Master Gas Purchase and Sale Agreement - Warren Resources Inc.
MASTER GAS PURCHASE AND SALE AGREEMENT
This Master Gas Purchase and Sale Agreement consists of these General Terms
and Conditions and all other Exhibits and Transaction Confirmations
(collectively, this "Agreement") and is entered into effective as of the 1st day
of January, 2001 (the "Effective Date") by and between Warren Resources, Inc., a
New York corporation ("Buyer"), and _____________, a Delaware limited
partnership ("Seller"). Buyer and Seller may also be referred to individually as
"Party" or collectively as "Parties."
General Terms and Conditions
ARTICLE 1
DEFINITIONS
All references to Articles and Sections are to those set forth in this
Agreement. Reference to any document means such document as amended from time to
time and reference to any Party includes any permitted successor or assignee
thereof. The following definitions and any terms defined internally in this
Agreement shall apply for all purposes of this Agreement and all notices and
communications made pursuant to this Agreement.
1.1 "Alternative Delivery Procedure" or "ADP" means that the Parties have
agreed to make and accept deliveries of Gas under a NYMEX Gas Futures Contract
under terms that are different from the delivery terms specified in the Futures
Contract and have notified NYMEX that the transaction will be completed under
the Alternative Delivery Procedure as provided in the NYMEX Rules. ADP shall
incorporate the meaning and remedies of Priority Firm as described herein.
1.2 "Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such person. For this purpose,
"control" means the direct or indirect power, whether by contract or through the
ownership of capital stock or equity interests or otherwise, to elect a majority
of such other Person's board of directors or similar governing body or to direct
or cause the direction of the management and policies of such Person.
1.3 "Bankruptcy Proceeding" means, with respect to a Person, any of the
following: (i) the making of an assignment or any general arrangement for the
benefit of creditors; (ii) the filing by such Person of a petition or otherwise
commencing, authorizing or acquiescing in the commencement of a proceeding or
cause of action under any bankruptcy or similar law for the protection of
creditors, or the filing of such a petition against such Person if such petition
is not withdrawn or dismissed for 30 Days after such filing; (iii) such Person
otherwise becomes bankrupt or insolvent (however evidenced); or (iv) such Person
is unable to pay its debts as they fall due.
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1.4 "Business Day" means any day other than a Saturday, Sunday or a Federal
Reserve Bank holiday.
1.5 "Buyer" means the Party to a Transaction who is obligated to purchase
and receive, or cause to be received, Gas during a Delivery Period.
1.6 "Collateral Requirement" means the sum of (a) the maximum of (i) the
net amount owed by one Party to the other Party for performance provided
pursuant to any and all Transactions performed in the immediately preceding
month and (ii) the net amount owed by one Party to the other Party for
performance to be provided pursuant to any and all Transactions to be performed
in the immediately following month, plus (b) the net amount owed by one Party to
the other Party for performance provided (or to be provided) pursuant to any and
all Transactions performed in the current month, plus (c) the sum of Gains,
Losses and Costs, as defined in Section 6.3.
1.7 "Claims" means all actions, suits or proceedings, whether threatened or
filed and whether groundless, false or fraudulent, that directly or indirectly
relate to the subject matter of an indemnity, and the resulting losses, damages,
expenses, attorneys' fees and court costs, whether incurred by settlement or
otherwise, and whether such actions, suits or proceedings are threatened or
filed prior to or after the termination of this Agreement.
1.8 "Confirm Deadline" means 5:00 p.m. on the second Business Day following
the date of receipt of the Transaction Confirmation.
1.9 "Contract Price" means the price in $U.S. (unless otherwise provided
for) per MMBtu to be paid by Buyer to Seller for the Gas pursuant to a
Transaction.
1.10 "Contract Quantity" means that quantity of Gas that Seller agrees to
sell and deliver, or cause to be delivered, to Buyer, and that Buyer agrees to
purchase and receive, or cause to be received, from Seller pursuant to the terms
of a Transaction.
1.11 "Day", "day" or "daily" means a period of twenty-tour (24) consecutive
hours coextensive with a "day" as defined by the Receiving Transporter; or as
otherwise stated in the Transaction Confirmation.
1.12 "Daily Contract Quantity" means the agreed upon quantity of Gas to be
delivered and received, pursuant to a Transaction, each Day during the Delivery
Period.
1.13 "Delivery Period" means the period during which deliveries are to be
made.
1.14 "Delivery Point(s)" means the point(s) agreed upon by Seller and Buyer
where Seller will deliver and Buyer will receive Gas.
1.15 "Demand Charges" means the amount of reservation charge, if any,
specified for a Transaction.
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1.16 "Eligible Collateral" shall mean (i) cash or (ii) a Letter of Credit
from a financial institution acceptable to the beneficiary Party.
1.17 "Equitable Defenses" means any bankruptcy, insolvency, reorganization
and other laws affecting creditor's rights generally, and with regard to
equitable remedies, the discretion of the court before which proceedings to
obtain same may be pending.
1.18 "Exchange for Physical" or "EFP" means the purchase, sale or exchange
of natural Gas as the "physical" side of an exchange for physical transaction
involving gas future contracts. EFP shall incorporate the meaning and remedies
of Priority Firm as defined herein.
1.19 "Firm" means, with respect to a Transaction, that the only excuse for
the failure to deliver Gas by Seller or the failure to receive Gas by the Buyer
pursuant to a Transaction is the existence of Force Majeure.
1.20 "Force Majeure" means an event or circumstance not within the
reasonable control of the Party (or in the case of third party obligations or
facilities, the third party) seeking to have its performance obligation excused
thereby (the "Claiming Party"). Force Majeure includes, but is not limited to:
acts of God; landslide; lightning; earthquake; fire; storm; hurricane; flood;
explosion; accident or breakage or necessity of repairs to machinery, equipment,
or pipelines; weather related events affecting an entire geographic region such
as low temperatures which cause freezing or failure of wells, lines of pipe, or
other facilities; interruption of firm transportation or storage; riot; civil
disturbance; insurrection; war; strike, lockout or labor dispute; labor or
material shortage; sabotage; and action, inaction or restraint by court order or
public or governmental authority (so long as the Claiming Party has not applied
for or assisted in the application for, and has opposed where and to the extent
reasonable, such government action). Force Majeure specifically excludes (i) the
loss of Buyer's markets or Buyer's inability economically to use or resell Gas
purchased hereunder; (ii) Seller's ability to sell Gas to a market at a more
advantageous price; and (iii) the curtailment of interruptible transportation.
1.21 "GAAP" means United States generally accepted accounting principles,
consistently applied.
1.22 "Gas" means any mixture of hydrocarbons and non-combustible gases as a
gaseous state consisting primarily of methane.
1.23 "Guarantor" for Buyer means Warren Resources, Inc.
1.24 "Imbalance Charges" means any scheduling penalties, imbalance
penalties, overpull or unauthorized overrun penalties, operational flow order
penalties, cash out charges, banking charges or similar penalties, fees or
charges (in cash or in kind) assessed by a Transporter for failure to satisfy
the Transporter's balance, scheduling and/or nomination requirements.
1.25 "Interest Rate" means, for any day, 15% per annum plus the per annum
rate of interest equal to the prime lending rate as may from time to time be
published in The Wall Street Journal under "Money Rates" on such day, or if such
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day is not a Business Day, the immediately preceding Business Day; provided,
however, that the Interest Rate shall never exceed the maximum rate permitted by
applicable law.
1.26 "Interruptible" means that either Party may interrupt its performance
at any time for any reason, with no liability, except such interrupting Party
may be responsible for any Imbalance Charges related to its interruption after
the nomination is made to the Transporter and until the change in deliveries
and/or receipts is confirmed by Transporter.
