AGREEMENT
By and Between
KeySpan Energy Trading Services LLC
and
Coral Energy Holding, L.P.
Dated: April 1, 2000
TABLE OF CONTENTS
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SECTION SECTION NUMBER
-------- --------------
Recitals
Purpose 1
Scope 2
Definitions 3
Joint Oversight Committee 4
KeySpan Energy Trading-Related Transactions 5
CORAL-Related Transactions 6
KeySpan Energy Trading Book 7
CORAL Book 8
KeySpan Energy Trading Shareholder Targets 9
Contract Years 10
CORAL Guarantees KeySpan Energy Trading Shareholder Targets 11
Sharing of Gains/Losses From KeySpan Energy Trading Book 12
Costs of Rendering Services Under the Agreement 13
Sharing of Gains/Losses From CORAL Book 14
Responsibility for Penalty Payments 15
Reporting By Parties and Reconciliation of Accounts 16
Settlement of Transactions at Expiration or Termination of Agreement 17
A. CORAL Book
B. KeySpan Energy Trading Book
C. Pro Rating for Early Termination
TABLE OF CONTENTS
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SECTION SECTION NUMBER
Exclusivity 18
Payments 19
Effective Date and Term of Agreement 20
Termination by KeySpan Energy Trading 21
Termination by CORAL 22
Termination for Bankruptcy Event 23
Notice Required for Early Termination 24
Access to Records 25
Support from KeySpan Energy Trading 26
Support from CORAL 27
Representations 28
Conflicts Waiver 29
Transactions and Relationships Outside this Agreement 30
Limitation of Liability 31
Indemnification 32
A. Indemnification by KeySpan Energy Trading
B. Indemnification by CORAL
Confidentiality 33
Notices and Communications 34
Miscellaneous 35
Governing Law and Jurisdiction 36
Other Services 37
TABLE OF CONTENTS
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SECTION SECTION NUMBER
Affiliate Services 38
Sole Engagement 39
Force Majeure 40
Severability 41
Use of Name 42
Insurance 43
A. CORAL Insurance
(i) Coverage
(ii) Insurance Notification
(iii) Insurance No Limit
(iv) CORAL Option to Self Insure
(v) Subcontractor Compliance
B. KeySpan Energy Trading Insurance
Section Headings 44
Waiver 45
No Relationship Created 46
Survival of Obligations 47
AGREEMENT
This Agreement (the "Agreement"), dated April 1, 2000, is by and
between KEYSPAN ENERGY TRADING SERVICES LLC ("KeySpan Energy Trading"), a New
York limited liability company with offices at 000 Xxxx Xxx Xxxxxxx Xxxx,
Xxxxxxxxxx, Xxx Xxxx 00000, and CORAL ENERGY HOLDING, L.P. ("CORAL"), a Delaware
limited partnership with offices at Xxxxx 000, 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx
00000. KeySpan Energy Trading and CORAL are individually referred to herein, as
the context requires, as a "Party" and collectively as the "Parties."
RECITALS
KeySpan Energy Trading is a subsidiary of KeySpan Corporation d/b/a
KeySpan Energy, provides fuel management services to its affiliates The Brooklyn
Union Gas Company d/b/a Brooklyn Union and KeySpan Gas East Corporation d/b/a
Brooklyn Union of Long Island and provides fuel management services to LIPA
pursuant to the EMA; and
CORAL is currently providing certain asset management assistance and
certain risk management advisory services to KeySpan Energy Trading with regard
to the management of the energy assets of Brooklyn Union of Long Island and fuel
and energy management for LIPA pursuant to a separate agreement (the "Alliance
Agreement"). In addition, CORAL is currently providing certain technology
hosting services to KeySpan Energy Trading pursuant to a separate agreement (the
"Hosting Agreement ") which Hosting Agreement will continue in accordance with
its terms; and
KeySpan Energy Trading wishes to contract with CORAL for certain
asset management assistance and risk management advisory services to enhance
collaboration of supply, trading, and risk management activities for the
management of the energy assets of Brooklyn Union, Brooklyn Union of Long Island
and fuel and energy management for LIPA; and
CORAL wishes to contract with KeySpan Energy Trading to provide such
services;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the Parties
hereby agree as follows:
1. Purpose
Pursuant to this Agreement, which will supersede and replace the
Alliance Agreement, CORAL and KeySpan Energy Trading collaborate to (a) develop
a strategy to enhance utilization of all energy supply, transportation and
storage contracts of Brooklyn Union and Brooklyn Union of Long Island, (b)
employ CORAL's industry knowledge and expertise regarding risk management
methodologies and trading activities with respect to fuel oil, natural gas,
electricity and emission credits, (c) enhance KeySpan Energy Trading's knowledge
and understanding of the energy marketplace and the available products, services
and information technology to facilitate energy transactions, (d) enhance
CORAL's knowledge and understanding of the Northeast energy market, and (e)
engage in "arms length" energy transactions for the mutual benefit of the
Parties, their shareholders, customers, and Coral's partners, as applicable and
as further described in this Agreement.
2. Scope
CORAL will assist KeySpan Energy Trading in the origination,
structuring, valuation, and execution of energy-related transactions related to,
among other things, the storage, transportation, transmission, sale, and
purchase of natural gas, fuel oil, electricity and emission credits. CORAL will
share with KeySpan Energy Trading its knowledge of these activities including,
but not limited to, the structuring and decision-making process enabling
implementation of these activities and the monitoring, tracking, and evaluation
of the results thereof. CORAL personnel (i.e., a minimum of four staff members)
will work with KeySpan Energy Trading personnel at KeySpan Energy Trading's New
York offices. CORAL shall assign additional CORAL personnel who will be
responsible for all activities relating to the nominating and scheduling of
natural gas supplies for KeySpan Energy Trading's regulated natural gas utility
affiliates (i.e., Brooklyn Union and Brooklyn Union of Long Island), KeySpan
Energy Trading's on- and off-system fuel management transactions, and KeySpan
Energy Trading's other off-system gas transactions. KeySpan Energy Trading will
provide all information to CORAL on a timely basis in order for CORAL to perform
such nominating and scheduling activities. CORAL will follow KeySpan Energy
Trading's lawful instructions in such regard, and to the extent such
instructions are not provided by KeySpan Energy
Trading on a timely basis, CORAL will be under no obligation and have no
liability with regard to nominations and scheduling for which it receives no
instructions from KeySpan Energy Trading.
CORAL shall confirm all gas supplies purchased for Brooklyn Union
sales customers, shall provide KeySpan Energy Trading with daily gas supply
confirmation reports in sufficient detail to satisfy KeySpan Energy Trading
requirements and will assist KeySpan Energy Trading personnel in confirming gas
for electric generation for LIPA. The confirmation activities performed on
behalf of Brooklyn Union shall continue until such time as required by Brooklyn
Union. The target date for Brooklyn Union to confirm its gas supplies is June
30, 2000. In the event the target date needs to be extended beyond June 30,
2000, KeySpan Energy Trading will provide CORAL with notice of such modification
to the target date by no later than June 1, 2000. CORAL will not, however,
perform gas scheduling and confirmation activities relating to transportation
marketer gas, and will not be provided with information associated with
individual marketer supplies on the Brooklyn Union or Brooklyn Union of Long
Island systems.
CORAL will perform deal entry, pathing and other data entry into
KeySpan Energy Trading's GMS system licensed to KeySpan Energy Trading by Altra
Software Services, Inc. ("Altra"), provided that KeySpan Energy Trading obtains
written approval from Altra to allow CORAL to perform the foregoing duties, and
KeySpan Energy Trading obtains and pays for a sufficient number of licenses to
satisfy CORAL's requirements to perform such functions. If at any time Altra's
written approval is rescinded or CORAL's duties hereunder conflict with CORAL's
license agreements with Altra, CORAL will suspend performing such duties and
CORAL and KeySpan Energy Trading will mutually agree on a course of action to
take.
CORAL will perform the reconciliation of gas supplier and pipeline
invoices. CORAL will also prepare and send the invoices for KeySpan Energy
Trading's off-system gas sales and provide KeySpan Energy Trading copies of all
invoices and reports sufficient for KeySpan Energy Trading to process, record,
pay, and/or collect costs and revenues relating to KeySpan Energy Trading-
Related Transactions. Through this Agreement, KeySpan Energy Trading and CORAL
may engage in KeySpan Energy Trading-Related Transactions (as defined in Section
5) and CORAL-Related Transactions (as defined in Section 6). It is contemplated
that this relationship will enhance the
value of and facilitate increased utilization of all of Brooklyn Union and
Brooklyn Union of Long Island's energy contracts, thereby reducing costs through
lower fuel prices and increased off-system sales credits and enhancing the net
margin contribution for KeySpan's shareholders and CORAL's partners.
CORAL and KeySpan Energy Trading shall record and track the
energy-related transactions and activities that each manages, respectively. The
criteria for determining whether a certain energy- related transaction or
activity will be managed by CORAL or KeySpan Energy Trading is set forth in this
Agreement. The Parties will periodically report to each other, as further
described in this Agreement, regarding the gains and losses, revenues and
expenses, and Incentive Revenues resulting from the energy-related transactions
and activities that they manage pursuant to this Agreement. This Agreement
contemplates a sharing of Incentive Revenues and net margin contributions from
these energy-related transactions by the Parties, as set forth in this
Agreement.
NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED TO BE A RELINQUISHMENT
OF KEYSPAN ENERGY TRADING'S CONTROL OVER THE ENERGY CONTRACTS AND ASSETS THAT IT
MANAGES.
3. Definitions
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
Ancillary Services - Operating reserves provided by the KeySpan generation
facilities that serve LIPA pursuant to the PSA.
Base Gas - Non-working inventory storage gas.
BNY - Brooklyn Navy Yard Cogeneration Partners, L.P.
BNY Agreement - The Second Revised Fuel Management Agreement between LILCO
and BNY, dated September 25, 1996, and all subsequent amendments, assigned
to KeySpan.
Book - An account for reporting Incentive Revenues, net margin contribution
(gain or loss) and margins above cost attributed to KeySpan Energy
Trading-Related Transactions and CORAL Related-Transactions and activities.
CORAL Book - As set forth in Section 8, the book of business maintained by
CORAL with respect to CORAL Energy-Related Transactions.
CORAL-Related Transactions - Those energy transactions which are specified
in Section 6 of this Agreement.
Costs for Rendering Services - An agreed upon amount representing CORAL's
costs as determined under Section 13 and as recovered by CORAL through the
sharing of Excess Gain pursuant to Section 12.
Electric Incentive - The revenue or loss from the incentive or disincentive
resulting from the revised System Power Supply Performance
Incentive/Disincentive in Appendix B of the EMA.
EMA - The Energy Management Agreement by and between LILCO and LIPA, dated
June 26, 1997.
Energy Management Fee - The fee for KeySpan Energy Trading's services as
set forth in the EMA.
Energy Manager - The manager of LIPA's fuel requirements as set forth in
the EMA.
Fuel Incentive - The revenue or loss from the incentives or disincentives
resulting from the Fuel Purchase Performance Incentive/Disincentive in
Appendix A of the EMA.
Incentive Maximums - The limit as set forth in the EMA that effectively
caps the maximum revenue or loss available for sharing under this
Agreement.
Incentive Revenues - The EMA Gas/Oil Incentive and Electric Incentive,
collectively.
KeySpan - KeySpan Corporation d/b/a KeySpan Energy, formerly MarketSpan
Corporation, and/or its subsidiaries.
KeySpan Gas East Corporation d/b/a Brooklyn Union of Long Island - A
subsidiary of KeySpan Corporation and successor to LILCO for the provision
of gas service in the jurisdictional territory formerly served by LILCO.
KeySpan Energy Trading Book - As set forth in Section 7, the book of
business maintained by KeySpan Energy Trading with respect to KeySpan
Energy Trading-Related Transactions.
KeySpan Energy Trading-Related Transactions - Energy-related transactions
as defined in Section 5.
KeySpan Transaction - The combination of LILCO and KeySpan effective as of
May 29, 1998 pursuant to the Amended and Restated Agreement and Plan of
Exchange and Merger between
The Brooklyn Union Gas Company and LILCO, dated as of June 26, 1997, as
amended by the Amendment, Assignment and Assumption Agreement by and among
The Brooklyn Union Gas Company, LILCO, and KeySpan, dated as of September
29, 1997.
LILCO - Long Island Lighting Company as it existed prior to the LIPA
Transaction.
LIPA - Long Island Lighting Company d/b/a LIPA, a wholly-owned subsidiary
of Long Island Power Authority (a corporate municipal instrumentality of
the State of New York).
LIPA Agreement - The Agreement and Plan of Merger, dated June 16, 1997, by
and among BL Holding Corp., LILCO, LIPA and LIPA Acquisition Corp.
LIPA Transaction - The merger effective as of May 29, 1998 of LILCO with
LIPA Acquisition Corp., a New York corporation and a wholly-owned
subsidiary of LIPA, at which time KeySpan became the successor party to
LILCO's interest in, among other things, the EMA and the PSA.
NYSPSC - Public Service Commission of the State of New York
Off-System Gas Sales or Off-System Sales of Gas - The sale and/or delivery
of natural gas by KeySpan Energy Trading on behalf of Brooklyn Union or
Brooklyn Union of Long Island to parties located outside of the natural gas
jurisdictional territory serviced by Brooklyn Union and Brooklyn Union of
Long Island.
Off-System Sales of Electricity - The sale and/or delivery of electric
energy, including electric ancillary services by KeySpan Energy Trading on
behalf of LIPA to parties located outside of the electric jurisdictional
territory formerly serviced by LILCO.
PSA - Power Supply Agreement between LILCO and LIPA, dated June 26, 1997.
Term - The term of this Agreement as set forth in Section 20.
4. Joint Oversight Committee
CORAL and KeySpan Energy Trading shall form a Joint Oversight
Committee ("Committee") for the purpose of setting strategies and oversight of
implementation to enhance the value of the assets, contracts and incentives
managed by KeySpan Energy Trading for inclusion in the KeySpan Energy Trading
Book as well as those managed by CORAL for inclusion in the CORAL Book. The
focus of the Committee is to direct the Parties toward a mutually agreed
platform for growth. The Committee will meet quarterly to monitor performance
and make course adjustments to the agreed goals. In addition, the Committee
shall be the forum for (i) adjusting the amount of the Contract Year 2001 and
Contract Year 2002 CORAL guaranty, if warranted, as provided for in Section 9
and for (ii) setting CORAL's Costs for Rendering Services under this Agreement
for such contract years pursuant to Section 13. The Committee will conduct
quarterly meetings, and call any special meetings that are necessary to discuss
performance results, to project expected future revenues and margins, to
identify and resolve issues affecting the successful performance of the Parties
under this Agreement, to discuss transaction strategies and to resolve disputes
between the Parties.
The Committee shall be composed of two representatives from CORAL and
two representatives from KeySpan. Each Party shall submit the names of its
designees to the other Party for approval, with such approval not to be
unreasonably withheld. If written notice of objection to a designated
representative is not received by the designating Party within ten (10) business
days of transmitting the designation of such representative to the
non-designating Party, such designated representative will be deemed acceptable
to the non-designating Party. The Parties may change their designated
representatives to the Committee at any time during the Term by transmitting
such designation to the non-designating Party.
5. KeySpan Energy Trading-Related Transactions
KeySpan Energy Trading shall enter into and manage the following
energy-related transactions, relating solely to those assets KeySpan Energy
Trading manages for Brooklyn Union and Brooklyn Union of Long Island, the fuel
and system power management services KeySpan Energy Trading provides to LIPA
under the EMA, which are hereby defined as "KeySpan Energy Trading-Related
Transactions:"
a. Off-System Gas Sales, excluding sales of Base Gas;
b. Service provided under fuel management agreements to third parties
other than LIPA;
c. Sales of emission credits and related transactions to parties other
than LIPA or to LIPA pursuant to LIPA's right of first refusal under
the PSA, excluding the transfer, sale, or
donation of emission credits pursuant to any agreement or settlement entered
into between KeySpan and any government entity or not-for-profit entity;
d. Off-System Sales of Electricity and Ancillary Services;
e. Electric Incentive;
f. Fuel Incentive; and
g. EMA Management Fee.
In addition, CORAL and KeySpan Energy Trading may mutually agree
during the Term to exclude certain transactions from the KeySpan Energy Trading
Book and from being classified as a KeySpan Energy Trading-Related Transaction.
6. CORAL-Related Transactions
The transactions set forth in this Section 6 include CORAL's
activities in physical and financial energy markets and are herein collectively
defined as "CORAL-Related Transactions":
a. CORAL's sales of natural gas, electricity, fuel oil, and emission
credits to KeySpan Energy Trading, on behalf of Brooklyn Union,
Brooklyn Union of Long Island and LIPA;
b. CORAL's transactional activities related to KeySpan Energy
Trading-Related Transactions;
c. CORAL's transactional activities related to any sales or purchases of
natural gas, electricity, fuel oil, and emission credits between CORAL
and KeySpan Energy Trading, on behalf of Brooklyn Union, Brooklyn
Union of Long Island and LIPA, provided that CORAL-Related
Transactions shall not include the term contracts, as amended, between
Shell Gas Trading and The Brooklyn Union Gas Company, dated October
20, 1987 and October 18, 1990 respectively, which have been assigned
to a Coral affiliate, or any of CORAL's transactional activities
relating to such contracts; and
d.CORAL financial transactions relating to KeySpan Energy Trading's hedging
activities.
In addition, CORAL and KeySpan Energy Trading may mutually agree
during the Term to exclude certain transactions from the CORAL Book and from
being classified as a CORAL- Related Transaction.
