member to make such payments (other
than any termination or unwind payments associated with an interest rate
swap, commodity hedge, or like agreement) shall constitute an operating
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expense of the Member's municipal utility system payable solely from the
revenues and other available funds of such system as a cost of purchased
natural gas. Termination or unwind payments associated with an interest
rate swap, commodity hedge, or like agreement shall be payable after any
bonds or other debt obligations of the Member having a first lien on the net
revenues of the Member's system, or as required by the instruments securing
such bonds or other debt obligations. The Member is authorized and
empowered by applicable law to recover the amounts payable by it under this
Agreement through rates and charges established by the Member and
collected from its utility customers; or
(ii) The Member has entered into project-based or requirements
contracts with its Participating Utilities providing for the sale or utilization
of the Gas supply from its Participation Share in Gas Supply Pool No.1 and
for the collection by the Member from such Participating Utilities of revenues
sufficient to enable the Member to pay timely all Costs and all Individual
Costs payable by it to Public Gas Partners under this Agreement. The
Member covenants and agrees that its obligation to make payments to Public
Gas Partners under this Agreement (other than any termination or unwind
payments associated with an interest rate swap, commodity hedge, or like
agreement) shall be paid solely from such revenues as an operating expense
of the Member as a cost of purchased natural gas. Termination or unwind
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payments associated with an interest rate swap, commodity hedge, or like
agreement shall be payable after any bonds or other debt obligations of the
Member having a first lien on the net revenues of the Member's system, or as
required by the instruments securing such bonds or other debt obligations.
Such payments shall be made whether or not Gas Supply Pool No.1 or any portion
thereof is acquired, completed, operable, or operating and notwithstanding the
suspension, interruption, interference, reduction or curtailment of deliveries of Gas
under this Agreement for any reason whatsoever, in whole or in part. The
obligation of the Member to make such payments is absolute and unconditional,
shall not be subject to any reduction, whether by offset, counterclaim, or otherwise,
and shall not be conditioned upon the performance by Public Gas Partners under
this Agreement or any other agreement or instrument.
13.6 Nature of Payment Obligation. The obligation of the Member to make
payments under this Agreement shall not constitute a debt of the Member within
the meaning of any constitutional or statutory provision or limitation or a general
obligation of or pledge of the full faith and credit of the Member, and neither the
Member nor the State/Commonwealth of
or any agency or political
subdivision thereof shall ever be obligated or compelled to levy ad valorem taxes to
make the payments provided for under this Agreement, and the obligation of the
Member to make payments pursuant to this Agreement shall not give rise to or
42
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constitute a lien upon any tangible property of the Member or any tangible property
located within its boundaries or service area.
ARTICLE 14
FAILURE TO PERFORM AND DEFAULT
14.1 Default by Public Gas Partners and Remedies. Public Gas Partners
shall be in default of its obligations under this Agreement (i) if it fails to make a
payment as and when provided for in this Agreement, (ii) if it fails to deliver to the
Member its Summer Share or Winter Share, as applicable, of Gas that is produced
or otherwise delivered from Gas Supply Pool No.1, or (iii) if it breaches any
covenant, agreement or obligation on its part contained in this Agreement. Public
Gas Partners is not obligated to deliver any specific quantity of Gas, but rather is
obligated to deliver the Member's Summer Share or Winter Share, as applicable, of
such Gas as is available at a given point in time. In the event Public Gas Partners
defaults in its obligation to make a payment as and when provided for in this
Agreement, Public Gas Partners shall have five business days after notice to cure
such default. Public Gas Partners shall pay interest at the same rate as is
described in Section 13.2 from the date when payment is due until payment is
made. In the enforcement of its right of recovery, the Member may bring any suit,
action, or proceeding at law or in equity, including mandamus and action for specific
performance, as may be necessary or appropriate to enforce such payment
obligation. In the event of any default by Public Gas Partners in its delivery
43
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obligations to the Member or under any other covenant, agreement or obligation on
its part contained in this Agreement, the Member's sole remedy for such default
shall be limited to mandamus, injunction, action for specific performance, or any
other available equitable remedy as may be necessary or appropriate to enforce
such covenant, agreement or obligation. In no event may the Member withhold or
offset any payment owed to Public Gas Partners under this Agreement.
14.2 Default by the Member. Each of the following shall constitute a
default by the Member under this Agreement:
(a) failure of the Member to make to Public Gas Partners any of the
payments (other than a Prepayment under Section 21.2) for which provision is
made in this Agreement within five business days after the due date of any such
payment; or
(b) failure by the Member to observe any of the covenants,
agreements, or obligations on its part contained in this Agreement and failure to
remedy the same for a period of 30 days after written notice specifying such failure
and requiring it to be remedied shall have been given by Public Gas Partners; or
(c) bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings, including without limitation proceedings under Title 11,
Chapter 9, United States Code, or other proceedings for relief under any federal or
state bankruptcy law or similar law for the relief of debtors, are instituted by or
44
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against the Member and, if instituted against the Member, said proceedings are
consented to or are not dismissed within 30 days after such institution.
14.3 Continuing- Oblig-ation of the Member. In the event of any default
referred to in Section 14.2, the Member shall not be relieved of its liability for
payment of any amounts in default or its failure to observe its covenants,
agreements, and obligations under this Agreement, and Public Gas Partners shall
have the right to recover from the Member any amount in default. In enforcement
of any such right of recovery, Public Gas Partners may bring any suit, action, or
proceeding at law or in equity, including without limitation mandamus and action
for specific performance, as may be necessary or appropriate to enforce any
covenant, agreement, or obligation of the Member under this Agreement or the
obligation of the Member to make any payment for which provision is made in this
Agreement.
14.4 Rig-ht of Public Gas Partners to Suspend Service. In addition to
proceeding with its rights against the Member upon default pursuant to Section
14.3, Public Gas Partners in its sole discretion, upon not less than five business
days' written notice to the Member, may suspend the Member's right to receive Gas
and other consideration and services applicable to its Participation Share under this
Agreement and temporarily cease and discontinue providing delivery of all or any
portion of Gas otherwise deliverable to the Member under this Agreement for a
period of time within Public Gas Partners' discretion, until full satisfaction by the
45
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Member of its obligations under this Agreement. In connection with its
determination to discontinue providing delivery of all or any portion of the Gas
supplies otherwise deliverable to the Member, Public Gas Partners shall take into
account, among such other matters as Public Gas Partners in its sole discretion may
deem relevant, the amounts and due dates of its payment obligations under its
financial and contractual obligations with respect to Gas Supply Pool No.1 and the
funds, revenues, and reserves available to Public Gas Partners to enable it to meet
such obligations. Any such discontinuance and suspension of deliveries to the
Member shall not terminate, reduce, modify, or relieve the Member's obligations
and liabilities under this Agreement. Upon any such discontinuance and
suspension of deliveries, Public Gas Partners in its sole discretion may take any and
all actions it deems necessary pending the cure of such default or the termination of
the Member's Participation Share as provided in Section 14.5 to address the impact
of such default, including without limitation the short-term marketing of any Gas
otherwise deliverable to the Member and the application of available reserves.
