in all other respects identical to the letter of credit being replaced) to
be made from time to time at Buyer's option by written notice to Venoco, which
notice shall contain an itemization of such Eligible Expenses. Venoco shall have
the right, upon reasonable prior written notice to Buyer and during normal
business hours of Buyer, to audit Buyer's books and records solely as they
relate to the claimed Eligible Expenses in order to verify the amount of
Eligible Expenses so notified by Buyer.
(iii)
Notwithstanding any other provision of this Agreement to the
contrary, (A) the amount of the Performance Security shall be maintained at all
times prior to the LNG Operations Commencement Date in an amount not less than
Twenty Five Million Dollars ($25,000,000), and (B) from and after the LNG
Operations Commencement Date, Buyer shall no longer be required to provide and
maintain the Performance Security, which, provided no claims secured thereby are
then pending, shall be cancelled and returned in accordance with the last
sentence of Section 2.7(d).
(f)
Disposition Upon Termination.
(i)
IN THE EVENT THAT THIS AGREEMENT IS TERMINATED IN ACCORDANCE WITH
SECTION 10.1(a) AS A RESULT OF THE MATERIAL BREACH, OR MATERIAL DEFAULT, BEFORE
THE LNG OPERATIONS COMMENCEMENT DATE, IN THE PERFORMANCE BY BUYER OF ITS
OBLIGATIONS HEREUNDER, AFTER GIVING EFFECT TO THE APPLICABLE CURE PERIOD AND
CURE RIGHTS (A "MATERIAL BUYER DEFAULT"), VENOCO SHALL BE ENTITLED TO (i) IF
SUCH MATERIAL BUYER DEFAULT OCCURS AFTER COMPLETION OF PLUGGING AND ABANDONMENT,
DRAW AND RETAIN THE BALANCE OF THE PERFORMANCE SECURITY AVAILABLE AS OF THE DATE
OF SUCH MATERIAL BUYER DEFAULT, AS LIQUIDATED DAMAGES INTENDED TO COMPENSATE
VENOCO FOR SUCH MATERIAL BUYER DEFAULT, OR (ii) IF SUCH MATERIAL BUYER DEFAULT
OCCURS PRIOR TO COMPLETION OF PLUGGING AND ABANDONMENT, DRAW THE ENTIRE AMOUNT
REMAINING UNDER THE PERFORMANCE SECURITY AND RETAIN FROM SUCH FUNDS, AS
LIQUIDATED DAMAGES INTENDED TO COMPENSATE VENOCO FOR SUCH MATERIAL BUYER
DEFAULT, AN AMOUNT EQUAL TO THE SUM OF (x) ALL COSTS INCURRED BY VENOCO IN
CONNECTION WITH PLUGGING AND ABANDONMENT OPERATIONS (TO
4
THE EXTENT NOT PAID BY BUYER, OR DRAWN UNDER THE P&A COST PAYMENT SECURITY),
(y) ALL COSTS RELATING TO THE REDRILLING OF THE WELLS THAT WERE PLUGGED AND
ABANDONED DURING PLUGGING AND ABANDONMENT AND (z) THE OTHER DAMAGES SUFFERED BY
VENOCO FROM THE SHUTDOWN OF OPERATIONS ON PLATFORM GRACE IN CONNECTION WITH
PLUGGING AND ABANDONMENT, INCLUDING THE PRESENT VALUE, DISCOUNTED AT TEN PERCENT
(10%), OF THE NET FUTURE CASH FLOW ATTRIBUTABLE TO ALL PROVED, PROBABLE AND
POSSIBLE OIL AND GAS RESERVES (AS SUCH RESERVES AND NET PRESENT VALUE ARE EACH
DETERMINED BY VENOCO'S INDEPENDENT RESERVES ENGINEER AND CONTAINED IN SUCH
ENGINEER'S MOST RECENT RESERVES REPORT) THAT WERE EXPECTED TO BE PRODUCED BY
VENOCO FROM WELLS ON PLATFORM GRACE, AND WHICH VENOCO HAS REASONABLY DETERMINED
ARE NO LONGER CAPABLE OF BEING PRODUCED AS A RESULT OF ACTIONS TAKEN BY VENOCO
IN THE PERFORMANCE OF ITS P&A OBLIGATIONS. FOR THE PURPOSES OF THE PRECEDING
SENTENCE, THE OIL AND GAS