Document:

Exhibit 10.1

 

Amended and Restated Employment Agreement

 

This Amended and Restated Employment Agreement (as amended and restated, this “Agreement”) is made as of April 26, 2012 by and between Scientific Games Corporation, a Delaware corporation (the “Company”), and Jeffrey S. Lipkin (“Executive”), and amends and restates in its entirety the original employment agreement between the parties made as of March 2, 2009 but effective as of April 1, 2009.

 

NOW, THEREFORE, in consideration of the premises and mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive, the parties hereto agree as follows.

 

1.      Employment; Term.  The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth in this Agreement.  This term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on April 1, 2009 and ending on December 31, 2015, as may be extended in accordance with this Section 1 and subject to earlier termination in accordance with Section 4 hereof.  The Term shall be automatically extended without further action by either party hereto by one additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party hereto shall have given written notice to the other party hereto prior to the date which is ninety (90) days prior to the date upon which such extension would otherwise have become effective electing not to further extend the Term, in which case Executive’s employment shall terminate on the date upon which such extension would otherwise have become effective, unless terminated in accordance with Section 4 hereof.

 

2.      Position and Duties.  During the Term,  Executive will serve as (a) Senior Vice President and Chief Financial Officer of the Company and (b) an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the stockholders or by the board of directors of any such subsidiary or affiliate, as the case may be.  In such capacities, Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions and as otherwise may be assigned to the Executive from time to time by the Chief Executive Officer or upon the authority of the Board.  Subject to Section 4(e) hereof, Executive’s functions, duties and responsibilities are subject to reasonable changes as the Company may in good faith determine from time to time.  Executive hereby agrees to accept such employment and to serve the Company and its subsidiaries and affiliates to the best of Executive’s ability in such capacities, devoting substantially all of Executive’s business time to such employment; provided, however, that Executive shall be entitled to devote reasonable time to (i) manage his personal investments and otherwise attend to personal affairs, including family financial and legal affairs, (ii)  teach, lecture or perform other public-service activities, and (iii) serve on the board of directors of one public corporation or other entity with the approval of the Board, each in a manner that does not materially conflict or unreasonably interfere with his responsibilities hereunder.

 

3.      Compensation.

 

(a)           Base Salary.  From and after March 1, 2012,  Executive will receive a base salary of five hundred fifty thousand U.S. Dollars (US$550,000) per annum (pro-rated for any partial year), payable in accordance with the Company’s regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive.  In the event that the Company, in its sole discretion, from time to time determines to increase Executive’s base salary, such increased amount shall, from and after the effective date of such increase, constitute the

 

	
 
    	
 
    
	
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“base salary” of Executive for purposes of this Agreement.

 

(b)           Incentive Compensation.  Executive shall have the opportunity annually to earn incentive compensation in amounts determined by the Compensation Committee of the Board (the “Compensation Committee”) in accordance with the applicable incentive compensation plan of the Company as in effect from time to time (“Incentive Compensation”).  Under such plan, Executive shall have the opportunity annually to earn up to 67% of Executive’s base salary as Incentive Compensation at “target opportunity” (“Target Bonus”) and up to 133% of Executive’s base salary as Incentive Compensation at “maximum opportunity” (“Maximum Bonus”) on the terms and subject to the conditions of such plan.

 

(c)           Eligibility for Annual Equity Awards.  Executive shall be eligible to receive an annual grant of stock options, restricted stock units or other equity awards in the sole discretion of the Compensation Committee and in accordance with the applicable plans and programs for similarly situated senior executives of the Company and subject to the Company’s right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any accrued or vested interest of Executive under any such plan or program.

 

(d)           Expense Reimbursement.  Subject to Section 3(g) hereof, the Company shall reimburse Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by Executive in connection with the performance of Executive’s duties under this Agreement, on a timely basis upon timely submission by Executive of vouchers therefor in accordance with the Company’s standard procedures.

 

(e)           Health and Welfare Benefits.  Executive shall be entitled to participate, without discrimination or duplication, in any and all medical insurance, group health, disability, life insurance, accidental death and dismemberment insurance, 401(k) or other retirement, deferred compensation, stock ownership and such other plans and programs which are made generally available by the Company to similarly situated senior executives in accordance with the terms of such plans and programs and subject to the Company’s right to at any time amend or terminate any such plan or program.  Executive shall be entitled to four (4) weeks of paid vacation per annum, holidays consistent with the Company’s policies, and any other time off in accordance with the Company’s policies in effect from time to time.

 

(f)            Special Performance-Vesting RSU Award.  The Company has granted to Executive on February 22, 2012 seventy-eight thousand five hundred ninety seven (78,597) performance-vesting restricted stock units (the “Special Performance-Vesting RSUs”) under the Scientific Games Corporation 2003 Incentive Compensation Plan, as amended and restated (the “Plan”), pursuant to an equity award agreement entered into by and between the Company and Executive (the “Special Performance-Vesting Equity Award Agreement”).  The Special Performance-Vesting Equity Award Agreement provides that the Special Performance-Vesting RSUs shall vest if, as and when certain “Adjusted EBITDA” targets are achieved in accordance with the Special Performance-Vesting Equity Award Agreement, subject to any applicable provisions relating to accelerated vesting and forfeiture as described in this Agreement and the Special Performance-Vesting Equity Award Agreement.  Notwithstanding anything contained in this Agreement or in the Special Performance-Vesting Equity Award Agreement to the contrary, any unvested portion of the Special Performance Vesting RSUs will not accelerate and will be forfeited upon termination of Executive’s employment with the Company under Section 4 hereof or otherwise (including as a result of expiration of the Term on December 31, 2015); provided, however, that, subject to Section 5.6 hereof, in the event of any such termination pursuant to Section 4(b), Section 4(c), Section 4(e), Section 4(f) or Section 4(h) (by virtue of the expiration of the

 

	
 
    	
 
    
	
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Agreement on December 31, 2015 by virtue of the Company providing notice of non-renewal pursuant to Section 1 of the Agreement) between December 31 of a particular year and a potential vesting date with respect to the Special Performance Vesting RSUs (i.e., March 15 of the following year), any unvested portion of the Special Performance Vesting RSUs will not be forfeited unless and until the determination has been made by such March 15 (in accordance with the vesting provisions applicable to such unvested portion) that any unvested portion of the Special Performance Vesting RSUs does not vest on such March 15 (and, to the extent that such unvested portion of the Performance Vesting Grant does not vest on such March 15, such vested portion shall be forfeited).

 

(g)           Taxes and Internal Revenue Code 409A.  Payment of all compensation and benefits to Executive specified in this Section 3 and in Section 4 of this Agreement shall be subject to all legally required and customary withholdings.  The Company makes no representations regarding the tax implications of the compensation and benefits to be paid to Executive under this Agreement, including, without limitation, under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable administrative guidance and regulations (“Section 409A”).  Section 409A governs plans and arrangements that provide “nonqualified deferred compensation” (as defined under the Code) which may include, among others, nonqualified retirement plans, bonus plans, stock option plans, employment agreements and severance agreements.  The Company reserves the right to provide compensation and benefits under any plan or arrangement in amounts, at times and in a manner that minimizes taxes, interest or penalties as a result of Section 409A.  In addition, in the event any benefits or amounts paid hereunder are deemed to be subject to Section 409A, including payments under Section 4 of this Agreement, Executive consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A (including, but not limited to, delaying payment until six (6) months following termination of employment).  Notwithstanding anything herein to the contrary, if (i) at the time of Executive’s “separation from service” (as defined in Treas. Reg. Section 1.409A-1(h)) with the Company other than as a result of Executive’s death, (ii) Executive is a “specified employee” (as defined in Section 409A(a)(2)(B)(i) of the Code), (iii) one or more of the payments or benefits received or to be received by Executive pursuant to this Agreement would constitute deferred compensation subject to Section 409A, and (iv) the deferral of the commencement of any such payments or benefits otherwise payable hereunder as a result of such separation of service is necessary in order to prevent any accelerated or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder to the extent necessary (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six (6) months following Executive’s separation from service with the Company (or the earliest date as is permitted under Section 409A).  Any remaining payments or benefits shall be made as otherwise scheduled hereunder.  Furthermore, to the extent any payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A, or otherwise such payments or other benefits shall be restructured, to the extent possible, in a manner determined by the Company that does not cause such an accelerated or additional tax.  To the extent any reimbursements or in-kind benefits due to Executive under this Agreement constitute deferred compensation under Section 409A, any such reimbursements or in-kind benefits shall be paid to Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).  Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.

 

4.             Termination of Employment.  Executive’s employment may be terminated at any time prior to the end of the Term under the terms described in this Section 4.

 

	
 
    	
 
    
	
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(a)           Termination by Executive for Other than Good Reason.  Executive may terminate Executive’s employment hereunder for any reason or no reason upon 60 days’ prior written notice to the Company referring to this Section 4(a); provided, however, that a termination by Executive for “Good Reason” (as defined below) shall not constitute a termination by Executive for other than Good Reason pursuant to this Section 4(a).  In the event Executive terminates Executive’s employment for other than Good Reason, Executive shall be entitled only to the following compensation and benefits (collectively, the “Standard Termination Payments”):

 

(i)         any accrued but unpaid base salary for services rendered by Executive to the date of such termination, payable in accordance with the Company’s regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive;

 

(ii)        all vested non-forfeitable amounts owing or accrued at the date of such termination under benefit plans, programs and arrangements set forth or referred to in Section 3 hereof in which Executive theretofore participated will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder);

 

(iii)       except as provided in Section 5.6 hereof, all stock options, restricted stock units and other equity-based awards will be governed by the terms of the plans and programs under which such options, restricted stock units or other awards were granted; and

 

(iv)       reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 3(d) hereof.

 

(b)           Termination By Reason of Death.  If Executive dies during the Term, the last beneficiary designated by Executive by written notice to the Company (or, in the absence of such designation, Executive’s estate) shall be entitled only to the Standard Termination Payments (including, if applicable, any benefits that may be payable under any life insurance benefit of Executive for which the Company pays premiums, in accordance with the terms of any such benefit and subject to the right of the Company (or its applicable affiliate) to at any time amend or terminate any such benefit).

 

(c)           Termination By Reason of Total Disability.  The Company may terminate Executive’s employment  in the event of Executive’s “Total Disability.”  For purposes of this Agreement, “Total Disability” shall mean Executive’s (1) becoming eligible to receive benefits under any long-term disability insurance program of the Company or (2) failure to perform the duties and responsibilities contemplated under this Agreement for a period of more than 180 days during any consecutive 12-month period due to physical or mental incapacity or impairment.  In the event that Executive’s employment is terminated by the Company by reason of Total Disability, the Company shall pay the following amounts, and make the following other benefits available, to Executive:

 

(i)            the Standard Termination Payments;

 

(ii)           an amount equal to Executive’s annual base salary, payable over a period of twelve (12) months after such termination in accordance with Section 4(g) of this Agreement; provided such amount shall be reduced by any disability payments provided to Executive as a result of any disability plan sponsored or maintained by the Company or any of its affiliates providing benefits to Executive; and

 

	
 
    	
 
    
	
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(iii)          if Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the Company shall pay the monthly premiums for such coverage for a period of twelve (12) months.

 

(d)           Termination by the Company for Cause.  The Company may terminate the employment of Executive at any time for “Cause.”  For purposes of this Agreement, “Cause” shall mean: (i) gross neglect by Executive of Executive’s duties hereunder; (ii) Executive’s conviction (including conviction on a nolo contendere plea) of a felony or any non-felony crime or offense involving the property of the Company or any of its subsidiaries or affiliates or evidencing moral turpitude; (iii) willful misconduct by Executive in connection with the performance of Executive’s duties hereunder; (iv) intentional breach by Executive of any material provision of this Agreement; (v) material violation by Executive of a material provision of the Company’s Code of Conduct; or (vi) any other willful or grossly negligent conduct of Executive that would make the continued employment of Executive by the Company materially prejudicial to the best interests of the Company.  In the event Executive’s employment is terminated for “Cause,” Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments.  For purposes of this Agreement, an act or failure to act on Executive’s part shall be considered “willful” if it was done or omitted to be done by him knowingly, purposefully and not in good faith.  For the avoidance of doubt, “Cause” shall not include the mere disagreement or difference of views, in and of itself, between Executive and one or more directors or officers of the Company or any of its affiliates with respect to any matter(s) relating to the business, affairs or operations of the Company and/or any of its affiliates (it being understood and agreed that this sentence does not exclude from “Cause,” without limitation, any act or failure to act which otherwise would constitute “Cause” resulting from such disagreement or difference of views).

 

(e)           Termination by the Company without Cause or by Executive for Good Reason.  The Company may terminate Executive’s employment at any time without Cause, for any reason or no reason, and Executive may terminate Executive’s employment for “Good Reason.”  For purposes of this Agreement “Good Reason” shall mean that, without Executive’s prior written consent, any of the following shall have occurred:  (i) a material change, adverse to Executive, in Executive’s positions, titles, offices, or duties as provided in Section 2 hereof, except, in such case, in connection with the termination of Executive’s employment for Cause or due to Total Disability, death or expiration of the Term; (ii) an assignment of any significant duties to Executive which are materially inconsistent with Executive’s positions or offices held under Section 2 hereof; (iii) a material decrease in base salary or material decrease in Executive’s incentive compensation opportunities provided under this Agreement; (iv) change the location of Executive’s office or of the Company’s principal executive offices from the existing location in New York, NY to a place not within thirty (30) miles of the existing location in New York, NY, or change the location of Executive’s office to a location other than the location of the Company’s principal executive office; and (v) any other material failure by the Company to perform any material obligation under, or material breach by the Company of any material provision of, this Agreement; provided, however, that a termination by Executive for Good Reason under any of clauses (i) — (v) of this Section 4(e) shall not be considered effective unless Executive shall have provided the Company with written notice of the specific reasons for such termination within thirty (30) days after he has knowledge of the event or circumstance constituting Good Reason and the Company shall have failed to cure the event or condition allegedly constituting Good Reason within thirty (30) days after such notice has been given to the Company.  In the event that Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason (and not, for the avoidance of doubt, in the event of a termination pursuant to Section 4(a), (b), (c), or (d) hereof or due to the expiration of the Term), the Company shall pay the following amounts, and make the following other benefits available, to Executive.

 

	
 
    	
 
    
	
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(i)            the Standard Termination Payments;

 

(ii)           an amount equal to the sum of (1) Executive’s annual base salary and (2) Executive’s Severance Bonus Amount, such amount payable after such termination over a period of twelve (12) months after such termination in accordance with Section 4(g) of this Agreement).  For purposes of this Agreement, “Severance Bonus Amount” shall mean an amount equal to the highest annual Incentive Compensation previously paid to Executive in respect of the two (2) most recent fiscal years of the Company but not more than the Executive’s Target Bonus for the-then current fiscal year;

 

(iii)          no later than March 15 following the end of the year in which such termination occurs, in lieu of any Incentive Compensation for the year in which such termination occurs, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during the entire year in which such termination occurred, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such termination occurs;

 

(iv)          subject to Section 5.6 hereof and except to the extent otherwise provided at the time of grant under the terms of any equity award to Executive and except with respect to the Special Performance-Vesting RSUs (any RSUs of which that remain unvested as of such expiration shall be forfeited upon such termination, except to the extent otherwise contemplated by the proviso in Section 3(f)(iii) of this Agreement), any stock options, restricted stock units and any other equity-based awards held by Executive that remain unvested as of such termination that, in each case, were awarded to Executive as part of a regular, formula-based award under the Company’s Management Incentive Compensation Program will become fully vested and non-forfeitable (provided that any such options (together with any other vested options) will cease being exercisable upon the earlier of three (3) months after such termination and the scheduled expiration date of such options), and, in all other respects, all such options and other awards shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted; provided, however, that in the event such termination occurs prior to the Compensation Committee’s determination as to the satisfaction of any performance criteria to which any such stock options, restricted stock units and/or other equity-based awards is subject, such stock options, restricted stock units and/or other equity-based awards (as the case may be) will not vest (and, in the case of any such stock options, will not become exercisable) unless and until a determination is or has been made by the Compensation Committee that such criteria have been satisfied, at which time such stock options, restricted stock units and/or other equity-based awards (as the case may be) will vest (and, in the case of any such stock options, will become exercisable) to the extent contemplated by the terms of such award (it being understood and agreed, for the avoidance of doubt, that such stock options, restricted stock units and/or other equity-based awards (as the case may be) will immediately be forfeited to the extent contemplated by the terms of such award in the event that such criteria are determined not to have been satisfied); provided, further, however, if necessary to comply with Section 409A, settlement of any such equity-based awards shall be made on the date that is six (6) months plus one (1) day following expiration of the Term; and

 

(v)           if Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the Company shall pay the monthly premiums for such coverage for a period of twelve (12) months.

 

	
 
    	
 
    
	
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(f)            Termination by the Company without Cause or by Executive for Good Reason  in connection with a Change in Control.  In the event Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason pursuant to Section 4(e) hereof and such termination occurs upon, or within one (1) year immediately following, a “Change in Control” (as defined below), Executive shall be entitled (without duplication) to the payments and benefits described in Section 4(e) hereof, except that such amount shall be multiplied by two (2) and such amount shall be payable over a period of twenty-four (24) months after termination in accordance with Section 4(g) of this Agreement; provided, however, to the extent that such amount under Section 4(e)(ii) hereof is exempt from Section 409A and/or if such Change in Control constitutes a change in ownership, change in effective control or a change in ownership of a substantial portion of the assets of the Company under Regulation Section 1.409A-3(i)(5), such amount otherwise payable under Section 4(e)(ii) hereof shall be paid in a lump sum in accordance with Section 4(g) of this Agreement.  Notwithstanding the foregoing, payments pursuant to this Section 4(f) shall be reduced by the amount necessary, if any, to ensure that the aggregate compensation to be received by the Executive in connection with such Change in Control does not constitute a “parachute payment,” as such term is defined in 26 U.S.C. § 280G.

 

For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if: (i) any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding the Company and any subsidiary or affiliate and any employee benefit plan sponsored or maintained by the Company or any subsidiary or affiliate (including any trustee of such plan acting as trustee) or any current stockholder of 20% or more of the outstanding common stock, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing at least 40% of the combined voting power of the Company’s then-outstanding securities; (ii) the stockholders of the Company approve a merger, consolidation, recapitalization, or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 60% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the voting securities of the Company outstanding immediately prior to such transaction; provided that, for purposes of this Section 4(f), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 60% threshold is due solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity or of any subsidiary of the Company or such surviving entity; (iii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company of all or substantially all of its assets (or any transaction having a similar effect), or the Company sells all or substantially all of the stock of the Company to any person or entity other than an affiliate of the Company; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, together with any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii) or (iii) above) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board.

 

(g)           Timing of Certain Payments under Section 4.  Payments pursuant to Sections 4(c)(ii), 4(e)(ii), 4(f) (solely with respect to the amount determined by reference to Section 4(e)(ii) hereof

 

	
 
    	
 
    
	
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and subject to the proviso in the first sentence of Section 4(f) hereof) or 4(h) of this Agreement, if any, shall be payable in equal installments in accordance with the Company’s standard payroll practices over the applicable period of months contemplated by such Sections following the date of termination (subject to such deductions or amounts to be withheld as required by applicable law and regulations); provided, however, that if and to the extent necessary to prevent any acceleration or additional tax under Section 409A, such payments shall be made as follows:  (i) no payments shall be made for a six-month period following the date of Executive’s separation of service (as defined in Section 409A(a)(2)(B)(i) of the Code) with the Company; (ii) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-month period shall be paid in a lump sum six (6) months following the date of Executive’s separation of service with the Company (subject to such deductions or amounts to be withheld as required by applicable law and regulations); and (iii) during the period beginning six (6) months following Executive’s separation of service with the Company through the remainder of the applicable period, payment of the remaining amount due shall be payable in equal installments in accordance with the Company’s standard payroll practices (subject to such deductions or amounts to be withheld as required by applicable law and regulations).  In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, if and to the extent necessary to comply with Section 409A, amounts payable following termination of employment in a lump sum, including pursuant to Section 4(e)(iii) of this Agreement, shall instead be paid six (6) months following the date of Executive’s separation of service (subject to such deductions or amounts to be withheld as required by applicable law and regulations).

 

(h)           Benefits upon Expiration of Term of Agreement.  In the event that the Agreement expires on December 31, 2015 or on any subsequent anniversary thereof by virtue of the Company providing notice of non-renewal pursuant to Section 1 of the Agreement, the Executive will receive the following:

 

(i)            the Standard Termination Payments;

 

(ii)           an amount equal to nine months’ (i.e., 75%) of Executive’s annual base salary and 75% of Executive’s Severance Bonus Amount, such amount payable over a period of twelve (12) months after such termination in accordance with Section 4(g) of this Agreement; and

 

(iii)          subject to Section 5.6 hereof and except to the extent otherwise provided at the time of grant under the terms of any equity award to Executive and except with respect to the Special Performance-Vesting RSUs (any RSUs of which that remain unvested as of such expiration shall be forfeited upon such termination, except to the extent otherwise contemplated by the proviso in Section 3(f)(iii) of this Agreement), (A) 100% of any stock options and restricted stock units held by Executive that remain unvested as of such expiration that, in each case, were awarded to Executive on or prior to December 31, 2011 as part of a regular, formula-based award under the Company’s Management Incentive Compensation Program and (B) 50% of any stock options, restricted stock units and any other equity-based awards held by Executive that remain unvested as of such expiration that, in each case, were awarded to Executive after December 31, 2011 as part of a regular, formula-based award under the Company’s Management Incentive Compensation Program, will (in each case under sub-clause (A) and (B) above) become fully vested and non-forfeitable (provided that any such options (together with any other vested options) will cease being exercisable upon the earlier of three (3) months after such expiration and the scheduled expiration date of such options),

 

	
 
    	
 
    
	
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and, in all other respects, all such options, restricted stock units and other awards shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted; provided, however, that in the event such termination occurs prior to the Compensation Committee’s determination as to the satisfaction of any performance criteria to which any such stock options, restricted stock units and/or other equity-based awards is subject, such stock options, restricted stock units and/or other equity-based awards (as the case may be) will not vest (and, in the case of any such stock options, will not become exercisable) unless and until a determination is or has been made by the Compensation Committee that such criteria have been satisfied, at which time such stock options, restricted stock units and/or other equity-based awards (as the case may be) will vest (and, in the case of any such stock options, will become exercisable) to the extent contemplated by the terms of such award (it being understood and agreed, for the avoidance of doubt, that such stock options, restricted stock units and/or other equity-based awards (as the case may be) will immediately be forfeited to the extent contemplated by the terms of such award in the event that such criteria are determined not to have been satisfied); provided, further, however, if necessary to comply with Section 409A, settlement of any such equity-based awards shall be made on the date that is six (6) months plus one (1) day following expiration of the Term.

 

(i)            No Obligation to Mitigate.  Executive shall have no obligation to mitigate damages pursuant to this Section 4, but shall be obligated to promptly advise the Company regarding obtaining other employment providing health insurance benefits with respect to services provided to another employer during any period of continued payments pursuant to this Section 4. The Company’s obligation to make continued insurance payments to or on behalf of Executive shall be reduced by any insurance coverage obtained by Executive during the severance period through employment by another entity (without regard to when such coverage is paid).

 

(j)            Set-Off.  To the fullest extent permitted by law and provided an acceleration of income or the imposition of an additional tax under Section 409A would not result, any amounts otherwise due to Executive hereunder (including, without limitation, any payments pursuant to this Section 4) shall be subject to set-off with respect to any amounts the Executive otherwise owes the Company or any subsidiary or affiliate thereof.

 

(k)           No Other Benefits or Compensation.  Except as may be provided under this Agreement, under any other written agreement between Executive and the Company, or under the terms of any plan or policy applicable to Executive, Executive shall have no right to receive any other compensation from the Company, or to participate in any other plan, arrangement or benefit provided by the Company, with respect to any future period after such termination or resignation.

 

(l)            Release of Employment Claims; Compliance with Section 5.  Executive agrees, as a condition to receipt of any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments), that Executive will execute a general release agreement, in a form reasonably satisfactory to the Company, releasing any and all claims arising out of Executive’s employment (other than enforcement of this Agreement).  The Company shall provide Executive with the proposed form of release referred to in the immediately preceding sentence no later than two (2) days following the date of termination.  Executive shall have 21 days to consider the release and if he executes the release, shall have seven (7) days after execution of the release to revoke the release, and, absent such revocation, the release shall become binding.  Provided Executive does not revoke the release, payments contingent on the release (if any) shall be paid no earlier than eight (8) days after execution thereof in

 

	
 
    	
 
    
	
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accordance with the applicable provisions herein.  The Company’s obligation to make any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments) shall immediately cease if Executive willfully and materially breaches Section 5.1, 5.2 , 5.3, 5.4, or 5.8 hereof.

 

5.             Noncompetition; Non-solicitation; Nondisclosure; etc.

 

5.1 Noncompetition; Non-solicitation.

 

(a)           Executive acknowledges the highly competitive nature of the Company’s business and that access to the Company’s confidential records and proprietary information renders Executive special and unique within the Company’s industry. In consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3 and 4 hereof), Executive agrees that during the Term (including any extensions thereof) and during the Covered Time (as defined in Section 5.1(e) hereof), Executive, alone or with others, will not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer, employee, consultant, advisor, director or otherwise) in any Competing Business. For purposes of this Section 5, “Competing Business” shall mean any business: (i) involving: the design and production of instant lottery tickets and/or the management of related marketing and distribution programs; the manufacture, sale, operation or management of on-line lottery systems (draw games), video gaming, including fixed odds or server-based betting terminals and video lottery terminals; the development and commercialization of licensed and other proprietary game entertainment for any lottery product channels; the provision of wagering (whether pari-mutuel (pooled) or otherwise) or venue management services for racetracks and off-track betting facilities; the production and sale of prepaid cellular phone cards; and/or any other business in which the Company or its subsidiaries is then or was within the previous nine (9) months engaged in at the time of Executive’s termination; (ii) in which Executive was engaged or involved (whether in an executive or supervisory capacity or otherwise) on behalf of the Company and with respect to which Executive has obtained proprietary or confidential Company information; and (iii) that is conducted anywhere in the United States or in any other geographic area in which any business of the Company or its subsidiaries described under clause (i) above is then (or was within the previous nine (9) months) conducted at the time of Executive’s termination; provided, that, for purposes of this Section 5, the business conducted by the Company or its subsidiaries includes, without limitation, any business of the Company or its subsidiaries conducted through joint ventures or strategic investments that are accounted for under the equity method of accounting; provided, further, that, for the avoidance of doubt, a business is not a “Competing Business” for purposes of this Section 5 unless it falls within each of clauses (i), (ii) and (iii) above.  Without limiting the other restrictions in this Section 5, nothing in this Section 5.1(a) is intended to preclude the unknowing ownership or trading by Executive of securities in a Competing Business through a mutual fund or being an investment banker at a firm that represents Competing Business interests.  Moreover, the acquisition of up to 2% of the outstanding equity, debt securities, or other equity interests or any person, corporation, partnership, or other business entity for passive investment purposes shall not, in and of itself, be construed as engaging in a Competing Business.

 

(b)           In further consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3 and 4 hereof), Executive agrees that, during the Term (including any extensions thereof) and during the Covered Time, Executive shall not, directly or indirectly:  (i) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to terminate his, her, or its relationship with the Company; (ii) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to become employees, agents, consultants or representatives of any other person or entity; (iii) solicit or attempt to

 

	
 
    	
 
    
	
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induce any customer, vendor or distributor of the Company to curtail or cancel any business with the Company; or (iv) hire any person who, to Executive’s actual knowledge, is, or was within 180 days prior to such hiring, an employee of the Company.

 

(c)           During the Term (including any extensions thereof) and during the Covered Time, Executive agrees that upon the earlier of Executive’s (i) negotiating with any Competitor (as defined below) concerning the possible employment of Executive by the Competitor, (ii) responding to (other than for the purpose of declining) an offer of employment from a Competitor, or (iii) becoming employed by a Competitor, (A) Executive will provide copies of Section 5 of this Agreement to the Competitor, and (B) in the case of any circumstance described in (iii) above occurring during the Covered Time, and in the case of any circumstance described in (i) or (ii) above occurring during the Term or during the Covered Time, Executive will promptly provide notice to the Company of such circumstances. Executive further agrees that the Company may provide notice to a Competitor of Executive’s obligations under this Agreement. For purposes of this Agreement, “Competitor” shall mean any person or entity (other than the Company, its subsidiaries or affiliates) that engages, directly or indirectly, in the United States in any Competing Business.

 

(d)           Executive understands that the restrictions in this Section 5.1 may limit Executive’s ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and acknowledges that the consideration provided under this Agreement (including, without limitation, Sections 3 and 4 hereof) is sufficient to justify such restrictions. In consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees that Executive will not assert in any forum that such restrictions prevent Executive from earning a living or otherwise should be held void or unenforceable.

 

(e)           For purposes of this Section 5.1, “Covered Time” shall mean the period beginning on the date of termination of Executive’s employment (the “Date of Termination”) and ending twelve (12) months after the Date of Termination.

 

5.2       Proprietary Information; Inventions.

 

(a)           Executive acknowledges that, during the course of Executive’s employment with the Company, Executive necessarily will have (and during any employment by the Company prior to the Term has had) access to and make use of proprietary information and confidential records of the Company.  Executive covenants that Executive shall not during the Term or at any time thereafter, directly or indirectly, use for Executive’s own purpose or for the benefit of any person or entity other than the Company, nor otherwise disclose to any person or entity, any such proprietary information, unless and to the extent such disclosure has been authorized in writing by the Company or is otherwise required by law.  The term “proprietary information” means:  (i) the software products, programs, applications, and processes utilized by the Company; (ii) the name and/or address of any customer or vendor of the Company or any information concerning the transactions or relations of any customer or vendor of the Company with the Company; (iii) any information concerning any product, technology, or procedure employed by the Company but not generally known to its customers or vendors or competitors, or under development by or being tested by the Company but not at the time offered generally to customers or vendors; (iv) any information relating to the Company’s computer software, computer systems, pricing or marketing methods, sales margins, cost of goods, cost of material, capital structure, operating results, borrowing arrangements or business plans; (v) any information identified as confidential or proprietary in any line of business engaged in by the Company; (vi) any information that, to Executive’s actual knowledge, the Company ordinarily maintains as confidential or proprietary; (vii) any business plans,

 

11

 

budgets, advertising or marketing plans; (viii) any information contained in any of the Company’s written or oral policies and procedures or manuals; (ix) any information belonging to customers, vendors or any other person or entity which the Company, to Executive’s actual knowledge, has agreed to hold in confidence; and (x) all written, graphic, electronic data and other material containing any of the foregoing. Executive acknowledges that information that is not novel or copyrighted or patented may nonetheless be proprietary information.  The term “proprietary information” shall not include information generally known or available to the public or generally known or available to the industry or information that becomes available to Executive on an unrestricted, non-confidential basis from a source other than the Company or its directors, officers, Executives, or agents (without breach of any obligation of confidentiality of which Executive has actual knowledge at the time of the relevant disclosure by Executive).  Notwithstanding the foregoing and Section 5.3 hereof, Executive may disclose or use proprietary information or confidential records solely to the extent (A) such disclosure or use may be required or appropriate in the performance of his duties as a director or employee of the Company, (B) required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him to divulge, disclose or make accessible such information (provided that in such case Executive shall first give the Company prompt written notice of any such legal requirement, disclose no more information than is so required and cooperate fully with all efforts by the Company to obtain a protective order or similar confidentiality treatment for such information), (C) such information or records becomes generally known to the public or trade without his violation of this Agreement, or (D) disclosed to Executive’s spouse, attorney and/or his personal tax and financial advisors to the extent reasonably necessary to advance Executive’s tax, financial and other personal planning (each an “Exempt Person”); provided, however, that any disclosure or use of any proprietary information or confidential records by an Exempt Person shall be deemed to be a breach of this Section 5.2 or Section 5.3 by Executive.

