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Resolution No. 09916
1 RESOLUTION NO. 9916 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF 3 VERNON APPROVING AND AUTHORIZING THE EXECUTION OF 4 (i) A BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BY AND BETWEEN THE CITY OF VERNON AND 5 SACRAMENTO MUNICIPAL UTILITY DISTRICT AND (ii) AN EXCHANGE AGREEMENT BY AND BETWEEN THE CITY OF 6 VERNON AND SHELL ENERGY NORTH AMERICA (US) L.P. REGARDING THE SALE AND DELIVERY OF PREPAID NATURAL GAS 8 9 WHEREAS, the City of Vernon (the "Cit " y ) owns and operates. a 10 municipal natural gas distribution system for supplying the City's 11 municipal electric system with natural as and g providing natural gas 12 to businesses and industries within the Cit y; and 13 WHEREAS, the City desires to sell and purchase prepaid gas 14 to or ,from Sacramento Municipal Utility District ("SMUD"), on a firm 15 or interruptible basis; under general, terms and conditions published 16 by the North American Energy Standards Board ("NAESB") and 17 WHEREAS,. the City has determined that it is to the City's 18 advantage, and in the public interest of the residents and businesses 19 in the City, to enter into a contract with SMUD for the purchase and 20 sale of natural gas; and 21 WHEREAS, the sale of Vernon's prepaid natural gas to-.SMUD 22 requires a change in gas delivery to Vernon from the Southern 23 California Gas Company ("SoCalGas") system to the Pacific Gas & 24 Electric system for delivery to SMUD; and 25 WHEREAS, to implement the delivery change, the, most 26 competitively priced option was to use another marketer; and 27 WHEREAS, on June 2, 2008, the City Council of the City of 28 Vernon adopted~Resolution No. 9631 approving a Base Contract .for Sale 1 and Purchase of Natural Gas with Coral Energy Resources, L.P., a 2 subsidiary of Shell Energy North America (US), L.P. ("Shell") for the 3 sale or purchase of prepaid gas; and 4 WHEREAS, since the City of Vernon and Shell already have an 5 agreement in place, the most cost effective method of such delivery 6 change is ,an exchange transaction with Shell using a modified 7 Transaction Confirmation reclassifying Vernon from Seller to Owner-and 8 reclassifying Shell frgm Buyer to Exchange Agent; and 9 WHEREAS, the exchange transaction with Shell is not a sale 10 and purchase but merely a simultaneous exchange of each MMBtu received 11 into SoCalGas to Pacific Gas & Electric; and 12 WHEREAS, the City has determined that it is to the City's 13 advantage, and in the public interest of the residents and businesses 14 in the City, to enter into a contract with Shell for the exchange 15 transaction. 16 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE 17 CITY OF VERNON AS FOLLOWS: 18 SECTION 1: The City Council of the City of Vernon hereby 19 finds and determines that the recitals contained hereinabove are true 20 and. correct. 21 SECTION 2: The City Council of the City of Vernon hereby 22 approves the Base Contract for Sale. and Purchase of Natural Gas with 23 SMUD,,in substantially the same form as the copy which_is attached 24 hereto as Exhibit A and incorporated by reference;.. 25 SECTION 3: The City .Council of the City of Vernon hereby 26 approves the Transaction Confirmation with Shell, in substantially the 27 same form as the copy which is attached hereto as Exhibit Band 28 incorporated by reference. - 2 - 1 1 SECTION 4: The City Council of the City of Vernon hereby 2 authorizes the Director of Light & Power to execute said agreements 3 with SMUD and Shell for, .and on behalf of, the City of Vernon and the 4 City Clerk is hereby authorized to attest thereto. 5 SECTION 5: The City Council of the City of Vernon hereby 6 authorizes the City Administrator, or his designee, to make whatever 7 nonsubstantive, administrative and/or text changes, upon advice of 8 counsel, to the agreements. 9 SECTION 6: The City Council of the-City of Vernon hereby 10 directs the City Clerk, or her designee, to send one fully executed 11 agreement to SMUD-and one fully executed agreement to Shell.- 12 SECTION 7: The City Council of the City of Vernon hereby 13 authorizes the City Administrator, or his designee, to execute and 14 deliver such other agreements, documents and certificates, and to 15 perform such other acts and deeds, as may be necessary or convenient 16 to effect the purposes of this Resolution and the transactions herein 17 authorized. 18 SECTION 8: The City Clerk of the City of Vernon shall 19 certify to the passage of this resolution, and thereupon and 20 thereafter the same shall be in full force and effect. 21 APPROVEb AND ADOPTED this 13th day of Apri1,..20-09. 22 u~ 24 Name: Leonis C. Malburg 25 Title : Mayor / .i~-1 26 ATTEST: 27 ~ 28 MAN.ELA GIRON, it Clerk - 3 - 1 STATE OF CALIFORNIA ) , 2 ) ss COUNTY OF LOS ANGELES ) 3 4 I, MANUELA GIRON, City Clerk of the City of .Vernon, do ,hereby 5 certify that the foregoing Resolution, being Resolution No. 9916, was 6 duly adopted by the City Council of the City of Vernon at a regular 7 meeting of the City .Council duly held on Monday, April 13, 2009, and 8 thereafter. was duly signed. by the Mayor or .Mayor Pro-Tem of the .City of 9 Vernon. 10 11 ~ 12 MANUELA GIR ty Clerk 13 (SEAL) 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 _ 4 - EXHIBIT A Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following date: May 1, 2009 The parties to this Base Contract are the following: PARTY A PARTY B Ci of Vernon PARrYNAME Sacramento Munici al Utili District 6301 S Street 4305 S. Santa Fe Avenue ADDRESS P.O. Box 15830 Vernon, CA 90048 Sacramento, CA 95852-1830 www.citvofvernon.ora eus?NESS wEeslrE wwwsmud.ora CONTRACT NUMBER 060883022 D-U-N-S®NUMBER 009235342 US FEDERAL: 95-6000808 ? US FEDERAL: 94-6001157 TAX /D NUMBERS ~ OTHER: California . JuR/solcT~oN of California ORGANIZATION . ? Corporation ? LLC a Chartered City and Municipal Corporation of the ? Limited Partnership ? Partnership State of California COMPANY TYPE ? LLP ? Other: a Municipal Utility District organized under the laws of the State of _ California - GUARANTOR IF APPLICA6LE .CONTACT INFORMATION ' ATTN; Donal O'Callaghan ATTN:. Kevin Hart TEL#: 323-583-8891 FAX#: 323-826-1425 COMMERCIAL TEL#: '916-732-7048 FAX#; 916-732-6436 EMAIL: docallaohan(cilci:vernon ca us EMAIL; khan@smud.org ATTN:. Somme as above ATTN: Jay Glaubitr TEL#: F~#, SCHEDULING TEL"#: 916-732-6206 FAX# 99B-732-6436 EMAIL: EMAIL;- J laubl smud:or A7TNi Same as above CONTRACTiAND' ATTN: Barry Brunelle TEL#: F~#; LEGAL NOTICES TEL#t 916-732.6523 FAX#: `916-732-6854 EMAIL:. EMAIL: bbrunel smud.or' ATTN: Same as_above CREDIT ATTN: Mark Oosterman TEL#: FAX#: TEL#: 916-732-5676 FAX#: .916-732.6436 EMAIL: ` EMAIL: mooste smud.oY ATTN: ` Same asabove TRANSACTION ATTN:: Energy Settlements TEL#: F~#. CONFIRMATIONS TEL#; ,:.916-732-6847 FAX#: :'876-732-b664 EMAIL::: EMAILt tfischb@smud.org ACCOUNTING INFORMATION ATTN: Same as above INVOICES ATTN: Energy Settlements • PAYMENTS TEL#: 916-732-6847 FAX#: `:976-732-6664` TEL#: FAX#: SETTLEMENTS EMAIIr ifischb EMAIL:: ~iasmud.org BANK: The Bank of New York Mellon ABA: 02'1000078 ACCT; GLA 111-565 ,.:BANK: Bank ofAmerjca FC: TAS A/C 800457 lMlRE TRANSFER - ' TAS A/C NAME: Vernon ESC 'O6 Citi Gas Account NUMBERS ABA: 1210-0035-8 ACCT: 01488-80182 ATTN: Aurora Quiazon 213-630-6236 (IF APPLICABLE) OTHER DETAILS: Sacramento Main Copyright ©2006 North American Eriergy Standards Board, Inc. NAESB Standard 6.3.1 Alf Rights Reserved September 5, 2006 Base Contract for Sale and Purchase of Natural Gas (Continued) 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 the anorooriate box(es) from each section; Section 1.2 ? -Oral (default) Section 10.2 ~ No Additional Events of Default (default) Transaction OR Additional Procedure Written Events of ? Indebtedness Cross Default Default Section 2.7 ? 2 Business Days afterreceipt (default) ° Party A: Confirm Deadline OR ? Party B: ' 5 Business Days after receipt ? Transactional Cross Default Specified Transactions• Section 2.8 ? Seller (default) Confirming Party OR ? Buyer _ City of Vernon Section 3.2 ~ Cover Standard (default). Section 10:3.1 ~ Early Termination Damages Apply (default) Performance OR Early Obligation ? Spot Price Standard Termination OR Damages ? Early Termination Damages Do Not Apply Note; The following Spof Frice'Publication.applies to both of the immediate/ recedin - Section 10.3.2 ? .Other Agreement Setoffs Apply (default) Other Section 2.31 ~ Gas;Daily Midpoint (default) Agreement ~ Bilateral (default) Spot P[ice- . Setoffs Publication - Triangular OR.-': ? Other Agreement Setoffs Do Not Apply Section,.6 ~ Buyer Pays At and After Delivery Point (default) Taxes OR ? Seller Pays Before and At Delivery;Point Section 7.2 ~ 25"' Day of Month.following Month of delivery. Section 15.5. Payment Date (default) Choice Of Law California OR ? Da of Month followin Month of delive" Section 7.2 ; ~ Wireltransfer (default) Section 15.10 ~ Confidentiality applies (default) Method of Payment . ? Automated Clearinghouse Credit (ACH) Confidentiality OR' ? Check ? Confidentiality tloes riot apply Section 7.7 ~ Netting applies (default) Netting OR ? Nettin does not a I Special Provisions Numberofsheets attached` NOne ? Addenaum(s): None IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. Ctt of Vernon PARTVNAME Sacramento Muitici al lJtili District - - SIGNATURE - B - - . - B - DOnal l) Calla ha0 PRINTED NAM ~ E Director of LI ht and Power TITLE Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 2 of 13 September 5, 2006 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 to the party receiving Gas and "Seller" refers to the parley delivering Gas. The entire agreement between the arties shall be the Contract as defined in Section 2.9. The parties have selected either the "Oral Transaction 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 or telephone conversation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally bound from-the time they so agree to transaction terms and may each rely thereon..Any such transaction shall be considered a "writing" and 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, EDl.ormutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction Procedure) prodded 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 Confirmation as the identification- and authentication of Confirming Party. If the Transaction Confirmation contains any provisions other than those relating to the commercial terms of the transaction (i.e., price, quantity, pertormance obligation, delivery point, period of delivery and/or transportation conditions), -which modify or supplement the Base Contract or General Terms and Conditions of this Contract (e:g., arbitration. or:additional representations and warranties), such provisions shall .not be deemed to be accepted pursuant. to Section 1:3 but must be expressly agreed.. to by both parties; provided that the foregoing. shalt .not invalidate an transaction a reed to b the artier.. Written Transaction Procedure: 1.2 The parties will use the following Transaction Confirmation procedure. Should the parties come to an agreement regarding a Gas purchase and sale. transaction for a particular Delivery Period, he Confirming Party shall, and' the other party 'may; record that agreement on a Transaction Confirmation and' communicate such Transaction Confirmation ,by facsimile, EDI, or mutually agreeable electronic means, to the other party by the close 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 assa a of the Confirm:Deadline without'ob'ection from the receivin a , as rovided in Section 1.3. 1.3. If a sending party's Transaction Confirmation is materially different from the receiving party's understanding of the agreement . referred to in Section 1.2, such receiving early shall notify 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 party. The fiailure of the receiving parry to so notify the sending party in writing by the Confirm Deadline constitutes the receiving parry's agreement to the`terms of .the transaction described in the sending-party's Transaction Confirmation. If where are any material differences between timely sent Transaction Confirmations governing the same transaction, then neither Transaction Confirmation shall be'ibinding until or unless such differences are resolved including the use. of any evidence that clearly resolves the differences in the Transaction Confirmations. In the event of a conflict among: the terms of (i) a binding Transaction Confirmation pursuant to Section 1.2; (ii) the oral agreement of the parties which may be evidenced, by a recortled conversation, where the parties have selected the Oral,Transaction .Procedure of the-Base Contract:, (iii) the :Base 'Contract, and (iv) these General Terms and Contltions, the terms of the documents shall govern in'the priority listed in this sentence. 1.4. The parties agree that each party may. electronically record all elephone conversations with respect to this Contract between their respective employees, without any special or further notice to the other party. Each'party shall obtain any .necessary consent of its agents and employees to`such recording. Where theparties have selected the. Oral Transaction Procedure in Section. 1;2 of the -Base Contract, the parties, agree not to contest the validity qr enforceability of telephonic recordings entered. into in accordance with the ..requirements of this Base Contract. SECTION 2. DEFINITIONS The terms et forth below-shall have the meaning ascribed to them below. Other terms are also defined elsewhere in the.~Gontract and shall have the meanings ascribed to them herein. 2.1. "Additional Event of Default" shall mean Transactional Cross Default or Indebtedness Cross Default, each as and if selected by the parties pursuant to the Base Contract. 2.2. "Affiliate" shall mean, in relation to any person, any entity controlled, directly or indirectly, by the person, any entitythat controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of at least 50 percent of the voting power of the entity or person. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All. Rights Reserved Page 3 of 13 September 5, 2006 2.3. "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 pertorm a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer. 2.4. "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. , 2.5. "British thermal unit" or "Btu" shall mean the International BTU, which is also called the Btu (IT). 2.6. "Business Day(s)" shall mean Monday through Friday, excluding Federal Banking Holidays for transactions in the U.S. 2.7. "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. 2.8. "Confirming Party" shall mean the party designated in the Base Contract to prepare and forward Transaction Confirmations to the . other party. 2.9. "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 entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties. 2.10. "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 toby-the parties in ,.transaction. 2.11. "Contract Quantity"' shall. mean the quantity of Gas to be delivered- and taken as agreed to by the parties in a transaction. 2.12. "Cover Standard", as referred to in .Section 3.2; shall mean that.if.there is an unexcused failure to take or dehve.r any quantity ofiGas pursuant to this Contract, then the performing party shall use .comrrlercially reasonable efforts to (i) (:Buyer is the pertorming 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 reasonable for the delivery or production area, as applicable, consistent with: the amount of notice provided by the nonpertorming,party; the immediacy of the Buyer's Gas consumption needs or;Seller's Gas sales requirements, as applicable; the quantities involved; .and the anticipated length of failure by the-nonperforming party: 2.13, "Credit Support Obligation(s)'.' shall mean any obligatron(s).fo provide or establish credit support for, or on behalf of, a party to this Contract such as -cash, an irrevocable standby: letter of credit, a margin agreement, a prepayment, a security .interest in an asset,. guaranty, or other good and sufficient security of a continuing'nature. 2.14. "Day" shall mean a period of 24 consecutive. hours, coextensive with a "day" as defined by the Receiving Transporter in a particular transaction.. 2.15: ".Delivery Period" shall be the period during which deliveries are to be made as agreed to by he parties in a transaction. 2.1;b:. "Delivery Point(s)" shall mean such point(s) as are agreed to by the parties in a transaction. 2.17, EDI" shall mean an electronic data interchange pursuant to an, agreement entered into: by the parties; specifically relating to the communication of Transaction Confirmations under this Contract. 2.18. EFP" shall-mean the purchase, sale or exchange of natural Gas'as the "physical" side of an exchange forphysical transaction involving gas futures contracts, EFP shall incorporate the meaning and remedies of "Firm", ,provided that a party's excuse for nonperformance of its obligations to deliver or receive Gas will be .governed by the rules of the relevant futures exchange regulated under the Commodity Exchange Act: 2.19. Firm" shall.:mean that either party may, :interrupt its pertormance without liability only to the extent that such • _ performance is prevented for reasons of Force Majeure; provided, however, that during Force Majeure interruptions, the party invoking Force Majeure;may be responsible for any Imbalance Charges as set forth in Section 4,3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by the Transporter: 2.20. "Gas" shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous state. consisting primarily of methane..- 2.21. "Guarantor",hall mean any entity that has provided a guaranty efthe obligations of a party hereunder. 2.22. "Imbalance Charges" shall mean any fees, penalties, costs dr charges (in cash or in kind) assessed by a Transporter for failure to satisfy the Transporter's balance and/or nomination requirements. 2.23. "Indebtedness Cross Default".shall mean if selected on the Base Contract by the parties with respect to a party, that it or its. Guarantor, if any,, experiences a default, or similar condition or .event however therein defined; under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether present or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed money in an aggregate amount greater than the threshold specified in the Base Contract with respect to such party or its Guarantor, if any, which results in such indebtedness becoming immediately due-and payable. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved. Page 4 of 13 September 5, 2006 2.24. "Interruptible" shall mean that either party may interrupt its pertonnance at any time for any reason, whether or not caused by an event of Force Majeure, with no liability; except such interrupting party may be responsible for any .Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by Transporter. 2.25. "MMBtu" shall mean one million British thermal units, which is equivalent to one dekatherm. 2.26. "Month" shall mean the period beginning on the first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar month. 2.27. "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. 2.28. "Receiving Transporter" shall mean fhe Transporter receiving Gas at a Delivery Point; or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point. 2.29. "Scheduled Gas" -shall -mean the quantity of Gas confirmed by Transporters) for movement, transportation or management. 2.30. "Specified Transaction(s)" shall mean any other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas, and any othertransacton or agreement identified as a Speafied Transaction under the Base Contract. 2.31. "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 ocation 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 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. 2.32. "Transaction Confirmation" shall mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant fo' Section 1 for a particular Delivery Period. 2.33. "Transactional Cross Default` shall mean if elected on the.:-.Base Contrac# by the parties with.: respect to a party, that it shall be in default, however therein dQfned, under any Specified Transaction. 2.34:. ''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 ih the case of Seller or to receive Gas,in the case of Buyerfor a designated number of days `during a period as specified Qn the applicable Transaction Confirmation: 2.35. "Transporter(s)" shall mean all: Gas gathering or pipeline companies, or local distribution companies, acting in the capaaty of a transporter, transporting Gas for Seller or Buyer upstream or downstream', respectively, of the Delivery Point pursuant td a particular transaction.. SECTION 3. PERFORMANCE OBLIGATION 3.1. Seller agrees to-sell and deliver, and Buyer 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 partie& in a transaction. The arties have selected either the "Cover Standard" or the "S of Price.Standard" as indicated on the Base Contract. CoverStandard: 3.2. The sole and exclusive remedy of the parties: irr the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach: by Seller on any Day(s), payment by Seller to Buyer in an amorant;equal to the positive difference; if :any; between the purchaseprice paid by Buyer utilizing the Cover Standard and the Coritraet Price, adjusted for commercial?y reasonable' differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the G.ontract Quantity and the quantity actually delivered by Seller for such Day(s) excluding any quantity for which no replacement is available; or (ii) in the event of a breach by Buyer on any.Day(s), payment by'Buyer to SeNer in the amount equal to the positive- difference; if any, between the Contract Price and the price received by Seller utilizing the Cover Standard. for the resale of such Gas; adjusted for commercially reasonable differences in transportation costs to' or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually taken by Buyer for such Day(s) excluding any quantity for which no sale is available; and (iii) ih the event that Buyer has usetl commercially reasonable efforts td replace the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such replacement or sale is available for aIF or any portion of the Contract Quantity of Gas, then in addition to (i) or (ii) above, as applicable; the sole and exclusive remedy of the performing party with respect to the Gas not replaced or sold shall be an amount equal to :any unfavorable difference between the Contract Price and the Spot Price, adjusted for such transportation to the applicable Delivery Point; multiplied by the quantity of such Gas not replaced or sold. Imbalance Charges. hall not be recovered underthis Section 3:2, but Seller and/or Buyer shall be responsible for imbalance Charges, if any, as provided`in Section 4.3. The amount of such .unfavorable difference shall be payable five Business Days after' presentation of the pertorming party's invoice, which shall- set forth ttie basis u on which such amount was calculated. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 13 September 5, 2006 S of Price Standard: 3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an amount. equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for-such Day(s), multiplied by the positive difference, if any, obtained by subtracting the applicable Spot Price from the Contract Price. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such ,unfavorable difference shall be payable five Business Days after presentation of the pertorming .party's .invoice, which shall set forth the basis u on which-such amount was calculated. 3.3. Notwithstanding Section 3.2, the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by both parties. 3.4. In addition to Sections 3.2'and 3.3, the parties may provide for a Termination Option in a Transaction Confirmation executed in writing by both- parties. The Transaction Confirmation containing the Termination Option will designate the length of nonperformance triggering the Termination Option and the procedures for exercise thereof, how damages for nonpertormance will be compensated, and how liquidation costs will be calculated. SECTION 4. TRANSPORTATIQN,:`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 Poiht(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 Transporters) involved in the transaction, of the quantities of Gas to be deliverred and purchased each Day. Should either party become aware that,actual deliveries at the Delivery Point(s) are greater orlesser than the Scheduled Gas, such parlyshall promptly notify the other party...- 4.3. The parties shall use commercially reasonable efforts to avoid imposition of anyJmbalance 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 uch Imbalance Charges or reimburse Seller for uch Imbalance Charges paid by Seller: If the Imbalance Charges were incurred as a result of Seller's delivery of quantities §f Gas greater than or less than the Scheduled Gas; then Seller. shall pay forsuch Imbalance Charges orreimburse Buyer for such Imbalance;Charges paid by Buyer. SECTION 5. QUALITY AND MEASUREMENT All Gas delivered by Seller shall meet the pressure, quality and heat content requirements of the Receiving Transporter. The unit of quantity measuremenffor purposes of this Contract"shall be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving Transporter. _ - , SECTION 6. TAxEs Th`e parties have selected either `Buyer Pays At and`After Delivery:Point" or "Seller Pays ::Before and At Delivery"Point" as indicated on the Base :Contract. Bu er Pa s At and After pelive 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 Delivery Point(s). ;`Buyer shall pay br 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 responsibilty hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes. Any party,entitled to an exam tion from an such Taxes or char es shall furnish the other a an necessa documentation thereof. Seller Pa s Before and At Delive 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'DeliVery Point(s) and all Taxes aY the Delivery Point(s). Buyer shall pay or cause to;be paid all Taxes on or with respect to the Gas 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 exam tion from an such Taxes or char es shall furnish the other 'a` an necessa documentation thereof. SECTION 7. :.BILLING, PAYMENT, AND AUDIT 7.1. Seller shall invoice Buyer for Gas delivered and received 'rn the .preceding Month and for any other applicable charges, providing supportirtg documentation acceptable in industry practice to support the amount charged. If the actual quantity delivered is not known by the billing date, billing will be prepared based on the quantity of Scheduled. Gas. The invoiced quantity will then be adjusted to the actual quantity on the following Month's billing or as soon thereafter as actual delivery information is available. Copyright ©2006 North American Energy Standards Board, Ina NAESB Standard 6.3.1 All Rights Reserved Page 6 of 13 September 5, 2006 7.2. Buyer shall remit the amount due under Section 7.1 in the manner spedfied in the Base Contrail; in immediately available funds, on or before the later of the Payment Date or 10 Days after receipt of the invoice by Buyer, provided that if the Payment Date is not a Business Day, payment is due on the next Business Day following that date: In the event any payments are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2. 7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the nonpertormirig party for an accelerated payment setting forth the basis upon which the invoiced amount was calculated. Payment from the nonpertorming party will be due five Business Days after receipt of invoice. 7.4. If the invoiced party, in good faith, disputes the amount of any such invoice or any part thereof, such invoiced party will pay such amount as it concedes to be correct; provided, however, if the invoiced party disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay. In the event the parties are unable to resolve such dispute, either party :may pursue any remedy available at law or in equity to enforce its rights pursuant to this Section. 7.5. Ifthe invoiced party-fails to remit the full amount payable when due, interest on the unpaid portion shall accrue from the date dine until the 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. 7.6. A party shall have the right, at its own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of the relevant portion of :the books, records, and telephone recordings of the. other party -only to the extent reasonably. necessary to verify the accuracy.of any statement; charge, payment, or computation made under the Contract.. This right to examine, audit, and to obtain copies shall not be available with respect to proprietary information not diredJy relevant to transactions under this Contract. All invoices and billings shall be conclusively presumed final and accurate and all associated daims 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 partyowing 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 pu. rsuant 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 prev..ail to the extent-inconsistent herewith: - SECTION H. ..: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 he specified Delivery Point(s): Buyer shall have responsibility for and assume 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 15.8„ ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, JNCLUDING ANY WARRANTY OF MERCHANTABILITY OR OFFITNESS FOR ANY PARTICULAR PURPOSE; ARE DISCLAIMED. " 8.3. Seller agrees to indemnify'Buyer and save it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from any and. all persons, arising-from or out of claims of title, personal injury (including death). 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 any and all persons, arising from or out of claims regardingrpayment, personal injury (including death) or property damage from said Gas or other charges thereon which attach after#itle passes to Buyer: 8.4. The parties agree that the delivery of and the transfer of title to all Gas under this Contract shall take place within the Customs'Territory of the United States (as defined in general note 2 of the Harmonized Tariff Schedule of the United-:States 19 U.S.C. §1202, General Notes, page 3); provided, however, that in the event Seller--took title to the Gas outside the Customs Territory:of the United States, Seller represents and warrants that it is the importer of record for all Gas entered and delivered into the United States; and shall be responsible for entry and entry summary filings as well as the payment of duties, taxes and fees, if any, and all applicable record keeping requirements. 8.5. 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 apse from the failure of Gas delivered by Seller to meet the quality requirements of Section 5. SECTION 9. NOTICES 9.1. All Transaction Confirmations, invoices, payment instructions, and other communications made pursuant to the .Base i Contract (''Notices") shall be made to the addresses specified in writing by the respective parties from time to time:. 9.Z. All Notices required hereunder shall be in writing and may be sent by facsimile or mutually acdptable electronic means, a nationally recognized overnight courier service, first class mail or hand delivered. 9.3. Notice shall be given when received on a Business Day by the addressee. In the absence of proof of the actual receipt date, the following presumptions will apply.. Notices sent by facsimile shall be deemed to .have been received upon the sending party's receipt of its facsimile machine's confirmation of successful transmission. If the day on which such facsimile is received is Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved ~ Page 7 of 13 September 5, 2006 j not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall be considered delivered five Business Days after mailing. 9.4. The party receiving a commercially acceptable Notice of change in payment instructions or other payment information shall not be obligated to implement such. change until ten Business Days after receipt of such Notice. SECTION 10. FINANCIAL RESPONSIBILITY 10.1. If either party.("X") has reasonable grounds for insecurity regarding the performance of any obligation under 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 or its Guarantor,- if:applicable), Xmay demand Adequate Assurance of Performance. "Adequate Assurance of Performance" shall mean sufficient- security in the form, amount, for a term, and from an issuer, all as reasonably acceptable to X, including, but not limited to cash, :a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty.. Y hereby grants to X a continuing.-first priority security interest in, lien on, and right of setoff against all Adequate Assurance of Performance in the form of cash transferred. by Y to X pursuant to this Section 10.1. Upon the return by X to Y of such Adequate Assurance of Performance, the security interest and lien granted hereunder on that Adequate Assurance of Performance sFiall be released automatically and, to the extent possible, without any further action by either party. 10.2. In the event (each an "Event of Default") either party (the "Defaulting Party") or its Guarantor shall: (i) make an assignment or any general arrangement for the benefit of creditors; (ii) file a petition or otherwise commence, authorize, or acquiesce in.the commencement of,a proceeding or case under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (iii) otherwise become bankrupt or insolvent (however evidenced); (iv) be uriable to pay its debts as they fall due; (v) have a receiver, provisional liquidator, conservator, custodian, trustee, or other similar official appointed with respectto it or substantially all of its assets; (vi) fail to perform any obligation to the other party with respect to any Credit Support Obligations relating to the Contract; (vii) fail to give Adequate Assurance of Pertormance under Section 10.1 within 48 hours but at least one Business Day of a written request by the other party; (viii) not have paid any amount due the other party hereunder on_or before the second Business Day following,written Notice that such .payment,is due;- or ix)..be the affected party with respect to any Additional went of Default; then the other party (the "Non-Defaulting Party'') shall have the right, 'at its sole election, to immediately withhold and/or suspend. deliveries or payments upon Notice. and/or to terminate and'iiquidate the- transactions under the: Contract, in the manner provided in Section 10.3, in addition to any and all other remedies available hereunder: 10.3. If an Event of .Default has .occurred and is continuing, the Non-Defaulting Party shall have the right, by Notice to the Defaulting Party, to designate a Day, no earlier than the Day such Notice is given and no later than 20 Days after such Notice is given, as an early termination date (the °Early Termination-:Date") for the liquidation and termination pursuant to Section 1.0:3.1 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' erminated under; applicable law:.("Excluded Transactions'`.), which .Excluded Transactions must besliquidated and terminated as soon thereafter as is legally permissible, and upon termination shall be a Terminated Transaction and be valued cohsistent with Section 10.3.1 pelow. With respect fo each Excluded Transaction,sits actual termination date shall be the Earl Termination Date for ur oses of Section 10.3.1, . The parties have selected either "Early Termination Damages Apply" or "Early Termination Damages Do Not; Apply" as indicated on the Base:Contract. ' Earl Termination Dama es A 10.3.1. As of the, Early Termination Date, the Noq-Defaulting Party shall determine, in good faith and in a commercially reasonable manner (i) the amount .owed (whether or riot then due) by each party with respect to aIl:Gas delivered and received between the parties under Terminated Transactions grid Excluded Transactions on and before the Early Termination Date, and all other applicable charges relating to such deliveries and>receipts (including without limitation any amounts owed under Section 3.2), for which payment has 'not yet been made bythe party hat owes such ;payment under this Contract and,(ii) the Market Value, as defined below, of each Terminated Transaction. The Noh-Defaulting Party shall (x) liquidate and accelerate each :Terminated Transaction at its Market;Value, so that=each amount equal. to the difference between-such Market Value and the Contract Value, as defined below, of such Terminated Transaction(s) shall be due to the Buyer underthe Terminated Transaction(s) if `such Market Value exceeds the Contract Value and o the Seller if the :apposite is the case; and (y) where appropriate, discount each amount then due under clause (x) above to present value in a commercially reasonable mariher as of the Early Termination Qate (to take account;of the period between the date. of liquidation and the date on 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 he amount of Gas remaining to be delivered orpurchased under a ransaction multiplied by the market price fora imilar transaction at the Delivery Point determined by the Non=Defaulting Party in a'commercially-reasonable manner.. To ascertain the.Market Value, the Non.