-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CCsQtFNhGe0zeb8TwW1zs1Vm0I4oz79dIs8BH9FNMhl9K5Mb5TNlIbFpkw9nzjYC 79ufy4l7SzN+oRY/kzPA6g== 0000950123-02-005116.txt : 20020514 0000950123-02-005116.hdr.sgml : 20020514 ACCESSION NUMBER: 0000950123-02-005116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW JERSEY RESOURCES CORP CENTRAL INDEX KEY: 0000356309 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 222376465 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08359 FILM NUMBER: 02646016 BUSINESS ADDRESS: STREET 1: 1415 WYCKOFF RD STREET 2: PO BOX 1468 CITY: WALL STATE: NJ ZIP: 07719 BUSINESS PHONE: 9089381494 MAIL ADDRESS: STREET 1: 1350 CAMPUS PKWY STREET 2: P O BOX 1468 CITY: WALL STATE: NJ ZIP: 07719 10-Q 1 y60698e10-q.txt NEW JERSEY RESOURCES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 Commission file number 1-8359 NEW JERSEY RESOURCES CORPORATION (Exact name of registrant as specified in its charter) NEW JERSEY 22-2376465 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1415 WYCKOFF ROAD, WALL, NEW JERSEY - 07719 732-938-1480 (Address of principal executive offices) (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES: X NO: The number of shares outstanding of $2.50 par value Common Stock as of May 2, 2002 was 26,951,369. PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands, except per share data) OPERATING REVENUES ................................................. $ 525,780 $ 890,035 $ 921,611 $1,557,522 ---------- ---------- ---------- ---------- OPERATING EXPENSES Gas purchases .................................................... 419,883 784,119 738,363 1,369,776 Operation and maintenance ........................................ 23,531 23,313 46,603 47,231 Depreciation and amortization .................................... 7,538 8,154 15,969 16,377 Energy and other taxes ........................................... 15,528 18,635 26,606 32,059 ---------- ---------- ---------- ---------- Total operating expenses .......................................... 466,480 834,221 827,541 1,465,443 ---------- ---------- ---------- ---------- OPERATING INCOME ................................................... 59,300 55,814 94,070 92,079 Other income ....................................................... 998 2,102 2,250 2,695 Interest charges, net .............................................. 4,070 5,367 8,455 11,036 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES ......................................... 56,228 52,549 87,865 83,738 Income tax provision ............................................... 21,298 19,519 33,254 31,652 ---------- ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING ................................................................... 34,930 33,030 54,611 52,086 Cumulative effect of a change in accounting for derivatives, net of tax of $930 .................................... -- -- -- (1,347) ---------- ---------- ---------- ---------- NET INCOME ......................................................... $ 34,930 $ 33,030 $ 54,611 $ 50,739 ========== ========== ========== ========== EARNINGS PER COMMON SHARE-BASIC INCOME BEFORE ACCOUNTING CHANGE ............................... $ 1.30 $ 1.24 $ 2.04 $ 1.96 ========== ========== ========== ========== NET INCOME .................................................... $ 1.30 $ 1.24 $ 2.04 $ 1.91 ========== ========== ========== ========== EARNINGS PER COMMON SHARE-DILUTED INCOME BEFORE ACCOUNTING CHANGE ............................... $ 1.29 $ 1.24 $ 2.01 $ 1.95 ========== ========== ========== ========== NET INCOME .................................................... $ 1.29 $ 1.24 $ 2.01 $ 1.90 ========== ========== ========== ========== DIVIDENDS PER COMMON SHARE ......................................... $ .30 $ .29 $ .60 $ .59 ========== ========== ========== ========== AVERAGE SHARES OUTSTANDING BASIC ......................................................... 26,863 26,574 26,800 26,508 ========== ========== ========== ========== DILUTED ....................................................... 27,163 26,727 27,108 26,673 ========== ========== ========== ==========
See Notes to Consolidated Financial Statements 1 CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED MARCH 31, (Thousands) 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income .............................................................................. $ 54,611 $ 50,739 Adjustments to reconcile net income to cash flows Depreciation and amortization .......................................................... 15,969 16,377 Amortization of deferred charges ....................................................... 2,816 3,382 Deferred income taxes .................................................................. 2,315 8,261 Manufactured gas plant remediation costs ............................................... (6,197) (5,457) Change in working capital .............................................................. (42,366) (24,801) Other, net ............................................................................. (383) 1,629 --------- --------- Net cash flows from operating activities ................................................. 26,765 50,130 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from common stock .............................................................. 6,639 6,549 Proceeds from long-term debt ............................................................ 89,231 -- Payments of long-term debt .............................................................. (815) (43,343) Purchases of treasury stock ............................................................. (1,676) (1,983) Payments of common stock dividends ...................................................... (15,867) (15,357) Net change in short-term debt ........................................................... (80,600) 39,700 --------- --------- Net cash flows from financing activities ................................................. (3,088) (14,434) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Expenditures for Utility plant .......................................................................... (20,368) (19,936) Real estate properties and other ....................................................... (318) (3,099) Equity investments ..................................................................... -- (278) Cost of removal ........................................................................ (1,854) (1,364) Proceeds from asset sales ............................................................... 1,014 4,161 --------- --------- Net cash flows from investing activities ................................................. (21,526) (20,516) --------- --------- Net change in cash and temporary investments ............................................. 2,151 15,180 Cash and temporary investments at September 30 ........................................... 4,044 1,904 --------- --------- Cash and temporary investments at March 31 ............................................... $ 6,195 $ 17,084 ========= ========= CHANGES IN COMPONENTS OF WORKING CAPITAL Receivables ............................................................................. $(128,669) $(191,607) Inventories ............................................................................. 27,752 51,019 Deferred gas costs ...................................................................... 12,672 (16,233) Purchased gas ........................................................................... 48,814 119,256 Prepaid and accrued taxes, net .......................................................... 34,751 38,029 Customers' credit balances and deposits ................................................. (3,791) (9,806) Accounts payable & other ................................................................ (6,638) (8,800) Broker margin accounts .................................................................. (15,571) (6,589) Other, net .............................................................................. (11,686) (70) --------- --------- Total .................................................................................... $ (42,366) $ (24,801) ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for Interest (net of amounts capitalized) ................................................... $ 7,288 $ 9,818 Income taxes ............................................................................ $ 27,428 $ 3,440
See Notes to Consolidated Financial Statements 2 CONSOLIDATED BALANCE SHEETS ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------ MARCH 31, SEPTEMBER 30, MARCH 31, 2002 2001 2001 (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands) PROPERTY, PLANT AND EQUIPMENT Utility plant, at cost ............................................. $ 1,034,225 $ 1,016,911 $ 994,935 Real estate properties and other, at cost .......................... 27,075 26,759 29,730 ----------- ----------- ----------- 1,061,300 1,043,670 1,024,665 Accumulated depreciation and amortization .......................... (312,262) (299,721) (289,015) ----------- ----------- ----------- Property, plant and equipment, net ................................ 749,038 743,949 735,650 ----------- ----------- ----------- CURRENT ASSETS Cash and temporary investments ..................................... 6,195 4,044 17,084 Construction fund .................................................. 3,600 3,600 7,600 Customer accounts receivable ....................................... 200,099 82,150 285,482 Unbilled revenues .................................................. 15,600 3,941 14,385 Allowance for doubtful accounts .................................... (3,775) (3,026) (4,025) Gas in storage, at average cost .................................... 42,544 70,019 13,209 Materials and supplies, at average cost ............................ 2,726 3,003 3,120 Prepaid state taxes ................................................ -- 8,268 -- Underrecovered gas costs ........................................... 18,888 15,335 28,937 Derivatives ........................................................ 10,645 24,698 51,471 Broker margin accounts ............................................. 44,469 28,898 -- Other .............................................................. 28,840 20,822 14,237 ----------- ----------- ----------- Total current assets .............................................. 369,831 261,752 431,500 ----------- ----------- ----------- DEFERRED CHARGES AND OTHER Equity investments ................................................. 14,316 15,468 20,433 Regulatory assets .................................................. 81,398 98,753 96,465 Underrecovered gas costs ........................................... 16,781 33,006 -- Derivatives ........................................................ 9,222 14,428 13,750 Other .............................................................. 28,658 24,836 9,285 ----------- ----------- ----------- Total deferred charges and other .................................. 150,375 186,491 139,933 ----------- ----------- ----------- Total assets ................................................ $ 1,269,244 $ 1,192,192 $ 1,307,083 =========== =========== ===========
See Notes to Consolidated Financial Statements 3 CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------------ MARCH 31, SEPTEMBER 30, MARCH 31, 2002 2001 2001 (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ (Thousands) CAPITALIZATION Common stock equity .................................................. $ 372,839 $ 352,069 $ 390,001 Redeemable preferred stock ........................................... 298 298 400 Long-term debt ....................................................... 415,822 353,799 298,185 ---------- ---------- ---------- Total capitalization ................................................ 788,959 706,166 688,586 ---------- ---------- ---------- CURRENT LIABILITIES Current maturities of long-term debt ................................. 26,922 529 495 Short-term debt ...................................................... 5,200 85,800 33,000 Purchased gas ........................................................ 134,140 85,326 272,715 Accounts payable and other ........................................... 31,528 38,166 31,611 Dividends payable .................................................... 8,069 7,837 7,804 Accrued taxes ........................................................ 45,717 15,771 33,103 Derivatives .......................................................... 35,337 35,431 10,569 Broker margin accounts ............................................... -- -- 7,216 Customers' credit balances and deposits .............................. 10,632 14,423 6,480 ---------- ---------- ---------- Total current liabilities ........................................... 297,545 283,283 402,993 ---------- ---------- ---------- DEFERRED CREDITS Deferred income taxes ................................................ 77,067 95,182 113,234 Deferred investment tax credits ...................................... 9,323 9,497 9,671 Deferred revenue ..................................................... 15,820 19,046 20,027 Derivatives .......................................................... 5,307 9,209 8,212 Manufactured gas plant remediation ................................... 53,840 53,840 45,219 Other ................................................................ 21,383 15,969 19,141 ---------- ---------- ---------- Total deferred credits .............................................. 182,740 202,743 215,504 ---------- ---------- ---------- Total capitalization and liabilities .......................... $1,269,244 $1,192,192 $1,307,083 ========== ========== ==========
See Notes to Consolidated Financial Statements 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General The financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The September 30, 2001 balance sheet data is derived from the audited financial statements of New Jersey Resources Corporation (the Company). Although management believes that the disclosures are adequate to make the information presented not misleading, it is recommended that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 2001 Annual Report on Form 10-K. In the opinion of management, the information furnished reflects all adjustments necessary for a fair statement of the results of the interim periods. Because of the seasonal nature of the Company's utility operations and other factors, the results of operations for the interim periods presented are not indicative of the results to be expected for the entire year. 2. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, New Jersey Natural Gas Company (NJNG), NJR Energy Services Company (Energy Services), NJR Retail Holdings Corporation (Retail Holdings), NJR Capital Services Corporation (Capital) and NJR Service Corporation. The Retail and Other segment includes Retail Holdings and its four wholly-owned subsidiaries, NJR Home Services Company (Home Services), NJR Natural Energy Company (Natural Energy), NJR Power Services Company and NJR Plumbing Services Company. Retail and Other also includes Capital and its wholly-owned subsidiaries, Commercial Realty & Resources Corp. (CR&R), NJR Investment Company and NJR Energy Corporation (NJR Energy). 3. Capitalized and Deferred Interest The Company's capitalized interest totaled $106,000 and $267,000 for the three months ended March 31, 2002 and 2001, respectively, and $228,000 and $533,000 for the six months ended March 31, 2002 and 2001, respectively. Pursuant to a New Jersey Board of Public Utilities (BPU) order, NJNG recovers carrying costs on uncollected balances related to its manufactured gas plant (MGP) remediation expenditures (see Note 4c. Manufactured Gas Plant Remediation) and underrecovered gas costs (see Note 4b. LGA and Other Adjustment Clauses). Accordingly, Other income included deferred interest of $658,000 and $1.1 million for the three months ended March 31, 2002 and 2001, respectively, and $1.5 million and $1.1 million for the six months ended March 31, 2002 and 2001, respectively, related to remediation and underrecovered gas costs. 5 4. Legal and Regulatory Proceedings a. Energy Deregulation Legislation In February 1999, the Electric Discount and Energy Competition Act (Act), which provides the framework for the restructuring of New Jersey's energy markets, became law. In March 2001, the BPU issued a written order that approved a stipulation agreement among various parties to fully open NJNG's residential markets to competition, restructure its rates to segregate its Basic Gas Supply Service (BGSS) and Delivery (i.e., transportation) service prices as required by the Act, and expand an incentive for residential and small commercial customers to switch to transportation service. The Act allows continuation of each utility's role as a gas supplier at least until December 31, 2002. In June 2001, the BPU initiated a proceeding to review issues related to the potential of making the BGSS competitive. In July 2001, NJNG submitted a BGSS proposal that provides for additional customer choices and includes a request to develop new incentive mechanisms. In January 2002, the BPU issued an order which stated that BGSS could be provided by suppliers other than state gas utilities, but at this time it should be provided by the state's natural gas utilities. The parties are currently discussing NJNG's July 2001 proposal and no assurance can be made as to the timing or terms of any resolution to such proposal. b. LGA and Other Adjustment Clauses In fiscal 2001, the BPU approved price increases of approximately 2 percent per month for a period from December 2000 through July 2001 under a Flexible Pricing Mechanism (FPM). The BPU ordered, based on the extraordinary circumstances prevailing at the time, that NJNG could accrue interest at the rate of 5.5 percent per year on its underrecovered gas costs commencing on April 1, 2001 and continuing through October 31, 2001. The BPU also directed NJNG to establish a Gas Cost Underrecovery Adjustment (GCUA) surcharge to collect the underrecovered gas costs and accrue interest at a rate of 5.75 percent per year, commencing December 1, 2001 until November 30, 2004. On November 15, 2001, NJNG filed with the BPU for the establishment of the GCUA to collect $29.9 million in underrecovered gas costs and sought to reduce the current gas cost recovery rate. The combined effect of the two changes resulted in an approximate 10.8 percent price decrease effective December 1, 2001. The filing also contained a proposal to extend the existing margin-sharing mechanisms related to NJNG's off-system sales and capacity management programs for two years beyond their currently scheduled expiration of December 31, 2002. On January 21, 2002, NJNG filed with the BPU for an additional 3 percent price decrease as a result of lower projected gas costs. The BPU approved this filing on February 6, 2002 and the decrease became effective immediately. c. Manufactured Gas Plant Remediation NJNG has identified eleven former MGP sites, dating back to the late 1800's and early 1900's, which contain contaminated residues from the former gas manufacturing operations. Ten of the eleven sites in question were acquired by NJNG in 1952. All of the gas manufacturing operations ceased at these sites at least by the mid-1950's and in some cases had been discontinued many years earlier, and all of the old gas manufacturing facilities were subsequently dismantled by NJNG or the former owners. NJNG is currently involved in administrative proceedings with the New Jersey Department of Environmental Protection (NJDEP) and local government authorities with respect to the plant sites in question, and is participating 6 in various studies and investigations by outside consultants to determine the nature and extent of any such contaminated residues and to develop appropriate programs of remedial action, where warranted. Since October 1989, NJNG has entered into Administrative Consent Orders or Memoranda of Agreement with the NJDEP covering all eleven sites. These documents establish the procedures to be followed by NJNG in developing a final remedial clean-up plan for each site. With respect to ten of the MGP sites, until September 2000 most of the cost of such studies and investigations had been shared under an agreement with the former owner and operator of such ten MGP sites. In September 2000, a revised agreement was executed pursuant to which NJNG is responsible for two of the sites, while the former owner is responsible for the remaining eight sites. Also in September 2000, NJNG purchased a 20-year cost-containment insurance policy for these two sites. NJNG continues to participate in the investigation and remedial action for one MGP site that was not subject to the original cost-sharing agreement. Through a Remediation Rider approved by the BPU, NJNG is recovering its expenditures incurred through June 30, 1998 over a seven-year period. Costs incurred subsequent to June 30, 1998, including carrying costs on the deferred expenditures (as discussed in Note 4: Capitalized and Deferred Interest), will be reviewed annually and recovered over rolling seven-year periods, subject to BPU approval. In September 1999, NJNG filed for recovery of expenditures incurred through June 30, 1999. In January 2001, NJNG filed for recovery of expenditures incurred through June 30, 2000, and the parties are currently reviewing the details of these filings. In March 1995, NJNG instituted an action for declaratory relief against 24 separate insurance companies in the Superior Court of New Jersey. These insurance carriers provided comprehensive general liability coverage to NJNG from 1951 through 1985. Prior to the institution of the suit, NJNG requested the insurance carriers to defend and indemnify it with respect to the environmental liability created by the former manufactured gas plants. The insurance carriers all denied coverage claiming that various terms in the policy preclude coverage. In 2001, settlements were reached with several of the excess carriers, while other carriers were dismissed without prejudice when it was determined that the state's allocation method would not have assessed any liability to the particular carrier. In September 2001, NJNG reached a favorable settlement with the insurance carrier that provided the majority of NJNG's coverage. This settlement involves a significant cash payment to NJNG that will be tendered in four annual installments. One carrier remains and NJNG is optimistic that a settlement can be reached in that matter. No assurance can be made as to the timing or terms of such settlement. d. South Brunswick Asphalt, L.P. NJNG was named as a defendant in a civil action commenced in New Jersey Superior Court (Superior Court) by South Brunswick Asphalt, L.P. (SBA) and its affiliated companies, seeking damages arising from alleged environmental contamination at three sites owned or occupied by SBA and its affiliated companies. Specifically, the suit charges that tar emulsion removed from 1979 to 1983 by an affiliate of SBA (Seal Tite Corp.) from NJNG's former MGP sites has been alleged by the NJDEP to constitute a hazardous waste and that the tar emulsion has contaminated the soil and ground water at the three sites in question. The case proceeded to trial in April 2002 and on May 2, 2002, a verdict on liability was entered in favor of SBA. Prior to a decision on the amount of liability, the parties entered into a settlement agreement. NJNG believes that the settlement costs are recoverable through the ratemaking process (See Management's discussion in Item 2 (MD&A) under the heading Critical Accounting Policies, Environmental Items) and therefore does not believe that the ultimate resolution of this matter will have a material adverse effect on its financial condition or results of operations. No assurance can be given as to the timing or extent of the ultimate recovery of such costs. 7 e. Combe Fill South Landfill NJNG was joined as a third-party defendant in two civil actions commenced in October 1998 in the U.S. District Court for the District of New Jersey (District Court) by the U.S. Environmental Protection Agency and the NJDEP. These two actions seek recovery of costs expended in connection with, and for continuation of the cleanup of, the Combe Fill South Landfill, a Superfund site in Chester, New Jersey. The plaintiffs claim that hazardous waste NJNG is alleged to have generated was sent to the site. There are approximately 180 defendants and third-party defendants in the actions thus far. Each third-party complaint seeks damages under the Comprehensive Environmental Response, Compensation and Liability Act, the New Jersey Spill Act and declaratory relief holding each third-party defendant strictly liable, and contribution and indemnification under the common law of the United States and New Jersey. The case has recently been settled with respect to NJNG and a number of other de micromis parties (defined as disposing of less than 0.1% of the waste into the site), and a court order confirming the settlement was entered on May 9, 2002. The settlement provides for release of NJNG from all claims, including future claims and natural resource damages. The third-party plaintiffs retained the right to seek to reopen the settlement if future developments result in a change in NJNG's status as a de micromis party. NJNG determined that the amount of the settlement was immaterial and, based on the required change in the amount of the waste at the site before the settlement could be reopened, NJNG currently believes that its status should not change. No assurance can be given as to the possibility that NJNG's status as a de micromis party will not change in the future. f. Various The Company is party to various other claims, legal actions and complaints arising in the ordinary course of business. In management's opinion, the ultimate disposition of these matters will not have a material adverse effect on its financial condition or results of operations. 5. Earnings Per Share (EPS) On January 22, 2002 the Board of Directors approved a three-for-two split of its outstanding shares of common stock and on March 4, 2002, the Company began trading on a post-split basis. All share and per share amounts have been adjusted to reflect this split. The incremental shares required for inclusion in the denominator for the diluted EPS calculation were 300,635 and 138,318 for the three months ended March 31, 2002 and 2001, respectively and 308,252 and 149,945 for the six months ended March 31, 2002 and 2001, respectively. These shares relate to stock options and restricted stock and were calculated using the treasury stock method. The numerator for each applicable basic and diluted calculation was income before cumulative effect of a change in accounting and net income, respectively. Net income for the six months ended March 31, 2001 included a charge of $1.3 million, or $.05 per share, resulting from the cumulative effect of a change in accounting for derivatives under SFAS 133. 8 6. Construction Fund and Long-Term Debt The Company has $335-million in revolving credit agreements with several banks. The Company portion of the facility consists of $135 million with a three-year term and the NJNG portion of the facility consists of $100 million with a 364-day term and $100 million with a three-year term. The Company facilities are used to finance unregulated operations. The NJNG facility is used to support its commercial paper borrowings. Consistent with management's intent to maintain a portion of its commercial paper borrowings on a long-term basis, and as supported by its long-term revolving credit facility, the Company included $50 million of commercial paper borrowings as Long-term debt on the Consolidated Balance Sheet at March 31, 2002, September 30, 2001 and March 31, 2001. In April 1998, NJNG entered into a loan agreement whereby the New Jersey Economic Development Authority (EDA) loaned NJNG the proceeds from its $18 million Natural Gas Facilities Revenue Bonds, Series 1998C, which were deposited into a construction fund. NJNG may draw down these funds in reimbursement for certain qualified expenditures. NJNG has drawn down $14.4 million of these funds through March 31, 2002 and the remaining $3.6 million was drawn down on May 8, 2002. 7. Segment Reporting The segment data has been reclassified to reflect the new business segments that are discussed in Note 2: Principles of Consolidation. The Natural Gas Distribution segment consists of regulated energy and off-system and capacity management operations. The Energy Services segment consists of unregulated fuel and capacity management operations. The Retail and Other segment consists of appliance service, commercial real estate development, retail marketing, investment and other corporate activities.
