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HomeMy WebLinkAbout19604 ORD - 01/12/1987TEXAS: A RESOLUTION APPROVING THE AMENDMENT OF GAS SEARCH AGREEMENT, GAS AVAILABILITY AGREEMENT AND EXPLORATION AND DEVELOPMENT AGREEMENT AND SETTLEMENT OF THE COASTAL CORP. ET AL V. VALERO ENERGY CORP. ET AL, NO. C -028-86-D, 206TH JUDICIAL DISTRICT; AND DECLARING AN EMERGENCY. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, SECTION 1. 6That, as part of the settlement of The Coastal Corp. et al v. Valero Energy Corp. et al, No. C -028-86-D, 206th Judicial District, the City Manager is authorized to approve the "Amendment Of Gas Search Agreement, Gas Availability Agreement And Exploration And Development Agreement," a true copy of which is attached hereto, amending the "Gas Search Agreement" (attached as an exhibit to the final judgment in Cause No. 300,241, Lone Star Gas Co., v. Valero TransmissionCo. et al, 200th District Court, Travis County, Texas), and that the City Manager and City Attorney's office be authorized to take all steps necessary to vote the City's interest under the Settlement Trust Agreement and complete said settlement. SECTION 2. That upon written request of the Mayor or five Council members, copy attached, to find and declare an emergency due to the need for efficient and effective administration of City affairs, such finding of an emergency is made and declared requiring suspension of he Charter rule as to consideration and voting upon ordinances or resolu ns at three regular meetings so that this resolution is passed and shall ake effect upon fixst reading as an emergency measure this the /301- day of , 19 ATTEST: U &cretarY MAYOR APPROVED: (a DAY OF ,�ao„avy , 19 g7 HAL GEORGE, CITY ATTORNEY / By �. 'tent City Attirney O1P.031.01 THE CI Y OF CORPUS CHRISTI, TEXAS 19604 MICROFILMED 4 o,e tou.e AMENDMENT OF GAS SEARCH AGREEMENT, GAS AVAILABLITY AGREEMENT AND EXPLORATION AND DEVELOPMENT AGREEMENT This AMENDMENT AGREEMENT made between and among THE COASTAL CORPORATION, a Delaware corporation (herein called "Coastal"), formerly named VALERO ENERGY CORPORATION, Coastal States Gas Corporation, a Delaware corporation (herein called "New Company"), VALERO TRANSMISSION COMPANY, a Delaware corporation (herein called "Lo -Vaca"), formerly named Valero Intrastate Transmission Company, and TEXAS COMMERCE BANK, NATIONAL ASSOCIATION, a national banking corporation, in its capacity as Trustee under the Settlement Trust Agreement hereinafter identified (herein in such capacity called "Trustee"), joined herein for the purposes herein stared by BORDER EXPLORATION COMPANY, a Texas corporation (herein called "Border"), COASTAL OIL & GAS CORPORATION, a Delaware corporation (herein called "COGC"), COASTAL LIMITED VENTURES, INC., a Texas corporation (herein called "Limited"), and ANR PRODUCTION COMPANY, a Delaware corporation (herein called "ANR"), WITNESSETH: I. GENERAL 1.01. Reference is here made for all purposes and as fully as if set out herein in full to that certain Gas Search Agreement (herein called the "Gas Search Agreement") dated as of December 28, 1979, among Coastal, New Company, Lo -Vaca and Mercantile National Bank at Dallas as the then Trustee under the Settlement Trust Agreement, which was entered into pursuant to the Settlement Plan therein identified between Coastal, New Company, Lo -Vaca and certain customers of Lo-Vaca's gas distribution system as Settling Customers. For identification purposes, mention is made that a copy of said Settlement Plan is contained in a prospectus dated February 14, 1979, and supplemented April 30, 1979, which prospectus, together with copies of the Settlement Trust Agreement and Gas Search Agreement referred to herein, are all attached as exhibits to the Final Judgment entered on December 31, 1979, in Cause No. 300,241, styled Lone Star Gas Company vs. Valero Transmission Company (Formerly Lo -Vaca Gathering Company), et al. (•hereinafter called the "Settlement Litigation Docket") in the District Court of the Presiding District Judge of the District Court of Travis County, Texas (53rd Judicial District), which Court is referred to in the Gas Search Agreement as the 200th District Court. For convenience in identifying parties named in the Gas Search Agreement, Valero Energy Corporation and valero Transmission Company are herein referred to as "New Company" and "Lo -Vaca," respectively, as they were referred to in the Gas Search Agreement; and unless otherwise stated herein, all other terms used in this Amendment Agreement which are defined in the Gas Search Agreement shall likewise have the meaning therein stated; provided that the term "Settling Customers" shall refer to the persons who, at the relevant time, own and hold the "Interests" in the "Gas Search Program Trust" (as such terms are defined in the Settlement Trust Agreement) originally allocated pursuant to Sections 2.02 and 2.04(a) of the Settlement Trust Agreement, determined after giving effect to all transfers (including transfers by death, operation of law or otherwise) of such "Interests" down to such relevant time permitted under the terms of the Settlement Trust Agreement. Mercantile National Bank at Dallas has heretofore resigned as Trustee under the Settlement Trust Agreement and as Escrow Agent under the Gas Search Agreement, and Texas Commerce Bank, National Association, has been duly appointed as successor Trustee under such Settlement Trust Agreement and as successor Escrow Agent under such Gas Search Agreement and is now serving in such capacities. Border, COGC and Limited are all Coastal Companies which are parties to the Gas Search -2- 06d4U.0 Litigation referred to hereinafter. Peter Paul Petroleum Company, a Texas corporation ("Peter Paul"), was not a Coastal Company but was a party to the Hidalgo County Litigation (identified hereinafter) by reason of the fact that Peter Paul had acquired interests from a Coastal Company in certain wells drilled on Interests which were dedicated to Lo -Vaca prior to the date of the Gas Search Agreement under a gas purchase contract as described in Section 4.06 of the Gas Search Agreement as to which the pricing provisions have been amended as to such wells as contemplated in Section 4.06 of the Gas Search Agreement, and had also entered into other agreements with a Coastal Company in drilling certain additional wells in the Service Area and ratified certain seller's contracts with New Company as contemplated under Section 4.05 of the Gas Search Agreement as to such additional wells, so that Peter Paul's interest in gas to be produced from all such wells became Additional Gas Dedicated for Sale to the System at Program Prices pursuant to the Gas Search Agreement. Border has acquired and now owns the interests of Peter Paul in the Hidalgo County Litigation, and COGC and ANR have entered into an exchange agreement with Peter Paul whereby COGC and ANR will acquire the interests of Peter Paul in all such wells and the gas to be produced therefrom subject to such gas purchase contracts• and the Gas Search Agreement; and in joining in this Amendment Agreement Border, COGC and ANR are acting both for themselves and also as successors to Peter Paul and with respect to the applicable interests thus acquired and to be acquired by Border, COGC and ANR from Peter Paul. Union Rheinische Petroleum, Inc., a Texas corporation ("Union"), iS a plaintiff in the Hidalgo County Litigation described hereinafter by virtue of the fact that it had acquired Interests in and participated with a Coastal Company in drilling certain wells from which gas attributable to the Interests of Union was being sold to Lo -Vaca but had not been -3- 0666U.0 Dedicated for Sale to the System at Program Prices. Union is not a party to this Amendment Agreement. 1.02. The Gas Search Agreement has been supplemented by a Settlement Agreement (herein called the "Settlement Agreement") dated as of July 11, 1984, among Coastal, New Company, Lo -Vaca, the Trustee, the Escrow Agent under the Gas Search Agreement, Peter Paul and Border, resolving certain issues as to pricing of gas under the Gas Search Agreement and certain accounting errors and other matters as more fully set forth in such Settlement Agreement, to which reference is also here made for all purposes. Unless otherwise stated herein, terms used in this Amendment Agreement which are not defined in the Gas Search Agreement but are defined in the Settlement Agreement shall have the meaning stated in the Settlement Agreement. 1.03. Since the Settlement Date, the demand for gas on Lo-Vaca's gas systemhas very substantially lessened and the natural gas market, in general, is being adversely affected by a significant surplus in currently available natural gas deliverability. At the same time, prevailing well head prices for newly discovered gas have fallen significantly, to levels substantially below the Program Prices applicable to gas production from substantial numbers of wells producing Additional Gas Dedicated for Sale to the System at Program Prices pursuant to the Gas Search Agreement. During the past few years, except during brief periods of high demand, Lo -Vaca has purchased reduced volumes of Additional Gas Dedicated for Sale to the. System pursuant to the Gas Search Agreement. Coastal, Border, COGC, Limited, Peter Paul and Union have filed suit in the 206th Judicial District Court in Hidalgo County, Texas (being Cause No. C -028-86-D, styled The Coastal Corporation, et aI., vs. Valero Energy Corporation, er al., and being herein called the "Hidalgo County Litigation"), against New Company, Lo -Vaca, the Trustee, Settling Customers, -4- 0646U.0 and Reata Industrial Gas Company, a Delaware corporation (herein called "Reata"), and Valero Industrial Gas Company, a Delaware corporation (herein called "Industrial") (both Reata and Industrial being subsidiaries of New Company), in which Coastal and the other Plaintiffs are seeking monetary damages for alleged failures of Lo -Vaca and New Company to take or pay for volumes of gas under gas sales contracts and are also seeking a declaratory judgment terminating the Gas Search Agreement and all gas contracts made a part of the Program under the Gas Search Agreement or entered into pursuant thereto. New Company, Lo -Vaca and the other Lo -Vaca Affiliates named in such Hidalgo County Litigation, as well as all defendants who have answered in the Hidalgo County Litigation, have denied liability on the claims asserted by said Plaintiffs and that such Plaintiffs are entitled to a declaratory judgment as requested by them. No trial has been conducted, and the Hidalgo County Litigation is pending. Conoco Inc. ("Conoco"), one of the Settling Customers, has filed suit (the "Conoco Suit") against Coastal and other Coastal Companies and New Company in the 53rd Judicial District Court of Travis County, Texas (the "200th District Court" referred to in the Gas Search Agreement), in a matter originally styled Conoco Inc. vs. The Coastal Corporation, et al., and docketed as Cause No. 396,463, which suit has been renumbered and docketed in the Settlement Litigation Docket, seeking, among other matters, a judicial declaration that the Gas Search Agreement is valid and in full force and effect. Coastal and the other Coastal Company defendants in the Conoco Suit are contesting certain of the claims and allegations made by'Conoco, no trial on the merits has been conducted with respect to such contested issues, and said Conoco Suit is pending. 1.04. Under the circumstances, the parties hereto are in agreement that it would 'be in the best interests of all concerned to amend the Gas Search Agreement and the gas sales -5- 06,160.0 contracts, or amendments to gas sales contracts, executed by certain parties to this Amendment Agreement pursuant to which Additional Gas Dedicated for Sale to the System pursuant to the Gas Search Agreement is dedicated to New Company or Lo -Vaca, •incident to which amendments Coastal will offer to sell certain volumes of gas directly to Settling Customers at a discounted price for a period of six years, and incident to which Coastal, COGC, Limited and Border (on behalf of itself and Peter Paul) will dismiss (with prejudice to the refiling of such claims) their claims in the Hidalgo County Litigation, the parties will seek to obtain entry of a Final Court Order (as hereinafter defined) in the Settlement Litigation Docket, certain alleged claims of the parties arising under and in connection with the Gas Search Agreement and said gas sales contracts, or amendments to gas sales contracts, will be released and extinguished, and various other agreements will be entered into among parties to .the Hidalgo County Litigation and other Coastal and New Company subsidiaries, as described hereinafter. 