14.5 Termination and Transfer of the Member's Participation Share
Following Default. Public Gas Partners and the Member acknowledge that a
default by the Member or by any of the Other Members under the Production
Sharing Agreements could reduce the revenues available to Public Gas Partners
which are necessary for Public Gas Partners to meet its financial and contractual
obligations with respect to Gas Supply Pool No.1, either on a timely basis or at all,
46
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that the ability of Public Gas Partners to deliver Gas, other benefits, and services to
the Members from Gas Supply Pool No.1 will be materially and adversely affected,
and accordingly that the interests of all Members will be materially and adversely
harmed. Accordingly, the Parties agree that Public Gas Partners shall have the
right to terminate the Member's Participation Share at any time following the
suspension of service to the Member under Section 14.4. The termination of the
Member's Participation Share may occur only upon action by the Board of Directors,
following a recommendation of such termination by the Operating Committee, at a
duly called and noticed meeting of the Board of Directors at which the Member shall
have the right to make a presentation to the Board of Directors before the Board of
Directors votes on the question of such termination. In the event the Board of
Directors determines to terminate the Member's Participation Share, the Member
shall be given written notice of termination, to occur not sooner than five days
following such notice. The provisions of this Section 14.5 and of Section 14.6 are
intended by the Parties to provide a means to ensure the sufficiency of revenues to
Public Gas Partners following a default by the Member or one or more of the Other
Members under the Production Sharing Agreements by providing for the
termination and reallocation of the defaulting Member's Participation Share upon a
determination by Public Gas Partners to follow that course. Public Gas Partners
shall attempt to mitigate the impact of any such reallocation on the non-defaulting
Members. The Member agrees that the provisions of this Section 14.5 and of
47
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Section 14.6 are reasonable and necessary in order to achieve the benefits of its
joint and cooperative undertaking with the Other Members set forth in the
Production Sharing Agreements with respect to Gas Supply Pool No. 1.
14.6 Step-Up Requirements. In the event of a default by anyone or more of
the Other Members under their Production Sharing Agreements, Public Gas
Partners, in addition to the remedies and actions provided elsewhere in Article 14:
(a) May require the Member and each of the non-defaulting Other
Members to pay, in addition to the Costs and Individual Costs otherwise due under
the Production Sharing Agreements, an additional amount equal to the defaulting
Other Member's unpaid Costs multiplied by a fraction, the numerator of which is
the Member's Participation Share and the denominator of which is the aggregate
Participation Shares of the non-defaulting Other Members; provided, however, that
such increase (i) shall not exceed 25% of Costs otherwise due from the Member
under this Agreement in accordance with its Participation Share and (ii) shall not
extend for a period of more than three months; and
(b) Shall, in the event the remedies and actions provided in Article
14 do not generate revenues necessary for Public Gas Partners to meet its financial
and contractual obligations with respect to Gas Supply Pool No.1 and in any event
upon the termination of one or more of the Other Members' Participation Shares
pursuant to Section 14.5, require the Member to increase its Participation Share on a
pro rata basis by an amount necessary to absorb the Participation Share or Shares of
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the defaulting Member or Members; provided, however, that the aggregate amount of
any and all such Participation Share increases under this Section 14.6 that may be
allocated to the Member during the term of this Agreement shall never exceed 25% of
the Member's Participation Share as set forth in the original Exhibit A (as it existed
on the effective date of this Agreement). Any such reallocation of the Participation
Share of one or more defaulting Other Members to the Member and to non-defaulting
Other Members by Public Gas Partners may take place only following the
termination of a defaulting Other Member's Participation Share as provided in
Section 14.5. Upon approval by Public Gas Partners of any such reallocation, Public
Gas Partners within five days shall notify the Member of its revised Participation
Share and the revised Participation Shares of the Other Members, in the form of
notice set forth in Exhibit I. Nothing in this Section 14.6 or otherwise in this
Agreement shall preclude the Member and any of the Other Members from proposing
a reallocation of their revised Participation Shares following such notice. Public Gas
Partners in its sole discretion may agree to any such proposed reallocation, in which
event it shall notify all Members, in the form of notice set forth in Exhibit I, of their
revised Participation Shares within five days of such approval. Public Gas Partners
shall exercise all of its rights against all defaulting Other Members, and all such
defaulting Other Members shall remain liable to Public Gas Partners and the
Member and non-defaulting Other Members for Costs incurred and damages suffered
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by them in connection with the actions taken with respect to the Participation Shares
of such defaulting Other Members as provided for in this Section 14.6.
14.7 Termination of the Member's Participation Share Following-
Prepayment. In the event that the Member has made a Prepayment under Section
21.2 at the time the Member's Participation Share is terminated pursuant to
Section 14.5, Public Gas Partners, upon the expiration of the term of the Other
Members' Production Sharing Agreements and as part of the winding up
arrangements under such Production Sharing Agreements, shall repay to the
Member the depreciated net book value of the Member's Participation Share at the
date of the Member's default, as determined by the books and records of Public Gas
Partners, less any unrecovered Costs of Public Gas Partners resulting from the
Member's default, and net of any other Costs applicable to the Member's
Participation Share, without interest (the "Defaulting Obligation"), from the
amounts, if any, remaining after the payment of all of Public Gas Partners' other
financial and contractual obligations with respect to Gas Supply Pool No.1 (the
"Non-Defaulting Obligations"). The Member acknowledges and agrees that, with
respect to the payment provided for in this Section 14.7: (i) satisfaction of the Non-
Defaulting Obligations will continue on schedule, so that payment of the Defaulting
Obligation may be many years in the future, (ii) the Member shall have no right to
demand acceleration of the Defaulting Obligation, and (iii) the payment of the Non-
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Defaulting Obligations may exhaust the assets of Gas Supply Pool No.1, leaving
nothing to satisfy the Defaulting Obligation.
14.8 Abandonment of Remedy. In the event any proceeding undertaken on
account of any default shall have been discontinued or abandoned for any reason,
the parties to such proceeding shall be restored to their former positions and rights
under this Agreement, respectively, and all rights, remedies, powers, and duties of
Public Gas Partners and the Member shall continue as though no such proceeding
had been taken.
14.9 Waiver of Default. Any waiver at any time by either Public Gas
Partners or the Member of its rights with respect to any default of the other Party,
or with respect to any other matter arising in connection with this Agreement, shall
not be a waiver with respect to any subsequent default, right, or matter.
ARTICLE 15
FORCE MAJEURE
15.1 Suspension ofOblig-ations. In the event either Party is rendered
unable, wholly or in part, by Force Majeure as defined in Section 15.3 to carry out
its obligations under this Agreement, other than the obligation of the Member to
make payments due to Public Gas Partners under this Agreement, which is an
unconditional obligation, it is agreed that the obligations of such Party, so far as
they are affected by Force Majeure, shall be suspended during the continuation of
such inability to carry out its obligations caused by Force Majeure, but for no longer
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period. The Party affected by Force Majeure shall remedy the Force Majeure
condition to the extent possible with all reasonable dispatch; provided, however,
that neither Party shall be required against its will to settle or otherwise adjust any
labor dispute. The Party claiming Force Majeure shall give notice to the other
Party, together with a detailed description of the Force Majeure event which
renders the Party unable to carry out its obligations, by telephone as soon as
reasonably possible after the occurrence of the Force Majeure event, followed by a
facsimile transmission as soon as reasonably possible thereafter.
