Document:

exv10w17

 

1

Exhibit 10.17

Natural Gas Purchase and Sale Agreement

Cogeneration

Companhia de Gás de São Paulo — Comgás

X

Corn Products Brasil — Ingredientes Industriais Ltda.

January / 2006

 

 

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Natural Gas Purchase and Sale Agreement

Corn Products Brasil and Companhia de Gás de São Paulo — Comgás

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE ONE — DEFINITIONS AND INTERPRETATION OF TERMS

	 	 	4	 
	ARTICLE TWO — PURPOSE

	 	 	12	 
	ARTICLE THREE – COMMERCIAL SUPPLY

	 	 	12	 
	ARTICLE FOUR – DAILY CONTRACTED AMOUNT

	 	 	12	 
	ARTICLE FIVE — QUALITY

	 	 	13	 
	ARTICLE SIX — DELIVERY POINT AND PROPERTY TRANSFER

	 	 	16	 
	ARTICLE SEVEN – TERMS FOR DELIVERY OF GAS

	 	 	16	 
	ARTICLE EIGHT – PRICE

	 	 	17	 
	ARTICLE NINE — SCHEDULING OF AMOUNTS TO BE TAKEN, COMMITMENTS
AND PENALTIES FOR DEFAULT

	 	 	18	 
	ARTICLE TEN — COMMITMENT OF PRIORITY OF PURCHASE OF DAILY
CONTRACTED AMOUNT (DCA) OF THE AGREEMENT AND GAS USAGE RESTRICTION

	 	 	28	 
	ARTICLE ELEVEN – INVOICING, PAYMENT MANNER AND GUARANTEE

	 	 	30	 
	ARTICLE TWELVE – MEASUREMENT

	 	 	36	 
	ARTICLE THIRTEEN — EFFECTIVENESS AND EXTENSION

	 	 	39	 
	ARTICLE FOURTEEN — FORTUITOUS CASE OR FORCE MAJEURE

	 	 	39	 
	ARTICLE FIFTEEN- ASSIGNMENT AND ENCUMBRANCE OF RIGHTS AND OBLIGATIONS

	 	 	43	 
	ARTICLE SIXTEEN – NOVATION AND FORBEARANCE

	 	 	44	 
	ARTICLE SEVENTEEN — DEFAULT AND TERMINATION

	 	 	44	 
	ARTICLE EIGHTEEN — NOTICES

	 	 	49	 
	ARTICLE NINETEEN — DISPUTES RESOLUTION

	 	 	50	 
	ARTICLE TWENTY- GENERAL LIMIT OF LIABILITY

	 	 	59	 
	ARTICLE TWENTY-ONE – AMENDMENT

	 	 	60	 
	ARTICLE TWENTY-TWO — ANNEXES

	 	 	60	 
	ARTICLE TWENTY-THREE – CONTRACTUAL AMOUNT

	 	 	60	 
	ARTICLE TWENTY-FOUR – AGREEMENT OF THE PARTIES

	 	 	60	 

 

 

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	 	NATURAL GAS PURCHASE AND SALE AGREEMENT ENTERED INTO
BY AND BETWEEN, COMPANHIA DE GÁS DE SÃO PAULO -
COMGÁS AND, ON THE OTHER SIDE, CORN PRODUCTS
BRASIL - INGREDIENTES INDUSTRIAIS LTDA:

By this private instrument of piped natural gas purchase and sale agreement, the parties hereof, on
the one side, COMPANHIA DE GÁS DE SÃO PAULO — COMGÁS, concessionaire of piped gas distribution
services in the State of São Paulo, a corporation of authorized capital, headquartered in the City
of São Paulo, at Rua das Olimpíadas, 205, 10° andar, enrolled with the National Register of Legal
Entities of the Ministry of Finance (CNPJ) under No. 61.856.571/0001-17, hereinafter referred to as
COMGÁS, herein represented as per its by-laws, and, on the other side

CORN PRODUCTS BRASIL — INGREDIENTES INDUSTRIAIS LTDA., a private limited company, headquartered in
the City of São Paulo, State of São Paulo, at Av. do Café, 277, Torre B, 2° andar, enrolled with
the National Register of Legal Entities of the Ministry of Finance (CNPJ) under No.
01.730.520/0001-12, hereinafter referred to as the User, herein properly represented, by
virtue of the mutual promises and covenants herein contained, agree to be bound as follows:

WHEREAS:

	•	 	the decision of the Federal Government to increase the participation of natural gas in the national energetic
matrix;
	 
	•	 	Law No. 9,478/97, which establishes provisions on the National Energetic Policy, has as one of its purposes
the development, in economic bases, of the use of natural gas;
	 
	•	 	Decree No. 3,371, of February 24, 2000, which established, within the competency of the Ministry of Mines and
Energy, the Priority Program of Thermoelectricity, and MME Ordinance No. 551, of December 6, 2000,
which ruled the program of incentive to cogeneration, stimulated entrepreneurs and investors to submit
proposals for the implementation of Cogeneration Thermoelectric Projects;

 

 

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	•	 	the Cogeneration Plant was included in said Priority Program of Thermoelectricity by means
of GCE Resolution No. 127 of April 16, 2002;
	 
	•	 	as provided for in paragraph 2 of Article 25 of the Constitution of the Republic — with the wording ascribed
to it by the Constitutional Amendment No. 5 of August 15, 1995 — , it is incumbent upon the States to exploit
directly, or by means of a concession, the piped Gas services pursuant to the law;
	 
	•	 	as per the concession agreement entered into with the State of São Paulo, Comgás is the exclusive
concessionaire of public services of piped Gas distribution in the State of São Paulo, covering the
location area of the Cogeneration Plant;

	 
	•	 	 Comgás entered into the Comgás-Supplier Agreement with the Supplier;

	 
	•	 	Comgás intends to provide to the User and the latter intends to purchase from
Comgás, according to the rules and conditions of this Agreement, the Natural
Gas to be used exclusively as fuel at the Cogeneration Plant;
	 
	•	 	the last generating unit of the Cogeneration Plant started commercial operation on June 26, 2004, in
accordance with ANEEL Decision No. 490 of June 25, 2004; and
	 
	•	 	On December, 29, 2004, Comgás and the User executed a gas supply agreement, within the
context of the Priority Program of Thermoelectricity, for the supply of Gas by Comgás
to be used exclusively as fuel in the Cogeneration Plant, which was amended on March, 30,
2005, on May 31, 2005 and on July 20, 2005, on November 20, 2005 and on December 20, 2005
(“Short-Term
Agreement”), pursuant to which Comgás and the User agreed to execute,
a natural gas supply agreement to be used as fuel in the Cogeneration Plant, also under the
conditions of the Priority Program of Thermoelectricity, with term of up to 20 years;

do hereby agree to establish that this Natural Gas Purchase and Sale Agreement shall be ruled
by the following clauses and conditions:

ARTICLE ONE — DEFINITIONS AND INTERPRETATION OF TERMS

	1.1	 	In this Agreement, whenever they are written in upper case, the terms below will have the
definitions that are assigned to them in this article:

Year – shall mean a period of time that:

	 	a)	 	for the first Year, shall begin on the Commercial Supply
Start-up Day and shall end the last Day of the corresponding year;

 

 

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	 	b)	 	for each Year succeeding the Year referred to in item (a)
above, except for the last Year of effectiveness of the Agreement,
shall begin on the first Day of the corresponding year and shall end on the
last Day of the corresponding year;
	 
	 	c)	 	for the last Year of effectiveness of the Agreement, shall
begin on the first Day of the corresponding year and shall end on the last
Day of effectiveness of the Agreement;

provided, however, that the term ”year”, where not written in upper case, shall mean a
calendar year.

Arbitration - is defined in item 19.1.2.

Arbitrator (First Arbitrator, Second Arbitrator, Third Arbitrator) - shall mean
each member of the Arbitration Tribunal appointed pursuant to item
19.2.3.

Calorie – shall mean the quantity of heat required to increase the temperature
from one gram (1g) of pure water from fourteen point five Celsius degrees (14.5oC) up to
fifteen point five Celsius degrees (15.5oC) at the absolute pressure of 0.101325MPa.

Fortuitous Case or Force Majeure - is defined in Article Fourteen.

Cogeneration Plant - shall mean all the equipment of the cogeneration plant called
Corn Mogi Co-Generator Central, driven by natural gas, located in the Municipality of Mogi
Guaçu, State of São Paulo, which will receive the Gas for purposes of
Cogeneration, inserted into the Priority Program of Thermoelectricity.

Cogeneration - corresponds to the process of combined production of useful heat
and mechanical energy, usually converted totally or partially into electric energy from the
chemical energy made available by one or more fuels, pursuant to Article 3 of ANEEL
Resolution No. 21 of January 20, 2000 or in any other Law that amends or replaces
it.

Reference Conditions - shall mean a temperature of twenty degrees Celsius
(20oC) and absolute pressure of 0.101325MPa and the Superior
Calorific Power (SCP) for the Gas equal to the Reference
Calorific Power.

Base Conditions - shall mean a temperature of twenty degrees Celsius
(20oC) and absolute pressure of 0,101325Mpa.

 

 

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Regulation and Measurement Set (CRM) - Set of equipment owned by
Comgás  intended to regulate the pressure and measure and record the
volumes, pressures and temperature of Gas that will supply the Cogeneration
Plant, installed at a place to be assigned by User, close to its
boundary, as agreed upon between the Parties. This station is the one
responsible for officially measuring the Natural Gas supply subject of this
Agreement.

Agreement — shall mean this Natural Gas Purchase and Sale
Agreement, its annex, as well as any amendments and changes agreed upon and signed
by the Parties. 

Supplier-Comgás Agreement - shall mean a natural gas purchase and sale agreement
entered into between the Supplier and Comgás, having as its purpose the
purchase, by Comgás, and the sale, by Supplier of the Natural Gas
subject of this Agreement, to be used exclusively as fuel at the
Cogeneration Plant.

Short-Term Agreement – shall mean the agreement specified in the last whereas.

Day - shall mean a period of time that will start at 6:00 a.m. (six o’ clock) of
each day and will end at 6:00 a.m. (six o’ clock) of the following day; and the term “day”
when not written in upper case shall mean a period of twenty-four (24) hours that will
start at 0:00 (midnight) of each day and will end at midnight (0:00) of the same day.

Collection Document - shall mean every invoice, trade bill, debt note or document
issued by one Party for collection of any amount to be paid, under the
Agreement, by the other Party.

Dollar or US$ - shall mean the legal currency of the United States of
America.

Affiliate Company – shall mean any company (i) controlled by one of the
Parties, (ii) the controlling company of one of the Parties or
(iii) under the common control of the controlling company of one of the Parties.

Failure in Supply (FF) - is any situation characterized by the occurrence, on any
given Day, at the Delivery Point, of any one of the following events:

a. lack of availability of Gas in accordance with the Daily
Requested Amount;

 

 

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	 	b.	 	non-acceptance of the Daily Requested Amount (DRA) by Comgás,
except under the terms of item 9.9.1.1 or item 17.1; 
	 
	 	c.	 	restriction or interruption in the supply of Gas as a result of an
operating fact not attributable to the User;
	 
	 	d.	 	non-conformity in relation to the specifications of Gas defined in
item 5.1;
	 
	 	e.	 	subject to the provisions of items 7.3 and 7.4, failure to comply with any of
the Gas delivery conditions defined in items 7.2 and 7.5;

except for any of the following events — when there will be no Failure in Supply:

	 	i.	 	the fact being attributed to an Fortuitous Case or Force Majeure;
	 
	 	ii.	 	for a fact attributable to the User;
	 
	 	iii.	 	upon the previous agreement by the User in receiving the
Gas out of specification or in nonconformity with the provisions of item 5.1,
or the receipt of the Gas by the User out of specification or in
nonconformity with the provisions of item 5.1, under the terms of item 5.2 (v);
	 
	 	iv.	 	Comgás’ refusal to accept a Daily requested amount (DRA)
incompatible with the situations of Comgás’ Scheduled Interruptions
and/or of Supplier’s Scheduled Interruptions .

Provider — is the party with which the Supplier has entered into or may
enter into a natural gas purchase agreement for the supply of Gas subject of this
Agreement.

Commercial Supply- shall mean the supply of Natural Gas made by
Comgás to the User at the Cogeneration Plant under the
conditions set forth in this Agreement.

Guarantee – is the guarantee to be delivered by the User to
Comgás, in the terms of item 11.9 and its subitems.

Natural Gas or Gas — is the natural gas subject of this
Agreement, consisting of a mixture of hydrocarbons that are essentially comprised
of methane, other hydrocarbons and non-fuel gases, which are extracted from natural
reservoirs and which are found in the gaseous state under the Base Conditions.
When not written in upper case, the terms “gas” and “natural gas” refer to the
generality of the product, and not necessarily to this Agreement.

 

 

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Commercial Supply Start-up- shall mean the date, defined under the terms of
Article Three, on which the Commercial Supply shall start.

Law - shall mean any law, code, decree, regulation, resolution, ordinance,
deliberation, judgment, order, directive, political directions, agreements or any other
requirements or restrictions enacted by any Public Body, provided that these
latter two be regulated. 

Distribution Margin – is defined in items 8.1.2 and 8.1.2.1.

Month — shall mean a period of time that:

	 	a)	 	with respect to the first Month, will start on the
Commercial Supply Start-up Day and will end on the last Day of the
relevant month;
	 
	 	b)	 	with respect to each Month of effectiveness
of the Agreement following the first
Month, except for the last
Month  of effectiveness of the
Agreement, will start on the first Day of the month and end on the last Day of the relevant month;
	 
	 	c)	 	with respect to the last Month
of effectiveness of the Agreement,
will start on the first Day of the relevant month and end on the last
Day of effectiveness of the Agreement.

provided, however, that, when not written in upper case, the term “month” shall mean a
calendar month.

Cubic Meter (m3) - is the volume of Gas that, under
the Base Conditions, occupies the volume of one (1) cubic meter.

Change in Law - shall mean the occurrence, after the execution date of this
Agreement, of any of the following events which demonstrably affects the
performance of the obligations undertaken by the Parties, under the terms of this
instrument:

	 	i.	 	enactment, commencement of effectiveness, change, suspension or revocation of
any Law;
	 
	 	ii.	 	change in the interpretation or application of any Law.

Notice - shall mean any communication in writing sent by one Party to the
other, required or allowed under the terms of this Agreement.

Public Body - shall mean a body, agency, entity or public law legal entity that
has jurisdiction over either Party or the transactions provided for in this
Agreement.

 

 

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Scheduled Interruptions - are transitory situations foreseen and informed by means
of a Notice with, at least, ninety (90) days in advance, which demand the
restriction or interruption in the supply or receipt of Gas, for purposes of
maintenance or repair, technically recommended, in pipelines, in the Cogeneration Plant
or in related ducts:

	 	•	 	to the supply of Gas by the Carrier to the Supplier
or by the Supplier to Comgás (Supplier’s Scheduled
Interruptions);
	 
	 	•	 	to the supply of Gas by Comgás to the User
(Comgás’ Scheduled Interruptions); and
	 
	 	•	 	to the receipt of Gas by the User, for maintenance of
equipment of the Cogeneration Plant or of the User’s plant
(User’s Scheduled Interruptions),

which, for the rightful reasons provided for in this Agreement, shall fit the
following rules or principles:

	 	i.	 	for the User, the total number of days of Scheduled
Interruptions, cumulatively, may not exceed, in each five (5)-Year
period, the average of twenty (20) Days per Year, provided
that, in each Year, the number of days of interruption shall not exceed
sixty (60) Days, Comgás being allowed to coordinate its
Scheduled Interruptions within such period, jointly with the
User;
	 
	 	ii.	 	for Comgás or its Supplier, the total time of
Scheduled Interruptions may not exceed, in each three (3)-Year
period, the total of fifteen (15) Days;

the Parties shall use their efforts in order to cause the coincidence of their
respective Days of Scheduled Interruptions.

Party(ies) — shall mean, in the singular, Comgás or the User, as
per the context; and in the plural, shall mean Comgás and the User,
concomitantly.