1.05. Accordingly, the Trustee, as authorized in Section 11.02 of the Settlement Trust Agreement with the consent of Settling Customers having in the aggregate sixty-five percent (65%) of the 'Interests" as defined in the Settlement Trust Agreement, Coastal, New Company and Lo -Vaca, joined herein by Border, COGC, Limited and ANR for the purposes herein stated, have entered into this Amendment Agreement as an agreement supplemental to the Gas Search Agreement, for the purpose of amending and supplementing certain of the terms and provisions of such Gas Search Agreement and other agreements supplemental to the Settlement Trust Agreement and Gas Search Agreement and for other purposes as set out hereinafter. 1.06. Reference is also here made for all purposes and as fully as if set out herein in full to that certain Gas Availability Agreement (herein called the "Gas Availability Agreement") dated as of December 28, 1979, between Coastal and -6- Lo -Vaca, which was also entered into pursuant to the Settlement Plan identified therein and in the Gas Search Agreement. Incident to this amendment of the Gas Search Agreement, Coastal and Lo -Vaca have also agreed to amend the Gas Availability Agreement as set out in Article IV hereinafter. 1.07. Reference is also here made for all purposes and as fully as if set out herein in full to that certain Exploration and Development Agreement (herein called the "E&D Agreement") dated as of December 28, 1979, between New Company and Coastal, which was also entered into pursuant to the Settlement Plan identified therein and in the Gas Search Agreement. incident to this amendment of the Gas Search Agreement, New Company and Coastal•have also agreed to amend the E&D Agreement as set out in Article V hereinafter. II. AMENDMENTS TO GAS SEARCH AGREEMENT AND GAS PURCHASE CONTRACTS In consideration of the mutual covenants and agreements herein contained, Coastal, New Company, Lo -Vaca and the Trustee, joined herein by Border, Limited, COGC and ANR for the purposes herein stated, hereby covenant and agree as follows: 2.01. As recited in the Settlement Agreement, from time to time since the Program Effective Date, Coastal has caused to be executed and delivered to New Company various seller's contracts, as provided for in Section 4.05 of the Gas Search Agreement, providing for the sale of Additional Gas Dedicated for Sale to the System at Program Prices, all of which contracts are listed in Exhibit A to the Settlement Agreement and are herein called "Seller's Contracts." Additionally, from time to time since the Program Effective Date, Coastal has caused to be amended the pricing provisions of various gas purchase contracts between Coastal Companies and • Lo -Vaca which existed on the date of the Gas Search Agreement, -7- 0 ..&1).0 so as to cause gas produced from certain specific wells covered thereby to become Additional Gas Dedicated for Sale to the System at Program Prices in accordance with the provisions of Section 4.06 of the Gas Search Agreement, all of which contracts and amendments thereto are listed in Exhibit B to the Settlement Agreement and which contracts and amendments thereto, insofar only as such gas purchase contracts and amendments thereto cover gas to be produced from the specific wells described in such respective amendments attributable to the Interests of any Coastal Program Party (including, without limitation, the Interests of Peter Paul acquired or to be acquired by COGC and ANR) or to any Appurtenant Interest burdening the Interests of any Coastal Program Party, are herein called "Section 4.06 Contracts." The Seller's Contracts and the Section 4.06 Contracts, collectively, include all of the contracts now existing covering Additional Gas Dedicated for Sale to the System at Program Prices. The Coastal Company parties to this Amendment Agreement who are (collectively) sellers under the Seller's Contracts and Section 4.06 Contracts listed in Exhibit A and Exhibit B to the Settlement Agreement are Border, Limited, COGC and ANR (COGC and ANR as successors to the Interests of Peter Paul); and Border, Limited, COGC and ANR are herein sometimes called a "Coastal Program Party" or "Coastal Program Parties." 2.02. Notwithstanding any contrary term or provision of the Gas Search Agreement, it is agreed and stipulated that the Gas Search Agreement is hereby amended as follows: (a) Effective as of the Effective Date (defined in Section 7.03 of this Amendment Agreement) the term of the gas search program provided for in the Gas Search Agreement shall end and terminate. (b) Coastal shall not have any obligation to incur or cause to be incurred or to expend or cause to be expended any amount whatsoever of Qualified Expenditures at any time or times after the Effective Date. All provisions of Section 2.02 of the Gas Search Agreement are amended to provide and require that Coastal incur or cause to be incurred only an amount (and no greater or additional amount) of -8- Qualified Expenditures which is equal to the Qualified Expenditures Coastal has actually incurred or caused to be incurred prior to the Effective Date, regardless of whether such actual Qualified Expenditures are or have been accurately reported pursuant to the Gas Search Agreement. No further reports of Qualified Expenditures shall be required to be made at any time or times after the Effective Date; and all of Sections 2.03 through 2.12, both inclusive, of the Gas Search Agreement are hereby deleted therefrom effective as of the Effective Date. (c) Coastal shall not have any obligation to cause any volume whatsoever of Ultimately Recoverable Reserves of Additional Gas to be Dedicated for Sale to the System after the Effective Date. As provided in Section 2.03 of this Amendment Agreement, all Seller's Contracts and Section 4.06 Contracts covering Additional Gas Dedicated for Sale• to the System prior to the Effective Date are being amended so as to terminate the term thereof as of the Effective Date, so that from and after the Effective Date there will be no Ultimately Recoverable Reserves of Additional Gas Dedicated for Sale to the System pursuant to any Seller's Contracts or Section 4.06 Contracts. No records or reports of Ultimately Recoverable Reserves of Additional Gas Dedicated for Sale to the System will be required to be maintained or made at any time or times after the Effective Date. In this respect, without limiting the foregoing, all of Article 3 of the Gas Search Agreement is hereby deleted therefrom effective as of the Effective Date. (d) Coastal shall have no obligation or duty whatsoever after the Effective Date to sell or to offer to sell or to cause any Coastal Company to sell or to offer to sell to New Company or Lo -Vaca any Program Gas or any other Additional Gas, either at Program Prices or otherwise than at Program Prices, and neither Coastal nor any Coastal Company shall have any obligation or duty whatsoever after the Effective Date to cause any Program Gas or any other Additional Gas to become Dedicated for Sale to the System, either at Program Prices or otherwise than at Program Prices. After the Effective Date, Coastal and all Coastal Companies shall have the unrestricted right to sell or offer to sell Program Gas or any other Additional Gas without regard to any provision of the Gas Search Agreement. Without limiting the foregoing, all of Sections 4.01 through 4.05, both inclusive, of the Gas Search Agreement are hereby deleted therefrom effective as of the Effective Date. (e) In view of the foregoing amendments, all of Article 6 and all of Article 7 of the Gas Search Agreement are hereby deleted therefrom effective as of the Effective Date. 2.03. Effective as of the Effective Date and notwithstanding any contrary term or provision of any of the Seller's Contracts or Section 4.06 Contracts, it is agreed and stipulated that each of the Seller's Contracts and each of the Section 4.06 Contracts is hereby amended to provide that the -9- 06,16U.0 term of such Seller's Contract or Section 4.06 Contract, as applicable, shall end and terminate on the Effective Date and to provide that no Coastal Program Party as seller under such Seller's Contract or Section 4.06 Contract, as applicable, shall have any obligation, duty or right to sell or deliver any gas to the buyer under such Seller's Contract or section 4.06 Contract after the Effective Date and that the buyer under such Seller's Contract or Section 4.06 Contract, as applicable, shall have no obligation, duty or right after the Effective Date to purchase or take any gas under such Seller's Contract or Section 4.06 Contract produced from or attributable to any Interests of any Coastal Program Party or any Appurtenant Interest burdening the Interests of any Coastal Program Party. Accordingly, from and after the Effective Date no gas produced from or attributable to any Interests of any Coastal Program Party or any Appurtenant Interest burdening the Interests of any Coastal Program Party shall be sold to or purchased by New Company or Lo -Vaca pursuant to any Seller's Contract or Section 4.06 Contract, regardless of whether such gas is produced from or attributable to an Interest owned by a Coastal Program Party under such Seller's Contract or Section 4.06 Contract or is produced from or attributable to an Appurtenant Interest burdening the Interests of any Coastal Program Party. As to gas sold and delivered under Seller's Contracts and Section 4.06 Contracts prior to the Effective Date, payment and accounting therefor shall be made in accordance with the provisions of such Seller's Contracts and- Section 4.06 Contracts and the Gas Search Agreement, as applicable. Express mention is made that the provisions of this Section 2.03 amending and terminating the term of Section 4.06 Contracts are applicable only as to gas to be produced from the specific wells covered by the contract amendments listed in Exhibit B to the Settlement.Agreement which is produced from or attributable to the Interests of any Coastal Program Party or any 1 OL.Ii.1.c Appurtenant Interest burdening the Interests of any Coastal Program Party, and that -this Section 2.03 is not intended and shall not be construed to affect the term of any applicable original gas purchase contract with Lo -Vaca which was amended by any such amendment listed in Exhibit B to the Settlement Agreement insofar as such original gas purchase contract may cover or affect (i) gas to be produced from any well other than the particular well or wells described in an amendment or amendments made pursuant to Section 4.06 of the Gas Search Agreement and listed in Exhibit B to the Settlement Agreement or (ii) gas (if any) to be produced from any well described in any amendment made pursuant to Section 4.06 of the Gas Search Agreement produced from or attributable to the Interests of any person (an "Other Owner") other than a Coastal Program Party or the owner of an Appurtenant Interest burdening the Interests of such Coastal Program Party; provided that it is specifically understood and agreed that no such original gas purchase contract with Lo -Vaca will cover or affect in any respect any gas produced from or attributable to the Interests of any Coastal Program Party or any Appurtenant Interest burdening the Interests of any Coastal Program Party after the Effective Date from any of the wells listed in Exhibit B to the Settlement Agreement which are covered by the Section 4.06 Contracts referred to herein. This Amendment Agreement shall not alter or affect any gas purchase contract with Lo -Vaca executed prior to the Effective Date by any person, as seller, pursuant to Section 4.07 of the Gas Search Agreement, including, without limitation, any such gas purchase contract from Union, as seller, with•Lo-Vaca (as to gas produced from or attributable to the Interests of Union); provided that, insofar as the parties to this Amendment Agreement are concerned, it is stipulated and agreed that Lo -Vaca may, in its discretion, release and terminate any such gas purchase contract from Union, as seller, insofar as to gas produced from or -11- agicu.c attributable to the Interests of Union and related Appurtenant Interests burdening the Interests of Union. 