Document:

ex10_65.htm

Exhibit 10.65

 

Base Contract for Sale and Purchase of Natural Gas

This Base Contract is entered into as of the following date:   May 12, 2009

 

The parties to this Base Contract are the following:

 

	 	
PARTY A (Seller)

ConocoPhillips Company and ConocoPhillips Alaska, Inc
	  	
PARTY NAME
	  	
PARTY B (Buyer)

Chugach Electric Association, Inc.
	 
	 	  	  	  	  	  	 
	 	
700 G. St.

Anchorage, AK 99510
	  	
ADDRESS
	  	
5601 Electron Drive

Anchorage, AK  99519
	 
	 	  	  	
BUSINESS WEBSITE
	  	  	 
	 	
CEA 2009-01
	  	
CONTRACT NUMBER
	  	
_______
	 
	 	
00-136-8265
	  	
D-U-N-S® NUMBER
	  	
_______
	 
	 	
x         US FEDERAL:  73-0400345 (COP)

x         US FEDERAL:  94-2700433 (CPAI)
	  	
 

TAX ID NUMBERS
	  	
x        US FEDERAL:  _______

o         OTHER:
	 
	 	  	  	
JURISDICTION OF ORGANIZATION
	  	  	 
	 	
x        Corporation

o         Limited Partnership

o         LLP
	
o         LLC

o         Partnership

o         Other: __________
	  	
COMPANY TYPE
	  	
x        Corporation

o         Limited Partnership

o         LLP
	
o    LLC

o    Partnership

o    Other __________  
	 
	 	  	  	
GUARANTOR

(IF APPLICABLE)
	  	  	 
	 	
 

CONTACT INFORMATION
	 
	 	  	  	  	  	  	 
	 	
ATTN:  Cook Inlet Gas Marketing
	  	  	  	
ATTN:      Suzanne Gibson,
Director, Energy Resources
	 
	 	
TEL#:   (907) 265-1605
	
FAX#: (918) 662-6889
	  	
§ COMMERCIAL
	  	
TEL#:       (907) 762-4577
	FAX# (907) 762-4688	 
	 	
EMAIL:  Von.L.Huthins@ConocoPhillips.com
	  	  	  	
EMAIL:    Suzanne_Gibson@chugachelectric.com
	 
	 	  	  	  	  	  	 
	 	
ATTN:        Cook Inlet Gas Control
	  	  	  	
ATTN:       Burke Wick, Director, System Control
	 
	 	
TEL#:         (907) 263-4704
	
FAX#:  (918) 662-6895
	  	
§ SCHEDULING
	  	
TEL#:       (907) 762-4779
	 	 
	 	
EMAIL:     Brandy.Ostrinski@ConocoPhillips.com
	  	  	  	
EMAIL:   Burke_Wick@chugachelectric.com
	 
	 	  	  	  	  	  	 
	 	
ATTN:  ____________
	  	
§ CONTRACT
	  	
ATTN:       General Counsel
	 
	 	
TEL#:   ____________
	
FAX#:    ____________
	  	
 AND LEGAL
	  	
TEL#:        ___________
	FAX#:  ___________	 
	 	
EMAIL:
	  	
 NOTICES
	  	
EMAIL:
	 
	 	  	  	  	  	  	 
	 	
ATTN:    ____________
	  	  	  	
ATTN:        ___________
	 
	 	
TEL#:    ____________
	
FAX#:    ____________
	  	
§   CREDIT
	  	
TEL#:         ___________
	
FAX#:   ___________
	 
	 	
EMAIL:
	  	  	  	
EMAIL:
	 
	 	  	  	  	  	  	 
	 	
ATTN:        Cook Inlet Gas Control
	  	
§   TRANSACTION
	  	
ATTN:      Suzanne Gibson,
Director, Energy Resources
	 
	 	
TEL#:        (907) 263-4704
	
FAX#:  (918) 662-6895
	  	
CONFIRMATIONS
	  	
TEL#:      (907) 762-4577
	 	 
	 	
EMAIL:    Brandy.Ostrinski@ConocoPhillips.com
	  	  	  	
EMAIL:   Suzanne_Gibson@chugachelectric.com
	 
	 	  	  	  	  	  	  	  	 
	 	
ACCOUNTING INFORMATION
	 
	 	  	  	  	  	  	 
	 	
ATTN:      Revenue Alaska
	  	
§ INVOICES
	  	
ATTN:     Chugach Electric Association, Inc.
	 
	 	
TEL#:       918-661-1649
	
FAX#:   918-6625453
	  	
§ PAYMENTS
	  	
TEL#:      907-762-4369
	 	 
	 	
EMAIL:  Toni.M.Glass@conocophillips.com
	  	
§ SETTLEMENTS
	  	
EMAIL: Marina_Mccoy-Casey@chugachelectric.com
	 
	 	  	  	  	  	  	 
	 	
BANK:     Bank One
	  	  	
WIRE TRANSFER
	  	
BANK:    FNB of A
	  	 
	 	
ABA:       071000013
	
ACCT:         643625114
	  	
NUMBERS
	  	
ABA:       125200060
	ACCT:   1104751  	 
	 	
OTHER DETAILS:
	  	
(IF APPLICABLE)
	  	
OTHER DETAILS:
	 
	 	  	  	  	  	  	  	  	 
	 	
BANK:    Bank One
	  	  	  	  	
BANK:     FNB of A
	  	 
	 	
ABA:      071000013
	
ACCT:         643625114
	  	
ACH NUMBERS
	  	
ABA:       125200060
	ACCT:   1104751	 
	 	
OTHER DETAILS:
	  	
 (IF APPLICABLE)
	  	
OTHER DETAILS:
	 
	 	  	  	  	  	  	 
	 	
ATTN:    __________________

ADDRESS:    ______________
	  	
CHECKS

(IF APPLICABLE)
	  	
ATTN:            Marina McCoy-Casey

ADDRESS:    5601 Electron Drive Anchorage, AK 99519
	 

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

 

 

 

 

Base Contract for Sale and Purchase of Natural Gas

(Continued)

 

This Base Contract incorporates by reference for all purposes the General Terms and Conditions for Sale and Purchase of Natural Gas published by the North American Energy Standards Board.  The parties hereby agree to the following provisions offered in said General Terms and Conditions.  In
the event the parties fail to check a box, the specified default provision shall apply.  Select the appropriate box(es) from each section:

 

	
 

Section 1.2

Transaction Procedure
	
 

o     Oral (default)

OR

x    Written
	 	
 

Section 10.2

Additional 

Events of
	
 

x   No Additional Events of Default (default)

 

o   Indebtedness Cross Default

	
 

Section 2.7

Confirm Deadline
	
 

o     2 Business Days after receipt (default)

OR

x    10  Business Days after receipt
	 	
Default
	
 

o    Party A:  __________________

 

o    Party B:  __________________

 

o    Transactional Cross Default

Specified Transactions:

 

	
 

Section 2.8

Confirming Party
	
x    Seller (default)

OR

o    Buyer

OR

o
	 	  	  
	
 

Section 3.2

Performance Obligation
	
 

o    Cover Standard (default)

OR

o    Spot Price Standard

OR

x   Special Provisions Section 16.2

 
	 	
 

Section 10.3.1

Early Termination Damages
	
 

x   Early Termination Damages Apply (default)

 

OR

 

o   Early Termination Damages Do Not Apply

	
Note: The following Spot Price Publication applies to both of the immediately preceding.
	 	
 

Section 10.3.2
	
 

o   Other Agreement Setoffs Apply (default)

	
 

Section 2.31

Spot Price

Publication
	
 

x   Gas Daily Midpoint (default)

OR

o
	 	
Other 

Agreement 

Setoffs
	
o   Bilateral (default)

 

o   Triangular

	
 

Section 6

Taxes
	
 

o    Buyer Pays At and After Delivery Point (default)

OR

x   Seller Pays Before and At Delivery Point
	 	  	
OR

 

x   Other Agreement Setoffs Do Not Apply

	
 

Section 7.2

Payment Date

 
	
 

x    25th Day of Month following Month of 

delivery (default)

OR

o    Day of Month following Month of delivery
	 	
 

Section 15.5

Choice Of Law
	
 

Alaska                                                      

	
 

Section 7.2

Method of Payment
	
 

x   Wire transfer (default)

o    Automated Clearinghouse Credit (ACH)

o    Check
	 	
 

Section 15.10

Confidentiality
	
 

o            Confidentiality applies (default)

OR

x            Confidentiality does not apply

	
 

Section 7.7

Netting
	
 

x    Netting applies (default)

OR

o     Netting does not apply
	 	  	  

	
x Special Provisions Number of sheets attached:    10 pages

o Addendum(s):

 

IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate.

 

	
ConocoPhillips Company
	
PARTY NAME
	
Chugach Electric Association, Inc.

	 	 	 	 	 
	
By
	
/s/ J.L. Bowles
	
SIGNATURE
	
By
	
/s/ Bradley Evans

	
J. L.  Bowles
	
PRINTED NAME
	
Bradley Evans

	
Vice President
	
TITLE
	
CEO

	
ConocoPhillips Alaska Inc.
	
PARTY NAME
	  
	 	 	 	 
	
By:
	
/s/ J. L. Bowles
	
SIGNATURE
	  
	
J. L. Bowles
	
PRINTED NAME
	  
	
President
	
TITLE
	  

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

  

Page 2 of 23

  

 

General Terms and Conditions

Base Contract for Sale and Purchase of Natural Gas

 

SECTION 1.     PURPOSE AND PROCEDURES

1.1.              These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis.  "Buyer" refers to the
party receiving Gas and "Seller" refers to the party delivering Gas.  The entire agreement between the parties shall be the Contract as defined in Section 2.9.

The parties have selected either the “Oral Transaction Procedure” or the “Written Transaction Procedure” as indicated on the Base Contract.

Oral Transaction Procedure:

1.2.             The parties will use the following Transaction Confirmation procedure.  Any Gas purchase and sale transaction may be effectuated in an EDI transmission or telephone
conversation with the offer and acceptance constituting the agreement of the parties.  The parties shall be legally bound from the time they so agree to transaction terms and may each rely thereon.  Any such transaction shall be considered a “writing” and to have been “signed”.  Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may, confirm a telephonic transaction by sending the other party a Transaction
Confirmation by facsimile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction Procedure) provided that the failure to send a Transaction Confirmation shall not invalidate the oral agreement of the parties.  Confirming Party adopts its confirming letterhead, or the like, as its signature on any Transaction Confirmation as the identification and authentication of Confirming Party.  If the Transaction Confirmation
contains any provisions other than those relating to the commercial terms of the transaction (i.e., price, quantity, performance obligation, delivery point, period of delivery and/or transportation conditions), which modify or supplement the Base Contract or General Terms and Conditions of this Contract (e.g., arbitration or additional representations and warranties), such provisions shall not be deemed to be accepted pursuant to Section 1.3 but must be expressly agreed to by both parties; provided that the foregoing
shall not invalidate any transaction agreed to by the parties.

Written Transaction Procedure:

1.2.             The parties will use the following Transaction Confirmation procedure.  Should the parties come to an agreement regarding a Gas purchase and sale transaction for a particular Delivery Period, the Confirming Party shall, and the other party may, record
that agreement on a Transaction Confirmation and communicate such Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means, to the other party by the close of the Business Day following the date of agreement.  The parties acknowledge that their agreement will not be binding until the exchange of nonconflicting Transaction Confirmations or the passage of the Confirm Deadline without objection from the receiving party, as provided in Section 1.3.

1.3.              If a sending party's Transaction Confirmation is materially different from the receiving party's understanding of the agreement referred to in Section 1.2, such receiving
party shall notify the sending party via facsimile, EDI or mutually agreeable electronic means by the Confirm Deadline, unless such receiving party has previously sent a Transaction Confirmation to the sending party.  The failure of the receiving party to so notify the sending party in writing by the Confirm Deadline constitutes the receiving party's agreement to the terms of the transaction described in the sending party's Transaction Confirmation.  If there are any material differences between
timely sent Transaction Confirmations governing the same transaction, then neither Transaction Confirmation shall be binding until or unless such differences are resolved including the use of any evidence that clearly resolves the differences in the Transaction Confirmations.  In the event of a conflict among the terms of (i) a binding Transaction Confirmation pursuant to Section 1.2, (ii) the oral agreement of the parties which may be evidenced by a recorded conversation, where the parties have
selected the Oral Transaction Procedure of the Base Contract, (iii) the Base Contract, and (iv) these General Terms and Conditions, the terms of the documents shall govern in the priority listed in this sentence.