1.27 "Law" means any law, rule, regulation, order, writ, judgment, decree
or other legal or regulatory determination by a court, regulatory agency or
governmental authority of competent jurisdiction.
1.28 "Legal Proceedings" means any suits, proceedings, judgments, rulings
or orders by or before any court, arbitration panel or governmental authority.
1.29 "Material Adverse Change" is defined as (i) with respect to Buyer;
Buyer's certified liabilities shall exceed its assets, and (ii) with respect to
Seller, as of each fiscal year-end occurring during the term of this Agreement,
Seller's Proved Gas Reserves (as defined in SECURITIES and EXCHANGE ACCOUNTING
SERIES RELEASE No. 257) shall be less than 135% of the total volume of natural
gas that Seller is required to deliver to Buyer under the remaining term of the
Agreement.
1.30 "MMBtu" or "dekatherm" means one million British thermal units (each
Btu representing the amount of heat required to raise the temperature of one
avoirdupois pound of pure water from fifty-eight and five tenths degrees (58.5E)
Fahrenheit to fifty-nine and five-tenths degrees (59.5E) Fahrenheit at a
constant pressure of fourteen and seventy-three hundredths (14.73) pounds per
square inch absolute).
1.31 "New Taxes" means (i) any Taxes enacted and effective after the
earlier of the Effective Date of the Agreement or the beginning date of the
first Delivery Period under the Agreement, or (ii) any law, order, rule or
regulation, or interpretation thereof, enacted and effective after the earlier
of the Effective Date of the Agreement or the beginning date of the first
Delivery Period under the Agreement resulting in application of any Tax to a new
or different class of Persons.
1.32 "Person" means any individual, partnership, limited partnership,
limited liability partnership, corporation, limited liability company, trust,
association or other entity.
1.33 "Priority Firm" means Firm service that is subject to the more
restrictive Force Majeure provision set out in Section 4.8(b) of this Agreement.
1.34 "Receiving Transporter" means the Transporter receiving Gas at the
Delivery Point, or absent such Receiving Transporter, the Transporter delivering
Gas at the Delivery Point.
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1.35 "Regulatory Approvals" means all current and future approvals of or
filings with courts or governmental, administrative or regulatory bodies (state
or federal) having jurisdiction over a Party or any Transaction, as required by
applicable Law.
1.36 "Scheduling" or "Scheduled" means the acts of Seller, Buyer and/or
their designated representatives, including each Party's Transporters, if
applicable, of notifying, requesting and confirming to each other the quantity
of Gas (and specific requirements therefor) to be delivered on a daily basis
during the Delivery Period at a specified Delivery Point.
1.37 "Seller" means the Party to a Transaction who is obligated to sell and
deliver, or cause to be delivered, Gas during a Delivery Period.
1.38 "Taxes" means any or all ad valorem, property, occupation, severance,
generation, first use, conversion, Btu or Gas, transport, transmission, utility,
gross receipts, privilege, sales, use, consumption, excise, lease, transaction,
and other taxes, governmental charges, regulatory assessments by federal, state
or local agencies or commissions (including, but not limited to, FERC
assessments), license fees, permits or assessments or increases therein, other
than taxes based on net income or net worth.
1.39 "Transaction" means a particular transaction agreed to by the Parties
relating to the purchase and sale of Gas for a particular Delivery Period
pursuant to this Agreement.
1.40 "Transaction Confirmation" means a written document, similar in form
to Exhibit B, which sets forth certain terms of a Transaction which have been
agreed to by the Parties.
1.41 "Transportation Charges" means the amount, if any, to be paid by Buyer
to Seller for Gas transportation services as agreed by the Parties in a
Transaction.
1.42 "Transporter" means any gathering company, pipeline or local
distribution company on which Gas is transported under this Agreement on behalf
of Seller or Buyer to or from the Delivery Point in a particular Transaction.
ARTICLE 2
SCOPE OF AGREEMENT
2.1 Scope of Agreement. From time to time the Parties may, but shall not be
obligated to, enter into Transactions for, or related to, the purchase or sale
of Gas hereunder. Each Transaction shall be effectuated and evidenced in
accordance with this Agreement and shall constitute a part of this Agreement.
The Parties are relying upon the fact that all Transactions, together with this
Agreement, shall constitute a single integrated agreement, and that the Parties
would not otherwise enter into any Transaction. Any conflict between this
Agreement and a Transaction Confirmation shall be resolved in favor of the
Transaction Confirmation. This Agreement shall govern all outstanding
Transactions between the Parties which are not governed by a separate executed
contractual agreement between the Parties and Transactions between the Parties
which are effectuated from and after the Effective Date unless expressly stated
otherwise.
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2.2 Transaction Procedures.
(a) During the term of this Agreement, the Parties may notify each other
that Gas is available for purchase or sale. Transactions may be effectuated and
evidenced by exchange and acceptance of a Transaction Confirmation (Written
Transaction Procedure) signed by both Parties. No Party shall be deemed to have
accepted any Transaction Confirmation unless and until it has been signed by
such party.
(b) The specific terms to be established by the Parties for each
Transaction shall include the Buyer and Seller, the Gas, the Delivery Period,
the Contract Price, the Delivery Point, the Contract Quantity, whether the
Service Level is (1) Firm, (2) Priority Firm, (3) EFP, (4) ADP or (4)
Interruptible, and such other terms as the Parties shall agree upon.
2.3 Term of Agreement. The term of this Agreement shall commence on the
Effective Date and shall remain in effect until terminated (a) by either Party
upon 30 Days' prior written notice, or (b) as otherwise provided herein;
provided, however, that this Agreement shall remain in effect with respect to
any Transaction(s) entered into prior to the effective date of its termination
until both Parties have fulfilled all their obligations with respect to such
Transaction(s).
2.4 Electronic Signatures. If a Party has the capability to affix a
signature to an electronically transmitted document, the terms "signature,"
"signed," "executed," "execution," or similar terms shall include the same in
electronic forms.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
On the Effective Date and the date of entering into each Transaction, each
Party represents and warrants to the other Party that (i) it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation and is qualified to conduct its business in each jurisdiction in which
a Transaction will be performed by it, (ii) it has all Regulatory Approvals
necessary for it to perform legally its obligations under this Agreement and
each Transaction, (iii) the execution, delivery and performance of this
Agreement and each Transaction are within its power, have been duly authorized
by all necessary action and do not violate any of the terms and conditions in
its governing documents, any contracts to which it is a Party or any Law
applicable to it, (iv) this Agreement and each Transaction when entered into in
accordance with this Agreement constitutes its legally valid and binding
obligation enforceable against it in accordance with its terms, subject to any
Equitable Defenses, (v) there are no Bankruptcy Proceedings pending or being
contemplated by it or, to its knowledge, threatened against it, (vi) there are
no Legal Proceedings that materially adversely affect its ability to perform its
obligations under this Agreement and each Transaction, (vii) it understands and
agrees that the other Party is not acting as its fiduciary, advisor or agent
with respect to this Agreement or any Transaction, (viii) it is not relying upon
the advice, assurance or representations of the other Party, except for those
representations set forth in this Agreement, (ix) it has knowledge and
experience in financial matters and its industry that enable it to evaluate the
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merits and risks of entering into this Agreement and each Transaction, (x) it is
a "Merchant" as that term is defined in the Uniform Commercial Code, and (xi) it
is a producer, processor or commercial user of, or merchant handling, the Gas
subject to this Agreement or the products or byproducts thereof, and it has
entered into this Agreement, and will enter into each Transaction, solely for
the purposes related to its business as such.
During the term of this Agreement, Seller agrees not to commit to future
fixed-price natural gas sales in excess of its Proved Gas Reserves, as defined
in Section 1.30 hereof.