-.Defaulting Party may,consider among other valuatiohs; any or all of;tte settlement prices of NYMEX Gas'fiatures,contracts,-quotations from leading dealers in-energy swap contracts or physical gas trading markets, similar sales or purchases and any other bona fide third-party offers, all adjusted for the length of the term and differences in transportation costs. A party shall not be required to enter into a replacement transaction(s) in order fo determine the Market Value. Any extension(s) of the term of a transaction to which parties are not bound as of the Early Termination Date includin but not limited to "ever reen rovisions" shall not be considered in determinin Contract Values -and Copyright ©2006 North American Energy Standards Board, Ina NAESB Standard 6.3.1 All Rights Reserved Page 8 of 13 September 5, 2006 Market Values. For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction shall be considered in determining Contract °Values and Market Values. The rate of interest used in calculating net resent value shall be determined b the Non-Defaultin Part in a commercial) reasonable manner. Earl Termination Dama es Do Not A I 10.3.1. As of the Early Termination Date, the Non-Defaulting Party shall determine, in good faith and in a commercially reasonable manner, 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 deliveries and receipts (including without limitation any amounts owed under Section 3.2), for which a ment has not et been made b the art that owes such a ment under this Contract. The parties have selected either "Other Agreement Setoffs Apply" or "Other Agreement Setoffs Do -Not Apply" as indicated on the Base Contract. Other A reement Setoffs A I Bilateral Setoff Option: 10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section.10.3.1, so that all°such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized to setoff an.y`Net Settlement-Amount against (i) any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Cpfatract; and (ii) any amount(s) (including any excess cash margin or excess cash collateral) owed or held by the patty that is entitled to the Net Settlement Amount under any other agreement or arrangement between the parties. Triangular Setoff Option: .10.3.2. The Non-Defaulting Party shalt net or aggregate, as appropriate, any and all. amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other {the."Net Settlement Am.punt"). At its sole.. option, and without,prior Notice to the Defaulting Party,-,the Non-Defaulting Party is hereby authorized to setoff (i) any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obligation relating to `the Contract; (ii) any Net Settlement Amount. against any amount(s) (including ahy excess cash margin or excess cash collateral) owed by or to ,a party under any. other agreement or arrangement between the. parties; (iii) any Net Settlement Amount owed to the-Non-Defaulting Patty against any amount(s). (including any excess-cash margin or excess cash collateral) owed by the Non-Defaulting Party or its Affiliates to the Defaulting Party under any other .agreement or arrangement; (iv) any Net Settlement'Amount owed to the Defaulting Party against-any amount(s) (including any excess cash margin. or excess cash collateral) owed by the Defaulting Party to the Non-Defaulting Party or its Affiliates under any other agreemenfi or arrangement; and/or (v) .gray Net Settlement Amount owed to the Defaulting Party against any amount(s) .(including any excess cash margin or excess cash collateral) owed by the Defaulting Party or its Affiliates to the`Noh=Defaulting Party under an other a reement o~ arran ement: Other A reement Setoffs Do Not A '1 : 10.3.2, The Non-Defaulting Party shall net or aggregate, as appropriate, any and all. amounts owing between. the parties under Section,10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by ohe party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party may setoff any Net Settlement Amouht against any margin or-other collateral held by a party in connection with;any Credit Support Obli anon relatin ;to the Contract. 10.3.3. If :.any obligation that is to be included in any netting, aggregation or setoff pursGarit.to Section, .10.3:2 is unascertained; the Non-Defaulting Party may in good faith estimate that obligation and net, aggregate or setoff, as applicable, in respect of the estimate; object to the Non-Defaulting Party accounting to the Defaulting Party when the obligation is ascertained. Any amount noY hen due which is included. in any netting; aggregatioh or setoff pursuant to Section 10.3.2-ahall be discounted to net present value in a commercially reasonable mannerdetermined 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 the'.Net Settlement 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 Ne# Settlement Amount as well as any setoffs applied against such amount :pursuant to Section 103.2,.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 uhpaid.portion of the Net Settlement Amount as adjusted by setoffs, shall accrue from the :date due until the date of payment at a rate equal d the lower of (i) the then-effective,prime rate of interest published under. "Money Rates" by The Wall Street Journal, plus two: percent per anhum. 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 Buyek' 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 to arising from the Contract. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 13 September 5, 2006 10.7. With respect to this Section 10, 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 MAJEURE 11.1. Except with regard to a party'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 Section 11.2. 11.2. Force Majeure shall include, but not be limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms orstorm warnings, 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 region, such as low temperatures which cause freezing or' failure of wells or lines of pipe; (iii) interruption and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances,,.cots, sabotage, insurrections or wars, or acts of terror; and (V) governmental actions such as necessity for compliance with-any court order, law, statute, ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a - Force Majeure and to7esolve the event or occurrence once it has occurred irti-order to resume performance.. 11.3. Neither party shall~be entitled to the: benefit of the provisions of Force Majeure to the extent performance is affected by . any or all of the following circumstances: (i) the'curtailment of interruptible or secondary Firm transportation unless primary, in-path, Firm transportation is also curtailed;. (ii) the party, claiming excuse failed to remedy the condition .and to resume the performance of such covenants or obligations with reasonable-dispatch; or (iii) economic hardship, to include, without limitation, Seller's ability to sell Gas at a higher or more advantageous price than the Contract Price, Buyer's ability to purchase Gas of a lower or more advantageous price than the Contract Price, or a regulatory agency disallowing, in whole or in part, the pass through of costs resulting from this Contract; (iv) the loss of Buyer's market(s) or;Buyer's inability to use or resell Gas purchased hereunder, except, in either case, as provided in Section 11.2; or (v) the lossorfailure of Seller's gas supply or depletion of reserves, except, in either case, as provided in Section..1.1:2. The party claiming Force Majeure shall not be excused from its. responsibility #or.lmbalance Charges. 11.4. Notwithstanding anything to the contrary herein, the parties agree that the settlement of sfrikes, lockouts or-other industrial t9sturbances shall be within he sole discretion of the party experiencing such disturbance. 11.5. The party whose performance is prevented by Force Majeure must provide Notice to the other party. Initial Notice may be given orally; however, written Notice with reasonably full.. particulars of: he event or occurrence is required as soon as reasonably possible. Upon providing. written Notice of Force Majeure to the other party, the affected party will be relieved of its obligation, -from the onsebof the Force Majeure event, to make or accept delivery of Gas, as applicable, to the extent and for the duration of Force Majeure, and neither parry shall be deemed to have failed in such. obligations tothe-:other during such occurrence or event: 11.6, Notwithstanding Sections 1.1.2 and 11.3; the parties may ag"ree to alternative Force Majeure;provisions in a'Transaction Confirmation executed in writing by both parties. SECTION 12. TERM -This Contract may be terminated on 30 Day's written Notice, but shalt remain in effect until the expiration of the latest Delivery Period of any transaction(s). The rights of either party pursuant to Section 7.6, Section 10, Section 13, the obligations'to;makc payment hereunder, and the obligation of either party to indemnify the other, pursuant hereto shall survive the termination of the Base Gohtract or any transaction.. $ECTLON 13. LLMITATIONS FOR BREACH OF ANY PROVISION FOR WHICH AN:EXPRESS REMEDY OR MEASURE OF DAMAGES:IS PROVIDED, SUCH. EXPRESS REMEDY OR :MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVEREMEDY. A PARTY'$ LIABILITY HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT AW 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 $USINESS 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 1MTHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OE ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR AOTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSS{BLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE. REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR.LOSS. Copyright ©2006 North American Energy Standards Board, .Inc. NAESB Standard 6.3.1 All Rights Reserved Page 10 of 13 September 5, 2006 SECTION 14. MARKET DISRUPTION If a Market Disruption Event has occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price for the Floating Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected Day then the replacement price for the Floating Price shall be determined within the next two following Business Days with each party obtaining, in good faith and from non- . affiliated market participants in the relevant market, two quotes for prices of Gas for the affected Day of a similar quality and quantity in-the geographical location closest in proximity to the Delivery Point and averaging the four quotes. If either party fails to provide two quotes then the average of the other party's two quotes shall determine the replacement price for the Floating Price. "Floating Price" .means the price or a factor of the price agreed to in the transaction as being based upon a specified index. "Market Disruption Event" means; with-respect to an index specified for a transaction, any of the following events: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of trading to commence or the permanent discontinuation or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (e) both parties agree that a material change in the formula for or the method. of determining the Floating Price has occurred. For the purposes of the calcralation of a replacement price for the Floating-Price, all numbers shall be rounded to three decimal places. If the fourth decimal number. is five or greater, then the third decimal number shall be increased by one and if the fourth decimal number is less than five, then th.e third decimal number shall remain unchanged. SECTION 15. MlscEU_ArvEOUs 15.1. This Contract shall be binding upon and 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 whol2 or in part, will be made without the prior written consent of the non-assigning party (and shall not relieve the assigning .party from liability hereunder), which consent will not be unreasonably withheld or delayed; provided,. either. party may (i) transfer, sell; pledge, encumber, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with. any financing or other financial arrangements, or (ii) transfer its interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any such assignment, transfer and assumption,: the transferor shall: remain principally liable for and shall not be relieved of or discharged from any obligations hereunder. 15.2. 1f any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate,-void,, ormake-unenforceable.any-otherprgvision; agreement-or covenant of this Contract. " - 15.3.. No waiver of any breach of this. Contract shall be held to be a waiver of any other or subsequent breach. .15.4. This Contract sets forth all understandings 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 be amended only by a writing executed byboth parties. 15.5. The interpretation and performance of this Contract shall be governed by the caws of the jurisdiction as indicated on lte Base Contract, excluding, however, any conflict of laws rule which would apply the )aw of another,jurisdiction. 15.6.. This Contract and all provisions herein will be subjectto all applicable and valid statutes, rules, orders and regulations of any governmental authority fiaving jurisdiction:over the parties, their facilities,>or Gas supply, this Contract or transaction or any provisions thereof. 15.T. There is no third party beneficiary to this Contract; 15.8.... Each early o this Contract represents and warrants"that it has full and complete authority to enter into and perform this Contract. Each person who executes this Contract on behalf of either parry represents and wan'antsthat it has full and complete authority to do sound that such party will be bound hereby. 15:9. The headings and subheadings contained in this Contract are used solely for convenience antl do not constitute a part of this Contract between the parties and shall not be. used to construe or interpret the provisions, of this Contract. 15.10. Unless the parties have elected on the Base.Contract not to make this Section 15.10 applicable to this Contract, neither parry shall disclose directly or indirectly without the prior written consent of the other party the terms of any transaction to a third party (other -than the :employees, lenders,. royalty owners, counsel, accountants and. other agents of he party, or prospective purchasers: of all or substantially all of a.party's assets or;of any rights under-.this Contract, provided such persons shall haveagreed to keep such terms confitlential) except (i) in;order to comply with any applicable aw, order, regulation, or exchange rule, (ri) to he extent necessary for the enforcement of this Contract , (iii) to the extent necessary to implement any transaction,(iv) to the extent necessary to comply with a regulatory agency's reporting requirements including but not limited to gas cost recovery proceedings; or (v).to the extent such:in,formation is delivered 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 it is aware which may: result in disclosure. of the terms of any transaction (other than as permitted hereunder) and use reasonable efforts to prevent or limit the disclosure. The existence of this Contract. is not subject to this confidentiality obligatioli. Subject to Section 13, the parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidential.ry obligation. ' l`he terms of any transaction hereunder'shall be-kept.confidential by the parties hereto for one year from-the expiration. of the transaction. In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclosure, Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 Alf Rights Reserved Page 11 of 13 September 5, 2006 and shall cooperate (consistent with the disclosing party's legal obligations) with the other party's efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party. 15.11. -The parties may agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties ` 15.12. Any original executed Base Contract, Transaction Confirmation or other related document may be digitally copied, photocopied, or stored on computer tapes and disks (the "Imaged Agreement"). The Imaged Agreement, if introduced as evidence on paper, the Transaction Confirmation, if introduced as evidence in automated facsimile form, the recording, if introduced as evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings will be admissible as between the parties to the same extent and under the.' same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the recording, the Transaction Confirmation, or the Imaged Agreement on the basis that such were. not originated or maintained in documentary form. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence. DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more defintte 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 ANYAND 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. Note: Page 13 of 13; the pro forma Transaction Confirmation, is not included with this base contract. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 12 of 13 September 5, 2006 TRANSACTION CONFIRMATION EXHIBIT A FOR IMMEDIATE DELIVERY Date: April 7, 2009 This Transaction Confirmation is subject to the final Base Contract between Seller and Buyer dated Mav 1.2009. The terms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract. SELLER: City of Vernon BUYER: Sacramento Municipal Utility District Attn: Donal O'Callaghan Attn: Barry Bruhelle Phone: 323-583-8811 Phone: 916-732=6523 Fax:' 323-826-1425 Fax: 916-732-6854 • Contract Price: For each month of delivery, the average price posting from Natural Gas Intelligence (NGq Bidweek Survey for deliveries to "Southern Border, PG.&E," minus twenty-five cents ($0.25) per MMBtu. Delivery Period: Begin: May 1, 2009. End: May 31, 2021 Pertormance Obligation and Contract Quantity is Firm Fixed Quantities: Per the Supply Schedule attached hereto as Exhibit B showing monthly quantities up to 15,300 MMBtu per day, subject to Special Condition 3, below. Delivery Point: PG&E - Topock Special Conditions: 1. By execution of this Transaction Confirmation, Buyer makes the certifications, representations and agreements contained in the Qualified Use Certificate attached hereto as Exhibit C. 2. Notwithstanding that the Cover Sheet reflects at Section 10.3.1 that "Early Termination Damages Apply," the parties hereby agree for this transaction that "Early Termination Damages Do Not Apply." 3. Seller shall have the recurring unilateral right to reduce Firm Fixed Quantities in Exhibit B up to 1,800 MMBtu per day by providing Buyer 60-day written notice. Seller may exercise this right at any time during the term hereof. Seller: City of Vernon Buyer: Sacramento Municipal. Utility District By: Donal O'Callaghan BY~ Title: Director of Light and Power Title:. Date: Date: Exhibit B to the Transaction Confirmation between City of Vernon and Sacramento Municipal Utility District dated April 7, 2009 Units are MMBtu Firm Fixed Firm Fixed Firm Fixed Firm Fixed Month quantities Month Quantities Month Quantities Month Quantities May-09 421,000 Aug-12 474,000 Nov-15 410,000 Feb-19 381,000 Jun-09 417,000. Sep-12 443,000 Dec-15 435,000 Mar-19 421,000 Jul-09 474,000 Oct-12 435,000 Jan-16 421,000 Apr-19 417,000 Aug-09 462,000 Nov-12 417,000 Feb-16 399,000 May-19 435,000 Sep-09 455,000 .Dec-12 421,000 Mar-16 435,000 Jun-19 403,000 Oct-09 428,000 Jan-13 435,000 Apr-16 410,000 Jul-19 474,000 Nov-09 410,000 Feb-13 381,000 May-16 428,000 Aug-19 468,000 Dec-09 435,000 Mar-13 421,000 Jun-16 417,000 Sep-19 449,000 Jan-10 421,000 Apr-13 417,000 Jul-16 462,000 Oct-19 435,000 Feb-10 381,000 May-13 435,000 Aug-16 47.4,000 Nov-19. 410,000 Mar-10 435,000 Jun-13 403,000 Sep-16 455,000 Dec-19 428,000 Apr-10 417,000 Jul-13 474,000 Oct-16 421,000 Jan-20 435,000 May-10 421,000 Aug-13 468,000 Nov-16 417,000 Feb-20 392,000 Jun-10 417,000 Sep-13 449,000 Dec-16 428,000 Mar-20 428,000 Jul-10 468,000 Oct-13 435,000 Jan-17 428,000 Apr-20 417,000 Aug-10 468,000 Nov-13 410,000 Feb-17 381,000 May-20 421,000 Sep-10 455,000 Dec-13 428,000 Mar-17 435,000 Jun-20 417,000 Oct-10 421,000 Jan-14 435,000 .Apr-17 403,000 Jul-20 474,000 Nov-10 417,000 Feb-14 381,000 May-17 435,000 Aug-20 462,000 Dec-10 435,000 Mar-14 421,000 Jun-17 417,000 Sep-20 455,000 Jan-11 421,000 Apr-14 417,000 Jul-17 462,000 .Oct-20 428,000 Feb-11 381,000 May-14 428,000 Aug-17 474,000 Nov-20 410,000 .Mar-11 435;000 Jun-14 410,000 Sep-17 449,000 Dec-20 435,000 Apr-11 410,000 Jul-14 474;000 Oct-17 428,000 Jan-21 421,000 May-11 428;000 Aug-14 462,000 Nov-17 417,000 Feb-21 381,000 Jun-11 417,000 Sep-14 455,000 Dec-17 421,000 Mar-21 435,000 Jul-11 462,000 Oct-14 435,000 Jan-18 435,000 Apr-21 417,000 Aug-11 474,000 Nov-14 .403,000 Feb-18 381,000 May-21 294,000 Sep-11 455,000 Dec-14 435,000 Mar-18 428,000 Oct-11 421,000 Jan-15 428,000 .Apr-18 410,000 Nov-11 417;000 Feb-15 381,000 May-18 435,000 Dec-11 428,000 Mar-15 428,000 Jun-18 .410,000 Jan-12 428,000 Apr-15 417,000 Jul-18 468,000 Feb-12 399,000 May-15 421,000 Aug-18 474,000 SMUD Initials Mar-12 428,000 Jun-15 417,000 Sep-18 443,000 Apr-12 410,000 Jul-15 474,000 Oct-18 435,000 May-12 435,000 Aug-15 462,000 Nov-18 417,000 Vernon Initials Jun-12 410,000 Sep-15 455,000 Dec-18 421,000 Jul-12 468,000 Oct-15 428,000 Jan-19 435,000 EXHIBIT C TO THE TRANSACTION CONFIRMATION BETWEEN CITY OF VERNON AND SACRAMENTO MUNICIPAL UTILITY DISTRICT DATED APRIL 7, 2009: QUALIFYING USE CERTIFICATE In connection -with the purchase of gas (the "Gas") by Buyer (capitalized terms used in this Certificate and not otherwise defined shall have the meanings given such terms in the Transaction Confirmation (the "Confirmation") of which this Certificate is a part) from Seller pursuant to the Confirmation, Buyer certifies, represents and agrees as follows: (a) Tax-Exempt Bonds. Buyer understands that the Gas relates to tax- exempt bonds issued on behalf of Seller to prepay for the Gas. (b) General Requirements. Except as described below, (i) none of the Gas -will be used in any Private Business Use and (ii) all of the Gas will be used for a Qualifying Use. The Buyer is a utility. that is owned by a state or local .governmental unit or a political sub-division or instrumentality thereof (a "Governmental Person"). (e) Qualifying Use. For purposes of this Certificate, Qualifying Use means gas to be: (A) furnished to Retail Gas Customers of the Buyer who are located in the gas Service Area of the Buyer; (B) used by the Buyer to produce electricity that will be furnished to Retail Electric Customers of the Buyer who are located. in the electricity Service Area of .the Buyer; (C) used by the Buyer to produce electricity that will be sold to a utility that is .owned by another Governmental Person and furnished to Retail Electric Customers of that utility who are located in the electricity Service Area of that utility and in a manner that does not give rise to Private Business Use; or (D) used to fuel thepipeline transportation of the Gas. (d) Service Area. For purposes of this Certificate, the Service Area of a utility owned by a Governmental Person consists of: OHS West:260609536.2 (i) Any area throughout which the utility provided, at all times during the 5-year period ending on June 27, 2006: (A) in the case of a natural gas utility, natural. gas transmission. or distribution. service; and (B) in the case of an electric utility, electricity distribution service; and (ii) Any area recognized as the service area of the utility under state or Federal law: (e) Retail .Gas Customer. For purposes of this Certificate, a Retail Gas Customer is a customer that purchases gas other than for resale. (f) Retail Electric Customer.. For purposes of this Certificate, a Retail Electric Customer is a customer that purchases electricity other than for resale. (g) Private Business Use. Gas shall be treated as used for a Private Business Use if such, Gras. (or electricity produced with such Gas) is sold to persons other than Governmental Persons or to Retail Gas Customers or Retail Electric Customers on a basis • other than rates that are generally applicable and uniformly applied. (h) .Additional information. Buyer agrees to furnish any information that may reasonably be requested by Seller or any governmental. agency to substantiate the accuracy of the foregoing certifications and representations. OHS West:260609536.2 EXHIBIT B ~ ~ , Shell Energy North America (iJ5), L.P. TRANSACTION CONFIRMATION Date: Apri19, 2009 City of Vernon, California Contract ID Donal O'Callaghan rade Date: Director of Li t and Power gh p`ea1 No.. 4305 South Santa Fe Avenue Vernon, CA 90058 ;r;=> Vernon Document Control Fax: (323) 826-1425 - .This Confirmation ("Confirmation") shall confirm and effectuate ~3~ agreement between Shell orgy North America (US) L.P. r~ ("Exchange Agent") -and The City of Vernon, California ("Owner ' ~ ~ arding the exchange of eider the terms set forth below, and subject to the terms and conditions of the Base Contract for Sale aii'rl ~:~r~lrrse ofN~}ural Gas by air~;~b~tween Vernon and Shell .Energy dated May 1, 2008 ("Contract"). rrt ' . :1 , I. Term ' 1•;:. This Confirmation shall be effective on May 1, 2009 ~h~~ugh'~~r~ 1, 2009, c3 shall continue month to month thereafter unless terminated by either party upon 30 days prior written notice; ~r a mitilt~l~1 ~Qreed ur`fm ~crmination date. ("Term"). ~t r:. II. ~ Performance Obligation an~C~ntrai~~ uantity: f 1' t Owner shall notify Exchange Ageni;;~pn ~~r before ~A p.m. Paci~ti~ I~revailing Time on the fifth Business Day prior to the applicable Month of delivery of the amount of to be e~,{~nged at the D,~,l~very Points stated below (the Daily Contract Quantity). In the event that Owner fails ~p,,~~~1~ Exchan~~ Awgettt ~'kryitli~~i<tl~t,time fi~R~, the Daily Contract Quantity to be exchanged shall be as set forth on the attachet~.~,~dt>~ X11 ~ ~~l unit ~ tih,iil bt ~i~ livered in ra~~~ quantities consistent with industry standards. , {4Y.5 III. Delivery Poini: Owner, or Owners agent, s~~>l deliver and E~y~ige Age'~~hall receive the Daily Contract Quantity at the Southern California Gas Company interconnection at~lt~enburg, Califoi±i~`l~. Exchange. Agent shall deliver, andrJ(,~wner, ur d~signee'of Owner, shall receive the Daily Contract Quantity at the Pacific Gas & Electric Company interconnection at` `Ci ~c~ck. ,~rizona. N. Contract Price: The Contract Price shall be a settlement payment to be determined each month and made to either Exchange Agent or Owner as based on the- following formula: Contract Price ($/MMBtu) _ (NGI, PG&E Southern Border -NGI, SoCalGas Average) + $0.025 Payment =Contract Price x Daily Contract Quantity If the result is positive: Payment by Owner to Exchange Agent Tf the result is negative: Payment by Exchange Agent to Owner 1 i Notes "NGI" means the price published in Natural Gas Intelligence, Bidweek Averages for the applicable month of delivery at the specified Delivery Points. V. Special Conditions Notwithstanding any conflicting provisions of the Base Contract, this Transaction Cpnfirmation is for exchange only of Gas between Seller (Owner) and Buyer (Exchange Agent). Exchange Agent shall have title x~;;~'d. control of Gas only during. the simultaneous receipt and redelivery ofgas at the Delivery Points herein. f J ~JL i SHELL ENERGY NORTH AMERICA (US), L.P. CITYaOh'IRNO~,`~;',ALIFORNIA .:r. t~.y, F J;},,,, ai rrJ. '~1 i ~4ik 44 t ti i l.. 51J J jl J'~ -NAME: Pat Butler NAlVI`~,~,a".... , .•:13" TITLE: Contracts Manager :r. ~ TITLE: 1 4RJ~:.. t f DATE: J ! - ti'il, i ~ii i. ,,t !J 511:. r..- Sl J ~ . Y~ 4_ _ - ~~y, ! - - .:'l :.1. Base Contract for Sale and Purchase. of Natural Gas .This Base Contract is entered into as of the following date: May 1; 2009 The parties to this Base Contract are the following: PARTY A PARTY NAME PARTY B Cit of Vernon Sacramento Municipal Utili District 6301 S Street 4305 S. Santa Fe Avenue ADDRESS P.O. Box 15830 Vernon, CA 90048. Sacramento, CA 95852-1830 vuww.cityofvernon.ory BUSINESS WEBSITE vvvuw.smud.org CONTRACT NUMBER 060883022 D-U-N-S®NUMBER 009235342 US FEDERAL: 95-6000808 ? US FEDERAL: 94-6001157 TAX ID NUMBERS ? OTHER: JURISDICTION OF CahfOrrlla ORGANIZATION California ? Corporation ? LLC a Chartered City and Municipal Corporation of the ? Limited Partnership ? Partnership State of California COMPANY TYPE ? LLP ? Other: a Municipal Utility District organized under the laws of the State of California GUARANTOR IF APPLICABLE CONTACT INFORMATION ATTN:. DonafO'Callaohan ATTN: Kevin Hart • COMMERCIAL. TEL#: 323-583-8811 FAX#: 323-826-1425' TEL#: 916-732-7048 FAX#: 916-732-6436 EMAIL: docallaohanC~ci.vernonca.us EMAII: khan@smud.org ATTN:. Same. as above SCHEDULING ATTN: Jay Glaubitz TEL#: FAX#: TEL#: :916-732.6206 FAX# 916-732-6436 EMAIL: EMAIL: J laubi smud,or ATTN: Same as above CONTRACT AND ATTN: Barry Brunelle LEGAL NOTICES TEL#; FAX#: TEL#: 916-732.6523` FAX#: 916-732.6854 EMAILr EMAIL: bbrunel smud.or . ATTN: Same as above ~ CREDIT ATTN: Mark Oosterman TEL#: FAX#: TEL#: 916-732-5675 FAX#: `916-732.6A36 EMAII: EMAII: monster smud.or ATTN; Same as above TRANSACTION ATTN: ,Energy Settlements CONFIRMATIONS TEk#: 916.732-6847 FAX#: 916.732=5554 TEL#: FAX#: EMAIL: EMAIL: tlischb@smud.org ACCOUNTING INFORMATION ATTN: Same as above INVOICES ATTN: .Energy Settlements • PAYMENTS - TEL#: 916.732-6847 FAX#: '916-73?•5554 TEL#r FAX#: SETTLEMENTS EMAIL; tflschb@smud.org EMAIL; -BANK: The Bank of New York Mellon ABA: 021.000018 ACCT: GLA 111-565 BANK: Bank ofAmerica FC: TAS A/C 800457 WIRE TRANSFER TAS AIC NAME:- Vernon ESC '06 Citi Gas Account NUMBERS ABA: 1210-0035-8 ACCT:. 01488-80182 ATTN: Aurora Quiazon 213-630-6236 (IF APPLICABLE) OTHER DETAILS: Sacramento Main Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved September 5, 2006 Base Contract for Sale and Purchase of Natural Gas (Continued) 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 the appropriate box(es) from each section: Section 1.2 ? Oral (default) Section 10.2 / No Additional Events of Default (default) Transaction OR Additional Procedure Written Events of ? Indebtedness Cross Default Default ? Party A; Section 2.7 ? 2 Business Days after receipt (default) Confirm Deadline OR ? Party B: ' 5 Business Days after receipt ? Transactional Cross Default Specified Transactions: Section 2.8 ? Seller (default) Confirming Party OR ? Buyer City of Vernon Section 3.2 ~ Cover Standard,(default) Section 10.3.1 ~ Early Termination Damages Apply (default) Performance OR Early Obligation ? Spot Price Standard Termination OR Damages ? Early Termination Damages Do Not Apply Note: The following Spof Price Publication applies to both of the immediate) recedin Section 10.3.2 ? Other Agreement Setoffs-Apply (default)- Other Section 2.31 ~ Gas Daily Midpoint (default) Agreement ~ Bilateral (default) Spot Price Setoffs Triangular Publication OR ? Other Agreement Setoffs Do Not Apply Section 6 ~ Buyer Pays At and After Delivery Point (default) Taxes. OR SellerPaysBefore and At Delivery Point Section 7.2 ~ 25`h Day of Month following Morith of delivery .Section 15.5 California Payment Date (default) Choice Of Law OR ? Da of Month followin Month of delive Section 7.2 ~ Wire transfer (default) Section 15.10 ~ Confidentiality applies (default) Method of Payment rr Automated Clearinghouse Credit (ACH) Confidentiality OR ? Cheek ? Confidentiality does not apply Section 7.7 ~ Netting applies (default) Netting OR Nettin does. not a L Special Provisions Number of sheets attached: NOtle ? Addendum(s); NOne IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. Cit of Vernon FARTYNAME Sacramento Munici _al Utility District ~ SIGNATURE ~ Donal O'Callaghan PRINTED NAME B~ (tIQY ~ i~t I?f,.~~L Director•of L'ght and Po r nr~e S'U Pp R 1! rSv CZ ~ ft S S ~l I~I° ~ ATTEST• ~ d~ p~c~+ntt; st~~NnGt"s r2 • Manuela 'r n, City Clerk ~~rlf~Gy `~V:~arnrC X c~ y~r~,n~~s~ Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard.6.3.1 All Rights Reserved Page 2 of 13 September 5, 2006 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 iritended 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 arties shall be the Contract as defined in Section 2.9. The parties have selected either the "Oral Transaction 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 or telephone conversation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally bound from the time they so agree to transaction terms and may each rely thereon. Any such transaction shall be considered a "writing" and 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 Confirmation as the identification and authentication of Confirming' Party. If the Transaction Confirmation contains any provisions other than those relating to the commercial terms of the transaction (i.e., price, quantity, performance obligation, delivery point, period of delivery and/or transportation conditions), which modify or supplement the Base Contract or General Terms and Conditions of this Contract (e.g,, arbitration or additional representations and warranties), such provisions shall not be deemed to be accepted pursuant to Section 1.3 'but must be expressly agreed to by both.. parties; provided that the foregoing shall not invalidate an ransaction a reed to b the arties. Written Transaction Procedure: 1.2. The parties will use the following Transaction Confirmation procedure, Should he parties come to an agreement regarding a Gas purchase and sale transaction for a particular Qelivery Period, the Confirming Party shall, ahd the other party may, record- that agreement on a Transaction Confirmation and communicate such Transaction Confirmation by facsimile, EDI or mutually. agreeable electronic. means, to the other party by the close of the Business Qay following the date of agreement. The parties .acknowledge that their agreement will not be binding until the exchange of nohconflicting Transaction Confirmations or the assa e of the Confirm Deadline without ob'ection from the receivin art , as rovided in Section 1.3. 1.3. If a sending party's Transaction Confirmation is materially different from the receiving party's understanding of the agreement referred to in Section 1.2, such receiving party shall notify 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 party. The failure of the ' receiving party to so notify the sending party in writing by the Confirm Deadline constitutes the receiving party's agreement to the terms of the transaction described in the sending party's Transaction Confirmation. If there are any material differences between timely. sent Transaction Confirmations governing the same transaction, then neither Transaction Confirmation shall be binding until or unless such differences are resolved including the use of any evidence that clearly resolves the differences in the Transaction Confirmations. In the event of a conflict among the terms of (i) a binding Transaction Confirmation pursuant to Section 1.2, (ii) the oral agreement of the parties which may be evidenced by a recorded conversation, where the parties have selected the Oral Transaction Procedure of the Base Contract, (iii) the Base Contract, and {iv) these General Terms and Conditions, the tenrrs of the documents shall govern in the priority listed in this sentence. 