7. KeySpan Energy Trading Book
The KeySpan Energy Trading Book records the net margin contribution
allocated to KeySpan shareholders from the gains and losses derived from KeySpan
Energy Trading-Related Transactions. The portion of the net margin contribution
allocated to KeySpan's shareholders from KeySpan Energy Trading-Related
Transactions is determined as follows:
1. Gas Off-System Sales Net Margin - KeySpan shareholders' share of
the margin contribution (gain/loss) from KeySpan Energy
Trading-Related Transactions involving Off- System Gas Sales, as
approved by the NYSPSC, excluding gas originally purchased for
generation unless and until KeySpan shareholders share in the margin
contribution (gain/loss) from the sale of gas originally purchased
for generation under the EMA or an amendment thereto. Such margin is
calculated as (i) gas sales revenue plus applicable hedging gains,
less (ii) all relevant costs including allocated gas costs,
applicable taxes, applicable hedging costs and losses, variable
transportation costs, and fixed costs incrementally incurred pursuant
to such transactions; and
2. Fuel Management Agreement Margin - KeySpan shareholders' share of
the margin contribution (gain/loss) for services provided under fuel
management agreements with BNY, Trigen and NYPA, and any future fuel
management agreements entered into by KeySpan Energy Trading with
third parties during the Term, all as approved by the NYSPSC. The term
"BNY Margin" shall mean KeySpan shareholders' share of the margin
received from the BNY Agreement. The BNY margin is calculated as (i)
demand and variable charges paid by BNY less $3 million; plus (ii)
KeySpan shareholders' share of the margin contribution (gain/loss)
from the shared BNY fuel cost savings; plus (iii) KeySpan
shareholders' share of the margin contribution (gain/loss) from the
remarketing of Excess BNY Gas as defined in the BNY Agreement. NYPA
Margin shall mean the KeySpan shareholders' share of the margin from
the NYPA fuel management agreement, currently one hundred (100%)
percent
of the revenue. Trigen Margin shall mean the KeySpan shareholders'
share of the margin from the Trigen fuel management agreement. The
margin from such agreement is calculated as (i) demand and variable
charges paid by Trigen less (ii) all relevant costs including
allocated gas costs, applicable taxes, applicable hedging costs and
losses, variable transportation costs and fixed costs incrementally
incurred pursuant to such transaction;
3. Emission Credits Margin - KeySpan's shareholders' share of the
margin contribution (gain/loss) from KeySpan Energy Trading-Related
Transactions involving sales of emission credits and related
transactions, as set forth in the PSA. Such margin is calculated as
(i) the revenue received for such sales plus applicable hedging gains
less (ii) the costs of such credits including applicable transaction
costs (e.g., broker fees, taxes) and applicable hedging costs and
losses associated with such transactions; and
4. Off-system Sales of Electricity and Ancillary Services Margin -
KeySpan shareholders' share of the margin contribution (gain/loss)
from KeySpan Energy Trading- Related Transactions involving off-system
sales of electricity and Ancillary Services as set forth in the EMA.
Such margin is calculated as (i) electric and ancillary sales revenue
plus applicable hedging gains, less (ii) the incremental cost of
energy for such sales including any other costs or charges (including
applicable taxes and applicable hedging costs and losses) incurred to
produce and deliver the electricity and/or ancillary services. The
incremental costs shall include startup and no-load operation costs,
if applicable. If any of these basic sharing arrangements change due
to NYSPSC order or subsequent amendments to the EMA, PSA, or BNY
Agreement, the Parties agree that the Committee will review changes to
the sharing provisions, the CORAL guaranty amount and related CORAL
costs to render service in this Agreement that are necessary to
comport with such orders or amendments; provided however, that such
changed provisions shall preserve, to the extent reasonably possible,
the rights and obligations of the Parties under this Agreement. To the
extent the Parties cannot mutually agree to such revisions, within
thirty (30) days of the date of such amendment or orders,
a Party may elect to terminate this Agreement by providing notice
pursuant to the provisions of Section 24 hereof.
KeySpan Energy Trading shall manage all KeySpan Energy
Trading-Related Transactions.
8. CORAL Book
The CORAL Book records the net margin contribution from the gains and
losses derived from CORAL-Related Transactions. The CORAL Book reflects the net
margin contribution realized by CORAL from CORAL-Related Transactions.
CORAL shall execute and manage transactions for the CORAL Book.
9. KeySpan Energy Trading Shareholder Targets
KeySpan Energy Trading Shareholder Targets are based on KeySpan
shareholders' share of the margins from KeySpan Energy Trading-Related
Transactions as described in Section 6.
During the Term, KeySpan Energy Trading Shareholder Target will be as
follows:
a. Calendar year 2000 - $25,063,000;
b. Calendar year 2001 - the greater of (i) $25,063,000 or (ii)
KeySpan shareholders' share of the actual margins realized
from KeySpan Energy Trading- Related Transactions in
calendar year 2000, not to exceed a cap of $31,328,750; and
c. Calendar year 2002 - the greater of (i) $6,265,750 or (ii)
one-fourth (1/4) of KeySpan shareholders' share of the
actual margins realized from KeySpan Energy Trading-Related
Transactions in calendar year 2001, not to exceed a cap of
$7,832,188.
KeySpan Energy Trading and CORAL, through the Committee, mutually
agree to review the KeySpan Energy Trading Shareholder Target, the corresponding
cap used for the calculation of such target, and the corresponding CORAL
guaranty of such target, for Calendar Years 2000, 2001 and 2002. The Committee
shall take into account any extraordinary market conditions or events including,
but not limited to, regulatory, contractual and market changes, and any
extraordinary corporate event or transaction involving KeySpan Energy Trading or
its affiliates that will affect the targets in the relevant calendar year(s) to
determine (i) if such extraordinary changes have occurred whereby conditions
existed in Calendar Years 2000 or 2001 that will not be replicated in the
subsequent Calendar Year thereby warranting a reduction to the KeySpan Energy
Trading Shareholder Targets as set forth in subsections b and c of this Section,
or (ii) if such extraordinary changes have occurred whereby conditions will
exist in Calendar Years 2001 or 2002 thereby warranting an increase to, or a
waiver of, the cap to be applied to the setting of the KeySpan Energy Trading
Shareholder Targets as set forth in subsections b and c of this Section.
10. Contract Years
--------------
During the term of this Agreement, the Contract Years will be as follows:
a. Contract Year 2000 - April 1, 2000 through December 31, 2000;
b. Contract Year 2001 - January 1, 2001 through December 31, 2001;
and
c. Contract Year 2002 - January 1, 2002 through March 31, 2002.
11. CORAL Guarantees KeySpan Energy Trading Shareholder Targets
CORAL hereby guarantees to pay to KeySpan Energy Trading the KeySpan
Energy Trading Shareholder Target for each Contract Year as set forth herein on
a prorated basis as applicable. For Contract Year 2000, CORAL guarantees to pay
to KeySpan Energy Trading the prorated amount of $17,531,100. For calendar year
2001, CORAL guarantees to pay to KeySpan Energy Trading the KeySpan Energy
Trading Shareholder Target for Calendar Year 2001 and Calendar Year 2002 as set
forth in Section 9 above.
12. Sharing of Gains/Losses From KeySpan Energy Trading Book
At the end of each Contract Year, the gains and losses in the KeySpan
Energy Trading Book will be netted to produce an overall net gain or loss. If
the KeySpan Energy Trading Book reflects an overall net loss, CORAL will pay to
KeySpan Energy Trading the full amount of its guaranteed KeySpan Energy Trading
Shareholder Target for the applicable Contract Year. If the KeySpan Energy
Trading Book reflects an overall net gain, but such net gain is below the
guaranteed KeySpan Energy Trading Shareholder Target for the applicable Contract
Year, CORAL will pay to KeySpan Energy Trading the difference between such
overall net gain and the KeySpan Energy Trading Shareholder Target for the
applicable Contract Year. If the KeySpan Energy Trading Book reflects an overall
net gain that exceeds the KeySpan Energy Trading Shareholder Target for the
applicable Contract Year, CORAL and KeySpan Trading will
share the amount of the overall net gain that exceeds the KeySpan Energy Trading
Shareholder Target for the applicable Contract Year ("Excess Gain"). CORAL and
KeySpan Energy Trading shall share the Excess Gain sixty (60%) percent/forty
(40%) percent, respectively, until such point when CORAL has recovered its Costs
for Rendering Services under this Agreement for the applicable Contract Year.
Thereafter, CORAL and KeySpan Energy Trading shall share the remainder of the
Excess Gain, if any, fifty (50%) percent/fifty (50%) percent. All amounts
payable by CORAL to KeySpan Energy Trading or by KeySpan Energy Trading to CORAL
shall be paid within sixty (60) days from the end of each Contract Year, subject
to the provisions of Sections 10 and 16.
13. Costs of Rendering Services Under the Agreement
CORAL and KeySpan Energy Trading agree that CORAL's Costs for
Rendering Services under this Agreement for each calendar year, 2000, 2001 and
2002, is $1,775,000 which, prorated for Contract Year 2000, is $1,332,000, and
prorated for Contract Year 2002, is $443,000. The Parties mutually agree that
the Committee can consider modifying the Costs for Rendering Services for
Contract Year 2001 and Contract Year 2002 if a Party can demonstrate that the
Costs for Rendering Services for a Contract Year is not a reasonable estimation
of the costs CORAL will incur to provide services under this Agreement. The
Costs for Rendering Services sets out the amount to recovered through the sixty
(60%) percent/forty (40%) percent sharing mechanism pursuant to Section 12,
without regard to the actual cost to provide services in the applicable Contract
Year. 14. Sharing of Gains/Losses From CORAL Book
At the end of each Contract Year under this Agreement, the gains and
losses in the CORAL Book will be netted to produce an overall net gain or loss.