Each Party covenants that it will cause these representations and
warranties to be true and correct throughout the term of the Agreement.
ARTICLE 4
OBLIGATIONS AND DELIVERIES
4.1 Purchase and Sale of Gas. With respect to each Transaction and subject
to the terms of this Agreement, Seller shall sell and deliver, or cause to be
delivered, and Buyer shall purchase and receive, or cause to be received, at the
Delivery Point the Contract Quantity, and Buyer shall pay Seller the Contract
Price in accordance with Article 8. The price shall be the complete
consideration to Seller and Seller shall be responsible for the cost of
compressing, gathering, processing, treating, liquefying, and transporting the
Gas, together with royalties and taxes on the Gas, and all other costs and
charges which are incurred prior to the Delivery Point. If Buyer is required to
remit or pay such royalties and/or such taxes, then Buyer may deduct or withhold
such amounts from payments made to Seller. Buyer shall be responsible for the
costs of transporting the Gas and any other costs related to the Gas or its
sale, use or possession, at and from the Delivery Point.
4.2 Service Levels. A Transaction may specify any one of the following
service levels.
(a) Firm. Buyer shall be required to purchase and receive, and Seller shall
be required to sell and deliver on a Firm basis during the term hereof the
Contract Quantity agreed upon in a Transaction. Failure to receive or deliver
the Contract Quantity agreed upon in a Transaction may, at the option of the
performing Party, constitute a breach of this Agreement for which damages shall
be recoverable pursuant to the terms of this Agreement, unless such failure is
caused by an event of Force Majeure as provided herein.
(b) Priority Firm. Firm service that is subject to the more restrictive
Force Majeure provision set out in Section 4.8(b) of this Agreement. Failure to
receive or deliver the Contract Quantity agreed upon in a Transaction may, at
the option of the performing Party, constitute a breach of this Agreement for
which damages shall be recoverable pursuant to the terms of this Agreement,
unless such failure is caused by an event of Force Majeure as provided herein
and as specifically restricted in Section 4.8(b).
(c) Exchange For Physical (EFP). Exchange For Physical (EFP) shall mean
that the Parties have agreed to make and accept deliveries of Gas, subject to
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the additional terms under the Special Provisions for EFP and ADP, and the
Parties have also assumed, or caused to be assumed, equal and opposite positions
in NYMEX Gas Futures contracts and have closed out such positions to effectuate
the EFP transaction in compliance with the NYMEX Rules. The EFP Transaction will
be subject to the additional terms under the Special Provisions for EFP and ADP
Transactions. The performance obligation on EFP Transactions will be Priority
Firm. Failure to receive or deliver the Contract Quantity agreed upon in a
Transaction may, at the option of the performing Party, constitute a breach of
this Agreement, for which damages shall be recoverable pursuant to the terms of
this Agreement, unless such failure is caused by an event of Force Majeure as
provided herein and specifically restricted in Section 4.8(b).
(d) Alternative Delivery Procedure (ADP). Alternative Delivery Procedure
(ADP) shall mean that the Parties have agreed to make and accept deliveries of
Gas under a NYMEX Gas Futures contract under different terms than the standard
delivery terms in the NYMEX Gas Futures contract. In addition, the Parties have
notified NYMEX, in compliance with the NYMEX rules, that the transaction will be
completed under the Alternative Delivery Procedure. The Alternative Delivery
Procedure Transaction will be subject to the additional terms under the Special
Provisions for EFP and ADP Transactions. The performance obligation on ADP
Transactions will be Priority Firm. Failure to receive or deliver the Contract
Quantity agreed upon in a Transaction may, at the option of the performing
Party, constitute a breach of this Agreement, for which damages shall be
recoverable pursuant to the terms of this Agreement, unless such failure is
caused by an event of Force Majeure as provided herein and specifically
restricted in Section 4.8(b).
(e) Interruptible. Buyer shall be required to purchase and receive, and
Seller shall be required to sell and deliver on an interruptible basis during
the term hereof, the Contract Quantity specified in a Transaction, with the
understanding that such volumes may be reduced, interrupted or terminated by
receipt of proper scheduling notice as provided in Sections 4.3 and 4.4 of this
Agreement.
4.3 Transportation. Seller shall have the sole responsibility for
transporting the Gas, or ensuring that the Gas is transported, to the Delivery
Point. Buyer shall have the sole responsibility for transporting the Gas, or
ensuring that the Gas is transported at and after the Delivery Point. If the
supply or transportation necessary to deliver or receive the Contract Quantity
is unavailable for any reason, the Party responsible for or having notice of
such interruption shall promptly notify the other Party by telecopy.
4.4 Nominations; Scheduling. The Parties shall coordinate their nomination
activities, giving sufficient time to meet the deadlines of the affected
Transporters. Each Party shall give the other Party timely prior notice,
sufficient to meet the requirements of all Transporters involved in the
Transaction, of the quantities of Gas to be delivered and received each Day.
Should either Party become aware that actual deliveries at the Delivery Point
are greater or lesser than the Scheduled Gas, such Party shall promptly notify
the other Party.
Unless otherwise agreed, Seller is obligated to Schedule, or cause to be
Scheduled, with the appropriate Transporters and to deliver, or cause to be
delivered, Gas to the Delivery Point and Buyer is obligated to Schedule, or
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cause to be Scheduled, with the appropriate Transporters and to receive, or
cause to be received, Gas at and from the Delivery Point, in accordance with the
Transporters' notice requirements. If the Parties have agreed to allow
variations in the daily quantities of Gas to be delivered, Buyer, or if so
agreed, Seller, shall notify the other Party, in accordance with the applicable
Transporters' Scheduling deadlines, of the Daily Contract Quantities of Gas to
be delivered and received during a Delivery Period.
4.5 Rate of Flow; Imbalance Charges. The Scheduled Gas to be received by
Buyer hereunder shall be delivered by Seller at uniform hourly and daily rates
of flow as nearly as practicable, but it is recognized that due to operating
conditions the quantities of Gas received and delivered may not be in balance on
any one particular Day. The Parties shall use commercially reasonable efforts to
avoid imposition of any Imbalance Charges. If Buyer or Seller receives an
invoice from a Transporter that includes Imbalance Charges, the Parties shall
determine the validity as well as the cause of such Imbalance Charges. If the
Imbalance Charges were incurred as a result of Buyer's actions or inactions
(which shall include, but not be limited to, Buyer's failure to accept
quantities of Gas equal to the Scheduled Gas), then Buyer shall pay for such
Imbalance Charges, or reimburse Seller for such Imbalance Charges paid by the
Seller to the Transporter. If the Imbalance Charges were incurred as a result of
Seller's actions or inactions (which shall include, but shall not be limited to,
Seller's failure to deliver quantities of Gas equal to the Scheduled Gas), then
Seller shall pay for such Imbalance Charges, or reimburse Buyer for such
Imbalance Charges paid by the Buyer to the Transporter. During Force Majeure
interruptions, the Party invoking Force Majeure may be responsible for any
Imbalance Charges related to its interruption after the nomination is made to
the Transporter and until the change in deliveries and/or receipts is confirmed
by the Transporter.
4.6 Quality; Measurement; Pressure. There is no warranty by Seller, express
or implied, concerning the quality of Gas delivered other than a warranty that
all Gas delivered by Seller shall be of the quality maintained in the pipeline
of the first Transporter upstream of the Delivery Point. Measurement of Gas
quantities hereunder shall be in accordance with the tariff of the first
Transporter immediately downstream of the Delivery Point. The unit of quantity
measurement for purposes of this Agreement shall be one (1) MMBtu. Gas Delivered
hereunder shall be at commercial operating pressures sufficient to deliver such
quantities at the Delivery Point; however, in no event shall such operating
pressure exceed the maximum operating pressure of the system receiving the Gas
hereunder. Each of Buyer and Seller are completely and solely responsible for
the installation and maintenance of overpressure protection equipment on each
Party's respective pipelines, valves, and/or other interconnection equipment.