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 --------------------------------------------------------- (Thousands) Operating Revenues Natural Gas Distribution $ 289,609 $ 420,805 $ 509,557 $ 745,604 Energy Services 231,581 465,155 402,469 803,499 Retail and Other 4,612 5,808 9,705 12,137 --------- --------- --------- ----------- Subtotal 525,802 891,768 921,731 1,561,240 Intersegment revenues (22) (1,733) (120) (3,718) --------- --------- --------- ----------- Total $ 525,780 $ 890,035 $ 921,611 $ 1,557,522 ========= ========= ========= =========== Operating Income Natural Gas Distribution $ 53,002 $ 53,081 $ 83,000 $ 84,274 Energy Services 5,222 1,435 8,747 5,506 Retail and Other 1,076 1,298 2,323 2,299 --------- --------- --------- ----------- Total $ 59,300 $ 55,814 $ 94,070 $ 92,079 ========= ========= ========= ===========
9 The Company's assets for the various business segments are detailed below:
As of As of As of March 31, 2002 September 30, 2001 March 31, 2001 ------------------------------------------------------ (Thousands) Assets Natural Gas Distribution $1,054,556 $1,065,748 $1,072,934 Energy Services 162,972 78,042 148,791 Retail and Other 51,716 48,402 85,358 ---------- ---------- ---------- Total $1,269,244 $1,192,192 $1,307,083 ========== ========== ==========
8. Investments Included in Equity investments on the Consolidated Balance Sheet is the Company's less-than-1-percent ownership interest in the Capstone Turbine Corporation (Capstone), a developer of microturbines, which completed its initial public offering in June 2000. In July 2001, the Company entered into a five-year zero-premium collar to hedge changes in the value of 100,000 shares of its investment in Capstone. The collar consists of a purchased put option with a strike price of $9.97 per share and a sold call option with a strike price of $24.16 per share for 100,000 shares. The Company entered into this transaction to hedge its anticipated sale of 100,000 shares of Capstone at the settlement date in 2006 and, accordingly, accounts for the transaction as a cash flow hedge. The change in Other comprehensive income for the six months ended March 31, 2002 is a $94,000 unrealized gain related to this collar. Through March 31, 2002, accumulated other comprehensive income includes a $546,000 unrealized gain related to this collar. 9. Comprehensive Income
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 --------------------------------------------------------- (Thousands) Net income $ 34,930 $ 33,030 $ 54,611 $ 50,739 -------- -------- -------- -------- Other comprehensive income: Change in fair value of equity investments, net $ (819) $ 50 $ (218) $ (8,599) Change in fair value of derivatives, net (18,186) (2,182) (25,010) 9,658 Cumulative effect of a change in accounting for derivatives, net -- -- -- 20,530 -------- -------- -------- -------- Total Other comprehensive income $(19,005) $ (2,132) $(25,228) $ 21,589 -------- -------- -------- -------- Comprehensive income $ 15,925 $ 30,898 $ 29,383 $ 72,328 ======== ======== ======== ========
Accumulated Other Comprehensive Income, included in Stockholders equity on the Consolidated Balance Sheets, was a negative $15.6 million at March 31, 2002, $9.6 million at September 30, 2001 and $35.1 million at March 31, 2001. 10 10. Change in accounting Effective October 1, 2000, the Company adopted SFAS 133. (See Note 3: Derivative Activities) At October 1, 2000, the effect of adopting SFAS 133 was as follows:
(Thousands) Increase/ (Decrease) ---------- Fair value of derivative assets $ 56,963 Fair value of derivative liabilities $ 17,657 Regulatory liability $ 6,834 Cumulative effect on net income from a change in accounting, net $ (1,347) Cumulative effect of a change in accounting for derivatives in other comprehensive income, net $ 20,530
The cumulative effect on net income from a change in accounting resulted from derivatives that do not qualify for hedge accounting. The amounts included in Other comprehensive income related to natural gas instruments will reduce or be charged to gas costs as the related transaction occurs. Based on the amount recorded to accumulated other comprehensive income at March 31, 2002, $5.3 million is expected to be recorded as an increase to gas costs in 2002. For the three months ended March 31, 2002 and 2001, $16 million was credited and $100,000 was charged to gas costs, and for the six months ended March 31, 2002 and 2001, $31.3 million was credited and $1 million was charged to gas costs, respectively. The cash flow hedges described above cover various periods of time ranging from April 2002 to October 2010. 11. Commitments and contingent liabilities Energy Services has entered into a marketing and management agreement for the Stagecoach storage project. Stagecoach is a 12 billion cubic feet (Bcf) high-injection/high-withdrawal facility in New York State with interstate pipeline connections to the Northeast markets which is expected to begin operations in the third quarter of fiscal 2002. Energy Services is the exclusive agent for marketing Stagecoach services for a 10-year period, subject to standard termination rights, ending March 31, 2012. During this period, Energy Services has agreed to arrange contracts for, or purchase at fixed prices, sufficient services to provide Stagecoach with revenues of $18 million for the period from April 1, 2002 to March 31, 2003 and $22 million annually from April 1, 2003 to March 31, 2012. Stagecoach can require Energy Services to make the foregoing purchases only if Stagecoach is capable of providing the underlying services. In addition, Energy Services believes that the price at which it would be required to purchase these services is currently below market. Energy 11 Services has reached three-year agreements with two third parties for the purchase of over 35 percent of the required level of services from Stagecoach. Due to the attractive pricing available to Energy Services, as compared with current market prices, and the current and expected level of third-party contracts, the Company believes that the potential purchase obligation in the Stagecoach agreement will not result in any future losses. Additionally, under the Stagecoach agreement, Energy Services is required to provide to, and maintain at, the Stagecoach facility 2 Bcf of firm base gas, and to manage up to 3 Bcf of interruptible base gas for the term of the agreement. 12. Other At March 31, 2002, there were 26,892,062 shares of common stock outstanding and the book value per share was $13.86. Certain reclassifications have been made of previously reported amounts to conform with current year classifications. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED MARCH 31, 2002 A. RESULTS OF OPERATIONS Consolidated net income for the quarter ended March 31, 2002 increased 5.8 percent to $34.9 million, compared with $33 million for the same period last year. Basic EPS increased 4.8 percent to $1.30, compared with $1.24 last year. Diluted EPS increased 4 percent to $1.29, compared with $1.24 last year. Consolidated net income for the six months ended March 31, 2002 increased 7.7 percent to $54.6 million, compared with $50.7 million for the same period last year. Basic EPS increased 6.8 percent to $2.04, compared with $1.91 last year. Diluted EPS increased 5.8 percent to $2.01, compared with $1.90 last year. The increase in consolidated net income in both the three and six months ended March 31, 2002 was attributable primarily to continued profitable customer growth at the Company's principal subsidiary, NJNG, reduced operation and maintenance expenses, lower net interest charges and higher results in NJRES and Home Services, which more than offset the impact of record warm weather. Consolidated net income for the six months ended March 31, 2001 included a charge of $1.3 million, or $.05 per share, resulting from the cumulative effect of a change in accounting for derivatives under SFAS 133. NATURAL GAS DISTRIBUTION OPERATIONS NJNG's financial results are summarized as follows:
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 ------------------------------------------------------- (Thousands) Revenue $289,609 $420,805 $509,557 $ 745,604 ======== ======== ======== ========= Gross margin Residential and commercial $ 71,528 $ 69,700 $121,480 $ 119,057 Transportation 7,643 10,803 13,726 20,353 -------- -------- -------- --------- Total firm margin 79,171 80,503 135,206 139,410 Off-system and capacity management 1,241 2,158 2,876 3,483 Interruptible 210 168 422 360 -------- -------- -------- --------- Total gross margin $ 80,622 $ 82,829 $138,504 $ 143,253 ======== ======== ======== ========= Operation and maintenance expense $ 19,142 $ 21,058 $ 38,736 $ 41,546 ======== ======== ======== ========= Operating income $ 53,002 $ 53,081 $ 83,000 $ 84,274 ======== ======== ======== ========= Other income $ 463 $ 1,285 $ 1,564 $ 1,337 ======== ======== ======== ========= Cumulative effect of a change in accounting -- -- -- $ (275) ======== ======== ======== ========= Net income $ 31,219 $ 31,596 $ 48,353 $ 48,047 ======== ======== ======== =========
13 Gross Margin Gross margin is defined as gas revenues less gas costs, sales tax and a Transitional Energy Facilities Assessment (TEFA). Gross margin provides a more meaningful basis for evaluating utility operations since gas costs, sales tax and TEFA are passed through to customers and, therefore, have no effect on earnings. Gas costs are charged to operating expenses on the basis of therm sales at the rates included in NJNG's tariff. The Levelized Gas Adjustment Clause (LGA) allows NJNG to recover gas costs that exceed the level reflected in its base rates. Sales tax is calculated at 6 percent of revenue and excludes sales to other utilities, off-system sales and federal accounts. TEFA is calculated on a per-therm basis and excludes sales to other utilities, off-system sales and federal accounts. Firm Margin Residential and commercial gross margin is subject to a Weather Normalization Clause (WNC), which provides for a revenue adjustment if the weather varies by more than one-half of 1 percent from normal, or 20-year average, weather. The WNC does not fully protect NJNG from factors such as unusually warm weather and declines in customer usage patterns, which were set at the conclusion of NJNG's last base rate case in January 1994. The accumulated adjustment from one heating season (i.e., October through May) is billed or credited to customers in subsequent periods. This mechanism reduces the variability of both customer bills and NJNG's gross margin due to weather fluctuations. The components of gross margin from residential and commercial customers are affected by customers switching between sales service and transportation service. NJNG's total gross margin is not affected negatively by customers who utilize its transportation service and purchase their gas from another supplier because its tariff is designed such that no profit is earned on the commodity portion of sales to firm customers. All customers who purchase gas from another supplier continue to utilize NJNG for transportation service. Total firm margin decreased $1.3 million, or 1.7 percent, and $4.2 million, or 3 percent, for the three and six months ended March 31, 2002, respectively, compared with the same periods last year, due primarily to 18 percent and 24 percent warmer weather as compared with the three and six month periods last year, respectively. This record warm weather resulted in lower average customer usage, which more than offset the impact of customer growth and the WNC. The weather for the six months ended March 31, 2002 was 18 percent warmer than normal, which, in accordance with the WNC, resulted in the accrual of $14.8 million of gross margin for recovery from its customers in the future. The weather for the six months ended March 31, 2002 was the warmest in NJNG's history. At March 31, 2002, NJNG also had $8.3 million in accrued WNC margins to be collected from its customers in fiscal 2002 due to the impact of weather in prior fiscal years. NJNG estimates that for the six months ended March 31, 2002, the record warm weather resulted in $6 million of lost margin beyond the amount captured in the WNC. Gross margin from sales to residential and commercial customers increased $1.8 million, or 3 percent, and $2.4 million, or 2 percent, for the three and six months ended March 31, 2002, compared with the same periods last year. The increase in gross margin was due primarily to the impact of 11,485 customer additions during the twelve months ended March 31, 2002, the impact of the WNC and firm transportation customers switching back to firm sales service, which more than offset the decrease in sales due to the warm weather. Sales to residential and commercial customers were 20.6 Bcf and 33.7 Bcf for the three and six months ended March 31, 2002, compared with 23.3 Bcf and 40.1 Bcf for the same periods last year. 14 Gross margin from transportation service decreased $3.2 million, or 29 percent, and $6.6 million, or 33 percent, for the three and six months ended March 31, 2002, compared with the same periods last year. The decrease in margin was due primarily to customers switching back to sales service. NJNG transported 3 Bcf and 5.1 Bcf for the three and six months ended March 31, 2002, respectively, compared with 4.3 Bcf and 7.9 Bcf, in the same periods last year. NJNG had 10,035 and 22,063 residential customers and 3,476 and 3,233 commercial customers using transportation service at March 31, 2002 and 2001, respectively. The decrease in the number of transportation customers was due primarily to changes in market conditions, which resulted in customers returning to sales service from transportation service. Off-System and Capacity Management To reduce the overall cost of its gas supply commitments, NJNG has entered into contracts to sell gas to customers outside its franchise territory when the gas is not needed for system requirements. These off-system sales enable NJNG to spread its fixed demand costs, which are charged by pipelines to access their supplies year round, over a larger and more diverse customer base. NJNG also participates in the capacity release market on the interstate pipeline network when the capacity is not needed for its firm system requirements. Effective October 1, 1998 through December 31, 2002, NJNG retains 15 percent of the gross margin from these sales, with 85 percent credited to firm customers through the LGA. An incentive mechanism designed to reduce the fixed cost of NJNG's gas supply portfolio also became effective October 1, 1998. Any savings achieved through the permanent reduction or replacement of capacity or other services is shared between customers and shareowners. Under this program, NJNG retains 40 percent of the savings for the first 12 months following any transaction and retains 15 percent for the remaining period through December 31, 2002, with 60 percent and 85 percent, respectively, credited to firm sales customers through the LGA. NJNG also has a Financial Risk Management (FRM) program, which is designed to provide price stability to it's system supply portfolio. The FRM program includes an incentive mechanism designed to encourage the use of financial instruments to hedge NJNG's gas costs, with an 80/20 percent sharing of the costs and results between customers and shareowners, respectively, through December 31, 2002. NJNG has requested an extension of these incentives through December 31, 2004. NJNG's off-system sales, capacity management and FRM programs totaled 30.2 Bcf and generated $1.2 million of gross margin, and 56.4 Bcf and $2.9 million of gross margin, for the three and six months ended March 31, 2002, compared with 25.4 Bcf and $2.2 million of gross margin, and 54.6 Bcf and $3.5 million of gross margin for the respective periods last year. The decrease in margin was due primarily to lower results from the FRM program. Interruptible NJNG serves 49 customers through interruptible sales and/or transportation tariffs. Sales made under the interruptible sales tariff are priced on market-sensitive oil and gas parity rates. Although therms sold and transported to interruptible customers represented 4.7 percent and 3.9 percent of total throughput for the six months ended March 31, 2002 and 2001, respectively, they accounted for less than 1 percent of the total gross margin in each period due to the margin-sharing formulas that govern these sales. Under these 15 formulas, NJNG retains 10 percent of the gross margin from interruptible sales and 5 percent of the gross margin from transportation sales, with 90 percent and 95 percent, respectively, credited to firm sales customers through the LGA. Interruptible sales were .1 Bcf and .3 Bcf for the six months ended March 31, 2002 and 2001, respectively. In addition, NJNG transported 4.6 Bcf and 3.9 Bcf for the six months ended March 31, 2002 and 2001, respectively, for its interruptible customers. Operation & Maintenance (O&M) Expense O&M expense decreased $1.9 million, or 9 percent, and $2.8 million, or 6.8 percent, for the three and six months ended March 31, 2002, respectively, compared with the same periods last year. The reduction in O&M expense was due primarily to the benefits of an early retirement program initiated last year, a reduction in bad debt expense associated with lower revenue, lower regulatory rider expenses due to lower sales and general cost control efforts. Operating Income Operating income decreased $79,000, or less than one percent, and $1.3 million, or 1.5 percent, for the three and six months ended March 31, 2002, compared with the same periods last year. The decreases were due primarily to the decrease in total gross margin described above, which was partially offset by a reduction in O&M and depreciation expenses. The decrease in depreciation expense was due primarily to components of NJNG's computer software becoming fully depreciated. NJNG installed the software between 1995 and 1997. NJNG currently does not anticipate any significant capital expenditures to replace or upgrade the software in the near future. Net Income Net income decreased $377,000, or 1.2 percent, and increased $306,000, or less than one percent, for the three and six months ended March 31, 2002, compared with the same periods last year. The six month increase was due primarily to lower interest costs, resulting primarily from lower interest rates, and increased recovery of carrying costs on deferred regulatory assets, which is included in Other income (see Note 3. Capitalized and Deferred Interest), more than offsetting the lower operating income. Net income for the six months ended March 31, 2001 included a charge of $275,000 resulting from the cumulative effect of a change in accounting for derivatives under SFAS 133. 16 ENERGY SERVICES OPERATIONS Energy Services' provides unregulated fuel and capacity management and wholesale marketing services.
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 ---------------------------------------------------------- (Thousands) Revenues $ 231,581 $ 465,155 $ 402,469 $ 803,499 ========= ========= ========= ========= Gross margin $ 6,325 $ 2,016 $ 10,745 $ 6,817 ========= ========= ========= ========= Operating income $ 5,222 $ 1,435 $ 8,747 $ 5,506 ========= ========= ========= ========= Other income $ 50 $ 221 $ 105 $ 476 ========= ========= ========= ========= Cumulative effect of a change in accounting -- -- -- $ (688) ========= ========= ========= ========= Net income $ 3,035 $ 1,168 $ 5,171 $ 3,105 ========= ========= ========= =========
Energy Services' revenues decreased due primarily to significantly lower wholesale natural gas prices prevailing during the three and six months ended March 31, 2002, which more than offset higher sales. Energy Services' gross margin and operating income increased for the three and six months ended March 31, 2002, compared to the same periods last year, as a result of higher margins from pipeline and storage transactions and daily and term wholesale capacity and commodity marketing. Net income for the six months ended March 31, 2001 included a charge of $688,000 resulting from the cumulative effect of a change in accounting for derivatives under SFAS 133. Energy deliveries totaled 86.9 Bcf and 147.8 Bcf for the three and six months ended March 31, 2002, respectively, compared with 59 Bcf and 114.7 Bcf for the same periods last year. The increase was due primarily to additional volumes from pipeline, storage and capacity transactions, and additional sales to wholesale customers. RETAIL AND OTHER OPERATIONS Retail and Other consists primarily of Home Services, which provides appliance and installation services to approximately 131,000 customers, Natural Energy, which has participated in the unregulated retail marketing of natural gas, CR&R, which develops commercial real estate, and NJR Energy, which consists primarily of equity investments in Capstone and the Iroquois Gas Transmission System, L.P. (Iroquois). The consolidated financial results of Retail and Other are summarized as follows: 17
Three Months Ended Six Months Ended March 31, March 31, 2002 2001 2002 2001 --------------------------------------------------- (Thousands) Revenues $ 4,612 $ 5,808 $ 9,705 $ 12,137 ======== ======== ======== ======== Other income $ 485 $ 601 $ 581 $ 893 ======== ======== ======== ======== Cumulative effect of a change in accounting -- -- -- $ (384) ======== ======== ======== ======== Net income (loss) $ 676 $ 266 $ 1,087 $ (413) ======== ======== ======== ========
Retail and Other revenues for the three and six months ended March 31, 2002 decreased due primarily to the expiration of Natural Energy's residential contracts, which more than offset increased revenue at Home Services resulting from the formation of the installation service business in July 2001 and price increases on appliance service contracts. Other income for the three and six months ended March 31, 2002 decreased due primarily to lower interest income and dividends. Net income for the three and six months ended March 31, 2002 increased due primarily to revenue growth and cost containment efforts at Home Services, and last year's results included a charge of $384,000 resulting from the cumulative effect of a change in accounting for derivatives under SFAS 133. In 1996, CR&R entered into a sale-leaseback transaction that generated a pre-tax gain of $17.8 million, which is included in Deferred revenue and is being amortized to Other income over the 25-year term of the lease. The primary tenant of the facility, NJNG, is leasing the building under a long-term master lease agreement and continues to occupy a majority of the space in the building. B. LIQUIDITY AND CAPITAL RESOURCES In order to meet the working capital and external debt financing requirements of its unregulated subsidiaries, as well as its own working capital needs, the Company maintains committed credit facilities with several banks totaling $135 million. At March 31, 2002, there was $124.5 million outstanding under these agreements. NJNG satisfies its debt needs by issuing short- and long-term debt based upon its own financial profile. The Company meets its common equity requirements, if any, through new issuances of the Company's common stock, including the proceeds from its Automatic Dividend Reinvestment Plan (DRP). The DRP also allows for the purchase of shares in the open market to satisfy the plan's needs. The Company can switch funding options every 90 days. 18 The following table is a summary of contractual cash obligations and their applicable payment due dates.