2.04. Effective as of the Effective Date and notwithstanding any contrary term or provision thereof, it is agreed and stipulated that each of the New Company contracts heretofore made between New Company and Lo -Vaca providing for the sale to Lo -Vaca of gas purchased by New Company under Seller's Contracts is hereby amended to provide that the term of such New Company contract shall end and terminate on the Effective Date and to provide that the seller under such New Company contract shall have no obligation, duty or right to sell or deliver any gas to the buyer under such New Company contract after the Effective Date and that the buyer under such New Company contract shall have no obligation, duty or right to purchase or take any gas under such New Company contract after the Effective Date. Accordingly, from and after the Effective Date no gas shall be sold to or purchased by Lo -Vaca pursuant to any New Company contract. As to gas sold and delivered under New Company contracts prior to the Effective Date, payment and accounting therefor shall, of course, be made in accordance with the provisions of the New Company contracts and Gas Search Agreement, as applicable. III. SALE OF COASTAL SALE GAS 3.01. As used herein, the following terms shall have the following meanings: (a) "Applicable Price" shall mean, as to Coastal Sale Gas sold during any month, the price per MMBtu payable for such Coastal Sale Gas pursuant to Customer Contracts determined in accordance with Section 3.07 hereof. As pointed out in Section 3.07, the Applicable Price as to certain Appurtenant Gas shall be determined on the basis of the applicable "Market Price" per MMBtu determined under Section 3.07; and the Applicable Price as to Basic Gas and any additional Appurtenant Gas shall be determined on the basis of the applicable "Discounted Price" per MMHtu determined under Section 3.07. (b) "Appurtenant Gas" shall mean Coastal Sale Gas produced from and attributable to any Appurtenant -12- 0 6, l 6 U. C Interest burdening an Interest owned by any Coastal Seller from which Basic Gas is simultaneously produced and which Appurtenant Interest is not owned by a Coastal Seller or any other Coastal Company. (c) "Basic Gas" shall mean Coastal Sale Gas produced from and attributable to Interests owned by Coastal Sellers, not including Appurtenant Gas. "Basic Gas" shall also mean any other gas (if any) which is not produced from or attributable to an Interest owned by a Coastal Seller or any Appurtenant Interest burdening any such Interest, which is purchased by such Coastal Seller from any person (including, without limitation, Lo -Vaca or any Lo -Vaca Affiliate [as defined in Section 3.07 below]) and delivered (or caused to be delivered) by such Coastal Seller to a Delivery Point for sale to Participating Customers under Customer Contracts as Coastal Sale Gas. As to Basic Gas, if any, purchased by a Coastal Seller at a time when such gas is physically situated in the Lo -Vaca System, such Basic Gas shall be deemed for all purposes (other than Subsection 3.01(d) hereof) to have been "delivered" on the date of such purchase to a Delivery Point under the Gas Transportation Agreements and shall be deemed to constitute a number of Mcf's of gas equal to the MMBtu's of such purchased gas divided by the Btu Factor for the then current month. (d) "Btu Factor" shall mean, as to any month, the weighted average number (whether greater or less than "1") of MMBtu's per Mcf contained in all Coastal Sale Gas delivered by Coastal Sellers to all Delivery Points (collectively) under all Gas Transportation Agreements between Lo -Vaca and Participating Customers during such month. (e) "Coastal Sale Gas" shall mean gas sold to Participating Customers pursuant to Customer Contracts. (f) "Coastal Sellers" shall mean and include Coastal, Border, Limited, COGC, ANR and any other Coastal Company which may deliver or cause to be delivered Coastal Sale Gas to Lo -Vaca for sale to Participating Customers under Customer Contracts. (g) "Customer Contract" shall •mean a gas purchase contract between Coastal, as seller, and a Participating Customer, as buyer, providing for the sale of Coastal Sale Gas from Coastal Sellers to such Participating Customer. As described in Section 3.02 hereof, each Settling Customer which has elected to become a Participating Customer has entered into a Customer Contract with Coastal in the form attached hereto and incorporated herein as Exhibit 1, to be effective as of the Effective Date, pursuant to which such Participating Customer may purchase the applicable Daily Contract Quantity of Coastal Sale Gas as to such Participating Customer during the term of such Customer Contract. (h) "Customer Fraction" shall mean, as to each Participating Customer whose Customer Contract remains in force and effect on the relevant day, a fraction having as its numerator a number equal to the Daily Contract Quantity for such Participating Customer and -13- g as its denominator a number equal to the Total Volume as of such day. (i) "Customer Ratio" shall mean, as between or any two or more Participating Customers at any ant time, the ratio of the total of (i) the atage amount of the "Interest" in the "Gas Search am Trust" (as such terms are defined in the ament Trust Agreement) then owned by a :ipating Customer, plus or minus (as applicable) :he percentage amount of all 'Gas Purchase lement Percentages," if any, assigned to or by applicable) such Participating Customer by unents of Gas Purchase Rights delivered to the ae prior to the Final Date of the Final Court as compared to the total of the percentage . of such "Interest" plus or minus (as ;able) the percentage amount of assigned "Gas ise Entitlement Percentages," if any, determined such date as to such other Participating er or Participating Customers. For information ;es, Exhibit 3 hereto contains a list of the and addresses of the owners of the "Interests" e "Gas Search Program Trust" as defined in the :ment Trust Agreement as reflected by the se's records as of December 31, 1985. j) "Daily Contract Quantity" shall mean, as to Participating Customer, the maximum number of of Coastal Sale Gas which such Participating er is entitled to purchase on any one day nt to a Customer Contract while such Customer ct remains in force and effect, determined as to such Participating Customer under Section 3.03 k) "Daily MMBtu Contract Quantity" shall mean, each Participating Customer on any day, a number (Btu's of Coastal Sale Gas determined by lying the Daily Contract Quantity for such ipating Customer by the Btu Factor for the then t month. 1) "Dedicated Wells" shall mean the specific ng wells which are (immediately prior to the ive Date) covered by Seller's Contracts or a 4.06 Contracts and listed in Exhibit A or : B to the Settlement Agreement. n) "Gas Transportation Agreement" shall mean a ransportation agreement between Lo -Vaca, as )rter, and a Participating Customer, as shipper, ing for the transportation and delivery to such ipating Customer of Coastal Sale Gas purchased a Customer Contract. As described in 3.02 hereof, each Settling Customer who has 1 to become a Participating Customer has entered Gas Transportation Agreement with Lo -Vaca in )tially the form attached hereto and )rated herein as Exhibit 2 effective as of the .ve Date. • "Lo -Vaca Sale Volume' shall mean, as to each .pating Customer whose Customer Contract remains :ct and as to each day when any.Coastal Sale Gas ailable for delivery by Lo -Vaca to such gating Customer, that volume (expressed in -14- • 06't 6 V.0 MMBtu's), if any, of gas (herein called "Lo -Vaca Sale Gas") delivered by Lo -Vaca to such Participating Customer on such day at Redelivery Points described in such Participating Customer's Gas Transportation Agreement which is in excess of the total of (i) the Other Transportation Gas Volume (if any) delivered to such Participating Customer on such day, and (ii) the Daily MMBtu Contract Quantity of such Customer for such day. On any day when any Other Transportation Gas Volume is delivered to a Participating Customer, only the excess, if any, of the gas delivered to such Participating Customer at such Redelivery Points shall be deemed to be Coastal Sale Gas or, if applicable, Lo -Vaca Sale Gas. In this regard, on any day when the price or amount payable by a Participating Customer for any Lo -Vaca Sale Gas sold or available for sale to such Participating Customer on any day is based on the volume of Lo -Vaca Sale Gas delivered or available for delivery to such Participating Customer without regard to the Btu content thereof, it shall be deemed that each Mcf of gas delivered or available for delivery to such Participating Customer at such Redelivery Points during such day contains a number of Btu's equal to the weighted average Btu's per Mcf content of all gas delivered to such Participating Customer at such Redelivery Points during the month including such day for purposes of determining the relative volumes (in Mcf) of the Other Transportation Gas Volume (if any), the Coastal Sale Gas deliveries and the Lo -Vaca Sale Volume as to such Participating Customer for such day. In all events, the Btu content per Mcf of all gas delivered by Coastal Sellers to Delivery Points under Gas Transportation Agreements for sale to any Participating Customer while any Participating Customer's Customer Contract remains in force and effect shall be calculated and determined by Lo -Vaca in a manner consistent with the procedures and standards prescribed in the Customer Contract. Unless otherwise hereafter specifically agreed in writing between Lo -Vaca and an individual Participating Customer from time to time, it is agreed and stipulated that no Participating Customer shall be entitled to reduce the volume, if any, of gas which such Participating Customer is otherwise (by virtue of any existing or future gas sale contract between Lo -Vaca, as seller, and such Participating Customer, as Buyer [a 'Lo -Vaca Sale Contract"]), obligated to purchase from Lo -Vaca on any day by virtue of or as a result of the delivery to such Participating Customer on such day of Coastal Sale Gas; provided only that Lo -Vaca agrees that any Participating Customer shall be entitled to reduce the volume of Lo -Vaca Sale Gas, if any, which such Participating Customer is obligated to purchase from Lo -Vaca at Redelivery Points under its Gas Transportation Agreement on any day under the provisions of any Lo -Vaca Sale Contract existing on the Effective Date by a number (if any) of MMBtu's of • gas equal to the "Reduction Fraction" (as below defined) as to such Participating Customer of the total number of MMBtu's of Coastal Sale Gas, up to (but not in excess of) the "Eligible Volume" (as below defined) thereof, which is actually deemed delivered to such Participating Customer on such day at all such Redelivery Points. As to each Participating Customer on each day the "Eligible Volume" of Coastal Sale Gas shall be equal to a number of MMBtu's of Coastal Sale Gas equal to the Daily MMBtu Contract Quantity for -15- 06.164 .0 such day under the Customer Contract executed by such Participating Customer prior to the Effective Date, less the number of MMBtu's, if any, of such Daily MMBtu Contract Quantity which are attributable solely to the inclusion and consideration of "Gas Purchase Entitlement Percentages," if any, assigned to such Participating Customer under Assignments of Gas Purchase Rights in the calculation of such Participating Customer's "Customer Ratio" and "Daily Contract Quantity" under the provisions of subparagraph 3.01(i) and Section 3.03 of this Amendment Agreement. No amount of Coastal Sale Gas purchased by a Participating Customer pursuant to a Customer Contract originally executed by a different Participating Customer and which has been assigned to the former Participating Customer as assignee of such Customer Contract will be deemed a part of the "Eligible Volume" as to such assignee; provided only that any person which succeeds to the rights of the Participating Customer which originally executes a Customer Contract, by corporate merger or consolidation or incident to the purchase of all or substantially all the assets of such Participating Customer, shall for purposes of this subparagraph be deemed to be the "Participating Customer" which originally executed such Customer Contract. As to each Participating Customer who (i) purchased no gas from Lo -Vaca during the period from 7:00 a.m., Houston local time, on September 1, 1985, through 7:00 a.m., Houston local time, on August 31, 1986 (the "Subject Period"), or (ii) purchased gas from Lo -Vaca during the Subject Period but purchased no "Short -Term Gas" (as below defined) during the Subject Period, the "Reduction Fraction" shall be "1/1." As to any Participating Customer who purchased gas from Lo -Vaca during the Subject Period and also purchased Short -Term Gas during the Subject Period, the "Reduction Fraction- shall be a fraction having as its denominator the total number of MMBtu's of gas purchased by such Participating Customer from Lo -Vaca during the Subject Period plus the total number of MMBtu's of Short -Term Gas purchased by such Participating Customer during the Subject Period, and having as its numerator the total number of MMBtu's of gas purchased by such Participating Customer from Lo -Vaca during such Subject Period. "Short -Term Gas" means and includes all gas, if any, purchased by a Participating Customer during the Subject Period from Reata, Industrial or VLDC Company (a Lo -Vaca Affiliate) or any or all of them. Additionally, if at any time or times Lo -Vaca agreed to permit a Participating Customer to reduce the volume of gas which such Participating Customer was obligated to purchase from Lo -Vaca to enable such Participating Customer to purchase and receive delivery through the Valero System of gas purchased from any other person, the volumes of gas purchased by such Participating Customer from any such other person or persons during the Subject Period which were delivered to it through the Valero System and which displaced corresponding volumes of gas which such Participating Customer was otherwise obligated to purchase from Lo -Vaca shall also be included in "Short -Term Gas." (o) "Monthly Contract Quantity" shall mean, as to each Participating Customer during any month, a number of