15.2 Force Maieure in the Context of this Ag-reement. This Agreement
provides that the Member is responsible for its Participation Share of the Costs and
is entitled to receive its Participation Share of the benefits associated with the
production and delivery of Gas acquired by Public Gas Partners under Gas Supply
Pool No.1. Accordingly, Public Gas Partners' obligation to deliver Gas to the
Member under this Agreement is limited by the extent to which Gas is available or
benefits are otherwise received by Public Gas Partners from its interests or rights
under Gas Supply Pool No.1, and the Member agrees that any reduction in such
quantities below any projected or expected level that might otherwise be interpreted
as a violation of Public Gas Partners' obligations under this Agreement shall be
deemed an event of Force Majeure under this Agreement, unless such reduction is
the result of willful misconduct or gross negligence on the part of Public Gas
Partners.
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15.3 Force Maieure Defined. The term "Force Majeure" means acts of God;
strikes, lockouts, or other industrial disturbances; acts of the public enemy; wars,
blockades, insurrections, or riots; epidemics; landslides, lightning, earthquakes,
storms, floods, hurricanes, tornadoes, or washouts; civil disturbances or arrests or
restraints of governments and peoples; regulatory actions; explosions, breakage, or
accidents to necessary machinery or lines of pipe; the unanticipated necessity for
maintenance of or making repairs or alterations to necessary machinery or lines of
pipe; freezing of wells or lines of pipe associated with the production, gathering, or
delivery of Gas under Gas Supply Pool No.1; partial or entire failure of wells under
Gas Supply Pool No.1; curtailment or interruption of firm transportation necessary
to the delivery of Gas; and any other causes, whether of the kind herein enumerated
or otherwise, not within the reasonable control of the Party claiming Force Majeure
and which by the exercise of due diligence such Party is or would have been unable
to prevent or overcome.
ARTICLE 16
EXCLUSIVITY AND AUTHORIZATION FOR ACQUISITIONS
Public Gas Partners is authorized to pursue acquisitions under Gas Supply
Pool No.1 up to the Annual Nominated Quantity for the Member for a period of 36
months from the effective date of this Agreement; provided, however, that the
Member may reduce its Annual Nominated Quantity to the level already acquired
by Public Gas Partners under Gas Supply Pool No.1, as described in Article 22, on
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not less than 120 days' written notice. No other reduction in the Annual Nominated
Quantity by the Member shall be permitted for any reason whatsoever. The
Member agrees that it shall pursue acquisitions of working or royalty interests in
Gas reserves exclusively through Public Gas Partners for a period of 36 months
from the effective date of this Agreement; provided, however, that the Member is
free to pursue the acquisition of working or royalty interest transactions on its own
so long as it offers any such transaction to the Operating Committee. The Member
shall present any such transaction to the Operating Committee at the same time it
presents such transaction to its governing body. The Operating Committee shall be
given the same period of time to review any such transaction and reach a
determination as to whether or not to approve the transaction as part of Gas Supply
Pool No.1 as it shall have, in the ordinary course of its operations, to review
potential transactions presented to it by the Manager. If the circumstances require
the consummation of the transaction before requisite approval by the Operating
Committee can be achieved, the Member may complete the transaction and then
offer it to the Operating Committee. In any event, if the Operating Committee
declines to pursue the transaction offered to it by the Member, the Member may
pursue the transaction on its own or in conjunction with any other entities,
including Other Members. Furthermore, if the Operating Committee declines to
pursue, or terminates pursuit of, any transaction developed by the Manager, or one
brought to it by any of the Other Members, the Member is free to pursue the
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transaction on its own behalf or in conjunction with any other entity, including one
or more Other Members.
ARTICLE 17
SUCCESSION AND ASSIGNMENT
17.1 Succession. The terms and provisions of this Agreement shall extend
to and be binding upon the respective heirs, successors, assigns, legal
representatives, or transferees of the Parties consistent with the provisions of
Section 17.2.
17.2 Assignment. Except as provided in this Section 17.2, neither Party
may assign its rights and interests under this Agreement except to another
Governmental Entity (as defined in the Bylaws), and then only with the prior
written consent of the other Party. If the Member seeks to assign its rights and
interests under this Agreement to another Governmental Entity (as defined in the
Bylaws) that is one of the Other Members, then such prior written consent of Public
Gas Partners shall not be unreasonably withheld. Any assignment or other transfer
of a Party's interests in this Agreement must include the express assumption, in
writing, by the assignee or transferee of the duties and obligations of the assigning
or transferring Party under this Agreement. Notwithstanding the foregoing, it is
expressly recognized and agreed by the Parties that Public Gas Partners may
assign its rights and interests in this Agreement or the revenues to be derived
under this Agreement for the purpose of securing any issue of debt or securing any
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alternate price arrangement undertaken in connection with the acquisition or
management of components of Gas Supply Pool No.1, and that the Member may
assign its rights and interests in this Agreement or the revenues to be derived
under this Agreement for the purpose of securing any issue of bonds or other
obligations or any such alternate price arrangement undertaken in connection with
its Prepayment to Public Gas Partners for Gas supplies to be purchased under this
Agreement, or for the management of such supplies.
17.3 Third Party Beneficiaries. It is specifically agreed that there are no
third party beneficiaries to this Agreement, and that this Agreement shall not
impart any rights enforceable by any person, firm, organization, or corporation not
a Party to this Agreement.
ARTICLE 18
SPECIAL COVENANTS
18.1 Rates. Fees. and Charg-es of the Member. The Member shall at all
times charge and collect rates, fees, and other charges for its gas supply or
electricity services to its members or customers as shall be required to provide
revenues at least sufficient in each fiscal year, together with other available funds,
to pay all amounts due as they come due under this Agreement, together with all
other obligations of the Member, and the Member shall promptly enforce the
payment of all material accounts due and owing to the Member.
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18.2 General Tax Covenant of Public Gas Partners. Bonds may be issued
by the Member for the Prepayment for the purchase of Gas supplies from Public
Gas Partners under this Agreement with the intention that some or all of the
interest thereon be excluded from gross income of the holders thereof under Section
103 of the Code. Accordingly, Public Gas Partners agrees for the benefit of the
owners of such bonds that it will act in accordance with written instructions
provided by the Member from time to time and shall not take any action, or fail to
take any action, contrary to such instructions if such action, or failure to take
action, would adversely affect the exclusion from the gross income of the holders
thereof of interest on the bonds under the Code. Public Gas Partners has previously
filed with the Internal Revenue Service a request for a ruling that it is an
instrumentality of the Members for purposes of Sections 115 and 141 of the Code
and addressing certain other matters relating to the transactions contemplated by
this Agreement. A true, correct, and complete copy of such ruling request is
attached to this Agreement as Exhibit B. Public Gas Partners agrees to provide to
the Member copies of all correspondence between Public Gas Partners (including its
counsel and advisors) and the Internal Revenue Service relating to such ruling
request, within five business days of the sending or receipt of such correspondence.
18.3 Continued Existence of the Member. The Member hereby covenants
and agrees to maintain its existence during the term of this Agreement, and not to
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cause its dissolution or to merge or to cause or permit all of its assets to be conveyed
to any entity, unless, in the case of a merger, it is the surviving entity.
