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EXHIBIT 10.32
NATURAL GAS ADVANCE SALE CONTRACT
DATED
AUGUST 24, 2000
BETWEEN
COLUMBIA NATURAL RESOURCES, INC.,
AS SELLER
AND
MAHONIA II LIMITED,
AS PURCHASER
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TABLE OF CONTENTS
ARTICLE I - INTERPRETATION
SECTION 1.01 DEFINITIONS............................................... 1
SECTION 1.02 HEADINGS.................................................. 4
SECTION 1.03 NUMBER.................................................... 4
SECTION 1.04 NON-BUSINESS DAYS......................................... 4
ARTICLE II - SALE AND PURCHASE OF NATURAL GAS
SECTION 2.01 SALE AND PURCHASE OF NATURAL GAS.......................... 5
SECTION 2.02 MEASUREMENT AND QUALITY................................... 5
SECTION 2.03 DELIVERY AND RECEIPT OF NATURAL GAS; RIGHT TO REQUEST
ALTERNATE DELIVERY POINTS................................. 5
SECTION 2.04 PAYMENT OF DELIVERY FEES.................................. 6
SECTION 2.05 FORCE MAJEURE DEFAULT DELIVERY POINTS..................... 6
SECTION 2.06 FAILURE OF DELIVERY OR RECEIPT; TRANSPORTATION AND
BALANCING................................................. 7
SECTION 2.07 RIGHTS AND REMEDIES; WAIVER OF CERTAIN DAMAGE CLAIMS...... 8
SECTION 2.08 POSSESSION, TITLE AND RISK................................ 8
SECTION 2.09 ROYALTIES................................................. 9
SECTION 2.10 TAXES..................................................... 9
SECTION 2.11 NO WARRANTY............................................... 9
SECTION 2.12 PREPARATION OF CERTIFICATES; ADJUSTMENTS FOR ACTUAL
DELIVERY.................................................. 9
ARTICLE III - REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF SELLER.................. 9
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF PURCHASER............... 11
ARTICLE IV - COVENANTS
SECTION 4.01 AFFIRMATIVE COVENANTS OF SELLER........................... 12
ARTICLE V - EVENTS OF DEFAULT AND EARLY TERMINATION
SECTION 5.01 EVENTS OF DEFAULT......................................... 13
SECTION 5.02 EARLY TERMINATION BY PURCHASER............................ 13
SECTION 5.03 CALCULATION OF TERMINATION PAYMENT........................ 14
SECTION 5.04 SURETY BOND............................................... 15
SECTION 5.05 RIGHTS AND REMEDIES OF PURCHASER.......................... 17
SECTION 5.06 PURCHASER'S FAILURE TO ACCEPT DELIVERY.................... 17
ARTICLE VI - EVENTS OF CHANGE AND ACCELERATED TERMINATION
SECTION 6.01 EVENTS OF CHANGE.......................................... 18
SECTION 6.02 ACCELERATED TERMINATION................................... 18
SECTION 6.03 PAYMENTS ON ACCELERATED TERMINATION....................... 18
ARTICLE VII - MISCELLANEOUS
SECTION 7.01 NOTICE.................................................... 19
SECTION 7.02 INTEREST ON OVERDUE AMOUNTS............................... 20
SECTION 7.03 GOVERNING LAW; WAIVER OF JURY TRIAL....................... 20
SECTION 7.04 SEVERABILITY.............................................. 21
SECTION 7.05 PLACE OF PAYMENT; CURRENCY................................ 21
SECTION 7.06 PURCHASER NOT AN AGENT.................................... 21
SECTION 7.07 BENEFIT OF THE AGREEMENT.................................. 21
SECTION 7.08 ASSIGNMENT AND TRANSFER................................... 21
SECTION 7.09 ENTIRE AGREEMENT.......................................... 22
SECTION 7.10 AMENDMENTS................................................ 22
SECTION 7.11 NO WAIVERS, REMEDIES...................................... 22
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SECTION 7.12 TIME OF THE ESSENCE....................................... 22
SECTION 7.13 COUNTERPARTS.............................................. 22
SECTION 7.14 GUARANTY AGREEMENT........................................ 22
SECTION 7.15 INTENT.................................................... 22
SECTION 7.16 DISCLOSURE OF INFORMATION................................. 22
SECTION 7.17 STAMP AND DOCUMENTARY TAXES............................... 23
SECTION 7.18 FURTHER ASSURANCES........................................ 23
ANNEX 1 SELLER'S CONDITIONS PRECEDENT
EXHIBIT A-1 FORM OF SURETY BOND
EXHIBIT A-2 FORM OF DEMAND NOTICE
EXHIBIT B FORM OF OPINION OF SELLER AND GUARANTOR
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NATURAL GAS ADVANCE SALE CONTRACT
This NATURAL GAS ADVANCE SALE CONTRACT (this "Agreement") is entered into
as of August 24, 2000, between COLUMBIA NATURAL RESOURCES, INC., a Texas
corporation (the "Seller"), and MAHONIA II LIMITED, a Jersey Channel Islands
company (the "Purchaser").
WHEREAS, Seller desires to sell and Purchaser desires to purchase certain
quantities of Natural Gas (as hereafter defined) on the terms and conditions set
forth herein;
NOW THEREFORE, in consideration of the respective covenants and agreements
of the parties hereinafter set forth and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by each of the
parties, the parties hereby agree as follows:
ARTICLE I - INTERPRETATION
Section 1.01 Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated:
"Accelerated Termination Date" has the meaning given such term in Section
6.02(b).
"Acceptable Surety Companies" means surety companies (i) having a
long-term unsecured credit rating or financial strength rating no less than the
equivalent of an A- rating by Standard & Poor's Ratings Group and (ii)
acceptable to Purchaser in its sole discretion.
"Applicable Instruments" of any Person means the Certificate or Articles
of Incorporation, by-laws and other organizational documents of such Person and
all contracts, indentures, agreements, instruments and documents to which such
Person is a party or by which such Person or any assets of such Person may be
bound or affected.
"Btu" shall be defined pursuant to the transporting pipeline's FERC
approved tariff.
"Business Day" means a day, other than a Saturday or a Sunday, on which
commercial banks are not authorized or required to be closed in New York, New
York.
"Confirmation Letter" has the meaning given such term in Section 2.01.
"Deficiency Quantity" means in respect of a particular Delivery Month the
amount by which the Required Delivery Quantity for that Delivery Month exceeds
the quantity of Natural Gas actually delivered and received hereunder in respect
of such Delivery Month.
"Delivery Month" means each calendar month commencing with the month of
August, 2001, through and including the month of July, 2005.
"Delivery Point" means a delivery point at any of the following locations
as set forth in the Confirmation Letter or as otherwise determined in accordance
with the terms and conditions of this Agreement: (i) Columbia Gas Transmission
Corporation's pool AS39145, or (ii) such other locations as Seller may elect
pursuant to Section 2.03(d) or as may be agreed by the parties hereto pursuant
to Section 2.05.
"Early Termination Date" shall have the meaning ascribed thereto in
Section 5.02.
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"Event of Change" shall have the meaning given such term in Section 6.01.
"Event of Default" shall have the meaning given such term in Section 5.01.
"Federal Funds Rate" means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Purchaser from three Federal funds brokers of nationally recognized
standing selected by Purchaser.
"FERC" shall have the meaning given such term in Section 2.02.
"Force Majeure" shall mean a failure by either party to perform
obligations hereunder, except for the obligation to make payment due hereunder,
to the extent that such failure is caused by war, riots, insurrections, fires,
explosions, sabotage, strikes and other labor or industrial disturbances, acts
of God or the elements, government laws, regulations or requests, disruption or
breakdown of production or transportation facilities, line or compressor freeze
outs, failures of transporters in receiving and delivering Natural Gas tendered
(other than compliance with OFOs or other similar notices from a transporter) or
by any other cause reasonably beyond the control of such party, but does not
include the failure to perform obligations solely as a result of the fact that
to do so will result in economic loss or hardship to such party.
"Governmental Requirement" shall mean all judgments, orders, writs,
injunctions, decrees, awards, laws, ordinances, statutes, regulations, rules,
franchises, permits, certificates, licenses, authorizations and the like of any
government or any commission, board, court, agency, instrumentality or political
subdivision thereof.
"Guarantor" shall mean Columbia Energy Group, a Delaware corporation.
"Guaranty Agreement" shall mean that certain Guaranty dated of even date
herewith given by Guarantor in favor of Purchaser to secure the payment and
performance obligations of Seller under this Agreement and the Confirmation
Letter, as set forth therein, as the same may be amended, modified or replaced
from time to time.