Affected Party- shall mean the Party invoking the occurrence of an
Fortuitous Case or Force Majeure, in order to be released from the compliance with
any of its obligations under this Agreement.

Expert Proceeding- shall mean the procedure for dispute resolution provided for in
item 19.3.

Expert - shall mean the qualified technician pursuant to item 19.3.3 who is
appointed for purposes of dispute resolution through Expert Proceeding.

 

 

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Reference Calorific Value (RCV) — shall mean the SCV of nine thousand four
hundred Kilocalories per Cubic Meter (9,400 kcal/m3).

Superior Calorific Value (SCV) — shall mean the quantity of heat produced by
combustion, under constant pressure, of a mass of gas occupying a volume of one cubic meter
(1m3) at the temperature of twenty degrees Celsius (20oC) and under
absolute pressure of 0.101325MPa, with total condensation of the combustion water vapor.
Its measurement unit shall be kcal/m3.

Delivery Point — shall mean the location where the Gas shall be made
available to the User, as set forth in Article Six.

Price of Gas Sale - is defined in item 8.1, its subitems related thereto.

Gas Price - is defined in item 8.1.1, its subitems and annex(es) related thereto.

Priority Program of Thermoelectricity (PPT) - shall mean the program for
implementation of thermoelectric plants established by the Federal Government under the
authority of the Ministry of Mines and Energy, in accordance with Decree No. 3,371 of
February 24, 2000.

Amount of Gas or Amount of Natural Gas — shall mean any volume
of Natural Gas subject of this Agreement, expressed in Cubic
Meters under the Reference Conditions.

Daily Contracted Amount (DCA) - is the Amount of Gas subject of this
Agreement as defined in Article Four.

Scheduled Daily Amount (SDA) — is the Amount of Gas subject of this
Agreement, which the User, in its schedule of amounts to be taken, in
accordance with the provisions established in item 9.2, has requested Comgás to
made available at the Delivery Point on the corresponding Day and which
has been accepted by Comgás.

Daily Taken Amount (DTA) - is defined in item 9.4.

Daily Requested Amount (DRA) - is the Amount of Gas that, in accordance
with the rules of this Agreement and subject to the limit of the Daily
Contracted Amount, the User requests that Comgás make available to
the User, on any given day, at the Delivery Point.

Missing Amount (QF) – corresponds, on each Day, to the shortfall between
the Daily Requested Amount and the Amount of Gas actually made available
to the User by Comgás at the Delivery Point on that
same Day. 

 

 

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Measured Amount (QM) - is the Amount of Gas that, in accordance with the
ascertainment made by the Measurement Systems of the CRM, has been
delivered at the CRM on the Day, corrected for the Reference
Conditions on the Day. For purposes of correction of the
Measured Amount, the factor resulting from the division of the average
daily SCP of Gas on the Day – as determined at the point closest
to the CRM where the Gas is sampled for laboratorial analysis – by PCR, with
rounding up of the fourth decimal place shall be applied to the measured volume.

Amount Not Taken (ANT) - corresponds, in any given Year or
Month of Gas supply, to an Amount of Gas that the User
has taken below its Take or Pay commitment. 

Amount Paid and Not Taken (APNT) - corresponds to the accrued balance, in
Amount of Gas, by the User before Comgás as a result of payments
made to Comgás of the Amounts Not Taken (ANT), and it may be recovered
by the User within the term and under the conditions provided for
in this Agreement. 

Amount Paid and Not Taken of the Year (APNTY) – is the
specific Amount Paid and Not Taken (APNT) of a determined Year, according
to item 9.5.2.

Amount Recovered by User (ARU) - is an Amount of Gas that on any given
Day or in a given period, in accordance with the rules set forth in Article Nine,
is recovered by the User and deducted from its balance of Amount Paid and Not
Taken (APNT).

Kilocalorie (kcal) - shall mean one thousand (1,000) Calories.

Real or R$ - shall mean the legal currency in Brazil.

Amounts Taken in Excess of Schedule — are defined in item 9.6.

Amounts Taken Below Schedule - are defined in item 9.7.

Arbitration Award - shall mean the final award (as per items 19.2.5 and 19.2.6) to
be presented by the Arbitration Tribunal to the Parties in procedures for
disputes resolution.

 

 

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Ship or Pay - is defined in item 9.8.

Measurement System - shall mean the set of primary and secondary elements of flow,
temperature and pressure measurement and, if any, converters, transmitters, flow computers,
integrators and recorders.

Supplier – shall mean Petróleo Brasileiro S.A – Petrobras, as supplier of
Natural Gas to Comgás, under the terms of Supplier-Comgás
Agreement or any other that may replace it.

Take or Pay — is defined in item 9.3, items “b” and “c”.

Distribution Take or Pay – is defined in item 9.8.2 (ii).

Exchange Rate - means the average rate for sale of Dollar defined as the
effective rate on the respective date of conversion disclosed by the Brazilian Central
Bank’s System (SISBACEN), identified as PTAX-800 transaction — Option 5 – Currency 220.

Carrier - shall mean any provider of natural gas transportation service through
pipelines, established in accordance with the applicable provisions of the National
Petroleum Agency (ANP) or an entity replacing it in the competence of regulating and/or
inspecting said activity.

Arbitration Tribunal – is defined in item 19.2.3.

Measured Volume – means any amount of GAS measured by the CRM measurement
system in cubic meters under the base conditions.

ARTICLE TWO — PURPOSE

	2.1	 	The purpose of this Agreement is the sale and supply by Comgás, and the
purchase and receipt by the User, in the conditions set forth herein, of
Natural Gas, exclusively for serving the needs of the Cogeneration
Plant

ARTICLE THREE – COMMERCIAL SUPPLY

	3.1	 	For the purposes of this Agreement, it is established, as the date of execution of
this Agreement, the Commercial Supply Start-up date.

ARTICLE FOUR – DAILY CONTRACTED AMOUNT

	4.1	 	The Daily Contracted Amount (DCA), at the Reference Conditions,
shall be of three hundred thousand Cubic Meters per day (300,000
m3/day).

 

 

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	 	4.1.1	 	After ten (10) years the User shall be entitled to increase, the Daily
Contracted Amount (DCA) in up to five percent (5%) upon notice to comgás
sent at least twelve (12) months before the new DCA becomes effective.

ARTICLE FIVE — QUALITY

5.1 The Gas to be delivered by Comgás to the User
shall present characteristics of quality that meet, at least, the specifications of Ordinance
No. 104 of July 8, 2002, issued by the National Petroleum Agency – ANP or those
that may replace it in view of a supervening Law.

5.2 Whenever Comgás is aware of the possibility of the Gas being
supplied at the Delivery Point, partially or totally, in nonconformity with the
specifications set forth in item 5.1, the following provisions shall apply:

	 	i.	 	Comgás shall notify, in writing, the User, as soon as
possible, of the expected non-conformity in the Gas to be supplied,
indicating what would be the probable non-conforming items and, precisely, the
respective quality deviations;
	 
	 	ii.	 	after the receipt of the Notice referred to in item above, the
User shall inform, as soon as possible, whether it accepts or not to receive
the Gas out of specification; it being henceforth expressly understood and
accepted that the User’s failure to inform its decision within the term
stated in the Notice will be considered as the User’s option not to
receive the Gas out of specification.
	 
	 	iii.	 	if it opts to receive the Gas out of specification, the
User shall be entitled to a ten percent (10%) discount on the portion of the
price pertaining to the Gas (commodity), except when the nonconformity is
only pertaining to a SCP greater than the specified;
	 
	 	iv.	 	if, however, the User opts not to receive the Gas out of
specification or fails to inform its decision and, it actually does not take said
Gas, the Failure in Supply for the non-compliance with the DRA will
deemed to have occurred, and Comgás shall bear the payment of the penalties
provided for in item 9.9.2;

 

 

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	 	v.	 	if the User has informed that it would reject the Gas out
of specification or fails to inform its decision, but, in spite of that, the
Gas is taken at the Delivery Point, the Failure in Supply
will be not be deemed to have occurred, and Comgás shall not be liable for
any penalties and/or liability for damages that may eventually be caused to the
equipment and facilities of the User, as well as to the Cogeneration
Plant as a result of the informed non-conformity; being preserved, however, the
right of the User to the discount referred to in subitem (iii) above.

	5.2.1	 	If Comgás delivers the Gas out of the specification provided for
in item 5.1, without giving prior Notice to the User of the existing
non-conformity, the following rules shall be applicable:

	 	a)	 	If, exclusively as a result of the nonconformity presented by the
Gas and the cause-effect relation being duly evidenced, the
Cogeneration Plant suffers any damages in its equipment, then, unless the
nonconformity has occurred as a result of an Fortuitous Case or Force Majeure,
Comgás shall bear, always subject to the limit provided for in
Article Twenty, until the damages have been repaired;
	 
	 	(i)	 	with the penalties applicable for the cases of Failure in
Supply, as provided for in item 9.9.2, subject to the limit established in
item 9.9.3;
	 
	 	(ii)	 	the costs determined according the procedures set forth in item
19.1.1, effectively incurred with the repair of the equipment of the
Cogeneration Plant that has evidently been damaged by the use of the
Gas out of specification, subject to the limit established in item 5.2.2
below.
	 
	 	b)	 	If the supply of Gas out of specification does not cause any
damages to the equipment of the Cogeneration Plant or if the cause-effect
relation referred to in item (a) above has not been evidenced, the Failure in
Supply shall be deemed not to have occurred, and Comgás shall not be
liable for any penalties and indemnification for the repair of damages, being
preserved, however, the right of the User to the discount referred to in
item 5.2 (iii) above — which discount, however, is not enforceable if the
non-conformity has resulted from an Fortuitous Case or Force Majeure.

 

 

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	 	c)	 	In case of item (a) above, during the period required for repairing
the equipment of the Cogeneration Plant, the Take or Pay,
Ship or Pay and Distribution Take or Pay commitments will be
suspended. Said commitments will also be suspended during the period required for
repairing the equipment of the Cogeneration Plant in case the damage of
such equipment has occurred as a result of the occurrence of an Fortuitous
Case or Force Majeure. The period required as stated above will be determined
as per the procedure provided for in item 19.1.1.

	5.2.2	 	Subject to the provisions of Article Twenty, in any event, the total of payments of
Comgás set forth in item 5.2.1(a)(ii) shall exceed, during the whole
effectiveness of this Agreement, the maximum limit corresponding to five per cent
(5%) of the value of the Agreement, determined by the following formula:

     IL = K x 0.05 x DCA x N x GP, where:

	 	 	 	IL  —  is the maximum limit of payment by Comgás;
	 
	 	 	 	DCA  —  is the Daily Contracted Amount;
	 
	 	 	 	N  —  is the number of days of effectiveness of the
Agreement, calculated as of the execution
date of the Agreement up to the final
date set forth in item 13.1;

	 
	 	 	 	GP  —  is the Gas Price in force on the date of
occurrence of the event set forth in item
5.2.1(a)(ii) converted to Reais per
Cubic Meter at the Reference
Conditions according to the Exchange Rate
of the last business day of the
Month of payment of a certain
indemnification.

	 
	 	 	 	K              is the percentage of use of the IL, which shall
vary from 0 to 1, and, on the execution date of
this Agreement, shall correspond to 1. At
each payment made by Comgás under the
terms of item 5.2.1(a)(ii), a new K factor shall
be determined by the reduction of (i) the
percentage corresponding to such payment in
relation to the value 0.05 x DCA x N x GP from the
(ii) previous K factor.

5.3 Irrespectively of the analyses made by the User, Comgás shall verify
the quality of the Gas supplied, by means of analyses whose results shall be forwarded to
the User in a periodicity compatible with the frequency of measurement set forth in
Ordinance ANP No. 104.

	 	5.3.1	 	Upon the occurrence of a discrepancy between the results of quality verifications
made by the Parties, each of them shall grant free access to the other
Party in order to follow up the sampling and the analysis of the Gas,
aimed at establishing a solution for the pending matter.

 

 

16

	5.4	 	In case the dispute is not settled within ten (10) days as of the occurrence of the
discrepancy referred to in item 5.3.1, the dispute will be submitted to an Expert
Proceeding.

ARTICLE SIX — DELIVERY POINT AND PROPERTY TRANSFER

	6.1	 	The Delivery Point will be located immediately downstream the outlet flange
of the Regulation and Measurement Set (CRM), which shall in turn be located in the
User’s Unit located at Rua Paula Bueno, 2935 – Mogi Guaçu, State of São Paulo.
	 
	6.2	 	 It is established as measurement point the Regulation and Measurement
Set (CRM) owned by Comgás, located at the User’s facilities. 
	 
	6.3	 	 The transfer of ownership of the Gas from Comgás to the
User will occur at the Delivery Point.

	 	6.3.1	 	All risks and losses of Gas: 

	 	•	 	Up to the Delivery Point shall be for the account of Comgás;
	 
	 	•	 	As from the Delivery Point shall be for the account of the User.

ARTICLE SEVEN – TERMS FOR DELIVERY OF GAS

	7.1	 	 The Gas will be delivered by Comgás to the User at
the Delivery Point in conformity with the quality aspects set forth in Article
Five.
	 
	7.2	 	 The supply control manometric pressure at the Delivery Point will be no
more than seventeen (17) kgf/cm2 and not less than twelve (12) kgf/cm2.

	 	7.2.1	 	In special situations, the Parties may define control pressures
other than that stated in item 7.2.

	7.3	 	The average hourly flow shall be no more than one twenty-fourth (1/24) of the Daily
Contracted Amount — DCA, provided that an increase of up to ten percent (10%) shall be
allowed.
	 
	7.4	 	The instantaneous
flow, in Cubic Meters
per hour, shall not be more
than one twenty-fourth
(1/24) of the Scheduled Daily Amount — SDA,

 

 

17

	 	 	 	provided that an increase, for periods not greater than fifteen (15) minutes a Day, of up to ten percent (10%) shall be allowed.
	 
	7.5	The maximum delivery temperature of the Gas shall be thirty-five degrees Celsius (35oC). 

ARTICLE EIGHT – PRICE

	8.1	 	The Price of Gas Sale (PS) at the Delivery Point to be charged by
Comgás for the exclusive purposes of Cogeneration will be comprised of the
sum of two portions: one related to the Gas Price (GP) and other related to the
Distribution Margin (DM), in accordance with their respective values at each time, so
that PS = GP + DM.

	 	8.1.1	 	The Gas Price (GP), in turn, is comprised of the sum of two portions: one
related to the commodity (PC) and the other related to Transportation (PT), so
that: GP = PC + PT and shall be determined and readjusted as per the methodology stated in
Annex 1.

	 	8.1.1.1	 	The Gas Price (GP) shall be added by the taxes levied on the purchase of
gas by Comgás in the Supplier-Comgás Agreement which are not
creditable in view of legal determination or determination of any competent
authority.

	 	8.1.2	 	The Distribution Margin (DM) shall be that set forth by the
Commission of Public Energy Services – CSPE for the cogeneration segment stated in
Ordinance CSPE No. 366, of May 30, 2005 or any other that may replace it.

	 	8.1.2.1	 	Pursuant to Annex 2 of CSPE Ordinance No. 366/05, the Distribution Margin
(DM) shall be calculated in cascade, i.e., progressively for each class of
consumption, considering the amount of Gas consumed by User in the
month:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	COGENERATION OF ELECTRIC ENERGY
	 	 	 	 	 	 	FOR SELF CONSUMPTION OR SALE TO
	 	 	 	 	 	 	END CONSUMER (VARIABLE R$/m 3 with
	CLASS	 	m 3/month	 	PIS and COFINS and without ICMS)
	1
	 	Up to 100,000.00 m3	 	 	0.1661096	 
	2
	 	100,000.01 through 500,000.00 m3	 	 	0.1314942	 
	3
	 	500,000.01 through 2,000,000.00 m3	 	 	0.1291321	 

 

 

18

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	COGENERATION OF ELECTRIC ENERGY
	 	 	 	 	 	 	FOR SELF CONSUMPTION OR SALE TO
	 	 	 	 	 	 	END CONSUMER (VARIABLE R$/m 3 with
	CLASS	 	m 3/month	 	PIS and COFINS and without ICMS)
	4
	 	2,000,000.01 through 4,000,000.00 m3	 	 	0.1168830	 
	5
	 	4,000,000.01 through 7,000,000.00m3	 	 	0.1022740	 
	6
	 	7,000,000.01 through 10,000,000.00 m3	 	 	0.0876628	 
	7
	 	((OVER)) 10,000,000.00 m3	 	 	0.0727138	 

	8.2	 	The Price of Gas Sale (PS) shall be added by the Tax on Operations Pertaining to the
Movement of Merchandise and on Interstate and Intermunicipality Transportation Service
Provision and Communications – ICMS, under the terms of the applicable legislation, as well as
by any other federal, state and municipal taxes (taxes, fees, rates, tax and para-tax
contributions) levied or that may be levied on the operation of this Agreement.

