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Resolution No. 96311 2 3 4 5 6 7 8 9 10 11 12 13 14 15 E17 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 9631 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BY AND BETWEEN THE CITY OF VERNON AND CORAL ENERGY RESOURCES, L.P., A SUBSIDIARY OF SHELL ENERGY NORTH AMERICA (US), L.P. WHEREAS, the City of Vernon (the "City") owns and operates a municipal natural gas distribution system for supplying the City's municipal electric system with natural gas and providing natural gas to businesses and industries within the City; and WHEREAS, the City desires to sell and purchase prepaid gas to or from Coral Energy Resources, L.P., a subsidiary of Shell Energy North America (US), L.P. ("CER/SENA"), on a firm or interruptible basis, under general terms and conditions published by the North American Energy Standards Board ("NAESB"); and WHEREAS, the City has determined that it is to the City's advantage, and in the public interest of the inhabitants of the City, to enter into a contract with CER/SENA for the purchase and sale of natural gas. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained hereinabove are true and correct. SECTION 2: The City Council of the City of Vernon hereby approves the Base Contract for Sale and Purchase of Natural Gas with CER/SENA, a copy -of which is attached hereto as Exhibit A and incorporated by reference. I SECTION 3: The City Council of the City of Vernon hereby 2 authorizes the Mayor or Mayor Pro-Tem to execute the Contract with 3 CER/SENA for, and on behalf of, the City of Vernon and the City Clerk 4 is hereby authorized to attest thereto. 5 SECTION 4: The City Council of the City of Vernon hereby 6 directs the City Clerk, or her designee, to give one fully executed 7 Contract to: 8 Shell Energy North America (US), L.P. Attn. Christopher Luick, Commercial Advisor 9 4445 Eastgate Mall, Suite 100 10 San Diego, CA 92121 11 SECTION 5: The City Council of the City of Vernon hereby 12 authorizes the City Administrator, or his designee, to execute and 13 deliver such other agreements, documents and certificates, and to 14 perform such other acts and deeds, as may be necessary or convenient to 15 effect the purposes of this Resolution and the transactions herein 16 authorized. 17 SECTION 6: The City Clerk of the City of Vernon shall 18 certify to the passage of this resolution, and thereupon and thereafter 19 the same shall be in full force and effect. 20 APPROVED AND ADOPTED this 2nd day of June, 2008. 21 22� �Gw� 23 Name: Leonis C. Malburg 24 Title: Mayor /44az '' - _ 25 26 AT . E 27 M NUELA GIRON, Cit Clerk 28 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STATE OF CALIFORNIA COUNTY OF LOS ANGELES )ss I, MANUELA GIRON, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 9631, was duly adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Monday, June 2, 2008, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. (SEAL) A"'�Ct �- 4-tn'-' ANUELA GIRON, dity Clerk - 3 - EXHIBIT A Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following date: May 1, 2008. The parties to this Base Contract are the following: Coral Energy Resources, L.P., a Delaware Limited Partnership, and and a subsidiary of Shell Energy North America (US) L.P. Duns Number: 01-501-4421 Contract Number: U.S. Federal Tax ID Number: 76-0505584 Notices: 4445 EastGate Mall, Suite 100, San Diego, CA 92121 Attn: Contract Administration Phone: (858) 320-1500 Fax: (858) 320-1585 Confirmations: 909 Fannin, Plaza Level 1. Houston, TX 77010 Attn: Contract Administration Phone: (713) 230-7505 Fax: (713) 265-2171 Invoices and Payments: 909 Fannin, Plaza Level 1, Houston, TX 77010 Attn: _ Gas Accounting Phone: (713) 767-5400 Fax: (713) 767-5445 Wire Transfer or ACH Numbers (if applicable): BANK: _ Citibank. N.A. ABA: 021000089 ACCT: 30603902 Other Details: The City of Vernon, a Chartered Citv and Municioal Corporation of the State of California Duns Number: 060883022 Contract Number: U.S. `Federal Tax ID Number: 95-6000808 4305 Santa Fe Ave. Vernon. CA 90058 Attn: DonalO'Callaahan Phone: 323-583-8811 Fax: 323-826-1425 4305 Santa Fe Ave. Vernon, CA 90058 Attn: Donal O'Callaghan Phone: 323-583-8811 Fax: 323-826-1425 4305 Santa Fe Ave. Vernon. CA 90058 Attn: Donal O'Callaghan Phone: 323-583-8811 Fax: 323-826-1425 BANK: The Bank of New York ABA: 021000018 ACCT: 800457 Other Details: This Base Contract incorporates by reference for all purposes the General Terms and Conditions for Sale and Purchase of Natural Gas published by the North American Energy Standards Board. The parties hereby agree to the following provisions offered in said General Terms and Conditions. In the event the parties fail to check a box, the specified default provision shall apply. Select only one box from each section: Section 1.2 ♦ Oral (default) Section 7.2 ♦ 25 Day of Month following Month of Transaction ❑ Written Payment Date delivery (default) Procedure ❑ Day of Month following Month of delivery Section 2.5 ♦ 2 Business Days after receipt (default) Section 7.2 ♦ Wire transfer (default) Confirm ❑ Business Days after receipt Method of ❑ Automated Clearinghouse Credit (ACH) Deadline Payment ❑ Check Section 2.6 ❑ Seller (default) Section 7.7 ♦ Netting applies (default) Confirming ❑ Buyer Netting ❑ Netting does not apply Party ♦ Coral Energy Resources, L.P. Section 3.2 ♦ Cover Standard (default) Section 10.3.1 ♦ Early Termination Damages Apply (default) Performance ❑ Spot Price Standard Early Termination ❑ Early Termination Damages Do Not Apply Obligation Damages Note: The following Spot Price Publication applies to both Section 10.3.2 ♦ Other Agreement Setoffs Apply (default) of the immediately preceding. Other Agreement ❑ Other Agreement Setoffs Do Not Apply Setoffs Section 2.26 ♦ Gas Daily Midpoint (default) Section 14.5 Spot Price ❑ Choice Of Law Texas Publication Section 6 ♦ Buyer Pays At and After Delivery Point Section 14.10 ♦ Confidentiality applies (default) Taxes (default) Confidentiality ❑ Confidentiality does not apply ❑ Seller Pas Before and At Delivery Point ♦ Special Provisions Number of sheets attached: Two 2 ♦ Addendum(s): Exhibit B — Credit Support Addendum IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. CORAL ENEJOY RESOU S L.P. Party Name By Anw- Name:aw»"A,� Title: G. (/,�.,'�og;o�y' ATTEST: By: THE CITY OF VERNON Party Name By _ Name: Title: Mayor / Mayor Pro Tem APPROVED AS TO FORM: By: Manuela Giron City Clerk Jeff A Harrison, City Attorney Copyright © 2002 North American Energy Standards Board NAESB Standard 6.3.1 All Rights Reserved April 19, 2002 General Terms and Conditions Base Contract for Sale and Purchase of Natural Gas SECTION 1. PURPOSE AND PROCEDURES 1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers tpthe patty receiving Gas and "Seller" refers to the party delivering Gas. The entire agreement hatwaan the nnrtia_c Ghnll ha tha r`nnfrA n-:i1,fi91rAi3rl in RoHinn 9 7 The parties have selected either the "©rai transaction Procedure" or the "Written Transaction Procedure" as indicated on the Base Contract. Oral Transaction Procedure: t n- 1.2. The parties will use tf�e ,foil�trving Traction Confirmation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmissl9lbtelephcot versation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally boundffrq n theitlmert y so agree to transaction terms and may each rely thereon. Any such transaction shall be considered a "writing" andave't�eenigned". Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party rriay, confirfn a telephonic transaction by sending the other party a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral TranSeCtion Procedur_) provided that the failure�t,( sent a Transaction 1 orlfirmation shall -t�Qt nvalideX _hp� ralragreement° of the partres3 t;onfirmingParty adopts its.confirmmg 1teh�eacl;`"or the hke,ks its srrure on�y�in ation�Coir�tiort..nos the ldentliiG and au laentii tion of Conf+rm7ng Party: Jt ie ransactron Do nfirmatron ntams any rov 6 other�than f se relating to theirRrcialeyf the transaction (i.e., peetantity, perFprmance ob1aion, delrvero Neriodn J very and/or transper;3#Ic$aonditto. s�,rrhic05 h mody�r supplement�NK the 13ase Contat or Genf aTerms ar0�liibhs of hi�Ctract (e.g., ��+R Y a,. arbitra oia r eoditio 1 e resentations antl warranti`esj �iph provisions�shall not tr�eemed to t��e�ce d pursu�. erection 1.3 but mI br �e cpres Jyl greed to by bo#h parties; p�f�� ,I, what the foregoing shaJ of invalidat �aT#y ansac � d to by the artier,. e '=rYa-E'Y'`T'4r Written�TrahsaG#lon*t?r cedure:.. 1.2. t T#�e ar4ies,- ,JJl,a a the followingM� ransactiola,Confirmation procedure. ShoUli the parties ne o n agree erl regarding a Gas trchase,and sale transaction for,z p e particular eivery, Period, the Confirming party shall andhe Ter party)na, ,record that agreernt an a Transaction Confirmationfand communicate. such Transaction Confirryiation by fcsimileDl or mutual) agreeable electi-MOiffi, ns, to�the other party by the close of the Business Day following the date o ei1 eefrr the parties=a kr owledge that their agreement' ills{not be jbinding until the exchange of r onconflrcfir)g '(rapsactlon C n rnaa cps vfi #1 a passage bf fie Confirm Deadlii$' urn#houtob'ection- tom the rec ihig party, as roviced in Section,1,: ,� �. j a } to ,s z% ':,. n s s t A— n c- 1 3 zs If sedtnglpai Sys Transaction Confirmation isrtatenally oiifeient frorflheeceiving patty's�rst7ling oi'thecreement referred to in S�eCtirn1.2 su�Iareceiwrig party shall notify the sending party via facsimtl �Dl or,mutually agreeableelfronic man fiyhe Confirm Deadline unless sUeh recelving party hasFpreviously suit a TF�nsaction Corifiixnatioh td`ti a sending p e failure of the red WAng party to so notifythe sendn fiparty in writing by the. Confirm Deadlrnexconstitutes�t6e recervrngparty's agr�rnenf �o fhe torr�s� Hof ttatransaction r: descnbedEnthe seting�parfys Transaction Confirmation If there are any material differences betweeme15ent Transcti0n_Conflrmations 3., 1 , governlr g the€dame tr0hsastlon, then neither Transactid-h - gg hfirmation shall a binding ntil br unless s1ac i rilfForet ces arexresblved including the useycf a eviddh-d - P. tha dearly reso des the differences ir�,gthe Transaction Confirm tiptis. In the eve ' o a onflict o%ag a terms of i a big � r � T ; nsa or% (yonfirmation u uant to Secilon 'f 2� ii the oral agreement o I arties i�� z �e evide�n�ed _ () ►9� P) 9: � a recorded " 1 conve[satronvherea�tttarties have selected the Uralransaction Procedttre of the ash Contract, �I� ease Cotractand (iv) these General T0riii's and �:on ibot s, the termsrofbe documents,'h 1f<<govern in the priority list� ir�this senteMW li 1 A. Th ipartiesyag a at each pa rriay electrorileally record all telephone conversations with c o this Co��ac wean their � =s s ? t i rE � k { �;_ respects e�employees, 5 oiitany specialprfurther notice§ athe other a � ach paity4yha�l obtain an, +tae army consen o ifs agents and employes tp such recctriJinj Where tetparties haysefgctei the OralyTansactionrodure in iof the` _�;" i�s dntract, the partiesgi ee not to cbnrtest the validity orer�forceabilityf te)elgnic recordi�igs entered )n%in accordarcv(nie requi7 of this Base Contras t However noting herein shall b� aanstrued as a uiaiver of any obleQtion to thedrttissibility of �sidence.�= t IL M .h ITIONS sF f4 a:. _mow. r',�� The terms set forth below shall have the meaning ascribed to them below. Other terms are also defined elsewhere in the Contract and shall have the meanings ascribed to them herein. 2.1. "Alternative Damages" shall mean such damages, expressed in dollars or dollars per MMBtu, as the parties shall agree upon in the Transaction Confirmation, in the event either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer. 2.2. "Base Contract" shall mean a contract executed by the parties that incorporates these General Terms and Conditions by reference; that specifies the agreed selections of provisions contained herein; and that sets forth other information required herein and any Special Provisions and addendum(s) as identified on page one. 2.3. "British thermal unit' or "Btu" shall mean the International BTU, which is also called the Btu (IT). Copyright© 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 2 of 10 April 19, 2002 2.4. "Business Day" shall mean any day except Saturday, Sunday or Federal Reserve Bank holidays. 2.5. "Confirm Deadline" shall mean 5:00 p.m. in the receiving party's time zone on the second Business Day following the Day a Transaction Confirmation is received or, if applicable, on the Business Day agreed to by the parties in the Base Contract; provided, if the Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party's time zone, it shall be deemed received at the opening of the next Business Day. 2.6. "Confirming Party" shall mean the`party designated in the Base Contract to prepare and forward Transaction Confirmations to the other party. r-` 2.7. "Contract" shall mean the le ally�bin�ding relationship established by (1) the Base Contract, (ii) any and all binding Transaction Confirmations and (iii) where the pa es f��a± selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have enterec�ifi0through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation 2.8. "Contract Price" shall mean the amount xpressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties 6,a transaction 2.9. "Contract Quantity" sha N othhe qualitr`ty:of Gas to be delivered and taken as agreed to by the parties in a transaction. V M M 2.10. "Cover Standard", as referred to I 3.2, shall mean that if there is an unexcused failure to take or deliver any quantity of Gas pursuant to this Contract, th rj�the p rFO1.pfhg party shall use commercially reasonable efforts to (i) if Buyer is the performing party, obtain Gas, (or an altemate fuel if eIe .5"ai' y Buyer and replacement Gas is not available), or (ii) if Seller is the performing party, sell Gas, in either case, at a price reasona"tiie for the delivery or production area, as applicable, consistent with: the amount of notice providefi by,the nonpe ormrng party; the imm+ di cy f the Beu�y 's Gas, sumption needs og Sellers hassles requirements, as applicable he quanti# es n�oJv d, and tNe anticipat tj of arl re by hewnonper ing party � ,, , ` --�t+n x �__fie, sam ,s�'t K �a-'- N2-' '.. 2 11C�eiit Suppf¢bClwrrgation(s)hatl mean ai�pigaEion(s) to pro,ide or est�lsh credit 13r.or or on �e i fv, a party to this COrrrct such as�nrevocable sa�atlby letterfredrl= a mar m reementa ty r g g repaymen , _,, sect r� mt rest in n asset, a performaneebpnd, guaranty or other good and suffiiet�sacurity of a con trnuing nattue'� Y`50 j k ,Dayshallneana period of4consecutitcers coextensive; with a dad+ ,as definedbybReceivi gsporter in a particuaranaactiort� ,€j �s s 15 2.13.. "{�e1rVe�y Pelaod� shall be the peTj6d during �hihich deliveries areYA "be made§bAkbgreed to b�;'th0n5ttres in a,!-- sactron. VT 2.14Deiib'py POtnt(sj shall mean such poin(s) as are agreed to bythe parties its atiansaction r 2 15 Y "ED1" Small rnean`ar electronic o to intercha'ih`ge pursuant to an-bgreement eri Bred into es, specifics relating to the coicafion of T rnmunransaotion Confirmations undei this Contract �_i 2.16EFP stall mien the purchase sale or exchange b`f'natural Gas asthe "physical $sadeQ anzear(ge forihyi al transaction mvolvigg jas fufi res''Contracts. EFP shall incorp rateJtf q meaning as rerrredies o1 �ir �r0` 1d, adMhatt p i[y's` excuse for nonperf0rmatice:, it$ bb`ligations to deliver or receiy—ft as will be, govern si by the rules 0# the lelei �0S bhange regulated under theornmodit+fxchange Act. 4r ,t� 2 17 u z'Fir '" shalJ��ean'that either party may interrupt its; perForman e v i'th60 =liability only to�fxte t that sucfir prformance is prevented for reasonsrat=oice Majeure, provided, hiwever;that durrng Fgrce Majeire mterruptios,h�rr invoking Force Majeure may bye responsible or art Imbalance Charges as setforth it Section 413 related to%i interruption fter the nomm n i anade to the Transp0rer and ufitii the c}aange in deliveries and/or receipts is confirme by the Transporter. �r vagni 2.18. "Gas" shall rrieari any mixture -bf hydrocarbons and noncombus(be gases inma?gaseous st a sisbng pniria i f 6ethane. 2 19 f Inbalancel�atges shall mean any feesrenaies, costs or harges (irca h or in ssessed by#�fisporter for failure to atisfy the ans orters balarice�and/or norn netionaequiremen, ;_10 MIS 2.20"lri#erruptiblz'; shall mean that el;Ner art maote.ru tits erfoirnance at n dime forasdxheth r paused b p y y�ititiala ee Ch re set forth in an event 0f Force Ma wre, with no liability, -except t su i�terrtipting part a be re Bible for = € Sectidh'.4 elated t unter,uption afl:er�ti a nominati�ra is spade to the Transporter�i �ntil the c a� ft� �eliveri >� ' Veceipts is confirffif by Transporter ri J z, F 2 21 'I1i1MBtu' s a1j�mean one millian ritish ther " I un which is a ivalent to I dekatherm 1 11y4 ��'2� -. jb r 2 22 r$ej �W�hth shall 5ml;an the periods eginning cps tN rst i Day ©f he calenbdrrmonth Y er i g mm�edrafal prior to the commencement of the iirstDay of the neMalendar rNM R€�`�I ��,��.�: � 1� _.__ , a ...,... % 2.23. "Payment Date" shall mean a date, as indicated on the Base Contract, on or before which payment is due Seller for Gas received by Buyer in the previous Month. 