1.4. The parties agree that each party may electronically record all telephone conversations with respect to this Contract between their respective employees, without any special or further notice to the other party. Each party shall obtain any necessary consent of its agents and employees to such recording. Where the parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, the parties agree not to contest the validity or enforceability of telephonic recordings entered into in accordance with the requirements of this Base Contract. SECTION 2. DEFINITIONS 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. "Additional Event of Default" shall mean Transactional Cross. Default or Indebtedness Gross Default, each as and if selected by the parties pursuant to the Base Contract: 2.2. "Affiliate" shall mean, in relation to any person, any entity controlled, directly or indirectly, by he person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of at least 50 percent of the voting power of the entity or person, Copyright ©2006 North American Energy Standards Board, Ina NAESB Standard 6,3.1 All Rights Reserved Page 3 of 13 September 5, 2006 2.3. "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. 2.4. "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. 2.5. "British thermal unit" or "Btu" shall mean the International-BTU, which is also called-the Btu (IT). 2.6. "Business Day(s)" shall mean Monday through Friday, excluding Federal Banking Holidays for transactions in the U.S. 2.7. "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. 2.8. "Confirming Party".shall mean the parry designated in the Base Contract to prepare and forward Transaction Confirmations to the other party. 2.9. "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 entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties. 2.10. "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 toby the parties in a transaction, 2.11. "Contract Quantity" shall mean the quantity of Gas to be delivered and taken as agreed to by the parties in a transaction. 2.12. "Cover Standard", as referred to,n 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 performing 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 reasonable for the delivery or production area, as applicable, consistent with: the amount of notice provided by the nonperforming party; the immediacy of the Buyer's Gas consumption needs or Seller's Gas sales requirements, as applicable; the quantities involved; and the anticipated length of failure by the nonperfon~ing party. 2.13. "Credit Support Obligation(s)" shall mean any obligation(s) to provide or establish credit support for, or on behalf of, a party to this Contract such as cash, an irrevocable standby letter of credit, a margin agreement, a prepayment, a security interest in an asset, guaranty, or other good and sufficient security. of a continuing nature. 2.14. "Day" shall mean a period of 24 consecutive hours, coextensive with a "day" as defined by the Receiving Transporter in a particular transaction. 2.15.: "Delivery Period" shallbe the period during which deliveries are to be made as agreed to by the parties in a transaction. 2.16. "Delivery Point(s)" shall mean such point(s). as are agreed fo by the parties in a transaction. 2.17. "EDI" shall rnean an electronic. data interchange pursuant to an agreement entered into by the parties, specifically relating to the communication of Transaction Confirmations under this Gontract, 2.18. "EFP" shall mean the purchase, sale or exchange of natural Gas as the "physical" side of an exchange for physical transaction involving gas futures contracts. EFP shall incorporate the meaning and remedies of "Firm", provided that a party's excuse for nonperformance of its obligations to deliver or receive Gas will be governed by the rules of the relevant futures exchange regulated under the Commodity Exchange Act. 2..19. "Firm" shall mean that either party may interrupt its performance without liability only to the extent that such performance is prevented. for reasons of Force Majeure; provided, however, that during Farce Majeure interruptions, the party invoking Force Majeure may be responsible for any Imbalance Charges as set forth in Section 4,3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by the Transporter. 2.20, "Gas".shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane. 2.21: "Guarantor" shall mean any entity that has provided a guaranty of the obligations of a party hereunder. 2.22. "Imbalance Charges" shall mean any fees, penalties, costs or charges (in cash or in kind) assessed by a Transporter for failure to satisfy the Transporter's balance and/or nomination requirements. 2.23. "Indebtedness Cross Default" shall mean if selected on the Base Contract by the parties with respect to a party, that it or its Guarantor, if any, experiences a default, or similar condition or event however therein defined, under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether present or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed money in an aggregate amount greater than the threshold specified in the Base Contract with respect to such party or its Guarantor, if any, which results in such indebtedness becoming immediately due and payable. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved. Page 4 of 13 September 5, 2006 2.24. "Interruptible" shall mean that either party may interrupf its performance at any time for any .reason, whether or not caused by an event of Force Majeure, with no liability; except such interrupting party may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by Transporter. 2.25. "MMBtu" shall mean one million British thermal units, which is equivalent to one dekatherm. 2.26. "Month" shall mean the period beginning on the first Day of the calendar month and ending immediately prior, to the commencement of the first Day of the next calendar month. 2.27. "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. 2.28. "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. 2.29. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporters) for movement, transportation or management. 2.30. "Specified Transactiori(s)" shall mean any other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas, and any other transaction or agreement identified as a Specified Transaction under the Base Contract. 2.31.. "Spot Price " as referred to in Section 3.2 shall mean .the price fisted in the publication indicated on the Base Contract, under the listing applicable tothe geographic location, closest in proximity to the Delivery Paint(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 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. 2.32. "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. 2.33. "'Transactional Cross Default"'shall mean if selected on the Base Contract:by the parties with respect to a party, that it shall be in default; however therein defined, under any Specified Transaction. 2.34. "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#o receive Gas'in the case of:Buyer for a designated number of days during a period as specified on the applicable Transaction Confirmation. 2.35. "Transporter(s)" shall mean aII 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,r of the Delivery Point. pursuant to a particular transaction. SECTION 3. PERFORMANCE OBLIGATION 3.1. Seller agrees to sell and deliver, and Buyer 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 either the "Cover Standard" or the "Spot Price Standard" as indicated on the Base Contract. - Cover Standard: 3.2. -The so e and_exclusive remedy of the parties in he event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach ly Seller on any Day(s), payment by Seller to Buyer in an amount equal to the positive difference, if any, between the purchase.: price paid by Buyer utilizing the Cover Standard and the Contract Price,, adjusted for commercially. reasonable-.differences in 'transportation costs to or from the Delivery. Point(s), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s) excluding any quantity for which no replacement,is available; or (ti) in the event of a breach by 'Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the positive difference, if-any, .between the Contract Price and the .price received by Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually taken by Buyer for such Day(s) excluding any quantity for which no sale is available; and -(iii) in the event that Buyer has used commercially reasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party; and no such replacement or sale is available for all or any portion of the Contract Quantity of Gas, then in addition to (i) or (ii) above, as applicable, the sole and exclusive remedy of the performing party with respect to the Gas not replaced or sold shall be an amount equal to any unfavorable difference between the Contract Price and the Spot Price, adjusted for such transportation to the applicable Delivery Point, multiplied by the quantity of such Gas not replaced or sold. Imbalance Charges shall not be recovered under this Section 3.2, but Seller-and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party's invoice, which shall set forth the basis u on which such amount was calculated. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 13 September 5, 2006 Spot Price Standard: 3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Gontract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by .Seller and received by Buyer for such .Day(s), multiplied by the positive difference, if any, obtained by subtracting the applicable Spot Price from the Contract Price. .Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. -The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing. party`s invoice, which shall set forth the basis u on which such amount was calculated.- 3.3. Notwithstanding Section 3.2, the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by both parties. 3.4. In addition to Sections 3:2 and 3.3, the parties may provide for a Termination Option in a Transaction Confirmation executed in writing by both parties. The Transaction Confirmation containing the Termination Option will designate the length of nonperformance triggering the Termination Option and the procedures for. exercise thereof, how damages for nonperformance will be compensated, and how. liquidation 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 Transporters) 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 tharrthe Scheduled Gas, such party shall promptly rotifythe other party:' 4.3. `The parties shalt 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 incun~ed 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. QUALLTY AND MEASUREMENT All-`Gas delivered by Seller shall meet he pressure, quality and heat content requirements of the Receiving Transporter. The unit of quantity measurement for purposes of this Contract shall be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the'established procedures of the Receiving Transporter. SECTION 6. TAxEs The parties have selected either "Buyer Pays At and After Delivery Point" or "Seller Pays Before and At Delivery Point" as indicated on the Base Contract. Bu er Pa s At and After Delive 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 Delivery 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 exem tion from an such Taxes or char es-shall furnish the other art an necessa documentation thereof. Seller Pa s Before and At Delivery Point: Sellershall 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 Delivery Point(s) and- all Taxes at the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes oh or with respect to the Gas after' the Delivery Point(s). If a' party is required to remit or pay Taxes that are the other party's - responsibility hereunder, sthe party responsible for such Taxes shall promptly reimburse the other party for such Taxes. Any party>entitled to an exem tion from an such Taxes or char es shall furnish the other art an necessa documentation thereof. SECTION 7. BILLING, PAYMENT, AND AUDIT 7.1. Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for any other applicable charges, providing supporting documentation acceptable in industry practice to support the amount charged: If the actual quantity delivered is not known by the billing date, billing will be prepared based on the quantity of Scheduled Gas. The invoiced quantity will then be adjusted to the actual quantity on the following Month's billing or as soon thereafter as actual delivery information is available. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 6 of 13 September 5, 2006 7.2. Buyer shall remit the amount due under Section 7.1 in the manner specified in the Base Contract, in immediately available funds, on or before the later of the Payment Date or 10 Days after receipt of the invoice by Buyer; provided that if the Payment Date is not a Business Day, payment is due on the next Business-Day following that date. In the event any payments. are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2. 7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the nonperforming party for an accelerated payment setting forth the basis upon which the invoiced amount was calculated. Payment 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 amount of any such invoice or any part thereof, such invoiced parry will pay such amount as it concedes to be correct; .provided, however, if the invoiced party disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay.. In the event the parties are unable to resolve such dispute, either party`maypursue any remedy available at law or in equity to enforce its rights pursuant to this Section. 7.5. If the. invoiced party fails to remit the full amount payable when due, interesf on the. unpaid portion shall accrue from the date due until the 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. 7.6. A party-shall have the right, at its own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of .the relevant portion of the books, records, and telephone recordings of the other parry only to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under the Contract. This right to examine, audit, 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 shalt 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 3Q Days of Notice and substantiation of such inaccuracy. 7.7. Unless the parties have elected on the Base Contract not to make this Sectiori 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, ' SECTION 8. TIThE, 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 Points}: Buyer shall have responsibility for and assume any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s). 8.2. Seller wan~antS that it will have the right to convey and will transfer. good and merchantable title to all Gas sold hereunder and delivered by it #o Buyer, free and clear of all liens, .encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 15.8, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE DISCLAIMED. 8.3. Seller agrees to indemnify Buyer and save it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from any and all persons, arising from or out of claims oftitle, personal injury (including death) or property damage from said Gas or other chargr;s thereon which attach before title passes to Bciyer: Buyer agrees to indemnify Seller and save it harmless from all Claims, from any and all persons, arising from or out of claims regarding payment, personal injury (including death) or property damage from said Gas or other charges thereon which attach after title passes to Buyer. 8.4. The parties agree that the delivery of and the transfer of title to alt Gas under this Contract shall take place within the ' Customs Territory of the United States (as defined in general note 2 of the Harmonized Tariff Schedule of the United States 19 U.SrC., §1202, General Notes,.page 3); provided, however, that in the event Seller took title to the Gas outside the Customs Territory of the United States, Seller represents and warrants that it is the importer of record for all Gas entered and delivered into the United States, and shall be responsible for entry and entry summary filings as well as the payment of duties, taxes and fees, if any, and all applicable record keeping requirements. 8.5. 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 9.1. All Transaction Confirmations, invoices, payment instructions, 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 tirrre. 9.2. All Notices required hereunder shall be in writing and may be sent by facsimile or mutually. acceptable electronic means, a nationally recognized overnight courier service, first class mail or hand delivered. 9.3. Notice shall be given when received on a Business Day. by the addressee. In the absence of proof of the actual receipt date, the following presumptions will apply. Notices sent by facsimile shall. be deemed to have been received upon the sending party's receipt of its facsimile machine's confirmation of successful transmission. If the day on which such facsimile is received is Copyright ©..2006 North American Energy Standards Board, Inc: NAESB Standard 6.3.1 All Rights Reserved Page 7 of 13 September 5, 2006 not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall be considered delivered five Business Days after mailing. 9.4. The party receiving a commercially acceptable Notice of change in payment instructions or other payment information shall not be obligated to implement such change until ten Business Days after receipt of such Notice. SECTION 10. .FINANCIAL RESPONSIBILITY 10.1.. If either party ("X") has reasonable grounds for insecurity regarding the performance of any obligation under 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 or its Guarantor; if applicable), X may demand Adequate Assurance of Performance. "Adequate Assurance of Performance" shall mean sufficient security in the form, amount, for a term, and from an issuer, all as reasonably acceptable to X, .including, but. not limited to cash, a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty. Y hereby grants to X a continuing first priority security interest in, lien on, and right of setoff against all Adequate Assurance of Performance in the form of cash transferred byY to X pursuant to this Section 10.1. Upon the return by X to Y of~,such Adequate Assurance of Performance, the security interest and lien granted hereunder on that Adequate Assurance of Performance shall be released automatically and, to the extent possible, without any further action by either party. 10.2. In the event (each an "Event of Default") either party (the "Defaulting Party") or its Guarantor shall (i) make an assignment or any general arrangement for the benefit of creditors; (ii) file a petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (iii) otherwise become bankrupt or insolvent (however evidenced); (iv) be unable to pay its debts as they fall due; (v) have a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of its assets; (vi) fail to perform any obligation to the other party with respect to any Credit Support Obligations relating to the Contract; (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; (viii) not have paid any amount due the other party hereunder on or before the second Business Day following written Notice that such payment is due; or ix) be the affected party with respect to any-Additional Event of Default; then the other party (the "Non-Defaulting Party") shall have the right, at its -sole election, to immediately withhold and/or suspend deliveries or payments upon Notice and/or to terminate and liquidate the transactions under tha Contract, in the manner provided in Section 10.3, in addition to any and all other remedies available hereunder. 10:3. If an Event of Default has occurred and is continuing, the Non-Defaulting Party shall have the light, by Notice to the Defaulting Party, to designate a Day, no earlier than the Day such Notice is given and. no later. than 20 Days after such Notice is given, as an early termination date (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 ("Excluded Transactions"), which Excluded Transactions must be liquidated and terminated as soon thereafter as is legally permissible, 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 Earl Termination Date for ur oses of Section 10.3.1. The parties have selected either "Early Termination Damages Apply" or "Early Termination Damages Do Not Apply" as indicated on the Base Contract. .Earl. Termination Dama es Ap 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 deliveries 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 amount equal to the difference between such Market Value and the Contract Value, as defined below, of such Terminated Transaction(s) shall be due to the .Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and to the Seller if the opposite is 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 on which such amount would have otherwise been due pursuant to the relevant Terminated Transactions). For pw~poses 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 for a similar transaction at the Delivery Point determined by the Non-Defaulting Party in a commercially reasonable manner. 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 energy swap contracts or physical gas trading markets, similar sales or purchases and any other bona fide third-party offers, all adjusted for the length of the term and differences in transportation costs. A party shall not be required to enter into a replacement transaction(s) in order to determine the Market Value. -Any extension(s) of the term of a transaction to which parties are not bound as of the Early Termination Date includin but not limited to "ever reen rovisions" shall not be considered in determinin Contract Values and Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 8 of 13 September 5, 2006 Market Values. For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction shall be considered in determining Contract °Values and Market Values. The rate of interest used in calculating net resent value shall be determined b the Non-Defaultin Part in a commerciall reasonable manner. Early Termination Dama esbo Not 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, the amount owed (whether or not then due) by each party with respect #o 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 deliveries and receipts (including without limitation any amounts owed under Section 3.2), for which a ment has not et been made b the art that owes such a ment under this Contract. The parties have selected either "Other Agreement Setoffs Apply" or "Other Agreement Setoffs Do Not Apply" as indicated on the Base Contract. Other A reement Setoffs Ap Bilateral SetoffAption: 10.3.2. The Non-.Defaulting Party..-shall net or aggregate, as appropriate, any-and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice to the Defaulting. Party, the Non-Defaulting Party is hereby authorized to setoff any Net Settlemenf Amount against (i) .any. margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; and (ii) any amount(s) .(including any excess cash margin or excess cash collateral) owed or held by the party that is entitled to the Net Settlement Amount under any other agreement or arrangement between the parties.- Triangular Setoff Option: 10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At its sole option, and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized to setoff (i) any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; (ii) any Net Settlement Amount against any amount(s) (including any excess cash margin or excess cash collateral) owed by or to a party under any other agreement or arrangement between the :parties; (iii) any Net Settlement Amount owed to the Non-Defaulting Party against any amount(s) (including any excess'cash margin or excess cash .collateral) owed -by the Non-Defaulting Party or its Affiliates to the. Defaulting -Party under any other agreement or arrangement; (iv) any Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any. excess cash margin or excess cash collateral) owed by .the Defaulting Party to he Non-Defaulting Party. or its Affiliates under any other agreement or arrangement; and/or (v) 'any Net Settlement Amount owed to the Defaulting Party againsf any amount(s) (including any excess cash margin or excess cash collateral) owed by the Defaulting Party or its Affiliates to the. Non-Defaulting Party under an other a reement or arran ement. Other Agreement Setoffs Do Not Apply: 10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party may setoff any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obli ation relatin to the Contract. 10.3.3. If any obligation that is to be included in any netting, aggregation or setoff pursuant to Section 10.3.2 is 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 the Net Settlement 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 as well as any setoffs applied against such arrrount pursuant to Section 10.3.2, 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 as adjusted by setoffs, shall accrue from the date due until the date of paymentat a rate equal to the lower of (i) the then-effective prime rate of rnterestpublished under."Money Rates" by The Wall Street Journal, plus two percent pel~,annum;'or (ii) the maximum applicable lawful interesf 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 to arising from the Contract. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 13 September 5, 2006 10.7. With respect to this Section 10, if the parties have executed a separate .netting agreement with close-out netting provisions, the terms and conditions therein shall prevail Co the extent inconsistent herewith.' SECTION 11. FORCE MAJEURE 11.1. Except with regard to a party'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 failureto 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 Section 11.2. 11.2. Force Majeure shall include, -but not be limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, 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 region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption .and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances, riots; sabotage, insurrections or wars, or acts of terror; and (v) governmental actions such as necessity for compliance with .any court`order, law, statute, ordinance,: regulation; or policy having the effect of law promulgated by a governmental authority having jurisdiction.. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event'oroccurrence once it has occurred in order to resume performance. 11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by any or all of the following circumstances: (i) the curtailment of interruptible or secondary Firm transportation unless primary, in-path, Firm transportation is also curtailed; (ii) the party claiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations with reasonable dispatch; or (iii) economic hardship, to include, without limitation, Seller's ability to sell Gas at a higher or more advantageous price than the Contract Price, Buyer's ability to purchase Gas at a lower or more advantageous price than the Contract Price; or a regulatory agency disallowing, in whole or in part, .the pass through of costs resulting from this Contract; (iv) the loss of Buyer's market(s) or Buyer's inability to use or resell Gas purchased. hereunder, except, in either case, as provided in Section 11.2; or (v) the loss or failure of Seller's gas supply or depletion of reserves, except, in either case, as provided in Section 11.2. The party claiming Force Majeure shall not be excused from its responsibility for Imbalance Charges. 11'.4. Notwithstanding anything to the contrary herein, the parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the party experiencing such disturbance. 11:5. The party whose performance is prevented by Force Majeure must provide Notice to the other party. Initial Notice may be given orally; however, written Notice with reasonably full particulars of the event or occurrence is required as soon as reasonably possible. Upon providing written Notice of Force Majeure to the other party, the affected party will be relieved of its obligation, from the onset of the Force Majeure event, to make or accept delivery. of Gas, as applicable, to the extent and for the duration of Force Majeure, and neither party shall be deemed to have failed in such obligations to the other during such. occurrence or evenf. 11.6. Notwithstanding Sections 11,2-and 11.3, the parties. may. agree to alternative Force Majeure provisions in a Transaction Confirmation executed in writing by both parties. SECTION 12: TERM - This Cahtract may be terminated on 30 Day's written Notice; but shall remain in effect until the expiration of the latest Delivery Period of any transaction(s)... The rights of either party pursuant to Section 7,6, Section 10; Section 13, the. obligations to make payment hereunder, and the obligation'of either party to indemnify the other, pursuant ..hereto shall. survive the termination of the Base Contract or any transaction. SECTION 13. LIMITATIONS FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY'S LIABILITY HEREUNDER SHALL BE LIMITED AS SETFORTH 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. 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,, Copyrighf ©2006 North American. Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 10 of 13 September 5, 2006 SECTION 14. MARKET DISRUPTION If a Market Disruption Event has. occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price for the Floating Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected Day then the replacement price for the Floating Price shall be determined .within the next two ,following Business Days -with each party obtaining, in good faith and from non- . affiliated market participahts in the relevant market, two quotes for prices of Gas for the affected Day of a similar quality and quantity in the geographical location closest in proximity to the Delivery Point and averaging-the four quotes. If either party fails to provide two quotes then the average of the other. party's two quotes shall determine the replacement price for the Floating Price. "Floating Price".means the price or a factor of the price agreed to in the transaction as being based upon a specified index. "Market Disruption Eveht" means, with respect to an index specified for a transaction, any of the following events: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of #rading to commence or the permanent discontinuation or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (e) both parties agree that a material change in the formula for or the method of determining the Floating Price has occurred. For the purposes of the calculation of a replacement price for the Floating Price, all numbers shall be rounded to three decimal places. If the fourth decimal number is five or greater, then the third decimal number shall be increased by one and if the fourth decimal number is less than five, then the third decimal number shall remain unchanged. SECTION 15. MISCELLANEOUS 15.1, This Contract shall be binding upoh and 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 in part, will be made withouf the prior written consent of the non-assigning party .(and shall not relieve the assigning party from liability hereunder), which consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements, or (ii) transfer its- interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any such assignment, transfer and assumption, the transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations hereunder. 15.2. If any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any other provision, agreement or covenant of this Contract. 15.3. No waiver of any breach of this Contract shall be held to be a waiver of any other or subsequent breach. 15.4. This Contract sets forth all understandings 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 be amended only by a writing executed by both parties. 15.5. The interpretation and performance of this Contract shall be governed by the laws of the jurisdiction as indicated on the Base Contract, excluding, however, any conflict of laws rule which would apply the law of another jurisdiction. 15.6. This Contract and all provisions herein will be subject to all applicable and valid statutes, rules, orders and regulations of any governmental authority having jurisdiction over the parties, their facilities, or Gas supply, this Contract or transaction or any provisions thereof. 15.7.... There js no third party beneficiary to this Contract. 15.8. Each :parley to this Contract represents and warrants that it has full and complete authority to enter into and perform this Contract. Each person who executes this_Contract on behalf of either party represents and warrants that it has full and complete authority to do so and that such party-.will be bound thereby. _15.9. The headings and subheadings contained in this Contract are used solely for convenience and do not constitute a part of this Contract between the parties and shall not be used to construe or interpret`the provisions of this Contract. 15.10, Unless the parties have elected on the Base Contract not to make this Section 15.10 applicable to this Contract, neither party shalt disclose directly or indirectly without the prior written consent of the other party the terms of anytransaction to a third party (other than the employees, lenders, royalty owners, counsel, accountants and other agents of the party, or prospective purchasers of all or substantially all of a party's assets or of any rights under this Contract, provided such persons shall have agreed to keep such terms confidential) except (i) in order to comply with any applicable law, order, regulation, or exchange rule, (ii) to the extent necessary for the enforcement of this Contract , (iii) to the extent. necessary to implement any transaction, (iv) to the extent necessary to comply with a regulatory agency's reporting requirements including but not limited to gas cost recovery proceedings; or (v) to the extent such information is delivered to such third party for the sole purpose of calculating a published index. Each early shall notify the other party of any proceeding of which it is aware which may result in disclosure of the terms of any transaction (other than as permitted hereunder) and use reasonable efforts to prevent or limit the disclosure. The existence of this Contract is not subject to this confidentiality obligation. Subject to Section 13; the-parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidentiality obligation.- The terms of any transaction' hereunder shall be kept confidential by the parties hereto for one year from the expiration of the transaction. In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclosure, Copyright ©2006 North American Energy Standards Board, Ina NAESB Standard 6.3.1 All Rights Reserved Page 11 of 13 September 5, 2006 and shall cooperate (consistent with the disclosing party's legal obligations) with the other party's efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party.. 15.11. The parties may agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties 15.12. Any original executed Base Contract, Transaction Confirmation or other related document may be digitally copied, photocopied, or stored on computer tapes and disks (the."Imaged Agreement'), The Imaged Agreement, if introduced as evidence on paper, the Transaction Confirmation, if introduced as evidence ih automated facsimile form, the recording, if introduced as evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format; in any judicial, arbitration, mediation or administrative proceedings will be admissible as between the parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the recording, the Transaction Confirmation, or the Imaged Agreement on-the, basis that such were not originated or maintained in documentary form. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence. 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 thisContract 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. Note: Page 13 of 13, the pro forma Transaction Cohfirmation, is not included with this base contract. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 12 of 13 September 5, 2006 EXHIBIT A TRANSACTION CONFIRMATION EXHIBIT A FOR IMMEDIATE pELIVERY :'G~'~r ~ ~ ~ ~ ~ ~~s_,: Date: April 7, 2009 This Transaction Confirmation is subject to the final Base Contract between. Seller and Buyer dated May 1, 2009. The terms of this Transaction Confirmation. are binding unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract. SELLER: City of Vernon BUYER: Sacramento Municipal Utility District Attn: Donal O'Callaghan Atfn: Barry Brunelle Phone: 323-583-8811 Phone: 916-732-6523 Fax: 323-826-1425 Fax: 916-732-6854 Contract Price: For each month of delivery, the average price posting from Natural Gas Intelligence (NGI) Bidweek Survey for deliveries to "Southern Border, PG&E,"minus twenty-five cents ($0.25) per MMBtu. _ Delivery Period: Begin: May 1, 2009. End:. May 31, 2021 Performance Obligation and Contract Quantity is Firm Fixed Quantifies: Per the Supply Schedule attached hereto as Exhibit B showing monthly quantities up to 15,300 MMBtu per day, subject to Special Condition 3, belovv. Delivery Point: PG&E - Topock Special Conditions: 1. By execution of this Transaction Confirmation, Buyer makes the certifications, .representations and agreements contained in the Qualified Use Certificate attached hereto as Exhibit C. 2. Notwithstanding that the Cover Sheet reflects at Section 10.3.1 that "Early Termination Damages Apply," the parties hereby agree for this transaction that "Early Termination Damages Do Not Apply." 3, Seller shall have the recurring unilateral right to reduce Firm Fixed Quantities in Exhibit B up to 1,800 MMBtu per day by providing Buyer 60 day written notice. Seller may exercise this right at any time during the term hereof. Seller: City of Vern Buyer: mento Municipal Utility District ~ Kl3 By: Donal O'Callaghan By~ James R. Shetler Title: AGM, Energy Supply Title: Director of Light and Power Date: .Date: /~0 9 ATTEST: ~5 UELA GIRON, Cit Clerk EXHIBIT B Exhibit B to the Transaction Confirmation between City of Velrnon and Sacramento Municipal Utility District dated April 7, 2009 Units are MMBtu Firm Fixed Firm Fixed Firm Fixed Firm Fixed Month Quantities Month Quantities Month Quantities Month Quantities May-09 421,000 Aug-12 474,000. Nov-15 410,000 Feb-19 381,000 Jun-09 417,000 Sep-12 443,000 Dec-15 435,000 Mar-19 421,000 Jul-09 474,000 Oct-12 435,000 Jan-16 421,000 Apr-19 417,000 Aug-09 462,000 Nov-12 417,000 Feb-16 399,000 May-19 435,000 Sep-09 455,000 Dec-12 421,000 Mar-16 435,000 Jun-19 403,000 Oct-09 428,000 Jan-13 435,000 Apr-16 410,000 Jul-19 474,000 Nov-09 410,000 Feb-13 381,000 May-16 428,000 Aug-19 468,000 Dec-09 435,000 Mar-13 421,000 Jun-16 417,000 Sep-19 449,000 Jan-10 421,000 Apr-13 417,000 Jul-16 462,000 Oct-19 435,000 Feb-10 381,000 May-13 435,000 Aug-16 474,000 Nov-19 410,000 Mar-10 435,000 Jun-13 403,000 Sep-16 455,000 Dec-19 428,000 Apr-10 417,000 Jul-13 474,000 Oct-16 421,000 Jan-20 435,000 May-10 421,000 Aug-13 468,000 Nov-16 417,000 Feb-20 392,000 Jun-10 417,000 Sep-13 449,000 Dec-16 428,000 Mar-20 428,000 Jul-10 468,000 Oct-13 435,000 Jan-17 .428,000 Apr-20 417,000 Aug-10 468,000 Nov-13 410,000 Feb-17 381,000. May-20 421,000 Sep-10 455,000 Dec-13 42$,000 Mar-17 435,000 Jun-20 417,000 Oct-10 421,000 Jan-14 435,000 Apr-17 403,000 Jul.-20 474,000 ___Nov-10 __417,000 Feb-14 ___381,000 May-17 _ 435,000 Au_g-20 x}62,000 Dec-10 435,000 Mar-14 421,000 Jun-17 417,000 Sep-20 .455,000 Jan-11 421,000 Apr-14 417,000 Jul-17 462,000 Oct-2Q 428,000 Feb-11 381,000 May-14 428,000 Aug-17 474,000 Nov-20 410,000 Mar-11 435,000 Jun-14 410,000 Sep-17 449,000 Dec-20 435,000 Apr-11 410,000 Jul-14 474,000 Oct-17 428,000 Jan-21 421,000 May-11 428,000 Aug-14 462,000 Nov-17 417,000 Feb-21 381,000 tun-11 417,000 Sep-14 455,000 Dec-17 421,000 Mar-21 435,000 Jul-11 462,000 Oct-14 435,000 Jan-18 435,000 Apr-21 417,000 Aug-11 474,000 Nov-14 403,000 Feb-18 381,000 May-21 294,000 Sep-11 455,000 Dec-14 435,000 Mar-18 428,000 Oct-11 421,000 Jan-15 428,000 Apr-18 410,000 Nov-11 417,000 Feb-15 381,000 May-18 435,000 Dec-11 428,000 Mar-15 428,000 Jun-18 410,000 Jan-12 428,000 Apr-15 417,000 Jul-18 468,000 ~I~r, Feb-12 399,000 May-15 421,000 Aug-18 474,000 UD Initials Mar-12 428,000 Jun-15 417,000 Sep-18 443,000 Apr-12 410,000 Jul-15 474,000 .Oct-18 435,000 May-12 435,000 Aug-15 462,000 Nov-18 417,000 Vernon Initials Jun-12 410,000 Sep-15 455,000 Dec-18 421,000 Jul-12 468,000 Oct-15 428,000 Jan-19 435,000 EXHIBIT C EXHIBIT C TO THE TRANSACTION CONFIRMATION BETWEEN CITY OF VERNON AND SACRAMENTO MUNICIPAL UTILITY DISTRICT DATED APRIL 7, 2009: QUALIFYING USE CERTIFICATE In connection with the purchase of gas (the "Gas") by Buyer (capitalized terms used in this Certificate and not otherwise defined shall have the meanings given such terms in the Transaction Confirmation (the "Confirmation") of which this. Certificate is a part) from Seller pursuant to the Confirmation, Buyer certifies, represents and agrees. as follows: (a) Tax-Exempt Bonds. Buyer understands that the Gas relates to tax- exempt bonds issued on behalf of Seller to prepay for the Gas. (b) General Requirements. Except as described below, (i) none of the Gas will be used in any Private Business Use and (ii) all of the Gas will be used for a Qualifying Use. The Buyer is a utility -that is owned by a state or local governmental unit or a political sub-division or instrumentality thereof (a "Governmental Person"). (e) Qualifying Use. For purposes of this Certificate, Qualifying Use means gas to be: (A) furnished to Retail Gas Customers of the -Buyer who are located in the gas Service. Area of the Buyer; (B) used by the Buyer to produce electricity that will be furnished to Retail Electric Customers of the Buyer who are located. in the electricity Service Area of the Buyer; (C) used by the Buyer to produce electricity that will be sold to a utility that is owned by another Governmental Person and furnished to Retail Electric Customers of that utility who are located in the electricity Service -Area of that utility and in a manner that does not give. rise to Private Business Use; or (D) used to fuel the pipeline transportation of the Gas. (d) Service Area. For purposes of this Certificate, the Service Area of a utility owned by a Governmental Person consists of: OHS West260609536.2 (i) Any area throughout which the utility provided, at all times during the 5-year period ending on June 27, 2006: (A) in the case of a natural gas utility, natural gas transmission or distribution service; and (B) in the case of an electric utility, electricity distribution service; and (ii) Any area recognized as the service area of the utility under state or Federal law. (e) Retail Gas Customer. For purposes of this Certificate, a Retail Gas Customer is a customer that purchases gas other than for resale. (f) Retail Electric Customer. For purposes of this Certificate, a Retail Electric Customer is a customer that purchases electricity other than for resale. (g) Private Business Use. Gas shall be treated as used for a Private. Business Use if such Gas (or electricity produced with such Gas) is sold to persons other than Governmental Persons or to Retail Gas Customers or Retail Electric Customers an a basis other than rates that are generally applicable and uniformly applied. (h) Additional information. Buyer agrees to furnish any information that may reasonably be requested by Seller or any governmental agency to substantiate the accuracy of the foregoing certifications and representations, OHS West:260609536.2 fl i fi 4{ cf 'tl-., li I r f / i ~ ~ ~ ~ "e~~~ ' 1, ~ - ~ ~ IE~. LIGHT & POWER DEPARTMENT Donal O'Callaghan, Director bf Light & Power April 15, 2009 Mr. Steven L. Weisenberg Commercial Advisor Shell Energy North America (IJS), L.P. 4445 Eastgate Mall Suite 100 San Diego, California 92121.. Dear Mr. Weisenberg: Subject: Exchange Transaction Confirmation Enclosed for your records is a fully executed original "Transaction Confirmation" between Shell Energy North America (US) L.P. and the City of Vernon. If you have any questions, please do not hesitate to call me at (323) 5$3-8811, extension 834. Sincerely, CITY OF VERNON n-,~ 1 Donal O'Callaghan Director of Utilities & Government Infrastructure DO:rmt ce: Dan Bergmann Document Control -Gas 4305 Santa Fe Avenue, Vernon, California 9005$ Telephone (323) 583-8811 Fax (323) 826-1425 `~xCltlSl?l2fl/ ~~UStJ'tQ~C 7ransmlttal Number: 230-G Page 7 of 1 City of Vernon TI~,/yN ~7IYl ~TT~L Light & Power oepartn,ent LETTER 4305 Santa Fe Avenue, Vernon, CA 90058 Tel.:. 323-583-8811, Fitt. 561 Fax: 323-826-7:425 FROM: Light &-Power Department DATE; 4175/09` ATTN: Mr. Steven L. Weisenberg CommercialeAdvisor " TO: Sheit Energy North America {US}, L.P. '4445 Eastgate Mall Staite 100 San Die o, CA 92.121 C , We Transmit For Your The Followin Herewith ? .Under Se arate Cover - - Transmitted Via ? ApprovaF ? Speciflcatlons ? Fax Number. ? Review and Comment ? Submittals ® Overnight Service : 8830 b7141785 ? Distribution as Indicated ? prawings ?`-US MaiL• ? Infomtatlon Only ? Close-OuYDocuments Per Your Instructions- ®UselFle ? Computer-Files ? Hand Delivered ? Action: ? Documents ® Contract Documents ? Olhee ? Other: CD Co ies Date Descrl ,tion 1 4/45!09 Exchange Transaction Confirmation COMMENTS _ - Transmitted From: Michelle Mermis 4305 Santa Fe Avenue, Vernon, CA 90058 Tel.i 323-583-881:1, Ext 812 Fax: 323-826-1425. Copies To: File: D: Be man Transmittals /Gas 12.0420 Please 31gn, Date and Return She11 Energy North America (US), L.P. TRANSACTION CONFIRMATION Date: April 10, 2009 City of Vernon; California ContractID Donal O'Callaghan. Trade Date: Director of Light and Power. Deal No.: 4305 Sante Fe Avenue Vernon, CA 90058 Vernon Document Control Fax: (323) 826-1425 This Confirmation ("Confirmation") shall confirm and effectuate the agreement between Shell Energy North America (US) L.P. ("Exchange Agent") and. The City bf Vernon, California ("Owner") regardirig the exchange of Gas under the terms set forth below, and subj ect to the terms and conditions of the Base Contract for Sale and Purchase of Natural Gas by and between Owner and .Exchange Agent dated May 1, 2008-("Contract"). L Term This Confirmation shall be effective on May 1, 2009, through May 31, 2009, and shall continue Month to Month thereafter unless terminated by either party upon 30 Days' prior written notice, or a mutually agreed upon termination date ("Term"). IL Performance Obligation and Contract Quantity: .Owner shall notify Exchange. Agent on or before. 5:00. p.m. Pacific Prevailing Time on the fifth Business Day prior to the applicable Month of delivery of the amount of Gas to be exchanged at the Delivery Points stated below (the "Daily Contract Quantity"). In the :event that Owner fails to notify Exchange Agent within that time frame, thebaily Contract Quantity to be exchanged shall be as set forth on the attached Schedule A. All:volumes shall be delivered in ratable quantities consistent with industry standards. .III. Delivery Point: Owner, or Owner's designated agent, shall deliver; and Exchange Agent shall receive, the baily Contract Quantity at the Southern California Gas Co. interconnect at Ehrenburg, California. Exchange Agent shall deliver, and Owner (or Owner's designee) shall receive, the Daily Contract Quantity at the Pacific Gas & Electric Southern border California interconnect. IV. Contract Price: The Contract Price shall be a settlement payment to be determined each.Month and made to either Exchange Agent or Owner as based on the following formula: Contract Price ($/MIVIBtu) ° (NGI, PG&E Southern Border -NGI, SoCalGas .Average). + $0.025 If the result is positive: Payment by Owner to Exchange Agent If the result is negative: Payment by Exchange. Agent to Owner Payment =Contract Price x Daily Contract Quantity Note "NGI" means the price published in Natural Gas Intelligence, Bidweek Averages for the applicable month of delivery at the specified Delivery Points. 1 V. ,Special Conditions Notwithstanding anyconflicting provisions of the Base Contract, this Transaction Confirmation is for exchange only of Gas between Seller (Owner) and Buyer (Exchange Agent). For the purposes of this Transaction Confirmation only, the definition of Contract Price set- forth in Section 2.8 of the Contract is amended by deleting the word "purchase" and replacing it with the word "exchange". .Exchange Agent is .providing. a gas exchange arrangement only, aild makes no ,representation or warranty regarding the tax treatment of the exchanges. made hereunder. In connection therewith, Owner. agrees to indemnify and. hold harmless. Exchange Agent against any and all claims arising out of or in any way relating to Owner's tax treatment of the exchanges made hereunder. SHELL ENERGY NORTH AMERICA (US), L.P. CITY OF VERNON, CALIFORNIA BY: NAME: U ~'~'i y~,v'j NAME: Donal O'Callaghan TITLE:. ~ ~ ~ LQ pfC ~ i ~f~tvl ~ TITLE: Director of Light and Power. + DATE: ~~ri l t ,Z fy ~ ~ DATE: ~ ATTEST., By Manuela Giro%n, City erk DATE: ~ 2 Schedule A to the Transaction Confirmation between City of Vernon and Shell Energy-North America (US) L.P., dated April 10, 2009 Quantities are MMBtu per Month Month Quantity Month Quantity Month Quantity Month Quantity May-09 421,000 Aug-12 474,000 Nov-15 410,000 -Feb-19 381,000 Jun-09 417,000 Sep-12 443,000 Dec-15 .435,000 Mar-19 421,000 Jul-09 474,000 Oct-12 435,000 Jan-16 421,000 Apr-19 417,000 Aug-09 462,000 Nov-12 417;000 Feb-16 399,000 May-19 435,000. Sep-09 455,000 Dec-12 421,000 Mar-16 435,000 Jun-19 403,000 Oct-09 428,000 Jan-13 435,000 Apr-16 410,000 Jul-19 474,000 Nov-09 410,000 feb-13 381,000 May-16 428,000 Aug-19 468,000 Dec-09 435;000 Mar-13 421,000 Jun-16 417,000 .Sep-19 449,000 Jan-10 421;000 Apr-13 417,000 Jul-16 462,000 Oct-19 435,000 Feb-10 381,000 May-13 435;000 Aug-16 474,000 Nov-19 410,000 Mar-10 435,000 Jun-13 403,000 Sep-16 455,000 Dec-19 428,000 Apr-10 417,000 Jul-13 474,000 Oct-16 421;000 Jan-20 435,000 May-10 421,000 .Aug-13 468,000 Nov-16 417,000 Feb-20 392,000 Jun-10 417;000 Sep-13 449,000 Dec-16 428,000 Mar-20 428,000 Jul-10 468;000 Oct-13 435,000 Jan-17 428,000 Apr-20 417,000 Aug-10 468,000 Nov-13 410,000 Feb-17 381,000 May-20 421,000 .Sep-10 455,000 Dec-13 428,000 Mar-17 435,000 Jun-20 417,000 Oct-10 42.1;000 Jan-14 435,000 Apr-17 403,000 Jul-20 474,000 Nov-10 417,000 Feb-14 381,000 May-17 435,000 'Aug-20 462;000 Dec-10 435,000 Mar-14 421,000 Jun-17 417,000 Sep-20 455,000 Jan-11 421,000 Apr-14 417,000 .Jul-17 462,000 Oct-20 428,000 Feb-11 381,000 May-14 428,000 Aug-17 474,000 Nov-20 410,000 Mar-11 435;000 Jun-14 410,000 Sep-17 449;000 Dec-20 435,000 .Apr-11 410,000 Jul-14 474,000 Oct-17 428,000 Jan-21 421,000 May-11 428,000 Aug-14 462,000 Nov-17 417,000 Feb-21 381,000 Jun-11 417,000 Sep-14 455,000 Dec-17 421,000 Mar-21 435;000 Jul-11 462,000 Oct-14 435,000 Jan-18 435,000 Apr-21 417,000 Aug-11 474,000 Nov-14 403,000 Feb-18 381,000 May-21 294,000 Sep-11 455,000 Dec-14 435;000 Mar-18 428,000 Oct-11 42.1,000 Jan-15 428,000 Apr-18 410,000 Nov-11 417,000 feb-15 381,000 May-18 435,000. Dec-11 428;000 Mar-15 428,000 Jun-18 410,000 Jan-12 428,000 Apr-15 417,000. Jul-18 468,000 Feb-12 399,000 May-15 421,000 Aug-18 474,000 Mar-12 428,000 Jun-15 417,000 Sep-18 443,000 ...Apr-12 410,000 Jul-15 474,000 Oct-18 435;000 May-12 435,000 Aug-15 462,000 Nov-18 417,000 Jun-12 410,000 Sep-15 455,000 Dec-18 421,000 Jul-12 468,000 Oct-15 428,000 Jan-19 435,000 STAFF REPORT ~~R o 9 zoos- LIGHT & POWER. ~1~YC~.E~K'S OFFICE DATE: April 9, 2009 TO: Mayor and :City Council FROM: .Donal O'Callaghan, Director of Light & Power RE: Sale of Prepaid Gas In order to facilitate atax-exempt refinancing of the debt associated with Vernon's .prepaid natural gas with Vernon, we will have to sell the remaining volume of the .prepaid natural gas to another municipal-qualified long-term purchaser (Q'ualified User). On February 11, 2009, a .request for proposal was issued to all qualified municipals in California, -and shortly thereafter, two more large-municipals out of State. Vernon received five responses: 1. City of Palo .Alto 2. Colorado Springs Utility 3. Municipal Gas Authority of Georgia 4. Roseville Electric 5: Sacramento Municipal Utility District (SMUD) The most competitive and- successful bidder was SMUD (see Attachment 1). SMUD was both the most competitive bid and the closest point. of delivery for the City Of Vernon's prepaid natural -gas. The City of Vernon has retained .approximately 2,200 MMBtu .per day of -the prepaid natural gas for sale to Vernon's existing natural gas commodity customers, which are also Qualified Users. under the tax iaw. Additionally, Vernon may.-elect at any~time'to recall an additional 1,800 MMBtu per day for sale to future Vernon natural. gas .commodity.. customers. This recall. will be .elected as .the .:natural gas commodity load grows on the Vernon gas system.: Quantities -sold to SMUD each month will .range from 12,700 to 15,300. MMBtu per day. - The sale of Vernon's prepaid natural gas to SMUD requires a change in delivery point. This- means that the gas being .delivered into the Southern California Gas Company's (SoCalGas) system for delivery to Vernon must be delivered into the Pacific. Gas & Mayor City Council April 9, 2009 Page 2 Electric (PG&E) system for delivery to .SMUD. .Staff has investigated .several solutions- for moving the gas from one system to the other. Options .investigated were. to use Citigroup presently delivering gas to the Vernon City Gate, to use another gas marketer with a natural gas :exchange agreement, or for Vernon. to pay for transportation across the SoCalGas system for delivery into PG&E. The most competitively: priced option .was to use another- marketer,- which is Shell Trading. North America, (see Attachment 2). Vernon and Shell already have in place a base "Sale and Purchase" contract, dated May 1, 2009, previously approved by the. City Council. This exchange transaction with Shell is- being -executed. using a modified Transaction Confirmation reclassifying the "Seller" (Vernon} as the- "Owner," and the "Buyer" (Shell) as the "Exchange Agent." .This is not a sale and purchase with SheIL It _ is merely a simultaneous exchange. For each. MMBtu Shell receives into SoCalGas, it will-deliver an MMBtu into Pacific Gas & Electric. Characterization-and management in this 'fashion is critical #o meet requirements of federal tax law associated with the ..prepaid gas. Recommendations 1. .City of Vernon enter. into. the minus index sale of the. prepaid natural Gas to SMUD for the remaining term of the Vernon Natural Gas Prepaid Transaction. 2. Simultaneously the City of Vernon enters into an Exchange Agreement with-Shell Trading North America for the delivery of the City of Vernon prepaid natural gas.. from the Southern California Gas Company system (Vernon) to the Pacific-Gas & Electric system (SMUD). DO: rmt Attachments cc: Dan Bergmann Judy Lehr Document Control -Gas ATTACHMENT 1 Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following-.date: May 1, 2009- - The parties to this Base Contract are the following: PARTY A PARTY B ' PARTY NAME Ci of Vernon Sacramento Munici aI Utili District 6301 S Street 4305 S. Santa fe Avenue ADDRESS P.O. Box 15830 Vernon, CA 90048 Sacramento, CA 95852-1830_ www.citvofvernon:ora euslNESS weeslrE wwwsmtad.org CONTRACT NUMBER 060883022 D-U-N-SO NUMBER.. OOg235342 US FEDERAL: 95-6000808 ? US FEDERAL: 94-6001157 TAX ID NUMBERS ? OTHER: California JUlelsolcTioN of California ORGANIZATION ? Corporation ? LLC a Chartered City and Municipal Corporation of the ? Limited Partnership ? Partnership' State of California COMPANY TYPE ? LLP ? Other: a Municipal Utility Districf organized under the laws of the State of California GUARANTOR IF APPLICABLE CONTACT INFORMATION ATTN: Donal O'Callaohan COMMERCIAL ATTN: Kevin Hart TEL#: 323-583-8811 FAX#: 323-826-1425 TEL#: 916-732-7048 FAX#: 916-732-6436 EMAIL: docallaghan(cilci.varnon.ca.us EMAIL: khan@smud.org ATTN: Same as above SCHEDULING ATTN: Jay Glaubitz TEL#: FAX#: TEL#: 916-732-6206 FAX# 916-732-6436 EMAIL: EMAIL: J laubi smud.or ATTN; Same as above CONTRACT AND ATTN: Barry Brunelle LEGAL NOTICES TEL#: FAX#: TEL#: 916-732-6523 FAX#: 916-732-6854 EMAIL: EMAIL: bbiunel smud.or ATTN: Same as above CREDIT ATTN: Mark Oosterman TEL#: FAX#: TEL#: 916-732-5675 FAX#: 916-732-6436 EMAIL: EMAIL: monster smud.or ATTN: Same as above • TRANSACTION ATTN: Energy Settlements CONFIRMATIONS TEL#: 916-732-6847 FAX#: 916-732-5554 TEL#: .FAX#: EMAIL: EMAIL: tfischb@smud.org ACCOUNTING INFORMATION ATTN: Same as above INVOICES ATTN: Energy Settlements • PAYMENTS TEL#: 916-732-6847 FAX#: 916-732-5554 TEL#: FAX#: SETTLEMENTS EMAIL: tfischb@smud.org EMAIL: BANK: The Bank of New York Mellon ABA: 021000018 ACCT: GLA 111-565 BANK: Bank of America fC: TAS A/C 800457 w/RE TRANSFER TAS A/C NAME: Vernon ESC '06 Citi Gas Account NUMBERS ABA: 1210-0035-8 ACCT. 01488-80182 ATTN: AuroraQuiazon-213-630-6236 (IF APPLICABLE) OTHER DETAILS: SacramentOMain Copyright ©2006 North American Energy Standards Board, Ina NAESB Standard 6.3.1 All Rights Reserved September 5, 2006 Base Contract for Sale and Purchase of Natural Gas- (Continued) .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 partiesfail to check a box, the specified default proVisionshall apply. Select the appropriate box(es) from each section: Section 1.2 ? -Oral (default) Section 10.2 ~ No Additional Events of Default (default) Transaction OR Additional Procedure Written Events of ? Indebtedness Cross Default Default ? Party A: Section 2.7 ? 2 Business Days after receipt (default) Confirm Deadline OR ? Party B: ' 5 Business Days after receipt ? Transactional Cross Default Specified Transactions:- Section 2.8 ? Seller (default) Confirming Party OR ? Buyer. Citv of Vernon Section 3.2 ~ Cover Standard (default) Section 10.3.1 ~ Early Termination Damages Apply (default): Performance OR Early Obligation ? Spot Price Standard Termination- OR Damages ? Early Termination Damages Do Not Apply Note: The following-Spot Price Publication applies to both of the immediate) recedin Section 10.3.2 i ~ Other Agreement Setoffs Apply (default) Other Section 2.31 ~ Gas Daily Midpoint (default) Agreement ~ Bilateral (default) Spot Price Setoffs Publication Triangular OR ? Other Agreement Setoffs Do Not Apply Section 8 ~ Buyer Pays At and After Delivery Point (default) Taxes' OR ? Seller Pays Before and At Delivery Point Section 7.2 ~ 25"' Day of Month following Month of delivery Section 15.5 California Payment Date (default) Choice Of Law OR ? Da of Month followin Month of deliver Section 7.2 ~ Wire transfer (default) Section 15.10 ~ Confidentiality applies (default) Method of Payment i~ Automated Clearinghouse Credit (ACH) Confidentiality OR u Check a Confidentiality does not apply .Section 7.7 ~ Netting applies (default) Netting OR ? Nettin does not a I Special Provisions Number of sheets attached: NOII@ ? Addendum(s): NOne IN WITNESS. WHEREOF, the parties hereto have executed this Base Contract in duplicate. Cit of Vernon PARrvnIAME Sacramento Munici al Utili District - - SIGNATURE ~ _ B B Donal O'Calla Ilan PRINTED NAME Director of Li ht and Power nr~E Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 2 of 13 September 5, 2006 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 transactiohs'of Gas on a Firm or Interruptible basis. "Buyer" refers to the party receiving Gas and "Seller" refers to the parley. delivering Gas: The entire agreement between the arties shall be the Contract as defined irrSection 2.9. .The parties have selected either the "Oral Transaction 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 transactionmay be effectuated in an EDI. transmission or telephone conversation with the offer and acceptance constituting the agreement of .the .parties.. The parties-shall be legally bound from the time they so agree to transaction terms and may-each rely. thereon. Any such .transaction shall be considered`a "writing" and 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, EDl 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 .Confirmation as the identification and authentication of Confirming Party. If the Transaction Confirmation contains any provisions other than those relating to the commercial terms of the transaction. (i:e., price, quantity, performance obligation, delivery point, period of delivery and/or transportation conditions), which modify- or supplement the Base .Contract or General Terms and Conditions of this Contract (e:g.;°arbitration or additionaF representations and warranties),-such provisions shall not be deemed to be accepted pursuant to Section 1.3 but must be expressly agreed to by both. parties; provided that the foregoing shall not .invalidate an transaction a reed to b the arties. Written Transaction Procedure: 1.2. The parties will usethe following Transaction Confirmation procedure.. Should the parties come to an agreement regarding a Gas purchase and sale transaction for a particular Delivery-Period, the Confirming Party shall, and the other party may, record that agreement on a Transaction: Confirmation and communicate such Transaction Confirmation by facsimile, EDI or mutually agreeable electronic. means, to the other party by the close of-the Business Day following the date of agreement. The parties ackndvvledge that heir agreement will not be binding until. the exchange of nonconflicting Transaction Confirmations or the assa e of the Confirm Deadline without ob'ection from the receivin art , as rovided in Section 1.3. 1.3. If a sending parry's Transaction Confirrriation is materially different from the receiving party's understanding of the agreement referred to in Section 1.2, such receiving party shall notify 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 parry. The failure of the receiving parry to so notify the sending party in writing by the Confirm Deadline constitutes the receiving party's agreement to the terms of the transaction described in the sending party's Transaction Confirmation. If there are any material differences between timely sent Transaction Confrmations governing the same transaction, then neither Transaction Confirmation shall be binding until or unless-such differences are resolved including the use of any evidence that clearly resolves the differences iri the Transaction Confirmations. In the event of a conflict among the terms of (i) a binding Transaction Confirmation pursuant to Section 1:2, (ii) the oral agreement of the parties which may be evidenced by a recorded conversation, where the .parties have selected the Oral Transaction Procedure of the .Base Contract, (iii) the Base Contract, and (iv) these General Terms and Conditions, the terms of the documents shall govern in the priority listed in this sentence. 1.4. The parties agree that each party may electronically record all telephone conversations with respect to this Contract between their respective employees, without any special or further notice to the other-party. Each party shall obtain any necessary consent of its agents and employees to such recording: Where the parties. have selected the Oral Transaction. Procedure in Section 1.2 of the .Base Contract, the parties agree not to contest the validity or enforceability of telephonic recordings entered into in accordance with the requirements of this Base Contract..: SECTION 2. DEFINITIONS The terms set forth below shall have the meaning ascribed to them below. Other terms are also defned elsewhere in the Contract and shall have the meanings ascribed to,them herein. 2.1. "Additional Event of Default" shall mean Transactional Cross Default or Indebtedness Cross Default, each as and if selected by the parties pursuant to the Base Contract. 2.2. "Affiliate" shall mean, in relation #o any person, anyentity controlled, directly or indirectly, by the person, any entitythat controls, directly or indirectly, the person or any entity. directly or indirectly under common control with -the person.. For this purpose, "control" of any entity or person means ownership of at least 50 percent of the voting. power of the entity or person. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 3 of 13 September 5,.2006 2.3. "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 -Finn obligation to deliver Gas iri the case of Seller or to receive Gas in the case of Buyer. 2.4. "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, 5. "British thermal unit" or "Btu" shall mean the International BTU, which is also called the Btu (IT). 2.6. "Business Day(s)" shall mean Monday through Friday, excluding. Federal Banking Holidays for transactions in the U.S. 2.7. ' "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... 2.8: "Confirming Party" shall mean the party designated in the Base Contract to prepareand forward Transaction Confirmations to the other party. 2.9. "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. entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties.- 2.:10. "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 in a transaction. 2.11. "Contract Quantity" shall mean the quantity of Gas to be delivered and taken as agreed to by -the parties in a transaction: 2.12.. "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 performing 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 reasonable for the delivery or production area, as applicable, consistent with: the amount of notice provided by the nonperforming party; the immediacy of the Buyer's Gas consumption needs or Seller's Gas sales requirements, as applicable; the quantities involved; and the anticipated length of failure by the nonperforming party. 2:13. "Credit Support Obligation(s)" shall mean any obligation(s) to provide. or establish credit support for, or on behalf of, a party to this Contract such as cash, an irrevocable standby letter. of credit, a margin agreemeht; a prepayment, a security interest in an asset, guaranty, or othergood and sufficient security of a continuing nature. 2.14: "Day" shall mean a period of 24 consecutive hours, coextensive with a ".day" as defined by the Receiving Transporter in a particular transaction. 2.15. "Delivery Period" shall be the period during which deliveries are to'be made as agreed to by the parties iri a transaction. 2.16. "Delivery Point(s)" shall mean such point(s) as are agreed to by the parties in a transaction. 2:17. "EDI" shall mean an electronic data interchange pursuant to an agreement entered into by the parties, specifically relating to the communication of Transaction Confirmations under this Contract. 2.18. "EFP" shall mean the purchase,-sale or exchange of natural Gas as the "physical" side of an exchange for physical transaction involving gas futures contracts. EFP shall incorporate the meaning and .remedies of "Firm", provided that a party's excuse for nonperformance of its obligations to deliver or receive Gas will be governed. by the rules of the relevant futures exchange regulated under the Commodity Exchange Act. 2.19. "Firm" shall mean that either party may interrupt its performance without liability only to the extent that such performance is prevented for reasons of Force Majeure; provided; however, that during Force Majeure interruptions, the party invoking Force Majeure may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruptiori after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by the Transporter. 2:20. "Gas" shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane. 2.21. "Guarantor" shall. mean. any entity that has provided a guaranty of the obligations of a party hereunder, 2.22. "'Imbalance Charges" shall mean any fees, penalties, costs or charges (in cash or in kind) assessed by a Transporter for failure to satisfy the Transporter's balance and/or nomination requirements. 2.23. "Indebtedness Cross Default" shall mean if selected on the Base Contract by the parties with respect to a party; thafiit or its Guarantor, if any, experiences a default, or similar condition or event however therein defined, under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether present or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed . money in an aggregate amount greater than the threshold specified in the Base ..Contract with respect to such party or its Guarantor, if any,-which results in such indebtedness becoming immediately due and payable: Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 4 of 13 September 5, 2006 2.24. "Interruptible" shall mean that either party may interrupt its performance at any time for any reason, whether or not caused by an event of Force Majeure, with no liability;- except such interrupting party may be responsible for any Imbalance Charges as set forth. in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the. change in deliveries and/or receipts is confirmed by Transporter. 2.25. "MMBtu"shall mean-one million British thermal units, which is equivalent to one dekatherm. 2.26. "Month" shall mean the period beginning on the .first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar-month. 2.27. "Payment Date" shall mean a date, as indicated on the Base Contract, on orbefore which payment is due Seller for Gas received by Buyer in the previous Month. 2.28. "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. 2.29. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporters) for movement, transportation or management: 2.30. "Specified Transactiori(s)" shall mean any-other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas and any other transaction or agreement identified as a Specified Transaction under the Base Contract. 2.31. "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 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 #ollowing: (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. 2.32. "Transaction Confirmation" shall mean a document, similar to the form of Exhibit A; setting forth the- terms of a transactioh formed pursuant to`Section for a particular Delivery Period. 2.33. "Transactional Cross Default" shall-mean if selected on the Base Contract by the parties with respect to a party, that it shall be in default, however therein defined, underany Specified Transaction. 2.34. "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 specifed on the applicable Transaction Confirmation. 2.35. "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 Buyer 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 arties have selected either the "Cover Standard" or the "S of Price Standard" as indicated on the Base Contract. Cover Standard: 3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following; (i) in the event of a breach by Seller on-any Days},.payment by Seller to Buyer in an amount equal to -the positive difference, if any, between the purchase price paid by Buyer .utilizing the -Cover Standard and the Contract Price, .adjusted for commercially-reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s) excluding. any quantity for which no replacement is available; or (ii) in the event of a breach by Buyer on any Day(s); payment by Buyer to Seller in the .amount equal to the positive difference, if any, between the Contract Price and the price received by Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially reasonabla differences in transportation costs to or from the Delivery Points}; multiplied by the difference between the Contract Quantity and the quantity actually taken by Buyer for-such Day(s) excluding any quantity for which no sale is available; and (iii) in the event that Buyer has used commercially reasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such .replacement or sale is available-for all or any portion of the Contract Quantity of Gas, .then in addition to (i) or (ii) above; as applicable, the sole and exclusive remedy of the performing party with respect to the Gas not replaced or sold shall be an amount .equal to any unfavorable difference between the Contract Price and the Spot Price, adjusted for such transportation to the. applicable Delivery Point, multiplied by the quantity of such Gas not replaced or sold. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if"any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business. Days-after presentation of the. performing party's invoice, -which shall set forth ttie basis u on which such amount was calculated. Copyright ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 13 September 5, 2006 Sot Price Standard: 3.2. The-sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the eventof a breach by Seller. on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the-Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an amount equal to the difference between the Contract Quantity and-the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if-any, obtained by subtracting the applicable Spot Price from the Contract Price. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable-difference shall be payable five Business Days after presentation of the performing party's invoice, which shall set forth the basis u on which such amount was calculated. 3.3. Notwithstanding Section 3,2, the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by-both parties.. 3.4. In addition to Sections 3.2 and 3.3, the parties may provide fora Termination .Option in a Transaction Confirmation executed in writing by both .parties. The Transaction Confirmation containing the Termination Option will designate the length of nonperformance triggering the Termination Option and the procedures for exercise thereof,. how damages for nonperformance will be compensated, and how liquidation costs will be calculated. SECTION 4. TRANSPORTATION, NOMINATIONS, AND IMBALANCES 4.1. Seller shall have the sole responsibility fortransporting the Gas to the Delivery Point(s). Buyer shall have the sole respohsibility 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 Trarisporter(s). Each party shall give the other party timely prior Notice, sufficient to meet the requirements of all Transporters) involved in the transaction, of the. quantities of Gas to be delivered and purchased each Day. Should either party become aware that actual deliveries at the Delivery Point(s) are greater orlesser than the Scheduled Gas, such party shall promptly notify the other party. 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 AND MEASUREMENT 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 shall be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving Transporter. SECTION 6. TAxEs The parties have selected either `Buyer Pays At and After Delivery Point" or "Seller Pays Before and At Delivery Point" as .indicated on the Base Contract. Bu er Pa s At and After Delive 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 Delivery 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 town exem tion from an such Taxes or char esshall furnish the other a an necessa documentation thereof. Seller Pa s Before and At Delive 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 Delivery Point(s) and all Taxes at-..the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on or with<respect to the .Gas 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 exem tion from an such Taxes or char es shall furnish the other a an necessa documentation thereof. SECTION 7. BILLING, PAYMENT, AND AUDIT 7.1 . Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for any other applicable charges, providing supporting documentation acceptable in industry practice to support the amount charged: if the actual`quantity delivered is not known by the billing date, billing will be prepared. based on the quantity of Scheduled Gas. The invoiced quantity will then be adjusted #o the actualquantity on the following Month's billing or as soon thereafter asactual delivery information is available. Copynght ©2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved. Page 6 of 13 September 5, 2006 7.2. Buyer shall remit the amount due under Section 7.1 in the manner specified in the Base Contract, in immediately available funds, on or before the later of the Payment Date. or 10 Days after receipt. of the invoice. by Buyer;- provided- that if the Payment Date is not a Business Day, payment is due on the next Business Day following that date. In the event any payments are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2. 7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the .nonperforming party for an accelerated payment setting forth the basis upon which the invoiced amount was calculated.- Payment- 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 amount of any such invoice or any part thereof, such invoiced party will pay such amount as it concedes to be correct; provided, however, if the invoiced party disputes the amount due, it ..must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay. In the event the parties are unable. to resolve such dispute, either party may pursue any remedy available at law or in equity to enforce its rightspursuant to this Section. 7.5. If the invoiced party fails to remit the full. amount payable when due, interest on the unpaid portion shall accrue from- the date dine until the-date of payment at a rate equal to the lower of(t) the then-effective prirne 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. 7.6. A party shall have the right, at its own expense, upon reasonable Notice and at reasonable-times, to examine and audit and to obtain copies of the relevant portion of the books, records; and .telephone recordings of the other parry only to the extent .reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under the Contract: This right to examine, audit, and to obtain copies shall not be available with respect to proprietary informatioh 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 underSection 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 #erms and conditions therein shall prevail to the extent inconsistent herewith. SECTION 8. TITLE, WARRANTY, AND INDEMNITY 8.1. Unless otherwise specifically agreed, -title to the Gas shall passYrom 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 specifed Delivery Point(s). Buyer shall have responsibility for and assume any liability with respect to aid 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 15.8, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE DISCLAIMED. 8:3. Seller agrees to indemnify Buyer and save it hanr~less from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from any and all persons, arising from or out of claims of title, personal injury (including death) 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 any and all persons, arising from or out of claims regarding payment, personal injury (including death) or property damage from said Gas or other charges thereon which attach after title passes to Buyer. 8.4. The parties agree that the delivery of and the transfer of title to all. Gas under this Contract shall take place within the Customs Territory of the United States (as defined in general.-note 2 of the Harmonized Tariff Schedule of the United States 19 U.S.C. §1202, General Notes, page 3); provided, however, .that in the event Seller took title to the Gas outside the Customs Territory of the United States, Seller represents and warrants that it is-the importer of record for all Gas entered and delivered into the United States, and shall be responsible for entry and entry summary filings as-well as the payment of duties, taxes and fees, if any, and all applicable record keeping requirements. 8.5. 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 9.1. All Transaction Confirmations, invoices, payment instructions, 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 .Notices required hereunder shall be in writing and maybe sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service, first class mail or hand delivered. 9:3. Notice shall be given when received on a Business Day by the addressee. In the absence of proof of the actual-receipt date, the following presumptions will apply. Notices sent by facsimile shall be deemed to .have been received upon the sending party's receipt of its facsimile machine's confirmation of successful transmission. If the day on which such .facsimile. is received is Copynght ©2006 North American Energy Standards Board, Inca NAESB Standard 6.3.1 All Rights Reserved Page 7 of 13 September 5, 2006 not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice. by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall be considered delivered five Business Days after mailing. 9.4: The party receiving a commercially acceptable. Notice of change in payment instructions or other payment information shall not be obligated to implement such change Until ten Business Days after receipt of such Notice: SECTION 10. FINANCIAL RESPONSIBILITY 10:1. If either party.("X") has reasonable. grounds for insecurity regarding. the performance of any obligation under 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 or its Guarantor, if applicable), X may demand Adequate Assurance of Performance. "Adequate Assurance of Performance" shall mean sufficient security in the form,. amount, for a term, and from an issuer,. all. as reasonably acceptable to X, including, but not limited to cash, a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty. Y hereby grants to X a continuing first priority security interest in, lien on, and right of setoff .against all Adequate Assurance of Performance in the form of cash transferred by Y to X pursuant to this Section 10,1. Upon the return by X to Y of such Adequate Assurance of Performance, the security interest and lien granted hereunder on that Adequate Assurance of Performance shall be released automatically and; to the extent possible, without any further action by either party.. -10.2. In the event- (each an "Event of Default") either- party (the "Defaulting Party") or -its Guarantor shall (i) make an assignment or any general arrangement .for the benefit of creditors; (ii) file a petition or .otherwise. commence; authorize, or acquiesce in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (iii) otherwise become bankrupt or insolvent(however evidenced); (iy) be unable to pay its debts as they fall due; (v) have a receiver; provisional liquidator,- conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of its assets; (vi) fail to perform any obligation to-the other party with respect to .any Credit Support Obligations relating to the Contract; (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; (viii) not have paid any amount due the other party hereunder on or before the: second Business Day following written Notice-that such payment is due; or ix) be the affected party with respect to any Additional Event of Default; then the other party (the "Non-Defaulting Party") shall have the right, of its sole election, to immediately withhold and/or suspend deliveries or payments upon Notice and/or to terminate and liquidate the transactions under the Contract, in the manner provided in Section 10:3, in addition. to any and all other remedies available hereunder. 10.3. If an Event of Default has occurred and is continuing, the Non-Defaulting Party shall have the right, by Notice to the Defaulting Party, to designate a Day, no earlier than the Day such Notice is given and. no later than 20 Days after such Notice is given, as an early termination date-(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 ("Excluded Transactions"), which Excluded-Transactions must be liquidated and terminated as soon thereafter as is legally permissible; 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 Earl Termination Date for ur oses of Section 10.3.1. The parties have selected either "Early Termination Damages Apply" or "Early Termination Damages Do Not Apply" as indicated on the Base Contract. -Earl Termination Dama es A 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 deliveries 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 amount equal to the difference between such Market Value and the Contract Value,. as defined below, of such Terminated Transaction(s) shall be due to the Buyer under the Terminated Transaction(s) if such Market - Value exceeds the Contract Value and to fhe Seller if the opposite is 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 on which such amounfwould 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 for a similar transaction at the Delivery Point determined by the Non-Defaulting Party in a commercially reasonable manner. 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 energy swap contracts or physical gas trading markets, similar safes or purchases and any. other bona fide third-party offers, all adjusted for the length of the term and differences in transportation costs. A party shall not be required to enter into a replacement transaction(s) in order to determine the Market Value. Any extension(s) of the term of a transaction to -which parties are not bound as of the Early Termination -Date includin but not limited to "ever reen rovisions" shall -not be considered in determinin Contract Values and Copyright ©2006 North American Energy Standards Board, Inc. NAESBStandard 6.3.1 -All Rights Reserved Page 8 of 13 September 5, 2006 Market Values. For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction shall be considered in determining. Contract -Values and Market Values. The rate of interest used in calculating net resent value shall be determined b the Non-Defaultin Part in a commercial) reasonable manner. -Earl Termination Dama es Do Not A 10.3.1. As of the Early Termination Date, the Non-Defaulting Party shall determine, in good faith-.and iri a commercially reasonable manner, 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 deliveries. and receipts (including without limitation any amounts owed. under Section 3.2), - for which a ment has not et been made b the art that owes such a ment under this Contract. The .parties have selected either "Other Agreement Setoffs .Apply" or "Other. Agreement Setoffs Do Not Apply" as indicated on the Base Contract. Other A reement Setoffs Ap Bilateral Setoff Option: 10.3.2. .The Non-Defaulting`Party shalt net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount-payable by one party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice to the Defaulting Party; the Non-Defaulting Party is hereby authorized to setoff any Net Settlement Amount against (i) any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; and (ii) any amount(s) (including any excess cash margin or excess -cash collateral) owed or held by the party that is entitled to the Net. Settlement Amount under any other agreement or arrangement between the parties.- Triangular Setoff Option: 10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3:1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount'): At its sole option, and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized tosetoff (i) any Net"Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; (ii) any Net Settlement Amount against any amount(s) (including any excess cash margin. or excess cash collateral) owed by or to a party under any other agreement or arrangement between the parties; (iii) any Net Settlement Amount owed to the Non-Defaulting Party against any amount(s) (including any excess cash margin or`excess cash collateral) owed by the Non-Defaulting Party or its- Affiliates- to the Defaulting Party under any other agreement or arrangement; (i~) any Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any excess. cash margin or excess cash collateral)'owed by the Defaulting Party to the Non-Defaulting Party or its Affiliates under any other agreement or arrangement; and/or (v) any Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Defaulting Party or its Affiliates to the Non-Defaulting Party under an other a reement or arran ement. Other A reement Setoffs Do Not A I 10.3.2. The Non-Defaulting Party shall net or aggregate; as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice #o the Defaulting Party, the Non-Defaulting Party may setoff any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obli ation relatin to the Contract. 10.3.3. If any obligation that is to be included in any netting, aggregation or -setoff pursuant to Section 10.3.2 is 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 Nori-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 the Net Settlement 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 Ne# Settlement Amount as well as any setoffs applied against such amount pursuant to Section 10.3.2, 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 ofthe Net Settlement Amountas adjusted by setoffs, shad accrue from the date due until the 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 to arising from the Contract. Copyright ©2006North American Energy Standards Board, Inc.. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 13 September 5, 2006 10.7. With respect .to this Section 10, 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 MAJEURE 11.1. Except with regard to a party'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#o perform a Firm obligation, to the extentsuch failure was caused by Force Majeure. The term "Force Majeure" as employed herein means any cause not reasonably within the dontrol of the party claiming suspension, as further defined in Section 11.2. 11.2. Force Majeure shall include,, but not be limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes, which result in evacuation of the affected-area, floods, washouts, explosions, breakage or accident or necessity of repairs to madhinery or equipment or-lines of pipe; (ii) weather related events affecting an entire geographic region, such as low temperatures. which cause freezing or failure of wells or lines of pipe; (iii) interruption and/or curtailment. of -Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, .lockouts or other industrial disturbances, riots, sabotage, insurrections or wars, or acts of terror; and (v) governmental actions-such as necessity for compliance with any court order, law, statute; ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a .Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance. 11.3. Neither party shall be entitled to the benefit of the provisidns of Force Majeure to the extent performance is affected by any or all of the following circumstances: (i) the curtailment of interruptible or secondary Firm transportation unless primary, in-path, Firm transportation is also curtailed; (ii) the party claiming excuse failed to remedy the condition .and to resume the performance of such covenants or obligations with reasonable dispatch; or (iii) economic hardship; to include, without limitation, Seller's ability to sell -Gas at a higher or more advantageous price than the ContractPrice, Buyer's abilityto purchase Gas at a -lower or-more advantageous price than the Contract Price, or a regulatory agency .disallowing, in whole or in part; the pass through of costs resulting from this Contract; (iv) the loss of Buyer's market(s) or Buyer's inability. to use or resell Gas purchased hereunder, except, in either case, as provided in Section 11.2; or (v) the loss or failure of Seller's gas supply or depletion of reserves, except, in either-case, as provided in Section 11.2. The party clairing Force Majeure shall not be excused from its responsibility for mbalance Charges. 11.4. Notwithstanding .anything to the contrary herein, the parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the party experiencing such disturbance. 11.5. The party whose performance is prevented by Force Majeure-must provide Notice to the other party. Initial Notice may be given orally; however, written Notice with reasonably full particulars of the event or occurrence is required as soon as reasonably possible. Upon providing written Notice of Force Majeure to the. other party, the affected party will be relieved of its obligation, from the onset of the Force Majeure event, to make or accept delivery of Gas, as applicable, to the extent-and for the duration of Force Majeure, and neither party shall be deemed to have failed. in such obligations to the other during such occurrence or event. 11:6. Notwithstanding Sections 11.2 and 11.3, the parties may agree to alternative Force Majeure provisions in a Transaction Confirmation executed in writing by both parties. SECTION 12. TERM 'This Contract may be terminated on 30 Day's written Notice, but shall remain iri effect until the expiration of the latest Delivery Period of any transaction(s). The rights of either party pursuant to Section 7.6, Section 10, Section 13, the obligations to make payment hereunder, and the obligation of either party to indemnify the other, pursuant hereto shall survive the termination of the Base Contract or -any transaction. SECTION 13. LIMITATIONS FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS 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. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGETHRT 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. Copyright ©2006 North American Energy Standards Board, Inca NAE$B Standard 6.3.1 All Rights Reserved Page 10 of 13 . September 5, 2006 SECTION 14. MARKET DISRUPTION If a Market Disruption Event has occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price #or the Floatirg Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected Day then the. replacement price for the Floating Price shall be determined within the next#wo following Business Days with each party obtaining, in good faith and from non- affiliatedmarket participants in the relevant market, two quotes for prices of Gas: for the affected Day of a similar quality and. quantity in the geographical location closest in proximity to the Delivery Point and averaging the four quotes. If either party fails to provide two-quotes then the average of the-other party's two quotes shall determine the replacement-price for. the Floating. Price. "Floating Price" means the price or a factor of the price agreed to in the transac#ion as bejng based, upon a specified index. "Market Disruption Event" means, with respect to an index specified for a transaction, any of the following evehts: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of trading to commence or the permanent discontinuation or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (e) both parties agree that a material change in the formula for or the method of determining the Floating Price has occurred. For the purposes of the calculation of a replacement price for the Floating Price, all numbers shall be rounded to three decimal places. If the fourth decimal number is five or greater, then the third decimal number shall be increased by one and if the fourth decimal number is less than five, then the third decimal number shall remain unchanged. SECTION 15. MlscEt_~a,NEOUs 15.1. This Contract shall be binding upon and 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 shalt run for the full term of this Contract. No assignment of this Contract, in whole or in part, will be made without the prior written consent of the non-assigning party (and shall not relieve the assigning party from liability hereunder), which consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber, or assign this Contract or the accounts, revenues; or proceeds hereof in connection with any financing or other financial arrangements; or (ii) transferits interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any such assignment, transfer and assumption, the transferor shall remain principally liable for and shall not be relieved of ordischarged from any obligations hereunder. 15:2. If any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any other provision, agreement or covenant of this Contract. 15.3. No waiver of any breach of this Contract shall be held to be a waiver of any other or subsequent breach. 15.4. This Contract sets fiorth all understandings 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 be .amended only by a writing executed by both parties. 15.5. The interpretation and performance of this Contract shall be governed by the laws of the jurisdiction as indicated on the Base .Contract, excluding, however, any conflict of laws rule which would apply the law of another jurisdiction. 15,6. This Contract'and all provisions herein will be subject to all applicable and valid statutes, rules, orders and regulations of any governmental authority having jurisdiction over the parties, their facilities, or Gas supply, ,this'Contract or transaction or any provisions thereof. 15.7. There is no third party beneficiary to this Contract. 15.8. Each party to this Contract represents and warrants that it has full and complete authority to enter into and perform this Contract. Each person who executes this Contract on behalf of either party represents and warrants that it has full and complete authority to do so and that such party will be bound thereby. 15.9. The headings and subheadings cohtained in this Contract are used solely for convenience and do not constitute a part of this Contract between the parties and shall not be used to construe or interpret the provisions of this Contract. 15.10. Unless the parties have elected on the Base Contract not to make this Section 15.10 applicable to this Contract, neither party shall disclose directly or indirectly without the prior written consent of the other party the terms of-any transaction to a third party (other than the employees, lenders, royalty owners, counsel, accountants and other agents of the party, or prospective purchasers of all- or substantially all of a party's assets or of any rights under this Contract, provided such persons shall have agreed to keep such terms confidential) except (i) in order to comply with any applicable law, order, regulation, or exchange rule, (ii) to the extent necessary forthe enforcement of this Contract , (iii) to the extent necessary to implement any transaction, (iv) to the extent necessary to comply with a regulatory agency's reporting requirements including but not limited to gas cost recovery proceedings; or (v) to the extent such information is delivered 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 it is aware which. may result in disclosure of the terms of any transaction (other than as permitted hereunder) and use reasonable efforts to prevent or limitthe disclosure. The existence of this Contract is not subject to this confidentiality obligation. Subject to Section 13, the parties shall be entitled to all. remedies available at law or in equity to enforce, or seek relief in connection with this confdentiality obligation. The terms of any transaction hereunder shall. be kept confidential by the,. parties hereto for one year from the expiration of the transaction.. In the event that disclosure is required by a governmental body. or applicable law, the party subject to such requirement may - disclose the material terms of this Contract to the extent so required, but shall promptly notify: the other party, prior to disclosure, Copyright ©2006 North American Energy Standards Board, Inc: NAESBStandard 6.3.1 All Rights Reserved Page 11 of 13 September 5, 2006 and shall cooperate (consistent with the disclosing party's legal obligations) with the other party's efforts to obtain protective orders or similar restraints with respect to such disclosure attheexpense of the other party:. 15.11.. The parties may. agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties 15.1.2. Any original executed Base Contract, Transaction Confirmation or other related document may be digitally-.copied, photocopied, or stored on computer tapes and disks (the "Imaged Agreement"). The Imaged Agreement, if introduced as evidence on paper, the. Transaction Confirmation, if introduced as evidence in automated facsimile-form,. the recording; if introduced as evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings will be admissible as between the parties. to the same extent. and -under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the recording, the Transaction Confirmation, or the Imaged Agreement on the basis that such were not originated or maintained in documentary form.- However, nothing herein shall be construed as a waiver of anyother objection to the admissibility of -such evidence. DISCLAIMER: The purposes of this Contract are to facilitate trade; avoid misunderstandings and make more definite thetermsof 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, CONDITION5OR 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. Note: Page 13 of 13, the pro forma Transaction Confirmation, is not included with this base contract. Copyright ©2006 North American Energy Standards Board, Inc. NAESBStandard 6.3.1 All Rights Reserved Page 12 of 13 September 5, 2006 TRANSACTION CONFIRMATION EXHIBIT A FOR IMMEDIATE DELIVERY _ ~ Date:. April 7, 2009 This Transaction Confirmation is subject to the final Base Con#ract between Seller and Buyer dated Mav 1, 2009: The #erms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days. of receipt unless otherwise specified in the Base Contract. SELLER: City of Vernon BUYER: Sacramento Municipal Utility District Attn: Donal O'Callaghan Attn: Barry Brunelle Phone: 323-583-8811 Phone: 916-732-6523 -Fax: 323-826-1425 Fax: 916-732-6854 Contract Price: For each month of delivery, the average price posting from Natural Gas Intelligence (NGI) BidweeK Survey for deliveries to "Southern Border, PG&E," minus twenty-five cents ($0.25) per MMBtu. Delivery Period: Begin: May 1, 2009. End: May 31, 2021 Performance Obligation and Contract Quantity is Firm Fixed Quantities: Per the Supply Schedule attached hereto as Exhibit B showing monthly quantities up to 15,300 MMBtu per day, subject to Special Condition 3, below. Delivery Point:. PG&E - Topock Special Conditions: 1. By execution of this Transaction Confirmation, Buyer makes the certifications, representations and agreements contained in the Qualified Use Certificate attached hereto as Exhibit C. 2. .Notwithstanding that the Cover Sheet reflects at Section 10.3.1 that "Early Termination Damages Apply,'` the parties hereby agree for this transaction that "Early-Termination Damages Do Not Apply." 3. Seller shall have the recurring unilateral right to reduce Firm Fixed Quantities in Exhibit B up to 1,800. MMBtu per day by providing Buyer 60 day written notice. Seller may exercise this right at anytime during-the term hereof. Seller: -City of Vernon Buyer: Sacramento Municipal Utility District By: Donal O'Callaghan By: Title: Director of Light and Power Title: -Date: Date: 'Exhibit B to the Transaction Confirmation between City of Vernon and Sacramento Municipal Utility District-dated April 7, 2009. Units are MMBtu Firm Fixed Firm Fixed Firm Fixed Firm Fixed Month Quantities Month Quantities Month Quantities Month Quantities May-09 421;000 Aug-12 474,000 Nov-15 410,000 Feb-T9 381,000- Jun-09 417,000 Sep-12 443;000 Dec-15 435,000 Mar-19 42.1,000 Jul-09 .474,000 Oct-12 435,000 Jan-16 421;000 Apr-19 417,000 Aug-09 462;000 Nov-12 417,000 Feb-16 399,000 May-19 435,000 Sep-09 455;000 Dec-12 421,000 Mar-16 435,000 Jun-19 403,000 Oct-09 .428,000 Jan-13 435,000 Apr-16 410,000 Jul-19 474,000 Nov-09 410,000 Feb-13 381,000 May-16 428,000 Aug-19 468,000 Dec-09 435;000 Mar-13 421,000 Jun-16 417,000 Sep-19 449,000 Jan-10 421,000 Apr-13 417,000 Jul-16 462,000 Oct-19 435,000 Feb-10 .381,000 May-13 435,000 Aug-16 474,000 .Nov-19 410,000 Mar-10 435,000 Jun-13 403,000 Sep-16 455,000 Dec-19 428,000 Apr-10 417,000 Jul-13 474,000 Oct-16 421;000 Jan-ZO 435;000 May-10 .421,000 Aug-13 468,000 Nov-16 417,000 .Feb-20 392,000 Jun-10 417,000 Sep-13 449,000 Dec-16 428,000 Mar-20 428,000 Jul-10 468,000 Oct-13 435,000 Jan-17 428,000 Apr-20 417,000 Aug-10 468,000 Nov-13 410,000 Feb-17 381;000 May-20 421,000 Sep-10 455,000 Dec-13 428,000 Mar-17 435,000 Jun-20 417,000 Oct-10 421,000 Jan-14 435,000 Apr-17 403,000 Jul-20 474,000 Nov-10 417,000 Feb-14 381,000 May-17 435,000. Aug-20 462,000 Dec-10 435,000 Mar-14 421,000 Jun-17 417,000 Sep-20 455,000 Jan-11 421,000 Apr-14 .417,000 Jul-17 462,000 Oct-20 428,000 Feb-11 381,000 May-14 428,000 Aug-17 .474,000 Nov-20 410,000 Mar-11 435;000 Jun-14 410,000 Sep-17 449,000 Dec-20 435,000 Apr-11 410,000 Jul-14 474,000 Oct-17 428,000 :Jan-21 421,000 May-11 428;000 Aug-14 462,000 Nov-17 417,000 Feb-21 381,000 Jun-11 417,000 Sep-14 455,000 Dec-17 421,000 Mar-21 435,000 Jul-11 462,000 Oct-14 435,000 Jan-18 435,000 Apr-21 417,000 Aug-11 474,000 .Nov-14 403,000 Feb-18 381,000 May-21 294,000 Sep-11 455,000 Dec-14 435,000 Mar-18 428,000 Oct-11 421,000 Jan-15 428,000 Apr-18 410,000 Nov-11 417,000 Feb-15 381,000 May-18 435,000 Dec-11 428,000 Mar-15 428,000 Jun-18 410,000 Jan-12 428,000 Apr-15 417,000 Jul-18 468;000 Feb-12 399,000 May-15 .421,000 Aug-18 474,000 SMUD Initials Mar-12 .428,000 Jun-15 417,000 Sep-18 443;000 Apr-12 410,000 Jul-15 474;000 Oct-18 .435,000 May-12 435,000 Aug-15 462,000 Nov-18 417,000 Vernon Initials Jun-12 410,000 Sep-15 455,000 Deo-18 421,000 Jul-12 468,000 Oct-15 428,000 Jan-19 435,000 EX~IIBIT C TO THE. TRANSACTION CONFIRMATION BETWEEN CITY OF VERNON AND SACRAMENTO MUNICIPAL UTILITY DISTRICT DATED APRIL 7, 2009: QUALIFYING USE CERTIFICATE In connection with the- purchase of gas (the "Gas") by Buyer- (capitalized terms used in this Certificate and not otherwise defined shall have the meanings given such terms in the Transaction Confirmation (the "Confirmation") of which this Certificate is a part) from Seller pursuant to the. Confirmation, Buyer certifies, represents and agrees as follows: (a) Tax-Exempt Bonds. Buyer understands that the Gas relates to tax- exempt bonds issued on behalf of Seller to prepay for the Gas.. (b) General Requirements. Except as described below, (i) none of the. Gas -will be used in any Private Business Use and (ii) all of the Gas will be used for a Qualifying Use. The Buyer is a utility that is owned by a state or local governmental unit or a political sub-division or instrumentality thereof (a "Governmental Person"). (c) Qualifying Use. For purposes of this Certificate, Qualifying Use means gas to be: (A) furnished to Retail Gas Customers of the Buyer who are located in the gas Service Area of the Buyer; (B) used by the Buyer to produce electricity that will be furnished to Retail Electric Customers of the Buyer who are located. in the electricity Service Area of the Buyer; (C) used by the Buyer to produce electricity that will be sold to a utility that is owned by another Governmental Person and furnished to Retail Electric Customers of that utility who are located in the electricity Service Area of that utility and in a manner that does not give rise to Private Business Use; or (D) used to fuel the pipeline transportation of the Gas. (d) Service Area. For purposes of this Certificate, the Service Area of a utility owned by a Governmental Person consists of: OHS West:260609536.2 (i) Any area throughout which the utility provided, at all times during the 5-year period ending on June 27, 2006: (A) in the ease of a natural gas utility, natural gas transmission. or distribution. service; and (B) in the case of an electric utility, electricity distribution service; and (ii) Any area recognized as the service area of the utility under state or Federal law. (e) Retail Gas Customer. For purposes of this Certificate, a Retail Gas Customer is a customer that purchases gas other than for resale. (f) Retail Electric Customer. For purposes of this Certificate, a Retail Electric Customer is a customer that purchases electricity- other than for resale. (g) Private Business Use. Gas shall be treated as used for a Private Business - Use if such Gas (or electricity produced with such Gas) is sold to persons-other than Governmental Persons or to Retail Gas Customers or Retail Electric Customers on a basis other than rates that are generally applicable and uniformly applied. (h) Additional information. Buyer agrees to furnish any information that may reasonably be requested by Seller or any governmental. agency to substantiate the accuracy of the foregoing certifications and representations. OHS West:260609536.2 ATTACHMENT 2 Shell Energy North America (US), L.P. TRANSACTION CONFIRMATION Date:. April 9, 2009 City of Vernon, California Contract ID .Donal O'Callaghan Trade Date: Director of Light and Power I )cal No.: 4305 South Santa Fe Avenue .Vernon, CA 90058 Vernon Document Control Fax: (323) 826-1425 `T'his Confirmation ("Confirmation") shall confirm and effectuate the ~~~~raement between Shell Energy North America_(US) L.P. ("Exchange Agent") and. The City of Vernon, California ("Owner'' ~ re~~arding the exchange of Gas under the terms set forth below, and subject to the terms and conditions of the Base Contract for Sale and Pua ~luise of I~Tat~zral Gas by aid h~tween Vernon and Shell Energy dated May 1, 2008 ("Contract"). L Term This Confirmation shall be effective on May 1, 2009 6hr~ugh M~iy3l, Z~iu~~_ anci shall continue- month to month thereafter. unless terminatedby either party upon 30 days prior written noticed or a mutua~lv~acrr~,i u~~~in tc1-mination date. ("Term"). - IL Performance Obligation anal C~~~utr,ict Quantity: Owner shall notify-.Exchange Agcnl ~~n h~,fi~r~~ ~:(~i1 p.m. Pacili~ 1'r~:~ailing Time on fhe fifth Business Day prior-to the applicable .Month of delivery-of the amount ~~f ~ i„ I~~ r~.rh,uiged at thr I)rli~ery Points stated below -(the Daily Contract Quantity). In the .event -that Owner fails m n oti I ~ I c I ~ n ~ ~ ; A n t i t I ~ i n t I ~ a < < i n ~ I ~ra n ~ . the Daily- Contract Quantity to be exchanged shall be as set fortkoritheattachr~l S~h~•duie;l. ,~\II ~~~lum~s~tih~ill h~ ~Icli~erc~l in r~~~al~lcquantitiesconsistentwithindustrystandards. III. Delivery Poi n i Owner, or Owners agcn~, hall deliver and l:xch~ui~.; Agent shall receive the Daily Contract Quantity at the Southern California Gas- - Company interconnection at ~hrenburg, Californl~; Exchange Agent shall deliver, and Owner, ~~r ~iasignee of Owner, shall receive the -Daily Contract Quantity at the Pacific Gas & Electric Company interconnection at `I ~,pncl:.:~rizona. 