ARTICLE NINE — SCHEDULING OF AMOUNTS TO BE TAKEN, COMMITMENTS AND PENALTIES FOR DEFAULT

	9.1	 	Before the date of the first request of Gas, each Party
shall inform to the other, by means of Notice, a fax number to which the operating
notices shall be transmitted in relation to the performance of this Agreement. 

	9.2	 	Scheduling of Amounts of Gas to be Taken

	 	 	 	As of the Commercial Supply Start-up, the User shall send on a
monthly basis to Comgás, with twelve (12) days in advance from the beginning of
the Month of supply, a Notice with the schedule of the amount of
Gas to be taken referring to the current Month and to the two subsequent
Months. 

	 	9.2.1	 	The schedule referred to above shall detail the Daily Requested Amounts (DRA)
for the next Month, as well as, only for the sake of indication, the total
amounts for the two subsequent months, everything taking into account the Scheduled
Interruptions and subject to the limit of the Daily Contracted Amount
(DCA). 
	 
	 	9.2.2	 	The schedule of the Month shall detail, for the sake of indication, the
portion of the Amount Paid and Not Taken (APNT) which will be used on each
Day of that Month — which will become, upon the use, the Amount
Recovered by User (ARU). Such amount may not exceed, on the daily average of that
Month, forty-four percent (44%) of the Daily Contracted Amount
(DCA), except after the end of this Agreement, when, subject to the
provisions of item 9.5.3 (b), such amount shall be a hundred per cent (100%) of that would be the old
DCA.

 

 

19

	 	9.2.3	 	The Daily Requested Amount (DRA) for any given day may be changed
(increased or decreased) by the User, subject to the limit of the DCA, upon
delivery of Notice to Comgás up to 8:00 a.m. (eight o’ clock) of the day
previous to the corresponding day of supply.
	 
	 	9.2.4	 	Until two o’ clock (2:00 p.m.) of the day previous to the corresponding day of
supply, Comgás, through delivery of Notice to the User, shall
confirm the acceptance of the Daily Requested Amount, which will be
considered as the Scheduled Daily Amount. Comgás’ failure to make such
confirmation within the term provided for above shall be automatically considered as
acceptance of the Daily Requested Amount (DRA) by Comgás, and such DRA
shall be automatically considered SDA.
	 
	 	9.2.5	 	Exceptionally, upon the occurrence of any operating problems that restrict the
capacity of Gas delivery, the Parties may negotiate a reduction of the
Scheduled Daily Amount (SDA) for any given Day. Should the
Parties agree on such reduction, the Daily Contracted Amount
(DCA), exclusively on that Day, will be reduced to the amount of
the new Scheduled Daily Amount (SDA), not characterizing thus
Failure in Supply.
	 
	 	9.2.6	 	If there is availability of Gas and interest of Comgás and the
User, the Scheduled Daily Amount (SDA) may be increased during the
Day, and the quantity so increased shall be then the Scheduled Daily Amount
(SDA) of said Day.

	9.3	 	Commitments of Gas Receipt (Take or Pay)

	 	 	 	Except for the situations of non-delivery or non-receipt of Gas for Failure in
Supply, Scheduled Interruptions or Fortuitous Case or Force Majeure
of either Party, the User undertakes to:

	 	a)	 	purchase and take, on a daily basis, from Comgás no more than one hundred
and ten percent (110%) of the Scheduled Daily Amount (SDA), limited to one
hundred and ten percent (110%) of the Daily Contracted Amount (DCA), and not
less than eighty percent (80%) of the Scheduled Daily Amount (SDA) of
Gas for the corresponding Day, subject, in case of the
noncompliance, to the penalties provided for in items 9.6 and 9.7 and respective
subitems;
	 
	 	b)	 	at every Month of the effectiveness of the Agreement,
purchase and take from Comgás — and, even if it does not take, pay– an
Amount of Gas that, at the daily average of the corresponding Month
is either equal to or greater than fifty-six percent (56%) of the Daily
Contracted Amount in effect referred to by Article Four;

 

 

20

	 	c)	 	at every Year of the effectiveness of the Agreement,
purchase and take from Comgás — and, even if it does not take, pay– an
Amount of Gas that, at the daily average of the corresponding Year
is either equal to or greater than eighty percent (80%) of the Daily
Contracted Amount (DCA) in effect referred to by Article Four;

	 	9.3.1	 	The percentages referred to in subitems (b) and (c) of item 9.3 correspond to the
monthly and annual Take or Pay commitments, whose compliance will be verified by
taking into account only the Daily Taken Amount (DTA) such as defined in
item 9.4.

	9.4	 	Daily Taken Amount (DTA)
	 
	 	 	The Daily Taken Amount (DTA) will be determined by the formula:
	 
	 	 	DTA = QM – ARU
	 
	 	 	where :
	 
	 	 	DTA  —  Is the Daily Taken Amount;
	 
	 	 	QM  —  Is the Measured Amount at CRM on the respective Day; and
	 
	 	 	ARU  —  Is the Amount Recovered by the User on the respective Day.

	 	9.4.1	 	The sum, in the Month, of the Daily Taken Amounts (DTAs)
will be used as parameter for purposes of determination of the Amount Not Taken in the
Month (ANTM) and the Amount Not Taken of the Year
(ANTy), pursuant to item 9.5.

	9.5	 	Amounts Not Taken — Determination
	 
	 	 	The Amounts Not Taken (ANTs) of Gas to be paid by the User
to Comgás in view of the provisions of subitems (b) and (c) of item 9.3 shall
be calculated according to the following formulas:

	 	a)	 	amount to be paid in each Month:
	 
	 	 	 	
	 
	 	b)	 	amount to be paid in each Year:
	 
	 	 	 	

 

 

21

where:

	 	 	 	 	 
	ANTM

	 	-
	 	is the Amount of Gas not Taken in the
Month, being zero if the calculation result is negative;
	 
	M

	 	-
	 	is the number of Days of the Month of supply;
	 
	PPM

	 	-
	 	is the total number of days (or a fraction thereof) corresponding
to Scheduled Interruptions in the Month, at the
proportion in which they have affected the receipt or the regular
supply of Gas at the Delivery Point
	 
	PPPY

	 	 	 	is the total number of Days (or a fraction thereof)
corresponding to Scheduled Interruptions exclusively
from Comgás in the Year, at the proportion in
which they have adversely affected the regular supply of the
Gas at the Delivery Point;
	 
	DCA

	 	-
	 	is the Daily Contracted Amount effective in the
Month and/or Year of supply, receptively for
subitems (a) and (b) of this item;
	 
	QNFFj

	 	-
	 	is the portion of the Scheduled Daily Amount (SDA) which
has not been taken on day “j” for a reason of Failure in
Supply;
	 
	QNFMj

	 	-
	 	is the portion of the Scheduled Daily Amount (SDA) which
has not been taken on day “j” due to an Act of God or a
Force Majeure Event;
	 
	DTAj

	 	-
	 	is the Daily Taken Amount on day “j”;
	 
	ANTY

	 	-
	 	is the Amount Not Taken of Gas in the
Year, being zero if the calculation result is negative;
	 
	Y

	 	-
	 	is the number of the Days in the Year of supply.

	 	9.5.1	 	Payments for Amounts Not Taken

	 	The amount to be paid by the User to Comgás as Amount Not
Taken (Take or Pay) shall be:

	 	(a)	 	at every Month, the product of the ANTM
(Amount Not Taken in the Month) by the value of the portion pertaining to
the commodity of the Gas Price in effect at the end of the last day of
the Month of supply, added by the taxes due, as provided for in the
applicable legislation.
	 
	 	(b)	 	at every Year, the product of the ANTY
(Amount Not Taken in the Year) by the value of the portion pertaining to
the commodity of the Gas Price in effect at the end of the last day of
the Year of supply, added by the taxes due, as provided for in the
applicable legislation.

 

 

22

	 	 	 	The amounts referred to in item 9.5.1 shall be paid by the User within the
same term and according to the same rules and further conditions set forth in Article
Eleven for the payment of Gas invoices pertaining to the invoicing period.

	 	9.5.2	 	Amount Paid and Not Taken (APNT)
	 
	 	 	 	Once the payment of each of the amounts referred to in item 9.5.1 has been made, the
corresponding Amount Not Taken (ANT) will be added to the Amount Paid and
Not Taken of the corresponding Year (APNTy), being the total APNTy
on the first moment of the Year equal to zero. 

	 	9.5.3	 	Recovery of Amounts Paid and Not Taken 
	 
	 	 	 	The User may recover, in whole or in part – upon Notice as per
item 9.2.2, always for consumption at the Cogeneration Plant, the remainder of
the Amounts Paid and Not Taken (APNTs) of Gas (commodity),
as follows:

	 	a)	 	during the effectiveness of the Agreement, including any
possible extension pursuant to item 13.1:

	 	(i)	 	up to the last Month of the seventh
(7th) Year subsequent to the Year of
verification of the Amount Paid and Not Taken of a certain
Year (APNTy);
	 
	 	(ii)	 	on the condition that it has already requested and
taken, in the Month in which there is the recovery, an Amount
of Gas corresponding, at least, to the monthly Take or Pay
commitment;

	 	b)	 	after the end of the term established in the Article Thirteen,
including its eventual extension pursuant to Article Thirteen: except for the
event of termination caused by the User or for its fault:

	 	(i)	 	up to the limit of the DCA or to such limit that may be
agreed by Comgás and the User;
	 
	 	(ii)	 	up to the term of three hundred and sixty five (365)
days following the end of the Agreement, pursuant to item 13.1.1.

	 	9.5.3.1	 	The portion taken by the User of the remainder of Amounts Paid and
Not Taken (APNT’s) will be referred to as Amount Recovered by the
User (ARU) and will be, at the time of such
recovery, deducted from the said remainder, by order, from the oldest to the
most recent APNTY.

 

 

23

	 	9.5.3.2	 	For the Amount Recovered by the User (ARU), the User shall pay
to Comgás the portion corresponding to the taxes levied, under the terms of
the applicable legislation.
	 
	 	9.5.3.3	 	For the Amounts Recovered by the User (ARU’s) in accordance with item
9.5.3(b), the User shall also pay to Comgás the portion of the
Gas Price pertaining to the transportation of the entire volume recovered in
the Month or ninety-five percent (95%) of what would be the Daily
Contracted Amount (DCA), whichever is higher, with all taxes levied thereon.
	 
	 	9.5.3.4	 	After the deadlines referred to in subitems (a) and (b) of item 9.5.3 or after the
termination of the Agreement by Comgás as a result of a default by
the User, the balance of the Amount Paid and Not Taken will be
considered as having been extinguished, whether there is a remainder or not, and the
User will not have any right of recovery. In case of termination of the
Agreement by the User for a default by Comgás or in case
of termination under the terms of item 17.5(a), Comgás shall pay to the
User the amounts provided for in item 17.4.1(ii).
	 
	 	9.5.3.5	 	In the event of termination of the Agreement under the terms provided for
in item 17.5(b):

	 	(a)	 	the remainder of the Amount Paid and Not Taken
(APNT) of Gas will be considered as being extinguished,
whether there is a remainder or not, and the User will not have
any right of recovery, in case the termination of the Agreement
pursuant to said item 17.5(b) results from unilateral decision by the
User or from a default of the User;
	 
	 	(b)	 	the amount corresponding to the possible residual
amount of the Amount Paid and Not Taken (APNT) of Gas
will be paid by Comgás to the User, as
provided for in item 17.4.1(ii), if the termination of the
Agreement pursuant to said item 17.5(b) results from unilateral
decision of Comgás or from a default of Comgás.

	9.6	 	Penalty for Amount Taken in Excess of Schedule
	 
	 	 	If, on any given Day, the User takes an Amount of Gas exceeding
by more than ten percent (10%) the Scheduled Daily Amount (SDA) for that
Day, or ten percent (10%) of the Daily Contracted Amount (DCA)
in effect, whichever is lower, then it shall pay to Comgás, unless if agreed upon between the
Parties, in addition to the regular invoicing:

 

 

24

	 	i)	 	a penalty in the amount determined by the following formula:

	 	 	 	 	 	 
	 	PATES

	 	=
	 	0.30 [(QM-QL) x PC + QT x PT], where:
	 	 
	 	 	 	 
	 	PATES

	 	-
	 	Is the amount, on the Day, of the penalty for Amount Taken in
Excess of Schedule to be paid by the User to
Comgás;
	 	 
	 	 	 	 
	 	QM

	 	-
	 	is the Measured Amount on such Day;
	 	 
	 	 	 	 
	 	QL

	 	-
	 	is the lowest Amount of Gas established below:
	 	 
	 	 	 	 
	 	 

	 	 	 	•  the SDA for that Day added by ten percent (10%) or
	 	 
	 	 	 	 
	 	 

	 	 	 	•  the DCA added by ten percent (10%);
	 	 
	 	 	 	 
	 	PC

	 	-
	 	is the amount of the portion pertaining to the commodity in the Gas
Price in effect on the last Day of the Month in
which the User has taken a quantity of Gas higher than
the Scheduled Daily Amount (SDA), already expressed in
R$/m3, considering the Exchange Rate of the last
business day of the same Month;
	 	 
	 	 	 	 
	 	QT

	 	-
	 	is an Amount of Gas expressed in m3, whose amount is:
	 	 
	 	 	 	 
	 	 

	 	 	 	• equal to the difference between Measured Amount
(QM) and the smallest Amount of Gas among the following: 110%
of the Scheduled Daily Amount (SDA) or 110% of the
Daily Contracted Amount (DCA), if 110% of the Scheduled Daily
Amount (SDA) of such Day is greater than 95% of the
Daily Contracted Amount
(DCA);

	 	 
	 	 	 	 
	 	 

	 	 	 	• equal to QM – 95% of the DCA, if 110% of the SDA of that
Day is lower than 95% of the DCA and QM is greater than 95% of
the DCA;

	 
	 	 

	 	 	 	•  equal to zero, in the other events;
	 	 
	 	 	 	 
	 	PT

	 	-
	 	is the amount of the portion pertaining to the transportation in the
Gas Price in effect on the last Day of the
Month in which the User has taken Amounts of Gas
greater than the Scheduled Daily Amount (SDA), already
expressed in R$/m3, considering the
Exchange Rate of the last business day of the
same Month. 

	 	9.6.1	 	Without prejudice to the provisions of item 9.6, if the User fails to
comply with the limits specified in said item, and that implies risk to the operation of
the distribution system, Comgás may limit the flow in the Regulation and
Measurement Set (CRM), upon prior notice to the User.
	 
	 	9.6.2	 	The payment of the penalty referred to in item 9.6 will be made on the maturity date
of the invoices pertaining to the concerned Month as
provided for in item 11.4 — and the User shall be subject, in case of
non-payment within such term, to the same additions and other rules applicable to the
invoices paid in delay, pursuant to Article Eleven.