 

(b)           Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by Executive during the Term (and during any employment by the Company prior to the Term) shall belong to the Company, provided that such Inventions grew out of Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. Executive shall further:  (i) promptly disclose such Inventions to the Company; (ii) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (iii) sign all papers necessary to carry out the foregoing; and (iv) give testimony in support of Executive’s inventorship.  If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by Executive within two (2) years after the termination of Executive’s employment with the Company, it is to be presumed that the Invention was conceived or made during the Term.  Executive agrees that Executive will not assert any rights to any Invention as having been made or acquired by Executive prior to the date of this Agreement, except for Inventions, if any, disclosed in Exhibit A to this Agreement.

 

5.3  Confidentiality and Surrender of Records.   Executive shall not, during the Term or at any time thereafter (irrespective of the circumstances under which Executive’s employment by the Company terminates), except to the extent required by law, directly or indirectly publish, make known or in any fashion disclose any confidential records to, or permit any inspection or copying of confidential records by, any person or entity other than in the course of such person’s or entity’s employment or retention by the Company, nor shall Executive retain, and will deliver promptly to the Company, any of

 

	
 
    	
 
    
	
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the same following termination of Executive’s employment hereunder for any reason or upon request by the Company.  For purposes hereof, “confidential records” means those portions of correspondence, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic tape, or electronic or other media or equipment of any kind in Executive’s possession or under Executive’s control or accessible to Executive which contain any proprietary information.  All confidential records shall be and remain the sole property of the Company during the Term and thereafter.

 

5.4  Non-disparagement.  Executive shall not, during the Term and thereafter, disparage in any material respect the Company, any affiliate of the Company, any of their respective businesses, any of their respective officers, directors or employees, or the reputation of any of the foregoing persons or entities.  Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making truthful statements that are required by applicable law, regulation or legal process.

 

5.5 No Other Obligations.  Executive represents that Executive is not precluded or limited in Executive’s ability to undertake or perform the duties described herein by any contract, agreement or restrictive covenant.  Executive covenants that Executive shall not employ the trade secrets or proprietary information of any other person in connection with Executive’s employment by the Company without such person’s authorization.

 

5.6 Forfeiture of Outstanding Equity Awards; “Clawback” Policies.  The provisions of Section 4 hereof notwithstanding, if Executive willfully and materially fails to comply with Section 5.1, 5.2, 5.3, 5.4, or 5.8 hereof, all options to purchase common stock, restricted stock units and other equity-based awards granted by the Company (whether prior to, contemporaneous with, or subsequent to the date hereof) and held by Executive or a transferee of Executive shall be immediately forfeited and cancelled.  Executive acknowledges and agrees that, notwithstanding anything contained in this Agreement or any other agreement, plan or program, any incentive-based compensation or benefits contemplated under this Agreement (including Incentive Compensation and equity-based awards) shall be subject to recovery by the Company under any compensation recovery or “clawback” policy, generally applicable to senior executives of the Company, that the Company may adopt from time to time, including without limitation any policy which the Company may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Company’s common stock may be listed.

 

5.7 Enforcement.  Executive acknowledges and agrees that, by virtue of Executive’s position, services and access to and use of confidential records and proprietary information, any violation by Executive of any of the undertakings contained in this Section 5 would cause the Company immediate, substantial and irreparable injury for which it has no adequate remedy at law.  Accordingly, Executive agrees and consents to the entry of an injunction or other equitable relief by a court of competent jurisdiction restraining any violation or threatened violation of any undertaking contained in this Section 5.  Executive waives posting of any bond otherwise necessary to secure such injunction or other equitable relief.  Rights and remedies provided for in this Section 5 are cumulative and shall be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.

 

5.8 Cooperation with Regard to Litigation.  Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by being available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative.  In addition, except to the extent that Executive has or intends to assert in good faith an interest or position adverse to or inconsistent with the

 

	
 
    	
 
    
	
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interest or position of the Company, Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), to assist the Company in any such action, suit, or proceeding by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, in each case, as reasonably requested by the Company.  The Company agrees to pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred in connection with Executive’s cooperation and assistance including, without limitation, reasonable fees and disbursements of counsel, if any, chosen by Executive if Executive reasonably determines in good faith, on the advice of counsel, that the Company’s counsel may not ethically represent Executive in connection with such action, suit or proceeding due to actual or potential conflicts of interests.

 

5.9 Survival.  The provisions of this Section 5 shall survive the termination of the Term and any termination or expiration of this Agreement.

 

5.10 Company.  For purposes of this Section 5, references to the “Company” shall include the Company and each subsidiary and/or affiliate of the Company.

 

6.             Code of Conduct.  Executive acknowledges that he has read the Company’s Code of Conduct and agrees to abide by such Code, as amended or supplemented from time to time, and other policies applicable to employees and executives of the Company.

 

7.             Indemnification.  The Company shall indemnify and advance expenses to (subject to receipt by the Company of an undertaking by or on behalf of Executive to repay such advanced amounts if it shall ultimately be determined that Executive is not entitled to be indemnified) Executive to the full extent permitted under the Company’s Certificate of Incorporation or By-Laws and pursuant to any other agreements or policies in effect from time to time in connection with any action, suit or proceeding to which the Executive may be made a party by reason of Executive being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company.

 

8.             Assignability; Binding Effect.  Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution and as specified below.  The Company may assign this Agreement and the Company’s rights and obligations hereunder, and shall assign this Agreement and such rights and obligations, to any Successor (as hereinafter defined) which, by operation of law or otherwise, continues to carry on substantially the business of the Company (or a business unit of the Company for which Executive provided services) prior to the event of succession, and the Company shall, as a condition of the succession, require such Successor to agree in writing to assume the Company’s obligations and be bound by this Agreement.  For purposes of this Agreement, “Successor” shall mean any person that succeeds to, or has the practical ability to control, the Company’s business directly or indirectly, by merger or consolidation, by purchase or ownership of voting securities of the Company or all or substantially all of its assets.  The Company may also assign this Agreement and the Company’s rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to Executive hereunder.  This Agreement shall be binding upon and inure to the benefit of Executive, Executive’s heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

 

9.             Complete Understanding; Amendment; Waiver.  This Agreement constitutes the complete understanding between the parties hereto with respect to the employment of Executive and supersedes all other prior agreements and understandings, both written and oral, between the parties

 

	
 
    	
 
    
	
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hereto with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party hereto with respect thereto except as expressly set forth herein.  Except as contemplated by Section 3(g) hereof, this Agreement shall not be modified, amended or terminated except by a written instrument signed by each of the parties hereto.  Any waiver of any term or provision hereof, or of the application of any such term or provision to any circumstances, shall be in writing signed by the party hereto charged with giving such waiver.  Waiver by either party hereto of any breach hereunder by the other party hereto shall not operate as a waiver of any other breach, whether similar to or different from the breach waived.  No delay by either party hereto in the exercise of any rights or remedies shall operate as a waiver thereof, and no single or partial exercise by either party hereto of any such right or remedy shall preclude other or further exercise thereof.

 

10.           Severability.  If any provision of this Agreement or the application of any such provision to any person or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law.  If any provision of this Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court making such determination shall reduce the scope, duration and/or area of such provision (and shall substitute appropriate provisions for any such invalid or unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced.  The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants contained in this Agreement, then that invalid or unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced.  In the event that any court determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent invalid or unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable.

 

11.           Survivability.  The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive’s employment hereunder, or of this Agreement, shall so survive such termination, whether or not such provisions expressly state that they shall so survive.

 

12.           Governing Law; Arbitration.

 

(a)           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be wholly performed within that State, without regard to its conflict of laws provisions.

 

(b)           Arbitration.

 

(i)            The Executive and the Company agree that, except for claims for workers’ compensation, unemployment compensation and any other claim that is non-arbitrable under applicable law, final and binding arbitration shall be the exclusive forum for any dispute or controversy between them, including, without limitation, disputes arising under or in connection with this Agreement, Executive’s employment, and/or termination of employment, with the Company; provided, however, that the Company shall be entitled to commence an action in any court of competent jurisdiction for injunctive relief in connection with any alleged actual or

 

	
 
    	
 
    
	
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threatened violation of any provision of Section 5 hereof.  Judgment may be entered on the arbitrators’ award in any court having jurisdiction.  For purposes of entering such judgment or seeking injunctive relief with regard to Section 5 hereof, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Southern District of New York; (ii) the Supreme Court of the State of New York, New York County; or (iii) any other court having jurisdiction; provided that damages for any alleged violation of Section 5 hereof, as well as any claim, counterclaim or cross-claim brought by Executive or any third-party in response to, or in connection with any court action commenced by the Company seeking said injunctive relief shall remain exclusively subject to final and binding arbitration as provided for herein.  The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which either may now or hereafter have to such jurisdiction, venue and any defense of inconvenient forum.  Thus, except for the claims carved out above, this Agreement includes all common-law and statutory claims (whether arising under federal state or local law), including, but not limited to, any claim for breach of contract, fraud, fraud in the inducement, unpaid wages, wrongful termination, and gender, age, national origin, sexual orientation, marital status, disability, or any other protected status.

 

(ii)           Any arbitration under this Agreement shall be filed exclusively with, and administered by, the American Arbitration Association in New York, New York before three arbitrators, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration.  The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  The Company shall pay all costs uniquely attributable to arbitration, including the administrative fees and costs of the arbitrators.  Each party shall pay that party’s own costs and attorney fees, if any, unless the arbitrators rule otherwise.  Executive understands that he is giving up no substantive rights, and this Agreement simply governs forum.  The arbitrators shall apply the same standards a court would apply to award any damages, attorney fees or costs.  Executive shall not be required to pay any fee or cost that he would not otherwise be required to pay in a court action, unless so ordered by the arbitrators.

 

(c)           WAIVER OF JURY TRIAL.  BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS ARBITRATION PROVISION.

 

13.           Titles and Captions.  All paragraph titles or captions in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provision hereof.

 

14.           Joint Drafting.  In recognition of the fact that the parties hereto had an equal opportunity to negotiate the language of, and draft, this Agreement, the parties acknowledge and agree that there is no single drafter of this Agreement and, therefore, the general rule that ambiguities are to be construed against the drafter is, and shall be, inapplicable.  If any language in this Agreement is found or claimed to be ambiguous, each party hereto shall have the same opportunity to present evidence as to the actual intent of the parties hereto with respect to any such ambiguous language without any inference or presumption being drawn against any party hereto.

 

	
 
    	
 
    
	
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15.           Notices.  All notices and other communications to be given or to otherwise be made to any party to this Agreement shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by certified mail or by a recognized national courier service, postage or charges prepaid, (a) to Scientific Games Corporation, Attn: General Counsel, at 750 Lexington Avenue, 25th Floor, New York, NY 10022, (b) to Executive, at the last address shown in the Company’s records, or (c) to such other replacement address as may be designated in writing by the addressee to the addressor.

 

	
 
    	
 
    
	
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on April 26, 2012.

 

	
 
    	
 
    
	
 
    	
SCIENTIFIC   GAMES CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   A. Lorne Weil 
    
	
 
    	
Name:
    	
A.   Lorne Weil
    
	
 
    	
Title:
    	
Chairman   and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Jeffrey S. Lipkin
    
	
 
    	
Name:
    	
Jeffrey   S. Lipkin
    

 

	
 
    	
 
    
	
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Exhibit A

 

Inventions

 

None

 

	
 
    	
 
    
	
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19ex10_1.htm

Exhibit 10.1

 

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL

TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL

HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,

AND THE REDACTED TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH

TWO ASTERISKS (**)

 

 

 

 

NOBLE ENERGY MEDITERRANEAN LTD.

 

DELEK DRILLING LIMITED PARTNERSHIP

 

ISRAMCO NEGEV 2 LIMITED PARTNERSHIP

 

AVNER OIL EXPLORATION LIMITED PARTNERSHIP

 

DOR GAS EXPLORATION LIMITED PARTNERSHIP

 

and

 

THE ISRAEL ELECTRIC CORPORATION LIMITED

 

 

GAS SALE AND

 

PURCHASE AGREEMENT

 

 

 

 

DATED March 14, 2012

 

  

  

  

 

INDEX

 

	
Article

	
Title

	
Page

	 	 	 
	
‎Article 1

	
Definitions

	
6

	 	 	 
	
‎Article 2

	
Period of Agreement and Commissioning

	
23

	 	 	 
	
‎Article 3

	
Agreement for Sale and Purchase

	
30

	 	 	 
	
‎Article 4

	
Warranties, Covenants and Taxes

	
31

	 	 	 
	
‎Article 5

	
Sellers’ Rights/Commingling and Unitization

	
38

	 	 	 
	
‎Article 6

	
Quantities and Nominations

	
39

	 	 	 
	
‎Article 7

	
Facilities

	
50

	 	 	 
	
‎Article 8

	
Exchange of Information

	
51

	 	 	 
	
‎Article 9

	
Take or Pay

	
55

	 	 	 
	
‎Article 10

	
Price, Price Review and Adjustment

	
59

	 	 	 
	
‎Article 11

	
Billing and Payment

	
68

	 	 	 
	
‎Article 12

	
Quality

	
74

	 	 	 
	
‎Article 13

	
Delivery Point

	
76

	 	 	 
	
‎Article 14

	
Pressure

	
77

	 	 	 
	
‎Article 15

	
Measurement

	
78

	 	 	 
	
‎Article 16

	
Force Majeure

	
80

	 	 	 
	
‎Article 17

	
Default

	
84

	 	 	 
	
‎Article 18

	
Assignment and Security Interests

	
89

 

  

2

  

 

	
‎Article 19

	
Governing Law and Dispute Resolution

	
95

	 	 	 
	
‎Article 20

	
Security and Credit Cover

	
104

	 	 	 
	
‎Article 21

	
Relationship and Sellers’ Coordinator

	
106

	 	 	 
	
‎Article 22

	
Immunity

	
109

	 	 	 
	
‎Article 23

	
Miscellaneous Provisions

	
110

 

Schedules

 

	
1

	
Sellers' Petroleum Rights

	 	 
	
2

	
Sellers’ Percentages and Sellers' Interest

	 	 
	
3

	
Sellers' Agreements

	 	 
	
4

	
List of Charges on Sellers' Petroleum Rights

	 	 
	
5

	
Specification

	 	 
	
6

	
Corporate Guarantee

	 	 
	
7

	
Bank Guarantee

	 	 
	
8

	
Letter of Credit

	 	 
	
9

	
Delivery Point Diagram (**)

	 	 
	
10

	
Form of Buyer's Consent (**)

 

  

3

  

 

THIS AGREEMENT is entered into on the 14th day of March 2012

 

BETWEEN

 

	
(1)

	
Noble Energy Mediterranean Ltd., a Cayman Islands company that has limited liability, registered in Israel as a foreign company No. 560017162, having its principal place of business at 12 Abba Eban Boulevard, Herzlia, 46725 Israel;

 

Delek Drilling Limited Partnership, an Israeli Limited Partnership having its principal place of business at 12 Abba Eban Boulevard, Herzlia, 46725 Israel;

 

Isramco Negev 2 Limited Partnership, an Israeli limited partnership having its principal place of business at 8 Granit Street, Petach Tikva, 49222, Israel;

 

Avner Oil Exploration Limited Partnership, an Israeli Limited Partnership having its principal place of business at 12 Abba Eban Boulevard, Herzlia, 46725 Israel; and

 

Dor Gas Exploration Limited Partnership, an Israeli limited partnership having its principal place of business at France Building, Europark, P.O. Box 10, Yakum, 60972, Israel;

 

(each a "Seller" and together the "Sellers") of the one part; and

 

	
(2)

	
The Israel Electric Corporation Limited, an Israeli Company having its principal place of business at 1 Nativ Haor Street, Haifa, 31000 Israel (the "Buyer") of the other part.

 

The Sellers on the one part and the Buyer on the other part are a "Party" to this Agreement and the Sellers and the Buyer are collectively "Parties" to this Agreement.

 

WHEREAS

 

	
(A)

	
The Sellers' Petroleum Rights have been granted to the Sellers and the Sellers have entered into the Sellers' Agreements.

 

	
(B)

	
Under and by virtue of the Sellers' Petroleum Rights and the Sellers' Agreements:

 

	
  

	
(1)

	
Operations have been carried out by the Sellers and as a result accumulations of Natural Gas currently estimated to be in excess of two hundred and fifty Billion Cubic Meters (250 BCM) (Proved and Probable reserves) have been discovered within the Reservoir; and

 

	
  

	
(2)

	
The Sellers are the owners of the Sellers' Interest and parties to the Sellers’ Agreements.

 

  

4

  

 

	
(C)

	
The Sellers desire to sell to the Buyer and the Buyer desires to buy from the Sellers, at the Delivery Point Natural Gas during the Contract Period, upon and subject to the terms and conditions herein contained.

 

NOW IT IS HEREBY AGREED AS FOLLOWS

 

  

5

  

 

ARTICLE 1

 

Definitions

 

	
1.1

	
Defined Terms

 

Except where the context otherwise indicates or requires the following terms in this Agreement shall have the following meanings:

 

	
  

	
1.1.1

	
"Act of Insolvency" means, if, as to any Person, an order is made by a court or an effective resolution is passed for the reorganization under any bankruptcy law, dissolution, liquidation, administration or winding up of such Person; an application for the dissolution, liquidation, administration or winding up of such Person is submitted to the courts and is not withdrawn or dismissed within ninety (90) days; such Person dissolves, liquidates, is wound up, or otherwise terminates its existence; such Person becomes insolvent, bankrupt or makes an assignment for the benefit of creditors (other than an assignment permitted under Article ‎18.6 of this Agreement); or a receiver or administrator is appointed for a substantial part of such Person's assets and such appointment is not withdrawn or cancelled within thirty (30) days.

 

	
  

	
1.1.2

	
"Actual Increase Date" means the date upon which the Sellers notify the Buyer that they have completed the commissioning and testing of the facilities contemplated by the Sellers' Additional Development Plan but not later than ninety (90) days following the Additional Flow Date.

 

	
  

	
1.1.3

	
"Additional Delay Period" has the meaning set out in Article ‎6.4.11.

 

	
  

	
1.1.4

	
"Additional Delivery Point" has the meaning set out in Article ‎13.1.

 

	
  

	
1.1.5

	
"Additional Flow Date" means the date on which the Sellers' Additional Facilities are completed to the extent required in order to enable Sellers to deliver Gas at the Delivery Point in accordance with the Buyer's Proper Nominations following the coming into effect of the increased MaxHQ as a consequence of the Buyer's exercise of the Increase Option.

 

  

6

  

 

	
  

	
1.1.6

	
"Adjusted Annual Contract Quantity" or "Adjusted ACQ" has the meaning set out in Article ‎9.1.2.

 

	
  

	
1.1.7

	
"Affected Party" has the meaning set out in Article ‎16.8.

 

	
  

	
1.1.8

	
"Affiliate" means a company, partnership or other legal entity, which controls, is controlled by, or which is controlled by an entity that controls, any of the Sellers or the Buyer. Control means the ownership, directly or indirectly, of fifty percent (50%) or more of the voting rights, and/or the power to appoint half or more of the directors, in a company, partnership or other legal entity. With respect to any of the Sellers that are limited partnerships, Affiliates shall include the general partner of such limited partnership, and any company, partnership or other legal entity, which controls, or which is controlled by an entity that controls the general partner.

 

	
  

	
1.1.9

	
"Annual Contract Quantity" or "ACQ" has the meaning set out in Article ‎6.1.

 

	
  

	
1.1.10

	
"Annual Reconciliation Statement" has the meaning set out in Article ‎11.2.1.

 

	
  

	
1.1.11

	
"Annual Take or Pay Quantity" has the meaning set out in Article ‎9.3.1.

 

	
  

	
1.1.12

	
"Anti-trust Consent" means any consent or approval required under the Israel Restrictive Trade Practices Law 1988 in relation to this Agreement to be granted by the appropriate authority or court, such consent or approval to be final and unconditional or, if not, then subject to conditions which have been agreed to by the Party or Parties to whom such conditions apply.

 

  

7

  

 

	
  

	
1.1.13

	
"Approval Date" means forty five (45) Days following the Effective Date.

 

	
  

	
1.1.14

	
"Ashdod Delivery Point" has the meaning set out in Article ‎13.1.

 

	
  

	
1.1.15

	
"Banks" has the meaning set out in Article ‎18.6.1.

 

	
  

	
1.1.16

	
"Bar" means pressure equal to one hundred thousand (100,000) Pascals (Pascal: as defined in ISO 1000:1981(E)).

 

	
  

	
1.1.17

	
"BTU" means an amount of heat equal to one thousand and fifty-five decimal zero six (1,055.06) Joules (Joules: as defined in ISO 1000:1981(E)).

 

	
  

	
1.1.18

	
"Business Day" means any day except a Friday, a Saturday and a day on which banks are closed for business in Israel.

 

	
  

	
1.1.19

	
"Buyer's Actual Generation" means the aggregate gross quantity of electricity generated in any Contract Year by the Buyer (in TWH) from all types of fuels, including (**).

 

	
  

	
1.1.20

	
"Buyer's Capacity Notice" has the meaning set out in Article ‎17.3.3(c).

 

	
  

	
1.1.21

	
"Buyer's Facilities" means the equipment installed by or on behalf of the Buyer at the entry to the Downstream System for the purposes of enabling the Buyer to receive Specification Gas to be delivered under this Agreement at the Delivery Point.

 

	
  

	
1.1.22

	
"Buyer's Stations" means the gas fired power stations and all related equipment and machinery, owned or operated by the Buyer, as are necessary from time to time to generate and distribute electricity.

 

  

8

  

 

	
  

	
1.1.23

	
"Calendar Year" means a period beginning at 0600 on the first day of January in any calendar year and ending at 0600 on the first day of January of the next succeeding calendar year.

 

	
  

	
1.1.24

	
"Carry Forward" has the meaning set out in Article ‎9.2.1.

 

	
  

	
1.1.25

	
"Carry Forward Aggregate" has the meaning set out in Article ‎9.2.2.

 

	
  

	
1.1.26

	
"Charged Assets" has the meaning set out in Article ‎18.6.3.

 

	
  

	
1.1.27

	
"Cold Start" means recommencement of supply of Specification Gas through Sellers’ Facilities after the Sellers’ Facilities did not supply Specification Gas to any purchasers for a period of at least one (1) Hour which resulted in a shut-down of the Sellers’ Facilities.

 

	
  

	
1.1.28

	
"Commencement Date" means the first Day immediately following the last day of the Commissioning Period.

 

	
  

	
1.1.29

	
"(**)" has the meaning set out in Article 17.3.1.

 

	
  

	
1.1.30

	
"Commissioning Period" has the meaning set out in Article ‎2.4.1.

 

	
  

	
1.1.31

	
"Contract Period" means the period mentioned in Article ‎2.1.1.

 

	
  

	
1.1.32

	
"Contract Price" means the amount, in US Dollars, calculated in accordance with Article ‎10.1.

 

	
  

	
1.1.33

	
"Contract Year" means the following periods (as applicable):

 

	 	
(a)

	
the period beginning at 0600 on the Commencement Date and ending at 0600 on the immediately following first day of January; and

 

  

9

  

 

	 	
(b)

	
the period beginning at 0600 on the first day of January immediately after the Commencement Date and ending at the same hour on the first day of January in the immediately succeeding Calendar Year and thereafter during the Contract Period any successive period of twelve (12) consecutive Months commencing at 0600 on the first day of January in each Calendar Year except for the Calendar Year in which the Contract Period ends; and

 

	 	
(c)

	
in the year in which the Contract Period ends, the period beginning at 0600 on the first day of January and ending at 0600 on the last Day of the Contract Period.

 

	
  

	
1.1.34

	
"CPI" has the meaning set out in Article ‎10.1.3.

 

	
  

	
1.1.35

	
"Credit Cover" means any of the following forms of guarantee: (i) a corporate guarantee substantially in the form set out in Schedule 6 ("Corporate Guarantee"), provided by Alon Natural Gas Exploration Ltd. for Dor Gas Exploration Limited Partnership; or (ii) a bank guarantee substantially in the form set out in Schedule 7 ("Bank Guarantee"); or (iii) a Letter of Credit substantially in the form set out in Schedule 8 ("Letter of Credit"), issued by one of the top three (3) Israeli Banks or issued by a non Israeli Bank whose Credit Rating is at least S&P’s rating group "A" or Moody’s rating "A2".

 

	
  

	
1.1.36

	
"Cubic Meter" or "m3" means when applied to gas that quantity of gas which at fifteen (15) degrees Celsius and at an absolute pressure of one decimal zero one three two five (1.01325) Bar and the gas being free of water vapor, occupies the volume of one (1) cubic meter, being a meter as defined in ISO 1000: 1981(E).

 

	
  

	
1.1.37

	
"Daily Delivery Tolerance" has the meaning set out in Article ‎6.7.1(b).

 

  

10

  

 

	
  

	
1.1.38

	
"Daily Contract Quantity" or "DCQ" has the meaning set out in Article ‎6.2.1.

 

	
  

	
1.1.39

	
"Day" means a period of twenty-four (24) hours beginning at 0600 on any day and ending at 0600 on the following day.

 

	
  

	
1.1.40

	
"Deemed Increase Date" means the Day immediately prior to the fourth (4th) anniversary of the Sellers' Additional Conditions Date (if applicable).

 

	
  

	
1.1.41

	
"Delivery Point" has the meaning set out in Article ‎13.1.

 

	
  

	
1.1.42

	
"Delivery Pressure" has the meaning set out in Article ‎14.1.1.

 

	
  

	
1.1.43

	
"Delivery Tolerances" has the meaning set out in Article ‎6.7.1.

 

	
  

	
1.1.44

	
"Disclosed Information" has the meaning set out in Article ‎8.5.1.

 

	
  

	
1.1.45

	
"Dispute" has the meaning set out in Article ‎19.2.

 

	
  

	
1.1.46

	
"Downstream System" means the pipelines, installations and other facilities owned and/or operated by the Transporter downstream of the Delivery Point necessary for the transportation of Gas from the Delivery Point to Buyer’s Stations.

 

	
  

	
1.1.47

	
"Effective Date" means the date of execution of this Agreement.

 

	
  

	
1.1.48

	
"Excess Gas" has the meaning set out in Article ‎6.9.3.

 

	
  

	
1.1.49

	
"Expert" means any Person appointed from time to time under and subject to the provisions of Article ‎19.3.

 

	
  

	
1.1.50

	
"Extended Contract Period" has the meaning set out in Article ‎2.1.2.

 

	
  

	
1.1.51

	
"First Period" means the period Commencing on the Commencement Date and ending on the earlier of: (i) the Increase Date (if applicable); and (ii) the last Day of the Contract Period.

 

  

11

  

 

	
  

	
1.1.52

	
"Flow Date" has the meaning set out in Article ‎2.2.1.

 

	
  

	
1.1.53

	
"Force Majeure" has the meaning set out in Article ‎16.1.

 

	
  

	
1.1.54

	
"Gas" means Natural Gas, Specification Gas or both, as the context may permit or require.

 

	
  

	
1.1.55

	
"Gauge" means the pressure in excess of one decimal zero one three two five (1.01325) Bar (which is one (1) standard atmosphere).

 

	
  

	
1.1.56

	
"Governmental Approval" means the consent or approval of the Government of Israel pursuant to section 11(A)(9A) of the Government Companies Law, 5735-1975 in relation to this Agreement, such consent or approval to be final and unconditional or, if not, then subject to conditions which have been agreed to by the Party or Parties to whom such conditions apply.

 

	
  

	
1.1.57

	
"Higher Heating Value" means the superior (higher) real calorific value as described in ISO: 6976:1995 (E) of one Cubic Meter of Natural Gas at the reference condition of 15/15 Degrees Celsius and 1.01325 Bar (a) for the actual natural gas in the real state.

 

	
  

	
1.1.58

	
"Hour" means a period of sixty (60) minutes beginning on the hour.

 

	
  

	
1.1.59

	
"Hourly Delivery Tolerance" has the meaning set out in Article ‎6.7.1(a).

 

	
  

	
1.1.60

	
"IF" has the meaning set out in Article ‎10.1.3.

 

	
  

	
1.1.61

	
"Increase Date" means the Actual Increase Date or the Deemed Increase Date, as determined in accordance with Article ‎6.4.10.

 

	
  

	
1.1.62

	
"Increase Notice" has the meaning set out in Article ‎6.4.1.

 

  

12

  

 

	
  

	
1.1.63

	
"Increase Option" means the option for the Buyer in accordance with Article ‎6.4 to increase the MaxHQ to (**) MMBTU together with a corresponding increase of the DCQ to (**) MMBTU.

 

	
  

	
1.1.64

	
"Initial Quota" has the meaning set out in Article ‎9.4.1.

 

	
  

	
1.1.65

	
"Installed Capacity" means (i) with respect to Sellers' Fueled Electricity Producer's production units that are supplied exclusively by the Sellers, the aggregate electricity production capacity (in MW) stipulated in the nameplate of such units; and (ii) with respect to Sellers' Fueled Electricity Producer's production units that are supplied by the Sellers on a non-exclusive basis, a proportionate part of the aggregate electricity production capacity (in MW) stipulated in the nameplate of such units calculated based on the ratio of: (i) the annual contract quantity of gas to be supplied by the Sellers to such Sellers' Fueled Electricity Producer; and (ii) the aggregate quantity of gas to be supplied to such Sellers' Fueled Electricity Producer from Sellers and from other sources.

 

	
  

	
1.1.66

	
"LCIA" means the London Court of International Arbitration.

 

	
  

	
1.1.67

	
"LIBOR" means London Interbank Offered Rate for three (3) month maturities, for US Dollar deposits, as published on the first banking day following any relevant due date for payment under this Agreement by the Wall Street Journal or if not so published, then by the Financial Times of London.

 

	
  

	
1.1.68

	
"Maintenance" has the meaning set out in Article ‎6.11.1.

 

	
  

	
1.1.69

	
"Maintenance Period" has the meaning set out in Article ‎6.11.1.

 

	
  

	
1.1.70

	
"Make-Up Aggregate" has the meaning set out in Article ‎9.3.4.

 

  

13

  

 

	
  

	
1.1.71

	
"Maximum Hourly Quantity" or "MaxHQ" has the meaning set out in Article ‎6.3.

 

	
  

	
1.1.72

	
"Minimum Bill Quantity" or "MBQ" has the meaning set out in Article ‎9.1.3.

 

	
  

	
1.1.73

	
"MMBTU" means one million (1,000,000) BTUs.

 

	
  

	
1.1.74

	
"Month" means a period beginning at 0600 on the first day of any calendar month and ending at 0600 on the first day of the next succeeding calendar month.

 

	
  

	
1.1.75

	
"Monthly Statement" has the meaning set out in Article ‎11.1.1.

 

	
  

	
1.1.76

	
"MW" means one million watts.

 

	
  

	
1.1.77

	
"Nameplate Capacity of Sellers' Facilities" means the expected maximum capacity of the Sellers' Facilities as determined in the design basis of such facilities.

 

	
  

	
1.1.78

	
"Natural Gas" means any hydrocarbons (or mixture of hydrocarbons and other gases consisting primarily of methane) which at fifteen (15) Degrees Celsius and atmospheric pressure are or is in the gaseous state.

 

	
  

	
1.1.79

	
"Net Annual TOP Quantity" has the meaning set out in Article ‎9.3.2(a).

 

	
  

	
1.1.80

	
"New Producers Adjustment Quantity" has the meaning set out in Article ‎9.4.1(a).

 

	
  

	
1.1.81

	
"Non-Interruptible Gas Sales Agreements" means agreements entered into by the Sellers in which the Sellers undertook to deliver Gas to a purchaser at the Delivery Point through Sellers' Facilities, but excluding any agreement pursuant to which the Sellers have the right to curtail supply of gas in circumstances of insufficient capacity in Sellers' Facilities.

 

	
  

	
1.1.82

	
"Off-Spec Gas" means Natural Gas that does not conform to the Specification.

 

  

14

  

 

	
  

	
1.1.83

	
"Over Deliveries" has the meaning set out in Article ‎6.10.

