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HomeMy WebLinkAbout10-1966 1nr0 141{ j, CONTRACT FOR INDUSTRIAL CAS SERVICE Lom ftm Gas Company a" ---~c-~~_~~-mss c~~a_ ocrc~~ 3~, 3 R WS a 4 GAS SALES CONTRACT THIS AGREEMENT, made and entered into by and between LONE STAR GAS COMPANY, a Texas corporation, hereinafter referred to as "Seller," and the CITY OF DENTON, TEXAS, a municipal corporation, hereinafter referred to as "Buyer," W I T N E S S E T H: WHEREAS, Buyer owns and operates electric generating stations known and designated as its Engine Plant and'Steam Plant, located in "Denton County, Texas, rnd Buyer contemplates the possible construction of enlargements or additions to said plants and of additional electric generating stations within twenty-five (25) miles of the City of Denton, which electric generating stations now in operation, under construction or hereafter to be co.istructed, and all enlargements or additions there- to, are hereinafter sometimes collectively referred to as B:yer's "Plants"; and WHEREAS, Buyer desires t.) be assured of an adequate supply of natural gas to meet the fuel requirements for the operation of said Plants, and Seller desires to sell such gas to Buyer; i NOWT THE-eEF0RE, in consideration of the premises and the sum of One Dollar ($1.00) cash in hand paid to each party by the other party hereto, the receipt of which is acknowledged, and of the mutual covenants and agreements herein contained, Seller and Buyer do hereby contract and sgree with each other as follows: ARTICLE I. SUBJECT MATTER: (1) Subject to the terms and provisions hereinafter set out, Seller agrees to sell and deliver to Buyer and Buyer agrees to purchase and receive from Seller, at the points of delivery herein provided for, natural gas for the fuel requirements for the operation of Buyer's Plants during the term hereof, up to but not in excess of the Maximum Peak Day and Maximum Annual Fuel Requirements provided for in Article II hereof, to the extent of and in accordance with the terms, conditions and limitations hereinafter stipulated, , (2) Nothing contained herein shall be construed as obligating Buyer to pay Seller for any gas fuel, or the equivalent thereof, which is purchased from any other person, firm or corporation and consumed in Buyer's Plants in excess of the Maxinum Annual Fuel. Requirements set forth in Exhibit "A" of paragraph (1) of Article II hereof, or for any of Buyer's fuel requirements less than said Maximum Annual Fuel Require- ments which Seller fails or declines to supply. ARTICLE II. QUANTITY: (1) The quantity of ges, computed on the basis of a heating value of one thousand (1,000) British Thermal Units per cubic foot, which Seller is obligated to sell and deliver to Buyer and which Buyer is ob- ligated to purchase and receive from Seller hereunder, during each Cal- endar Year of the germ hereof shall be a volume of gas equal to Buyer's fuel requirements for it.*% Plants, up to but not in excess of Buyer's .2- Maximum Peak Day Fuel Requirements ana Maximum Annual Fuel Requirements for each of said years, as set forth in the following Exhibit "A": Exhibit "A" Maximum Peak Day Maximum Annual Calendar Fuel Requirements Fuel Requirements Year (Million Cubic Feet) (Million Cubic Feet) 1966~l • /3. ~ ~ 2,550 1967 2,900 1968 17, I r • 3,310 1969 3.9780 1970 ,z a 3 4, 3OO 1971 4,900 1972 . 5)590 1973 3 3 . 6070 1974 3 9, ? 71270 , 1975 • 8, 280 1976 S , X 9;450 S S ' ~ 10,760 1977 1978 120270 1979 3 14, ooo (2) Without limiting the obligation of Buyer to take and pay for all of the fuel requirements of its Plants, up to but not in excess of the Maximum Annual Fuel Requirements set forth in Exhibit "4" during each Calendar Year of the term hereof beginning with the Calendar Year I -3- 1965, Buyer agrees to take and pay for or pay for wi, .;,cr taken or not, during the Calendar Years 1966, 1967, 1968 and 1969, a Minimum Volume of gas which is equal to seventy-five (75) per cent of the amount of Buyer's Estimated Annual Fuel Requirements for each such Calendar Year as set forth in the following Exhibit "Er. and during the Calendar Year 1970 and each Calendar Year thereafter during the term hereof, a mini- mum Volume of gas which is equal to seventy-five,(75)!per cent of the amount of Buyer's Estimated Annual Fuel Requirements for such Calendar Year determined in accordance with the provisions of said Exhibit "E'; Exhibit "2r Estimated Annual Fuel Requirements Calendar Year (Million Cubic Feet) 1966 2,550 1967 2,900 1968 3,310 ln, 69 3, 780 On or before October 1, 1967, Buyer will submit to Seller written notice setting forth the Estimated Annual Fuel Re- quirements of Buyer for the Calendar Year 1970, and on or before October 1 & each year thereafter up to and includ- ing the year 1976, Wryer will submit to Seller similar written notice, giving the Estimated Annual Fuel Require- ments of Buyer for the Calendar Year which begins two (2) j years and three (3) months in the futwv) from said October 1. - rr In determining the Ainimum Volume for the partial Calendar Year of 1966 Buyer's Estimated Annual Fuel Requirements will be proportion- ately reduced on a monthly basis. (3) In no Calendar Year shall the Estimated Annual Fuel Requirements of Buyer as provided for in Exhibit "B" of paragraph (2) of this Article exceed the Maximum Annual Feel Requirements for such year as set forth in Exhibit "A" of paragraph (1) of this Article; and Seller's obligation to deliver gas hereunder shall not exceed, in any Calendar Year, Buyer's Estimated Annual Fuel Requirements set forth or determined as provided for in said Exhibit "B", and such obligation shall not exceed, in any hour of any day, oru3-twentieth (1/20r'of the Maximum Peak Day Fuel Requirements for the CC,endar Year which includes such day. The figures shown in the "Maximum Peak Day" column of Ex- hibit "r are based on present forecasts of future generation additions. In the event that Rater, by written notice to Seller as provided