1.4.              The parties agree that each party may electronically record all telephone conversations with respect to this Contract between their respective
employees, without any special or further notice to the other party.  Each party shall obtain any necessary consent of its agents and employees to such recording.  Where the parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, the parties agree not to contest the validity or enforceability of telephonic recordings entered into in accordance with the
requirements of this Base Contract.

SECTION 2.     DEFINITIONS

The terms set forth below shall have the meaning ascribed to them below.  Other terms are also defined elsewhere in the Contract and shall have the meanings ascribed to them herein.

2.1.              “Additional Event of Default” shall mean Transactional Cross Default or Indebtedness Cross Default, each as and if selected by the parties pursuant to the
Base Contract.

2.2.              “Affiliate” shall mean, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly,
the person or any entity directly or indirectly under common control with the person.  For this purpose, “control” of any entity or person means ownership of at least 50 percent of the voting power of the entity or person.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

 

Page 3 of 23

 

 

2.3.              “Alternative Damages” shall mean such damages, expressed in dollars or dollars per MMBtu, as the parties shall agree upon in the Transaction Confirmation,
in the event either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer.

2.4.              "Base Contract" shall mean a contract executed by the parties that incorporates these General Terms and Conditions by reference; that specifies the agreed selections
of provisions contained herein; and that sets forth other information required herein and any Special Provisions and addendum(s) as identified on page one.

2.5.              "British thermal unit" or "Btu" shall mean the International BTU, which is also called the Btu (IT).

2.6.              "Business Day(s)" shall mean Monday through Friday, excluding Federal Banking Holidays for transactions in the U.S.

2.7.              "Confirm Deadline" shall mean 5:00 p.m. in the receiving party's time zone on the second Business Day following the Day a Transaction Confirmation is received or, if
applicable, on the Business Day agreed to by the parties in the Base Contract; provided, if the Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party's time zone, it shall be deemed received at the opening of the next Business Day.

2.8.              "Confirming Party" shall mean the party designated in the Base Contract to prepare and forward Transaction Confirmations to the other party.

2.9.              "Contract" shall mean the legally-binding relationship established by (i) the Base Contract, (ii) any and all binding Transaction Confirmations and (iii) where the
parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties.

2.10.            "Contract Price" shall mean the amount expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties in a transaction.

2.11.            "Contract Quantity" shall mean the quantity of Gas to be delivered and taken as agreed to by the parties in a transaction.

2.12.            "Cover Standard", as referred to in Section 3.2, shall mean that if there is an unexcused failure to take or deliver any quantity of Gas pursuant to this Contract, then the performing
party shall use commercially reasonable efforts to (i) if Buyer is the performing party, obtain Gas, (or an alternate fuel if elected by Buyer and replacement Gas is not available), or (ii) if Seller is the performing party, sell Gas, in either case, at a price reasonable for the delivery or production area, as applicable, consistent with:  the amount of notice provided by the nonperforming party; the immediacy of the Buyer's Gas consumption needs or Seller's Gas sales requirements, as applicable; the
quantities involved; and the anticipated length of failure by the nonperforming party.

2.13.            "Credit Support Obligation(s)” shall mean any obligation(s) to provide or establish credit support for, or on behalf of, a party to this Contract such as cash, an irrevocable
standby letter of credit, a margin agreement, a prepayment, a security interest in an asset, guaranty, or other good and sufficient security of a continuing nature.

2.14.            "Day" shall mean a period of 24 consecutive hours, coextensive with a "day" as defined by the Receiving Transporter in a particular transaction.

2.15.            "Delivery Period" shall be the period during which deliveries are to be made as agreed to by the parties in a transaction.

2.16.            "Delivery Point(s)" shall mean such point(s) as are agreed to by the parties in a transaction.

2.17.            "EDI" shall mean an electronic data interchange pursuant to an agreement entered into by the parties, specifically relating to the communication of Transaction Confirmations under
this Contract.

2.18.            "EFP" shall mean the purchase, sale or exchange of natural Gas as the "physical" side of an exchange for physical transaction involving gas futures contracts.  EFP shall
incorporate the meaning and remedies of "Firm", provided that a party’s excuse for nonperformance of its obligations to deliver or receive Gas will be governed by the rules of the relevant futures exchange regulated under the Commodity Exchange Act.

2.19.           "Firm" shall mean that either party may interrupt its performance without liability only to the extent that such performance is prevented for reasons of Force Majeure; provided, however,
that during Force Majeure interruptions, the party invoking Force Majeure may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by the Transporter.

2.20.            "Gas" shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane.

2.21.            “Guarantor” shall mean any entity that has provided a guaranty of the obligations of a party hereunder.

2.22.            "Imbalance Charges" shall mean any fees, penalties, costs or charges (in cash or in kind) assessed by a Transporter for failure to satisfy the Transporter's balance and/or nomination
requirements.

2.23.            “Indebtedness Cross Default” shall mean if selected on the Base Contract by the parties with respect to a party, that it or its Guarantor, if any, experiences a default,
or similar condition or event however therein defined, under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether present or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed money in an aggregate amount greater than the threshold specified in the Base Contract with respect to such party or its Guarantor, if any, which results in such indebtedness becoming
immediately due and payable.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

 

Page 4 of 23

 

 

2.24.            "Interruptible" shall mean that either party may interrupt its performance at any time for any reason, whether or not caused by an event of Force Majeure, with no liability, except
such interrupting party may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by Transporter.

2.25.            "MMBtu" shall mean one million British thermal units, which is equivalent to one dekatherm.

2.26.            "Month" shall mean the period beginning on the first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar month.

2.27.            "Payment Date" shall mean a date, as indicated on the Base Contract, on or before which payment is due Seller for Gas received by Buyer in the previous Month.

2.28.            "Receiving Transporter" shall mean the Transporter receiving Gas at a Delivery Point, or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point.

2.29.            "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporter(s) for movement, transportation or management.

2.30.            “Specified Transaction(s)” shall mean any other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas, and any other transaction
or agreement identified as a Specified Transaction under the Base Contract.

2.31.            "Spot Price " as referred to in Section 3.2 shall mean the price listed in the publication indicated on the Base Contract, under the listing applicable to the geographic location
closest in proximity to the Delivery Point(s) for the relevant Day; provided, if there is no single price published for such location for such Day, but there is published a range of prices, then the Spot Price shall be the average of such high and low prices.  If no price or range of prices is published for such Day, then the Spot Price shall be the average of the following: (i) the price (determined as stated above) for the first Day for which a price or range of prices is published that next
precedes the relevant Day; and (ii) the price (determined as stated above) for the first Day for which a price or range of prices is published that next follows the relevant Day.

2.32.            "Transaction Confirmation" shall mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant to Section 1 for a particular Delivery
Period.

2.33.            “Transactional Cross Default” shall mean if selected on the Base Contract by the parties with respect to a party, that it shall be in default, however therein defined,
under any Specified Transaction.

2.34.            “Termination Option” shall mean the option of either party to terminate a transaction in the event that the other party fails to perform a Firm obligation to deliver
Gas in the case of Seller or to receive Gas in the case of Buyer for a designated number of days during a period as specified on the applicable Transaction Confirmation.

2.35.            "Transporter(s)" shall mean all Gas gathering or pipeline companies, or local distribution companies,
acting in the capacity of a transporter, transporting Gas for Seller or Buyer upstream or downstream, respectively, of the Delivery Point pursuant to a particular transaction.

SECTION 3.    PERFORMANCE OBLIGATION

3.1.              Seller agrees to sell and deliver, and Buyer agrees to receive and purchase, the Contract Quantity for a particular transaction in accordance with the terms of the Contract.  Sales
and purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction.

The parties have selected either the “Cover Standard” or the “Spot Price Standard” as indicated on the Base Contract.

Cover Standard:

3.2.              The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event
of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the positive difference, if any, between the purchase price paid by Buyer utilizing the Cover Standard and the Contract Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s) excluding any quantity for which no replacement is available; or (ii) in
the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the positive difference, if any, between the Contract Price and the price received by Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually taken by Buyer for such Day(s) excluding any quantity for which no sale is available;
and (iii) in the event that Buyer has used commercially reasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such replacement or sale is available for all or any portion of the Contract Quantity of Gas, then in addition to (i) or (ii) above, as applicable, the sole and exclusive remedy of the performing party with respect to the Gas not replaced or sold shall be an amount equal to any unfavorable difference between the Contract Price
and the Spot Price, adjusted for such transportation to the applicable Delivery Point, multiplied by the quantity of such Gas not replaced or sold.  Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3.  The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party’s invoice, which shall set forth the basis upon
which such amount was calculated.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

 

Page 5 of 23

 

 

Spot Price Standard:

3.2.           The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference
between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained
by subtracting the applicable Spot Price from the Contract Price.  Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3.  The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party’s invoice, which shall set forth the basis upon which such amount was calculated.

3.3.              Notwithstanding Section 3.2, the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by both parties.

3.4.              In addition to Sections 3.2 and 3.3, the parties may provide for a Termination Option in a Transaction Confirmation executed in writing by both parties.  The
Transaction Confirmation containing the Termination Option will designate the length of nonperformance triggering the Termination Option and the procedures for exercise thereof, how damages for nonperformance will be compensated, and how liquidation costs will be calculated.

SECTION 4.    TRANSPORTATION, NOMINATIONS, AND IMBALANCES

4.1.              Seller shall have the sole responsibility for transporting the Gas to the Delivery Point(s).  Buyer shall have the sole responsibility for transporting the
Gas from the Delivery Point(s).

4.2.              The parties shall coordinate their nomination activities, giving sufficient time to meet the deadlines of the affected Transporter(s).  Each party shall give
the other party timely prior Notice, sufficient to meet the requirements of all Transporter(s) involved in the transaction, of the quantities of Gas to be delivered and purchased each Day.  Should either party become aware that actual deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas, such party shall promptly notify the other party.

4.3.              The parties shall use commercially reasonable efforts to avoid imposition of any Imbalance Charges.  If Buyer or Seller receives an invoice from a Transporter
that includes Imbalance Charges, the parties shall determine the validity as well as the cause of such Imbalance Charges.  If the Imbalance Charges were incurred as a result of Buyer’s receipt of quantities of Gas greater than or less than the Scheduled Gas, then Buyer shall pay for such Imbalance Charges or reimburse Seller for such Imbalance Charges paid by Seller.  If the Imbalance Charges were incurred as a result of Seller’s delivery of quantities of Gas greater than or less
than the Scheduled Gas, then Seller shall pay for such Imbalance Charges or reimburse Buyer for such Imbalance Charges paid by Buyer.

SECTION 5.    QUALITY AND MEASUREMENT

All Gas delivered by Seller shall meet the pressure, quality and heat content requirements of the Receiving Transporter.  The unit of quantity measurement for purposes of this Contract shall be one MMBtu dry.  Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving
Transporter.

SECTION 6.    TAXES

The parties have selected either “Buyer Pays At and After Delivery Point” or “Seller Pays Before and At Delivery Point” as indicated on the Base Contract.

Buyer Pays At and After Delivery Point:

Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery Point(s).  Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at the Delivery Point(s) and all Taxes
after the Delivery Point(s).  If a party is required to remit or pay Taxes that are the other party’s responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes.  Any party entitled to an exemption from any such Taxes or charges shall furnish the other party any necessary documentation thereof.

Seller Pays Before and At Delivery Point:

Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery Point(s) and all Taxes at the Delivery Point(s).  Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas
after the Delivery Point(s).  If a party is required to remit or pay Taxes that are the other party’s responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes.  Any party entitled to an exemption from any such Taxes or charges shall furnish the other party any necessary documentation thereof.

SECTION 7.     BILLING, PAYMENT, AND AUDIT

7.1.              Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for any other applicable charges, providing supporting documentation acceptable in
industry practice to support the amount charged.  If the actual quantity delivered is not known by the billing date, billing will be prepared based on the quantity of Scheduled Gas.  The invoiced quantity will then be adjusted to the actual quantity on the following Month's billing or as soon thereafter as actual delivery information is available.

 

	
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7.2.              Buyer shall remit the amount due under Section 7.1 in the manner specified in the Base Contract, in immediately available funds, on or before the later of the Payment
Date or 10 Days after receipt of the invoice by Buyer; provided that if the Payment Date is not a Business Day, payment is due on the next Business Day following that date.  In the event any payments are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2.