2.24. "Receiving Transporter" shall mean the Transporter receiving Gas at a Delivery Point, or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point. 2.25. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporter(s) for movement, transportation or management. 2.26. "Spot Price " as referred to in Section 3.2 shall mean the price listed in the publication indicated on the Base Contract, under the listing applicable to the geographic location closest in proximity to the Delivery Point(s) for the relevant Day; provided, if there is no single price published for such location for such Day, but there is published a range of prices, then the Spot Price shall be the average Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 3 of 10 April 19, 2002 of such high and low prices. If no price or range of prices is published for such Day, then the Spot Price shall be the average of the following: (i) the price (determined as stated above) for the first Day for which a price or range of prices is published that next precedes the relevant Day; and (ii) the price (determined as stated above) for the first Day for which a price or range of prices is published that next follows the relevant Day. 2.27. "Transaction Confirmation" shah>mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant to Section 1 for a particular Delivery Period. 2.28. 'Termination Option" shall meaRWi option of either party to terminate a transaction in the event that the other party fails to perform a Finn obligation to deliver Gas in the cas, Se let or to receive Gas in the case of Buyer for a designated number of days during a period as specified on the applicable Transaction GonfitWtion. 2.29. "Transporter(s)" shall meat aII Gas gathering or pipeline companies, or local distribution companies, acting in the capacity of a transporter, transporting Gas for Sell errr Bu+cyUttream or downstream, respectively, of the Delivery Point pursuant to a particular transaction. SECTION 3. PERFOF1/IANCE OBLGATION Fs, 3.1. Seller agrees to sell ano. and Buffer agrees to receive and purchase, the Contract Quantity for a particular transaction in accordance with the terms of theentfa`ct. Sales h purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction. The parties have selected eithe M Covsr`SaFI`dard" or the "Spot Price Standard" as indicated on the Base Contract. Cover Standard: vr. 3.2. The sole and exclusJlv%remedy of the pgrt esjra atheevent� of apbrpaeh� of a Firm obli = ion fo el v r pr receive Gas -shall be 5 3.a j3+ g r bj�S afk recovery of he folloy ing Ott)` r the event�Af a breae is bey Setjer-an any S y s), payrr�& t, by Se ern t%r_ e1=1 an Dort equal to the positivd r�ifferonce i)sa between thefurchase pro, yti; y Buyer utiMOng the CQAC4t-Standarc�a h (�gntrac Pam , : djusted for 1 <a commeaallyeasonb(e�f#erences inransportatio�{swo or from t1ae Deliveryo�rnt(s), mulf p i y�ie diffe Between the Contra t Q rarlt�ty anclF a quantity acto -g, deliverediltt�e i for such ay(s); or (ii he event chi' by B `er i ny Day(s), Y r., paymrttt�t7yer t Se]lern the amo equal tot a pos% a difference of an), bey ern the Con rr g and ttii�eceived by Seller 6l llag vthe Coe tandard for �ae resale of s t- adjusted f�t=commercta) r reasonab des in t iaspor�ation costs V •; to or fromheDehveyfF chms it{s), multiplteslay the differetween the�ontract Qty and th is �ctuall�#als�b Buyer for such a0s), or (w) ttte event tha��,�yer has us d rommerciallyoi'oasonable orts to r a of Gas S 4 has used s � 3 Est t w �' r�; comm cia�jly reasor�ati eS efforts to self t ie Gas to ir�p_arty, and tao;, such rep�acement or s fie s ar ilabie Mien a sole and ContraRn ""M the f 'att e_r S 0e, adj exclusive remedy ofhe pyerforming part�7Ftall be artyfamrable differ rice betwe�o Iusted �x for such transportation to,ihe applical{te belivery Potrtf,my)plied by the _difference etween the��r�Quant�rf''dAMe quantity actuall;i de6veed by'Sellet and received,b Buyer fotucpay(s). Imbalance Chargeashall not eerryed undersection 3.2, but Seller aradlor Buyer shaliybe responsit�fe for Imbalance Carges, d and, a provided in SsctrorS��fhaiount ffiitchnfavorable difference shall'be pa�abie�five Business Days after presentation of the eJ�orring party' vo o°' whfct%t71 set #oi#�i tie basis upon which such amount was,calculated. -NMI, ard_ f =g ieS of PStand x y: UIR 3 2 TJ�e dole and exclusive remedy o the parties mtheevent of a breach„of;a ,Firm obhgatrtirtlo3delirVei or receive has shall be recoveryof the fo�ld�ing (r) n the event ofi a breach by Seller on any Day(s), payment by Sel er o uyer fn an mount#equal to the difference between the,l pn#tact Quanf ty and the actual qt'r Mity delivered by Seller-O." received y yet for such Days) multiplied by the) os9%(iue difference if any, obtained by subtrac�mg #he,Contract Price from the Spot Price; ort( 1. J I e event off bleach by Buyer on anyW, y(s� pa�rpe.nt y Buyer to Seller in an amount equal to the difference between the Contras u�n�fIty am the; ctual quantity deliveMdhb Seller aiTd #ecoived by Buffer for such ��f(s); multiplied b� `the posit�ri difference, �a btaine t1) t acting the applica�e�ot Pneom the Contractl?rice. Imbalarfce Charges shag .'not be reoo�iered underte�on 3 2beller and/or Buyerzsiail te'resp�ipstbl�fior Imbalance Charges, iany,Yas provided mSection 4.3�The amount uc�tafavor bl clffrence shall r E:�•.� r " 4 sxk be pat�te dive Buses Days after presentation of?e performing pa s invoiceanih�ch shall s t lafhe basis'ao�uhich such 3 3 Blot vlthstanc ink Section 3.2, fhe parties mad agfe� to Altematij"e; Damages�i�la I ransact o n�nation c ed in writing b both artles.�'NO Y P 3 ; 417 3 �r x 3.4. t sections 3.2 and 3 ; the parties . aylprovide for a Terminatio ' potion in a Tr ig' c b ;'Confi rt ii 3ra xecuted in wntmgap both partes;� TeTransactio Confirmation >5otlrnng the Teanation OM will des(_ , e�lengtho dperformance tnggetlierminaf�ption and t(ie procedures"off `�Cec s€�hQreofow dagm- ma� for nogaceVirall bo € : pensated, and how ligtaitlatib costs will 61alculated." �e. v ._ass - SECTION 4. TRANSPORTATION, NOMINATIONS, AND IMBALANCES 4.1. Seller shall have the sole responsibility for transporting the Gas to the Delivery Point(s). Buyer shall have the sole responsibility for transporting the Gas from the Delivery Point(s). 4.2. The parties shall coordinate their nomination activities, giving sufficient time to meet the deadlines of the affected Transporter(s). Each party shall give the other party timely prior Notice, sufficient to meet the requirements of all Transporter(s) involved in the transaction, of the quantities of Gas to be delivered and purchased each Day. Should either party become aware that actual deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas, such party shall promptly notify the other party. Copyright© 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 4 of 10 April 19, 2002 4.3. 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 receipt of quantities of Gas greater than or less than the Scheduled Gas, then Buyer shall pay for such Imbalance Charges or reimburse Seller for such Imbalance Charges paid by Seller. If the Imbalance Charges were incurred as a result of Seller's delivery of quantities of Gas greater than or less than the Scheduled Gas, then Seller shall pay for such Imbalance Charges or reimburse Buyer for such Imbalance Charges paid by Buyer. SECTION 5. QUALITY AREMENT All Gas delivered by Seller shall meet the pre --(,ire, quality and heat content requirements of the Receiving Transporter. The unit of quantity measurement for purposes of this Connct sFgalfie one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving Transoler. SECTION 6. TAXES d. The parties have selected either;A'Bu er Pays At and After Delivery Point" or "Seller Pays Before and At Delivery Point" as indicated on the Base Contract., Buyer Pays At and After Delive ,zPofnj z Seller shall pay or cause to be paid aifaxes, f,~is fevies, penalties, licenses or charges imposed by any government authority ('Taxes") on or with respect to the Gas prior to the flehvery toin(sj. Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at the Delivery Point(s) and all Taxes after t`e` Delivery`Point(s). If a party is required to remit or pay Taxes that are the other party's responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes Any�arty entitled to an exemption . ; from an �srich Taxes pr,,char eszahall fumish:the other `a a#i' nee eocmentation:_thereof r _ a �.. ;. r1 a 8e#ore , Selle4 ADivePo� ta� } Seller=5hal1 paWor caili A& 6paid all taxes, fees, levies penalties, licenses,�c charges imposed by ari g Cer merit au on or with res�ect tghe Gaprrtothe Delivery Points) an =Tfta�C�;s at the Dehery Point(sBuyer shally�e to bey aalTaxes on or �� Ott .� �a.� � �� .�. � .. with rpec# #the Gaf#er the Delivtoint(s). anpai is require �p remit or pay Taxes theare ether ,s£ies � ,� �,nsibili ty herexem lion from art: uci Taxes br cha es shall furnish fhe other _a r en necessa cocumentatidwhereof.LL;,,,.; s y, n, SECT` _ N 7 7.1. „ ,. S611er sl supporpng do'uh date bllpng Nnll:bE following IVlontl's31 7.2. Buyer st before ot later of A Y payment is due of made in acc q-ban , 7.3. In tfge e nonperforming p� the noperformin r.: 7.4F if tie env as it eoiircieys` to !G, PAY -,WENT, Ate iyer for Gas delivered stable in industry practio sed on the ,quantity of m thereafteras actual c mount due under Sectii Date or 10 Qays after i iness Day following the ction 7.2 its becolon flue purs due five Business De good faith�d4putes the >rovided, "ver, If th may p ftd any remedy ailable at law 7.5. If the mvoie,ed Marty #ails to rem date o1 payment at al,- ti egyal to the ;� �,� e Joumal;:;piul;hwo pere;eniopeFannum; or to .d in the the amoi ,as. The nation is event Month ;and for ar��yother"pplicablehcher-ges, providing If 6t actual quay bty c Ali 61 is notouvnfiy the billing entity jj?erabestjUYedtij the 10 on the the Base Corgfra(t,anrziriediatelyavaailable funds, on or p- rovided thatihe�'a niehqy�bate no# yBusiness Day, Its are due Buy x hereunClery;payrri to B,Uver shall be actions 3 2,or 3.3, t ie basis upon which ceipt of intrce. K;g . any such myoice or ar party disl:@es the a ited. In the event the Ihts pursuA-to this S amountjP.0', a yvhen due, lgterest on (i) the ttfen ffeO, ve prime rat of into iwmum applic t le lawful mte est rate. to the it from iereof, 4911h l ode d'party +�I � rts�uch amount sue, it mtI % c1�F suppc r 166umentation are unabI(ON—r e e sucC dither party fromue until the gates -1 R2111 all Street 7.6 A�Pa Y shall %aveW right, at i s�Wri expense �jx rig asonable Neat ce and at e�asronable tim ;P o rl me an u i rid to obtain 3e{ copiesdfrhe�relevant pfior1}of the books;ords, and fiephhe fiord}gsie other par[ only to tttextel�sonab e¢essary to verify the ae racy o any silffien�„:charge, pa�ent, or comp, t © i% der the t niragt. This r ght o e rr i e baits a t obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Contract All invoices and billings shall be conclusively presumed final and accurate and all associated claims for under- or overpayments shall be deemed waived unless such invoices or billings are objected to in writing, with adequate explanation and/or documentation, within two years after the Month of Gas delivery. All retroactive adjustments under Section 7 shall be paid in full by the party owing payment within 30 Days of Notice and substantiation of such inaccuracy. 7.7. Unless the parties have elected on the Base Contract not to make this Section 7.7 applicable to this Contract, the parties shall net all undisputed amounts due and owing, and/or past due, arising under the Contract such that the party owing the greater amount shall make a single payment of the net amount to the other party in accordance with Section 7; provided that no payment required to be made pursuant to the terms of any Credit Support Obligation or pursuant to Section 7.3 shall be subject to netting under this Section. If the parties have executed a separate netting agreement, the terms and conditions therein shall prevail to the extent inconsistent herewith. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 10 April 19, 2002 SECTION 8. TITLE, WARRANTY, AND INDEMNITY 8.1. Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the Delivery Point(s). Seller shall have responsibility for and assume any liability with respect to the Gas prior to its delivery to Buyer at the specified Delivery Point(s). Buyer shall have responsibility for and any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s). 8.2. Seller warrants that it will have tfie right to convey and will transfer good and merchantable title to all Gas sold hereunder and delivered by it to Buyer, free and clear4f all liens, encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 14.8, ALL OTHER WARRANTIES,* EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE; MRE DISCLAIMED. 8.3. Seller agrees to indemnify Buyer aril save it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from",ny ancfall persons, arising from or out of claims of title, personal injury or property damage from said Gas or other charges thereon which attac i before title passes to Buyer. Buyer agrees to indemnify Seller and save it harmless from all Claims, from any and all persons ,.arising fro`fn or but of claims regarding payment, personal injury or property damage from said Gas or other charges thereon which attach after #Ile passes to Buyer. 8.4. Notwithstanding the otheri�rotnslons of is9tion 8, as between Seller and Buyer, Seller will be liable for all Claims to the extent that such arise from the failure of Gas 0lNerd. by Sell;rto rfi►eet the quality requirements of Section 5. SECTION 9. NOTICESf =4. 9.1. All Transaction Confirmations Invoices payments and other communications made pursuant to the Base Contract ("Notices") shall be made to the addresses specified in writing by the respective parttes,f[omlime to time r 5 k 9.2. hereunder may be sent bacslmde or rruually acceptable elec#Ir olcmatrs a'nationilly recognized overrng;ht�etflfrler servrceO, lirst class marlsor hand delivered t 3EN 9 3 N ice shall.,',, be I-Ve when repea)red on a BfiWtib' s�Day by the addressee. �0 the absen% of�p of of the tact al ceipt date, the fo�ip i l resume ions rill apply No#ices sent Uy fi cs mile shall Abe deemed"t ave beeb�recel upon �e� r71 party's a such earlier fin1't after mailrng SECTION 10 1 If ether (whether or riot creditwarth�ness sufficieTit security letter of credit, at= security) 10 2 In the evIi any general array commencement o1 proceedipg Commi they falf,0' -(y) 4 it or sUbstrafaally relatirdvrR4 -� Co M> mLs&TTW BusHof a second BUfflfless t right, atr,,, , sole eI( the transoctons u ie's confirms#ion of m. on ausness D night mafl or courier ied by the receiving CIAL RESPONS )y the dema amount a sect n "Event r the be rig or ca; ist it (ill) ✓er, prov sets; (vi) fail to g uest by t grouna party (° equate )r the to terest it 'ault") ei )f credit ler any t wise bet liquidat perforr equate er party that su ned to h; :e via fin urity reg ing, witt of Perk W.=CCE or a per (the "Del e a pet! or similz rupt or it ✓ator, cu: lation to of Perf at have r it is due; in If the day on whit call be deefed to ha, been recbrIvetl on the ass mail rs`hal1 be cor rig the perf6rrnai-4e1i limitation, the d u rote "Adequat0NA. ale to X includin ,, b lance bond or guae , ng Party or its guar, or otherwise comme at ✓ for the br�tection of ent (howd'ver,evidenc an, trustE e;Mother si other pa�ith respi nice uANryction 1 any n the or p; 10.3, the (the to is not a following is sent or ass Days A Contract nge in the shall mean irrevocable )f any such gnment or ;ce in the on filed or s debts as respect to )bligations least one before the I have the 1 liquidate available 10 3 1f �n Event o {Def 'It has occp�red and is corat�n it 'the Non Defaulting P4 hall haves "'Of E y Notre � e Defaulting Ku; Party, tordEsi pate a D:ay ao.' earlier th a fhe Day su lE�6ce rs l en aigrp7 ter than 0 Days t oleo ° ram Even, as an early termination date (the Early Termination Date") for the liquidation" and termination pursuant' oi�SecfionlU.3.1 oa>r transactions under the Contract, each a "Terminated Transaction". On the Early Termination Date, all transactions will terminate, other than those transactions, if any, that may not be liquidated and terminated under applicable law or that are, in the reasonable opinion of the Non - Defaulting Party, commercially impracticable to liquidate and terminate ("Excluded Transactions"), which Excluded Transactions must be liquidated and terminated as soon thereafter as is reasonably practicable, and upon termination shall be a Terminated Transaction and be valued consistent with Section 10.3.1 below. With respect to each Excluded Transaction, its actual termination date shall be the Early Termination Date for purposes of Section 10.3.1. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 6 of 10 April 19, 2002 The parties have selected either "Early Termination Damages Apply" or "Early Termination Damages Do Not Apply" as indicated on the Base Contract. Early Termination Damages Apply: 10.3.1. As of the Early Termination Date, the Non -Defaulting Party shall determine, in good faith and in a commercially reasonable manner, (i) the amount owed ;(whether or not then due) by each party with respect to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such delivenes and receipts (including without limitation any amounts owed under Section 3.2), for which payment has not yet been made by the p rtj%that owes such payment under this Contract and (ii) the Market Value, as defined below, of each Terminated Transaction T,=,he f Wefaulting Party shall (x) liquidate and accelerate each Terminated Transaction at its Market Value, so that each amountaqualo%#he difference between such Market Value and the Contract Value as defined below, of such Terminated Transaction(s) sF'all bdYdd& e,§ the Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and to the Seller Ifthe oppositd1b the case; and (y) where appropriate, discount each amount then due under clause (x) above to present value in acommercially reasonable manner as of the Early Termination Date (to take account of the period between the date of liquidation�anm the dater which such amount would have otherwise been due pursuant to the relevant Terminated Transactions). N For purposes of this Section III 0i3 1 "Contra t Value" means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the Contact Pnce,ad"Market Value" means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by t1�e )narks# prie`for a similar transaction at the Delivery Point determined by the Non -Defaulting Party in a commercially reasonable manlier Tb-`ascertain the Market Value, the Non -Defaulting Party may consider, among other valuations agy or all of the settlement prices of NYMEX Gas futures contracts, quotations from leading dealers in enemy. swap contrasts or physical gasradrng markets; similarnals�r Purchases andthy other bona fid'e�r partyaFers;jt`j�ustedfior the length of tMe term artcliifferences in transportation <�:osisA`:party shallot be regdreri to enter4eplacemetrarsactidn(s) in order to det rmine t)j,ilarket Value. ip,A_ extensio(sJ3ofythe term ofransactiorEowhich pr�ea� of bou �das6f,the EarlyWN— imams (iri lttdlpg :but not lirr�iteds5reasonabi visions) shall not be _p�onsidered i �c ete�nang C �tr�et�l7alues and Yrhevo�dance ofogtant to whichone partEhas the rightt��ettd the terniofatansaction d m�:c eterr fining Contract Values fie rate of Interest used Ir�calc` ting net p eseflialue shall he Non Defaultin Pe an a come_rrianner.Y_ fr' Earl jfe�miiri #ion Da`ma es Do Not A I 10 Pis of th8i ily Termination Date, the on Defaulfing Perty shall dete;rmine, in ood`x"A th' and �f mmercially reasonable3manner themount owed whether or not them clue) by eachparty with resj�ect to all has tleliveed anteg�a between the parties under Ter urinated Transactors and Exctuded Transactions on and before the Ea TsrmJIYT tion Da ea s all other applicable charges relating #o such delivenes and rece ptsinluding withoat,1imitation anymoun: sued}under Sec�oirit3) for which a merit has riot et be+~t� made b the a ;, that owes such<`;a ment under his Contract- The parties have selected either "Other Agreement Setoffs Apply" or `ether Agreemet�Setofis I3o NotAppl�y's indicated on t U Other Agreement`Setoffs ply: s r 1013 2 The Nc hxDef6diting Party shall net or aggregate, as appropriate, any and all amoi: A s owarag between`the{patties under Sectionl_0 3 1 so thatll such amounts ire netted opggregated to a single liquidated amount pa%ba b_y one paryyf�the other (the "Net Settlement Amount) At its sole option and without prior Notice to the Defaulti> g Party, the Non�Defaulting Party may setoff (i) any Net Se demerit Amou>at owed to the Non-Defaultmg�Party against any margin oW er collate Faf held3b U1 in cosh ct�on with any Credituoport ObhgaGo�n relating to the ,Contract; br (a�)ary Net Settlement Amolanpayable tothe Defaulting r-r�lygainst any amoun(s) payable b` the Defaulting Warty to the fonefiaulting Parfy,under anyfltt er agreerrienirarrangerentbiween the 1 30 2 The Ntori Defaulting Party shall net or�gr�fiae, as appronate, any 11 amounso ing between the +ties under Section "10 3 1:, so that ill sr5ch amounts are netted or ag gated to a single liquidatVdarnount pays eyby ne par�to t e other (the Net Settlement Amount') At its sole option and withutnor Notice to the Defaulting�a'rty, the ofii Defaulting Pa�Wsetoff any Net Settlement Amountowed to the Non Defaultin I?a anst an mar in or otherco ateral held � 9 g T y u ittnsconnectio { i ny Credit r�y Supp©rt;Obli ation rblir to the Contract W, IN d 10.3Y3 :If any ol�afion that is tb be includedte1y�frr�gaggfiignor setoff purMsuao5�oc.a1Q'�isfinascertained, the Non -Defaulting Party may in good faith estimate that obligation and net, aggregate or setoff, as applicable, in respect of the estimate, subject to the Non -Defaulting Party accounting to the Defaulting Party when the obligation is ascertained. Any amount not then due which is included in any netting, aggregation or setoff pursuant to Section 10.3.2 shall be discounted to net present value in a commercially reasonable manner determined by the Non -Defaulting Party. 10.4. As soon as practicable after a liquidation, Notice shall be given by the Non -Defaulting Party to the Defaulting Party of the Net Settlement Amount, and whether the Net Settlement Amount is due to or due from the Non -Defaulting Party. The Notice shall include a written statement explaining in reasonable detail the calculation of such amount, provided that failure to give such Notice shall not affect the validity or enforceability of the liquidation or give rise to any claim by the Defaulting Party against the Non -Defaulting Party. The Net Settlement Amount shall be paid by the close of business on the second Business Day following such Notice, which date shall not be earlier than the Early Termination Date. Interest on any unpaid portion of the Net Settlement Amount shall accrue from the date due until the Copyright© 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 7 of 10 April 19, 2002 date of payment at a rate equal to the lower of (i) the then -effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate. 10.5. The parties agree that the transactions hereunder constitute a "forward contract" within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each "forward contract merchants" within the meaning of the United States Bankruptcy Code. 10.6. The Non -Defaulting Party's r with respect to the occurrence of any other defenses that it is or may be ent 10.7. With respect to this Section''; the terms and conditions therein shall SECTION 11. FORCE M g 11.1. Except with regard to a fi Section 4, neither party shall be 1I Majeure. The term "Force Majeu% suspension, as further defined in'ee 11.2. Force Majeure shall mcludl earthquakes, fires, storms or storm explosions, breakage or accident or an eniire€gecfgraphiaeglon suehYa curtailren cf Firm ansportation disturf3ances riots, abotge, insui order,-,. fistattate, o i mince, reaul; s under this Section 10 are the sole and exclusive remedies of the Non -Defaulting Party ermination Date. Each party reserves to itself all other rights, setoffs, counterclaims and irising from the Contract. e, parties have executed a separate netting agreement with close-out netting provisions, othe extent inconsistent herewith. )bligatignq make payment(s) due under Section 7, Section 10.4, and Imbalance Charges under the other for failure to perform a Firm obligation, to the extent such failure was caused by Force employed herein means any cause not reasonably within the control of the party claiming it bye hfbited to, the following: (i) physical events such as acts of God, landslides, lightning, uch as hurricanes, which result in evacuation of the affected area, floods, washouts, iy of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting mperatures,which cause freez r -orof wells 9glines Py plp ry p5jt terruptior ,and/or torage 4 � Trar spoit�i`s;� (iv) a is of of ors;; such asp strikes o) kouts r iher .industrial r Wft i or warsCand Yjgovernmental actions=such as nece�ssi �t amplia,,, elWtth any court c was [ w, c.=a g r ''xY policy ha'A fhweffect of la i firomulgatedgl y a.gover Me fat ythonty ia_a,�, urisdiction. its to avdidtt�"e at verse imparts of a FoA' aieure ah � e the eu i<�r ccurrence once iunasiooceurretl o bider 10 resume pertormance �' , 11 3 fNei#herrpar[yha11 be entitledito the benefit Qfherrovisions of.tggn rce Maje all of tie f.6116Wng circUrristances: (1) the eurtailmeni of�tltr Eruptible or secondary transportaii©n is als6%Wbrtailed; (ii) the party claiming�eiDQ failed to remedy the covenants or c)bjigattoris with reasonablespatch; oi(iu)eeonomic hardship, to Ind higher orinote2a vantageous'price than tMe Contract Pfide Buyer's ability Ca purchase Contract pace br3a regulatory agency disallowing, in while orn`part, the pass through Buyer's fnarkef(s) or Btiy 9 inability to use or resell Gas purchased hereunder;#except loss or.failure of'Sellei's gas supply or depletion of reserves, a i;cept, in eithefi,'Z' se, as Majeure shall not berexcused from its responsibility for, lmt�a(ance Charge < 11 4 Notwithstanding anything to the contrary he.00 the parties agree tFiat th disturbai6ce5shali be within the sole discretion of the party experiencing such distort 11 5 Thejparty whose performances prevented by Force Majeure must pro 4i given ally however, written :Notice withy reasonably full particulars of the event or oci Upon prodding writtenJdotice of Force Majeure to the other party, the affected party Force Nlaleure event fd make; or accept de0 ery of Gas, as applicable, to the extent an shall be deemed to J�a� e=failed in such obligations to the athef boring such dccurrence c 11 6 I�otwrthstaffd tlg .Sections 11.; yar d 11.3, t$ patties may agree to alter Confii`mation executed itkWriting by both parties. g 3 SECT�M 12 ° TERM � r This %hW613rriay beuerrnihated on 30 D'ay's written Notice i6ut shall remain in effect i transaiction(sy The ngts` of :either party�ursuant to Sec#fir 7.6 and Seefion 10, tt 1 ego the extej_q nc F m transpotta�iafi ffi o edition and �o�r�suW#h( ids, without lirnitatr an eller i :Kf sat a loweriioreadvai as if costs resultiragfromtis Ag in r,rase in Notice 1 ence is Force n as the hf A , pursuant hereti ,' hall survivelthe terminatight°of the Base,ntr 'ct 'any 3 aLIMITATION by any or )ath, Firm e of such II Gas at a e than the the loss of ; or (v) the iing Force industrial may be possible. ;et of the her party od of any , and the FOR BRF_ACH=OF ANYT OVISION FOR`WHICH AN EXPRE85-'RtM5DYVR"NIEASURE OF-DAI I 'iGES"IT- OVIOEI3 SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY'S LIABILITY HEREUNDER 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 PROVIDED HEREIN OR IN A TRANSACTION, A PARTY'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. 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. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 8 of 10 April 19, 2002 TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. SECTION 14. MISCELLANE(;PS 14.1. This Contract shall be binding uponyand inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and the covenants, conditions, rights and obligations of this Contract shall run for the full term of this Contract. No assignment of this Contract, in whole or" a'tJh part' will be made without the prior written consent of the non -assigning party (and shall not relieve the assigning party from liability hereug66r), cot tah, consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber, or assign tht Cod"_. r the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements, or (ii) transferits mfeFes�'to=any parent or affiliate by assignment, merger or otherwise without the prior approval of the w . other party. Upon any such assignrrJent trarisfer d-nd assumption, the transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations hereunder, 14.2. If any provision in this C;dff 'acf� determined_ to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make ian�rtfor'ceableL nay pther provision, agreement or covenant of this Contract. �c F 14.3. No waiver of any breach of►s Contract stsDIl be held to be a waiver of any other or subsequent breach. 14.4. This Contract sets fot00f3 "between the parties respecting each transaction subject hereto, and any prior contracts, understandings and representations, whether oral or written, relating to such transactions are merged into and superseded by this Contract and any effective transaction(s) This Contract may bye ,amendeo only by a w�itrng e�Ccuted by both arttes .; Y 14.5. The rnterpretatron and' performance of this ohtract }shall be gov�r ed by they laws of th� junsdiotro t asp ift"Of aced on the Base Contract, excluding however any conflicf f#aws rule vi!i1bfii wot�Jd apply the taw of anothe 'iitrisdicUon £ � ; 14.6. "N 7firs Contract nd all provisions niisrein will be subject to all app I' le and %hd statutesimr airs ands Fegala r ns of any govemmeritaiuthon"ng jurisdiction Qer the parties, the�racilities or Gas supply, tiistontract orransactron or anyjproist ns thereof. 4 e is no third party boneficiaryto ,this Contract 14 8 lac Wm arty to this Contract represents and warrants that it has fu)Gand compl t&buthority tD�en�r lr�o�and p�o��rl' rs Contract. Each person 5 , o exa4ufes this Contract onehalf of either`party represent warrants that it has ful alb mPlete a ©rid to do so and that sucor yAMIll be fth thereby. q 14.9. ;�Tfie leadmgs` and subheadingscontained in this Contract are used solely for canveniencear�do not copse a part of this Contract between the parties and shall not 14"sed to constrd'e or interpret the provisions of this Contract 14 10 Unless the parries have elected on the Base Contract not to make thisection 141,U2appl cable %#Fits Contract, neither party shall disclose directly or rndrre�tly without the pnor written consent of the other pal Ey the terms of any transactionoxa third party (other than the employees fenders, royalty owners, counsel, accountants and other agentsbf the party, or prop3ec�trepurctiasets q�all or substantially all of a party's assets or of ahy nghts under this Contract, provaded such �per'sons`s allMp agreed tolkeep uc i temps cohfii%ntfal) except (i) in order to"comp(y with nytappticable law, order regulation or exchange rule n) to , - e, _', c, ent necessa 7#or the enforcemet2t ofzthis Contract , (iii) to the extent necessaray to implement,any transaction{ or (tu) to the ex�ent�iic i information is cleli�ered to such third party for the sole purpose of calcula rng a published index Each party shall notify the other OR rty of any' ceeding 5'I%' `hich'`Aif js�awaretwhi�� may result in disclosrreoftte ternlsof ahy transaction"(t?#her thane permitted hereunder) and useeasonable efforts tb p�eent orimittiedisclosure. The eistahceof thisContract is not subjec# to this conf�dentiallty obligation5ubject to 8ec`tron 13, the xaes�shall; be enitietb }all remedies available atldw or rn equity to ;enforce; or seek relief in connecfl"on with this onfidentiali rIrgation. The terms cf any trap con; hereunder shall bb:kept nfrdctt`tial,%_y the parties ho f6for one earfjb the expiration f the transaction. £j¢ ? ? aiy x y e �: "Y j `Js jh' R`= 3 `44�.,, �3k �3' } -fg 5 4 is In the e er�t that disclosure is required by a:govemmental "body or applicable law, the§arty subject to4�ch requiremer't�ma+ sclose the materio[,A %ins of this Contract to the a Cterat so required, but shall prompt notify the other` party, prior to d#sclosure, d shall cooperate (consistenE with the disclosing party's I al pftations withhhe, other a s #' eg ) p rty forts to obfal► protective ordam"tsimilar reetr rt is ith respect to such disclosure at the expense of the other:party t 14.11 ` The parties may agree to dispute resolu£ion procedures in 'pecial PrbyisiOns attad d- #o the Base dr Tract or in a Transactiotj Confirmation ;executed in writing by both' arties:';_ FF n� 3 4 r R DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of purchase and sale of natural gas. Further, NAESB does not mandate the use of this Contract by any party. NAESB DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NON -INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT NAESB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 10 April 19, 2002 TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY EXHIBIT A Letterhead/Logo Date: r Transaction Confirmation #: x This Transaction Confirmation is sublecttfae Base Contract between Seller and Buyer dated The terms of this Transaction Confirmationg unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract.k rt } SELLER: 5� AN BUYER: 4 4'AM Attn: Attn: ate fs r Phone: Phone: Fax: r...:<, Fax: Base Contract No. Base Contract No. Tramp'. ter Or,ans(a to ; r44 , Trans ©r(er;`Contras# u ber. ��r s 2 �franspbt er Contract Number `� � R0 j{{-'4;� rit.s }y��e._ � �� r tom.§ w't..ifis�[i�_.,L;4 C', ,Fi" €,., f�4a'xa�; .`'t✓r t.-�}�i. f..f.s: }` dSJ'.'.?.. .; �,.1,'�'.