MMBtu's of Coastal Sale Gas equal to the sum -16- 06.16U.0 of a number of MMBtu's for each day of such month equal to the lesser of: (i) the Daily MMBtu Contract Quantity for such Participating Customer for such day, less such number of MMBtu's (if any) of such quantity of Coastal Sale Gas which such Participating Customer was prevented from taking during such day by reason of Force Majeure; or (ii) the number of MMBtu's of gas of the quality specified in the Gas Transportation Agreement (up to the Daily MMBtu Contract Quantity for such Participating Customer for such day) which was available for delivery on such day to such Participating Customer as Coastal Sale Gas at the applicable Redelivery Points pursuant to Lo-Vaca's Gas Transportation Agreement with such Participating Customer. (p) "Other Transportation Gas Volume" shall mean, as to each Participating Customer on each day, the number of MMBtu's (if any) of gas delivered to such Participating Customer on such day at.Redelivery Points described in such Participating Customer's Gas Transportation Agreement which has merely been transported by Lo -Vaca other than pursuant to such Gas Transportation Agreement and has been produced by such Participating Customer for its own account or purchased by such Participating Customer other than from Lo -Vaca or from any "Lo -Vaca Affiliate" (as below defined) and other than pursuant to a Customer Contract provided for herein. A "Lo -Vaca Affiliate" as of any time shall be deemed to be any person which, as of such time, controls, is controlled by or is under common control with Lo -Vaca, with "control" meaning the power, by virtue of stock ownership, contract or. otherwise to control the policies or business operations of a person. (q) "Participating Customer" shall mean a Settling Customer which has elected to purchase Coastal Sale Gas pursuant to a Customer Contract by executing and returning copies of the Customer Contract to the Trustee prior to the date of execution of this Amendment Agreement by the Trustee, in the manner described in Section 3.02 hereof. A person to which the rights and obligations of the buyer under a Customer Contract have been assigned as permitted under the terms of such Customer Contract shall be deemed a "Participating Customer" as to such Customer Contract while it is the "buyer" under such Customer Contract. (r) "Total Daily Volume" shall mean, as to each -day, a number of Mcf's of Coastal Sale Gas equal to the total of the Daily Contract Quantities of all Participating Customers whose Customer Contracts remain in force and effect on such day. Unless otherwise stated herein, each term defined in the form of Customer Contract attached hereto as Exhibit 1 or in the form of Gas Transportation Agreement attached hereto as Exhibit 2 shall have the meaning therein stated when used in this Amendment Agreement. -17- 0616U.0 3.02. Incident to providing an opportunity for each Settling Customers to vote whether such Settling Customer approves or disapproves of this Amendment Agreement and whether the Trustee should execute this Amendment Agreement pursuant to the authority in Section 11.02 of the Settlement Trust Agreement, the Trustee has informed each Settling Customer who desires to become a Participating Customer upon (and contingent upon occurrence of) the Effective Date to execute and return to the Trustee for delivery to Coastal and Lo -Vaca, respectively, two copies of each of the form of Customer Contract and the Gas Transportation Agreement attached hereto as Exhibits 1 and 2, respectively, after: (a) Inserting the address of such Settling Customer in the appropriate blanks below the Buyer's signature to the Customer Contract, and inserting in the appropriate blank in paragraph 7 of Article XIV in the Customer Contract the maximum number (the "Daily Maximum") of Mcf's of Coastal Sale Gas per day which such Settling Customer is willing to approve as the Daily Contract Quantity applicable to such Settling Customer; provided that, if such blank is not filled in, such Daily Maximum shall be deemed to be "40,000 Mcf's"; and (b) Inserting the address of such Settling Customer in the appropriate blanks below the Shipper's signature to the Gas Transportation Agreement. Additionally, in anticipation that some of the Settling Customers may desire to purchase or otherwise acquire from other Settling Customers the rights of the latter Settling Customers to enter into a Customer Contract to participate in purchasing Coastal Sale Gas pursuant to this Amendment Agreement, there is attached hereto as Exhibit 4 a form of Assignment of Gas Purchase Rights. At any time or times prior to (but not after) the Final Date of the Final Court Order, a Settling Customer who has duly executed and returned copies of the Customer Contract and Gas Transportation Agreement may deliver to the Trustee for delivery to Coastal an Assignment of Gas Purchase Rights executed by another Settling Customer whereby .such latter Settling Customer assigns to such former Settling Customer a "Gas Purchase Entitlement Percentage" as -18- '06.16U .0 described in such Assignment of Gas Purchase Rights. The "Gas Purchase Entitlement Percentage" thus assigned to a Participating Customer shall be taken into account by Coastal in calculating such Participating Customer's Customer Ratio and the Daily Contract Quantity under its Customer Contract and Gas Transportation Agreement. The Trustee shall serve only as a depository for Customer Contracts, Gas Transportation Agreements, and Assignments of Gas Purchase Rights, and assumes no responsibility or liability for the documents, including, but not limited to, review of the documents to ensure in any respect that an individual who signed any Customer Contract, Gas Transportation Agreement, or Assignment of Gas Purchase Rights in the name of an owner of an "Interest" in the "Gas Search Program Trust" (as such terms are defined in the Settlement Trust Agreement) appearing in the records of the Trustee is the person who owns such "Interest" or that the individual who signed such document or documents is duly authorized and empowered to bind such "Interest" by such signature or that any signature affixed to any Customer Contract, Gas Transportation Agreement, or Assignment of Gas Purchase Rights is a valid signature. Coastal shall be entitled to assume that each person which purports to execute an Assignment of Gas Purchase Rights in the name of the owner of an "Interest" in the "Gas Search Program Trust" (as such terms are defined in the Settlement Trust Agreement) appearing in the records of the Trustee which is delivered to the Trustee by a Participating Customer is the person which owns such "Interest" and that the individual who signs such Assignment of Gas Purchase Rights is duly authorized and empowered to bind such person by such signature; and neither the Trustee nor Coastal shall have any liability to any Participating Customers for or as a result of any error'in calculating the Customer Ratio or Daily Contract Quantity of any Participating Customer or Participating Customers based on such assumption. However, -19- 06I6U.0 any Participating Customer whose Customer Ratio or Daily Contract Quantity as calculated by Coastal is erroneously increased by virtue of an Assignment of Gas Purchase Rights delivered to the Trustee and Coastal which is not duly executed by and binding upon the owner of any such "Interest" in such "Gas Search Trust" shall be liable and responsible to all other Participating Customers for any damages suffered by them as a result of the corresponding erroneous reductions in their Customer Ratios and Daily Contract Quantities calculated by Coastal on the basis of such Assignment of Gas Purchase Rights. 3.03. Promptly after the Final Date of the Final Court Order, Coastal agrees that it will calculate the Daily Contract Quantity for each Participating Customer which has executed and returned copies of the Customer Contract'and Gas Transportation Agreement prior to (but not after) the date of execution of this Amendment Agreement by the Trustee and will insert, such Daily Contract Quantity (expressed as a number of Mcf's) in the appropriate blank in paragraph 8 of Article XIV in the two copies of the Customer Contract signed by such Participating Customer, execute such copies of the Customer Contract and return one fully executed copy thereof to such Participating Customer. The Daily Contract Quantity for a Participating Customer shall be calculated by Coastal as follows: (a) Coastal shall allocate 40,000 Mcf's among all the Participating Customers in proportion to their Customer Ratio. If the number of Mcf's thus allocated to a Participating Customer (herein called the "Customer Basic Volume") is greater than the Daily Maximum specified by such Participating Customer as described in Subsection 3.02(a) above, the Daily Contract Quantity as to such Participating Customer shall be equal to such Daily Maximum, and the excess (expressed in Mcf's) of the Customer Basic Volume of such participating Customer above such Daily Maximum will herein be called "Surplus Available Volume." (b) The Daily Contract Quantity for each Participating Customer (if any) for which the Daily Contract Quantity is not determined pursuant to Subsection (a) last above shall be equal to the lesser of (i) the Daily Maximum specified by such Participating Customer as described in -20- 'ocisu.c Subsection 3.02(a) above, or (ii) the total of such Participating Customer's Customer Basic Volume plus an allocated share (as hereinafter provided) of Surplus Available Volumes (if any). A portion of the Surplus Available Volumes shall first be allocated among such Participating Customers in proportion to the Customer Ratio as among such Participating Customers until the share so allocated to any one such Participating Customer shall cause its Daily Contract Quantity to equal the Daily Maximum as to such Participating Customer or (if applicable) until all such Surplus Available Volumes have been so allocated. If any unallocated portion of the Surplus Available Volumes remains, the same procedure shall then be followed successively by allocating additional portions of the Surplus Available Volumes among the remaining. Participating Customers (if any) in proportion to their Customer Ratio (thereby eliminating Participating Customers in succession) until all of such Surplus Available Volumes have been allocated in such manner or, if applicable, until the Daily Contract Quantity of each Participating Customer has been determined to be equal to the Daily Maximum specified by such Participating Customer. (c) In construing and applying the foregoing provisions of Subsections (a) and (b) of this Section 3.03, it is expressly stipulated that in no event will the total of the Daily Contract Quantities of all Participating Customers exceed the lesser of (i) 40,000 Mcf's or (ii) the sum of the Daily Maximums specified by all such Participating Customers as described in Subsection 3.02(a) above. 3.04. Coastal will promptly advise Lo -Vaca of the Daily Contract Quantity determined for each Participating Customer pursuant to Section 3.03 above; and Lo -Vaca agrees that it shall thereupon promptly insert such Daily Contract Quantity (expressed as a number of Mcf's) in the appropriate blank in paragraph 5 of Article XIV in the two copies of the Gas Transportation Agreement signed by such Participating Customer, execute such copies of the Gas Transportation Agreement and return one fully executed copy thereof to such Participating Customer. 3.05. Subject to Section 3.09 hereof, for each day on and after the Effective Date while a Customer Contract with a Participating Customer remains in force and effect, the number (if any) of MMBtu's of Coastal Sale Gas delivered to and purchased by such Participating Customer shall be deemed and considered to be the lesser of: -21- "oeisle. c (a) The total number of MMBtu's of gas delivered on such day to such Participating Customer at the Redelivery Points described in such Participating Customer's Gas Transportation Agreement with Lo -Vaca as determined pursuant to such Gas Transportation Agreement, less the Other Transportation Gas Volume (if any) as to such Participating Customer on such day; or (b) The Daily MMBtu Contract Quantity for such Participating Customer for such day; or (c) Such lesser number, if any, of MMBtu's of Coastal Sale Gas to be purchased by such Participating Customer on such day as has been stipulated in a written notice given by said Participating Customer to Coastal and Lo -Vaca at least ten (10) days prior to the first day of the month during which such day is included. 