If the CORAL Book contains an overall net gain, CORAL and KeySpan Energy Trading
shall share the overall net gain fifty (50%) percent/fifty (50%) percent. If the
CORAL Book contains an overall net loss, KeySpan is not obligated to CORAL for
any amount of the net loss. All amounts payable by CORAL to KeySpan Energy
Trading shall be paid within sixty (60) days from the end of each Contract Year.
15. Responsibility for Penalty Payments
Unless otherwise agreed to in advance by both Parties, any penalties
incurred by KeySpan Energy Trading with respect to the KeySpan Energy Trading
Book will not be subject to sharing with CORAL. Unless otherwise agreed to in
advance by both Parties, any penalties incurred by CORAL with respect to the
CORAL Book will not be subject to sharing with KeySpan Energy Trading.
Notwithstanding the foregoing, CORAL shall pay all penalties incurred by KeySpan
that resulted from CORAL actions or omissions in performing the service of
scheduling natural gas deliveries as set forth in Section 2 above, provided that
CORAL shall not be obligated to pay such penalties if any of CORAL's actions or
omissions were due to (i) following instructions from KeySpan Energy Trading or
(ii) the failure of KeySpan Energy Trading to provide CORAL with timely
nomination and scheduling instructions.
16. Reporting By Parties and Reconciliation of Accounts
The CORAL Book and the KeySpan Energy Trading Book shall be reviewed
monthly by CORAL and KeySpan personnel, respectively. Reports concerning the
CORAL Book shall be provided monthly based on a xxxx-to-market accounting
procedures. Reports concerning the KeySpan Energy Trading Book shall be provided
monthly based on accrual accounting procedures or, if deemed acceptable by
KeySpan's accountants at the time of the review, xxxx-to-market accounting. Each
month, the Parties will provide mutually agreed upon reports to the other Party.
Such reports shall include, among other things, activity to date, revenues and
expenses and net margin contribution.
17. Settlement of Transactions at Expiration or Termination of Agreement
Upon expiration of the Term or termination of this Agreement, the
following procedures shall be implemented to settle the transactions
contemplated herein:
A. CORAL Book
Coral will xxxx-to-market all existing positions except transactions
that the Parties had mutually agreed previously to continue sharing in the
gains and losses beyond the expiration or termination of this Agreement and
will implement the allocation of gains and losses set forth in Section 14
of this Agreement.
Unless the Parties have mutually agreed prior to the commencement of
an individual transaction to continue sharing the gains and losses beyond the
expiration or termination of this Agreement, there will be no further sharing of
gains and losses from the CORAL-Related Transactions.
In the event the Parties had mutually agreed previously for an
individual transaction to continue sharing the gains and losses beyond the
expiration or termination of this Agreement, the Parties shall also mutually
agree to such sharing mechanism and payment terms related thereto.
In the event the Parties had mutually agreed previously for an
individual transaction to continue sharing the gains and losses beyond the
expiration or termination of this Agreement, upon further mutual agreement of
the Parties and at a mutually agreed upon price, one Party may purchase the
other Party's entire future interest (or cash out) in the CORAL-Related
Transaction. After any such purchase, such transaction will no longer be deemed
a CORAL-Related Transaction and the Party whose interest was purchased will no
longer have any responsibility to maintain any obligation under, or right to
share in the net margin resulting from, any such transaction after the date of
such purchase.
B. KeySpan Energy Trading Book
At the expiration or termination of this Agreement, the KeySpan
Energy Trading Book will close and the gains and losses will be distributed
pursuant to Section 12. Unless the Parties have mutually agreed prior to the
commencement of an individual transaction to continue sharing the gains and
losses beyond the expiration or termination of this Agreement, there will be no
further sharing of gains and losses from the KeySpan Energy Trading-Related
Transactions.
In the event the Parties had mutually agreed previously for an
individual transaction to continue sharing the gains and losses beyond the
expiration or termination of this Agreement, the Parties shall also mutually
agree to such sharing mechanism.
In the event the Parties had mutually agreed previously for an
individual transaction to continue sharing the gains and losses beyond the
expiration or termination, and upon further mutual agreement of the Parties and
at a mutually agreed upon price, one Party may purchase the other Party's entire
future interest (or cash out) in the KeySpan Energy Trading-Related Transaction.
After any such purchase, such transaction will no longer be deemed a KeySpan
Energy Trading- Related Transaction and the Party whose interest was purchased
will no longer have any responsibility to maintain any obligation under, or
right to share in the net margin resulting from, any such transaction after the
date of such purchase. The KeySpan Energy Trading Book will be adjusted to
reflect any mandated accounting changes, NYSPSC regulations, and modifications
in the LIPA Agreement, EMA and PSA.
C. Reconciliation of Accounts
(i) At the expiration or termination of this Agreement, KeySpan
Energy Trading will estimate the margin contribution on a
xxxx-to-market basis of any KeySpan Energy Trading- Related
Transaction in which CORAL will continue to retain an interest after
the expiration or termination of this Agreement. To the extent CORAL's
share of such margin contribution would reduce the payment CORAL would
make to KeySpan Energy Trading under Section 16C(iv) of this
Agreement, such payment will be reduced by CORAL's share of such
margin contribution. To the extent the addition of this margin
contribution to the KeySpan Energy Trading Book would result in an
increase in KeySpan Energy Trading's net payment to CORAL as described
below in Section 16C(iv), such margin contribution will not be added
to the payment by KeySpan Energy Trading, and any appropriate payment
will be made quarterly as prescribed in Section 16C(iii) below. To the
extent the net margin contribution that otherwise would have been paid
by CORAL to KeySpan Energy Trading has been reduced, KeySpan Energy
Trading will reduce by an amount equal to such reduction (on a net
present value basis), payments otherwise owed CORAL pursuant to
Section 16C(iii) below.
(ii) Upon the termination of any such KeySpan Energy
Trading-Related Transaction in question, KeySpan Energy Trading will
reconcile the actual margin contribution, any reductions in the
payment by CORAL to KeySpan Energy Trading pursuant to Section 16C(i)
above, and any reductions in quarterly payments made by KeySpan Energy
Trading to CORAL pursuant to Section 16C(i), so that net payments will
be equal to what they would have been for such KeySpan Energy
Trading-Related Transaction if the payments were made as described
below in Section 16C(iii). KeySpan Energy Trading will notify CORAL in
writing, and any net
margin contribution owed by KeySpan Energy Trading to CORAL, or by CORAL to
KeySpan Energy Trading will be paid within sixty (60) days of the termination of
each such KeySpan Energy Trading-Related Transaction.
(iii) With respect to any KeySpan Energy Trading-Related
Transaction in which CORAL will continue to retain an interest after
the expiration or termination of this Agreement, assuming accrual
accounting treatment, the net margin contribution resulting from the
transaction after expiration or termination of this Agreement will be
calculated quarterly and will be allocated as described above in
Section 12 and a disbursement of funds will be made within sixty (60)
days after the end of each quarter.
(iv) At the expiration or termination of this Agreement, after
all Incentive Revenues and net margin contributions have been
allocated and offset as described in this Agreement, subject to (1)
the limitations on the sharing of net losses as described in Sections
12 and 14 (2) the guaranty payment by CORAL as described in Sections
11 and 16D and (3) any change in CORAL's costs to render service
hereunder pursuant to Sections 13 and 16D hereof, monies will be
disbursed as follows: there will be a netting of the Parties'
positions in the KeySpan Energy Trading Book with the Parties'
positions in the CORAL Book, and any net amount due to one Party will
be paid by the other Party within sixty (60) days of the expiration of
this Agreement.
D. Pro Rating for Early Termination
To the extent this Agreement terminates for any reason prior to the end of
the Term, the guaranty payable by CORAL for each Contract Year will be reduced,
pro rata, to the date of such termination. To the extent this Agreement
terminates prior to the end of its Term, CORAL's costs to render service
hereunder shall be reduced pro rata for the applicable Contract Year, to the
date of termination.
18. Exclusivity
KeySpan Energy Trading agrees that during the Term, KeySpan Energy
Trading will not, without the prior written consent of CORAL, enter into, or
participate in, an alliance with any other person or entity, whether within or
outside of the United States, for the purpose of (i) sharing any
revenues, margins or money associated with KeySpan Energy Trading-Related
Transactions, and (ii) sharing energy market information and collaborating to
construct and implement a comprehensive strategy to enhance the utilization of
the physical energy assets traded by KeySpan Energy Trading in the competitive
energy market, unless such alliance would become effective after the expiration
of the Term. During the Term, as evidenced by this Agreement, KeySpan Energy
Trading hereby enters into an exclusive arrangement for the type of services
provided by CORAL hereunder, and KeySpan Energy Trading shall not enter into a
competing form of arrangement, contract or relationship with any commercial
bank, investment bank, trading house, brokerage firm, financial consulting firm
or other person for the services to be provided by CORAL hereunder without the
prior written consent of CORAL.