�t3`.3.:: Tfl'2`2 i �"3T�1 '�'h t { >'. ag- Conk#'ace $111vIBtu or 52 Deli Per#Ad Bain#; 3 rfi End j s y S a Perf4rifianbe 0bliWtd Contra`Muantity: -S ' eft One) Firri able A #1 Y , bl e "R ,uant MMBtu � n vMBtUS/dy inimum MN B clday ._ EFP S _ Maximum 3x �g �1vIMBtus/daj� �. sub eco Secfion ei'g' 4 t election f�£' of cox A HS ©L7Setler Deliverer psilnt(sj�>1r� �y y (If a f pooarng oimtisrsed, hst a specifcgeographicand �ipel;,ine location] }=� h Special�Conditions a-q_` r sgn3 � ti4 ,RR t , -- ' s-., N ,� a a�Am ' E v k rt n'}t eyu, : �' i-A 3Lr S 'YE 1.' fi 1'=.4ty"Ti } y- _i x'r ru r •33": `NOR,��'F ' ' a— Seller s fl� F R EXEQJTNC 1 - Buyer �Ic IYOT FOR 111�By: K'ir gy�.�_ �r� }�z3 �� .. Date: Date: Copyright © 2002 North American Energy Standards Board, Inc. All Rights Reserved Page 10 of 10 NAESB Standard 6.3.1 April 19, 2002 SPECIAL PROVISIONS TO BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS (FORM NAESB Standard 6.3.1) BY AND BETWEEN CORAL ENERGY RESOURCES, L.P. AND THE CITY OF VERNON DATED MAY 1, 2008 SECTION 1_2 Oral Transaction Procedure: Delete the fifth sentence, and replace with the following: "Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may, confirm a telephonic transaction by sending the other party a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by the Section 1.2 (Oral Transaction Procedure); provided, however, the parties agree that with respect to any transaction having a Delivery Period of less than one Month that such transactions shall be documented by a recording of the telephone transaction and that neither party shall submit a written Transaction Confirmation. If any transaction having a Delivery Period of less than one Month is not recorded by the Confirming Party, then the Confirming Party shall, and the other party may, confirm such transaction by sending a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means. The failure to send a Transaction Confirmation shall not invalidate the oral agreement of the parties." 1.44 At the end of Section 1.4, insert the following text: "For those transactions documented by telephone recordings, no such transaction shall be vitiated should a malfunction occur in equipment regularly utilized for recording transactions or retaining any recorded transactions or the operation thereof, and in such event the transaction shall be evidenced by the written and computer records of the parties concerning the transaction made contemporaneously with the telephone conversation." 2.27 At the end of the sentence add the phrase: "except for those transactions having a Delivery Period of less than one Month which are documented by telephone recordings pursuant to Section 1.2." 5 Add the following sentence at the end of the paragraph: "EXCEPT FOR THE OTHER PROVISIONS IN THIS SECTION 5, SELLER HEREBY NEGATES ALL EXPRESS, IMPLIED, OR STATUTORY REPRESENTATIONS AND WARRANTIES OF ANY KIND, INCLUDING THOSE RELATING TO. MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM COURSE OF DEALING OR USAGE OF TRADE." 10.1 Delete in its entirety and replace with the following paragraph under Section 10.1: "During the term of this Contract, the parties shall be required to meet and maintain the requirements contained in the Credit Support Addendum attached hereto as Exhibit B and incorporated herein." 10.2 Delete the following text from Section 10.2: "(vii) fail to give Adequate Assurance of Performance under Section 10.1 within 48 hours but at least one Business Day of a written request by the other party; or (viiix)", and add "or (vii)". 10.3.1 Add the following sentence to the end of the first paragraph of Section 10.3.1: "If the determination pursuant to clauses (x) and (y) above of the difference between the Market Value(s) and Contract Value(s) of all the Terminated Transactions does not result in an amount being owed to the Non -Defaulting Party, it shall be deemed that such difference is zero." 11.2 Insert the phrase "and (vi) a claim of Force Majeure of the foregoing type by a third party supplying the Gas delivered or to be delivered hereunder" before the period and after the word "jurisdiction" in the seventh line of Section 11.2. 12 Delete the second sentence of Section 12 and replace it with the following: "The rights of either party pursuant to: (i) Section 7.6, (ii) Section 10, (iii) Section 13, (Iv) Section 14.10, (v) Waiver of Jury Trial provisions (if applicable), (vi) Arbitration provisions (if applicable), (vii) the obligation to make payment hereunder, and (viii) the obligation of either party to indemnify the other pursuant hereto, shall survive the termination of the Base Contract or any transaction." 14.10 Add the following new sentence to the end of the first paragraph of Section 14.10: "With respect to financial statements provided in connection with the Contract, this obligation shall survive for a period of three (3) years following the date such financial statements were provided to a party." 14.12 Add the following new Section 14.12: "No guaranty will be provided` hereunder, nor will there be any credit support providers, on behalf of Coral Energy Resources, L.P., notwithstanding anything in this Contract to the contrary, in the event that Coral Energy Resources, L.P., merges into Shell Energy North America (US), L.P., and Shell Energy North America (US), L.P., assumes by operation of law all of Coral Energy Resources, L.P.'s obligations under this Contract. The City of Vernon acknowledges that no consent by The City of Vernon will be required hereunder if Coral Energy Resources, L.P., merges into Shell Energy North America (US), L.P., and Shell Energy North America (US), L.P., assumes by operation of law all of Coral Energy Resources, L.P.'s obligations under this Contract." 14.13 Add the following new Section 14.13: "All amounts payable by the City of Vernon hereunder are payable only from the City of Vernon Light and Power Department Fund." Version 12/19/2007 14.14 Add the following new Section 14.14 "As a California Municipal Corporation, all waivers, agreements as to venue, jurisdiction, indemnities and remedies and other matters hereunder dependent on the powers of the City of Vernon are qualified to the extend such are permitted by applicable law." INITIAUAPPROVAL COUNTERPARTY CORAL Version 12/19/2007 EXHIBIT B TO BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BETWEEN CORAL ENERGY RESOURCES, L.P. and CITY OF VERNON CREDIT SUPPORT ADDENDUM 1. Credit Terms. Defined terms used in this Credit Support Addendum ("Addendum") and not defined in the Base Contract shall have the meaning set forth in Section 6 herein. (a) Security Threshold. As used in this Addendum, "Security Threshold" means, on any date of determination, the lowest of (i) the amount set forth in the following table based on the lowest applicable Credit Rating for such Party or its Credit Support Provider, as applicable; (ii) the amount of any dollar limit contained in a guaranty provided by a Party's Credit Support Provider pursuant to this Addendum; or (iii) zero if a Material Adverse Change or an Event of Default has occurred and is continuing with respect to that Party or its Credit Support Provider, as applicable. Party's or Credit Support Provider's Credit Rating Moody's S&P Security Threshold A3 or above A- or above $25,000,000 Baa 1 BBB+ $10,000,000 Baa2 BBB $7,500,000 Baa3 BBB- $5,000,000 Bat BB+ $2,500,000 Below Bat Below BB+ $0 (b) Material Adverse Change. As used herein, "Material Adverse Change" means (i) the Credit Rating of a Party or its Credit Support Provider, as applicable, falls below BB+ by S&P or Bat by Moody's, or a Party or its Credit Support Provider, as applicable, is no longer rated by at least one of the foregoing rating agencies; or (ii) a default has occurred with respect to indebtedness for borrowed money of a Party or its Credit Support Provider, as applicable, that has resulted in an acceleration of such indebtedness in an aggregate amount in excess of its Cross Default Threshold. As used herein, "Cross - Default Threshold" means, with respect to Coral's Credit Support Provider, fifty million dollars ($50,000,000), and with respect to Counterparty or its Credit Support Provider, as applicable, ($10,000,000). 2. Credit Requirements. If at any time, and from time to time, during the term of the Contract, the Contract Exposure for a Party (the "Providing Party") exceeds such Party's Security Threshold, then the other Party (the 'Requesting Partw') may request that the Providing Party provide Performance Assurance in an amount equal to the amount by which its Contract Exposure exceeds its Security Threshold. On any Business Day (but no more frequently than weekly with respect to Letters of Credit and daily with respect to cash), the Providing Party, at its sole cost, may request that the amount of Performance Assurance be reduced based upon a decrease in the Contract Exposure as calculated on such Business Day. Any Performance Assurance being provided or returned shall be delivered within one (1) Business Day of the date of such request. The amount of Performance Assurance being provided by the Providing Party shall be rounded upwards to the next multiple of two hundred and fifty thousand dollars ($250,000), and the amount of Performance Assurance being returned by the Requesting Party shall be rounded down to the next multiple of two hundred and fifty thousand dollars ($250,000). 3. Grant of Security Interest; Remedies. To secure its obligations under the Contract, and to the extent it delivers Performance Assurance hereunder as the Providing Party, each Party hereby grants to the Requesting Party, as secured party, a present and continuing security interest in, lien on, and right of setoff against, all Performance Assurance in the form of cash, and any and all proceeds resulting therefrom, held by or on behalf of the Requesting Party. The Providing Party agrees to take such further action as the Requesting Party may reasonably require in order to perfect, maintain, and protect the Requesting Party's security interest in such collateral. Upon the occurrence and continuance of an Event of Default with respect to the Providing Party, then, unless the Providing Party has satisfied in full all of its payment and performance obligations under the Contract that are then due, the Requesting Party may (i) exercise any of the rights and remedies of a secured party under applicable law with respect to all Performance Assurance; (ii) exercise its right of setoff against any and all Performance Assurance; (iii) draw on any Letter of Credit issued for its benefit, and (iv) liquidate all Performance Assurance then held by the Requesting Party free from any claim or right of any nature whatsoever of the Providing Party. The Requesting Party shall either apply the proceeds of the Performance Assurance realized upon exercise of such rights or remedies to reduce the Providing Party's obligations under the Contract, in such order as it elects, and the Providing Party shall remain liable for any amounts owing to the Requesting Party after such application, subject to the Requesting Party's obligation to return any surplus proceeds remaining after such obligations are satisfied in full, or hold such proceeds as collateral security for the Providing Party's obligations under the Contract. 4. Credit Events Of Default. The following events ("Credit Events") shall be additional Events of Default under Section 10.2 of the Contract and the Non -Defaulting Party shall have the right to exercise any of the remedies provided for under Section 10 of the Contract upon the occurrence of a Credit Event as provided herein: (i) the failure of the Defaulting Party to establish, maintain, extend or increase Performance Assurance when required pursuant to this Addendum; or (ii) the failure of the Defaulting Party's Credit Support Provider, if any, to perform any covenant set forth in any guaranty agreement delivered pursuant to this Addendum; or (iii) the failure of the Defaulting Party or its Credit Support Provider, if any, to timely provide financial information as required in this Addendum, and such failure is not remedied within thirty (30) Days after written notice of such failure is given to the Defaulting Party; or (iv) the occurrence of a Letter of Credit Default. 5. Financial Information. Upon request, a Party or its Credit Support Provider, as applicable, shall deliver to the other Party (i) within one hundred twenty (120) Days following the end of its fiscal year, a copy of the audited consolidated financial statements for such fiscal year certified by independent certified public accountants and (ii) within ninety (90) Days after the end of each of the first three fiscal quarters of its fiscal year, a copy of the quarterly unaudited consolidated financial statements for such fiscal quarter. In all cases, the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles or such other principles then in effect. 6. Definitions. With respect to this Addendum, the following definitions shall apply: "Contract Exposure" means the net amount (i) determined pursuant to Section 10.3.1 of the Contract that would be payable from the Providing Party to the Requesting Party, as if an Early Termination Date had been declared pursuant to Section 10.3 of the Contract (notwithstanding whether or not an Event of Default has occurred) and all transactions had been terminated; (ii) plus the net amount of all other payments owed but not yet paid between the Parties, whether or not such amounts are then due, for performance already provided pursuant to any and all transactions conducted under the Contract; (iii) less the amount of any Performance Assurance then held by the Requesting Party. 2 "Coral" means Coral Energy Resources, L.P. "Counterpartd" means City of Vernon, CA "Credit Rating" means (i) with respect to a Party or its Credit Support Provider, as applicable, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement), its underlying revenue bond rating, or its issuer credit rating by the specified rating agency, and (ii) with respect to a financial institution, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement) or its deposit rating by the specified rating agency. "Credit Support Provider" means a third party providing a guaranty for a Party pursuant to this Addendum. With respect to Coral, its Credit Support Provider shall be Shell Energy North America (US), L.P. "Defaulting Party" has the meaning set forth in Section 10.2 of the Contract. "Interest" means the interest rate to be paid by the Requesting Party should be calculated at the Federal Funds Effective Rate - the rate for that day opposite the caption "Federal Funds (Effective)" as set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System. Such interest shall be calculated on the basis of the actual number of days elapsed and on the basis of a year of 360 days. Upon request, the transfer of the interest amount for each calendar month will be made on the second business day of the next calendar month. "Letter of Credit" means one or more irrevocable, standby letters of credit from a Qualified Institution. "Letter of Credit Default" means with respect to an outstanding Letter of -Credit that is held by the Requesting Party, the occurrence of any of the following events: (i) the Providing Party fails to extend or replace such Letter of Credit delivered as Performance Assurance hereunder at least twenty (20) Business Days prior to its expiration, or (ii) the Letter of Credit delivered hereunder shall expire, terminate or otherwise fail to remain in full force and effect for any reason, or (iii) the Qualified Institution which issued such Letter of Credit hereunder fails to maintain the requirements of a Qualified Institution as specified herein or fails to comply with or perform its obligations under such Letter of Credit and such failure is not remedied within five (5) Business Days after written notice of such failure is given to Requesting Party, or (iv) the Qualified Institution which issued such Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit, or (v) the Qualified Institution which issued such Letter of Credit shall become Bankrupt. Upon the occurrence of a Letter of Credit Default, the Providing Party agrees to transfer to the Requesting Party either a substitute Letter of Credit or other Performance Assurance, in each case on or before the second (2Id) Business Day after receipt by the Providing Party of written notice from the Requesting Party. "Moody's" means Moody's Investors Service, Inc., or its successor. "Non -Defaulting Party" has the meaning set forth in Section 10.2 of the Contract. "Part 'means a party to the Contract, and collectively referred to as the "Parties". "Performance Assurance" means collateral in the form of cash, Letters of Credit, or other security acceptable to the Requesting Party. If the collateral is in the form of cash, such cash shall be placed by the Requesting Party in a segregated, Interest bearing account on deposit with a Qualified Institution and Interest shall accrue to the Providing Party. The requirement to maintain a segregated escrow account shall not apply if the Requesting Party or its Credit Support Provider, as applicable, has a Credit Rating of at least A- by S&P or A3 by Moody's. 3 "Qualified Institution" means the domestic office of a commercial bank or trust company (which is not an affiliate of either Party) (i) organized under the laws of United States (or any state or a political subdivision thereof), (ii) having assets of at least ten billion dollars ($10,000,000,000), and (iii) having a Credit Rating of at least A- by S&P and at least A3 by Moody's. "S&P" means Standard & Poor's Ratings Services (a division of McGraw-Hill, Inc.) or its successor. 