Swap Agreement dated as of June [ ], 2010 between ENERGY CORPORATION OF AMERICA and ECA MARCELLUS TRUST I
Exhibit 10.12
dated as of
June [ ], 2010
between
ENERGY CORPORATION OF AMERICA
and
TABLE OF CONTENTS
| Page | ||||
| ARTICLE I DEFINITIONS; TERMS GENERALLY |
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Section 1.01 Definitions |
1 | |||
Section 1.02 Terms Generally |
3 | |||
| ARTICLE II PAYMENTS |
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Section 2.01 Payments |
4 | |||
Section 2.02 Netting of Payments |
5 | |||
Section 2.03 General Conditions |
5 | |||
Section 2.04 Certain Notices |
5 | |||
| ARTICLE III MISCELLANEOUS |
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Section 3.01 Amendments |
5 | |||
Section 3.02 No Waiver |
5 | |||
Section 3.03 Remedies Cumulative; Non-Exclusive; Etc |
5 | |||
Section 3.04 Successors and Assigns |
5 | |||
Section 3.05 Severability |
6 | |||
Section 3.06 Survival; Revival; Restatement |
6 | |||
Section 3.07 Acknowledgments |
6 | |||
Section 3.08 No Agency Relationship; No Assignment of Trades |
7 | |||
Section 3.09 Governing Law |
7 | |||
Section 3.10 Counterparts |
7 | |||
Section 3.11 ENTIRE AGREEMENT |
7 | |||
Section 3.12 No Third Party Beneficiaries |
7 | |||
Section 3.13 Tax Hedge Designation |
7 | |||
Exhibit A — Confirmations |
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i
This SWAP AGREEMENT, dated as of June [ ], 2010, is between ENERGY CORPORATION OF
AMERICA, a West Virginia corporation (“ECA”), and ECA MARCELLUS TRUST I, a Delaware
statutory trust (the “Trust”).
R E C I T A L S
WHEREAS, the Trust was created pursuant to that certain Amended and Restated Trust Agreement
by and among ECA, as trustor, Corporation Trust Company, as Delaware trustee, and The Bank of New
York Mellon Trust Company, N.A., as trustee;
WHEREAS, ECA has entered into commodity derivatives transactions with certain counterparties;
WHEREAS, the parties hereto desire to allocate among themselves certain of the economic
benefits and costs associated with certain of these transactions;
NOW, THEREFORE, in consideration of the premises herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS; TERMS GENERALLY
DEFINITIONS; TERMS GENERALLY
Section 1.01 Definitions. As used herein, terms defined above have the meanings given
such terms above and the following terms have the following meanings:
“Agreement” means this Swap Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
“BP Trade Documents” means the ISDA Master Agreement dated as of March 12, 2004
between ECA and BP Energy Company, including the Schedule thereto and each Confirmation entered
into thereunder, in each case as in effect on the date hereof.
“Business Day” means a day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed.
“Confirmations” means the collective reference to each Confirmation attached hereto as
Exhibit A.
“Counterparties” means the collective reference to BP Energy Company and Xxxxx Fargo
Foothill, Inc.
“Defaulting Party” means, with respect to any Trade on any date of determination, any
Person: (a) that is a “Defaulting Party” or an “Affected Party” with respect to such Trade on such
date under the applicable Trade Documents (as such terms are defined therein) or (b) in respect of
which a “Potential Event of Default” or an “Event of Default” has occurred and is
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continuing on such date under the applicable Trade Documents (as such terms are defined
therein).
“ECA Gross Up Amount” means, in relation to any Scheduled Payments or any Illegality
Termination Payments required to be made by the Counterparties during any Quarterly Period, an
amount equal to the sum of all such Scheduled Payments or Illegality Termination Payments, as the
case may be, that were due and payable by the Counterparties but not paid by the Counterparties to
ECA during such Quarterly Period (a) on account of the exercise of any right of netting or set-off
against (i) obligations owed by ECA or its affiliates to the Counterparties or their affiliates
under agreements or instruments other than the Trade Documents or (ii) any obligation of ECA to pay
an Excluded Amount pursuant to the Trade Documents; or (b) to the extent that any Counterparty (i)
set-off any such Scheduled Payments or Illegality Termination Payments, as the case may be, against
any posted collateral held by ECA (or any obligation of ECA to transfer that posted collateral) or
(ii) withheld payment of any such Scheduled Payments or Illegality Termination Payments, as the
case may be, up to the value of any posted collateral held by ECA.