7.3.              In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the nonperforming party for an accelerated payment setting
forth the basis upon which the invoiced amount was calculated.  Payment from the nonperforming party will be due five Business Days after receipt of invoice.

7.4.              If the invoiced party, in good faith, disputes the amount of any such invoice or any part thereof, such invoiced party will pay such amount as it concedes to be correct;
provided, however, if the invoiced party disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay.  In the event the parties are unable to resolve such dispute, either party may pursue any remedy available at law or in equity to enforce its rights pursuant to this Section.

7.5.              If the invoiced party fails to remit the full amount payable when due, interest on the unpaid portion shall accrue from the date due until the date of payment at a rate
equal to the lower of (i) the then-effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate.

7.6.              A party shall have the right, at its own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of the relevant portion of
the books, records, and telephone recordings of the other party only to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under the Contract.  This right to examine, audit, and to obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Contract.  All invoices and billings shall be conclusively presumed final and accurate and all associated claims for under- or overpayments
shall be deemed waived unless such invoices or billings are objected to in writing, with adequate explanation and/or documentation, within two years after the Month of Gas delivery.  All retroactive adjustments under Section 7 shall be paid in full by the party owing payment within 30 Days of Notice and substantiation of such inaccuracy.

7.7.              Unless the parties have elected on the Base Contract not to make this Section 7.7 applicable to this Contract, the parties shall net all undisputed amounts due and owing,
and/or past due, arising under the Contract such that the party owing the greater amount shall make a single payment of the net amount to the other party in accordance with Section 7; provided that no payment required to be made pursuant to the terms of any Credit Support Obligation or pursuant to Section 7.3 shall be subject to netting under this Section.  If the parties have executed a separate netting agreement, the terms and conditions therein shall prevail to the extent inconsistent herewith.

SECTION 8.      TITLE, WARRANTY, AND INDEMNITY

8.1.              Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the Delivery Point(s).  Seller shall have responsibility for and assume
any liability with respect to the Gas prior to its delivery to Buyer at the specified Delivery Point(s).  Buyer shall have responsibility for and assume any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s).

8.2.              Seller warrants that it will have the right to convey and will transfer good and merchantable title to all Gas sold hereunder and delivered by it to Buyer, free and clear
of all liens, encumbrances, and claims.  EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 15.8, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE DISCLAIMED.

8.3.              Seller agrees to indemnify Buyer and save it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from
any and all persons, arising from or out of claims of title, personal injury (including death) or property damage from said Gas or other charges thereon which attach before title passes to Buyer.  Buyer agrees to indemnify Seller and save it harmless from all Claims, from any and all persons, arising from or out of claims regarding payment, personal injury (including death) or property damage from said Gas or other charges thereon which attach after title passes to Buyer.

8.4.              The parties agree that the delivery of and the transfer of title to all Gas under this Contract shall take place within the Customs Territory of the United States (as
defined in general note 2 of the Harmonized Tariff Schedule of the United States 19 U.S.C. §1202, General Notes, page 3);  provided, however, that in the event Seller took title to the Gas outside the Customs Territory of the United States, Seller represents and warrants that it is the importer of record for all Gas entered and delivered into the United States, and shall be responsible for entry and entry summary filings as well as the payment of duties, taxes and fees, if any, and all applicable
record keeping requirements.

8.5.              Notwithstanding the other provisions of this Section 8, as between Seller and Buyer, Seller will be liable for all Claims to the extent that such arise from the failure
of Gas delivered by Seller to meet the quality requirements of Section 5.

SECTION 9.     NOTICES

9.1.              All Transaction Confirmations, invoices, payment instructions, and other communications made pursuant to the Base Contract ("Notices") shall be made to the addresses
specified in writing by the respective parties from time to time.

9.2.              All Notices required hereunder shall be in writing and may be sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service,
first class mail or hand delivered.

9.3.              Notice shall be given when received on a Business Day by the addressee.  In the absence of proof of the actual receipt date, the following presumptions will
apply.  Notices sent by facsimile shall be deemed to have been received upon the sending party's receipt of its facsimile machine's confirmation of successful transmission.  If the day on which such facsimile is received is not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day.  Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after
it was sent or such earlier time as is confirmed by the receiving party.  Notice via first class mail shall be considered delivered five Business Days after mailing.

 

	
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9.4.              The party receiving a commercially acceptable Notice of change in payment instructions or other payment information shall not be obligated to implement such change until
ten Business Days after receipt of such Notice.

SECTION 10.  FINANCIAL RESPONSIBILITY

10.1.           If either party (“X”) has reasonable grounds for insecurity regarding the performance of any obligation under this Contract (whether or not then due) by the other party (“Y”)
(including, without limitation, the occurrence of a material change in the creditworthiness of Y or its Guarantor, if applicable), X may demand Adequate Assurance of Performance.  “Adequate Assurance of Performance” shall mean sufficient security in the form, amount, for a term, and from an issuer, all as reasonably acceptable to X, including, but not limited to cash, a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty.  Y hereby grants
to X a continuing first priority security interest in, lien on, and right of setoff against all Adequate Assurance of Performance in the form of cash transferred by Y to X pursuant to this Section 10.1.  Upon the return by X to Y of such Adequate Assurance of Performance, the security interest and lien granted hereunder on that Adequate Assurance of Performance shall be released automatically and, to the extent possible, without any further action by either party.

10.2.            In the event (each an "Event of Default") either party (the "Defaulting Party") or its Guarantor shall: (i) make an assignment or any general arrangement for the benefit of creditors;
(ii) file a petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (iii) otherwise become bankrupt or insolvent (however evidenced); (iv) be unable to pay its debts as they fall due; (v) have a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of
its assets; (vi) fail to perform any obligation to the other party with respect to any Credit Support Obligations relating to the Contract; (vii) fail to give Adequate Assurance of Performance under Section 10.1 within 48 hours but at least one  Business Day of a written request by the other party; (viii) not have paid any amount due the other party hereunder on or before the second Business Day following written Notice that such payment is due; or ix) be the affected party with respect to any Additional
Event of Default; then the other party (the "Non-Defaulting Party") shall have the right, at its sole election, to immediately withhold and/or suspend deliveries or payments upon Notice and/or to terminate and liquidate the transactions under the Contract, in the manner provided in Section 10.3, in addition to any and all other remedies available hereunder.

10.3.            If an Event of Default has occurred and is continuing, the Non-Defaulting Party shall have the right, by Notice to the Defaulting Party, to designate a Day, no earlier than the
Day such Notice is given and no later than 20 Days after such Notice is given, as an early termination date (the “Early Termination Date”) for the liquidation and termination pursuant to Section 10.3.1 of all transactions under the Contract, each a “Terminated Transaction”.  On the Early Termination Date, all transactions will terminate, other than those transactions, if any, that may not be liquidated and terminated under applicable law (“Excluded Transactions”),
which Excluded Transactions must be liquidated and terminated as soon thereafter as is legally permissible, and upon termination shall be a Terminated Transaction and be valued consistent with Section 10.3.1 below.  With respect to each Excluded Transaction, its actual termination date shall be the Early Termination Date for purposes of Section 10.3.1.

The parties have selected either “Early Termination Damages Apply” or “Early Termination Damages Do Not Apply” as indicated on the Base Contract.

Early Termination Damages Apply:

10.3.1.        As of the Early Termination Date, the Non-Defaulting Party shall determine, in good faith and in a commercially reasonable manner, (i) the amount owed (whether or not then due) by each party with respect
to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such deliveries and receipts (including without limitation any amounts owed under Section 3.2), for which payment has not yet been made by the party that owes such payment under this Contract and (ii) the Market Value, as defined below, of each Terminated Transaction.  The Non-Defaulting Party shall (x) liquidate
and accelerate each Terminated Transaction at its Market Value, so that each amount equal to the difference between such Market Value and the Contract Value, as defined below, of such Terminated Transaction(s) shall be due to the Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and to the Seller if the opposite is the case; and (y) where appropriate, discount each amount then due under clause (x) above to present value in a commercially reasonable manner as of the Early
Termination Date (to take account of the period between the date of liquidation and the date on which such amount would have otherwise been due pursuant to the relevant Terminated Transactions).

For purposes of this Section 10.3.1, “Contract Value” means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the Contract Price, and “Market Value” means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the market price for a similar
transaction at the Delivery Point determined by the Non-Defaulting Party in a commercially reasonable manner.  To ascertain the Market Value, the Non-Defaulting Party may consider, among other valuations, any or all of the settlement prices of NYMEX Gas futures contracts, quotations from leading dealers in energy swap contracts or physical gas trading markets, similar sales or purchases and any other bona fide third-party offers, all adjusted for the length of the term and differences in transportation
costs.  A party shall not be required to enter into a replacement transaction(s) in order to determine the Market Value.  Any extension(s) of the term of a transaction to which parties are not bound as of the Early Termination Date (including but not limited to “evergreen provisions”) shall not be considered in determining Contract Values and Market Values.  For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction
shall be considered in determining Contract Values and Market Values.  The rate of interest used in calculating net present value shall be determined by the Non-Defaulting Party in a commercially reasonable manner.

 

	
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Early Termination Damages Do Not Apply:

10.3.1.        As of the Early Termination Date, the Non-Defaulting Party shall determine, in good faith and in a commercially reasonable manner, the amount owed (whether or not then due) by each party with respect to all Gas delivered and received between the parties under Terminated Transactions
and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such deliveries and receipts (including without limitation any amounts owed under Section 3.2), for which payment has not yet been made by the party that owes such payment under this Contract.

The parties have selected either “Other Agreement Setoffs Apply” or “Other Agreement Setoffs Do Not Apply” as indicated on the Base Contract.

Other Agreement Setoffs Apply:

Bilateral Setoff Option:

10.3.2.        The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated
amount payable by one party to the other (the “Net Settlement Amount”).  At its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized to setoff any Net Settlement Amount against (i) any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; and  (ii) any amount(s) (including any excess cash margin or excess cash collateral) owed or held by the party that is entitled
to the Net Settlement Amount under any other agreement or arrangement between the parties.

Triangular Setoff Option:

10.3.2.        The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”).  At
its sole option, and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized to setoff (i) any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; (ii) any Net Settlement Amount against any amount(s) (including any excess cash margin or excess cash collateral) owed by or to a party under any other agreement or arrangement between the parties; (iii) any Net Settlement Amount owed
to the Non-Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Non-Defaulting Party or its Affiliates to the Defaulting Party under any other agreement or arrangement;  (iv) any Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Defaulting Party to the Non-Defaulting Party or its Affiliates under any other agreement or arrangement; and/or (v) any
Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Defaulting Party or its Affiliates to the Non-Defaulting Party under any other agreement or arrangement.

Other Agreement Setoffs Do Not Apply:

10.3.2.        The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”).  At
its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party may setoff any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract.

10.3.3.        If any obligation that is to be included in any netting, aggregation or setoff pursuant to Section 10.3.2 is unascertained, the Non-Defaulting Party may in good faith estimate that obligation and net,
aggregate or setoff, as applicable, in respect of the estimate, subject to the Non-Defaulting Party accounting to the Defaulting Party when the obligation is ascertained.  Any amount not then due which is included in any netting, aggregation or setoff pursuant to Section 10.3.2 shall be discounted to net present value in a commercially reasonable manner determined by the Non-Defaulting Party.

10.4.           As soon as practicable after a liquidation, Notice shall be given by the Non-Defaulting Party to the Defaulting Party of the Net Settlement Amount, and whether the Net Settlement Amount
is due to or due from the Non-Defaulting Party.  The Notice shall include a written statement explaining in reasonable detail the calculation of the Net Settlement Amount, provided that failure to give such Notice shall not affect the validity or enforceability of the liquidation or give rise to any claim by the Defaulting Party against the Non-Defaulting Party.  The Net Settlement Amount as well as any setoffs applied against such amount pursuant to Section 10.3.2, shall be paid by the close
of business on the second Business Day following such Notice, which date shall not be earlier than the Early Termination Date.  Interest on any unpaid portion of the Net Settlement Amount as adjusted by setoffs, shall accrue from the date due until the date of payment at a rate equal to the lower of (i) the then-effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate.

10.5.           The parties agree that the transactions hereunder constitute a "forward contract" within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each "forward contract
merchants" within the meaning of the United States Bankruptcy Code.

 

10.6.           The Non-Defaulting Party's remedies under this Section 10 are the sole and exclusive remedies of the Non-Defaulting Party with respect to the occurrence of any Early Termination Date.  Each
party reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or may be entitled to arising from the Contract.