for in Erlilbit "B", establishes its Estimated Annual Fuel Requirements for W Calendar Year at less than the Maximum Annual Fuel Requirements for that year as set forth in Exhibit "A", then the Maximum Peak Day Fuel Require- ments for such Calendar Year shall be reduced to the same proportion that the Estimated Annual Fuel Requirements su established for such Calendar Year bears to said Maximum Annual Fuel Requirements for said Calendar Year. In no event shall Buyer's Estimated Annual Fuel Requirements for any Calendar Year of the term hereof exceed Bayer's Estimated Annual Fuel Requirements for the immediately preceding Calendar Year by the percent- age greater than twenty-five per cent (25%) of the Estimated Annual Fuel -5- Requirements for such immediately preceding Calendar Year, and in no event shall Buyer establish its Estimated Annual Fuel Requirements for any Calendar Year at an amount less than eighty per cent (80%) of the highest Estimated Annual Fuel Requirements previously established by Buyer for any Calendar Year subsequent to the Calendar Year 1966, pro- vided, however, that such amount shall not be less than the Estimated Annual Fuel Requirements for the Calendar Year 1966 as set forth in paragraph (2) of Article II hereof. (b) Buyer agrees that all of the gas purchased hereunder will be used or consumed in and for the operation of its Plants, and that no part of such gas will be resold or used for any other purpose. Nothing contained in this contract shall be construed as obligating Buyer not to purchase fuel from any other person, firm or corporation whatsoever, whether for use in Buyer's Plants or for any other purpose, in excess of the Maximum Annual Fuel Requirements set forth in Exhibit "r of para- graph (1) of this Article, or for any of Buyer's fuel requirements less than the Maximum Annual Fuel Requirements set forth in said Exhibit "A" which Seller faile or declines to supply, and nothing contained in this contract shall prevent Seller from selling and Buyer from buying here- under any additional quantities of gas in excess of such Maximum Annual Fuel Requirements which Seller has available. &4 which Buyer desires to purchase. (5) If, during any Calendar Year of the term hereof, Buyer should fail to purchase the Minimum Volume of gas required by this contract to be purchased during such year, Seller shall notify Buyer -6- within fifteen (15) days following the end of such Calendar Year that Buyer failed to purchase the Minimum Volume of gas so required, ac- companying such notice with an itemized statement of the amount due Seller by reason of such deficiency. Such amount Fhall be computed by using the weighted average of' the monthly prices ;mid by Buyer to Seller for gars purchased under this contract during such Calendar Year, and during each Billing Month of the next succeeding Calendar Year, commencing with the Billing Month ending on January 31 thereof, Sell- er's bills to Buyer, for gas delivered during such months, shall be increased by adding to such bills an amount equal to one-twelfth (112) of the total amount due Seller by reason of Buyer's failure to purchase, during the preceding Calendar Year, tae Minimum Volume of gas required to be purchased hereunder. ARTICLE III. UQ ALITY : Seller shall deliver to Buyer natural gas which is of mer- chantable quality and reasonably free from water and other objection- able fluids and from sand and other objectionable solids and which con- tains not more than twenty (20) grains of total sulphur nor more than one (1) grain of hydrogen sulphide per one hundred (100) cubic feet of gas, and which has a heat content of not less than nine hundred (900) British Thermal Units per cubic foot under the conditions of measurement set forth in Article V. :'eller will notify Buyer as soon as possible in advance of any change in the source of gas supply which would effect a substantial change in the BTU content of the gas delivered to Buyer. -7- y. ARTICLE IV. DELIVERY AND CONNECTION FACILITIES: (1) The points of delivery of gas to be sold and delivered by Seller to Buyer hereunder shall be at the outlet side of Seller's regu- lating and meterLng stations which shall be installed, if not already installed, by Seller at locations, mutually acceptable to Buyer and Seller, on the sites of Buyer's plants, including any such plants under construction or to be constructed by Buyer in the future. Seller agrees that it will construct, operate and maintain such regulating and meter- ing stations, as well as the necessary tap or lateral lines from its main pipe line system to said regulating and metering stations. Buyer agrees that it will furnish to Seller without charge suitable space at its plant sites for Seller's tap and lateral pipe lines, regulating and metering stations and appurtenant equipment, and that it will install and maintain the necessary service lines to connect with Seller'a lines at the outlet side of Seller's regulating and metering stations. Buyer shall authorize no person other than an agent of Seller, or a person otherwtse lawfully authorized, to tamper with, inspect or remove same, and Seller shall have free ingress to and egress from Buyer's premises for the construction, maintenance, repair and replacement of its prop- erty located thereon, or for any purpose connected with the supplying of gas hereunder. (2) Gas is deliverable by Seller to Buyer hereunder at the outlet side of SeUer's regulating and metering stations where Buyer's service line connects with Seller's supply line. Seller shall maintain -8- at each of said delivery points such reasonably steady presses as may be designated by Buyer at each point of delivery but not in excess of a maximum of seventy-f iv-- (75) pounds per square inch gauge pressure aad. ne4--less--"an 4wanty-ftr {23'j-pou }ewer sgeAwe t"b_gauga.Pree-- ..