"Hub Fees" means any charges, fees or costs, by either Seller or
Purchaser, relating to hubs, pooling points or title transfers charged by either
the pipeline immediately upstream of and delivering into the Delivery Point or
the pipeline immediately downstream of and taking Natural Gas from the Delivery
Points and actually incurred in connection with the transfer of Natural Gas
between Seller and Purchaser at the Delivery Point.
"Initial Surety Bond" means the surety bond issued by the Initial Surety
Companies, as sureties, dated August 24, 2000, in favor of Purchaser, initially
in the maximum penal sum of $200,000,000 which maximum penal sum shall be
reduced over time in accordance with Exhibit A attached thereto, expiring August
31, 2005, as the same may be amended, modified, or replaced from time to time.
"Initial Surety Companies" means, collectively, American Home Assurance
Company, Travelers Casualty & Surety Company of America, and Hartford Fire
Insurance Company.
"MMBtu" means one million Btus.
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"Natural Gas" means a mixture of gaseous hydrocarbons consisting primarily
of methane and meeting the quality standards and specifications required
pursuant to Section 2.02.
"NYMEX" means the New York Mercantile Exchange, Inc. and any successor
thereto.
"OFO" shall have the meaning given such term in Section 2.06(d).
"Payment Date" shall mean the 25th day of any month following a Delivery
Month, or if such day is not a Business Day, the next succeeding Business Day.
"Person" means any individual, corporation, company, partnership, joint
venture, trust, unincorporated association, government or any commission, board,
court, agency, instrumentality or political subdivision thereof, any other
entity or any trustee, receiver, custodian or similar official.
"Prepaid Price" means the purchase and sales price set forth as such in
the Confirmation Letter.
"Purchaser" has the meaning ascribed thereto in the introductory paragraph
hereto.
"Reference Dealer" means a leading company in the natural gas marketing
business selected by Purchaser in good faith from among companies engaging in
natural gas commodity derivative transactions whose senior unsecured debt rating
is no less than BBB- as publicly announced by Standard & Poor's Ratings Group
(or its successor) and no less than Baa3 as publicly announced by Moody's
Investors Service, Inc. (or its successor).
"Replacement Value" means (i) if Seller is the party which has failed to
perform, the price which Purchaser, acting in good faith and at arm's length,
actually pays, or has contracted to pay, for Natural Gas to replace the
Deficiency Quantity at the agreed Delivery Points plus any additional
transportation and other costs and expenses incurred by Purchaser in connection
with the purchase of such Deficiency Quantity; and (ii) if Purchaser is the
party which has failed to perform, the price which Seller, acting in good faith
and at arm's length, actually receives, or has contracted to receive, for the
sale of the Deficiency Quantity less any additional transportation and other
costs and expenses incurred by Seller in connection with the sale of such
Deficiency Quantity.
"Required Delivery Quantity" means the amount of MMBtus of Natural Gas to
be delivered and received during a given Delivery Month pursuant to this
Agreement as agreed upon in the Confirmation Letter.
"Seller" has the meaning ascribed thereto in the introductory paragraph
hereto.
"Substitute Surety Bond" has the meaning given to such term in Section
5.04(b)(i).
"Surety Bond" means the Initial Surety Bond or the Substitute Surety Bond,
as the case may be.
"Surety Companies" means, collectively, the Initial Surety Companies and
all Acceptable Surety Companies selected pursuant to Section 5.04, if any.
"Taxes" means all federal, state, municipal or local, ad valorem,
property, stamp, occupation, severance, production, gathering, pipeline,
utility, withholding, gross production, gross turnover, sales, value added, use,
excise, environmental, transaction, customs, export and any other present or
future governmental taxes, charges, duties and assessment of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions to tax and
interest attributable thereto), other than taxes based on net income or net
worth.
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"Termination Date" means either the Accelerated Termination Date or the
Early Termination Date, as the case may be.
"Termination Payment" has the meaning given such term in Section 5.03(a)
or Section 5.03(b), as applicable.
"Transaction Documents" means this Agreement, the Confirmation Letter, the
Guaranty Agreement and the Surety Bond.
"United States Dollars", "U.S. Dollars", or "U.S. $" means the lawful
currency of the United States of America in immediately available funds.
"Unpaid Amounts" means, with respect to any Termination Date, the
aggregate of the amounts that became payable (whether or not due) to Purchaser
hereunder prior to the occurrence of such Termination Date and that remain
payable (whether or not due) as at such Termination Date, together with interest
thereon from (and including) the date such amounts became due and payable to
(but excluding) such Termination Date at the U.S. Base Rate less all amounts, if
any, owed by Purchaser to Seller pursuant to Section 2.03(d) and Section 2.06(c)
plus interest thereon from (and including) the date such amounts became due and
payable to (but excluding) such Termination Date at the U.S. Base Rate.
"U.S. Base Rate" means, at any time, a fluctuating interest rate per annum
as shall be in effect from time to time, which rate per annum shall at all times
be equal to the greater of: (a) the rate of interest announced publicly by The
Chase Manhattan Bank in New York, New York, from time to time, as its prime
commercial lending rate; or (b) one-half of one percent per annum above the
Federal Funds Rate in effect from time to time. In the event there is any Unpaid
Amount, Purchaser will use reasonable efforts to inform Seller of changes in the
U.S. Base Rate promptly upon the occurrence of such changes.
Section 1.02 Headings. The division of this Agreement into Articles and
Sections and the insertion of an index and headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. The terms "this Agreement", "hereof", "hereunder" and similar
expressions refer to this Agreement and not to any particular Article, Section,
clause, paragraph, annex, exhibit or other portion hereof and include any
agreement supplemental hereto. Unless something in the subject matter or context
is inconsistent therewith, references herein to Articles, Sections, clauses and
paragraphs are to Articles, Sections, clauses and paragraphs of this Agreement.
Section 1.03 Number. Words importing the singular number shall include the
plural and vice versa, and words importing the masculine gender shall include
the feminine and neuter genders and vice versa.
Section 1.04 Non-Business Days. Whenever any action to be taken hereunder
shall be stated to be required to be taken or any payment to be made hereunder
shall be stated to be due on a day other than a Business Day, unless otherwise
specifically provided for herein, such payment shall be made or such action
shall be taken on the next succeeding Business Day with the same force and
effect as if made on the due date, and no additional amounts shall be payable as
a result of such delay.
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ARTICLE II - SALE AND PURCHASE OF NATURAL GAS
Section 2.01 Sale and Purchase of Natural Gas.
(a) On August 25, 2000, Purchaser and Seller shall agree upon and execute
a letter as described in this Section 2.01 (such letter, as the same may be
amended from time to time pursuant to Section 2.03(d), being the "Confirmation
Letter") and agree upon the schedule to the Initial Surety Bond providing for
the periodic reductions to the maximum penal sum thereunder. If on August 25,
2000, a Confirmation Letter and such schedule to the Initial Surety Bond have
not been executed and delivered by the parties thereto or if the Prepaid Price
has not been paid by Purchaser to Seller, then this Agreement shall terminate
and be null and void and without any further force and effect, and without any
further actions by the parties.
The Confirmation Letter shall specify (i) a mutually acceptable Prepaid
Price (which shall be approximately U.S. $250,000,000), (ii) the date on which
the Prepaid Price shall be paid (which shall be the same day such Confirmation
Letter is executed), and (iii) for each Delivery Month, the Delivery Points, the
Required Delivery Quantity, and the amount thereof to be delivered and received
at each such Delivery Point, each as mutually agreed by Purchaser and Seller.
(b) In consideration of the payment to Seller of the Prepaid Price, (i)
Seller hereby agrees to sell and deliver, or cause to be delivered, to Purchaser
or to its account in each Delivery Month, at the Delivery Points, the Required
Delivery Quantity (in the amounts set forth in the Confirmation Letter) on the
terms and conditions set forth in this Agreement; and (ii) Purchaser hereby
agrees to accept delivery of such Natural Gas. Subject to the terms of Section
2.03(d) and Section 2.06(c), payment of the Prepaid Price shall constitute
payment in full of the purchase price of the Natural Gas to be delivered
hereunder and under the Confirmation Letter.
(c) All payments under this Agreement by Seller or Purchaser shall be made
by wire transfer in immediately available funds to an account designated by the
party entitled to receive such payment, with such designation to be made at
least two Business Days prior to the date on which this payment is to be made.