 

	
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10.7.           With respect to this Section 10, if the parties have executed a separate netting agreement with close-out netting provisions, the terms and conditions therein shall prevail to the extent
inconsistent herewith.

SECTION 11.   FORCE MAJEURE

11.1.           Except with regard to a party's obligation to make payment(s) due under Section 7, Section 10.4, and Imbalance Charges under Section 4, neither party shall be liable to the other for failure
to perform a Firm obligation, to the extent such failure was caused by Force Majeure.  The term "Force Majeure" as employed herein means any cause not reasonably within the control of the party claiming suspension, as further defined in Section 11.2.

11.2.           Force Majeure shall include, but not be limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such
as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances,
riots, sabotage, insurrections or wars, or acts of terror; and (v) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction.  Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance.

11.3.           Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by any or all of the following circumstances: (i) the curtailment
of interruptible or secondary Firm transportation unless primary, in-path, Firm transportation is also curtailed; (ii) the party claiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations with reasonable dispatch; or (iii) economic hardship, to include, without limitation, Seller’s ability to sell Gas at a higher or more advantageous price than the Contract Price, Buyer’s ability to purchase Gas at a lower or more advantageous price than the
Contract Price, or a regulatory agency disallowing, in whole or in part, the pass through of costs resulting from this Contract; (iv) the loss of Buyer’s market(s) or Buyer’s inability to use or resell Gas purchased hereunder, except, in either case, as provided in Section 11.2; or (v) the loss or failure of Seller’s gas supply or depletion of reserves, except, in either case, as provided in Section 11.2.  The party claiming Force Majeure shall not be excused from its responsibility
for Imbalance Charges.

11.4.           Notwithstanding anything to the contrary herein, the parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the
party experiencing such disturbance.

11.5.          The party whose performance is prevented by Force Majeure must provide Notice to the other party.  Initial Notice may be given orally; however, written Notice with reasonably full
particulars of the event or occurrence is required as soon as reasonably possible.  Upon providing written Notice of Force Majeure to the other party, the affected party will be relieved of its obligation, from the onset of the Force Majeure event, to make or accept delivery of Gas, as applicable, to the extent and for the duration of Force Majeure, and neither party shall be deemed to have failed in such obligations to the other during such occurrence or event.

11.6.           Notwithstanding Sections 11.2 and 11.3, the parties may agree to alternative Force Majeure provisions in a Transaction Confirmation executed in writing by both parties.

SECTION 12.  TERM

This Contract may be terminated on 30 Day’s written Notice, but shall remain in effect until the expiration of the latest Delivery Period of any transaction(s).  The rights of either party pursuant to Section 7.6, Section 10, Section 13, the obligations to make payment hereunder, and the obligation of either party to indemnify
the other, pursuant hereto shall survive the termination of the Base Contract or any transaction.

SECTION 13.  LIMITATIONS

FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY.  A PARTY’S LIABILITY HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.  IF
NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, A PARTY’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY.  SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.  UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN
TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.  TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE,
OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

 

	
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SECTION 14.  MARKET DISRUPTION

If a Market Disruption Event has occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price for the Floating Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected
Day then the replacement price for the Floating Price shall be determined within the next two  following Business Days with each party obtaining, in good faith and from non-affiliated market participants in the relevant market, two quotes for prices of Gas for the affected Day of a similar quality and quantity in the geographical location closest in proximity to the Delivery Point and averaging the four quotes. If either party fails to provide two quotes then the average of the other party’s two
quotes shall determine the replacement price for the Floating Price.  "Floating Price" means the price or a factor of the price agreed to in the transaction as being based upon a specified index.  "Market Disruption Event" means, with respect to an index specified for a transaction, any of the following events: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of trading to commence or the permanent discontinuation
or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (e) both parties agree that a material change in the formula for or the method of determining the Floating Price has occurred. For the purposes of the calculation of a replacement price for the Floating Price, all numbers shall be rounded to three decimal places.  If
the fourth decimal number is five or greater, then the third decimal number shall be increased by one and if the fourth  decimal number is less than five, then the third  decimal number shall remain unchanged.

SECTION 15.   MISCELLANEOUS

15.1.           This Contract shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and the covenants, conditions,
rights and obligations of this Contract shall run for the full term of this Contract.  No assignment of this Contract, in whole or in part, will be made without the prior written consent of the non-assigning party (and shall not relieve the assigning party from liability hereunder), which consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with any financing
or other financial arrangements, or (ii) transfer its interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party.  Upon any such assignment, transfer and assumption, the transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations hereunder.

15.2.           If any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make unenforceable
any other provision, agreement or covenant of this Contract.

15.3.           No waiver of any breach of this Contract shall be held to be a waiver of any other or subsequent breach.

15.4.           This Contract sets forth all understandings between the parties respecting each transaction subject hereto, and any prior contracts, understandings and representations, whether oral or
written, relating to such transactions are merged into and superseded by this Contract and any effective transaction(s).  This Contract may be amended only by a writing executed by both parties.

15.5.           The interpretation and performance of this Contract shall be governed by the laws of the jurisdiction as indicated on the Base Contract, excluding, however, any conflict of laws rule
which would apply the law of another jurisdiction.

15.6.           This Contract and all provisions herein will be subject to all applicable and valid statutes, rules, orders and regulations of any governmental authority having jurisdiction over the
parties, their facilities, or Gas supply, this Contract or transaction or any provisions thereof.

15.7.           There is no third party beneficiary to this Contract.

15.8.           Each party to this Contract represents and warrants that it has full and complete authority to enter into and perform this Contract.  Each person who executes this Contract
on behalf of either party represents and warrants that it has full and complete authority to do so and that such party will be bound thereby.

15.9.           The headings and subheadings contained in this Contract are used solely for convenience and do not constitute a part of this Contract between the parties and shall not be used to construe
or interpret the provisions of this Contract.

15.10.         Unless the parties have elected on the Base Contract not to make this Section 15.10 applicable to this Contract, neither party shall disclose directly or indirectly without the prior written consent
of the other party the terms of any transaction to a third party (other than the employees, lenders, royalty owners, counsel, accountants and other agents of the party, or prospective purchasers of all or substantially all of a party’s assets or of any rights under this Contract, provided such persons shall have agreed to keep such terms confidential) except (i) in order to comply with any applicable law, order, regulation, or exchange rule, (ii) to the extent necessary for the enforcement of this Contract
, (iii) to the extent necessary to implement any transaction, (iv) to the extent necessary to comply with a regulatory agency’s reporting requirements including but not limited to gas cost recovery proceedings; or (v) to the extent such information is delivered to such third party for the sole purpose of calculating a published index.  Each party shall notify the other party of any proceeding of which it is aware which may result in disclosure of the terms of any transaction (other than as permitted
hereunder) and use reasonable efforts to prevent or limit the disclosure.  The existence of this Contract is not subject to this confidentiality obligation.  Subject to Section 13, the parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidentiality obligation.  The terms of any transaction hereunder shall be kept confidential by the parties hereto for one year from the expiration of the transaction.

In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclosure, and shall cooperate (consistent with the disclosing party’s legal obligations)
with the other party’s efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party.

 

	
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15.11.         The parties may agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties

15.12.         Any original executed Base Contract, Transaction Confirmation or other related document may be digitally copied, photocopied, or stored on computer tapes and disks (the “Imaged Agreement”).
The Imaged Agreement, if introduced as evidence on paper, the Transaction Confirmation, if introduced as evidence in automated facsimile form, the recording, if introduced as evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings will be admissible as between the parties to the same extent and under the same
conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the recording, the Transaction Confirmation, or the Imaged Agreement on the basis that such were not originated or maintained in documentary form. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence.

 

 

 

	DISCLAIMER:  The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of purchase and sale of natural gas.  Further, NAESB does not mandate the
use of this Contract by any party.  NAESB DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT
NAESB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING.  EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT.

 

 

	
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NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

  

Page 12 of 23

  

 

	  	
TRANSACTION CONFIRMATION
	
EXHIBIT A

	  	
FOR IMMEDIATE DELIVERY
	  

 

	
 

Letterhead/Logo

 
	  	  	
 

Date: ____________, ____

Transaction Confirmation #: _________

 

	
 

This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated  May 12, 2009.  The terms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract.

	
 

SELLER:

ConocoPhillips Company/ ConocoPhillips Alaska, Inc.           

______________________________________________

______________________________________________

Attn:   Von Hutchins                                                                      

Phone:    (907) 265-1605­­­                                                                 

Fax:         (918) 662-6889                                                                  

Base Contract No.   CEA 2009-01                                                 

Transporter: __­­­­­­­­­­­­­­­­­­­­­­__________________________________

Transporter Contract Number: _______________________
	
 

BUYER:

  Chugach Electric Association, Inc.                                             

_______________________________________________

_______________________________________________

Attn: _ Suzanne Gibson,
Director, Energy Resources_______

Phone: _(907) 762-4577                               

Fax: _(907) 762-4816                                        

Base Contract No. ________________________________

Transporter: _____________________________________

Transporter Contract Number: _______________________

 

	
 

Contract Price:  $                                  /Mcf or                                                         

	
 

Delivery Period:  Begin:                        ,                                         End:             ,               
 

	
 

Performance Obligation and Contract Quantity:  (Select One)

 

	
Firm (Fixed Quantity):

                MMcf/day

o EFP

 
	
Firm (Variable Quantity):

      0     MMcf/day Minimum

              MMcf/day Maximum

subject to Section 4.2. at election of

o Buyer or o Seller
	
Interruptible:

Up to              MMcf/day

 

	
 

Delivery Point(s):    See Section 16 of Base Agreement for conditions regarding delivery

(If a pooling point is used, list a specific geographic and pipeline location):

	
 

Special Conditions:

 

	
 

Seller: __________________________________________

 

By: ____________________________________________

 

Title: ___________________________________________

 

Date: __________________________________________

 
	
 

Buyer:  __________________________________________

 

By: ____________________________________________

 

Title: ___________________________________________

 

Date: __________________________________________

 

	
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NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

  

Page 13 of 23

  

 

Special Provisions Addendum

 

 

SECTION 16.  SPECIAL PROVISIONS

16.1.         Supplemental Definitions

 

	
  
	
·
	
2.36.  “Firm Gas Supply Tranche” shall mean the total volume of Gas equal to 100% of the Gas volumes utilized at the Bernice Lake Power Plant, the Nikiski Power Plant and the International Power Plant, 40% of the Gas volumes utilized at the Beluga Power Plant, and 40% of the Buyer’s share of the Southcentral Power Plant excluding any Gas utilized to generate economy energy sales at any or
all of those facilities, up to a limit of 50 MMcf/day measured on an hourly basis at the Delivery Points which Buyer uses to serve Buyer’s retail customers and contracts with Matanuska Electric Association, Homer Electric Association and City of Seward.

	
  
	
·
	
2.37. “Delivery Start Date” shall mean, at Buyer's election, either January 1, 2010, or the date that Marathon’s current volumetric obligation to Buyer is exhausted, which is currently expected to occur sometime during the 2nd or 3rd quarter of
2010.

	
  
	
·
	
2.38 “Firm Fixed Quantity” shall mean the base portion of the Firm Gas Supply Tranche, measured on an hourly basis, that is demarcated based on the annually derived methodology described in Attachment 1.

	
  
	
·
	
2.39 “Firm Variable Quantity” shall mean the secondary portion of the Firm Gas Supply Tranche after subtracting the Firm Fixed Quantity at any point in time.  There is no minimum take requirement for the Firm Variable Quantity, but Buyer shall not purchase any portion of the Firm Variable Quantity from another supplier absent a reduction in the Firm Variable Quantity in accordance with the procedure
described in this section or Seller's failure to deliver such Gas volumes.  During periods in which Seller is still authorized to export LNG and the Nikiski LNG Plant is actively exporting LNG, Buyer may, with 120 days' advance Notice (or on shorter notice if the Parties so agree), reduce the Firm Variable Quantity to as low as zero, or subsequently reinstate any portion of such reduced quantity.  If Seller ceases to be authorized to export LNG or the Nikiski LNG Plant is no longer actively
exporting LNG, as described in Section 16.3(g), during the term of the Base Contract, then Buyer must, within 30 days' Notice from Seller, make a one-time election on a fixed maximum level for Firm Fixed Quantity plus Firm Variable Quantity (not to exceed 50 MMcf/day), which maximum will remain in effect until December 31, 2013.