19. Payments
All payments by and between the Parties shall be made in United
States dollars and shall be made net of any sales, use, excise, transfer, gross
receipts, capital gains, or similar taxes (but not including taxes imposed or
based upon net income) to the extent applicable. If such taxes are imposed on
any payment, KeySpan Energy Trading or CORAL, as the case may be, shall pay any
amounts to the other Party as shall be required so that the net amount received
by CORAL and KeySpan Energy Trading is the amount that CORAL and KeySpan Energy
Trading would have received had such taxes been included as a cost before the
allocations of the CORAL Book and KeySpan Energy Trading Book had been made as
described herein. Any amounts payable by one party to the other pursuant to
Sections 12, 14 and 17 may be netted and offset against each other.
20. Effective Date and Term of Agreement
This Agreement shall be effective as of April 1, 2000 (the "Effective
Date") and subject to the provisions for termination provided herein, this
Agreement shall continue through March 31, 2002 (the "Term").
21. Termination by KeySpan Energy Trading
KeySpan Energy Trading shall have the right to terminate this
Agreement if: (i) CORAL fails to pay any amounts due to KeySpan Energy Trading
from CORAL pursuant to this Agreement and such breach is not cured within five
(5) days following written notice from KeySpan Energy
Trading; (ii) CORAL otherwise breaches this Agreement in any material respect,
and such breach is not cured within thirty (30) days following written notice
from KeySpan Energy Trading; (iii) any representations made by CORAL hereunder
are false or misleading immediately upon written notice from KeySpan Energy
Trading; or (iv) KeySpan is directed to terminate or materially modify this
Agreement by a state or federal regulatory agency having jurisdiction over such
matters.
22. Termination by CORAL
CORAL shall have the right to terminate this Agreement, in whole or in
part, if: (i) KeySpan Energy Trading fails to pay to CORAL amounts due to CORAL
from KeySpan Energy Trading pursuant to this Agreement and such breach is not
cured with five (5) days following written notice from CORAL; (ii) KeySpan
Energy Trading otherwise breaches this Agreement in any material respect and
such breach is not cured within thirty (30) days following written notice from
CORAL; (iii) any representations made by KeySpan Energy Trading hereunder are
false or misleading immediately upon written notice from CORAL; or (iv) CORAL is
directed to terminate this Agreement by a state or federal regulatory agency
having jurisdiction over such matters.
23. Termination for Bankruptcy Event
In the event that a Bankruptcy Event occurs with respect to either
KeySpan Energy Trading or CORAL, the other Party may terminate this Agreement
immediately upon giving written notice to the other Party, provided that CORAL
will continue to provide the services set forth in the fourth, fifth and sixth
sentences of paragraph 1 of Section 2, paragraph 2 of Section 2, paragraph 3 of
Section 2 and paragraph 4 of Section 2 for an additional ninety (90) days after
such termination for a mutually agreed upon fee. "Bankruptcy Event" shall, for
the purposes of this Agreement, mean with respect to any entity that such
entity: (i) becomes insolvent or is unable to pay its debts as they become due
or admits in writing its inability generally to pay its debts as they become
due; (ii) makes a general assignment, arrangement or composition with or for the
benefit of its creditors; (iii) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or presented against it,
such proceeding or petition (a) results in a
judgment of insolvency or bankruptcy or the entry of an order of relief or the
making of an order for its winding-up or liquidation or (b) is not dismissed,
discharged, stayed or restrained in each case within sixty (60) days of the
institution or presentation thereof; (iv) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger), (v) seeks or becomes subject to the
appointment of an administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all or substantially
all its assets; (vi) causes or is subject to any event with respect to it that,
under the applicable laws of any jurisdiction, has an analogous effect to any of
the events specified in clauses (i) to (v) inclusive; or (vii) takes any action
in furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the foregoing acts.
24. Notice Required for Early Termination
A Party that elects to terminate this Agreement pursuant to Sections
7, 21, 22 or 40, must do so by providing ninety (90) days written notice to the
other Party. After written notice has been served, the Agreement will terminate
on the last day of the calendar month in which the ninetieth day falls.
25. Access to Records
CORAL agrees to maintain detailed books, records, and accounts of the
affairs of CORAL in such a manner so as to permit KeySpan Energy Trading or its
representatives to ascertain all CORAL-Related Transactions. Subject to the
confidentiality obligations of the Parties, CORAL shall permit any officer,
employee or agent of KeySpan Energy Trading, with reasonable notification, to
inspect such books and records of CORAL, and discuss the affairs and accounts
with representatives of CORAL during normal business hours throughout the Term,
and for a period of one year after the expiration or termination of this
Agreement.
KeySpan Energy Trading agrees to maintain detailed books, records,
and accounts of the affairs of KeySpan Energy Trading in such a manner so as to
permit CORAL to ascertain all KeySpan Energy Trading Energy-Related Transactions
and the Incentive Revenues. Subject to the confidentiality obligations of the
Parties, KeySpan Energy Trading shall permit any officer, employee or agent of
CORAL, with reasonable notification, to inspect such books and records of
KeySpan Energy Trading, and discuss the affairs and accounts with
representatives of KeySpan Energy Trading during normal business hours
throughout the Term, and for a period of one year after the expiration or
termination of this Agreement.
26. Support from KeySpan Energy Trading
KeySpan Energy Trading agrees to cooperate with CORAL in connection
with CORAL's performance of its obligations hereunder and to furnish CORAL
within a reasonable time with information reasonably requested by CORAL during
the Term. KeySpan Energy Trading recognizes and confirms that in performing its
obligations, CORAL (i) will be relying on data and instructions provided by
KeySpan Energy Trading with respect to KeySpan Energy Trading's operations, (ii)
will not independently verify the accuracy or completeness of such data and
instructions provided by KeySpan Energy Trading, and (iii) does not assume
responsibility for, or for independently verifying the accuracy or completeness
thereof. CORAL accepts no responsibility for any erroneous analyses or
conclusions which flow from any inaccuracy or incompleteness of such information
or instructions provided by KeySpan Energy Trading, provided that such erroneous
analyses or conclusions are the direct result of the inaccurate or incomplete
information or instructions provided by KeySpan Energy Trading; and provided
further that CORAL shall be responsible for accurately compiling and
incorporating assumptions, projections and figures in CORAL's valuations and
models. Any report of CORAL may be based in part on the information referred to
above and may be in such form as CORAL shall determine. CORAL may qualify any
section in any report in such manner as CORAL believes appropriate.
KeySpan Energy Trading agrees to ensure the timely review and
execution of KeySpan Energy Trading-Related Transactions. KeySpan Energy Trading
shall use reasonable efforts to have KeySpan Energy Trading's officers,
accountants and other advisors cooperate so that CORAL may have timely access
(at reasonable and convenient times and as KeySpan Energy Trading reasonably
deems necessary for the purposes and scope of this Agreement) to KeySpan Energy
Trading's officers, accountants and other advisors as reasonably requested by
CORAL for purposes of this engagement within normal business hours of KeySpan
Energy Trading subject to the Confidentiality Agreement referred to in Section
33 hereof. CORAL shall notify KeySpan Energy Trading in
writing if CORAL, in its judgment, is not receiving adequate or timely
information from KeySpan Energy Trading or if CORAL has not had adequate access
to KeySpan Energy Trading's officers, accountants or other advisors.
KeySpan Energy Trading will timely pay any person or entity rendering
services, goods or materials to KeySpan Energy Trading in connection with this
Agreement and will not allow any liens to be placed on any CORAL property in
connection with nonpayment of any such person or entity.
27. Support from CORAL
The Parties acknowledge that the ultimate success of the Parties'
objectives under this Agreement is dependent upon the amount of support provided
by CORAL personnel hereunder. CORAL shall provide the services, training, and
other activities which are described in this Agreement at its own cost and
expense, subject to Section 13 hereof.
CORAL will assign a sufficient number of staff, with requisite
expertise so that CORAL can perform its obligations under this Agreement, to be
available to KeySpan Energy Trading for assistance and counsel with regard to
KeySpan Energy Trading-Related Transactions and CORAL- Related Transactions, all
at CORAL's expense, subject to Section 13 hereof. Specifically, CORAL will
provide full-time personnel as mutually deemed necessary at KeySpan Energy
Trading's offices and CORAL's offices to assist KeySpan Energy Trading in the
origination, structuring, and execution of energy-related and financial
instrument transactions. CORAL will also provide sufficient personnel with
natural gas, fuel oil, electricity and emission trading expertise to work
closely with KeySpan Energy Trading's risk management personnel at KeySpan
Energy Trading's offices and at CORAL's offices to achieve the stated purposes
of this Agreement. CORAL will also work with KeySpan Energy Trading personnel at
KeySpan Energy Trading's offices, or as necessary at CORAL's offices, to enhance
the knowledge of KeySpan Energy Trading personnel in the origination, structure,
decision making, execution and risk management of CORAL-Related Transactions.
CORAL will perform its obligations hereunder in a diligent,
professional, and workmanlike manner, consistent with industry practice.
CORAL will timely pay any person or entity rendering services, goods
or materials to CORAL for use in performance of its obligations under this
Agreement and will not allow any liens to be placed on any KeySpan property in
connection with nonpayment of any such person or entity.
CORAL shall cause all of its personnel involved in providing the
services contemplated by this Agreement to KeySpan Energy Trading shall observe
and comply with all of KeySpan Energy Trading's operating and security
requirements and procedures of which they are advised, informed, or become
aware.