7. Successors. In the event of an assignment of the Contract by Counterparty as provided therein, the provisions of this Addendum shall not be applicable to any such assignee. In such event, an assignee will be required to meet the reasonable credit requirements of Coral for the extension of unsecured credit before further deliveries of Gas are made. COUNTERPARTY CORAL 4 `►.1 � I. . 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 June 9, 2008 Shell Energy North America (US), L.P. Coral Energy Attn: Christopher Luick Commercial Advisor 4446 Eastgate Mall, Suite 100 San Diego, CA 92121 Re: Base Contract for Sale and Purchase of Natural Gas Dear Mr. Luick: Transmitted herewith is a fully executed agreement as referenced above, approved by City Council on June 2, 2008, through Resolution No. 9631. If you have any questions regarding this matter, please call Mr. Donal O'Callaghan at (323) 583-8811 ext. 834. ry truly yours, ANeyAGZ�� City Clerk NG:dr c: Donal O'Callaghan Resolution No. 9631 Agreement File No. 08-054 ET,cfusive(y Industriaf Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following date: May 1, 2008. The parties to this Base Contract are the following: Coral Energy Resources, L.P., a Delaware Limited Partnership, and a subsidiary of Shell Energv North America (US). L.P. Duns Number: 01-501-4421 Contract Number: U.S. Federal Tax ID Number: 76-0505584 Notices: 4445 EastGate Mall, Suite 100, San Diego, CA 92121 Attn: Contract Administration Phone: (858) 320-1500 Fax: (858) 320-1585 Confirmations: 909 Fannin, Plaza Level 1, Houston, TX 77010 Attn: Contract Administration Phone: (713) 230-7505 Fax: (713) 265-2171 Invoices and Payments: 909 Fannin, Plaza Level 1, Houston, TX 77010 Attn: Gas Accounting Phone: (713) 767-5400 Fax: (713) 767-5445 Wire Transfer or ACH Numbers (if applicable): BANK: Citibank, N.A. ABA: 021000089 ACCT: 30603902 Other Details: and The Citv of Vernon. a Chartered Citv and Municioal Corporation of the State of California Duns Number: 060883022 Contract Number: U.S.`Federal Tax ID Number: 95-6000808 4305 Santa Fe Ave. Vernon. CA 90058 Attn: Donal O'Callaghan Phone: 323-583-8811 Fax: 323-826-1425 4305 Santa Fe Ave, Vernon, CA 90058 Attn: Donal O'Callaghan Phone:323-583-8811 Fax: 323-826-1425 4305 Santa Fe Ave. Vernon, CA 90058 Attn: Donal O'Callaghan Phone: 323-583-8811 Fax: 323-826-1425 BANK: The Bank of New York ABA: 021000018 ACCT: 800457 Other Details: This Base Contract incorporates by reference for all purposes the General Terms and Conditions for Sale and Purchase of Natural Gas published by the North American Energy Standards Board. The parties hereby agree to the following provisions offered in said General Terms and Conditions. In the event the parties fail to check a box, the specified default provision shall apply. Select only one box from each section: Section 1.2 ♦ Oral (default) Section 7.2 ♦ 25 Day of Month following Month of Transaction ❑ Written Payment Date delivery (default) Procedure ❑ Day of Month following Month of delivery Section 2.5 ♦ 2 Business Days after receipt (default) Section 7.2 ♦ Wire transfer (default) Confirm ❑ Business Days after receipt Method of ❑ Automated Clearinghouse Credit (ACH) Deadline Payment ❑ Check Section 2.6 ❑ Seller (default) Section 7.7 ♦ Netting applies (default) Confirming ❑ Buyer Netting ❑ Netting does not apply Party ♦ Coral Energy Resources, L.P. Section 3.2 ♦ Cover Standard (default) Section 10.3.1 ♦ Early Termination Damages Apply (default) Performance ❑ Spot Price Standard Early Termination ❑ Early Termination Damages Do Not Apply Obligation Damages Section 10.3.2 ♦ Other Agreement Setoffs Apply (default) Note: The following Spot Price Publication applies to both of the immediately preceding. Other Agreement Setoffs ❑ Other Agreement Setoffs Do Not Apply Section 2.26 ♦ Gas Daily Midpoint (default) Section 14.5 Spot Price ❑ Choice Of Law Texas Publication Section 6 ♦ Buyer Pays At and After Delivery Point Section 14.10 ♦ Confidentiality applies (default) Taxes (default) Confidentiality ❑ Confidentiality does not apply ❑ Seller Pas Before and At Delivery Point ♦ Special Provisions Number of sheets attached: Two 2 ♦ Addendum(s): Exhibit B — Credit Support Addendum IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. By I stswi w . - Name: ,clfi A EST: Title: Sr- V - P g By: Manuela G THE CITY OF VERNON Party Name By ern -.Name: eonls C. M lburg V, P Title: mayor 7 TR Tem �' 4 AR13ROVP AS TO FORM: ity Clerk ' zn n I-m ---J- Copyright © 2002 North American Energy Standards Board All Rights Reserved Standard 6.3.1 April 19, 2002 General Terms and Conditions Base Contract for Sale and Purchase of Natural Gas SECTION 1. PURPOSE AND 1PROCEDURES 1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to the( party receiving Gas and "Seller" refers to the party delivering Gas. The entire agreement between the narties shall be the Contract as defined in Section 2.7. The parties have selected either the "OraPTransaction Procedure" or the "Written Transaction Procedure" as indicated on the Base Contract. Oral Transaction Procedure: 1.2. The parties will use the following Transaction Confirmation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmission oc telephone itonversation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally bound fir„om thetime they so agree to transaction terms and may each rely thereon. Any such transaction shall be considered a "writing' antl to have been "signed". Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may confirm` a telephonic transaction by sending the other party a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction Procedure) provided- that the failure to„send ^a Transaction Confirmation shall not invalidate the oral agreement ;of the parties: Confirming,,party adopts its confirming letterhead, or, the like, As its signature on any Transaction"' -on firmatioh..as the identificaport and authentication of Confirming Party.; if the Transaction Confirmation contains any: prouis ons other than those relating to the commercial terms of the transaction (i.e., price, quantity, performance obligation, delivery point period of de6kvery and/or transpdrtation conditiCSns), wj�ich modify or supplerrtet the;Sase Contrect or GeneralTerms and Conditions of this Contract (e.g., R= arbitration or additiotmal representations and warranties); such provisions shall not be deemed to bezaccepted pursuant fo Section 1.3 but mfist be expressly agreed to by both parties; proulded;hat the foregoing shali, not invalidate and transactioeect to by the al lief. .e,'S, .s�1.>t, .... ,'.. r.x.<, z_. Y.c .M�;:- 5;. k r r'- _..:a... -,`.. 7 Written TtansactionrPrQeedure:AM 1.2. The parties well use;the following Transaction Confirmation procedure. Should the parties come to an agreement regarding a Gas purchase antl sale transaction for a particular Deliye'ry:Period, the�Confirr Party shall, end the,otl er party may; ecord that agreement ona Transactor= Confirmation :and communicate such Transaction Confirmation by fDi or mutually, -agreeable electronic means, to'the other party by theclose of the Business Day following the date .of agreement The parties acknowledge that their agreement will not be''binding until:.the exchange of-nonconflicting Transaction Confirmations or the; passage of the Confirm Deadline without ob'ection from the receivin' party, as rovided in Section,..1:3. s; 1 3 If a sending patty`s Transaction Confirmation is materially different from the receiving party', utOdersonding ofThe agreement referred to in Secfidn}15L2 such receiving party shall$nofity the sending party via facsimile EDI or mutually agreeable electronic means by the Confirm Deadline, unless such receiving party has previously sent a Transaction Confirmation to the sending par y The failure of the receiving party to so notjfy the sending: party in writing b� tl�g- Confirm Deatlline`=constitutes the receiving party', agreement to the terms of the transaction described m the sending parlys Transaction Confirmation If the"r`e are any material differences betweertirriely sent Transaction°Confirmations governing the same tr nsac ion, then neither Transaction Confirimation shall be binding until or unless such differences are resglued including the use bf any evi ena.thottlearly resolves�the differences iWjhe Transaction Confirmatloris. In the event of a conflict among the terms of (i) a bip,tlm Transaction Confirmation pursuant to Section 1 �, tii) the oral agreement of` g parties which may4be evidence( b� a recorded conversation where #hey parties have selected the Oral'Transaction Procedure of the Bse;Contract, (nitfle�Base Conraet snit (iv) these General Terms and Conditions; the terms of the documents shall,govern in the priority listed m this sentence 1 4. The parties agree that each party nay electronically re°cord all telephone conversations with respet to'this Contract0betweeh their respective employees' without;any special �rfurther notice to thi3',other party Each parry shalt obtain any necessary consent,of is agents and employees to such re"cording Where the patties havers -elected the Oral Tnsaction irocedure in SectiQ�n- L 2'of the Base Contract, the partiesragree not to contest the validity 4,' nt rceability of tele (ionic recordings entered into in accordane ,Wth the requirements cif this Base Contract However, riothtng herein shall be construed as aTwaiver of any obt"on to the admissibility of such idence. nix SECTION 2 ;D[EFJNITIONS The terms set forth below shall have the meaning ascribed to them below. Other terms are also defined elsewhere in the Contract and shall have the meanings ascribed to them herein. 2.1. "Altemative"Damages" shall mean such damages, expressed in dollars or dollars per MMBtu, as the parties shall agree upon in the Transaction Confirmation, in the event either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer. 2.2. "Base Contract" shall mean a contract executed by the parties that incorporates these General Terms and Conditions by reference; that specifies the agreed selections of provisions contained herein; and that sets forth other information required herein and any Special Provisions and addendum(s) as identified on page one. 2.3. "British thermal unit' or "Btu" shall mean the International BTU, which is also called the Btu (IT). Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 2 of 10 April 19, 2002 2.4. "Business Day" shall mean any day except Saturday, Sunday or Federal Reserve Bank holidays 2.5. "Confirm Deadline" shall mean 5:00 p.m. in the receiving party's time zone on the second Business Day following the Day a Transaction Confirmation is received or, if applicable, on the Business Day agreed to by the parties in the Base Contract; provided, if the Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party's time zone, it shall be deemed received at the opening of the next Business Day. 2.6. "Confirming Party`' shall mean the party designated in the Base Contract to prepare and forward Transaction Confirmations to the other party. 2.7. "Contract" shall mean the legally binding relationship established by (i) the Base Contract, (ii) any and all binding Transaction Confirmations and (iii) where the parties have<selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have enternto„through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation 4 2.8. "Contract Price" shall mean the amount expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties i,,i, transaction 2.9. "Contract Quantity" shall mearj$the quantity;of Gas to be delivered and taken as agreed to by the parties in a transaction. 2.10. "Cover Standard", as referred to in Section' 3.2, shall mean that if there is an unexcused failure to take or deliver any quantity of Gas pursuant to this Contract, then the performng party shall use commercially reasonable efforts to (i) if Buyer is the performing party, obtain Gas, (or an alternate fuel;; if elected"by Buyer and replacement Gas is not available), or (ii) if Seller is the performing party, sell Gas, in either case, at a price reason" ble"for the delivery or production area, as applicable, consistent with: the amount of notice provided by the nonperforming (party; the immediacy__}9f the Buyer's Gas, ponsumption needs or Sellers Gas sales, requirements, as 2.11. this C 2.12. 2.13. 2.14. 2.15. the cc 2.16. involv nonpe under 2.17. quantities involved; and the anficipatE t Sup{iort Qblrgation(s)"shall mean ai uch riijir6vocable `standby letter nd guaranty or other ood'and suffi( Z 1 shall ma a' period of p24 consecuti may oe�responsm Transporter and u 2 18 "Ga`s" sh 2.19. "fmbalan 2.20. Nfitbfrupti an even) of Force I II be the all mear electron tion Cor purcha; )ns to c e Act. t either Majeui )glance e in del mixture shall rr inoI ption during point(s) i interch ons unc or exc I incorp or rece may int vided, h les as s ; and/or r party txcept nomi failUre by thelionperforming part! in(s) to provide or establish credit a marginagreement; a�prepaym ty of a continuing natyfe coextensiY'a with a veries ar( reed to b) ;uant to a ntract. iatural G< meaning iat during Section 4 costs c :quiremer ipt its per pting pars de to the e madejas agreed to parties in a ransacti( reement entered into adies of the rules on behalf of, a party to interest inP an asset, a Y k § ` �f eiving Tra`rts'porter in a a in a transaction. specificallyrelating to z for physicat transaction it a pai ty s' excuse for esexchange regulated 4tho0t:"liability only to the extent that such peCf©rmance is ;e Maleure interruptionsthe�party"invoking Force Majeure Gated to=its �interruption�afterthe nomination is�made to the the Transporter_ gases in a gaseous state eorsistrng primarily of'methane. srges (in_ gash or in kind) assay"sed by a"T.rabsporter for nce at a y%me for arty�rebl$om whether orfiot: caused by r be responsible for anyj Imbalance Chargas 6sset forth in ,porter end until the chi recelots is confirmed,byTransporter x}, f 3 x ui 221 Btu.,shall mean one million British therrrhal units, which is egdivalent to one dekatherm s 2.224`'Month shall; mean the period peginning n the first Day 6V3he calen'dWmonth a6d5idAdin ",immediately `prior to the commef cernont of therfirst;�l ay of the next:calendar months �. �n _a. ,. , .T_, 2.23. "Payment Date" shall mean a date, as indicated on the Base Contract, on or before which payment is due Seller for Gas received by Buyer in the previous Month. 2.24. "Receiving Transporter" shall mean the Transporter receiving Gas at a Delivery Point, or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point. 2.25. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporter(s) for movement, transportation or management. 2.26. "Spot Price " as referred to in Section 3.2 shall mean the price listed in the publication indicated on the Base Contract, under the listing applicable to the geographic location closest in proximity to the Delivery Point(s) for the relevant Day; provided, if there is no single price published for such location for such Day, but there is published a range of prices, then the Spot Price shall be the average Copyright© 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 3 of 10 April 19, 2002 of such high and low prices. If no price or range of prices is published for such Day, then the Spot Price shall be the average of the following: (i) the price (determined as stated above) for the first Day for which a price or range of prices is published that next precedes the relevant Day; and (ii) the price (determined as stated above) for the first Day for which a price or range of prices is published that next follows the relevant Day. 2.27. "Transaction Confirmation" shall- mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant to Section 1 for a particular Delivery Period. 2.28. Termination Option" shall mean the option of either party to terminate a transaction in the event that the other party fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer for a designated number of days during a period as specified on the applicable Transaction Confrmtfon. 2.29. "Transporter(s)" shall mean all Gas gathering or pipeline companies, or local distribution companies, acting in the capacity of a transporter, transporting Gas for Seller.