3.06. While Coastal alone is named as Seller in, and has full corporate responsibility for sale and delivery of the quantities of Coastal Sale Gas provided to be sold and delivered under the terms of, the Customer Contracts, each of Border, Limited, COGC and ANR as owners of Interests from which Basic Gas may be produced from various of the respective Dedicated Wells, hereby severally agrees that all gas produced and saved from any and all of the Dedicated Wells from and attributable to the Interests of either of such Coastal Program Parties (now owned or hereafter acquired) at any time after the Effective Date and prior to termination of the last to terminate of the Customer Contracts will be delivered to Lo -Vaca for delivery to Participating Customers and sold to such Participating Customers as Basic Gas pursuant to Customer Contracts. Further,- to the extent they have the right and power to do so (and subject to any right of any owner of an Appurtenant Interest to take in kind or otherwise direct or control the disposition or marketing of gas produced from or attributable to such Appurtenant Interest), each of Border, Limited, COGC and ANR also severally agrees that all gas produced and saved from any or all of the Dedicated Wells from and attributable to Appurtenant Interests burdening an Interest of any of such Coastal Program Parties (now owned or hereafter acquired) at any time after the Effective Date and prior to -22- termination of the last to terminate of the Customer Contracts will be delivered to Lo -Vaca for delivery to Participating Customers and sold to such Participating Customers as Appurtenant Gas pursuant to Customer Contracts. 3.07. The Applicable Price to be paid by Participating Customers for Coastal Sale Gas purchased under Customer Contracts during each month shall be determined as follows: (a) As used in this Section 3.07, the following terms shall have the following meanings: (i) "Market Price," for any month, shall be equal to the greater of: (A) $1.00 per MMBtu; or (B) $1.47 per MMBtu multiplied by the Adjustment Fraction for such month. (ii) "Discounted Price," for any month, shall be determined separately for each Participating Customer and shall be the greater of: (A) $1.00 per MMBtu; or (8) The lesser of (1) $1.25 per MMBtu multiplied by the Adjustment Fraction for such month (herein called "Base Price"), or (2) the Lowest Valero Price for such month determined as to such Participating Customer. (iii) The "Lowest Valero Price," for any month, shall be determined separately for each Participating Customer. If a Participating Customer purchases gas from a Qualified Valero Marketer during such monthat any Redelivery Point under its Gas Transportation Agreement, the "Lowest Valero Price" for such Participating Customer for such month shall be the lowest actual bona fide price ("Actual Purchase Price") per MMBtu charged by any Qualified Valero Marketer for any material (that is, more than nominal or inconsequential). volume of gas sold and delivered by such Qualified Valero Marketer to such Participating Customer at any such Redelivery Point during such month, minus $0.185 per MMBtu; provided that and if (and only if) such Participating Customer gives Coastal written notice (a "Valero Price Notice") of such Lowest Valero Price (including information as to the Redelivery Point or Redelivery Points at which such purchases were made and the identity of the Qualified Valero Marketer making such sale) prior to the twentieth (20th) day of the next succeeding month. If the Lowest Valero Price is not determined for a Participating Customer ("Subject Customer") for a month pursuant to the provisions of the last preceding sentence, the -23- U616U.0-• Lowest Valero Price for such Subject Customer for . such month shall, if applicable, be the lesser of a "Lowest Valero Price" per MMBtu determined under (A) or (B) below, to wit: (A) If Coastal has received a Valero Price Notice from one or more other Participating Customers prior to the fifteenth (15th) day of the next succeeding month pursuant to and in accordance with this subparagraph (iii), the Lowest Valero Price for such Subject Customer for such prior month pursuant to this subparagraph (A) shall be equal to the arithmetical average of the Actual Purchase Prices per MMBtu reported in said Valero Price Notice or Valero Price Notices, minus $0.185 per MMBtu (to be deducted after, not before, calculating such arithmetical average); OR (B) If such Subject Customer has purchased gas from Lo -Vaca at any Redelivery Point provided for in its Gas Transportation Agreement during such month, the Lowest Valero Price for such Subject Customer for such month pursuant to this subparagraph (8) shall be the weighted average of the actual bona fide prices per MMBtu charged by Lo -Vaca for all gas sold by Lo -Vaca to such Subject Customer at all Redelivery Points provided for in its Gas Transportation Agreement during such month, minus $0.185 per MMBtu. If the Lowest Valero Price is not determined for a Participating Customer ("Subject Customer") for a month pursuant to any of the provisions of either of the last two preceding sentences, the Lowest Valero Price for such Subject Customer for such month shall be deemed to be equal to the Base Price for such month. Coastal and its representatives shall have the right at any reasonable time or times during normal business hours to audit, examine and review the books and records of any Participating Customer pertaining to the determination of any Actual Purchase Price reported by such Participating Customer for any month in• any Valero Price Notice given to Coastal. (iv) A "Qualified Valero Marketer," for any month, shall mean a Lo -Vaca Affiliate which sells and delivers, in bona fide sales to other persons (other than any other Lo -Vaca Affiliate) made during such month, an average of at least 40,000 Mcf's of gas per day. On or before the tenth (10th) day of each month after the Effective Date while any Customer Contract remains in effect, Lo -Vaca shall notify Coastal and each Participating Customer whose Customer Contract remains in effect and who purchased gas during the last preceding month from a Qualified Valero Marketer of the name of each Lo -Vaca Affiliate (if any) which was a Qualified Valero Marketer (as herein defined) during the last preceding month. New Company agrees that Coastal and its representatives shall also have the right at any: reasonable time or times during normal business -24- 0616U.0 hours to audit, examine and review the books and records of any Lo -Vaca Affiliate pertaining to the determination of any Actual Purchase Price based on a purchase of gas from such Lo -Vaca Affiliate in any month which is reported by a Participating Customer in any Valero Price Notice given to Coastal or pertaining to the determination that such Lo -Vaca Affiliate was a Qualified Valero Marketer (as herein defined) during any month for which a sale of gas made by it to a Participating Customer is reported by such Participating Customer in a Valero Price Notice given to Coastal; provided, however, if Coastal exercises its rights under this sentence, Coastal shall keep confidential and not disclose to persons other than employees, attorneys or agents of Coastal or the related Participating Customer any data which New Company advises Coastal that New Company considers confidential as determined in New Company's sole opinion. (v) Except as otherwise provided in subparagraph (vi) next below, the "Adjustment Fraction," for any month, shall be a fraction having 81.679 (the "Beginning Denominator") as its denominator and having the AIP for such month as its numerator. (vi) The "AIP," for any month, shall mean the estimated weighted average industry price per Mcf for such month as estimated by the economic consulting firm Energy Planning, Inc., of Houston, Texas ("Energy Planning"), as provided for hereinafter. Prior to the Effective Date, Coastal shall, at its expense, enter into a• contract (the "Energy Planning Contract") with Energy Planning pursuant to which Energy Planning will agree to provide to Coastal on or before twenty (20) days after the end of each month after the Effective Date while any Customer Contract remains in force and effect a written report ("Monthly AIP Report") reflecting the good faith estimate of Energy Planning as to the weighted average of the prices per Mcf (estimated to the nearest one-tenth of one cent and herein called the "AIP" for such month) paid for gas produced and sold during such month under contracts for the sale of gas in the fields or at the tailgate of gas processing plants in Railroad Commission Districts 2, 3, 4, 5 and 6 (as such Railroad Commission Districts were constituted as of the date of execution of this Amendment Agreement by Coastal) from new leases (that is, leases dated after January 1, 1980, and numbered from Railroad Commission Lease No. 85,000 forward) providing for delivery into gas. transmission lines for resale, as required to be reflected and reported in the "Producers' Monthly Gas Tax Reports" (currently, T Code 11660) filed or to be filed in the Office of the Comptroller of the State of Texas and representing the total sales to be reported (as estimated by Energy Planning in good faith) for such month to the forty (40) largest purchasers (by volume, but excluding Exxon Corporation and •United Texas Transmission Company) in the above described Railroad Commission Districts. Such Energy -25- t lanning Contract shall also require that each onthly AIP Report also include, for historical nformation purposes, a calculation by Energy lanning of the actual weighted average of the rices per Mcf (calculated to the nearest ne-tenth of one cent) paid for gas produced and old during the fourth month last preceding the ate of such Monthly AIP Report under contracts or the sale of gas in the fields or at the ailgate of gas processing plants in said ailroad Commission Districts from new leases (as ?lined above) providing for delivery into gas ransmission lines for resale as reflected in lch "Producers' Monthly Gas Tax Reports" filed a the Office of the Comptroller of the State of axas and representing the total reported sales the forty (40) largest purchasers (by volume, ccluding Exxon Corporation and United Texas :ansmission Company) in said Railroad Commission Lstricts during said fourth preceding month. inally, said Energy Planning Contract shall :ovide that Energy Planning will, at any time or Imes upon request of any Participating Customer, ail to such Participating Customer a copy of any )mthly AIP Report furnished to Coastal pursuant J such Energy Planning Contract upon payment by iid Participating Customer of Energy Planning's :andard fee of $50.00 for providing such copy. Jon request, Coastal will mail a copy of such iergy Planning Contract to any Participating istomer. If for any "reason Energy Planning ases to provide Monthly AIP Reports prior to e termination of all Customer Contracts, then is agreed that, for purposes of determining e 'Adjustment Fraction" for each month after e last month ("Final AIP Month") for which the e is reported in the last such Monthly AIP port ("Final AIP Report") provided by Energy anning, there shall be substituted as the merator in the Adjustment Fraction for each ch month a "Substitute AIP" equal to the ellhead price" per Mcf of natural gas for the st recent month which is published in the tural Gas Monthly report published by the ergy Information Administration, U.S. partment of Energy (or any successor agency) erein called the. "DOE Monthly Report"), in the st recent DOE Monthly Report published prior to e end of the next succeeding month after the ath for which such Adjustment Fraction is being lculated; provided that in such event there all also be substituted as the denominator in a Adjustment Fraction for each such month a Ilar amount (the "Substitute Denominator") ich, if used as the denominator in an ljustment Fraction" determined for the Final ? Month having the applicable Substitute AIP such Final Month as its numerator, produces a action equal to the Adjustment Fraction Lculated for such Final AIP Month using the jinning Denominator and the AIP reflected in Final AIP Report. Alternatively, if for any ison Energy Planning ceases to provide Monthly ' Reports prior to termination of all Customer atracts, or if Coastal and a majority of the ;tomer Committee mutually agree to discharge orgy Planning and appoint a "Substitute Energy" -26- 0 oi1su.'d as hereinafter provided, then upon request of either Coastal or a majority of the Customer Committee, Coastal and said Customer Committee (acting by vote of a majority of the members thereof) shall in good faith mutually agree upon and select a qualified, independent person ("Substitute Energy") to prepare Monthly AIP Reports for all months commencing after selection of Substitute Energy, under a contract with Coastal in substantially the form of the Energy Planning Contract; and, for all months for which Substitute Energy provides such Monthly AIP Reports, the Adjustment Fraction' shall be calculated using the Beginning Denominator and the AIP for the applicable month provided by Substitute Energy in its Monthly AIP Report for such month, in lieu of the Substitute AIP and Substitute Denominator. The "Customer Committee" shall be composed of five (5) persons consisting of one representative to be appointed by each of the five (5) Participating Customers having the largest Daily Contract Quantity under Customer Contracts remaining in force and