Section 2.02 Measurement and Quality. Natural Gas delivered to a specific
Delivery Point hereunder shall be measured by the operator of such Delivery
Point in accordance with its then current Federal Energy Regulatory Commission
("FERC") approved tariff procedures. All such Natural Gas shall meet or exceed
the then current FERC approved tariff requirements of Purchaser's transporter
receiving Natural Gas at such Delivery Point, including, without limitation,
requirements of quality, composition, temperature and pressure.
Section 2.03 Delivery and Receipt of Natural Gas; Right to Request
Alternate Delivery Points.
(a) Seller agrees to deliver or caused to be delivered to Purchaser and
Purchaser agrees to accept delivery from Seller in each Delivery Month at the
Delivery Points determined pursuant to this Agreement, the Required Delivery
Quantity required to be delivered hereunder and under the Confirmation Letter in
such Delivery Month. Seller shall have no right, without the prior written
consent of Purchaser, to deliver quantities of Natural Gas hereunder in excess
of the Required Delivery Quantity in respect of any Delivery Month during such
Delivery Month, and Purchaser shall have no right to schedule and take hereunder
in excess of the Required Delivery Quantity.
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(b) Seller and Purchaser shall take such action as shall be necessary to
properly schedule the delivery and receipt of such Natural Gas at the Delivery
Points in each Delivery Month in compliance with all applicable rules,
regulations and procedures at such Delivery Points.
(c) Each Delivery Month, Seller shall arrange for delivery, and Purchaser
shall arrange for receipt, of Natural Gas to begin at the Delivery Points no
later than the first day of the Delivery Month and to be completed no later than
the last calendar day of the Delivery Month. All deliveries and receipts shall
be at hourly and daily rates that are as uniform as possible over the course of
the Delivery Month in accordance with generally accepted pipeline scheduling
practices.
(d) Seller may elect to deliver Natural Gas at alternate delivery points
other than the Delivery Points set forth in the Confirmation Letter with respect
to a Delivery Quantity for a Delivery Month provided (i) that Seller has given
Purchaser written notice (which notice shall constitute an amendment to the
Confirmation Letter) of its election no later than five (5) Business Days before
the end of the calendar month preceding the Delivery Month in which it proposes
to make delivery at such alternate delivery points, (ii) Purchaser consents in
writing to delivery at such alternate delivery points and (iii) such alternate
delivery points allow multiple title transfers at a single point or at different
points in a pool and are mutually agreeable to Seller and Purchaser. If there is
any transportation cost differential associated with delivery of such Natural
Gas at such alternate delivery points (as measured against delivery at the
Delivery Points set forth in the Confirmation Letter with respect to such
Delivery Quantity for such Delivery Month), Purchaser shall prepare and deliver
to Seller, within five (5) Business Days after the end of the applicable
Delivery Month a certificate setting out the calculation of the transportation
cost differential accompanied by reasonably available back-up documentation
therefor. Any such certificate shall, absent manifest error, be conclusive
evidence of the amount of such transportation cost differential. If Seller owes
Purchaser compensation pursuant to this Section 2.03(d), Seller shall pay
Purchaser such amount within five (5) Business Days following its receipt of
Purchaser's certificate. If Purchaser owes Seller compensation pursuant to this
Section 2.03(d), Purchaser shall pay Seller such amount on the next succeeding
Payment Date.
Section 2.04 Payment of Delivery Fees. Seller shall pay all costs in
connection with transportation of the Natural Gas to the Delivery Points and
Purchaser shall pay all costs in connection with transportation of the Natural
Gas from the Delivery Points. Seller shall be responsible for the payment of all
Hub Fees (whether charged to Seller or Purchaser) payable in connection with
delivery of Natural Gas hereunder at any Delivery Point. Seller shall not be
responsible for any insurance, storage, transportation or other costs in respect
of the period after title to any Natural Gas delivered hereunder has passed to
Purchaser in accordance with Section 2.08 of this Agreement. Purchaser shall not
be responsible for any insurance, storage, transportation or other costs in
respect of the period prior to the time title to any Natural Gas delivered
hereunder has passed to Purchaser in accordance with Section 2.08 of this
Agreement.
Section 2.05 Force Majeure Default Delivery Points. Seller is obligated to
deliver to Purchaser and Purchaser is obligated to receive from Seller, at the
Delivery Points, the Required Delivery Quantity in accordance with the terms and
conditions of this Agreement and the Confirmation Letter. If as a result of an
event of Force Majeure, either (i) Seller is unable, after using all reasonable
business efforts, to deliver the Required Delivery Quantity to Purchaser at the
Delivery Points or (ii) Purchaser is unable, after using all reasonable business
efforts, to receive the Required Delivery Quantity from Seller at the Delivery
Points in the amounts agreed upon pursuant
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to this Agreement, then Seller shall be obligated to deliver and Purchaser shall
be obligated to receive, the relevant Required Delivery Quantity at a mutually
acceptable comparable delivery point or points, which delivery point or points
shall allow multiple title transfers at a single point or at different points in
a pool, with mutually acceptable adjustments for quality and location. If the
parties are unable to agree on a comparable delivery point or points and
adjustments for quality and location, then the parties shall comply with the
terms of Section 2.06(a), Section 2.06(b) and Section 2.06(c).
Section 2.06 Failure of Delivery or Receipt; Transportation and Balancing.
(a) (i) Without prejudice to Articles V and VI, if as a result of an event
of Force Majeure, Seller is unable to meet its delivery obligation in respect of
a Delivery Month at the Delivery Points (or at a mutually satisfactory
comparable delivery point or points under Section 2.05), then Seller shall pay
to Purchaser, as liquidated damages, the Replacement Value of the Deficiency
Quantity in respect of that Delivery Month. The Replacement Value shall be paid
to Purchaser no later than the Payment Date next following such Delivery Month,
and Purchaser will accept such payment in lieu of the Deficiency Quantity for
such Delivery Month. Where Seller is unable to meet its delivery obligation as
aforesaid, Purchaser shall use all reasonable efforts to minimize the
Replacement Value of any Deficiency Quantity and Purchaser shall prepare and
deliver to Seller, within five (5) Business Days after the end of the applicable
Delivery Month, a certificate setting out the calculation of the Replacement
Value accompanied by reasonably available back-up documentation therefor. Any
such certificate shall, absent manifest error, be conclusive evidence of the
amount due in respect of the Replacement Value. Seller shall notify Purchaser as
soon as possible of any anticipated inability to perform all or any portion of
its obligations hereunder.
(ii) Without prejudice to Article VI, if as a result of an event of Force
Majeure, Purchaser is unable to meet its obligation to accept delivery of all or
any part of the Required Delivery Quantity in respect of a Delivery Month at the
Delivery Points (or at a mutually satisfactory comparable delivery point or
points under Section 2.05), then Seller shall pay to Purchaser, in lieu of
delivery of the Deficiency Quantity in respect of such Delivery Month, the
Replacement Value of such Deficiency Quantity in respect of that Delivery Month.
The Replacement Value shall be paid to Purchaser no later than the Payment Date
next following such Delivery Month, and Purchaser will accept such payment in
lieu of the Deficiency Quantity for such Delivery Month. Where Purchaser is
unable to meet its acceptance obligation as aforesaid, Seller shall use all
reasonable efforts to maximize the Replacement Value of any Deficiency Quantity
and Seller shall prepare and deliver to Purchaser, within five (5) Business Days
after the end of the applicable Delivery Month, a certificate setting out the
calculation of the Replacement Value accompanied by reasonably available back-up
documentation therefor. Any such certificate shall, absent manifest error, be
conclusive evidence of the amount due in respect of the Replacement Value.
Purchaser shall notify Seller as soon as possible of any anticipated inability
to perform all or any portion of its obligations hereunder as a result of an
event of Force Majeure.
(b) If a party is unable to perform any of its obligations to deliver or
receive Natural Gas hereunder as a result of an event of Force Majeure, such
party shall give notice and full particulars of such event of Force Majeure to
the other party as soon as reasonably possible and shall take all reasonable
actions necessary to remedy the event of Force Majeure.