4 .7 Title, Risk of Loss and Indemnity. As between the Parties, Seller
shall be deemed to be in exclusive possession and control (and responsible for
any damages or injury resulting therefrom or caused thereby) of the Contract
Quantity prior to the Delivery Point and Buyer shall be deemed to be in
exclusive control (and responsible for any damages or injury resulting therefrom
or caused thereby) of the Contract Quantity at and from the Delivery Point.
Seller represents that it will have paid or caused to have been paid all
royalties, taxes and other sums due on production and delivery of the Gas to the
Delivery Point. Seller warrants that it will deliver to Buyer at the Delivery
Point the Contract Quantity free and clear of all liens, claims and encumbrances
arising prior to the Delivery Point. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, ARE DISCLAIMED.
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Title to and risk of loss related to the Contract Quantity shall transfer from
Seller to Buyer at the Delivery Point. Seller shall indemnify, defend and hold
harmless Buyer from and against any Claims arising out of or in any way relating
to Seller's ownership, possession or control of the Contract Quantity up to the
Delivery Point, and Buyer shall indemnify, defend and hold harmless Seller from
and against any Claims arising out of or in any way relating to Buyers
ownership, possession or control of the Contract Quantity at and from the
Delivery Point.
4.8 Force Majeure.
(a) If either Party is rendered unable by Force Majeure to carry out, in
whole or part, its obligations under a Transaction and such Party gives notice
and full details of the event to the other Party as soon as practicable after
the occurrence of the event, then during, but for no longer than, the period
such Party shall be unable to perform its obligations in whole or in part, the
obligations of the Party affected by the event (other than the obligation to
make payments then due or becoming due with respect to performance prior to the
event) shall be suspended to the extent required; provided, however, Buyer shall
be obligated to pay (i) Demand Charges with respect to a Transaction
notwithstanding the Force Majeure and (ii) any Imbalance Charges related to its
interruption after the nomination is made to the Transporter and until the
change in deliveries and/or receipts is confirmed by the Transporter. The Party
claiming the Force Majeure shall remedy the Force Majeure with all reasonable
dispatch; provided, however, that this provision shall not require Seller to
deliver, or Buyer to receive, the Contract Quantity at points other than the
Delivery Point.
(b) For Priority Firm Transactions, Force Majeure will not apply to excuse
performance under the Transaction if an alternative gas supply is available at a
hub, a pooling point, multiple pipeline interconnect, or other aggregation point
where alternate sources of gas supply and transportation are available for
purchase, regardless of the source and price of the gas supply initially
scheduled for delivery.
(c) Neither Party shall be entitled to the benefit of this Section 4.8
under any or all of the following circumstances: (i) to the extent that the
inability was caused by the negligence or fault of the Party claiming relief;
(ii) to the extent the event constituting Force Majeure was intentionally
initiated or intentionally acquiesced in by the Party claiming relief for the
purpose of allowing that Party to claim Force Majeure; or (iii) if the inability
was caused by a Party's lack of funds.
(d) It is understood and agreed that the settlement of strikes or lockouts
shall be entirely within the discretion of the Party having the difficulty, and
that the above requirement of the use of commercially reasonable efforts in
restoring normal operating conditions shall not require the settlement of
strikes or lockouts by acceding to the terms of the opposing Party when such is
inadvisable in the discretion of the Party having the difficulty.
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4.9 Failure to Deliver/Receive in Firm, Priority Firm, EFP and ADP
Transactions.
(a) Unless excused by Force Majeure or Buyer's failure to perform, if
Seller fails to deliver all or part of the Contract Quantity that the Parties
agreed to Schedule pursuant to a Firm, Priority Firm,, EFP or ADP Transaction,
Seller shall pay Buyer, on the date payment would otherwise be due to Seller an
amount for each MMBtu of such deficiency equal to the positive difference, if
any, obtained by subtracting the Contract Price from the Replacement Price.
"Replacement Price" means the price at which Buyer, acting in a commercially
reasonable manner, purchases a substitute for the Contract Quantity not
delivered by Seller (plus any additional transportation costs, if any, incurred
by Buyer for transportation of Gas to the Delivery Point). Buyer, at its sole
option, may elect not to replace Gas, in which case Buyer shall recover the
positive difference, if any, obtained by subtracting the Contract price from the
market price for such quantity as determined by Buyer in a commercially
reasonable manner.
(b) Unless excused by Force Majeure or Seller's failure to perform, if
Buyer fails to receive all or part of the Contract Quantity that the Parties
Scheduled pursuant to a Finn, Priority Firm, EFP or ADP Transaction, Buyer shall
pay Seller, on the date payment would otherwise be due, an amount for each MMBtu
of such deficiency equal to the positive difference, if any, obtained by
subtracting the Sales Price from the Contract Price. "Sales Price" means the
price at which Seller, acting in a commercially reasonable manner, resells the
Gas not received by Buyer (including additional transportation costs, if any,
incurred by Seller for transportation of Gas to the Delivery Point). Seller, at
its sole option, may elect not to resell Gas, in which case Seller shall recover
the positive difference, if any, obtained by subtracting the market price for
such quantity as determined by Seller in a commercially reasonable manner from
the Contract Price.
4.10 Failure to Deliver/Receive in Interruptible Transactions. A Party
shall be excused from delivering or receiving the Contract Quantity, in whole or
in part, in an Interruptible Transaction for any reason without liability,
unless otherwise provided in a Transaction Confirmation, except such
interrupting Party may be responsible for any Imbalance Charges related to its
interruption after the nomination is made to the Transporter and until the
change in deliveries and/or receipts is confirmed by Transporter.
ARTICLE 5
FINANCIAL RESPONSIBILITY
5.1 Security/Guarantee Agreement. In order to secure all payment
obligations of Buyer to Seller, Buyer may be requested by Seller to cause its
Guarantor to execute and deliver to Seller the Guaranty Agreement substantially
in the form attached hereto as Exhibit C.
5.2 Collateral Requirement. Upon the occurrence and during the continuance
of a Material Adverse Change or Event of Default with respect to one Party, the
other Party (the "Beneficiary Party"), on any Business Day, may request the
first Party ("the "Posting Party") to provide Eligible Collateral (in such form
as selected by the Posting Party) in an amount equal to the Collateral
Requirement. Eligible Collateral shall be delivered within two (2) Business Days
of the date of such request.