Payments Due by Period Less than 1 1-3 4-5 After 5 Contractual Obligations Total Year Years Years Years - --------------------------------------------------------------------------------------------------------------- (Thousands) Long-Term Debt $ 392,345 $ 25,000 $199,500 -- $167,845 Capital Lease Obligations 50,399 1,922 6,229 $ 2,298 39,950 Operating Leases 5,753 1,783 3,034 452 484 Commercial Paper 5,200 5,200 -- -- -- Potential Storage Obligations 187,246 6,777 25,731 42,925 111,813 Gas Supply Purchase Obligations 404,455 110,885 176,154 56,100 61,316 ---------- -------- -------- -------- -------- Total Contractual Cash Obligations $1,045,398 $151,567 $410,648 $101,775 $381,408 ========== ======== ======== ======== ========
NJNG The seasonal nature of NJNG's operations creates large short-term cash requirements, primarily to finance gas purchases and customer accounts receivable. NJNG obtains working capital for these requirements, as well as for the temporary financing of construction expenditures, sinking fund needs, MGP remediation expenditures and energy tax payments, through the issuance of commercial paper and short-term bank loans. To support the issuance of commercial paper, NJNG maintains a committed credit facility totaling $200 million, consisting of $100 million with a 364-day term and $100 million with a three-year term. Remaining fiscal 2002 construction expenditures are estimated at $29 million. These expenditures will be incurred for services, mains and meters to support NJNG's continued customer growth, and general system renewals and improvements. In addition, NJNG incurred $6.1 million remediating its former manufactured gas plants during the six months ended March 31, 2002 and estimates additional expenditures of approximately $13.4 million, net of insurance recoveries, for the remaining six months of fiscal 2002. NJNG expects to finance these expenditures through internal generation, the issuance of short-term debt and the draw down of $3.6 million remaining in its EDA construction fund. The timing and mix of these issuances will be geared toward maintaining a common equity ratio of at least 50 percent, which is consistent with maintaining its current short- and long-term credit ratings. ENERGY SERVICES Energy Services does not currently expect any significant capital expenditures or external financing requirements in fiscal 2002. Energy Services meets its working capital requirements through loans from the Company. 19 RETAIL AND OTHER Retail and Other does not currently expect any significant capital expenditures or external financing requirements in fiscal 2002. CRITICAL ACCOUNTING POLICIES The following is a description of the most important Generally Accepted Accounting Policies (GAAP) that are used by the Company. The use of estimates by management is a critical element in applying GAAP. The consolidated financial statements of the Company include estimates and actual results in the future may differ from such estimates. The Company's largest subsidiary, NJNG, maintains its accounts in accordance with the Uniform System of Accounts as prescribed by the BPU. As a result of the ratemaking process, NJNG is required to follow Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation and, as a result, the accounting principles applied by NJNG differ in certain respects from those applied by unregulated businesses. Regulatory Assets & Liabilities NJNG is required under SFAS No. 71 to record the impact of regulatory decisions on its financial statements. NJNG's LGA requires it to project its gas costs over the subsequent 12 months and recover the excess, if any, of such projected costs over those included in its base rates through levelized charges to customers. Any under- or over-recoveries are treated as a Regulatory asset or liability and reflected in the LGA in subsequent years. NJNG also enters into derivatives that are used to hedge gas purchases and the offset to the resulting derivative assets or liabilities are recorded as a Regulatory asset or liability. In addition to the LGA, other Regulatory assets include the remediation costs associated with manufactured gas plant (MGP) sites, which are discussed below under Environmental Items, and the WNC, which is discussed in the Natural Gas Distribution segment of the MD&A. If there are changes in future regulatory positions that indicate the recovery of such regulatory assets is not probable, the related cost would be charged to income. Energy Trading Activity Derivative activities are recorded in accordance with Statement of Financial Accounting Standards No.133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS 133), under which the Company records the fair value of derivatives held as assets and liabilities. The changes in the fair value of the effective portion of derivatives qualifying as cash flow hedges are recorded, net of tax, in Other comprehensive income, a component of Common stock equity. Under SFAS 133, the Company also has certain derivative instruments that do not qualify as cash flow hedges. The change in fair value of these derivatives is recorded in net income. In addition, the changes in the fair value of the ineffective portion of derivatives qualifying for hedge accounting are recorded as an increase or decrease in gas costs or interest expense, as applicable, based on the nature of the derivatives. The derivatives that NJNG utilizes to hedge its gas purchasing activities are recoverable through its LGA. Accordingly, the offset to the change in fair value of these derivatives is recorded as a regulatory asset or liability. The Company has not designated any derivatives as fair value hedges as of December 31, 2001. 20 The fair value of derivative investments is determined by reference to quoted market prices of listed contracts, published quotations or quotations from independent parties. In the absence thereof, the Company utilizes mathematical models based on current and historical data. The effect on earnings of valuations from our mathematical models is immaterial. Environmental Items NJNG periodically updates the environmental review of its MGP sites, including a review of its potential liability for investigation and remedial action, based on assistance from an outside consulting firm. On the basis of such review, NJNG will estimate expenditures to remediate and monitor these MGP sites, exclusive of any insurance recoveries. NJNG's estimate of these liabilities are based upon currently available facts, existing technology and presently enacted laws and regulations. Where available information is sufficient to estimate the amount of the liability, it is NJNG's policy to accrue the full amount of such estimate. Where the information is sufficient only to establish a range of probable liability and no point within the range is more likely than any other, it is NJNG's policy to accrue the lower end of the range. Since NJNG expects to recover these expenditures through the regulatory process, in accordance with SFAS 71, it has recorded a Regulatory asset corresponding to the accrued liability, which is included in Other deferred credits on the Consolidated Balance Sheet. The actual costs to be incurred by NJNG are dependent upon several factors, including final determination of remedial action, changing technologies and governmental regulations, the ultimate ability of other responsible parties to pay and any insurance recoveries. If there are changes in future regulatory positions that indicate the recovery of such regulatory asset is not probable, the related cost would be charged to income. As of March 31, 2002, $78.4 million of previously incurred and accrued remediation costs is included in Regulatory assets on the Consolidated Balance Sheet. 21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FINANCIAL RISK MANAGEMENT Commodity Market Risks Natural gas is a nationally traded commodity, and its prices are determined effectively by the New York Mercantile Exchange (NYMEX) and over-the-counter markets. The prices on the NYMEX and over-the-counter markets generally reflect the notional balance of natural gas supply and demand, but are also influenced significantly from time to time by other events. The regulated and unregulated natural gas businesses of the Company and its subsidiaries are subject to market risk due to fluctuations in the price of natural gas. To hedge against such fluctuations, the Company and its subsidiaries have entered into futures contracts, options agreements and over-the-counter swap agreements. To manage these instruments, the Company has well-defined risk management policies and procedures, which include daily monitoring of volumetric limits and monetary guidelines. The Company's natural gas businesses are conducted through three of its operating subsidiaries. First, NJNG is a regulated utility whose recovery of gas costs is protected by the LGA, which utilizes futures, options and swaps to hedge against price fluctuations. Second, using futures and swaps, Energy Services hedges purchases and sales of storage gas and transactions with wholesale customers. Finally, NJR Energy has entered into several swap transactions to hedge an 18-year fixed-price contract to sell approximately 20.9 Bcf of natural gas (Gas Sale Contract) to a gas marketing company. NJR Energy has hedged both its price and physical delivery risks associated with the Gas Sale Contract. To hedge its price risk, NJR Energy entered into two swap agreements effective November 1995. Under the terms of these swap agreements, NJR Energy will pay to its swap counterparties the identical fixed price it receives from the gas marketing company in exchange for the payment by such swap counterparties of a floating price based on an index price plus a spread per Mmbtu for the total volumes under the Gas Sale Contract. In order to hedge its physical delivery risk, NJR Energy entered into a purchase contract with a second gas marketing company for the identical volumes that it is obligated to sell under the Gas Sale Contract, under which it pays the identical floating price it receives under the swap agreements mentioned above. The following table reflects the changes in the fair market value of commodity derivatives from September 30, 2001 to March 31, 2002.
Balance Increase Balance September 30, (decrease) in Fair Amounts March 31, 2001 Market Value Settled 2002 - -------------------------------------------------------------------------------- (Thousands) NJNG $(20,978) $ (1,795) $(27,296) $ 4,523 Energy Services 15,355 (12,523) 31,571 (28,739) NJR Energy (343) 2,451 (786) 2,894 -------- -------- -------- -------- Total $ (5,966) $(11,867) $ 3,489 $(21,322) ======== ======== ======== ========
22 There were no contracts originated and valued at fair market value and no changes in methods of valuations during the six months ended March 31, 2002. The following is a summary of fair market value of commodity derivatives at March 31, 2002 by method of valuation and by maturity.
Current Next Fiscal Next Three In excess of Total Fiscal Year Year Fiscal Years 5 years Fair Value ------------------------------------------------------------------------ (Thousands) Price based on NYMEX $(4,802) $(23,178) $(5,011) $ 220 $(32,771) Price based on over-the-counter published quotations $ 472 $ 3,778 $ 5,761 $ 730 $ 10,742 Price based upon models $ 100 $ 188 $ 186 $ 232 $ 706
The following is a summary of commodity derivatives by type as of March 31, 2002:
Amounts included in Volume Price per Derivatives (Bcf) (Mmbtu) (Thousands) - -------------------------------------------------------------------------------- NJNG Futures 0.5 $2.48 - 3.155 $529 Swaps 38.8 $ (1,472) Options 1.3 $2.00 - 4.70 $ 5,466 Energy Services Futures 2.7 $2.225 - 4.63 $(30,235) Swaps 8.6 $ 1,496 NJR Energy Swaps 21.9 $ 2,894
The Company uses a value-at-risk (VAR) model to assess the market risk of its net futures, swaps and options positions. The VAR at March 31, 2002, using the variance-covariance method with a 95 percent confidence level and a one-day holding period, was $324,000. The calculated VAR represents an estimate of the potential change in the value of the net positions. These estimates may not be indicative of actual results since actual market fluctuations may differ from forecasted fluctuations. 23 Interest Rate Risk - Long-Term Debt As of March 31, 2002, the Company (excluding NJNG) had variable rate debt of $124.5 million. According to the Company's sensitivity analysis, if interest rates were to change by 100 basis points, annual interest expense, net of tax, would change by $735,000. At March 31, 2002, NJNG had total variable-rate debt outstanding of $147 million, of which $56 million has been hedged by the purchase of a 6.5-percent interest rate cap through the year 2003. According to the Company's sensitivity analysis, NJNG's annual interest rate exposure on the $56 million, based on the difference between current average rates and the 6.5 percent interest rate cap, is limited to $1.2 million, net of tax, at March 31, 2002. If interest rates were to change by 100 basis points on the remaining $91 million of variable rate debt, NJNG's annual interest expense, net of tax, would change by $537,000 at March 31, 2002. 24 INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain of the statements contained in this report (other than the financial statements and other statements of historical fact), including, without limitation, those with respect to expected disposition of legal and regulatory proceedings, exposure under the Stagecoach agreement, a need to replace or upgrade NJNG's computer software, expected capital expenditures and external financing requirements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can also be identified by the use of forward-looking terminology such as "may," "intend," "expect," "continue," or comparable terminology and are made based upon management's expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on the Company will be those anticipated by management. The Company wishes to caution readers that the assumptions that form the basis for forward-looking statements with respect to, or that may impact earnings for, fiscal 2002 and thereafter include many factors that are beyond the Company's ability to control or estimate precisely, such as estimates of future market conditions, the behavior of other market participants and changes in interest rates. Among the factors that could cause actual results to differ materially from estimates reflected in such forward-looking statements are weather conditions and economic conditions, demographic changes in NJNG's service territory, fluctuations in energy commodity prices, energy conversion activity and other marketing efforts, the conservation efforts of NJNG's customers, the pace of deregulation of retail gas markets, competition for the acquisition of gas, the regulatory and pricing policies of federal and state regulatory agencies, changes due to legislation at the federal and state levels, the availability of Canadian reserves for export to the United States and other regulatory changes. While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with its preparation of management's discussion and analysis of results of operations and financial condition contained in its quarterly and annual reports, the Company does not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. 25 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings Information required by this Item is incorporated herein by reference to Part I, Item 1, Note 5 - Legal and Regulatory Proceedings. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10-1 Amended and Restated Natural Gas Storage Marketing and Management Agreement between NJR Energy Services Company and eCORP Marketing, LLC, dated as of January 9, 2002 (the "Marketing and Management Agreement") (Sections marked with "***" are redacted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) 10-2 Base Gas Lease Agreement between NJR Energy Services Company and Central New York Oil and Gas Company, LLC, dated as of January 9, 2002 10-3 Transportation Capacity Release Agreement between NJR Energy Services Company and eCORP Marketing, LLC, dated January 9, 2002 (Sections marked with "***" are redacted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) 10-4 Letter Agreement between NJR Energy Services Company and eCORP Marketing, LLC, dated January 9, 2002 with respect to the Marketing and Management Agreement (b) Reports on Form 8-K On January 10, January 23 and May 6, 2002 reports on Form 8-K were filed by the Company furnishing under Item 9 information disclosed pursuant to Regulation FD. 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEW JERSEY RESOURCES CORPORATION Date: May 14, 2002 /s/ Glenn C. Lockwood --------------------------- Glenn C. Lockwood Senior Vice President and Chief Financial Officer 27 EXHIBIT INDEX 10-1 Amended and Restated Natural Gas Storage Marketing and Management Agreement between NJR Energy Services Company and eCORP Marketing, LLC, dated as of January 9, 2002 (the "Marketing and Management Agreement") (Sections marked with "***" are redacted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) 10-2 Base Gas Lease Agreement between NJR Energy Services Company and Central New York Oil and Gas Company, LLC, dated as of January 9, 2002 10-3 Transportation Capacity Release Agreement between NJR Energy Services Company and eCORP Marketing, LLC, dated January 9, 2002 (Sections marked with "***" are redacted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission) 10-4 Letter Agreement between NJR Energy Services Company and eCORP Marketing, LLC, dated January 9, 2002 with respect to the Marketing and Management Agreement EX-10.1 3 y60698ex10-1.txt AMENDED AND RESTATED AGREEMENT EXHIBIT 10-1 SECTION(S) MARKED WITH "***" ARE REDACTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT THAT WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. AMENDED AND RESTATED NATURAL GAS STORAGE MARKETING AND MANAGEMENT AGREEMENT BETWEEN NJR ENERGY SERVICES COMPANY AND eCORP MARKETING, LLC AS OF JANUARY 9, 2002 TABLE OF CONTENTS
Page ---- ARTICLE 1: EFFECTIVE DATE AND TERM................................................................................2 ARTICLE 2: SCOPE OF SERVICES......................................................................................2 2.1 Scope of Services................................................................................2 2.2 Wholesale Trading................................................................................3 2.3 Guaranty.........................................................................................4 2.4 Performance of Services..........................................................................4 2.5 Long-Term Capacity Release to NJRES..............................................................4 2.6 Recall by eCORP Marketing of Released Tennessee Capacity.........................................4 ARTICLE 3: COMPENSATION...........................................................................................5 3.1 Pre-Development Phase............................................................................5 3.2 Development and Commercial Operating Phase Compensation..........................................5 3.3 System Software..................................................................................7 3.4 Status of Payments...............................................................................7 *** ARTICLE 4: AUTHORITY TO ENTER INTO NATURAL GAS SUPPLY AND TRANSPORTATION ARRANGEMENTS.............................7 ARTICLE 5: GUIDELINES.............................................................................................8 ARTICLE 6: RECORDS................................................................................................8 ARTICLE 7: CONFIDENTIAL INFORMATION...............................................................................8 7.1 Non-Disclosure...................................................................................8 7.2 Regulatory Disclosure............................................................................9 ARTICLE 8: INDEMNIFICATION/LIABILITY..............................................................................9 8.1 Indemnification..................................................................................9 8.2 Limitation of Liability.........................................................................10 8.3 Insurance.......................................................................................10 ARTICLE 9: FORCE MAJEURE.........................................................................................10 9.1 Force Majeure...................................................................................10 9.2 Performance.....................................................................................10 9.3 Continued Force Majeure.........................................................................11
i ARTICLE 10: CURTAILMENTS.........................................................................................11 ARTICLE 11: CONTRACTUAL RELATIONSHIP.............................................................................11 ARTICLE 12: BUYOUT FEE...........................................................................................12 ARTICLE 13: BILLING AND PAYMENT..................................................................................12 13.1 Billing and Payment.............................................................................12 13.2 Information.....................................................................................13 ARTICLE 14: eCORP MARKETING PUT OPTION...........................................................................13 14.1 Gross Revenue Projection........................................................................13 14.2 Put Option......................................................................................14 14.3 Limitations.....................................................................................15 14.4 Termination of Put Option.......................................................................15 14.5 Conditions Precedent............................................................................15 ARTICLE 15: DEFAULT..............................................................................................16 15.1 Default.........................................................................................16 15.2 eCORP Marketing Default Event...................................................................16 15.3 NJRES Default Event.............................................................................17 ARTICLE 16: PUBLICITY............................................................................................18 16.1 Releases........................................................................................18 16.2 Articles........................................................................................18 ARTICLE 17: DISPUTE RESOLUTION...................................................................................18 17.1 Disputes........................................................................................18 17.2 Litigation......................................................................................18 17.3 Waiver of Trial by Jury.........................................................................18 ARTICLE 18: GENERAL..............................................................................................19 18.1 Obligations of the Parties......................................................................19 18.2 Notices.........................................................................................19 18.3 Binding Effect..................................................................................19 18.4 Entire Agreement................................................................................19 18.5 Amendment.......................................................................................19 18.6 Assignment......................................................................................20 18.7 Survival........................................................................................20 18.8 Governing Law...................................................................................20 18.9 Regulatory Matters..............................................................................20 18.10 Jurisdiction....................................................................................20