(c) In the event that (i) Seller or Seller's agent or transporter
inadvertently delivers more or less than the Required Delivery Quantity for any
Delivery Month, or (ii) Purchaser or Purchaser's
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agent or transporter inadvertently receives more or less than the Required
Delivery Quantity for any Delivery Month, and unless the parties otherwise agree
or except as otherwise required by applicable tariff provisions, if any, such
overages or underages shall be corrected or adjusted in (A) Natural Gas, if such
corrections or adjustments are made in the same Delivery Month, and (B) cash, if
such corrections or adjustments are made in the next succeeding Delivery Month;
and the party delivering or receiving excess quantities will be liable to the
other party for any associated pipeline penalties or cashouts. Each party shall
notify the other as promptly as possible of any changes in its rate of delivery
or receipt of Natural Gas at any Delivery Point and take all reasonable actions
necessary to minimize or avoid the incurrence of pipeline penalties and
imbalances.
(d) Should either party receive an operational flow order ("OFO") or other
order or notice from a transporter requiring action to be taken in connection
with this Agreement or Natural Gas flowing under this Agreement, such party
shall immediately notify the other party of the OFO and promptly provide the
other party a copy of same by facsimile. The parties shall take all actions
required by the OFO within the time prescribed therein. Each party shall
indemnify, defend and hold harmless the other party from any damages or
liability (including, without limitation, all non-compliance penalties and
attorneys' fees) associated with an OFO (i) of which the indemnifying party
failed to give the indemnified party the notice required hereunder or (ii) under
which the indemnifying party failed to take the action required by the OFO
within the time prescribed therein.
Section 2.07 Rights and Remedies; Waiver of Certain Damage Claims. Except
as set forth in this Section 2.07, the rights and remedies of the parties set
forth in this Agreement and the other Transaction Documents are non-exclusive of
the other rights and remedies of the parties existing at law or equity. It is
expressly agreed that, notwithstanding any other rights or remedies which a
party may have, payments made in accordance with Section 2.06, Section 5.02,
Section 5.06 and Section 6.03 constitute the exclusive damages available to
Seller and Purchaser for nondelivery or nonacceptance of Natural Gas. To the
fullest extent permitted by applicable law, neither party shall be liable for
any punitive, exemplary, incidental, consequential, indirect or direct (other
than as set forth in this Section 2.07) or other damages, in tort, contract or
otherwise in respect thereof. The parties acknowledge and agree that the Natural
Gas subject of this Agreement is not unique and that no claim for specific
performance is appropriate.
Section 2.08 Possession, Title and Risk. Possession of and title to
Natural Gas delivered pursuant hereto and the Confirmation Letter shall pass
from Seller to Purchaser at the Delivery Points when the Natural Gas is
nominated and confirmed for delivery from the pool pursuant to the transporting
pipeline's FERC tariff. Until such time, Seller shall be deemed to be in control
and possession of, have title to, risk of loss of and be responsible for such
Natural Gas and, after such time, Purchaser shall be deemed to be in control and
possession of, have title to, risk of loss of and be responsible for such
Natural Gas.
Section 2.09 Royalties. Seller shall at all times have the obligation to
make settlements for all royalties and payments to mineral and royalty owners,
governmental entities or agencies (whether federal, state, municipal or local)
and all other Persons having an ownership interest in the Natural Gas delivered
by Seller to Purchaser hereunder. Seller hereby agrees to indemnify Purchaser
and save it harmless from all suits, actions, debts, accounts, damages, costs,
losses and expenses arising from or out of adverse claims of any and all Persons
in respect of royalties, taxes, license fees or charges thereon which are
applicable before the title passes to Purchaser or which may be levied and
assessed upon Seller in respect of a sale of the Natural Gas to Purchaser.
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Section 2.10 Taxes. Seller is liable for and shall pay, cause to be paid
or reimburse Purchaser if Purchaser shall have paid, all Taxes applicable to the
Natural Gas sold hereunder prior to the time title to the Natural Gas has passed
to Purchaser, unless allocated to Purchaser as hereinafter provided. Purchaser
is liable for and shall pay, cause to be paid or reimburse Seller if Seller
shall have paid, all Taxes applicable to the Natural Gas sold hereunder at or
after the time title to the Natural Gas has passed to Purchaser. Both parties
shall use reasonable efforts to administer this Agreement and implement the
provisions in accordance with their intent to minimize Taxes. Purchaser
represents that it is engaged in the business of reselling the Natural Gas
delivered under this Agreement and the Confirmation Letter and Purchaser is
purchasing the Natural Gas for resale to third parties, and accordingly
Purchaser is entitled to purchase the Natural Gas hereunder free of any Taxes
and Purchaser agrees to pay any Taxes incurred as a result of the absence of
such resale exemption. Each party agrees to cooperate with obtaining any
exemption from or reduction of Tax upon request by the other party.
Section 2.11 No Warranty. PURCHASER ACKNOWLEDGES THAT IT HAS ENTERED INTO
THIS AGREEMENT AND IS CONTRACTING FOR THE NATURAL GAS TO BE SUPPLIED BY SELLER
BASED SOLELY UPON THE EXPRESS COVENANTS, REPRESENTATIONS AND WARRANTIES HEREIN
SET FORTH (including Section 2.02) AND, SUBJECT TO SUCH COVENANTS,
REPRESENTATIONS AND WARRANTIES (including Section 2.02), ACCEPTS SUCH NATURAL
GAS "AS IS, WHERE IS" AND "WITH ALL FAULTS."
Section 2.12 Preparation of Certificates; Adjustments for Actual Delivery.
With respect to the preparation of any certificate pursuant to Section 2.03(d)
or Section 2.06(a), to the extent that the actual quantity is not available to
Purchaser or Seller, as the case may be, by the fifth Business Day after the end
of the applicable Delivery Month, Purchaser or Seller, as the case may be, may
prepare any certificate required to be prepared hereunder based on nominated
quantities, subject to reduction for any known periods when nominated quantities
were not delivered and subject to later correction based on actual data. If such
certificate is rendered based on nominated quantities rather than actual
quantities, Purchaser or Seller, as the case may be, shall render a corrected
certificate as soon as possible after actual quantities are known.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of Seller. Seller represents
and warrants to Purchaser as of the date hereof with respect to the Transaction
Documents other than the Confirmation Letter and as of the date of execution of
the Confirmation Letter and payment of the Prepaid Price with respect to all
Transaction Documents as follows:
(a) Status and Authority. Seller is a corporation incorporated under the
laws of the jurisdiction of its formation and has all necessary corporate power
and authority to carry on its business as now being conducted by it. Seller has
full corporate power and authority to enter into this Agreement and the
Transaction Documents to which it is a party and to do all acts and things and
execute and deliver all other documents as are required hereunder or thereunder
to be done, observed or performed by it in accordance with the terms hereof or
thereof.
(b) Power and Authority. The execution, delivery and performance by Seller
of this Agreement and the Transaction Documents to which it is a Party and the
consummation of the
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transactions contemplated hereby and thereby are within Seller's corporate power
and authority and have been duly authorized by all necessary corporate action.
(c) Consents, Approvals, Etc. No authorization, consent or approval of, or
other action by, or notice to or filing with, any governmental authority,
regulatory body or any other Person is required for the due authorization,
execution, delivery or performance by Seller of this Agreement, or the
consummation of the transactions contemplated by this Agreement, except those
approvals which have been obtained, and those notices and filings which have
been made, copies of all of which have been delivered to Purchaser.
(d) Validity of Documents and Enforceability. This Agreement and the
Transaction Documents to which Seller is a party are the legal, valid and
binding obligations of Seller enforceable against Seller in accordance with
their terms, except as the enforceability thereof may be limited by the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and by general principles of equity.
Neither the execution and delivery of this Agreement or any Transaction Document
to which Seller is a party nor compliance with the terms and conditions hereof
or thereof by Seller (i) will result in a violation of the terms of any
Applicable Instrument of Seller or (ii) requires any approval or consent of any
governmental authority or agency, including the Securities and Exchange
Commission, having jurisdiction except such as has already been obtained.
(e) Compliance with Laws. Neither the execution, delivery and performance
by Seller of this Agreement or the Transaction Documents to which it is a party
nor the consummation of the transactions contemplated hereby or thereby (i)
violates any provision of any Applicable Instrument of Seller or any
Governmental Requirement applicable to Seller or (ii) does or will result in or
require the creation or imposition of any lien on any properties, assets or
revenues of Seller. Seller is in compliance with the Applicable Instruments of
Seller and all Governmental Requirements applicable to Seller except as
non-compliance would not have a material adverse effect on Seller's performance
of the Transaction Documents.
(f) Investment Company. Seller is not an "investment company" subject to
regulation under the Investment Company Act of 1940, as amended.
(g) Public Utility Holding Company. Seller is subject to regulation as a
"subsidiary" of a "holding company" in each case as such term is defined in the
Public Utility Holding Company Act of 1935, as amended.