18.4 Continued Existence of Public Gas Partners. Public Gas Partners
hereby covenants and agrees to maintain its existence during the term of this
Agreement, and not to cause its dissolution or to merge or to cause or permit all of
its assets to be conveyed to any entity, unless, in the case of a merger, it is the
surviving entity.
18.5 Covenant Not to Vary Terms of Agreements. Public Gas Partners
covenants that it shall not vary the terms of any of the Production Sharing
Agreements from the terms of this Agreement except in accordance with the
procedures set forth in Section 1.10 and except for individual Nominated
Quantities, Seasonal Nominations, Points of Delivery, and individual statutory
requirements and organizational matters.
18.6 [This section is applicable to joint action agency members.]
Covenant to Enforce Underlving Contracts. The Member agrees that it shall
maintain in effect and shall enforce during the term of this Agreement contracts
with its Participating Utilities that underlie its purchase and payment obligations
under this Agreement and provide for purchase and payment obligations of such
Participating Utilities with respect to Gas provided to the Member pursuant to this
Agreement in such amounts and at such times as to equal in amount and timing the
Member's obligations under this Agreement.
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ARTICLE 19
INFORMATION TO BE PROVIDED BY THE PARTIES TO EACH
OTHER
19.1 Financial Reporting- by the Member. The Member agrees to deliver to
Public Gas Partners: (i) within 150 days after the end of each fiscal year of the
Member, financial statements of the Member for such fiscal year, audited by
independent certified public accountants selected by the Member; (ii) if requested by
Public Gas Partners, within 90 days after the end of each fiscal quarter of the
Member, financial statements of the Member as of the end of such quarter, certified
by its chief financial officer or other equivalent officer or employee; and (iii) such
other financial data as Public Gas Partners may reasonably request. All such
financial statements referred to in clause (i) above shall be prepared in accordance
with generally accepted accounting practices.
19.2 Other Information to Be Made Available by the Member. The Member
acknowledges that the ability of Public Gas Partners to obtain financing for the
acquisition and operation of Gas Supply Pool No.1 depends upon, among other
things, the credit standing of the Member and the Other Members and that it will
be necessary for Public Gas Partners to provide certain information concerning the
Members in connection with such financing. Consequently, the Member covenants
to and agrees with Public Gas Partners that the Member shall, upon request,
provide to Public Gas Partners information with respect to the Member, including
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without limitation financial and operating information and all contracts,
documents, reports, bond resolutions and indentures, as may be requested by Public
Gas Partners or its counsel in connection with the financing of Gas Supply Pool No.
1. Furthermore, in addition to such information and the information required by
Section 19.1, the Member covenants to and agrees with the Public Gas Partners
that the Member will furnish to Public Gas Partners such other information and
documents as Public Gas Partners may reasonably request from time to time that is
in the possession of the Member.
19.3 Financial Reporting by Public Gas Partners. Public Gas Partners
agrees to deliver to the Member: (i) within 150 days after the end of each fiscal year
of Public Gas Partners, financial statements of Public Gas Partners for such fiscal
year, audited by independent certified public accountants selected by Public Gas
Partners; (ii) within 90 days after the end of each fiscal quarter of Public Gas
Partners, financial statements of Public Gas Partners as of the end of such quarter,
certified by its chief financial officer; and (iii) such other financial data as the
Member may reasonably request. All such financial statements referred to in
clause (i) above shall be prepared in accordance with generally accepted accounting
practices.
19.4 Other Information to Be Made Available by Public Gas Partners. In
addition to the records described in Section 13.4 in connection with a request by the
Member for information concerning billings by Public Gas Partners and the
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financial reports described in Section 19.3, Public Gas Partners shall make
available for examination by the Member at mutually agreeable times the following
information:
(a) all books of accounts, records, documentation, and contracts in the
possession of Public Gas Partners relating to the operation of Gas Supply Pool No.
l'
,
(b) all agreements and data in the possession of Public Gas Partners
relating to the financing of Gas Supply Pool No.1;
(c) all operating and financial records and reports relating to Gas Supply
Pool No. 1 in the possession of Public Gas Partners; and
(d) such other information and documents with respect to Gas Supply Pool
No.1 as the Member may reasonably request from time to time and that is in the
possession of Public Gas Partners.
19.5 Information to Be Provided in Connection with the Member's
Prepayment. Public Gas Partners acknowledges that, in connection with the
Member's financing of its Prepayment, it will be necessary for the Member to
provide certain information with respect to Public Gas Partners and Gas Supply
Pool No.1. Consequently, Public Gas Partners covenants to and agrees with the
Member that it shall, upon request, provide to the Member such information,
including without limitation financial and operating information and all contracts,
documents, reports, financing and related documents, as may be requested by the
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Member or its counsel in connection with the financing of the Member's
Prepayment.
19.6 Costs Associated With Providing- Information. To the extent Public
Gas Partners incurs Costs in gathering and compiling documents or other
information, such Costs shall be billed as Individual Costs.
ARTICLE 20
COMPONENTS OF GAS SUPPLY POOL NO.1
20.1 Gas Supply Pool No.1 Portfolio. Public Gas Partners will acquire long-
term gas supplies on a portfolio project basis. Gas Supply Pool No.1 shall consist of
(i) one or more acquisitions of working interests, royalty interests, net profits
interests, leasehold interests, and any and all other interests in Gas reserves,
related facilities, or lands, (ii) the acquisition and management of contract
deliverability rights through secured natural gas prepayment transactions, and (iii)
the acquisition and management of other contract rights to the delivery of Gas,
sufficient in the aggregate to fulfill the nominations received from the Member and
all Other Members equal to the aggregate of all Nominated Quantities. Public Gas
Partners may fulfill the Nominated Quantities through one transaction or any
number of transactions, and the Member, under this Agreement, agrees to
participate in the entirety of Gas Supply Pool No.1. Individual transactions shall
each be a component of Gas Supply Pool No.1. Public Gas Partners may
participate with third parties, including third parties that are not Governmental
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Entities (as defined in the Bylaws), in any transaction that is part of Gas Supply
Pool No.1 in the acquisition, operation, development or redevelopment of such
project, including without limitation through joint ventures, joint bidding
arrangements, farmout agreements, participation agreements, co-development
agreements, or like agreements or arrangements.
20.2 Working- Interests and Royaltv Interests. As described in Section 20.1,
the portfolio acquired by Public Gas Partners under Gas Supply Pool No.1 may
include, without limitation, working interests and royalty interests in Gas
producing properties, which shall include associated gathering, processing,
compression, and other facilities.