ii EXHIBITS Exhibit A - Risk Management Procedures Exhibit B-1 - Put Option monthly prices - first year Exhibit B-2 - Put Option monthly prices - subsequent years Exhibit B-3 - Adjusted Put Option monthly prices - subsequent years Exhibit B-4 - Adjusted Put Option monthly prices - subsequent years Exhibit B-5 - Adjustment to Put Option monthly prices - subsequent years Exhibit B-6 - Adjustment to Put Option monthly prices - first year Exhibit C - Form of Guaranty Exhibit D - Form of Notice of Agreements for Revenue Pool Assessment Exhibit E - Calculation of Net Amount as to Wholesale Trading Transactions LOCATIONS OF DEFINITIONS Acceptable Credits Section 2.2(c) Agreement Opening Paragraph Amendment Recitals Buyout Fee Article 12 Buyout Right Article 12 Capacity Release Agreement Recitals CNYOG Recitals Controlled Transportation Capacity Risk Management Procedures Debtor Relief Laws Section 15.2(b) Development Phase Section 3.2(a) Direct Transactions Risk Management Procedures eCORP Holding Recitals eCORP Marketing Opening Paragraph eCORP Marketing Default Event Section 15.2 Expert Section 17.4 First Valuation Period Section 14.2(a) Force Majeure Section 9.1 LIBOR Section 2.2(c) MOSI Section 3.3 NJRC Section 2.3 NJRC Guaranty Section 2.3 NJRES Opening Paragraph NJRES Default Event Section 15.3 Operating Phase Section 3.2(a) Original Agreement Recitals Permitted Transactions Risk Management Procedures Procedures Risk Management Procedures iii Pre-Development Phase Section 3.1 Proposed Second Amendment Recitals Put Option Section 14.2 Released Tennessee Capacity Recitals Revenue Pool Section 3.2(d) Revenue Sharing Incentive Payments Section 3.2(d) Risk Management Procedures Article 5 Sale Event Article 1 Senior Depositary Agreement Section 2.7 Senior Lenders Section 14.2(c) Senior Loan Agreement Section 14.2(c) Services Section 2.1 Stagecoach Project Recitals Stagecoach Holding Article 1 Storage Capacity Recitals Tennessee Recitals Valuation Period Section 3.2(d) West LB Section 2.7 Wholesale Trading Transactions Risk Management Procedures iv AMENDED AND RESTATED NATURAL GAS STORAGE MARKETING AND MANAGEMENT AGREEMENT This AMENDED AND RESTATED NATURAL GAS STORAGE MARKETING AND MANAGEMENT AGREEMENT (this "Agreement"), dated as of January 9, 2002, is by and between NJR ENERGY SERVICES COMPANY, a New Jersey corporation ("NJRES"), and eCORP MARKETING, LLC, a Delaware limited liability company and successor by merger to eCORP MARKETING, LLC, a Nevada limited liability company ("eCORP Marketing"). WITNESSETH WHEREAS, on October 11, 1998, NJRES and eCORP Holding, LLC a/k/a eCORP, LLC ("eCORP Holding") entered into that certain Natural Gas Storage Marketing and Management Agreement (the "Original Agreement") concerning the development and marketing of the Stagecoach Natural Gas Storage Project located in Tioga County, New York (the "Stagecoach Project") that is owned and operated by Central New York Oil and Gas Company, LLC ("CNYOG"); WHEREAS, on July 10, 2000, NJRES, eCORP Holding and eCORP Marketing entered into that certain Restatement and Amendment to Natural Gas Storage Marketing and Management Agreement (the "Amendment") whereby eCORP Marketing was substituted for eCORP as a party to the Original Agreement and certain amendments were made to the Original Agreement; WHEREAS, NJRES and eCORP Marketing have discussed, but never entered into, a proposed Put Option and Second Amendment to Natural Gas Storage Marketing and Management Agreement (the "Proposed Second Amendment"); WHEREAS, eCORP Marketing holds all of the firm storage capacity in the Stagecoach Project (the "Storage Capacity"); WHEREAS, eCORP Marketing wishes to develop and implement a comprehensive marketing plan for the Storage Capacity it holds in Stagecoach Project, including but not limited to establishing the economic feasibility of the Stagecoach Project and actively marketing the Storage Capacity to customers; WHEREAS, NJRES through its key personnel has expertise in the development, marketing and management of natural gas transportation and storage assets and services; WHEREAS, eCORP Marketing and NJRES (i) have heretofore effected a long-term release to NJRES of an aggregate of 90,000 Dth per day of firm transportation services pursuant to the Gas Transportation Agreement dated June 7, 2001, between eCORP Marketing and Tennessee Gas Pipeline Company ("Tennessee"; such services being hereinafter referred to as the "Released Tennessee Capacity"), and (ii) contemporaneously herewith, are entering into a Transportation Capacity Release Agreement (the "Capacity Release Agreement") providing for the re-release of the Released Tennessee Capacity to eCORP Marketing on the terms and conditions set forth therein; and WHEREAS, eCORP Marketing and NJRES wish to amend and restate the Original Agreement to incorporate the provisions and amendments contained in the Amendment and the provisions and amendments contemplated by the Proposed Second Amendment; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereby agree as follows: ARTICLE 1: EFFECTIVE DATE AND TERM This Agreement shall be effective as of October 11, 1998, and shall continue in force and effect until the first to occur of (i) termination in accordance with Article 12 or 15 below, (ii) the occurrence of a Sale Event (as hereinafter defined), or (iii) March 31, 2012. As used in this Agreement, the term "Sale Event" shall mean (x) liquidation, dissolution, or winding-up of the existence or business of eCORP Marketing and/or CNYOG, (y) closing of a sale of Stagecoach Holding, LLC ("Stagecoach Holding") or its business, whether structured as a merger or consolidation of Stagecoach Holding and/or any of eCORP Marketing or CNYOG with or into any other entity, sale of all or substantially all assets or equity interests of Stagecoach Holding, eCORP Marketing and/or CNYOG, or otherwise, or (z) closing of a public offering of securities of Stagecoach Holding or any of its subsidiaries (including eCORP Marketing or CNYOG) registered pursuant to the Securities Act of 1933, as amended. ARTICLE 2: SCOPE OF SERVICES 2.1 Scope of Services. NJRES will assist eCORP Marketing in the development and implementation of a comprehensive marketing plan for the Stagecoach Project, assist in negotiating applicable agreements, and actively manage and administratively monitor all natural gas storage and related transportation services to be provided to eCORP Marketing's customers in connection with the Stagecoach Project by providing the following (the "Services") in accordance with applicable law and prudent industry practice: (a) assisting eCORP Marketing in the performance of due diligence to establish the economic feasibility of the Stagecoach Project; (b) assisting in the development of a marketing plan for the Stagecoach Project; (c) actively marketing the Storage Capacity and related services to customers under contract terms and policies that conform to the Risk Management Procedures referenced in Article 5 below in an attempt to maximize revenues from the release of Storage Capacity and related services; (d) implementing and operating an accounting and tracking system for billing purposes with respect to the Storage Capacity and related services, sending invoices to storage customers and remitting corresponding customer payments and 2 associated revenues directly to eCORP Marketing pursuant to Section 2.7, and providing monthly written accounts receivable and accounts payable reports to eCORP Marketing; (e) providing assistance to eCORP Marketing in establishing an administrative back room capability sufficient to enable eCORP Marketing to monitor the marketing and trading activities performed by NJRES under this Agreement on eCORP Marketing's behalf; (f) using NJRES's relationships with the interstate natural gas pipeline companies that interconnect directly with the Stagecoach Facility to negotiate appropriate interconnection and related transportation arrangements with such pipelines, or to make such other arrangements as may be required to support the regulatory approval and successful marketing of the Stagecoach Facility; and (g) obtaining and maintaining all consents, licenses, approvals, registrations, permits or other authorizations required by applicable law to be held by NJRES for the performance of its obligations under this Agreement and providing reasonable support and cooperation to eCORP Marketing in its procurement of all consents, licenses, approvals, registrations, permits or other authorizations required by applicable law to be held by it. 2.2 Wholesale Trading. The Services to be provided to eCORP Marketing by NJRES shall also include the Wholesale Trading Transactions for the Stagecoach Project that will provide for the sale, use or trading of Storage Capacity and/or Controlled Transportation Capacity that is released or otherwise made available by eCORP Marketing. eCORP Marketing will, subject to applicable regulations, release Storage Capacity and Controlled Transportation Capacity to the extent required to support Wholesale Trading Transactions as requested by NJRES. Interest will be charged by NJRES to eCORP Marketing on transactions that utilize NJRES' credit lines. Interest will be computed monthly using the *** on the balance due from transactions with counterparties related to activities of the Stagecoach Project for prior and current month sales, net of prior month purchases for those counterparties with whom there are netting agreements and net of current month purchases. Interest at the same rate will be charged monthly on the margins required to be placed with financial counterparties to support derivative transactions. Since credit risk is solely for the account of eCORP Marketing as long as sales are made with Acceptable Credits (as such term is defined in the Risk Management Procedures), NJRES will provide assistance in determining a reasonable allowance for bad debts for eCORP Marketing. As used in this Agreement, the term "LIBOR" means, with respect to each day during the applicable period, the rate per annum equal to the rate determined by reference to Page 3750 (or such other page as may replace that page) on the Dow Jones Telerate (British Lenders Association Settlement Rate) as of 11:00 a.m., London, England time two business days prior to the beginning of such period, for delivery on the first day of such period for the number of days comprised therein and in an amount comparable to the amount of the applicable obligation of eCORP Marketing. 3 2.3 Guaranty. NJRES shall deliver at the closing of the financing referred to in Section 14.5(a) below a guaranty in favor of eCORP Marketing of NJRES's obligations hereunder by New Jersey Resources Corporation ("NJRC") substantially in the form of Exhibit C (the "NJRC Guaranty"). The failure by NJRES to deliver or maintain the NJRC Guaranty shall constitute a default of this Agreement as provided in Section 15.3. 2.4 Performance of Services. eCORP Marketing acknowledges that NJRES is engaged, and will continue to be engaged, in the region of the Stagecoach Project and elsewhere, among other things, in buying and selling storage capacity and related services for its own account and for the account of others, and in furnishing services the same as or similar to the Services being provided hereunder for its own benefit and for the benefit of others. Nothing in this Agreement shall be construed to restrict NJRES's ability to engage in the foregoing business activities or any others subject to NJRES's fiduciary obligation to eCORP Marketing as a result of and with respect to its role as agent to eCORP as described in Article 4. NJRES shall act in good faith in its management and distribution of the various opportunities for the sale of Storage Capacity and related services on behalf of eCORP Marketing in its performance of the Services hereunder and NJRES's performance of the same or similar services for its own benefit or on behalf of affiliates or other third parties. 2.5 Long-Term Capacity Release to NJRES. At such time as the Released Tennessee Capacity is deemed to be commercially operational (currently projected for January 15, 2002), eCORP Marketing and NJRES shall take all such actions as may be required to effectuate on Tennessee's electronic bulletin board the conversion of the long-term release to NJRES of the Released Tennessee Capacity that has heretofore been effected into a long-term release to NJRES of the Released Tennessee Capacity at a monthly reservation rate of $3.58 per Dth, which release shall be (i) for a term coterminous with the term of the Gas Transportation Agreement dated June 7, 2001 between eCORP Marketing and Tennessee (the "GTA"), including any extensions of such term, and all rights to extend the term of the GTA shall be exercisable by eCORP Marketing only at the direction of and with the prior written consent of NJRES, and (ii) recallable by eCORP Marketing on the terms specified in Section 2.6 below. NJRES agrees to satisfy and perform all of shipper's obligations (including without limitation payment obligations) under the replacement shipper firm service agreement as well as Tennessee's applicable FERC Gas Tariff with respect to such released capacity. *** NJRES agrees to and does hereby indemnify and hold harmless eCORP Marketing and its successors, assigns, officers, directors, agent and employees from and against any and all losses, damages, liabilities, injuries, costs and expenses (including without limitation attorneys' fees) due to or arising out of any breach of its obligations pursuant to this Section 2.5. eCORP Marketing agrees to and does hereby indemnify and hold harmless NJRES and its successors, assigns, officers, directors, agent and employees from and against any and all losses, damages, liabilities, injuries, costs and expenses (including without limitation attorneys' fees) due to or arising out of any breach of its obligations pursuant to this Section 2.5. 2.6 Recall by eCORP Marketing of Released Tennessee Capacity. Upon any termination of this Agreement prior to March 31, 2012, eCORP Marketing shall have the right to recall the Released Tennessee Capacity upon the provision to NJRES of written notice given prior to the effective date of such termination. eCORP Marketing's recall of the Released 4 Tennessee Capacity shall be effective immediately upon expiration of the notice period specified in the preceding sentence, or at such other time as may be mutually agreed to by the parties and consistent with Tennessee's applicable FERC Gas Tariff then in effect; provided, however, that the effective date of the recall with respect to any portion of the Released Tennessee Capacity that is subject to a Controlled Transportation Capacity transaction shall be the day following the termination date of such transaction. 2.7 Customer Payments. Any and all payments by customers with respect to Direct Transactions shall be paid by customers directly to CNYOG (in accordance with the Depositary and Trust Agreement among CNYOG, eCORP Marketing, Westdeutsche Landesbank Girozentrale, New York Branch ("West LB") and Wilmington Trust Company, dated as of January 9, 2002 (the "Senior Depositary Agreement")) except for payments as to Controlled Transportation Capacity which are subject to the payment mechanisms set forth in the FERC Gas Tariff of Tennessee. Any and all payments by customers with respect to Wholesale Trading Transactions shall be paid by customers to NJRES and NJRES shall account for and remit such payments to eCORP Marketing (in accordance with the terms of the Senior Depositary Agreement) within three business days of receipt to the extent net amounts are owed to eCORP Marketing as determined pursuant to Exhibit E. NJRES shall not be entitled to deduct any other amounts, including without limitation, payments due and owing to NJRES hereunder from the revenues it receives on behalf of eCORP Marketing with respect to Wholesale Trading Transactions. ARTICLE 3: COMPENSATION 3.1 Pre-Development Phase. The "Pre-Development Phase" of the Stagecoach Project is that period beginning with the initial site selection and/or the execution of an initial acquisition or storage development agreement, and continuing until the Stagecoach Project has been developed sufficiently to enable the filing of an application at the FERC seeking approval to construct or enhance storage. The Pre-Development Phase shall be deemed completed as of the date of the filing of such application. During the Pre-Development Phase, the services to be provided by NJRES shall be regarded as a part of NJRES' on-going business development. Therefore, NJRES will not be compensated for any expenses it incurs in connection with providing Pre-Development Phase services unless eCORP Marketing shall have agreed in writing to compensate NJRES for certain extraordinary expenses in advance of NJRES' incurring such expenses. 3.2 Development and Commercial Operating Phase Compensation. (a) Definitions and Estimated Service Values. Following the completion of the Pre-Development Phase upon the filing by eCORP (or its affiliates) with FERC of an application for certificate of public convenience and necessity, the "Development Phase" will begin. Once the construction of the Stagecoach Project is completed as evidenced by written certification from CNYOG that the Stagecoach Project is ready for operation, the "Operating Phase" will begin. During both the Development Phase and the Operating Phase, the parties hereto agree that NJRES 5 shall be entitled to compensation and expense reimbursement as provided in subsections (b), (c) and (d) below. (b) Expense Reimbursement. During the term of this Agreement eCORP Marketing will be obligated to reimburse NJRES for its reasonable and documented out-of-pocket expenses incurred in connection with its storage marketing activities. Such expenses will include, without limitation, airfare, hotels, telephone, car rentals, postage, overnight delivery services and printing. Absent the prior written consent of eCORP Marketing, eCORP Marketing's obligation to reimburse such expenses shall be limited to *** per calendar year. The parties hereto agree that NJRES may incur software expenses during the Development Phase and Operating Phase and that such expenses may be recovered by NJRES from eCORP Marketing by mutual agreement between NJRES and eCORP Marketing. (c) Software/Backroom Tool Expenses Fee. Commencing August 1, 2001 and continuing for the remaining term of this Agreement, eCORP Marketing will pay NJRES *** per month for providing Services hereunder, including software and backroom tools necessary to provide the Services. (d) Revenue Sharing Incentive Payments. In addition to the compensation set forth above, NJRES will receive incentive payments ("Revenue Sharing Incentive Payments") based on a "Revenue Pool" calculated for each Valuation Period (as hereinafter defined) as follows: (i) all revenues of eCORP Marketing generated through Permitted Transactions, (ii) revenue generated from transactions completed by CNYOG pursuant to its FERC Gas Tariff (except revenues paid to CNYOG pursuant to the storage services agreement contemplated by Precedent Agreement with eCORP Marketing, dated as of November 17, 1999), and (iii) revenue provided by NJRES pursuant to the provisions of Article 14 hereof, provided that each such transaction is in compliance with the Risk Management Procedures adopted pursuant to Article 5 hereof; less (iv) transportation/storage variable fees (but not demand fees) with respect to Controlled Transportation Capacity and transportation/storage variable fees and demand fees with respect to all other pipeline transportation capacity; and less (v) the purchase price of the natural gas commodity necessary to generate such revenues which is purchased by or on behalf of eCORP Marketing. The Revenue Sharing Incentive Payments for each Valuation Period shall be determined as follows: *** The annual period for calculating the Revenue Sharing Incentive Payments (the "Valuation Period") will be April 1 through March 31 of each year, beginning 6 with April 1, 2002. The Revenue Sharing Incentive Payments shall be paid to NJRES no later than the May 25th following the last day of each applicable Valuation Period; provided, that, in the event any accrued revenue included in the applicable Revenue Pool has not been collected as of such date, NJRES shall defer its right to receive that portion of the Revenue Sharing Incentive Payment attributable thereto until such time as such accrued but uncollected revenue is collected. Any amounts not paid by the date due shall bear interest ***. In the event that in any Valuation Period, NJRES is not paid a minimum of *** in Revenue Sharing Incentive Payments, the shortfall will bear interest at a rate equal to ***. This shortfall and interest must be paid in the following year in addition to the current year's incentive payment. In the event a Sale Event occurs, this shortfall and interest will be paid upon the closing of such sale as an accrued expense. (e) eCORP Marketing shall pay to NJRES a fee of *** per month. Any amounts not paid by the 25th day of the month shall bear interest ***. 3.3 System Software. For system infrastructure eCORP Marketing will pay NJRES *** on September 1, 2000 and receive the Multi-Option Systems, Inc. ("MOSI") gas management system source code and any data that may be contained in such gas management system on behalf of eCORP Marketing. NJRES will provide a current copy of the source code and data each month thereafter by the tenth (10th) day of the month. The MOSI source code and associated data furnished by NJRES to eCORP Marketing may be used only by eCORP Marketing and its affiliates. eCORP Marketing may not sell or transfer such intellectual property to a third party without the prior written consent of NJRES. In no event shall NJRES or MOSI, developer of the software system, be liable to eCORP for any direct, indirect, special, exemplary, incidental, punitive or consequential damages arising from the performance or nonperformance of the MOSI gas management system, including, but not limited to, lost profits, lost data, loss of the gas management system or any associated equipment or software, or cost of substitute facilities, equipment, software or services. NJRES shall have no obligation to provide any future upgrades or support of any kind with respect to the MOSI gas management system. 