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EXHIBIT 6.10
[TORCH ENERGY MARKETING INC. LETTERHEAD]
TO: TREK RESOURCES, INC.
ATTN: XXXX XXXXXXXXXX
0000 XXXXXXXXXX XXXXXX
XXXXXX, XX 00000
DATE: August 1, 2000
Re: TORCH Contract No. 20245
Gentlemen:
Confirming the following agreement ("Agreement") between Torch Energy Marketing,
Inc. (TEMI) Trek Resources, Inc. ("Trek") for a FIXED PRICE contract as
described below (each of TEMI and TREK is referred to as a "Party" and together
are referred to as the "Parties"):
1. TRADE DATE: August 1, 2000
2. EFFECTIVE DATE: September 1, 2000
3. PERIOD ENDING DATE(S): The last day of each calendar month
of the Agreement, the last period
ending date being August 31, 2001.
4. BUYER OF FIXED PRICE: TEMI
5. SELLER OF FIXED PRICE: TREK
6. COMMODITY: West Texas Intermediate Crude
Oil (WTI)
7. QUANTITY: 200 Barrels Per Day
8. QUANTITY MEASUREMENT UNIT: Barrels
9. FIXED PRICE: $26.25
10. EXPIRATION DATE OF AGREEMENT: September 10, 2001
11. PREMIUM AMOUNT: Not applicable
12. ACTUAL AVERAGE PRICE: The unweighted arithmetic average of the price of
West Texas Intermediate Crude Oil (WTI) as traded on the New York
Mercantile Exchange for each calendar month during the term of the
agreement. The Actual Average Price calculation shall include each day
of the month, including all weekends and holidays, with prices for the
weekend and holiday being the posted price on the last working day
prior to the weekend or holiday.
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13. SETTLEMENT:
Settlement shall be determined after each calendar month of the
Agreement using one of the following methods: (i) when the Actual
Average Price is less than the Fixed Price, TEMI will wire to TREK that
price difference times the number of barrels per month; or (ii) when
the Actual Average Price is greater than the Fixed Price, TREK will
wire to TEMI that difference times the number of barrels per month; or
(iii) when the Actual Average Price equals the Fixed Price, no payment
is required from either party.
Cash settlement shall be due and payable in U.S. dollars against TEMI's
invoice and payment details by 4:00 p.m., Central Time, by wire
transfer of immediately available funds, on the twentieth day following
the last day of the calendar month, for each month of the agreement,
being September, 2000 through August, 2001. Payment by the debtor Party
will be made without any deduction or withholding for, or on account
of, any tax(es) (if any), except to the extent required by law, and
without any set off, counterclaim, restriction or condition, except as
otherwise provided in the last paragraph of this Section (13) and
Section (19)(E). Mutual credits and debits arising from any other swap
agreement(s) entered into between the Parties hereto and having a
common maturity/settlement date shall be included in calculating the
net amount payable in each instance. Payment shall be made by wire
transfer to the payee Party's designated bank and account in
immediately available funds on or before due date unless otherwise
agreed upon between the Parties. A Party that defaults in the payment
of any amount due hereunder will, to the extent permitted by law, pay
interest on that amount to the other Party based upon a year of 360
days for the number of days elapsed from the date on which the payment
was due to and including the date on which payment is made, compounded
daily at a per annum rate equal to 1% plus the highest Prime Rate
published as such in The Wall Street Journal.
Each obligation of each Party to pay any amount due under this
Agreement [other than an amount that is due under Section (19)(E)] is
subject to the condition precedent that no Event of Default (as
hereinafter defined) (or event, act or omission which, with the passing
of time and/or the giving of notice, will give rise to an Event of
Default) has occurred and is continuing with respect to the other
Party.
14. NO PHYSICAL DELIVERY: No physical delivery shall take place or be
required of either Party hereunder. This transaction shall be
cash-settled as described herein.
15. NO BROKER/AGENT: Both Parties are acting as principal in this Agreement
and neither Party is acting as a broker or agent for any other party.
16. CREDIT TERMS: Each Party shall act in good faith toward the other and
meet XXXX's reasonable credit requirements.
TREK hereby represents to TEMI that it sells crude oil to Plains
Marketing, L.P. ("Plains") and that the volume stipulated in Section 7
does not exceed 60% of its equity crude oil volume sold to Plains.
TREK agrees to properly execute an agreement giving TEMI and Plains the
right to offset any funds which may become due to TEMI, in accordance
with the terms provided in Section (13), against the monthly settlement
due TREK, from Plains, for the purchase of TREK's equity crude oil
("the Offset Agreement"). The Offset Agreement will be executed on TREK
letterhead, in triplicate, in a form prescribed by and furnished by
TEMI and Plains. Additionally, the Offset Agreement will give Plains
the right to amend the term of the crude oil lease purchase contract
(between TREK and Plains) to at least match the term stipulated in
Sections (2) and (3) herein. Such contract term, once amended,
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TORCH Contract No. 20245
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may only be amended at the discretion of Plains, but in no event will
the remaining term be less than the term stipulated herein.