20.3 Minimum Portfolio Requirements. The Parties acknowledge and agree
that the Member's obligations under this Agreement extend to each of the
individual transactions that are components of Gas Supply Pool No.1, and that Gas
Supply Pool No.1 shall only include transactions that are approved by requisite
action of the Operating Committee and the Board of Directors, as applicable, and
which, when aggregated with other transactions already undertaken as part of Gas
Supply Pool No.1 pursuant to requisite action of the Operating Committee and the
Board of Directors, meet the following minimum criteria:
(a) Projected minimum portfolio margins of $0.50 (50~) per MMBtu
below applicable forward curve pricing, as determined in accordance with criteria
established by the Operating Committee. Forward curve pricing shall be defined in
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such criteria as (i) all forward contract months listed by the New York Mercantile
Exchange ("NYMEX") at the time of the determination by the Operating Committee
to consummate a transaction and (ii) forward pricing as determined by the
Operating Committee for months extending beyond those listed by NYMEX. In the
event that the Operating Committee determines that NYMEX is no longer a viable
and liquid benchmark for forward curve pricing, the Operating Committee may
determine to use another listed exchange or trade publication forward curve.
(b) At least 60% of the risk adjusted available volumes in Gas
Supply Pool No.1 are reserves or are secured by underlying assets that are
classified as proved, developed and producing reserves by a nationally recognized
reservoir engineering firm engaged by Public Gas Partners to provide an
independent review of the reserves, or by financial instruments from counterparties
holding a minimum aggregate credit rating of "AA-" or equivalent from one of the
national credit rating agencies (Moody's, S&P, or Fitch); and (iii) the assets being
acquired must be located onshore in the continental United States or Canada, or in
the shallow waters of the United States.
20.4 Minimum Security for Secured Prepavments. As described in Section
20.1, Public Gas Partners may enter into secured natural gas prepayment
transactions as a component of Gas Supply Pool No.1. Such prepayments must be
secured by a credit rating of "AA-" or better, or an equivalent credit rating, through
the underlying unenhanced credit rating of the applicable supplier, or provide
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comparable security through a parent guaranty, a separate corporate guaranty, a
surety bond, a letter of credit, the pledge of assets, or the posting of other collateral
acceptable to Public Gas Partners.
20.5 Dissolution of Gas Supply Pool No.1. The Operating Committee may
by vote of 80% of all of the members of the Operating Committee determine that
Gas Supply Pool No.1 shall be dissolved by sale or other disposition. Any such vote
of the Operating Committee shall be presented by the Operating Committee as a
recommendation to Public Gas Partners for a vote in compliance with the Bylaws.
Upon such vote by Public Gas Partners, the determination of the Operating
Committee shall be the action of Public Gas Partners. Upon a decision by the
Operating Committee to implement the sale or other disposition of a component of
Gas Supply Pool No.1, the Operating Committee shall determine whether the
proceeds of any such sale or other disposition are to be reinvested in Gas Supply
Pool No.1 or returned to the Member and the Other Members. Any return to the
Member and the Other Members shall be in accordance with their respective
Participation Shares. Upon the dissolution of Public Gas Partners, the Member
shall receive a return in an amount equal to its Participation Share of the net assets
of Public Gas Partners following sale or other disposition of such assets and the
winding up of Public Gas Partners' affairs.
20.6 Completion of Gas Supply Pool No.1. The Operating Committee shall
determine when the Annual Nominated Quantities of the Member and the Other
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Members have been met by the transactions comprising Gas Supply Pool No.1. The
Operating Committee's determination in this regard shall meet the standard set
forth below in this Section 20.6 and shall be conclusive. Upon such determination,
Gas Supply Pool No.1 shall be closed, meaning that no additional acquisitions shall
be made. The Operating Committee may not reach such a determination unless it
finds that at least 80% of the aggregate Annual Nominated Quantities of the
Member and the Other Members will be available for delivery on the date of such
determination. Notwithstanding the foregoing, Gas Supply Pool No.1 shall
automatically be closed not later than three years after the effective date of this
Agreement if it has not been closed by action of the Operating Committee; provided,
however, that if there are ongoing negotiations as of such date involving one or
more potential transactions that the Operating Committee wishes to continue, the
Operating Committee may keep Gas Supply Pool No.1 open for the purposes of
completing such negotiations.
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ARTICLE 21
FINANCING OF GAS SUPPLY POOL NO.1
21.1 Interim Financing by Public Gas Partners. Public Gas Partners shall
obtain all interim financing necessary to acquire each component of Gas Supply
Pool No.1 and to consummate each transaction that is part of Gas Supply Pool No.
1. Public Gas Partners shall obtain title to all interests and supplies it acquires and
shall hold all such properties in its name. All costs and expenses associated with
such interim financing shall be included in the Costs billed to the Member on a
monthly basis in accordance with the terms of this Agreement.
21.2 Permanent Financing-. Within six months after notice from Public Gas
Partners that it must make a Prepayment to Public Gas Partners for the acquisition
of its Participation Share of Gas Supply Pool No.1 acquired to that point in time,
plus any anticipated capital development or other Costs that the Operating
Committee determines are necessary or advisable to collect in advance, the Member
shall obtain its own permanent financing or shall otherwise obtain funds sufficient
to make its Prepayment to Public Gas Partners for its Participation Share. Such
notice provided by Public Gas Partners to the Member shall specify the amount of
the Prepayment to be made and the date upon which it is due. The amount of the
Prepayment shall be calculated by multiplying the Member's Participation Share by
the sum of (i) the total acquisition, development or other Costs incurred by Public
Gas Partners in acquiring and developing the components of Gas Supply Pool No.1,
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net of amounts recovered to the date of the Prepayment from the Member in
monthly billings for Public Gas Partners' debt service or other interim financing
Costs, (ii) an additional amount as determined by the Operating Committee up to
the amount representing the Operating Committee's projection of capital
development Costs to be incurred in connection with enhancing production and
deliverability of fields and wells in Gas Supply Pool No.1; and (iii) any additional
amount as determined by the Operating Committee.
21.3 Failure to Make Prepayment. In the event that the Member fails to
make its Prepayment by the due date, the Parties agree that all quantities of Gas
acquired by Public Gas Partners for the Member shall be held by Public Gas
Partners and may be disposed of in one of the following ways, in Public Gas
Partners' sole discretion: (i) Public Gas Partners may continue to sell all or any
portion of the Gas to the Member under the terms and conditions of this Agreement
as though Public Gas Partners had not yet provided notice to the Member that it
must make its Prepayment to Public Gas Partners; (ii) Public Gas Partners may
transfer the Member's Participation Share to the Other Members; (iii) Public Gas
Partners may transfer the Member's Participation Share to a member of Public Gas
Partners that is a participant in a Project other than Gas Supply Pool No.1, with
the concurrence required in Section 4.4(c); (iv) Public Gas Partners may transfer the
Member's Participation Share to a Governmental Entity (as defined in the Bylaws)
that is not a member of Public Gas Partners, with the concurrence required in
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Section 4.4(c); (v) Public Gas Partners may sell the Gas it acquired pursuant to the
Member's Annual Nominated Quantity on a short-term or long-term basis to Other
Members; or (vi) Public Gas Partners may sell the Gas it acquired pursuant to the
Member's Annual Nominated Quantity on a short-term or long-term basis to third
parties that are not Members. In the event Public Gas Partners chooses to pursue
option (ii), option (iii), or option (iv) above, this Agreement shall terminate upon
notice from Public Gas Partners that it has selected such option and has completed
all related transactions and winding up arrangements in accordance with this
Agreement. In all cases, Public Gas Partners may pursue all remedies available at
law or in equity against the Member to protect Public Gas Partners' interests and
the interests of the Other Members.