'I IV. Contract Price: The Contract Price shall be a settlement payment to be determined each month and made to either Exchange Agent or Owner as based on the following formula: Contract Price ($/MMBtu) _ (NGI, PG&E Southern Border -NGI, SoCalGas Average) + $0.025 Payment =Contract Price x Daily Contract Quantity If the result is positive: Payment by Owner to Exchange Agent If the result is negative: Payment by Exchange Agent to Owner 1 Notes "NGI" means the price published in Natural Gas Intelligence, Bidweek Averages for the applicable month of delivery at the specified Delivery Points. V. Special Conditions Notwithstanding any conflicting provisions of the Base Contract, this Transaction Confirmation is for exchange only of Gas between Seller (Owner).and Buyer (Exchange Agent). Exchange Agent shall have title t~~ :~n~i control of Gas only during the simultaneous receipt and redelivery of gas at the Delivery Points herein. SHELL ENERGY NORTH AMERICA (US), L.P. CITY nF 1' El{NU\, C.iT,IFORNIA BY: 131 . NAME: Pat Butler NAi~] I TITLE: Contracts Manager TiTL I DATE: DAT 2 Shell Energy Nod~th America (US), L.F. TRANSACTION CONFIRMATION Date: April 10, 2009 City of Vernon, California Contract ID Donal O'Callaghan. Trade Date: Director of Light and Power Deal No.: 4305 Sante Fe Avenue Vernon, CA 90058 Vernon Document Control Fax: (323) 826-1425 This Confirmation ("Co~rmation") shall confine and effectuate the agreement between Shell Energy North America (US) L.P. ("Exchange Agent") and The City of Vernon, California ("Owner") regarding the exchange of Gas under the terms set forth below, and subject to the terms and conditions of the Base Contract for Sale and Purchase of Natural Gas by and between Owner and Exchange Agent dated May 1, 2008 ("Contract"). I, Term This Confirmation shall be effective on May 1, 2009, through May. 31; 2009, and shall continue Month to Month thereafter unless terminated by either party upon 30 Days' prior written notice, or a mutually agreed upon termination date ("Term"). l<I. .Performance U6ligation and Contract Quantfty: Owner shall notify Exchange Agent on or befoxe 5:00 p.m. Pacific Prevailing Time on the fifth Business Day prior to the applicable Month of delivery of the amount of Gas to be exchanged at the Delivery Points stated below (the "Daily Contraot Quantity"). In the event that Owner fails to notify Exchange Agent within that time frame, the Daily Contract Quantity to be exchanged shall be as set forth on the attached Schedule A. All volumes shall be delivered in ratable quantities consistdnt with industry standards. III. Delivery Point: Owner, or Owner's designated agent, shall deliver, and Exchange Agent shall receive, the Daily Contract Quantity at the Southern California Gas Co. interconnect at Ehrenburg, California. Exchange Agent shall deliver, and Owner (or Owner's designee) shall receive, the Daily Contract Quantity at the Pacifio Gas & Electric Southern border California interconnect. IV. Contract Frfce: The Contract Price shall be a settlement payment to be determined each Month and made to either Exchange Agent or Owner as based on the following formula: Contraot Price ($/IVIl~~tu) =(NGI, PG&E Southern Border -NGI, SoCalGas Average) + $O.OZS If the result is positive; Payment by Owner to Exchange Agent If the result is negative: Payment by Exchange Agent to Owner Payment =Contract Price x Daily Contract Quantity Note "NGI" means the price published in Natural Gas Intelligence, Bidweek Averages for the applicable month of delivery at the specified Delivery Points. 1 V. Special Conditions Notwithstanding any conflicting provisions of the Base Contract, this Transaction Confirmation is for exchange only of Gas between Seller (Owner) and Buyer (Exchange Agent). For the purposes of this Transaction Confuznation only, the definition of Contract Price set forth in Section 2.8 of the Contract is amended by deleting the word "purchase" and replacing it with the word "exchange". Exchange Agent is providing a gas exchange arrangement only, and makes no representation or warranty regarding the tax treatment of the exchanges made hereunder. In connection therewith, Owner agrees to indemnify and hold harnless Exchange Agent against any and all claims arising out of or in any way relating to Owner's tax treatment of the exchanges made hereunder. SMELL, ENERGY NORTH AMERICA (IJS), I..P. CITY OF VERNON, CALIFORNIA BY: BY: NAME: PatBUtler NAME: Donal O'Calla TITLE: Contracts Manager TITLE: Director of Li t and Power DATE: DATE: ATTEST: By: Manuela Giron, City Clerk DATE: 2 .J: - 1 RESOLUTION NO. 9631 2 A RESOLUTION OF THE CITY COUNCIL OF TH.E CITY OF 3 VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A 4 BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BY AND BETWEEN THE CITY OF VERNON AND CORAL ENERGY 5 RESOURCES, L.P., A SUBSIpIARY OF SHELL ENERGY NORTH AMERICA (US), L.P. 6 7 WHEREAS, the City of Vernon (the "City") owns and operates a 8 municipal natural gas distribution system for supplying the City's ~ • 9 municipal electric system with natural--gas and providing natural gas to 10 businesses and industries within the City; and 11 WHEREAS,. the City desires to sell. and purchase prepaid gas to 12 or-from Coral Energy Resources, L.P., a subsidiary of Shell Energy. 13 North America-(US), L.P. ("CER/SENA"), on a firm or interruptible 14 basis, under general- terms and conditions published by the North 15 American Energy Standards Board:..("NAESB"); and 16 WHEREAS, the City has determined that it is to the City's 17 advantage, and in the public interest of the .inhabitants of the City, 18 to enter into a contract with CER/SENA for the purchase and sale of 19 natural gas. 20 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE 21 CITY OF VERNON AS FOLLOWS: 22 SECTION 1: The City. Council of the City of-Vernon hereby ~ 23 :finds and determines that .the recitals contained hereinabove are true 24 and correct. 25 SECTION 2: The City Council of the City of Vernon hereby 26 approves the Base Contract for Sale and Purchase of Natural Gas with 27 CER/SENA, a-copy-of which zs attached hereto as Exhibit A and 28 incorporated by reference. 1 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 an 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, S-cite 100 10 San Diego, CA 921.21 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 2"d day of June, 2008. 21 2 2 ~2.c.r~.-~~'~f~ G`Gu~ 23 Name: Leonis C. Malburg 24 Title: Mayor /.-I~,• nr,, m__ 25 26 AT E 27 M NUELA GIRON, Cit Clerk 28 - 2 - Y 1 STATE OF CALIFORNIA ) 2 )ss COUNTY OF LOS ANGELES ) 3 4 I, MANUELA GIRON, City Clerk of the City of Vernon, do hereby 5 certify that the foregoing Resolution, being .Resolution No. 9631, was. ;6 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 8 thereafter was-duly signed by the Mayor or Mayor. Fro-Tem of the City of 9 Vernon. 10 ~ 11 ANUELA GIRON, ity Clerk 12 13 (SEAL) 14 15 1~ 6 17 18 19 20 21 22 23 24 25 26 27 28 - - 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 Eneray Resources, L P a Delaware Limited Partnership and The City of Vernon, a Chartered Citv and Municipal and a subsidiary.of Shell Enerav North America NS) L P , Corporation of the State of California Duns Number: 01-501-4421.. Duns-Number: 060883022 Contract Number, Contract Number: U.S. Federal Tax ID Number: 76-0505584. U.S.'Federal Tax ID Number: 95-6000808 Notices: 4445EastGate Mall, Suite 100, San Dleao, CA 92121 4305 Santa Fe Ave. Vemon, CA. 90058 Attn: _ Contract Administration ~ Attn: Donal O'Callaghan Phone: 1858) 320-1500 Fax: (858).320-7585 Phone: 323-583-8811. Fax: 323-826-1425.:. Confirmations: 909 Fannin. Plaza Level 1. Houston. TX 77010: 4305 Santa Fe Ave, Vemon, CA 90058 Attn: Contract Administration Attn: Donal O'Callaghan Phone: (713) 230-7505 Fax: ,(713) 265-2171 Phone: 323-583-8811 Fax: 323.826-1425. Invoices and P_yments: .909 Fannih. Plaza Level 1. Houston, TX 77010 ' 4305 Santa Fe Ave. Vemon, CA.90058 _ Attn: - Gas Accounting. Attn: Donal O'Caliaahan Phon©: (713) 767-5400 Fax: 1713) 767-5445 Phone: 323-583-8811 Fax: 323-826-1425 .Wire Transfer or ACH Numbers (if applicable): BANK:. .Citibank N.A. BANK:. .The Bank of New York ABA; , 021000089 ABA: 021000018. ACCT: 30603902 ACCT: _ 800457 Other Details`. 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 sec4on: Section 1.2 ? Oral (default) Section 7.2 ? 25 Day of Month following Month of Transaction ? Written Payment Date delivery (default} Procedure p pay of Month following Month of delive Section 2:5 ? 2 Business Days after receipf (default) Section 7.2 ? Wire transfer (default) Confirm ? Business Days after receipt Method of ? Automated Clearinghouse Credit (ACH) Deadline Payment p .Check Section 2.6 ? Seller (default) Section 7.7 ? Netting applies (default) Confirming ? Buyer Netting ? Netting does not apply Party ? Coral Energv 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 Dame es Nofe: The following Spot Price Publ/cat/on apples to both Section 10.3.2 ? Other Agreement Setoffs Apply (default) of the Immediately preceding. Oiher 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 Pa. s Before and At Delive ~ Point ? Special Provisions Number of sheets attached: 0 2 ? Addendum(s); Exhibit B -Credit Suppo t,LAddendum IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. .CORAL EN Y RESOUR S L.P. THE CITY OF VERNON Party Name Party Name By By Name: ~w»~ _ Name:. Title: Cam,, (/';~cT~.og;~ ATTEST: Title: Mayor / Mapor Pro Tem APPROVED AS TO FORM: By: By: Ma eta irpn ~y 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. PURPOS!* AND PROCEDURES ~r~ 1.1. These General Terms and .Co~~,it~'ons are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis: Buyer' refers tsf~he;; '~~y receiving Gas and Seller refers to the party. delivering Gas. The entire agreement between the arties shall be the Contr,~at ash: e~ed in Section 2.7. The parties have selected either lie "~~r,~, ~ r'ensaction Procedure" or the "Written Transaction Procedure" as Indicated on the Base Contract. {~~y, t~ Oral Transaction Procedure r~_~; ~ ~ ¢ 1.2. The. parties will use t~e~f~ ing T ction Confirmation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmis~~11l,~~ elep, s~': versation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally bou`h``~~)r~m the~time~t. $y so agree to transaction terms and may each rely thereon. Any such transaction shallbe considered a "wriin ' a ~f ~ ~~ave~ ned". Notwithstandin the fore Din sentence the arties a ee that Confer i g 4 ~ 9 9 g 9 ~ P gr m ng Party shall,. and the other party ~ gp~i` telephonic transaction by sending the other party a .Transaction Confirmation by facsimile, EDt or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaettpn FRrocedu~)Q~~provided~-that the fatlure~# s:~gr)~,T~ }~gt~,s~~tio,~~„ ~:firmafion shallot t ' ~ ' ~ a _ , greeme~t of the parties~~;~,~ rming'art .s~dopts its i~firming "~i~e ~,~e~, or ~ihe li a its si ure on~~• ,ion :tion;~~as the Identi~ t~o~iad au.~~n~ ` tion of Coro~n~ng Party. ansacfion~i'flrmatio ;teens are ,~r ij~l~'othe~ tl~' ~1~*se relating to the - cial the tran on (i.e., ic~~ entity, perftance o Son, deli e ~ eriod ' ry and/or trans~~~ Yt~~• f ondi ; rich mode ,supple , ase ConX 'tor Ge Terms a`_; ~ t- = s of tract (e.g., arbitra ' T~~ditio = ` e~sentation~it'd warrants ~ ~1~provision hall not tr ~emed to d ur , o~ action 1.3 ~r„ rA ~~s ~ .i ~xk ~ P but f~. ~ res .%fi rimed to by bQ~i~parties; p.~) hat the foe ``Ding she I invalids sactia ~ to b the a.: Writte~~ ~ `s aiort'~(,,ce~c~ture: ~f~ «~Y~` ~ ; ~ ~ • ~ ~ . ¢x< , 1.2. ~ r^ fZ~.~CEiesriU4ft ••the follov~tr(5r~y~~ransactid,~~ ,j ~`~rmatian pro ure. Sho she partie` ~n agr r~,~e~>"1,~~garding a f (~~s r r Ito ~-t ~ rz: ~'[t ( 3u ~ ~ K~ ~ ~ 3 ~ ~G} Gas ~rels~~' sq~'~~'r saction fo~~~~tarticular ~~~Q ~Feriod, the~nfim,ing any shall; , r par~i record that agreern'ei~t ~Sn1 ~ ra acfl n: Confirms i~r~~~and coin ut~~aa ~ such Trania~tion Confirrj~atwn by3f I DI or fi t f :,~~agreeable ~ ~ ~~hotta ~~p~, ~r party b}~~`~'close of ~~nr r~.ess Da f `I'~", 'n .the date : artie'r~ (sledge that elects lp,, h~7 their afire tYtent~riuill;l of ~e, `binding until ~,he excha~~e~o''r! rionconfhcti .saction r f©: s~ -pas ~'~~~ie Conflrm Deadllfy~.IK,'ffe~rb~ tom the reo'a'~i~ra a , aes~ 9V•I.• od in S_ectid~ _ , a ,,,,~~a;~~.~' '~F ru 1.3. ;,tKl~ ~kn~u~9~~~xansaction~firmation i~ i`t~te~lty drffet'ent f~ ceiving par i.~~r o tli"'~ ant referred to in S~e,~~`~,{~, 2, s d~S~i~ig party s a~l~,r~otify the seYld(~.~jarly via facs ~ n~l.p' mutually ~I ni¢ m ~~he Confirm Deadl~n~u is s~ ~ slvi~g party ha (~'fe~viously se: t " nsaction Can~1 ~ ati~fi'~~e sending 3 f. i sire of t'~ ng party to a' .x,~ ~ , k ~ w a y 1 - ~ ~ - rJ! kPt so noit`y~ ~indt ; ' ~ writing b ~ o• Confirm :constitutes I receivin artys agr~.:. n q , Gs to ~t~transaction descn e n`e se. ~ = i Transacf~ ~Confirmati = z ~~h~~e are any ~ erial diffe s betwee : ' ~e ~?Transrr~~nfirmations - ~F`~i'F t 3 . Ind '~,'•:T _ 5. {1 . govern g~ ~sam "~''ao~~p? then ne r;Transacti- ~ atian shall .binding runless r'~ces ar ~d including the us ~~afi~~tievic!'~ ~'jL~~learly res ~s'the differ ~ ~ he Transa _ ~.n Confirm ' . In the nflict ~ e terms of ~ (i) a bi, ~~ansa rmation p ,ant to Se d~ ~ • li) the oral ,eement o arties i ` ~ ~ avid ~ recorded conve ~'r ,her ~s haves •~"'d the Ors ; tion Proce~ : `e of the = ` -WContract ~ ~ , ~~e Coy iv these Genera pand F=`~i the terms - ~ a dacum ~ t~ ~ }„ry(7~overn in riority list ; ~ ~ his sente • ~ 1.4..E r~Y3 Ft'k ;arties ~ ~ ~r ~at each p ~ ~ ay ele'ctrt~° ,record all tel ~ ~ one con , 'ons with ~ is _ ~ een their respec~tiV~#~ir~"ployee 'r q `zany specie ~ .further nof"rr o2 other party ~ • ach pa _ obtain art " - ~_;~a cons gents and ens to a~~p'~~uch r~'~' ri~~ x Where th'~ ~"rties hav e : ~ ntract, the p lr ~ ~;p`o the. Oral T rrsaction dure in of the parties `~4not to cat~k validity o~r~orceability'f~~'( `atonic records ~ s entered h ~ ; accords . requi : ~ f this Base Contrq° ~(~~I,q'f~~ver, - t~ ~ h`~rein shall ~ecttsnstrued a~, '~`~~r of any obi 'onto the Visibility of. , ce. ti „~~,r _ ' SEC~~I~ ~ ~~fr .~11TION~~~E,, ~~u~~~~£n~~~~~ - ..~,,~~:(,a.~h sat ;,s s'~~ ~a:,:<t~ar~.•1.~.+~ '~`~sL`v.~,'~a~-,_>. Ks; sue; : The terms set #orth 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. 2.9 . "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 fordl other information required. herein and any Special Provisions and addendum(s) as Identified on page one. 2.3. "Br+tish thermal unit' or "Btu" shall mean the International BTU, which is also called the Btu (IT). Copyright ©2002 Norih American Energy Standards Board, Ina 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 Limo zone, it shall be deemed received at the opening of the next Business Day. ~ 2.6. "Confirming Party" shall mean th~py designated in the Base Contract to prepare and forward Transaction Confirmations to the other PartY• F tike 2.7. "Contract" shall mean the le~all~~f~~n ~ ing relationship established by (i) the Base Contract, (ii),any and all binding Transaction Confirmations and (fil) where the pages ~ .elected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have ,e,~terd through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction. Confirmation ~ ~ ~ t 2.8. "Contract Price" shall men they mbt]nt .pressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties in a~t~a,~sactlon~ 2,9. "Contract.Quantity" shall l~~~the q ~ Hof Gas to be delivered and taken as agreed to by the parties in a transaction.- ' ~ 2.1.0. "Cover Standard", as rtif r. dtto I b ~ 3.2, shall mean that if there is an unexcused failure to take or deliver any quantity oaGas pursuant to this Cohtrac(;'~7 ~heF~ m,~„mg party shall use commercially reasonable efforts to.(i) if Buyer is the performing p rky, obtain Gas (or an alternate ;~~f e. t y Buyer and replacement Gas is not'available), ar (li) if Seller is the performing party, - sell .Gas, in either case, at a price re Sof~b~f 'for the:delivery or production area, as applicable, consistent with: the amouht of notice provide tl ;`the nortpe~u~ arty the imrrap~l' f ~p~ r,: Gases umption nee G jj ~ . Gds :ale require ents, as applice { {:quan rts' alr.~d~`; and ~anficiP~ # :at~ b ' ttironpe . • tiing~~ r~a^~f . ±s 'i 2.11 • . t Su p~ .;a ation(s}R4 " 1 mean a ~ - f~~on(s) top ; ; Ide or es# ~ ~~,h credit s : .br on a party to this O~ r~;;~ch ~ ,vocable ~ by letter a a margin 'agreement l ~`repayme ; ; `~'r . int .re ~ ° `h -asset a perfor~i ` ~l~nd, ~~1~ ~ far other ~~~and suffi i ~ "~irity of a cd~fhuing nogg j_ 2.12 ~ A hall 1 ~ „ - ~w , : y~az.period of ~COnsecuti+~ ~ .,r~~ coextend e'wifh a s define;y ueceivi t • orter In a particu~~~ F,n ctiort ~ , 5~~ ~ ~ - - ~ ~d ~c~f ~ ~kYi. ;~i r~,+`~' ~ ~o' fit ~ ` ~C ~ ' 2.13.~,~,~.~~1 J' P~`~ fall be the I`,ftud during I~~~i~iveries are;be made , ;greed to : ~s in a on. , v ~ Y- f i ~ 2.14. ~~11 Pl#~ ~s~'s~ all mean ~ oint s 3~~~~ ~ ~ ~ ~ n s ~ z ~ry ~'~yN~~~ p ~ fi ~,a,~~greed to by~`~ parties I~ tansaCtip ~ ~ y ~ ~ ~"G, r~3~i ~f~~l~;1t?:, s'~~~ y, frnl£ ~ -2.15. ~ t~~~3~1 ~~la~ll '~r11~ah~~Ti electronic tfa#a interch ~'~~~~u~suant to ar~~greement e~~ered into b°y ies, sp i~`? ,relating to 4 ~ r -r f s r ~ < ,a, the co,,,rriumca)igr? of~'i%t`~ ~~~dtion.Con{1r,~rtafions undet~1, ~ntract ~r"~ ~ ~ k, ~ , Ys l r ~]n 4rl sr.7 k Y ~ 1 J a r .5`~~Frd i ~'(~~l la~.~ Y -rS ' t k e t Y€ ~ ~iv xt , .y ?>.t - 2.16. a ~F " s II! ''Y ~e urchas`e~le or ezc ~ ~ Natural Ga : '.'r~tl~e "physlcal~~ ~ . e for ; ransactlan , ~~J' ~1 ~ ~ , p r~~ ; r 4r ' involy ~ ~ ft~~ ~e~~~~",cts. EFPSrPi~all incarp meaning f ~ edies o ~ ~r ~ , ~ ? d hat.: ~ excuse for nonp~ ~~~~ce j;~,ii,~~~i'~:tions to deliver. or recei~ ;~~vi~l~b~~~ov~~ the rules t~ ~ ~e , , t tinge regulated under~~'.~~mm~'Olt"~C~h'~~'d~~llge IgCt, s i}~~ k ~ s.` r, `~'j~~" t~, - ~ v~ . 2,17. ~i s~a~l ` ea x~that either rty may int~c~ if~~performan ~ lthbt~t~'li bility onl ' ~ `that s e • ~ rmance is ' WY .t V k' a ~ ~ '.p „ preve ~e~q~i`eafi{,~~ ' ~ ,ce Majeur j~rbvided, h e~ ,r~;~ hat dunng orce Maje ~e interrupt` ~ mvo a Majeure .tj lr~f5` .3~ r ~5 k~ t r* P a• r h A `l may b~~~ r*e;zppnsible3~"~ ~lmbalance ~ , rges ass ~t~ Section 4~~Telated toy ~ interrupfio ~ a~r~tomin ~ R.. ; ,ode to the Trans'~~e<~ ~r5d u~~tJ§t Inge in del ~s and/or ~~is~la confirme b the Tra §rter. ~ ~ :f 21 ~ -ter„ a~3f~~~~ ~N,sl~ ~ c;`~` F'~~`r _ . 8. sha,t~e~a'"r~ny mixture,of't~ydrocarbo ~~r~oncombust ~e gases ia. seous st: f3~ ~ g pre a ~t ~ ~ methane. H f t. r~ r,: - ~b K y. a r~r ~ - 2.19.E ~itl~~lanc~~, '~t~¢" shall m~~~aany fees k :s, costs o ~~~harges (ir,c,~h ar in ss~ used b ffi. ,sporter for failur~t¢,~~'~ the-ry hurter s balan dnd/or norm ~ I equiremen ~ 2.20. ~t~','~e~'ruptibf a~lf~mean that~d Ker party pt its pert ~ ante at Mme fora 'S ~ heth aused by an ev'~ ~rce M. r With no liable exce t s ~ tin a a be re " :ibis for a ~ ~a >;e Ch r : et forth in Sectiog~`~~~ated t ~,ru tion aft~~ fie Women ~ p ~ g p y ~,f ~ p ~~de to the ~nsporter ntil'the c: tµ 'leve`e receipts is confer e~~" `tins e ~y , i ~ x' K 3 Y :.3 :C' 7 ~ ~ ~.x,\ ~3 J ~i 4 54' ,Qa " 2.21. ~ ~'ll~tu" sl~~l~~" `one milh~~~~tish the` ~~which Ise valerit to ~ ~ ekather V~` ,a ~ ~ ~ e' ~hn s ~ ~K~f s ~ s ~ > 2.22.~~~r ~ , ~ ri the per~~eginning rr ~„i) t ~r .qy Galen , •month lmm. ;prior to the comma =:e~.nt of tf~ .~~stay of the r4~~~-.calendar ~~~~~r~~>x,~n~:-.... ~ 2,23. "Payment Date" shall mean a date, as indicated on the Base Contract, oh 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 Transporters) 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 t~ 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 (il.) 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. 2.2Z. "Transaction .Confirmation" shal>Ymean a document, similar to the form of Exhibit A; setting forth the' terms of a transaction formed pursuant to Section 1 for a partict~)ar Delivery Period. t 2.28. "Termination Option" shall mearth~eption of either party to terminate a transaction in the event that the other party falls to perform a Firm obligation to deliver Gas in the casof ter or to receive Gas in the case of Buyer fora designated number of-days during a period as specified on the applicable Transaction ~onfi Pron. ~t 2.29. "Transporter(s)" shall mear~'~~all ~ ~ffthering or pipeline companies, or local distribution companies, acting in the capacity of a transporter, transpoNng Gas for Selleur Bu~+~~~~~ S;~ream or downstream, respectively, of the Delivery Point pursuant to a particular transaction. SECTION 3. PERFO MANCE OB ~ ATION 3.1. Seller agrees fo sell arm and Btu agrees to receive and urchase, the Contract Quanti for. a articular transaction in P tY p accordance with the terms of th ~ S ~~~~.purchases will be bn a Fitm or Interruptible basis, as agreed to by the parties in a transaction. . ~ .;r' . The artles have selected eith • `~yt'Co~r~~',~idard" or the "S of Price Standard" as indicated on the Base Contract. Cover Standard: 3.2. ~~Tj<?,e dole artl~~r«~~v~ ~rerMedy of the p~.•ttes~ tra i a e ®emt~of a t~; aaf~~~of a Firm oblig Q T' ~ , ',ye Gas~~hall be ''~~r .r r~ 1~~Y .e [ ~ F recovg follorl t ~~3 ttre ever~~%f a brea~~i ~`r~r7r~aa~"iy pay by Se a ~ t,eq~al-sto the posittr t ~e'hce, i~~~~ ~(vveen th %~~hase pri~e° a`~''. ~'y Buyer utl g the C ~ Standar ~ ,ntrac djusted for com er ly~r~asorf a -.i ; rences t ftsportafio a~Q or from ~ Delivery - ga(s), mul 'e diffe ~ tween the Contra ~ tity a~ :.entity act ~delivered~ ~ • for such ~ s ; or (11 he event a ' ~ , yO ~ ~ by B r.. ;.ny DaY(s), paym er to ~ p I ~ the amo [ qual tot Ye difference , f any, be the Co_ . end t ~ceived by Seller (i f ~$~,~,e C d t' ftdard for tpsale of s adjusted ~ ~commer `easonali , ss to tion costs to or ~ ehv ~ i ~ t multtp e i the dill , ~tween the ~ ntract Q and th ' tuall . ~ Buyer for such' s ,j~~,~:(ii k~~,„s•event th ~ -yer has s merciall ~asonabl ~rts to r' • Gas Chas used com I~I~ir so ~ ~rts to se a Gas to ,~~"~,=artY and q:such repay ment or table, ~ "sole and exclu r2~n~ec~i,.of %irming pa ~ all be a ~ ~ ~ ~ the ' ~ adjusted fable dtffe ~ ce betwet~e Contra. o for su h;1Yai~spp)Ftati~o ~ ~a ~~e applical~`elivery: PbT ~ jplied by t ~ iiifferenceiween the a~ uant < • ife quantity actua ` dq~'t~~q~r~~i f~~x ~,t y Bu er fo`r~ ~ [ z y,~s~l~ end recety r~ y ~ ,~~ay(s). Imb ~:ce Chargr„shall not B ° . d un ~ action 3.2, but Seller ~n~l/o`r,~u~er~,~ ~Ie responsible. for Imbal c C ' rges, tf a ~J~ y~~*~ provided m : cunt ~.nfavorable ~ ia~{ ~1 -iyy i . ~r`-h':~5, nor " 1~ F€'4 s~£7 differepce shall ~e p~y~'~'i~e,~tve Busine.s~~~pays after ~e~~lt~floh of the ~c?~iing party c)i r' ~ pl seta d ~~~`basis upon which~Uch aii~ou :t.;W`.~tc~af~Ulated. ~~~~,~}s~# ~r ~f:.. . ..a p. _ - ~ .ev I, i'=7 ~ ~f"~`i~ur~iv t~ a`1~7~.~~i. y* y~~ ~ C- ~,~n Spot Pace Standart! .~~~X~ ~,;~t ~x;~~'~ ~ 3.2. The` sole aYitl ~x~l,~sive reme the parti~e;i, ~fl~z~,~event of aRp~~~~l~ gf~a,Firm oblig ~a~ f i 'r or rd,~~~ ~ as shall be recovery of $(1e fbAetinrrn ~~(r~,lim the evert ref a breach ~t e)f~r on any ~ y(s`/, pay ,ant b Sei _ ri ah a ual to the dlfferd ~~be~it3vee~~'~e,~~t~act Quant~it~r ~hd the ac ~ I _ a~ltity deliver r~ by Selle~jd received ~ ~ f~~5r suc,~l~ ;~s~~,~•_multiplied by the, ttl~~ diffe,~,i~" ,many, obtalrt,~y subtrac~,~t~ Contract Pn ..from the of Pnce; or`; ~ event o ~ ~ by Buyer on an ~ 4~}r pad ~~~uyer to SbJ~in an am ,Ito the dlence be rs~ 'the Cont f • and~ii ~t~tnal quantity deiive dM. `~Selle" i~' r~'ived by ~ ~r for such ~ .~multiplted 'tthe pose ,.fference, Y~ t~alne - actin the a tic e 4'ct Pr is _e Contra' "~.xice. Imb I 'e~har es shy `'not be re ~~red un 9 PP a i , g ~I. de on 3. ~ Iler and/or Buyers ~ resp~§r~' ,~~r Imbalan ~rarges, i a r;'`'rovided rn action 4.3 amount favor rence shall. be par ire Bush ~ ~•ys after ~ntation ofa 4~orming pa '~`s invoice,. :.i'ch shall •e bas : ' hich such amours A ~~Icula~ ~i.~"'. ~ r, 3.3. ,~~~e3lthstari't~t~ ~~otion 3.2, tl~ ~}~arties mz~y t~l=o Altemattt ;;Damages ~Transactr ~ r titian ~ ~ i in writing by both~P~a'I~'f~s (~t; ~ ti~ "`fx fy~rv~ ~ ' `t ~ 3.4. , ~j`htion t~~~'' )~i~s 3.2 anct~~ the parti a~: pprovide for ~~'~~~~brminatio Pion in a ~ ~ 'Confi fl ~ ~ xecuted in writin~ )j~ h parti~'~'~, ~~Transacttb" ~ onfirmatioh~ ~~ahtn the T; 'nation O ~ will de$ tl - `en th ~ ~ ~ g 9 . hi5erformance trigge. ~ ' J'ermiry~'t~ ~ 'tion and t~i`a;~~ocedures~l~e"ft)'i~~'' eo : ~[dama j ~ for no . ~ • e rll~b °~'ensated, and IIOW II ~I` I f'1 COStS~~VI I~D6• ICUlated:''ta~;, . ~..~t"~~~n.~.~~:i !a.:~~.~t ..ra.,,,. ,,..,,,i;_ ' 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, gluing 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 Transporters} 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 patty 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 Aprii 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 Imbalet5"~a Charges paid by Buyer. SECTION 5. QUALITY AN i~~ A~,~ASUREMENT All Gas delivered by Seller shall meet ' p ~ _ re; quality and heat content requirements of the Receiving Transporter. The unit of quantify measurement for purposes of this Cor~~ct s I one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures ofthe Receivin ~Tra~ . ~ i~~. ~ fir SECTION 6. TAXES ~~r;: The parties have selected erthe ~B~r PaysA~frd After Delivery Point" or "Seller Pays Before and At Delivery Point" as indicated on the Base Contract. ~ ~ 8u er Pa At and After Delive ~4 Seller shall pay or cause to be pal~(asces,rfees jevtes, penalties, licenses or charges Imposed by any government authority ('Taxes") on or with .respect to the Gas prior to e~.~~irvery~f"'3i~~~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 pia Dairver~ 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 ~romptl~! reimburse the other;~arty for such Taxes. An arty entitled to an gtS~mption from afi `~st~~~`faxes: ~,r Saar a f ~~11 fu isJl:the of ,;,~~g ~~1~ ~ uientatio ereo~ ` ~ E ;Y'. Sellers t~ ~~ore a ~ a ~tive Pot ti~~ ~ ~ ` Seller I "y or ca ~ ' paid all ta~ i flees, levie ~I es, licenses .charges ~sed by an nt au d •~xes") on or with r fq~ _e G a the Delivs~ int(s) an ~ ~ at the Der ~ ~ry Points ;,yer shall ~ _ to be k;~axes on or with r ~ ;t~~ ; e rythe Delrv~`,~oint(s). ~~r is require remit or F Taxes tH: ther ponsibility hereu ~ ~ r fl _~j'le for suc ~es-shall r ~~n ~ ~rtY - ~,~s~~ ~ _u~ ~ ~ermbtarse tf~ they pa such Tax riy anti ~ ~r~exemption from. ~xes,?O ~~fra, s shall fu, }the other ~hecessa ~ umentati ~ ~reof, f~ ~ Sli~~tt S[44~`r a4F ~y ~~~~~y ~ ~ ~ ~ _ j. SEC ,;~B~l~ING, PA 51~,1~~fiJT, AN©,A~r,~T ~ ~ ~y fi ~ '~~~i i~~, l7' ,"~e+`-fin ~ s. „g y~~ ~ x~3 € j 7.1. ~ ~e li3r shall t~tv8,~r,~ [3uyer for C~~$;delivered ~~i~{F~yed in the ieedi Mo r'~~ ` l ng and for a ~ g ~ ~p'plicabl Ids, providing suppo i~g;~ocu>rrtenta~l~sn~,aptable in indiai(ry practice~~~a~lt the amount` <arged, ff th~;~ctual quaf'( ' rs no ~ ~'~y the billing date, bl GHQ lflnll f~;~re~~r~7~~sed on th~~~ntity of Sc"~~1~1 fGas. The i vaaed quantrty`'i~ii Y ' j = d the ~ ~~,tity on the followi t obi s~b'irli ~ o e ' 6 ~ #t! , ~«~~r ~~§~sban there ~~ra5 actual dey~ r~ormahon rs ~ , ~ a - . 7.2. ~ '8('i~er s~j~all+t'~',~~j~~11~`amount de~e~lander Section ~t ~ x ~t ~~g~ar~~er ~ the Base~,~ ~ j e(_ ai a 1e funds,. on or before ~~~e'#ero N~`a, r~}v ~y ~'r~ Date or iQ ~~ys after r~~~~ ~ `~iri~orce by'~ _rovided that ~ . I ~ ~ . ~ ~ $ " ~ ~ f ~ Y ~ ~ e `f' ~~usiness Day, paymq?~ ~'`~tl ! r, orb ~ f~i siness Da~ owing that da ra'the event a f -a tl _ are due g . ~ ~ a ~ er shall be ,j~.-~t,~r ~ ~ , ,K P Y~ ~ ;~y made; r~~a , an~~~ rs~Section 7.2 ' r ~ ~ a • ~ ~ . r' ' ' ~ ~~3_s~~iy, ~R;f. y g Ci ' ~ - , sAii ~ fib, 7.3. I~ }t `~e e ~ gri~~yn7ents becai"~ue purs ~h{,,c~o~ actions 3 ,or 3:3, th~erforming r~ ~ subrnr r~olce to the non fit a ~ ~ , F ~ 54 F~ p$ p s ~~cceleratec(~ ;ment.sett # ~t~the basis u~ n which the voiced ar~,~ n §alcul .:mentfrom the nq Apr grr~mg ~a 1 a~{!5e due fiva~,~'~'~,~Siness Da` w { ~~~~ceipt of rn~ce. ~ x` S hit sr { i ~ ~ft R? 7.4. ~ s invor ai'~rh good fartf~{ ~sputes the ~ ~ < < any such rn Ice or an -thereof, s * _ ~ patty '~~ch amount as it u~~ u;~ . to ~ ~ ~~4,Provided, 4 :ever, 'rf th ~ p ~ Party dls~~s the a .dine, it m ~ . ~ sup ~ ~ F rnentation accep t~lemd~dustr~ ,~to support mount p . ~~t~ •Lted. In the vent the are unab ` o . ve such -~,u either party may p rs r ~ ' rein ~ila}jle at law G~ , ui to en ~rts4n hts ursu g p to this ~ . ~ y~ ~ ~ ,_I ~ ~ ~~~ils to remrt~ II arnoun ip aivhen due, i~ rest on th ~ ",laid portion I - t from ~ ~'ue until the date o`i' ~ brit at aA(~ al to the lo, ~~~of (i) the , ~~tt.'ve prima t of inter ~ fished un ' . ~ - j'Rates _ x, ~ /11a11 Street ~ ~ Joum , ~ ~u~'A Pe : _ ~k ~i num; or (It ~S,mawmums 1! y e lawful inte.t rate. _ 7.ti. : ~ shat. rs right, at expens ~ F 'asonable ahd at nabie tim; ~ Inca ' d to obtain copie . ~ levant ~ ~ ,the book ~ ~ ids, and ` . e r , gs a other a :only to ~ one ` ~ . ' sary to verify the ac:~~ x~ any s .,,tg~. ~ harge, pa , ,eft, or corn ~ • ~ er ~re~~' ~tra~t. .:fs ri9.~ ~ . ~ Main copies shall not he 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. lie 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 appl(cable 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 amor]nt 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 specffically 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 arid any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(sj. 8.2. Seller warrants that it will have~~~Ye right to convey and will transfer good and merchantable title to all Gas sold hereunder and .delivered by it to Buyer, free and clear~3f ~~(I liens, encumbrances, and claims.. EXCEPT A5 PROVIDED IN THIS SECTION 82 AND IN SECTION 14.8, ALL OTHER .WARRA I I~ FJCPRESS OR IMPLIED, INCLUDING ANY WARRANTY- OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PUR~O~,RE DISCLAIMED. 8.3. Seller agrees to indemnify ~~8yers~~ave it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims") from ny a~~~~~ersons, arising from or out of claims of title, personal .injury or property damage from ~r ~ t ~4 said Gas or other charges thereon ` hich,a,~tae~.~before title passes to Buyer. Buyer agrees to indemnify Selier and save it harmless from all Claims, from an and all erson '~risin ~fd`'hi or~~` Y p ~ g~''~ of claims regarding payment, personal injury pr property damage from said Gas or other charges thereon which attach after e.~asses to Bu r ` 8.4. Notwithstanding the oth ~ '~s ons of ~ ction 8, as between Seller and Buyer, Seller will be liable for all Claims to the extent-that such arise from the failure. pf Gas ~I~~d: by Seel ~~ieet the quality requirements of Section 5. SECTION 9: NoTlc f,(~* ~c. 9.1. All Transaction Confirmations rnvolces, payments and other communications made pursuant to the Base Contract ("Notices") shall be rn~a ~Ra~' to the addr~sse,,~ a~eplfied in wntirt 4~ tie e~pe4ti a r„M~arfe;; o~ time to time. Ll-. ~i. yi4 '~Y~ 1. li a'~~}-a , F ~5T7 ~ Z~ r ~ lf~t ~ '3'aYs Y,3 i~,.l[^ -3~'t%i' p':`?~'f3 ~ F ~ . F~ a+r q ~r~ ~r~-`"• 7r~ § =s'rq`SN arF ~ :s t. _ R ff- ~ - '4 9.2. ~~.~~Ij~~lotioes r~~u r~.d ~"ereund 't` ay be s~~ a~r`~or - ~Ily acc le ele.~~ I r; a n , re~nized 237 a - t~,Y"xH,.i~i ~•y~~ .i'w£ + 8 overrngfi ~ ~ftr~r se rs~'olass marlror;hand dell e~g~ ~ ~ _y~ ~ E ~ lY ~;yiN 5 9.3. ``~es $e shal ~~~i2h when re ~d on a B ~ ay by the. gdressee. a absen _ ••of the ~ ~ .ceipt date, the fojl'~~'~ .esur~i i~' ~ ~~ill appiy y ~tices sen ~ ~ f~~imile shall 1~ deemed ave bee ~u" .pon ~ ~ ing party's T rf , l ~ , ] Y.qv' cut receipr#~~~ifs` apsimi~l e~hines con ~tion of s c ~~1 transmiss If the ~on which u 1~ smile i d is not a Busin~~`~,~, ~ ~ is ~ ~('i ` ~ ~ ~ ' ~ following ~,~r , ,p~,).p.m. on a ~r~Uless Da ~ ~ ' eh facsimll -hall bed ~ 'ed to hav , ived o f Busing`' ,7~oti se ~'~prnightma fir"courier sh~l~ _emed to ha `been rec on the rti ss Da as sent or such d ~fi~('~'tlte~as,~ ~~Y4~,~it=;med by tl~~~feceiving pay ~„N tice via firs lass mailisi~~f be cpns'• 9 ~jvered ~ y~ess Days after m~ ~j ' ~ sF, ~ <f~ ,~'Y ~~•j` 1 7 {k~~ ~~fH~lty3.~ ~ - 5 lz t~pf M Jg~~: ,~-h ~ d ~ttLfu ~a 2, a AX3r +s1'7 ~qit $5' ~Sj:: ~VV'x . h~ 3~~ A3~~ , SEC;~I'~~~~~~'I~ ~ ~ r NA~NCIAL R~1~~PONSIB I ' x~`~~_. a ~i 5 h, r c~ - i r~~ ~ ~ ~ ~ r: 10.1.E ,t~f~ ~t~~r~~?at~ ~X~~ :~as reasohd~xle ground p~h~eaurity regig the perfd~~~ f , tion .s. Contract (whethg~~~~PFh-n~t~(ah~~(~ga~~ by the o't~e~; party in''~o t~drng, wlthb~u~~lrhltation, th ~ ,mate I.,2 nge in the creditur~h~tes~ f t ~~~'~~rr~ demari~Jryt~~ie uate /~~ss ~ ~e of Perfo~rrt`n °Ade u~ a ~4~" + ~~iti>x i~~,t r,,~,~~,~ Y q sk,~rz ~ , ~ , 9 ~ f ' E s shall mean suffici~'~,ts~~~cr]nty~l>~~t~fp~ , amcurit a?~d~ „for the te~~ ~ ~,m~~~y~;~cce~i~~e~~ ~X, Including ~ ~ i. ~ y irrevocable letter Qf~c~~•_i~ a'~~ t a secu Interest in' ~ # t5 ~.pa~,x , tY et or a pert ~ and or gt.f ~y t y the.. r s~. • f any. such h, ?a:' , Y n ~t a 'fix d S. ~ ~ ~ { tv~k v ti 10.2.E ~In the eV' ~ ach an 'Event b~fault eit r; the "Def tin Part r its uar o I ' ~P ) ~ ( .g Y ~ . g ~(I) mak' a Ignment or any g~ ~ a~ ~rra tv,~or the ber~~{ of creditg~ I)~Ile a petititi'h or othe . ~e commern~ ~ .~~)ze, o l ce in the comm ~ft!3ent o~ ~ ~p~eeding or cae'e tl 'der any b k ` etc. or simllarj~w for the r section of c • ~ ~~~ave lion filed or proce i, ~P~. fir ~ t r l~ ~ ` q ~~~o7nme~~i~~~galnst it;: (iii) ~~h~~ ise bec ~p~ nkrupf or ins,~S went (ho ,,evidence • ~nable~, : , s debts as they fa~~1c~i ha ~ ~ ~$jver, prove b~ai liquidate a rvator, cus'~,;,ian, trust t other si i s Ira off ;I f~'res ect to PP p it.or ~ ,;ally a ~~sets; (vI) `~I o perfo 3lgation to '''other pa , ith respe ~ ~~edif ~ bligations relati Conf~ 'fail to gI ~.;'dequate a of Perfo ~sance un ~ ;~:ction 10 r , $ ho s ..least one l3usin.. ~ of a w, nest by t her party; ` ~iot have p any amo ~ Ge the of reun ~ before the secon ~s~,~. ss D 1c~~Ing written ~ that su. f ~`pnt is due, ~'~n the oth rty (the " 4 ing P ~ _ r I have the right, ~l~ t~s ~BJ~~ elec~~ na ~rnmediatel~nthhold an ~ s~send delive or pay pon Not • ~ = o ter yad liquidate the tr' ~ ~ft~`ns un t ~,AContract, t 3~ ~e marine r t ~'d in Secti y ~ 10.3, in ~ ~lon to a ~ father ~ available y~~i GY k„'4~ 99 4.' y. 10.3.. ;,Event, tit has occ~ tl and is I the Non s .~ulting P hall hav ~ , 'y Na. ~ 'Defaulting Pa t~or~' Hate a~ ~ ~d` earlier th ~ e Da su. a ri afar tha 0 Da ~ . f. m''k,. s ~~r ~a~ Y , as an early termina`~ion ate (the ~ar~y"~"ermination Date") fpr the IIquI a Ian and termina on pufsuarit o ec on o a 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 tie 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, Ina 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. Earl Termination Dama es A 10.3,1. As of the Early Termrnatipn. Date, the Non-Defaulting Party shall determine, in good faith and in a commercially reasonable manner, (i) the amount awpd:;(whether or not then due) by each party with respect to all Gas delivered and received between,the parties under Terminated'(k~ansactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such del~verhe~~.and receipts (including without limitation any amounts owed under Section 3.2), for which payment has not yet been made. by th~ p .that owes such payment under this Contract and (ii) the Market Value, as defined below, of -each-Terminated Transaction: ~e io~efauiting Party shall (x) liquidate and accelerate each Terminated Transaction at its Market Value, so that each amount~~qu~l~ir difference between such. Market Value and the Contract Value, as defined. below, of such Terminated Transaction(s) s,)~all be~~u~~, the Buyer under the Terminated Transaction(s) ifsuch Market Value exceeds the Contract Value and to the Seller fi e o~slt s the case; and (y) where appropriate, discount each amount then due under clause (x):above to present value in a mmercially r~~sonable manner as of the Early Termination Date (to_take account of the period between the date of liquldatro ~an~~Jti a date ~ which such amount would have otherwise been due pursuant to the relevant a~`x~~~ ~ Terminated Transactions). ~y~~s,}~}E . ;~hz` r For purposes of this Section 1O~ci~~1 ~,i~~ont a~,iae" means the amount of Gas remaining tv be delivered or purchased under a transaction .multiplied by the Co~~trt~~nc~.'