&mrs%upAsz nermi opaeatir*-eondil.on9-#- lax r' (3) Seller and Buyer agree to commence and proceed with due diligence in the construction of the facilities which are necessary to enable Seller to deliver and Buyer to receive gas hereunder, commencing at twelve (12;00) o'clock midnight on July 1, 1966 with respect to Buyer's Engine Plant and Steam Plant. The delivery and acceptance of gas hereunder shall begin as herein set out, and the title to and own- ership of the gas delivered hereunder shall pass to and absolutely vest in Buyer at the points of delivery herein provided for. (4) Each of the parties hereto agrees to promptly notify the other party of expected changes in operating conditions which will affect the d?livery and receipt of gas hereunder, and the reasons for such ex- pected changes. In the event that Buyer proposes to construct an addi- tional electric generating station or stations or enlargements or addi- tions to its Engine Plant or its Steam Plant, Buyer agrees to notify Seller in writing at least twelve (12) months prior to the date on which Buyer will be ready to receive gas hereunder for the fuel requirements of such additional electric generating station or stations or of any such enlargement or addition, setting forth in such notice the estimated date on which such additional station or stations or enlargements or addi- tions will be placed in operation and the estimated annual and peak day -4- requirements of gas therefor, so that Seller may be prepared to make deliveries of gas to meet the fuel requirements thereof; provided, how- ever, that in no event shall Seller be required to install new delivery facilities or to enlarge its existing delivery facilities, subsequent to December 31, 1976, in order to'enable it to make deliveries of gas to Buyer for the fuel requirements of additional electric generating station or stations or of any enlargement or addition to existing electric generating station or stations. ARTICLE V. ANT: (1) For the purpose of this contract the unit of measurement of gas shall be one thousand (1,000) cubic feet at a pressure base of four- teen and sixty-five one-hundredths (14.65) pounds per square inch absolute and at a temperature base of sixty degrees (60°) Fahrenheit. Meter measure- ments shall be computed by Seller into such units in accordance with Boyle's Law for volume variations due to pressure and correc z-d for deviation, us- ing daily averages of recorded specific gravity (determined to three decimal places) and flowing temperature and using a value for atmospheric pressure of fourteen and four-tenths (14.4) pounds per square inch absolute. (2) The gas delivered hereunder shall be measured by means of meters of standard type, which shall be installed, operated and maintained by Seller and placed at the aforementioned points of delivery or in as close proximity thereto as practicable. Meters, and other measurement instruments and equipment, shall be tested and adNeted for accuracy monthly by Seller at Seller's expense. -10- (3) Buyer shall have access to said metering equipment at all times, but the reading, calibration and adjustment thereof and the chang- ing of charts shall be done only by the employees or agents of Seller. Charts and records from such metering equipment shall remain the property of Seller and shall be kept on file by Seller for a period of not less than four (4) years. However, upon request of Buyer, Seller shall submit to Buyer charts and records from its metering equipment, together with calculations therefrom, for Buyer's inspection and verification, subject to return by Buyer within ten (10) days after receipt thereof. (4) Buyer may, at its option and expense, install and operate meters, instruments and equipment to check Seller's meters, instruments and equipment, but the measurement of gas for the purpose of this agree- ment shall be by Seller's meters only, except as hereinafter specifically provided. The meters, instruments and equipment installed by Buyer shall be subject at all reasonable times to inspection or examination of Seller, but the reading, calibration and adjustment thereof shall be done only by Buyer. (5) Each party shall give to the other party notice of the time of all tests of meters sufficiently in advance of such tests so that the other party may conveniently have its representatives present, provided, however, that if either party has given such notice to the other party and such other part;, is not present at the time specified, then the party gi•.',ig the notice may proceed with the test as though the other party were present. Upon written request from either party, the party making the test will furnish the other party a copy of any test report requested. -11- ` 4 (6) Meter measurements computed by Seller shall be deemed to be correct except where the meter is found to be inaccurate by as much as two (2) per cent, fast or slow, or to have failed to register, in eiU er of which cases Seller shall repair or replace the meter. The quantity of gas delivered while the meter was inaccurate or failed to register shall be determined by the readings of Buyer's check meter, if installed and in good operating condition, or by correcting the error if the percentage of error is ascertainable by calibration or mathematical calculation, if not so ascertainable, then it shall be determined by estimating the quan- tity on a basis of deliveries under similar conditions when the meter war, registering accurately. No adjustment or correction shall be made for a period longer than thirty (30) days. (7) The daily average heating value of the gas delivered here- under, expressed in British Thermal Units per cubic feet and computed on the basis of a pressure of fourteen and sixty-five one-hundredths (14.65) pounds per square inch absolute and a temperature of sixty degrees (60°) I Fahrenheit, shall be determined at Seller's expense by the use of record- ing calorimeters of standard type, which shall be installed and operated by Seller. Each calorimeter shall be tested for accuracy by Seller at regular monthly intervals and should arty test show it to be