ARTICLE 22
CHANGES IN NOMINATED QUANTITY
22.1 Reductions in Nominated Quantity. Effective upon not less than 120
days' notice to Public Gas Partners, the Member may decrease its Annual
Nominated Quantity (together with its Seasonal Nominations) to the level already
acquired by Public Gas Partners through completed transactions under Gas Supply
Pool No.1, but before Gas Supply Pool No.1 is filled. Upon the Member's exercise
of such option, Public Gas Partners shall reduce the total Annual Nominated
Quantities for Gas Supply Pool No.1 to eliminate that portion of the Annual
Nominated Quantity that is no longer wanted by the Member and shall calculate
69
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
the revised Participation Shares of the Member and of all Other Members in Gas
Supply Pool No.1. All Members, including the Member if the Member decreases its
Annual Nominated Quantity and any of the Other Members that decreases its
Annual Nominated Quantity, remain obligated for all Costs of the existing portfolio
and future transactions making up Gas Supply Pool No.1; however, individual
Participation Shares shall be changed. An example of the calculation of the
Member's new Participation Share and the Participation Shares of the Other
Members under such circumstances is set forth in Exhibit G.
22.2 Increases in Nominated Quantity. In the event that any new Members
are added to Gas Supply Pool No 1, consistent with the procedures described in the
Bylaws and Section 4.4(c), the Member shall have the right, with the unanimous
consent of the Other Members, to increase its Annual Nominated Quantity
(together with its Seasonal Nominations). The Member shall provide notice in
writing to Public Gas Partners and each of the Other Members of its requested
Increase.
ARTICLE 23
TERM
23.1 Full Term. This Agreement shall be effective upon (i) its execution and
delivery to Public Gas Partners by the Member on or prior to December 31,2004,
and (ii) the acceptance by the Board of Directors and the execution by Public Gas
Partners of Production Sharing Agreements with Members whose Annual
70
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
Nominated Quantities total at least 50,000 MMBtu per day. Unless this Agreement
is earlier terminated under the provisions of this Agreement, it shall continue in
effect until the last to occur of the following: (a) the date on which the principal of,
premium, if any, and interest on all bonds, notes, loans, or obligations issued or
borrowings incurred by Public Gas Partners (with respect to Gas Supply Pool No. 1)
or the Member (with respect to a Prepayment) have been paid or sufficient funds
shall have been irrevocably set aside for the full defeasance thereof; and (b) such
time as each and every component of Gas Supply Pool No. 1 is terminated, all
deliveries thereunder have been completed, all Costs thereunder have been paid,
and all contractual obligations of Public Gas Partners to third parties have been
fully performed or provided for, all upon the determination of the Operating
Committee to effect the final dissolution of Gas Supply Pool No.1 as provided in
Section 20.5.
23.2 Early Termination. The Member may not withdraw from membership
in Public Gas Partners while this Agreement is in effect without the unanimous
consent of the Operating Committee and the subsequent unanimous consent of the
Board of Directors. The Member may be removed from membership in Public Gas
Partners by vote of the Board of Directors if it is in default of its payment
obligations under this Agreement or if it fails to make its Prepayment as required
by this Agreement, consistent with written policies established by Public Gas
Partners. In the event the Member withdraws from or is removed from membership
71
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
in Public Gas Partners, this Agreement shall be terminated as of the effective date
of such termination of membership, subject to the continuing obligation of the
Member to satisfy all of its payment and other obligations under this Agreement
and the conclusion of all winding up arrangements as provided for in this
Agreement. Notwithstanding the foregoing provisions of this Section 23.2, if a court
of competent jurisdiction determines that the Member is barred by the law of its
State/Commonwealth from participating in Public Gas Partners as a member, but
that the Member may otherwise be a party to this Agreement, the Member shall
relinquish its seat on the Board of Directors but shall retain its seat on the
Operating Committee, and this Agreement shall otherwise remain in full force and
effect. This Agreement shall also terminate upon the effective date of the
dissolution of Public Gas Partners.
ARTICLE 24
NOTICES
Any notice, request, demand, or statement provided for in this Agreement
must be given in writing, unless another provision of this Agreement specifically
provides otherwise. Notice must be provided by delivery in person, by United
States mail, or by express courier. Notice must be provided at the addresses shown
below, which addresses may be changed by written notice from one Party to the
other:
72
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
Public Gas Partners:
Correspondence, notices and billing:
Public Gas Partners, Inc.
c/o Municipal Gas Authority of Georgia
104 TownPark Drive
Kennesaw, GA 30144
Attn:
Tel:
Fax:
E-mail:
With a copy to:
Chairman, Public Gas Partners, Inc.
c/o
Attn:
Tel:
Fax:
E-mail:
Payments:
Public Gas Partners, Inc.
Bank:
ABA No.:
Account:
73
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
The Member:
Correspondence, notices, billing, and payments:
Attn:
Tel:
Fax:
E-mail:
ARTICLE 25
RELATIONSHIP TO AND COMPLIANCE WITH OTHER
INSTRUMENTS
It is recognized by the Parties that Public Gas Partners, in undertaking or
causing to be undertaken the planning, financing, acquisition, operation and
maintenance of Gas Supply Pool No.1, must comply with the requirements of the
financial and contractual obligations incurred by it and all regulatory permits and
approvals necessary therefor, and it is therefore agreed that this Agreement is
made subject to the terms and provisions of all financial and contractual
instruments entered into by Public Gas Partners with respect to Gas Supply Pool
No. 1 and all such permits and approvals. Public Gas Partners covenants and
agrees that it will use its best efforts for the benefit of the Member to comply in all
material respects with all terms, conditions, and covenants applicable to it
contained in the financial and contractual instruments entered into by Public Gas
Partners with respect to Gas Supply Pool No.1 and all such permits and approvals.
74
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
Public Gas Partners covenants and agrees that it will not, without the consent of
the Member, enter into any agreement or instrument which will, in the reasonable
business judgment of Public Gas Partners at the date of the decision, materially and
adversely affect the rights and obligations of the Member under this Agreement.
ARTICLE 26
LIABILITY OF PARTIES
Public Gas Partners and the Member shall assume full responsibility and
liability for the maintenance and operation of their respective properties and each
shall, to the extent permitted by law, indemnify and save harmless the other from
all liability and expense on account of any and all damages, claims, or actions,
including injury to or death of persons arising from any act or accident in
connection with the installation, presence, maintenance, and operation of the
property and equipment of the indemnifying party and not caused in whole or in
part by the negligence of the other party; provided, however, that any liability
which is incurred by Public Gas Partners through the operation and maintenance of
Gas Supply Pool No.1 or pursuant to financial and contractual instruments entered
into by Public Gas Partners with respect to Gas Supply Pool No.1 and not covered,
or not covered sufficiently, by insurance shall be paid solely from the revenues of
Public Gas Partners under this Agreement, and any payments made by Public Gas
Partners to satisfy such liability shall be Costs under this Agreement.
75
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
ARTICLE 27
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and each of which
shall be deemed to be original instruments.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date hereinabove first written.
PUBLIC GAS PARTNERS, INC.