 

 

25

9.7 Penalty for Amount Taken Below Schedule

	 	 	 	If, on any given day, the User takes an Amount of Gas lower than eighty
percent (80%) of the Scheduled Daily Amount for that Day, it shall pay to
Comgás, as of the second event in any given Month, or as of the seventh
event in a certain Year, in addition to the regular invoicing, a penalty in the
amount determined by the following formula:

	 	 	 	 
		PATBS 

	= 
	(0.80x SDA — QM) x B x PC, where:
		 
	 	 
		Patbs

	-
	is the limit amount, on the day, of the Penalty for Amount Taken Below
Schedule to be paid by the User to Comgás;
		 
	 	 
		B

	-
	the amount of B shall depend on the percentage of deviation to be produced
between the Scheduled Daily Amount (SDA) and the amount actually
taken, as follows:
		 
	 	 
		 

	 	§ If QM 3 (0.80 x SDA), then B = 0 ;
		 
	 	 
		 

	 	§ If QM < (0.80 x SDA) and QM 3 (0.75 x SDA), then B = 0.05;
		 
	 	 
		 

	 	§ If QM < (0.75 x SDA) and QM 3 (0.70 x SDA), then B = 0.10;
		 
	 	 
		 

	 	§ If QM < (0.70 x SDA), then B = 0.15
		 
	 	 
		QM

	-
	Is the Measured Amount on such Day;
		 
	 	 
		SDA

	-
	Is the Scheduled Daily Amount for that Day;
		 
	 	 
		PC

	-
	is the amount of the portion pertaining to the commodity in
the Gas Price in effect on the last day of the Month in
which the User has taken the Amount of Gas lower
than the Scheduled Daily Amount (SDA), already expressed
in R$/m3, considering the Exchange
Rate of the last business day of the month.

	 	9.7.1	 	The payment of the penalty referred to in item 9.7 will be made on the maturity date
of the invoices pertaining to the concerned Month as provided for in
item 11.4 – and the User shall be subject, in case of non-payment within such
term, to the same additions and other rules applicable to the invoices paid in delay,
pursuant to Article Eleven.

9.8 Payment Commitment of Firm Transportation and Distribution Margin 

	 	9.8.1	 	On a monthly basis, the User shall pay to Comgás, within the term
set forth in item 11.4, the product of the portion pertaining to the

	 	 	 	transportation of the Gas Price (PT) by the greater amount between
the following (QT) added by the taxes levied, as provided for in the applicable
legislation:

 

 

26

	 	i.	 	the sum, in the Month, of the Daily Taken Amount
(DTA) plus the Amount Recovered by the User (ARU).
	 
	 	ii.	 	the product of ninety-five percent (95%) 3⁄4 Ship or
Pay 3⁄4 of the Daily Contracted Amount (DCA) by the number of
Days of the corresponding Month, deducted from this calculation
the situations of non-delivery or non-receipt of Gas for
Failure in Supply, Fortuitous Case or Force Majeure by
either Party and/or Scheduled Interruption by Supplier
and/or Comgás, in the proportion that they have adversely affected
the receipt or the regular supply of Gas at the Delivery Point.

	 	9.8.2	 	On a monthly basis, the User shall pay to Comgás, within the term
set forth in item 11.4, the product of the portion pertaining to the Distribution
Margin by the greater among between the following (QT) added by the taxes levied,
as provided for in the applicable legislation:

	 	i.	 	the sum, in the Month, of the Daily Taken Amount
(DTA) plus the Amount Recovered by the User (ARU).
	 
	 	ii.	 	the product of eighty percent (80%) of the Daily
Contracted Amount (DCA) –the Distribution Take or Pay — by the
number of Days of the corresponding Month, deducted from this
calculation the situations of non-delivery or non-receipt of Gas
for Failure in Supply, Fortuitous Case or Force Majeure by
either Party and/or Comgás’ Scheduled Interruption or the
Supplier’s Scheduled Interruptions, in the proportion it has adversely
affected the receipt or the regular supply of Gas at the Delivery
Point.

9.9 Gas Supply Commitment

	 	9.9.1	 	Comgás undertakes to accept the Daily Requested Amounts (DRA) as
Scheduled Daily Amounts (SDA), as well as to make available to the
User, at the Delivery Point, at every Day, an Amount of
Gas equal to the Daily Requested Amount (DRA) for the corresponding
Day.

	 	9.9.1.1	 	Comgás is released from its obligation to accept, as Daily Requested
Amount (DRA), Daily Requested Amounts (DRA) that are
incompatible with situations of Comgás’ and/or Supplier’s
Scheduled Interruptions.

 

 

27

	 	9.9.2	 	In the event of proven Failure in Supply, Comgás shall pay to the
User, as the sole and enforceable compensation, the amount determined by the
following formula, always subject to the limit set forth in item 9.9.3 below:
	 
	 	 	 	Md = 0.15 x GP x QF
	 
	 	 	 	where:
	 
	 	 	 	Md  —  daily fine, in national currency;
	 
	 	 	 	QF  —  Missing Amount on the Day on which there was a Failure in Supply;
	 
	 	 	 	GP  —  Gas Price at the Delivery Point, pursuant to item 8.1.1 of
Article Eight, in effect in the Month.

	 	9.9.2.1	 	The payment of the penalty referred to by item 9.9.2 shall be made on the
maturity date of the invoices pertaining to the concerned Month as provided
for in item 11.4 — the User shall be subject, in case of non-payment within
such term, to the same additions and other rules applicable to the invoices paid in
delay, pursuant to Article Eleven.

	 	9.9.3	 	Under no circumstance, the total of payments by Comgás as a result of
Failure in Supply may exceed, in each Year, the non-cumulative limits
specified below, subject to the provisions of Article Twenty.

	 	(i)	 	in case the Failure in Supply is the result of a
failure in supply by the Supplier in the Supplier-Comgás
Agreement: limit corresponding to 3,285,000 m 3 multiplied by the Gas
Price in effect, converted to Reais per Cubic Meters,
calculated according to the following formula:

	 	 	 	 	 
	IL

	 	=
	 	K x 3,285,000 x GP, where
	 
	IL

	 	-
	 	is the maximum limit of payment by Comgás
in case of Failure in Supply
resulting from a failure in supply by the
Supplier in the Supplier-Comgás
Agreement;
	 
	GP

	 	-
	 	is the Gas Price in force on the date
of occurrence of each Failure in Supply
converted to Reais per Cubic
Meter at the Reference Conditions
according to the Exchange Rate of
the last business day of the Month of
payment of an indemnification.
	 
	K

	 	 	 	is the percentage of use of the IL, which shall
vary from 0 to 1, and, on the execution date of
this Agreement and on the beginning of
each Year, shall correspond to 1. At
each payment made by Comgás for
Failure in Supply, a new K factor shall
be determined by the reduction of (i) the
percentage corresponding to such payment in
relation to the value 3,285,000 x GP from the
(ii) previous K factor.

 

 

28

	 	(ii)	 	in case the Failure in Supply is exclusively attributable to
Comgás: limit corresponding to 3,285,000 m 3 multiplied by the Gas
Price in effect, converted to Reais per Cubic Meters,
calculated according to the following formula:

	 	 	 	 	 
	IL

	 	=
	 	K x 3,285,000 x GP, where
	 
	IL

	 	-
	 	is the maximum limit of payment by Comgás
in case of Failure in Supply
exclusively of Comgás;
	 
	 	 	 	 
	GP

	 	-
	 	is the Gas Price in force on the date
of occurrence of each Failure in Supply
converted to Reais per Cubic
Meter at the Reference Conditions
according to the Exchange Rate of
the last business day of the Month of
payment of an indemnification.
	 
	 	 	 	 
	K

	 	 	 	is the percentage of use of the IL, which shall
vary from 0 to 1, and, on the execution date of
this Agreement and on the beginning of
each Year, shall correspond to 1. At
each payment made by Comgás for
Failure in Supply, a new K factor shall
be determined by the reduction of (i) the
percentage corresponding to such payment in
relation to the value 3,285,000 x GP from the
(ii) previous K factor.

	 	9.9.3.1	 	The Parties agree that the indemnification limits provided for in
item 9.9.3 above are exclusively established for each Year and are not
cumulative with the limits of other Years. Therefore, any possible balance
of the indemnification limit of any given Year, which has not been used for
such Year, will not be added to the indemnification limits of the
subsequent Year.

ARTICLE TEN — COMMITMENT OF PRIORITY OF PURCHASE OF DAILY CONTRACTED AMOUNT (DCA) OF THE
AGREEMENT AND GAS USAGE RESTRICTION

	10.1	 	Priority of Acquisition of Daily Contracted Amount (DCA) of
the Agreement

	 	10.1.1	 	The User agrees that the supply of Gas, subject of this
Agreement, will have priority in relation to any other supply of piped gas to the
Cogeneration Plant which it may possibly request to Comgás until the
Daily Contracted Amount (DCA) set forth in this Agreement is
reached.
	 
	 	10.1.2	 	If the User consumes gas from other agreement in violation with the provisions
of 10.1.1 above, the User shall pay to Comgás, as penalty, the amount
calculated by the formula P = GP x QT, where:

 

 

29

	 	 	 	 	 	 	 	 	 
	P   	 	-	 	is the amount of the penalty pertaining to the Day;
	 
	 	 	 	 	 	 	 	 
	GP	 	-	 	is the total unit price of the Gas at the Delivery Point in effect on the
last day of the month of occurrence of the fact generating the penalty, converted into
Reais per Cubic Meter at the Reference Conditions, according to
the Exchange Rate of the day prior to the payment day to Comgás.
	 
	 	 	 	 	 	 	 	 
	QT	 	-	 	is the Amount of Gas (expressed in Cubic Meters at the Reference
Conditions) taken on the Day by the User which is not the
Gas subject of this Agreement, limited to the difference
[DCA — QR – QFF], in which:
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	DCA
	 	-
	 	Is the Daily Contracted Amount;
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	QR
	 	-
	 	Is the Amount of Gas subject
of this Agreement which has
been used on that Day by the
User;
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	QFF
	 	-
	 	Is the Amount of Gas which, on
that Day, has been subject of
proven Failure in Supply;

	 	10.1.3	 	The payment of the penalty referred to by item 10.1.2 shall be made on the maturity
date of the invoices pertaining to the supply of Gas of the concerned Month
– the User shall be subject, in case of non-payment within such term, to the
same additions and other rules applicable to the Gas supply invoices paid in
delay, pursuant to Article Eleven of this Agreement.
	 
	 	10.1.4	 	The payment obligation of the penalty referred to in item 10.1.2 will be irrespectively
of all the other obligations under the Agreement, including the Take or
Pay, Ship or Pay and Distribution Take or Pay obligations and the
payment of the full price for any amount of Gas supplied at the Delivery
Point.
	 
	 	  10.2	 	Gas Usage Restriction
	 
	 	10.2.1	 	The User agrees that all the Gas subject of this Agreement
shall be consumed at the Cogeneration Plant.
	 
	 	10.2.2	 	If the User destines any Amount of Gas to any other use(s) in
violation with the provisions above, the User shall pay to Comgás, as a
penalty, the amount corresponding to the product of such Amount of Gas by seventy
percent (70%) of its total unit price (PS) at the Delivery Point in effect on the
last Day of the month of occurrence of the fact generating the penalty.

 

 

30

	 	10.2.3	 	The payment of the penalty referred to by item 10.2.2 shall be made on the maturity
date of the invoices pertaining to the supply of Gas of the concerned Month
as provided for in item 11.4 – the User shall be subject, in case
of non-payment within such a term, to the same additions and other rules
applicable to the Gas supply invoices paid in delay, pursuant to Article
Eleven of this Agreement.
	 
	 	10.2.4	 	The payment obligation of the penalty referred to in item 10.2.2 will be
irrespectively of all the other penalties and obligations of the
Agreement, including the ones related to termination, Take or Pay,
Ship or Pay, Distribution Take or Pay and the obligation to pay the full price of
the totality of Gas supplied at the Delivery Point.

ARTICLE ELEVEN – INVOICING, PAYMENT MANNER AND GUARANTEE

11.1
Amounts to Be Invoiced

	 	11.1.1	 	Portion Pertaining to the Commodity:

	 	 	 	For the supply of Gas (commodity), the invoicing amount will be determined
by the application of the following formula:

	 	 	 	where:

	 	 	 	 
	 	FC

	  -  
	is the amount of the invoicing of the commodity in each period of invoicing to be paid by the User
on the maturity date defined pursuant to item 11.4;
	 	 
	 	 
	 	DTAj

	  -  
	is the Daily Taken Amount on day “j”;
	 	 
	 	 
	 	PC

	  -  
	is the unit amount of the portion pertaining to the commodity added by the taxes and converted
into national currency per Cubic Meter at the Reference Conditions in accordance with
the Exchange Rate of the last business day of the Month of supply;
	 	 
	 	 
	 	K

	  -  
	is the first Day of Gas supply in the invoicing period; 
	 	 
	 	 
	 	J

	  -  
	is each one of the Days of Gas supply in the concerned invoicing period;

	 	 
	 	 
	 	N

	  -  
	corresponds to the last Day of Gas supply in the concerned invoicing period;
	 	 
	 	 
	 	DFc

	  -  
	is the supplementary amount of the invoicing of the commodity pertaining to the previous supply period,
calculated by means of the difference between (i) the amount ascertained in accordance with the
Exchange Rate published on the business days previous to the 25th day of the Month
of supply and (ii) the amount invoiced in the previous period being deducted therefrom the
supplementary amount of the DFc previously applied.

 

 

31

	 	11.1.2	 	Portion Pertaining to the Transportation

	 	 	 	In relation to the Gas transportation, the invoicing amount will be
determined by means of the application of the following formula:

     where:

	 	 	 	 	 
	 	FT

	-
	 	is the invoicing amount pertaining to the transportation
in each period of invoicing, to be paid by the
User on the maturity date as defined pursuant to
item 11.4;
	 
	 	 	 	 
	 	QT

	-
	 	is the Amount of Gas defined pursuant to item 9.8
	 
	 	 	 	 
	 	PT

	-
	 	is the amount of the portion pertaining to the
transportation of the Gas Price in force on the
Month of supply and converted into national
currency per Cubic Meter at the Reference
Conditions by the Exchange Rate of the last
business day of the Month of
supply.
	 
	 	 	 	 
	 	DFt

	-
	 	is the supplementary amount of the invoicing of the
transportation pertaining to the previous supply period,
calculated by means of the difference between (i) the
amount ascertained in accordance with the Exchange
Rate published on the business day previous to the
25th day of the Month of
supply and (ii) the amount invoiced in the previous
period being deducted therefrom the supplementary amount
of the DFt previously applied.

	 	11.1.3	 	Portion pertaining to the Distribution Margin
	 
	 	 	 	In relation to Comgás’ Distribution Margin, the invoicing amount shall be
as established hereinafter:

 where:

	 	 	 	 	 
	 	Fm

	-
	 	is the invoicing amount pertaining to the Distribution Margin in each Month of
invoicing, to be paid by the User on the maturity date as defined pursuant to item 11.4;
	 
	 	 	 	 
	 	QMi

	-
	 	is the Amount Measured on Day i, in m3.
	 
	 	 	 	 
	 	N

	-
	 	is the last Day of Gas supply in the Month or the considered supply
period
	 
	 	 	 	 
	 	Mg

	-
	 	is the Distribution Margin calculated as defined in items 8.1.2 and 8.1.2.1
	 
	 	 	 	 
	 	I

	-
	 	is each one of the Days of Gas supply in the Month or period of
invoicing considered

 

 

32

	 	11.1.4	 	Portion Pertaining to the Amount Not Taken 
	 
	 	 	 	In relation to the Amount Not Taken, the invoicing amount shall be
determined by the application of the formulas provided for in item 9.5.

	11.2	 	- Periodicity of Invoicing and other Collections.
	 
	 	 	Invoicing shall be made on a monthly basis, and each Month shall correspond to a
Gas supply period. The other Collection Documents shall be issued with
the same periodicity, without prejudice to the provisions of item 11.3.

	11.3	 	Submission of Bill of Sales and Collection Documents
	 
	 	 	Comgás shall submit to the User the bill of sales and the Collection
Documents up to the tenth (10th) day of the Month following the
Month to which they refer and up to the tenth (10th) day of the first
Month of the subsequent Year for the invoicing related to annual Take
or Pay. The failure by Comgás to submit the Collection Documents
within the established term shall result in the extension of the maturity date for a
period equivalent to the delay. 

	11.4	 	Collection Documents – Maturity Dates
	 
	 	 	The amounts of the Collection Documents shall be paid in the country legal currency,
by way of credit into the current account of Comgás (to be previously informed), up
to the twenty-fifth (25th) day of the month following the Month to which
they refer, or, if such is not a business day, on the first (1st ) subsequent
business day.

