EXHIBIT 10-2
BASE GAS LEASE AGREEMENT
This Base Gas Lease Agreement ("Lease Agreement") is entered into this
9th day of January, 2002 by and between NJR Energy Services Company ("NJRES"), a
New Jersey corporation, and Central New York Oil And Gas Company, LLC ("CNYOG"),
a New York limited liability company.
WHEREAS, CNYOG owns and operates an interstate natural gas storage
facility known as the Stagecoach Natural Gas Storage Facility located in Tioga
County, New York ("Stagecoach"); and
WHEREAS, CNYOG may need to maintain a certain minimum quantity of
natural gas, hereinafter referred to as "base gas," to enable CNYOG to operate
Stagecoach; and
WHEREAS, NJRES owns or controls supplies of natural gas and is willing
to lease a certain quantity of such natural gas to CNYOG for use as base gas, on
the terms and conditions set forth herein; and
WHEREAS, in consideration for such lease of natural gas by NJRES, CNYOG
is willing to enter into an interruptible service agreement with NJRES under its
Rate Schedule ISS at the minimum rates legally permissible and on such other
terms and conditions as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and the mutual benefits to be realized by the parties, NJRES and CNYOG
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Unless otherwise defined in this Lease Agreement, all capitalized terms
used herein shall have the same definitions as set forth in the FERC
Gas Tariff Original Volume No. 1 of Central New York Oil And Gas
Company, LLC filed with the Federal Energy Regulatory Commission,
effective December 1, 2001, as it may be supplemented and amended from
time to time ("CNYOG Tariff").
ARTICLE II
TERM
2.1 This Lease Agreement shall be effective from the date first above
written, and shall continue for a primary term of ten (10) years, which
term shall automatically be extended for additional periods of one year
unless terminated by either party
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upon the provision of not less than thirty (30) days written notice to
the other prior to the expiration of any such term. Notwithstanding the
foregoing, this Lease Agreement shall terminate automatically in the
event that that certain Amended and Restated Natural Gas Storage
Marketing and Management Agreement executed by and between NJRES and
eCORP Marketing, LLC as of January 9, 2002 ("M&M Agreement") is
terminated for any reason, and the effective date of the termination of
this Lease Agreement shall be deemed the same date as the effective
date of the termination of the M&M Agreement. In addition, (i) CNYOG
shall have the right to terminate this Lease Agreement at any time by
sending NJRES at least thirty (30) days advance written notice of
termination, and (ii) NJRES shall have the right to terminate this
Agreement in the event of a CNYOG Default (as hereinafter defined) that
continues beyond any applicable cure period. The parties hereto hereby
retain any and all other remedies available at law or in equity. As
used herein, the term "CNYOG Default Event" shall mean any of the
following events:
(a) if CNYOG shall fail to comply with any provision of this Lease
Agreement; provided, however, such failure to comply shall not
constitute a CNYOG Default Event if such failure is remedied
within twenty (20) days of written notice by NJRES of such
failure; or
(b) CNYOG shall (i) execute an assignment for the benefit of its
creditors, (ii) become or be adjudicated a bankrupt or
insolvent, (iii) admit in writing its inability to pay its
debts generally as they become due, (iv) apply for or consent
to the appointment of a conservator, receiver, trustee, or
liquidator of it or of all or a substantial part of its
assets, (v) file a voluntary petition seeking reorganization
or an arrangement with creditors, or to take advantage of or
seek any other relief under any applicable liquidation,
conservatorship, bankruptcy, insolvency, rearrangement,
moratorium, reorganization, or similar debtor relief laws
affecting the rights of creditors generally from time to time
in effect ("Debtor Relief Laws"), (vi) file an answer
admitting the material allegations of or consenting to, or
default in, a petition filed against it in any proceeding
under any Debtor Relief Laws, or (vii) institute or
voluntarily be or become a party to any other judicial
proceedings intended to effect a discharge of its debts, in
whole or in part, or a postponement of the maturity or the
collection thereof; or
(c) (i) an order, judgment, or decree shall be entered by any
court of competent jurisdiction approving a petition seeking
reorganization of CNYOG or appointing a conservator, receiver,
trustee, or liquidator of CNYOG or of all or any substantial
part of any such company's assets, and such order, judgment,
or decree is not permanently stayed or reversed within ninety
(90) days after the entry thereof, or (ii) a petition is filed
against CNYOG seeking reorganization, an arrangement with
creditors, or any other relief under any Debtor Relief Laws,
and such petition is not discharged within ninety (90) days
after the filing thereof.
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2.2 Notwithstanding the foregoing Section 2.1, in the event of the
termination of this Lease Agreement, all provisions of this Lease
Agreement necessary to fulfill the rights and obligations of the
parties hereto (including, but not limited to, the withdrawal and
return of all natural gas leased hereunder and the satisfaction of all
payment and indemnification obligations) shall survive until such
rights and obligations have been fulfilled or waived.
ARTICLE III
LEASE OF BASE GAS
3.1 NJRES hereby agrees to lease to CNYOG 2,000,000 dekatherms ("dt") of
natural gas for use by CNYOG as base gas for Stagecoach. Such leased
natural gas shall be referred to herein as "NJRES Base Gas."