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ARTICLE 6
DEFAULTS AND REMEDIES
6.1 An "Event of Default". An "Event of Default" shall mean with respect to
a Party ("Defaulting Party"): (i) the failure by the Defaulting Party to make
any payment required pursuant to this Agreement, provided the payment is not the
subject of a good faith dispute as described in Section 8.1, within five (5)
Business Days after the payment due date, (ii) the failure by the Defaulting
Party to perform any obligation to the other Party (the "Non-Defaulting Party")
set forth in this Agreement including the failure to deliver or receive
described in Section 4.9, and such failure is not excused by Force Majeure or
cured within two (2) Business Days after written notice thereof to the
Defaulting Party, (iii) the occurrence of a Material Adverse Change with respect
to the Defaulting Party; provided, however, that such Material Adverse Change
shall not constitute an Event of Default if the Defaulting Party establishes
within two (2) Business Days after written notice and maintains for so long as
the Material Adverse Change is continuing, Eligible Collateral in an amount
equal to the Collateral Requirement for the Defaulting Party, (iv) the
Defaulting Party shall fail to establish, maintain, extend or increase Eligible
Collateral, if required; (v) the Guarantor of the Defaulting Party shall fail to
perform any covenant set forth in the guaranty agreement it delivered in respect
of this Agreement, or any representation or warranty made by such Guarantor in
said guaranty agreement shall be false or misleading when made or when deemed to
be repeated, the guaranty agreement shall expire or be terminated or shall in
any way cease to guaranty the obligations of the Defaulting Party under this
Agreement, and the same shall not be cured within two (2) Business Days after
written notice to the Defaulting Party, or (vi) with respect to Buyer, at any
time, Buyer defaults on its indebtedness to third parties, resulting in
obligations of Buyer in excess of $50,000,000 being accelerated or capable of
becoming accelerated, or with respect to Seller, at any time, Seller defaults on
its indebtedness to third parties, resulting in obligations of Seller in excess
of 5% of Seller's Net Proved Reserves being accelerated or capable of becoming
accelerated, and the same shall not be cured within two (2) Business Days after
written notice to the Defaulting Party, (vii) any false or misleading
representation or warranty herein made by the Defaulting Party or its Guarantor,
and the same shall not be cured within two (2) Business Days after written
notice to the Defaulting Party, or (viii) the Defaulting Party or the Guarantor
shall be the subject of a Bankruptcy Proceeding.
6.2 Other Events. In the event Buyer is regulated by a federal, state or
local regulatory body, and such body shall disallow all or any portion of any
costs incurred or yet to be incurred by Buyer under any provision of this
Agreement, such action shall not operate to excuse Buyer from performance of any
obligation nor shall such action give rise to any right of Buyer to any refund
or retroactive adjustment of the Contract Price provided in any Transaction.
Notwithstanding the foregoing, if a Party's activities hereunder become subject
to regulation of any kind whatsoever under any law to a greater or different
extent than that existing on the earlier of the Effective Date or the beginning
date of the first Delivery Period under the Agreement and such regulation either
(i) renders this Agreement illegal of performance by, or unenforceable against,
a Party, or (ii) materially adversely affects the business of a Party, with
respect to its financial position or otherwise, then in the case of (i) above,
either Party, and in the case of (ii) above, only the affected Party, shall at
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such time have the right to declare an Early Termination Date with respect to
all Transactions in accordance with the provisions of Section 6.3(a) in which
case the Parties shall determine their Gains, Losses and Costs and make payment
to each other in the manner set forth in Sections 8.1 and 8.2.
6.3 Early Termination.
(a) If an Event of Default occurs with respect to a Defaulting Party at any
time during the term of this Agreement and the Defaulting Party fails to cure
prior to expiration of the cure period, the Non-Defaulting Party may, for so
long as the Event of Default is continuing, (i) establish a date (which date
shall be between the first (1st) Day following the last day of the cure period
or the Day of the Event of Default in the case where there is no cure period and
ten (10) Business Days after the Non-Defaulting Party notifies the Defaulting
Party )("Early Termination Date") on which any or all Transactions selected by
it shall terminate (individually a "Terminated Transaction" and collectively the
"Terminated Transactions") and (ii) withhold any payments due in respect of the
Terminated Transactions; provided, however, upon the occurrence of any Event of
Default listed in item (viii) of Section 6.1, all Transactions and this
Agreement in respect thereof shall automatically terminate, without notice, and
without any other action by either Party as if a payment due date had been
declared immediately prior to such event. The notice of the Early Termination
Date may be by telephone if such notice is confirmed in writing within two (2)
Business Days. If an Early Termination Date has been designated, the
Non-Defaulting Party shall in good faith calculate its Gains, Losses and Costs
resulting from the termination of the Terminated Transactions pursuant to
Section 6.3(b) and (c). The Non-Defaulting Party shall aggregate such Gains,
Losses and Costs with respect to all Transactions into a single net amount
("Termination Payment") and notify the Defaulting Party, including detailed
support for the Termination Payment calculation. It is expressly agreed that a
Party shall not be required to enter into replacement transactions in order to
determine the Termination Payment. If the Non-Defaulting Party's aggregate
Losses and Costs exceed its aggregate Gains, the Defaulting Party shall, within
five (5) Business Days of receipt of such notice, pay the Termination Payment to
the Non-Defaulting Party, which amount shall bear interest at the Interest Rate
from the payment due date until paid. If the Non-Defaulting Party's aggregate
Gains exceed its aggregate Losses and Costs, if any, resulting from termination
of the Terminated Transactions, the Non-Defaulting Party shall pay such excess
to the Defaulting Party on or before the later of: (1) ten (10) Days after the
end of the month ending on or after the Early Termination Date; or (2) the date
five (5) Business Days after receipt by the Defaulting Party of the
Non-Defaulting Party's notice given above, which amount shall bear interest at
the Interest Rate from the payment due date until paid.
(b) Gains, Losses and Costs shall be determined by comparing the value of
the remaining Delivery Period, Contract Quantities and Contract Prices under
each Terminated Transaction had it not been terminated to the equivalent
quantities and relevant market prices for the remaining Delivery Period either
quoted by a bona fide third party offer or which are reasonably expected to be
available in the market under a replacement contract for each Terminated
Transaction. To ascertain the market prices of a replacement contract, the
NonDefaulting Party may consider, among other valuations, any or all of the
settlement prices of the KCBT or NYMEX gas future contracts, quotations from
leading dealers or brokers in Gas contracts and other bona fide third party
offers, all adjusted for the length of the remaining Delivery Period and
differences in transportation costs.
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(c) As used herein with respect to the Non-Defaulting Party: (i) "Costs"
shall mean brokerage fees, commissions and other similar transaction costs and
expenses reasonably incurred by such Party either in terminating any arrangement
pursuant to which it has hedged its obligations or entering into new
arrangements which replace a Terminated Transaction, and attorneys' fees, if
any, incurred in connection with enforcing its rights under this Agreement; (ii)
"Gain" shall mean an amount equal to the present value of the economic benefit
(determined (A) using the "Asked Yield" interest rate for the appropriate United
States Treasury Bond or Note, whose maturity coincides with the month of the
future delivery obligation, as quoted in the Government Bonds and Notes section
of The Wall Street Journal plus one percent (1%) and (B) exclusive of Costs), if
any, to it resulting from the termination of its obligations with respect to a
Terminated Transaction, determined in a commercially reasonable manner; and
(iii) "Losses" shall mean an amount equal to the present value of the economic
loss (determined (A) using the "Asked Yield" interest rate for the appropriate
United States Treasury Bond or Note, whose maturity coincides with the month of
the future delivery obligation, as quoted in the Government Bonds and Notes
section of The Wall Street Journal plus one percent (1%) and (B) exclusive of
Costs), if any, to it resulting from the termination of its obligations with
respect to a Terminated Transaction, determined in a commercially reasonable
manner. At the time for payment of any amount due under this Section 6.3, each
Party shall pay to the other Party all additional amounts payable by it pursuant
to this Agreement.
(d) The Defaulting Party must provide written notice of any objection to
the Termination Payment calculation within two (2) Business Days after receipt
of notice from the Non-Defaulting Party. If written objections are provided, the
Parties will negotiate in good faith to agree on the Termination Payment prior
to the payment due date. If good faith negotiations between the Parties do not
result in a mutually agreeable resolution, the Parties agree to consider the use
of alternative dispute resolutions prior to submitting such dispute to
litigation proceedings.