By:
ATTESTED:
Printed Name:
By:
Its:
Title:
THE MEMBER
By:
ATTESTED:
Printed Name:
By:
Its:
Title:
M: \ clients \ 18200\ 18200-1 \ NATURAL GAS PRODUCTION SHARING AGREEMENT 091604 DRAFT #8 CLEAN
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DRAFT #8 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHmIT B
RULING REQUEST SUBMITTED BY PUBLIC GAS
PARTNERS. INC. TO THE INTERNAL REVENUE SERVICE
Page 1 of 1
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHIBIT C
POINTS OF DELIVERY
The tailgate of the Sabine Pipe Line Company's Henry Hub near Henry,
Louisiana.
Page 1 of 1
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHIBIT D
BREAKDOWN OF ANNUAL BUDGET BY CATEGORIES
The Costs incurred by Public Gas Partners and billed to the Member will
include but not be limited to the following:
~ Acquisition Costs (paid prior to Member's Prepayment)
o Public Gas Partners' debt costs to acquire interests in reserves and
other Gas supplies and to fund capital development costs of Gas
Supply Pool No.1.
~ Capital Development Costs
o Ongoing budgeted expenditures to develop non-producing
properties acquired in Gas Supply Pool No. 1 and to enhance
production from producing reserves.
~ O-perating- Costs
o Ongoing expenditures for operating wells, gathering, treating,
processing, compression, transportation, and otherwise producing
Gas from Public Gas Partners' interests, making the Gas of pipeline
quality, and delivering it to the Point of Delivery.
~ Outside Services Costs
o Ongoing and occasional costs for professional services and other
outside services not provided by the Manager, including but not
limited to reservoir engineering, accounting, audit, legal, consulting
and comparable services.
~ Administrative Fees
o Ongoing administrative and general costs of managing Public Gas
Partners and maintaining its program of acquiring and managing a
portfolio of transactions making up Gas Supply Pool No. 1.
Initially, these services shall be provided by the Manager, and the
Page lof2
DRAFT #7 - 9/9/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 Draft
Member shall pay its share of the administrative fees set forth in
this Agreement and in the Services Contract.
~ Other Costs
o Any other costs not falling within one of the other categories,
whether ongoing or occasional.
Page 2 of2
DRAFT #8 - 9/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHIBIT E
NATURAL GAS SERVICES CONTRACT BETWEEN PUBLIC GAS
PARTNERS. INC. AND THE MUNICIPAL GAS AUTHORITY OF GEORGIA
Page 10fl
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHIBIT F
FORM OF OPINION OF COUNSEL TO THE MEMBER
Page 1 of 1
--.....
DRAFT #8 - 9/9/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHmIT G
ILLUSTRATIVE CALCULATION OF REVISED PARTICIPATION SHARES
FOLLOWING A REDUCTION IN TIlE MEMBER'S NOMINATED
QUANTITY
Page 1 of 1
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
EXHIBIT H
FORM OF HEDGING AND RISK MANAGEMENT POLICY
DEFINITIONS
HEDGE - A hedge is used by Public Gas Partners to reduce the risk
associated with normal business activities of buying or selling commodities or
financial instruments. To qualify as a hedge there must be at least an 80%
correlation between the hedging instrument and the underlying asset being hedged
such as a commodity or interest rate.
SPECULATION -Using financial instruments in a manner not expected to
reduce the risk associated with Public Gas Partners' business activities related to
Gas Supply Pool No. 1. Speculation will not be authorized at any time.
FINANCIAL INSTRUMENTS - Financial instruments shall include
derivative products such as over-the-counter (OTC) instruments; for example,
options and swaps and the various combinations of such products. It also may
include exchange-traded instruments such as futures and options.
POLICY
Hedging can be an effective tool in reducing the interest rate and commodity
risk involved with the purchase and sale of natural gas. Hedging may also be
Page 1 of 4
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
appropriate to reduce price risk associated with the purchasing and storing of
natural gas.
Public Gas Partners will engage only in financial hedge transactions that are
consistent with prudent risk management practices related to Public Gas Partners'
Gas sales or acquisition commitments (including fixed price commitments made to
Members) or existing assets and liabilities and foreseeable future purchase and
sales requirements.
All interest rate hedges and all long-term commodity swaps (greater than
three years) require Operating Committee authorization via a resolution of the
Operating Committee.
Officers or employees of Public Gas Partners or the Manager shall not
directly or indirectly own or trade in energy futures contracts or options on energy
futures contracts for their own accounts.
Public Gas Partners shall not trade financial hedge instruments (including
interest rate hedges and commodity swaps options, and combinations thereof) with
a non-exchange Counterparty unless the Counterparty meets the following credit
criteria:
(i) for any hedge with a term of two years or greater, the
Counterparty's obligations are rated, or are insured or guaranteed by an
entity whose obligations are rated, in one of the two highest rating categories,
without regard to gradations within a category, of any nationally recognized
Page 2 of 4
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
rating service; and, for any hedge with a term of less than two years, the
Counterparty's obligations are rated, or are insured or guaranteed by an
entity whose obligations are rated, in one of the three highest rating
categories, without regard to gradations within a category, of any nationally
recognized rating service; or
(ii) the Counterparty's exposure to Public Gas Partners is
collateralized at 102% of the market value of such exposure, marked to
market no less frequently than quarterly.*
COUNTERPARTY AUTHORIZATION
Based on the credit criteria referenced above, Public Gas Partners will
execute master swap agreements and maintain relationships with a sufficient
number of acceptable Counterparties to ensure a competitive environment to price
the applicable hedging transactions. Authorization for negotiating and executing
these agreements will be provided by the Board of Directors via resolution on an as
needed basis.
HEDGE COMMITTEE
· Delayed start date hedges may not exceed 36 months for single A-rated counterparties.
Page 3 of 4
DRAFT #8 - 9/21/04
PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
Compared to 9/16/04 (Draft #7)
A Hedge Committee will oversee the activities of the hedging program. The
Committee shall be comprised of the
The role of the Hedge Committee will be to determine whether a proposed
transaction is a bona fide hedge, to choose the hedge vehicle to be utilized, and to
review the performance of the hedging activity on a monthly basis. The Hedge
Committee shall meet at least monthly, and may meet more often if needed. A
member of the Hedge Committee shall be appointed to keep minutes of the
meetings. The Hedge Committee shall provide the Operating Committee a
summary of its activity every three months.
LIMITS AND AUTHORITY
The notional volume of hedging instruments shall not be greater than the
contractual volume of offsetting "physical" market agreements. If at any time the
total annual actual or expected net cash flow requirements associated with hedges
exceeds $3,000,000 (not including the impact of long-term commodity swaps entered
into as part of long-term gas supply arrangements), the hedge portfolio will be
immediately reviewed by the Hedge Committee to confirm that financial hedges in
place remain appropriate.