	
  
	
·
	
2.40 “Interruptible Gas Supply” shall have the meaning set forth in Section 16.3(f).

16.2.        Modifications to the Base Contract

	
  
	
·
	
Section 1.4 is deleted.

	
  
	
·
	
Section 2.31 is deleted.

	
  
	
·
	
Section 2.34 is deleted.

	
  
	
·
	
Section 3.2 is deleted and replaced as follows:

Except as provided in the final sentence of this Paragraph, Buyer's sole remedy for Seller's failure to deliver Gas that Seller is obligated to deliver under this Contract is the cost actually incurred by Buyer utilizing the Cover Standard to purchase and transport the amount of Gas (or, if Gas is not reasonably available, electric power)
necessary to cover the shortage in excess of the cost that would have been incurred by Buyer if Buyer had purchased that Gas under this Contract.  Except as provided in the final sentence of this Paragraph, Seller's sole remedy for Buyer's failure to take Gas that Buyer is obligated to take under this Contract is the difference between the amount that Buyer would have paid for the Gas not taken and the amount, if any, received by Seller utilizing the Cover Standard in a contemporaneous replacement sale
of the Gas to a third party.  Imbalance Charges shall not be recovered under this provision but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3.  The amount of such unfavorable difference shall be payable fifteen (15) Business Days after presentation of the performing party’s invoice, which shall set forth the basis upon which such amount was calculated.  Nothing in this Agreement will restrict a Party from seeking the remedy
of specific performance with respect to a breach of this Agreement.

	
  
	
·
	
Section 11.3 items (iv) and (v) are to be moved, in their entirety, into Section 11.2, and added into the first sentence as items (vi) and (vii), but, in each case, with the deletion of the phrase “except, in either case, as provided in Section 11.2”.

	
  
	
·
	
A new item (viii) is inserted into the first sentence in Section 11.2, as follows: “(viii) volcanic eruptions, which necessitate the preventative shutdown of equipment or machinery.”

	
  
	
·
	
Section 12, first phrase, is deleted and replaced as follows: “This Contract will terminate on December 31, 2016.”

	
  
	
·
	
The following new paragraph shall be added as Section 15.13:

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

  

Page 14 of 23

  

 

15.13  Approval of this Contract by the Regulatory Commission of Alaska (RCA) is a condition precedent for the effectiveness of this Contract.  Such approval means a final order of the RCA, without conditions or modifications unacceptable to the Parties, or either of them.  Approval will be deemed to have
occurred on the date that a RCA order approving the Contract without conditions or modifications unacceptable to the Parties becomes final.

 

	
16.3.
	
Subject to the terms and conditions of this Contract, Seller shall deliver and sell, and Buyer shall receive and pay for the Contract Quantity composed of the Firm Gas Supply Tranche and Interruptible Gas Supply, as described and limited below.

	
  
	
a)
	
Transaction Confirmations for Firm Fixed Quantities, Firm Variable Quantities, and Interruptible Gas Supply will be established and updated as necessary, but not less than on a quarterly basis, starting at the Delivery Start Date and continuing until December 31, 2016, according to the principles specified within this Special Provisions Addendum, unless mutually agreed otherwise.

	
  
	
b)
	
New Transaction Confirmations will be agreed per the procedures outlined in Section 1.2 at such times that delivery circumstances necessitate such action.  At a minimum, changes in price will require new Transaction Confirmations on a quarterly basis.   Additional changes that are currently contemplated include but are not limited to annual changes to the Firm Fixed Quantity and the maximum
Firm Variable Quantity.  If Buyer exercises the right described in Section 16.1 above to increase or decrease the maximum Firm Variable Quantity, then a new Transaction Confirmation will also be required.

	
  
	
c)
	
The derivation of the annual determination of the maximum Firm Fixed Quantity is set forth in Attachment 1.

	
  
	
d)
	
The methodologies to be used to determine prices for Firm Fixed Quantities and Firm Variable Quantities in the Transaction Confirmations are outlined in Attachment 2.

	
  
	
e)
	
The details governing Delivery Points and daily nomination procedures are outlined in Sections 16.4 and 16.5.

	
  
	
f)
	
“Interruptible Gas Supply” shall mean that quantity of Gas required by Buyer, and provided by Seller, in excess of the Firm Gas Supply Tranche pursuant to an interruptible Transaction Confirmation under the following conditions.  To the extent Buyer has gas supply needs that are in excess of the then applicable Firm Variable Quantity, Seller shall use commercially reasonable efforts to make such
interruptible volumes available to Buyer from Seller’s field production.  Seller agrees that such commercially reasonable efforts will include curtailing the delivery of Gas to the Nikiski LNG Plant to the extent necessary to meet these unmet needs of Buyer provided, however, that Seller will not be obligated to curtail deliveries to the Nikiski LNG Plant if the curtailment will result in any material operational difficulties or technical harm to the Nikiski LNG Plant.  During periods
in which Seller is still authorized to export LNG and is actively exporting LNG, the price for these interruptible volumes of Gas shall be the Firm Variable Price set forth in Attachment 2; at all other times the price will be negotiated at the time the Interruptible Transaction Confirmation is made and shall not exceed two hundred percent (200%) of the Firm Fixed Price set forth in Attachment 2.

	
  
	
g)
	
For purposes of this Section 16.3 and the definition of Firm Variable Quantity, “Nikiski LNG Plant is actively exporting LNG” shall mean that Seller has not provided Buyer with 90 days written Notice that the Nikiski LNG Plant is being shutdown for the remainder of the term of this Contract and that the US Department of Energy has been informed
of such shutdown.

	
16.4.
	
Buyer will nominate to Seller in writing via electronic means at least 12 hours in advance of the next calendar day the hourly volumes of Gas by power plant location that Buyer desires for that entire calendar day.  Subject to Section 16.5, Seller retains the right to select the Delivery Point(s), but Seller shall use commercially reasonable efforts to deliver Gas to Buyer at the Delivery Points in the order
of preference listed in Attachment 3 to meet the Buyer’s nomination request.  Seller's nomination confirmation or alternative response shall be sent to Buyer in writing via electronic means at least 9 hours in advance of the relevant calendar day.  Should the timing of the nominations in this Section 16.4 no longer meet the timing requirements of Transporter(s), then Buyer and Seller will work together to adjust the nomination timing.

	
16.5.
	
It is Buyer’s responsibility to secure the necessary transportation for the Gas downstream of the Delivery Point(s).  The costs associated with transporting nominated Gas downstream of the Delivery Point(s) into regulated pipelines shall be borne by the Buyer.  In order to minimize Buyer’s transportation costs, Buyer and Seller commit to do the following:

	
  
	
a)
	
Buyer and Seller will meet periodically to forecast Firm Gas Supply Tranche requirements by facility and jointly formulate plans for transporting the required volumes of Gas in a cost effective manner.

	
  
	
b)
	
Buyer and Seller shall within 90 days following the execution of this Contract work cooperatively, reasonably, and in good faith to:  (1) determine if: (a) a direct connection from the Nikiski LNG Plant to the Nikiski power plant can be established, and (b) a capacity expansion from the Beluga River Unit (BRU) to the Beluga Power Plant is warranted, and (2) work to secure gas exchange opportunities that will
reduce the cost of transportation to be borne by the Buyer.  Seller shall have no obligation to expend funds in connection with these items.

	
  
	
c)
	
Seller shall make available to Buyer for delivery from BRU to the Beluga Power Plant the quantity of BRU Gas determined by the following equation: BRU gas takes by BRU owners other than Seller times 50%, less any reduction in Seller's BRU gas take rights resulting from Seller's overlift position and less quantities delivered to Buyer under the agreement listed as (2) in Attachment 4, up to 40% of the Gas requirements
at the Beluga Power Plant, excluding any Gas utilized to generate economy energy sales.  Seller shall have the option of transporting Gas for delivery at Seller’s expense to the Beluga Power Plant to satisfy its obligations in the preceding sentence unless such option adversely affects Buyer’s transportation options or operation of the Beluga Power Plant in Buyer’s sole discretion.  In addition, any Gas production from the BRU to be sold by Seller during the term of this
Contract will first be made available to Buyer under this Contract.  For purposes of interpretation of this Section 16.5 (c), if Seller’s working interest in BRU changes, then the percentage in the equation in the first sentence shall be modified to maintain Buyer’s quantity of BRU Gas from the Seller’s working interest share of BRU field production.

 

	
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All Rights Reserved
	
September 5, 2006

 

  

Page 15 of 23

  

	
  
	
d)
	
Seller shall give Buyer first priority for all Gas delivered through the Nikiski LNG Plant Connection (ENSTAR/APC Metering Station K277).

	
16.6.
	
To verify Seller's compliance with its obligations under 16.5(c), an independent third party, selected by Buyer and reasonably acceptable to Seller, may perform an audit in accordance with Section 7.6, subject to reasonable confidentiality terms, and report the audit findings to Buyer and Seller.  To verify the Gas requirements at the Beluga Power Plant, excluding any Gas utilized to generate economy energy
sales, for purposes of Section 16.5(c), and to verify the Gas quantities utilized at the power plants to be served by the Firm Gas Supply Tranche, excluding any Gas utilized to generate economy energy sales, an independent third party, selected by Seller and reasonably acceptable to Buyer, may perform an audit in accordance with Section 7.6, subject to reasonable confidentiality terms, and report the audit findings to Buyer and Seller.

 

	
16.7
	
Seller will be responsible for the payment of all royalties, and any fees, penalties and assessments attributable to the royalties, on Gas delivered under this Contract provided that the Alaska Department of Natural Resources agrees that the price paid under this Contract is the value of the State of Alaska's royalty share of production under AS 38.05.180 (aa) (with the exception of production covered by a royalty settlement
agreement).  The parties will work together to obtain acceptance by the Alaska Department of Natural Resources of the price paid under this Contract as the value of the State of Alaska's royalty share of production under AS 38.05.180(aa) (with the exception of production covered by a royalty settlement agreement) within 90 days of the effective date of this Contract.  If the parties are not successful in obtaining such acceptance, Buyer will reimburse Seller for any royalty payments which
exceed the royalty payments that would be payable, for Gas not covered by a royalty settlement agreement, if the price paid under this Contract was equal to the value of the State of Alaska's royalty share of such production as determined by the Alaska Department of Natural Resources.

 

16.8         Price Risk Management Alternative

At any time 90 days prior to noon Central Time on the last day of NYMEX trading in futures contracts for a Month, Buyer may request Seller’s trading desk in Houston, TX to quote a “Fixed Price” to apply to Gas to be delivered during such Month, pursuant to this transaction.  A Fixed Price means a fixed price per
MMBtu, a fixed price plus or minus a floating basis, or a floating price plus or minus a fixed basis.  Buyer may elect to lock the price of any quantity, so long as quantity does not exceed the Firm Fixed Quantity, and for any term up to December 31, 2016, for which price is to be locked.  Seller has the right to choose a single basis location from the Firm Fixed Quantity Price basket described in Attachment 2 which will then become the basis for that entire portion of the Fixed Price volumes.   For
billing purposes, Gas for which the price has been fixed will be considered first Gas through the meter.  Any other volume of Gas delivered to and received by Buyer for which the price is not fixed, will be priced in accordance with Attachment 2.  The parties’ agreement to a Fixed Price will be confirmed in the procedure described in Section 1.2 of this Agreement.

If a Fixed Price is agreed to earlier than three Business Days prior to the close of NYMEX trading in futures contracts for the Month of flow, then notwithstanding Section 11 of this Agreement, in the event either party is unable due to Force Majeure from delivering or receiving any quantity of Gas subject to a Fixed Price, the following
settlement shall be applicable: (i) if the Index Price exceeds the applicable Fixed Price, Seller shall pay Buyer for each MMBtu of Gas not delivered or received, an amount equal to the difference between the Index Price and the Fixed Price, and (ii) if the applicable Fixed Price exceeds the Index Price, Buyer shall pay Seller for each MMBtu of Gas not delivered or received an amount equal to the difference between the Fixed Price and the Index Price.

For the purposes of this Section 16.8, “Index Price” means the first of the month index price published by Platts Inside FERC Gas Market Report that most accurately reflects the market value of the gas for the Delivery Point on which the Fixed Price was based as indicated on the Transaction Confirmation at the time the Fixed Price
is fixed.  1 MMBtu = 1 Mcf.