effect as of the time when Coastal or any one of such five (5) Participating Customers requests that such Customer'Conmittee be appointed for purposes of agreeing with Coastal upon selection of Substitute Energy. (b) Inasmuch as Coastal Sale Gas will be delivered at various points on the Lo -Vaca gas distribution system, the identical gas will not necessarily be redelivered by Lo -Vaca to Participating Customers under Customer Contracts. In any event, it is agreed and stipulated that for purposes of determining the Applicable Price of Coastal Sale Gas sold to a Participating Customer during a month, it shall be conclusively deemed and considered that the ratio of the number of MMBtu's of Basic Gas sold to such Participating Customer during the month as compared to the number of MMBtu's of Appurtenant Gas sold to such Participating Customer during such month is the same as the ratio of the total number of MMBtu's of Basic Gas delivered by Coastal Sellers to Lo -Vaca during such month as compared to the total number of MMBtu's of Appurtenant Gas delivered by such Coastal Sellers to Lo -Vaca during such month. The Applicable Price per MMBtu of Coastal Sale Gas deemed sold and delivered to a Participating Customer during a month shall be determined (separately as to each Participating Customer and as to each month) by application of the following formula: with B + C A being equal to'the total number of MMBtu's of Coastal Sale Gas delivered by Coastal Bio e� s to Lo -Vaca at all Delivery Points multip lea aeiiv� �d ey ,.coasEtu se ofe Appurtenant Gas suchu� (i) -the Sellers to Want Gas Lo -Vaca at -Z7. all Delivery Points during such month, or (ii) three -sixteenths (3/16) of the total number of MMBtu's of Coastal Sale Gas delivered by Coastal Sellers to Lo -Vaca at all Delivery Points during such month; and C being equal to the Discounted Price applicable as to such Participating Customer for such month multiplied by the sum of (i) the total number of MMBtu's of Basic Gas delivered by Coastal Sellers to Lo -Vaca at all Delivery Points during such month, plus (ii) the number, if any, of MMBtu's of Appurtenant Gas delivered by Coastal Sellers to Lo -Vaca at all Delivery Points during such month in excess of three -sixteenths (3/16) of the total number of MMBtu's of Coastal Sale Gas delivered by such Coastal Sellers to Lo -Vaca at all Delivery Points during such month. 3.08. Lo -Vaca shall provide statements to Coastal prior to the tenth working day of each month reflecting the total Mcf's and MMBtu's of gas delivered by Coastal Companies to each delivery point on the Valero System (including deliveries to all Delivery'Points under Gas Transportation Agreements with Participating Customers determined in accordance with the provisions of such Gas Transportation Agreements). Coastal shall then provide statements to Lo -Vaca prior to the fifteenth working day of each month reflecting the sources of such gas delivered at each such delivery point and the volumes thereof which are attributable to the Interests of Coastal Companies and Appurtenant Interests burdening such Interests. Lo -Vaca shall then provide statements to Coastal prior to the twentieth working day of each month reflecting the total number of MMBtu's of Coastal Sale Gas delivered by Lo -Vaca during the preceding month to each Participating Customer under a Customer Contract at Redelivery Points under and as determined pursuant to the applicable Gas Transportation Agreement with such Participating Customer and Section 3.05 and, if applicable, Section 3.09 of this Amendment Agreement. Coastal shall then calculate the Applicable Price for the Coastal Sale Gas sold to Participating Customers during such preceding month based on the relative numbers of MMBtu's of -28- Basic Gas and Appurtenant Gas included in the Coastal Sale Gas delivered to all Delivery Points under their Gas Transportation Agreements during such preceding month (subject to and in accordance with the provisions of Section 3.07 above), and shall provide statements to the respective Participating Customers as provided for in the Customer Contracts. 3.09. It is recognized that it may not be practicable to schedule deliveries of Coastal Sale Gas to Delivery Points under Participating Customers' Gas Transportation Agreements and redeliveries of Coastal Sale Gas to Participating Customers at Redelivery Points under the Gas Transportation Agreements in such manner that the number of NMBtu's of Coastal Sale Gas thus delivered to Lo -Vaca on each day will exactly equal the number of MMBtu's of Coastal Sale Gas thus redelivered by Lo -Vaca to Participating Customers on that day. Accordingly, it is agreed that on any day or days when scheduling variances result in a shortfall of deliveries of Coastal Sale Gas to Delivery Points as compared to the total MMBtu's of Coastal Sale Gas which would be deemed and considered to be delivered to all Participating Customers on such day at Redelivery Points under the provisions of Section 3.05 hereof, Lo -Vaca will make available and will deliver gas of the quality provided for in the Gas Transportation Agreement at such Redelivery Points as Coastal Sale Gas to the extent of such shortfall; provided that at no time will Lo -Vaca be required (unless it so elects) to deliver gas to Participating Customers as Coastal Sale Gas if the aggregate cumulative number of MMBtu's of gas delivered as Coastal Sale Gas to Participating Customers at Redelivery Points down to such time exceeds the aggregate cumulative number of MMBtu's of Coastal Sale Gas actually delivered to Delivery Points down to such time by more than 120,000 MMBtu's. Conversely, if on any day or days when scheduling variances result in an excess of deliveries of MMBtu's of Coastal Sale Gas to Delivery Points as compared to the total -29- oc,isa.0 MNBtu's of Coastal Sale Gas deemed and considered to be delivered to all Participating Customers at Redelivery Points on such day under the provisions of Section 3.05 hereof, Lo -Vaca and Coastal agree that such excess will, to the extent possible, be applied first to balance any outstanding shortfalls of deliveries of Coastal Sale Gas on previous days and any remainder will be redelivered to Participating Customers as Coastal Sale Gas on the next succeeding day or days. Lo -Vaca and Coastal will cooperate in scheduling deliveries of Coastal Sale Gas at Delivery Points in an effort to maintain an exact balance of deliveries of Coastal Sale Gas at Delivery Points with redeliveries of Coastal Sale Gas at Redelivery Points on each day and during each month, and for this purpose (i) Lo -Vaca agrees that it will reduce future takes of Coastal Sale Gas as promptly as practicable as necessary to adjust for excess deliveries of Coastal Sale Gas on any day or days, and (ii) Coastal agrees that Lo -Vaca may require that Coastal cause Coastal Sellers to deliver up to one hundred ten percent (110%) of the Total Daily Volume of Coastal Sale Gas on any day or days to the extent necessary to make up for shortfalls of deliveries of Coastal Sale Gas at Delivery Points on any prior day or days. If at the termination of the term of the last to end of the Customer Contracts any imbalance shall exist between the total MMBtu's of Coastal Sale Gas delivered to Delivery Points down to such time and the total MMBtu's of Coastal Sale Gas redelivered to Participating Customers pursuant to Gas Transportation Agreements at Redelivery Points down to such time, then, as applicable, (i) Coastal shall cause Coastal Sellers to deliver up to one hundred ten percent (110%) of the Total Daily Volume of Coastal Sale Gas (determined as of the last day of the term of such Customer Contract or Customer Contracts) to Lo -Vaca at Delivery Points .on the next succeeding day or days to the extent required to make up any deficiency in deliveries of Coastal -30- os: au:c' . Sale Gas by Coastal Sellers down to such termination date, or Lo -Vaca shall redeliver to Coastal .(or as directed by Coastal) at any point or points on Lo-Vaca's System (subject to available pipeline capacity) designated by Coastal corresponding volumes of gas on any day or days as thereafter requested by Coastal to the extent required to return any surplus in deliveries of Coastal Sale Gas by Coastal Sellers down to such termination date. The Applicable Price per MMBtu of Coastal Sale Gas during any month shall be calculated on the basis of the actual number of MMBtu's of Coastal Sale Gas delivered at Delivery Points on each day during such month and on the relative volumes of Appurtenant Gas and Basic Gas included in such Coastal Sale Gas (subject to and in accordance with the provisions of Section 3.07 above), without regard to any variance between such deliveries of Coastal Sale Gas by Coastal Sellers and the number of MMBtu's of gas redelivered to Participating Customers as Coastal Sale Gas on any such day or during .such month. If on any day, as a result of Lo-Vaca's exercise of its right to refuse to deliver additional gas as Coastal Sale Gas as provided for above in this Section 3.09 or for any other reason, the total number of MMBtu's of gas available for delivery to Participating Customers as Coastal Sale Gas shall be less than the aggregate number of MMBtu's of Coastal Sale Gas which would otherwise be deemed and considered to be delivered to all Participating Customers on such day at Redelivery Points under the provisions of Section 3.05 hereof, then (without in anywise releasing Coastal from liability for any breach of its Customer Contracts with Participating Customers, if any such breach has occurred) it is stipulated that the number of MMBtu's of Coastal Sale Gas which will be deemed and considered to have been delivered to and purchased by the respective Participating Customers on such day shall be determined as follows: -31- 06I6LI C . (a) If the number of MMBtu's of Coastal Sale Gas which would be deemed and considered to have been delivered to a Participating Customer under the provisions of said Section•3.05 is equal to or less than such Participating Customer's Customer Fraction of the total number (if any) of MMBtu's of gas available for delivery to all Participating Customers as Coastal Sale Gas on such day, then the number of MMBtu's of Coastal Sale Gas deemed delivered to and purchased by such Participating Customer on such day shall be determined pursuant to Section 3.05. (b) All of the gas (if any) which is available for delivery on such day to Participating Customers as Coastal Sale Gas and which is not deemed delivered to Participating Customers pursuant to Subsection 3.09(a) above shall be deemed delivered to and purchased by the remaining Participating Customers whose Customer Contracts remain in effect, in proportion to the ratio of their respective Daily. Contract Quantities; provided that in no event will the number of MMBtu's of Coastal Sale Gas deemed delivered to a Participating Customer pursuant to this Subsection (b) exceed the number of MMBtu's of Coastal Sale Gas which would otherwise be deemed to be delivered to such Participating Customer under the provisions of Section 3.05; and provided, further, that any excess of Coastal Sale Gas available for delivery on such day to a Participating Customer or Participating Customers above the number of MMBtu's of Coastal Sale Gas which would otherwise be deemed delivered to such Participating Customer or Participating Customers pursuant to Section 3.05 shall be allocated among the remainder of the Participating Customers referred to in this Subsection (b) in proportion to the ratio of their respective Daily Contract Quantities. 3.10. Nothing in this Article III or elsewhere in this Amendment Agreement is intended or shall be construed to limit, affect or restrict the right (or obligation) of Lo -Vaca to limit, restrict or reduce the Lo -Vaca Sale Volume or the Other Transportation Gas Volume to be delivered to any Participating Customer on any day as may be required or permitted under applicable laws or regulations or contractual agreements between Lo -Vaca or any Lo -Vaca Affiliate and such Participating Customer now or hereafter existing. 