3.2 NJRES shall deliver the NJRES Base Gas to the Point of
Injection/Withdrawal at such rates of injection as are mutually agreed
by the parties; provided, however, that the parties shall use
commercially reasonable efforts to complete the delivery and injection
of such NJRES Base Gas by June 30, 2002.
3.3 CNYOG shall reimburse NJRES for all transportation charges incurred by
NJRES to transport the NJRES Base Gas from Tennessee Gas Pipeline
Company's Station 319 to the Point of Injection/Withdrawal.
3.4 NJRES shall deliver to CNYOG gas for use as NJRES Base Gas to which it
has good and merchantable title and which is free and clear of all
liens, encumbrances and claims. Title to the NJRES Base Gas shall at
all times remain with NJRES. CNYOG shall at all times acknowledge
NJRES's ownership of the NJRES Base Gas while such gas is in CNYOG's
possession and control and CNYOG shall not, directly or indirectly,
create, incur, assume or suffer to exist any liens, encumbrances or
claims with respect to any NJRES Base Gas while such gas is in CNYOG's
possession and control.
3.5 In lieu of a cash lease payment, CNYOG shall be obligated to enter into
a service agreement with NJRES under its Rate Schedule ISS on the terms
and conditions set forth in Article VII below.
3.6 CNYOG acknowledges and agrees that the NJRES Base Gas is leased, to be
delivered and to be held for the sole purpose of serving as base gas at
Stagecoach and shall use such gas for no other purpose without the
express written consent of NJRES.
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ARTICLE IV
WITHDRAWAL OF NJRES BASE GAS
4.1 NJRES shall have no right to withdraw any NJRES Base Gas from
Stagecoach while this Lease Agreement remains in effect.
4.2 Upon termination of this Lease Agreement pursuant to Article II, CNYOG
shall, at the election of NJRES, (i) redeliver the NJRES Base Gas to
NJRES at the Point of Injection/Withdrawal at daily rates and times
within the ability of CNYOG to tender for delivery and NJRES to receive
over a mutually agreeable period of up to eighteen (18) months (or such
longer period consistent with the applicable requirements of the CNYOG
Tariff as may be required by NJRES to accept such gas for redelivery),
and/or (ii) transfer (at no cost to NJRES) any or all of the NJRES Base
Gas then in storage to the account of NJRES under any then existing
NJRES FSS Service Agreement or ISS Service Agreement, so long as such
transfer does not exceed the receiving party's Maximum Storage
Quantity. As an alternative to the foregoing, by mutual agreement of
the parties, NJRES may sell such NJRES Base Gas to CNYOG at a price to
be negotiated.
ARTICLE V
RATES AND CHARGES
5.1 CNYOG shall assess no charges against NJRES with respect to the
injection, withdrawal, or storage of the NJRES Base Gas.
5.2 CNYOG shall be responsible for the payment of all taxes (including
federal, state and local taxes, sales, gross receipts, use, ad valorem,
value-added, excise, and real and personal taxes, and penalties,
additions and interest with respect thereto), assessments, and fees
(including license, registration, filing and recording fees) (all of
the foregoing shall be referred to herein as "Impositions") associated
with the NJRES Base Gas applicable to any period during the term of
this Lease Agreement, and CNYOG agrees to pay, and indemnify and hold
harmless NJRES from and against, all such Impositions.
ARTICLE VI
POSSESSION AND CONTROL, RISK OF LOSS, AND INDEMNIFICATION
6.1 As between the parties hereto, CNYOG shall be deemed to be in exclusive
control and possession of the NJRES Base Gas from the time it is
received by CNYOG from NJRES at the Point of Injection/Withdrawal until
the time it is delivered from CNYOG to NJRES at the Point of
Injection/Withdrawal; at all other times, NJRES shall be deemed to be
in exclusive control and possession of such gas. As between them, the
party in control and possession of the NJRES Base Gas shall bear all
risk of loss with respect to all or any portion of such gas and be
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responsible for any damage or injury caused thereby while the NJRES
Base Gas is in CNYOG's possession and control.
6.2 CNYOG assumes all liability for and shall indemnify, defend and hold
harmless NJRES and its successors, assigns, officers, directors, agents
and employees from and against any and all losses, damages,
liabilities, injuries, costs and expenses (including without limitation
attorneys' fees) due to or arising out of any claims, including injury
to and death of persons, arising from any act or incident related to
Stagecoach while the NJRES Base Gas is in CNYOG's control and
possession.
6.3 CNYOG shall, at all times, maintain with respect to all gas stored from
time to time in Stagecoach, including the NJRES Base Gas, insurance
against loss in an amount not less than thirty million dollars
($30,000,000). Any such policy of insurance shall name NJRES as an
additional insured and shall insure NJRES regardless of any breach or
violation of any warranty, declaration or condition contained in such
policies by CNYOG. Upon request of NJRES, CNYOG shall furnish
certificates of insurance with respect to such insurance to NJRES for
inspection.