“Excluded Amount” means any amount payable by one party to another party pursuant to
any Trade Documents on account of indemnity or reimbursement obligations (including additional
amounts owing in respect of tax gross up obligations), costs, fees, expenses (including, without
limitation, attorneys fees) or default interest.
“Illegality” has the meaning specified in the applicable Trade Documents; provided
that the term “Illegality” when used herein in reference to any Trade will only be deemed to have
occurred with respect to such Trade if either (a) the Counterparty is an “Affected Party” (as
defined in the applicable Trade Documents) with respect to such Illegality; or (b) both (i) ECA is
an “Affected Party” (as defined in the applicable Trade Documents) with respect to such Illegality
and (ii) the Trust would have been an “Affected Party” (as defined in the applicable Trade
Documents) with respect to such Illegality if it were a party to such Trade.
“Illegality Termination Payment” means any Termination Payment that becomes due and
payable as the result of the termination of any Trade prior to the stated termination date thereof
based on the occurrence of an Illegality.
“Period End Date” means March 31, June 30, September 30 and December 31 of each
calendar year.
“Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, governmental authority or other entity.
“Quarterly Payment Date” means, with respect to any Quarterly Period, the date that is
thirty days after the last day of such Quarterly Period.
“Quarterly Period” means each period from but excluding one Period End Date to and
including the next Period End Date.
“Scheduled Payment” means, with respect to any Trade, the net payment required to be
made by one party thereto to the other party thereto on a “Payment Date” or a “Settlement
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Payment Date” pursuant to the related Confirmation, without giving effect to the existence of
any “Potential Event of Default”, “Event of Default” or the designation of an “Early Termination
Date” (as such terms are defined in the applicable Trade Documents) or any right of setoff,
counterclaim or defense, and excluding, for the avoidance of doubt: (a) any obligation to transfer
cash collateral or other collateral, (b) any Termination Payment and (c) any Excluded Amount.
“Termination Payment” means, with respect to any Trade or group of Trades: (a) the
net amount which is due and payable by one party thereto to the other party thereto in respect of
the early termination of such Trade or group of Trades, as determined pursuant to the applicable
Trade Documents (including, for the avoidance of doubt, any unpaid amounts), but (b)
without giving effect to any right of set-off and/or right to apply any margin, collateral,
guarantees or other credit support delivered or held in connection with such Trade, and (c)
excluding any Scheduled Payments (other than unpaid amounts) and any Excluded Amounts.
“Trades” means the collective reference to each transaction evidenced by the
Confirmations.
“Trade Documents” means the collective reference to the BP Trade Documents and the
Xxxxx Trade Documents.
“Trust Gross Up Amount” means, in relation to any Scheduled Payments or any Illegality
Termination Payments required to be made by ECA during any Quarterly Period, an amount equal to the
sum of all such Scheduled Payments or Illegality Termination Payments, as the case may be, that
were due and payable by ECA but not paid by ECA to the Counterparties during such Quarterly Period
to the extent that ECA (i) set-off any such Scheduled Payments or Illegality Termination Payments,
as the case may be, against any posted collateral held by the Counterparties (or any obligation of
the Counterparties to transfer that posted collateral) or (ii) withheld payment of any such
Scheduled Payments or Illegality Termination Payments, as the case may be, up to the value of any
posted collateral held by the Counterparties.
“Xxxxx Trade Documents” means the ISDA Master Agreement dated as of June 30, 2004
between ECA and Xxxxx Fargo Foothill, Inc., including the Schedule thereto and each Confirmation
entered into thereunder, in each case as in effect on the date hereof.
Section 1.02 Terms Generally. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”. Unless the context
requires otherwise: (a) any reference herein to any law shall be construed as referring to such
law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to
time; (b) any reference herein to any Person shall be construed to include such Person’s successors
and assigns (subject to the restrictions contained in this Agreement); (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof and (d) any reference herein
to Sections or Exhibits shall be construed to refer to Sections of, or Exhibits to, this Agreement.