	 	11.4.1	 	In case of delay in the delivery of the Collection Document, the maturity date
shall be extended for a term identical to the number of days of delay, remaining
applicable, however, the original dates set forth in items 11.1.1 and 11.1.2 for the
determination of the Exchange Rate. 
	 
	 	11.4.2	 	The Collection Document(s) shall be issued by Comgás, in the name of:
	 
	 	 	 	Corn Products Brasil – Ingredientes Industriais Ltda 
	 
	 	 	 	Rua Paula Bueno, 2935
	 
	 	 	 	Mogi Guaçu – SP — CEP 13841-010
	 
	 	11.4.3	 	Comgás shall include into each invoice the calculation of any penalties due by
the User in accordance with Article Nine.

 

 

33

	11.5	 	Compensation of Fines Imposed by the User to Comgás
	 
	 	 	In the event Comgás has incurred in any fines properly notified and charged by way
of a Collection Document issued by the User, its amount, if acknowledged by
Comgás, may be used by the User to set-off its debt towards Comgás
in the Month of payment.

	 	11.5.1	 	In the event the total of fines referred to by item 11.5 is higher than the debt of the
User towards Comgás in any given Month, the difference in favor
of the User shall be credited by Comgás into a current account of the
User, to be timely informed, on the same maturity date of the invoice pertaining
to the Gas which has been supplied in the Month of occurrence of the
fact generating the fine.

	11.6	 	Late Payment Charges
	 
	 	 	The payments made in delay shall be updated by the accumulated variation of the IGP-M/FGV
(General Index of Market Prices, published by Fundação Getúlio Vargas) 3⁄4 or any other
index that may replace it — and added by interest of one percent (1%) per month, everything
on a pro rata tempore basis, considering the period between the effective payment date and
the maturity date, in addition to a fine of two percent (2%) on the updated principal amount.
If the IGP-M/FGV is extinguished and not officially replaced by any other index, the
Parties shall agree, within the term of fifteen (15) days, on a new index for the
same purpose.

	 	11.6.1	 	If within the term of fifteen (15) days the Parties fail to reach an agreement
on the index to be used in replacement of the IGP-M/FGV, the dispute shall be settled by
an Expert.

	11.7	 	Error in Collection Document.
	 
	 	 	In the event that an error is found in the amount of a Collection Document,
whether a shortfall or an excess, Comgás shall make the appropriate
correction for set-off in the next succeeding month. In case of an error in the amount of a
Collection Document, the User may notify Comgás within three (3)
days after the receipt of the Collection Document, requiring Comgás to
correct the error and reissue the Collection Document. If the Collection
Document is corrected in 3 days and delivered to the User within such term,
it shall be settled within the original term. If the corrected Collection Document
is delivered to the User after 3 days, it shall be settled by the
User within twenty (20) days as of the receipt of the corrected Collection
Document.

 

 

34

	11.8	 	Disputed Collections
	 
	 	 	In case any amount charged by one Party to the other in any Collection
Document is disputed, the following procedures shall be applied:

	 	a)	 	The disputing Party ( “Disputing Party”) shall give notice
of such dispute to the other Party (“Non-Disputing Party”) on or before the
due date of the Collection Document, describing in detail the disputed
amount, the reasons for its disagreement, the alternative adopted in relation to the
amount charged, in addition to any other elements it deems important in order to
settle the dispute;
	 
	 	b)	 	The Non-Disputing Party shall make the payment of the total amount
charged on a timely basis, informing the portion subject to potential refund.
	 
	 	c)	 	If the Non-Disputing Party agrees with the Disputing Party,
the Non-Disputing Party shall give notice to the Disputing Party of
its agreement and refund the latter, within the maximum term of fifteen (15) days, the
disputed amount, in case such amount was paid subject to potential refund.
	 
	 	d)	 	If the Non-Disputing Party does not agree with the Disputing
Party, then the Non-Disputing Party shall give notice to the
Disputing Party of its disagreement and the dispute shall be immediately
submitted to an Arbitration Tribunal, unless the Parties decide to
submit the dispute first to an Expert.

	 	11.8.1	 	If, at any time, a Party waives or reconsider its opinion with respect to a
dispute, such Party may, as the case may be:

	 	i.	 	refund to the other Party the amount paid subject to
potential refund, added by the charges provided for in item 11.8.1.2;
	 
	 	ii.	 	release any amount paid “subject to potential refund” from such
condition;
	 
	 	iii.	 	pay the costs and expenses incurred so far with the procedures of
Arbitration or Expert Proceeding.

	 	11.8.1.1	 	Said waiver or review shall be formally notified to the other Party and
to the president of the Arbitration Tribunal or Expert, and the
controversy shall be extinguished. 
	 
	 	11.8.1.2	 	The Party which, upon decision by the Arbitration Tribunal or
the Expert, shall be required to return the amount paid subject to the
potential refund, shall also pay to the other
Party the corresponding financial charges on the previously disputed amount, the total of
which shall be calculated in view of:

 

 

35

	 	 	 	

	 	i.	 	the time elapsed from the maturity of the debt – or
since its payment subject to potential refund;
	 
	 	ii.	 	the monthly charge corresponding to the variation of
the IGPM-FGV, plus one percent (1%) per month.

	11.9	 	Payment Guarantee
	 
	 	 	As guarantee to the fulfillment of all of its obligations provided for in the
Agreement, specially the payment obligations by the User of any amount
owed under this Agreement, the User shall deliver to Comgás a
Guarantee consisting in a bank letter of credit, in a form acceptable to
Comgás, issued by a financial institution acceptable to Comgás, in the
amount corresponding to 90 multiplied by the Daily Contracted Amount multiplied by
the Gas Sale Price. The guarantee shall be delivered by the User to
Comgás in the event of, in any Year, the sum of days in delay of payment
by the User is equal to more than 10 days or in the event there are more than 2
events of delay of payment by the User. The User shall deliver the
guarantee to Comgás within thirty (30) days counted as of the date on which the
obligation to deliver the guarantee had been constituted, in the terms provided above.

	 	11.9.1	 	The Guarantee shall be valid and effective in its full amount until the
full compliance with all obligations of the User provided in this
Agreement.

	 	11.9.1.1	 	In case the GUARANTY has a term of existence shorter than the date of full
compliance with all the USER’s payment obligations as set forth herein, the USER shall
renew the GUARANTY or deliver a new GUARANTY according to the AGREEMENT, up to thirty
(30) days before the end of its effectiveness. In case the USER does not renew the
GUARANTY or does not delivery a new GUARANTY to COMGÁS within the above stated term,
COMGÁS may enforce the existing GUARANTY to cover any amounts due by the user and/ or
suspend the supply of GAS to the USER until the GUARANTY has been renewed, or until a
new GUARANTY is delivered to COMGÁS.

 

 

36

	 	11.9.2	 	In case of change or adjustment in the Gas Sale Price, the User shall
(i) update the value of the Guarantee within the maximum term of thirty (30) days
counted as of the date on which the change or update had occurred and (ii) deliver the
updated version of the bank letter of credit to Comgás within such term.
	 
	 	11.9.3	 	In case the Guarantee granted by the User is used by
Comgás, in the terms set forth in item 17.1, the User shall renew the
Guarantee, in the value and terms established in item 11.9, within the maximum
term of thirty (30) days counted as of the date of its use.

ARTICLE TWELVE – MEASUREMENT

12.1 Except as otherwise provided in this Agreement, the
Parties agree to use the measurement units of the International Unit System — SI. 

12.2 The measurements of Gas delivered to the User shall be made in
the Measurement System integrating the CRM, as follows:

	 	i.	 	the volume unit shall be the Cubic Meter;
	 
	 	ii.	 	the local atmospheric pressure value (for Campinas and Region, Patm = 0.93
kgf/cm 2) shall be assumed as being constant during the effectiveness of the
Agreement, if such an amount is required for converting the volume into the
Base Conditions;
	 
	 	iii.	 	the calorific power shall be determined by calculation, based on ISO Rule
6976, as from the composition of the Gas determined by chromatography based
on ISO Rule 6974;
	 
	 	iv.	 	the measured volumes shall be expressed at the Base Conditions.

	 	12.2.1	 	The measurement signal, if any, shall be made available by Comgás if requested
by the User.

	12.3	 	- The measurement of the total volume of Gas supplied to the User shall be
made by the instruments of the Measurement System installed at CRM at the
Delivery Point. Comgás shall be responsible for the operation, maintenance,
calibration and adjustments of the Measurement System installed at CRM.
	 
	12.4	 	- The ascertainment of the total volume of Gas supplied to the User shall be made by the
Comgás, by applying the following procedures, depending on the type of Measurement System that
is installed at CRM:

 

 

37

	 	i.	 	orifice meter: procedures described in API-MPMS 14.3 (“Natural Gas Fluids
Measurement — Concentric, Square-Edged Orifice Meters”);
	 
	 	ii.	 	turbine meter: procedures described in INMETRO Ordinance No. 114, of 1997, or
in ABNT ISO Rule 9951;
	 
	 	iii.	 	ultra-sonic meter: procedures described in AGA Report No. 9 (“Measurement of
Gas by Multipath Ultrasonic Meters”);
	 
	 	iv.	 	other meter: as agreed in advance by the Parties.

	 	12.4.1	 	For the Measurement Systems indicated in item 12.4, the compressibility factor
shall be calculated pursuant to ISO 12 213 (“Compressibility Factors of Natural Gas and
Other Related Hydrocarbon Gases”). 

	12.5	 	- The calibration and adjustments of CRM shall always be made by Comgás,
Notice given to the User no less than five (5) days  in advance, so
as to allow the User, if it so wishes, to send a representative in order to
follow up the works.

	 	12.5.1 	The User shall always provide access to Comgás or any third
parties accompanied by Comgás to CRM.

	12.6	 	The period between two calibrations and successive ordinary adjustments of the CRM’s
Measurement System, as of the Commercial Supply Start-up, shall be of 1
year. The other calibration procedures are to be agreed upon between the
Parties.
	 
	12.7	 	The User may, upon delivery of a Notice to Comgás, request an
extra calibration of any instrument integrating the CRM’s Measurement System, on
which case the corresponding costs shall be fully borne by the User, if the
instrument is considered adjusted, or by Comgás, if the instrument is considered out
of adjustment. Comgás undertakes to make the calibration within the lowest possible
term. The instruments of the CRM’s Measurement System that, after the calibration,
present measurement errors not greater than the value of one point five percent (1.5%), either
upwards or downwards, as a reference, shall be considered adjusted.
	 
	12.8	 	In case, after the calibration of the CRM’s Measurement System, such calibration
indicates that the Measurement System was not adjusted, i.e., it is evidenced that
the Measurement System had a deviation in the measured amount greater than 1.5%,
either upwards or downwards, the respective correction factor shall be technically determined
by Comgás; and the User shall be allowed to follow up the works.

	 	12.8.1	 	No correction shall be applicable in the cases in which the measurement error of any
given component of the CRM’s Measurement System is lower than those stated in
item 12.7 above.

 

 

38

	 	12.8.2	 	Once the period in which the CRM’s Measurement System had presented measurement
errors above the ones permitted is perfectly defined, corrections of value equal to the
deviation verified shall be applied, either upwards or downwards, on the amounts actually
registered in that period by the Measurement Systems.
	 
	 	12.8.3	 	If the period in which the CRM’s Measurement System was out of calibration is
unknown, the corrections referred to in item 12.8.2 shall be applied on the amounts
actually recorded by the Measurement Systems in the past forty-five (45) Days
of consumption or in the last half of the period of time between the two latest
calibrations of the Measurement System, whichever is the lower period of time.

	12.9	 	If, on any given day, there is a dispute as regards the Amounts of Gas made
available at the CRM or failure in the CRM, including removal of any of its
components for maintenance, without interruption in the supply of Gas — the daily
volume of Gas supplied in relation to such Day shall be determined
as follows, in order of preference:

	 	a)	 	in the measurement systems of gas of the Cogeneration Plant in the period,
if any, provided that access by Comgás and any third parties accompanied by
Comgás to the measurement instruments installed at the Cogeneration
Plant, as well as to the information referring to their calibration, is allowed.
For purposes of using such resource, Comgás shall previously inspect and
approve, based on the metrological legislation in effect and the technical rules
applicable, the use of such measurement instruments for that purpose.
	 
	 	b)	 	based on the measurements made in any other Comgás’ Measurement
Systems — by difference, if, as from the difference, it is possible to calculate,
on a safety way, said volume of Gas taken by the User;
	 
	 	c)	 	indirectly calculated, if possible, based on the electric energy and steam
generated at the Cogeneration Plant in the period, provided that access by
Comgás and any third parties accompanied by Comgás to the meters
installed at the Cogeneration Plant, as well to the information pertaining to
their calibration, is allowed;
	 
	 	d)	 	in an amount equal to the average of the Daily Taken Amounts
(DTA’s) of the last ninety (90) Days on which there was effective
supply — subject to later adjustments, upon agreement between the Parties.

	12.10	 	All the other matters or disputes pertaining to this Article, whose determinations in
relation to their settlement have not been differently stated in the previous items, shall be
submitted to Expert Proceeding — with sharing in equal portions between both
Parties of the corresponding expenses and costs of such procedure.

 

 

39

ARTICLE THIRTEEN — EFFECTIVENESS AND EXTENSION

	13.1	 	- This Agreement shall be valid on its execution date and its end shall occur on
03/31/2023, which may be extended, by means of agreement by the Parties, in writing,
provided that such agreement is formalized with twenty four (24) months in advance to the term
initially agreed for its end.

	 	13.1.1	 	In the end, pursuant to the provisions of item 13.1, an additional maximum period of
three hundred and sixty five (365) days shall be added for purposes of recovery by the
User of its eventual remaining balance of the Amounts Paid and Not
Taken, being effective, in this period, all the provisions of the Agreement
related to and necessary for the recovery of such Amounts of Gas.
Exclusively during the additional period referred to in this item and for the sole
purpose of recovery of APNTs, the User shall be released from its Take or
Pay commitment, remaining effective, however, the Ship or Pay and
Distribution Take or Pay commitments.

	 	 	 	 	 
	ARTICLE FOURTEEN - FORTUITOUS CASE OR FORCE MAJEURE

	14.1	 	Generic Concept
	 
	 	 	Any event or circumstance which combines the following requirements shall be
considered an Fortuitous Case or Force Majeure      , with strict observance
of the provision pertaining to force majeure contained in Article 393 and its sole
paragraph of the Brazilian Civil Code:

	 	i.	 	its occurrence takes place and continues beyond the control of the
Affected Party;
	 
	 	ii.	 	the Affected Party has not contributed, directly or indirectly, for
its occurrence, which includes the fact that it does not arise from (i) default of any
of the obligations of the Affected Party under the terms of this
Agreement; (ii) failure by the Affected Party to comply with the
Law;or  (iii) negligence, error or omission of the Affected Party;
	 
	 	iii.	 	the action taken by the Affected Party’s, albeit diligent
and timely, is not sufficient to prevent or mitigate the effects of its occurrence;
and
	 
	 	iv.	 	its occurrence has the effect of affecting or preventing performance by the
Affected Party of its obligations provided for in this Agreement.

	14.2	 	Effects on the Agreement
	 
	 	 	Except as provided in item 14.3, upon the occurrence of an Fortuitous Case or Force
Majeure, the Affected Party shall be relieved from performing its
obligations hereunder,
as well as it shall be exempted from any liability resulting from delays or failure to perform its obligations where directly
attributable to such Fortuitous Case or Force Majeure.

 

 

40

	14.3	 	Obligations Not Excluded
	 
	 	 	No Fortuitous Case or Force Majeure shall relieve the Affected Party
from performing any of its obligations arising or accruing prior to the occurrence
thereof, event though any such obligation may become due during or following the
Fortuitous Case or Force Majeure, especially the obligations to pay sums of money
contained herein. 
	 