ARTICLE VII
ISS SERVICE AGREEMENT
7.1 CNYOG hereby agrees to enter into an interruptible storage, injection
and withdrawal service agreement with NJRES pursuant to its Rate
Schedule ISS ("ISS Service Agreement"). Such ISS Service Agreement
shall be generally consistent with the Form of ISS Service Agreement
set forth in the CNYOG Tariff, and it shall have the following terms
and conditions:
a. the Maximum Storage Quantity shall be 3,000,000 dt;
b. the Maximum Daily Injection Quantity shall be 150,000 dt;
c. the Maximum Daily Withdrawal Quantity shall be 300,000 dt;
d. the only applicable rates and charges shall be the Annual
Charge Assessment and the Electric Power and Use/Loss rates;
provided, however, that such rates and charges shall apply
only to the extent they are unavoidable pursuant to the CNYOG
Tariff; and
e. the term shall be for a primary term of ten (10) years, which
term shall be extended on a year-to-year basis unless
terminated by either party upon the provision of fifteen (15)
months' prior written notice to the other.
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ARTICLE VIII
NOTICES AND COMMUNICATIONS
8.1 All notices and other written communications between the parties shall
be sent by any of the following methods: (i) Certified U.S. Mail,
postage prepaid with return receipt requested; or (ii) prepaid delivery
service with receipt confirmed by the carrier; or (iii) facsimile
transmission with receipt confirmed by the sender's machine; or (iv)
delivery in person. Any communication not specifically required to be
in writing may also be sent by electronic data exchange upon mutual
agreement of the parties.
8.2 The contact information for communicating with a party shall be as
follows:
For CNYOG: With a copy to:
Central New York Oil And Central New York Oil And
Gas Company, LLC Gas Company, LLC
10,000 Memorial Drive 211 North Robinson, Suite 1510
Suite 530 One Leadership Square
Houston, TX 77002 Oklahoma City, OK 73102-7101
Attention: Chief Operating Officer Attention: General Counsel
FAX: 713-526-2363 FAX: 405-235-0992
For NJRES:
NJR Energy Services Company
P.O. Box 1464
Wall, NJ 07719
Attention: Director - Energy Services
FAX: 732-938-1071
ARTICLE IX
MISCELLANEOUS
9.1 Agreement Binding on Successors. This Lease Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party hereto may
assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of the other party.
9.2 Headings. The headings in this Lease Agreement are solely for
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
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9.3 Counterparts. This Lease Agreement may be executed in counterparts, all
of which taken together shall constitute a single document.
9.4 Governing Law. This Lease Agreement has been negotiated and shall be
consummated in the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to conflict of laws.
9.5 Regulatory Matters. This Lease Agreement shall be subject to all valid
applicable federal, state and local laws and to the orders, rules and
regulations of any duly constituted federal or state regulatory body or
authority having jurisdiction. Should either party hereto, by force of
any such law or regulation, be ordered or required to do any act
inconsistent with the provisions of this Lease Agreement or prohibited
from performing any act required under this Lease Agreement or should
its performance under this Lease Agreement become commercially
impracticable as a result of such law or regulation, then the parties
shall negotiate in good faith to reform this Lease Agreement so as to
give effect to the original intention of the parties. In the event that
such reformation is not possible, then the affected party shall have
the right to terminate this Lease Agreement upon 10 days' written
notice to the other party, which notice shall be given within 30 days
after the party giving notice becomes aware of the facts or
circumstances giving rise to this right to terminate. If the right to
terminate is not exercised by either party, then the Lease Agreement
shall continue but shall be deemed modified to conform to the
requirements of such law or regulation.
9.6 Entire Agreement. This Lease Agreement and the other documents referred
to herein set forth the entire understanding of the parties with
respect to the subject matter hereof, supersede all existing agreements
among them concerning such subject matter and may be modified only by a
written instrument duly executed by the party or parties against whom
enforcement thereof is or could be sought.
9.7 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NJRES AND CNYOG HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION
WITH THIS LEASE AGREEMENT.
9.8 This Lease Agreement is not intended to create a partnership,
corporation, limited liability company or any other form of business
entity or association between the parties.
9.9 Jurisdiction. Any legal action or proceeding with respect to this
Agreement and any action for enforcement of any judgment in respect
thereof shall be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, each of NJRES and
eCORP Marketing hereby accepts for itself and in respect of
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its property, generally and unconditionally, the exclusive jurisdiction
of the aforesaid courts and appellate courts from any appeal thereof.
Each of NJRES and eCORP Marketing irrevocably consents to the service
of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each of NJRES and eCORP Marketing
at its notice address provided pursuant to Section 5. hereof. Each of
NJRES of eCORP Marketing hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Agreement brought in the courts referred to above and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall affect the
right of either party hereto or its designees to serve process in any
other manner permitted by law.
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IN WITNESS WHEREOF, this Lease Agreement has been executed by the
parties as of the date first above written.
NJR ENERGY SERVICES COMPANY
By: _______________________________
Name: _____________________________
Title: ____________________________
CENTRAL NEW YORK OIL AND GAS COMPANY, LLC
By: _______________________________
Name: _____________________________
Title: ____________________________
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