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
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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
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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,
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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
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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
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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,
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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
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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
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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
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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
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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
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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
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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
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•
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
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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
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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.
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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
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'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,
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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
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'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:
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"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
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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
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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
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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
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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.
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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
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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
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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
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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
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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:
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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