3.4 Status of Payments. As of the date hereof, NJRES and eCORP Marketing stipulate and agree that as of the date of this Agreement there are no payments due and owing to NJRES pursuant to this Agreement, except with respect to payments required by Section 3.2(c) in the amount of ***. *** ARTICLE 4: AUTHORITY TO ENTER INTO NATURAL GAS SUPPLY AND TRANSPORTATION ARRANGEMENTS Subject to the conditions and limitations set forth in the Risk Management Procedures, in order to conduct Wholesale Trading Transactions and the business of purchasing gas and/or arranging for and scheduling the transportation of natural gas for or on behalf of eCORP 7 Marketing or designated third-parties in connection with the services to be provided by NJRES under this Agreement, NJRES may be required from time-to-time to obligate eCORP Marketing to make certain payments for the supply of natural gas and related transportation services, or to otherwise bind eCORP. eCORP hereby gives NJRES, and NJRES hereby accepts, authority to act as eCORP's agent for the limited purpose of entering into Permitted Transactions (as such term is defined in the Risk Management Procedures) without the prior approval of eCORP Marketing, and committing eCORP Marketing accordingly; provided, however, that NJRES shall exercise such authority strictly in accordance with the Risk Management Procedures adopted in accordance with Article 5 below. eCORP Marketing will not be liable for or have any responsibility with respect to any transactions or commitments entered into by NJRES on behalf of eCORP Marketing in contravention of such Risk Management Procedures. In such event, NJRES agrees to indemnify, defend and hold eCORP Marketing harmless against all claims, actions, loss, damage, liabilities and expenses (including attorney's fees) arising from or as a result of NJRES's violation of said Risk Management Procedures; provided, however, that NJRES shall not be liable to eCORP Marketing for any penalties or costs imposed upon or losses incurred by eCORP Marketing as a result of any transaction wherein NJRES acted in good faith and within the Risk Management Procedures in all material respects with respect to such transaction. ARTICLE 5: GUIDELINES NJRES and eCORP have mutually agreed upon certain guidelines with respect to the sale, use and trading of the Storage Capacity and Controlled Transportation Capacity and related services and the management of risks associated therewith which are set forth in Exhibit A (the "Risk Management Procedures"). In connection with its provision of Services to eCORP Marketing under this Agreement, NJRES will conduct and account for all business transactions related to the Storage Capacity pursuant to the Risk Management Procedures. ARTICLE 6: RECORDS NJRES shall maintain and make available to eCORP Marketing complete and accurate accounts and records of all transactions conducted by it on behalf of eCORP Marketing. Such records shall include, but not be limited to, copies of all invoices, receipts, correspondence and reports relating to the Services or any other service provided by NJRES hereunder. All such records shall be maintained either in hard copy or such other acceptable medium by NJRES for a minimum period of five (5) years from the date of the respective transaction. Upon reasonable notice and during regular business hours, NJRES shall provide unrestricted access to all such records to eCORP Marketing or anyone authorized by eCORP Marketing including a representative of the Senior Lenders (as hereinafter defined). ARTICLE 7: CONFIDENTIAL INFORMATION 7.1 Non-Disclosure. (a) Neither party hereto (a "Receiving Party") shall permit any information which it receives, which is specifically and conspicuously identified by the other party (the 8 "Disclosing Party") as proprietary and confidential (by stamp, legend or otherwise) ("Confidential Information"), to be disclosed or communicated to any other entity which is not a party to this Agreement, without (i) the prior written consent of the Disclosing Party claiming the information as proprietary, or (ii) fulfilling such conditions as such party may describe; provided, however the Receiving Party may disclose such information to its counsel, accountants or other representative or to a potential lender, in which case the Receiving Party shall cause such person not to disclose the Confidential Information except to the extent permitted herein. (b) The restrictions set forth in Section 7.1(a) hereof shall apply to this Agreement and the terms and conditions thereof but shall not apply to information which (i) is contained in a publicly disclosed printed publication bearing a date prior to the date of this Agreement; (ii) becomes publicly known otherwise than through a wrongful act of the receiving party; (iii) is in the possession of the receiving party prior to receipt from the disclosing party or is independently developed by the receiving party, provided that the person or persons developing same have not had access to such information; (iv) is rightfully obtained without restriction by the receiving party from a third party who has the right to make such disclosure; or (v) is released to anyone without restriction by the disclosing party. The receiving party shall not be liable for any inadvertent disclosures made in spite of using the same standard of care which it uses to protect its own proprietary or confidential information, provided that upon discovery of such disclosure or use, it shall promptly notify the disclosing party and shall immediately use its best efforts to prevent any further inadvertent disclosure or use. 7.2 Regulatory Disclosure. If the receiving party is required by a federal, state or local governmental agency or a court of competent jurisdiction to disclose information which includes the disclosing party's confidential information, the receiving party shall notify the disclosing party of such required disclosure as soon as practicable prior to the time such disclosure is to be made in order to allow the disclosing party adequate time to prevent or restrict the disclosure of its confidential information. Except for the notification required by the preceding sentence, nothing herein shall require the receiving party to participate in or cooperate with the disclosing party to prevent disclosure. ARTICLE 8: INDEMNIFICATION/LIABILITY 8.1 Indemnification. NJRES hereby agrees to indemnify and defend eCORP Marketing, its officers, directors, partners, agents, and employees against all claims, loss, damage, expense and liability to third persons (including NJRES's own employees) arising out of, resulting from, based upon, or proximately caused by the negligent acts or willful misconduct of NJRES or anyone acting under its direction or control or in its behalf. Except as otherwise provided in Article 4 hereof, eCORP Marketing hereby agrees to indemnify and defend NJRES, its affiliates, officers, directors, partners, agents, and employees against all claims, loss, damage, expense and liability to third persons (including eCORP Marketing's own employees) incurred 9 without NJRES's negligence or willful misconduct arising out of or in connection with the Stagecoach Project and/or the performance of NJRES's duties hereunder. Each party hereto shall furnish the other party with written notification (as soon as possible, but in no event later than ten (10) days prior to the time any response is required by law) after such party becomes aware of any event or circumstances, or the threat thereof, which might give rise to such indemnification. At the indemnified party's request, the indemnifying party shall defend any suit asserting a claim covered by this indemnity and shall pay all costs and expenses (including the cost of investigation and attorney's fees and expenses) that may be incurred in enforcing this indemnity. The indemnified party may, at its own expense, retain separate counsel and participate in the defense of any such suit or action. 8.2 Limitation of Liability. In no event, including any event for which either party hereto has agreed to indemnify the other party, shall either party, or its affiliates, officers, agents, directors, partners or employees be liable to the other party, its affiliates, agents, officers, directors, partners or employees for incidental, special, indirect, punitive or consequential damages of an economic (e.g., lost profits) nature connected with or resulting from performance or non-performance of this Agreement. The indemnification obligations set forth in this Agreement shall survive the termination of this Agreement. 8.3 Insurance. eCORP Marketing shall at all times maintain public liability insurance covering the Stagecoach Project and the activities contemplated by this Agreement which shall name NJRES as an additional insured. Such insurance shall be obtained from insurers reasonably acceptable to NJRES and shall provide for liability coverage in an amount appropriate for an undertaking of this nature, which amount shall be sufficient to prudently cover the liability risks of the Stagecoach Project and the activities contemplated by this Agreement, and which amount shall be mutually agreed to by the parties prior to the commencement of the Development Stage. Upon request of NJRES, eCORP Marketing shall provide to NJRES certificates of insurance evidencing such insurance. ARTICLE 9: FORCE MAJEURE 9.1 Force Majeure. The term "Force Majeure" as used herein means occurrences beyond the reasonable control of and without the fault or negligence of the party claiming Force Majeure, including but not limited to acts of God, strike or other labor dispute, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, sabotage, acts of public enemy, change in law or applicable regulation subsequent to the date hereof and action or inaction by any federal, state or local legislative, executive, administrative or judicial agency or body which, in any of the foregoing cases, by exercise of due foresight such party could not reasonably have been expected to avoid, and which, by exercise of due diligence, it is unable to overcome. 9.2 Performance. Except for the obligations of either party to make any required payments including, without limitation, obligations under this Agreement and payment for services previously performed, the Parties shall be excused from performing their respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that they are unable to so perform or are prevented from performing by a Force Majeure, provided that: 10 (a) the non-performing party, as promptly as practicable after the occurrence of the Force Majeure, but in no event later than seven (7) days thereafter, gives the other party written notice describing the particulars of the occurrence; (b) the suspension of performance is of no greater scope and of no longer duration than is reasonably required by the Force Majeure; (c) the non-performing party uses its best efforts to remedy its inability to perform; and (d) as soon as the non-performing party is able to resume performance of its obligations excused as a result of the occurrence, it shall give prompt written notification thereof to the other party. 9.3 Continued Force Majeure. (a) Either party may terminate this Agreement upon ten (10) days written notice if an event of Force Majeure hereunder prevents either party from substantial performance of its respective obligations hereunder for a period of six (6) consecutive months. (b) Upon termination of this Agreement as provided for in subsection (a) above, the parties shall have no further liability or obligation to each other except for (i) any obligation arising prior to the date of such termination and (ii) payment of any and all amounts outstanding on the date the Force Majeure event occurred. ARTICLE 10: CURTAILMENTS As set forth in Section 2.2 and Article 4 hereof, NJRES may, as agent for eCORP Marketing, make arrangements for daily supplies and/or transportation of natural gas in connection with Wholesale Trading Transactions. In the event an interstate pipeline company, local distribution company, supplier of natural gas, or other third-party reduces, curtails or interrupts the supply and/or transportation of such natural gas as contracted for by NJRES in its capacity as agent for eCORP Marketing, NJRES shall reasonably attempt to alleviate such reduction, curtailment or interruption. However, in no event shall NJRES be obligated to provide eCORP Marketing with such daily supplies and/or transportation. If such reduction, curtailment or interruption cannot be alleviated through NJRES's reasonable efforts, eCORP Marketing may directly pursue its recourse and remedies against any third party responsible for said matters. ARTICLE 11: CONTRACTUAL RELATIONSHIP In performing the Services set forth herein, NJRES shall operate as and shall have the status of an independent contractor and, except as specifically set forth in Section 2.2 and Article 4 hereof or as may be agreed to by the parties, shall not act as or be an agent or employee of eCORP Marketing. The relationship between eCORP Marketing and NJRES, for purposes of 11 this Agreement, shall be that of "customer" and "independent contractor." This Agreement shall not be construed to create a partnership or joint venture relationship between the parties. ARTICLE 12: BUYOUT FEE eCORP Marketing may elect in its sole discretion to terminate this Agreement at any time during the term hereof by exercising a buyout right (the "Buyout Right") for a fee in the amount of *** (the "Buyout Fee"); provided, that the Buyout Fee shall be increased by the additional amount set forth below in the event eCORP Marketing exercises its recall rights under Section 2.6 above: *** eCORP Marketing may exercise the Buyout Right by providing written notice of termination to NJRES at least ninety (90) days prior to the end of any Valuation Period. Such termination shall be effective as of the end of such Valuation Period in which the notice is given. The Buyout Fee must be paid by eCORP Marketing to NJRES on or prior to the last day of such Valuation Period. Should eCORP Marketing exercise its Buyout Right and terminate this Agreement, NJRES will be entitled to receive all of its Revenue Sharing Incentive Payments and other compensation provided for in Article 3 which is earned during the Valuation Period in progress at the time the Buyout Right notice is given and all prior Valuation Periods. Upon the effectiveness of any termination pursuant to the Buyout Right, all of the rights and obligations of the parties hereunder will terminate, including pursuant to the provisions of Article 14 hereof, except as otherwise provided herein. In addition to the foregoing, the Buyout Fee shall be payable to NJRES upon the closing of any Sale Event. Upon such closing, NJRES will be entitled to receive all of its Revenue Sharing Incentive Payments and other compensation provided for in Article 3 which is earned during the Valuation Period in progress at the time the Buyout Right notice is given through the end of such Valuation Period and all prior Valuation Periods. Upon such closing, all of the rights and obligations of the parties hereunder will terminate, including pursuant to the provisions of Article 14 hereof, except as otherwise provided herein. The Buyout Fee shall be due and payable upon termination of this Agreement; provided, however, that it shall be reduced by *** in the event of termination under Section 15.3 of this Agreement. ARTICLE 13: BILLING AND PAYMENT 13.1 Billing and Payment. (a) NJRES Invoice. As soon as practicable after the end of each month, NJRES shall invoice eCORP Marketing for all compensation due for the preceding month under Section 2.2 and Article 3 of this Agreement. Such monthly invoice shall set 12 forth the applicable monthly fixed compensation charge in accordance with Sections 3.2(c) hereof and any amounts due to NJRES pursuant to Sections 2.2 and 3.2(b). NJRES shall invoice eCORP Marketing separately as necessary with respect to compensation due to NJRES, if any, pursuant to Sections 3.2(d). (b) Payment. Payment of any invoice shall be made within ten (10) days of receipt thereof except in the event of a good faith dispute which shall be resolved pursuant to Article 17. Payment may be made by wire transfer. Except as otherwise provided herein, a late payment penalty shall accrue on any amounts not timely paid by eCORP Marketing at the rate of one percent (1%) per month from the date due until the date paid. 13.2 Information. During the term of this Agreement and for a period of five (5) years thereafter, each party shall have the right, during business hours and upon reasonable notice, to examine the books, records and charts of the other party to the extent necessary to verify the accuracy of any statement, charge or computation made pursuant to this Agreement. If any such examination or other review or information reveals any inaccuracy in any prior invoice, necessary adjustments will be made, provided that no adjustments shall be made more than two (2) years after any such invoice was received. In addition, a party may set-off against future payments, any payments such party is entitled to receive as a result of adjustments to prior invoices. ARTICLE 14: eCORP MARKETING PUT OPTION 14.1 Gross Revenue Projection. On the last day of each calendar month and, in any event, no later than at least sixty (60) business days prior to the Expected Commercial Operation Date with respect to the Valuation Period beginning April 1, 2002, and by October 1 of each year as to the Valuation Period commencing on the following April 1 and as to all subsequent Valuation Periods, NJRES shall provide notice to eCORP Marketing of the value of all Direct Transactions and Wholesale Transactions (as defined in the Risk Management Procedures) then in effect which are to be taken into account in connection with the assessment of the projected Revenue Pool for the applicable Valuation Period. Such notice shall be in the format of Exhibit D ("Proposed Statement") attached hereto. Within five (5) business days of receipt of the Proposed Statement, eCORP Marketing shall provide, in writing, any comments with respect to accuracy of the Proposed Statement or confirm, in writing, that the Proposed Statement is acceptable. If agreed upon, the Proposed Statement will become the final statement of the projected Revenue Pool (the "Final Statement") for the purposes of this Article 14. If the parties are unable to agree on the Final Statement by such date, such dispute shall be resolved pursuant to Section 17.4. For purposes of this Section 14.1, there shall be included in the calculation of the projected Revenue Pool only those Wholesale Trading Transactions at the time of calculation the value of which are fixed and determined through the date of their liquidation and that will close in the applicable Valuation Period. For the purposes of this Section 14.1, the term "Expected Commercial Operation Date" shall mean March 31, 2002 or such later date on which commercial operations of the Stagecoach Project is expected to occur, as designated by eCORP Marketing in a written notice to NJRES. eCORP Marketing agrees in order for the Put Option to be effective for the following calendar month, eCORP Marketing must exercise such option no 13 later than the 23rd day of the previous month. In no event will the Put Option be exercised in arrears. 14.2 Put Option. Each right of eCORP Marketing to cause NJRES to purchase services under this Section 14.2 is referred to in this Agreement as a "Put Option." (a) If the amount set forth in the Final Statement for the Valuation Period beginning April 1, 2002 and ending March 31, 2003 (the "First Valuation Period"), is less than $18,000,000, as determined pursuant to Section 14.1 hereof, eCORP Marketing shall have the one-time right, exercisable on or before February 28, 2003, to cause NJRES to purchase for NJRES's own account and benefit available firm storage and transportation services at monthly prices defined in Exhibit B-1 so as to cause the amount of the projected Revenue Pool for such period to reach $18,000,000; provided, that, if eCORP Marketing does not exercise such Put Option in writing by May 30, 2002, (i) the monthly unit prices reflected in Exhibit B-2 will used in lieu of those set forth in Exhibit B-1 and (ii) such Exhibit B-2 monthly unit prices will be adjusted, only for the First Valuation Period, as provided in Exhibit B-6. If eCORP Marketing does not exercise such Put Option in writing by February 28, 2003, such Put Option shall be deemed waived only for the First Valuation Period. (b) If the amount set forth in the Final Statement for any Valuation Period after the First Valuation Period is less than $22,000,000, as determined pursuant to Section 14.1 hereof, eCORP Marketing shall have the right to cause NJRES to purchase for NJRES's own account and benefit available firm storage and transportation services at monthly prices defined in Exhibit B-2 so as to cause the amount of the projected Revenue Pool for such period to reach $22,000,000. If eCORP Marketing does not exercise its Put Option by the preceding November 30 with respect to all subsequent Valuation Periods after the First Valuation Period, the Put Option shall be deemed waived only for the next following Valuation Period. (c) Upon the receipt by NJRES of an Actual Performance Certificate from eCORP Marketing certifying working gas capacity for the Stagecoach Project equal to or greater than 9.0 Bcf but less than 10.0 Bcf, Exhibit B-2 hereto will be replaced by Exhibit B-3 hereto on the following November 30 for the following and all subsequent Valuation Periods. Upon the receipt by NJRES of an Actual Performance Certificate from eCORP Marketing certifying working gas capacity for the Stagecoach Project equal to or greater than 10.0 Bcf but less than 11 Bcf, Exhibit B-2 or B-3 hereto (as the case may be) will be replaced by Exhibit B-4 hereto on the following November 30 for the following and all subsequent Valuation Periods. Upon the receipt by NJRES of an Actual Performance Certificate from eCORP Marketing certifying working gas capacity for the Stagecoach Project equal to or greater than 11.0 Bcf, Exhibit B-2, B-3 or B-4 hereto (as the case may be) will be replaced by Exhibit B-5 hereto on the following November 30 for the following and all subsequent Valuation Periods. As used herein, the term "Senior Loan Agreement" shall mean that certain 14 Construction and Term Loan Agreement among CNYOG, eCORP Marketing, the Senior Lenders and the Administrative Agent, dated as of January 9, 2002 and the term "Senior Lenders" shall mean the lenders thereunder. 14.3 Limitations. NJRES's obligations under this Article 14 shall not be construed as a guarantee of the amount of the Revenue Pool. In the event the Put Option is exercised with respect to a Valuation Period, NJRES shall be obligated only to purchase services at the applicable monthly prices defined in Exhibit B-1, B-2, B-3, B-4, B-5 or B-6 (as applicable) to the extent such services are reasonably available during such Valuation Period. In the event such services are not available because of a lack of storage capacity, lack of transportation services or other reasons so as to allow the Revenue Pool to reach the stated levels, the obligation of NJRES under this Article 14 shall be limited to the extent such services are available. In addition, in no event shall NJRES be required to purchase or pay for a service that is not deemed commercially operational by FERC and, in the event a service which is eligible for inclusion in the Revenue Pool is not deemed commercially operational by FERC, the obligation of NJRES under this Article 14 shall be adjusted accordingly. For purposes of Section 2(f) of the Original Sheet 100 of CYNOG's FERC Gas Tariff, eCORP Marketing shall be responsible for all base gas requirements of the Stagecoach Project with respect to the transaction to purchase services by which the Put Option is accomplished. In the event of any conflict between the provisions of this Section 14.3 and any other provisions of this Agreement, the provisions of this Section 14.3 shall control. 14.4 Termination of Put Option. Commencing on the date which is three years after the date hereof, NJRES shall have the right upon no less than one year's notice to acquire the Senior Lenders' position under eCORP Marketing's Senior Loan Agreement from such Senior Lenders by satisfying in full all of the obligations of eCORP Marketing and CNYOG to such Senior Lenders to the reasonable satisfaction of such Senior Lenders. If NJRES acquires eCORP Marketing's Senior Loan Agreement, the provisions of this Article 14 shall terminate and NJRES's position thereunder shall be subordinate to the senior subordinated debt and preferred units issued pursuant to the Securities and Note Purchase Agreement between Stagecoach Holding and AIG Highstar Capital, L.P. 14.5 Conditions Precedent. This Article 14 shall not become effective unless and until eCORP Marketing notifies NJRES in writing that: (a) Financing has been obtained by CNYOG for the completion of the construction of the Stagecoach Project so that it can be reasonably expected to become commercially operational before April 1, 2002; and (b) The Senior Lenders providing financing for the Stagecoach Project have approved this Agreement. 15 If NJRES does not receive such written notice by 5:00 PM Central Time on February 1, 2002, that both of the above conditions have been met, then this Article 14 shall be of no force or effect and the Agreement shall remain in full force and effect without this Article 14. ARTICLE 15: DEFAULT 15.1 Default. Upon the occurrence of an eCORP Marketing Default Event (as hereinafter defined) that continues beyond any applicable cure period, NJRES may, in its sole discretion and upon notice to eCORP Marketing, terminate either (a) its obligations under Article 14 hereof or (b) this Agreement. Upon the occurrence of an NJRES Default Event (as hereinafter defined) that continues beyond any applicable cure period, eCORP Marketing may, in its sole discretion and upon notice to NJRES, terminate this Agreement. The parties hereto hereby retain any and all other remedies available at law or in equity. 