3
ARTICLE II
PAYMENTS
PAYMENTS
Section 2.01 Payments. On the Quarterly Payment Date for each Quarterly Period,
commencing with the Quarterly Period ending June 30, 2010:
(a) ECA will pay to the Trust an amount equal to the sum of the following (without
duplication): (i) all Scheduled Payments received by ECA from the Counterparties under all Trades
during such Quarterly Period plus (ii) the ECA Gross Up Amount, if any, related to
Scheduled Payments required to be made by the Counterparties to ECA under all Trades during such
Quarterly Period plus (iii) the amount of any Scheduled Payment required to be made by any
Counterparty to ECA under any Trade during such Quarterly Period that was not received by ECA from
such Counterparty, but only if ECA was a Defaulting Party on the date such Scheduled Payment was
required to be made by such Counterparty;
(b) the Trust will pay to ECA an amount equal to the sum of the following: (i) all Scheduled
Payments made by ECA to the Counterparties under all Trades during such Quarterly Period
plus (ii) the Trust Gross Up Amount, if any, related to Scheduled Payments required to be
made by ECA to the Counterparties under all Trades during such Quarterly Period, excluding,
in the case of both clauses (i) and (ii) of this subsection (b), any Scheduled Payment made by ECA
to any Counterparty under any Trade with respect to which ECA (x) was a Defaulting Party on the
date such Scheduled Payment was required to be made by ECA and (y) continues to be a
Defaulting Party on the Quarterly Payment Date;
(c) ECA will pay to the Trust an amount equal to the sum of the following: (i) all Illegality
Termination Payments received by ECA from the Counterparties under all Trades during such Quarterly
Period plus (ii) the ECA Gross Up Amount, if any, related to Illegality Termination
Payments required to be made by the Counterparties to ECA under all Trades during such Quarterly
Period;
(d) the Trust will pay to ECA an amount equal to the sum of the following: (i) all Illegality
Termination Payments made by ECA to the Counterparties under all Trades during such Quarterly
Period plus (ii) the Trust Gross Up Amount, if any, related to Illegality Termination
Payments required to be made by ECA to the Counterparties under all Trades during such Quarterly
Period;
(e) if any Trade has been terminated prior to its stated termination date other than as the
result of the occurrence of an Illegality, then notwithstanding the termination of such Trade, ECA
will pay to the Trust an amount equal to the sum of each Scheduled Payment that would have become
due and payable by the relevant Counterparty to ECA during such Quarterly Period if such Trade had
not been so terminated; and
(f) if any Trade has been terminated prior to its stated termination date other than as the
result of the occurrence of an Illegality, then notwithstanding the termination of such Trade, the
Trust will pay to ECA an amount equal to the sum of each Scheduled Payment that would have become
due and payable by ECA to the relevant Counterparty during such Quarterly Period if such Trade had
not been so terminated.
4
Section 2.02 Netting of Payments. If on any Quarterly Payment Date amounts would
otherwise be payable by each party to the other pursuant to Section 2.01, then, on such date, each
party’s obligation to make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds
the aggregate amount that would otherwise have been payable by the other party, replaced by an
obligation upon the party by whom the larger aggregate amount would have been payable to pay to the
other party the excess of the larger aggregate amount over the smaller aggregate amount.
Section 2.03 General Conditions. All payments made hereunder shall be made in
immediately available funds to the account or accounts from time to time specified by the relevant
payee. If any payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day.
Section 2.04 Certain Notices. ECA shall promptly notify the Trust of the
designation of an “Early Termination Date” pursuant to any Trade Document and the termination of
any Trade, and shall provide the Trust with any documentation or other information related thereto
as the Trust may reasonably request from time to time.
ARTICLE III
MISCELLANEOUS
MISCELLANEOUS
Section 3.01 Amendments. Any amendment, modification or waiver in respect of this
Agreement will only be effective if in writing (including a writing evidenced by a facsimile
transmission) and executed by each of the parties hereto.
Section 3.02 No Waiver. No failure on the part of any party to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power or privilege, or any
abandonment or discontinuance of steps to enforce such right, power or privilege, under this
Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
Section 3.03 Remedies Cumulative; Non-Exclusive; Etc. All rights, powers, privileges,
remedies, and recourses granted in this Agreement or otherwise available at law or equity: (a)
shall be cumulative and concurrent; (b) may be pursued separately, successively, or concurrently;
(c) may be exercised as often as occasion therefor shall arise, it being agreed that the exercise
or failure to exercise or the beginning, or the abandonment, or the delay of any of same, shall in
no event be construed as a waiver or release thereof or of any other right, remedy, or recourse and
(d) are intended to be, and shall be, nonexclusive.
Section 3.04 Successors and Assigns. The provisions of this Agreement shall be
binding upon each party and its successors and permitted assigns and shall inure, together with all
the rights and remedies hereunder, to the benefit of such party and its respective successors and
assigns; provided that no party may assign, transfer or delegate any of its rights or
5
obligations under this Agreement without the prior written consent of the other parties, and
any such purported assignment, transfer or delegation shall be null and void.