6.4 Setoff. Without affecting or prejudicing the provisions of this
Agreement requiring the calculation and payment of certain net payment amounts
for monthly payments as provided under Section 8.2 and Termination Payments as
provided under Section 6.3, all payments will be made without setoff or
counterclaim; provided, however, if an Event of Default occurs, in addition to
and not in limitation of any other right or remedy (including any right to
setoff, counterclaim, or otherwise right to withhold payment) under applicable
law, the Non-Defaulting Party may, at its option and in its discretion, setoff
against any amounts owed to the Defaulting Party (whether under this Agreement
or otherwise and whether or not then due) any amounts due from the Defaulting
Party (whether under this Agreement or otherwise and whether or not then due).
The obligations of the Parties under this Agreement in respect of such amounts
shall be deemed satisfied and discharged to the extent of any such setoff. If
the amount of an obligation has not been ascertained, the Non-Defaulting Party
may, in good faith, estimate that obligation and setoff in respect of the
estimate, subject to the Non-Defaulting Party or the Defaulting Party, as the
case may be, accounting to the other Party when the obligation is ascertained.
The Non-Defaulting Party shall give the Defaulting Party notice of any setoff
effected hereunder provided that failure to give such notice shall not affect
the validity of the setoff. Nothing in this Section shall be deemed to create a
charge or other security interest.
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6.5 Other Remedies for Nonpayment. Notwithstanding any other provision of
this Agreement, if Buyer or Seller fails to pay to the other Party any amounts
due within two (2) Business Days after the due date, the Non-Defaulting Party
shall have the right to (i) suspend performance under any or all Transactions
until such amounts, plus interest at the Interest Rate, have been paid and/or
(ii) exercise any remedy available at law or in equity to enforce payment of
such amount plus interest at the Interest Rate; provided, however, that if the
Defaulting Party, in good faith, shall dispute the amount of any such billing or
part thereof and shall pay such amount as it concedes to be correct, no
suspension shall be permitted.
ARTICLE 7
LIMITATIONS; DUTY TO MITIGATE
7.1 Limitation of Remedies, Liability and Damages. THE PARTIES CONFIRM THAT
THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY
THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS
REMEDY OR MEASURE OF DAMAGES IS PROVIDED, UNLESS OTHERWISE STATED HEREIN, SUCH
EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE
OBLIGOR'S LIABILITY SHALL BE LIMITED AS' SET FORTH IN SUCH PROVISION AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR
MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE OBLIGOR'S LIABILITY SHALL
BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY WHICH SHALL INCLUDE ANY COURT COSTS AND
ATTORNEY FEES INCURRED TO ENFORCE OBLIGATIONS UNDER THE AGREEMENT, SUCH DIRECT
ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR
DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED,
NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY
OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS
THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND
THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID
HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT
OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS
INCONVENIENT AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF
THE HARM OR LOSS.
7.2 Duty to Mitigate. Each Party agrees that it has a duty to mitigate
damages and covenants that it will use commercially reasonable efforts to
minimize any damages it may incur as a result of the other Party's performance
or non-performance of this Agreement.
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7.3 UCC. Except as otherwise provided for herein, the provisions of the
Uniform Commercial Code ("UCC") of the state the law of which shall govern this
Agreement shall be deemed to apply to all Transactions and the Commodities shall
be deemed to be "goods" for purposes of the UCC. EXCEPT AS EXPRESSLY SET FORTH
HEREIN, SELLER EXPRESSLY DISCLAIMS ANY, AND MAKES NO OTHER, REPRESENTATION OR
WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
ANY REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES,
MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSES.
ARTICLE 8
BILLING; PAYMENT
8.1 Billing and Payment. Seller shall invoice Buyer for Gas delivered and
received in the preceding Month and for any other applicable charges, providing
supporting documentation acceptable in industry practice to support the amount
charged. If the actual quantity delivered is not known by the billing date,
billing will be prepared based on the Scheduled Contract Quantities. The invoice
quantity will then be adjusted to the actual quantity on the following Month's
billing or as soon thereafter as actual delivery information is available. Buyer
shall pay, by wire transfer, the amount set forth on the invoice on or before
the later of the twenty-fifth (25th) Day of the calendar month in which the
invoice is received, or ten (10) Days after receipt of the invoice by Buyer;
provided that if the due date is not a Business Day, payment is due on the next
Business Day following the due date. If Buyer fails to remit the full amount
payable by it when due, interest on the unpaid portion shall accrue at the
Interest Rate from the due date until the date of payment. If Buyer, in good
faith, disputes the amount of any such statement, Buyer will pay to Seller such
amount as it concedes to be correct no later than the due date and shall provide
a written explanation of the basis for the disputed amount. If any amount
disputed by Buyer is determined to be due to Seller, it shall be paid within ten
(10) Days of such determination, along with interest accrued at the Interest
Rate from the due date of the original invoice until the date paid. In the event
payments are due to Buyer hereunder, payment to Buyer shall be made in
accordance with this Section 8.1.
8.2 Payment Netting Arrangement. Notwithstanding the provisions of Section
8.1, the Parties agree to the automatic netting of all amounts due to or from
each other arising out of all Transactions under this Agreement. Such netting to
be effected by a net payment arrangement whereby each month each Party shall
calculate the excess of all unpaid amounts due the other Party over all unpaid
amounts due it under the Agreement and remit payment of such excess, if any.
8.3 Audit. Each Party has the right, at its sole expense and during normal
working hours and after providing written notice at least five (5) Business Days
prior to the audit, to examine the records of the other Party (including
recorded telephone conversations) to the extent reasonably necessary to verify
the content of any telephone conversation, the accuracy of any statement, charge
or computation made pursuant to this Agreement. If requested, a Party shall
provide to the other Party statements evidencing the quantities of Gas delivered
at the Delivery Point. If any such examination reveals any inaccuracy in any
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statement, the necessary adjustments in such statement and the payments thereof
will be made promptly and interest calculated at the Interest Rate from the date
the overpayment or underpayment was due until paid; provided, however, that no
adjustment for any statement or payment will be made unless objection to the
accuracy thereof was made prior to the lapse of two (2) years from the rendition
thereof; and provided further that this provision will survive any termination
of the Agreement for a period of two (2) years from the date of such termination
for the purpose of such statement and payment objections.
ARTICLE 9
TAXES
9.1 Taxes. Seller is liable for and shall pay, or cause to be paid, or
reimburse Buyer if Buyer has paid, all Taxes applicable to a Transaction or upon
the Gas that is the subject thereof arising prior to the Delivery Point. If
Buyer is required to remit such Tax, the amount shall be deducted from any sums
due to Seller. Seller shall indemnify, defend and hold harmless Buyer from any
Claims for such Taxes. The Contract Price does not include reimbursement for,
and Buyer is liable for and shall pay, cause to be paid, or reimburse Seller if
Seller has paid, all Taxes applicable to a Transaction or upon the Gas that is
the subject thereof arising at and from the Delivery Point, including any Taxes
imposed or collected by a taxing authority with jurisdiction over Buyer. Buyer
shall indemnify, defend and hold harmless Seller from any Claims for such Taxes.
Either Party, upon written request of the other, shall provide a certificate of
exemption or other reasonably satisfactory evidence of exemption if either Party
is exempt from Taxes, and shall use reasonable efforts to obtain and cooperate
with obtaining any exemption from any Tax.
9.2 GST. For Gas delivered and received in Canada, if any, Buyer is liable
for the Canadian goods and services tax ("GST") provided for in the Excise Tax
Act (Canada) or a similar tax enacted under successor legislation. Buyer will
pay Seller the amount of GST payable for purchase of the Gas in addition to all
other amounts payable under the Agreement. Seller will hold the GST paid by
Buyer and will remit such GST as required by law. Each Party will provide the
other Party with any information required to satisfy GST payment or remittance
requirements, including GST registration numbers. Buyer will provide valid
certificate(s) of exemption for any Transaction for which Buyer is claiming
exception from the GST. Until an exemption from the GST is properly claimed and
documented, Buyer's obligation to pay the GST to Seller, and Seller's obligation
to collect, hold and remit the GST, remain as enumerated above.