~~ ~ ~"Market Value" means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by fY~tti~~~tark$ ~ ~ y~ ~~or a similar transaction at the Delivery Point determined by the Non-Defaulting Party in a commercially reasonable mail"ner ~escertaln the Market Value, the Non-Defaulting Party may consider, among other valuations an or all ,of ithea settlement prices of NYMEX Gas futures contracts,. quotations from leadin dealers in enerigy, awap contra~(~ s~S~S~.~ Ysica~~sgas~'~r~~tg mark ,t~~ simrli~r~`( ~~r~~pu~g~s a y'~othe .ono ti8~ r~ ~~e~jl.-'ust~c~~r the length~of t~'e~kt~rm ar~i~~rnces in t ortation ~s a shali,'i~t be regr~ ~ 'f~ ~~ceme • ctidn(s) in ~ ~ ~ ,;p rtY I 'ri to enter.3. order itq~~c~etei;~mine ~r~~t Value extensro jb~~Ihe term of ~ ,ransactio oh which p": i ' -fit bou. the Early Termir`~ d~ ~ to (r ttd abut not li t d to `'eve 4~ F ovisions" fall not be ~ .~l' ) ~`~"sidered i" ~~ng C •:.lues and MarkQ)~ ~ For h~, dance of t, any op a i r~~ant to whr_ 4~one pa the right • ~~he to - • ~nsaction shall red a ~,inin Co ct Values ~ et Values ! _e rate of r t used i ~,a r net so ~ :clue shall be det i' ' th ~ .,dfaultin Phi vain a comn~t 1. "u;easonable§~anner. 4_,~`~ Earl f m)~;ar ~n ges Do Not I~ ~ ,~f~ 3 1~~~~~~~ of ~tly Termrn+~f~~~h .Date, tq j ' ~~efaulting -qty shall rmine, in~ , t~' and menially reasot~a~l~a'r~ir,~~ e oUnt owed `(~iether or n ue) by each _ rty with r 'ct tc al{ Cba ~ iv d an between the pa~~~'ft~r~~der 'i~~%[ni~~~ed Transaii(ro~;s and. Ex r i'` 'f'ransactlo ~~`c~ ~ ~ e~"'~~tion all other _ ~ ~ ~ r~l and be orfe the Ea a applicat~lc gfi:~rge~ r~t~trYh~'~o such deli~'er~~s and re ~ eluding with ° t+mrtatron ~y m u • ' - ~~er Se 3 ~~;for which a merit.has=~So~~ xQttge~Y~s~~de b -they that ow ~ s ;a ment unef~,,,IS Contrac The p~rtre~ fra~r~'~~~ectetlxrrither O~tfieAgreeme~~~5~~`ffs Apply' r`~f`~~ her Agreemrr a o p as indicated On ttl~ B$Se{•QOFt`~,t`'a `t i ti~ f;,~r~ ~~.';r~~~~ '~,t-:: t ~a~4'& a Other A rumen ~ySe~dA~ I k . ~ ~ ~r~~,' ~U ~ ',Y6 ~ ; ;`~~j f ' ~P ~s+. F ~ ~2 ~:Yl` L e~~~F ~f x ~ ~:~C~1~k-~LFaraf,(:~P3..ksT''~ - t s ~i ~h Via` . 10,{~2~,~ Th~~ ~vf~iilting Part~~nall net o.r ~,~~~e, as apprc~ late, any gd aA amo ~an• ~ bttwee hth ~ .dies under Section S10 3 i sc~s'th t J~~$~"~i~h amoun~~ ~~r~ netted g~ ;~g~ated to a sl;~ 1 le Ilqulda e~ amount p, F b e'~T,~`Ihe pa , , ~ other (the "Net S~~~tlerrieht A ~ p~~~l~t its sole o ,ion and wIt ~ ~ °ior Notice tort' o Defaul ~ =+Part the: 'n f: ' ' ~ r I ~ Y. p ~~~iiting . F setoff (i) any N,.~~~S~ttlemer~~~~rib~l~ kyf`sowed to tf~~ l~~n-Defautti ~~P~ry against a~~ margin o f~er collatet~;~~~fy`yit in c A with an Credit~`,~,~~5F~5't Ob~~q~ oFt~~~r lating. to ( r,;~ontract; ~ Net Sett ~nent Amo3 ayable t~ h ~ ~ulting ~ ~ ainst any amoun~~ =~~able rfp,~efaulting ~~.r~y to the aulting Pa ~'~~under an ~er agree - range ~ _ een the Othe ~ " f~.~lnent ~~~t`~~ Quo Not A )?~k ` . F~~i~ ~ - . 1 b f "fhe i~J~o,~i~~~~~Ulting Par~y~fl~ll net or t f e, as apprc~R 'ate, any - ~ : it amoun ~ ~ ~ a; etwee ~t -s~'ies under Sectigsfljlt),~~E1 so tfia'~~~~ch amount~s~r~ netted ~ ated to a sr ' le liquida~~` ount p ~ 7ie pa = other (the -Net Stet~lemefit Am~Lt~ ~'~~'At its sole ~ ,(t n and wit= p`r Notice to ~e_Defaulti ~ arty, the ~ ~ Icing P etoff any Net S~ 13~~~.n'Y Amo" tt ` W to the No ~~~faultin ~ g ainst any m Fein or oth ~ ~teral hel ~ ~ nnec ~ ' ' ny Credit Su ~~~~II ation rr ~t `the Cont ~a ~s~t _ - 1 b~~ ~~3.a~)If any~,H I~ Qn that is " ` included ~ ~ ~~n. ~ ~k~,.~ . `egg ,T ll~~;er. se off i?.~~; ~~~~~4.. ; ~inascertalned,. 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 5ettiement 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 accnae from the date due until the Copyright ©2002 North American Energy Standards Board, inc. NAESB Standard 6.3.1 All F21ght's 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. of 10.6. The Non-Defaulting Party's rer~ie~les -under this Section 10 are the sole and exclusive remedies of the. Non-.Defaulting Party with respect to the occurrence of any ~rl A ermination. Date: Each-party reserves to itself all other rights, setoffs, counterclaims and other defenses that it isor may be ent~~d~to,rising from the Contract. 10.7. With respect to this Section X10,. _f, parties have executed a separate netting agreement with close-out netting provisions, the terms and conditions therein sh; ~~~pre~he extent inconsistent herewith. SECTION 11. FORCE M• JEU;RE~~;. 11.1. Except with regard to a ~r rty's obligati~t~ make payment(s) due under Section 7, Section 10.4, and Imbalance Charges. under Section 4, neither. party shall be' " "f~'°~~'the of e ~~~r failure to perform a Firm obligation, to the extent such failure was caused by Force Majeure. The term "Force M i1f "ire's em I -::herein means any cause not reasonably within the control of fhe parry claiming suspension, as further defined mi ~ ~11.2~~ d i 11.2. Force Majeure shall me ~ ~ e~ ut .~~'~f ~ ited to, the following: (i) physical events such as acts of God; landslides, lightning, earthquakes, fires, storms or sto~i'~~rrrl~~s~sch as hurricanes, which result In evacuation of the affected area, floods, washouts, explosions., breakage ar accident or necessity of repairs to machinery or equipment or lines of pipe, (ii) weather related events affecting an ent~r~~ ~ ~(~g~raphia~re g~4~su~tl~as lovybterrraer~tY r tl'ph~ p;~~fre~z' ~r~failure of waif ~ r ! ~ al' ~ terrup#f n',~and/or curtarl,{~ ~~~Firm'tr ~~~t~lon: an~~~~~storage'b ay~ n~`~'oi~~(Iv~~ of of sasuch.' ~t- ~ .t~er-fil~`dustrial ~ Q 4 ~;T,f ~ t~~~; irisurrec~r~r' or wars 1i ,~governme t ~ actions as nec - I _ mplia w . h any court order, ~ ~~te, o r nose, regulatio policy h ~ effect of la ,~romulga ~y a"gove i i = hori ~ . tirisdictlon. Seller . t ~ ° ~ ~ ' ' ~~r sh I ~easonabl bits to av~`J ~ Q ~dverse Imp ~s of a Fo ~MaJeure a" - ;the '•-ccurrence ~ v F y'. ~ 3•-l.k -a' once It ra~my~rred p~ ~ ~'to resume ,ormance~ ~ a ~ •'r 11.3 ~~~~'~~`f~e`~ a ~.e entitled a~t'e benefit ~~~~pvisions of ra~`rce Ma'e o the exte ance i all of _ ~ s ~ ~ g _ ~ nces. i ~'`,=curtailme _ '~rru table o sl3condaJ , ~ trans o Ys n ~ atha Firm transpo~ I~~ ~~alsbr ~r~~iled• (ii) the`°p claimin ~~e, failed to I?'redy the ~ ~itlon and ~ tu, the p ~ ' e of such >4 he'd zf 't ra r ~r x+`a wr M,. d~. ~ covenphts~q`r~cPr~at~n'ts with reasonabl$,~Ispatch; o~ f~l r~~gnomic har ship, to incit~,c~ without lirn I.er's a II Gas at a higher~Qr,~o~6~~~va ~ti~=price than e. Contract P~ r ~ User's abllrty urchase ~ ~ at a Lowe vantac~~ >re than the Contra rQ`~g (afo'i'y`agency dl `~~I)Qvving, in wti 1~Ed,;~~ii art, the a hrou h o~'do,~•'sts resulti`• ~ ~ ~r~: ree ~ ~ ,s~j , ~ ~i P P ~ g lY. ~ ,,~la the loss of Buyer' strt'~11<~f(~`~~ir l3~ d~~1?5abrliry to Os~;~r resell G~ ~f~r.~h`~sed hereu .~xcept,ln r~fae s~e• ~.r .e in 5e io ~1;s2 or } a r a s' rJ a: .c a i €i4~ , ~ i ~ ' ' v) the loss o~ fi i , f ~e~le~,s as~,s„upply or c~ ~lefion of resr'~~~ kept, in el e, as provi ~ , _ n y The i min Force Ma eur ~lbfr'~re ~~c~u from its r~s'~'nsibili f© r~r `nce Char" ~ ~ m ` ~'~~~~r'~~ ~ z;~ g c r ~ # i~"~~ F ~•str + -'m'd } y~ ~ i~4 e 11.4 1'~loithstrit~~~l~~tything to the contrary heftafirt 'therp,~}~[es ag~;~~~the settleme :J~y ~+t~s,~~l~ck~~si' ther industrial djsturba cd;t,.shail~,~e~~ult~,~r xhe sole diser`efion of the p~ft~3~~,perlencing a1~ ~ h~fi~t fiance. a ssr~L~ra 'i irl~~^ ~ ~ s~ ~ l,'~t^~' '7 3,~,3t' a,~.s t' , p ~ - 4.rr s sr c - I~~ .V~_ s .c ? r ~ - i 11.5. TIgr~)7ar~ lid'~S~rformance~le~prevented~t''Vi'e' ~e Majeure u~ts ` pr=dvl~ Notice to~~~~( ' ,aty. Ina fE[~ _ ~e-may be ~I"1. 1 ~ ~ r t~ s w given ~~~g~Qwe ~ ,~viritte~llNotice wit~,r ri~asonably f(ailRpar~i~~ilars of the ant or oco~r5`~ence Is re _ ~ "&~„~"pon as rE fy possible. ~ ~`4` ~1 ~ 9i. tP z A P n 1 ~ SA - ' iVZ7' t h "~~r. 3.. Upon ~ro~tdrr~~ wr~t:~'r~, ie~ of Force f~j~~ire to the ~~'7ty the affe ed party w'J a relieved - ~ ~ ~~`tion, fry ~ nset of the Force.liA~i±~~r~ event#~Q ~ or acre ta' ehVe of Ga rW hcable, tot eliextent an €~'the durati'~ ~ o :~'e~Ma'eu~~~ . ither a shall bc`~ i~~rh~d to'~~il~,~ in such opl r~a)ions to th ei',Fdfaring such currence o ' nt. ~ ~ - x~.~""-" h a a rr . ~ ~'s~~¢,Ttt~{~~ ~~'t~ S . 11.6. ' `''°(thst~J ~~ctions l l ~"f"id 11.3, t~"~~t~s may aglW~`~ to alter . Force y r 'visio ~ ~ Transaction 3'u W 7 ~al~f? a 3' g °s €s e~ Confi~i J~~`xecut~~=~~iting by bot~Fprties. ~~~,~rA A~ +;f~ ~ x ; ~ p;~~~'~s ~~+^~f fir;: .f r r- •K~ +t ~ ~ This ~tr~~. r+nay b$~'' I,~ted on 30 ~~a~'s written N~'~r~e !~i~ shall rem 4 in effect n ; e expiratl. • • e~ ~#est D ~ ° nod of an transa~,~ The a `f '~bf~either pa y~"~rtrsuant tot . i<i~7.6 and S on 10 th ; i~ations t ~ • ~'~yment r ~r, and the obliga her pa~~' 1~~,~i`~~;mnify the~~~'c, Pursuan r~f~T~hall survive' .:e terminatrq g .the Base ~ `~5~ any r~s ~b iL trh s `~f'ri n i ° s ~ } z F t.} ~ N3 r y x. 5 ~ a ~t:• 1 C~` ~+q ~ ~ ~1L~afi ~-,4. ~~I ~s1i i. f t f~' t$.F.F3 SEC ~ ~ t r1t: ~ rf ~ ~ i ; 1~~Z ~ 3 a py f 1~# ~ FOR BR~~rOF At~~'~ROVISION FOR'I-iICH AN ~ D ~ SURE O!"D~' ~1 ~~~SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY'S LIAl3lLITY 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 !S EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, A PARTY'S. LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. SUCH DIRECT ACTUAL DAMAGES SHALL B6 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 BUSWESS 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 REMEDIESAND 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 S 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 pAMAGE5 CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. SECTION 14. MISCELLANEO~,US • 14.1. This Contract shall be binding u)7ot~~,and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and the cover~~nts~=~onditfons, rights and obligations of this Contract shall run for the full term of this Contract. No assignment of this Contract, in. whole o~~in p~~. will be made without the prior written consent of the non-assigning .party (and shall not relieve the assigning party from liability hereur~~er), ri consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber, or assign tip Co ° r the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements, or (li) transferifts int', u zany parent or affiliate by assignment, merger or otherwise without the prior approval of the other party.. Upon any such assrgnfxrent, tF~ns~f rfid assumption, the. transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations ereunder, 14.2,- If any. provision in this ~ deterrrt~~c~•ao be invalid; void or unenforceable by any court having jurisdiction, such determination shall not Invalidate, Vold, or maker,. f ~eableny other provision, agreement or covenant of this Contract. 14.3. No waiver of an breach , a~ tc ~ ` y ~ k on~h's~~~ be held to be a waiver of any other or subsequent breach. 14.4, This Contract sets forth a~l , y_ derstr~between the parties respecting each transaction subject hereto, and any prior contracts, understandings and representations, th~r~~o I or written, relating to such transactions are merged into and superseded by this Contract and ar~}~y~off~ ~ ive tran~aptiP~ r(s) t Thts.,Contract m~yQ ~r~end,~~~l pn~(~y~~a w~tin~~}~e?c~cuted by bqt~. ~ ~a ~i~~ ~ ° F ,F i 14.5, ti 'The rrtterpr~ta~~n~.~d `performe~n of this ~ract.,shali be god by th taws oft ~~"~~~i~r~s$~s~n.~~ 8,..on=lie Base Contract ~~d~'~~ing, t''vV2~'~~, any contlicf~~ws rule i, would apply the t of anoth~~~nsdicUon , 1~4.6.~~~~~ ~~.~ntr ~~~~II provlslons~ereln will ~'~~~~Q"ct to all ap~~'able and r~~i~ statutes es ~`~~rs.an ~ ~t4 y govern ~ ~tFiori i f'urisdictio, t, e' the a ` ~ f a) X~ ns of an ~ x ~ try p rtie f e~r~acilities, or Ga> supply, ntract or ; 'or an re ~~s thereof. 14,7. ~ e~~,s no ftrtf ; ~ beneficia 3 ,s .t'~ this Conti ~!r"~ , , 14.8.~J-~~~t~cr rty ,it~~s,~bntract rep ~~rts and ,n ~~at it has ~ ,nd comp) ~euthonty t• . ~r i»~'and p is Contract,, t5 ~ fii)v A~ r ~ ~ S f 54' L/ c. ~ Jr '~kl ~r~Yl Each p~k ~ o~ex t~tl~'s~ t'~,s Contract4 ehalf of ei ~r;~~ represent ~rrd warrar} at it has fu I,~a~m~lete a t~ do so and thatsrtc~h a ~ ~ '~~2 ig ~r ~~"'t ~ ~ip ~~I berasf~faereby. as t~~~ ~ ~ ~ i~~ ~ 14.9. ~`>~r ` ~ ~ ~ . ~ ~ ~ ~ ; ~ ,N ~idm ~ ~~d subheading~ntained irl~~this,~,~ntract are ~pisolely fot~.~nvernence.~a'D~~tot con t ;part of this Contract b~fiNeet.~ the ~a~#les~'nd shall nd t?~lused to cq~st~f interpret this,~[.~! visions ofl`~his Contractc~. ~ ~r ~u 1 7 ~ d ~ [ ° 7 .r, iii_ [,f'~4-«`+~ rs we.nu, Y ~ ~?33~i}u ~."5 .14.10 ~'Un)~ss`~'~`i~ pates have elected~~nlfhe Base ~g tr~rcttnot to make~~'4i ection 14.'I~~~= ~ ~~l ~~ontra h r a shall disclose d~`~,c~ly A~ ip~ir~e ly'without the~pri~C written ct~~ ~tYh~T fi the other ,,+~+~y~~,, erms of~~~t , n' o.thir ~ P rtY fy~ ~ ~ r Y ~ Y M , y ~ M,~ij ,'s S~c~. t ,p ' ~ emplavPp;''ler~de ro}~i~l owners, counsel, accounts ts~a~i~~~thar ~o v : Y r ~ ~ (ther than the g~ntsi p~~rty, or prosp{ ~ X skUbstantially all of a part~`,~, is f~ahy'nyfits under thr,~a~pntract, p uf~de~~~~'~}`fel`son` I] , v a reed toy: r ¢ ` g ~e (~~s co Ott r3 i:i~~ except (i) in ~ ~ f ~ ~ S .ti T y, order t~rorr~ly wi n~~~~Plicable law ~~rder, regulati~ ~r~~~cChange ruler.; ~ ~ ~8nforcemp fr~fiis Contract , ~ G ~ 6 's ~ k ~~'~,t ~ '~ctent nets s ; .(iii) to r~e~~nt ~e~~~ to implement ~r~ transact o , i~: to the e d f ~r~ ation rs`e ~~ch thi 3 r the sole t a ~ Qtly ~ ~ purpo ~ cula i ~'~~blirshed inde,ch party ;C~fity the other ,dY of an} "oceeding ~ h ~ ~'~`aware ~Y result in r disclo pry , ~e t~t`1a~of~ah.~ transacfio ~~o#her than Grp 4~ted hereun ) and use° ° sonable e ~ gent a . i • Thee s~~ , ~pf they, rJ ~ls not sub ,r~ ~fb this con ~ ~ ;disclosure. ~ ~ J ~ ielf~` obligation Ubject to S Qn 13, the a ]bee ~4~11 remedies avails or i ii ~`~o,~enforce; o~~ ek relief in ~ , r~lo~~ n with this ;nfidentiali ation. ~ i?an tr 4 f G ~ [ ~ .~~~>g ~ ~c~,f Y . hereunder shall t'~} tnfide fi ~e parties h r~~;for one y ~ ~~,re expiratio '~'f the trait 'fin. ~ ~ , In theYr3 , at di t r ) .required b~,' [ ~govemm ~`~ud'c~ or a Irca ~ law the a sub ect t~ - uirem , ~ isclose the mater I s of this c ~C~ct to the e e tiso re uirl ~'~ufr~'hall rom t ' { ~ seat ~,?~,r. q ' h p p , .notify the ~ Party, p : r r °sure, a h cogperate , ~ ~ i. a z (consist [a~,f~ the d~~l s r~g~arty s leg ~ ttigations) y~rthft~'~a~ther party s _ its to oli rotective o,~ers~ t~iilar r , 'th respect to such,tlfSj~`~ure at tjh~~~YpQnse of the t party. -„~x ~ {,tl~: ~ ~ ~ f~~ ~ r= fig [ it R U lY h I " - 1411?~~,'Ie=~artres°;~may agree to at~s`~te resolu.p ~rbiedures in ~beclal Pr~~rsi~ins attac~e~i~<of~; Bas ~ f, ct or in a Trans~~©~i ~vnfirmafion ~xocuted in V,)~~ig by both ~'~#iesti : ' ~s ~ ~€'~s ;1 ~ F ~ d f' - ;a -0 a~i~ ,mac ~ iJ ~f j 4~~4~ f a yiyj ~ ~TM,~~+ t4rr,~~ ~ i~~ `5'~4~~~ 3~a'•fa~'~"1 1~~~~~~ - ei_+e.. ,Y Rr ti~r AEG<s,. ...,..u ire"'3. ~R~~.`rr.~'f. 4 DISCLAIMER: The purposes of this Contract are to fadlitate trade, avoid misunderstandings and make more definite the terms of oonfrads of purchase and sale of natural gas. Further, NAESB does not mandate the use of this Contract by any pally. 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 WRRTE,N, 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 CUSTpM 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 AR151NG OUT OF ANY USE OF THIS CONTRACT. Copyright m 2002 North American Energy Standards Board, Ina NAESB Standard 6.3.1 All Rights Reserved Page 8 of 10 April 19, 2002 TRANSACTION CONFIRMATION EXHIBIT A FOR IMMEDIATE DELIVERY Letterhead/Logo ~ ~ Date: Transaction Confirmation This Transaction Confirmation is s~~Jec a Base Contract between Seller and Buyer dated .The terms of this Transaction Conf+rmat on r Ong unless disputed in writing within 2 Business Days of receipf unless otherwise specified in the Base Contract. SELLER: ~ BUYER: f a:r. Attn: Attn: ~ Phone: -r'~,z~~u ~a;~f`~~'~ , . Phone: .,~~wF~ .Fax: Fax: Base Contract No. ' Base Contract No, Tram ~~'#S ~ " ~~fr~r~~~s~~-ifi~ n5, ~ ~y ~,f~~€r~ t~.~~ ~r s}` •r Tram ~ e~,~ontr ~ g `~f`r ~ ~ns • :,er Contre..o ~ urnber. ~ ~t i'~ ~'~~€rJ ajf~, ~ a ~T;f'~ ~ C9.~ t4;'~~e~{~ Hey e; }'ki,~; - ~f~~.Y~ ~ ~ ~ _ 1k t 3. _ Con ~ ~,~et $ ,~~u1Btu or ~ Delis A~., ~Ad: B , ~44. ,~~'~zs. ~ ~ ~ , ~1. ~ End rs~'n r- ~ i Perf~~a~ ~ijbli ~i Ord Contr~t',uantity ~ ~ ine) r{ E , - Flrrr~,~,(~~Pd'~~1~~n}%~r ~ g F.t ~ ~r~able Qua . ~~f~Y)~ ~ ~ ~ ~ '~ible: .r t~~f 1~~~/d~ ~`~;~'~~'''~VIMBtus/da.`~, himum ~ a °i~at t . . ~ ~ . Y ? ~r~; ~~tp~k *s~~~~s ~t~~ ~VIMBtUSlda `imum ~y~~ .~`y~, t rc° y ~ ,Section 4 ~.<n ~ ~~~ction of ~ _ # : . yam ftF x ~ ~ef~i~t. ~f,'' f or,'~~iler 'S. 7 . i If a ~oi~' ~ oif;ra~ i~ I~$t a s ecl eo ra hic cab e''ne locatio - Y ~ ~TM4~xr. c(~~, i 3 as,ti 7~ Su$,y ~ .c.Y~' j8' Specta'i~~ ditl r! ~~~~ar~ ~ k*i # psi ~ ~ ~ f~ ~ ' ~ P ~ , _ l ~ k$'~ rl'~ 3~E~i h yam` ~~f ~ M 4t~~,¢ ~S ~'t,~l^j ik ~ ' f . ~~r~`-f ~ fit' ~ ' 3 " a Seil6rx~~y i~~~. ~ ~ ; , :1? EXEC ~ .Buyer, ` . , T FOR. f = ,N . Date; Date: Copyright ©2002 North American Energy Standards Board, Inc. NAESB Standard 8.3.1 All Rights Reserved Page 10 of 10 April 19, 2002 SPECIAL PROVISIONS TO BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS (FORM NAESB Standard 6.3.1) BY AND $ETWEEN 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 trarisaction by sending the other party a Transaction Confirmation by facsimile, EDI ormutually agreeable electronic means within three Business pays 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,,,^4 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 contempbraneouslywlth 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 QTHER 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 (vl) 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 pelete the second sentence of Section 12 and replace it with the followings "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 fo 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:' 1410 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 1,4.12; "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 6e 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." 74.13 Add the following new Section 14.13: Ali 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." IN171AUAPPROVAL COUNTERPARTY CORAL Version 12/19/2007 EXHIBIT B TO BASE CONTRACT FOR SALE ANp 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) Securit~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- ar 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 Partw') exceeds such Party's Security Threshold, then the other Party (the "Requesting Part') 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 weeldy with respect to Letters of Credit . and daily with respect tb 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 ari Event of Default with respect to the Providing Party, then, unless the Providing Party has satisfied in full all of its i 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 ar 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 shell 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 giverrto 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) bays 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 (il) 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 (notwithstand'ing 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 thin'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. °CounterpartV' means City of Vernon, CA "Credit Rating" means (i) with respect to a Partyor 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 ratirig, 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 setforth 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 "6=ederal 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 bemade on the second -business day of the next calendar month. "Letter. of Credit" means one or more irrevocable, standbyJetfers .of credit from a Qualified- Institution. "Letter of Credit. befault" 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 falls 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 flue (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. "Moodv'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 ($10,000,000,000), and (iii) having a Credit Rating of at feast A- by S&P and at least A3 by Moody's. "S&P" means Standard & Poor's Ratings Services. (a division of McGraw-Hill, Inc.) or its successor. 7. Successors. In the event of an assignment of the Contract by Counterparty as provided therein, the provisions of this Addendum shall not be applicable to any such assignee. In such event, an assignee will be required to meet the. reasonable credit requirements of Coral far the extension of unsecured credit before further deliveries of Gas are made. COUNTERPARTY CORAL r t 'i ~ S. L~il~~~~ E:R.^ f }dJ'~ y_Hf33 L 93Uk1 e~..Li ~k c2Yfi ik~c~$ 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 June 9, 2008 She11 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 fu11y executed agreement as referenced above, approved by City Council on June 2,2008, through Resolution. No. 9631. Tf you have any questions regarding this matter, please call Mr. Donal O'Callaghan at (323) 5$3=8811 ext. 834. ry truly yours, Ne y G City Clerk NG:dr c: Donal O'Callaghan Resolution No. 9631 Agreement File No. 08-054 ExcCusiveCy IndustriaC 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 The. City of Vernon,. a Chartered City and Municipal and a subsidiary of Shell Enerav North America (U5). L.P. Corporation of the. State of California Duns Number: 01-501-4421 Duns Number: 060883022 Contract Number: Contract Number: U.S. Federal Tax 1D Number: 76-0505584. U.S,`~Federal Tax iD Number: 95-6000808 Notices: 4445 EastGate Mal,hSuite 100, San Dieao. CA :92121.. X305 Santa.Fe Ave. Vernon,,._CA. 90058 Attn: Contract Administration ~ Attn: Donal O'Callaghan Phone: 18581:320-1500 Fax: (858) 320-1585.. Phone: 323-583-8811 Fax; 323-826-1425 Confirmations: 909 Fannin. Plaza Level 1, Houston, TX 77010 4305 Santa Fe Ave, Vernon, CA 90058 Attn: Contract Administration Attn: Donal O'Callaahan Phone: (713) 230-7505. Fax:. (7131265-2171 Phone: 323-583-8811 Fax: 323-826.1425 Invoices and Payments: 909 Fannin, Plaza Level 1 Houston. 7X 77010 4305 Santa Fe Aver Vernon. CA 90058 Atth:. Gas Accountina Attn: Donal O'Callaghan Phone: (713) 767-5400 Fax: (713) 767-5445 Phone: 323-583-8811 Fax: 323-826-1425 Wire Transfer or ACH Numbers (if applicable): BANK: Citibank, N,A. BANK: The Bank of New York ABA: 021000089 ABA: 021000018 ACCT: 30603902. ACCT: 800457 Other Details: 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 ? bay of Month following Month of delive 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 v 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 ? Spof Price Standard Early Termination ? -Early Terminatloh Damages Do Not Apply Obligation Dama es Note: The following Spot Price Publication applies to both Section 10.3.2 ? Other Agreement Setoffs Apply (default) of the immedfa tely preceding. Setoffs greement ? Other Agreement Setoffs Do Not Apply Section 2_.26 ? .Gas Daily Midpoint (default) Section 14.5 Spot Price p Choice Of Law Texas Publication Section 8 ? Buyer Pays At and After Delivery Point . Section 14.10 ? Confidehtiality applies (default} Taxes (default) Confidentiality ? Confidentlality'does not apply ? Seller Pa s Before and At Delive 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 ENE GY RESO RCES L.P. THE CITY OF VERNON Party Nam Party Name By By Name: ~ A EST: Name: eonis C. M burl A Title; V'~~ h~:~ By: Title: ayor / Manuela Gi n. ity Clerk ROV AS TO FORM: Copyright ©2002 North American Energy Standards Board ' l3 tan ar ..1 All Rights Reserved April 19, 2002 General Terms and Conditions -Base Contract for Sale and Purchase of Natural Gas 4 SECTION 4 . PURPOSE ANi~ =PROCEDURES 1.1. These General Terms and Go~d~~ans are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to~~the+`Pay receiving .Gas and "Seller" refers'to the party delivering Gas. The entire agreement between the arties shall be the Contr,~t as de#iiied in Section 2.7. e "Oral Transaction Procedure or the Written'Transaction Procedure as Indicated Base Contractve selected efther;th " on the µ Oral Transaction Procedure: 1.2. The parties will use tt~e"follo~~ding Transaction Confirmation procedure. Any Gas purchase and -sale transaction may be effectuated in an EDI transmissroii qr telephony cu~~ versation with the offer and acceptance constituting the agreement of the parties, The parties shall be legally bounri;f~om the time tf7ey so agree to transaction terms and may each-rely thereon. Any such transaction shall be considered a "writing dn~ rt ~ l~av~~ been"signed". Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, :and the other party nia~ egn~tt[n a telephonic transaction by sending the other party a Transaction Confirmation by facs(mile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction•;;ProcedirP)~}~rovrded~#hat the. failure ~o; senJ a Tr~~ns~ tiony~9o~rtfirmation shall~rtot~^inraltda~c~;~;t~ ~e~r ;~greem~'~ht~of the parties ~ Confirming I nit; adopts its cofrming'ietkerhe~~ci; or"the~ Iik~~;mss its si~~~a#ure on and; Tr~a~,eag~ronQ~~iTmatrort;.~~s the Identifi~ationrand authcntroatlon of Coinfuming Party:~",If~the Transacfion .~~';i~firmatro tains an~rro~,~ls~ori othe ~f~lase relating to ther~c~>iiin,ercial ter~n,~,bf.the trar~sacti~n (i.e., ~fli;e, ctuantity, perfq.~'.ance ot~l~~aon, deliveiy~omf; heriod~~elir~ery and/or transport, tir,,n ~~ndlti~ns};,il~w}~ich modify ar suppler~~nt thy-'~3ase Conf1f1~~~t or Gen;cr~nlTerms anC~ditions of ~i~~an~ract (e.g,, arbitratir~n or ~ciciitu~nal r ~prpsentation.~;,md warranfi!? , ~~,rhj provisrons~~~hall not bF ci~emed to h~~rcej~trd purs~nnt~ao section 1.3 but must h'~ e;piessl~ ~~ib;$d to by f~`~~h,~parties; ~ol~~d.,.(hat the fo~oing shall r~1 invalydafE'ar~ry ~transactior~ a~rea~( to by the artie5? ~ ~ Written Transactior Procedure: `h E ~~~~q _ ~ . Fa. 1.2. The 3r lies ill utiethe follow~r~~~Transaction~C,oniif~ination probe. ure. Sho~i~;he parties'~onie to an agreein,E~nt regarding a Gas. ~'UrchaSe 'and sal,, t~~r1¢action fcr ~,~I~articular Dc3ta~er,Period, the~~jnfirming ~.y shall a~:ci the 4thcr party m-~y~,; record that agreement, on a Tran~a~ti.e~i~~ Confirmation•~-and comn~rm;cat~, such Transaction Confir~r~atron by f~s~m~le~; CDI or ;rnutuall.y,agreeable electronio means, 1uti~e cl~Her party by the~tclose of tha Busii~esS Day follu~h~ing the date~'cf`~~i`reei7~ent. The p rti_s n~{'ni7ledge that their atire~cmcnt J~:ill not ~Q~binding until the exchan~~ o{ r~©nconflrctln~ transaction Confirmations or~tlie p~ssace 4f fhe Confirm Deadlrr~~~•:~ith~utoh~e~tiari ~t'~ri~ the recaivin art , as rovided in Sectld. , ~'i~'. 1.3. ; . ,~If a ac ncliiiq I»rh's T,•f~ansaction+~ or~frmation is rr~atcri?II; riiffe~entfro~tthc~ r~ceivingpa~~~fi~;~istandinq of the ~~~'e~ment referred to in Sant un~i .2 srich r~ r,~ivir~g party sf~~l~~npfify the senc~nu, p~drty via facsi : ' fez ~I~I,~r; mutually dq ~tga~~ls~le~t~onic mc~ ~n5 b;;~~ he Confirm Deadlr,~,~„ rilessscichre di,~irigparlyha~~L r~wrousl se.ntaFTransaetionCo~~~trori~fot:esending~ ~G~ gfaiJ",reoft~i c~c~i~,;ln a to so no f~~t~,~sendirig pari~~~;writing b~tConfirm De~"rllm~~~constitutes ~,~,e receiving`=~ a s a ~~m ht~'to:h' ter ~S,-a~tn~:~~transacton descry ~'~in~fic. sondiny h,if~!S~S Transac(r ~~onfirmatiun I, IY1~Ce are any m, tenal differ. ,n~ s beiwee ~ ~trVn~l, ''Trans ctrb t Confirmations goverr~~ng~~i,e same t~ ~nsaa~h~n, then nejt~~~Y'Transactiq,~~ C.~n#j~mation shal~~k~ binding ~ ypr unless s=c~i"r drtrclnces ar~ I~_ d including - the us`~ of any c~. i~'ern ~ th it dearly reso ~ps~the differQ?ic~ p~~the Transa' ~ n Confirm 'ik In the event ~f a ronflict re terms of (i) a bu~dmg Tiansa'ction C~ i~t7fmation p~~ pant to Sect n 1„~i) the oral~~reement o~t ¢parties wf~ith ~ y.~ evid ' recorded Convet~~;~ti~ri,~ydherethe ;~rtPs have se tad the Ora' r.n~'~ction"Proce'ii~iPe of the B~~Contract,, iu) thh~~e Co:, n~,, ~ ~ (iv)these Genera`)t ~rrrri~s and Cony fits; the term~flie documer~k~;sh~+ll~govern in tho priority list3i inxthis sente)~co ~ fl ~ 1.4. The. paities'~c~re~ ih~at each pafi; may electron~r all; record all tel~plone convoy ~tions with fps ~ ~~r~his Cotraa ~tweeh.their respective ~n~plo ; :es ~ ~thi~iYyany specr ,l or further not~c~: to th€~ other part~r~ "ach parts ~I~ obtain an'~;, ~s~ cons,- nt a`~~s~gents and emplo~~e~~;s: to such roc rdrt». ;Where tf1 `rties havo scloct~;cj the Oral ~f nsaction dc~dure in e l i . _of they nse,¢~ `ntract the x v. s parties~~grr~riottocont~sfifihevalidityot~~ f~rceabilitycf~,t~~l~pfionicrecordr,~ entered-ri~~rr~accordar~~~~th~,th`~,requi.r[~e~,~sf this Base - Contra~t Ho~rrevcr, nothing J~~rern shall G~ ~nstrued ab ~ ~ ~~,i~~eY of any obl~~m4ron to the a~iissrbrlrty of Luc, avida,~ce. ~ ~ SEC~~I~~: 2. ®EFINITION$ ~ ~ ;Y~ ~ p~~„ r ~ v : „t iit3~n'. .f•.k_fa F .I,?;k aF+.}'vE _'~~~c,~,~~'.~'`~ir ~L~ss€3`,4~F4f~sM~~,'rai 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, Ina NAESB 5fandard 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 bay agreed to by the parties in the Base Contract; provided, if the Trahsactiori 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 padY~ 2.7. "Contract" shall mean the le~allyr4bm~ing relationship established by (i) the Base Contract, (ii) any and all binding Transaction Confirmations and (iii) where the pa sees I~aU~selected the Qral Transaction. Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have ~ter~d rr%to' through an EDI transmission or by telephone, but that have not been confirmed in.a binding Transaction Confirmatron ~ 2.8, "Contract Price" shall mean the emoun~ Qxpressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties ir~~'a transaction ~~Vi 2.9. "Contract Quantity" shall nieaii•th? qufintit?~?of Gas to be delivered and taken aS agreed to by the parties in a transaction. 2.10. "Cover Standard", as ri'tPrrHCi to in :Se{cho~~ 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 per~fc~rting party shall use commercially reasonable efforts to (i) if Buyer is the performing party, obtain Gas, (or an alternate fu.~l~rf el~;cf~~1>by Buyer and replacement Gas is not available), or (ii) if Seller is the performing party, sell .Gas, in either case, at a price reasohef~~a forthe .delivery or production area, as applicable, consistent with: the amount of notice provided b~!~the nonperformin~~p~,~y; the immeld'ia,G.; 4f the ~u~ q~r,;,satG~~,;~n~sumptlon need~to.~S,~ller's Gas~s~~ ,requirements, as applic~,~le, the quantities in.otvuil, and th~~cantrcipat leng~l~•.~~iffpfall~~;e bytr,~iglnonpeifiRr~ ing part~~ 3 ~~,w~ Y ~ r , r_ t ~ 2-.11.~ CrEiait Sup;?urt otligatlon(s)'~ mean an} ub `:ion(s) to ~~de or est ~ art tgr or on behalf, a art to i' ~ F~~ p ~~rzg ci x h credit ~rtp p Y this Contract-'such ~s an sir evocable ~ ~dby letterrc~ty a margm~ greement= `repaymer~fts a secunt~ ,ntcr,,st ~n in asset, a perforfi~~nce~6cnd gir,aran~~,orother ~ `~i y g ' ` 4and suffi- erg soea nit of a cd ~lhuin nat ~ ~ Ski, J 1 { 11 ~a ~ 2.12. Dn;• shill rl~c nr~na(.period o ~ ~.,~onsecuti~~~l,~'~;urs, coextensr~fwrth a ~a~y(as define qty tl~h" ~cervrr~t~i Tr~~sporter in a paficular lr,nsaciiuri. ~ ~ ~ a ~~P 2 13 4~li.cuy Period shall be the fa`ert~c~d during ~rlhich c)e~lverles are~~tobe madel~"s agreed to b;,~ ti7o IY: ,~~s In a transaet,on. 2 14. 'D@h~7e,y Poini(~~' shall mean su~h point(s) ds are agreed to by Ih,Q parties in ,9 transactro,~,tk 2.15. iEDI',' shall rii~an electronic clataintercht,ngo hursuantto an~greement e~~tered Into t~5~the pifls, spocrf~cal~y~,relating to the comrhurticntlon of Transaction Conf,rr~iations und~:r this C .ntracf. ~e v; 2.16.. EFR' shall n,~ an the purchase~•sale or exc4iangc c~f~hatural Ga~~as t,e "physrcaly~ .l° 8,~ ,f~a e for physic~~transaction involving ups futures ~o~1tr cts. EFf' shall mcorpt~r~tn the' meaning and`' nedies of~a~~,i ~ rlproVr e~ hat a ait~i}s`~ excuse for nonpeurh,a'ncr~ ~f pis of ~,u~tions to deliver or receive vas ~ ill be~gov~'rnet~'tbu:the rules~(~t ~ ~~(~yan ~~t~i~~r~e~ ~p~hange regulated ' 5' 1 .ItH ~y.+Y undertthe~Comm~di+; ~~ch~rlgeAct. ~ ~~r~ ~s >r 2.17. ~irfn shr,ll Inc. ,n that either p~~~~~ may Interrupt its,f;performan'~'"~?:~i~f5butzliability' onlyf~ib tli 4+)hat s`~4~h,p~rf~rmance is preventp~i for~rc ~soris ~t ~~,rce Majeur,~ ~?~,ovided, h~~ o~ er;;jhat duringForce Majet~e interruptio~~s, ~t ~~.~y invo~ng F'~~re Majeure may f?o responsihie.tor ;,ny~lmbalance''Ch~rges as sit forth;ii' Section 4~3`~xelated to'r~~t~~interruptr~~ ~~~nomin~lbh~re rffiade to the Trans(~urjer and until he ~h'~nge in deliveries and/or recoipts I~ confirme~;y the Tra sp~prter. ~ ~ 2.18.; Gas' skull f~~ ~n any mixture of'h.rdrocarbonsan~t rioncombustp~e gases in,a raaseous st~to, corj~,~trng pririnnly ofi~methane. ~ w tin , r ° ~ , 2 19. ~ Inil~al ~nc~` CharuN~' shall ma~ri~any fees pens,lt es, costs of harges (it cah or in KIt~1{i) n5s ' ed b~~a ~'rat;porter for failure to s~,tis(; the&~fni~spoiler's balar~t~~~ nd/or norfiination requlremen ' ~ ~ ? ~,r:t 2 20 , 'Inf~~rru trbl` s"l~a can thatlrelt pr art a interi~u tits erfp~nance at ~n me fora : oasori°,vheth"~: ao •caused b an event of Fofrce Ma`~~t~re~~~'~lth no liabrd~t~~~ti.except su,~h interi~f,pting party~ay be res n ~~,ble for a ~ y~ Imbalan~~e Chaff ~ set forth in 5ecti~n ~~~~~~lated tt~)~,,,~~~~~~'~~~ruption aftEh ftje nomina~on is made to the'X~risporter' until the ct ~i~ge ~i d~ liveri~~ l~receipts is confir~i;~eci t,yF:~ransp~r)t~~~f~~ • x ~ ~ ~-~E~t .;~`x~ ~t 2.21.E ' t,11448tu shl~~es"~n one milliclrr~ ~ltish then ~ units; which is ei~t,lvalent to ~~ekatherrr) f; ~ ~ , t~ 2 22 ~ f writh" sh`~~~ean the pono ~egrnnrng~n i.t~,~:Itfi tt;, ~y o;-~f~e calen~r month ,fin r~ imm441 ~y~prior to the commec~cement of tf~e.~rr~st~Day of the ne~ ~ ~ealendar rn~nth:~{b,: _.~~_~~~r... ~.,F~~?~~~;~_ f 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 inthe 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 Transporters) 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 bay for which.. a price or range of prices is published that next follows the relevant Day. 2.27. "Transaction Confirmation" shalt mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant tq Section 1 for a partic~"ar Delivery Period. ~ r~ 2.28. 'Termination Option" shall mear~,th~''~dption of either party to terminate a transaction in the event that the other party fails to perform a Firm obligation to deliver Gas in tha cas,~`~oft Iler or to receive Gas in the case:of Buyer for a designated number of days during a period as specified on the applicable Transaction ~'nfi ~ tin. ~s~ d~ 2.29. "Transporter(s)" shall mea~all {,~s~~~theririg. or pipeline companies, or local distribution .companies, acting in the capacity of a transporter, transporting Gas for Seller~or B~{`~~~~r}eam or downstream, respectively, of the Delivery Point pursuant to a particular transaction. ~~~~a~ SECTION 3. PERFOR?nIIANCE OBLIGATION 3.1. Seller agrees to sell anr~ ~i~l~~r, and B~~,,yei agrees to receive and purchase, the Contract Quantity for a particular transaction in acwrdance with the terms of the Goritrnct Salea ~iid purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction. ` .The arties have selected erth~r.thet~^'Cove St~~i~~dard" or the "S of Price Standard" as indicated on the Base Contract. Cover Standard: ~r<--° 3.2. T;e;sole an~c,~~ axclu~~~~e remedy of the pa~j~~~rclntr~th.~.