(h) Ownership of Natural Gas. The Natural Gas to be delivered by Seller to
Purchaser hereunder shall be delivered to Purchaser with good and marketable
title thereto, free and clear of all liens, encumbrances or any other adverse
claims whatsoever, including royalties and Taxes for which Seller is responsible
under Sections 2.09 and 2.10, except for those that may be imposed by statute
and which are released upon payment by Seller of the purchase price under its
agreements to acquire the Natural Gas.
(i) Commercial Purpose. Seller has entered into this transaction for
commercial purposes related to its business as a producer, processor or
merchandiser of Natural Gas or natural gas liquids and not for speculative
purposes. Seller has the capability (either directly or indirectly), and
intends, to make delivery of the Natural Gas to be delivered hereunder. Seller
is selling the Natural Gas in the ordinary course of its business. Seller is
also acting as a principal and not as an agent, understands and acknowledges
that Purchaser has been and will be acting only on an arm's
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length basis and not as its agent, broker, advisor or fiduciary in any respect;
Seller is relying solely upon its own evaluation of this Agreement and the
transactions contemplated hereby (including the present and future results,
consequences, risks and benefits thereof, whether financial, accounting, tax,
legal or otherwise) and upon advice from its own professional advisors,
understands this Agreement and the transactions contemplated hereby and the
risks associated therewith, has determined that those risks are appropriate for
it, and is willing to assume those risks, and has not relied and will not be
relying upon any evaluation or advice (including any recommendation, opinion or
representation) from Purchaser or its affiliates or the representatives or
advisors of Purchaser or its affiliates.
(j) Margin Stock. Seller is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of the Prepaid Price
hereunder will be used to buy or carry any margin stock.
Section 3.02 Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
(a) Status and Authority. Purchaser is a company incorporated under the
laws of the jurisdiction of its formation and has all necessary corporate power
and authority to carry on its business as now being conducted by it. Purchaser
has full corporate power and authority to enter into this Agreement and the
Transaction Documents to which it is a party and to do all acts and things and
execute and deliver all other documents as are required hereunder or thereunder
to be done, observed or performed by it in accordance with the terms hereof or
thereof.
(b) Power and Authority. The execution, delivery and performance by
Purchaser of this Agreement and the Transaction Documents to which it is a Party
and the consummation of the transactions contemplated hereby and thereby are
within Purchaser's corporate power and authority and have been duly authorized
by all necessary corporate action.
(c) Validity of Documents and Enforceability. This Agreement and the
Transaction Documents to which Purchaser is a party are the legal, valid and
binding obligations of Purchaser enforceable against Purchaser in accordance
with their terms, except as the enforceability thereof may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity. Neither the execution and delivery of this Agreement or any Transaction
Document to which Purchaser is a party nor compliance with the terms and
conditions hereof or thereof by Purchaser (i) will result in a violation of the
terms of any Applicable Instrument of Purchaser or (ii) requires any approval or
consent of any governmental authority or agency having jurisdiction except such
as has already been obtained.
(d) Consents, Approvals, Etc. No authorization, consent or approval of, or
other action by, or notice to or filing with, any governmental authority,
regulatory body or any other Person is required for the due authorization,
execution, delivery or performance by Purchaser of this Agreement, or the
consummation of the transactions contemplated by this Agreement, except those
approvals which have been obtained, and those notices and filings which have
been made, copies of all of which have been delivered to Seller.
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(e) Compliance with Laws. Neither the execution, delivery and performance
by Purchaser of this Agreement or the Transaction Documents to which it is a
party nor the consummation of the transactions contemplated hereby or thereby
violates any provision of any Applicable Instrument of Purchaser or any
Governmental Requirement applicable to Purchaser. Purchaser is in compliance
with the Applicable Instruments of Purchaser and all Governmental Requirements
applicable to Purchaser except as non-compliance would not have a material
adverse effect on Purchaser's performance of the Transaction Documents.
(f) Commercial Purpose. Purchaser has entered into this transaction for
commercial purposes related to its business in conjunction with its line of
business and not for speculative purposes. Purchaser has the capability (either
directly or indirectly), and intends, to take delivery of the Natural Gas to be
delivered hereunder. Purchaser is acquiring the Natural Gas in the ordinary
course of business.
ARTICLE IV - COVENANTS
Section 4.01 Affirmative Covenants of Seller. Seller covenants and agrees
with Purchaser that so long as any obligation of Seller to deliver Natural Gas
or to make any payment is outstanding hereunder:
(a) Compliance with Laws, etc. Seller will comply with all Governmental
Requirements applicable to the performance of Seller's obligations hereunder,
except where noncompliance therewith would not have a material adverse effect on
Seller or on the performance of the Transaction Documents. Seller will comply
with the Applicable Instruments of Seller except as non-compliance would not
have a material adverse effect on Seller's performance of the Transaction
Documents.
(b) Maintenance of Corporate Existence. Seller will maintain its corporate
existence, except as otherwise permitted pursuant to Section 7.08.
(c) Notice of Event of Default or Event of Change. Seller shall notify
Purchaser of the occurrence of any event which with the passage of time or the
giving of notice, or both, would be an Event of Default or an Event of Change
promptly after becoming aware of the same.
(d) Qualification. Seller will be duly qualified to do business as a
foreign corporation and will be in good standing under the laws of all
jurisdictions in which the failure to be so qualified could have a material
adverse effect on Seller's performance of the Transaction Documents by or before
the first Delivery Month.
ARTICLE V - EVENTS OF DEFAULT AND EARLY TERMINATION
Section 5.01 Events of Default. Each of the following events shall
constitute an "Event of Default" by Seller under this Agreement:
(a) Seller shall (i) fail to deliver the Required Delivery Quantity either
(A) to the Delivery Points in accordance with the terms of this Agreement and
the Confirmation Letter or (B) to one or more mutually acceptable alternate
delivery points in accordance with Section 2.05 if an
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event of Force Majeure has occurred in a Delivery Month; and (ii) if an event of
Force Majeure has occurred and delivery to or receipt by Purchaser at one or
more alternate Delivery Points is not possible, fail to make a payment of the
Replacement Value in respect thereof in accordance with the provisions of
Section 2.06 and any such failure is not remedied within three (3) Business
Days; or
(b) Seller shall fail to pay any amounts due under any other Transaction
Document and such failure is not remedied within the grace period set forth
therein or, if no grace period is specified, within three (3) Business Days
after Purchaser's written notice to Seller thereof (designated a "Notice of
Default"); or
(c) Seller shall fail to perform or observe any material term, covenant or
agreement contained herein or in any Transaction Document to which it is a party
on its part to be performed or observed (other than any term, covenant or
agreement whose breach or default in performance is specifically dealt with
elsewhere in this Section 5.01) and such failure shall remain unremedied for
twenty-five (25) days after written notice (designated a "Notice of Default")
thereof to Seller by Purchaser; or
(d) Seller shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against Seller seeking to adjudicate it
as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property, and in the case of any such proceeding instituted against it
(but not yet instituted by it), shall remain undismissed or unstayed for a
period of sixty (60) days or Seller shall take any corporate action to authorize
any of the actions set forth above in this Section 5.01(d); or
(e) any representation or warranty made by Seller in this Agreement or any
Transaction Document shall prove to have been incorrect in any material respect
when made; or
(f) an Event of Default under the Guaranty Agreement shall occur and be
continuing or the Guaranty Agreement shall cease to be the legal, valid and
binding obligation of Guarantor or Guarantor shall so state in writing.
Section 5.02 Early Termination by Purchaser. At any time while an Event of
Default is continuing, Purchaser may, by notice to Seller specifying the
relevant Event of Default, designate a Business Day not earlier than the fifth
(5th) Business Day nor later than the tenth (10th) Business Day following
Seller's receipt of such notice (as provided in Section 7.01) as an early
termination date ("Early Termination Date"); provided, however, that if an Event
of Default pursuant to Section 5.01(d) shall have occurred, the Early
Termination Date shall occur immediately on the occurrence of such Event of
Default without the need for Purchaser to give any prior notice. Upon the
designation or occurrence of an Early Termination Date, the obligation of Seller
to make any further deliveries of Natural Gas to Purchaser under this Agreement
shall terminate and Seller shall pay to Purchaser the Termination Payment
together with any Unpaid Amounts. All amounts payable under this Section 5.02
shall become due on the Early Termination Date and shall be payable on the third
Business Day immediately following delivery by Purchaser of the statement
required pursuant to Section 5.03(c). Such amount will be paid together with (to
the extent permitted by applicable law) interest thereon (before as well as
after judgment or the filing of any petition for bankruptcy) from (and
including) the Early Termination Date to (but excluding) the date such amount is
paid, at
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the rate specified in Section 7.02. The parties agree that the Termination
Payment is a reasonable pre-estimate of the damages which would be incurred by
Purchaser as a result of an Event of Default and not a penalty.