inoperative or recording in error as much as ten (10) British Thermal Units, plus or minus, proper correction of recorded values shall be made for the period during which the recorder was inoperative or recording in error, and if this period cannot be ascertained, correction shall be made to the values recorded during the latter half of the period elapsed since the last -12- previous test. The degree of saturation by water vapor of the gas to be delivered hereunder shall be determined monthly by Seller, using standard instruments and methods, and the results thereof shall be prolerly taken into account in determining the heating value of the gas deli•rered. ARTICLE VI. PRICE: (1) The price payable by Buyer for the gas to be delivered here»:,.3er shall be determined for etch Billing Month, as that term is de- fined in Article DC hereof, by increasing or decreasing, as the case may be, the Base Price in effect during such month, as set forth in paragraph (2) of this Article, by an amount equal to the amount by which the weighted average pricey as defined in paragraph (3) of this Article, of all gas purchased by Seller during the month immediately preceding such Billing Month exceeds or is less than thirteen cents (13¢) per one thousand (1,000) cubic feet of gss; provided, however, that all of the prices payable by Buyer for the gas to be delivered by Seller to Buyer hereunder are subject to adjustment for variations in the British Thermal Unit heat content of the gas in the manner and to the extent set out in Article VII hereof. (2) The Base Price for the gas to be delivered hereunder shall be eighteen cents (18¢) per one thousand (1,000) cubic feet of gas. (3) For the purpose of this agreement, the terns "weighteO average price" of gas purchased by Seller :hall mean the weighted average price per one thousand (1,000) cubic feet of all gas purchased by Seller during any month, computed to the nearest one-hundredth of one cent, and vhall be determined by dividing the total dollar amount paid or accrued -13- on Seller's books for all gas purchased by Seller during such month by the total number of thousands of cubic feet of gas purchased by Seller during such month, adjusted to the same pressure base as gas sold here- under, and shall include, in addition to the cost of the gas itself, all Class A Taxes, as hereinafter defined in Article VIII hereof; provided, that if any portion of the cost of gas accrued on Seller's books during any month is not paid by Seller to the party or parties entitled thereto because of the fact that such accrual is canceled, or if W portion of the cost of gas or of any Class A tax which has been paid by Seller is refunded to Seller, or if Seller is required by the terms of any gas pur- chase contract, or of any agreed settlement of a disputed claim, or by a determination or judgment of a regulatory body or court having or assert- ing ,jurisdiction, to make retroactive payments with respect to gas pre- viously purchased 'hy Seller, then appropriate adjustments to compensate therefor shall be made in the price payable for gas delivered by Seller to Buyer hereunder as soon as practicable after the time of such cancella- tion, refund or retroactive payment, provided, that the period during which such adjustments are to be made shall be determined by Seller suuject only to the condition that the same shall be made within a reasonable period of time taking into consideration the total amount of any such cancella- tion, refund or retroactive payment, but no adjustments as provided for herein shall be made after this contract has terminated except with respect to items canceled, refunded or paid prior to the date of such termination, nor shall any adjustments as provided for herein be made with respect to any gas purchased by Seller prior to the first delivery of gan to Buyer -1~- I hereunder. It is recognized that some of the gas delivered by Seller to Byer hereunder during any month may be gas cwned in place and produced by Seller o, ray be gas previously purchased or produced trj Seller which is taken from one of its underground storage reservoirs, In.t such gas shall not be considered in determining the weighted average price of gas pur- l chased by Seller during such month; provided, however, that gas placed in storage by Seller for later delivery to Buyer or other customers of Seller shall be c%ccounted for as gas purchased during the month in which it was actually purchased. It is also recognized that some of the gas delivered by Seller to Buyer hereunder during any month will probably be gas pur- chased by Seller from an affiliate or subsidiary company, and in computing, the weighted average price of gas purchased by Seller during any month all gas purchased by Seller from an affiliate or subsidiary company shall be considered to have been purchased at the price or prices being paid by Seller for (:as purchased under substantially similar contractual terms and provisions from other suppliers in the same field, or, if Seller is not purchasing gas from any other suppliers in such field under subecan- tially similar contractual terms and provisions, then in Seller'e same supply area; provided, that if during such month Seller does not purchase gas from any other suppliers in either the same field or the same supply area in which Seller is purchasing gas from Seller's affiliate or subsidiary company, then the gas purchased by Seller from its affiliate or subsidiary in such field shall be considered to have been purchased at the highest :Orice which had been offend to Seller's affiliate or subsidiary by any other purchaser or prospectAve purchaser for such gas under contractual -15- terms and conditions substantially similar to those customarily included in Seller's gas purchase contracts, but if no offer for the purchase of such gas had been received by Seller's affiliate or subsidiary company from any other purchaser or prospective purchaser, then the gas purchased by Seller from such affiliate or subsidiary company in such field shall be considered to have been purchased at the price or prices being paid by Seller for gas purchased under substantially similar contractual terms and proviraioas from other suppliers i.: the field nearest to that in which Seller is purchasing such gas from said affiliate or subsidiary company. Nothing contained in this contract shall prevent Seller from entering into any amendment, modification, renewal, extension or replacement of any existing or future gas purchase contract or contracts between Seller and its gas suppliers. (4) If :he weighted average of the monthly prices paid by Buyer to Seller for gas purchased he.