`or Buyer upstream or downstream, respectively, of the Delivery Point pursuant to a particular transaction. SECTION 3. PERFORMANCE OBLIGATION 3.1. Seller agrees to sell and deliver, and ¢uyer agrees to receive and purchase, the Contract Quantity for a particular transaction in accordance with the terms of the Contract. Sales and purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction. The parties have selected eitherztlie "Cover Standard" or the "Spot Price Standard" as indicated on the Base Contract. Cover Standard: 3.2. The sole and exclusive remedy of the parties n the,eventof a breach -of a Firm obligation to deliver orzecelve Gas shall be recovery of th`e follovng i) m`'the event of a breach b Seller on'any Day(s), payment by Sellerto BU}�erm ari=emount equalto the positive differ ace if;any, of rveen the pu1'chase price'`p id by Buyer utilizing the CoverJStandard and the)`Contract=Paco,; adjusted for commercially reasonable differences m (ransportation,'egsts�to or from the Deliverybint(s), mutt p ied by'the difference between the Contract Quantity ar)d the quantity actually delivered'€t�y$eller for such Day(s); or (ii) m the event ofga breach by Buy�er�onany Day(s), payment by B0 ,pr to Seller m the amoqr�t equal to the=�o5ifive differences Sf any, bet�ieen the Con�ract Pr�2ce�and the prie��[eceived by Seller°utilizing-the Coder $#andard for fhe resale of s.uehas:, adjusted fQ,r;commerciallykreasonabledtftereces m trspb�Ftation costs to or fromthe Delivety'Poirtt(s), multiplied, by the difference between the Contract Quantity and thequafityactuallyta�enliy Buyer for such Days) or (iu) ;in��the' event that Buyer has fused commercially�xreasonableeft�orts to repiaoerfeGas of Sei(er� has used commercially reasonable efforts to sell the Gas to a thirtl j arty, and no,� such replacement or sale isailableten the sole and exclusive remedy ofEthe performing party shall be ary unfavQiable difference betweenthe Contract Pnce `end the Spbt Price, adjusted for such transportatiotn to the applicable Delivery Pom# rmultplied by the difference between theUContract Quantityt and the quantity actually delivered by Seller and received by Buyer for such Q;ay(s). Imbalance Chargesshall not be rec'oVered under this w$ection 3.2, but Seller andlor Buyer shall`be responsible for Imbalance Charges, if any as`:provided m S'ectk-, 4 3 The_ amount ofasuchy unfavorable difference shill be:payable five Business bays after presentation of the performing party s,mvoice which shall set forth thebasis upon which such, amount was calculated. Spot 0ijc'e_SIt' andard 3.2. The sole and exclusive remedy of the parties m #M- event of a breach of a; Firm obligation fo deliver or receive Gas shall be recovery of the following (i) in the event of a breach WSeller on any Day(s), payment by Seller to BUyerAh an amourit,equal to the difference between the Contract Quantity and the actual q'gentity delivered by Seller,apd received xby Bu14, yer for such Days) multiplied by the'positive difference, if any, obtained by subtracting the Contract Price from the Spot Price; orw(n) in the event of a breach by Buyer on any Day(s); paymenf by Buyer to Seller in an amount equal to the difference between the ContractQuantity and the aciu'al quantity dehvePed by Seller and+received by Buyer for suchsDay(�): multiplied hy the positive $difference; f an��,5ottained b'ysUbtacting the applicable Spot Price from the Contract Price. Imbalance Charges sh If not be reeeuered under this'" Section 3.2,;',- UE,"Seller and/or Buyershah tie responsible for Imbalance t'harges if anyijci, �l rovided m Section 4.3 `The amount of st%ch ufifavorable difference shall be payable five Business Days after presentation of theperforming party's invoice, which shall set'for(h the basisup'on"which such amOUnt.1NaS oaICUlated, 3 ` ` l# i . y <' :: .E a. Ff x �. 3 3 Notwithstanding Section 3.2, the parties may,agree to Alternative' Damages�in a' Transacfio�r Qn it ation e Cecyfed in writing by both parties' � 3.4In atldition to Sections 3.2 and 3 8; the parties may provide for a�Termination Op#ion m a Transactio ;'Confirrna#iQp executed in wntmg� py both parties The Transaction Confirmation contammg„the Termination Option will designate the �ength'of,noT performance triggering the Terminetion,Option and the procedures for exercise thereof, how damages for nonperformance will be compensated, and how hquidafion costs'will-be calculated: "" SECTION 4. TRANSPORTATION, NOMINATIONS, AND IMBALANCES 4.1. Seller shall have the sole responsibility for transporting the Gas to the Delivery Point(s). Buyer shall have the sole responsibility for transporting the Gas from the Delivery Point(s). 4.2. The parties shall coordinate their nomination activities, giving sufficient time to meet the deadlines of the affected Transporter(s). Each party shall give the other party timely prior Notice, sufficient to meet the requirements of all Transporter(s) involved in the transaction, of the ,quantities of Gas to be delivered and purchased each Day. Should either party become aware that actual deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas, such party shall promptly notify the other party. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 4 of 10 April 19, 2002 4.3. 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 Buyers receipt of quantities of Gas greater than or less than the Scheduled Gas, then Buyer shall pay for such Imbalance Charges or reimburse Seller for such Imbalance Charges paid by Seller. If the Imbalance Charges were incurred as a result of Seller's delivery of quantities of Gas greater than or less than the Scheduled Gas, then Seller shall pay for such Imbalance Charges or reimburse Buyer for such Imbala,hce Charges paid by Buyer. SECTION 5. QUALITY AND `MEASUREMENT s All Gas delivered by Seller shall meet the pressure, quality and heat content requirements of the Receiving Transporter. The unit of quantity measurement for purposes of this Contract ahall' be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving Transpotte<. SECTION 6. TAXES t The parties have selected either "Buyer Pays A# and After Delivery Point" or "Seller Pays Before and At Delivery Point" as indicated on the Base Contract. ' z 3 Buyer Pays At and After Delivery Point: Seller shall pay or cause to be paid all taxes fees, levies, penalties, licenses or charges imposed by any government authority ("Taxes") on or with respect to the Gas prior to the., livery„Point(s). Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at the Delivery Point(s) and all Taxes after the Delivery Point(s). If a party is required to remit or pay Taxes that are the other party's responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes Any party entitled to an exemption from ah such.Taxes pr char es shall furnish the other a . .an `,necessa documbntation thereof ", Seller Pa Before ariti,At Delve Point urt, -." i x.f x " Seller sf�all pay; or cause,to Jibe>paid all taxes, fees, levies,¢penalties, licenses or charges imposed by an govemment authonty ( Taxes") on or with respect to the Gas:pnor to; the Delivery Points) and all Taxs}s at the Delivery Point(s),SQBuyer shall pay of cause to be pai,, 'Taxes on or with respept tohe Gaffs after the Delivery Roint(s). IY,a party; is required:to remit or pay Taxes that afeth�Nother part)! s responsibility hereunder, the party responsible for such�Taxes shall promptly:reimburse theother partyy forsuch Taxesx Anyparty enfi#ledto an:°exemption from ansuch;:7axes or char, es shall furnish ;the other "a an "`"necessa documentationthereof SECTION 7, ;=BILLING, PAYMENT, AND AUDIT arc, 7 1 Seller shall invoice Buyer for Gas delivered and received in the preceding Month;;and for ary others applicable charges, providing supporting documentation acceptable in industry practice'to support the amount charged. If the,actual quantityr delivered is not known by the billing date billing wnll'.:be prepared based on the quantity of Scheduleq Gas. The invoiced quantity will then be ad]ustedAo the actuaj quantity on the followirig Month's billing or -as soon thereafter,as actual delivery information is available. 7.2. Y Bityer shall remit the amount due under Section 71 m the manner specrfied In the Base'"Contract in immediately available funds, on or before the laterof'the Payment Date or 10Days after receipt of the invoice by�BuyerY provided that if theParment Date is nova Business Day, paymentiis due on the nextYBusiness Day following that date an glr`the event yents are d paymue Buyerhereunder,a,payment fo'Buyer shall be made in accordance with t)iis'Section 7.2 �r - _ �a E� , -51 7.3. In the event payments becomardue pursuant to Sections 3 2 or 3.3, the performing party Wmay nsubmit�an tivoice to the nonperforming party for an accelerated payment setting forfh.the basis upgn which the invoiced arrioun't vgasxalculated 'Fament from the nonperforming party will be due five Business Days after receipt of invoice. 7 4 If the invoiced `party, in good faith disputes the omount of any such invoice or any part thereof, soch,myoicetl party liwti�pav such amount as it concetles to be corrbct ,provided, however, if the invoiced party disputes the amount due, it mustxpr uWe;supporhn�documentation acceptable in industry pactieeto support the amount pal d or disputed. In the event the parties are unable to resol,4e such tlispute °either party may pufsue any remedy available at law or�lnrequity to enforce its°rights-pursuant=to this Section z ;y 7 5 If the mvoicetl�=party fails to remit the full amountpayable"tnihen due interest on the unpaid portionhallaectUe from a datecJue until the date of payment at a rate equal to the lowerf (i) the theh effective prime rate of interest published under Ivortey _Rates' brie Wall Street Journal; plus two percent per annum; or (u)°tlie" maximum .applicable lawful interest rate. ;, ,''r'. , y„ 7 6 A party shall have the riMIXght, at ifs awn expense`tapon` reasonable Npttce and at reasonable timos, is xarne and autlit and to obtain copies ofzthe`relevantlportion of the books Tecords, and telephone recorSlmgs of tie other parj only to th e nt reasonably r2ecessary to verify the aceuracyofany statement'charge, payment, or computation made under the .Con., „tract. This right toF,examme,naudit,,and to obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Contract. All invoices and billings shall be conclusively presumed final and accurate and all associated claims for under- or overpayments shall be deemed waived unless such invoices or billings are objected to in writing, with adequate explanation and/or documentation, within two years after the Month of Gas delivery. All retroactive adjustments under Section 7 shall be paid in full by the party owing payment within 30 Days of Notice and substantiation of such inaccuracy. 7.7. Unless the parties have elected on the Base Contract not to make this Section 7.7 applicable to this Contract, the parties shall net all undisputed amounts due and owing, and/or past due, arising under the Contract such that the party owing the greater amount shall make a single payment of the net amount to the other party in accordance with Section 7; provided that no payment required to be made pursuant to the terms of any Credit Support Obligation or pursuant to Section 7.3 shall be subject to netting under this Section. If the parties have executed a separate netting agreement, the terms and conditions therein shall prevail to the extent inconsistent herewith. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 10 April 19, 2002 SECTION 8. TITLE, WARRANTY, AND INDEMNITY 8.1. Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the Delivery Point(s). Seller shall have responsibility for and assume any liability with respect to the Gas prior to its delivery to Buyer at the specified Delivery Point(s). Buyer shall have responsibility for and any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s). 8.2. Seller warrants that it will have the right to convey and will transfer good and merchantable title to all Gas sold hereunder and delivered by it to Buyer, free and clear of all liens, encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 14.8, ALL OTHER WARRANTIES, "EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOS`Efi4RE DISCLAIMED. 8.3. Seller agrees to indemnify Buyer and1save it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from.."any and` alY,:persons, arising from or out of claims of title, personal injury or property damage from said Gas or other charges thereon which attach ;before title passes to Buyer. Buyer agrees to indemnify Seller and save it harmless from all Claims, from an and all ersons,>'arisin from`or out of claims regarding y p g eg g payment, personal injury or properly damage from said Gas or other charges thereon which attach after fitle passes to Buyer 8.4. Notwithstanding the other provisions of;this Section 8, as between Seller and Buyer, Seller will be liable for all Claims to the extent that such arise from the failure of Gas delivered by Seller to`meet the quality requirements of Section 5. SECTION 9. NOTICES' �f z 9.1. All Transaction Confirmations invoices, payments and other communications made pursuant to the Base Contract ("Notices") shall be made to the addresses specified in writing by„the respective parties from time to time 9 2 All Nofices required "hereunder may be sent' b�}facsimile`or mutually acceptable electronic means a "nationally recognized overnight couner service first class mall or hand delivered' 9.3. Notice shall be liven when received on a Business=Day by the aridressee. ffh`lhe absence�of roof of the actual [eceipt date, the following Lpresumpfions will apply. Notices sent1by facsimile shall be deemed to have been rece,ived�"upon the'sae,nd ng party's receipt" ofG its fecsimile�_ machine's confirmation of sdbbdsgful� transmission. If the day on which such fadsimile is �recef/e'd is not a Business 4ay or is after five p.m. on a Business Day�'then such facsimile shall be deemed to have been received on the heiit following Business Day ;Notice by overnight mail or courier shall bedeemed to have been recei,, on the riti Business Day aft�r'it was sent or such earlier time as is confirmed by the ,receiving paerty Notice via first class mail "shall be considered 'delivered five Bishess Days after m a I I .a f SECTION 1`0 IN RESPONSIBILITY rt ;' 10 1 If either parCy(�X) has reasonable grounds` for ►hsecurity regarding the performance of any �ouligation untler this Contract (whether or not then due) by the other,., party (Y) `(including, without limitation the occurrence of a, material change in the creditworthiness of Y s, X inay demand Adequate Assurance of Performance "Adequate tAssurancef ff Performanco" shall mean sufficient security in the forrti amount andtor the term reasona 1, accepta61l to X, including, bu rn", lim►te l to �a_-sfandby irrevocable letter :of.. credit, a prepayment, a secunty�interest in''.an, asset or a performance bond or guaranty `(including the,issiaer3;of any such 10 2 ` In the event (each an "Event of Default") either party (the "Defaulting Party') or its guararitor shall` (i) make an assignment or any general arrangement for the benefit of creditors, (n) file a pefition' or otherwise commencer rauthorze, or acquiesce in the comme°ncerhent of a4proceeding or case ►tnder any bankruptcy or similar lavv for the protection of creditors orhave such pefiton filed or proceeding commenced against it; (iii) otherwise become�bankrupt or insolvent (how ver:evidence)(iu�beunable totipay,its debts as they fall"due, (v) hake a receiver, provisional liquidator conservator, custodian, trustee or other simlafic al,;appoint�ed 3�ivixh respect to I t or subsfafitially all of, itsg assets; (vi) k#aih to perforrri Feny obligation to too other pa y with respect4�t an)r Credit Sv ►p d (Jbligations relating to the: Contract, (vii) fail to give Adequate Assurance of Performance un er ection 10 1wltblh,, B hour'i-but tat; least one BusinessDay of a wntenrtequest by the tither partyor(viiinot have pard any amorit'due the otHgr partyereundetbiq� before the second 43usiness Day f t@ fflbg written )`,Rte that sueh�',`payment is due, then the oth i party (the "f�Qh�Defabiting P�rty'�)�s�,all have the right, at:►ts sole election, to immediately withhold and[or suspend deliveries or payment upon Noticeand/orgE#o ternnnateand liquidate the transa%tions under the Contract, in,tlie mannerproVitled in Section 10.3, in ad dition to ar�ad,llother remedies available hereunder s x r 10 3 Jf an Event of befault has occurred and is continuing the Non Defaulting PA►y}shall have the{ igllt by Notice to the Defaulting Party tq designate a Day na' earlier then the Day such Noce is given and t10 later thari20 Daysafe such Notice's girei, as an early termination da'"te (the "Early Termination `Date) for the"liquidation and termination pursuant"to Section 10.3.1 of all transactions under the Contract, each a "Terminated Transaction". On the Early Termination Date, all transactions will terminate, other than those transactions, if any, that may not be liquidated and terminated under applicable law or that are, in the reasonable opinion of the Non - Defaulting Party, commercially impracticable to liquidate and terminate ("Excluded Transactions"), which Excluded Transactions must be liquidated and terminated as soon thereafter as is reasonably practicable, and upon termination shall be a Terminated Transaction and be valued consistent with Section 10.3.1 below. With respect to each Excluded Transaction, its actual termination date shall be the Early Termination Date for purposes of Section 10.3.1. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 6 of 10 April 19, 2002 The parties have selected either "Early Termination Damages Apply" or "Early Termination Damages Do Not Apply" as indicated on the Base Contract. Early Termination Damages Apply: 10.3.1. As of the Early Termination Date, the Non -Defaulting Party shall determine, in good faith and in a commercially reasonable manner, (i) the amount owe, ,(whether or not then due)" by each party with respect to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such deli and receipts (including without limitation any amounts owed under Section 3.2), for which payment has not yet been made by the party,.that owes such payment under this Contract and (ii) the Market Value, as defined below, of each Terminated Transaction The Non- Defaulting Party shall (x) liquidate and accelerate each Terminated Transaction at its Market Value, so that each amountkequal `to h`difference between such Market Value and the Contract Value, as defined below, of such Terminated Transaction(s) shall bee be to, the Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and to the Seller if,the opposito§ the case; and (y) where appropriate, discount each amount then due under clause (x) above to present value in a commercially reasonable manner as of the Early Termination Date (to take account of the period between the date of liquidation and .,the date'---', which such amount would have otherwise been due pursuant to the relevant Terminated Transactions). For purposes of this Section 10 3 ,1 Contract Value" means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the Contract; Price, and "Market Value" means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the market price fior a similar transaction at the Delivery Point determined by the Non -Defaulting Party in a commercially reasonable mani7er. To' 'ascertain the Market Value, the Non -Defaulting Party may consider, among other valuations any or all „of the settlement prices of NYMEX Gas futures contracts, quotations from leading dealers in ener swap gg contracts or physicai gas trading markets, similar sales or purchases and any other bona fide third party offers all`adlusted for the length :of the term and;;differences in transportation costs A; party shall not be required to enter, mto 'a relacemet'transaction(s) in order to determine the: Market Value. /any. extension (s) of the term of a transaction to which parties Barg not bound as of,, the Early Termmatwn Date (incl`uding ;but not limited to evergreen provisions) shall not be considered irrdeterrpinmg Contract Values and Market Values For theg'avoidance of clou t, any option purs`taant to which one party has the right to 0tend"the term ofka transaction shall be`consitlered in determining Contract Values and Market Values the rate of interest used mycalitlafing net present value shall be determined t the Non befaultin Part ;in a comme�ciall ;re asonable,manner. �, , , ., y5,s Early.Termination Dam#* Do Not Ap I` x 10 3 1 As of the Early Termination Date tfie' Noj� befaulting Party shall determine intgooc( faith; and in ,a § rnmercially reasonable manner the iamount owed.(whether or not then due) by each party with respect to all Gad delivered and reeelved between the parties under Terminated Transactions and Excluded Transactions on and before the Early 'Iti` l`nation Date ,and all other applicable charges relating to such deliveries and receipts (including without limitation any amounts ovvetl under Section,3 2) , for which _. a ment.has not et been made b the: art` that owes such ''a merit under'this Contract ,>, . , , , `<i , , i;, " ,4 The parties Have selected either "Other Agreemdht, Setoffs Apply" o'r ";'04her Agreement Setoffs Do Not,Apply" .a`s indicated on the;BaseContract: Other"A Apply: 10=3 2 The None Defaulting artyshall net or aggregate, as appropriate any 'and all amot}ntsoVum'between the parties under Section 10 31, so that all such amounts are netted or aggregated to a single liquidated amount payable by one pa�fy to the other (the "Net Settlement Amount) At its sole opfion and without prior Notice to°the Defau[66 arty the Non Defaulting Marty may setoff (i) any Net, Settlement Amount "owed to the Non -Default hg Party against ahj7 margin oi, other collateral heldiby;it in c�""—" tlon with any Credit Support Obligation relating to the fiContract or (ii� arty Net Settlement Amount payable tooth, 6 Qefaulting iParty against any amount($) payable byNthe Defaulting =Party to the Non Defaulting Partyn under any other agreement or arrangemeit fjotween the 10 3 2 ,The Non CSefpulting Party shall net or aggregate, as appropriate any ;antl 11 amounts�ow�m�g_�betweed" the �ar ies under Section 10 3 1`; so that all such amounts are netted o"i: aggregated to a single liquidated amount payable bone party,to the, other (the "Net Settlement Amount') At its sole option and without prior Notice to the Defaulting -'Party the N,on�pefaultng Party riay==setoff any Net Settlement Amouht,oWed to the Non Defaulting Party�aga nst any margin or othENE,46llateral held_by it i% conneciioitm o--any Credit Su ort`;Obli ation relatin to,'the Contract' 10 3 If any;obis Ovation that is fo be included Tara n` ttm ,'aggregation, or setoff �..._ , g Me 0 pyrsuantto Secfjor032ris unascertained, the Non -Defaulting Party may in good faith estimate that obligation and net, aggregate or setoff, as applicable, in respect of the estimate, subject to the Non -Defaulting Party accounting to the Defaulting Party when the obligation is ascertained. Any amount not then due which is included in any netting, aggregation or setoff pursuant to Section 10.3.2 shall be discounted to net present value in a commercially reasonable manner determined by the Non -Defaulting Party. 10.4. As soon as practicable after a liquidation, Notice shall be given by the Non -Defaulting Party to the Defaulting Party of the Net Settlement Amount, and whether the Net Settlement Amount is due to or due from the Non -Defaulting Party. The Notice shall include a written statement explaining in reasonable detail the calculation of such amount, provided that failure to give such Notice shall not affect the validity or enforceability of the liquidation or give rise to any claim by the Defaulting Party against the Non -Defaulting Party. The Net Settlement Amount shall be paid by the close of business on the second Business Day following such Notice, which date shall not be earlier than the Early Termination Date. Interest on any unpaid portion of the Net Settlement Amount shall accrue from the date due until the Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 7 of 10 April 19, 2002 date of payment at a rate equal to the lower of (i) the then -effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate. 10.5. The parties agree that the transactions hereunder constitute a "forward contract" within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each "forward contract merchants" within the meaning of the United States Bankruptcy Code. 10.6. The Non -Defaulting Party's remedies under this Section 10 are the sole and exclusive remedies of the Non -Defaulting Party with respect to the occurrence of any Early Termination Date. Each party reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or may be entitled tot'arising from the Contract. 10.7. With respect to this Sectionvl0,=if the parties have executed a separate netting agreement with close-out netting provisions, the terms and conditions therein shall°prevail to the extent inconsistent herewith. SECTION 11. FORCE MAJEU,RE 11.1. Except with regard to a pjlarty's obligation to make payment(s) due under Section 7, Section 10.4, and Imbalance Charges under Section 4, neither party shall be liable�,to the other for failure to perform a Firm obligation, to the extent such failure was caused by Force Majeure. The term "Force Majeure as employed'; herein means any cause not reasonably within the control of the party claiming suspension, as further defined in ;aecfion 11.2. Force Majeure shall inelude;`but not be limlited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm vuarnings 'such as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting an entire geographic egion, such as low temperatures which cause freezing vor°failure of wells or lines of pipe (lii) interruption=and/or curtailment of Firm transportation and/or storage by. Transporter"s (iv) acts of others, such as s 4�ikes" la�ckoufs or £other -industrial disturbances §'jots sabotage' insurrections or wars• andf(u)igovernmental actions such as necesaity fcr4compliance with any court order, la fi statute, ordrnarip regulation oir policy haVing 66"effect of lave promulgated l y a goverr�rnental�authority hauin�jurisdiction. Sellerrand Buyer sha�L."M- a reasonable efforts to avoid the 6dverse impacts of a Force Majeure and,Ao�r�sb�l�e the event or4ccurrence once ithasroocurred=in,order=to resume performances 11 3 <~ `Neither party shall be entitled to the benefittoftthe provisions of -,Force Majeure`to the extent perfor�rri`a ice is,affected by any or all of the folloait+mg circumstances: (i) the curtailment ormterruptible or secondary Flrm transpogafionunCess pjrnary; in=path, Firm transportation is also: curtailed; (ii) the party claiming excuse failed to remedy the condition and 46 resume!the performance of such covenants or a:bligations with reasonable ci,(spatch; or (m) economic hardship, to include, without limit- tion,�Seller's ability to sell Gas at a higher or more advantageous price than the'Contract Pride F Buyer's ability tQ purchase Ges at a lower¢or more advantageousKprice than the Contract Price 'or a regulatory'agency disallowing, in whole or h part, the pass`through of costs resulting from this<Agreement (iu) the loss of Buyer's mark f(s) or Buyer s.ihability to use or resell Gas purchased hereunder; except, ineither case as provided in Sedtbij 1r9 2; or (v) the loss orai(ure of Seller'. gas supply or depletion of reserues,`except, in eithef ease, as The party claiming Force Mateur`.c shall not be excusedfrom its res�ionsibility for Imbalance Charges h 11 4 Notwithstanding anything to the contrary herein i:h'e parties agree that the settlement of strikes; lo`dkotits or other industrial disturbances `shall be within" the sole dis&tion of the`party'experiencmg such disturbance. i 11.5The party whose performance ispreventedby Force Majeure must provide, Notice to the other party. Initial Noti;e may be given orally, however, written ;Notice with reasonably hall partculars of the event or occurrence is regeiredas soon as as possible. Upon `providing wnttem once of Force Mateure to the�b. her party, the affected party wIl be relievedtof its'�obligation, from�the 9pset of the Force Mateureevent, to make_ or accept delivery of Gad as applicable, to the.extent andfor the duratidn of Force�Majeure, andlneither party shall b" eempd to have failed in such obligations to the other during such occurrence or event. : e 11 6,Notwthstanding Sections 11 2 and 11 3 the parties may agree to alternative Force N�ateure'prbvisions�rmVa<gTransaction Confirrratlon executedih writing by both partiesx E. SECS LION 12 TERM' This Contract may be terminated on 30 Days written Notice but shall remairt in effect untlrthe expiration Hof the latest Delr�ery Period of any transactions) The rights of either party pursuant to.Section7.6 and Section 10, the ¢ollgations toakepyment hereunder, and the obligation of either partyto indemnify the other, pursuani hereto shall survive tltie termination ofthe Base Cottract ot;any trahsactrori: fLfMITATION SECTIONw.13. S , .. ? s° FOR BREACROF ANY PROVISION FOkWHICH AN E . RESS'REMEDY OR MEASURE OF°,DAMAGt§48_ PROVIDED; SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY'S LIABILITY HEREUNDER 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 PROVIDED HEREIN OR IN A TRANSACTION, A PARTY'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. 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. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 8 of 10 April 19, 2002 TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. SECTION 14. MISCELLAN 14.1. This Contract shall be binding respective parties hereto, and the coves assignment of this Contract, in whole or the assigning party from liability hereunc sell, pledge, encumber, or assign thin' financial arrangements, or (ii) transfel;)'t: other party. Upon any such assignm'en or discharged from any obligations lerei 14.2. If any provision in this Coritrd shall not invalidate, void, or make-unenf 14.3. No waiver of any breach of thi 14.4. This Contract sets forth all un understandings and representations, wl and any effective transaction(s) This G 14.5. The interpretation":arid oertorr 14.6. S inure to the benefit of the successors, assigns, personal representatives, and heirs of the iitions, rights and obligations of this Contract shall run for the full term of this Contract. No I be made without the prior written consent of the non -assigning party (and shall not relieve consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, it the accounts, revenues, or proceeds hereof in connection with any financing or other i any parent or affiliate by assignment, merger or otherwise without the prior approval of the ind assumption, the transferor shall remain principally liable for and shall not be relieved of ;rmIddd, to be invalid, void or unenforceable by any court having jurisdiction, such determination e any other provision, agreement or covenant of this Contract. ct shall -be held to be a waiver of any other or subsequent breach. dings "between the parties respecting each transaction subject hereto, and any prior contracts, oral or written, relating to such transactions are merged into and superseded by this Contract may be Amended only by a writing executed by both parties of this'�Gontract shall"be governed by the laws of the j`unsdictidh as indicated on the Base Ns rule which would apply the]haw of anotherautisdicfion ein will be sub�eFt to all applicable and valid statutesu)es ,orcfrs and regulations of any the parties,'their facilities, or Gas supply, thls,Contract or fansactiori or any provisions thereof. 14 7 There rs no third party beneficiary to'this Contract '' " 14 8 Each party tothis Contract represents and warrants 4hat it has fult and complete authonty torenter into and perFormths Contract. Each person who executes this Contract oh Behalf of either party represents and warrants that it has fu11 and complete authontyrt do so and that such party will be bountl thereby. 14 9 The heatlinga and subheadings contained in' this Contract are used solely for cpnvenience. and do "not constitute a part of this Contract between the parties and shall not be used to construe2or interpret the provisions of this Contract, 14 10 Unless the p�rfies have elected on the Base Gontract not to make this Section 1410;ap�ilicable to this Contract, oeitt er party shall disclose directly or indirectly without the pnor written consent of the other party the terms of a"ny transaction to a third, party (other than the employees lenders, royalty owners, counsel, accountants and other agents of the party, or pros'pecfive purchasers of all or substantially all of a party's assets or of any nghts under this contract, provided such persons�Shall have agreed to keep such terms confidential)."except (i) in order to comply witf� any a p1tcable law„order, regulation, or exchange rule, (n) =to the extent necessaryyfory the enforcemegf of this Contract , (iu) to the extent necessary to: implement any transaction, or=iv) to the extenY'such'tnformation is de(ivared�to such third party for the sole purpose of calculating a published index ; Each party shall notify the other party of any proceeding of,which itisaware which tmay result in disclosure of the terrns�of�any transaction,(ofher than as permitted hereuncer) and use reasonable efforts to prevent or limit thedisclosure. The existence of this Contract is not subtec# to this confdentiahty obligation Subject to Section 13 the parties shall be entitled to all remedies availabl_e at law or in equity`to enforce; or seek relief in connection with this confidentiality obligation. The tomis'ofi any transaction hereunder shall be#keptconfidenfial b the parties hereto for one year from the expiration)of the transactionw , In the event`that disc,I6'9 a is required by, a, govemme,'n#a)!body or applicable law, the party subjeuY ct tQ'suci cegtairemen# may disclose the material terms _of this Contract to the e�itent so required but shall promptty ;notify the other party, pn�r to disclosure, end shall; cooperate (consistent with the draclo�ingparty's legat`oljligations) with the other party s eff, orts to obtain protective ordersor similar restraints with respect to such`+:disclosure at the expense of the of r, party. , 14.11 ': The parties tray agree to dispute resolution ;procedures in 'Fpecial Provisions attache to" tie Basdit or in a Transaction Gonfirmattion executed in writing by both parties DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of purchase and sale of natural gas. Further, NAESB does not mandate the use of this Contract by any party. NAESB DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NON -INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT NAESB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT. Copyright © 2002 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 10 April 19, 2002 EXHIBIT A TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY Copyright © 2002 North American Energy Standards Board, Inc. All Rights Reserved Page 10 of 10 EXHIBIT A NAESB Standard 6.3.1 April 19, 2002 SPECIAL PROVISIONS TO BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS (FORM NAESB Standard 6.3.1) BY AND BETWEEN CORAL ENERGY RESOURCES, L.P. AND THE CITY OF VERNON DATED MAY 1, 2008 SECTION 1.2 Oral Transaction Procedure: Delete the fifth sentence, and replace with the following: "Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may, confirm a telephonic transaction by sending the other party a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by the Section 1.2 (Oral Transaction Procedure); provided, however, the parties agree that with respect to any transaction having a Delivery Period of less than one Month that such transactions shall be documented by a recording of the telephone transaction and that neither party shall submit a written Transaction Confirmation. If any transaction having a Delivery Period of less than one Month is not recorded by the Confirming Party, then the Confirming Party shall, and the other party may, confirm such transaction by sending a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means. The failure to send a Transaction Confirmation shall not invalidate the oral agreement of the parties." 