Section 5.03 Calculation of Termination Payment.
(a) "Termination Payment" shall be the mean amount determined on the basis
of quotations from at least four Reference Dealers as the amount that would have
been payable on the Termination Date by Purchaser in consideration of an
agreement between Purchaser and the quoting Reference Dealer, and subject to
such documentation evidencing agreement on price as they may in good faith
agree, with the relevant Termination Date as the date of commencement of such
agreement that would have the effect of preserving for Purchaser the equivalent
of the remaining Required Delivery Quantities as set forth in the Confirmation
Letter that, but for the occurrence of the relevant Termination Date, Seller
would have been obligated to perform hereunder after such Termination Date.
Purchaser will request each Reference Dealer to provide its quotation to the
extent practicable as of the same time (without regard to different time zones)
on the relevant Termination Date (or, if a Termination Date is deemed to occur,
as of a time as soon thereafter as practicable). The time as of which such
quotations are to be provided will be selected in good faith by Purchaser. If
exactly three such quotations are provided, the Termination Payment will be the
quotation remaining after disregarding the highest and lowest quotations. For
this purpose, if more than one quotation has the same highest value or lowest
value, then one of such quotations shall be disregarded. If fewer than three
quotations are provided, then the Termination Payment shall be calculated in
accordance with Section 5.03(b).
(b) Subject to Section 2.07, if the Termination Payment cannot be
determined in accordance with Section 5.03(a) because fewer than three
quotations are provided, "Termination Payment" shall be an amount (discounted at
a U.S. Dollar interest rate reflecting the interpolated discount rate for the
forward London Interbank Offered Rate curve for the period commencing on such
Termination Date and ending on the last date of the last scheduled Delivery
Month) equal to the total amount required, as determined as of the relevant
Early Termination Date by Purchaser in good faith, to compensate it for its
direct actual losses and costs (including loss of bargain and reasonable legal
fees and other out-of-pocket expenses) that it incurs as a result of the early
termination of Seller's delivery obligations hereunder, including, without
limitation, any damages, losses, or expenses incurred in obtaining, terminating,
liquidating, reestablishing or employing hedges or related trading positions
against Purchaser's position hereunder.
(c) On or as soon as reasonably practicable following the occurrence of a
Termination Date, Purchaser will calculate the Termination Payment and will
provide Seller with a statement (1) showing, in reasonable detail, such
calculations (including all relevant quotations) and (2) giving details of the
relevant account to which the Termination Payment is payable. Any such statement
shall, absent manifest error, be conclusive evidence of the amount due in
respect of the Termination Payment.
Section 5.04 Surety Bond.
(a) Initial Surety Bond. To support its obligation to make the Termination
Payment hereunder, Seller hereby agrees to deliver the Initial Surety Bond on or
before the date set forth in the Confirmation Letter for payment of the Prepaid
Price.
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(b) Substitute Support Arrangements. If, at any time, the long-term
unsecured credit rating or financial strength rating of any of the Surety
Companies of the then-current Surety Bond shall be downgraded below the level
specified in clause (i) of the definition of "Acceptable Surety Companies" or
such rating shall be withdrawn, Seller agrees that within 30 Business Days
following delivery of a request of Purchaser, it shall deliver or cause to be
delivered one of the following:
(i) a replacement surety bond (the "Substitute Surety Bond") in
substantially the form of Exhibit A-1 or otherwise acceptable to
Purchaser issued by one or more Acceptable Surety Companies having a
schedule of payment obligations equal to, and reducing periodically
in accordance with, the remaining schedule of payment obligations
under the Surety Bond being replaced;
(ii) an irrevocable performance letter of credit in form and substance
satisfactory to Purchaser from a bank satisfactory to Purchaser in
its sole discretion covering payment amounts equal to, and reducing
periodically in accordance with, the remaining schedule of payment
obligations under the Surety Bond being replaced;
(iii) cash collateral in an amount equal to, and reducing periodically in
accordance with, the remaining schedule of payment obligations under
the Surety Bond being replaced, pursuant to a collateral agreement
in form and substance satisfactory to Purchaser in its sole
discretion; or
(iv) any combination of clauses (i), (ii) or (iii) set forth above
providing support in the amount of, and reducing periodically in
accordance with, the remaining schedule of payment obligations under
the Surety Bond being replaced;
provided however, Seller shall be deemed to have satisfied the foregoing
obligations of this Section 5.04(b) by the payment of a monthly premium in the
amount of 35 basis points per annum of the applicable Surety Company's
Commitment Percentage (as such term is defined in the Surety Bond) of the
Monthly Maximum Penal Sum (as such term is defined in the Surety Bond) with
respect to each month during which the long-term unsecured credit rating or
financial strength rating of any of such Surety Companies shall remain below the
level specified in clause (i) of the definition of "Acceptable Surety
Companies". Such premium shall begin to accrue on the 31st Business Day after
Seller's receipt of the request specified above and shall be payable monthly in
arrears on each Payment Date thereafter so long as (A) the long-term unsecured
credit rating or financial strength rating of any of such Surety Companies shall
remain below the level specified in clause (i) of the definition of "Acceptable
Surety Companies" or such rating remains withdrawn, and (B) Seller has not
otherwise satisfied the obligations of Section 5.04(b)(i), (ii), (iii) or (iv).
Upon delivery by Seller and acceptance by the Purchaser of any of the
items described in clauses (i) through (iv) of this Section 5.04(b), the Surety
Bond being replaced shall be deemed to be immediately null and void and
Purchaser shall promptly return the same to Seller and shall provide such
acknowledgment that same is released and of no further force or effect and that
the liability of the Surety Companies in respect of the Surety Bond being
replaced is discharged, in each case as such Surety Companies or Seller may
reasonably request.
(c) Payment Demands Under Surety Bonds. Upon the failure by Seller to make
the Termination Payment in full in accordance with this Agreement, which unpaid
amount of Termination Payment is not made by Guarantor in accordance with the
Guaranty Agreement within
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any applicable grace period provided for therein, in addition to drawing under
the irrevocable performance letter of credit or the cash collateral provided for
in Section 5.04(b), Purchaser shall have the right, by providing written notice
in the form attached hereto as Exhibit A-2, with appropriate insertions, to the
Surety Companies specifying the unpaid amount of the Termination Payment then
due, to instruct the Surety Companies to pay the lesser of such unpaid amount of
the Termination Payment or the current remaining payment obligation under and in
accordance with the Surety Bond. Notwithstanding the foregoing, in no event
shall Purchaser have the right to demand or receive, collectively, from the
Surety Companies and drawing under the irrevocable performance letter of credit
or cash collateral, any amount in excess of such unpaid amount of the
Termination Payment.
(d) Payment Under Surety Bond. The Surety Companies shall make their pro
rata payment under the Surety Bond to Purchaser not later than 10 Business Days
after receipt of a demand for payment pursuant to Section 5.04(c). It is
expressly agreed that, as provided in Section 5 to the Initial Surety Bond (and
the corresponding section in any Substitute Surety Bond), the payment by the
Surety Companies of their respective Commitment Percentage of the amount
demanded in accordance with this Section 5.04 shall, as to such Surety Company,
constitute satisfaction in full of all of its obligations under the Surety Bond.
Such payment shall be the exclusive remedy of the Purchaser under the Surety
Bond. Upon payment by a Surety Company, the Purchaser shall assign its rights to
payment against Seller and Guarantor to such Surety Company.
(e) No Waiver. Seller and Guarantor acknowledge that payment shall be made
by the Surety Companies in strict compliance with their respective obligations
under the Surety Bond (including Section 4 of the Initial Surety Bond or the
equivalent provision in any Substitute Surety Bond) and agree not to dispute
prior to payment any payment by the Surety Companies in compliance with the
Surety Bond. Notwithstanding the foregoing, and notwithstanding the provisions
of any Surety Bond (including but not limited to Sections 4 and 8 of the Initial
Surety Bond) no written notice as between Purchaser and the Surety Companies,
and no payment to or for the benefit of Purchaser by Seller, Guarantor or the
Surety Companies shall constitute a waiver of any other right, remedy or power
of Seller or Guarantor under this Agreement or any document executed in
connection herewith.