 

	
  

	
1.1.84

	
"Period Shortfall" has the meaning set out in Article ‎17.1.6.

 

	
  

	
1.1.85

	
"Person" includes any person, firm, partnership, association, company, body corporate, or individual.

 

	
  

	
1.1.86

	
"Petroleum Law" means the Israel Petroleum Law 5712-1952.

 

	
  

	
1.1.87

	
"Price Adjustment" has the meaning set out in Article ‎10.7.1.

 

	
  

	
1.1.88

	
"Price Adjustment Date" has the meaning set out in Article ‎10.7.1.

 

	
  

	
1.1.89

	
"Price Adjustment Notice" has the meaning set out in Article ‎10.7.1.

 

	
  

	
1.1.90

	
"Price Control Event" means the issuance, imposition or enactment of a decree, ruling, declaration, regulation, order, directive, instruction or other legal instrument, pursuant to the Israeli Prices of Commodities and Services (Supervision) Law, 5756-1996 or to any other law or regulation, the effect of which is the reduction of the amount to be received by Sellers for Gas to be delivered to the Buyer pursuant to this Agreement.

 

	
  

	
1.1.91

	
"Price Period" means a Calendar Year.

 

	
  

	
1.1.92

	
"Proper Nomination" has the meaning set out in Article ‎6.9.1.

 

	
  

	
1.1.93

	
"Properly Nominated" has the meaning set out in Article ‎6.9.1.

 

	
  

	
1.1.94

	
"Proved and Probable Reserves" means the sum of Proved Reserves and Probable Reserves as these terms are defined in the 2007 Petroleum Resource Management System (PRMS) approved by the Society of Petroleum Engineers (SPE).

 

	
  

	
1.1.95

	
"Provisional Contract Price" has the meaning set out in Article ‎10.6.1(a).

 

  

15

  

 

	
  

	
1.1.96

	
"PUA Approval" means any consent or approval required in relation to this Agreement to be granted by the Israeli Public Utilities Authority- Electricity, such consent or approval to be final and unconditional or, if not, then subject to conditions which have been agreed to by the Party or Parties to whom such conditions apply.

 

	
  

	
1.1.97

	
"Reasonable and Prudent Operator" means a Person seeking in good faith to perform its contractual obligations and in so doing and in the general conduct of its undertaking exercising that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced operator complying with the applicable law and industry standards engaged in the same type of undertaking under the same or similar circumstances and conditions.

 

	
  

	
1.1.98

	
"Representative Rate" means the representative rate of exchange of the New Israeli Shekel against the US Dollar, as published by the Bank of Israel.

 

	
  

	
1.1.99

	
"Reservoir" means that reservoir (currently known as the Tamar field) covered by Petroleum Lease I/12"Tamar" and which is more particularly identified in Schedule 1.

 

	 	
1.1.100

	
"Reservoir Event" has the meaning set out in Article ‎16.2.1.

 

	 	
1.1.101

	
"Review Month" has the meaning set out in Article ‎10.1.1.

 

	 	
1.1.102

	
"Sanction Notice" has the meaning set out in Article ‎6.4.2(b).

 

	 	
1.1.103

	
"Sanction of the Additional Development" means the approval by the Sellers under the Sellers' Agreements of a program and budget for the Sellers' Additional Development Plan.

 

	 	
1.1.104

	
"Second Period" means the period commencing on the Increase Date (if applicable) and ending on the last Day of the Contract Period.

 

  

16

  

 

	 	
1.1.105

	
"Sellers' Additional Conditions" has the meaning set out in Article ‎6.4.4.

 

	 	
1.1.106

	
"Sellers' Additional Conditions Date" means the date on which the Sellers' Additional Conditions are satisfied or waived by the Sellers.

 

	 	
1.1.107

	
"Sellers' Additional Development Plan" means the plan for the construction and installation by or on behalf of the Sellers of additional facilities including the Sellers' Additional Pipeline and if applicable the Sellers' Additional Receiving Facilities and gas storage facilities in the Mari-B reservoir, as may be required for the increase of the total capacity of the Sellers' Facilities to enable delivery of Gas to the Ashdod Delivery Point and/or the Additional Delivery Point (as applicable), at cumulative peak rates of at least (**) MMBTU per (**) and (**) MMBTU per (**), for the purposes of fulfilling the Sellers' obligations to deliver Specification Gas in response to the Buyer's Proper Nominations in the case of an increase of the MaxHQ pursuant to the provisions of Article ‎6.4. It is clarified that the Sellers will not be required to increase the maximum rate of production from the Reservoir to more than (**) MMBTU per (**).

 

	 	
1.1.108

	
"Sellers' Additional Facilities" means the Sellers' Additional Pipeline and, if applicable, the Sellers' Additional Receiving Facilities.

 

	 	
1.1.109

	
"Sellers' Additional Pipeline" means a new pipeline, owned or operated by or on behalf of the Sellers, connecting the new platform to be installed by the Sellers in the area of the "Ashkelon" I/10 Lease to the Sellers' Additional Receiving Facilities (if applicable) or to the Yam Tethys Facilities.

 

	 	
1.1.110

	
"Sellers' Additional Receiving Facilities" means the new facilities, to be owned or operated by or on behalf of the Sellers, for the receipt, pressure reduction, processing, treatment, measurement and/or delivery of Gas that will be transported from the Sellers' Petroleum Rights through the Sellers' Additional Pipeline to the Ashdod Delivery Point or the Additional Delivery Point.

 

  

17

  

 

	 	
1.1.111

	
"Sellers' Agreements" means the agreements or arrangements between the Sellers, listed in Schedule 3.

 

	 	
1.1.112

	
"Sellers' Capacity Increase Notice" has the meaning set out in Article ‎17.3.3(b).

 

	 	
1.1.113

	
"Sellers’ Coordinator" has the meaning set out in Article ‎21.2.1.

 

	 	
1.1.114

	
"Sellers' Delay Period" has the meaning set out in Article ‎2.3.2.

 

	 	
1.1.115

	
"Sellers’ Facilities" means such platforms, wells, pipelines, installations and other equipment, installed or to be installed by or on behalf of the Sellers, as are necessary from time to time to produce, process, transport, measure and deliver Specification Gas at the Delivery Point pursuant to this Agreement including the Yam-Tethys Facilities and if applicable, the Sellers' Additional Facilities.

 

	 	
1.1.116

	
"Sellers' Fueled Electricity Producers" means any Private Electricity Producer, as defined in the Electricity Sector Law 5756-1996, that is (**).

 

	 	
1.1.117

	
"Sellers' Interest" means the aggregate total of the Seller’s Percentages.

 

	 	
1.1.118

	
"Sellers' Lenders" has the meaning set out in Article ‎18.6.4.

 

	 	
1.1.119

	
"Sellers' (**)" means Sellers having entered into (**).

 

	 	
1.1.120

	
"Sellers' Petroleum Rights" means those petroleum rights in relation to the Reservoir under the Petroleum Law, to which the Sellers are party and which are set out in Schedule 1.

 

  

18

  

 

	 	
1.1.121

	
"Seller's Percentage" means the respective interests of the Sellers, expressed as a percentage, in the Sellers' Petroleum Rights as set out in Schedule 2.

 

	 	
1.1.122

	
"Shortfall Aggregate" has the meaning set out in Article ‎17.2.1.

 

	 	
1.1.123

	
"Shortfall Gas" has the meaning set out in Article ‎17.1.1.

 

	 	
1.1.124

	
"Shortfall Price" has the meaning set out in Article ‎10.8.3.

 

	 	
1.1.125

	
"Specification" has the meaning set out in Article ‎12.1.1.

 

	 	
1.1.126

	
"Specification Gas" means Natural Gas that complies with the Specification and any Off-Spec Gas that the Buyer takes in accordance with the terms of Article ‎12.2.4.

 

	 	
1.1.127

	
"Spot Sales Customer" has the meaning set out in Article ‎9.4.1(b).

 

	 	
1.1.128

	
"Take or Pay Period" means the period commencing on the later of the Commencement Date and (**) and ending at the end of the Contract Period.

 

	 	
1.1.129

	
"Target Completion Date" has the meaning set out in Article ‎6.4.11.

 

	 	
1.1.130

	
"Technical MinHQ" means (**) MMBTU.

 

	 	
1.1.131

	
"Three Month Window" has the meaning set out in Article ‎6.4.10.

 

	 	
1.1.132

	
"Total Contract Quantity" (or "TCQ") means a quantity of Gas equal to two billion and seven hundred and sixty million (2,760,000,000) MMBTU, and upon the Actual Increase Date (if applicable) the TCQ shall be increased to three billion five hundred and thirty six million (3,536,000,000) MMBTU.

 

	 	
1.1.133

	
"Transportation Agreement" means the agreement dated 13th January 2009 between Buyer and the Transporter.

 

  

19

  

 

	 	
1.1.134

	
"Transporter" means the Person granted the license to transport Gas from the Delivery Point to Buyer’s Stations, currently Israel Natural Gas Lines Ltd.

 

	 	
1.1.135

	
"Twelve Month Window" has the meaning set out in Article ‎6.4.9.

 

	 	
1.1.136

	
"TWH" means one trillion watt hours.

 

	 	
1.1.137

	
"Week" means a period of seven (7) days beginning at 0600 on a Sunday and ending at 0600 on the following Sunday.

 

	 	
1.1.138

	
"Weekly Delivery Tolerance" has the meaning set out in Article ‎6.7.1(c).

 

	 	
1.1.139

	
"Yam-Tethys Agreements" means the agreement(s) to be entered into by and between the Sellers and the Yam-Tethys Partners providing for the transportation and processing within the Yam-Tethys Facilities and delivering to the Buyer at the Delivery Point, of Gas from the Reservoir pursuant to this Agreement.

 

	 	
1.1.140

	
"Yam-Tethys Facilities" means such platform, wells, pipelines, installations and other equipment, installed or to be installed by or on behalf of the Yam-Tethys Partners (and constituting part of the Sellers' Facilities) to the extent such are used from time to time to store, process, transport and deliver Gas from the Reservoir to the Buyer at the Delivery Point pursuant to this Agreement.

 

	 	
1.1.141

	
"Yam-Tethys Partners" means the owners of interests in the "Ashkelon" I/10 Lease granted pursuant to the Petroleum Law that covers the Mari-B gas reservoir offshore Israel.

 

	 	
1.1.142

	
"YT GSPA" means the gas sale and purchase agreement dated June 25, 2002 by and between the Buyer and the Yam-Tethys Partners (as amended) and the Agreed Principles dated July 2, 2009 (as amended).

 

  

20

  

 

	
1.2

	
Interpretation

 

In this Agreement, Article headings and the index are inserted for convenience only and do not affect the interpretation of this Agreement; and unless the context indicates a contrary intention:

 

	
  

	
1.2.1

	
the term "Agreement" includes the Schedules to this Agreement and any amendments to this Agreement;

 

	
  

	
1.2.2

	
references to Articles or Schedules shall be deemed to be references to Articles of or Schedules to this Agreement;

 

	
  

	
1.2.3

	
the singular shall be deemed to include the plural and vice versa except with respect to the Sellers or to a Seller;

 

	
  

	
1.2.4

	
references in this Agreement to any law, decree or statutory provision shall be deemed to include references to any regulations and orders made thereunder;

 

	
  

	
1.2.5

	
references in this Agreement to any law shall include references to such law as it may, after the Effective Date, from time to time be amended, supplemented or re-enacted;

 

	
  

	
1.2.6

	
references to time shall be construed as a reference to whatever time shall be statutorily in force in Israel;

 

	
  

	
1.2.7

	
the words and phrases "other", "including" and "in particular" shall not limit the generality of any preceding words or be construed as being limited to the same class as the preceding words where a wider construction is possible;

 

	
  

	
1.2.8

	
where a word or phrase is defined, its other grammatical forms shall have corresponding meanings;

 

	
  

	
1.2.9

	
references to "writing" include any mode of representing or reproducing words, numbers, symbols or drawing in a visible form and includes by facsimile or by electronic mail;

 

	
  

	
1.2.10

	
references to any decision, determination, election, discretion or act of the Sellers under this Agreement, mean any decision, determination, election, discretion or act exercised or made unanimously or carried out jointly by the Sellers or, if applicable, by the Sellers’ Coordinator on behalf of all Sellers;

 

  

21

  

 

	
  

	
1.2.11

	
for the purposes of this Agreement, the energy content of Gas delivered hereunder shall be calculated in accordance with its Higher Heating Value;

 

	
  

	
1.2.12

	
the words "shall" and "will" shall be construed to have the same meaning and effect.

 

  

22

  

 

ARTICLE 2

 

Period of Agreement and Commissioning

 

	
2.1

	
Commencement and Period

 

	
  

	
2.1.1

	
The Contract Period: This Agreement shall come into force on the Effective Date and subject to Article ‎2.1.3 shall continue until the earlier of:

 

	
  

	
(a)

	
the fifteenth (15th) anniversary of the Commencement Date ; and

 

	
  

	
(b)

	
the date of delivery by the Sellers under this Agreement of an aggregate quantity of Gas equal to the Total Contract Quantity;

 

unless terminated earlier by either Party in accordance with the terms of this Agreement or extended in accordance with the provisions of Articles ‎2.1.2 and ‎9.5.6 ("Contract Period").

 

	
  

	
2.1.2

	
Extended Contract Period: In the event that by the thirteenth (13th) anniversary of the Commencement Date, the Buyer notifies the Sellers in writing that it reasonably anticipates that it will not be able to take from the Sellers an aggregate quantity of Specification Gas equal to the Total Contract Quantity by the fifteenth (15th) anniversary of the Commencement Date, and that it requests an extension of the Contract Period, then the Contract Period will be automatically extended by an additional period commencing on the fifteenth (15th) anniversary of the Commencement Date and ending on the earlier of: (i) the seventeenth (17th) anniversary of the Commencement Date; and (ii) the date by which the Buyer will have taken from the Sellers under this Agreement an aggregate quantity of Gas equal to the Total Contract Quantity (the period from the date on which this Agreement would have come to an end and until such later date being herein called the "Extended Contract Period"). During the Extended Contract Period, the provisions of this Agreement (including, inter alia, the provisions of ‎Article 9) shall continue to apply, except that any Carry Forward Aggregate which has accrued under this Agreement prior to the commencement of the Extended Contract Period shall be cancelled and shall not serve to reduce the Annual Take or Pay Quantity attributable to the Extended Contract Period.

 

  

23

  

 

	
  

	
2.1.3

	
Conditionality: This Agreement is conditional upon (i) the Buyer and the Sellers obtaining the Anti-trust Consent or waiving such condition; (ii) the Buyer obtaining the Governmental Approval or waiving such condition; and (iii) the Buyer obtaining the PUA Approval or waiving such condition.

 

	
  

	
2.1.4

	
Anti-Trust Consent: The Sellers and the Buyer together shall diligently pursue the application for the Anti-trust Consent and shall make reasonable endeavors to obtain the Anti-trust Consent as soon as possible but in any event before the Approval Date. The Parties shall keep each other informed as to progress made towards obtaining the Anti-trust Consent on at least a weekly basis and shall co-operate with each other and provide reasonable assistance to each other to obtain the Anti-trust Consent.

 

If the Anti-trust Consent is not obtained before the Approval Date, or such condition is not waived by both Parties:

 

	 	
(a)

	
the Parties shall meet as soon as possible, and in any event within seven (7) days after the Approval Date, to discuss the prospects for obtaining the Anti-trust Consent; and

 

	 	
(b)

	
promptly after the date of such meeting or seven (7) days after the Approval Date (whichever is the later) either Party may, provided that it has complied with its obligations under this Article ‎2.1.4(a), terminate this Agreement on not less than seven (7) days prior written notice and upon the expiration of such notice period this Agreement will terminate, except if, before the termination date as specified in the notice, the Anti-trust Consent is obtained, then notwithstanding the notice of termination, this Agreement shall not terminate but shall continue in force.

 

	
  

	
2.1.5

	
Governmental Approval: The Buyer shall diligently pursue the Governmental Approval and shall make reasonable endeavors to obtain the Governmental Approval as soon as possible but in any event prior to the Approval Date. Buyer shall keep the Sellers informed as to progress made towards obtaining the Governmental Approval.

 

If the Governmental Approval is not obtained before the Approval Date, or such condition precedent is not waived by the Buyer:

 

  

24

  

 

	 	
(a)

	
the Parties shall meet as soon as possible, and in any event within seven (7) days after the Approval Date, to discuss the prospects for obtaining the Governmental Approval;

 

	 	
(b)

	
promptly after the date of such meeting or seven (7) days after the Approval Date (whichever is the later) the Sellers may terminate this Agreement on not less than seven (7) days prior written notice and upon the expiration of such notice period this Agreement will terminate except if, before the termination date as specified in the notice, the Government Approval is obtained, then notwithstanding the notice of termination, this Agreement shall not terminate but shall continue in force; and

 

	 	
(c)

	
if the Government Approval is not obtained by September 30, 2012 the Buyer may, provided that it has complied with its obligations under Article ‎2.1.5, terminate this Agreement on not less than seven (7) days prior written notice and upon the expiration of such notice period this Agreement will terminate, except if, before the termination date as specified in the notice, the Government Approval is obtained, then notwithstanding the notice of termination, this Agreement shall not terminate but shall continue in force.

 

	
  

	
2.1.6

	
PUA Approval: The Buyer shall diligently pursue the PUA Approval and shall make reasonable endeavors to obtain the PUA Approval as soon as possible but in any event prior to the Approval Date. Buyer shall keep the Sellers informed as to progress made towards obtaining the PUA Approval.

 

If the PUA Approval is not obtained before the Approval Date, or such condition precedent is not waived by the Buyer:

 

	 	
(a)

	
the Parties shall meet as soon as possible, and in any event within seven (7) days after the Approval Date, to discuss the prospects for obtaining the PUA Approval;

 

	 	
(b)

	
immediately after the date of such meeting or seven (7) days after the Approval Date (whichever is the later) the Sellers may terminate this Agreement on not less than seven (7) days prior written notice and upon the expiration of such notice period this Agreement will terminate except if, before the termination date as specified in the notice, the PUA Approval is obtained, then notwithstanding the notice of termination, this Agreement shall not terminate but shall continue in force; and

 

  

25

  

 

	 	
(c)

	
if the PUA Approval is not obtained by September 30, 2012 the Buyer may, provided that it has complied with its obligations under Article ‎2.1.6, terminate this Agreement on not less than seven (7) days prior written notice and upon the expiration of such notice period this Agreement will terminate, except if, before the termination date as specified in the notice, the PUA Approval is obtained then notwithstanding the notice of termination, this Agreement shall not terminate but shall continue in force.

 

	
  

	
2.1.7

	
Effect of Conditionality: Articles 1, ‎2.1, ‎2.6, 4, ‎8.5, 18, 19, 21, 22 and 23 will take effect on and from the Effective Date.

 

	
2.2

	
Flow Date

 

	
  

	
2.2.1

	
The "Flow Date" is the date on which the Sellers’ Facilities are completed to the extent required in order to deliver Specification Gas from the Reservoir at the Delivery Point in accordance with the terms of this Agreement (**) for the purposes of commissioning and testing the Sellers’ Facilities. The Sellers shall provide the Buyer not less than fourteen (14) days notice prior to the occurrence of the Flow Date. It is the intention of the Sellers that the Flow Date shall occur by July 1, 2013.

 

	
2.3

	
Consequences of Delays in Flow Date

 

	
  

	
2.3.1

	
Construction of Sellers' Facilities: In accordance with the terms of this Agreement, Sellers shall construct the Sellers' Facilities in order to enable Sellers to deliver Specification Gas produced from the Reservoir at the Delivery Point in accordance with the terms of this Agreement by October 1, 2013.

 

	
  

	
2.3.2

	
Sellers' Delay Period: In the event that by January 1, 2014 the Flow Date has not occurred, then in respect of each Day from and after January 1, 2014 until the Flow Date (the "Sellers' Delay Period"), the Sellers shall make payments to the Buyer in accordance with the provisions of Article ‎2.3.3 subject to the Sellers' limitation of liability as set out in Article ‎17.4.7, and such payments shall be the Sellers' sole liability to the Buyer and Buyer's sole remedy in such circumstances. For the avoidance of doubt, the Sellers shall be entitled to claim relief by reason of Force Majeure in accordance with ‎Article 16 in respect of such delay and liability. All such payments shall be made monthly in respect of each Day and shall be set out in a statement to be sent by the Buyer to the Sellers in accordance, mutatis mutandis, with ‎Article 11.

 

  

26

  

 

	
  

	
2.3.3

	
Sellers' Payments: With respect to each Day during the Sellers' Delay Period (except to the extent such delay was caused by an event of Force Majeure) the Sellers shall pay the Buyer a sum of money equal to (**) in lieu of Sellers' liability for Shortfall Gas under Article ‎17.1 and such payments shall be the limit of the Sellers' liability and Buyer's sole remedy in such circumstances.

 

	
  

	
2.3.4

	
Termination due to Sellers' Delay: In the event that Sellers' Delay Period continues for a period of more than six (6) Months (except to the extent such delay was caused by an event of Force Majeure), then Buyer and Sellers shall meet within seven (7) days after the end of such six (6) Month period, to discuss and seek to agree on appropriate arrangements that will enable delivery of Specification Gas in accordance with the terms of this Agreement until the occurrence of the Flow Date, and if no such agreement is reached within thirty (30) days after the end of such six (6) Month period, the Buyer may, at any time thereafter, by not less than sixty (60) days' prior written notice to the Sellers, terminate this Agreement, unless prior to the expiry of such notice period the Flow Date has occurred, and in such event, notwithstanding such notice of termination, this Agreement shall not terminate but shall continue in force.

 

	
2.4

	
Commissioning Period

 

	
  

	
2.4.1

	
The "Commissioning Period" shall be a period commencing on the Flow Date and ending on the earlier of (i) the date upon which the Sellers notify the Buyer that they have completed the commissioning of the Sellers' Facilities, and (ii) the date of expiry of ninety (90) days following the Flow Date.

 

	
  

	
2.4.2

	
The Sellers will provide to the Buyer not less than fourteen (14) days' prior notice of the commencement of the Commissioning Period. During the Commissioning Period the Sellers may carry out commissioning activities of the Sellers' Facilities.

 

	
  

	
2.4.3

	
During the Commissioning Period the Buyer shall use reasonable endeavors to nominate and take delivery of Specification Gas in such quantities and at such rates as may reasonably be requested by the Sellers to carry out the commissioning and testing of the Sellers’ Facilities. For the avoidance of doubt, the provisions of Articles ‎9.3 and ‎17.1 shall not apply during the Commissioning Period.

 

  

27

  

 

	
  

	
2.4.4

	
The Sellers will notify the Buyer upon completion of the commissioning of the Sellers’ Facilities.

 

	
2.5

	
Information and Inspection

 

	
  

	
2.5.1

	
Within thirty (30) days after the Effective Date and once every three (3) months thereafter until the Flow Date, the Sellers and the Buyer shall meet and discuss the state of progress of the Sellers’ Facilities (including permitting) and the plans for the development and commissioning of the Sellers’ Facilities.

 

	
  

	
2.5.2

	
On the request of the Buyer, the Sellers shall allow for the inspection of the progress of the construction and installation of the Sellers’ Facilities, upon reasonable advance request by the Buyer, such inspection to occur during normal working hours and provided Buyer complies with Sellers' standard safety and security procedures.

 

	
  

	
2.5.3

	
It is acknowledged and agreed that nothing in this ‎Article 2 shall oblige either Party to do or omit to do anything which would:

 

	 	
(a)

	
breach or otherwise adversely affect any bona fide commitment of confidentiality owed to any Person; or

 

	 	
(b)

	
procure or allow any rights of access or inspection in excess of or contrary to such rights as may be available to and exercisable by one Party in favor of the other.

 

	
2.6

	
Termination

 

	
  

	
2.6.1

	
Without prejudice to any other rights that the Sellers may have under this Agreement or pursuant to applicable law, the Sellers may terminate this Agreement in circumstances where the Buyer commits an Act of Insolvency that may reasonably be expected to materially adversely affect the performance by the Buyer of its obligations under this Agreement, by giving the Buyer not less than one hundred and twenty (120) days written notice

 

  

28

  

 

	
  

	
2.6.2

	
Without prejudice to any other rights that the Buyer may have under this Agreement or pursuant to applicable law, the Buyer may terminate this Agreement in circumstances where any or all of the Sellers commit an Act of Insolvency that may reasonably be expected to materially adversely affect the performance by all of the Sellers of their obligations under this Agreement, by giving the Sellers not less than one hundred and twenty (120) days written notice.

 

	
  

	
2.6.3

	
The Sellers and the Buyer agree that they will not exercise any termination rights, except in relation to significant or continuing breaches by the other Party of a material provision of this Agreement and only after giving the breaching Party a period of one hundred and twenty (120) days (unless a shorter period is determined under this Agreement) in which to remedy the breach.

 

	
  

	
2.6.4

	
Any termination of this Agreement shall not affect any rights or obligations, which may have accrued prior to such termination.

 

	
  

	
2.6.5

	
Any notice of termination of this Agreement by the Sellers, shall be given by the Sellers to the Buyer as a single notice binding on all the Sellers on the same terms and being expressed to terminate this Agreement in respect of each of the Seller's Percentages and in respect of the Sellers' Interest.

 

	
  

	
2.6.6

	
Any notice of termination of this Agreement by the Buyer, shall be given by the Buyer to the Sellers jointly binding on all the Sellers on the same terms and being expressed to terminate this Agreement in respect of the Sellers’ Interest and in respect of each of the Sellers in relation to its respective Seller's Percentage, except that in circumstances where the grounds for any such notice of termination are given only in respect of Article ‎2.6.2 and are applicable to any one or more of the Sellers, but not all the Sellers, then such notice shall not have effect if, before its expiry, the Seller (or Sellers) in respect of which such notice has been served shall have signed an agreement or deed providing for the transfer of the relevant Seller’s Percentage (or as the case may be respective Sellers’ Percentages) under this Agreement to another Seller or Sellers or to other transferees in compliance with the provisions of ‎Article 18.

 

  

29

  

 

ARTICLE 3

 

Agreement for Sale and Purchase

 

	
3.1

	
Agreement

 

Subject to the terms of this Agreement, the Sellers agree to deliver and sell and the Buyer agrees to take and pay for or, if not taken, pay for Gas, in such quantities, at such times and in such manner as shall from time to time be provided for under this Agreement.

 

	
3.2

	
Uses and Sources

 

	
  

	
3.2.1

	
The Buyer shall not be limited or restricted in the use of the Specification Gas purchased under this Agreement or in the purpose for which such Specification Gas is purchased by the Buyer.

 

	
  

	
3.2.2

	
Without derogating from the Sellers’ obligations in relation to the Sellers' Facilities under this Agreement, the Sellers shall not be limited or restricted in their sources of Natural Gas (whether from Israel or imported from elsewhere) for the purposes of delivering Specification Gas to the Buyer under this Agreement.

 

  

30

  

 

ARTICLE 4

 

Warranties, Covenants and Taxes

 

	
4.1

	
Sellers' Warranties and Title

 

	
  

	
4.1.1

	
Without prejudice to any obligation of the Sellers under this Agreement, each of the Sellers (as to its Seller’s Percentage) warrants to the Buyer as of the Effective Date, as follows:

 

	 	
(a)

	
title to all Gas sold and delivered by such Seller under this Agreement and that all Gas delivered by such Seller shall, upon delivery, be free from all liens, charges, encumbrances and adverse interests of any and every kind;

 

	 	
(b)

	
the Sellers' Petroleum Rights are valid and subsisting and are free from all liens, charges, encumbrances and adverse interests of any and every kind, other than the charges listed in Schedule 4 hereto;

 

	 	
(c)

	
under the Sellers' Petroleum Rights, the Sellers have discovered accumulations of Natural Gas currently estimated to be in excess of two hundred and fifty (250) BCM (Proved and Probable Reserves) within the Reservoir and have, subject to receiving all permits required under law, the right to produce, sell and deliver Natural Gas from the Reservoir in accordance with the terms of this Agreement for the whole of the Contract Period;

 

	 	
(d)

	
the Sellers together are the owners of the Sellers' Petroleum Rights and are parties to the Sellers’ Agreements and, subject to receiving all permits required under law and entering into the Yam-Tethys Agreements as required by Article ‎4.2.1(b), it has no knowledge of any matter which might prevent it from producing Natural Gas from the Reservoir or from transporting, processing, delivering and selling Specification Gas to the Buyer at the Delivery Point through the Sellers’ Facilities in accordance with the terms of this Agreement for the duration of the Contract Period;

 

	 	
(e)

	
it has received no notification of any claims and knows of no grounds for any claim which may be adverse to or inconsistent with the ownership and other rights specified in Article ‎4.1.1‎(c) whether from holders of interests adjoining the Reservoir or otherwise;

 

  

31

  

 

	 	
(f)

	
it is duly organized and validly existing under the laws of the jurisdiction of its formation and it has the legal right, power and authority to conduct its business and execute and deliver this Agreement and observe and perform its obligations under this Agreement;

 

	 	
(g)

	
the entry by it into and performance of this Agreement is within its power and has been duly authorized by all necessary action on its part and shall not breach any law or determination or provision applicable to its governing documents;

 

	 	
(h)

	
the Seller and any director, officer, employee or affiliated company of such Seller has not made, offered, or authorized and will not make, offer, or authorize with respect to the matters which are the subject of this Agreement, any payment, gift, promise or other advantage, whether directly or through any other person or entity, to or for the use or benefit of any public official (i.e., any person holding a legislative, administrative or judicial office, including any person employed by or acting on behalf of a public agency, a public enterprise or a public international organization) or any political party or political party official or candidate for office, where such payment, gift, promise or advantage would violate (i) the applicable laws of Israel or the United States of America (including, without limitation, the Foreign Corrupt Practices Act of 1977, as amended, U.S.C. §78dd-1, et seq.); (ii) the principles described in the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed in Paris on December 17, 1997, which entered into force on February 15, 1999, and the Convention’s Commentaries; or (iii) the principles described in the United Nations Convention Against Corruption, which entered into force on December 14, 2005. Each Seller shall defend, indemnify and hold the other Parties harmless from and against any and all claims, damages, losses, penalties, costs and expenses arising from or related to, any breach by such Seller of such warranty. Such indemnity obligation shall survive termination or expiration of this Agreement. Each Seller shall in good time (i) respond in reasonable detail to any notice from any other Party reasonably connected with the above-stated warranty; (ii) furnish applicable documentary support for such response upon request from such other Party; (iii) maintain adequate internal controls, properly record and report all transactions; and (iv) comply with the laws applicable to it. Each Seller acknowledges and confirms that: (i) each Party must rely on the other Parties’ system of internal controls, and on the adequacy of full disclosure of the facts, and of financial and other data regarding action undertaken under this Agreement; (ii) No Party is in any way authorized to take any action on behalf of another Party that would result in an inadequate or inaccurate recording and reporting of assets, liabilities or any other transaction, or which would put such Party in violation of its obligations under the laws applicable to the operations under this Agreement;

 

  

32

  

 

	 	
(i)

	
this Agreement constitutes a legal valid and binding act and obligation enforceable against such Seller in accordance with the terms of this Agreement.

 

	
4.2

	
Sellers' Covenants

 

	
  

	
4.2.1

	
Each of the Sellers (as to its Seller's Percentage) covenants with the Buyer that throughout the Contract Period:

 

	 	
(a)

	
except in conjunction with a permitted assignment, creation of security or charge or encumbrance made under the provisions of ‎Article 18, its Seller’s Percentage and its rights under this Agreement shall be maintained and preserved free and clear (save as aforesaid) from any assignment, security, charge or encumbrance;

 

	 	
(b)

	
prior to the Commencement Date it shall enter into the Yam-Tethys Agreements on terms which provide for the transportation of Specification Gas to the Delivery Point so as to enable it to comply with its obligations under this Agreement;

 

	 	
(c)

	
it shall not agree to or (to the extent that it is within its power to prevent) permit any amendment or modification of the Sellers' Agreements or the Sellers' Petroleum Rights or the Yam-Tethys Agreements, whereby the Sellers' ability to perform its obligations under this Agreement are likely to be prevented or materially adversely affected and shall observe and perform all terms thereof and exercise its rights thereunder in such manner as to secure that the terms and provisions of this Agreement shall be performed;

 

	 	
(d)

	
(**); and

 

  

33

  

 

	 	
(e)

	
it shall obtain all and any necessary consents or approvals required from time to time to permit the performance of the Sellers' obligations hereunder.