In the event that amounts due under the Agreement, if any, for a
particular contract month yields a net amount, after any setoffs or
deductions, due to TEMI, then such payment shall be the sole obligation
of TREK.
If TREK chooses to cover any credit exposure by transfer of funds, then
upon transfer of funds, TEMI will credit TREK's account with interest
calculated at a rate per annum equal to the LIBOR (London Interbank
Offered Rate) minus one percent (1%) as quoted in the Wall Street
Journal. TREK hereby grants a security interest in these funds to TEMI
and XXXX agrees to hold these funds as security for the account of
TREK, to be partially or totally refunded at TREK's discretion when the
excess credit exposure is reduced or eliminated.
17. WIRING INSTRUCTIONS: The following is the wire transfer information for
payment:
To Torch: To TREK:
Chase Bank of Texas, N.A. Please Advise
Houston, Texas
ABA No. 000000000
For the Account of Torch Energy Marketing, Inc.
Account No. 00101399294
18. REPRESENTATIONS:
A. Each Party to this transaction represents and warrants unto the other
that (i) it is a producer, processor, or commercial user of, or a
merchant handling the commodity which is the subject of this
transaction, or the products or by-products thereof; (ii) it is either
a corporation, partnership or proprietorship which (a) has total assets
exceeding $10 million, (b) the obligations under this Agreement are
guaranteed or otherwise supported by a letter of credit, or (c) has a
net worth of $1 million and is entering into this transaction to manage
the risk of an asset or liability owned or incurred (or reasonably
likely to be owned or incurred) in the conduct of its business; or is
an individual having total assets exceeding $10 million and is entering
into this transaction to manage the risk of an asset or liability owned
or incurred (or reasonably likely to be owned or incurred) in the
conduct of its business; (iii) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary
corporate or other action on its part; (iv) this Agreement is a legally
valid and binding obligation of it, enforceable against it in
accordance with its terms, except as may be limited by bankruptcy,
re-organization, moratorium or other similar laws affecting creditors'
rights generally; and (v) the terms of this Agreement have been
individually tailored and negotiated
B. TEMI represents to TREK that TEMI has taken an equal and opposite trade
position for this Agreement.
19. MISCELLANEOUS:
A. The interests and obligations arising from this Agreement are
non-transferable and non-assignable.
B. If at any time after the Parties enter into this Agreement any
provision of this Agreement is held by any court or government agency
of competent jurisdiction to be illegal, void or enforceable, such
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provision shall be of no force and effect, but the illegality or
enforceability of such provision shall have no effect upon and shall
not impair the enforceability of the remainder of this Agreement.
C. Any claim or controversy arising out of this Agreement, or the
interpretation thereof, shall be settled by arbitration under the then
prevailing rules of the American Arbitration Association. Judgment
based upon the decision of the arbitrator may be entered into any court
having jurisdiction thereof.
D. In the event the determining reference or quotation of the New York
Mercantile Exchange price for WTI hereunder ceases to be published
permanently, or for six or more consecutive Business Days (as
hereinafter defined) during any applicable monthly pricing period, the
Parties hereto shall attempt in good faith to agree upon a substitute
means or mechanism for determining the floating price to be used in
calculating the Actual Average Price (for the duration of this
Agreement or for the affected monthly pricing period, as applicable).
In the event the Parties cannot reach an agreement upon such a
substitute means or mechanism, the matter shall be referred to three
qualified, outside/unrelated experts for binding resolution, with TEMI
naming one such expert and the other Party hereto naming the second
such expert, and with the two experts so named selecting the third
expert. The decision of the third expert with respect to a substitute
means or mechanism for determining the floating price to be used in
calculating the Actual Average Price shall be binding on the Parties
hereto. The cost of any such expert resolution shall be borne equally
by and between the parties hereto. "Business Day" means any day on
which commercial banks are open for business in New York City.
E. i. For purposes of this Agreement, an "Event of Default" shall
have occurred if either Party (the "Defaulting Party") shall
(a) fail to pay the other Party any amount when due under this
Agreement, provided that the Defaulting Party receives notice
of such delinquent payment from the other Party, and fails to
cure such default in payment within two Business Days of
receipt of notice of such delinquent payment, or (b) the
Defaulting Party or any of its affiliates, defaults under any
other swap agreement with the other Party or any of its
affiliates, which default would permit early termination or
liquidation of such other agreement, or (c) any of the
Defaulting Party's representations set forth in this Agreement
prove to have been untrue or misleading in any material
respect when made and continue to be untrue, or (d) file a
petition or otherwise commence or authorize the commencement
of a proceeding or case under any bankruptcy, insolvency,
reorganization, or similar law for the protection of
creditors, or have any such petition filed or proceeding or
case commenced against it and it is not successful in having
such petition, proceeding, or case dismissed within 60 days,
or (e) have a liquidator, administrator, receiver or trustee
appointed with respect to it or any substantial portion of its
property or assets, or (f) fail to observe and perform any
other material agreement, term or condition contained in this
Agreement other than in paragraphs (a) through (e)
hereinabove, if such failure continues for a period of seven
Business Days after notice of such failure is given to the
Defaulting Party by the other Party.