Page 4 of 4
EXllmIT I
FORM OF NOTICE OF REVISED PARTICIPATION SHARES
# 2224887_v2
Appendix 1
PROJECT PARTICIPANT'S
NOMINATED QUANTITY FOR GAS SUPPLY POOL NO.1
GAS ENTITLEMENT SHARE
Name and Address of
Proiect Participant Summer Season
City of Clearwater 500 Dth's
Clearwater Gas System
400 N. Myrtle Ave
Clearwater, FL 33755
Winter Season
1,500 Dth's
Annual Nominated
Quantitv
1,000 Dth's
Gas Entitlement
Share
# 2224887_v2
Appendix 2
PROJECT PARTICIPANT'S POINT OR POINTS OF DELIVERY
PROJECT PARTICIPANT
POINT OR POINTS OF DELIVERY
City of Clearwater
. North Gate Station:
1010 N. Hercules Ave, Clearwater, DRN# 3171
. South Gate:
2531 Nursery Rd, Clearwater, DRN # 3172
. Northeast Gate:
2910 McMullen Booth Rd, Clearwater, DRN# 3168
. Trinity Gate:
8017 Mitchell Blvd, New Port Richey (Pasco County), DRN# 291990
# 2224887_v2
-~
Appendix 3
FORM OF OPINION OF COUNSEL TO PROJECT PARTICIPANT
_,200_
[Underwriters, Counterparties
or other Interested Parties]
Florida Gas Utility
4619 NW 53rd Avenue
Gainesville, FL 32609
Re: PGP Gas Supply Agreement No. 1[; Other
Financial Instruments]
Ladies and Gentlemen:
I am counsel to the fplease insertl (the "Public Agency"),
and am furnishing this opinion to you in connection with the PGP Gas Supply
Agreement No. 1 ("PGP Gas Supply Agreement") [Financial Instrument] (the
"Agreement"), dated as of , and executed between Florida Gas Utility
("FGU"), [ ] and the Public Agency as a Project Participant and
purchaser of Gas from FGU.
All terms used herein in capitalized form and not otherwise defined
herein shall have the same meanings as ascribed to them in the Agreement.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of the following:
(a) The Constitution and laws of the State of Florida including, as
applicable, special acts, ordinances, charters and agreements pursuant
to which the Public Agency was created and by which it is governed;
(b) Resolution No. _, duly adopted on , 200_ [please
insert one or, if applicable, more resolution numbers and
dates] (collectively, the "Resolution"), and certified as true and correct
by certificate and seal as of [ ], authorizing the Public Agency
to execute and deliver (i) the PGP Gas Supply Agreement described
below and (ii) [other Agreement], in accordance with the provisions
of the Constitution of the State of Florida, the Florida Interlocal
Cooperation Act of 1969, Section 163.01 and Chapter 166, Florida
Statutes, and other applicable provisions of law;
(c) A copy of the PGP Gas Supply Agreement [other Agreement]
executed by the Public Agency;
(d) The Interlocal Agreement dated September 1, 1989, as amended on
June 1, 1992, and as amended and restated by Amended and Restated
Interlocal Agreement dated as of July 1, 1996, and thereafter amended
and restated by Second Amended and Restated Interlocal Agreement
dated as of July 27, 1999, between the Public Agency and the other
public agencies named therein (the "Interlocal Agreement");
(e) [The Official Statement, [Private Placement Memorandum]
[Other] dated as of [ 1, relating to [ ];]
(f) [The Continuing Disclosure Agreement, dated as of [ ]
(the "Continuing Disclosure Agreement"), among the Public
Agency, FGU, and [ ]; and]
(g) All outstanding instruments relating to bonds, notes or other
indebtedness of or relating to the Public Agency's System.
I have also examined and relied upon originals or copies, certified or
otherwise authenticated to my satisfaction, of such other records, documents,
certificates and other instruments, and made such investigations of law, as in my
judgment I have deemed necessary or appropriate to enable me to render the
opinions expressed below.
Based upon the foregoing, I am of the opinion that:
1. The Public Agency is [a public body corporate and municipal
corporation of the State of Florida], [a utility authority and a part of
government of the City of 1, [a public agency as defined in
Section 163.01(3)(b), Florida Statutes, as amended, and an electric
utility as defined in Section 361.11(2), Florida Statutes, as amended]
[PLEASE SELECT AS APPROPRIATE], duly organized and validly
existing under the laws of the State of Florida, with the legal right to carry
on the business of its System as currently being conducted and as proposed to
2
be conducted [as described in the [Official Statement] [Private
Placement Memorandum] [other].]
2. The Public Agency has the right and power to adopt the Resolution, and the
Resolution has been duly adopted by the Public Agency and is in full force
and effect as of the date hereof in the form in which adopted.
3. The PGP Gas Supply Agreement[, the Financial Instrument] [,the
Continuing Disclosure Agreement] (collectively, the "Agreements") and
the Interlocal Agreement have been duly and lawfully authorized, executed
and delivered by the Public Agency, and constitute the legal, valid and
binding agreements and obligations of the Public Agency, enforceable against
the Public Agency in accordance with their respective terms.
4. The authorization, execution, delivery, receipt and performance of the
Agreements and all agreements and documents provided for or contemplated
by the Resolution do not violate any applicable judgment or order of any court
and do not conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, the terms of any statute of the
State of Florida, the Public Agency's ordinances or charter, any
administrative rule or regulation of the State of Florida or any agency thereof
or of any bond resolution, indenture, agreement, license, permit, franchise, or
other instrument to which the Public Agency is subject, or by which it or any
of its properties is bound, or result in the creation or imposition of any lien,
charge or other security interest or encumbrance of any nature whatsoever
upon any of the properties or assets of the Public Agency, except as expressly
provided by the Agreements, nor do such actions result in any violation of
any order, rule or regulation applicable to the Public Agency of any court or of
any federal, state or other regulatory authority or governmental body having
jurisdiction over the Public Agency or any federal statute, order, rule or
regulation applicable to the Public Agency or the State of Florida.
5. Amounts payable by the Public Agency to FGU pursuant to the PGP Gas
Supply Agreement [Financial Instrument] will constitute operating
expenses of the Public Agency's System.
6. All approvals, consents or authorizations of, or registrations, or filings with,
any governmental or public agency, authority or person required on the part
of the Public Agency in connection with the execution, delivery and
performance by it of the Agreements have been obtained or made.
3
7. There is no action, suit, litigation, inquiry, investigation or other proceeding
by or before any court, governmental agency, public board or body or other
tribunal of competent jurisdiction (either State or Federal) pending or, to the
best of my knowledge after due inquiry, threatened against the Public Agency
or its System which (a) questions the creation, organization or existence of
the Public Agency, (b) affects or seeks to prohibit, restrain or enjoin the
Public Agency from entering into, or wherein an unfavorable decision would
materially adversely affect the ability of the Public Agency to, comply with its
obligations contained in the Agreements, including the payment obligations
to FGU contained therein, or (c) in any way affects or questions the validity,
legality or enforceability of the Agreements, nor, to the best of my knowledge,
is there any basis therefor.
8. Project Participant Representative has the power and authority to enter into
Financial Products of the type described in the PGP Gas Supply Agreement
or to authorize FGU to enter into such transactions on Project Participant's
behalf and to bind Project Participant with respect thereto, subject in each
case to the general parameters set forth in Exhibit A to the PGP Gas Supply
Agreement.
The opinions set forth herein as to the enforceability of the legal
obligations of the Public Agency are subject to and limited by (i) bankruptcy,
insolvency, reorganization, moratorium and similar laws, in each case relating to or
affecting the enforcement of creditors' rights generally, and (ii) other general
principles of equity.
Very truly yours,
# 222488Lv2
4