 

	
4.3

	
Buyer's Warranties and Covenants

 

	
  

	
4.3.1

	
The Buyer warrants to the Sellers as of the Effective Date as follows:

 

	 	
(a)

	
it has the right for the whole of the Contract Period to purchase Specification Gas from the Sellers in accordance with the terms of this Agreement;

 

	 	
(b)

	
it is duly organized and validly existing under the laws of the jurisdiction of its formation and it has the legal right, power and authority to conduct its business and execute and deliver this Agreement and observe and perform its obligations under this Agreement;

 

	 	
(c)

	
its entry into and performance of this Agreement is within its power and has been duly authorized by all necessary action on its part and shall not breach any law or determination or provision applicable to its governing documents;

 

	 	
(d)

	
it has entered into the Transportation Agreement with the Transporter providing for the transportation of Specification Gas from the Delivery Point through the Downstream System to the Buyer’s Stations for the duration of the Contract Period;

 

  

34

  

 

	 	
(e)

	
the Buyer and any director, officer, or employee of the Buyer or any affiliated company has not made, offered, or authorized and will not make, offer, or authorize with respect to the matters which are the subject of this Agreement, any payment, gift, promise or other advantage, whether directly or through any other person or entity, to or for the use or benefit of any public official (i.e., any person holding a legislative, administrative or judicial office, including any person employed by or acting on behalf of a public agency, a public enterprise or a public international organization) or any political party or political party official or candidate for office, where such payment, gift, promise or advantage would violate (i) the applicable laws of Israel or the United States of America (including, without limitation, the Foreign Corrupt Practices Act of 1977, as amended, U.S.C. §78dd-1, et seq.); (ii) the principles described in the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed in Paris on December 17, 1997, which entered into force on February 15, 1999, and the Convention’s Commentaries; or (iii) the principles described in the United Nations Convention Against Corruption, which entered into force on December 14, 2005. The Buyer shall defend, indemnify and hold the other Parties harmless from and against any and all claims, damages, losses, penalties, costs and expenses arising from or related to, any breach by the Buyer of such warranty. Such indemnity obligation shall survive termination or expiration of this Agreement. The Buyer shall in good time (i) respond in reasonable detail to any notice from any other Party reasonably connected with the above-stated warranty; (ii) furnish applicable documentary support for such response upon request from such other Party; (iii) maintain adequate internal controls, properly record and report all transactions; and (iv) comply with the laws applicable to it. Buyer acknowledges and confirms that: (i) each Party must rely on the other Parties’ system of internal controls, and on the adequacy of full disclosure of the facts, and of financial and other data regarding action undertaken under this Agreement; (ii) No Party is in any way authorized to take any action on behalf of another Party that would result in an inadequate or inaccurate recording and reporting of assets, liabilities or any other transaction, or which would put such Party in violation of its obligations under the laws applicable to the operations under this Agreement;

 

	 	
(f)

	
this Agreement constitutes a legal, valid and binding act and obligation enforceable against it in accordance with the terms of this Agreement.

 

	
  

	
4.3.2

	
The Buyer covenants with the Sellers that throughout the Contract Period, the Buyer shall:

 

	 	
(a)

	
not agree to or (to the extent that it is within its power to prevent) permit any amendment or modification of the Transportation Agreement whereby the Buyer's ability to perform its obligations under this Agreement are likely to be prevented or materially adversely affected and shall observe and perform all terms thereof and exercise its rights thereunder in such manner as to secure that the terms and provisions of this Agreement shall be performed; and

 

	 	
(b)

	
obtain all and any necessary consents or approvals required to permit the performance of the Buyer's obligations hereunder.

 

  

35

  

 

	
4.4

	
Taxes and Royalties

 

	
  

	
4.4.1

	
Each of the Sellers as to its Seller's Percentage shall pay or cause to be paid all royalties, taxes, duties, levies and other sums arising in respect of production, transportation, gathering, processing and handling of Natural Gas before delivery by such Seller to the Buyer at the Delivery Point.

 

	
  

	
4.4.2

	
The Buyer shall pay or cause to be paid all taxes, duties, levies and other sums arising in respect of receipt, processing, handling and transportation of Natural Gas after delivery to the Buyer by each of the Sellers at the Delivery Point.

 

	
  

	
4.4.3

	
All and any royalties, taxes, duties, levies or other sums arising at the Delivery Point shall be borne by the Parties as specified in the applicable legislation or other charging provisions.

 

	
  

	
4.4.4

	
Notwithstanding the above, the Buyer shall also bear and pay or (as the case may be) timely reimburse each of the Sellers in respect of any:

 

	 	
(a)

	
Value Added Tax payable pursuant to Israeli Law in relation to Gas sold by such Seller to the Buyer under this Agreement;

 

	 	
(b)

	
Excise Duty payable pursuant to the Excise Law on Fuels-1958 and Purchase Tax payable pursuant to the Purchase Tax Law- 1952, as applicable, and any other similar law, in relation to Gas sold by such Seller to the Buyer under this Agreement; and

 

	 	
(c)

	
Any new tax, duty or levy imposed pursuant to Israeli Law on Natural Gas in relation to Gas sold by such Seller to the Buyer under this Agreement, provided (**).

 

	
4.5

	
Indemnities and Acknowledgements

 

	
  

	
4.5.1

	
Each of the Sellers as to its Seller’s Percentage shall indemnify and hold harmless the Buyer against any and all loss, damage and expense of every kind on account of:

 

	 	
(a)

	
adverse claims relating to such Seller’s title to any or all Gas delivered to the Buyer hereunder; or

 

	 	
(b)

	
any and all royalties, taxes, duties, levies or other sums which the Sellers are obligated to bear and pay pursuant to Article ‎4.4 above.

 

  

36

  

 

	
  

	
4.5.2

	
The Buyer shall indemnify and hold harmless each of the Sellers as to its Sellers’ Percentage against any and all loss, damage and expense of every kind on account of taxes, duties, levies and other sums which the Buyer is obligated to bear and pay pursuant to Article ‎4.4 above.

 

  

37

  

 

ARTICLE 5

 

Sellers’ Rights / Commingling and Unitization

 

 

	
5.1

	
Sellers’ Rights

 

Nothing in this ‎Article 5 shall be construed as relieving Sellers from any of their specific obligations pursuant to this Agreement, including without limitation the requirement to comply with the pressure and quality requirements provided in this Agreement. Without derogating from the above, Sellers shall be entitled to:

 

	
  

	
5.1.1

	
Determine the manner in which they conduct their physical operations;

 

	
  

	
5.1.2

	
Supply Natural Gas for delivery under this Agreement from sources other than the Reservoir at their sole discretion;

 

	
  

	
5.1.3

	
Commingle Natural Gas produced pursuant to the Sellers’ Petroleum Rights with Natural Gas produced from any other source or sources subject specifically to: (a) the pressure and quality requirements provided in this Agreement; (b) such arrangements as would be made by a Reasonable and Prudent Operator regarding allocation, attribution and measurement procedures in respect of Natural Gas produced at the Reservoir and all Natural Gas delivered at the Delivery Point;

 

	
  

	
5.1.4

	
Pool, combine or unitize all or any part of the Sellers’ Interest with interests in any other licenses or leases and in such event this Agreement shall extend and apply to the interest of the Sellers in such unit to the extent that such interest is derived from the Sellers’ Interest; and

 

	
  

	
5.1.5

	
Enter into agreements to supply third parties with Natural Gas from the Reservoir or elsewhere; (**).

 

  

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ARTICLE 6

 

Quantities and Nominations

 

	
6.1

	
The ACQ

 

	
  

	
6.1.1

	
For each Contract Year the "Annual Contract Quantity" (or "ACQ") shall be the aggregate of the respective DCQs applicable on each Day during that Contract Year.

 

	
6.2

	
The DCQ

 

	
  

	
6.2.1

	
Except as otherwise provided for in this Agreement, the "Daily Contract Quantity" or "DCQ" shall be as follows:

 

	 	
(a)

	
In respect of each Day of the Commissioning Period, the DCQ shall be zero (0);

 

	 	
(b)

	
In respect of each Day of the period commencing on the Commencement Date and ending on the Day immediately prior to the fifth (5th) anniversary of the Commencement Date, the DCQ shall be (**) MMBTU;

 

	 	
(c)

	
In respect of each Day of the period commencing on the fifth (5th) anniversary of the Commencement Date (provided such date falls within the First Period) and ending on the last Day of the First Period, the DCQ shall be (**) MMBTU; and

 

	 	
(d)

	
Notwithstanding the above, in respect of each Day of the Second Period (if applicable), the DCQ shall be (**) MMBTU.

 

	
6.3

	
Hourly Quantities

 

Except as otherwise provided for in this Agreement, the "Maximum Hourly Quantity" (or "MaxHQ") shall be as follows:

 

	
  

	
6.3.1

	
In respect of each Day of the Commissioning Period, the MaxHQ is not applicable.

 

	
  

	
6.3.2

	
In respect of each Day of the First Period, the MaxHQ shall be equal to the lower of: (i) (**) MMBTU and (ii) (**).

 

	
  

	
6.3.3

	
In respect of each Day of the Second Period (if applicable), the MaxHQ shall be equal to the lower of: (i) (**) MMBTU; and (ii) (**).

 

  

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6.4

	
Increased Quantities and Additional Facilities

 

	
  

	
6.4.1

	
Subject to the provisions of this Article ‎6.4, upon the Buyer serving on the Sellers the Increase Notice, the Sellers will be obliged to seek to fulfill certain conditions to obtain approvals, permits and rights to the effect that, subject to the fulfillment of such conditions (or their waiver by the Sellers), the Sellers will be obliged to construct, install, maintain and operate such additional Sellers' Facilities as may be required to increase the MaxHQ to (**) MMBTU.

 

With effect from the Additional Flow Date to be established in accordance with this Article ‎6.4, (but subject to any intervening occurrence of a Price Control Event) the MaxHQ will be so increased to (**) MMBTU together with the corresponding increase of the DCQ to (**) MMBTU), all in accordance with and subject to the provisions of this Article ‎6.4.

 

	
  

	
6.4.2

	
Buyer's Notice to Increase Quantities: The Buyer shall have the right to exercise the Increase Option by written notice to be delivered to the Sellers (the "Increase Notice") by the earlier of:

 

	 	
(a)

	
April 2, 2013; or

 

	 	
(b)

	
in the event that prior to February 1, 2013 the Sellers notify the Buyer in writing that the Sanction of the Additional Development has occurred (the "Sanction Notice"), by the later of: (i) December 31, 2012 (if Sellers' notification was delivered before October 15, 2012); and (ii) forty five (45) Days after the Sanction Notice.

 

	
  

	
6.4.3

	
Additional Flow Date: Following receipt of the Increase Notice, the Sellers shall be obliged to seek to satisfy the Sellers' Additional Conditions with the aim that the Additional Flow Date will occur within forty eight (48) Months after the Sellers' Additional Conditions Date.

 

	
  

	
6.4.4

	
Sellers' Additional Conditions: The Increase Option will be subject to the following conditions (the "Sellers' Additional Conditions"):

 

	 	
(a)

	
the obtaining by the Sellers of the approval of the Ministry of Energy and Water Resources for the Sellers' Additional Development Plan in a form and on terms reasonably acceptable to the Sellers;

 

  

40

  

 

	 	
(b)

	
the obtaining by the Sellers of the rights to land on shore in Israel as may be required to construct the facilities contemplated in Sellers' Additional Development Plan, in a form and on terms reasonably acceptable to the Sellers; and

 

	 	
(c)

	
the obtaining of the building permits and the approvals required for the construction and operation of the facilities contemplated in Sellers' Additional Development Plan.

 

	
  

	
6.4.5

	
Satisfaction of Sellers' Additional Conditions: The Sellers shall employ reasonable endeavors to procure that the Sellers' Additional Conditions are satisfied within six (6) months after Sellers receive the Increase Notice (or such later date as may be mutually agreed to in writing by the Parties). The Sellers shall keep the Buyer informed on a periodical basis and on reasonable request as to progress made towards achieving Sellers' Additional Conditions.

 

	
  

	
6.4.6

	
Termination due to Non-Satisfaction of Sellers' Additional Conditions: In the event that Sellers' Additional Conditions have not been satisfied or were not waived by the Sellers within twelve (12) Months after Sellers receive the Increase Notice (or such later date as may be mutually agreed to in writing by the Parties), the Buyer may terminate the Increase Option by not less than fourteen (14) days written notice and the provisions of Article ‎6.4.8 will apply. In the event that Sellers' Additional Conditions have not been satisfied or were not waived by the Sellers within eighteen (18) Months after Sellers received the Increase Notice or such later date as may be mutually agreed to in writing by the Parties, and the Increase Option has not been terminated by the Buyer, then the Sellers, provided they have sought to obtain the Sellers' Additional Conditions, shall also have the right to terminate the Increase Option by not less than fourteen (14) days written notice and the provisions of Article ‎6.4.8 will apply.

 

	
  

	
6.4.7

	
Termination due to Price Control: Notwithstanding the provisions of Articles ‎6.4.1 to ‎6.4.6, in the event that prior to the Increase Date a Price Control Event occurs, the Sellers shall have the right, at their sole and absolute discretion, to terminate the Increase Option by ninety (90) days' notice to the Buyer and the provisions of Article ‎6.4.8 will apply.

 

  

41

  

 

	
  

	
6.4.8

	
Effect of Termination: Upon expiry of a termination notice pursuant to Articles ‎6.4.6, ‎6.4.7 or ‎6.4.12, the Increase Notice shall be null and void ab initio, the Sellers will be relieved from their obligations under Article ‎6.4, and the Increase of the MaxHQ, DCQ and TCQ shall not become effective.

 

	
  

	
6.4.9

	
The Twelve Month Window: The Sellers shall use reasonable endeavors to ensure that the Additional Flow Date occurs within a twelve (12) month period, such period to commence no earlier than twenty four (24) Months after the Sellers' Additional Conditions Date; and end no later than forty eight (48) Months after the Sellers' Additional Conditions Date (such 12 month period, the "Twelve Month Window"). The Sellers will inform the Buyer of the commencement date of the Twelve Month Window within six (6) Months after the Sellers' Additional Conditions Date.

 

	
  

	
6.4.10

	
The Three Month Window: At least ninety (90) days prior to the first day of the Twelve Month Window, the Sellers will notify Buyer of a ninety (90) Day period in which they anticipate the Additional Flow Date to occur, such period to be within the Twelve Month Window (the "Three Month Window"). Within thirty (30) days after receipt of Sellers' notice specifying the Three Month Window, the Buyer will notify Sellers whether it has elected that the Increase Date will be the Actual Increase Date or the Deemed Increase Date. If Buyer fails to give such notice, the Increase Date will be the Actual Increase Date.

 

	
  

	
6.4.11

	
Additional Delay Period: If Buyer notified Sellers in accordance with Article ‎6.4.10 that the Increase Date will be the Actual Increase Date and the Additional Flow Date has not occurred (except due to circumstances in which the Sellers were relieved from liability for reasons of Force Majeure or Article ‎6.4.8) by the earlier of:

 

(i) the fourth (4th) anniversary of the Sellers' Additional Conditions Date; or (ii) the last day of the Three Month Window (such earlier date, the "Target Completion Date"), then in respect of each Day from the Target Completion Date (as such date may be postponed due to an event of Force Majeure) until the Additional Flow Date (the "Additional Delay Period"), the Buyer will have the right to nominate Gas under this Agreement as if the Increase Date had occurred and the Sellers shall make reasonable endeavors to make deliveries in accordance with Buyer's Proper Nominations and any quantities of Gas not delivered by the Sellers shall be deemed to constitute Shortfall Gas in accordance with the provisions of ‎Article 17, and the delivery of Gas by Sellers in reduction of such quantity of Shortfall Gas from the Shortfall Aggregate shall be the Sellers' sole liability to the Buyer and Buyer's sole remedy in such circumstances.

 

  

42

  

 

	
  

	
6.4.12

	
Termination due to Delays: In the event that the Additional Delay Period continues for a period of more than twelve (12) Months (except to the extent such delay was caused by an event of Force Majeure), Buyer and Sellers shall meet within seven (7) days from such date, to discuss and seek to agree on appropriate arrangements that will enable delivery of such part of the Buyer's Proper Nominations that is attributable to such Increase Notice. If no such agreement is reached within thirty (30) days after such meeting, the Buyer may, at any time after the expiry of such period, by written notice to the Sellers, terminate the Increase Option effective sixty (60) days after the giving of such notice, unless prior to the expiry of such notice period the Additional Flow Date has occurred, in which event, the Increase Option is not terminated but is effective. On termination of the Increase Option as above the provisions of Article ‎6.4.8 will apply.

 

	
  

	
6.4.13

	
Available Capacity: Without derogating from the provisions of Articles ‎6.4.1 to ‎6.4.8, if by December 31, 2012 the Increase Notice has not been given, then at Buyer's request the Sellers shall advise the Buyer whether they have available uncontracted capacity in the Sellers' Facilities and are able to increase the MaxHQ and DCQ under this Agreement using the existing Sellers' Facilities. In the event the Sellers advise the Buyer that they do have available capacity as aforesaid and within thirty (30) days thereafter the Buyer notifies the Sellers that it would like to increase the MaxHQ and the DCQ hereunder, the Buyer and Sellers shall meet within fourteen (14) days from the date of Buyer's notice in order to discuss such increase.

 

	
  

	
6.4.14

	
Commissioning of Sellers' Facilities: Following the Additional Flow Date, the Sellers shall be entitled to carry out commissioning activities and the provisions of Articles ‎2.4 and ‎2.5, will apply, mutatis mutandis, in relation to the commissioning of such facilities.

 

  

43

  

 

	
6.5

	
(**)

 

	
6.6

	
Deliveries

 

	
  

	
6.6.1

	
In respect of each Hour during the Commissioning Period, the Sellers shall use reasonable endeavors to deliver at the Delivery Point the quantities of Specification Gas nominated by the Buyer for delivery in respect of such Hour in accordance with the provisions of Article ‎2.4.

 

	
  

	
6.6.2

	
In respect of each Hour from the Commencement Date, the Sellers shall tender for delivery at the Delivery Point the quantities of Specification Gas Properly Nominated by the Buyer in respect of such Hour.

 

	
  

	
6.6.3

	
Subject to applicable law and unless otherwise instructed by any governmental authority, (**).

 

	
6.7

	
Operational Delivery Tolerances

 

	
  

	
6.7.1

	
The Parties agree that the following operational tolerances will apply in respect of deliveries that fall short of or exceed the quantity Properly Nominated for delivery at the Delivery Point ("Delivery Tolerances"):

 

	
  

	
(a)

	
(**);

 

	
  

	
(b)

	
(**); and

 

	
  

	
(c)

	
(**).

 

	
  

	
6.8

	
Notification of Requirements

 

	
  

	
6.8.1

	
Not later than 1500 on the Wednesday immediately preceding the beginning of each Month, the Buyer shall give notice to the Sellers of the quantity of Specification Gas it then forecasts to be required in respect of each Day of that Month. This forecast is indicative and non-binding.

 

	
  

	
6.8.2

	
Not later than 1500 on the Wednesday immediately preceding each Week, the Buyer shall give notice to the Sellers of the quantity of Specification Gas it then forecasts to be required in respect of each Hour of that Week. This forecast is indicative and non-binding.

 

  

44

  

 

	
  

	
6.8.3

	
Not later than 1500 each Day, the Buyer shall give notice to the Sellers nominating the quantity of Specification Gas it requires to be delivered at the Delivery Point in respect of each Hour of the immediately following Day. This nomination will be binding and final, subject to variations in accordance with Articles ‎6.8.5 and ‎6.8.6.

 

	
  

	
6.8.4

	
No later than 1600 on each Day, the Sellers shall inform the Buyer of their ability to meet the Buyer’s nominations, fully or partially in respect of any Hour of the immediately following Day. The above shall not derogate from nor add to the Sellers’ obligations and liabilities to deliver quantities of Gas under Article ‎6.8.3 above.

 

	
  

	
6.8.5

	
The Buyer shall be entitled by notice to the Sellers at any time to vary the quantities of Specification Gas so nominated pursuant to Article ‎6.8.3 provided that such notice is given not less than fourteen (14) Hours before the Hour to which it relates and provided such variation complies with Article ‎6.9.2.

 

	
  

	
6.8.6

	
The Buyer may at any time before any Hour request any variation in the Proper Nomination at shorter notice than is prescribed in Article ‎6.8.5, provided such variation complies with Article ‎6.9.2 and the Sellers shall use reasonable endeavors to comply fully with the variation so requested, it being specifically agreed that:

 

	 	
(a)

	
the Sellers’ failure to comply with the variation so requested shall not constitute Shortfall Gas; and

 

	 	
(b)

	
any such request to increase the Proper Nomination shall not affect the Sellers’ obligations in relation to the delivery of the quantity as previously nominated under Article ‎6.8.3 (or as varied under Article ‎6.8.5) in respect of such Hour.

 

	
  

	
6.8.7

	
In the event that the Buyer does not make a Proper Nomination in respect of any Hour pursuant to this Article ‎6.8, the Buyer shall be deemed to have nominated a quantity equal to the quantity Properly Nominated for that Hour in the preceding Day.

 

	
  

	
6.8.8

	
If due to an event of Force Majeure Buyer is unable to take, or if for any reason Sellers are unable to deliver, the quantities Properly Nominated by the Buyer, then for the duration of the Day covered by the then current Proper Nomination, the Properly Nominated quantity for each Hour in such Day shall continue to be the quantity specified in such Proper Nomination, and if such inability continues after the end of the Day covered by the then current Proper Nomination, then thereafter for the continuation of such inability the Properly Nominated quantity for each Hour during such period shall be deemed to be the average Properly Nominated quantity for that same Hour of the same Day of the Week with respect to the three (3) previous Weeks.

 

  

45

  

 

	
  

	
6.8.9

	
Notwithstanding Article ‎6.8.3, any nomination of zero (0) by the Buyer in respect of any Hour shall be subject to the Buyer giving of not less than seven (7) Days' prior notice.

 

	
  

	
6.8.10

	
Notwithstanding the above, in the event that nomination procedures are imposed on the Parties by the Transporter which are inconsistent with the nomination procedures specified in this Article ‎6.8, the Parties shall revise the nomination procedures set out in this Article ‎6.8 so as to make them consistent with those imposed by the Transporter provided that the Sellers shall not be required to agree to procedures which are more onerous on the Sellers than the procedures specified in Article ‎6.8.5. In default of agreement between the Parties on such revisions, either Party may, by notice to the other, require the matter to be referred for determination by the Expert pursuant to Article ‎19.3.

 

	
6.9

	
Proper Nominations

 

	
  

	
6.9.1

	
For the purposes of this Agreement, "Proper Nomination" means a nomination which has been made in accordance with the requirements of Articles ‎6.8.3, ‎6.8.5, ‎6.8.7 or ‎6.8.9 and Article ‎6.9.2 and "Properly Nominated" means in relation to a quantity of Gas in respect of an Hour, the Proper Nomination.

 

	
  

	
6.9.2

	
A Proper Nomination made by the Buyer in respect of any Hour:

 

	 	
(a)

	
shall not exceed the applicable MaxHQ;

 

	 	
(b)

	
during the First Period, shall not exceed the quantity of Specification Gas Properly Nominated in respect of the immediately preceding Hour by more than:

 

	 	
(i)

	
(**) MMBTU if the Proper Nomination for the preceding Hour was equal to or lower than (**) MMBTU; and

 

	
  

	
(ii)

	
(**) MMBTU if the Proper Nomination for the preceding Hour was higher than (**) MMBTU;

 

  

46

  

 

	 	
(c)

	
during the Second Period (if applicable), shall not exceed the quantity of Specification Gas Properly Nominated in respect of the immediately preceding Hour by more than:

 

	 	
(i)

	
(**) MMBTU if the Proper Nomination for the preceding Hour was equal to or lower than five thousand (5,000) MMBTU; and

 

	 	
(ii)

	
(**) MMBTU if the Proper Nomination for the preceding Hour was higher than five thousand (5,000) MMBTU;

 

	 	
(d)

	
(**).

 

	 	
(e)

	
shall not be less than (**).

 

	 	
(f)

	
shall not, together with the aggregate hourly quantity nominated by the Buyer under the YT GSPA (to the extent applicable), exceed (**) MMBTU during the First Period and (**) MMBTU during the Second Period.

 

	 	
(g)

	
during the Maintenance Period shall not exceed the MaxHQ specified in the notice provided pursuant to Article ‎6.11.7.

 

	
  

	
6.9.3

	
Without derogating from the provisions of Article ‎6.9.2(a), during the First Period, Buyer may at any time nominate additional volumes of up to (**) MMBTU above the applicable MaxHQ ("Excess Gas") and Sellers shall make reasonable endeavors to comply with such nomination of additional volumes. For the avoidance of doubt, Excess Gas nominated by the Buyer in accordance with this Article ‎6.9.3 shall not be considered a Proper Nomination.

 

	
  

	
6.9.4

	
Without derogating from the provisions of Article ‎6.9.2(b) the Sellers will use reasonable endeavors, (**).

 

	
  

	
6.9.5

	
Without derogating from the provisions of Article ‎6.9.2(f), in the event that in any Hour, Buyer's nomination, together with the aggregate hourly quantity nominated by the Buyer under the YT GSPA (to the extent applicable) exceed (**) MMBTU, then the Sellers may, at their sole and absolute discretion, elect whether to comply with such nomination.

 

	
  

	
6.9.6

	
Subject to the provisions regarding Proper Nominations as above and without derogating from the provisions of Article ‎6.10, the Buyer is entitled to nominate every Hour, a quantity of Specification Gas between zero (0) and the MaxHQ, provided however that the Buyer will not nominate for any Hour a quantity of gas that is less than its pro-rata share of the Technical MinHQ, such share to be calculated based on the ratio between the ACQ in this Agreement and the cumulative annual contract quantities in all the gas sales agreements of the Sellers pursuant to which the Sellers will be delivering Natural Gas from the Reservoir at such date.

 

  

47

  

 

	
  

	
6.9.7

	
All nominations or notifications of quantities of Specification Gas under this Agreement shall (except where the context otherwise requires) be made in MMBTU.

 

	
  

	
6.9.8

	
The Buyer shall use reasonable endeavors to take at the Delivery Point the quantities of Specification Gas Properly Nominated by the Buyer and tendered for delivery by the Sellers in respect of such Hour.

 

	
6.10

	
Over Deliveries

 

For the avoidance of doubt, it is confirmed that the Buyer shall not be obliged to take amounts of Specification Gas tendered for delivery by the Sellers in excess of the amount Properly Nominated ("Over Deliveries").

 

	
6.11

	
Planned Maintenance

 

	
  

	
6.11.1

	
If the Sellers have reason in any Contract Year to expect that the necessities of maintenance, repair, modification, installation of new equipment, or replacement of the Sellers’ Facilities ("Maintenance") would require a reduction in the ability to deliver Specification Gas to the Buyer under this Agreement, the Sellers shall, by not less than six (6) months' notice to the Buyer and subject to reasonable endeavors to coordinate with the Yam Tethys Partners (to the extent the Sellers are delivering gas hereunder through the Yam Tethys Facilities) and the Buyer, specify a period ("Maintenance Period") during which the Sellers intend to conduct such Maintenance.

 

	
  

	
6.11.2

	
Any Maintenance Period specified by the Sellers pursuant to Article ‎6.11.1 may not exceed fourteen (14) consecutive days and thirty (30) Days in aggregate in any two (2) consecutive Contract Years.

 

	
  

	
6.11.3

	
The Sellers shall periodically update the Buyer in accordance with the table below as to the estimated start date and duration of the Maintenance Period and as to the level to which the MaxHQ will be reduced.

 

  

48

  

 

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

	
(**)

 

	
  

	
6.11.4

	
Sellers will use reasonable endeavors to schedule Maintenance Periods during the spring and autumn months.

 

	
  

	
6.11.5

	
The Parties agree that the provisions of Articles ‎6.11.3 and ‎6.11.4 above will not apply to Maintenance involving off-shore activities, provided however that the Sellers will keep the Buyer fully informed on an ongoing basis of any changes in relation to the Sellers' maintenance schedule.

 

	
  

	
6.11.6

	
The Sellers will specify by notice to the Buyer not less than one (1) month prior to the beginning of the Maintenance Period, as to the duration of the period during which the  MaxHQ will be reduced as above, provided that such period may not exceed the Maintenance Period.

 

	
  

	
6.11.7

	
During the Maintenance Period specified in this Article ‎6.11:

 

	 	
(a)

	
the Sellers may carry out the Maintenance; and

 

	 	
(b)

	
the MaxHQ for each Day during the Maintenance Period shall be reduced to the levels specified in the notice given by the Sellers to the Buyer, and the DCQ shall be reduced proportionately.

 

	
  

	
6.11.8

	
The Buyer shall make nominations in respect of each Day during the Maintenance Period by reference to such reduced MaxHQ specified in Article ‎6.11.7 above.

 

	
  

	
6.11.9

	
Without derogating from the provisions of Article ‎6.11, it is the intention of the Parties to use reasonable endeavors to minimize the Maintenance Periods required by them and the consequential reduction of the MaxHQ during such period.

 

  

49

  

 

ARTICLE 7

 

Facilities

 

	
7.1

	
Sellers' Facilities

 

The Sellers shall throughout the Contract Period:

 

	
  

	
7.1.1

	
Construct and install the Sellers' Facilities in accordance with the standard of a Reasonable and Prudent Operator;

 

	
  

	
7.1.2

	
Maintain and repair the Sellers' Facilities and all replacements thereto in good working order and condition in accordance with the standard of a Reasonable and Prudent Operator; and

 

	
  

	
7.1.3

	
Operate the Sellers' Facilities in accordance with the standard of a Reasonable and Prudent Operator.

 

	
7.2

	
Buyer's Facilities

 

The Buyer shall throughout the Contract Period:

 

	
  

	
7.2.1

	
Construct and install the Buyer's Facilities in accordance with the standard of a Reasonable and Prudent Operator;

 

	
  

	
7.2.2

	
Maintain and repair the Buyer's Facilities and all replacements thereto in good working order and condition in accordance with the standard of a Reasonable and Prudent Operator; and

 

	
  

	
7.2.3

	
Operate the Buyer’s Facilities in accordance with the standard of a Reasonable and Prudent Operator.

 

  

50

  

 

ARTICLE 8

 

Exchange of Information

 

	
8.1

	
Disclosure of Information

 

 

	
  

	
8.1.1

	
The Sellers and the Buyer shall throughout the Contract Period respectively provide to the other all such information as may be necessary or otherwise reasonably required to enable the other Party to carry out its obligations under this Agreement.

 

	
  

	
8.1.2

	
Without prejudice to the generality of the foregoing and to other provisions of this Agreement concerning the provision of information, the Sellers shall also provide a written program of proposed operations for each Month during the following Contract Year, which shall include details of any proposed maintenance programs in accordance with Article ‎6.11.

 

	
  

	
8.1.3

	
For the avoidance of any doubt, nothing in this Agreement shall be construed as granting the Sellers or the Buyer, whether directly or indirectly, access to any data or information relating to competitors of the Buyer or the Sellers (as applicable), or the methods of any such competitor, other than technical data or the data to be provided by the Sellers to the Buyer under Article ‎9.4 which is not likely to have an effect on the competition in the market.

 

	
8.2

	
Forecasts

 

	
  

	
8.2.1

	
The Sellers shall provide the Buyer, during each Month of October during the Contract Period, a written forecast of availability of Specification Gas during the next three (3) succeeding Contract Years and the Sellers' estimate of the uncontracted available capacity in Sellers' Facilities for the Contract Year following the date of such forecast.