9.3 New Taxes.
(a) Notwithstanding any other provision of this Agreement to the contrary,
if (i) a New Tax is imposed and (ii) Buyer or Seller would be responsible for
such New Tax and (iii) such New Tax is (as a result of laws, regulations and
applicable contracts of Buyer in effect as of the effective date of the New Tax)
of the type that Buyer can pass directly through to, or be reimbursed by,
another person or entity, Buyer shall pay or cause to be paid, or reimburse
Seller if Seller has paid, all such New Taxes and Buyer shall indemnify, defend
and hold harmless Seller from any Claims for such New Taxes.
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(b) If (i) a New Tax is imposed and (ii) Buyer or Seller would be
responsible for paying such New Tax and (iii) paragraph (a) does not apply, the
Party responsible for the New Tax ("Affected Party") shall be entitled to
declare an Early Termination Date with respect to those Transactions affected by
the New Tax ("Affected Transactions") in accordance with the provisions of this
Agreement subject to the following conditions: (a) the Affected Party must give
the other Party ("Non-Affected Party") at least 30 Days prior written notice
(the "Agreement Period") of its intent to declare an Early Termination Date
(which notice shall be given no later than 90 Days after the later of the
enactment or effective date of the relevant New Tax), and prior to the proposed
Early Termination Date, Buyer and Seller shall attempt to reach a mutual
agreement as to the sharing of the New Tax, (b) if a mutual sharing agreement is
not reached, the Non-Affected Party shall have the right, but not the
obligation, upon written notice to the Affected Party within the Agreement
Period, to pay the New Tax for any continuous period it so elects on a month to
month basis, and in such case the Affected Party shall not have the right during
such continuous period to declare the Early Termination Date on the basis of the
New Tax, (c) should the Non-Affected Party at its election agree to pay the New
Tax on a month to month basis, then upon 30 Days prior written notice to the
Affected Party of its election to cease payment of such New Tax, the Affected
Party shall then be liable for the payment of the New Tax and the Parties shall
again be subject to this Section 9.3 as if the New Tax had an effective date as
of the date the Non-Affected Party ceases payment of such New Tax, (d) if a
mutual sharing agreement is not reached and the Non-Affected Party does not
elect to pay the New Tax for any period of time within the Agreement Period, the
Early Termination Date shall take effect and all Affected Transactions must be
terminated and be subject to the same Early Termination Date, (e) the Early
Termination Date shall be effected as if an Event of Default had occurred;
provided, however, that both Seller and Buyer shall calculate in a commercially
reasonable manner their net Gain (amount of Gain after netting Losses and Costs)
or net Loss (amount of Losses and Costs after netting Gains) resulting from the
termination of all Affected Transactions as if they each were a Notifying Party;
and provided further, however, that each Party's Gains and Losses shall be
determined without taking into effect the impact of the New Taxes, (f) (i) if
both Parties have a net Gain, the Party with the greater net Gain shall pay to
the other Party fifty percent (50%) of the difference between the two (2) net
Gains; (ii) if both Parties have a net Loss, the Party with the lesser net Loss
shall pay to the other Party fifty percent (50%) of the absolute value of the
difference between the two (2) net Losses; and (iii) if one Party shall have a
net Gain and the other Party shall have a net Loss, the Party with the net Gain
shall pay to the other Party fifty percent (50%) of the sum of the absolute
value of the net Gain and the absolute value of the net Loss and (g) such
payment shall be payable as provided in Section 8.1. Prior to and including the
initial Agreement Period invoked under this Section 9.3, New Taxes shall be
allocated as if they were Taxes as provided in Section 9.1. The intent of this
Section 9.3 is to leave neither Party with an unfair burden as a result of New
Taxes.
ARTICLE 10
MISCELLANEOUS
10.1 Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the respective Parties. No
assignment of this Agreement, in whole or in part, will be made without the
prior written consent of the non-assigning Party, which consent shall not be
unreasonably withheld as long as the assignee has a credit status which is at
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least equivalent to the credit status of the assignor including any guarantor;
provided, however, that this Agreement may be assigned to any affiliate of
either Party without the prior written consent of the non-assigning Party, as
long as the entity has a credit status which is at least equivalent to the
credit status of the assignor including any guarantor. Any person which shall
succeed by purchase, merger or consolidation to the properties, substantially as
an entirety, of either Party hereto, shall be entitled to the rights and shall
be subject to the obligations of its predecessor in title under this Agreement;
and either Party may assign or pledge this Agreement under the provisions of any
mortgage, deed of trust, indenture, bank credit agreement, assignment or similar
instrument which it has executed or may execute hereafter.
10.2 Financial Information. If requested by the other Party, each Party
shall deliver (i) within 120 Days following the end of each fiscal year, a copy
of its annual report or the annual report of its Guarantor, in either case
containing audited consolidated financial statements for such fiscal year
certified by independent certified public accountants, and (ii) within 60 Days
after the end of each of its first three fiscal quarters of each fiscal year, a
copy of its quarterly report or the quarterly report of its Guarantor, in either
case containing unaudited consolidated financial statements for such fiscal
quarter. In all cases the statements required to be provided hereunder shall be
provided only to the extent generally made available to the public and shall be
for the most recent accounting period and prepared in accordance with GAAP or
such other principles then in effect; provided, however, that should any such
statements not be available timely due to a delay in preparation or
certification, such delay shall not be considered a default so long as such
Party diligently pursues the preparation, certification and delivery of the
statements.
10.3 Notices. All notices, requests, statements or payments shall be made
or given as specified in Exhibit A. Notices required to be in writing shall be
delivered by letter, facsimile or other documentary form. Notice by facsimile or
and delivery shall be effective at the close of business on the Day on which it
is received, and if actually received after the close of the Business Day on
which it was transmitted or hand delivered (or if not transmitted or hand
delivered on a Business Day) it shall be deemed received at the close of the
next Business Day. Notice by overnight mail or courier shall be effective at the
close of business two Business Days after it was sent. A Party may change its
addresses by providing notice of same in accordance herewith.
10.4 Governing Law. THE VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT
OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF WYOMIG,
EXCLUDING ANY LAWS OF THE STATE OF WYOMING APPLYING THE LAWS OF ANOTHER
JURISDICTION.
10.5 Survival. All indemnity and audit rights shall survive the termination
of this Agreement. All obligations provided in this Agreement shall remain in
effect for the purpose of complying herewith.
10.6 Confidentiality. Unless otherwise agreed by both Parties, the terms of
this Agreement and of any Transaction hereunder, including but not limited to
the Contract Price, the Contract Quantity, the Delivery Period, the identified
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Transporter(s), and all other material terms thereof shall be kept confidential
by the Parties hereto for one (1) year from the expiration of the applicable
Transaction, except (i) information shall not be considered confidential if at
the time of disclosure such information is fully within the public domain
through no breach of this Agreement by the other Party; is shown by evidence to
have been, and in fact has been known or independently developed by and is
currently in the possession of either Party prior to disclosure hereunder; or
was or is acquired from a third party who did not breach an obligation of
confidentiality by disclosing it to either Party; and (ii) each Party shall be
permitted to disclose Transaction information to its officers, directors,
employees, agents and professional advisors who have a need to know information
related to this Agreement and/or a Transaction entered into under this Agreement
and agrees to notify such persons of the confidential nature of the information
disclosed, and to be responsible for any breaches of this Agreement by such
persons; and (ii) to the extent that any information must be disclosed to a
third party for the purpose of effectuating transportation of Gas subject to the
Agreement or to meet reliability council, regulatory, administrative, judicial,
governmental or regulated commodity exchange requirements where necessary. If
disclosure is required, the disclosing Party will immediately notify the other
Party.