~~ ~tt,Qf a;pr~~~chr~of a Flrm oblr~~tj4nsto d IY9~r~ r~e~~ve Gas hall be recov~ ~ qft_ 'r followrn~~~~(I);:In~~he even~~f a brea~u~~ ~~Cler~n~`~ahy ~ ,~(s), payrria~it by Selle~_tc~,~;c, ~~`;`~i,"an ~ ,°ti`,tequal~~to the posifive riit~~nce rany, between the p~tr~~~hase pngb' ~~y Buyer uttll~I~g the Co~~e~,~5tandard~~` t~~~ -_•s ntrac djusted for commerel ~I za~~~aso able c~ fferences rn tr~~ispoitatio' o or from fh Delrvery~oirlt(s), multtp,~ . e drff~~~ ~tween the Contr'~c~ trty ar),U~k h~ quantity aci a~ ~delrveredf~ ~r for such tea. (s); or (r[) rr~ the event o idea„ . b B "n Da ~ , , ~ ~ P ~ Y Y Y(s); paym nk: b}~ sayer toy ~~gllei` In the amo ~ equal. to tl fie difference ~T any, be~e~n the Con ~~~.Ir a and t r ceived b Seller}Utili~ing the Gi~'r standard far ,wale of s~ ~r~ S • adjustedt~commer ~ )~y~.reasonat~ es in r s~}Matron costs to or f~om the Dc,liverr} No f(~), multiplae` ~y the diffe`~§~G~ ~~aween they ontract Q (r#y and the ~ ~~'-otuall ~ ;a~1}f~,y Buyer for r ~ , t ~ ~ r. such gay(s) , ur (iiiJ; nr tli~~event th~~ Beyer has .ustst I" ca~nmercially~asonable Arts to re etas ~tl~ has used commercrally~ rr sniff ~hlo o~rts to se>,I the. Gas to ~ th,r ~ ~ art and ~'~'r such re • ~ ment or ~`sr w~~lable,~~F~n the sole and r~~ ~ g P r~ ~~r'{~ Y, ~ per , exclusive remedy oftth~ peftormin a)#y,shall be ar~ ~~un'3v4~able diffe ede betweor~'t:e Contra ~ noe a ~1 the S,put Brice, adjusted for suc~h~~tirarisnorlati~~n to $he applical{`le'~Delivery Pt int ~rt~CjT~~plied by t c~'~difference`~ tween the~~j~~af uantit~~ and' : e uanti actually, delivered`by Selle~~and received~l~y Buyer fo s~i~h'`D~~y(s). Imb~~l~n~e Charge, shall note reooie°~'ed undor this action 3.2 but Seller aril/or ~uy'~~r tihall,;~e responsrtif~ for Imbal~~~~e Cfi'arges, if an~r, ays~fprovided r~i~~~~~p,~~, ,~},3. The amount of such unfavorable difference shall be.~payable,fi'veBusiness~~bays after~,pie5critati~rl of the'~ert~rming.party's irl~oi~;e,~~whioh''shall setforth th~~liasis upon whichsuch'~arnount•was'cal~~rlated. i ~w:, ;i, Sot Price standard. 3.2. TIi, `,~I~ rln~l er~lgsive remed,~ of the.parti~s in the event of a I~rea~,~~~~~~a,..Firm obligation to deji~~er or r~~Fr~ e Gas shall be recovery uf'the folloi~~ inr~ (1}yin the ev~rri of a breacF)~by S,~~ IJQr on any D';~y(s), payrjient by SeOer,to Buyer In an aC~a~~j~t ~e`~qual to the differen~~ pe.t~ ~c;ontl~r Contract Quan ray ~hd the ac t~l~ ~tity delrver{~ by Seller; aid receivecf~by buyent`or suc~i D ~y(sts multiplied by the,h~s~ti. e liftr rc n e,~tf any, obtarr1ed by subtracfrg t~Gontract Pnq .from the Spot Price, or~~i~))rl~the'e~'enf ofla hre~~ by Buyer on an)' D~ ~(s~~, paym©nt by{~uyer to S` ~,p~r~~in an am~t~ ~ ~ ~I to the drf~~ence be . een_ the Cont'r~Gt Quantrt and the a 'x~'al quantity delive~r~c~~' Div Sollersand r, ~~rved by rfor such•tr~ (~~~Lmultiplied ;:the posft,V~.~ifferenceIf,an~, obtained,l~; s~~acting the applic~hle. Spot Pnce fro~;r,t~~e Contra ice. Imb~~~.-•war es sh •Ik;?not be redov_ered under~s~tlu~s"'~bection 3.~•, but S~Iler and/or t.,-, ~ ~ x ~E ~r: g rfy ~ ~ ~ ~ , Buyer~~h ~i! t~.e res,~ti'n5ible ~'r Imbalan~e,harges, if.~anh}%~, rovlded In action 4.3a r~T~ ,amount •f iih urtfavor rff~rence shall be pay;~~t~le five E~usinESS D ys after p ~,~~ntation of ~h "~~f~ ~ Q',' e ' 8~p.~. _orming paf-ty~s invoice`~w~`ich shall Y rth;~ie base 'rhich such amount as•,colculafed ~ f¢~,5 ~~~suc~; ~ a . f . . ~ 3.3. Notv.ithstandinq S~etion 3.2, ris~'pafies ma~,fj~ retq Alternatr ~Damage~„ ~,Transactl , ~Confir~atlon~c~,i in writing by both p~rt~es. ~r~-~~: ~~~h'~. , ~ ~ , 3 4 ruin ~,d~rtion tb e~,ffo`hs 3.2 an~"~rj the party : ~~~rovlde for e~T~erminatlo ; ion rn a ~ ion Confr ~ ~i~~~xecuted in wntrn r by, bQ~~h parties TIi~ Transact(oti ~`Confirmatrc~ ont~arnrng the Ter~mation Q"~i will des(' ~ ~ ; _ sr" ~ ength',~ erformance trigge.,iip'ermir)~,ti~pri O;itign and t~1P ~i~ocedures~+~o~ry~~~ .erg rsP triet•eof to^y~dama~' for,n~q~ _ ~x ;•~wrl~b~ ,~:.~pensated, and how liq Id~ti Iii costs Dill t5e Calculated. n 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 Transporfer(s). Each party shall give the other party timely prior Notice, sufficient to meet the requirements of all Transporters) involved In the transaction, of the ,quantities of Gas to be delivered and 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 Q 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 quahtities 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 Chargesar reimburse Buyer far such Imbala~ie Charges paid by Buyer. SECTION 5. QUALITY AND~11~1`~;ASUREMENT All Gas delivered by Seller shall meet the ~,r~ts yore, quality and heat content requirements of the Receiving Transporter... The unit of quantity measurement for purposes of-this Contiract sh~l( E~~e one MMBtu dry. Measurement of Gas quantifies hereunder shall be in accordance with the established procedures of the Receiviri~ TransFx_~rt~r. SECTION 6. TAXES ~~t,u~,;ri~~ `~~.r The parties have selected either Buyer Pays A~=atid After Delivery Point" or "Seller Pays Before and At Delivery Point" as indicated on the Base Contract. ~ ~ .r ~x~ Bu er Pa s At and After Delivef:y Potent; Seller shall pay or cause to be paid -all taxes, fees, 13~:~ies, penalties, licenses or charges imposed by any government authority. ("Taxes") on or with respect to the Gas prior to the,~pelivery f~btnj(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 Clie• Deliv6ry Point(s). If a party is required to remit or pay Taxes that are the other party's responsibility hereunder,_the parry respons ble for such Taxes shall promptly rermburse the othe~r:party for such Taxes. Any parry entitled to an exemption froma?~ sia~~i'Taxes;_rchap~~~,~h3Cl~furnsti~theot~ie>i;-ar- ,~~ray ncr~~s~~ doc''.entation:thereof"~, ~ ~ %~,~,t ~ 3-i. .;f, ~ ~ - r '~~g rte,` f ~y Seller„Pa B'~'tore ad~At Delivery Por~~i~~ ~ ~ ~ t ~ "~~i Y~~YN ~ s s r . s Seller ,~f}III, nor cad's ~Yo be`~. aid all taxe , ees, levies ~f?nalia'es, Ilcenses•br char es ~ ~>°sed b an ue ~ n t autl>~on = "xes" on or .with resp~ ~t~c~'tte Gskp~q~~ fa. the DeliveF~v ~"rnnt(s) anct~~a~li~ a~,QS at the Deli~~c~ry Point(s~~ yer shall ray ar c~ito bed 5-'axes on or I , h~;the Dehv fit Raint(s). It ~a~+ a '''%is re uire tq remit o~k~~ Taxes that arP~ ~ ~ ~,hf p ry with r~ s Leo ~t~ne , r~ ~1' q , e ether. ' s onsibili ~ ~ ~ ,{~.w hereunt{~r'y tFi~ 'r°~rty~c si>ons~t.~le for such Taxes shall pfd, ~tl~y:'I•eimburse the bother pa if~~rsuch Taxe~~ Aii p,~y anti , texemption from an :suchal rsxes~or c;h'~ryc~s shall fu i h«the other patt~y, an.y:,necessary documentati©`n thereof ~§f ` , , r.. ,~~E _ I.J to I ~fj. 37ti . ~ ,q~ `y ~ p - I~ -y, S 4y,;y~ SECTION 7. FILLING, PAYMENT, ANGQ `AUpI~r k6 7.1. Seller shall ins"viC~9 Buyer for C~a ,,delivered ~nU rec~fved in the pr€~~eding Maitfi and for enj; otlicr af~plicable~rYi~r~~, providing support,nc r'ocuiiientatic ~ r3~ epfable in In~fLsfry practice toup{~:~,t3 the amount charged. If tt~e.actual quariiir,~ deln=e~cd is not t no~`~ythe billing date, i~ilfih~~aill t~~_ preh ,clJ~~sed on the,~~ntiry of ScheculF~d Gas: The r~~Q~ced quantity ~;nll .then Leadjuste¢-to the ~~tu ~I ~~'ntiry on the followlrt~ A4onth s hillin~t rr ~5`"boon thereaff~it~S actual deh,Y~~~ I~iforrnation is av~iila~ie. 7.2, ,Efiyc, sha'~ ,c,~ ~t the`amount du~`t3nder Sectlo~~ r V1 iii tno manner spc~cfie~d`jn the Base ;Can1a .rr, In ur~r~~,e~~jtgJaLallable funds, on or before ti>,~ later of'tl~e,PaymPiit Date or px _~ys after retcetj=~t of theFrnvoitce by Eu aer,:provided that ~~~he f~ayn~c;• Yf~Dat'~~~o~ a Business Day, payment=is dui nn the lie~tr~4~siness Da+~ldwing that date. ,,II~.'the event and payments are due B~~ler hucui,de~paym'. tt~~,B~yer shall be made in 3cc~u~ci~lnce s~itil this~~ection 7.2 ~~1;~ a r ~~M I~, ..s 7.3. ~Iri tl~c E~=ciir h +~mo'hts becotn~e~itue pursu~,~ t" sections 3 ~ ur 3 3, the E7Prformrng~~rl = n, submit ~n ~~1i7~oice to. the nonp~rFt3rminc~ part; fur in ~iecelerated~~~~~~nent setting torffl the basis upon which t e invoiced amount ~~as calculat~~`~~ ~ment from . thenonp~-rfc~mrngtp~~~t,= =illt~eduefivefBusinessDa`y~f(,er~~~ceiptofrnt,oice. ~ gy ~ 7.4. 1f tlie~rnvoidec t~ y, !i1 good faitFt, ~ i~5'putes the rj~=r~h(any such my ice or any drtahereof, s ~h or yn~ce~ party . I ~ ~ ch amount as it C,~n ede5 to ~rc,~~'?provided, ~ver, if the~~pge,~ party dis ~s the a I ~dtae, it m~st~.~o~~rie;supp +umentation accep~ka~e ~n lndust~`(~gtt8d'~to support fhbamount p~tt~ ~r ~s"~puted. In th event the p ~ are unab a csolvc such;: e`~either parry i 'v ti 1''. a '4 , ~ ~ ~ ~ 4 7Y ~ may pt')i<SUe anj reme.~, ~vau~~le at law o~r~~'quiiy to eri~rn its`~nghts purse r3tt~:to this Se t~i, _ ~ ~ ~u:, 7.5. if i,~~jnvoiced ~ariyfarls to remit the~~ull'amount ay~aleiVvhen due, i ,t' rest on the uri ~ id portion, hall3cciue from th~` da a, ue until the date of pa~~'t at ante` ufal to the I~"~~e~~Of (i) the th~n~uifeive prime r~` ~ of interest pu~~ished un ~ er ' Rlote~~ Rdt~ key ~=~~~Nall Street ~ ~y+i~ ~ is a~ ~ *t ~ Journal u~~5<1to perc~nt annum; or (u)i~ia~~naximum;;nppl~c;~t~fe lawful late ~~t rate. ~}i ~f ~ ,t~ . z~' , ~ ~ ~ ~ , ~ 7.6: A q~~i~y shal~hd~ ~t~~~ right, at if ~n expens~'~ ~ ~e'asonable N,lpe and at ~ nable ti ,~a ine an~~ ~~'i _ d to obtain co ier ~f thi~>"@levant'I,~rt,d` Hof the booker ~;e ~ rds, and n ~ rigs c,f he other ~l~only to _ ~ ~onat~~n, sary to verify the ac~yif~cty: any st~~jn ,~,~charge, pay,~ignt, or comj~ , ~~,•'~~~tti pri~~;~ +~~t~~t. Tfiis rigf~t(p~g,;~ i, sK,-~i•, i, )~,~r,~,~.ja,e twin 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 awing 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; providod 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. NAESl3 Standard 13.3.1 All Rights Reserved Page 5 of 10 April 19, 2002. SECTION 8. TITLE, WARRANTY, AND INDEMNITY 8.1: Unless otherwise specifically agreed, title to thQ Gas shall pass from Seller to Buyer at the Delivery Paint(s). Seller shall have responsibility for and assume any liability with respect to the Gas priorto its delivery to Buyer at the specified Delivery Point(s). Buyer shall have responsibility for and anyliabili#y with respect to said Gas after its delivery to Buyer at the Delivery Point(s). 8.2. Seller warrants that it will have # ~ right to convey and will transfer good and merchantable title to all Gas sold hereunder and delivered by it to Buyer, free and clear~~~-`~~I liens, encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 14.8, ALL OTHER WARRAI~TIE~,~EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PU ~~'OSE~ ARE DISCLAIMED. 8.3. Seller agrees to indemnrfy ~pye aril ave it harmless from all losses Irabrlities or claims including reasonable attorneys' fees and costs of court ("Claims"), from~ny~R~`~~~ersons, .arising from or out of claims of title, .personal injury or property damage from said Gas or other charges thereo hrch: attach~before title passes to Buyer. Buyer agrees to indemnify Seller and save it harmless from all Claims, from any and all person~;~~risrng~'"fiom ur~out of claims regarding payment, personal injury ar properly damage from said Gas or other charges thereon which attach afterfitle basses to buy 8.4. Notwithstanding the oth~f~~ro~srons of f~~is 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 ~~h~fer~~`~ by S~rl€~r to' meet the quality requirements of Section 5. SECTION 9. NOTICE~~,,, r"` 9.1. All Transaction Confirmations, invoices:; payments and~other communications made pursuant to the Base Contract ("Notices") shall ~e made to the~ar:i~resses specified in wrl##~gy~th ,respective part(~s f1' r~, time to time,,4~,~,~ { ~ , '~t All iJofices `rryulr , .hereunder~rj%ay be se`fs~li; fa'csunile yr r7~uiy ace; table elect r'" ,'aar~s a natrbnelly re~gnized { overn~l•rt coimcr sen,-ice fi~~class.ma ~~~~~and delivered. ~ E ~ t t, 9.3. s ~iNotice shall`bc gi when re~i'd on a B~1smr~sS~~Day by the:a~idressee. ~lnffhe absen q ~ - q~€.~bf the I tuahre~ceipt date, 'i F 5d.• ~ it1 ~ i5r ~ , the fallo~~:ing hresurithtioils will apply hJeitices send b=r fa~~rimile shalltk~e deemed,~v~.~iave been recei ed~upon~°e~st~hcfing partys receipt of its.f~csirnile r„~~~~jine's confinn~tion of suc~as~fCi~ transmiss~in. If the ay~on whrch~sich t? ~~irdle i ~~`r r6ivtd is not a Business Dey or is ail= r fi~~e=p.m: on a Bsihess Day~then~sU~h facsimil~~~hall be deed to have'~li~en' ~ved o~~~ ~ie~tt following Busin~~s bay. Notice; ~ ~ r~~~ernight ma1j~ br:=courier shit hokdPemed to hay~~been rec~~y ~ on the n~ yff&rsn~ke~ss Day'~~~„ft~f as sent or such ~3rlier timr, as is confi~'med by thQ receiving p~rt~r dice via first Mass mail~l~l be consilred dolivered tlae Bf,~~ess Days after mailuul, t ~ ~`3'n~ ~ SECTION '1 ~ FINANCIAL RESPONSIB.~LITY~.. ,°t i 10.1.~;'~'Ii oit e ~ f ~ ~at. ~~uf air u I~~atron toy n hor part; I ties reasonnbl~ grounds fc,r ~ns~curity rega`~diri~ the perform r~ y Iqb ~~1der~this Contract (whether u[. not than due).=by the oiiwr party ("Y~) ~(mcj'ding, wlthrrut lir,~nitatlon ther~cGurrence of"~a~ mate~~ar oha~~ge in the creditv,orthlno~s of Y~ s may demand ti8equate /~ssu~~°~i~c`e~of P©rfo~;ma~irP. "Adequate:~rAssia~ance gfPerforr'ran`ee" shall mean suffic~r~t secant; in'th~r farlt7i,amount and for thete~n,ras~o~l~~ly~cce~taLl~ lc X, includiri~ but not Ilmite~ to, a~sf~"ndby irrevocable letter of c~cdit a r=rcl», n,~rit, a securi~; Interest in~an asp t or a pert©~r~~a __~,+~p,~~ond or guaranty _(in~ ~u~d~ ~ the~i`~~i`p~~ f any such SeCUflt,) 78 ~ ~ ~ ~>1•i~~~ ~ -'yt~ F{ v'~ d ~'~~f - i, , q. 10.2.! In tla~ event (e eh~~n Evgnt ~~f Default) eit~h ~r~par.,?: (the Deftrng Party~Qr its guar itor~~ h~ make an asgnment or any g~neralarraixic«~cnit for the benefr~~~of credit r °,~i) file a petrtrors or other t e comme ~'~~h raze, o~~,aalui~ca~ce in the comnl,~n~r~~aient of a~j~~r~ ~ ~ing or casc;~[~]derany b~~~~~~pi~y or similar'~I~iw forthe~ ctlon of c ~ ~ ~ ave ~{cri, pctt wnflled or proce~drrl' mc~Pi`ccad 3°~,snst it; (iil)a'~~a"twrse bec,$i~iic~~~j,krupt or ms~vent (ho ;evidence ',::'~~nable`o k~ s debts as they fall ur; havo a rFC fiver, provl~ortal liquldatq rnn~~vator, cus~o-.ran, truste ~r~other si 'I rJ ~appoi . d tkfirespectto it or S~rbstahtally all of ~t~~a~'sets; (vi) r ~~o perfor Igation to tta other pa ~ £ith respe ~ redit h• + bligations relatir~~ tc~ th$ Contra t ivli} fail to gi ~ ~dequate~~s - `e of Perfo .'ance un Vii' .bction 10 ~e •8 hour` r' ;least one Busing ~=~of a viii iitPn quest by th ; • her party p ter' 'dot have p ~ .;any amot ue the of ~ reun = ~ before the secon~~>€F~fa~rfess D~~„ f ~Ila ~;ng written ~ '-e that su cnt Is due, i n the oth;. y (the " ~ ting P e ~ ~II have the right, ~t,nt~ sofa elect~~ n t mediatel~~v~r hold an ' ~ end deliver' or payme- ~ : ~tupon Nofi ~ j a ro ter ~ i qAd liquidate the tr~r~~`tt~~is un~itr the ~ontract, ~tf~r"e manned; l~$i~ ~d in Secti 10.3,. in ' ition to a _ - I,~~other';,, , ~ available hereuhr~l?r. ~ 5 j ,p ~ >i ~ ,t 10 3 If an Cvent of DPfarilt has occtir~rerJ and rs c~~n~ibi ~q~, the Non [~~aulting P a'hall hav : , r y No Defaulting tij s~ i~ ~ , Party,t to d~sig~nate ~ a1r :n`,~. earlier th Rthe Day su. • 6~. ~ ~ an~~S~~ater thin 20 Da r t#. _~fb~h, as an early terminatron d"ate (thee ~arly~ ermination Date") for the lrqurda ion an termrnafron pursuant 4o ecfion :3:1 0 "a "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 aro, in the reasonable opinion of the Non- Defaulting Party, commercially impracticable to Jiquidate 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. - r Copyright O 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. Earl Termination Damages A pl 10.3,1, As of the Early Termrnatlon Date, the Non-Defaulting Party shall determine, in-good faith and in a commercially reasonable manner, (I) the amount owe't]4Y(whether or not there due). by each party with respect to all Gas delivered- and received between the parties under Terminated T~an~sactions and Excluded Transactions on and before the Early Termirtafion Date and all other applicable charges relating to such del,(~`erras:;and receipts (including withou# limitation any amounts owed under Section 3.2), for which payment has not yet.been made by theme p~` 's~~h.at owes such payment untler this Contract and (ii) the Market Value, as defined below, of each Terminated Transaction, Tie l~~n~pefaulting Party shall (x) .liquidate and: accelerate each Terminated Transaction at its Market Value, so that each amount~equ~d`~iht' difference between such Market Value and the Contract Value, as defined below, of such Terminated Transaction(s) s,,~ II b~P{'"e tp, the Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and to the Seller i : the o ~ a('ryly ;the case; and (y} where appropriate, discount each amount then due under clause F~. (x) ebove tc present value in a mmercially r~sonable manner as of the Early Termination Date (to take account of the period between the date of liquidatro~~s~nct the date o~~,which such amount would have otherwise been. due pursuant to the relevant Terminated Transactions). .For purposes 'of this Section 1r~.3:1; ;'Contr'ac;t Value" mearis the amount of Gas remaining. to be delivered or purchased under a transaction multiplied by the Cantract~F'nca,_~2nci '`fvlarkef Value" means the amount of Gas remaining to be delivered or purchased under a#ransacfion multiplied bye nlar{~~~,;~hnce,.for a similar transaction at the Delivery Point determined by the Nan-Defaulting Party ih a commercially reasonable manrl~r 70' ascertain the Market Value, the Non-Defaulting Party :may consider, among other valuations, any or all of the settlement prices.rof NYMEX.,Gas futures contracts, quotations f~om leadin dealers in energy,,swap contracts' ar physrca1=g~5 tra~l~ng~'riiark~.~s,, similar `~x)e~,,br put'~~Ff'a~s ~"~~i ~r~~1 othet f~rQha fi~'~~,~~,~~L 4 ~et~;~ ~acjjuste~fi for the. length ~f~,+he'"term anti dtf~~rGnces in t~a'~~~ortatron ~~ds~s party shal~~rl~t be rPgt~rr+~°~ to ente~xllr~'f•~°~` F~cem~ tf ~actro~i(s) in r~ , ~ z p the Early order;to detdimine the P tarrket Value ~nx extensrqq~~jj(~) of. die term of{~ transaction tu•which g's e ii~it boa Termination haft (rncludrng~but not Ir i~~~ to "eveir'=T get. `ovisions") all not be, c~~~sidered m ~ '"1,~~ :jij~i~g C ~~lues and Marke.t~~luos f nr the s~oieance of d~c~;ut, any op io~~pu~'~`jant to whr~~one partk~.ii~s the rrgh# ~ ~ , he ter: p transaction shall h~ con idorec iri de~prl~£ining Cant sct Values ~n~t' 1 ~:~t Values 'e rate of ihte~'est used i~. 1` g net ~t value shall be de''t~.rnrinc~~l~b~~~Nun~D,~faultin P~ ~tt,,,ln a comrrlerc~a I ~~~reasonable~ntanner. ~ ~ , ~ ~ , . - -Earl ~T~rininatlon Darl~ag®s Do Not b~ ztf ~..,~-.r ~ • 10 3.1. Fps of tl~c ~ ~%ly Terming! ~ Date, tl~"~`u~Jon=Defaulting ~a~rty shall d@ eYmine, in and 1~~ a co ~mercially reaso~iahla n'i inner, tha aic~nt owed r~l~ether or n~ftdthen d ~,e) by eacf~~' rty with r$~'b`;ct to all ~ `rid an rw~~ between the partrQS untler. Trrrn~nated Transact~o~s and Ex~~~trrie~' ~ransactror~~n and bdfo to the Ea~ly;~ ~ ~tion ~~at~ ~~~i, all other applicable cl argc~ r4 at,n~ to such defy ~eri~s and rec~1i~4~ (including wrth~ ~lmitation ai~ amor~ntsr o~i d~~r Sec~,~i~~~~~).iforwhich a ment,hasnof et'been,rfade b the& that owes,z t~cl, is merit un~ this Contract~;,~.:~ .1 ~ fy~, t The parties have selected either "O~ryh~~~?Agreem8~t.,Setoffs Apply" ~~p~p,.t)~er Agreement Setoffs Do'gf~~t~,A?ppiy" as indicated on the Ba$~;'Con~tract. ~ ~ 4, Other': Agrceti7en°t Setoffs A p1Y; ~L' ~ ~~'i 1Dt=v^2n The i~un De salting Part, shall net or ~;tyre~ate, as apprc~~~riate any end all amo~ntr~}o~~irlg~L~~tweerjtha f~ fires under Sectrori~l~.~,1 s~ tf,~~t allr~uch amoun~s a`~`~ netted ~,,~~r~ugre~ated to a sale liquida.l~d amount pa}~ hIP t}tr c~he party to ~~s other (the "Net ~o.tl~riiont i~ni~un~ ~ ,fit its sole p tlgn and wi~ji ut peIer Notice t e DefaultmgParty the~~on L~bf`°~Iting t~~,rt ~ m, setoff any Nlt~t<,,~attlement, Y~n,ouri owed to tf~e ~1on-Defaulting P~-~ against a~margm o~.' otfler collate F h~ Idb~lt In c~' n~a(op with any Credit ~i,l~i~oit OLligatiuri relating to the r~ontract; pi (~i~~`~,,y Net Sett~q~nent Amcrtinf`payable t~•thc~ : ulting a, aihsf any amou~t~~ i'~` hI~ the ~efaulting'~'ti~rti'~+ to the Jon Daf~ulting Partunder any ctler agreett~nt R'~o~,4~anget~r " een the artiest ~~a .z._ t~ . .:t~; ~ . a e..: ,t .sue ~:,;s~ ~ r Otherr~Ag~eeiYicnt Setoffs~D,o Not A t q~fi° ' ~a~ r'' ~ - _'~.:t a~W a ~ s fit. r~ 1G 3 ~ '7hP Non Do~f~ulting Partv}~Si~ll net or ~ ~ra`~ae, as abbe )hate any; fall amoun ~ ~etween ~g ~les under Section 1 U 3,1 so that rill 5uhh amounts. ~~r~ netted or~~ ated to a s '~`le Iiquida. ~~~rrtount a , ~ a pa ~ ~ t ~ " ther th Net ~@ttlz merit Hmot,ni) j:~t its sole opts hand with ~ r;ro,h Notice to ~ Defaulti~;Y '~rty, the N~~1 ~ •1 ing P i- etoff any .Net S~ttle~~,c-rrt Amo~int ~~`bi~ to the Non (faulting T~ ~ ~.mst any mein or othQ ; ~ Lateral held i~ > ~nnec w. ~.~ny Credit Su ort Obli{a Uon r~rl ~,~the Contr~i~~ ~ ~ {I 7 4 r ~F k' 7 P ~ 1« Ix l n.. ^r~~. ..i' N t _ ; t r s 1,~ 3 ~3 ' If any~~llg~fa~n that is t~ included,,ir,~, ~e ~t~l~l, •agg ~~IQrl,~r setoff pt{r,~,r~t~~k~;ty~ ~ ,y >~~~.w unascertained, the Non-Defaulting Party may in good faith estimate that, obligation and net, aggregate or setoff, as applicable, in respect of the estimate, subjecYto the Non-Defaulting Party accounting to the Defaulting Party when the obligation is ascertained. Any amount note 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 th.e 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, Ina 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 finro percent per annum; or (ii).tho maximum applicable lawful intorest 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 rer~e'~).I,es under this Section 10 are the sole and exclusive remedies of the. Non-Defaulting Party with respect to the occurrence of any ~~r~, Y~Termination Date. Each party reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or may be entrfled b~ rising from the Contract. ~ . 10.7. With respect to this Sectio 0,_ d, parties have executed a separate netting agreement with close-out netting provisions,. the terms and conditions therein sh pre'~ai~~ o the extent inconsistent herewith. SECTION 11. FORCE I~I'QJEU is 11.1. Except with regard to a party's obligatror~~~t~o make payment(s) due under Section 7, Section -10.4, and Imbalance Charges under Section 4, neither party shall be ~1f31~ t~~ the other fvr failure to perform. a Firm obligation, to the extent such failure was caused by Force Majeure. .The. term "Force M~jt~~;e! as emp'o;©~i~herein means 'any cause. not reasonably within the control of the party claiming suspension, as further defined rn4 c~;tion 11.2.a 11.2. Force Majeure shall rncttirie, I{ut ncrt t~P'Ij~iited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or stone ~:%hrrtin~s,.sU~ch as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machineryor equipment or lines of pipe; (ii) weather related events affecting an entire r1~r~ raphrq~r ion, surf.r:as low r~ +,r ~~g = ry temper~tu~e~~,~ich~~ us?~freezi ~k~or~fiailure of well~~~or£Ilnes nf~ ~ ,~)~~nterruptld `~~nd/or curtailment c1 Firm klrantii,uit~tlon and~~r :storage <b„yrTranspo~h°~ (iv~~~#~ts of oth such a'~~~tri{~~s ~koufsor '~dj~,ei~..l~ndustrial disturbgn e~, ,~~ots, ' ~f_j~~ ~4; msurreetiens or wars,, anc~J govi~rnmerrt.~f actions ~ as nec~~s! .,b for eompli~tice ~.~~It any court order,Flgv~ ~,t~(frte, o~,drlin~ira; regulatio~t o7 policy h~:ing th~¢effect of la t. )~romulga by a gover~ : al a~~`thority'~ha irt.' urisdiction. .Seller an~`ti gu`~ er sh~l~ r~"~ d'reasanable ~1~~rts to av'~ =the adverse Impcts of a Fo ~ `:aJeure a, =j~solyc the .~enk~i~ccurrence once rt h-,s claourred~nn~Yto resume~iformance~~;r' ~ r~. t'wg 'r~t~ t~~ r 11.3. I~Joith~r• park silnll~te entitled~t`c~ it~ie benefit gf~~,e uruvisions of~,~rce Maje~,~ the exte~~ ~;drf~rri~ance i~ ot~Cl by any or all of the following Grrcun~~,j;ances: (r)the. curtailment of int~~ruptible or~,~condary~~rm transpo~~tit3n~•?aftas pn~, ,path, Firm transpnrf;ition ~ a!sb curtail>d; (ii) the,t~ariy claiming, ~cus~ failed to rer~tedy the co~~ltion and~Q resrp<the px~€ iaa~ee of such ~ coven~nts:or ~4bggatior~~ .rth reasonab ~1 ~Jispatch; o;r (i} ecgrromic harc~sY~iip; to inclrjde wwithout hm4ta,~ign~S~J~fer's aE5 r ~ III Gas at a higher~C~r,.rtiore ac : arit-~~epus'price than' F-Contract F[~ ~ r Buyer's ability tQ,purchase Ctias~at a lower~~`~fore"acjvantaf ~~s~;pri~e than the Contraet~PrirE~ or a regulatory agency di~l~n+ing, In wtf~o~f~ or, rt:part, the p~ss~through of ca~s is resultr:~"~~om tlii ,Agreet~~ n~t~(i~~)the loss of Buyers iYiark~t;s) cr Bliy`ers friability to u~ 'r resell G?s~~f~urt~!ir~sed hereu ~ery~except, m 9Jk~ier ~as4r~~s"'~7cvi~i~tl in S~~`~r~an 1' 11.2; or (v) the loss or failuro of Sellers g~s'supply or de~~~ron of res~r~es, except, in ert~8~ case, as provle~~eci ~n~e't1on 19 2: 'The prt;~ c~Jt~i'ning Force Majeur~ whall not heexcy~~~~i~from ifs r~s~onsibilityfor In~6a(ance Charges.': ~i,~' ,p~ 11.4. tJot~~+hthstan'drnc~ r~ything~ to the gontrary he`r++~n, iii Rai~r~rs a~roq~ th ~1the settleri~snt of stnlt~s, Ibck~uts or other industrial disturUartiees shall'~b~ witN,r~ the sole discr~on of thetp~rty cx~errencing ~uch~t~rbance. ~s`• r~ 11.5. Thr~ i> t ~~+•ihuti~~~j~ rformance ~revente ~ , ~ ~~~s't`~ o~i"~`~,Notice to t ~~~'~tf~~'~ ~ t Force Ma'eure V~ ~ ~ t p ~ s t,~t~t; Ir~iti~i NRtide may be given orally ho+ c+.er, ~ ntt~ t~,=Notice Wit)~~r,~sonably fC~l1~ arti:ulars of the ent or oco~,-ence rs reggiJ,ed,;3s se,on as r~nsona~b~y possible. Upon 'pr,~~idir;,<~ .~~ifFin tJotic?;~of Force Iv1~j~ure to the~,o ~j~~,r`~~ity, the affar~ked party ~Ie relieved~q`f~lt~~~(5ji~~~tron fr~. Ott ~Exnset of the Force P9~ieurc c ~ ant, io nt~P.~,or accept~`~I~ery of Gad; ~s~ap{ajicable, to theextent an~~i~ol`the duratrc~~ifol~~e3Majeu~ F t~i~ither party shall be{ctr erii~d t~ h~a ~c f~jled in such o~i~g~ations to th~o"thJe,~ d "ring such o~.eurrence or ~ ~'nt. ~ ~ . 11.6. ~ Noh~~ithstnntiir,q Sections 11 ~ end 11.3, the parties may agr,~~e to alter`~ut~~ Force M~`~ur~~ bvisio ~ ~;a 1`ransaction Confi~ma iqn-c~<ccuterl in ~+rrtln b both ~ rties. ,f ~ t SECf~~~N =~2. Y~ ~9~ ~ This Qon`~ra~ tstnay be tenr~(rp ted on 30 ba~r~~ written I~otite Luf shall rema~ yin effect u~t: a exptratr of~t~i slatest Ds~~ ~.~,t.,nod of any transats'tron(s~j~ The ~jghts ,either partr~~i~rsuant to+'~hction'.T,6 and SQ'~ on 10, th~h~gatrohs tom `ment~e ,fir, and the obligaJ~ +n ©f~tir~ter pa° to'i emnify the other, pursuan~~.tt rPto .shall survive tj~re terminat'~ ~,~the Base r~C zany tr t~'. SEC~I~ON~13 ~~LIMITATIONS , I~~ ~ ~ r:~ ~ ~;~~n~ FOR BREAI=I'OF ANY F'RJVISION FOR"V(/RICH AN ~WRESS REtv1EDY'OFt~`IJI~'ASURE OF'•pgIVI~A~`G~lE~jS~pRb¢tl]~['j SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY'S LIABILITY HEREUNDER SHALL BE LIMITED AS 5ET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR INEQUITY 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-0NLY. 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, FJCEMPLARY 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 fNTENT 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 PAIQ 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. MiscEtr~aN~oUs • ~~rl• 14.1. This Contract shall be binding upoh~and inure to the benefit of the. successors, assigns, personal representatives, and heirs of the respective parties hereto, and the covenrentsonditions; rights and obligations of this Contract shall run forthe full term of this Contract. No assignment: of this Contract, in whole o~~i~ ~~wrll be made without the prior written consent of the non-assigning party (and shall not relievo the assigning party from liability hereun~~r), ~~j~~ch consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber; or assign the&r Co)1t~act or the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements, or (ii) transfet•~)ts in~~rest to any parent or affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any such asslgnCrient, tr"~nsfar and assumption, the transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations fereunder. . 14.2. If an ' ' y provision in this Cor~4rac,t ~s determi~o~ to be invalid, void onunenforceable by any court having jurisdiction, such determination -shall not invalidate; void, or make uri~~i~forceable any other provision, agreement or covenant of this Contract, 14.3. No waiver of any breach of this Contra t 51~)I•be held to be a waiver of any other or subsequent breach. w~~ 14.4. This Contract sets forth all't~ftlersta~dl~j~s° 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 an effer•tive transaction(s) ThtS.,Contract m@v he amset~de~ only.Jiy y ~ t--~.- a'^!~tinq e>5~6uted by boJ~~~ a~C l .,S t 14.5. The interprEtatron and-performance of thrs'~~6~tra~tshall bejgo~t,r~ied by thp~~aws of t~li`~Q~jrrsctro~io~ as ux)icatetl on .the Base Contract; e;;clud~n~t, ho~~~F~ e~, any conflrtt rf~t~ws rulo ~:vh~~1'~o~i~d apply the~r~w of ano,her)urasdictron r 14.6. .This Ccntraca am III provisior5s,1$rein will s~~`t to all ap~lr4able andwaJid statutes, ~-~l'&~~.orders and:regc)atibns of any govemtsinta! authority hau~y~turisdictior~1 ~ the partid5 th'~,~~f~cilities, or Cas supply, this~Gontract or srn "~ctigi~ or any-pro ~s thereof. ..14.7. ~I,drt~ is nc, third i£~~~ beneficiaf'~o~?this Contr~~ct r~Mfi ry r;, ~ ~ t ~ ~ ~ u. ~ 14.8.' Earii hr3iiy t~ ihi5 Ck~ntact repr~q~r~i~ts and w~'rrr~nis that it has full~~nd compl~ee authority to~_ ~ intd and peifc,rrn~his Contract. Each NeiSo~i ~~;~hu ure~utes lh~s Contract on behalf of e~~~ti er~l,~;rty! represents~~nd warrar~~s~~iat it has fu'll~fnd coni;yl~te authonttu do so and that sUah part; `kill be k~ound°thereby. ~ ~ s • 14.9. The heading's and subheadin~~s ~~'htamed in', this. Cor~itract are uad solely for canvenrenc~~and do i~ot constitutct~ jyartof this Contact bPi.raert`thP'nart~ac ~~nd shall not housed to c~nstrueor interpretthP)i gvisions of`fhrs Contraci~-'~ ~ x 14.10 'Unless the ~,3r~es h~ve elected ~r~~t~he Base ~ontr~act;not to mak tht Section 141p '~f licnt~li7 to thisC~ntract riot ~ ' h ~ ~ ~ ~ ~ party shall disclos~drectly or Ind rrctl; `~ithout the,p~rio~ written con~ei~t~ b~ the other parh~~~~f7e terms of tf~ ~t~on to a third party i;other than the employ ~ Ici~ders, roe nlty r~uyners, counsel; accountants and`~th~~~agentsjl4t?tHc ; ~~~ty, or pros a~`~ rGh~sersrof5;~~;pr substantially all of a panes assets or cfarv ngtits.under this ontract; p~orlr~ri~~s1~`cl1 ~e~sons~tihatl brie agreed to~ ,terrrls c~~h't+dPnt~~));except (i) in order ~o,"•e:Onipl~~ ~.ith am n,~hii~cable law,~~~`~r, regulatigf~~or exchange ruleu~.~i~o thy, a~ ent nece~s~a ~ ~ e~,a~~~brcem`rtit uf~ft`is~Contract , (iii) totf~i~ ~;~:ieni rece~, my t'd~; implemen~ rly transact~un or•1 (i,u) to the ext anti such in~mation is ~ ~ t . ~~a ~tp~ich thi~t~ ~,~~h~ :for the sole purpo~~f c~lcr L+tuig a ,,~k~lr~hed inde~~~ch party ~~II noti~y the otheriarty of any;- oceedrng ~ ; I~?;ware-; cf1-~ y result in disclosu e of-.the ton,is ~f a taransactio other than Qmiitted hereun ) and use:~.fe- sonable e o ~ s ~o re'ent ort 1 ~ ifirl~tdisclosure. ~ P, g, T.he e~i ~Cnce of thi~SG~rtr~~(~~Is notsubJ~~~~fb this can getiEliality~obligation ~libJectto S~`~~r~n 13, the eQ'~ III be ertti~l ~1t II remedies avarlab~e ~,t la, or rrs,~.ghs.tenforce; of;§~k relief in n~tectiUnwith this ~tfidentialit~d Jigation. Th ~~ms~.p`~any tr~h5~~'io~,t.hereunder shall q"e ke ~t conf rienfial' ~t' arties h . ~ o for one r` vm the ex rrafio a `f the transa'~~ I gin. r ~ ~ t'` t In the,~v~nt-chat disclo~ur~i~; required ~~~govemm , fnlf body or apphc a law, the,~ti ~ sub)ectt ~ c tgq~iremit m~isclose the material icrm_ cf tliisCoi~tf~t to the e~t~n~so requird ~~ut _hall prompt,nofify the•~l~h~ a rr~, ~sclosure, ~n~ ~ Ili coo orate r, ~ P ~Y P s ~ P (consistent ~ Ash thF dis~l~s~n~~}~al'ly's legal>~' b~igatlons) trtYl'~the other partys~ forts to obta,~t~Yotective o~`~ `~~or sifnilar rests ~`~with respect to such,c~~s Icsuro at fhc o~~or~se of the o~ito~•party. ~ o~~~ ~ ~ 14.11 The t~~rlies m agree to dspd'_te resolutrn~ proG~edures rn ~~~ecial Pr ~isrt~ns attar, ~ k~ tli Base Contr•~t or Ina Tr~nsactlonConfn~motlon c.><ecuted in vGrit~rig by both~~~rtics'. ~ ~ $$~i~~ r~ . i5-~~s`~a. ro-w~~~ ~r~ , '~'~att~x,.,.,. ..,:~•su'r~ a DISCLAIMER; The purposes of this Contract are to fadlifate 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 THlS 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-0F ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY L.AW, BY REASON OF CUSTOM OR USAGE. IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSOAGREESTHAT UNDER NO CIRCUMSTANCES WILL NAESB RELIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITNE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT. Copyright ©2002 North American Energy Standards Board,lnc. NAESB Standard 6,3.1 All Rights Reserved Page 9 of 10 April 18, 2002. EXHIBIT A TRANSACTION CONFIRMATION EXHIBIT A FOR IMMEDIATE DELIVERY Letterhead/Logo Date: , Transaction Confirmation#: This Transaction Confirmation is su~ject to tli'i~ Base Contract between Seller and Buyer dated .The terms of this. Transaction Confirma{ion are't~in~7~ng unless disputed in writing within 2 Business Days of receipt unless otherwise .specified in the Base Contract, SELLER: BUYER: k ytii, Attn ~ - Attn: Phone: ~ - Phone: Fax' Fax• Base Contract No. Base Contract No. Trart~porter: F. ~y`y Tr~ns~c rt~it•: fi ~ 't Tt-an~~pnhtPr+Contra~t NumG~r ~Transp~r-terContr~'et k,lumber ~ Contract Price: ~ ,k~1~ABtu or ~ ~ ~ ~ ~ ~i 4 ~ . zo, ~F Deliy~~ry Pound: Qegin: ~ End 4 ~~,~T ~ t Performance Obllgatron ~a`~7d Contract Quantity: j(Sclcct Qne) Flrm; (Fixed Quantity). i=1rm (Variable Qua 4y): `t ~ Ntiiter.~y~~ible: t' MfviBluS/day _ f~'1MBtus/dayt`~7linimum Up to`'°~~„ fVll~1~t~s/ay ~ t o:~FP „ t:J1MBtus/dad i leximum e~ s ~Li~jC ct t~ Section 4.~ . ~ai~ele.ction of 3~ ~ ~ ~"Y V TIC.'. ~~le"'~.~trus a~ gBu~'eror i5~~Ilor ~ . ii¢~~- Delive~;.y Point(s). _ ~ t ~n list a s eci~~c , ep ra hic and ~c,l~ne location (If a.i~~r~ini~~pcmt~is u5~-~ p 9 9 P I ~f?' ~ ) Spe:clal Conditions: ~ 5{2 ~ } ~~r { y...l ~ Bu erg. N r Seller: (NOT F~R EXECUTION f ~ r I,(~~,~- , 1, y j OT FOR EXE~'~Y~N ~ f s ~ ~ ~ s By ~t~~l. ~I' M1~. } k Title: iu;~, ~ „ a ~?`,.W,.,.. ...nom • Title. Date: Date: Copyright ©2002 North American Energy Standards Board, Inc.. NAESt3 Standard 6,3.1 All Rights Reserved- Page 10 of 10 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„_4 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 orthe 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 theaelephone 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 QF 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 Sec#ion 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 1Q.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 ail 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 fo 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 .74,74 Add the following new Section 14.14 "As a California Municipal Corporation, all waivers, agreements as fo venue; jurisdiction, Indemnities and remedies and other matters. hereunder dependeht on the powers of the City of Vernon are qualified. to the extend such are permitted by applicable law." N ITIAUAPPROVAL COUNTERPARTY 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 SUPPpRT ADDENDUM 1, Credit Terms. Defined terms used in this Credit Support Addendum ("Addendum") and not defiried 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 gB+ $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 respecf 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- Defaulf 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, ($10,000000}. 2. Credit Requirements. If at any time, and from time to time, during the term of the Contract; the Contract Exposure far a~Party (the "Providing Part') 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). t. 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 vvith 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 Noh-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 vvith 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, GA "Credit Rating" means (I) with respect to a Party or its Credit Support Provider, as applicable, the lower of its long-term senior unsecured. dekit rating (not supported by third party- credit enhancement), its underlying revenue bond rating, or its issuer credit rating bythe 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. "Moodv's"means Moody's Investors Service, Inc., or its successor. "Non-Defaulting Parma" 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. CQUNTERPARTY , CORAL ~ c/~ 4