 

	
  

	
8.2.2

	
The Buyer shall (subject to having received Sellers program and forecasts) provide to the Sellers, during each Month of November during the Contract Period, a written forecast of the quantities of Specification Gas, which it reasonably expects to nominate during the next three (3) succeeding Contract Years.

 

  

51

  

 

	
8.3

	
Liability and Expense

 

	
  

	
8.3.1

	
All information, estimates and forecasts to be provided under this Agreement shall be provided in good faith, but neither Party shall be liable for the accuracy of any estimate or forecast made under this Article nor shall any such forecast vary the respective rights and obligations of the Parties hereunder.

 

	
  

	
8.3.2

	
All information, estimates and forecasts given or work undertaken under this Article shall be at the expense of the providing Party.

 

	
  

	
8.3.3

	
It is agreed that the provisions of this Agreement granting the Sellers, directly or indirectly, rights to receive information from the Buyer, access, visit, monitoring and inspection or to any other source of information, will not grant the Sellers access to information regarding the competitors of the Sellers or their mode of operation.

 

	
  

	
8.3.4

	
It is agreed that the provisions in this Agreement granting the Buyer, directly or indirectly, rights to receive information from Sellers, access, visit, monitoring and inspection or to any other source of information, will not grant the Buyer access to information regarding the competitors of the Buyer or their mode of operation.

 

	
8.4

	
Information and Access

 

	
  

	
8.4.1

	
It is acknowledged and agreed that nothing in this ‎Article 8 shall oblige either Party to do or omit to do anything which would:

 

	 	
(a)

	
breach or otherwise adversely affect any bona fide commitment of confidentiality owed to any Party; or

 

	 	
(b)

	
procure or allow any rights of access or inspection in excess of or contrary to such rights as may be legally available to and exercisable by one Party in favor of the other.

 

	
  

	
8.4.2

	
Notwithstanding the provisions of Article ‎8.5, it is agreed that all information, forecasts and estimates provided pursuant to Article ‎8.1 and Article ‎8.2 shall be kept confidential by the receiving Party and shall not be disclosed to any Person without the prior written consent of the providing Party.

 

	
8.5

	
Confidentiality

 

	
  

	
8.5.1

	
The terms and conditions of this Agreement and all information disclosed hereunder (including any disclosures made during any arbitration or Expert determination) shall until three (3) years after this Agreement has terminated be treated as confidential. Except as provided in Article ‎8.5.2, such terms and conditions shall not be disclosed in whole or in part by either Party and such information shall not be disclosed in whole or in part by the Party receiving the same to any other Person without the prior consent of the disclosing Party (such terms and conditions and such information being herein called "Disclosed Information").

 

  

52

  

 

The expression Disclosed Information shall not include any information which (when used or disclosed) has been made public other than through a breach of this Agreement or has been or could have been lawfully acquired (other than pursuant to the provisions of this Article ‎8.5) by the Party or Person using the same or to whom disclosure is made.

 

	
  

	
8.5.2

	
Notwithstanding the provisions of Article ‎8.5.1, neither Party shall be required to obtain the prior consent of the other in respect of disclosure of Disclosed Information:

 

	 	
(a)

	
to directors or employees of a Party and of Affiliates of such Party, provided that the Buyer or the Sellers (as the case may be) shall use reasonable endeavors to ensure that such Persons keep the Disclosed Information confidential on the same terms as are provided in this Article ‎8.5;

 

	 	
(b)

	
to Persons professionally engaged by or on behalf of such Party, provided that such Persons shall be required by such Party to undertake to keep such information confidential and be bound by confidentiality provisions substantially the same as those contained in this Article ‎8.5;

 

	 	
(c)

	
to any government department or any governmental or regulatory agency or body having jurisdiction over such Party, including the anti-trust commissioner and the petroleum commissioner, but only to the extent that such Party is legally compelled to make such disclosure;

 

	 	
(d)

	
to any lending or other financial institution (including rating agencies) or to any bona fide intending assignee of the whole or any part of the rights and interests in such Party or of such Party under this Agreement; but (in either case) only to the extent required in connection with obtaining such finance or in respect of such proposed assignment and subject to such institution or intending assignee first agreeing with such Party to be bound by confidentiality provisions substantially the same as those contained in this Article ‎8.5;

 

  

53

  

 

	 	
(e)

	
to the extent required by any applicable laws, rules and regulations of any recognized stock exchange or to the extent required by any lawful subpoena or other process in connection with any judicial, arbitral, or administrative proceeding;

 

	 	
(f)

	
to the Transporter, but only to the extent such disclosure is required;

 

provided, that in respect of Article ‎8.5.2, the disclosing Party: (i) shall keep the disclosure of Disclosed Information limited to the extent reasonably necessary for the purpose for which it is disclosed, (ii) shall wherever practicable and permissible, in advance of such disclosure (or if this is not practicable or permissible as soon as reasonably practicable or permissible thereafter), notify the other of such disclosure (and the extent thereof) and the identity of the Person(s) to whom disclosure was made, and (iii) shall so far as practicable minimize the further disclosure of the Disclosed Information.

 

	 	
8.5.3

	
Subject to Article ‎8.5.2 above, neither the Buyer nor the Sellers shall make any public representations, statements or announcements relating to this Agreement without the prior written approval of the other, such approval not to be unreasonably withheld.

 

  

54

  

 

ARTICLE 9

 

Take or Pay

 

	
9.1

	
The Adjusted ACQ and Minimum Bill Quantity

 

	
  

	
9.1.1

	
For each Contract Year during the Take or Pay Period (or that part of the first Contract Year commencing on the first Day of the Take or Pay Period and ending at the end of such Contract Year), the "Adjusted Annual Contract Quantity" and the "Minimum Bill Quantity" shall be calculated in accordance with the following provisions.

 

	
  

	
9.1.2

	
The Adjusted Annual Contract Quantity (or "Adjusted ACQ") shall be a quantity of Specification Gas equal to the ACQ applicable for the relevant Contract Year less the sum of the following:

 

	 	
(a)

	
the aggregate of the quantities of Specification Gas Properly Nominated by the Buyer for delivery during the relevant Contract Year which the Sellers did not for any reason deliver (including without limitation the Sellers' failure to deliver as a result of Force Majeure) but excluding any quantities that the Sellers failed to deliver in the circumstances of Article ‎11.5.2 and any failure by the Buyer to take delivery of Specification Gas properly tendered for delivery in accordance with this Agreement); and

 

	 	
(b)

	
the aggregate of the quantities of Specification Gas Properly Nominated by the Buyer for delivery during the relevant Contract Year which the Buyer did not take for reasons for which it was excused from liability under ‎Article 16 or as a result of the Buyer’s exercise of any right to refuse to take delivery under Article ‎11.5.2 and ‎Article 12.

 

	
  

	
9.1.3

	
The "Minimum Bill Quantity" or "MBQ" shall be a quantity of Gas equal to (**) of the Adjusted ACQ for each such Contract Year.

 

	
9.2

	
Carry Forward Aggregate

 

	
  

	
9.2.1

	
If and to the extent that in any Contract Year during the Take or Pay Period the aggregate of the quantities of Gas taken and paid for by the Buyer under this Agreement (excluding any quantity of Gas in respect of which the Buyer shall receive a credit pursuant to Article ‎9.5) exceeds: (i) in respect of the period commencing on the Commencement Date and ending on the fifth (5th) anniversary of the Commencement Date – (**) MMBTU; (ii) in respect of the period commencing on the fifth (5th) anniversary of the Commencement Date until the end of the First Period – (**) MMBTU; and (iii) for the Second Period (if applicable) – (**) MMBTU; then such amount shall be classified as "Carry Forward" in respect of such Contract Year.

 

  

55

  

 

	
  

	
9.2.2

	
Any quantity so classified as Carry Forward in respect of any Contract Year together with any Carry Forward so classified in respect of the (**), up to a maximum amount of (**) MMBTU and (**) MMBTU, shall (save to the extent of any use thereof pursuant to Article ‎9.3) be known as the "Carry Forward Aggregate" in force at any time or from time to time.

 

	
9.3

	
Take or Pay

 

	
  

	
9.3.1

	
In respect of each Contract Year during the Take or Pay Period or that part of the first Contract Year commencing on the first Day of the Take or Pay Period and ending at the end of such Contract Year, the amount of the Minimum Bill Quantity which has not been taken by the Buyer in such Contract Year under this Agreement shall be known as the "Annual Take or Pay Quantity" for such Contract Year.

 

	
  

	
9.3.2

	
In respect of any Contract Year for which there arises an Annual Take or Pay Quantity, such quantity shall be reduced by a quantity of Carry Forward Aggregate not exceeding (**) MMBTU during (**) MMBTU during (**), and:

 

	 	
(a)

	
any remaining amount of such Annual Take or Pay Quantity shall be known as the "Net Annual TOP Quantity"; and

 

	 	
(b)

	
such use of Carry Forward Aggregate shall be deemed to be a recovery of Carry Forward Aggregate by the Buyer to the extent of such use and the outstanding balance (if any) of Carry Forward Aggregate shall be reduced commensurately.

 

	
  

	
9.3.3

	
In respect of any Contract Year for which there arises a Net Annual TOP Quantity, the Buyer shall make payment to the Sellers, in accordance with the provisions of ‎Article 11 at the Contract Price applicable in respect of such Contract Year, for any such Net Annual TOP Quantity.

 

  

56

  

 

	
  

	
9.3.4

	
The Net Annual TOP Quantity in respect of such Contract Year together with the Net Annual TOP Quantity in respect of the (**) not already recovered pursuant to the provisions of Article ‎9.5, shall be known as "Make-Up Aggregate".

 

	
9.4

	
(**)

 

	
9.5

	
Recovery of Make-up Aggregate

 

	
  

	
9.5.1

	
In relation to each Contract Year at the commencement of which any Make-Up Aggregate exists, the Buyer shall receive a quantity credit (in MMBTU) in respect of any Specification Gas taken and paid for by the Buyer in excess of the (**) in the relevant Contract Year up to the balance of the then outstanding Make-Up Aggregate.

 

	
  

	
9.5.2

	
The quantities to be used in so reducing the Make-Up Aggregate shall be established by (**).

 

	
  

	
9.5.3

	
The quantity credit mentioned in Article ‎9.5.1 shall be converted to a monetary credit by multiplying such quantity with a price equal to the Contract Price applicable in respect of the Contract Year in which such Make-Up Aggregate is recovered, together with interest thereon at the rate of LIBOR plus one (1) percentage point from the day (or if applicable, from each of the days) on which the Buyer made payment in respect of Gas taken by the Buyer in excess of the Minimum Bill Quantity in the relevant Contract Year (which is subsequently deducted from the Make-Up Aggregate), until payment of the relevant credit amount.

 

	
  

	
9.5.4

	
The monetary credit calculated in accordance with Article ‎9.5.3 shall be taken into account in the Annual Reconciliation Statement in respect of such Contract Year.

 

	
  

	
9.5.5

	
Any such credit to the Buyer shall be deemed to be a recovery of Make-Up Aggregate by the Buyer to the extent of the quantity corresponding to such credit and the outstanding balance (if any) of Make-Up Aggregate shall be reduced commensurately.

 

	
  

	
9.5.6

	
Notwithstanding the foregoing provisions of this Article ‎9.5, if at what would otherwise be the end of the Contract Period there is any Make-Up Aggregate outstanding, then:

 

	 	
(a)

	
If such outstanding Make-Up Aggregate exceeds (**) MMBTU, then this Agreement shall not terminate on that date but shall continue in full force and effect for a number of Days equal to the Make-Up Aggregate divided by the DCQ or twelve (12) months, whichever is later so as to enable the Buyer to recover the outstanding Make-UP Aggregate in accordance with the terms of this Agreement. During this period, the provisions of this Agreement will continue to apply mutatis mutandis. In order to avoid any doubt, Article ‎9.3 will not apply; or

 

  

57

  

 

	 	
(b)

	
If such outstanding Make-Up Aggregate does not exceed (**) MMBTU, then on the fifteenth (15th) Business Day of the month immediately following the month in which such termination occurs the Sellers shall pay to the Buyer a sum of money equal to such outstanding Make-Up Aggregate multiplied by the Contract Price in force at the end of the Contract Year in which the termination occurred.

 

  

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ARTICLE 10

 

Price,  Price Review and Adjustment

 

	
10.1

	
Calculation of Contract Price

 

	
  

	
10.1.1

	
In the Month of December preceding each Price Period (each such Month being herein called a "Review Month"), the Sellers shall calculate the Contract Price for the Price Period in US Dollars per MMBTU in accordance with Articles ‎10.1.2 and ‎10.1.3 and such price so calculated shall be submitted to the Buyer for agreement as soon as practicable but in no event later than the last Day of the Review Month.

 

	
  

	
10.1.2

	
The Contract Price for the Price Period of 2011 (P2011) is five point zero four two US Dollars (US$5.042) per MMBTU.

 

	
  

	
10.1.3

	
The Contract Price for each subsequent Price Period following 2011 shall be calculated in accordance with the following formula:

 

(**)

 

Where:

 

"(**)" is (**).

 

"(**)" is (**).

 

"(**)" is (**).

 

"(**)" is (**).

 

"(**)" is (**):

 

For the Price Periods commencing on January 1, 2012 and ending on December 31, 2019 (i.e.: The Price Periods for the Calendar Years 2012 through 2019):

 

(**)

 

For the Price Periods from January 1, 2020 (i.e.: The Price Periods for the Calendar Years 2020 until the end of the Contract Period):

 

(**)

 

Where:

 

  

59

  

 

"CPI" means the U.S. Consumer Price Index for all Urban Consumers (CPI-U), U.S. City Average, All Items, Not Seasonally Adjusted (Index 1982-1984 = 100) (Series ID: CUUR0000SA0), as published by the United States Department of Labor, Bureau of Labor Statistics (on the Effective Date the CPI was published at the following web site: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt);

 

"CPIn" is the arithmetic average of the monthly values of the CPI for (**);

 

"(**)" is (**).

 

	
  

	
10.1.4

	
Example: (**)

 

 

	
  

	
10.1.5

	
The Parties agree that the Contract Price determined under this Agreement is appropriate for the selling to, and buying by, an anchor buyer of Gas in the Israeli market for use in Israel at the Effective Date.

 

	
  

	
10.1.6

	
All calculations to ascertain the Contract Price under this Agreement shall be made to five (5) places of decimals, without rounding and the final product shall then be rounded to the fourth decimal. A figure of five (5), or more, in the fifth place of decimals shall cause a rounding up of the fourth decimal.

 

	
  

	
10.1.7

	
All prices calculated in accordance with this ‎Article 10 are exclusive of all taxes and duties, and shall be payable in accordance with ‎Article 11.

 

	
10.2

	
Figures for Calculation of CPIn

 

In the application of the formula set out in Article ‎10.1.2, the latest figures for the relevant period needed to calculate CPIn which are available on the last day of the Review Month shall be used (whether the same are published in final or in provisional form) and the values so obtained shall not be adjusted consequent upon such figures being subsequently published in amended form except only:

 

	
  

	
10.2.1

	
in those specified circumstances and in the manner set out in Articles ‎10.4 and Article ‎10.6;

 

	
  

	
10.2.2

	
in the event that figures which are then published in provisional form are subsequently published in final form within two (2) months after the end of the Review Month.

 

  

60

  

 

	
10.3

	
Change in Base of CPI

 

	
  

	
10.3.1

	
If in the Review Month it is found that during the relevant three (3) Month period used in the application of the formula to obtain the Contract Price (CP) in Article ‎10.1.2 the CPI has been rebased to a different period then, subject to the provisions of Article ‎10.2: the new CPI, with respect to the period from and after such rebasing will be multiplied by a conversion factor calculated by dividing the value of the CPI for the Month of the rebasing using the base in effect prior to the rebasing, by the value of the CPI for the Month of the rebasing using the new base in effect following such rebasing.

 

For example: if with respect to the Month the rebasing became effective the CPI is equal to 190 and the new value of the CPI for such Month calculated in accordance with the base in effect from the rebasing is equal to 100, then the conversion factor will be equal to 1.9 (190/100) and each new CPI published under the new base will be multiplied by a factor equal to 1.9.

 

	
  

	
10.3.2

	
For the purposes of this Article ‎10.3, the expression "CPI" shall be construed as including any successor thereto agreed or determined pursuant to this ‎Article 10.

 

	
10.4

	
Unavailability or Change in Basis of or Error in the CPIn

 

	
  

	
10.4.1

	
If during the Review Month, in the opinion of either Party, the CPIn:

 

	 	
(a)

	
is permanently not available (or the Parties are unable to agree whether it is only temporarily unavailable);

 

	 	
(b)

	
contains an error in any of the relevant figures required to calculate the CPIn; or

 

	 	
(c)

	
is so changed in the basis of calculation as to affect materially the validity of price comparison or index comparison over time;

 

then either Party may, not later than the end of the Review Month, give notice to the other of such opinion and the Parties shall jointly endeavor to agree upon whether such opinion is valid and if so to agree upon an appropriate amendment to or replacement of the CPIn.

 

	
  

	
10.4.2

	
To the extent that the Parties have been able to agree upon an amendment to or replacement of the relevant CPIn, it shall be used in the calculation of the Contract Price for the relevant Price Period and subsequent Price Periods and shall not subsequently be amended in respect of the Price Periods for which it is used, even though the relevant CPIn subsequently becomes available or is corrected.

 

  

61

  

 

	
  

	
10.4.3

	
If the Parties are unable within thirty (30) days from the date of the notice given under Article ‎10.4.1, to agree whether the CPIn is so unavailable, erroneous or has been changed, the matter shall (at the request of either Party) be referred for determination to an Expert pursuant to Article ‎19.3.

 

	
  

	
10.4.4

	
If for any of the reasons specified in Article ‎10.4.1 the Contract Price cannot be calculated when required, then a Provisional Contract Price shall be calculated in accordance with the provisions of Article ‎10.6.

 

	
  

	
10.4.5

	
It is agreed that a change of name of the CPIn shall not in itself be taken to be a reason for reference to an Expert under this Article ‎10.4.

 

	
10.5

	
Expert Determination

 

In any determination to be made by reference to the Expert under Article ‎10.4.3:

 

	
  

	
10.5.1

	
If the issue referred to the Expert is the establishment of an appropriate replacement of the CPIn pursuant to Article ‎10.4.1(a), the Expert shall provide a replacement CPIn (being an index price or series of prices or combination of indices as close as possible in type and use to the CPIn required to be replaced, with such adjustments only thereto as may be necessary to reflect more closely the movements of such CPIn and shall in the same manner (if required) provide an appropriate value to be used as a substitute CPI0.

 

	
  

	
10.5.2

	
If it is agreed or determined that the circumstances set out in Article ‎10.4.1(b) have occurred and the Expert is requested to make an appropriate amendment or replacement, the Expert shall provide a determination to correct the error including a substitute CPI0 if applicable.

 

	
  

	
10.5.3

	
If it is agreed or determined that the circumstances set out in Article ‎10.4.1(c) have occurred and the Expert is requested to make an appropriate amendment or replacement, the Expert shall make such adjustments to the CPIn (and if appropriate its substitute CPI0) as may be required to restore the validity of price or index comparison over time or, if this is not possible, the Expert may substitute an alternative CPIn together with an appropriate value to be used as the CPI0 in the manner described in Article ‎10.5.1.

 

  

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10.5.4

	
If the Expert is of the opinion that the CPIn is only temporarily unavailable as described in Article ‎10.4.1(a), then Article ‎10.4.4 shall apply as if the Parties had agreed the same and, if the Expert is of the opinion that the CPIn has not been computed in error or has not materially changed as described in Articles ‎10.4.1(b) and ‎10.4.1(c), then the Contract Price for the Price Period in respect of which the reference to the Expert has been made shall be calculated in accordance with Article ‎10.1 as if no reference to the Expert had been made whereupon no subsequent reference to the Expert under Article ‎10.4 may be made in respect of such Price Period by such Party.

 

	
  

	
10.5.5

	
The Expert shall have no power to change the formula set out in Article ‎10.1.2.

 

	
10.6

	
Provisional Contract Price

 

	
  

	
10.6.1

	
If due to the unavailability of information, Sellers are unable to calculate the CPIn, or if the Buyer has notified the Sellers that it does not agree with the Sellers’ calculation of the Contract Price within fourteen (14) Days of receipt of the Sellers’ calculation pursuant to Article ‎10.1.1 then:

 

	 	
(a)

	
a price (herein referred to as the "Provisional Contract Price") shall be calculated as provided in Article ‎10.6.2; and

 

	 	
(b)

	
if for any reason the Provisional Contract Price cannot be calculated as mentioned in Article ‎10.6.1‎(a), then the Contract Price for the immediately preceding Price Period shall be used as the Provisional Contract Price for the current Price Period;

 

and until the Contract Price can be calculated and subject to retrospective adjustment as hereinafter provided, the Provisional Contract Price for such Price Period shall be deemed to be the Contract Price for such Price Period for all purposes of this Agreement.

 

	
  

	
10.6.2

	
The Provisional Contract Price shall be calculated in the same manner as the Contract Price pursuant to this ‎Article 10, but using in respect of any figure used to calculate the CPIn for use in the said formula which is not available or is the subject of dispute under this ‎Article 10, the latest undisputed figure from the specified publication or same authority which was available prior to the disputed figure.

 

  

63

  

 

	
  

	
10.6.3

	
Once the CPIn and figures required to calculate the Contract Price for any Price Period have all become available and any dispute in respect thereof has been finally settled, the Contract Price shall be calculated for such Price Period and shall take effect retrospectively from the commencement of such Price Period and any overpayment or underpayment by the Buyer hereunder made due to the application of the Provisional Contract Price shall be shown in the next Monthly statement following calculation of the Contract Price and shall be credited to or paid by the Buyer with interest calculated at the rate of LIBOR (**) from the date of any overpayment or underpayment to the date of credit or payment (as applicable) applying the agreed or determined Contract Price for such Price Period.

 

	
10.7

	
Review of Contract Price

 

The Contract Price shall be subject to review and adjustment pursuant to the terms of this Article ‎10.7:

 

	
  

	
10.7.1

	
By not later than thirty (30) days after each of the following dates:

 

	
(a)

	
the eighth (8th) anniversary of the Commencement Date (the "First Price Adjustment Date"); and

 

	
(b)

	
the eleventh (11th) anniversary of the Commencement Date (the "Second Price Adjustment Date");

 

either Party shall be entitled, by written Notice to the other Party (the "Price Adjustment Notice") to request a review of the Contract Price in accordance with the terms of this Article ‎10.7 (the "Price Adjustment") if, in its opinion, the Contract Price as at the respective Price Adjustment Date does not represent the price appropriate for the selling to, and buying by, (**).

 

	
  

	
10.7.2

	
A Party that requests a Price Adjustment shall specify in its Price Adjustment Notice the change it is requesting, including a reasonably detailed explanation of how such opinion was reached and all reasonably available non-confidential information that supports its opinion.

 

  

64

  

 

	
  

	
10.7.3

	
The Parties shall discuss the Price Adjustment diligently and in good faith in order to conclude and reach a mutually acceptable agreement at the earliest reasonable time of a revised Contract Price that represents the price appropriate for the selling to, and buying by, (**).

 

	
  

	
10.7.4

	
If the Parties fail to reach an agreement on the Price Adjustment within ninety (90) days after the Price Adjustment Notice was delivered (or by a later date as may be agreed in writing by the Parties), either Party may refer the matter to Arbitration pursuant to Article ‎19.4.

 

	
  

	
10.7.5

	
The Price Adjustment made pursuant to Article ‎10.7.1(a) if made, whether agreed upon between the Parties pursuant to Article ‎10.7.3, or determined in Arbitration pursuant to the provisions of Article ‎19.4, shall be referred to in this Agreement as the "First Price Adjustment". The Contract Price following the First Price Adjustment shall apply from the First Price Adjustment Date until the end of that Price Period.

 

	
  

	
10.7.6

	
The Price Adjustment made pursuant to Article ‎10.7.1(b), if made, whether agreed upon between the Parties pursuant to Article ‎10.7.3, or determined in Arbitration pursuant to the provisions of Article ‎19.4, shall be referred to in this Agreement as the "Second Price Adjustment". The Contract Price following the Second Price Adjustment shall apply from the Second Price Adjustment Date until the end of that Price Period

 

	
  

	
10.7.7

	
The Price Adjustment shall be made by way of a factor by which the Contract Price will be multiplied in accordance with the following formula:

 

For the First Price Adjustment:

 

  

 

For the Second Price Adjustment:

 

 

Where:

 

"PA1" is the First Price Adjustment factor.

 

"PA2" is the Second Price Adjustment factor.

 

  

65

  

 

	
  

	
10.7.8

	
The First Price Adjustment (PA1) shall not increase or decrease the Contract Price as at the First Price Adjustment Date by more than twenty five percent (25%) (i.e. 0.75 ≤ PA1 ≥ 1.25).

 

	
  

	
10.7.9

	
The Second Price Adjustment (PA2) shall not increase or decrease the Contract Price as at the Second Price Adjustment Date by more than ten percent (10%) (i.e. 0.90 ≤ PA2 ≥  1.10).

 

	 	
10.7.10

	
In the event that either Party requests a Price Adjustment, then with respect to the period as of the respective Price Adjustment Date and until the establishing of the Price Adjustment (whether as agreed by the Parties pursuant to Article ‎10.7.3, or as determined in Arbitration pursuant to the provisions of Article ‎19.4) the Contract Price shall continue to be calculated as if there was no Price Adjustment. Once the Price Adjustment has been agreed upon between the Parties pursuant to Article ‎10.7.3, or determined in Arbitration pursuant to the provisions of Article ‎19.4, the Contract Price shall be adjusted and shall take effect retrospectively from the respective Price Adjustment Date and any overpayment or underpayment by the Buyer in respect of the period from the Price Adjustment Date shall be shown in the next Monthly statement following calculation of the Contract Price based on the Price Adjustment, and shall be credited to or paid by the Buyer with interest calculated at the rate of LIBOR (**) from the date of any overpayment or underpayment to the date of credit or payment (as applicable) applying the adjusted Contract Price for such Price Period.

 

	 	
10.7.11

	
Example: (**)

 

	
10.8

	
Prices

 

	
  

	
10.8.1

	
Gas delivered under the terms of this Agreement shall be paid for at the Contract Price unless specified otherwise under this Agreement.

 

	
  

	
10.8.2

	
The Contract Price will include the amounts due to the Sellers for delivery of the Gas and providing the associated services as described in this Agreement, including the price of the energy content of the Gas, fees for capacity, processing, treatment, transportation, pressure reduction and measurement of the Gas prior to its delivery at the Delivery Point, and for the nomination procedures described in ‎Article 6.

 

  

66

  

 

	
  

	
10.8.3

	
Gas delivered in reduction of the Shortfall Aggregate under the provisions of ‎Article 17 shall be paid for at a price (herein called the "Shortfall Price"), that is (**).

 

	
  

	
10.8.4

	
Excess Gas nominated by the Buyer and delivered under the provisions of Article ‎6.9.3 shall be paid for at a price that is equal to (**).

	 

 

  

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ARTICLE 11

 

Billing and Payment

 

	
11.1

	
Monthly Statements

 

	
  

	
11.1.1

	
Not later than the fifth Business Day in the Month immediately following the earlier of September 2013 and the Flow Date and each Month thereafter, the Sellers shall render to the Buyer a statement ("Monthly Statement") which shall show for the preceding Month (inter alia) the information specified in Article ‎11.1.2.

 

	
  

	
11.1.2

	
The information referred to in Article ‎11.1.1 is:

 

	 	
(a)

	
In respect of each Hour of that Month: the quantity of Gas expressed in MMBTU (calculated in accordance with its Higher Heating Value) delivered to the Buyer at the Delivery Point and the Proper Nomination for such Hour, and to the extent Sellers' deliveries fell short of Buyer's Proper Nomination in excess of the Delivery Tolerance, (**);

 

	 	
(b)

	
Any reductions to the DCQ which are to be made in respect of any Day or Days in that Month (**);

 

	 	
(c)

	
The balance of any Shortfall Aggregate (**) outstanding at the end of that Month;

 

	 	
(d)

	
Any sum due and owing to the Buyer under the provisions of ‎Article 12 at the end of that Month;

 

	 	
(e)

	
The sum due and owing to the Sellers (obtained in accordance with all relevant provisions of this Agreement) in respect of Gas delivered hereunder at the Delivery Point during that Month showing the respective apportionment (if applicable) of such sum at the respective prices applicable pursuant to the terms of this Agreement;

 

	 	
(f)

	
Any sum due and owing to the Sellers under the provisions of Article ‎9.5 at the end of that Month;

 

	 	
(g)

	
Any other sum or sums due and owing at the end of that Month from either Party to the other under this Agreement;

 

  

68

  

 

	 	
(h)

	
The net sums payable by the Buyer to each of the Sellers or by each of the Sellers to the Buyer after taking account of all the foregoing matters set out in this Article ‎11.1;

 

	 	
(i)

	
The applicable taxes including value added tax and excise tax, if any, that are billable to Buyer or Sellers (as applicable) pursuant to applicable legislation or to this Agreement. Value Added Tax and excise tax (if any) will be expressed and paid by the Buyer to the Sellers in Israeli currency calculated in accordance with the Representative Rate known on the date of the tax invoice; and

 

	 	
(j)

	
(**).

 

	
11.2

	
Annual Reconciliation Statements

 

	
  

	
11.2.1

	
As soon as practicable after each Contract Year but no more than sixty (60) days after the end of the Contract Year, the Sellers shall render to the Buyer a statement (herein called the "Annual Reconciliation Statement") which shall show for the preceding Contract Year (inter alia) the information specified in Article ‎11.2.2.

 

	
  

	
11.2.2

	
The information referred to in Article ‎11.2.1 is:

 

	 	
(a)

	
The total quantity of Gas Properly Nominated by the Buyer in that Contract Year and the total quantity of Gas expressed in MMBTU delivered hereunder to the Delivery Point in that Contract Year;

 

	 	
(b)

	
The Adjusted ACQ for that Contract Year showing in detail the reductions made from the ACQ in conformity with the terms of this Agreement to arrive at the Adjusted ACQ;

 

	 	
(c)

	
The quantities of Gas for which the Buyer should have paid at the prices prescribed therefor and the quantities for which it has in fact paid at such prices;

 

	 	
(d)

	
The balance of Make-Up Aggregate from previous Contract Years (showing the Contract Year or Contract Years in respect of which all parts of such Make-Up Aggregate first arose and showing in detail all reductions therefrom made in respect of such preceding Contract Year) together with a statement of the balance of Make-Up Aggregate (if any) to be carried forward;

 

	 	
(e)

	
The balance of Carry Forward Aggregate remaining at the end of that Contract Year;

 

  

69

  

 

	 	
(f)

	
The Minimum Bill Quantity, the Annual Take or Pay Quantity and the Net Annual TOP Quantity for that Contract Year, if any;

 

	 	
(g)

	
All and any sums due and owing from either Party to the other in respect of that Contract Year or any previous Contract Year;

 

	 	
(h)

	
The net sums (if any) payable by the Buyer to each of the Sellers or by each of the Sellers to the Buyer as at the end of that Contract Year after taking account of all the foregoing matters set out in this Article ‎11.2; and

 

	 	
(i)

	
(**).

 

	
  

	
11.2.3

	
If the Sellers have not rendered such Annual Reconciliation Statement within sixty (60) days from the end of the relevant Contract Year, then the Buyer shall be entitled to do so within sixty (60) days thereafter and such statement shall be deemed the Annual Reconciliation Statement.

 

	
11.3

	
Payment Dates

 

	
  

	
11.3.1

	
On the fifteenth (15th) Business Day after the Buyer has received the Sellers' Monthly Statement for the preceding Month, the Buyer shall pay to each of the Sellers, or each of the Sellers shall pay to the Buyer (as the case may be), in funds available to the recipient on the day of payment, the sum set out in such Monthly Statement, excluding amounts payable on account of Value Added Tax, which shall be paid in accordance with the provisions of Article ‎11.4.5.