	
16.9
	
Reserves Certification

Seller must demonstrate that Seller has sufficient proven and risked probable reserves to fulfill its commitments under this Contract.  Within 30 days following execution of the Contract and on or before December 15th prior to the commencement of each
Contract Year, Seller will provide to Buyer a written determination of Seller’s remaining reserve commitments during the Term under (i) Seller’s commitments to third parties, (ii) this Contract, and (iii) any subsequent Gas sale agreements, along with a statement that proven and/or risked probable reserves are sufficient to cover all such commitments.  Upon reasonable request by Buyer, Seller will make such data and information (and reasonable access to relevant personnel of Seller) as may
be reasonably necessary for Buyer to evaluate the written determination of Seller's proven and risked probable reserves. Buyer will take all reasonable steps to preserve the confidentiality of the data received from Seller under this Section 16.9.

 

	
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NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

  

Page 16 of 23

  

	
16.10
	
Additional Firm Fixed Quantities

For calendar years 2014 through 2016, Seller shall deliver and sell, and Buyer shall receive and pay for a new “2.36 Firm Gas Supply Tranche” composed of the Firm Fixed Quantities described and limited below:

	
  
	
a)
	
Calendar year: 2014 - 25 MMscf/day, 2015 – 17 MMscf/day, 2016 – 8 MMscf/day.

	
  
	
b)
	
All volumes delivered under these Transaction Confirmations shall be deemed to be the first volumes received by Buyer.

	
  
	
c)
	
Pricing shall be in accordance with Attachment 2.

	
  
	
d)
	
All other provisions of this Contract apply.

	
16.11
	
New Taxes

Notwithstanding anything in Section 6 to the contrary and after March 31, 2013, Buyer will reimburse Seller for any Production Taxes (as defined and set by AS 43.55.011, as amended, replaced, or supplemented from time to time) or other new taxes attributable to the operations and transactions contemplated by this Contract in excess of $0.25
per Mcf of Gas.

	
16.12
	
Arbitration

 

Any dispute arising, in whole or in part, with respect to billing or Contract Price and not otherwise resolved by the Parties will be settled by arbitration in accordance with the CPR Rules for Non-Administered Arbitration then currently in effect ("CPR Rules") of the International Institute for Conflict Prevention & Resolution,
and judgment on the award rendered by the arbitrator(s) may be entered and enforced in any court of competent jurisdiction.  Any provisions available within the CPR Rules to expedite the proceeding will apply to the proceeding unless otherwise agreed by the Parties.

 

	
  
	
16.13
	
Court

 

Except as provided in Section 16.12, all disputes arising under this Agreement not otherwise resolved by the Parties will be resolved in the state courts of Alaska in Anchorage, Alaska.  Each Party, to the extent permitted by law, knowingly, voluntarily, and intentionally waives its right to a trial by jury in any action or
other legal proceeding arising out of or relating to this Agreement and the transactions it contemplates.  This waiver applies to any action or legal proceeding, whether sounding in contract, tort, or otherwise.

 

16.14      Commitment Regarding Beluga Power Plant

 

Seller and Buyer affirmatively commit to work together in good faith to create a commercially reasonable backup mechanism that will ensure a controlled shutdown of the Beluga Power Plant in the event of a loss of gas from the Beluga River Unit that interrupts the gas supply to the Beluga Power Plant.  Such a backup mechanism may consist
of engineering design, operational facilities, commercial contracts and protocols that ensure the Beluga Power Plant will have sufficient gas supplies to effect a controlled shutdown.

16.15       Royalty in Kind

If the State of Alaska elects to take its royalty in kind, then Seller will have the right, in its sole discretion, to reduce Seller's gas delivery obligations under this Contract by notifying Buyer, within sixty (60) Days after Seller receives formal notice from the state that it intends to take its royalty in kind, of the quantities of
Gas that Seller is unable to commit to deliver as a consequence of the royalty gas diversion.  Seller's notice will include new Transaction Confirmations for the relevant period establishing adjusted Firm Fixed Quantities and Firm Variable Quantities.  Any reduction under this paragraph in Seller's Gas delivery obligations will be proportionate to all of Seller's local end-user delivery obligations from Cook Inlet production.

 

	
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NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

  

Page 17 of 23

  

 

Attachment 1

Derivation of the Annual Value for Maximum Firm Fixed Quantity

For all years of the Base Contract (CEA 2009-001), the maximum Firm Fixed Quantity for a given year shall be determined using the following methodology, with the possible exception of calendar year 2010, which possible modifications are described in the last paragraph below:

By not later than December 15th in any year in which Seller is required to make deliveries under this Contract in the following year, Buyer shall provide a schedule indicating the total daily Gas utilized by generation plant (exclusive of any Gas used to generate
economy energy) for January 1 through November 30 of that same year.  The total daily volume used at all of Buyer’s plants will be sorted to determine the lowest 30 days of total Gas usage for that year.  Once the low 30 days have been determined, volumes utilized at the Beluga Power Plant will be multiplied by 40%.  The result will be added to the Gas utilized at all other power plants to determine the total Gas used for that given day.  The simple average of the
low 30 days will then be multiplied by 1.15 to determine the annual value for maximum Firm Fixed Quantity, which value will have a minimum of 34.5 MMcf/day and a maximum of 36.5 MMcf/day.   An example of this calculation using 2008 data is provided as follows:

 

	
2008 Gas Volumes
	  	  	  	  	  	  	  	  	  	  
	
Total Daily Volumes Sorted Lowest to Highest
	  	  	
Average of lowest 30 days:
	
31,755
	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	
Actual

Day
	
Total

Volumes
	
Beluga
	
Nikiski
	
Bernice

Lake
	
IGT
	
40% of

Beluga
	
100% of

Nikiski
	
100% of

Bernice
	
100% of

IGT
	
Total COP

Tranche
	
Days

	
181
	
53,201
	
50,949
	
0
	
2,251
	
0
	
20,380
	
0
	
2,251
	
0
	
22,631
	
1

	
118
	
58,402
	
46,640
	
11,601
	
161
	
0
	
18,656
	
11,601
	
161
	
0
	
30,418
	
2

	
96
	
59,417
	
48,078
	
11,339
	
0
	
0
	
19,231
	
11,339
	
0
	
0
	
30,570
	
3

	
104
	
59,428
	
47,558
	
11,871
	
0
	
0
	
19,023
	
11,871
	
0
	
0
	
30,894
	
4

	
103
	
59,736
	
47,551
	
12,045
	
140
	
0
	
19,020
	
12,045
	
140
	
0
	
31,205
	
5

	
180
	
59,746
	
53,575
	
2,316
	
3,856
	
0
	
21,430
	
2,316
	
3,856
	
0
	
27,601
	
6

	
168
	
59,837
	
43,556
	
11,223
	
5,058
	
0
	
17,422
	
11,223
	
5,058
	
0
	
33,703
	
7

	
105
	
60,198
	
48,040
	
11,987
	
172
	
0
	
19,216
	
11,987
	
172
	
0
	
31,374
	
8

	
97
	
60,573
	
49,352
	
10,813
	
408
	
0
	
19,741
	
10,813
	
408
	
0
	
30,962
	
9

	
131
	
60,620
	
46,997
	
11,424
	
2,199
	
0
	
18,799
	
11,424
	
2,199
	
0
	
32,422
	
10

	
169
	
60,857
	
41,737
	
11,214
	
6,939
	
967
	
16,695
	
11,214
	
6,939
	
967
	
35,815
	
11

	
186
	
60,909
	
53,101
	
2,272
	
5,536
	
0
	
21,241
	
2,272
	
5,536
	
0
	
29,049
	
12

	
106
	
61,038
	
48,969
	
12,069
	
0
	
0
	
19,588
	
12,069
	
0
	
0
	
31,656
	
13

	
119
	
61,071
	
49,459
	
11,613
	
0
	
0
	
19,783
	
11,613
	
0
	
0
	
31,396
	
14

	
132
	
61,198
	
46,841
	
11,424
	
2,932
	
0
	
18,736
	
11,424
	
2,932
	
0
	
33,093
	
15

	
102
	
61,252
	
49,207
	
12,045
	
0
	
0
	
19,683
	
12,045
	
0
	
0
	
31,728
	
16

	
159
	
61,704
	
48,870
	
11,223
	
1,610
	
0
	
19,548
	
11,223
	
1,610
	
0
	
32,382
	
17

	
90
	
61,843
	
49,887
	
11,957
	
0
	
0
	
19,955
	
11,957
	
0
	
0
	
31,911
	
18

	
117
	
61,863
	
50,479
	
11,385
	
0
	
0
	
20,191
	
11,385
	
0
	
0
	
31,576
	
19

	
120
	
61,895
	
50,282
	
11,613
	
0
	
0
	
20,113
	
11,613
	
0
	
0
	
31,725
	
20

	
110
	
61,973
	
50,556
	
11,418
	
0
	
0
	
20,222
	
11,418
	
0
	
0
	
31,640
	
21

	
166
	
63,001
	
50,396
	
11,223
	
1,383
	
0
	
20,158
	
11,223
	
1,383
	
0
	
32,764
	
22

	
174
	
63,177
	
50,350
	
10,935
	
1,891
	
0
	
20,140
	
10,935
	
1,891
	
0
	
32,967
	
23

	
141
	
63,266
	
47,210
	
11,333
	
4,723
	
0
	
18,884
	
11,333
	
4,723
	
0
	
34,940
	
24

	
171
	
63,272
	
49,354
	
10,920
	
2,999
	
0
	
19,741
	
10,920
	
2,999
	
0
	
33,660
	
25

	
111
	
63,308
	
51,500
	
11,371
	
438
	
0
	
20,600
	
11,371
	
438
	
0
	
32,409
	
26

	
107
	
63,475
	
49,851
	
12,049
	
1,576
	
0
	
19,940
	
12,049
	
1,576
	
0
	
33,565
	
27

	
101
	
63,578
	
51,189
	
12,045
	
344
	
0
	
20,476
	
12,045
	
344
	
0
	
32,865
	
28

	
114
	
63,578
	
52,200
	
11,379
	
0
	
0
	
20,880
	
11,379
	
0
	
0
	
32,258
	
29

	
162
	
63,743
	
50,454
	
11,223
	
2,066
	
0
	
20,182
	
11,223
	
2,066
	
0
	
33,471
	
30

 

 

If the Delivery Start Date is determined by the Buyer to be January 1, 2010, then Buyer and Seller will jointly decide the maximum Firm Fixed Quantity for the calendar year 2010 no later than August 1, 2009.  Under such circumstances, the Firm Fixed Quantity will remain fixed at the determined level until January 1, 2011, unless
otherwise agreed by Buyer and Seller.  Additionally, the Firm Variable Quantity will be correspondingly reduced by the same aggregate percentage as the Firm Fixed Quantity was reduced.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

  

Page 18 of 23

  

 

Attachment 2

Pricing Determinations

Firm Fixed Quantity Price (from Delivery Start
Date to December 31, 2016): The Contract Price will be the simple arithmetic average of the Platt’s Gas Daily midpoint prices for each “flow day” from the set of pricing locations listed below:

El Paso, Permian Basin; under the heading Permian Basin Area,

Waha; under the heading Permian Basin Area,

ANR, Okla.; under the heading Oklahoma,

Columbia Gulf, La.; under the heading Louisiana-Onshore South,

Agua Dulce Hub; under the heading South-Corpus Christi.

As an example, assume the following reported prices (per MMBtu) for a given day:

	
El Paso, Permian Basin
	 	$	3.500	 
	
Waha
	 	$	3.585	 
	
ANR, Okla.
	 	$	3.485	 
	
Columbia Gulf, La.
	 	$	4.760	 
	
Agua Dulce Hub
	 	$	4.245	 
	
Total
	 	$	19.575	 
	
divide by 5
	 	 	5	 
	
Daily Average
	 	$	3.915	 

The conversion to Mcf will assume 1 MMBtu = 1 Mcf; therefore, the Contract Price for the example trading day above would be $3.915/Mcf.  The Contract Price will be adjusted on a quarterly basis at the beginning of each quarter (January 1, April 1, July 1, and October 1) based upon the aggregate average price for all “flow days”
of the immediately preceding quarter (i.e. 3rd quarter price will be based upon the April 1 through June 30 prices).  If a price does not post for a particular location for a given “flow day(s)”, then the price from the last posted flow day and the next posted flow day will be averaged to replace the missing data for that location.  There will not be a reservation fee.

If the Delivery Start Date is determined by the Buyer to be January 1, 2010, then for the time period of January 1, 2010 through June 30, 2010, there will be a price collar in effect which will have a price floor of $5.75/Mcf and a price ceiling of $6.25.