Section 5.05 Rights and Remedies of Purchaser.
(a) If an Early Termination Date has been designated under Section 5.02 or
6.02 and Seller has not paid the amounts due under Section 5.02 or Section 6.03
when such amounts are due, then Purchaser: (i) shall have the right to exercise
any and all rights and remedies available to it under any Transaction Document
or available at law or equity, including calling upon the Surety Bond in
accordance with the terms of Section 5.04; and (ii) shall have the right and be
entitled, at its option, to offset balances held by it for account of Seller or
Guarantor at any of its offices or other amounts owed to it under any
Transaction Document, in U.S. Dollars or in any other currency, against any
Termination Payments or Unpaid Amounts (regardless of whether such balances are
then due to Seller or Guarantor), in which case it shall promptly notify Seller
or Guarantor thereof, provided that Purchaser's failure to give such notice
shall not affect the validity thereof. Purchaser's right to offset balances held
by it for the account of Guarantor pursuant to this Section 5.05 shall be
subject to the limits set forth in the Guaranty Agreement.
(b) All proceeds received after an Early Termination Date shall be applied
first to reimbursement of expenses and indemnities provided for in this
Agreement and other Transaction
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Documents owed by Seller to Purchaser and then to the Termination Payment and
any Unpaid Amounts; and any excess shall be paid to Seller or as otherwise
required by any governmental requirement.
Section 5.06 Purchaser's Failure to Accept Delivery. If other than as a
result of an event of Force Majeure, Purchaser defaults in its obligation to
accept delivery of all or any part of the Required Delivery Quantity in respect
of a Delivery Month at the Delivery Points and such default shall remain
unremedied for one (1) Business Day after notice thereof to Purchaser by Seller,
then Seller, as its sole and exclusive remedy, (i) shall sell the Deficiency
Quantity for such Delivery Month and pay to Purchaser, in lieu of delivery of
the Deficiency Quantity in respect of such Delivery Month, the Replacement Value
of such Deficiency Quantity in respect of that Delivery Month, and (ii) if
Purchaser fails (other than as a result of an event or events of Force Majeure)
to accept delivery of the entire Delivery Quantity in respect of any two
Delivery Months at the Delivery Points during a 12 month period, Seller may
terminate this Agreement in the same manner as it may be terminated by Purchaser
pursuant to Sections 5.02 and 5.03, except that Seller will give the relevant
notices and calculate the amount of the Termination Payment to be made by Seller
to Purchaser. The Replacement Value shall be paid to Purchaser no later than the
Payment Date next following such Delivery Month, and Purchaser will accept such
payment in lieu of the Deficiency Quantity for such Delivery Month. Where
Purchaser defaults in its acceptance obligation as aforesaid, Seller shall use
all reasonable business efforts to maximize the Replacement Value of any
Deficiency Quantity and Seller shall prepare and deliver to Purchaser, within
five Business Days after the end of the applicable Delivery Month, a certificate
setting out the calculation of the Replacement Value accompanied by reasonably
available back-up documentation therefor. Any such certificate shall, absent
manifest error, be conclusive evidence of the amount due in respect of the
Replacement Value.
ARTICLE VI - EVENTS OF CHANGE AND ACCELERATED TERMINATION
Section 6.01 Events of Change. Each of the following events shall
constitute an "Event of Change" for the purposes of this Agreement:
(a) the enactment, promulgation, execution or ratification of, or any
change in or amendment to, any regulation or law (or the application or
interpretation of any regulation or law, as determined by a court or regulatory
authority of competent jurisdiction or as determined by the opinion of
independent counsel mutually acceptable to Seller and Purchaser) that occurs
after the date hereof which would result in the imposition of a Tax (other than
an increase in the rate of a general tax on overall income) or of state or
federal government royalties (in excess of those royalties currently in effect)
or of export or price controls in a material amount by any government or taxing
authority upon a party hereto with respect to delivery of, or acceptance of
delivery of, Natural Gas under this Agreement or with respect to any cash
payment made pursuant to Section 2.06 which in any case would materially
adversely affect the net cost to Seller or Purchaser of performing its
obligations hereunder; or
(b) the enactment, promulgation, execution or ratification of, or any
change in or amendment to, any regulation or law (or the application or
interpretation of any regulation or law, as determined by a court or regulatory
authority of competent jurisdiction or as determined by the opinion of
independent counsel mutually acceptable to Seller and Purchaser) that occurs
after the
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date hereof which would result in the performance of any obligation of Seller to
deliver Natural Gas or Purchaser to accept delivery of Natural Gas under this
Agreement being unlawful; or
(c) any one or more events of Force Majeure (other than any event
specified in Section 6.01(b)) that occur and continue for a consecutive period
of longer than ninety (90) days.
Section 6.02 Accelerated Termination.
(a) During the continuation of an Event of Change contemplated by Section
6.01(a), both parties shall make reasonable efforts to make arrangements to
avoid the imposition of any Tax contemplated by Section 6.01(a); provided that
this Section 6.02 shall not impose on either party any obligation other than to
negotiate in good faith to make such arrangements as will not adversely affect
the parties.
(b) During the continuation of any Event of Change, or, in the case of an
Event of Change under Section 6.01(a), if any arrangement is not made pursuant
to Section 6.02(a), then either party may designate an accelerated termination
date ("Accelerated Termination Date") upon not less than two (2) and not more
than ten (10) Business Days' notice to the other party. Upon the Accelerated
Termination Date, the parties' obligations hereunder shall terminate, except for
the obligations contained in Section 6.03 and Section 7.02.
Section 6.03 Payments on Accelerated Termination. Upon the designation of
an Accelerated Termination Date, Seller shall pay to Purchaser an amount equal
to the Termination Payment plus any Unpaid Amounts. All amounts payable under
this Section 6.03 shall become due on the Accelerated Termination Date and shall
be payable on the Business Day following delivery by Purchaser of the
certificate of calculation of the Termination Payment contemplated by Section
5.03(c). The remedy under this Section 6.03 shall be Purchaser's sole remedy
upon the occurrence of an Accelerated Termination Date; provided that nothing
herein shall affect a party's obligation to make payments of amounts which were
due and owing (whether or not payable) on or prior to the occurrence of such
Accelerated Termination Date.
ARTICLE VII - MISCELLANEOUS
Section 7.01 Notice. Any demand, notice or communication to be made or
given hereunder shall be in writing and may be made or given by personal
delivery or by transmittal by telecopy addressed to the respective party as
follows:
To Seller:
Columbia Natural Resources, Inc.
900 Pennsylvania Avenue
Charleston, West Virginia 25362-0070
Attention: Chief Financial Officer
Telecopier No.: (304) 353-5249
Telephone No.: (304) 353-5067
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with a copy to:
Columbia Energy Group Service Corporation
13880 Dulles Corner Lane
Herndon, Virginia 20171
Attention: Chief Financial Officer
Telecopier No.: (703) 561-7303
Telephone No.: (703) 561-6792
To Purchaser:
Mahonia II Limited
22 Grenville Street
St. Helier
Jersey, Channel Islands JE4 8PX
Attention: Ian James
Telecopier No.: 44-1534-609333
Telephone No.: 44-1534-609000
with copy to:
The Chase Manhattan Bank
270 Park Avenue, 6th Floor
New York, New York 10017
Attention: Dinsa Mehta
Telecopier No.: (212) 834-6084
Telephone No.: (212) 834-2032
or to such other address or telecopy number as any party may from time to time
notify the others in accordance with this Section 7.01. Any demand, notice or
certification made or given by personal delivery shall be conclusively deemed to
have been given on the day of actual delivery thereof, or, if made or given by
telecopy, on the date that such transmittal is received by a responsible
employee of the recipient in legible form (it being agreed that the burden of
proving receipt will be on the sender and will not be met by a transmission
report generated by the sender's facsimile machine) or if such date is not a
Business Day, on the first Business Day following the transmittal thereof.
Section 7.02 Interest on Overdue Amounts. If any monetary amounts payable
under this Agreement are not paid when due, then such overdue amount shall bear
interest for each day until paid in full, payable on demand, both before and
after judgment or petition for bankruptcy, at the U.S. Base Rate plus one and
one-half percent per annum on the basis of the actual number of days elapsed and
on the basis of a year of 360 days, as the case may be, but in no event shall
the interest rate exceed the maximum rate allowed by law. Such interest shall be
determined daily and compounded monthly in arrears on the last day of each
calendar month.