 

	 	
11.3.2

	
On the last day of February in each Contract Year or within thirty (30) Business Days following the receipt of the Annual Reconciliation Statement, whichever is the later, the Buyer shall pay to each of the Sellers or each of the Sellers shall pay to the Buyer (as the case may be), in funds available to the recipient on the day of payment, the sum (if any) set out therein for the preceding Contract Year.

 

	
11.4

	
Payments

 

	
  

	
11.4.1

	
Payments under this Agreement shall be made in US Dollars by direct bank transfer or equivalent instantaneous transfer of funds to each of the Sellers or Buyer (as applicable) at such place in the US, Europe or Israel as the recipient may request or such other place as may be agreed (such agreement not to be unreasonably withheld).

 

  

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11.4.2

	
In the event any Seller requests that any payments to be made by the Buyer to such Seller hereunder be made in Israeli currency it shall submit its invoice in Israeli currency calculated in accordance with the Representative Rate known at the date of the invoice and Buyer shall comply with such request and make such payment in Israeli currency.

 

	
  

	
11.4.3

	
If the due date as specified above is not a banking day (i.e. a day on which banks are open for business) at the place of payment or place of receipt, then the due date shall be deferred to the next banking day.

 

 

	
  

	
11.4.4

	
Subject to the timely provision to the paying Party (which for the purposes of this Article will include the Buyer or each of the Sellers, as applicable) of appropriate withholding tax exemptions approvals, all payments made under this Agreement shall be made without withholding or deduction for, or on account of any taxes, duties, assessments or governmental charges of any nature imposed or levied by or on behalf of any authority having power to tax, unless such withholding or deduction is required by law.

 

	
  

	
11.4.5

	
In the event that any payments due to be paid by a Party hereunder are subject to Value Added Tax under Israeli Law, such Value Added Tax will be paid by such Party to the other Party at the prevailing legal rate, against procurement of a tax invoice (heshbonit mas) as required by Israeli law, by no later than one (1) Business Day prior to the date on which such Value Added Tax must be paid to the taxation authorities under the applicable law.

 

	
11.5

	
Failure to Pay

 

	
  

	
11.5.1

	
Should either the Buyer or any of the Sellers fail to make payment to the other of any sum due hereunder, interest thereon shall accrue at the rate per annum equal to LIBOR (**) (compounded annually) from the date when such payment is due hereunder until the same is made.

 

	
  

	
11.5.2

	
In the event of failure to pay any sum due pursuant to this Agreement which is not the subject of a dispute under Article ‎11.6.1 for seven (7) days from the applicable due date, then the Party to whom the same is due and owing may on fourteen (14) days prior notice to the other Party of the intention so to do, suspend delivery or receipt, as the case may be, of Specification Gas hereunder, and if such failure to pay continues for one hundred and twenty (120) days from the applicable due date, the Party to whom the same is due and owing may also, on fourteen (14) days prior notice to the other Party, terminate this Agreement, but the exercise of such right shall not constitute a waiver of, nor in any way prejudice, other remedies available to such Party.

 

  

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11.6

	
Disputed Amounts

 

	
  

	
11.6.1

	
In the event that the Buyer disputes any matter or sum set out in any Monthly Statement or any Annual Reconciliation Statement or the Sellers dispute any matter or sum set out in any Annual Reconciliation Statement prepared by the Buyer in accordance with Article ‎11.2.3, the Party disputing such matter or sum shall no later than three (3) Business Days before the due date for payment give notice to the other Party of the nature and extent of such dispute and of its election pursuant to Article ‎11.6.2 and the disputing Party shall (**).

 

	
  

	
11.6.2

	
The disputing Party shall be entitled (**).

 

	
  

	
11.6.3

	
Within fourteen (14) days after such payment due date, the Parties shall meet to seek to resolve such dispute, but if within thirty (30) days after such payment due date the Parties have not resolved such dispute, then either Party may refer such dispute to Arbitration in accordance with ‎Article 19.

 

	
  

	
11.6.4

	
Within seven (7) Business Days after such dispute is agreed or determined, the corresponding payment or repayment (as the case may be) due from one Party to the other shall be made together with interest at the rate set out in Article ‎11.5 from the applicable due date to the date of such payment or repayment.

 

	
11.7

	
Examination

 

The Parties shall each have the right, upon reasonable notice and at reasonable hours, to examine the books, records and charts of the other Party relevant to this Agreement to the extent necessary to verify the accuracy of any accounting statement, charge, calculation, determination or claim made pursuant to any of the provisions of this Agreement subject to the following:

 

  

72

  

 

	
  

	
11.7.1

	
Such books, records and charts need not be preserved longer than a period of twenty-four (24) Months after the end of the Contract Year to which such books records or charts refer unless they relate to an outstanding bona fide dispute.

 

	
  

	
11.7.2

	
If any such verification involves the examination of confidential documents not solely relating to the sale of Specification Gas hereunder, the requesting Party shall have the right to require the auditors of the other Party to provide a certified extract of the documents excluding such non-relating matters and the costs of preparing such extract shall be borne by the requesting Party unless it is established that there was an error in any such accounting statement, charge, computation or claim in which event the cost thereof shall be borne by the other Party.

 

	
  

	
11.7.3

	
If any such examination reveals any inaccuracy in any invoice or financial statement theretofore rendered, the Party to whom the resulting payment or repayment is due shall within seven (7) Business Days after the date that such inaccuracy is discovered but not later than two (2) years after the date of the relevant statement or invoice, submit to the other Party a statement showing all necessary adjustments to the former bill or financial statement. Within fourteen (14) Business Days after the amount due is established (by agreement or determination by Arbitration in accordance with ‎Article 19) the Party from whom payment is due shall make payment or repayment (in accordance, mutatis mutandis, with the provisions of Articles ‎11.4 and ‎11.5 above) of the sum so due.

 

	
  

	
11.7.4

	
Such right to examine must be exercised within twenty-four (24) Months after the end of the Contract Year to which the books, records or charts being examined refer.

 

  

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ARTICLE 12

 

Quality

 

	
12.1

	
Specification

 

	
  

	
12.1.1

	
Natural Gas tendered for delivery under this Agreement shall at the Delivery Point be in accordance with the specification set out in part 1 of Schedule 5 ("Specification").

 

	
  

	
12.1.2

	
If Natural Gas tendered for delivery hereunder forms part of a commingled stream, which at the Delivery Point fails to conform to the Specification, then whatever may be the reason for such failure, the Natural Gas tendered for delivery hereunder shall be deemed not to conform to the Specification.

 

	
12.2

	
Failure to Conform

 

	
  

	
12.2.1

	
If at any time the Natural Gas tendered for delivery at the Delivery Point is Off-Spec Gas, any Party that becomes aware that such Natural Gas is Off-Spec Gas shall promptly notify the Transporter and the other Party in accordance with Article ‎12.3. The Buyer shall have the right to accept or reject such Off-Spec Gas subject to the following provisions of this Article ‎12.2.

 

	
  

	
12.2.2

	
Upon becoming aware that the Natural Gas tendered for delivery at the Delivery Point is Off-Spec Gas, the Sellers shall promptly use reasonable endeavors to remedy such failure so as to make available Specification Gas.

 

	
  

	
12.2.3

	
The Buyer may refuse to take all or any part of the Off-Spec Gas until the deficiency has been remedied, but any such refusal shall not constitute a waiver of nor affect any other rights or remedies of the Buyer in respect of such failure on the part of the Sellers to deliver Specification Gas.

 

	
  

	
12.2.4

	
If the Buyer knowingly takes Off-Spec Gas (i.e. after having being notified by the Sellers or the Transporter that it is Off-Spec Gas) (**):

 

	
  

	
(a)

	
(**);

 

	
  

	
(b)

	
(**);

 

provided however, that the Sellers’ total liability with regard to any and all costs and expenses with respect to the circumstances set out in Article ‎12.2.4, shall be limited to (**).

 

  

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12.2.5

	
If the Buyer:

 

	 	
(a)

	
takes Off-Spec Gas not being aware that it is Off-Spec Gas; or

 

	 	
(b)

	
(**),

 

then, (**).

 

	
12.3

	
Notifications

 

The Sellers shall notify the Buyer as soon as reasonably practicable after becoming aware of any failure or anticipated failure in the quality of the Natural Gas giving details of the cause of the failure (including the type and degree of such non-conformance) and an estimate of the probable duration of the failure.

 

	
12.4

	
Determination

 

	
  

	
12.4.1

	
Any difference between the Parties, which may arise in respect of the quality of the Natural Gas, shall (at the request of either Party) be referred to the Expert for determination in accordance with Article ‎19.3.

 

	
  

	
12.4.2

	
Any difference between the Parties, which may arise in respect of any liabilities, costs, claims and expenses incurred under Article ‎12.2, shall (at the request of either Party) be referred for determination in accordance with Article ‎19.4.

 

  

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ARTICLE 13

 

Delivery Point

 

	
13.1

	
Delivery Point

 

	
  

	
13.1.1

	
"Delivery Point" means the Ashdod Delivery Point or the Additional Delivery Point as applicable.

 

	
  

	
13.1.2

	
The "Ashdod Delivery Point" is the point at the flange between the receiving terminal operated by the Yam-Tethys Partners in Ashdod and the Transporter’s receiving terminal in Ashdod (being the entry point to the Downstream System) as identified in the diagram set out in Schedule 9.

 

	
  

	
13.1.3

	
In addition to the Ashdod Delivery Point, the Sellers will have the right to designate additional Delivery Points which will be the point at the flange between a suppliers' receiving terminal and the Transporter’s receiving terminal near Ashkelon (being an entry point to the Downstream System) or at any such other entry points to the Downstream System as may be agreed by the Parties (each an "Additional Delivery Point").

 

	
  

	
13.1.4

	
In the event there is more than one Delivery Point, the Sellers will have the right to deliver Gas hereunder at any one or more Delivery Points at their discretion and the term Delivery Point shall be construed to mean any Delivery Point.

 

	
  

	
13.1.5

	
Specification Gas to be delivered under the terms of this Agreement shall be tendered for delivery by the Sellers to the Buyer at the Delivery Point.

 

	
13.2

	
Property and Risk

 

Title to Specification Gas and risk of loss of or damage to Specification Gas delivered in accordance with the terms of this Agreement shall pass from the Sellers to the Buyer at the Delivery Point and any liability in respect of such Specification Gas shall also pass at the Delivery Point.

 

  

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ARTICLE 14

 

Pressure

 

	
14.1

	
Delivery Pressure

 

	
  

	
14.1.1

	
The "Delivery Pressure" shall be a pressure sufficient to allow Natural Gas Properly Nominated by Buyer to enter the Downstream System, it being agreed that the pressure in the Downstream System will not exceed a Gauge maximum pressure of eighty (80) Bar.

 

	
  

	
14.1.2

	
The Sellers shall deliver Specification Gas at the Delivery Point at the Delivery Pressure.

 

	
  

	
14.1.3

	
For the avoidance of doubt, if the Sellers, acting as a Reasonable and Prudent Operator, tender the quantity of Specification Gas Properly Nominated for delivery in accordance with Article ‎14.1.2 above and that quantity is not delivered because the pressure downstream of the Delivery Point was higher than eighty (80) Bar (or such higher pressure agreed to by Sellers), then this event will be included in the circumstances of Buyer’s failure to take delivery of Specification Gas and the Sellers shall have no liability for such failure to deliver the quantity Properly Nominated.

 

  

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ARTICLE 15

 

Measurement

 

	
15.1

	
General

 

Buyer and Sellers agree to determine measurement procedures in consultation with the relevant Transporter procedures and application of good oil and gas industry practices in accordance with the American Gas Association (or European equivalent) codes and specifications and in accordance with part 2 of Schedule 5.

 

	
15.2

	
Measurement Devices

 

Sellers shall supply, operate and maintain, or cause to be supplied, operated and maintained, suitable gas volume, pressure and temperature measuring devices, and sampling systems and analytical equipment required for collecting samples and for determining quality and composition of the Natural Gas. Such metering station will be located at or near the Delivery Point. If the Sellers supply such measuring devices, they shall do so in accordance with the American Gas Association (or European equivalent) codes and specifications and in accordance with part 2 of Schedule 5.

 

	
15.3

	
Disputes

 

In the event of any dispute concerning the subject matter of this ‎Article 15, including but not limited to, disputes over the accuracy of measuring devices, their calibration, the result of a measurement, sampling, analysis, computation or method of calculation, such dispute shall be settled in good faith as mutually agreed between the Parties and in consultation with the Transporter, if appropriate. In the absence of such agreement the dispute shall be submitted to the Expert for determination pursuant to Article ‎19.3.

 

  

78

  

 

	
15.4

	
Costs and Expenses of Test and Verification

 

All costs and expenses for testing and verifying Sellers’ measurement devices shall be borne by Sellers, provided that if Buyer requests testing or verification of measurement devices, the costs for such action shall be borne by Buyer unless such devices are found to be outside tolerance limits. When the services of a competent impartial authority are required and selected by mutual agreement, then the fees and charges of such authority shall be borne equally by Sellers and Buyer.

 

  

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ARTICLE 16

 

Force Majeure

 

	
16.1

	
Definition

 

The expression "Force Majeure" means any event or circumstance (including (**)), which is beyond the control of the Buyer or the Sellers (as the case may be) (acting and having acted as a Reasonable and Prudent Operator) resulting in or causing:

 

	
  

	
16.1.1

	
the failure or inability by the Buyer or the Sellers (as the case may be) to perform any one or more of their respective obligations (including obligations of reasonable endeavors) under this Agreement; or

 

	
  

	
16.1.2

	
in the case of the Buyer, the occurrence of all or any of the circumstances specified in Article ‎16.4.2(d),

 

and which failure, inability or occurrence (as applicable) could not have been prevented or overcome by the exercise by the Buyer or the Sellers (as the case may be) of such action as would have been taken by a Reasonable and Prudent Operator.

 

	
  

	
For the avoidance of doubt, changes in market conditions, including changes that directly or indirectly affect the demand for or price of electricity and/or Gas, including inter alia, loss of customers, shall not constitute a Force Majeure event.

 

	
16.2

	
Exclusions

 

Notwithstanding anything in Article ‎16.1 (and without prejudice to the generality thereof):

 

	
  

	
16.2.1

	
The Sellers shall not be entitled to claim relief through Force Majeure for any failure to perform their obligations hereunder to the extent that such failure was caused by a (**).

 

	
  

	
16.2.2

	
The Buyer shall not be entitled to claim relief through Force Majeure in the event of any failure to perform its obligations hereunder to the extent that such failure was caused by any one or more of the following events or circumstances:

 

	 	
(a)

	
The failure to renew, extend or obtain any of Buyer’s Generation Licenses; or

 

	 	
(b)

	
Any requirement pursuant to Section 92 of the Israel Natural Gas Sector Law, 2002, to purchase Natural Gas from other producers or sources.

 

  

80

  

 

	
16.3

	
Payments

 

Notwithstanding anything in Article ‎16.1 (and without prejudice to the generality thereof) failure by either the Buyer or the Sellers (as the case may be) to pay money which is due shall not be treated as being Force Majeure or caused thereby unless such failure was due to Force Majeure affecting all reasonable means of payment in which event upon the cessation of such Force Majeure the Buyer or the Sellers (as the case may be) shall pay in addition to the above, interest on any amounts due hereunder at the rate of LIBOR (**) calculated from the due date to the date of payment.

 

	
16.4

	
Nature of Relief

 

The Buyer or the Sellers (as the case may be) shall, subject to Article ‎16.5 and Article ‎16.6, be relieved from liability under this Agreement as follows:

 

	
  

	
16.4.1

	
In the case of the Sellers, to the extent that by reason of Force Majeure, the Sellers:

 

	 	
(a)

	
fail to deliver the quantities of Specification Gas Properly Nominated for delivery under this Agreement;

 

	 	
(b)

	
fail to perform any of their other obligations under this Agreement; or

 

	 	
(c)

	
are otherwise in breach of any covenant under this Agreement.

 

	
  

	
16.4.2

	
In the case of the Buyer, to the extent that by reason of Force Majeure, the Buyer:

 

	 	
(a)

	
fails to take delivery of Specification Gas Properly Nominated for delivery and properly tendered for delivery under this Agreement;

 

	 	
(b)

	
fails to perform any of its other obligations under this Agreement;

 

	 	
(c)

	
is otherwise in breach of any covenant under this Agreement; or

 

	 	
(d)

	
is unable to:

 

	
  

	
(i)

	
accept Natural Gas at Buyer's Facilities and/or use Natural Gas to generate electricity at and/or transmit electricity from any of the Buyer’s Facilities; or

 

	
  

	
(ii)

	
transport or have transported in the Downstream System to any of Buyer’s Facilities the whole or any part of the Natural Gas which was to have been transported therein (pursuant to the Transportation Agreement) owing to the inoperability of the Downstream System caused by an event or circumstance beyond the control of the Transporter (acting and having acted as a Reasonable and Prudent Operator) and which could not have been prevented or overcome by the exercise by the Transporter of the standard of a Reasonable and Prudent Operator.

 

  

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16.4.3

	
In the event that either the Buyer or the Sellers shall exercise their respective rights (pursuant to Article ‎23.1) to perform any obligations under this Agreement by procuring that such obligations are performed by a third party, then the Buyer or the Sellers (as the case may be) shall only be entitled to be relieved from liability for reasons of Force Majeure to the extent that they acted as a Reasonable and Prudent Operator in appointing such third party and such third party would have been so entitled to such relief if such third party had been the Buyer or the Sellers (as the case may be) under this Agreement. For the avoidance of doubt, any Force Majeure event relating to the Yam-Tethys Facilities shall constitute a Force Majeure event under this Agreement provided that the inoperability of the Yam-Tethys Facilities would have entitled the Yam-Tethys Partners to such relief if Yam-Tethys Partners had been the Sellers under this Agreement.

 

	
16.5

	
Notice and Reports

 

Relief under Article ‎16.4 shall not be given to the Buyer or the Sellers unless such Party has:

 

	
  

	
16.5.1

	
By notice to the other Party (served as soon as reasonably possible and in no event later than seven (7) Days after becoming aware of the failure, inability or occurrence) that it intends to claim relief (and such notice shall contain such relevant information relating to such failure, inability or occurrence as is available including (without limitation) (**); and

 

	
  

	
16.5.2

	
Given (as soon as reasonably possible after the service of the notice under Article ‎16.5.1 but in any event not later than fifteen (15) Days thereafter) (**).

 

	
16.6

	
Remedial Steps

 

As soon as practicable after the occurrence of an event of Force Majeure, the Party claiming relief shall take all reasonable steps necessary in the applicable circumstances to remedy the failure, inability or occurrence. Relief under this ‎Article 16 shall cease to be available if the Party claiming relief (or, as applicable, such third party) fails to so take all necessary steps in the applicable circumstances to remedy the failure, inability or occurrence but such Party claiming relief shall not be obliged to settle any labor dispute except, in such manner as it shall in its own judgment consider fit.

 

  

82

  

 

	
16.7

	
Access

 

Upon request from the other, the Party claiming relief shall as soon as reasonably possible to the extent it is entitled to do so give or procure access or if it is not so entitled shall use reasonable endeavors to procure access (subject in each case to operational constraints) for a reasonable number of representatives of the other Party to examine the scene (if any) of the event or circumstance causing the failure, inability or occurrence (such access to be at the sole risk and cost of the Party seeking access).

 

	
16.8

	
Extended Force Majeure

 

If by reason of an event of Force Majeure any Party ("Affected Party") is unable to perform any material obligation required to be performed under this Agreement and such inability to perform continues for a period of (**), the other Party may terminate this Agreement by giving at least ninety (90) days' notice in writing to the Affected Party at the expiry of which this Agreement will terminate without prejudice to any rights of the Parties that have accrued prior to the date of termination.

 

  

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ARTICLE 17

 

Default

 

	
17.1

	
Shortfall Gas

 

	
  

	
17.1.1

	
With effect from the later of the Commencement Date and October 1, 2013, if the Sellers fail in respect of any Hour to deliver the quantity of Specification Gas Properly Nominated for delivery for any reason other than the Buyer's failure to take Specification Gas otherwise properly tendered for delivery in accordance with this Agreement, such amount will be "Shortfall Gas", provided however that (**).

 

	
  

	
17.1.2

	
Notwithstanding the above, for the purposes of calculating Shortfall Gas, a Proper Nomination in respect of any Hour shall not include any quantity of Specification Gas:

 

	 	
(a)

	
which exceeds the quantity taken by the Buyer in respect of the immediately preceding Hour (other than by reason of Sellers’ failure to tender for delivery Properly Nominated Gas in such preceding Hour) by more than:

 

(i) (**) MMBTU if the quantity taken by the Buyer in the preceding Hour was equal to or lower than (**) MMBTU; (ii) (**) MMBTU if the quantity taken by the Buyer in the preceding Hour was higher than (**) MMBTU (**) or (**) MMBTU if the quantity taken by the Buyer in the preceding Hour was higher than (**) MMBTU (**).

 

	 	
(b)

	
(**);

 

	 	
(c)

	
which exceeds zero (0) during the first three (3) Hours after a Cold Start (**); or

 

	 	
(d)

	
which exceeds (**) during the first (**) Hours after any Hour in which the Buyer and others nominated a total quantity of less than (**) MMBTU for delivery from the Reservoir to the Delivery Point or from the fourth Hour after such Hour quantities which exceeds the rates as set out in Article ‎17.1.2‎(a) above.

 

	
  

	
17.1.3

	
If any correction of quantities delivered in any Hour is made under the provisions of ‎Article 15, then the actual amount of any Shortfall Gas accrued shall be adjusted when the corrected amounts are available under the provisions of ‎Article 15 and the appropriate adjustments shall be made for the purposes of Article ‎17.2.

 

  

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17.1.4

	
In order to avoid any doubt, Shortfall Gas shall not include any quantity for which the Sellers are relieved from liability in accordance with ‎Article 16.

 

	
  

	
17.1.5

	
It is agreed that the provisions of Article ‎17.1 shall not apply in circumstances where in any Hour, the quantity of Gas delivered by the Sellers in respect of that Hour, is within the (**).

 

	
  

	
17.1.6

	
In respect of each Day and each Week, if the aggregate quantity of Gas delivered by the Sellers in respect of such periods, is not within the (**), respectively, then the extent to which the aggregate delivery falls short of the aggregate Proper Nominations for the applicable period ("Period Shortfall") will be Shortfall Gas in respect of the Month in which such period falls. It is agreed that each such quantity of Period Shortfall will be reduced by any quantities of Shortfall Gas already taken into account in respect of any Hour or Day falling within any longer aforesaid period. For the purposes of calculating the Week periods in any Month, there shall be included only those whole Weeks which end in that Month.

 

	
17.2

	
Monthly Shortfall Aggregate

 

	
  

	
17.2.1

	
The total of Shortfall Gas, in respect of any Month shall be aggregated as at the end of that Month (such aggregate amount together with any additions thereto pursuant to Article ‎17.2.3 being herein referred to as the "Shortfall Aggregate").

 

	
  

	
17.2.2

	
The first Specification Gas delivered after the end of that Month under this Agreement up to an amount equal to the Shortfall Aggregate which would otherwise be paid for by the Buyer at the Contract Price, shall be paid for at the Shortfall Price. The Shortfall Aggregate shall be reduced by the amount of Specification Gas which is paid for at the Shortfall Price.

 

	
  

	
17.2.3

	
To the extent that at the end of any Month the Shortfall Aggregate exceeds the amount of Specification Gas which is delivered in the next succeeding Month and paid for at the Shortfall Price, the balance shall be carried forward and be added to the Shortfall Aggregate for the next succeeding Month or Months (as the case may require).

 

	
  

	
17.2.4

	
If at any time or from time to time during the Contract Period the aggregate money value of the product of the Shortfall Aggregate and the difference between the applicable Shortfall Price and the Contract Price exceeds (**), then the Buyer may by notice to the Sellers elect that, subject to the limitations of liability under Article ‎17.4.8, the Sellers shall pay to the Buyer a sum of money equal to such aggregate money value and the Shortfall Aggregate shall be adjusted accordingly.

 

  

85

  

 

	
  

	
17.2.5

	
If at the end of the Contract Period there is any quantity of Shortfall Aggregate which has not been discharged then, subject to the limitations of liability under Article ‎17.4.8, the Sellers shall pay to the Buyer at such date of termination a sum of money equal to the product of the Shortfall Aggregate and the difference between the applicable Shortfall Price and the Contract Price at the end of the final Contract Year of the Contract Period.

 

	
17.3

	
(**)

 

	
17.4

	
Limitations of Liability

 

	
  

	
17.4.1

	
The payment by the Buyer to the Sellers for a quantity of Specification Gas equal to the Minimum Bill Quantity for each Contract Year of the Take or Pay Period shall be the exclusive remedy and the limit of all and any liability of the Buyer in respect of any failure to take Specification Gas in that Contract Year, and shall be in full satisfaction of all rights, costs, claims, and damages (whether direct, indirect, consequential or otherwise and howsoever arising) of the Sellers in respect thereof, including as a result of a breach of Article ‎7.2.

 

	
  

	
17.4.2

	
Subject to the provisions of Article ‎17.4.1 above, Buyer’s total liability for any breach of any of its other undertakings and obligations under this Agreement shall not exceed an amount equal to (**) in any Contract Year, excluding the final Contract Year, and a total amount equal to (**) for the whole Contract Period (including the final Contract Year). This limitation of liability shall not apply to (**).

 

	
  

	
17.4.3

	
The Buyer shall not be liable to the Sellers and the Sellers shall not be liable to the Buyer for any indirect (which includes loss of profit and business interruption claims), consequential, exemplary or punitive losses or damages. To the extent any damages are required to be paid hereunder are liquidated, the Parties hereby acknowledge and agree that the liquidated damages constitute an adequate compensation and shall be the exclusive remedy in such circumstances.

 

  

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17.4.4

	
The delivery by the Sellers of a quantity of Specification Gas to be paid for by the Buyer at the Shortfall Price or payments made according to the provisions of Article ‎17.2.4 and ‎17.2.5 (if applicable), shall be the exclusive remedy and the limit of and the sole damages to which the Buyer may be entitled from the Sellers (whether direct, indirect, consequential or otherwise and howsoever arising) in respect of Sellers’ failure to deliver Properly Nominated Specification Gas to the Buyer in any Hour, including as a result of a breach of Articles ‎6.5, ‎6.6.3, and ‎7.1.

 

	
  

	
17.4.5

	
The delivery by the Sellers of a quantity of Specification Gas to be paid for by the Buyer at the applicable Shortfall Price, shall be the exclusive remedy and the limit of and the sole damages to which the Buyer may be entitled from the Sellers (whether direct, indirect, consequential or otherwise and howsoever arising) in respect of Sellers’ failure to deliver Properly Nominated Specification Gas to the Buyer in any Hour in the circumstances described in Article ‎17.3 and the Sellers failure to comply with the provisions of Article ‎6.4.11. Notwithstanding the aforesaid, in the event that the Sellers are in breach of their undertakings under Article ‎6.6.3, the Buyer shall have the right to seek specific performance of such undertakings.

 

	
  

	
17.4.6

	
The Payment of any amount due pursuant to ‎Article 12, shall be the sole damages to which the Buyer may be entitled from the Sellers (whether direct, indirect, consequential or otherwise and howsoever arising) in respect of Sellers’ failure to deliver Properly Nominated Specification Gas to the Buyer in any Hour (in the circumstances of ‎Article 12).

 

	
  

	
17.4.7

	
The payment by Sellers to Buyer of the amounts to which Buyer may be entitled under Article ‎2.3 up to a maximum of (**) shall be the limit of Sellers' liability and Buyer’s exclusive remedy in such circumstances, other than termination rights pursuant to Article ‎2.3.4.

 

	
  

	
17.4.8

	
Notwithstanding anything to the contrary in this Agreement, Sellers total liability for any failure to deliver Specification Gas and all other breaches of any or all of their undertakings and obligations under this Agreement, including as a result of a breach of Articles (**), and ‎7.1, shall not exceed an amount equal to (**), and a total amount equal to (**) for the whole Contract Period (including the final Contract Year).

 

  

87

  

 

	 	
(a)

	
The limitation of liability under Article ‎17.4.8 above shall not apply to (**).

 

	 	
(b)

	
For the avoidance of doubt, the limitation of liability set out in this Article ‎17.4.8 will apply in respect of (**).

 

  

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ARTICLE 18

 

Assignment and Security Interests

 

	
18.1

	
General

 

	
  

	
18.1.1

	
For the purposes of this ‎Article 18, the expression "Party" means the Buyer of the one part and each of the Sellers of the other part, as appropriate.

 

	
  

	
18.1.2

	
No Party shall assign or transfer its rights and/or obligations under this Agreement or any part thereof except in accordance with the provisions of this ‎Article 18. Any assignment or transfer made without fulfilling the provisions of this ‎Article 18 shall be of no effect.

 

	
18.2

	
Transfer Among Sellers or to Affiliates

 

	
  

	
18.2.1

	
The Buyer and each of the Sellers may assign or transfer all or any portion of its rights and obligations under this Agreement (in this ‎Article 18 "transfer") to an Affiliate without the consent of the other Party, subject to the following:

 

	 	
(a)

	
Prior to such transfer, the transferring Party shall provide to the other Party details of the rights and obligations to be transferred and the name of the Affiliate (or if a transfer between Sellers, the name of the Seller to which the interest is to be transferred); and

 

	 	
(b)

	
At the time of such transfer, the transferring Party shall:

 

	
  

	
(i)

	
if the transferring Party is a Seller, transfer to the transferee a corresponding portion of the Seller’s Percentage;

 

	
  

	
(ii)

	
obligate the transferee to observe and perform the obligations under this Agreement transferred to it, including in the case of a transfer by a Seller, the obligation by the transferee to assume liability (commensurate with the interest transferred) in respect of all and any Make-Up Aggregate, Carry Forward Aggregate and Shortfall Aggregates accrued at the time of such transfer.

 

	
  

	
(iii)

	
if the transferring Party is a Seller, replace the Credit Cover provided to the Buyer pursuant to ‎Article 20 with a new Credit Cover on the same terms (mutatis mutandis) as the existing Credit Cover;

 

  

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(c)

	
Within seven (7) days after such transfer, the transferring Party shall give to the other Party notice of such transfer together with documentation regarding fulfillment of the provisions of Article ‎18.2.1‎(a) and ‎(b) above.

 

	
  

	
18.2.2

	
It is agreed that in the event of a transfer in accordance with the provisions of Article ‎18.2.1 above, the transferring Party shall remain fully liable to the other Party for the performance by the transferee of its obligations and discharge of its liabilities under this Agreement, except where the transferee has fulfilled the additional provisions of Article ‎18.4.1, in which case the transferring Party will be relieved of liability upon fulfillment of such provisions.

 

	
  

	
18.2.3

	
The provisions of Article ‎18.2.1 and ‎18.2.2 above will also apply to the transfer of rights and obligations from any of the Sellers to another Seller. Notwithstanding the provisions of Article ‎18.2.2, in the event of a transfer from any of the Sellers to another Seller, the transferring Seller will be relieved from liability to the Buyer for the performance of its obligations and discharge of its liabilities under this Agreement provided the transfer does not exceed in aggregate (**) of the transferring Seller’s Percentage.

 

	
18.3

	
Buyer's Structural Reform

 

	
  

	
18.3.1

	
Notwithstanding the provisions of Article ‎18.1 above, Buyer may transfer all of its rights and obligations under this Agreement to an Affiliate, without the prior consent of the Sellers, subject to; (i) such Affiliate providing to Sellers a written undertaking to be bound by all the terms and conditions of this Agreement, such undertaking to be in a form reasonably satisfactory to Sellers; and (ii) the Buyer remaining fully liable to Sellers for the performance by the Affiliate of its obligations and discharge of its liabilities under this Agreement.