	14.4	 	Procedures in Occurrences of Fortuitous Case or Force Majeure

	 	14.4.1	 	The Affected Party wishing to claim the occurrence of an Fortuitous Case or
Force Majeure for the purposes of item 14.2 above shall take the following steps:

	 	a)	 	notify the other Party of the occurrence of the event or
condition constituting Fortuitous Case or Force Majeure — as soon as
possible, but in no event later than four (4) days from the date on which the
Affected Party became aware of the occurrence of such event of condition,
indicating its estimated duration and its likely impact on the performance of its
obligations;
	 
	 	b)	 	take the necessary actions to correct or mitigate the consequences of
such event, in order to resume its contractual obligations as soon as possible;
	 
	 	c)	 	regularly inform the other Party about its actions and
planned actions with respect to item (b) above;
	 
	 	d)	 	promptly notify the other Party of the cessation of the
event and its consequences;
	 
	 	e)	 	grant to the other Party, whenever possible, access to any
facility affected by the event, for the purpose of local inspection, which may be
conducted at the expense and risk of such other Party;
	 
	 	f)	 	substantiate all facts and actions with documentation or available
records;
	 
	 	g)	 	exercise its rights in good faith and with due regard for the
interests of the other Party with respect to the performance of all
contractual obligations affected by the occurrence of such Fortuitous Case or
Force Majeure.

 

 

41

	 	14.4.2	 	In connection with item 14.4.1(b) above, the Affected Party shall not
be required, in the case of labor disputes, to act differently from what it may deem
appropriate in its sole judgment, to the extent that it acts in a manner consistent with
pas practices adopted in similar situations.
	 
	 	14.4.3	 	In the event of dispute as to the characterization of the fact as an Fortuitous Case
or Force Majeure, the Parties shall submit the dispute to
Arbitration, which shall decide based on the provisions of the applicable article
of this Agreement. Until the dispute is decided by the Arbitration
Tribunal, all obligations and rights of the Parties provided for in the
Agreement shall remain valid and applicable. 

	14.5	 	Scope
	 
	 	 	Without limiting the generality of the concept of force majeure contained in Article 393
and its sole paragraph of the Brazilian Civil Code, an Fortuitous Case or Force Majeure
may include the following events, listed by way of illustration only:

	 	i.	 	acts of terrorism or public attacks, war whether declared or not, threatened
war, guerrilla, insurrection, civil commotion, revolution, riot, rebellion, military
insurrection, coup d’état, siege, declaration of state of emergency or martial law,
embargo or blockade or other situations not falling within the exceptions referred to
item 14.6;
	 
	 	ii.	 	acts of sabotage, terrorism, vandalism or accidental destruction, even if
partially, of facilities of the Affected Party, as long as it has
not contributed to such occurrence;
	 
	 	iii.	 	cataclysms, lightning, earthquakes, tornadoes, storms that result in the
evacuation of the affected areas, floods, explosions and exceptional and unpredictable
weather events;
	 
	 	iv.	 	Change in Law (except for the extinction of the tax
benefits provided for in the Priority Program of Thermoelectricity) that
materially adversely affects the object of the Agreement, the
Supplier-Comgás Agreement or the Party claiming the occurrence of
Fortuitous Case or Force Majeure;
	 
	 	v.	 	expropriation, seizure, compulsory acquisition or nationalization by any
Public Body of all or a substantially all assets of the Affected
Party required for the performance of such Party’s obligations under
this Agreement.

 

 

42

	14.6	 	Excluded Events
	 
	 	 	The following events shall be excluded from the scope of an Fortuitous Case or Force
Majeure:

	 	i.	 	strike or any other disturbance of similar nature involving solely the
employees, agents, contractors or subcontractors of the Affected
Party;
	 
	 	ii.	 	change in the economic and financial situation of the Affected
Party, as well as changes in the market conditions for delivery of
Gas, whether or not arising by virtue of a drop in the demand for electric
energy generated by the Cogeneration Plant;
	 
	 	iii.	 	any accidental loss, damage or failure in any part of the industry plant,
facilities, machinery or equipment of the Affected Party or the
Cogeneration Plant, or any event related to their businesses, except if
resulting directly from the occurrence of an Fortuitous Case or Force Majeure;
and
	 
	 	iv.	 	delay in the performance of obligations undertaken by contractors or
subcontractors of the Affected Party which affects the performance
of any obligations undertaken by the Affected Party under this
Agreement, except where there is evidence that such delay on the part of the
contractors or subcontractors has resulted directly from the occurrence of an
Fortuitous Case or Force Majeure.

	14.7	 	Fortuitous Case or Force Majeure Incorporated by Reference
	 
	 	 	For all purposes of this Article, and to the extent that the requirements indicated in this
Article Fourteen are evidenced and met, there shall be also considered:

	 	(a)	 	Fortuitous Case or Force Majeure of Comgás:
Fortuitous Case or Force Majeure that affects: (i) the ability of the Carrier
and/or the Supplier to perform their respective obligations provided for
in the agreements executed with the Supplier that are required for the
performance of the Supplier-Comgás Agreement by the Supplier or (ii)
the Supplier’s ability to perform its respective obligations provided for in
the Supplier-Comgás Agreement; and
	 
	 	(b)	 	Fortuitous Case or Force Majeure of the
User: Fortuitous Case or Force Majeure that affects the ability
of the User to receive the Gas in view of damages at the
Cogeneration Plant.

 

 

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ARTICLE FIFTEEN- ASSIGNMENT AND ENCUMBRANCE OF RIGHTS AND OBLIGATIONS

	15.1	 	This Agreement, as well as the rights and obligations arising hereof, may not be
assigned, totally or partially, expect with the written agreement of the other Party,
which may not be unreasonably denied by the non-assigning Party, provided that the
requirements of item 15.1.1 are fulfilled.

	 	15.1.1	 	For the agreement referred to in item 15.1, it is an essential requirement that the
proposed assignee fulfill the conditions of technical guarantee and satisfactory economic
solvency to assume, in whole or in part, the obligations arising from the assignment.
Without such requirements, the other party would incur in a commercial risk substantially
greater than the one assumed. The non-assigning party shall be incumbent upon determining,
at its sole criteria, if the assignee fulfill the necessary conditions to the
implementation of the proposed assignment, provided that, in case the non-assigning party
disagrees with the assignment, it shall be incumbent upon evidencing the lack or
insufficiency of the conditions presented against the proposed assignee.

	 	15.1.1.1	 	Without prejudice to the provisions above and, if demanded, the User
shall obtain previously to the assignment of the Agreement, all and any
authorizations of the competent public bodies necessary for such assignment,
including authorization of the competent public body linked to the Priority
Program of Thermoelectricity.

	 	15.1.2	 	In case of an authorized assignment according to this Article, the assigning party shall
actually transfer to the assignee, in whole or in part, the rights and obligations
established in the Agreement.
	 
	 	15.1.3	 	Provided that the requirements established in this Articles are fulfilled, the
Parties agree to formalize any and all agreement and other documents necessary
for the assignment, as requested, as well to give reasonable mutual assistance in the
formalization of any assignment.

	15.2	 	In addition to the fulfillment of the terms of the legislation in force and of the provisions
of this Article, the Party that whishes to transfer its rights and/or obligations
under this Agreement shall express its intention by means of delivery of
Notice to the other Party.

	 	15.2.1	 	Within ninety (90) days following the date of receipt of the Notice referred to
in item 15.2, the non-assigning Party shall give its authorization or justify its
refusal.

 

 

44

	 	15.2.1.1	 	The lack of formal unfavorable manifestation within the term set forth in item
15.2.1 shall be considered as full agreement with the assignment by the omitting
Party.
	 
	 	15.2.1.2	 	In case of a refusal by the non-assigning Party that is considered
ungrounded by the assigning Party, the subject shall be submitted to a
decision of the Arbitration Tribunal.

	15.3	 	This Agreement, as well as the rights and obligations arising hereof, may not be
pledged or in any other way encumbered by any of the Parties, except with the written
prior agreement of the other Party

ARTICLE SIXTEEN – NOVATION AND FORBEARANCE

	16.1	 	The provisions set forth in this Agreement are limited to the supply of
Gas as contemplated herein, and shall not be deemed to constitute novation of any
arrangement, covenant or agreement of a similar nature already existing between the
Parties, which shall remain unchanged, except for the Short-Term Agreement.
	 
	16.2	 	Any and all forbearance with respect to the observance by the Parties of the
terms and conditions set forth in this Agreement shall not operate as change or
novation of the provisions agreed upon.
	 
	16.3	 	Comgás and the User decide to ratify the end of the term of the
Short-Term Agreement in view of the execution of this Agreement, considering
that the Short-Term Agreement set forth that its final term would occur on January
20, 2006 or on the execution date of this Agreement, whichever occurs first.

ARTICLE SEVENTEEN — DEFAULT AND TERMINATION

A) Default

	17.1	 	Default by the User
	 
	 	 	Subject to the provisions of subitem 17.1.1, if the User, at any time, fails
to (i) pay, in whole or in part, until its maturity date, the amount corresponding to any
Collection Document submitted to the User by Comgás in view of
this Agreement or, (ii) for disputed amounts, failed to proceed in accordance with
the provisions of item 11.8, (iii) establish, update, reestablish and/or renew the
Guarantee, according to the provisions and terms contained in item 11.9 and its
subitems, then, the default by the User shall be deemed to have occurred
on the maturity date of the respective Collection Document. After
ten (10) days counted as of the date of the default by the User, Comgás may, at
any time from such moment on, at its sole criteria, foreclose the Guarantee in the
amount corresponding to the

 

 

45

	 	 	totality of the amount in delay on the date of foreclosure of the referred
Guarantee. After thirty (30) days counted as of the date of default by the
User, Comgás may suspend the delivery of Gas to the
User, subject to the provisions of item 17.1.5 below, until the amount not paid,
added by the corresponding financial charges (as provided for in item 11.6) is:

	 	i.	 	paid to Comgás on a final basis or
	 
	 	ii.	 	paid to Comgás subject to potential refund.

	 	17.1.1	 	It shall not be considered a default by the User the non-payment of any
Collection Document issued by Comgás on the allegation of noncompliance
with a commitment of Take or Pay, Ship or Pay and Distribution Take
or Pay and/or a commitment of Article Ten, of which the User is released in
the corresponding period in accordance with items 17.2 (final part), 17.2.1 and 17.2.2.
	 
	 	17.1.2	 	The suspension of the supply of Gas as provided for in item 17.1 shall not
release the User from any other obligation in relation to this Agreement
and may not be invoked by the User as a reason for the termination hereof and not
even for the suspension of the commitments of Take or Pay, Ship or Pay or Distribution
Take or Pay and the commitments of Article Ten. 
	 
	 	17.1.3	 	Any possible forbearance by Comgás in the term to start the suspension of
delivery of Gas referred to in item 17.1 shall not be deemed a waiver of right,
and such suspension may start at any time following that term, while said default
persists.
	 
	 	17.1.4	 	The suspension shall not be applicable to the Amounts Paid and Not Taken
(APNT) of Gas, which will continue being reintegrated in accordance
with the rules of item 9.5.3 and their subitems.
	 
	 	17.1.5	 	The decision of suspending the supply of Gas in accordance with this item shall
be informed to the User within ten (10) days in advance.

	17.2	 	Default by Comgás
	 
	 	 	Exception made to the events provided for in subitem 17.2.1, if Comgás any time
fails to: (i) pay, in whole or in part, until its maturity date, the amount corresponding
to any Collection Document submitted to Comgás by the User in
view of this Agreement or, (ii) for disputed amounts, proceed in accordance with
the provisions of item 11.8, then, the default by the User shall be deemed to have
occurred on the maturity date of the respective Collection Document. After thirty
(30) days counted as of the date of default by Comgás, the User’s
Take or Pay, Ship or Pay and

 

 

46

	 	 	Distribution Take or Pay commitments and the commitments established in
Article Ten shall be suspended until the amount not paid – added by the corresponding
financial charges (as provided for in item 11.6) — is:

	 	i.	 	paid to the User on a final basis or
	 
	 	ii.	 	paid to the User subject to potential refund.

	 	17.2.1	 	It shall not be considered a default by Comgás the non-payment of any
Collection Document issued by the User directly or indirectly
as a result of the suspension of the supply of Gas caused by a default of the
User as provided for in item 17.1 and its applicable subitems.
	 
	 	17.2.2	 	The suspension of the commitments of Take or Pay, Ship or Pay and
Distribution Take or Pay and those provided for in Article Ten, in
accordance with item 17.2 and/or subitem 17.2.1, does not release Comgás from any
obligation pertaining to this Agreement and may not be invoked by Comgás
as a reason for its termination.

	B)	 	Termination 
	 
	17.3	 	Termination for the User’s default
	 
	 	 	After thirty (30) days have elapsed from any default by the User referred to by
item 17.1 which has not been fully cured, Comgás may unilaterally terminate this
Agreement, by sending a Notice to that effect to the User.

	 	17.3.1	 	In the event of termination of the Agreement in accordance with item 17.3
3⁄4 the occurrence of default is evidenced, according to the Agreement, in
order to give cause to said termination 3⁄4, the User:

	 	i.	 	shall be obliged to pay to Comgás, as the sole indemnification
applicable in such case, the amount of losses and direct damages incurred by
Comgás, excluding any indirect damages and/or loss of profits, resulting
from such termination for default, and the Parties agree and determine
that the amounts of the losses and direct damages incurred by Comgás will
include the amount of the indemnification payable by Comgás to the
Supplier for termination of the Supplier-Comgás Agreement in
view of the termination of this Agreement; the total amount of
such payments shall be limited to the current amount of the remainder of the
Agreement calculated only based on the Gas Price -
according to the regular remaining effectiveness term or one hundred and twenty
(120) months, whichever is shorter, at the discount rate agreed by the
Parties or defined in Arbitration in case the Parties
fail to reach an agreement on such rate, on a pro rata die basis;

 

 

47

	 	ii.	 	shall be responsible to pay all its pending debt toward
Comgás under this Agreement.

	 	17.3.1.1	 	The Parties agree that the indemnification set forth in item 17.3.1 (i)
represents the totality of indemnification that may be demanded by Comgás,
even if it sustain greater losses, and nothing else shall be claimed in court or
out-of-court.

17.4 Termination for default by Comgás

The User may unilaterally terminate this Agreement, by sending a
Notice to Comgás, in any one of the following situations:

	 	i.	 	After thirty (30) days have elapsed from any default by Comgás referred to
in item 17.2 which has not been fully cured;
	 
	 	ii.	 	exception made to Fortuitous Case or Force Majeure, if
Comgás, without prejudice to the obligations provided for in item 9.9, fails to
comply with its obligation of providing the User with the Gas
subject of this Agreement for a term greater than sixty (60) consecutive
Days or ninety (90) alternate Days in each twelve
(12)-Month period.

	 	17.4.1	 	In the event of termination of the Agreement in accordance with item 17.4
 — the occurrence of default is evidenced, according to the Agreement, in order to
give cause to said termination3⁄4, Comgás:

	 	i.	 	shall be obliged to pay to the User, as the sole indemnification
applicable in such case, the amounts of losses and direct damages incurred by the
User, — excluding any indirect damages and/or loss of profits-, resulting
from such termination for default; the total amount of such payments shall be
limited to the current amount of the remainder of the Agreement
calculated only based on the Gas Price according to the regular remaining
effectiveness term or one hundred and twenty (120) months, whichever is shorter,
at the discount rate agreed by the Parties or defined in
Arbitration in case the Parties fail to reach an agreement on
such rate, on a pro rata die basis;
	 
	 	ii.	 	shall remain responsible to pay all its pending debt towards the
User under this Agreement, as well as the amount corresponding
to any possible residual amount of Amount Paid and Not Taken (APNT) of
Gas, multiplied by the amount of the portion pertaining to the commodity
in the Gas Price (PC) in effect on the day of termination multiplied by
the latest Exchange Rate published before the original maturity of the
respective Collection Document provided for in item 11.4.

	 	17.4.1.1	 	The Parties agree that the indemnification set forth in item 17.4.1 (i)
represents the totality of indemnification that may be demanded against
Comgás, even if the User sustain greater losses, and nothing else
shall be claimed in court or out of court.