28. Representations
a. KeySpan Energy Trading represents and warrants to CORAL that:
(i) KeySpan Energy Trading is duly formed, validly existing, and in
good standing under the laws of the jurisdiction in which it is
organized;
(ii) This Agreement has been duly authorized, executed and delivered
by KeySpan Energy Trading and constitutes a legal, valid,
binding, and enforceable agreement of KeySpan Energy Trading;
(iii)The person executing this Agreement on behalf of KeySpan Energy
Trading has full power and authority to do so;
(iv) KeySpan Energy Trading is not relying on any representation of
CORAL (written or oral) except as to those representations
explicitly set forth herein;
(v) The execution and delivery of this Agreement and the performance
of the obligations under this Agreement by KeySpan Energy Trading
do not violate any provision of the documents pursuant to which
KeySpan Energy Trading is organized or, to the best of KeySpan
Energy Trading's knowledge, any contract or other agreement to
which KeySpan Energy Trading is a party or by which KeySpan
Energy Trading is bound, or any statute, or any rule, regulation,
or order of any governmental or regulatory authority applicable
to KeySpan Energy Trading;
(vi) KeySpan Energy Trading presently is unaware of any policies and
restrictions that would prohibit KeySpan Energy Trading's
activities as applicable to this
Agreement, including without limitation such policies and
restrictions as may be imposed by agreement or applicable
laws or regulations;
(vii)KeySpan Energy Trading is entering into this Agreement as
principal and not as an undisclosed agent for any non-affiliated
entity;
(viii) KeySpan Energy Trading, to the best of its knowledge, is an
"eligible swap participant" as defined in the Regulations of the
U.S. Commodity Futures Trading Commission, 17 CFR 35.1;
(ix) KeySpan Energy Trading has entered into this Agreement in
conjunction with its line of business or the financing of its
business;
(x) KeySpan Energy Trading is acting on its own behalf, and has made
its own independent decisions to enter into this Agreement and as
to whether the activities and obligations contemplated hereunder
are appropriate for it based upon its own judgment and upon
advice from such advisors as it has deemed necessary;
(xi) KeySpan Energy Trading is not relying on any communication
(written or oral) of CORAL as advice or as a recommendation. It
is understood that information and explanations related to the
terms and conditions of this Agreement shall not be considered
advice or a recommendation to enter into this Agreement or the
activities or obligations contemplated hereunder;
(xii)KeySpan Energy Trading has not received from CORAL any assurance
or guarantee as to the expected results of this Agreement and the
activities or obligations contemplated hereunder, except as
specifically addressed herein;
(xiii) KeySpan Energy Trading is capable of evaluating and
understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of the activities and obligations
contemplated by this Agreement and it is also capable of
assuming, and assumes, such risks;
(xiv)CORAL is not acting as a fiduciary for KeySpan Energy Trading in
respect of this Agreement or the activities or obligations
contemplated hereunder; and
(xv) This Agreement constitutes an arms-length agreement between
KeySpan Energy Trading and CORAL. KeySpan Energy Trading, and the
representative(s) of KeySpan Energy Trading acting on its behalf
in connection with entering into this Agreement, understand that
entering into OTC derivative transactions involves special risks,
including taxation, market, illiquidity, basis (location
differential), credit risks, and risks of counter-party default
or failure of performance due to force majeure or other causes.
However, it is understood that: (1) nothing herein shall
constitute a representation by KeySpan Energy Trading that CORAL
has authority to enter into OTC derivative transactions or
transactions on the New York Mercantile Exchange on KeySpan
Energy's behalf, and (2) nothing herein shall constitute a
representation by KeySpan Energy Trading that KeySpan Energy
Trading has authority granted to it by the Board of Directors of
KeySpan to enter into any OTC derivative transactions or
transactions on the New York Mercantile Exchange.
b. CORAL represents and warrants to KeySpan Energy Trading that:
(i) CORAL is duly formed, validly existing, and in good standing
under the laws of the jurisdiction in which it is organized;
(ii) This Agreement has been duly authorized, executed and
delivered by CORAL and constitutes a legal, valid, binding,
and enforceable agreement of CORAL;
(iii)The person executing this Agreement on behalf of CORAL has
full power and authority to do so;
(iv) The execution and delivery of this Agreement and the
performance of the obligations under this Agreement by CORAL
do not violate any provision of
the documents pursuant to which CORAL is organized, or any
contract or other agreement to which CORAL is a party or by
which CORAL is bound, or any statute, or any rule,
regulation, or order of any governmental or regulatory
authority applicable to CORAL;
(v) CORAL has expertise in the area of risk management and
trading;
(vi) CORAL has not received from KeySpan Energy Trading any
assurance or guarantee as to the expected results of this
Agreement and the activities or obligations contemplated
hereunder;
(vii)CORAL will maintain a staff sufficient in number so that
CORAL may perform its obligations to KeySpan Energy Trading
in accordance with the terms of this Agreement; and
(viii) All persons rendering services to CORAL for use in the
performance of its obligations under this Agreement have the
requisite expertise, knowledge, and training relating to
matters which are the subject of this Agreement so that
CORAL may perform its obligations in accordance with the
terms of this Agreement.
c. KeySpan Energy Trading agrees to indemnify and save harmless
CORAL, its partners, subsidiaries, employees and agents from and against any
claims or losses, including any and all expenses, costs, reasonable attorneys'
fees, settlements, judgments or awards incurred by CORAL, its partners,
subsidiaries, employees and agents in the defense of any such claims or lawsuit
or CORAL's having to return to KeySpan any amounts paid by KeySpan Energy
Trading to CORAL hereunder if (a) the execution and delivery of this Agreement
and the performance of the obligations under this Agreement by KeySpan Energy
Trading violates any provision of the documents pursuant to which KeySpan Energy
Trading is organized, or any contract or other agreement to which KeySpan Energy
Trading is a party or by which KeySpan Energy Trading is bound, or any statute,
or any rule, regulation, or order of any governmental or regulatory authority
applicable to KeySpan Energy Trading; or (b) KeySpan Energy Trading has policies
and restrictions that prohibit KeySpan Energy Trading's activities as applicable
to this Agreement, including without limitation such
policies and restrictions as may be imposed by agreement or applicable laws or
regulations. KeySpan Energy Trading's indemnity obligations in the preceding
sentence are not subject to the limitation of liability set forth in Section 31
of this Agreement which provides that liability shall not exceed the liable
Party's share of net positive margin, if any, from the other Party's Book.
29. Conflicts Waiver
KeySpan Energy Trading and CORAL acknowledge and accept that CORAL
and KeySpan Energy Trading, and persons connected with CORAL and KeySpan Energy
Trading, may have an interest in, or a conflict of duty regarding, a transaction
or matter which is the subject of this Agreement. While such interests or
conflicts may or may not be disclosed by one Party to the other, the mere
existence of such interests or conflicts will not be deemed to affect or impact
CORAL's or KeySpan Energy Trading's obligations hereunder, to the extent
described in this Section.
CORAL and KeySpan Energy Trading shall not have a duty to refrain
from engaging directly or indirectly in the same or similar business activities
or lines of business as the energy-related transactions, subject to any
applicable terms and conditions of exclusivity set forth in Section 18 of this
Agreement, and to the fullest extent permitted by applicable law, neither CORAL
nor any of its partners, officers or directors shall be liable to KeySpan Energy
Trading for breach of any fiduciary duty by reason of any such activities of
CORAL or of such partners' participation therein and neither KeySpan Energy
Trading nor any of its officers or directors shall be liable to CORAL for breach
of any fiduciary duty by reason of any such activities of KeySpan Energy Trading
or of such officers' or directors' participation therein.
30. Transactions and Relationships Outside this Agreement
KeySpan Energy Trading acknowledges and agrees that it engages, or
may in the future engage, in other dealings with CORAL on an arms-length basis,
and that any duties which CORAL may owe to KeySpan Energy Trading as a result of
the relationship established and governed by this Agreement do not extend to, or
otherwise affect, such other arms-length relationships.
KeySpan Energy Trading acknowledges that CORAL may render services to
other clients and institutions with respect to, and CORAL and such other clients
and institutions may enter into,
hedging, derivative, and physical or other transactions which are the same as,
similar to, or different from those which CORAL contemplates entering into
pursuant to this Agreement, and that CORAL shall be in all respects free to
carry on such activities as if this Agreement did not exist, even if such
activities involve taking action inconsistent with that presented to KeySpan
Energy Trading by CORAL hereunder, provided that whatever CORAL does for a third
party does not impair CORAL's obligations to KeySpan Energy Trading under this
Agreement.
31. Limitation of Liability
Except as provided in this Agreement, CORAL makes no representations
or warranties, express or implied, as to the merchantability, fitness for a
particular purpose or otherwise with respect to its obligations set forth in
this Agreement, any services, recommendations, or advice rendered pursuant to
this Agreement, or any energy-related transaction entered into pursuant to this
Agreement, and CORAL neither assumes nor authorizes any person to assume for it
any other warranty or liability in connection with this Agreement, its
obligations hereunder, any services, recommendations, or advice provided
hereunder, or any such energy-related transaction. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR INCIDENTAL, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. EXCEPT WITH RESPECT TO LIABILITY ARISING OUT OF OR RESULTING FROM GROSS
NEGLIGENCE, INTENTIONAL OR WILLFUL MISCONDUCT, OR DISHONEST ACTS, THE LIABILITY
OF EITHER PARTY TO THE OTHER PARTY SHALL NOT EXCEED THE LIABLE PARTY'S SHARE OF
NET POSITIVE MARGIN, IF ANY, FROM THE OTHER PARTY'S BOOK DETERMINED AT THE
EXPIRATION OR TERMINATION OF THIS AGREEMENT.