15.2 eCORP Marketing Default Event. As used in this Agreement, the term "eCORP Marketing Default Event" shall mean any of the following events: (a) if eCORP Marketing shall fail to comply with any provision of this Agreement or any other agreement to which NJRES and eCORP Marketing are parties, including the failure to make payments hereunder (except to the extent of a good faith dispute); provided, however, such failure to comply shall not constitute an eCORP Marketing Default Event if such failure is remedied within twenty (20) days of notice by NJRES of such failure; or (b) either of eCORP Marketing or CNYOG shall (i) execute an assignment for the benefit of its creditors, (ii) become or be adjudicated a bankrupt or insolvent, (iii) admit in writing its inability to pay its debts generally as they become due, (iv) apply for or consent to the appointment of a conservator, receiver, trustee, or liquidator of it or of all or a substantial part of its assets, (v) file a voluntary petition seeking reorganization or an arrangement with creditors, or to take advantage of or seek any other relief under any applicable liquidation, conservatorship, bankruptcy, insolvency, rearrangement, moratorium, reorganization, or similar debtor relief laws affecting the rights of creditors generally from time to time in effect ("Debtor Relief Laws"), (vi) file an answer admitting the material allegations of or consenting to, or default in, a petition filed against it in any proceeding under any Debtor Relief Laws, or (vii) institute or voluntarily be or become a party to any other judicial proceedings intended to effect a discharge of its debts, in whole or in part, or a postponement of the maturity or the collection thereof; or (c) (i) an order, judgment, or decree shall be entered by any court of competent jurisdiction approving a petition seeking reorganization of any of either eCORP Marketing or CNYOG or appointing a conservator, receiver, trustee, or liquidator of eCORP Marketing, CNYOG or Stagecoach or of all or any substantial part of any such company's assets, and such order, judgment, or decree is not permanently stayed or reversed within ninety (90) days after the entry thereof, or (ii) a petition 16 is filed against eCORP Marketing, CNYOG or Stagecoach Holding seeking reorganization, an arrangement with creditors, or any other relief under any Debtor Relief Laws, and such petition is not discharged within ninety (90) days after the filing thereof. 15.3 NJRES Default Event. As used in this Agreement, the term "NJRES Default Event" shall mean any of the following events: (a) if NJRES shall fail to comply with any provision of this Agreement or any other agreement to which NJRES and eCORP Marketing are parties, including the failure to make payments hereunder (except to the extent of a good faith dispute); provided, however, such failure to comply shall not constitute an NJRES Default Event if such failure is remedied within forty-five (45) days of notice by eCORP Marketing of such failure; or (b) either NJRES or NJRC shall (i) execute an assignment for the benefit of its creditors, (ii) become or be adjudicated a bankrupt or insolvent, (iii) admit in writing its inability to pay its debts generally as they become due, (iv) apply for or consent to the appointment of a conservator, receiver, trustee, or liquidator of it or of all or a substantial part of its assets, (v) file a voluntary petition seeking reorganization or an arrangement with creditors, or to take advantage of or seek any other relief under any Debtor Relief Laws, (vi) file an answer admitting the material allegations of or consenting to, or default in, a petition filed against it in any proceeding under any Debtor Relief Laws, or (vii) institute or voluntarily be or become a party to any other judicial proceedings intended to effect a discharge of its debts, in whole or in part, or a postponement of the maturity or the collection thereof; or (c) (i) an order, judgment, or decree shall be entered by any court of competent jurisdiction approving a petition seeking reorganization of NJRES or NJRC or appointing a conservator, receiver, trustee, or liquidator of NJRES or NJRC or of all or any substantial part of such company's assets, and such order, judgment, or decree is not permanently stayed or reversed within ninety (90) days after the entry thereof, or (ii) a petition is filed against NJRES or NJRC seeking reorganization, an arrangement with creditors, or any other relief under any Debtor Relief Laws, and such petition is not discharged within ninety (90) days after the filing thereof; or (d) (i) NJRES shall fail to deliver the NJRC Guaranty as contemplated by Section 2.3 above, (ii) a default by NJRC shall exist under the NJRC Guaranty and shall continue beyond any applicable cure period, or (iii) the NJRC Guaranty shall at any time cease to be in full force and effect or otherwise be unenforceable for any reason. 17 ARTICLE 16: PUBLICITY 16.1 Releases. No publicity releases (including news releases and advertising) relating to this Agreement shall be issued by either party without the prior written approval of the other party, except as may be required by law. 16.2 Articles. Neither party to this Agreement shall publish or release any technical paper, article, publication or announcement in connection with this Agreement, during or after the term of this Agreement, without the prior written approval of the other party. ARTICLE 17: DISPUTE RESOLUTION 17.1 Disputes. The parties shall use their best efforts to resolve any claim or dispute regarding any question of fact or law arising under this Agreement through good faith negotiations. If such dispute cannot be resolved through such good faith negotiations, the parties shall submit the dispute (except for disputes with respect to the Final Statement which shall be resolved pursuant to Section 17.4) for alternative dispute resolution in accordance with the Model Procedure for Mediation of Business Disputes as published by the CPR Institute for Dispute Resolution. 17.2 Litigation. Notwithstanding anything contained herein to the contrary, if a claim or dispute (except for disputes with respect to the Final Statement which shall be resolved pursuant to Section 17.4) hereunder is not resolved pursuant to Section 17.1 within 90 days after the giving of a notice by either party of the claim or dispute, either party may, upon giving the other party at least ten (10) days prior written notice, initiate litigation regarding such matter by submitting such matter for decision by a court of competent jurisdiction. 17.3 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NJRES AND ECORP MARKETING HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. 17.4 Disputes regarding Calculation of Projected Revenue. If the parties are unable to agree upon the Final Statement within fifteen (15) days of NJRES' issuance of the Proposed Statement, on or before such date, the parties shall mutually agree upon and appoint an expert (the "Expert") and such dispute shall be immediately referred to the Expert for resolution. The Expert shall promptly fix a time and a place in New York, New York, or another mutually acceptable location, for receiving information from the parties in connection with the dispute, make his or her sole decision only in relation to matters expressly referred to the Expert and issue a draft decision stating findings of fact, together with all necessary supporting information and documentation, to each party within twenty (20) days after the appointment of the Expert. Each party shall have five (5) days to submit to the Expert comments on the draft decision after its receipt thereof, and the Expert shall issue his or her final and binding determination in writing as soon as practicable, and in any case within thirty (30) days after the appointment of the Expert. The Expert shall have reasonable knowledge and experience with respect to gas storage facilities and the types of marketing and management services contemplated hereunder. 18 ARTICLE 18: GENERAL 18.1 Obligations of the Parties. eCORP Marketing shall promptly furnish to NJRES all information concerning eCORP Marketing and the Stagecoach Project as may be reasonably requested by NJRES in connection with NJRES's performance of the Services. eCORP Marketing shall execute documents and take all other actions reasonably requested by NJRES in connection with the performance of the Services. NJRES shall promptly furnish to eCORP Marketing all information concerning NJRES as may be reasonably requested by eCORP Marketing in connection with NJRES's performance of the Services. Each of eCORP Marketing and NJRES shall promptly notify the other of the receipt of any material correspondence or notification from any regulatory body in connection with the performance of the Services. 18.2 Notices. All notices and other communications given hereunder or in connection herewith shall be sent either (i) by registered or certified mail, return receipt requested, (ii) via a reputable nationwide overnight courier service; or (iii) via facsimile transmission, with a confirmation of receipt, in each case to the address set forth below. Any such notice, instruction or communication shall be deemed to have been delivered when received. If to eCORP Marketing: eCORP Marketing, LLC 10,000 Memorial Drive Suite 530 Houston, Texas 77024 Attention: G. S. Clifton Facsimile No. (713) 526-2363 If to NJRES: NJR Energy Services Company 1415 Wyckoff Road Wall, New Jersey 07719 Attention: Joseph P. Shields Facsimile No. (732) 919-8118 18.3 Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. 18.4 Entire Agreement. This Agreement sets for the entire understanding and agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof. 18.5 Amendment. This Agreement may be amended only with the written consent of both parties hereto. 19 18.6 Assignment. This Agreement may not be assigned by a party hereto without the written consent of the other party. 18.7 Survival. The provisions of Articles 7, 8, 17, and 18 shall survive the termination of this Agreement. 18.8 Governing Law. This Agreement shall be governed by the laws of the State of New York, without giving effect to the principles of conflicts of law thereof. 18.9 Regulatory Matters. This Agreement shall be subject to all valid applicable federal, state and local laws and to the orders, rules and regulations of any duly constituted federal or state regulatory body or authority having jurisdiction. Should either party hereto, by force of any such law or regulation, be ordered or required to do any act inconsistent with the provisions of this Agreement or prohibited from performing any act required under this Agreement or should its performance under this Agreement become commercially impracticable as a result of such law or regulation, then the parties shall negotiate in good faith to reform this Agreement so as to give effect to the original intention of the parties. In the event that such reformation is not possible, then the affected party shall have the right to terminate this Agreement upon 10 days' written notice to the other party, which notice shall be given within 30 days after the party giving notice becomes aware of the facts or circumstances giving rise to this right to terminate. If the right to terminate is not exercised by either party, then the Agreement shall continue but shall be deemed modified to conform to the requirements of such law or regulation. 18.10 Jurisdiction. Any legal action or proceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof shall be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each of NJRES and eCORP Marketing hereby accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts and appellate courts from any appeal thereof. Each of NJRES and eCORP Marketing irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each of NJRES and eCORP Marketing at its notice address provided pursuant to Section 18.2 hereof. Each of NJRES and eCORP Marketing hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of either party hereto or its designees to serve process in any other manner permitted by law. 20 IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first set forth above. eCORP MARKETING, LLC By: /S/ JOHN F. THRASH Name: John F. Thrash Title: Manager NJR ENERGY SERVICES COMPANY By: /S/ JOSEPH P. SHEILDS Name: Joseph P. Sheilds Title: Senior Vice President 21 Exhibit A Stagecoach Holding, L.L.C. Risk Management Procedures *** EXHIBIT B-1 PAGE 1 Purchase Prices for described services - Year 1 April 1, 2002 - March 31, 2003 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT EAST AURORA PRIMARY DELIVERY VARIOUS ZONE 4 AND ZONE 5 POINTS (SEE TABLE)
MAXIMUM MAXIMUM TGP LATERAL TGP ZONE DAILY STORAGE TRANSPORTATION 4-5 DELIVERY DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) 100 0 0 *** 0.00 *** 0.00 90 0 0 *** 0.00 *** 0.00 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 0 0
TGP ZONE 4-5 DELIVERY TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** 0.00 0.00 *** 90 *** 0.00 0.00 *** 60 *** 0.00 0.00 *** 30 *** 0.00 0.00 *** 10 *** 0.00 0.00 *** $ 0
DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP Zone 4-5 Delivery Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than MDQ due to TGP fuel retention (h) TGP Zone 4-5 Delivery Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP. Contract description, Attachment B (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity EXHIBIT B-1 (CONTINUED) PAGE 2 Purchase Prices for described services - Year 1 April 1, 2002 - March 31, 2003 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT 319 - PRIMARY DELIVERY WHITE PLAINS
MAXIMUM MAXIMUM TGP LATERAL DAILY STORAGE TRANSPORTATION TGP 300 LINE DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) less (1) 100 0 0 *** 0.00 *** 0.00 90 *** *** *** *** *** *** 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 *** *** *** TOTAL STORAGE SERVICES SOLD 100 0.00 0.00 90 *** *** 60 0.00 0.00 30 0.00 0.00 10 0.00 0.00 *** *** ***
TGP 300 LINE TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** 0.00 0.00 *** 90 *** *** *** *** 60 *** 0.00 0.00 *** 30 *** 0.00 0.00 *** 10 *** 0.00 0.00 *** ***
Amounts entered in column (b) for purposes of this exhibit are illustrative to demonstrate the Put calculation mechanics. Actual Put calculations will based on actual amounts inserted in column (b). EACH COMPONENT, COLUMN (a) THROUGH (k) AS DEFINED, CONSTITUTES THE ENTIRE 'PUT" SERVICE. IN NO EVENT MAY ONE COMPONENT BE 'PUT' TO NJRES WITHOUT THE ASSOCIATED COMPONENT FOR THAT PARTICULAR SERVICE ECORP MARKETING MUST CONSIDER OTHER 'REVENUE POOL' COMPONENTS AS DESCRIBED IN THE AGREEMENT WHEN DETERMINING THE SERVICES TO BE SOLD OR "PUT TO NJRES DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (This price is only valid with TGP Lateral and 300 Line Transportation (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP 300 Line Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than (b) due to TGP tariff fuel retention rates. (h) TGP 300 Line Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity (1) is the TGP tariff fuel retention rate Note: TGP is the Tennessee Gas Pipeline EXHIBIT B-2 PAGE 1 Purchase Prices for described services - Year 2 through 10 April 1, 2002 - March 31, 2012 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT EAST AURORA PRIMARY DELIVERY VARIOUS ZONE 4 AND ZONE 5 POINTS (SEE TABLE)
MAXIMUM MAXIMUM TGP LATERAL TGP ZONE DAILY STORAGE TRANSPORTATION 4-5 DELIVERY DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) 100 0 0 *** 0.00 *** 0.00 90 0 0 *** 0.00 *** 0.00 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 0 0
TGP ZONE 4-5 DELIVERY TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** 0.00 0.00 *** 90 *** 0.00 0.00 *** 60 *** 0.00 0.00 *** 30 *** 0.00 0.00 *** 10 *** 0.00 0.00 *** $ 0
DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP Zone 4-5 Delivery Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than MDQ due to TGP fuel retention (h) TGP Zone 4-5 Delivery Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP. Contract description, Attachment B (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity EXHIBIT B-2 (CONTINUED) PAGE 2 Purchase Prices for described services - Year 2 through 10 April 1, 2002 - March 31, 2012 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT 319 - PRIMARY DELIVERY WHITE PLAINS
MAXIMUM MAXIMUM TGP LATERAL DAILY STORAGE TRANSPORTATION TGP 300 LINE DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) less (1) 100 0 0 *** 0.00 *** 0.00 90 *** *** *** *** *** *** 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 *** *** *** TOTAL STORAGE SERVICES SOLD 100 0.00 0.00 90 *** *** 60 0.00 0.00 30 0.00 0.00 10 0.00 0.00 *** *** ***
TGP 300 LINE TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** 0.00 0.00 *** 90 *** *** *** *** 60 *** 0.00 0.00 *** 30 *** 0.00 0.00 *** 10 *** 0.00 0.00 *** ***
Amounts entered in column (b) for purposes of this exhibit are illustrative to demonstrate the Put calculation mechanics. Actual Put calculations will based on actual amounts inserted in column (b). EACH COMPONENT, COLUMN (a) THROUGH (k) AS DEFINED, CONSTITUTES THE ENTIRE 'PUT" SERVICE. IN NO EVENT MAY ONE COMPONENT BE 'PUT' TO NJRES WITHOUT THE ASSOCIATED COMPONENT FOR THAT PARTICULAR SERVICE ECORP MARKETING MUST CONSIDER OTHER 'REVENUE POOL' COMPONENTS AS DESCRIBED IN THE AGREEMENT WHEN DETERMINING THE SERVICES TO TO SOLD OR "PUT TO NJRES DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (This price is only valid with TGP Lateral and 300 Line Transportation (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP 300 Line Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than (b) due to TGP tariff fuel retention rates. (h) TGP 300 Line Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity (1) is the TGP tariff fuel retention rate Note: TGP is the Tennessee Gas Pipeline EXHIBIT B-3 PAGE 1 Purchase Prices for described services - Year 2 through 10 April 1, 2003 - March 31, 2012 TO BE USED IF TEST PROVES GREATER THAN 9 BCF BUT LESS THAN 10 BCF OF WORKING GAS STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT EAST AURORA PRIMARY DELIVERY VARIOUS ZONE 4 AND ZONE 5 POINTS (SEE TABLE)
MAXIMUM MAXIMUM TGP LATERAL TGP ZONE DAILY STORAGE TRANSPORTATION 4-5 DELIVERY DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) 100 0 0 *** 0.00 *** 0.00 90 0 0 *** 0.00 *** 0.00 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 0 0
TGP ZONE 4-5 DELIVERY TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** 0.00 0.00 *** 90 *** 0.00 0.00 *** 60 *** 0.00 0.00 *** 30 *** 0.00 0.00 *** 10 *** 0.00 0.00 *** $ 0
DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP Zone 4-5 Delivery Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than MDQ due to TGP fuel retention (h) TGP Zone 4-5 Delivery Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP. Contract description, Attachment B (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity EXHIBIT B-3 (CONTINUED) PAGE 2 Purchase Prices for described services - Year 2 through 10 April 1, 2003 - March 31, 2012 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT 319 - PRIMARY DELIVERY WHITE PLAINS
MAXIMUM MAXIMUM TGP LATERAL DAILY STORAGE TRANSPORTATION TGP 300 LINE DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) less (1) 100 *** *** *** *** *** *** 90 0 0 *** 0.00 *** 0.00 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 *** *** *** TOTAL STORAGE SERVICES SOLD 100 *** *** 90 0.00 0.00 60 0.00 0.00 30 0.00 0.00 10 0.00 0.00 *** *** ***
TGP 300 LINE TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** *** *** *** 90 *** $ -- $ -- *** 60 *** $ -- $ -- *** 30 *** $ -- $ -- *** 10 *** $ -- $ -- *** ***
Amounts entered in column (b) for purposes of this exhibit are illustrative to demonstrate the Put calculation mechanics. Actual Put calculations will based on actual amounts inserted in column (b). EACH COMPONENT, COLUMN (a) THROUGH (k) AS DEFINED, CONSTITUTES THE ENTIRE 'PUT" SERVICE. IN NO EVENT MAY ONE COMPONENT BE 'PUT' TO NJRES WITHOUT THE ASSOCIATED COMPONENT FOR THAT PARTICULAR SERVICE ECORP MARKETING MUST CONSIDER OTHER 'REVENUE POOL' COMPONENTS AS DESCRIBED IN THE AGREEMENT WHEN DETERMINING THE SERVICES TO TO SOLD OR "PUT TO NJRES DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (This price is only valid with TGP Lateral and 300 Line Transportation (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP 300 Line Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than (b) due to TGP tariff fuel retention rates. (h) TGP 300 Line Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity (1) is the TGP tariff fuel retention rate Note: TGP is the Tennessee Gas Pipeline EXHIBIT B-4 PAGE 1 Purchase Prices for described services - Year 2 through 10 April 1, 2003 - March 31, 2012 TO BE USED IF TEST PROVES GREATER THAN 10 BCF BUT LESS THAN 11 BCF OF WORKING GAS STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT EAST AURORA PRIMARY DELIVERY VARIOUS ZONE 4 AND ZONE 5 POINTS (SEE TABLE)
MAXIMUM MAXIMUM TGP LATERAL TGP ZONE DAILY STORAGE TRANSPORTATION 4-5 DELIVERY DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) 100 *** *** *** *** *** *** 90 0 0 *** 0.00 *** 0.00 60 0 0 *** 0.00 *** 0.00 30 0 0 *** 0.00 *** 0.00 10 0 0 *** 0.00 *** 0.00 *** ***
TGP ZONE 4-5 DELIVERY TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** *** *** *** 90 *** 0.00 0.00 *** 60 *** 0.00 0.00 *** 30 *** 0.00 0.00 *** 10 *** 0.00 0.00 *** ***
DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP Zone 4-5 Delivery Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than MDQ due to TGP fuel retention (h) TGP Zone 4-5 Delivery Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP. Contract description, Attachment B (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity EXHIBIT B-4 (CONTINUED) PAGE 2 Purchase Prices for described services - Year 2 through 10 April 1, 2003 - March 31, 2012 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT 319 - PRIMARY DELIVERY WHITE PLAINS
MAXIMUM MAXIMUM TGP LATERAL DAILY STORAGE TRANSPORTATION TGP 300 LINE DAYS OF QUANTITY QUANTITY STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION SERVICE (DTH) (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) less (1) 100 *** *** *** *** *** *** 90 0 0 *** $ - *** 0.00 60 0 0 *** $ - *** 0.00 30 0 0 *** $ - *** 0.00 10 0 0 *** $ - *** 0.00 *** *** *** TOTAL STORAGE SERVICES SOLD 100 *** *** 90 - - 60 - - 30 - - 10 - - *** *** ***
TGP 300 LINE TRANSPORTATION DAYS OF PRICE TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE /(DTH/MONTH) TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) (h) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** *** *** *** 90 *** $ -- $ -- *** 60 *** $ -- $ -- *** 30 *** $ -- $ -- *** 10 *** $ -- $ -- *** ***
Amounts entered in column (b) for purposes of this exhibit are illustrative to demonstrate the Put calculation mechanics. Actual Put calculations will based on actual amounts inserted in column (b). EACH COMPONENT, COLUMN (a) THROUGH (k) AS DEFINED, CONSTITUTES THE ENTIRE 'PUT" SERVICE. IN NO EVENT MAY ONE COMPONENT BE 'PUT' TO NJRES WITHOUT THE ASSOCIATED COMPONENT FOR THAT PARTICULAR SERVICE ECORP MARKETING MUST CONSIDER OTHER 'REVENUE POOL' COMPONENTS AS DESCRIBED IN THE AGREEMENT WHEN DETERMINING THE SERVICES TO TO SOLD OR "PUT TO NJRES DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (This price is only valid with TGP Lateral and 300 Line Transportation (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP 300 Line Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than (b) due to TGP tariff fuel retention rates. (h) TGP 300 Line Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity (1) is the TGP tariff fuel retention rate Note: TGP is the Tennessee Gas Pipeline EXHIBIT B-5 PAGE 1 PURCHASE PRICES FOR DESCRIBED SERVICES - YEAR 2 THROUGH 10 APRIL 1, 2003 - MARCH 31, 2012 TO BE USED IF TEST PROVES GREATER THAN 11 Bcf OF WORKING GAS STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT EAST AURORA PRIMARY DELIVERY VARIOUS ZONE 4 AND ZONE 5 POINTS (SEE TABLE)
TGP ZONE 4-5 MAXIMUM TGP LATERAL TGP ZONE 4-5 DELIVERY DAILY MAXIMUM TRANSPORTATION DELIVERY TRANSPORTATION DAYS OF QUANTITY STORAGE STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION PRICE SERVICE (DTH) QUANTITY (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY /(DTH/MONTH) (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) (h) 100 *** *** *** *** *** *** *** 90 0 0 *** 0.00 *** 0.00 *** 60 0 0 *** 0.00 *** 0.00 *** 30 0 0 *** 0.00 *** 0.00 *** 10 0 0 *** 0.00 *** 0.00 *** *** ***
DAYS OF TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** *** *** 90 0.00 $ - *** 60 0.00 $ - *** 30 0.00 $ - *** 10 0.00 $ - *** ***
DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP Zone 4-5 Delivery Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than MDQ due to TGP fuel retention (h) TGP Zone 4-5 Delivery Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP. Contract description, Attachment B (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity EXHIBIT B-5 (CONTINUED) PAGE 2 Purchase Prices for described services - Year 2 through 10 April 1, 2003 - March 31, 2012 STORAGE SERVICE WITH TENNESSEE GAS PIPELINE CAPACITY PRIMARY RECEIPT 319 - PRIMARY DELIVERY WHITE PLAINS