 

	
  

	
18.3.2

	
Buyer shall be entitled to transfer Buyer’s rights and obligations under this Agreement to an Affiliate pursuant to the Electricity Sector Act 1996, the Government Companies Act 1975 and/or an Israeli Government decision to carry out with respect to Buyer any solvent re-organization, merger or de-merger, privatization or other structural reform provided that any such proposed transfer shall be subject to the provisions of Article ‎18.2 or ‎18.4 (as the case may be).

 

  

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18.4

	
Transfer Generally

 

	
  

	
18.4.1

	
Any transfer by the Buyer, or by each of the Sellers to a third party (other than to an Affiliate or among Sellers as set out in Article ‎18.2), may only be made if the transferring Party shall:

 

	 	
(a)

	
reasonably satisfy the other Party that such proposed transferee has the financial and the technical status and ability to observe and perform the obligations to be transferred (regardless of any comparison with the corresponding status and ability of the transferring Party), and the Party wishing to transfer has given notice to that effect to the other and with such notice has given any necessary information to show such financial and technical status and ability of the proposed transferee. In such event, unless the Party to whom the notice has been given has within thirty (30) days given notice that it is not satisfied (stating the reasons therefore), it shall be deemed to be satisfied; and

 

	
  

	
(i)

	
where the transferring Party is the Buyer, the other Party (acting reasonably) will also be entitled to require from the transferee appropriate financial securities or guarantees and appropriate technical assurances in connection with such transfer and that the transfer be made together with a transfer to the transferee of a corresponding portion of Buyer’s rights in the generating units at Buyer’s Facilities (such portion to be determined by the Expert pursuant to Article ‎19.3, in the event of disagreement between Parties regarding the portion to be transferred); and

 

	
  

	
(ii)

	
(**).

 

	 	
(b)

	
provide to the other Party, details of the rights and obligations to be transferred;

 

	 	
(c)

	
if and to the extent applicable, provide to the other Party a new Credit Cover to replace the Credit Cover provided pursuant to ‎Article 20, in respect of the obligations to be transferred to the proposed transferee on the same terms (mutatis mutandis) as the existing Credit Cover;

 

	 	
(d)

	
if the transferring Party is a Seller, transfer to the transferee a corresponding portion of the Seller’s Percentage; and

 

	 	
(e)

	
obligate the transferee to observe and perform all the obligations of this Agreement transferred to it, including in the case of a transfer by a Seller, the obligation by the transferee to assume liability (commensurate with the interest transferred) in respect of all and any Make-Up Aggregate, Carry Forward Aggregate and Shortfall Aggregates accrued at the effective date of such transfer.

 

  

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18.4.2

	
In the event that the Sellers' Lenders, acting reasonably, do not approve Buyer's proposed transferee, the Buyer will be deemed not to have reasonably satisfied the Sellers in accordance with the provisions of Article ‎18.4.1.

 

	
  

	
18.4.3

	
With effect from the effective date of a transfer pursuant to this Article ‎18.4, the transferring Party shall, to the extent that it has transferred its obligations under this Agreement, be relieved from its obligations hereunder, but (except for the obligations assumed by the transferee of a Seller pursuant to Article ‎18.4.1(e)) no such transfer shall operate to relieve the transferring Party of any liability accrued under or pursuant to the terms of this Agreement prior to the effective date of such transfer.

 

	
  

	
18.4.4

	
Within seven (7) Days after such transfer, the transferring Party, jointly with the transferee, shall give to the other Party notice of such transfer.

 

	
18.5

	
Sellers' Percentage

 

	
  

	
18.5.1

	
The Seller’s Percentage of each of the Sellers as of the date hereof is set out in Schedule 2.

 

	
  

	
18.5.2

	
A Seller shall not transfer its Seller’s Percentage (or any part thereof) unless at the same time it (**).

 

	
  

	
18.5.3

	
(**).

 

	
18.6

	
Security for Financing

 

	
  

	
18.6.1

	
Notwithstanding the foregoing, a Seller may at any time (upon giving the Buyer not less than thirty (30) days prior notice thereof) assign its rights to the receipt of any monies due or to become due from the Buyer to it under this Agreement to or in favor of banks, bona fide financial entities or other lenders (in this Article ‎18.6 together called "Banks") as security for any financing, provided that the Buyer shall not be required or entitled to act on such assignment and make payment to the Banks unless:

 

  

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(a)

	
the assignment contains an acknowledgement from the Banks that their rights to receive monies under the assignment are subject to the terms of this Agreement; and

 

	 	
(b)

	
the Seller has provided the Buyer with a certified copy of an extract (referring to the above acknowledgement) from such assignment; and

 

	 	
(c)

	
the Seller has confirmed to the Buyer that the Buyer shall be entitled to rely on the receipt by such Banks of any monies paid by the Buyer to such Banks pursuant to such assignment as being due payment to the Seller hereunder.

 

	
  

	
18.6.2

	
The authority given by the Seller to the Buyer (consequent upon an assignment which has been made under the provisions of Article ‎18.6.1) to make payment of monies due hereunder to the Banks may be revoked by a notice given to the Buyer by the Seller which complies with the provisions of Article ‎11.4 and which expressly revokes such authority.

 

	
  

	
18.6.3

	
Notwithstanding the foregoing, a Seller may at any time (upon giving the Buyer not less than thirty (30) day prior notice thereof) create, subject to the terms of this Article ‎18.6.3, any security over all or any of its rights under this Agreement (the "Charged Assets") (except for the creation of security in respect of its rights hereunder to receive monies in respect of which rights the terms of Article ‎18.6.1 apply in relation to creation of security), the Seller’s Interest, the Seller’s Percentage of the Sellers’ Agreements and/or its interest in the Sellers’ Facilities in favor of Banks as security for any financing, but the creation of such security over the Charged Assets shall only be permitted and be effective against the Buyer if at the time of the creation of the security over the Charged Assets, such Banks shall covenant directly with the Buyer (i) to procure that upon the enforcement of such security, they or any receiver appointed pursuant to the instrument creating the security or other Person enforcing the security or having control over the Charged Assets or any purchaser of the Charged Assets, shall accept and comply with the obligations and covenants of the Seller in relation to the Charged Assets contained in this Agreement; and (ii) not to sell the Charged Assets to any purchaser, unless there shall simultaneously be an assignment of all the rights and obligations of the Seller in relation to the Charged Assets under this Agreement to such purchaser in accordance (mutatis mutandis) with the provisions of Article ‎18.4.

 

  

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18.6.4

	
The Buyer agrees, if required by any Lender of any Seller (individually and collectively referred to as "Sellers' Lenders"), to provide Sellers' Lenders with acknowledgments evidencing its consent to creating a security interest over the Charged Assets which shall include reasonable terms and conditions customary for an acknowledgement of this type, substantially in the form attached as Schedule 10 hereto.

 

  

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ARTICLE 19

 

Governing Law and Dispute Resolution

 

	
19.1

	
Governing Law

 

This Agreement shall be governed by and construed in accordance with the substantive laws of Israel. In resolving any Dispute, the Expert or the arbitrator(s) shall take into account international petroleum industry practices.

 

	
19.2

	
Dispute Resolution

 

Any dispute, claim, or controversy arising out of or relating to this Agreement, including without limitation any issue regarding the existence, validity, enforceability, interpretation, application, performance, breach, formation or termination of this Agreement (each a "Dispute"), shall be resolved exclusively and finally in accordance with the provisions of this ‎Article 19.

 

	
  

	
19.2.1

	
Disputes that are to be submitted to Expert determination in accordance with Articles ‎6.8.10, ‎9.4.3, ‎10.4.3, ‎12.4.1, ‎15.3, ‎17.3.3(d) and ‎18.4.1(a)(i) shall be resolved by Expert Determination in accordance with the provisions of Article ‎19.3; and

 

	
  

	
19.2.2

	
Any Dispute (other than those referred to in Article ‎19.2.1 but including any Dispute regarding the conduct, interpretation, enforcement or application of the Expert Determination), shall be resolved by Arbitration in accordance with the provisions of Article ‎19.4.

 

	
19.3

	
Expert Determination

 

	
  

	
19.3.1

	
Procedure for Appointment

 

	
  

	
The procedure for the appointment of the Expert shall be as follows:

 

	 	
(a)

	
The Party initiating Expert Determination shall give written notice to that effect to the other Party and with such notice shall give specific details of the Dispute to be resolved by the Expert.

 

  

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(b)

	

The Parties shall endeavor to agree on a Person to act as the Expert to whom the Dispute shall be referred for determination.

 

	 	
(c)

	
Notwithstanding the provisions of Article ‎19.3.1(b), if within fourteen (14) days from the delivery of the notice initiating the Expert Determination, the Parties have failed to agree upon the Expert to be appointed pursuant to Article ‎19.3.1(b), then the LCIA shall serve as appointing authority to appoint the Expert. Either Party may submit a written application to the LCIA, with a copy to the other Party, detailing the nature of the Dispute and the issues to be determined, setting out any matters the applicant may wish to bring to the attention of the LCIA for the purposes of making the appointment. Within ten (10) days of the submission of the Application to the LCIA, the other Party shall submit to the LCIA a reply to the Application. Within fourteen (14) days from the time of the reply to the application, the LCIA shall appoint a person to act as Expert, and in so doing the LCIA may take such independent advice as it thinks fit.

 

	 	
(d)

	
The Expert Determination shall be administered by the LCIA, which shall act as appointing authority and determine any challenges brought to the Expert. The LCIA's charges shall be in accordance with its schedule of arbitration fees and costs (Schedule of Fees) as in effect at the time the Expert Determination proceeding is initiated.

 

	 	
(e)

	
Prior to his appointment, the Expert shall provide the LCIA with a resumé of his experience, qualifications, and prior and present professional positions; shall agree in writing to a fee rate in accordance with the LCIA Schedule of Costs as then in effect; and shall sign a declaration to the effect that there are no circumstances known to him likely to give rise to any reasonable doubt regarding his independence and impartiality. The expert shall undertake a continuing obligation to disclose to the LCIA and the Parties any circumstances which may give rise to any reasonable doubt regarding his independence and impartiality after his appointment and before the conclusion of the Expert Determination.

 

	 	
(f)

	
If circumstances exist giving rise to justifiable doubts about the Expert’s independence or impartiality, a Party may challenge the appointment or continued service of the Expert by giving written notice to the LCIA within thirty (30) days of the appointment or within thirty (30) days of the challenging Party becoming aware of the circumstances giving rise to such doubts. Unless the challenged Expert withdraws or the other Parties agree to the challenge, the LCIA shall, within thirty (30) days, decide the challenge. If the challenge is sustained, the LCIA shall thereafter appoint a replacement Expert.

 

  

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(g)

	
If the Expert is either unwilling or unable to accept such appointment or has not confirmed his willingness and ability to accept such appointment within the said period of fourteen (14) days, then either Party may request the LCIA to appoint another Person as the Expert and the process shall be repeated until an Expert is found who accepts appointment.

 

	 	
(h)

	
The Parties shall cooperate with each other to ensure that the terms and conditions of the contract of appointment of the Expert are agreed with such Person as soon as possible.

 

	
  

	
19.3.2

	
Nature of Proceeding, Qualifications, and Confidentiality

 

	 	
(a)

	
The Expert shall act as an expert and not as an arbitrator. The law relating to arbitration shall not apply to the Expert or his determination or the procedure by which he reaches his determination.

 

	 	
(b)

	
The Expert Determination proceedings shall be conducted in the English language.

 

	 	

(c)

	

The failure of any Party to participate in the Expert Determination or to comply with any of the requirements of this Article shall not prevent the Expert Determination from proceeding or impair the validity and enforceability of the Expert Determination.

 

	 	
(d)

	
The determination of the Expert shall be final and binding upon the Parties, save in the event of fraud or manifest error.

 

	 	
(e)

	
No Person shall be appointed as the Expert unless such Person shall be qualified by education, experience, and training to determine the Dispute.

 

  

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(f)

	
No Person shall be appointed as the Expert who at the time of appointment is (or within two (2) Calendar Years before such appointment has been) a director, office holder or an employee of, or directly or indirectly retained as consultant to, either Party or any Affiliate of either Party or is the holder of shares directly or indirectly in a Party.

 

	 	
(g)

	
Any Person appointed as the Expert shall not be entitled to act as the Expert and shall promptly resign, if, at the time of the appointment or at any time before giving any determination under such appointment, such Person has or may have some interest or duty which materially conflicts or may materially conflict with such Person’s function under such appointment.

 

	 	
(h)

	
All information, data or documentation disclosed or delivered to the Expert in consequence of or in connection with the Expert’s appointment hereunder, shall be treated as confidential. Except for disclosure to technical or professional advisors under Article ‎19.3.3(a)(iii), the Expert shall not disclose to any Person any such information, data or documentation and all such information data and documentation shall remain the property of the Party disclosing or delivering the same and all copies thereof shall be returned on completion of the Expert's work.

 

	 	
(i)

	
Copies of all submissions and communications shall be provided to the LCIA, and once appointed, to the Expert, and to all other Parties.

 

	 	
(j)

	
The terms of appointment of the Expert shall contain an obligation on the part of the Expert to comply with such obligations as aforesaid.

 

	
  

	
19.3.3

	
Terms of Reference of the Expert

 

	 	
(a)

	
The terms of reference of the Expert shall contain (inter alia) provisions that:

 

	
  

	
(i)

	
the Expert shall not later than twenty-one (21) days after his appointment call the Parties to a meeting in Israel or such other place as the Parties may agree at which he shall raise any matters requiring clarification (whether arising out of his contract of appointment, the Dispute, or otherwise) and lay down the timetable and procedural rules to be applied, which timetable and rules shall not be inconsistent with the terms of this Article;

 

  

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(ii)

	
the Parties shall be entitled and required to supply data, documentation, and information and make written submissions to the Expert as the Expert deems necessary and appropriate for determining the Dispute;

 

	
  

	
(iii)

	
the Expert shall be entitled to obtain such independent professional and/or technical advice as he may reasonably require;

 

	
  

	
(iv)

	
any and all communications between and submissions made by either of the Parties and the Expert shall be made in English in writing and a copy thereof provided simultaneously to the other Party. The Expert shall not engage in any ex parte communications with any of the Parties. No meeting between the Expert and the Parties or either of them shall take place unless both Parties have a reasonable opportunity to attend any such meeting;

 

	
  

	
(v)

	
the Expert may adopt such procedures and may conduct the Expert Determination in such manner as he deems appropriate, consistent with the provisions of this Article. The Expert may hold an evidentiary hearing and require the Parties to attend and present evidence if he deems it reasonably necessary for the determination of the Dispute;

 

	
  

	
(vi)

	
the Expert shall issue his Determination within ninety (90) days of his appointment, or as soon thereafter as reasonably practicable or the Parties may agree in writing. The Expert’s Determination shall be in writing and shall state the reasons therefore. The Expert shall provide to the Parties a draft of his proposed Determination in respect of which both Parties shall be entitled to respond and make representations to the Expert within twenty-one (21) days after receipt of the draft Determination; and

 

	
  

	
(vii)

	
as soon as possible after the twenty-one (21) day period referred to in Article ‎19.3.3(a)‎(v), the Expert shall issue his final Determination.

 

	 	
(b)

	
If the Expert fails or refuses to comply with the terms of reference or to timely issue the Determination, then the Dispute shall be submitted to arbitration as provided in Article ‎19.4.

 

  

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(c)

	
Each Party shall bear the costs of providing all data, information and submissions given by it and the costs and expenses of all witnesses and Persons retained by it. The costs and expenses of the Expert and any independent advisers to the Expert shall be borne in the manner determined by the Expert and, failing such determination, one half by the Buyer and one half by the Sellers.

 

	 	
(d)

	
Unless otherwise agreed by the Parties or as determined by the Expert, all meetings and hearings with the Expert shall be held in Israel.

 

	
19.4

	
Arbitration

 

	
  

	
19.4.1

	
Except as referred to an Expert as set forth in Articles ‎19.2 and ‎19.3, any Dispute shall be referred to and finally and exclusively resolved by arbitration in accordance with this Article ‎19.4.

 

	
  

	
19.4.2

	
Disputes relating to matters with an amount in controversy of less than (**) shall be determined by a single arbitrator, in accordance with the Rules of Arbitration of the Israeli Institute of Commercial Arbitration. The seat of the arbitration shall be (**). If the Parties do not agree that the amount in controversy does not exceed (**), or if the Dispute involves a claim for relief other than monetary relief, then the arbitration shall be heard and determined by a tribunal of three (3) arbitrators in accordance with the provisions of Article ‎19.4.3 or ‎19.4.4 (as applicable).

 

	
  

	
19.4.3

	
Disputes relating to matters with an amount in controversy of (**) or more, but less than (**) shall be heard and determined by a tribunal of three (3) arbitrators. The arbitration shall be conducted pursuant to the Rules of Arbitration of the London Court of International Arbitration ("LCIA Rules"). The seat of the arbitration shall be (**). If the Parties do not agree that the amount in controversy is less than (**), then the arbitration shall be heard and determined by a tribunal of three (3) arbitrators in accordance with the provisions of Article ‎19.4.4.

 

	
  

	
19.4.4

	
Disputes relating to matters with an amount in controversy of (**) or more shall be heard and determined by a tribunal of three (3) arbitrators. The arbitration shall be conducted pursuant to the LCIA Rules. The seat of arbitration shall be London, England.

 

  

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19.4.5

	
With respect to any Dispute, the amount in controversy shall be based upon the amount claimed in the proceeding in all claims in the aggregate, but with claims and counterclaims being counted separately, exclusive of interest or attorneys’ fees, and including the actual or potential value to the Parties of any matters for which a declaration of the meaning, effect, or application of any terms, rights, or obligations arising out of or relating to this Agreement is requested, or for which other non-monetary relief is sought.

 

	
  

	
19.4.6

	
If a single arbitrator is to determine the Dispute, the Parties shall endeavour to agree on the arbitrator. If the Parties are unable to agree on the arbitrator within thirty (30) days of the date for the Respondent’s Response to the request for arbitration, then the arbitrator shall be appointed by the Israeli Institute of Commercial Arbitration in accordance with its Rules. The arbitrator shall be qualified by experience and education to determine matters in the nature of the Dispute.

 

	
  

	
19.4.7

	
If the Dispute is to be determined by a tribunal of three (3) arbitrators, the Claimant(s) and Respondent(s) shall each nominate a person to serve as arbitrator as provided in the LCIA Rules. The two arbitrators so appointed and confirmed shall, within thirty (30) days of their confirmation or such other time as the Parties may agree in writing, nominate a third person as arbitrator, who upon confirmation shall serve as the Chair of the Tribunal. The arbitrators so appointed shall be qualified by education and experience to determine matters in the nature of the Dispute.

 

	
  

	
19.4.8

	
No person shall be appointed as an arbitrator under this Agreement if at the time of appointment he is (or within three (3) years before such appointment has been) a director, office holder, or an employee of, or directly or indirectly retained as consultant to, either Party or any Affiliate of either Party or is the holder of shares directly or indirectly in a Party.

 

	
  

	
19.4.9

	
Any person appointed as an arbitrator shall not be entitled to act as an arbitrator if, at the time of the appointment or at any time before giving the award under the arbitration, such person has or may have some interest or duty which materially conflicts or may materially conflict with his function under such appointment.

 

	
  

	

19.4.10

	

The arbitration proceedings shall be held as promptly as possible at such place in Israel or England (as applicable) (or other place agreed to by both Parties) and at such time as the arbitrator(s) shall determine.

 

  

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19.4.11

	

The Parties hereby waive any reference to the courts under Sections 45 and 69 of the Arbitration Act 1996, and under Sections 21A and 29B of the Israeli Arbitration Law – 1968 and the first supplement thereto.

 

	
  

	

19.4.12

	

All arbitration proceedings shall be conducted in and all awards rendered in the English language.

 

	
  

	

19.4.13

	

The arbitrator(s) shall not be bound by the rules of evidence and civil procedure. The arbitrators shall not act as amiable compositeur or ex aequo et bono.

 

	
  

	

19.4.14

	

The Award shall be final and binding upon the Parties, and shall be without right of appeal. Judgment on the award may be entered in any court having jurisdiction.

 

	
  

	

19.4.15

	

The Arbitral Tribunal has the power and authority to award actual money damages, and to award declaratory, injunctive, or mandatory relief, including ordering specific performance. Any award of monetary damages shall be made in U.S. dollars, and shall include interest thereon from the date of breach until paid. The arbitrators shall have no power to award, and the Award shall not include consequential, punitive, or other special damages.

 

	
  

	

19.4.16

	

The fees of the arbitrator(s) and costs incidental to arbitration proceedings, including legal expenses of the Parties, shall be borne in accordance with the determination of the arbitrator(s).

 

	
  

	

19.4.17

	

The Parties shall conduct the arbitration proceedings in a fair, efficient and expeditious manner.

 

	
  

	

19.4.18

	

Any arbitration rendered pursuant to this ‎Article 19 is an international arbitration for the purposes of Israeli law, English law, United States law, and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

 

	
  

	

19.4.19

	

This Article constitutes an arbitration agreement between the Parties as defined in the Israeli Arbitration Law-1968.

 

  

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19.5

	
Jurisdiction

 

	
  

	
19.5.1

	
Subject to the above mentioned dispute resolution mechanism and the arbitration provisions set forth above in this Article, non-exclusive jurisdiction in respect of any matter relating to this Agreement shall be vested: (i) with respect to any Dispute pursuant to Articles ‎19.4.2 and ‎19.4.3 - in the competent courts of Tel Aviv – Jaffa; and (ii) with respect to any Dispute pursuant to Article ‎19.4.4 - in the courts of London, England.

 

  

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ARTICLE 20

 

Security and Credit Cover

 

	
20.1

	
Sellers’ Security

 

Dor Gas Exploration Limited Partnership (in this ‎Article 20, "Dor") shall provide and maintain Credit Cover for the benefit of the Buyer, as follows:

 

	
  

	
20.1.1

	
Dor shall, by October 1, 2013, provide the Buyer with a Credit Cover in the total amount of (**), which shall be maintained in force for the First Period to be increased within 30 Days from the commencement of the Second Period (if applicable) to an amount of (**), to be maintained until the end of the entire Contract Period.

 

	
  

	
20.1.2

	
In the event that Dor provides the Buyer with a Corporate Guarantee as its Credit Cover in any Contract Year, Buyer will be entitled to instruct Dor in respect of the following Contract Year, to replace the Corporate Guarantee with another type of Credit Cover (Bank Guarantee or Letter of Credit, at Dor's discretion) by written notice to Dor at least thirty (30) days prior to the latest date on which Credit Cover must be provided in respect of the following Contract Year in accordance with Article ‎20.1.1. Buyer's right to so instruct Dor will only apply in the following circumstances: (i) the guarantor under the Corporate Guarantee defaulted on any payment due under the Corporate Guarantee; or (ii) where there has been an adverse material change in the financial standing of the guarantor under such Corporate Guarantee which may reasonably be expected to impair such guarantor’s ability to make all payments under the Corporate Guarantee.

 

	
  

	
20.1.3

	
The Buyer shall be entitled to call on and draw down against the Credit Cover which is in the form of a Corporate Guarantee to the extent that, and at such time as, Dor has failed to meet its payment obligations in respect of all amounts which Dor owes to Buyer pursuant to this Agreement. The Buyer shall give Dor notice of not less than fourteen (14) days of its intention to call on and draw down against the Credit Cover (any such Corporate Guarantee) provided by Dor.

 

	
  

	
20.1.4

	
Dor may at anytime during the Contract Period choose to replace the Corporate Guarantee with any other type of Credit Cover (Bank Guarantee or Letter of Credit, at Dor's sole discretion) by written notice to the Buyer at least 30 (thirty days) prior to the latest date on which Credit Cover must be provided in respect of following Contract Year.

 

  

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20.1.5

	
The Buyer shall be entitled to draw down against Credit Cover which is in the form of a bank guarantee or a letter of credit to the extent that, and at such time as, Dor has failed to meet its payment obligations in respect of undisputed amounts or amounts determined under ‎Article 19 (whether in whole or in part) under this Agreement. The Buyer shall give to Dor a notice of not less than seven (7) days of its intention to draw down against any such Credit Cover provided by Dor.

 

  

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ARTICLE 21

 

Relationship and Sellers’ Coordinator

 

	
21.1

	
Relationship of Sellers

 

	
  

	
21.1.1

	
The Sellers are acting jointly in relation to matters such as the development of the Reservoir, the Sellers’ Facilities and the production, transportation and delivery of Specification Gas under this Agreement (and acting through the Sellers’ Coordinator in the circumstances set out in Article ‎21.2), but it is acknowledged by the Buyer (notwithstanding that this Agreement is entered into by all the Sellers with the Buyer) that nothing in this Agreement shall be deemed to constitute as between the Sellers any joint liability and each of the Sellers shall be liable to the Buyer only in respect of its Seller’s Percentage of such liability of Sellers as may arise under this Agreement.

 

	
  

	
21.1.2

	
Notwithstanding that the Buyer may make nominations for the delivery of Specification Gas under this Agreement in an aggregate nomination in a single notice delivered to the Sellers’ Coordinator pursuant to Article ‎21.2.1, the quantity deemed to have been nominated for delivery by each Seller shall be its respective Seller’s Percentage of the aggregate quantity so nominated.

 

	
  

	
21.1.3

	
The quantity of Specification Gas deemed to have been delivered at the Delivery Point by each of the Sellers in respect of each Hour shall be its respective Seller’s Percentage of the aggregate quantity of Specification Gas delivered by the Sellers at the Delivery Point in response to the Buyer’s nomination. To the extent that such aggregate quantity falls short of the Proper Nomination, such shortfall shall be attributed to each of the Sellers in proportion to its respective Seller’s Percentage.

 

	
21.2

	
Sellers’ Coordinator

 

	
  

	
21.2.1

	
The Sellers hereby appoint Noble Energy Mediterranean Ltd. as their representative (herein called the "Sellers' Coordinator", which expression shall include any successor appointed as provided herein) who shall be authorized to and shall act as the representative for the Sellers under this Agreement for the following purposes (provided that the authority hereby given to the Sellers' Coordinator relating to the giving of notices, nominations, statements and estimates shall not preclude the Sellers from giving any notices, nominations, statements and estimates which are within the scope of such authority):

 

  

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(a)

	
the giving and receiving of all notices, nominations, estimates, and requests, provided that such authority shall not extend to a notice of termination of this Agreement;

 

	 	
(b)

	
the giving and receiving of all financial and other statements, reports and information hereunder;

 

	 	
(c)

	
the making and witnessing of the measurement and testing of Specification Gas delivered to the Buyer under this Agreement and of the measuring equipment and adjustments to such equipment; and

 

	 	
(d)

	
the settling with the Buyer of all disputes or differences between the Parties hereunder:

 

	
  

	
(i)

	
in relation to the applicable DCQ;

 

	
  

	
(ii)

	
arising under ‎Article 15 or in relation to the volume and/or Higher Heating Value of Gas delivered in any Hour to the Buyer hereunder;

 

	
  

	
(iii)

	
arising under ‎Article 12; and

 

	
  

	
(iv)

	
as to whether the Sellers are entitled to relief under ‎Article 16 in respect of any underdelivery of Gas to the Buyer in any Hour.

 

	
  

	
21.2.2

	
The Sellers agree that the Buyer shall be entitled to act upon any or all acts or things done or performed or nominations, notices or statements given or received or agreements made from time to time in respect of the above matters or within the scope of its authority by the Sellers' Coordinator as fully and effectively as though the Sellers had themselves done or performed the same.

 

	
  

	
21.2.3

	
The Sellers may at any time change the Sellers' Coordinator provided that at all times during the Contract Period a Sellers' Coordinator is appointed. The Sellers shall notify the Buyer of any change of the Sellers' Coordinator.

 

  

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21.2.4

	
In the event that the Buyer considers the Sellers to be in breach of this Agreement as a result of an alleged failure of the Sellers' Coordinator to perform its duties described in this Agreement, the Buyer shall give the Sellers notice thereof and also give the Sellers a period of sixty (60) days to enable the Sellers to rectify or cause to be rectified the alleged breach before the Buyer institutes any legal proceedings in respect thereof.

 

  

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ARTICLE 22

 

Immunity

 

	
22.1

	
Immunity

 

Each of the Parties is subject to civil and commercial law with respect to its obligations under this Agreement, and the signing and performance of this Agreement by such Party constitute private and commercial acts rather than governmental and public acts. Each of the Parties irrevocably represents, warrants and agrees that this Agreement is a commercial rather than a public or governmental activity and that each such Party is not entitled to claim immunity from legal proceedings with respect to itself or any of its assets on the grounds of sovereignty or otherwise under any law or in any jurisdiction where an action may be brought for the enforcement of any of the obligations arising under or relating to this Agreement. To the extent that any of the Parties or any of their assets has or hereafter may acquire any right to immunity from set-off, legal proceedings, attachment prior to judgment, other attachment or execution of judgment on the grounds of sovereignty or otherwise, such Party irrevocably waives such rights to immunity in respect of its obligations arising under or relating to this Agreement.

 

  

109

  

 

ARTICLE 23

 

Miscellaneous Provisions

 

	
23.1

	
Performance of Obligations

 

Each Party shall be entitled to perform any of its obligations under this Agreement by procuring that such obligations are performed on its behalf by a third party, but such Party shall remain responsible to the other for the due performance of such obligations and for any failure or non-performance of such third party or any operator agents contractors or employees of such third party, as if such Party itself had failed to fulfill the relevant obligations.

 

	
23.2

	
Waiver

 

No waiver by any Party of any default or defaults by the other in the performance of any of the provisions of this Agreement shall operate or be construed as a waiver of any other or further default or defaults, whether of a like or different character.

 

	
23.3

	
Successors

 

This Agreement shall bind and inure to the benefit of the Buyer and each of the Sellers and their respective successors and permitted assigns.

 

	
23.4

	
Notices

 

	
  

	
23.4.1

	
Any notice to be given by one Party to another under this Agreement shall be in writing and shall be delivered by hand to the Party in question or sent to such Party by registered delivery, letter or facsimile or electronic transmission addressed to that Party at such address (or as the case may be, such facsimile transmission number or electronic mail address) as the Party in question may from time to time designate by written notice.

 

	
  

	
23.4.2

	
Until such notice shall be given, the addresses of the Parties shall be those which appear in this Agreement.

 

	
  

	
23.4.3

	
All notices delivered by recorded delivery or hand or sent by facsimile or electronic transmission shall be deemed to be effective when received at the recipient's address as aforesaid.

 

  

110

  

 

	
  

	
23.4.4

	
Any notice (other than routine notices and communications) given or facsimile or electronic transmission shall, unless already acknowledged, be subsequently confirmed by letter sent by registered delivery or delivered by hand, but without prejudice to the validity of the original notice, if received.

 

	
23.5

	
Entirety

 

This Agreement shall constitute the entire agreement between the Parties as to the matters addressed herein and shall supersede and take the place of all documents, minutes of meetings, letters or notes which may be in existence at the date hereof, and of all written or oral statements, representations and warranties which may have been made by or on behalf of the Parties as to such matters.

 

	
23.6

	
Survival

 

The provisions of Article ‎8.5, ‎Article 11 (to the extent necessary to finalize accounts) and ‎Article 19 shall survive the termination of this Agreement.

 

[Remainder of this page intentionally left blank, signature page to follow]

 

  

111

  

 

 

IN WITNESS of their agreement, each of the Parties have caused their respective duly authorized representative to sign this instrument in Tel Aviv, on March 14, 2012.

 

	
THE ISRAEL ELECTRIC

CORPORATION LIMITED

 

Name: Eli Glickman

Title: President & CEO

/s/ Eli Glickman

 

Name: Harel Blinde

Title: Senior Vice President & CFO

/s/ Harel Blinde

 

	  	
NOBLE ENERGY

MEDITERRANEAN LTD.