Without limiting the foregoing in any way, KeySpan Energy Trading
acknowledges that any xxxx-to-market valuations or models that may be provided
to it by CORAL are compilations of assumptions, projections and figures provided
by KeySpan Energy Trading or others, and agrees that CORAL shall have no
responsibility to verify the accuracy, completeness or reasonableness of any of
those projections or figures or the assumptions provided by KeySpan Energy
Trading on which
the valuations and models are based, provided that CORAL shall be responsible
for accurately compiling and incorporating such assumptions, projections and
figures in such valuations or models.
KeySpan Energy Trading confirms that it will rely exclusively on its
own counsel, accountants and other similar expert advisors for legal,
accounting, tax and other similar expert advice.
32. Indemnification
A. Indemnification by KeySpan Energy Trading
KeySpan Energy Trading agrees to indemnify and save harmless CORAL,
its partners, subsidiaries, employees, and agents from and against any claims,
lawsuits or losses, including any and all expenses, costs, reasonable attorneys'
fees, settlements, judgments or awards incurred by CORAL, its partners,
subsidiaries, employees, and agents in the defense of any such claim or lawsuit
arising out of or resulting from KeySpan Energy Trading following any
recommendation made by CORAL with respect to matters which are the subject of
this Agreement except if due to or involving the gross negligence, intentional
or willful misconduct, or dishonest acts of CORAL or any person or entity
rendering services, goods or materials to CORAL for use in the performance of
CORAL's obligations hereunder, provided that CORAL has complied with the
material provisions of this Agreement, and further provided that this indemnity
shall not relieve CORAL of its obligations under this Agreement or liability for
damages on account of breach, subject to the terms of Section 31 above.
KeySpan Energy Trading agrees to indemnify and save harmless CORAL,
its partners, subsidiaries, employees, and agents from and against any claims or
losses, including any and all expenses, costs, reasonable attorneys' fees,
settlements, judgments or awards incurred by CORAL, its partners, subsidiaries,
employees and agents in the defense of any such claim or lawsuit: (i) for injury
to persons or damage to property arising out of or resulting from the
negligence, gross negligence, intentional or willful misconduct, or dishonest
acts of KeySpan Energy Trading or any person or entity rendering services,
goods, or materials to KeySpan Energy Trading for use in the performance of its
obligations under this Agreement, to the extent of the negligence, gross
negligence, intentional or willful misconduct, or dishonest acts attributable to
KeySpan Energy
Trading or any such person or entity rendering services, goods, or materials to
KeySpan Energy Trading for use in the performance of its obligations under this
Agreement; or (ii) which arise out of a claim or allegation by any person or
entity rendering services, goods, or materials to KeySpan Energy Trading for use
in the performance of this Agreement that there is an amount due for such
services, goods, or materials.
The indemnity set forth in the second paragraph of this Section 32.A.
shall not be subject to the limitation of liability set forth in Section 31 of
this Agreement which provides that liability shall not exceed the liable Party's
share of net positive margin, if any, from the other Party's Book, if and to the
extent the claim or loss is covered by insurance as set forth in Section 43
hereof. Further, if the claim or loss giving rise to the indemnity set forth in
the second paragraph of this Section 32.A. arises out of or results from the
gross negligence, intentional or willful misconduct, or dishonest acts of
KeySpan Energy Trading or any person or entity rendering services, goods, or
materials to KeySpan Energy Trading for use in the performance of its
obligations hereunder, as provided in Section 31 of this Agreement, such
indemnity is not subject to the limitation of liability set forth in Section 31
of this Agreement which provides that liability shall not exceed the liable
Party's share of net positive margin, if any, from the other Party's Book, and
shall not be limited to the amount of any insurance coverage set forth in
Section 43 of this Agreement.
KeySpan Energy Trading shall indemnify and save harmless CORAL, its
partners, subsidiaries, employees, and agents from and against any penalties,
fines, or forfeitures imposed by a governmental authority or expenses associated
therewith (including, without limitation, litigation costs and reasonable
attorneys' fees) arising out of or resulting from any failure or refusal by
KeySpan Energy Trading to comply with any law, statute, regulation, rule,
ordinance, order, injunction, writ, decree or award of any government or
political subdivision thereof, or any agency, authority, bureau, commission,
department or instrumentality thereof, or any court, applicable to the
performance of KeySpan Energy Trading' s obligations under this Agreement.
B. Indemnification by CORAL
CORAL agrees to indemnify and save harmless KeySpan, its officers,
directors, employees, and agents from and against any claims, or losses,
including any and all expenses, costs, reasonable attorneys fees, settlements,
judgments or awards incurred by KeySpan, its officers, directors, employees and
agents in the defense of any such claim or lawsuit: (i) for injury to persons or
damage to property arising out of or resulting from the negligence, gross
negligence, willful or intentional misconduct, or dishonest acts of CORAL or any
person or entity rendering services, goods, or materials to CORAL for use in the
performance of its obligations hereunder, to the extent of the negligence, gross
negligence, willful or intentional misconduct, or dishonest acts attributable to
CORAL or any such person or entity rendering services, goods, or materials to
CORAL for use in the performance of its obligations under this Agreement; (ii)
for any financial losses that can be identified as resulting from the gross
negligence, intentional or willful misconduct, or dishonest acts of CORAL or any
person or entity rendering services, goods or materials to CORAL for use in the
performance of CORAL's obligations hereunder in connection with KeySpan Energy
Trading's following any recommendation made or advice given by CORAL with
respect to matters which are the subject of this Agreement; or (iii) which arise
out of a claim or allegation by any person or entity rendering services, goods,
or materials to CORAL for use in the performance of its obligations hereunder
that there is an amount due for such services, goods, or materials.
The indemnity set forth in the first paragraph of this Section 32.B.
shall not be subject to the limitation of liability set forth in Section 31 of
this Agreement which provides that liability shall not exceed the liable Party's
share of net positive margin, if any, from the other Party's Book, if and to the
extent the claim or loss is covered by insurance as set forth in Section 43
hereof. Further, if the claim or loss giving rise to the indemnity set forth in
the first paragraph of this Section 32.B. arises out of or results from the
gross negligence, intentional or willful misconduct, or dishonest acts of CORAL
or any person or entity rendering services, goods, or materials to CORAL for use
in the performance of its obligations hereunder, as provided in Section 31 of
this Agreement, such indemnity is not subject to the limitation of liability set
forth in Section 31 of this Agreement which provides that liability shall not
exceed the liable Party's share of net positive margin, if any, from
the other Party's Book, and shall not be limited to the amount of any insurance
coverage set forth in Section 43 of this Agreement.
CORAL shall indemnify and save harmless KeySpan, its officers,
directors, employees, and agents from and against any penalties, fines, or
forfeitures imposed by a governmental authority or expenses associated therewith
(including, without limitation, litigation costs and reasonable attorneys' fees)
arising out of or resulting from any failure or refusal by CORAL to comply with
any law, statute, regulation, rule, ordinance, order, injunction, writ, decree
or award of any government or political subdivision thereof, or any agency,
authority, bureau, commission, department or instrumentality thereof, or any
court, applicable to the performance of CORAL's obligations under this
Agreement.
33. Confidentiality
At the execution of this Agreement, CORAL and KeySpan Energy shall execute
a Confidentiality Agreement which sets forth the terms upon which the Parties
must treat confidential information provided or disclosed to each other pursuant
to this Agreement. The Confidentiality Agreement is hereby incorporated by
reference and copies are annexed as Appendix A.
34. Notices and Communications
Any notice, consent, authorization, determination or other
communication required or permitted to be given or made hereunder shall be in
writing and shall be sufficiently given or made if:
(a) mailed by U.S. certified or registered mail, postage prepaid,
return- receipt requested; or
(b) telecopied to the facsimile number set forth below and followed
by a copy delivered in accordance with Section 34(a) or 34(c); or
(c) delivered by nationally recognized express or overnight courier;
and
If to KeySpan Energy Trading addressed to it at:
------------------------------------------------
KeySpan Energy Trading Services LLC
000 Xxxx Xxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx
President
Fax: (000) 000-0000
If to CORAL addressed to it at:
------------------------------
CORAL Energy, L.P.
000 Xxxxxx Xxxxxx - Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxx Xxxxx
Vice President
Fax: (000) 000-0000
Notices shall be deemed effective when received. Each Party may change its
address and facsimile number for purposes of this Section 34 by notice to the
other Party pursuant hereto.
35. Miscellaneous
Except as expressly otherwise provided in Section 33 above, this
Agreement constitutes the entire agreement between the Parties with respect to
the matters addressed herein, supersedes all prior letters, correspondence,
conversations, agreements, understandings, and negotiations or discussions, both
written and oral, express or implied, between the Parties with respect to
matters addressed herein and cannot be amended or otherwise modified orally, but
only by a written instrument executed by the Parties setting forth such changes.