MAXIMUM TGP LATERAL TGP 300 LINE DAILY MAXIMUM TRANSPORTATION TGP 300 LINE TRANSPORTATION DAYS OF QUANTITY STORAGE STORAGE PRICE TOTAL ANNUAL PRICE TRANSPORTATION PRICE SERVICE (DTH) QUANTITY (DTH) /(DTH/MONTH) STORAGE CREDIT /(DTH/MONTH) QUANTITY /(DTH/MONTH) (a) (b) (a) * (b) = (c) (d) (c) * (d) * 12 = (e) (f) (g) = (b) less (1) (h) 100 *** *** *** *** *** *** *** 90 0 0 *** $ 0.01 *** 0 *** 60 0 0 *** $ 0.01 *** 0 *** 30 0 0 *** $ 0.00 *** 0 *** 10 0 0 *** $ 0.00 *** 0 *** *** *** ***
TOTAL STORAGE SERVICES SOLD 100 *** *** 90 0 0 60 0 0 30 0 0 10 0 0 *** *** ***
DAYS OF TOTAL ANNUAL TOTAL ANNUAL ANNUAL $ SERVICE TRANSPORTATION CREDIT CREDIT DTH/MSQ (a) ((b) * (f)) + ((g) * (h)) * 12 = (i) (e) + (i) = (j) (j) / (c) = (k) 100 *** *** *** 90 $ 0.01 $ 0.02 *** 60 $ 0.01 $ 0.02 *** 30 $ 0.01 $ 0.01 *** 10 $ 0.01 $ 0.01 *** ***
Amounts entered in column (b) for purposes of this exhibit are illustrative to demonstrate the Put calculation mechanics. Actual Put calculations will based on actual amounts inserted in column (b). EACH COMPONENT, COLUMN (a) THROUGH (k) AS DEFINED, CONSTITUTES THE ENTIRE 'PUT" SERVICE. IN NO EVENT MAY ONE COMPONENT BE 'PUT' TO NJRES WITHOUT THE ASSOCIATED COMPONENT FOR THAT PARTICULAR SERVICE eCORP MARKETING MUST CONSIDER OTHER 'REVENUE POOL' COMPONENTS AS DESCRIBED IN THE AGREEMENT WHEN DETERMINING THE SERVICES TO TO SOLD OR "PUT TO NJRES DEFINITIONS: (a) Number of days of storage service (b) Maximum Daily Quantity, MDQ, is the withdrawal capability from the field and a like amount of Tennessee Gas Pipeline Transportation (c) Maximum Storage Quantity, MSQ, is the number of Days of Service multiplied by MDQ (d) Storage Price is the total unit price per Dth of MSQ paid each month by NJRES to CNYOG and credited to eCORP Marketing (This price is only valid with TGP Lateral and 300 Line Transportation (e) Total Annual Storage Credit is the dollars paid by NJRES to CNYOG for the Stagecoach Storage Service which is credited to the eCORP Marketing invoice by CNYOG (f) TGP Lateral Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (g) TGP 300 Line Transportation Quantity, is the amount of transportation released on the Tennessee Electronic Bulletin Board. This volume is less than (b) due to TGP tariff fuel retention rates. (h) TGP 300 Line Transportation Price is the price per Dth, per Month, paid by NJRES to TGP and credited to the eCORP Marketing invoice by TGP (i) Total Annual Transportation Credit is the dollars paid by NJRES to TGP and credited to eCORP Marketing for the Tennessee Transportation Service (j) Total Annual Credit is the dollars paid by NJRES to CNYOG and TGP for the Storage and Transportation Services and subsequently credited to the eCORP Marketing TGP and CNYOG invoices (k) Total $ Dth/ MSQ is the annual dollars paid by NJRES for both Storage and Transportation Services divided by Maximum Storage Quantity (1) is the TGP tariff fuel retention rate Note: TGP is the Tennessee Gas Pipeline Exhibit B-6 *** EXHIBIT C GUARANTY AGREEMENT This Guaranty Agreement (this "Guaranty") is made as of the 9th day of January, 2002, between eCORP MARKETING, LLC, a Delaware limited liability company ("COMPANY"), and NEW JERSEY RESOURCES CORPORATION, a New Jersey corporation ("GUARANTOR"). W I T N E S S E T H: WHEREAS, Company and NJR ENERGY SERVICES COMPANY ("NJRES"), a wholly-owned subsidiary of Guarantor, have entered or will enter into (i) Amended and Restated Natural Gas Storage Marketing and Management Agreement between Company and NJRES, dated as of January 9, 2002, (the "M&M Agreement"); (ii) the Transportation Capacity Release Agreement between CNYOG, Company and NJRES, dated as of January 9, 2002, (the "Transportation Capacity Release"); (iii) Base Gas Lease Agreement between CNYOG and NJRES, dated as of January 9, 2002, (the "Base Gas Agreement"); and (iv) a certain letter agreement between CNYOG, Company and NJRES, dated as of January 9, 2002 regarding the M & M Agreement (the "Letter Agreement") (such agreements, as the same from time to time may be modified, amended and supplemented, shall be referred to herein as the "AGREEMENTS"). NOW THEREFORE, in order to induce Company to enter into Agreements, Guarantor hereby covenants and agrees as follows: 1. Guaranty. Subject to the provisions hereof, including, without limitation, Sections 6 and 16 below, Guarantor hereby irrevocably, absolutely and unconditionally guarantees, as a primary obligor and not merely as a surety, the timely payment and performance of all obligations of NJRES (the "NJRES OBLIGATIONS") to Company under the Agreements. This Guaranty is a guaranty of performance when due and not of collection. To the extent that NJRES shall fail in the payment or performance of any NJRES Obligation upon Company's compliance with Section 3, Guarantor shall honor such NJRES Obligation to the extent of such failure. The liability of Guarantor under this Guaranty shall be subject to the terms and conditions herein set forth. 2. Amendment: No renewal, extension, amendment, waiver, or modification of or addition or supplement to or deletion from any of the terms of the Agreements to which NJRES is a party or otherwise caused to occur or permitted to exist shall release or limit Guarantor's liability hereunder, and every such change is hereby in every respect consented to by Guarantor. 3. Demands and Notice. Company shall make a demand (herein referred to as a "PERFORMANCE DEMAND") upon Guarantor if at any time NJRES defaults under the Agreements and continues to fail or refuse to cure such default in performance for a period of fifteen (15) days, and Company has elected to enforce its rights under this Guaranty. A Performance Demand shall be in writing and shall reasonably and briefly specify the NJRES Obligation(s) which Company is calling upon Guarantor to perform and the nature of NJRES's breach. A Performance Demand in the foregoing form shall be deemed sufficient notice to Guarantor that it must perform or cause to be performed the NJRES Obligation(s). Guarantor shall also pay, within fifteen (15) days of Guarantor's receipt of a Performance Demand, all reasonable expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be incurred by Company in enforcing any rights with respect to, or collecting against Guarantor under, this Guaranty (as set forth in reasonable detail in the Performance Demand); provided, that Guarantor shall not be liable for any such expenses if no payment or performance under any of the Agreements is due or determined to be due. 4. Setoffs and Counterclaims. Guarantor reserves to itself all rights, setoffs, counterclaims and other defenses which NJRES is or may be entitled to arising from or out of the Agreements, except for defenses arising out of the bankruptcy, insolvency, dissolution or liquidation of NJRES. If any payment of the guaranteed obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of NJRES or a similar proceeding or circumstance, the Guarantor's obligations hereunder with respect to such payment or payments shall be reinstated as though such payment had not been made. 5. Notices. Any Performance Demand, notice, request, instruction, correspondence or other document to be given hereunder by any party to another (herein collectively called "Notice") shall be in writing and delivered personally or mailed by certified mail, postage prepaid and return receipt requested, or by telecopier, as follows: To Company: eCORP Marketing, LLC 10,000 Memorial Drive Suite 530 Houston, Texas 77024 Attention: G.S. Clifton Facsimile No: (713) 526-2363 Phone No.: (713) 882-2288 To Guarantor: New Jersey Resources Corporation 1415 Wyckoff Road P.O. Box 1464 Wall, New Jersey 07719 Attention: Allan Denninger Phone No.: (732) 938-7891 Fax No.: (732) 938-7547 Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telecopier shall be effective upon actual receipt if received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. All Notices by telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. Any party may change any address to which Notice is to be given to it by giving Notice as provided above of such change of address. 6. Limitation. Notwithstanding any contrary provision of this Guaranty or of the Agreement, Guarantor's maximum liability to Company under this Guaranty (the "Guaranty Cap") shall be equal to (a) $18,000,000 for the period from April 1, 2002 to and including March 2 31, 2003 and (b) $22,000,000 for each annual period thereafter from April 1, 2003 to and including March 31, 2012. 7. Amendment of Guaranty. No term or provision of this Guaranty shall be amended, modified, altered, supplemented or terminated except in a writing signed by the parties hereto. 8. Waivers. Guarantor hereby waives (a) notice of acceptance of this Guaranty; (b) presentment and demand concerning the liabilities of Guarantor, except as expressly hereinabove set forth; and (c) any right to require that any action or proceeding be brought against NJRES or any other person, or to require that Company seek enforcement of any performance against NJRES or any other person, prior to any action against Guarantor under the terms hereof. No delay of Company in the exercise of, or failure to exercise, any rights hereunder shall operate as a waiver of such rights, a waiver of any other rights or a release of Guarantor from any obligations hereunder. Guarantor hereby acknowledges receipt of a copy of each of the Agreements. 9. Assignment. This Guaranty shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of Company. The Guarantor shall not assign its obligations under this Guaranty without Company's prior written consent, which consent shall not be unreasonably withheld. 10. Covenants. At all times during which this Guaranty is in effect, Guarantor shall comply with the following financial covenants: (i) Leverage Ratio. At no time shall Guarantor's ratio of Consolidated Total Indebtedness to Consolidated Capitalization exceed 0.67:1.00; (ii) Interest Coverage. At no time shall the ratio of Guarantor's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters, taken as a single accounting period, to the Guarantor's Consolidated Interest Expense for the four (4) most recently completed Fiscal Quarters, taken as a single accounting period, be less than 2.25 to 1.0; and (iii) Asset Dispositions. Guarantor shall not, nor shall it permit any Subsidiary to, transfer or dispose of in a single transaction or series of related transactions assets within net book value in excess of $250,000,000. As used herein, the defined terms "Consolidated Total Indebtedness", "Consolidated Capitalization", "Consolidated EBITDA", "Consolidated Interest Expense", "Fiscal Quarter", and "Subsidiary" shall have the meaning assigned to such terms as of the date hereof in that certain Credit Agreement dated as of January 5, 2001 (the "Credit Agreement") by and among the Guarantor, PNC Bank, National Association, as Administrative Agent, Summit Bank, as Syndication Agent, and the other agents and lenders listed therein, and said defined terms (and each of the defined terms used in said defined terms) shall be incorporated by references as if fully stated herein. In the event of a failure by Guarantor to comply with financial covenants set forth in clauses (i) and (ii) above or the public announcement of a transfer or disposition described in clause (iii) above, the sole remedy of Company shall be the right of Company to 3 require that Guarantor arrange for the issuance of an Acceptable Letter of Credit (as defined below) in a stated amount of $18,000,000 should such requirement be imposed on or before March 31, 2003 and $22,000,000 thereafter, as soon as practicable but in any event within thirty (30) days of receipt of a written demand by Company for the same. Any such Acceptable Letter of Credit shall permit drawings thereunder solely by Company and for the account of Guarantor upon the presentation of a certification to the issuing bank (with a copy to Guarantor) stating that a Performance Demand has been validly presented hereunder and Guarantor has failed to honor such demand within fifteen (15) days after such presentation. In no event shall Company be permitted to make a demand under such Acceptable Letter of Credit in an amount in excess of the limitations set forth in Section 6. As used herein, an "Acceptable Letter of Credit" shall mean a clean irrevocable standby letter of credit with a term of three hundred and sixty five (365) days, and containing automatic annual renewal provisions, issued by a domestic commercial banking institution organized or chartered under the laws of the United States (or any State thereof) that has a senior unsecured non-credit enhanced debt rating of at least "A" by Standard and Poor's, a division of The McGraw-Hill Companies, Inc., or "A2" by Moody's Investment Services, Inc. (the "LOC Issuer"). The Acceptable Letter of Credit will provide that the LOC Issuer will provide notice to Company with a copy to NJRES not earlier than forty-five (45) days and not later than thirty (30) days prior to the expiry date of the Acceptable LOC as to whether or not the Acceptable LOC will be reissued for an additional three hundred and sixty five (365) days in a stated amount of $22,000,000 (an "Acceptable Extension"). Upon a notice from the LOC Issuer that it will not be issuing an Acceptable Extension (or Guarantor has not otherwise arranged for the issuance of a replacement Acceptable Letter of Credit in a stated amount of $22,000,000), then eCORP Marketing will draw on the Acceptable Letter of Credit and the proceeds thereof will be deposited under an escrow arrangement reasonably satisfactory to Guarantor and Company, which shall permit releases therefrom solely in the following circumstances (i) a Performance Demand has been validly presented thereunder and Guarantor has failed to honor such demand within fifteen (15) days after such presentation, in which case the amount so demanded shall be released to a Company or (ii) (A) Guarantor has arranged for a replacement Acceptable Letter of Credit in a stated amount of $22,000,000, (B) this Guaranty shall have terminated in accordance with Section 16 below, or (C) NJRES shall have effectively terminated its obligations under Section 14.4 of the M&M Agreement, in each such case the entire amount held in such escrow account shall be released to Guarantor. 11. Entire Agreement. This Guaranty embodies the entire agreement and understanding between Guarantor and Company and supersedes all prior agreements and understandings relating to the subject matter hereof. The headings in this Guaranty are for purposes of reference only, and shall not affect the meaning hereof. 12. GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH AND ENFORCED PURSUANT TO THE LAWS OF THE STATE OF NEW YORK, EXCLUDING ANY CONFLICT-OF-LAW RULES WHICH WOULD DIRECT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. 4 13. WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS GUARANTY. 14. Submission to Jurisdiction. Any legal action or proceeding with respect to this Guaranty and any action for enforcement of any judgment in respect thereof may be brought in the courts of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, Guarantor hereby accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid court from any appeal thereof. Guarantor irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to Guarantor at its notice address provided pursuant to Section 5. Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 15. Counterparts. This Guaranty may be executed in a number of counterparts, each of which, when executed, shall be deemed an original. 16. Termination. This Guaranty shall terminate and be of no further force and effect as of the earlier to occur of (i) the termination of all of the Agreements and (ii) March 31, 2012, and Guarantor shall have no further obligation thereunder unless a Performance Demand has been delivered to Guarantor prior to that termination, and then only to the extent of the performance so demanded. Upon termination of this Guaranty pursuant to this Section 16 or otherwise, any letter of credit issued pursuant to Section 10 above will be returned for cancellation. 5 IN WITNESS WHEREOF, the parties hereto have caused this Guaranty Agreement to be signed by their respective duly authorized representatives on the day and year first above written. By execution, signer certifies that signer is authorized to execute this Agreement on behalf of company: eCORP MARKETING, LLC - ---------------------------------------------------------- (Authorized Signature) John F. Thrash - ---------------------------------------------------------- (Print or Type Name) Manager - ---------------------------------------------------------- (Title) By execution, signer certifies that signer is authorized to execute this Agreement on behalf of company: NEW JERSEY RESOURCES CORPORATION - ---------------------------------------------------------- (Authorized Signature) Glenn C. Lockwood - ---------------------------------------------------------- (Print or Type Name) Senior Vice President and Chief Financial Officer - ---------------------------------------------------------- (Title) EXHIBIT D
------------------------------------------------------------------------------------------------------------- CONTRACT TERM STORAGE TGPL LATERAL ------------- ------------------------------------------------ -------------------------- PRICE/MONTH ANNUAL PRICE/MONTH ANNUAL CUSTOMER START END DAYS MDWQ CAPACITY (Dth) STORAGE VALUE (Dth) LATERAL VALUE - ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------- TGPL 300 LINE TRANSPORTATION TGPL ZONE 4-5 TRANSPORT SPREADS TOTAL ------------------------------------- ---------------------------------- ------------- ANNUAL PRICE/MONTH ANNUAL PRICE/MONTH ANNUAL UNIT ANNUAL CONTRACT UNIT CUSTOMER QUANTITY (Dth) 300 LINE VALUE QUANTITY (Dth) Z 4-5 VALUE VALUE VALUE VALUE PRICE - ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------- APR-02 MAY-02 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- JUN-02 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- JUL-02 AUG-02 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- SEP-02 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- OCT-02 NOV-02 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- DEC-02 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- JAN-03 FEB-03 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- MAR-03 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
------------------------------------------------- FISCAL YEAR 2002 ------------------------------------------------- Total MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- APR-03 MAY-03 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- JUN-03 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- JUL-03 AUG-03 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- SEP-03 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- OCT-03 NOV-03 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- DEC-03 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- JAN-04 FEB-04 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- MAR-04 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
------------------------------------------------- FISCAL YEAR 2003 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- APR-04 MAY-04 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- JUN-04 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- JUL-04 AUG-04 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- SEP-04 ------------------------------------------------- Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
---------------------------------------------------------------------------------------------------- OCT-04 NOV-04 ------------------------------------------------- ------------------------------------------------- Monthly MDWQ TGPL TGPL Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery Value Capacity Delivery Delivery Delivery ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------ DEC-04 ------------------------------------------------ Monthly MDWQ TGPL TGPL Contract Storage Storage 300-Line Other Z 4 Value Capacity Delivery Delivery Delivery ------------------------------------------------ $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------ TOTAL $ - - - - - =======================================================
---------------------------------------------------------------------------------------------------- JAN-05 FEB-05 ------------------------------------------------- ------------------------------------------------- MONTHLY MDWQ TGPL TGPL MONTHLY MDWQ TGPL TGPL CONTRACT STORAGE STORAGE 300-LINE OTHER Z 4 CONTRACT STORAGE STORAGE 300-LINE OTHER Z 4 VALUE CAPACITY DELIVERY DELIVERY DELIVERY VALUE CAPACITY DELIVERY DELIVERY DELIVERY ---------------------------------------------------------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - $ - - - - - - - $ - - - - - $ - - - - - ---------------------------------------------------------------------------------------------------- TOTAL $ - - - - - $ - - - - - ===========================================================================================================
------------------------------------------------- MAR-05 ------------------------------------------------- MONTHLY MDWQ TGPL TGPL CONTRACT STORAGE STORAGE 300-LINE OTHER Z 4 VALUE CAPACITY DELIVERY DELIVERY DELIVERY ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
------------------------------------------------- FISCAL YEAR 2004 ------------------------------------------------- MONTHLY MDWQ TGPL TGPL CONTRACT STORAGE STORAGE 300-LINE OTHER Z 4 VALUE CAPACITY DELIVERY DELIVERY DELIVERY ------------------------------------------------- $ - - - - - $ - - - - - $ - - - - - $ - - - - - - $ - - - - - ------------------------------------------------- TOTAL $ - - - - - ========================================================