Firm Variable Quantity Price (from Delivery Start Date to March 31, 2011): The Contract Price will be the average monthly price applicable for Kenai LNG delivered into Japan (as reported by Seller)
times 95%.  As an example, assume the following prices (per MMBtu) for a given quarter:

 

	
April
	 	$	6.559	 
	
May
	 	$	6.542	 
	
June
	 	$	5.999	 
	  	 	 	 	 
	
Total
	 	$	19.100	 
	
divide by 3
	 	 	3	 
	
Monthly Average
	 	$	6.367	 
	
Multiply by 95%
	 	 	 0.95	 
	
Firm Variable Price for 3rd Quarter
	 	$	6.048	 

The conversion to Mcf will assume 1 MMBtu = 1 Mcf; therefore the Contract Price for the example quarter above would be $6.048/Mcf.  The Contract Price will be adjusted on a quarterly basis at the beginning of each quarter (January 1, April 1, July 1, and October 1) based upon the average monthly price of the immediately preceding
quarter (i.e. 3rd quarter price will be based upon the April  through June monthly prices).  No reservation fee will apply to these volumes.  The Firm Variable Price will be capped at a value of 200% times the Firm Fixed Quantity Price for the corresponding time period.

Firm Variable Price (from April 1, 2011 to December 31, 2013): The Contract Price will be the “Platt’s National Average Price” as published in Platt’s
Gas Daily for each “flow day” times 120%.  As an example, assume the following reported price (per MMBtu) for a given day:

 

	
Platt’s National Average Price
	 	$	4.570	 
	
multiply by 120%
	 	 	 1.20	 
	
Daily Price
	 	$	5.484	 

The conversion to Mcf will assume 1 MMBtu = 1 Mcf; therefore, the Contract Price for the example trading day above would be $5.484/Mcf.  The Contract Price will be adjusted on a quarterly basis at the beginning of each quarter (January 1, April 1, July 1, and October 1) based upon the average price for all “flow days”
of the immediately preceding quarter (i.e. 3rd quarter price will be based upon the April 1 through June 30 prices).  No reservation fee will apply to these volumes.  The Firm Variable Price will be capped at a value of 200% times the Firm Fixed Quantity Price for the corresponding time period.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

 

Page 19 of 23

 

 

If (i) certain data or information required to calculate one or more of the prices herein is not or no longer available, or (ii) any Party, based on reasonable evidence, believes in good faith that (A) such data or information has been computed or published in error, or (B) the basis of calculating or reporting such data or information has
changed so as to materially alter the validity of the Energy Price determination as originally contemplated, then either Party may notify, in writing, the other Party of such deficiencies or beliefs.  The Parties will meet within five (5) Business Days after notice is received by the receiving Party and will determine if the deficiencies or beliefs are valid and, to the extent they are, will agree on appropriate amendments to the basis for calculating the Energy Price.  If the Parties do not
execute an amendment within fifteen (15) Business Days after the meeting, either Party may seek to resolve the dispute in accordance with Section 16.12.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

  

Page 20 of 23

  

 

Attachment 3

Delivery Points

 

All Gas sold and purchased under this Contract for the Beluga Power Plant will be delivered by Seller into one or more of the following designated "Delivery Points" as provided in Sections 16.4 and 16.5.  The Delivery Points are listed below in order of Buyer's preference, which order may be changed by written notice from Buyer to
Seller's representative listed in the relevant Transaction Confirmation.

 

	
  
	
1.
	
The inlet to Buyer’s facilities connected to the Beluga Unit Area Connection (to CEA off of the Beluga River field) – At the downstream flange of Beluga River Unit’s meter at or near the outlet of the Beluga River Unit’s gas filter building located within the West 1⁄2 of the Southwest 1⁄4 of Section 26, Township 13 North, Range 10 West, Kenai Peninsula Borough, Seward Meridian, State of
Alaska.

 

	
  
	
2.
	
Nikiski LNG Plant Connection (ENSTAR/APC Metering Station K277) – At the downstream flange of the connection between Seller's affiliate's piping at the Nikiski LNG Plant and ENSTAR's lateral from ENSTAR's Royalty Pipeline, located in the North 1⁄2 of the Southwest 1⁄4 of the Southwest 1⁄4 of Section 22, Township 7 North, Range 12 West, Kenai Peninsula Borough,
Seward Meridian, State of Alaska.

 

	
  
	
3.
	
The Kenai-Anchorage Pipeline – Kenai Unit Area Connection (ENSTAR/APC Station K670, Meters 500 & 505).  At the upstream flange of the Alaska Pipeline Company's master meter located at or near the inlet of the Alaska Pipeline Company's Kenai-Anchorage pipeline in Section 30, Township 5 North, Range 11 West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

 

	
  
	
4.
	
The Kenai Kachemak Pipeline – KKPL-APC Interconnection Point (MSN 601).  At the downstream weld of the 8-inch electronic isolation fitting, located just outside of KKPL's meter building, between the northern terminus of the KKPL and the APL's lateral to the inlet of the APC’s Kenai-Anchorage pipeline in Southeast 1⁄4 of Section 30, Township 5 North, Range 11 West, Kenai Peninsula Borough, Seward
Meridian, State of Alaska.

 

	 	
5.
	
Nikiski LNG Plant Connection (KNPL Metering Station 410) – At the upstream flange of the eight (8) inch lateral valve immediately upstream of the KNPL 403 meter connection that is downstream of Seller's affiliate's piping off of the KNPL 410 meter at the Nikiski LNG Plant, located in the North 1⁄2 of the Southwest 1⁄4 of the Southwest 1⁄4 of Section 22, Township 7 North, Range 12 West, Kenai Peninsula
Borough, Seward Meridian, State of Alaska.

 

All Gas sold and purchased under this Contract for the Bernice Lake Power Plant, the Nikiski Power Plant, the International Power Plant, and Southcentral Power Plant will be delivered by Seller into one or more of the following designated "Delivery Points" as provided in Sections 16.4 and 16.5.  The Delivery Points are listed below
in order of Buyer's preference, which order may be changed by written notice from Buyer to Seller's representative listed in the relevant Transaction Confirmation.

 

	
  
	
1.
	
A direct connection to the Nikiski LNG facility, as contemplated in Section 16.5(b).

 

	
  
	
2.
	
Nikiski LNG Plant Connection (KNPL Metering Station 410) – At the upstream flange of the eight (8) inch lateral valve immediately upstream of the KNPL 403 meter connection that is downstream of Seller's affiliate's piping off of the KNPL 410 meter at the Nikiski LNG Plant, located in the North 1⁄2 of the Southwest 1⁄4 of the Southwest 1⁄4 of Section 22, Township 7 North, Range 12 West, Kenai Peninsula
Borough, Seward Meridian, State of Alaska.

 

	
  
	
3.
	
Nikiski LNG Plant Connection (ENSTAR/APC Metering Station K277) – At the downstream flange of the connection between Seller's affiliate's piping at the Nikiski LNG Plant and ENSTAR's lateral from ENSTAR's Royalty Pipeline, located in the North 1⁄2 of the Southwest 1⁄4 of the Southwest 1⁄4 of Section 22, Township 7 North, Range 12 West, Kenai Peninsula Borough,
Seward Meridian, State of Alaska.

 

	
  
	
4.
	
The Kenai-Anchorage Pipeline – Kenai Unit Area Connection (ENSTAR/APC Station K670, Meters 500 & 505).  At the upstream flange of the Alaska Pipeline Company's master meter located at or near the inlet of the Alaska Pipeline Company's Kenai-Anchorage pipeline in Section 30, Township 5 North, Range 11 West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

 

	
  
	
5.
	
The Kenai Kachemak Pipeline – KKPL-APC Interconnection Point (MSN 601).  At the downstream weld of the 8-inch electronic isolation fitting, located just outside of KKPL's meter building, between the northern terminus of the KKPL and the APL's lateral to the inlet of the APC’s Kenai-Anchorage pipeline in Southeast 1⁄4 of Section 30, Township 5 North, Range 11 West, Kenai Peninsula Borough, Seward
Meridian, State of Alaska.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

  

Page 21 of 23

  

 

	
  
	
6.
	
Beluga Unit Area Connection (ENSTAR/APC Station 8601. Meters 170 A & B) – At the upstream flange of Alaska Pipeline Company's meter at or near the inlet of Alaska Pipeline Company's Beluga-Anchorage pipeline located within the West 1⁄2 of the Southwest 1⁄4 of Section 26, Township 13 North, Range 10 West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

 

Additional Delivery Points may be added by mutual consent of Buyer and Seller.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

  

Page 22 of 23

  

 

 Attachment 4

Seller’s Prior Gas Supply Contracts

Pursuant to Section 16, the following contracts (but not including extensions of these contracts) have relevance to Seller’s obligations if they are in effect at that time:

 

1) Agreement between Shell Oil Company and Alaska Pipeline Company dated December 20, 1982, which expires on December 31, 2009.

 

	
  
	
·
	
Letter Agreement dated May 24, 1983 amending Agreement between Shell Oil Company and Alaska Pipeline Company dated December 20, 1982.

 

	
  
	
·
	
Agreement between Shell Western E & P, Inc. and Alaska Pipeline Company dated January 26, 1988 amending Agreement between Shell Oil Company and Alaska Pipeline Company dated December 20, 1982.

 

	
  
	
·
	
Partial assignment of Agreement between Shell Oil Company and Alaska Pipeline Company dated December 20, 1982, as amended, from Shell Western E & P, Inc. to ARCO Alaska, Inc. effective October 1, 1989.

 

	
  
	
·
	
Agreement between ARCO Alaska, Inc. and Alaska Pipeline Company dated November 15, 1991, to amend an assigned interest in the Agreement between Shell Oil Company and Alaska Pipeline Company, dated December 20, 1982, as amended.

 

2) Agreement for the Sale and Purchase of Natural Gas between Chugach Electric Inc., and ARCO Alaska, Inc., dated April 21, 1989, which expires on or about May 2011.

3) Gas Sale and Purchase Agreement between Fairbanks Natural Gas, LLC and ConocoPhillips Alaska, Inc., dated December 21, 2007.

4) Gas Sales Agreement between ConocoPhillips Alaska, Inc. and Alaska Pipeline Company dated December 1, 2008, which expires December 31, 2010.

 

	
Copyright © 2006 North American Energy Standards Board, Inc.
	
NAESB Standard 6.3.1

	
All Rights Reserved
	
September 5, 2006

 

 

Page 23 of 23GENVEC,
INC.

      

      Warrant
To Purchase Common Stock

      

      Warrant
No.: 2009B-1

      Number of
Shares of Common Stock:
[                       ]

      Date of
Issuance:
[            ], 2009
(“Issuance
Date”)

      

      GenVec,
Inc., a Delaware Corporation, (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, BAM OPPORTUNITY FUND LP, the registered holder hereof
or its permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or
times on or after [Six months from issuance date] (the “Exercisability Date”), but not
after 11:59 p.m., New York Time, on the Expiration Date (as defined below)
[                             ]
fully paid and nonassessable shares of Common Stock (as defined below) (the “Warrant
Shares”).  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
14.  This Warrant is one of a series of warrants to purchase shares of
Common Stock (the “SPA
Warrants” issued pursuant to those certain Purchase Agreement, dated as
of August [     ], 2009 (the “Subscription Date”), by and
among the Company and the investor (the “Investor”) referred to therein
(the “Purchase
Agreement”) pursuant to the Company’s Registration Statement on Form S-3
(No. 333-140373) (the “Registration
Statement”).

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      1.           EXERCISE OF
WARRANT.