-eunder during either the first six (6) cal- endar months or the last six (6) calendar months of my Calendar Year of the term hereof should exceed twenty-rive cents (25¢) per one thousand (1,000) citbic feet of gas, exclusive of any ad,ustment in price due to heating value, then Buyer clay elect to cancel this contract by giving Seller written notice of intention to cancel as hereinafter provided in this paragraph. in the event Buyer should have and exercise the right to cancel this contract pursuant to the provisions of this paragraph, written notice of Buyer's election to cancel shall be given to Seller by Buyer within sixty (60) days after the end of the six-month period during which such right accrues; provided, that such notice of cancellation shall sot -16- ' forth the effective date thereof, which shall be a date not less than one (1) year nor more than two (2) years subsequent to the date of such notice; and provided further, that Buyer shall pay the same prices for gas re- ceived during the period from the date of said notice until the date of termination of this contract as would have been paid if this contract had not been terminated. ARTICLE VII. ADJUSTMENT FOR HEATING VALUE: If the weighted average heating value of the gas delivered by Seller to Buyer during any month is less than one thousand (1,000) British Thermal Units per cubic moot, the price payable by Buyer per one thousand (1,000) cubic feet of sas computed as provided in Article VI here- of shall be decreased one-tenth of one per cent (0.1%) for each British Thermal Unit ',•+elow one thousand (1,000) British Thermal. Units per cubic foot; and if the weighted average heating value of the gss so delivered during any month is more than one thousand (1,000) British Thermal Units per cubic foot, the price payable by Buyer per one thousand (1,000) cubic feet of gas computed as provided in Article VI hereof shall be increased one-tenth of one per cent (0.1%) for each British Thermal Unit above one thousand (1,000) British Thermal Units per cubic foot for such gas so delivered during such month. ARTICLE VIII. REIMBURSEMENT FOR TAXES AND RENTAIS: (1) The term "tai' or "taxes," as used in this contract, shall mean any kind or character of tax (other than ad koalorem, capital stock.. _lq. general property, income or excess profits taxes), license, fee, rental or charge, including specifically, without limitation by enumeration, any production, severance, gathering, transportation, processing, compression, dedication, use, sales, delivery or gross receipts tax, now or hereafter lawfully levied, assessed or made by any governmental authority on the gas itself or on the act, right or privilege of production, severance, gath- ering, transportation, processing, compression, dedication, use, sale or delivery of gas which is measured I+y gross receipts or by the volume, value or sales price to Seller or Buyer of the gas in question, but shall not include any value attributable to the liquid hydrocarbons in said gas; provided, however, that the term "tax" or *taxes" shall not be deemed to include any general franchise tax imposed on corporations on account of their corporate existence or on their right to do business within the state as a foreign corporation. (2) The terms *Class A Taxes," "Class B Taxes," and "Class C Taxes," as used in this contract, shall have the following meanings, to wit: (a) The term "Class A Taxes" shall be construed to mean all taxes, as herein defined, -+hich Seller pays for the account of or by way of reimbursement to its gas suppliers with respect to all gas purchased by Seller. (b) The to n1 "Class B Taxes" shall be construed to mean all taxes, as herein defined, which are or may be Levied upon and/or paid by Seller with respect to the gas sold by Seller to Buyer hereunder, exclusive of any Class A Taxes or Class C Taxes. -18- (c) The term "Class C Taxes" shall be construed to mean any license, fee, rental or charge which is or may be levied or imposed on Seller by any governmental authority for the use of its public streets, alleys and thoroughfares in the conduct of Seller's business, with respect to the gas sold by Seller to Buyer hereunde" arid/or the gross receipts received by Seller from the sale of gas to Buyer hereunder, or any sales or delivery tax which is or may be levied or imposed on and/or paid by Seller, with respect to the gas sold by Seller to Buyer hereunder and/or the gross receipts received by Seller from the sale of gas to Buyer hereunder. (3) All Class A Taxes shall be included, in addition to the cost of the gas itself, in computing the weighted average price of all gas purchased by Seller, in accordance with the provisions of Article VI hereof. Buyer agrees to reimburse Seller with respect to Class B Taxes and Class C Taxes, as herein defined, to the extent that the amount of Class B Taxes and Class C Taxes which are or may be levied upon and/or paid by Seller increases, with respect to the gas sold by Seller to Buyer hereunder, subsequent to July 1, 1958. (4) It is understood and agreed that the amount of reimburse- ment for any new or additional Class B Taxes and/or Class C Taxes, or any increase in Class B Taxes and/or Clasa C Taxes, shall be determined by applying the rate, or the increase in ti.: rate, of any such tax measured