No Party may transfer or assign any rights or obligations hereunder (whether by
merger, conversion, liquidation, operation of law, or otherwise) without the
prior written consent of the other Party. This Agreement shall be binding on the
Parties' successors (whether by merger, conversion, liquidation, operation of
law, or otherwise) and permitted assigns.
To the extent there is an extraordinary corporate transaction such as
a merger, consolidation, sale of assets, or similar transaction involving
KeySpan, KeySpan Energy Trading or some other entity affiliated with either of
the foregoing during the Term, the Parties agree to discuss any changes to this
Agreement that may be necessary, including but not limited to, changing the
scope, sharing provisions and the CORAL guaranty and costs to render service
hereunder. To the extent there is
an extraordinary corporate transaction such as a merger, consolidation, sale of
assets, or similar transaction involving CORAL or some other entity affiliated
with either of the foregoing during the Term, the CORAL's successor remains
bound to all of CORAL's obligations hereunder.
36. Governing Law and Jurisdiction
The Agreement will be governed by and construed in accordance with the laws
of the State of New York without regard to the conflicts of laws provisions
thereof.
37. Other Services
Nothing in this Agreement is intended to obligate or commit either
Party to purchase any services from, enter into any further agreements with,
provide any financing to, purchase any securities from, or enter into any cap,
swap or other derivative or hedging transaction with, the other Party, except as
specifically provided herein.
Nothing in this Agreement shall be construed giving either express or
implied authority to CORAL or any person or entity to represent KeySpan Energy
Trading in any transaction with any person or entity for any purpose, except as
granted consistent with the scope of this Agreement as described in Section 2.
38. Affiliate Services
KeySpan Energy Trading acknowledges and understands that CORAL's
obligations hereunder may be performed by CORAL personnel, or independent
contractors of CORAL. CORAL will remain responsible for the performance of its
obligations hereunder, regardless whether its obligations are performed directly
by CORAL personnel or by contractors, and KeySpan Energy Trading agrees to look
solely to CORAL for such performance. Subject to the terms of this Agreement,
including, without limitation, the confidentiality requirements of the
Confidentiality Agreement and Section 33 above, CORAL may (i) employ the
services of agents or contractors, (ii) share any information (including
non-public information) with such agents or contractors and receive from such
agents or contractors any relevant information, and (iii) staff the project with
such employees of itself and its agents or contractors as it deems appropriate
(and remove any such employees from the project as it shall deem appropriate
from time to time). Subject to the confidentiality requirements of the
Confidentiality Agreement and Section 33 above, KeySpan
Energy Trading acknowledges that the employees of CORAL and its agents or
contractors who staff the project may rotate in and out of the project as
needed. CORAL will not make substitutions of team members without the consent of
KeySpan Energy Trading which consent will not be unreasonably withheld.
39. Sole Engagement
KeySpan Energy Trading recognizes that CORAL has been retained only
for the purposes set forth in this Agreement, and that such engagement of CORAL
hereunder is not deemed to be on behalf of and is not intended to confer rights
individually upon any corporate member of KeySpan Energy Trading or any other
person as against CORAL. Unless otherwise expressly agreed by the Parties, only
KeySpan Energy Trading is authorized to rely upon the services of CORAL
hereunder, the deliverables or products hereof, or any statements, reports,
advice, opinions or conduct by CORAL.
40. Force Majeure
If either Party is rendered unable, wholly or in part, by force
majeure to carry out its obligations (other than payment and other financial
obligations) under this Agreement, it is agreed that the obligations of the
Parties, insofar as they are affected by such force majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period. As
used herein, "force majeure" means any cause not reasonably within the control
of the Party claiming suspension by reason of force majeure and which, by the
exercise of due diligence, such Party was unable to prevent or overcome.
If CORAL declares force majeure hereunder, and such force majeure
event lasts longer than thirty (30) consecutive days, then KeySpan Energy
Trading may terminate this Agreement by providing written notice to CORAL
pursuant to the provisions of Section 24 hereof.
If KeySpan Energy Trading declares force majeure hereunder, and such force
majeure event lasts longer than thirty (30) consecutive days, then CORAL may
terminate this Agreement by providing written notice to KeySpan Energy Trading
pursuant to the provisions of Section 24 hereof.
41. Severability
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Agreement that is invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining provisions hereof, and any
such invalidity or unenforceability shall not invalidate or render unenforceable
the remaining provisions hereof. 42. Use of Name
CORAL will not use KeySpan's name or any abbreviation thereof for any
advertising, promotions, trade displays or other commercial purposes without
prior written consent of KeySpan nor shall CORAL use KeySpan's logo or any
adaptation thereof for any such purposes without such consent.
43. Insurance
A. CORAL Insurance
(i) Coverage
CORAL (and all its subcontractors) shall, at
their own expense, procure and maintain the following
minimum insurance in forms and with reputable insurance
companies:
Workers' Compensation Insurance covering CORAL's
(and its subcontractors') employees in accordance with
statutory requirements and Employer's Liability Insurance
with a minimum limit of $1,000,000 each occurrence.
Commercial General Liability Insurance including
Personal Injury, Contractual, Contingent, Products
Liability, Independent Contractors, Broad Form Property
Damages and coverage, with the following minimum limits of
liability:
$1,000,000 per occurrence Combined Single Limit
$2,000,000 General aggregate
Umbrella Liability. A following form umbrella policy
shall be in force with Commercial General Liability and
Employer's Liability policies scheduled:
Limits required: $3,000,000 per occurrence/aggregate
(ii) Insurance Notification
Within ninety (90) days of the effective date of this
Agreement, CORAL shall deliver a Certificate of Insurance showing
that the insurance outlined above is in force and that not less than
fifteen (15) days notice will be given to KeySpan Energy Trading
prior to cancellation, termination or material alteration of said
insurance. KeySpan Corporation and its affiliates shall be named as
an additional insured on such certificates. The Certificate of
Insurance should be delivered to KeySpan Corporation, 000 Xxxx Xxx
Xxxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000; Attention: Risk Management;
Telephone No. (000) 000-0000.
(iii) Insurance No Limit
The insurance requirements as set forth are to fully
protect KeySpan Energy Trading from any and all claims by third
parties, including employees of CORAL or its agents, contractors,
subcontractors, and invitees. Said insurance, however, in no manner
relieves or releases CORAL, its agents, contractors, subcontractors,
or invitees from, or limits their liability as to any and all
obligations herein assumed. If such insurance is available only on a
claims-made basis, then the dates of coverage (including the
retroactive date) and the time period within which any claim can be
filed will be so stated on the Certificate of Insurance and CORAL
shall not permit any gaps in coverage to occur. CORAL shall notify
KeySpan Energy Trading in writing of all claims arising out of this
Agreement within twenty-four (24) hours after the occurrence thereof.
Such notice shall not relieve any Party of any of its obligations
under this Agreement, nor be construed to be other than a mere
notification.
(iv) Option to Self Insure
CORAL and/or its subcontractors may, at their option, self
insure all or part of their required coverage and limits. In the
event that CORAL decides to exercise this option, CORAL will provide
KeySpan Energy Trading with a letter stating that CORAL and/or its
subcontractors are/is exercising such option.
(v) Subcontractor Compliance
CORAL shall ensure that all of its subcontractors are in compliance
with these insurance provisions at all times.
B. KeySpan Energy Trading Insurance
KeySpan Energy Trading shall provide reciprocal insurance coverage and
limits while KeySpan Energy Trading's employees are in training on CORAL's site.
KeySpan Energy Trading may, at its option, self insure all or part of said
coverage and limits. In the event that KeySpan Energy Trading decides to
exercise this option, KeySpan Energy Trading will provide CORAL with a letter
stating that the option is being exercised.
44. Section Headings
Section headings herein are for convenience only and shall not limit or
modify the provisions hereof.
45. Waiver
The failure of either Party to object to or to take affirmative
action with respect to any conduct of the other Party which is in violation of
the terms of this Agreement shall not be construed as a waiver thereof, or of
any future breach or subsequent wrongful conduct. No waiver of any of the terms
of this Agreement shall be valid unless it is in writing and is signed by the
Party against whom such waiver is asserted.
46. No Relationship Created
No agency, partnership, joint venture or other joint relationship is
created by this Agreement.
47. Survival of Obligations
Those provisions which by their nature would survive termination or
expiration of this Agreement and which will enable the Parties to exercise their
rights and fulfill their obligations under this Agreement including, without
limitation, the obligations set forth in Sections 17, 28(c), 31, 32 and 33,
shall survive termination or expiration of this Agreement.
IN WITNESS HEREOF, the Parties have executed this Agreement as of the
date first herein written.
CORAL ENERGY HOLDING, L.P. KEYSPAN ENERGY TRADING SERVICES LLC
By: _______________________ By: ___________________________
Name: _______________________ Name: ___________________________
Title: _______________________ Title: ___________________________
GUARANTY BY KEYSPAN CORPORATION
-------------------------------
The undersigned hereby guarantees performance by KeySpan Energy
Trading Services LLC of its obligations under the foregoing Agreement.
KEYSPAN CORPORATION
By: ______________________
Name: ______________________
Title: ______________________
Date: ______________________