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Section 7.03 Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL LAWS OF THE UNITED
STATES OF AMERICA.
(b) ANY PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, THE JURISDICTION
OF THE AFORESAID COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS WITH
RESPECT TO ANY PROCEEDING (WHETHER OR NOT IN NEW YORK), BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PERSON, AT ITS
RESPECTIVE ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID PROCEEDINGS ARISING OUT OF
OR IN CONNECTION WITH THIS OR ANY OTHER TRANSACTION DOCUMENT BROUGHT IN THE
COURTS REFERRED TO IN SECTION 7.03(b) HEREOF AND HEREBY FURTHER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(d) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY LAW ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT
OF OR RELATING DIRECTLY OR INDIRECTLY TO ANY OF THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH.
Section 7.04 Severability. In the event that one or more of the provisions
contained in this Agreement shall be finally judicially determined to be
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction the validity, legality or enforceability of the remaining
provisions hereof shall not be affected or impaired thereby and the parties
agree to negotiate in good faith to agree on a provision which is enforceable
and which preserves the economic bargain of the parties to the greatest extent
possible. Each of the Sections of this Agreement is hereby declared to be
separate and distinct.
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Section 7.05 Place of Payment; Currency. Unless otherwise stated, all
payments herein or in any Transaction Document to Purchaser shall be made at
Purchaser's account, account number 323874541, maintained by Purchaser with The
Chase Manhattan Bank in New York City, New York. Unless otherwise stated, all
amounts expressed herein in terms of money refer to the United States Dollar and
all payments to be made hereunder shall be made in such currency.
Section 7.06 Purchaser Not an Agent. Purchaser acknowledges and confirms
that all purchases of Natural Gas hereunder are being made by it as a principal
and that it is not acting as agent for any other Person in connection with
purchases of Natural Gas hereunder. Seller acknowledges and agrees that
Purchaser may employ (and perform through) agents or servicers to perform its
obligations in respect of scheduling delivery and receipt of Natural Gas
hereunder, arranging for actual delivery and performance of Purchaser's other
obligations; and Seller agrees to accept performance through such agents or
servicers.
Section 7.07 Benefit of the Agreement. This Agreement shall inure to the
benefit of and be binding upon Seller, Purchaser and their respective successors
and assigns.
Section 7.08 Assignment and Transfer. Except as expressly provided in this
Section 7.08, neither party may assign any rights or delegate any obligations
hereunder without the prior written consent of the other party. Seller may
assign any rights or delegate any obligations hereunder without the consent of
Purchaser in the event of a transaction involving the sale, transfer or other
disposition of all or substantially all of the assets of Seller, or a
recapitalization, merger or other combination involving Seller, and in either
event, the survivor entity, if not Seller, expressly assumes the obligations of
Seller hereunder. Seller may otherwise assign any rights or delegate any
obligations hereunder with the consent of Purchaser, which consent will not be
unreasonably withheld or delayed. With the consent of Seller, which consent will
not be unreasonably withheld or delayed, Purchaser may assign or grant a
security interest in Purchaser's interests in this Agreement and the other
Transaction Documents as collateral security for any financing or hedging
provided to Purchaser or to any of its affiliates, whether now existing or
hereafter created; and the terms of such assignment may permit such assignee or
secured party to foreclose or substitute itself in lieu of Purchaser hereunder
and thereunder.
Section 7.09 Entire Agreement. This Agreement and the other Transaction
Documents constitute the entire agreement between the parties hereto and with
respect to the subject matter hereof supersede any prior agreement, undertaking,
declarations, commitments or representations, written or oral, in respect
thereof. There are no unwritten oral agreements among the parties.
Section 7.10 Amendments. This Agreement may not be modified or amended
except by an instrument in writing signed by Purchaser and Seller or by their
respective successors or permitted assigns.
Section 7.11 No Waivers, Remedies. No failure to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law except
as otherwise expressly provided herein.
Section 7.12 Time of the Essence. Time shall be of the essence in this
Agreement.
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Section 7.13 Counterparts. This Agreement may be executed in counterparts,
each of which so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument.
Section 7.14 Guaranty Agreement. Seller's payment obligations under this
Agreement are guaranteed by the Guaranty Agreement to the extent set forth
therein.
Section 7.15 Intent. The parties intend that this Agreement shall
constitute a purchase and sale of inventoriable goods and a forward contract
within the meaning of Section 556 of the United States Bankruptcy Code of 1978,
as amended from time to time.
Section 7.16 Disclosure of Information. In the event that any party
provides the other with written confidential information belonging to such
disclosing party or its affiliates which has been denominated in writing as
"confidential", the non-disclosing party agrees to thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that each utilizes in maintaining its own confidential information. This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without such party breaching its obligation of confidence hereunder,
(iii) are hereafter developed by such party without using the disclosing party's
information, (iv) are hereafter obtained by or available to such party from a
third party who owes no obligation of confidence to the disclosing party with
respect to such information, (v) are disclosed with the disclosing party's
consent, or (vi) as may be required by Persons regulating the activities of the
non-disclosing party, or law or regulation or order of any governmental
authority in any judicial, arbitration or governmental proceeding; provided,
however, a party shall (A) give the other party timely notice of the service or
subpoena or other process so that the other party may seek a protective order or
other legal remedy to prevent disclosure or to take steps to have the
confidentiality of such information protected to the extent possible under such
legal process, and (B) disclose only such information as is required by such
process. Further, any party may disclose any such information to any independent
petroleum engineers or consultants, any independent certified public
accountants, any legal counsel employed by it in connection with this Agreement
or any Transaction Document, including without limitation, the enforcement or
exercise of all rights and remedies thereunder; provided, however, that it
imposes on such Person to whom such information is disclosed the same obligation
to maintain the confidentiality of such information as is imposed upon it
hereunder. Notwithstanding anything to the contrary provided herein, this
obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the disclosing party requests in writing at
least 30 days prior to the expiration of such three year period, that the
non-disclosing party maintain the confidentiality of such information for an
additional three year period.
Section 7.17 Stamp and Documentary Taxes. To the fullest extent permitted
by applicable law, Seller agrees to pay, and shall indemnify Purchaser for any
and all liabilities incurred by it in connection with, any present or future
stamp or documentary taxes or any other excise or property taxes, duties,
charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Transaction Document.
Section 7.18 Further Assurances. The parties hereto agree to take all such
further actions and to execute, acknowledge and deliver all such further
documents that are necessary or useful to carry out the purposes of this
Agreement.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first written above.
COLUMBIA NATURAL RESOURCES, INC.
By: /s/ W.H. Harmon
Name: W.H. Harmon
Title: President and CEO
MAHONIA II LIMITED
By: /s/ Ian James
Name: Ian James
Title: Director
[Signature Page - Natural Gas Advance Sale Contract
between Columbia Natural Resources, Inc. and Mahonia II Limited]
27
ANNEX 1
To Natural Gas Advance Sale Contract
Conditions Precedent
1. The Guaranty Agreement shall have been executed by the Guarantor.
2. The Initial Surety Bond shall have been issued.
3. An opinion of counsel to each Surety Company shall have been delivered to
Purchaser and The Chase Manhattan Bank.
4. An opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel to Seller
and Guarantor, in substantially the form set out in Exhibit B, shall have
been delivered to Purchaser.
5. A certificate of the Secretary or an Assistant Secretary of Seller setting
forth (i) resolutions of its Board of Directors with respect to the
authorization of Seller to execute and deliver the Agreement and the
Transaction Documents to which it is a party and to enter into the
transactions and perform its obligations contemplated in those documents,
(ii) the officers of such Person (y) who are authorized to sign such
agreements and (z) who will, until replaced by another officer or officers
duly authorized for that purpose, act as its representative for the
purposes of signing documents in connection with such agreements and the
transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) certificate of incorporation, by-laws, if
any, and other organizational documents of Seller, certified as being true
and complete. Purchaser may conclusively rely on such certificate until it
receives notice in writing from Seller to the contrary.
6. A certificate of the Secretary or an Assistant Secretary of Guarantor
setting forth (i) resolutions of its board of directors authorizing
officers of Guarantor to issue guarantees in the name of Guarantor on
behalf of its subsidiaries, (ii) the officers of the Guarantor (y) who are
authorized to sign such agreement and (z) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents in connection with
such agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) certificate of
incorporation, by-laws, if any, and other organizational documents of
Guarantor, certified as being true and complete. Purchaser may
conclusively rely on such certificate until it receives notice in writing
from Seller to the contrary.
Annex 1-1