by gross receipts, units of volume, value or sales price to Seller's gross -lg- receipts hereunder or to the volume, value or sales price, respectively, of the gas delivered hereunder; provided, that in the event such increase cannot be directly related to the gas delivered hereunder or the gross receipts received by Seller, as hereinabove provided, the amount of re- imbursement to Seller shall be the same proportion to the volume of gas sold hereunder as the total amount of such increase is to the total vol- ume of gas sold by Seller. (5) It is understood and agreed that in the event any tax, charge or rental for which Seller has been reimbursed or paid by Buyer hereunder is subsequently declared unlawful,, Seller, upon recovery of the amount of such unlawful tax, charge or rental, shall refund to Buyer the entire amount of such reimbursement or payment made by Buyer to Seller which is so recovered by Seller; provided, however, that Seller shall not be required to make a refund to Buyer with respect to any amount so re- covered after this contract has terminated. (6) Any amounts due from Buyer to Seller as reimbursement for taxes, charges or rentals, in accordance with the provisions of this Article, chall be paid by Buyer to Seller at the time and in the manner that bills for gas delivered hereunder are payable, as provided in Article IX hereof. ARTICLE IX. PAYMENT : (1) For the purpose of billing and accounting for gas deliv- ered hereunder, the day shall begin at 12:00 o'clock midnight and extend to the next following 12:00 o'clock midnight, and the month (herein -2C. sometimes called the "Billing Month") shall begin at 12:00 o'clock mid- night on the last day of the calendar month and extend to 12:00 o'clock midnight on the last day of the following calendar month; provided, how- ever, that in Seller's determination of the weighted average price of gas purchased by Seller during any month, Seller will use its normal fiscal month calculations, and nothing herein shall be construed so as to require Seller to change such procedure. (2) Each party shall read all meters daily at 12:00 o'clock midnight as nearly as practicable, and Seller shall report to Buyer the results of such meter readings. (3) On or before the tenth (10th) day of each calendar month, Seller shall render to Buyer at its office in Denton, Texas, statements of the amount of gas delivered hereunder by Seller to Buyer at each point of delivery during the preceding Billing Month, and shall also render a bill for the gas so delivered. In computing such bill, the weighted average price of gas purchased by Seller, as determined in accordance with paragraph (3) of Article VI, for Seller's fiscal month immediately preceding the Billing Month, shall be used. On or before the twentieth (20th) day of each calendar month Buyer shall make payment to Seller at Seller's office in Denton, Texas, for all gas delivered hereunder to Buyer during the preceding Billing Month. (4) If Buyer should fail to pay any amount owing to Seller when same is due, interest thereon shall accrue at the rate of six per cent (6%) per annum from the date when such amount is d;a until sane is paid. If such failure to pay continues for sixty (60) days, Seller may, -21- in the absence of any bona fide dispute as to the amount or the time when same was due, suspend deliveries of gas hereunder, and the exercise of such right shall be in addition to any and all other remedies avail- able to Seller. (5) Each party shall have the right at reasonable hours to examine the books, records and charts of the other party to the extent necessary to verify the accuracy of any statement, payment, calculation or determination made pursuant to the provisions of any Article hereof. If any such examination shall reveal, or if either party shall discover, any error or inaccuracy in its own or the other party's statements, pay- ments, calculations or determinations, then proper adjustments and cor- rection shall be made as promptly as practicable thereafter; provided, however, that no adjustment or correction shall be made on or with re- spect to any error or inaccuracy which occurred more than two (2) years prior to the discovery thereof. ARTICLE X. TERM: Subject to the other terms and provisions hereof, this contract shall be effecttve from twelve (12:00) o'clock midnight on the r.! day af_1 •T , 1966, and shall thereafter continue and remain in full force and effect for a period and term extending to twelve (12:00) o'clock midnight on December 31, 1979. ARTICLE XI. FORCE MAJEURE: (1) In the event of either party hereto being rendered unable -22- wholly or in part by f orce ma,jeure to carry out its obligations under this agreement, other than to make payments due hereunder, it is agreed that on such party giving notice and full particulars of such force majeure in writing to the other party as soon as possible after the oc- currence of the cause relied on, then the obligations of the party giving such notice, so far as they are affected by such force ma,jeu-e, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall be as far as possible remedied with all reasonable dispatch. The term "force ma,jeure" as employed herein shall mean acts of God, strikes, lockouts or other industrial disturb- ances, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, arrests and restraints of the governments and people, civil disturbances, explosions, breakage or accident to machinery or lines of pipe, the necessity for making repairs to or alterations of machinery, equipment or lines of pipe, breakage of transmission lines, failure of electric equipment due to sleet, ice or other unavoidable causes, acci- dents to or failures of electric substations, transformers or switching devices, shortage of water, freezing of wells or lines of pipe, partial or entire failure of wells, and any other causes, whether of the kind herein enumerated or otherviLse not within the control of the party claim- ing suspension and