Section 3.05 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof or thereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 3.06 Survival; Revival; Restatement. To the extent that any payments made
hereunder are subsequently invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, debtor in possession, receiver or other Person or entity under
any bankruptcy law, common law or equitable cause, then to such extent, the obligations so
satisfied shall be revived and continue as if such payment had not been received and the rights,
powers and remedies under this Agreement shall continue in full force and effect. In such event,
this Agreement shall be automatically reinstated and each party shall take such action as may be
reasonably requested by any other party to effect such reinstatement.
Section 3.07 Acknowledgments.
(a) Each party hereby acknowledges that (i) no party has any fiduciary relationship with or
duty to any other party arising out of or in connection with this Agreement; (ii) no joint venture
is created hereby or otherwise exists by virtue of the transactions contemplated hereby among the
parties hereto; (iii) no other party is acting as a fiduciary or financial or investment advisor
for it; (iv) it is not relying upon any representations (whether written or oral) of any other
party; (v) no other party has given to it (directly or indirectly through any other Person) any
advice, counsel, assurance; guarantee, or representation whatsoever as to the expected or projected
success, profitability, return, performance, result, effect, consequence, or benefit (either legal,
regulatory, tax, financial, accounting, or otherwise) of this Agreement; (vi) it has made its own
investment, hedging, and trading decisions based upon its own judgment and upon any advice from
such advisors as it has deemed necessary, and not upon any view expressed by the other party; (vii)
all trading decisions have been the result of arm’s length negotiations between the parties; (viii)
it has a duty to read the Trade Documents and agrees that it is charged with notice and knowledge
of the terms of the Trade Documents; that it has in fact read the Trade Documents and is fully
informed and has full notice and knowledge of the terms, conditions and effects thereof and (ix) it
is entering into this Agreement with a full understanding of all of the risks hereof (economic and
otherwise) and it is capable of assuming and willing to assume (financially and otherwise) those
risks.
(b) Without limiting the applicability of any other provision of the U.S. Bankruptcy Code as
amended (the “Bankruptcy Code”) (including, without limitation, Sections 362, 546, 556, and
560 thereof and the applicable definitions in Section 101 thereof), the parties intend that the
transactions contemplated by this Agreement will constitute “forward contracts” or “swap
agreements” as defined in Section 101 of the Bankruptcy Code, and that the parties are entitled to
the rights under, and protections afforded by, Sections 362, 546, 556, and 560 of the Bankruptcy
Code.
6
(c) Each party represents to the other party that it is an “eligible contract participant”
within the meaning of the Commodity Exchange Act, Section 1a(12).
Section 3.08 No Agency Relationship; No Assignment of Trades. Each of the parties
hereto acknowledges and agrees that no agency relationship is created hereby or otherwise exists by
virtue of the transactions contemplated hereby among the parties hereto, it being expressly
understood and agreed that ECA has entered into the Trades and the Trade Documents related thereto
as principal on its own behalf, and ECA is not acting as an agent of the Trust with respect to any
Trade nor is ECA acting in any other capacity on behalf of the Trust, fiduciary or otherwise.
Nothing contained herein shall be interpreted to create or operate as an assignment, transfer or
novation of any Trade, any Trading Document or any interest or obligation therein or thereunder.
Section 3.09 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
Section 3.10 Counterparts. This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract. In making proof of this
Agreement, it shall not be necessary to produce or account for any counterpart other than one
signed by the party against which enforcement is sought. Delivery of an executed counterpart of a
signature page of this Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 3.11 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AS TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 3.12 No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto and no other Person (including, without limitation, any Counterparty) shall
have any rights, claims, remedies or privileges hereunder against any party hereto for any reason
whatsoever. There are no third party beneficiaries.
Section 3.13 Tax Hedge Designation. Unless otherwise specifically identified, the
Trust hereby identifies and designates this Agreement and the economic benefits and costs
associated with the underlying commodity derivatives transactions as a hedging transaction for tax
purposes under Section 1221(a)(7) of the Internal Revenue Code of 1986, as amended and Section
1.1221-2 of the Treasury regulations promulgated under the Internal Revenue Code. The transactions
being hedged are the sale of approximately 7,500 MMBtu per day of the natural gas production by ECA
attributable to the Trust from April 1, 2010 through June 30, 2012. The risk being hedged is the
price movement for natural gas production in the market where ECA sells the gas.
7
IN WITNESS WHEREOF, intending to be legally bound, each of the parties hereto has caused this
Agreement to be duly executed as of the date first above written.
| ENERGY CORPORATION OF AMERICA |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| ECA MARCELLUS TRUST I |
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| By: | ||||
| Name: | ||||
| Title: | ||||
Signature Page to Swap Agreement
EXHIBIT A
CONFIRMATIONS
CONFIRMATIONS
Exhibit A-1