       

      (a)             Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the Exercisability
Date, in whole or in part (but not as to fractional shares), by (i) delivery of
a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in
cash or wire transfer of immediately available funds or (B) by notifying the
Company that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)).  The Holder shall not be required to
surrender this Warrant in order to effect an exercise hereunder, provided that
this Warrant is surrendered to the Company by the second Business Day following
the date on which the Company has received each of the Exercise Notice and the
Aggregate Exercise Price (the “Exercise Delivery Documents”).  On or
before the first Business Day following the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the “Exercise Delivery Documents”),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “Transfer
Agent”).  The Company shall deliver any objection to the
Exercise Delivery Documents on or before the second Business Day following the
date on which the Company has received all of the Exercise Delivery
Documents.  In the event of any discrepancy or dispute, the records of
the Company shall be controlling and determinative in the absence of manifest
error.  On or before the third Business Day following the date on
which the Company has received all of the Exercise Delivery Documents and after
the Company has received this Warrant (the “Share Delivery Date”), the
Company shall, (X) provided that the Transfer Agent is participating in The
Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program (the “FAST Program”) and so long as
the certificates therefor are not required to bear a legend regarding
restriction on transferability, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y), if the
Transfer Agent is not participating in the FAST Program or if the certificates
are required to bear a legend regarding restriction on transferability, issue
and dispatch by overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company’s share register in the name of
the Holder or its designee, for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise.  Upon delivery of
the Exercise Delivery Documents and surrender of this Warrant, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares, as the case may be.  If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than five Business
Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised.  The Company shall pay any and all taxes that may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

       

      (b)             Exercise
Price.  For purposes of this Warrant, “Exercise Price” means $0.828
per share of Common Stock, subject to adjustment as provided
herein.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (c)             Limitations on
Exercises.  (1)  The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, such
Person (together with such Person’s affiliates) would beneficially own in excess
of 4.99% (the “Maximum
Percentage”) of the shares of Common Stock outstanding immediately after
giving effect to such exercise.  For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein.  Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).  For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q,
Current Report on Form 8-K or other public filing with the Securities and
Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding.  For
any reason at any time, upon the written or oral request of the Holder, where
such request indicates that it is being made pursuant to this Warrant, the
Company shall within two Business Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including the SPA Warrants, by the Holder and its affiliates since the date as
of which such number of outstanding shares of Common Stock was
reported.  By written notice to the Company, the Holder may increase
or decrease the Maximum Percentage to any other percentage not in excess of
4.99% specified in such notice; provided, that (i)
any such increase will not be effective until the 61st day
after such notice is delivered to the Company and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.

       

        (2)           No Exercise That Triggers
Pill.  This Warrant may not be exercised to acquire Warrant
Shares to the extent that when added to those already beneficially owned by the
Holder for purposes of the Rights Agreement dated as of September 7, 2001
between the Company and American Stock Transfer & Trust Company (the “Rights Agreement”), such
Warrant Shares would cause such Holder to become an Acquiring Person as that
term is used in the Rights Agreement with respect to that Holder.

       

      (d)             Cashless Exercise.
 The Holder may, in
its sole discretion, but only at times the Registration Statement is not
effective or an exemption from registration is not available, exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the “Net Number” of
shares of Common Stock determined according to the following formula (a “Cashless
Exercise”):

       

      
        
          
            
              	
                      Net
      Number = (A x B)
      - (A x C)

                    
	
                      B

                    

            

          

        

      

       

      For
purposes of the foregoing formula:

       

      A= the
total number of shares with respect to which this Warrant is then being
exercised.

       

      B= the
Weighted Average Price of the shares of Common Stock (as reported by Bloomberg)
for the five consecutive Trading Days ending on the date immediately preceding
the date of the Exercise Notice.

       

      C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (e)             Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.

       

      2.           ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.  The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:

       

      (a)             Adjustment upon Subdivision
or Combination of shares of Common Stock.  If the Company at
any time on or after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased.  If
the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased.  Any adjustment under this Section 2(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

       

      (b)             Other
Events.  If any event occurs of the type contemplated by the
provisions of Section 2(a) but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features to the holders of the
Company’s equity securities), then the Company’s Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares so
as to protect the rights of the Holder; provided, that no
such adjustment pursuant to this Section 2(b) will increase the Exercise Price
or decrease the number of Warrant Shares as otherwise determined pursuant to
this Section 2.

       

      3.        RIGHTS UPON DISTRIBUTION OF
ASSETS.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) in respect of
its Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case:

       

      (a)             any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Weighted
Average Price of the shares of Common Stock on the Trading Day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company’s Board of Directors) applicable to one share of
Common Stock, and (ii) the denominator shall be the Weighted Average Price of
the shares of Common Stock on the Trading Day immediately preceding such record
date; and

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (b)             the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided, that in the
event that the Distribution is of shares of Common Stock or common stock of a
company whose common shares are traded on a national securities exchange or a
national automated quotation system (“Other Shares of Common
Stock”), then the Holder may elect to receive a warrant to purchase Other
Shares of Common Stock in lieu of an increase in the number of Warrant Shares,
the terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the number of shares of Other Shares of Common
Stock that would have been payable to the Holder pursuant to the Distribution
had the Holder exercised this Warrant immediately prior to such record date and
with an aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).

       

      4.           PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

       

      (a)             Purchase
Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time prior to the Expiration Date the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock are
to be determined for the grant, issue or sale of such Purchase
Rights.

       

      (b)         
  Fundamental
Transactions.  Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property purchasable upon the exercise of the Warrant prior to such
Fundamental Transaction), such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant.  In addition to and not in substitution
for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant within 90 days after the consummation of the Fundamental Transaction
but, in any event, prior to the Expiration Date, in lieu of the shares of the
Common Stock (or other securities, cash, assets or other property) purchasable
upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had the Warrant been exercised immediately prior to such Fundamental
Transaction.  Provision made pursuant to the preceding sentence shall
be in a form and substance reasonably satisfactory to the Required
Holders.  The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied without regard to any limitations on the exercise of this
Warrant.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      5.           NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant and (iii)
shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of the SPA Warrants then outstanding (without
regard to any limitations on exercise).

       

      6.           WARRANT HOLDER NOT DEEMED A
STOCKHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in such Person’s capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person’s capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      7.           REISSUANCE OF
WARRANTS.

       

      (a)             Transfer of
Warrant.  This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by applicable securities laws.  Subject to
applicable securities laws, if this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company together with all applicable
transfer taxes , whereupon the Company will forthwith issue and deliver upon the
order of the Holder a new Warrant (in accordance with Section 7(d)), registered
as the Holder may request, representing the right to purchase the number of
Warrant Shares being transferred by the Holder and, if less then the total
number of Warrant Shares then underlying this Warrant is being transferred, a
new Warrant (in accordance with Section 7(d)) to the Holder representing the
right to purchase the number of Warrant Shares not being
transferred.

       

      (b)             Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form or
the provision of reasonable security by the Holder to the Company and, in the
case of mutilation, upon surrender and cancellation of this Warrant, the Company
shall execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

       

      (c)             Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company together with all
applicable transfer taxes, for a new Warrant or Warrants (in accordance with
Section 7(d)) representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new Warrant will
represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, that the
Company shall not be required to issue Warrants for fractional shares of Common
Stock hereunder.

       

      (d)             Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant shall (i) be of
like tenor with this Warrant, (ii) represent, as indicated on the face of such
new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date and (iv) have
the same rights and conditions as this Warrant.

       

      8.           NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 6 of Annex I of
the Purchase Agreement.  The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including,
in reasonable detail, a description of such action and the reason or reasons
therefore.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least 10 days prior
to the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B)
with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation; provided, that in
each case, such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      9.           AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided, that
no such action may increase the exercise price of any SPA Warrant or decrease
the number of shares or class of stock obtainable upon exercise of any SPA
Warrant without the written consent of the Holder; provided, further, that to the
extent that the Holder to whom this Warrant was issued on
[                                      ],
2009 (as issued, the “Original Warrant”) or such Holder’s affiliates (together
with such Holder, the “Original Affiliated Holders”) continue to hold this
Warrant or Warrants issued after a partial exercise or transfer of this Warrant
that are then exercisable for a majority of the shares underlying the Original
Warrant that remain exercisable, then in lieu of obtaining the written consent
of the Required Holder the Company must obtain the written consent of the
Original Affiliated Holder then holding this Warrant .  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.

       

      10.         GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

       

      11.         CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and the Investor and shall not be construed against any person as
the drafter hereof.  The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.

       

      12.         DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two Business Days of receipt of the Exercise Notice giving rise
to such dispute, as the case may be, to the Holder.  If the Holder and
the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within five Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent,
outside accountant.  The Company shall cause the investment bank or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
10 Business Days from the time it receives the disputed determinations or
calculations.  Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.  The expenses of the investment bank and
accountant will be borne by the Company unless the investment bank or accountant
determines that the determination of the Exercise Price or the arithmetic
calculation of the Warrant Shares by the Holder was incorrect, in which case the
expenses of the investment bank and accountant will be borne by the
Holder.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      13.         REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue actual damages for
any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a breach by it of its
obligations hereunder may cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to seek an injunction restraining any
breach.  Notwithstanding the foregoing, the absence of an effective
registration statement relating to the issuance of Warrant Shares upon exercise
of the Warrant shall not provide the Holder with the right to net-settle this
Warrant in cash.  Furthermore, the absence of an effective
registration statement or applicable exemption from registration does not
alleviate the Company’s obligation to deliver the Warrant Shares upon exercise
of this Warrant.

       

      14.         CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

       

       
(a)             “Bloomberg” means Bloomberg
Financial Markets.

       

       
(b)             “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

       

       
(c)             “Closing Bid Price” means, for
any security as of any date, the last closing bid price for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing bid
price, then the last bid price of such security prior to 4:00:00 p.m., New York
Time, as reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the average of the bid
prices, or the ask prices, respectively, of any market makers for such security
as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).  If the Closing Bid Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder.  If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section
12.  All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      (d)             “Common Stock” means
(i) the Company’s shares of Common Stock, $0.001 par value per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.

       

      (e)             “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

       

      (f)             “Eligible Market” means the
Principal Market, the NYSE Amex, The New York Stock Exchange, Inc., The NASDAQ
Global Select Market, The NASDAQ Capital Market, or the OTC Bulletin Board.®

       

      (g)             “Expiration Date” means the
fifth anniversary of the Issuance Date or, if such date falls on a day other
than a Business Day or on which trading does not take place on the Principal
Market (a “Holiday”),
the next date that is not a Holiday.

       

      (h)             “Fundamental Transaction” means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into another Person, (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of either the outstanding shares of Common Stock
(not including any shares of Common Stock held by the Person or Persons making
or party to, or associated or affiliated with the Persons making or party to,
such purchase, tender or exchange offer), (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock or (vi) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.

       

      (i)             “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

       

      (j)             “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      (k)            “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

       

      (l)             “Principal Market” means The
NASDAQ Global Market.

       

      (m)           “Required Holders” means the
holders of the SPA Warrants representing at least a majority of shares of Common
Stock underlying the SPA Warrants then outstanding.

       

      (n)            “Successor Entity” means the
Person (or, if so elected by the Required Holders, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

       

      (o)             “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
Time).

       

      (p)             “Weighted Average Price” means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC.  If the Weighted
Average Price cannot be calculated for such security on such date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Required
Holders.  If the Company and the Required Holders are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 12 with the term “Weighted Average Price” being substituted
for the term “Exercise Price.”  All such determinations shall be
appropriately adjusted for any share dividend, share split or other similar
transaction during such period.

       

      [Signature
Page Follows]

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.

      

      
        
          	 
      	
                  GENVEC,
      INC.

                
	 
      	 
      	 
      
	 
      	
                  By:

                	
                    

                
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
A

      

      EXERCISE
NOTICE

       

      TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

      WARRANT
TO PURCHASE COMMON STOCK

      

      GENVEC,
INC.

       

      The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”) of GenVec,
Inc., a Delaware corporation (the “Company”), evidenced by the
attached Warrant to Purchase Common Stock (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

      

      1.  Form of Exercise
Price.  The Holder intends that payment of the Exercise Price
shall be made as:

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            _________________

                                          	 	
                                            a “Cash Exercise” with respect to _________________
Warrant
      Shares.

                                          
	 
      	 	
                                             
      

                                          
	
                                            _________________

                                          	 	
                                            a “Cashless Exercise” with respect to
      _______________

                                            Warrant
      Shares.

                                          

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

      2.  Payment of Exercise
Price.  In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

      

      3.  Delivery of Warrant
Shares.  The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.

      

      4.  Representations and
Warranties.  By its delivery of this Exercise Notice, the
undersigned represents and warrants to the Company that in giving effect to the
exercise evidenced hereby the holder will not beneficially own in excess of the
number of shares of Common Stock (determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934) permitted to be owned under Section 1(f) of
this Warrant to which this notice relates.

      

      Date:
_______________ __, ______

      

      
        
          	
                    

                
	
                  Name
      of Registered Holder

                

        

      

      

      
        
          	
                  By:

                	
                    

                
	 
      	
                  Name:

                
	 
      	
                  Title:

                

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      ACKNOWLEDGMENT

      

      The Company hereby acknowledges this
Exercise Notice.

      

      
        
          
            
              	 
      	
                      GENVEC,
      INC.

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	 
      	
                      Name:

                    
	 
      	 
      	
                      Title:

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