 

Name: Lawson Freeman

Title: Vice President

/s/ Lawson Freeman

 

	
AVNER OIL EXPLORATION

LIMITED PARTNERSHIP

 

Avner Oil and Gas Limited, General Partner

 

Name: Gideon Tadmor

Title: CEO & Director

/s/ Gideon Tadmor

 

Name: Gabriel Last

Title: Director

/s/ Gabriel Last

 

 

	
DELEK DRILLING LIMITED

PARTNERSHIP

 

Delek Drilling Management (1993) Ltd., General Par­­­tner

 

Name: Gideon Tadmor

Title: Chairman

/s/ Gideon Tadmor

 

Name: Yossi Abu

Title: CEO

/s/ Yossi Abu

 

	
ISRAMCO NEGEV-2 LIMITED

PARTNERSHIP

 

Isramco Oil and Gas Ltd., General Partner

 

 

Name: Avi Geffen

Title: CEO

/s/ Avi Geffen

 

	
DOR GAS EXPLORATION LIMITED

PARTNERSHIP

 

Alon Gas Exploration Management Ltd.

General Partner

 

Name: Eli Misgav

Title: CEO

/s/ Eli Misgav

 

Name: Zvi Greenfeld

 

/s/ Zvi Greenfeld

 

 

  

112

  

SCHEDULE 1

 

Sellers' Petroleum Rights

 

Petroleum Lease I/12 "Tamar" granted on December 2, 2009 pursuant to section 26 of the Petroleum Law, 5712-1952.

 

  

113

  

 

SCHEDULE 2

 

Seller’s Percentages and Sellers’ Interest

 

	
Noble Energy Mediterranean Ltd.

	 	 	36.000	%
	
Delek Drilling Limited Partnership

	 	 	15.625	%
	
Avner Oil Exploration Limited Partnership

	 	 	15.625	%
	
Isramco Negev2 Limited Partnership

	 	 	28.750	%
	
Dor Gas Exploration Limited Partnership

	 	 	4.000	%
	
Total

	 	 	100.000	%

 

  

114

  

 

SCHEDULE 3

 

Sellers' Agreements

 

Joint Operating Agreement dated November 16, 1999, as amended, governing Sellers' Petroleum Rights

 

  

115

  

 

SCHEDULE 4

 

List of Charges on Sellers' Petroleum Rights

 

	
  

	
1.

	
Delek Drilling Limited Partnership hereby warrants and represents to the Buyer that as of the Effective Date, (**).

 

	
  

	
2.

	
Avner Oil Exploration Limited Partnership hereby warrants and represents to the Buyer that as of the Effective Date, (**).

 

	
  

	
3.

	
Dor Gas Exploration Limited Partnership hereby warrants and represents to the Buyer that as of the Effective Date, (**).

 

	
  

	
4.

	
Isramco Negev-2 Limited Partnership hereby warrants and represents to the Buyer that as of the Effective Date, (**).

 

  

116

  

 

SCHEDULE 5

 

Part 1

 

Specification for Gas Quality

 

Natural Gas tendered for delivery under this Agreement shall at the Delivery Point comply with the following requirements and the requirements of the Transporter as at the date of this Agreement.

 

	
1.

	
Gas made available for transport shall be free from odors, foreign materials, dust or other solid and liquids, waxes, gums and gum forming constituents. The Sellers shall furnish, install, maintain and operate such drips, separators, heaters and other devices as the Seller may deem necessary or desirable to effect compliance with this requirement

 

	
2.

	
For the avoidance of doubt, it is agreed that the Sellers may (acting as a Reasonable and Prudent Operator) inject substances while processing the Natural Gas provided that the Sellers are able to and do, in fact, remove all of such substances prior to the Delivery Point until the gas meets the current specification. On Buyer's request, the list of treatment substances shall be made available to the Buyer. If the Sellers fail to so comply, the Buyer may at any time require the Sellers to cease injection of such substances.

 

	
3.

	
Without prejudice to the generality of the provisions of Paragraph 1 & 2 above, gas at the Delivery Point shall conform to the parameters of Table 1.

 

	
4.

	
Sampling: Sampling of natural gas for continuous automatic and periodic laboratory analysis shall be in accordance with ISO 10715.

 

No material may be added to the stream being tested which will alter the tests results or cause the test to be non-representative of the moisture or liquefiable hydrocarbon content of the stream being tested.

 

	
5.

	
Gas Chromatography, Energy Calculations & Reports: Natural gas composition shall be continuously monitored using a gas-chromatograph measuring up to at least C6-plus and compatible with ISO 6974-5. Gas analysis shall be used for further calculations of gas mixture molecular weight, Higher Heating value, density, compressibility, energy & Wobbe Index at reference conditions and at actual line conditions (according to relevancy). Physical properties used to configure chromatographs and perform calorific value and relative density calculations shall be derived from the latest version of GPA Standard 2145/ISO 6976

 

Gas analysis shall be used for further calculations at the Metering Line Flow Computer:

 

  

117

  

	 	
·

	
Gas density at Standard Conditions shall be calculated in accordance with AGA Report No.8:1994/ISO-12213-1:1997

 

	 	
·

	
Gas density at Line Conditions shall be calculated in accordance with AGA Report No.8:1994/ISO-12213-1:1997

 

	
6.

	
The heating value of C6 shall be applied for all C6-plus compounds as long as laboratory measurements justify this simplicity. The Buyer shall be notified at any change.

 

	
7.

	
Calorific value in MJ/m3 units shall be reported to the 2nd decimal. A factor of 1055.056 MJ/MMBTU shall be used for unit conversion (AGA Report No. 8 & GPA 2172). Values in MMBTU/m3 shall be reported to the 5th decimal figure. (Wobbe index shall be reported accordingly). Compression factor, density and relative density shall be reported (If required) to the 4th decimal figure.

 

	
8.

	
Average values of continuously measured parameters in Table 1 shall be reported daily. Intermittent measurements shall be reported after completion.

  

118

  

 

Table 1: Parameters limits

 

	
Parameter

	
Requirement

	
Units

	
Methods & Remarks

	
Water Dew Point (WDP)

At any pressure up to and including 80 bar (g)

	
≤ 0 (Zero)

	
( oC )

	
(a)

	
Hydrocarbon Dew Point (HCDP)

At any pressure up to and including 80 bar(g)

	
≤ 5

	
( oC )

	
(b)

	
Total Sulphur (as S)

	
< 100

	
(ppm Weight)

	
(c)

	
Hydrogen Sulphide (as H2S)

	
< 5

	
(ppm Volume)

	
(d)

	
Carbon Dioxide

	
≤ 3.0

	
(Mole percent)

	
(e)

	
Total Inerts [N2+CO2+Ar]

	
≤ 5.0

	
(Mole percent)

	
(f)

	
Oxygen

	
≤ 0.01

	
(Mole percent)

	
(g)

	
Methane

	
≥ 92

	
(Mole percent)

	
(h)

	
Glycol

 

	
No free liquid to be present in gas at Delivery Point

	
--

	
(i)

	
Methanol

	
≤ 100

	
(ppm volume)

	
(j)

 

  

119

  

 

Table 1 (cont.): Parameters limits

	
Parameter

	
Requirement

	
Units

	
Methods & Remarks

	
Higher Heating Value

@ 15/15 oC & 101.325 Kpa

	
0.03460 - 0.03950

 

	
MMBTU/Cubic Meter

	
(k)

	
Wobbe Index

@ 15/15 oC & 101.325 Kpa

	
0.04620 - 0.05090

	
MMBTU/Cubic Meter

	
(l)

	
Supplied gas temperature

	
5 – 38

But

at least 10.0 oC above the actual WDP

at least 5.0 oC above the actual HCDP

and at least 10.0 oC at the PRMS Eshkol inlet

 

	
( oC )

	
--

	
Pressure

 

	
60-80

Seller shall supply sufficient pressure to allow nominated gas volumes to enter the INGL, transportation system, subject to the maximum pressure not exceeding 80 bar at the Delivery Point.

	
bar(a)

	
--

 

  

120

  

 

Methods & Remarks

 

a) Water Dew Point (WDP)

Moisture shall be measured continuously according to ASTM D 5454 - using a water concentration analyzer. The sensor should operate at a fixed controlled temperature greater than the maximum gas stream temperature. The gas sample stream should operate at a controlled pressure no greater than 3 bar (g). Calculation of WDP from the measured water concentration shall be based on equations (or commercial calculators) which produce results that are in agreement with the data given in table C.1 of appendix C to ISO 18543:2004; Natural gas — Correlation between water content and water dew point. Direct measurement of WDP according to ISO 6327-1981 (E) is permitted. Manual measurement according to ASTM D 1142 (chilled mirror) shall be the reference method.

 

b) Hydrocarbon Dew Point (HCDP)

HCDP shall be measured continuously by a chilled mirror instrument working in pressure ranges of 28 ± 3 bar(g), capable of measuring HCDP up to +20 deg C. Manual measurement according to ASTM D 1142 shall be the reference method.

 

Gas chromatographic laboratory analysis complying with ISO 23874 (and measuring until C12) may serve for research purposes.

 

c) Total Sulfur and Sulfur species.

Total Sulfur shall be analyzed quarterly in a certified laboratory during the first year of supply. Sulfur species concentrations shall be identified and compared with the concentration of total sulfur. After typical values are determined and no corrosive sulfur is present - then the frequency can be lowered (twice a year in the second year and annually afterwards).

 

If, however, concentrations greater than 6 mg/m3 of COS or RHS or any corrosive sulfur species (as S) shall be found at any time then total Sulfur shall be measured continuously using an ASTM standard (ASTM D7493 or ASTM D7165 – 10).

 

A full laboratory Sulfur species analysis shall be performed with any significant change of gas quality.

 

  

121

  

 

d) Hydrogen Sulphide

 

H2S shall be continuously monitored by automatic instruments complying with ASTM D4084 (Lead acetate reaction rate method).

 

 e, f & g) Oxygen and Total Inerts (N2+CO2+Ar)

 

N2, O2, Ar & CO2 shall be continuously measured by a GC with a lower detection limit not greater 0.005 % mole, using Helium as a carrier and a suitable column to split N2 and O2.

 

The limiting value for Oxygen in Table 1 is required during normal operations. Higher values are allowed during commissioning of new pipelines. Such values and durations of irregularity shall be agreed upon by all parties before commissioning.

 

h) Methane

 

Methane (and all typical natural gas components) shall be continuously monitored by GC according to ISO 6974-5. The limiting values of Table 1 are valid for the normal routine.

 

i) Glycol

 

No free liquid glycol shall be detected while determining the water and/or hydrocarbon dew point using the Bureau of Mines/chilled mirror device.

 

j) Methanol

 

Analysis for methanol content will only be required during periods when methanol is being injected for operational reasons. Buyer will be advised when used. Methanol content will be determined using a mutually agreed procedure. .

 

k) Higher Heating Value

 

Higher Heating Value - means the superior calorific value calculated as described in ISO: 6976:1995 (E) of one Cubic Meter of Natural Gas at the reference condition of 15/15 Degrees Celsius and 1.01325 Bar(a) for the actual natural gas in the real state. Full precision, definitive mode shall be used.

 

l) Wobbe Index

 

Wobbe Index shall be calculated according to ISO: 6976:1995 (E) at the reference condition of 15/15 Degrees Celsius and 1.01325 Bar (a) for the actual natural gas in the real state.

 

  

122

  

 

SCHEDULE 5

 

Part 2

 

Specification for Measurement

 

Measurements Codes & Specifications

 

Measuring devices shall be installed in accordance with the latest edition (at the time of installation) of American Gas Association standards AGA 7, AGA 8, AGA 9, AGA 10, and API 21.1. Chemical analyses shall be performed in accordance with ASTM, GPA or ISO/European equivalent mentioned in this document.

 

Measurement System

 

1. The measurement system shall be designed with sufficient redundancy (3x50 %) such that the failure of a single meter run does not shut down the whole measurement system. Each of these meter runs shall incorporate a single turbine meter and a single multipath ultrasonic meter in series in full compliance with above listed standards.

 

Double block and bleed valves shall be provided upstream and downstream of each meter run to allow switching from one run to another without compromising measurement performance and to ensure no gas bypasses the intended meter runs.

 

2. Each custody transfer meter run shall also include adequate flow conditioning meeting manufacturers' recommendations and the recommendations of the appropriate AGA standard. Flow conditioning must also eliminate the possibility of one meter affecting the performance of the other meter in series.

 

3. Each measurement system shall include an on-stream analyzer (gas chromatograph) and its associated sampling, calibration and carrier gas equipment. Where significant ultrasonic noise exists, “U” shaped piping shall be included upstream and downstream of the ultrasonic meter to isolate the meter from the noise.

 

 “Significant” noise shall be as defined in AGA Report No. 9, meaning noise levels sufficient to degrade meter performance significantly.

 

  

123

  

 

4. The primary components of the metering system, turbine meter, and ultrasonic meter, flow computer and gas chromatograph, should have approval for custody transfer by Nederlands Meetinstituut (NMi) or equivalent

 

5 The entire system must meet appropriate standards reflecting the area classification for the skid location, but Class 1 Group D Division II at a minimum.

 

6. The meters should be operated within the manufacturers recommended specific flow range and operating conditions to achieve the desired accuracy and normal life time.

 

7. The Sellers shall submit lists of selected equipment, drawings, standards and certifications of the selected equipment for measuring at the delivery points.

 

8. Seller shall nominate which volume metering device is to be utilised as the primary device (for custody transfer) and which device is to be utilised as the secondary (check) device.

 

9. Total measurement uncertainty of energy shall be +/-1% and shall be calculated according to ISO 5168.

 

The seller shall demonstrate that the metering system meets the agreed upon total uncertainty and the individual total uncertainties of the separate components.

 

Calibration

 

1. Each meter shall be flow certified prior to final delivery to Israel by an internationally recognized flow facility. During certification, the entire engineered meter run assembly shall be certified, at high pressure, in the exact configuration as the final installed configuration.

 

The Sellers shall invite the Buyer and the Transporter to witness onsite calibrations and/or verification of measurements by giving seven days notice, and shall make necessary arrangements for the participation of the Buyer/ Transporter or their formal representative. Buyer and Transporter will be responsible for all costs associated with the attendance of their personnel or representatives.

 

2. Once in normal operation, turbine meters will need to be recertified whenever their performance is suspect, whenever they fail spin tests or whenever they have been repaired. Ultrasonic meters are not generally recertified unless internal physical dimensions or transducer types are altered.

 

  

124

  

 

3. The results of the flow certifications and instrument calibrations shall be available upon request, together with a statement of conditions under which the calibration took place.

 

  

125

  

 

Calibration Intervals

 

	
Ultrasonic meters

	
Not required unless internal dimensions and/or transducer type changes

	
Spin tests for turbine meters

	
Not required unless the comparison between the Ultrasonic and Turbine meters exceeds 1⁄2% and no other solution can be identified.

	
Turbine meters proving

	
Not required when in series with USM

	
Flow tests at traceable flow labs (turbine meters)

	
Every 16 years

	
Flow computers

	
Quarterly

	
Pressure and Temperature Measuring Device

	
Quarterly

	
Difference between ultrasonic meter and the turbine meter in series

	
Collected continuously & reported quarterly.

Difference of greater than 1/2% shall be reported within 7 days, differences greater than 1% will also require a plan for remediation to be submitted by the Seller’

	
Gas chromatographs

 

	
Daily - By local automatic reference gas mixture.

Quarterly - By analysis of a reference gas mixture (not in current use as calibration).

All reference gas mixtures shall be certified by an accredited calibration laboratory.

	
Moisture analyzer

	
Monthly

	
HCDP analyzer

	
Monthly

	
H2S analyzer

	
Monthly

 

  

126

  

 

4. Calibration procedures shall be updated for new installation and transmitted to the Buyer and the Transporter. A report shall be sent to the Buyer and the Transporter following every calibration.

 

Requirements for Off-Line measurements

 

1. Verification of the accuracy of online chemical parameter measurements (from which physical property are determined) shall be carried out according to the instructions of the instrument's manufacturers. Where such instructions are missing or where they are found to be not sufficient, then by means of laboratory analysis of samples taken at appropriate time intervals and at least Quarterly (and where statutory requirements exist according to such requirements). In the event of discrepancy between the online facilities and the laboratory analysis, the measurement equipment shall be recalibrated. Shippers, Sellers and Transporters shall be notified should the discrepancy force a change in future or previous calculations of +/- 1/4% or greater.

 

  

127

  

 

SCHEDULE 6

 

CORPORATE GUARANTEE

 

(date)

 

The Israel Electric Corporation Limited

 

................................................

 

................................................

 

	
1.

	
At the request of [Dor Gas Exploration Limited Partnership] ("Debtor") we Alon Natural Gas Exploration Ltd. ("the Guarantor") hereby unconditionally and irrevocably guarantee the payment to the Israel Electric Corporation Limited ("IEC") of all amounts which the Debtor owes to IEC pursuant to the Gas Sale and Purchase Agreement dated [insert date] between the Debtor and others and IEC ("GSPA"), up to the total sum of [insert amount] in the aggregate (“Guarantee Amount") including without limitation amounts payable pursuant to the GSPA as damages in the event of a breach by the Debtor of any obligation under the GSPA. We confirm that we are familiar with the terms of the GSPA.

 

	
2.

	
Accordingly, we hereby undertake to pay IEC within seven (7) banking days any amount, not exceeding in the aggregate the Guarantee Amount, due to IEC from the Debtor pursuant to the GSPA which IEC claims from us from time to time, but prior to the Expiry Time, by written demand substantially in the form set out in Appendix A ("Payment Demand"). Except for the Payment Demand, IEC will not be required to provide any proof or other justification to its claim hereunder or to substantiate its demand in any way nor will it be required to first seek payment of the amount claimed from the Debtor or any other person.

 

	
3.

	
The obligations and liability of the Guarantor hereunder shall in no way be discharged, impaired or otherwise affected by the following (without limitation):

 

  

128

  

 

	 	
a.

	
any amendment to the GSPA, or any compromise, variation, total or partial release, discharge or waiver of any obligations under the GSPA (save, for the removal of doubt, the right to assert any defense which may be available to Debtor);

 

	 	
b.

	
failure to make prior demand on the Debtor or any other guarantors or to proceed against the Debtor in any legal, judicial or arbitral forum or failure to enforce or seek to enforce any other security taken in respect of the Debtor’s obligations under the GSPA, before proceeding against the Guarantor to enforce or collect under this Guarantee;

 

	 	
c.

	
bankruptcy, insolvency, merger, administration, reorganization, liquidation, arrangement with creditors or any similar act, event or proceedings affecting the Debtor, or any change in Debtor’s status, function, control or ownership;

 

	 	
d.

	
arrangements entered into between IEC and any other creditors of the Debtor;

 

	 	
e.

	
failure by IEC to give notice to the Guarantor of the occurrence of any of the events detailed in this clause 3; or

 

	 	
f.

	
any failure to realize or fully to realize the value of, or any release, discharge, exchange or substitution of, any security taken in respect of Debtor’s obligations under the GSPA.

 

	
4.

	
Without derogating from any other provisions of this guarantee which exclude the application of, or constitute a waiver by the Guarantor, of certain defenses or rights under the Israel Guarantee Law, 1967 (“the Guarantee Law”) (which defenses or rights would, but for such provision, have been available to the Guarantor), the Guarantor hereby waives all rights and defenses under the Guarantee Law (save, for the removal of doubt, the right to assert any defense which may be available to Debtor under the GSPA) and confirms that the provisions of the Guarantee Law affording such rights or defenses to a guarantor shall not apply to this guarantee.

 

Notwithstanding anything to the contrary or otherwise contained in this Guaranty, it is hereby expressly stipulated that the Guarantor's total liability hereunder shall be subject to the limitations of liabilities applicable to the Debtor included in Article ‎Article 17 of the GSPA.

 

  

129

  

 

	
5.

	
This Guarantee shall not be terminated by the dissolution, merger, reorganization or consolidation of the Guarantor, or the sale of any assets of the Guarantor, but shall be binding upon it and its successors and shall inure to the benefit of IEC and its successors.

 

	
6.

	
The Guarantor represents and undertakes that:

 

	 	
a.

	
the execution, delivery and performance of this Guarantee by the Guarantor will not cause the Guarantor to be in breach of or default under any law it is subject to, or under any agreement binding on it or any of its assets and no material litigation or administrative proceeding before, by or of any court or governmental authority is pending or (so far as the Guarantor is aware) threatened against it or any of its assets;

 

	 	
b.

	
the Guarantor is a company limited by shares, duly incorporated under the laws of the State of Israel with power to enter into this Guarantee and to exercise its rights and perform its obligations hereunder and all corporate and other actions required to authorize its execution of this Guarantee and the performance by it of its obligations hereunder have duly been taken;

 

	 	
c.

	
the obligations of the Guarantor under this Guarantee are legal and valid obligations binding on the Guarantor and enforceable in accordance with the terms hereof;

 

	 	
d.

	
the entering into of this Guarantee by the Guarantor and the exercise of the Guarantor’s rights and performance of the Guarantor’s obligations hereunder do not and will not: (a) conflict with any agreement, charge or other instrument or document to which it is a party or which is binding upon it or any of its assets, (b) conflict with its documents of incorporation or constitutive documents, or (c) conflict with any applicable law, regulation or official judicial order;

 

  

130

  

 

	
7.

	
This Guarantee is not assignable or transferable by Guarantor or IEC except together with an assignment of the GSPA and in accordance with its terms. In the event of Assignment of Buyer's rights and obligations in accordance with the provisions of the GSPA, this Guarantee will inure to the benefit of said permitted assignees of Buyer.

 

	
8

	
This Guarantee shall be binding upon and inure solely to the benefit of IEC or its assignees under section 7 above, and nothing in this Guarantee, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Guarantee.

 

	
9.

	
This Guarantee shall be governed by Israeli Law and the courts of Israel shall have exclusive jurisdiction in all matters arising therefrom and the Guarantor hereby submits irrevocably to the jurisdiction of the said courts.

 

	
10.

	
This Guarantee constitutes the entire agreement between the parties and supersedes and replaces any prior written or oral agreement, representations or undertaking between them relating to the subject matter of this Guarantee. Any addition or amendment to this Guarantee shall not be effective unless in writing and signed by the Parties’ authorized signatories.

 

	
11.

	
This Guarantee shall remain in force from the date hereof until noon on [--] ("Expiry Time"), whereupon this Guarantee shall expire and become null and void and have no further force or effect. Any Payment Demand must be delivered to Guarantor at the above address of our branch, by not later than the Expiry Time. Any Payment Demand submitted to us after the Expiry Time will not be entertained. For the removal of doubt, notwithstanding anything to the contrary in this Article 11, in event that a Payment Demand is submitted prior to the Expiry Time, this guarantee shall remain in full force and effect in respect of such Payment Demand.

 

IN WITNESS WHEREOF, Signed in ____ this __ day of _____ in the year ______

 

 

(parent)

 

  

131

  

 

Appendix A

 

Form of Payment Demand

 

THE ISRAEL ELECTRIC CORPORATION LIMITED

 

Messrs.

 

...........[the Guarantor]........

 

..............................

 

Re: Payment Demand pursuant to your Guarantee

No. .............. (the "Guarantee") dated ..................

 

I THE UNDERSIGNED the Chief Executive Officer [or Chief Financial Officer], of Israel Electric Corporation Limited (“IEC”) hereby demand payment on behalf of IEC of the sum of ___________ US Dollars (US$ _________) under the above Guarantee.

 

I hereby confirm and certify that –

 

	
(i)

	
the above amount claimed by IEC in this Payment Demand is due and payable to IEC by the Debtor under the Gas Sale and Purchase Agreement dated [--] between the Debtor and others and IEC (the “GSPA”); and

 

	
(ii)

	
IEC has given the Debtor not less than fourteen (14) days written notice of its intention to demand payment of the above amount under the Guarantee in accordance with Article 20.1.3 of the GSPA.

 

SIGNED, this ____ day of _________, in the year _________

 

By: _____________________________________________

 

CEO / CFO of the Israel Electric Corporation Limited

 

  

132

  

 

SCHEDULE 7

 

Form of Bank Guarantee

 

           (bank)

 

          (date)

 

The Israel Electric Corporation Limited

 

................................................

 

................................................

 

Gentlemen:

 

Bank Guarantee No. ......................

 

1.           At the request of [[Dor Gas Exploration Limited Partnership] ("Debtor") we hereby unconditionally and irrevocably guarantee the payment to The Israel Electric Corporation Limited ("IEC") of all amounts which the Debtor owes to IEC pursuant to the Gas Sale and Purchase Agreement dated [insert Date] between the Debtor and others and IEC ("GSPA"), up to the total sum of [insert Amount] in the aggregate (“Guarantee Amount").

 

2.           Accordingly, we hereby undertake to pay IEC within [seven (7)] banking days any amount, not exceeding in the aggregate the Guarantee Amount, which IEC claims from us from time to time, but prior to the Expiry Time, by written demand substantially in the form set out in Appendix A ("Payment Demand"). Except for the Payment Demand, IEC will not be required to provide any proof or other justification to its claim hereunder or to substantiate its demand in any way nor will it be required to first seek payment of the amount claimed from the Debtor or any other person.

 

3.           This Guarantee is not assignable or transferable.

 

  

133

  

 

4.           This Guarantee shall be governed by Israeli Law and the courts of Israel shall have exclusive jurisdiction in all matters arising therefrom.

 

5.           This Guarantee shall remain in force from the date hereof until noon on [_________] ("Expiry Time"), whereupon this Guarantee shall expire and become null and void and have no further force or effect. Any Payment Demand must be delivered to us at the above address of our branch, by not later than the Expiry Time. Any Payment Demand submitted to us after the Expiry Time will not be entertained.

 

IN WITNESS WHEREOF, Signed in ____ this __ day of _____ in the year ______

 

(bank)

 

  

134

  

 

Appendix A

 

Form of Payment Demand

 

THE ISRAEL ELECTRIC CORPORATION LIMITED

 

Messrs.

 

...........[the bank]........

 

..............................

 

Re:  Payment Demand pursuant to your Bank Guarantee

 

No. .............. (the "Guarantee") dated ..................

 

I THE UNDERSIGNED the Chief Executive Officer [or Chief Financial Officer], of Israel Electric Corporation Limited (“IEC”) hereby demand payment on behalf of IEC of the sum of ___________ US Dollars (US$ _________) under the above Guarantee.

 

I hereby confirm and certify that –

 

(i)           the above amount claimed by IEC in this Payment Demand is undisputed and is due and payable to IEC by the Debtor under the Gas Sale and Purchase Agreement dated [Insert Date] between the Debtor and others and IEC (the “GSPA”), or has been determined as due to IEC pursuant to Article 19 of the GSPA, and is unpaid as of the time that this Payment Demand is delivered to you; and

 

(ii)           IEC has given the Debtor not less than seven (7) days written notice of its intention to demand payment of the above amount under the Guarantee in accordance with Article 20.1.5 of the GSPA.

 

SIGNED, this ____ day of _________, in the year _________

 

      By: _____________________________________________

 

CEO / CFO of The Israel Electric Corporation Limited

 

  

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SCHEDULE 8

 

Form of Letter of Credit

 

SAMPLE

 

THE ISRAEL ELECTRIC CORPORATION LIMITED

 

(full address)

 

DEAR SIRS,

 

RE: IRREVOCABLE STANDBY LETTER OF CREDIT NO. (insert number)

 

AT THE REQUEST OF [DOR GAS EXPLORATION LIMITED PARTNERSHIP] (“DEBTOR”) WE, (full name and address of issuing bank), HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO....... IN YOUR FAVOUR TO GUARANTEE THE PAYMENT TO THE ISRAEL ELECTRIC CORPORATION LIMITED (‘IEC”) OF ALL AMOUNTS WHICH THE DEBTOR OWES TO IEC PURSUANT TO THE GAS SALE AND PURCHASE AGREEMENT DATED [insert date] BETWEEN THE DEBTOR AND OTHERS AND IEC (“GSPA”), UP TO THE TOTAL SUM OF [USD ___________] (US DOLLARS _________ MILLION) IN THE AGGREGATE (“GUARANTEE AMOUNT”).

 

ACCORDINGLY, WE (full name of issuing bank), HEREBY UNDERTAKE TO PAY IEC WITHIN FOURTEEN (14) BANKING DAYS ANY AMOUNT, NOT EXCEEDING IN THE AGGREGATE THE GUARANTEE AMOUNT, WHICH IEC CLAIMS FROM US FROM TIME TO TIME, BUT PRIOR TO THE EXPIRY TIME, BY WRITTEN DEMAND AS FOLLOWS:

 

QUOTE

 

THE ISRAEL ELECTRIC CORPORATION LIMITED

 

SRS.

 

___________(Full name and address of the issuing bank)

 

  

136

  

 

 

RE: PAYMENY DEMAND PURSUANT TO YOUR STANDBY LETTER OF

 

       CREDIT NO...  DATED...

 

I THE UNDERSIGNED THE CHIEF EXECUTIVE OFFICER (OR CHIEF FINANCIAL OFFICER), OF THE ISRAEL ELECTRIC CORPORATION LIMITED (“IEC”) HEREBY DEMAND PAYMENT ON BEHALF OF IEC OF THE SUM OF US DOLLARS (US $...................) UNDER THE ABOVE STANDBY LETTER OF CREDIT.

 

I HEREBY CONFIRM AND CERTIFY THAT –

 

(I)           THE ABOVE AMOUNT CLAIMED BY IEC IN THIS PAYMENT DEMAND IS UNDISPUTED AND IS DUE AND PAYABLE TO IEC BY [DOR GAS EXPLORATION LIMITED PARTNERSHIP] (the “DEBTOR”) UNDER THE GAS SALE AND PURCHASE AGREEMENT DATED [insert date] BETWEEN THE DEBTOR AND OTHERS AND IEC (“GSPA”), OR HAS BEEN DETERMINED AS DUE TO IEC PURSUANT TO ARTICLE 19 OF THE GSPA, AND IS UNPAID AS OF THE TIME THAT THIS PAYMENT DEMAND IS DELIVERED TO YOU; AND THAT

 

(II)           IEC HAS GIVEN THE DEBTOR NOT LESS THAN SEVEN (7) DAYS WRITTEN NOTICE OF ITS INTENTION TO DEMAND PAYMENT OF THE ABOVE AMOUNT UNDER THE STANDBY LETTER OF CREDIT IN ACCORDANCE WITH ARTICLE 20.1.5 OF THE GSPA.

 

SIGNED, THIS_____ DAY OF_____, IN THE YEAR_____

 

BY: __________________________________________________________

 

      CEO/CFO OF THE ISRAEL ELECTRIC CORPORATION LIMITED

 

END QUOTE

 

  

137

  

 

EXCEPT FOR THE PAYMENT DEMAND IEC WILL NOT BE REQUIRED TO PROVIDE ANY PROOF OR OTHER JUSTIFICATION TO ITS CLAIM HEREUNDER OR TO SUBSTANTIATE ITS DEMAND IN ANY WAY NOR WILL IT BE REQUIRED TO FIRST SEEK PAYMENT OF THE AMOUNT CLAIMED FROM THE DEBTOR OR ANY OTHER PERSON.

 

THIS STANDBY LETTER OF CREDIT IS NEITHER ASSIGNABLE NOR TRANSFERABLE.

 

THIS STANDBY LETTER OF CREDIT IS SUBJECT TO UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500.

 

THIS STANDBY LETTER OF CREDIT IS AVAILABLE WITH US AND SHALL REMAIN IN FORCE FROM THE DATE HEREOF UNTIL NOON ON (insert validity date) (“EXPIRY TIME”), WHEREUPON THIS STANDBY LETTER OF CREDIT SHALL EXPIRE AND BECOME NULL AND VOID AND HAVE NO FURTHER FORCE OR EFFECT WHETHER OR NOT THIS INSTRUMENT HAS BEEN RETURNED TO US FOR CANCELLATION. ANY PAYMENT DEMAND MUST BE DELIVERED TO US AT THE ABOVE ADDRESS OF OUR BRANCH, BY NOT LATER THAN THE EXPIRY TIME. ANY PAYMENT DEMAND SUBMITTED TO US AFTER THE EXPIRY TIME WILL NOT BE ENTERTAINED.

 

  

138

  

 

SCHEDULE 9

 

ASHDOD DELIVERY POINT DIAGRAM

 

(**)

 

  

139

  

 

SCHEDULE 10

 

FORM OF BUYER'S CONSENT

 

(**)

 

 

140

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