10.8 General. This Agreement constitutes the entire agreement between the
Parties relating to the subject matter contemplated by this Agreement. No
amendment or modification to this Agreement shall be enforceable unless reduced
to writing and executed by both Parties. This Agreement shall not impart any
rights enforceable by any third party (other than a permitted successor or
assignee bound to this Agreement). No waiver by a Party of any default by the
other Party shall be construed as a waiver of any other default. Nothing in this
Agreement shall be construed to create a partnership or joint venture between
the Parties. Any provision declared or rendered unlawful by any applicable court
of law or regulatory agency or deemed unlawful because of a statutory change
will not otherwise affect the remaining lawful obligations that arise under this
Agreement. The term "including" when used in this Agreement shall be by way of
example only and shall not be considered in any way to be in limitation. The
headings used herein are for convenience and reference purposes only.
The Parties have executed this Agreement in multiple counterparts to be
construed as one agreement effective as of the Effective Date.
BUYER:
WARREN RESOURCES, INC.
By:_________________________________
Name: Timothy A. Larkin
Title: Senior Vice President
and Chief Financial Officer
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SELLER:
By:__________________________
Name:____________________
Title:_____________________
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SPECIAL PROVISIONS
EFP and ADP Transactions
Special Provisions ("Special Provisions") attached to and forming a part of that
certain Master Gas Purchase and Sale Agreement dated January 1, 2001 by and
between Warren Resources, Inc. (`Buyer") and ______________________(`Seller")
(the "Agreement"). These Special Provisions shall apply to any Transaction
identified as an EFP or ADP Transaction on the relevant Transaction Confirmation
or in a recorded telephone conversation provided for in Section 2.2 of the
Agreement. Capitalized terms used in these Special Provisions shall have the
meanings ascribed to them in the Agreement.
1. In the event of any conflict between the terms of (i) these Special
Provisions and (ii) the other terms of the Agreement, the terms of these Special
Provisions shall govern.
2. The following terms shall have the meanings indicated:
1.49 "NYMEX" shall mean the New York Mercantile Exchange, a corporation
organized and existing under the Not-For-Profit Corporation Laws of the State of
New York.
1.50 "NYMEX Business Day" shall mean a day, other than Saturday or Sunday,
a NYMEX holiday or a Federal Reserve Bank holiday.
1.51 "NYMEX Gas Futures Contract" shall mean Natural Gas Futures Contract
entered into pursuant to the NYMEX Rules.
1.52 "NYMEX Rules" shall mean the rules of the NYMEX applicable to the
terms of the NYMEX Gas Futures Contract, including without limitation Rule
220.17 regarding EFP and Rule 220.17A regarding the adoption of ADP delivery
procedures by the Parties and any successor to any such rule.
1.53 "NYMEX Payment Date" shall mean (i) twentieth day of the Month
following the Delivery Period unless such date is not a NYMEX Business Day; (ii)
the preceding day which is a NYMEX Business Day if such day occurs other than on
a Monday; or (iii) the following day which is a NYMEX Business Day if such day
is a Monday.
3. NYMEX Rules shall apply to all EFP and ADP Transactions between the Parties
under the Agreement.
4. The following provision shall be incorporated into the Agreement:
Seller and Buyer agree to deliver and receive the Gas at an approximately
constant rate of delivery throughout the Delivery Period. To that end the
Transaction Confirmation shall set forth the average quantities to be scheduled.
5. Buyer shall remit payment on the NYMEX Payment Date.
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<PAGE>
EXHIBIT A
NOTICE AND PAYMENT ADDRESSES
Notices & Correspondence:
BUYER:
WARREN RESOURCES, INC.
489 Fifth Avenue
32nd Floor
New York, New York 10017
Telephone: (212) 697-9660
Fax: (212) 697-9466
SELLER:
Telephone:
Fax:
or to such other address as Seller shall from time to time designate by written
notice in accordance with Section 10.3.
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<PAGE>
Exhibit A-1
EXHIBIT B
Transaction Confirmation for Immediate Delivery
Date: ___________, 2001
Transaction Confirmation #:_________
Version:____________________________
Confirmation is subject to the Agreement between Seller and Buyer dated
________________. The terms of this Transaction Confirmation are binding unless
disputed in writing within 2 Business Days of receipt unless otherwise specified
in the Agreement.
SELLER: BUYER:
WARREN RESOURCES, INC.
Agreement No. ______________________________
Agreement No. ______________________________________________
Transportation Provider: __________________________
Transportation Provider: ___________________________________
Transportation Provider Contract Number:___________
Transportation Provider Contract Number:____________________
Contract Price
$__________________/MMBtu
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<PAGE>
Delivery Period:
Begin: ___________________, 2001 End: ____________________, 2001
Service Level; Contract Quantity; Daily or Hourly Contract Quantities: (Select
One)
[_] Firm [_] Priority Firm [_] EFP [_] ADP [_] Interruptible:
___________ MMBtu Up to ________________ MMBtu
___________ MMBtu/Day Up to ________________ MMBtu/day
Delivery Point(s): Scheduling:
Special Provisions: This Transaction Confirmation is being provided pursuant to
and in accordance with the Master Gas Purchase and Sale Agreement dated
___________, 2001 (the "Agreement") between Seller and Buyer, and constitutes
part of and is subject to all of the terms and provisions of such Agreement.
Terms used but not defined herein shall have the meanings ascribed to them in
the Agreement. If the Parties to this Transaction Confirmation have not reached
agreement on and executed a valid Agreement, the Parties agree, by their
signatures below, that the terms and conditions applicable to the particular
Transaction described in this Transaction Confirmation shall be the terms and
conditions of the latest version of the Gas Industry Standards Board, Inc.
(GlSB) Base Contract for Short-Term Sale and Purchase of Natural Gas in place as
of the Transaction Date, including Buyer's standard form of Special Provisions.
If, prior to the end of the Delivery Period, the Parties reach agreement on and
execute a valid Agreement, then the terms and conditions thereof shall be
applicable to the particular transaction described in this Transaction
Confirmation.
[_] Other Special Provisions attached. ________________ pages.
Seller:
Buyer:
Warren Resources, Inc.
By: ________________________
Title:
Date
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<PAGE>
Exhibit B-1
TRANSACTION CONFIRMATION
UNDER
MASTER GAS PURCHASE AND SALE AGREEMENT
DATED AS OF JANUARY 1, 2001
This Confirmation Notice is executed pursuant to and becomes a part of the
Master Gas Purchase and Sale Agreement between Warren Resources, Inc. ("Buyer")
and _________("Seller") and provides the following:
Buyer agrees to purchase and Seller agrees to sell baseload Gas volumes as
follows:
Service Level: Firm
Delivery Period:
Daily Contract
Quantity: ________MMBtu/day Firm Baseload
Delivery Point(s): l
Contract Price: $____/MMBtu
Special Provisions:
From time to time, Buyer or Seller may encounter opportunities for optimizing
the value of this Gas supply. In those events, either party may propose a 50-50
profit sharing arrangement with the other party. Pursuant to such transactions,
the parties may obtain incremental transportation to capture these
opportunities, in which event the profits to be shared would take into account
all costs and expenses associated with each transaction.
If the above accurately reflects your understanding of our agreement, please
indicate your approval by signing in the space below and returning it via fax to
Warren Resources, Inc. at (212) 697-9466.
SELLER BUYER
WARREN RESOURCES, INC.
By: _____________________ By: ________________________
Title: __________________ Title: _____________________
Date: ___________________ Date: ______________________
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