3.11. If the Effective Date occurs, .the provisions of this Article III will, to the extent applicable, inure to the benefit of Participating Customers as well as the parties to this Amendment Agreement. -32- Q 160.C" IV. AMENDMENTS TO GAS AVAILABILITY AGREEMENT 4.01. In consideration of the mutual covenants and agreements herein contained, Coastal and Lo -Vaca hereby covenant and agree that, notwithstanding any contrary provision of the Gas Availability Agreement, said Gas Availability Agreement is hereby amended as follows: (a) Unless otherwise stated, as used in this Article IV, the terms defined in the Gas Availability Agreement shall have the meaning therein stated. (b) Notwithstanding any contrary provision of the Gas Availability Agreement and in particular, but without limitation, notwithstanding any contrary provision of Article 2 of the Gas Availability Agreement, the term of the Gas Availability Agreement shall end and terminate on the Effective Date (defined in Section 7.03 of this Amendment Agreement), and said Gas Availability Agreement is hereby terminated on the Effective Date and declared and agreed to be of no further force or effect whatsoever from and after the Effective Date. (c) Notwithstanding any contrary provision of the Gas Availability Agreement, neither Coastal, a Coastal Company, Subject Producer nor any other party or parties now or hereafter owning a Subject Interest shall ever have any obligation after the Effective Date under the Gas Availability Agreement to make available or to sell or offer to sell to Lo -Vaca, a Company Affiliate, Company Subsidiary or a Designated Company Purchaser any Subject Gas; and Coastal, any Coastal Company, Subject Producer or any other party or parties now or hereafter owning a Subject Interest may, after the Effective Date, freely and in their discretion deal with and sell and dispose of and enter into Gas Sales Contracts with any person providing for the sale of Subject Gas which may be produced Erom or attributable to any Subject Interest without regard to and without any restriction whatsoever thereon under or by virtue of the Gas Availability Agreement. (d) It is stipulated that neither Lo -Vaca, a Company Affiliate, Company Subsidiary nor a Designated Company Purchaser has ever elected to purchase Subject Gas made available by Coastal, a Coastal Company, Subject Producer or any other party or parties owning a Subject Interest prior to the time of execution of this Amendment Agreement by Lo -Vaca, nor is any Subject Gas being made available pursuant to the Gas Availability Agreement at the time of execution of this Amendment Agreement by Lo -Vaca. 4.02. Notwithstanding the foregoing provisions of this Article IV, it is expressly stipulated and provided that Lo -Vaca expressly retains and reserves and does not release any claim, right or cause of action (if any there be) of Lo -Vaca -33- 06I6U.0 against Coastal arising prior to the Effective Date by virtue of the failure (if any) of Coastal or any Coastal Company or Subject Producer to make available to the Company for purchase pursuant to a Gas Sales Contract by the Company or a Designated Company Purchaser (by giving a notice of gas available for Gas Sales Contract in accordance with the General Procedures) any Subject Gas (if any) which Coastal or such Coastal Company or Subject Producer was or is required and obligated to thus make available prior to the Effective Date under the terms, conditions and provisions of the Gas Availability Agreement, or for any other breach or violation (if any) of the Gas Availability Agreement by Coastal occurring prior to the Effective Date. Likewise; notwithstanding the foregoing provisions of this Article IV, it is expressly stipulated and provided that Coastal expressly retains and reserves and does not release any claim, right or cause of action (if any) of Coastal against Lo -Vaca arising prior to the Effective Date by virtue of any breach or violation (if any) of the Gas Availability Agreement by Lo -Vaca occurring prior to the Effective Date. 4.03. In the event of any conflict between any term or provision of this Amendment Agreement and any term or provision of the Gas Availability Agreement, the terms and provisions of this Amendment Agreement shall govern and control. V. AMENDMENTS TO E&D AGREEMENT 5.01. In consideration of the mutual covenants and agreements herein contained, New Company and Coastal hereby covenant and agree that, notwithstanding any contrary provision of the E&D Agreement, said E&D Agreement is hereby amended as follows: (a) Unless otherwise stated, as used in this Article V, the terms defined in the E&D Agreement shall have the meaning therein stated. -34- 06I'U.c • (b) Notwithstanding any contrary provision of the E&D Agreement and in particular, but without limitation, notwithstanding any contrary provision of Article 2 of the E&D Agreement, the term of the E&D Agreement shall end and terminate on the Effective Date (defined in Section 7.03' of this Amendment Agreement), and said E&D Agreement is hereby terminated on the Effective Date and declared and agreed to be of no further force or effect whatsoever from and after the Effective Date. (c) Notwithstanding any contrary provision of the E&D Agreement, neither New Company nor any other NewCo Company shall ever have any obligation after the Effective Date under the E&D Agreement to make available to or to offer to Coastal any Interest in any leases or other Interests in any New Company Prospect or in any Other Prospect; and New Company and any other NewCo Company may, after the Effective Date, freely and in their discretion acquire and own and explore, develop, produce and otherwise deal with and dispose of leases and Interests in New Company Prospects and Other Prospects without regard to and without any restriction whatsoever thereon under or by virtue of the E&D Agreement. (d) It is stipulated that Coastal has never elected to participate with New Company or any other NewCo Company in any New Company Prospect or Other Prospect pursuant to the E&D Agreement prior to the date of execution of this Amendment Agreement by Coastal; nor has Coastal elected to participate with New Company or any other NewCo Company in a seismic program pursuant to Article 6 of the E&D Agreement prior to the date of execution of this Amendment Agreement by Coastal. 5.02. Notwithstanding the foregoing provisions of this Article V, it is expressly stipulated and provided that Coastal expressly retains and reserves and does not release any claim, right or cause of action (if any) of Coastal against New Company arising prior to the Effective Date by virtue of the failure (if any) of New Company or any NewCo Company to offer to grant to Coastal (by furnishing to Coastal a New Company . Prospect Election Form• or Other Prospect Election Form, as applicable) the right to acquire Interests in any leases or other Interests acquired by NewCo Companies in New Company Prospects or in Other Prospects (if any) which New Company or such NewCo Company was or is obligated and required to thus offer to grant to Coastal prior to the Effective Date under the terms, conditions and provisions of the E&D Agreement, or for any other breach or violation (if any) of the E&D Agreement by -35- 06j6U.0 New Company occurring prior to the Effective Date. Likewise, notwithstanding the foregoing provisions of this Article v, it is expressly stipulated and provided that New Company expressly retains and reserves and does not release any claim, right or cause of action (if any) of New Company against Coastal arising prior to the Effective Date by virtue of any breach or violation (if any) of the E&D Agreement by Coastal occurring prior to the Effective Date. 5.03. In the event of any conflict between any term or provision of this Amendment Agreement and any term or provision of the E&D Agreement, the terms and provisions of this Amendment Agreement shall govern and control. VI. DISMISSAL OF HIDALGO COUNTY LITIGATION; RELEASES 6.01. If (and only if) the Effective Date occurs, each of Coastal, COGC, Limited and Border (on behalf of itself and Peter Paul) covenant and agree that they will promptly dismiss, with prejudice to the refiling of such claims, their claims asserted in the Hidalgo County Litigation. Further, if this Amendment Agreement is executed by the Trustee and does not terminate pursuant to Section 7.02 below, each of the parties to this Amendment Agreement agrees that they will thereafter in good faith endeavor to defer any trial or other decision on the merits or further discovery proceedings in such Hidalgo County Litigation as between or among any of such parties (and Reata and Industrial) until the Effective Date or, if the Effective Date does not occur, until this Amendment Agreement terminates pursuant to Section 7.03 below. Each of the parties to the Hidalgo County Litigation will pay its own costs. 6.02. If (and only if) the Effective Date occurs, it is agreed and stipulated that: (a) Each of Coastal, Limited, Border, COGC and ANR (on behalf of themselves and Peter Paul) agree to and do release, acquit and forever discharge each of -36- 6U C New Company, Lo -Vaca, Reata and Industrial and their respective officers, directors, stockholders, partners, employees, agents, servants, predecessors, successors, assignees and legal representatives and all persons in privity with any of them, whether or not expressly named herein ("Valero Released Parties") of and from all claims, demands, damages, suits and causes of action, known or unknown, in connection with or arising out of any failure or alleged failure of New Company or Lo -Vaca to comply with or perform any agreement, obligation or duty arising prior to the Effective Date under or in connection with the Gas Search Agreement or any Seller's Contract or Section 4.06 Contract; provided only that neither Limited, Border, COGC nor ANR releases any claim for payment pursuant to the Gas Search Agreement, Seller's Contracts and Section 4.06 Contracts for gas actually delivered and sold to Lo -Vaca or New Company prior to the Effective Date. (b) Each of New Company and Lo -Vaca agree to and do release, acquit and forever discharge each of Coastal, Limited, Border, COGC, ANR and Peter Paul and their respective officers, directors, stockholders, partners, employees, agents, servants, predecessors, successors, assignees and legal representatives and all persons in privity with any of them, whether or not expressly named herein ("Coastal Released Parties") from all claims, demands, damages, suits and causes of action, known or unknown, in connection with or arising out of any failure oralleged failure of Coastal, Border, Limited, COGC, ANR or Peter Paul to comply with or perform any agreement, obligation or duty arising prior to the Effective Date under or in connection with the Gas Search Agreement or any Seller's Contract or Section 4.06 Contract; provided only that neither New Company nor Lo -Vaca releases any claim for refund pursuant to or under any Seller's Contract or Section 4.06 Contract of any overpayment made for gas actually delivered and sold to New Company or Lo -Vaca prior to the Effective Date. (c) The Trustee agrees to and does release, acquit and forever discharge each of the Valero Released Parties and Coastal Released Parties from all claims, demands, damages, suits and causes of action, known or unknown, of the Trustee on behalf of the Gas Search Trust or Settling Customers in connection with or arising out of any failure or alleged failure of any of the Valero Released Parties or Coastal Released Parties to comply with or perform any agreement, obligation or duty arising prior to the Effective Date under or in connection with the Gas Search Agreement or any Seller's Contracts or Section 4.06 Contracts; provided only that the Trustee does not release any claim for payment pursuant to the Gas Search Agreement for or with respect to any Additional Gas Dedicated for Sale to the System at Program Prices which was or is actually delivered and sold to Lo -Vaca or New Company under Seller's Contracts, Section 4.06 Contracts or New Company contracts prior to the Effective Date, nor does the Trustee release its right to receive payment from Border of the appropriate share of the payment of $620,000.00 made by Greenbriar 74 Exploration Limited and Fred L. Oliver (collectively, "Greenbriar") to Border :in December, 1984, pursuant to a Gas Balancing Agreement between -37- 1111 as,.u.c Greenbriar and Border for gas produced and sold by Greenbriar from the Yturria Land & Cattle Co. No. 1 Well listed in Exhibit B to the Settlement Agreement, to the extent, if any, that such payment is ultimately determined to be due and owing to Border and not refundable to Greenbriar pursuant to such Gas Balancing Agreement (mention being made that Border has heretofore deposited such entire sum of $620,000.00 in escrow with the Trustee pursuant to an Escrow Agreement dated January 17, 1985, to be divided between Border and the Trustee or refunded to Greenbriar as appropriate when the persons entitled to receive and retain such escrowed funds are ultimately determined). 6.03. If the Effective Date does not occur and this Amendment Agreement terminates under Section 7.02 or Section 7.03 hereof, nothing in this Article VI or elsewhere in this Amendment Agreement or in the Exhibits hereto, and no motions, pleadings, briefs or other matters filed by or on behalf of any party in connection with the Settlement Litigation Docket seeking or supporting entry of a Final Court Order as provided for in Section 7.03 below, shall waive or in anywise prejudice or affect the rights, claims or liabilities, if any, of any present or future parties to the Hidalgo County Litigation, the Conoco Suit or the Settlement Litigation Docket. 