 

 

48

17.5 Other Events of Termination

In addition to the events provided for in items 17.3 and 17.4, this Agreement may
be terminated by either Party, by sending a Notice in writing to the
other Party, in the events below:

	 	a)	 	with no liability whatsoever of any Party
towards the other
Party:

	 	(i)	 	upon mutual agreement between the Parties; or
	 
	 	(ii)	 	by the impossibility of consumption or supply of Gas
under this Agreement or under the Supplier-Comgás Agreement
as a result of an Fortuitous Case or Force Majeure 
lasting for a continued period longer than twelve (12) months;

	 	b)	 	with liability of the
Party that causes the
termination:

	 	i.	 	unilateral termination with no fault of the other
Party;
	 
	 	ii.	 	transfer, partially or totally, to any third parties of the rights
and obligations arising of this Agreement, in violation of the provisions
of Article Fifteen;
	 
	 	iii.	 	in view of a relevant violation of any contractual provision that,
under the terms of this Agreement, is not subject to payment by means of a
Collection Document and which has not been cured within the term of ninety (90)
days counted as of the receipt of Notice by the defaulting Party;
	 
	 	iv	 	in the event of termination of the Supplier-Comgás Agreement
for any reason (except for the reason provided for in item (a) (ii) above),
including, but not limited to, for default of either party in such agreement or by
unilateral termination by any of the parties. In this case, the liability for the
termination of this Agreement will be attributed to Comgás; or
	 
	 	v.	 	application for bankruptcy by any of the Parties, if any of the
Parties is decreed bankrupt, application for court or out of court reorganization
by any of the Parties, if said applications are not abandoned, denied or lose
their efficacy, as applicable, within the time set forth in the law or within 60
(sixty) days after they are started, whichever occurs first; or
	 
	 	vi.	 	loss of the applicable licenses by any of the Parties.
	 
	 	To these events, analogously and as applicable, the provisions of items 17.3.1,
17.3.1.1, 17.4.1. and 17.4.1.1 shall apply.

 

 

49

17.6 Default in Other Agreements

The default by either Party in any other agreements will not
be considered as default of this Agreement nor will cause
its termination, the application of penalties of any kind or the
suspension of any obligations provided for herein.

	17.7	 	The User agrees and acknowledges that it is exclusively responsible for the business
relationship with EnergyWorks do Brasil Ltda. or any successor or assigning party thereto,
including for the gas supply and the gas quality. Comgás may only be held liable for
any default in this Agreement exclusively before the User and subject to the
limits of liability provided for herein. The User shall hold Comgás harmless
from any actions or claims filed by third parties, including, without limitation, by
EnergyWorks do Brasil Ltda., grounded on the supply of Gas subject of this
Agreement or of any sub-products resulting from the supply of Gas subject of
this Agreement. The User also undertakes to compensate Comgás if
it may be bound to pay any indemnification to any third parties, including to EnergyWorks do
Brasil Ltda., as a result of such actions or claims. The amounts to be compensated by the
User to Comgás shall include all the indemnification possibly paid by
Comgás, as well as all the costs incurred by Comgás, including attorney’s
fees.

ARTICLE EIGHTEEN — NOTICES

	18.1	 	For all legal purposes arising of the Agreement, the Parties indicate
below their respective domiciles, the only places where all Notices to be made in
relation to the Agreement will be valid:

	 	i.	 	Companhia de gás de são paulo – Comgás

Rua das Olimpíadas, 205 – 10° andar

São Paulo — SP

CEP – 04551-000
	 
	 	ii.	 	Corn Products Brasil – Ingredientes Industriais Ltda 

Rua Paula Bueno, 2935

Mogi Guaçu — SP 

CEP 13841-010

	18.2	 	Any of the Parties will be entitled to change its domicile upon Notice
sent to the other party with fifteen (15) days in advance of such change.
	 
	18.3	 	Any Notice required or allowed, under the terms of this Agreement, will be
considered as received upon its delivery by facsimile transmission or by means of e-mail, in
both circumstances, provided that it is confirmed by means of registered sending or, in case
of personal delivery, at the time of its receipt.

 

 

50

ARTICLE NINETEEN — DISPUTE RESOLUTION

	 	19.1	 	Disputes

	 	19.1.1	 	In the event of any disputes relating to the interpretation or performance of this
Agreement, prior to taking any other measure the Parties shall seek a
solution by consensus. To this end, either Party shall send Notice to
the other for the Parties to meet in order to pursue such solution by consensus
within no more than 30 days after receipt of Notice, which period may be extended
only by agreement between the Parties. Within such period, the Parties
shall also agree whether the dispute involves a technical issue that should be submitted
to an Expert Proceeding. If the Parties so agree or if it is expressly
set forth in the Agreement that the dispute must be submit to an Expert
Proceeding, prompt action shall be taken for designation of an Expert
pursuant to item 19.3.2.
	 
	 	19.1.2	 	If a consensus solution is not reached during the period specified in subsection 19.1.1
above or if the Parties come to a consensus that the dispute does not involve a
technical issue requiring submission to an Expert Proceeding, then the dispute in
question shall be resolved by an Arbitration Tribunal, which shall apply in the
resolution of the dispute the substantive laws of Brazil (“Arbitration”).

19.2 Arbitration

	 	19.2.1	 	An Arbitration shall be governed, in all its procedural aspects, by the
UNCITRAL Arbitration Rules and shall take place in the City of São Paulo. The
administration of the Arbitration shall be conducted by the Brazil-Canadá
Commerce Chamber (BCCC). Arbitration shall necessarily be based on law, and
judgment based on equity or on the general principles of law or on custom and usage shall
be prohibited. In the case of a conflict between the UNCITRAL Rules and the rules
contained in this Agreement, the latter shall prevail.
	 
	 	19.2.2	 	The language utilized in the Arbitration and the decision handed down in
connection therewith shall be the Portuguese language.
	 
	 	19.2.3	 	The Arbitration Tribunal shall be composed of three (3) members who (i) shall
have at least ten (10) years of experience in matters relating to the subject matter of
the Arbitration, and (ii) shall have no conflict of interest with the subject
matter of the Arbitration, provided further that the Parties shall
observe the following provisions:

	 	i.	 	the Party asserting the dispute (First
Party) shall send Notice to the other Party
(Second Party), clearly stating the object of the dispute and
informing the name of the Arbitrator selected by it (First
Arbitrator);

 

 

51

	 	ii.	 	within thirty (30) days from receipt of the Notice mentioned
above, the Second Party shall inform to the First
Party, also by Notice, the name of the Arbitrator
selected by it (Second Arbitrator). If the Second
Party fails to act within said time limit, the First
Party may request that the President of the BCCC appoint the
Second Arbitrator;
	 
	 	iii	 	within fourteen (14) days from the appointment of the Second
Arbitrator, both Arbitrators shall appoint a Third
Arbitrator, who shall preside over the proceedings; and
	 
	 	iv.	 	if there is no consensus as to the appointment of the Third
Arbitrator, such appointment shall be made by the President of the BCCC.
The Third Arbitrator shall be proficient in the Portuguese
language.

	 	19.2.4	 	In the event that the UNCITRAL Rules are silent as to any procedural aspects, such
omissions shall be resolved by the arbitrators by reference, in the following
order, to:

	 	a)	 	to Law No. 9.307/96; and
	 
	 	b)	 	to the Brazilian Code of Civil Procedure.

	 	19.2.5	 	Within ninety (90) Days from commencement of Arbitration, the
Arbitrators shall issue a well-reasoned award (Arbitration Award).
	 
	 	19.2.6	 	The Arbitration Award shall indicate and describe in detail the
liabilities of the Parties, as well as the portion of legal fees and expenses and
Arbitration costs awarded to each Party. The Arbitration
Award shall be in writing and shall be binding on the Parties, which
specifically waive any judicial review thereof.
	 
	 	19.2.7	 	The Parties reserve the right to bring legal actions in the Brazilian courts to
(a) ensure institution of Arbitration, (b) seek temporary injunctive relief for
the protection of their rights prior to institution of Arbitration, provided that
any such action shall not be deemed a waiver of Arbitration as the sole method
for resolution of conflicts between the Parties and (c) enforce any decision
issued by the Arbitration Tribunal, including without limitation the
Arbitration Award. In any such event the courts mentioned in item 19.5
shall be the courts of competent jurisdiction.

19.3  Expert Proceeding

 

 

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	 	19.3.1	 	Once the Parties have agreed that a dispute is to be submitted to an Expert
Proceeding under item 19.1.1 above or there is an express contractual provision
establishing that a dispute must be submitted to an Expert Proceeding, the
provisions listed in items 19.3.2 through 19.3.7.2 shall apply to such Expert
Proceeding. 
	 
	 	19.3.2	 	Appointment of the Expert

The procedures for appointment of an Expert are as follows:

	 	(a)	 	a Party wishing to submit a dispute to an Expert
shall give Notice of such intent to the other Party, stating in
detail the reasons for the dispute;
	 
	 	(b)	 	by mutual agreement, the Parties shall within twenty-one
(21) days from delivery of the Notice referred to in the preceding item
appoint the Expert that shall be responsible for reviewing the matters
under dispute;
	 
	 	(c)	 	if within the term specified in the preceding item the
Parties are unable to reach a consensus as to the Expert to be
appointed, then the Party asserting the dispute shall, within five (5)
days, request in writing that the President of the Institute of Technological
Research (IPT) appoint an Expert. Such appointment shall be made within
thirty (30) days from receipt of written request therefor;
	 
	 	(d)	 	either Party may object one time to the Expert
appointed by the President of IPT. In the case of such an objection, the
procedure described in letter (c) of item 19.3.2 above shall be repeated. After
each Party has exercised its right to object as aforesaid, the procedure
described in letter (c) of item 19.3.2 above shall be repeated once again and the
Expert appointed in this manner shall necessarily be accepted by the
Parties.
	 
	 	(e)	 	the terms of the instrument of appointment of the Expert
shall be agreed between the Expert and the Parties and shall be
set forth in a writing to be executed by the Expert and the
Parties, provided further that the Expert and the
Parties shall cooperate in order to have such document finalized as soon
as reasonably possible;
	 
	 	(f)	 	in the event of impediment, refusal or absence of response for a
period of fourteen (14) days, a procedure for appointment of another
Expert, should this be the wish of the Parties:

 

 

53

	 	(i)	 	shall resume at the phase where the last name was
selected;
	 
	 	(ii)	 	shall be repeated accordingly until an Expert
that accepts and is able to assume his/her functions is appointed or until
the Parties decide to discontinue the procedure for appointment or
the submission of the dispute to an Expert;

	 	(g)	 	if there is a dispute between the Parties over the fees to
be paid to the Expert, such fees shall be determined by the President of
IPT, and the Parties shall necessarily abide by such determination and,
except as otherwise specifically provided for herein or in a separate agreement
for such purpose, the corresponding costs shall be borne equally by both
Parties;
	 
	 	(h)	 	if new facts arise or are disclosed that may cast a doubt on the
impartiality or qualification of the Expert with respect to the dispute,
including his/her omission regarding the provision of item 19.3.3, or if any
Party finds that there is a material risk of conflict of interests that
may influence the decision of the Expert, then either Party may
within seven (7) days from the date on which it became aware of such fact,
disclosure or omission, request that the President of IPT make a decision as to
the removal of the Expert or not;
	 
	 	(i)	 	in his/her decision the President of IPT shall take into account any
conditions which the requesting Party may wish to impose;
	 
	 	(j)	 	if the President of IPT decides to remove the Expert, he/she
shall appoint a replacement. In such case the procedures specified in letters (d)
to (f) above shall also be applicable with respect to the confirmation and
appointment of the new Expert.

19.3.3 Qualifications of the Expert

The person to be appointed as the Expert:

	 	(i)	 	shall be qualified through technical education, experience and
training to issue an opinion regarding the dispute;
	 
	 	(ii)	 	shall not have a conflict of interests, before or after accepting the
appointment; and
	 
	 	(iii)	 	shall not, at the time of appointment and during his activities as
the Expert with regard to such dispute, hold a position as officer, head
of department, employee, services provider, directly or through a third party, or
consultant of either Party or an Affiliate Company thereof, nor shall he/she have held or will held any such
position during the three (3) years preceding or following his/her appointment
as Expert.

 

 

54

	 	19.3.4	 	Confidentiality

All information, data or documents submitted to the Expert by either
Party shall be deemed confidential and shall not be disclosed by the
Expert to any person whatsoever, except to his employees or professional
consultants, provided, however, that such disclosure shall always be subject to the
provisions of item 19.3.4.1.

	 	19.3.4.1	 	The employees or professional consultants of the Expert shall prior
to receiving any information, data or documents referred to in item 19.3.4 above
specifically undertake in writing with the Expert to maintain them on a
strictly confidential basis.

	 	19.3.5	 	Obligations and Prerogatives of the Expert

The obligations of the Expert shall be set forth in the instrument of his
appointment, among which the following shall necessarily be included:

	 	(i)	 	impartially decide the dispute, based solely upon the facts and data furnished
by the PARTIES;
	 
	 	(ii)	 	decide the dispute within the time limit assigned therefor, which
shall not exceed sixty (60) days from the confirmation of his appointment,
excluding Days corresponding to delay in receiving information requested
or answers to queries or notices given to either Party;
	 
	 	(iii)	 	submit in writing to the Parties, prior to the expiration
of the time limit established in the preceding item, a draft of the document in
which he/she shall set forth his decision of the dispute, indicating the basis
therefor;
	 
	 	(iv)	 	keep and ensure the confidentiality referred to in item 19.3.4;
	 
	 	(v)	 	give ten (10) days’ prior Notice to the other Party
of any meeting he/she intends to conduct with a Party, so as to enable
such other Party to attend the meeting;
	 
	 	(vi)	 	return to the submitting Party all documents (and copies
thereof) submitted in connection with his/her duties, once they are completed.

 

 

55

	 	19.3.5.1	 	The Expert shall disregard all information submitted to him after a
period of thirty (30) days from his appointment, except for information delivered to
comply with a specific request, which information shall be delivered within no more
than ten (10) days from the request made by the Expert.
	 
	 	19.3.5.2	 	The Expert shall be entitled, in addition to the rights contained
in the instrument of his appointment, to request the Parties to deliver any
additional information he/she deems necessary for the resolution of the dispute, as
well as to retain for such purpose any expert or independent consultant, subject to
the determination of its fees within the reasonable limits practiced in the market.

	 	19.3.6	 	Obligations and Rights of the Parties

	 	19.3.6.1	 	Each Party shall have, with respect to the Expert and the
other Party, the following set of obligations in connection with submission
of a dispute to Expert Proceeding:

	 	(i)	 	send to the Expert, within thirty (30) days from his
appointment, documentation containing information necessary for the
resolution of the dispute;
	 
	 	(ii)	 	make available to the Expert, within ten (10)
days from the corresponding request, all additional specific information
that the Expert may deem necessary to conduct his activities;
	 
	 	(iii)	 	send concurrently to the other Party copies
of the documentation containing the information referred to in the
preceding two clauses;
	 
	 	(iv)	 	bear its costs for remittance of information to the
Expert and the other Party, as well as its expenses with
legal counsel, consultants, witnesses, employees and other persons involved
in the proceeding;
	 
	 	(v)	 	bear fifty percent (50%) of the common costs and
expenses of the Expert Proceeding, which shall include:

	 	•	 	the fees of the Expert;
	 
	 	•	 	the fees of any independent consultant called by the Expert;
	 
	 	•	 	the costs of selection and appointment of the Expert, if
made with the intermediation of the President of IPT;

 

 

56

	 	(vi)	 	abide by the final decision of the Expert,
except in the event of fraud or error with respect to the LAW or material
facts or in the event of demonstrable inadequacy in the consideration of
such facts.

	 	19.3.6.2	 	The rights of each Party include:

	 	(i)	 	the right to take part in any meeting of the
Expert with the other Party, as long as it communicates
to the Expert in writing that it intends to participate in such
meeting within five (5) Days from the receipt of the
Notice referred to in item 19.3.5(v);
	 
	 	(ii)	 	the right to comment upon or contest information sent
by the other Party to the Expert, as long as it does so
in writing within fourteen (14) Days from receipt of such
information; and
	 
	 	(iii)	 	specifically in respect of a dispute submitted to
Expert Proceeding, the right to commence Arbitration
proceedings at any time before execution of the instrument for appointment
of Expert referred to in item 19.3.2(e).