which by the exercise of due diligence such party is unable to prevent or overcame. (2) It is understood and agrreed that zhe settlement of strikes or lockouts shall be entirely within the discretion of the party having -23- the difficulty, and that the above re:sirement that any force ma,jeure shall be remedied with all reasons,; dispatch shall not require the settlement of strikes or lockouts by a- ,ding to tae demands of opposing party when such course is iiadvisable in the discretion of the party having the difficulty. ARTICLE XII. CURTAIItWT OF DELIVERIES. (1) Seller does not guarantee a continuous, uninterrupted supply of gas to Buyer hereunder, and Seller reserves the right, subject to the limitations hereinafter set forth in paragraphs (2) and (3) of this Article, to curtail or discontinue the supply of gas hereunder, if in the judgment of Seller a continuance of the supply of gas to Buyer under this contract would jeopardize or threaten adkquate service to Seller's domes- tic, commercial or industrial customers who are accorded by Seller a higher priority of service. (2) Buyer and Seller recognize the fact that each is engaged in rendering & service which is essential to the public health and safety and both consider the continuity of Buyer's fuel supply essential to the public welfare; that each serves domestic, commercial and industrial cus- tomers and that, im many cases, use of gas by Seller's domestic, commercial and industrial customers is dependent on Buyer's ability to render con- tinuous electric service; therefore, Buyer agrees that it will provide a reasonable quantity of stand-by fuel and equipment to meet its fuel re- quirements during periods when the gas supply hereunder may be curtailed or interrupted, and Seller agrees to exercise due diligence in making, -2k.. reasonable advance preparations to enable it to provide reasonably con- tinuous service to Buyer. As soon as rea,~ .ably possible after Seller has knowledge of a pending curtailment of ; ,rvice to Buyer, Seller will notify Buyer of such curtailment. (3) Seller may, in accordance with the provisions of paragraph (1) of this Article, curtail the supply of gas to Buyer hereunder at any time by as much as twenty-five per cent (25%) of 2.ver's fuel require- ments at such time without at the same time curtailing the supply of gas to other customers of Seller in Seller's curtailment zone in which Buyer's plant or plants are located who are accorded by Seller a priority of serv- ice equal to or higher than that provided by Rate 4-G of Seller's Schedule of Industrial Rates; provided, that no modification of said Schedule of Industrial Rates shall cause the service priority of Buyer to be raised or lowered in relation to that of other industrial customers of Seller; and provided further, that if it should be necessary at any time for Sell- er to curtail the supply of gas to Buyer hereunder in excess of twenty- five per cent (25%) of Buyer's fuel requirements at such time, Seller agrees that the supply of gas to other industrial customers of Seller in the curtailment zone in which Buyer's plant or plants are located who are accorded by Seller a priority of service equal to but not higher than Seller's said Rate 4-G shall be curtailed an equal percentage of the re- quirements of such customers at such time. With respect to curtailment of service to such other industrial customers, Seller shall only be obli- gated to make a good faith effort to effect such curtailment by following its usual practices with respect to notifications and instructions to such -25- other customers regarding such curtailment; and provided further, that refusal or inability by Seiler to supply gas to Buyer in excess of Seller's obligation to deliver to Buyer the maximum hourly, daily or annual require- ments set forth or provided for in this contract shall not constitute a curtailment of the supply of gas to Buyer hereunder as provided for in this Article. (4) If during any Calendar Year or Years of the term hereof Seller curtails or discontinues, for any reason, the supply of gas ;o Buyer hereunder to the extent that Seller does not supply ninety per cent (906) or more of the fuel requirements of Buyer's Plants during any such Calendar Year, up to but not in excess of Buyer's Estimated Annual Fuel Requirements for any such year, then Buyer may elect to cancel this con- tract by giving notice of intention to cancel as hereinafter provided in this paragraph. In the event Buyer should have and exercise the r5;iht to cancel this contract, written notice of such election to cancel shall be given to Seller by Buyer within six (6) months after the end of the Csl- ender Year during which such curtailment occurred, and such cancellation shall become effective at the end of two (2) years from and after the date of such notice. (5) Within ten (10) "vs after any curtailment of gas deliver- ies by Seller, Layer shall notify Seller in writing regarding the amount of gas which wE. actually curtained for any reason, including force ma- ,jeure, and the details of the computation of such amount, and Buyer's determination of the amount of such curtailment shall become final and binding on both parties unless protested in writing by Seller within ten (10) days after receipt by Seller of such notification. -26- (ci) In case of interruption or curtailment of service, as pro- vided for in this Article, including curtailment by reason of force ma,jeure as defined in Article XI hereof, the amount by which Buyer's total fuel re- quirements, up to but not in excess of its Estimated Annual Fuel Require- ments, are curtailed during any Calendar Year, shall, for the pr,::pose of determining whether Buyer has complied with its minimum purchase obliga- tion pursuant to Article II hereof, be added to the amount of gas actually purchased and received by Buyer during such Calendar Year. ARTICLE XIII. REGULATORY BODIES : (1) This agreement and all operations hereunder are subject to the applicable