6.04. Mention is made that incident to executing and • delivering this Amendment Agreement Coastal, New Company and Lo -Vaca and other parties to the Hidalgo County Litigation other than the Trustee and Settling Customers, as well as other subsidiaries of Coastal or New Company, are entering into various agreements whereby, upon the Effective Date, the claims and disputes among such parties in the Hidalgo County Litigation will be released and resolved. Such agreements include the amendment of existing gas processing agreements between affiliates of Coastal and New Company and agreements pertaining to the transportation for Coastal of gas obtained from new sources and gas released from existing gas purchase agreements with Lo -Vaca. Additionally, the provisions of all existing gas purchase contracts between affiliates of Coastal and New Company providing that a quantity of gas be taken or -38- paid for will be amended to provide that the purchaser under such agreements will not incur liability if in compliance with the market -demand rules of the Railroad Commission of Texas. An affiliate of Coastal will also convey to an affiliate of New Company a lateral pipeline operated by Lo -Vaca in Zapata, Webb and Jim Hogg Counties, Texas. Also among such agreements is an agreement between Lo -Vaca and COGC whereby Lo -Vaca will, unconditionally agree to release, on an automatic, noninterruptable basis, additional gas from certain gas purchase contracts between Lo -Vaca and COGC providing for the sale of gas from certain Interests of COGC and Appurtenant Interests burdening such Interests (herein collectively called the "COGC Properties") for a period of six (6) years after the Effective Date to the extent necessary to enable COGC to sell up to the Total Daily Volume of Coastal Sale Gas to Participating Customers on each day of such period from the COGC Properties (if and to the extent the required volumes of gas are not available for sale as Coastal Sale Gas from the Dedicated Wells or from other Coastal Sellers, if any, on any such day). Solely as between and among the parties to such other agreements and without in anywise altering, limiting or affecting the rights of the Trustee, Settling Customers or Participating Customers under this Amendment Agreement or any Customer• Contract or' Gas Transportation Agreement, it is stipulated that such other agreements will not be deemed merged into this Amendment Agreement and will be and remain in effect after the Effective Date solely as between and among the parties thereto. vii. MISCELLANEOUS 7.01. The headings of the articles of this Amendment Agreement are used herein solely for convenience in reference and shall not be deemed to.be parts hereof or to affect the construction hereof or otherwise to be of any force or effect. -39- • O 4 U.0 7.02. This Amendment Agreement will be executed by Coastal, Border, COGC, Limited, ANR, New Company and Lo -Vaca on the respective dates of execution set out above their signatures hereto, in advance of execution by the Trustee, in order that the Trustee will be afforded time to provide an opportunity for each Settling Customer to vote whether such Settling Customer approves or disapproves of this Amendment Agreement and whether the Trustee should execute this Amendment Agreement, which requires consent by Settling Customers having in the aggregate sixty-five percent (65%) of the "Interests" in the "Gas Search Trust" as defined in the Settlement Trust Agreement. Coastal, Border, COGC, Limited, ANR, New Company and Lo -Vaca each agrees that it shall not be entitled to withdraw its agreement to this Amendment Agreement at any time after a counterpart of this Amendment Agreement has been signed by all of Coastal, Border, COGC, Limited, ANR, New Company and Lo -Vaca; provided that this Amendment Agreement shallnot be or become operative or effective in any respect (except to bind Coastal, Border, COGC, Limited, ANR, New Company and Lo -Vaca not to withdraw their agreement hereto, and except as provided in Section 7.05 below) unless it is also executed by the Trustee; and provided, further, that any or all of Coastal, Border, COGC, Limited, ANR, New Company and Lo -Vaca shall have the right, in its or their sole discretion, to withdraw its agreement to this Amendment Agreement and to refuse to be or become bound hereby (in which event this Amendment Agreement shall terminate and be void and of no force or effect whatsoever) unless the Trustee shall execute and deliver a counterpart of this Amendment Agreement (after the Trustee has received consent of the requisite percentage in "Interests" of Settling Customers in the "Gas Search Trust" as defined in, and as provided for in Section 11.02 of, the Settlement Trust Agreement) on or before the expiration of sixty (60) days after the date of execution of this Amendment Agreement by Coastal as -40- 04I&U.0 set out below. When and if this Amendment Agreement is executed by the Trustee after having received such consents of Settling Customers as described above (prior to any of Coastal, Border, COGC, Limited, ANR, New Company or Lo -Vaca having exercised a right --if such a right arises --to withdraw its agreement to this Amendment Agreement under the provisions of the last preceding sentence hereof), this Amendment Agreement shall thereafter be binding upon all parties hereto and no party may withdraw herefrom unless this Amendment Agreement is terminated pursuant to the provisions of Section 7.03 below. 7.03. The "Effective Date" of this Amendment Agreement, as such term is used herein, shall be 7:00 a.m., local time in Houston, Texas, on the first day of the first calendar month which ensues after the expiration of thirty (30) days after the "Final Date" (as below defined) of the "Final Court Order' (as below defined), if and when such Final Date of such Final Court Order occurs. In this respect: (a) The "Final Court Order" means a judgment arising out of pleadings filed in the Settlement Litigation Docket pursuant to this Section 7.03, approving this Amendment Agreement and declaring this Amendment Agreement to be valid, effective and binding upon the parties hereto and to constitute a valid, effective amendment of the Gas Search Agreement, Seller's Contracts, Section 4.06 Contracts, Gas Availability Agreement and ESD Agreement in accordance with the terms and provisions hereof which does not violate the Settlement Trust Agreement; and (b) The "Final Date" of such Final Court Order shall be the date when such Final Court Order becomes final and not subject to appeal or further appeal. If' the Trustee executes this Amendment Agreement as provided for in Section 7.02, each other party to this Amendment Agreement agrees that it shall promptly join in and file an appropriate pleading (in the form of Exhibit 5 attached hereto or in such other form as may then be mutually agreed by such parties) requesting the 200th District Court in the Settlement Litigation Docket to enter a Final Court Order and shall support entry of such Final Court Order in any appeal or appeals pertaining thereto in a good faith effort to cause the -41- osisu.c ' Final Date of the Final Court Order to occur. If the Trustee executes this Amendment Agreement as • provided for in Section 7.02'of this Amendment Agreement, the Trustee agrees that it shall also petition the 200th District Court in the •Settlement Litigation Docket to review this Amendment Agreement and •to enter the Final Court Order if the Court finds that such execution of this Amendment Agreement by the Trustee, with consent of Settling Customers having in the aggregate sixty-five percent (65%) of the Interests in the Gas Search Program Trust, does not violate any terms or provisions of the Settlement Trust Agreement and that the Trustee is not required to obtain the express consent of each Settling Customer which chooses not to consent to the execution of this Amendment Agreement by the Trustee. Further, each Settling Customer which consents to execution of this Amendment Agreement by the Trustee shall thereby automatically and irrevocably authorize, empower and instruct the Trustee, as the duly authorized representative of such Settling Customer, to join on behalf of and in the name of such Settling Customer in such petition. If, however, a judgment (herein called an "Adverse Judgment") is entered in response to such pleadings filed in the 200th District Court in the Settlement Litigation Docket, disapproving this Amendment Agreement or declaring that this Amendment Agreement is not valid, effective or binding upon the parties hereto (or any one or more of such parties) or is not a valid, effective amendment of the respective instruments identified in Subsection (a) of this Section 7.03 in accordance with the terms and provisions hereof or violates the Settlement Trust Agreement (regardless of whether such Adverse Judgment is entered prior to or after conclusion of appeals, if any, with respect to any jud5ment entered by the 200th District Court in such cause either approving or disapproving this Amendment Agreement) and if such Adverse Judgment becomes final and not subject to further appeal (upon conclusion of all appeals, if -42- 06•16U.G any, with respect thereto), this Amendment Agreement and all Customer Contracts and Gas Transportation Agreements executed pursuant hereto. shall be void and of no force or effect whatsoever, and the "Effective Date" hereof shall not occur. 7.04. Subject only to the provisions of Sections 7.02 and 7.03 above, the terms and provisions of this Amendment Agreement shall be binding upon and shall inure to the benefit of the parties named herein and the respective successors and assigns of each of them. 7.05. Coastal agrees that it will reimburse the Trustee, within twenty (20) days after receipt of an itemized statement therefor, for the reasonable direct out-of-pocket expenses incurred by the Trustee in soliciting consents to this Amendment Agreement from Settling Customers as contemplated in Section 7.02 above, up to but not in excess of a total of $1,000.00. Such expenses to be reimbursed by Coastal shall not include salaries or other costs of officers or employees of the Trustee or overhead expenses of the Trustee, but shall include direct out-of-pocket expenditures such as printing and mailing expenses and any fees or charges paid to third parties to assist in soliciting such consents. Coastal shall be obligated to reimburse the Trustee for such expenses pursuant to this Section 7.05 (up to the maximum of $1,000.00 set forth above) regardless of whether sufficient consents are obtained from Settling Customers to enable the Trustee to execute this Amendment Agreement as specified in Section 7.02 above. 7.06. This Amendment Agreement may be executed in several counterparts, and each counterpart, when so executed and delivered, shall constitute an original instrument, and all -43- O.L6U.0 such separate counterparts shall constitute but one and the same instrument. WITNESS the execution hereof as follows: .The date of execution hereof by Coastal is .A/ci/t.f7aA42-m% /7 , 1986: • Ar• - THE COASTAL CORPORATION By Name: • 1.!_iirt!" i.inie‘ner-1- Name: AS:f4STAM127ci: Title: Senmr mit ..... • The date of execution hereof by New Company is /(..kuvt.ofic-ar- /7.- , 1986: VALERO ENERGY CORPORATION By Name: ame: 75os-e.047., eccm:(-1c Title: _mstanliilicraZi Title: Sen,ny-Y\CAL r)re4.kckrit The date of execution hereof by Lo -Vaca is Afeurnu.sew.... • /2_ , 1986: ATTEST: VALERO TRANSMI SION COMPANY Name: Title: .4,,,e-,e_Af........,___ By Name: bob A. aft ea=: 4861111111caaY---Title The date of execution NOthrhig.ese.. /Z. , 1986: 'WA/hi'', ATTEST:qd.:'4, '. LicrAdii 1.. .- ..i Name:.1;t70(lati, .4rk Title: III • la • c.er by hereof • • Border BORDER EXPLORATION COMPANY By Name: CTA37-x,er Title: is The/ date of execution hereof by COGC is AoLek4AW-.‹ 1Z , 1986. ATTEST: COASTAL OIL Et GAS CORPORATION By Name: rWelcre4N Title: `4,1•L,L..1i:.,1 Title: The • date of execution hereof by Limited is /z_ , 1986. ATTE 'X:, ACOASTAL LIMITED VENTURES, INC. -644-424- By )( ,Name: u). u-)e.irler+ :Title: nE),1,-.ii ;%. (StGNATURES CONT(NUED ON NEXT PAGE) Name: Til*Z7jey- Title: -44- (SIGNATURES CONTINUED FROM PREVIOUS PAGE) The /L• a ti'KA/•i� �2 date of execution hereof by ANR is /L , 1986. Name: . LUrmrrt- Title: • ANR PRODUCTION COMPANY By 'LT r Name: ! 14 Sw,r_e Title: The date of execution hereof by the Trustee is , 1986: ATTEST: Name: Title: TEXAS COMMERCE BANK, NATIONAL ASSOCIATION, in its capacity as the Trustee under the Settlement Trust Agreement By Name: Title: -45- Corpus Christi, Te fs /3 day of , 1981 TO THE MEMBERS OF THE CITY COUNCIL Corpus Christi, Texas For the reasons set forth in the emergency clause of the foregoing ordinance or resolution, an emergency exists requiring suspension of the Charter rule as to consideration and voting upon ordinances or resolutions at three regular meetings; I/we, therefore, request that you suspend said Charter rule and pass this ordinance or resolution finally on the date it is introduced, or at the present meeting of the City Council. Respectfully, Council Members Respectfully, MAYOR THE CIOF CORPUS CHRISTI, TEXAS The above ordinance was passed•y the following vote: Luther Jones / _ Dr. Jack Best Of David Berlanga, Sr. Leo Guerrero i Joe McComb Frank Mendez Bill Pruet /. /, Mary Pat Slavik Linda Strong