	 	19.3.7	 	Other Provisions

Unless otherwise expressly agreed by the Parties, if within the time limit
assigned in item 19.3.5(ii) the Expert fails to submit his/her decision, then
at the request of either Party the Expert shall be promptly removed
and another Expert shall be appointed, whereupon the appointment procedure
provided for in item 19.3.2 shall apply anew.

	 	19.3.7.1	 	After a final decision is rendered, the prevailing Party shall be
reimbursed by the Party prevailed upon for all documented costs incurred by
the prevailing Party in connection with the Expert Proceeding.
	 
	 	19.3.7.2	 	Law 9,307 of September 22, 1996 shall apply on a supplementary basis to this
section to the extent that such Law does not conflict with this section.

	19.4	 	Tripartite Arbitration

 

 

57

	 	19.4.1	 	The Parties recognize that the resolution of certain claims, disputes or
controversies arising out of or relating to this
Agreement may have implications for the performance by Supplier of its obligations under the
Comgás-Supplier Agreement; likewise, the resolution of certain claims,
disputes or controversies arising out of or relating to the Comgás-Supplier
Agreement may have implications for the rights and obligations of the
Parties under this Agreement. Accordingly, in the event of
commencement of arbitration proceedings under this Agreement, whose outcome
may have implications for the rights and/or obligations of Supplier under the
Comgás-Supplier Agreement, or in the event the resolution of a dispute by
arbitration under the Comgás-Supplier Agreement may have implications for the
rights and/or obligations of the Parties under this Agreement, it is
agreed that: (a) the Parties and/or Supplier may consolidate in a
single Tripartite Arbitration the disputes arising out of this
Agreement and the disputes arising out of the Comgás-Supplier
Agreement, (b) the Comgás-Supplier Agreement shall confer on the
User the right to join any arbitration conducted under the Comgás-Supplier
Agreement that meets the requirements in this item; (c) Supplier may join
any Arbitration conducted under this Agreement that meets the
requirements in this item; and (d) Comgás may require that the User
join any arbitration conducted under the Comgás-Supplier Agreement that meets
the requirements in this item (each a “Tripartite Arbitration”).

	 	19.4.2	 	In the event arbitration is commenced under the Comgás-Supplier Agreement,
Comgás shall give Notice of such fact to the User within no
more than 5 days from such commencement. In such case or in the case of
Arbitration instituted under item 19.1.2 hereof, the Parties shall
within no more than sixty (60) days from request for Arbitration confirm
institution of Tripartite Arbitration. In the event the Parties decide
to consolidate arbitrations and in the event the Parties and Supplier
join a Tripartite Arbitration, the Parties shall abandon any separate
arbitration then pending whose subject matter is encompassed by such Tripartite
Arbitration and shall assert any and all claims and counterclaims with regard to
their dispute(s) in such Tripartite Arbitration, in keeping with the procedures
established for such Tripartite Arbitration.

 

 

58

	 	19.4.3	 	In the event the Parties and Supplier are unable to come to a
consensus as to institution of Tripartite Arbitration within the period mentioned
in item 19.4.2 above, then the Parties and Supplier shall refer the
matter to BCCC. After five (5) days have elapsed from expiry of the period mentioned in
item 19.4.2 above, the Parties and Supplier shall submit in writing to
BCCC their defenses and answers, as the case may be, with respect to institution of
Tripartite Arbitration. Within five (5) days from receipt of the defenses or
answers of the Parties, BCCC shall appoint a sole Arbitrator to resolve
the dispute. Within three (3) days, the Parties and Supplier shall
confirm the appointment of the Arbitrator or shall repudiate such appointment
solely on the basis of item 19.2.3. Should a Party or Supplier so
repudiate, BCCC shall appoint a new Arbitrator that meets the requirements in
subitem 19.2.3 within three (3) days from receipt of repudiation by such Party or
Supplier. Once appointment of the Arbitrator is confirmed, he or she
shall within no more than fifteen (15) days make a decision as to the conduct of
Tripartite Arbitration, which decision shall necessary cover the following
points: (i) whether the conflict involves common factual and legal matters or,
alternatively, whether Supplier holds information necessary for resolution of the
conflict or the solution to be adopted, (ii) in the case of Arbitration requested
or commenced under this Agreement, whether the conflict involves contractual
rights or obligations of Supplier warranting its joining the proceedings or,
alternatively, in the case of arbitration requested or commenced under the
Comgás-Supplier Agreement, whether the conflict involves contractual rights or
obligation of the User warranting its joining the proceedings, (iii) whether a
Party shall be adversely affected by institution of Tripartite
Arbitration, and (iv) if separation of the disputes may pose a risk that conflicting
decisions be rendered as regards this Agreement and the Comgás-Supplier
Agreement.
	 
	 	19.4.4	 	Tripartite Arbitration shall be conducted by five (5) arbitrators, the
User to appoint the first Arbitrator, Comgás to appoint the
second Arbitrator and Supplier to appoint the third Arbitrator
within thirty (30) Days after receipt of Notice confirming initiation of
Tripartite Arbitration. The two (2) remaining Arbitrators shall be
appointed by mutual agreement as among the Arbitrators appointed by the
Parties and Supplier. If a Party or Supplier fails to
appoint its Arbitrator, such appointment shall be made by BCCC in keeping with
the criteria set forth in subitem 19.2.3(iv).
	 
	 	19.4.5	 	Decisions rendered in Tripartite Arbitration proceedings shall produce uniform
effects on this Agreement and on the Comgás-Supplier Agreement.
	 
	 	19.4.6	 	To the extent not inconsistent with the terms of item 19.4 and its subitems, the terms
and conditions set forth in Item 19.2 shall apply to Tripartite Arbitration,
including as regards applicable rules and regulations, place of Arbitration and effects of the Arbitration AWARD.

 

 

59

19.5 Jurisdiction

The Parties elect the courts sitting in the City of São Paulo, State of São Paulo,
to settle any issues arising out of this Agreement that cannot be resolved through
Arbitration as a result of an express law provision, to the exclusion of any other
courts, no matter how privileged they may be.

19.6 Applicable Law

This Agreement will be ruled and construed under the laws of the Federative
Republic of Brazil.

ARTICLE TWENTY- GENERAL LIMIT OF LIABILITY

Except in the case provided in item 17.4.1, for which case there is a specific liability
limit, the Parties hereby agree that, in no event whatsoever, the totality of payments to
be made by Comgás to the User, as a result of penalties and/or indemnification
under the terms of this Agreement, shall exceed, during the whole effectiveness of this
Agreement, the total maximum limit corresponding to six point five percent (6.5%) of the
amount of the Agreement, determined by the following formula:

IL= K x 0.065 x DCA x N x GP, where

	 	 	 	 	 
	IL

	 	-
	 	is the maximum limit of payments to be made by Comgás;
	 
	 	 	 	 
	DCA

	 	-
	 	is the Daily Contracted Amount;
	 
	 	 	 	 
	N

	 	-
	 	is the number of days of effectiveness of the Agreement,
calculated as of the execution date of the
Agreement up to the final date set forth in item
13.1;
	 
	 	 	 	 
	GP

	 	 	 	is the Gas Price in force on the date of occurrence
of each event of payment converted to Reais per
Cubic Meter at the Reference Conditions
according to the Exchange Rate of the last
business day of the Month of payment of a certain
indemnification.
	 
	 	 	 	 
	K

	 	-
	 	Is the percentage of use of the IL, which shall vary from 0 to
1, and, on the execution date of this Agreement,
shall correspond to 1. At each payment made by Comgás
for penalties and/or indemnification, under the terms of
this Agreement, a new K factor shall be determined by
the reduction of (i) the percentage corresponding to such
payment in relation to the value 0.065 x DCA x N x GP from the
(ii) previous K factor.

 

 

60

ARTICLE TWENTY-ONE – AMENDMENT

This Agreement and the Annex hereto may not be amended unless by a written instrument
signed by both Parties

ARTICLE TWENTY-TWO — ANNEXES

The annex to this Agreement, which is an integral part hereof, is the following document:
Annex 1 – Gas Price.

ARTICLE TWENTY-THREE – CONTRACTUAL AMOUNT

This Agreement is ascribed the amount of R$ 560,060,513.77 (Five hundred and sixty
million, sixty thousand, five hundred and thirteen reais and seventy seven cents), equivalent to
US$ 231,803,532.04 (Two hundred and thirty one million, eight hundred and three thousand, five
hundred and thirty two dollars and four cents) on June 16, 2005. Given the nature of this
Agreement, the amount indicated is estimate, not including the adjustments provided for
contractually, as well as taxes of any kind, nor it will be applicable to any provision of this
instrument.

ARTICLE TWENTY-FOUR – AGREEMENT OF THE PARTIES

The Parties express their agreement to the full contents of the Agreement,
binding themselves to faithfully and strictly comply with it. IN WITNESS WHEREOF, they execute in
the city of São Paulo, State of São Paulo, four (4) counterparts of a single tenor and contents and
for a single effect, on January 21, 2006.

COMPANHIA DE GÁS DE SÃO PAULO — COMGÁS:

	 	 	 
	(sgd.) Paulo César Nunes de Souza

Logistics and Human Resources Officer
	 	(sgd.) André Lopes de Araújo

Industrial Market, VNG and Great

Commerce Officer

 

 

61

CORN PRODUCTS BRASIL – INGREDIENTES INDUSTRIAIS LTDA.

	 	 	 
	(sgd.) Gilberto Sabatini Affonso

Finance and Administration Officer
	 	(sgd.) Alberto Yoshio Nakata

Attorney

	§	 	WITNESSES:

	 	 	 
	(sgd.) Carlos Edgard Montagna

Tax ID (CPF):070,846,528-50
	 	(sgd.) José Wagner Rodrigues da Silva

Tax ID (CPF): 063,391,588-20

A N N E X 1

GAS PRICE

I)
Definition and
Composition

The Gas Price at the Delivery Point (GP) shall be comprised of the sum of
two portions: one pertaining to the Commodity (PC) and other pertaining to Transportation
(PT), according to their respective amounts at each time, so that GP = PC + PT.

I.1) Base Price:

In relation to the month of April 2000, the amounts of the portion
pertaining to the Commodity (PCB) and the portion
pertaining to Transportation
(PTB)
on cash and with
no taxes, are as follows:

	 	§	 	PCB — US$ 1.101/MMBTU
	 
	 	§	 	PTB — US$ 1.374/MMBTU,

So
that the base Gas Price
(GPB) amounts to
US$ 2.475/MMBTU, to be converted into Reais as per I.4.

 

 

62

I.2) Price at Commercial Supply Start-up

At the Commercial Supply Start-up, the portions comprising the
Gas Price 3⁄4 for effectiveness up to the last day of the
month preceding the first anniversary of the Commercial Supply
Start-up 3⁄4 shall be calculated by the application of the
following formula:

	 	§	 	PCi
= PCB
x  	PPI1	 i	 
	 	 	PPI0	 
	 	 	 
	 	§	 	PTi
= PTB
x  	PPI1	 ,
where:	 
	 	 	PPI0	 

	 	 	 	 	 
	PCi

	 	-
	 	Is the amount of the portion
pertaining to the commodity at
the Commercial Supply
Start-up;
	 
	PTi

	 	-
	 	Is the amount of the portion
pertaining to Transportation at
the Commercial Supply
Start-up;
	 
	PPI1

	 	-
	 	Is the Producer Price Index,
Industrial Commodities published
by the U.S. Department of Labor,
Bureau of Labor Statistics
related to the month preceding
the month of the Commercial
Supply Start-up;
	 
	PPI0

	 	-
	 	Is the Producer Price Index,
Industrial Commodities published
by the U.S. Department of Labor,
Bureau of Labor Statistics
related to the month of March
2000.

I.3) Annual Readjustments

On an annual basis, on the first day of the month of anniversary of the
Commercial Supply Start-up, the portions comprising the Gas
Price 3⁄4 for effectiveness for a period of twelve (12) months
3⁄4 shall be readjusted as follows:

	 	§	 	PCi
= PCB
x  	PPIi	 ,	 
	 	 	PPI0	 
	 	 	 
	 	§	 	PTi
= PTB
x  	PPIi	 ,
	 
	 	 	PPI0	 

Where:

	 	 	 	 	 
	PCi

	 	-
	 	Is the amount of the portion
pertaining to the commodity
adjusted and applicable to each
twelve (12)-month period;
	 
	PTi

	 	-
	 	Is the amount of the portion
pertaining to Transportation
adjusted and applicable to each
twelve (12)-month period

 

 

63

	 	 	 	 	 	 
	 	PPIi

	 	-
	 	Is the Producer Price Index,
Industrial Commodities published
by the U.S. Department of Labor,
Bureau of Labor Statistics
related the month preceding the
adjustment month;
	 	PPI0

	 	-
	 	Is the Producer Price Index,
Industrial Commodities published
by the U.S. Department of Labor,
Bureau of Labor Statistics
related to the month of March
2000;

	 	 	I.4) The amounts of each portion previously defined shall be converted from US$/MMBTU to
R$/MMBTU through the Exchange Rate of the day preceding the maturity day of the
invoice pertaining to the gas supply.

II) Taxes, Contributions and Liens

Each portion previously defined shall be added by the taxes, contributions (including
PIS/PASEP and COFINS) and other liens on which they are levied or shall be levied.

III) Criteria for Rounding up and Decimal Places

In the calculations of prices stated in this annex, four (04) decimal places shall be used
for all prices, portions and indexes participating in those calculations. The rounding up
criteria shall be the mathematics criteria, i.e.:

 — If the fifth decimal place ranges from 0 through 4, the fourth place shall maintain its
value;

— If the fifth decimal place ranges from 5 through 9, the fourth place shall be
added a unit.<PAGE>

                                                                    EXHIBIT 10.7

      DESCRIPTION OF COMPENSATION ARRANGEMENTS WITH NON-EMPLOYEE DIRECTORS

Directors of the Company who are also Company employees receive no additional or
special compensation for serving as directors.

Following is a description of the compensation arrangements for the Company's
non-employee directors.

CASH COMPENSATION. Effective as of the beginning of fiscal year 2006, the
Company's directors, including its Director Emeritus, who are not employees
receive an annual cash fee of $32,000, payable in four equal quarterly
installments of $8,000 at the beginning of each fiscal quarter. In addition,
effective as of the beginning of fiscal year 2006, each non-employee director
who serves as a chair of the committee of the Company's Board of Directors
receives the following annual cash fees, in each case payable in four equal
quarterly installments at the beginning of each fiscal quarter: chairperson of
the Audit Committee -- $10,000; chairperson of the Compensation and Stock Option
Committee -- $5,000; and chairperson of the Nominations and Corporate Governance
Committee -- $3,000.

All non-employee directors also receive reimbursement of out-of-pocket expenses
for attendance at each Board or committee meeting.

EQUITY COMPENSATION. The Company's non-employee directors, but not its Director
Emeritus, also receive equity compensation for serving as directors.

For service during the 2005 fiscal year and in lieu of any other option or other
equity grant for service during that fiscal year, each of the Company's
non-employee directors received a one-time grant, on January 30, 2006, of (1)
467 shares of Class A common stock (which is equal to $32,000 divided by $68.55,
the fair market value of the stock on the day of grant) and (2) a fully vested
option to purchase 1,867 shares of the Company's Class A common stock (which is
equal to four times the number of shares granted under clause (1) above), with
an exercise price of $68.55, which was the fair market value of the stock on the
date of grant. The options are exercisable for a period of 6 years, subject to
earlier termination following termination of service as a director.

For service during each fiscal year after 2005, the Company's non-employee
directors will receive annual grants, as of the first business day of the fiscal
year immediately following such fiscal year, of (1) a number of shares of stock
equal to $32,000 divided by the fair market value of the Company's Class A
common stock on the date of grant and (2) a fully vested option to purchase such
number of shares of the Company's Class A common stock as is equal to four times
the number of shares of restricted stock awarded under clause (1) above, with an
exercise price equal to the fair market value of the Company's Class A common
stock on the date of grant. The options will be exercisable for a period of 6
years, subject to earlier termination following termination of service as a
director.

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