1.44 At the end of Section 1.4, insert the following text: "For those transactions documented by telephone recordings, no such transaction shall be vitiated should a malfunction occur in equipment regularly utilized for recording transactions or retaining any recorded transactions or the operation thereof, and in such event the transaction shall be evidenced by the written and computer records of the parties concerning the transaction made contemporaneously with the telephone conversation." 2.27 At the end of the sentence add the phrase: "except for those transactions having a Delivery Period of less than one Month which are documented by telephone recordings pursuant to Section 1.2." 5 Add the following sentence at the end of the paragraph: "EXCEPT FOR THE OTHER PROVISIONS IN THIS SECTION 5, SELLER HEREBY NEGATES ALL EXPRESS, IMPLIED, OR STATUTORY REPRESENTATIONS AND WARRANTIES OF ANY KIND, INCLUDING THOSE RELATING TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM COURSE OF DEALING OR USAGE OF TRADE." 10.1 Delete in its entirety and replace with the following paragraph under Section 10.1: "During the term of this Contract, the parties shall be required to meet and maintain the requirements contained in the Credit Support Addendum attached hereto as Exhibit B and incorporated herein." 10.2 Delete the following text from Section 10.2: "(vii) fail to give Adequate Assurance of Performance under Section 10.1 within 48 hours but at least one Business Day of a written request by the other party; or (viiix)", and add "or (vii)". 10.3.1 Add the following sentence to the end of the first paragraph of Section 10.3.1: "If the determination pursuant to clauses (x) and (y) above of the difference between the Market Value(s) and Contract Value(s) of all the Terminated Transactions does not result in an amount being owed to the Non -Defaulting Party, it shall be deemed that such difference is zero." 11.2 Insert the phrase "and (vi) a claim of Force Majeure of the foregoing type by a third party supplying the Gas delivered or to be delivered hereunder" before the period and after the word "jurisdiction" in the seventh line of Section 11.2. 12 Delete the second sentence of Section 12 and replace it with the following: "The rights of either party pursuant to: (i) Section 7.6, (ii) Section 10, (iii) Section 13, (iv) Section 14.10, (v) Waiver of Jury Trial provisions (if applicable), (vi) Arbitration provisions (if applicable), (vii) the obligation to make payment hereunder, and (viii) the obligation of either party to indemnify the other pursuant hereto, shall survive the termination of the Base Contract or any transaction." 14.10 Add the following new sentence to the end of the first paragraph of Section 14.10: "With respect to financial statements provided in connection with the Contract, this obligation shall survive for a period of three (3) years following the date such financial statements were provided to a party." 14.12 Add the following new Section 14.12: "No guaranty will be provided hereunder, nor will there be any credit support providers, on behalf of Coral Energy Resources, L.P., notwithstanding anything in this Contract to the contrary, in the event that Coral Energy Resources, L.P., merges into Shell Energy North America (US), L.P., and Shell Energy North America (US), L.P., assumes by operation of law all of Coral Energy Resources, L.P.'s obligations under this Contract. The City of Vernon acknowledges that no consent by The City of Vernon will be required hereunder if Coral Energy Resources, L.P., merges into Shell Energy North America (US), L.P., and Shell Energy North America (US), L.P., assumes by operation of law all of Coral Energy Resources, L.P.'s obligations under this Contract." 14.13 Add the following new Section 14.13: "All amounts payable by the City of Vernon hereunder are payable only from the City of Vernon Light and Power Department Fund." Version 12/19/2007 14.14 Add the following new Section 14.14 "As a California Municipal Corporation, all waivers, agreements as to venue, jurisdiction, indemnities and remedies and other matters hereunder dependent on the powers of the City of Vernon are qualified to the extend such are permitted by applicable law." INITIAUAPPROVAL COUNTERPARTY Ir CORAL Version 12/19/2007 EXHIBIT B EXHIBIT B TO BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BETWEEN CORAL ENERGY RESOURCES, L.P. and CITY OF VERNON CREDIT SUPPORT ADDENDUM 1. Credit Terms. Defined terms used in this Credit Support Addendum ("Addendum") and not defined in the Base Contract shall have the meaning set forth in Section 6 herein. (a) Security Threshold. As used in this Addendum, "Security Threshold" means, on any date of determination, the lowest of (i) the amount set forth in the following table based on the lowest applicable Credit Rating for such Party or its Credit Support Provider, as applicable; (ii) the amount of any dollar limit contained in a guaranty provided by a Party's Credit Support Provider pursuant to this Addendum; or (iii) zero if a Material Adverse Change or an Event of Default has occurred and is continuing with respect to that Party or its Credit Support Provider, as applicable. Party's or Credit Support Provider's Credit Rating Moody's S&P Security Threshold A3 or above A- or above $25,000,000 Baal BBB+ $10,000,000 Baal BBB $7,500,000 Baa3 BBB- $5,000,000 Bat BB+ $2,500,000 Below Bat Below BB+ $0 (b) Material Adverse Change. As used herein, "Material Adverse Change" means (i) the Credit Rating of a Party or its Credit Support Provider, as applicable, falls below BB+ by S&P or Bat by Moody's, or a Party or its Credit Support Provider, as applicable, is no longer rated by at least one of the foregoing rating agencies; or (ii) a default has occurred with respect to indebtedness for borrowed money of a Party or its Credit Support Provider, as applicable, that has resulted in an acceleration of such indebtedness in an aggregate amount in excess of its Cross Default Threshold. As used herein, "Cross - Default Threshold" means, with respect to Coral's Credit Support Provider, fifty million dollars ($50,000,000), and with respect to Counterparty or its Credit Support Provider, as applicable, ($10,000,000). 2. Credit Requirements. If at any time, and from time to time, during the term of the Contract, the Contract Exposure for a Party (the `Providing Party') exceeds such Party's Security Threshold, then the other Party (the `Requesting Party") may request that the Providing Party provide Performance Assurance in an amount equal to the amount by which its Contract Exposure exceeds its Security Threshold. On any Business Day (but no more frequently than weekly with respect to Letters of Credit and daily with respect to cash), the Providing Party, at its sole cost, may request that the amount of Performance Assurance be reduced based upon a decrease in the Contract Exposure as calculated on such Business Day. Any Performance Assurance being provided or returned shall be delivered within one (1) Business Day of the date of such request. The amount of Performance Assurance being provided by the Providing Party shall be rounded upwards to the next multiple of two hundred and fifty thousand dollars ($250,000), and the amount of Performance Assurance being returned by the Requesting Party shall be rounded down to the next multiple of two hundred and fifty thousand dollars ($250,000). 3. Grant of Security Interest: Remedies. To secure its obligations under the Contract, and to the extent it delivers Performance Assurance hereunder as the Providing Party, each Party hereby grants to the Requesting Party, as secured party, a present and continuing security interest in, lien on, and right of setoff against, all Performance Assurance in the form of cash, and any and all proceeds resulting therefrom, held by or on behalf of the Requesting Party. The Providing Party agrees to take such further action as the Requesting Party may reasonably require in order to perfect, maintain, and protect the Requesting Party's security interest in such collateral. Upon the occurrence and continuance of an Event of Default with respect to the Providing Party, then, unless the Providing Party has satisfied in full all of its payment and performance obligations under the Contract that are then due, the Requesting Party may (i) exercise any of the rights and remedies of a secured party under applicable law with respect to all Performance Assurance; (ii) exercise its right of setoff against any and all Performance Assurance; (iii) draw on any Letter of Credit issued for its benefit, and (iv) liquidate all Performance Assurance then held by the Requesting Party free from any claim or right of any nature whatsoever of the Providing Party. The Requesting Party shall either apply the proceeds of the Performance Assurance realized upon exercise of such rights or remedies to reduce the Providing Party's obligations under the Contract, in such order as it elects, and the Providing Party shall remain liable for any amounts owing to the Requesting Party after such application, subject to the Requesting Party's obligation to return any surplus proceeds remaining after such obligations are satisfied in full, or hold such proceeds as collateral security for the Providing Party's obligations under the Contract. 4. Credit Events Of Default. The following events ("Credit Events") shall be additional Events of Default under Section 10.2 of the Contract and the Non -Defaulting Party shall have the right to exercise any of the remedies provided for under Section 10 of the Contract upon the occurrence of a Credit Event as provided herein: (i) the failure of the Defaulting Party to establish, maintain, extend or increase Performance Assurance when required pursuant to this Addendum; or (ii) the failure of the Defaulting Party's Credit Support Provider, if any, to perform any covenant set forth in any guaranty agreement delivered pursuant to this Addendum; or (iii) the failure of the Defaulting Party or its Credit Support Provider, if any, to timely provide financial information as required in this Addendum, and such failure is not remedied within thirty (30) Days after written notice of such failure is given to the Defaulting Party; or (iv) the occurrence of a Letter of Credit Default. 5. Financial Information. Upon request, a Party or its Credit Support Provider, as applicable, shall deliver to the other Party (i) within one hundred twenty (120) Days following the end of its fiscal year, a copy of the audited consolidated financial statements for such fiscal year certified by independent certified public accountants and (ii) within ninety (90) Days after the end of each of the first three fiscal quarters of its fiscal year, a copy of the quarterly unaudited consolidated financial statements for such fiscal quarter. In all cases, the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles or such other principles then in effect. 6. Definitions. With respect to this Addendum, the following definitions shall apply: "Contract Exposure" means the net amount (i) determined pursuant to Section 10.3.1 of the Contract that would be payable from the Providing Party to the Requesting Party, as if an Early Termination Date had been declared pursuant to Section 10.3 of the Contract (notwithstanding whether or not an Event of Default has occurred) and all transactions had been terminated; (ii) plus the net amount of all other payments owed but not yet paid between the Parties, whether or not such amounts are then due, for performance already provided pursuant to any and all transactions conducted under the Contract; (iii) less the amount of any Performance Assurance then held by the Requesting Party. 2 "Coral" means Coral Energy Resources, L.P. "Counterparts' means City of Vernon, CA "Credit Rating' means (i) with respect to a Party or its Credit Support Provider, as applicable, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement), its underlying revenue bond rating, or its issuer credit rating by the specified rating agency, and (ii) with respect to a financial institution, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement) or its deposit rating by the specified rating agency. "Credit Support Provider' means a third party providing a guaranty for a Party pursuant to this Addendum. With respect to Coral, its Credit Support Provider shall be Shell Energy North America (US), L.P. "Defaulting Party' has the meaning set forth in Section 10.2 of the Contract. "Interest" means the interest rate to be paid by the Requesting Party should be calculated at the Federal Funds Effective Rate - the rate for that day opposite the caption "Federal Funds (Effective)" as set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System. Such interest shall be calculated on the basis of the actual number of days elapsed and on the basis of a year of 360 days. Upon request, the transfer of the interest amount for each calendar month will be made on the second business day of the next calendar month. "Letter of Credit" means one or more irrevocable, standby letters of credit from a Qualified Institution. "Letter of Credit Default" means with respect to an outstanding Letter of Credit that is held by the Requesting Party, the occurrence of any of the following events: (i) the Providing Party fails to extend or replace such Letter of Credit delivered as Performance Assurance hereunder at least twenty (20) Business Days prior to its expiration, or (ii) the Letter of Credit delivered hereunder shall expire, terminate or otherwise fail to remain in full force and effect for any reason, or (iii) the Qualified Institution which issued such Letter of Credit hereunder fails to maintain the requirements of a Qualified Institution as specified herein or fails to comply with or perform its obligations under such Letter of Credit and such failure is not remedied within five (5) Business Days after written notice of such failure is given to Requesting Party, or (iv) the Qualified Institution which issued such Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit, or (v) the Qualified Institution which issued such Letter of Credit shall become Bankrupt. Upon the occurrence of a Letter of Credit Default, the Providing Party agrees to transfer to the Requesting Party either a substitute Letter of Credit or other Performance Assurance, in each case on or before the second (2"d) Business Day after receipt by the Providing Party of written notice from the Requesting Party. "Moody's" means Moody's Investors Service, Inc., or its successor. "Non -Defaulting Party' has the meaning set forth in Section 10.2 of the Contract. "Part ' means a party to the Contract, and collectively referred to as the "Parties". "Performance Assurance" means collateral in the form of cash, Letters of Credit, or other security acceptable to the Requesting Party. If the collateral is in the form of cash, such cash shall be placed by the Requesting Party in a segregated, Interest bearing account on deposit with a Qualified Institution and Interest shall accrue to the Providing Party. The requirement to maintain a segregated escrow account shall not apply if the Requesting Party or its Credit Support Provider, as applicable, has a Credit Rating of at least A- by S&P or A3 by Moody's. 3 "Qualified Institution" means the domestic office of a commercial bank or trust company (which is not an affiliate of either Party) (i) organized under the laws of United States (or any state or a political subdivision thereof), (ii) having assets of at least ten billion dollars ($10,000,000,000), and (iii) having a Credit Rating of at least A- by S&P and at least A3 by Moody's. "S&P" means Standard & Poor's Ratings Services (a division of McGraw-Hill, Inc.) or its successor. 7. Successors. In the event of an assignment of the Contract by Counterparty as provided therein, the provisions of this Addendum shall not be applicable to any such assignee. In such event, an assignee will be required to meet the reasonable credit requirements of Coral for the extension of unsecured credit before further deliveries of Gas are made. COUNTERPARTY CORAL El