federal and state laws and. the applicable ordinances, orders, rules and regulations of any local, state or federal governmental authority having or asserting ,jurisdiction; but nothing contained herein shall be construed as a waiver of any right to question or contest any such law, ordinance, order, rule or regulation in any forum having jurisdiction in the premises. (2) In th% event either Buyer or Seller shall be required by a judgment or order of any governmontal authority having or asserting jurisdiction to either pay or charge prices for gas sold by Seller to Buyer hereunder which are higher or lower than the prices stipulated or provided for herein with respect to gas sold )y Seller to Buyer hereunder, Buyer and Seller shall each have the option of canceling this contract by giving the other party written notice of its intention to do so within six (6) months after the date of such Judgment or order, which cancellation -27- shall become effective at the er.d of two (2) years from and after the date of such notice. ARTICLE XIV. TZIUMATION PRIVILEGE; (1) If either party hereto shall fail to perform any of the covenants or obligations imposed upon it under and by virtue of this agreement (except where such failure shall be excused under any of the provisions of this agreement), then in such event the other party may, at its option, terminate this agreement by proceeding as follows: The party not in default shall cause a written notice to be served on the party in default, stating specifically the cause for terminating this agreement and declaring it to be the intention of the party giving the notice to terminate the same; whereupon, the party in default shall have thirty (30) days after the service of the aforesaid notice in which to remedy or remove the cause or causes of default stated in the notice of termination, and if within said period of thirty (30) days the party in default does so remedy and remove said cause or causes, then such notice shall be nullified and this agreement shall continue in full force and effect. In case the party in default does not so remedy and reriove the cause or causes of default within said period of thirty (30) da:rs, then this agreement shall become null and void from and after the expiration of ra.d period. (2) Any cancellation of this agreement pursuant to the pro- visions of this Article shall be without prejudice to the right of the party not in default to collect any amounts then due it and without waiver I -28. of any other remedy to which the party not in default may be entitled for violation of this agreement. ARTICLE XV. GENERAL: (1) Warranty: Seller hereby warrants „ne title to the gas to be sold hereunder, Seller's right to sell the same, and that same is free from all liens and adverse zlaims. (2) Right of Way: Buyer hereby grants to Seller the right to lay and maintain pipe lines and to install metering stations and other necessary equipment on Buyer's plant sites, as provided for in Article N hereof, only for the purpose of supplying gas hereunder, and such lines and other equipment placed by Seller on said plant sites shall remain the personal property of Seller, and, subject to the terms of this contract, may be removed by Seller at any time. (3) Indemnity: As between the parties hereto, Seller shall be in control and in possession of the gas deliverable hereunder and responsible for any damages or injuries caused thereby until the same shall have been delivered to Buyer at the points of delivery, except injuries and damages which shall be occasioned solely and proximately by the negligence of Buyer. After such deliver, of gas Buyer shall be deemed to be in exclusive control and possession thereof and responsible for any injuries or damages caused thereby, except injuries and damages which shall be occasioned solely and proximately by the negligence of Seller. -29- (4) Waiver of Breach: The waiver by either party of any breach of any of the provisions of this agreement shall not constitute a continuing waiver of other breaches of the same or other provisions of this agreement. (5) Notices: All notices provided for herein shall be in writing and shall be deemed to be delivered to Seller when addressed to Lone Star Gas Company, 301 South Harwood Street, Dallas 1, Texas, and de- posited in the United States mail, postage prepaid, and shall be deemed to be delivered to Buyer when addressed to Citiy Manager, City of Denton, Denton, Texas, and deposited in the United States mail, postage pm- paid. (b) Captions or Headings: The captions or headings preceding the various parts of this agreement are inserted and included solely for convenience and shall never be considered or given any effect in con- struing this contract or any part of this contract, or in connection with the intent, duties, obligations or liabilities of the respective parties hereto. (7) Assignment: This contrast shall be binding upon the parties hereto and their respective successors and assigns. All or any part of the rights or obligations of either party hereto may be at any time assigned, but any such assignment, unless accepted in writing by the other party hereto, shall not relieve the assignor of its obliga- tions hereunder, in the event the assignee sha' _ :ail to perform the same in accordance with the terms hereof. -30- 1 y w ARTICLE XVI. REPLACEMENT OF PRIOR CONTRACT: This contract, effective as of twelve (12:00) o'clock midnight on July 1, 1966, shall replace and supersede that certain Contract for Industrial Gas Service between Seller and Buyer, dated June 30, 1963 relating to Buyer's plants, together with any amendments or supplements to said contract. IN WITWZS WHEREOF, this agreement has been executed in dupli- ,.ate originals by the parties hereto on the _ i day of 1966, effective as of twelve o'clock midnight on July 1, 1966. ATTEST: LONE STAR GAS C01VANY 1 49! By Secre Vice President "Seller" ATrXST: C1'I'Y OF DENTON.0 TEXAS - (JN City Secretary Mayor "Buyer" -31-