ii. If an Event of Default occurs, the non-defaulting Party shall
not be obligated to make any payments to the Defaulting Party
for any third party brokerage fees and commissions which the
Defaulting Party incurs as a result of entering into any
Replacement Transaction(s).
iii. Each of the Parties agrees that (a) any amounts payable
pursuant to this Section 19(E) constitute a reasonable
estimate of payments and are not a penalty, and (b) such
amounts are payable by way of liquidated damages and neither
Party shall be entitled to recover any other damages in
addition thereto or in lieu thereof.
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iv. The Defaulting Party shall indemnify and hold the
Non-Defaulting Party harmless from any and all costs and
expenses of collection, including without limitation
reasonable attorney's fees and court costs, incurred in the
exercise of any remedies hereunder.
20. CONTACTS/REPRESENTATIVES:
For TEMI: For Trek:
Xxxxxx X. Xxxxx Mr. Xxxx Xxxxxxxxxx
Director - Risk Management Services (000) 000-0000
(000) 000-0000 FAX (000) 000-0000 (000) 000-0000 (Fax)
Xxx Xxxxxxxx
Manager, Risk Management Services
(000) 000-0000 FAX (000) 000-0000
Mailing Address for all Mailing Address for all
representatives: representatives:
Torch Energy Marketing, Inc. Trek Resources, Inc.
1221 Xxxxx, Suite 0000 0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000 Xxxxxx, XX 00000
21. LIMITATION OF LIABILITY: THE PARTIES AGREE THAT THE TOTAL MONETARY
LIABILITY OF EITHER PARTY WITH RESPECT TO (I) THIS AGREEMENT OR (II)
ANY ACT COMMITTED IN CONNECTION HEREWITH, WHETHER IN CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL NOT EXCEED (AS APPLICABLE)
THE FAIR MARKET VALUE OF THE COMMODITY SOLD OR TO BE SOLD HEREUNDER, OR
THE FAIR MARKET VALUE OF THAT PORTION OF SUCH COMMODITY UPON WHICH THE
CLAIM OR LIABILITY IS BASED. HOWEVER, "FAIR MARKET VALUE" SHALL INCLUDE
THE REASONABLE COSTS OF THE VALUE OF MONEY. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR INDIRECT OR CONSEQUENTIAL DAMAGES. NOTHING STATED
ABOVE IN THIS PARAGRAPH SHALL LIMIT LIABILITY FOR MALICIOUS MISCONDUCT
OR ANY INTENTIONAL INFLICTION OF PROPERTY DAMAGE OR PHYSICAL
HARM/INJURY. IN ADDITION, IF A PARTY TO THIS AGREEMENT IS COMPELLED TO
RETAIN THE SERVICES OF ONE OR MORE ATTORNEYS TO ENFORCE SAID PARTY'S
RIGHTS HEREUNDER (AGAINST THE OTHER PARTY HERETO) IN ANY COURT ACTION,
LITIGATION OR PROCEEDING, THE PARTY RETAINING COUNSEL SHALL HAVE THE
RIGHT TO BE REIMBURSED (BY THE OTHER PARTY HERETO) FOR SAID PARTY'S
REASONABLE COURT COSTS, EXPENSES AND ATTORNEY'S FEES IF SAID PARTY
RETAINING COUNSEL SHALL ULTIMATELY PREVAIL IN ANY SUCH COURT ACTION,
LITIGATION OR PROCEEDING.
22. ENTIRE AGREEMENT; COUNTERPARTS: This Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject
matter and supersedes all oral communications and prior writings with
respect thereto. This Agreement (and each amendment, modification and
waiver in respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be deemed an
original.
23. GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to its
conflict of laws principles.
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Please confirm your acceptance of the foregoing terms and conditions by
executing this Agreement in the space provided below and returning immediately
by fax (713/000-0000 or 713/210-7330) and the signed copy by mail.
We appreciate this opportunity to do business with you.
Very truly yours,
Torch Energy Marketing, Inc.
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
By: /s/ XXXXXX X. XXXXX
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Xxxxxx X. Xxxxx
Director
Risk Management Services
AGREED TO AND ACCEPTED this 11th day of September, 2000 by:
Trek Resources, Inc.:
By: /s/ XXXXXXX X. XXXXXXXXXX
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Name: Xxxxxxx X. Xxxxxxxxxx
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Title: President
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