EX-10.2 4 y60698ex10-2.txt BASE GAS LEASE AGREEMENT EXHIBIT 10-2 BASE GAS LEASE AGREEMENT This Base Gas Lease Agreement ("Lease Agreement") is entered into this 9th day of January, 2002 by and between NJR Energy Services Company ("NJRES"), a New Jersey corporation, and Central New York Oil And Gas Company, LLC ("CNYOG"), a New York limited liability company. WHEREAS, CNYOG owns and operates an interstate natural gas storage facility known as the Stagecoach Natural Gas Storage Facility located in Tioga County, New York ("Stagecoach"); and WHEREAS, CNYOG may need to maintain a certain minimum quantity of natural gas, hereinafter referred to as "base gas," to enable CNYOG to operate Stagecoach; and WHEREAS, NJRES owns or controls supplies of natural gas and is willing to lease a certain quantity of such natural gas to CNYOG for use as base gas, on the terms and conditions set forth herein; and WHEREAS, in consideration for such lease of natural gas by NJRES, CNYOG is willing to enter into an interruptible service agreement with NJRES under its Rate Schedule ISS at the minimum rates legally permissible and on such other terms and conditions as set forth herein; NOW, THEREFORE, in consideration of the mutual promises contained herein and the mutual benefits to be realized by the parties, NJRES and CNYOG agree as follows: ARTICLE I DEFINITIONS 1.1 Unless otherwise defined in this Lease Agreement, all capitalized terms used herein shall have the same definitions as set forth in the FERC Gas Tariff Original Volume No. 1 of Central New York Oil And Gas Company, LLC filed with the Federal Energy Regulatory Commission, effective December 1, 2001, as it may be supplemented and amended from time to time ("CNYOG Tariff"). ARTICLE II TERM 2.1 This Lease Agreement shall be effective from the date first above written, and shall continue for a primary term of ten (10) years, which term shall automatically be extended for additional periods of one year unless terminated by either party 1 upon the provision of not less than thirty (30) days written notice to the other prior to the expiration of any such term. Notwithstanding the foregoing, this Lease Agreement shall terminate automatically in the event that that certain Amended and Restated Natural Gas Storage Marketing and Management Agreement executed by and between NJRES and eCORP Marketing, LLC as of January 9, 2002 ("M&M Agreement") is terminated for any reason, and the effective date of the termination of this Lease Agreement shall be deemed the same date as the effective date of the termination of the M&M Agreement. In addition, (i) CNYOG shall have the right to terminate this Lease Agreement at any time by sending NJRES at least thirty (30) days advance written notice of termination, and (ii) NJRES shall have the right to terminate this Agreement in the event of a CNYOG Default (as hereinafter defined) that continues beyond any applicable cure period. The parties hereto hereby retain any and all other remedies available at law or in equity. As used herein, the term "CNYOG Default Event" shall mean any of the following events: (a) if CNYOG shall fail to comply with any provision of this Lease Agreement; provided, however, such failure to comply shall not constitute a CNYOG Default Event if such failure is remedied within twenty (20) days of written notice by NJRES of such failure; or (b) CNYOG shall (i) execute an assignment for the benefit of its creditors, (ii) become or be adjudicated a bankrupt or insolvent, (iii) admit in writing its inability to pay its debts generally as they become due, (iv) apply for or consent to the appointment of a conservator, receiver, trustee, or liquidator of it or of all or a substantial part of its assets, (v) file a voluntary petition seeking reorganization or an arrangement with creditors, or to take advantage of or seek any other relief under any applicable liquidation, conservatorship, bankruptcy, insolvency, rearrangement, moratorium, reorganization, or similar debtor relief laws affecting the rights of creditors generally from time to time in effect ("Debtor Relief Laws"), (vi) file an answer admitting the material allegations of or consenting to, or default in, a petition filed against it in any proceeding under any Debtor Relief Laws, or (vii) institute or voluntarily be or become a party to any other judicial proceedings intended to effect a discharge of its debts, in whole or in part, or a postponement of the maturity or the collection thereof; or (c) (i) an order, judgment, or decree shall be entered by any court of competent jurisdiction approving a petition seeking reorganization of CNYOG or appointing a conservator, receiver, trustee, or liquidator of CNYOG or of all or any substantial part of any such company's assets, and such order, judgment, or decree is not permanently stayed or reversed within ninety (90) days after the entry thereof, or (ii) a petition is filed against CNYOG seeking reorganization, an arrangement with creditors, or any other relief under any Debtor Relief Laws, and such petition is not discharged within ninety (90) days after the filing thereof. 2 2.2 Notwithstanding the foregoing Section 2.1, in the event of the termination of this Lease Agreement, all provisions of this Lease Agreement necessary to fulfill the rights and obligations of the parties hereto (including, but not limited to, the withdrawal and return of all natural gas leased hereunder and the satisfaction of all payment and indemnification obligations) shall survive until such rights and obligations have been fulfilled or waived. ARTICLE III LEASE OF BASE GAS 3.1 NJRES hereby agrees to lease to CNYOG 2,000,000 dekatherms ("dt") of natural gas for use by CNYOG as base gas for Stagecoach. Such leased natural gas shall be referred to herein as "NJRES Base Gas." 3.2 NJRES shall deliver the NJRES Base Gas to the Point of Injection/Withdrawal at such rates of injection as are mutually agreed by the parties; provided, however, that the parties shall use commercially reasonable efforts to complete the delivery and injection of such NJRES Base Gas by June 30, 2002. 3.3 CNYOG shall reimburse NJRES for all transportation charges incurred by NJRES to transport the NJRES Base Gas from Tennessee Gas Pipeline Company's Station 319 to the Point of Injection/Withdrawal. 3.4 NJRES shall deliver to CNYOG gas for use as NJRES Base Gas to which it has good and merchantable title and which is free and clear of all liens, encumbrances and claims. Title to the NJRES Base Gas shall at all times remain with NJRES. CNYOG shall at all times acknowledge NJRES's ownership of the NJRES Base Gas while such gas is in CNYOG's possession and control and CNYOG shall not, directly or indirectly, create, incur, assume or suffer to exist any liens, encumbrances or claims with respect to any NJRES Base Gas while such gas is in CNYOG's possession and control. 3.5 In lieu of a cash lease payment, CNYOG shall be obligated to enter into a service agreement with NJRES under its Rate Schedule ISS on the terms and conditions set forth in Article VII below. 3.6 CNYOG acknowledges and agrees that the NJRES Base Gas is leased, to be delivered and to be held for the sole purpose of serving as base gas at Stagecoach and shall use such gas for no other purpose without the express written consent of NJRES. 3 ARTICLE IV WITHDRAWAL OF NJRES BASE GAS 4.1 NJRES shall have no right to withdraw any NJRES Base Gas from Stagecoach while this Lease Agreement remains in effect. 4.2 Upon termination of this Lease Agreement pursuant to Article II, CNYOG shall, at the election of NJRES, (i) redeliver the NJRES Base Gas to NJRES at the Point of Injection/Withdrawal at daily rates and times within the ability of CNYOG to tender for delivery and NJRES to receive over a mutually agreeable period of up to eighteen (18) months (or such longer period consistent with the applicable requirements of the CNYOG Tariff as may be required by NJRES to accept such gas for redelivery), and/or (ii) transfer (at no cost to NJRES) any or all of the NJRES Base Gas then in storage to the account of NJRES under any then existing NJRES FSS Service Agreement or ISS Service Agreement, so long as such transfer does not exceed the receiving party's Maximum Storage Quantity. As an alternative to the foregoing, by mutual agreement of the parties, NJRES may sell such NJRES Base Gas to CNYOG at a price to be negotiated. ARTICLE V RATES AND CHARGES 5.1 CNYOG shall assess no charges against NJRES with respect to the injection, withdrawal, or storage of the NJRES Base Gas. 5.2 CNYOG shall be responsible for the payment of all taxes (including federal, state and local taxes, sales, gross receipts, use, ad valorem, value-added, excise, and real and personal taxes, and penalties, additions and interest with respect thereto), assessments, and fees (including license, registration, filing and recording fees) (all of the foregoing shall be referred to herein as "Impositions") associated with the NJRES Base Gas applicable to any period during the term of this Lease Agreement, and CNYOG agrees to pay, and indemnify and hold harmless NJRES from and against, all such Impositions. ARTICLE VI POSSESSION AND CONTROL, RISK OF LOSS, AND INDEMNIFICATION 6.1 As between the parties hereto, CNYOG shall be deemed to be in exclusive control and possession of the NJRES Base Gas from the time it is received by CNYOG from NJRES at the Point of Injection/Withdrawal until the time it is delivered from CNYOG to NJRES at the Point of Injection/Withdrawal; at all other times, NJRES shall be deemed to be in exclusive control and possession of such gas. As between them, the party in control and possession of the NJRES Base Gas shall bear all risk of loss with respect to all or any portion of such gas and be 4 responsible for any damage or injury caused thereby while the NJRES Base Gas is in CNYOG's possession and control. 6.2 CNYOG assumes all liability for and shall indemnify, defend and hold harmless NJRES and its successors, assigns, officers, directors, agents and employees from and against any and all losses, damages, liabilities, injuries, costs and expenses (including without limitation attorneys' fees) due to or arising out of any claims, including injury to and death of persons, arising from any act or incident related to Stagecoach while the NJRES Base Gas is in CNYOG's control and possession. 6.3 CNYOG shall, at all times, maintain with respect to all gas stored from time to time in Stagecoach, including the NJRES Base Gas, insurance against loss in an amount not less than thirty million dollars ($30,000,000). Any such policy of insurance shall name NJRES as an additional insured and shall insure NJRES regardless of any breach or violation of any warranty, declaration or condition contained in such policies by CNYOG. Upon request of NJRES, CNYOG shall furnish certificates of insurance with respect to such insurance to NJRES for inspection. ARTICLE VII ISS SERVICE AGREEMENT 7.1 CNYOG hereby agrees to enter into an interruptible storage, injection and withdrawal service agreement with NJRES pursuant to its Rate Schedule ISS ("ISS Service Agreement"). Such ISS Service Agreement shall be generally consistent with the Form of ISS Service Agreement set forth in the CNYOG Tariff, and it shall have the following terms and conditions: a. the Maximum Storage Quantity shall be 3,000,000 dt; b. the Maximum Daily Injection Quantity shall be 150,000 dt; c. the Maximum Daily Withdrawal Quantity shall be 300,000 dt; d. the only applicable rates and charges shall be the Annual Charge Assessment and the Electric Power and Use/Loss rates; provided, however, that such rates and charges shall apply only to the extent they are unavoidable pursuant to the CNYOG Tariff; and e. the term shall be for a primary term of ten (10) years, which term shall be extended on a year-to-year basis unless terminated by either party upon the provision of fifteen (15) months' prior written notice to the other. 5 ARTICLE VIII NOTICES AND COMMUNICATIONS 8.1 All notices and other written communications between the parties shall be sent by any of the following methods: (i) Certified U.S. Mail, postage prepaid with return receipt requested; or (ii) prepaid delivery service with receipt confirmed by the carrier; or (iii) facsimile transmission with receipt confirmed by the sender's machine; or (iv) delivery in person. Any communication not specifically required to be in writing may also be sent by electronic data exchange upon mutual agreement of the parties. 8.2 The contact information for communicating with a party shall be as follows: For CNYOG: With a copy to: Central New York Oil And Central New York Oil And Gas Company, LLC Gas Company, LLC 10,000 Memorial Drive 211 North Robinson, Suite 1510 Suite 530 One Leadership Square Houston, TX 77002 Oklahoma City, OK 73102-7101 Attention: Chief Operating Officer Attention: General Counsel FAX: 713-526-2363 FAX: 405-235-0992 For NJRES: NJR Energy Services Company P.O. Box 1464 Wall, NJ 07719 Attention: Director - Energy Services FAX: 732-938-1071 ARTICLE IX MISCELLANEOUS 9.1 Agreement Binding on Successors. This Lease Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party hereto may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the other party. 9.2 Headings. The headings in this Lease Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 6 9.3 Counterparts. This Lease Agreement may be executed in counterparts, all of which taken together shall constitute a single document. 9.4 Governing Law. This Lease Agreement has been negotiated and shall be consummated in the State of New York and shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. 9.5 Regulatory Matters. This Lease Agreement shall be subject to all valid applicable federal, state and local laws and to the orders, rules and regulations of any duly constituted federal or state regulatory body or authority having jurisdiction. Should either party hereto, by force of any such law or regulation, be ordered or required to do any act inconsistent with the provisions of this Lease Agreement or prohibited from performing any act required under this Lease Agreement or should its performance under this Lease Agreement become commercially impracticable as a result of such law or regulation, then the parties shall negotiate in good faith to reform this Lease Agreement so as to give effect to the original intention of the parties. In the event that such reformation is not possible, then the affected party shall have the right to terminate this Lease Agreement upon 10 days' written notice to the other party, which notice shall be given within 30 days after the party giving notice becomes aware of the facts or circumstances giving rise to this right to terminate. If the right to terminate is not exercised by either party, then the Lease Agreement shall continue but shall be deemed modified to conform to the requirements of such law or regulation. 9.6 Entire Agreement. This Lease Agreement and the other documents referred to herein set forth the entire understanding of the parties with respect to the subject matter hereof, supersede all existing agreements among them concerning such subject matter and may be modified only by a written instrument duly executed by the party or parties against whom enforcement thereof is or could be sought. 9.7 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NJRES AND CNYOG HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS LEASE AGREEMENT. 9.8 This Lease Agreement is not intended to create a partnership, corporation, limited liability company or any other form of business entity or association between the parties. 9.9 Jurisdiction. Any legal action or proceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof shall be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each of NJRES and eCORP Marketing hereby accepts for itself and in respect of 7 its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts and appellate courts from any appeal thereof. Each of NJRES and eCORP Marketing irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each of NJRES and eCORP Marketing at its notice address provided pursuant to Section 5. hereof. Each of NJRES of eCORP Marketing hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of either party hereto or its designees to serve process in any other manner permitted by law. 8 IN WITNESS WHEREOF, this Lease Agreement has been executed by the parties as of the date first above written. NJR ENERGY SERVICES COMPANY By: _______________________________ Name: _____________________________ Title: ____________________________ CENTRAL NEW YORK OIL AND GAS COMPANY, LLC By: _______________________________ Name: _____________________________ Title: ____________________________ 9 EX-10.3 5 y60698ex10-3.txt TRANSPORTATION CAPACITY RELEASE AGREEMENT EXHIBIT 10-3 SECTION(S) MARKED WITH "***" ARE REDACTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT THAT WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. TRANSPORTATION CAPACITY RELEASE AGREEMENT This Transportation Capacity Release Agreement (this "AGREEMENT") is entered into as of this 9th day of January, 2002, by and between NJR Energy Services Company, a New Jersey corporation ("NJRES"), and eCORP Marketing, LLC, a Delaware limited liability company and successor by merger to eCORP Marketing, LLC, a Delaware limited liability company ("eCORP MARKETING"). RECITALS: A. Each of Central New York Oil and Gas Company, L.L.C., a New York limited liability company ("CNYOG"), and eCORP Marketing is a wholly owned subsidiary of Stagecoach Holding, LLC, a Delaware limited liability company. CYNOG is the owner of the Stagecoach Natural Gas Storage Project located in Tioga County, New York. B. CNYOG and eCORP Marketing have entered into a Precedent Agreement dated November 17, 1999, which provides for the purchase of firm storage services by eCORP Marketing from CNYOG. C. eCORP Marketing and Tennessee Gas Pipeline Company ("TENNESSEE") have entered into a Gas Transportation Agreement dated June 7, 2001 (the "300 LINE GTA") providing for transportation of natural gas on a firm basis in accordance with the Federal Energy Regulatory Commission ("FERC") order issued on February 23, 2001 in Docket No. CP00-65-000. The 300 Line GTA has a primary term of 10 years. The primary receipt point thereunder is Tennessee Station No. 319 and the primary delivery point thereunder is Tennessee Clinton Roads, meter number 020608 in Sussex County, New Jersey (collectively, the "PRIMARY POINTS"). D. eCORP Marketing and NJRES have agreed to effectuate a long-term prearranged release of all of the capacity under the 300 Line GTA to NJRES. NOW, THEREFORE, in consideration of the agreements and benefits set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Annual Capacity Releases. (a) Commencing with an effective date of April 1, 2002, and continuing through March 31, 2012, unless earlier terminated as provided herein, NJRES and eCORP Marketing shall undertake to effectuate a prearranged annual release to eCORP Marketing on Tennessee's electronic bulletin board of 90,000 Dth per day at a monthly demand rate *** (or such lesser amount as is necessary to ensure that the total consideration for such capacity not exceed the maximum lawful rate, if any, applicable to the capacity). Each such annual release shall be effective on April 1 of each year (commencing April 1, 2002) and shall remain in effect until March 31 of the following year. (b) eCORP Marketing shall not be permitted to change either of the Primary Points during the term of any annual release pursuant to this Section 1. (c) eCORP Marketing shall satisfy and perform all of the shipper's obligations (including without limitation payment obligations) under the 300 Line GTA and Tennessee's FERC Gas Tariff, including rate schedule FT-A and the General Terms and Conditions, Fifth Revised No. 1 as on file, as may be amended from time to time ("Tennessee's Gas Tariff"), with respect to all capacity released pursuant to this Section 1. In the event eCORP Marketing fails to satisfy or perform such obligations, NJRES shall have the right to recall such released capacity. (d) In addition to the terms and conditions applicable to the prearranged releases described above, the parties agree that NJRES shall have the right to recall all or any portion of the capacity released pursuant to this Agreement in the event that the Amended and Restated Natural Gas Storage Marketing and Management Agreement executed by and between NJRES and eCORP Marketing as of January 9, 2002 ("M&M Agreement") is terminated for any reason. (e) Termination of capacity release obligation. In the event the M&M Agreement is terminated for any reason, NJRES's obligation to release capacity to eCORP pursuant to this Agreement shall also terminate. 2. Scope of Agreement. This Agreement shall be subject to the effective provisions of the 300 Line GTA and Tennessee's Gas Tariff, as may be amended from time to time. 3. Indemnity by eCORP Marketing. eCORP Marketing agrees to and does hereby indemnify and hold harmless NJRES and its successors, assigns, officers, directors, agents and employees from and against any and all losses, damages, liabilities, injuries, costs and expenses (including without limitation attorneys' fees) due to or arising out of any breach of this Agreement by eCORP Marketing. 4. Indemnity by NJRES. NJRES agrees to and does hereby indemnify and hold harmless eCORP Marketing and its successors, assigns, officers, directors, agents and employees from and against any and all losses, damages, liabilities, injuries, costs and expenses (including without limitation attorneys' fees) due to or arising out of any breach of this Agreement by NJRES. - 2 - 5. Notices. Except as otherwise specifically provided herein, any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or by Federal Express, Express Mail or similar overnight delivery or courier service or delivered (in person or by telecopy, telex or similar telecommunications equipment) against receipt to the party to whom it is to be given, If to eCORP Marketing: eCORP Marketing, LLC 10,000 Memorial Drive Suite 530 Houston, Texas 77024 Attention: G. S. Clifton Facsimile No. (713) 526-2363 If to NJRES: NJR Energy Services Company 1415 Wyckoff Road Wall, New Jersey 07719 Attention: Joseph P. Shields Facsimile No. (732) 938-7547 or (iv) in any case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 5. Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. Any notice given by other means permitted by this Section 5 shall be deemed given at the time of receipt thereof. 6. Agreement Binding on Successors. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party hereto may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the other party. 7. Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 8. Counterparts. This Agreement may be executed in counterparts, all of which taken together shall constitute a single document. 9. Governing Law. This Agreement has been negotiated and shall be consummated in the State of New York and shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. - 3 - 10. Regulatory Matters. This Agreement shall be subject to all valid applicable federal, state and local laws and to the orders, rules and regulations of any duly constituted federal or state regulatory body or authority having jurisdiction. Should either party hereto, by force of any such law or regulation, be ordered or required to do any act inconsistent with the provisions of this Agreement or prohibited from performing any act required under this Agreement or should its performance under this Agreement become commercially impracticable as a result of such law or regulation, then the parties shall negotiate in good faith to reform this Agreement so as to give effect to the original intention of the parties. In the event that such reformation is not possible, then the affected party shall have the right to terminate this Agreement upon 10 days' written notice to the other party, which notice shall be given within 30 days after the party giving notice becomes aware of the facts or circumstances giving rise to this right to terminate. If the right to terminate is not exercised by either party, then the Agreement shall continue but shall be deemed modified to conform to the requirements of such law or regulation. 11. Entire Agreement. This Agreement and the other documents referred to herein set forth the entire understanding of the parties with respect to the subject matter hereof, supersede all existing agreements among them concerning such subject matter and may be modified only by a written instrument duly executed by the party or parties against whom enforcement thereof is or could be sought. 12. Expenses and Attorneys' Fees. Each of the parties shall bear their own expenses incurred with respect to this Agreement and the transactions contemplated hereby. 13. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NJRES AND ECORP MARKETING HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. 14. Jurisdiction. Any legal action or proceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof shall be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each of NJRES and eCORP Marketing hereby accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts and appellate courts from any appeal thereof. Each of NJRES and eCORP Marketing irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each of NJRES and eCORP Marketing at its notice address provided pursuant to Section 5. hereof. Each of NJRES of eCORP Marketing hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of either party hereto or its designees to serve process in any other manner permitted by law. - 4 - IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first above written. NJR ENERGY SERVICES COMPANY By: /S/ JOSEPH P. SHEILDS Name: Joseph P. Sheilds Title: Senior Vice President eCORP MARKETING, LLC By: /S/ JOHN F. THRASH Name: John F. Thrash Title: Manager - 5 - EX-10.4 6 y60698ex10-4.txt LETTER AGREEMENT EXHIBIT 10-4 eCORP MARKETING, LLC 10,000 MEMORIAL DRIVE SUITE 530 HOUSTON, TEXAS 77024 January 9, 2002 Mr. Richard R. Gardner, Director Gas Supply & Capacity Management NJR Energy Services Company P.O. Box 1464 1415 Wyckoff Road Wall, NJ 07719 RE: Amended and Restated Natural Gas Storage Marketing and Management Agreement Dated January 9, 2002 Dear Rick: eCORP Marketing, LLC ("eCORP") and NJR Energy Services Company ("NJRES") are parties to the referenced Amended and Restated Natural Gas Storage Marketing and Management Agreement ("M&M Agreement"), pursuant to which NJRES is obligated to assist eCORP in the marketing and management of its natural gas storage and transportation services related to Central New York Oil and Gas Company, LLC's ("CNYOG") Stagecoach Natural Gas Storage Facility ("Stagecoach"). In order to accommodate the business and operational needs of all parties, and in consideration of the mutual benefits to be realized by the parties pursuant to the M&M Agreement, NJRES and eCORP desire to establish certain additional rights and obligations that would take effect in the event that the total inventory of natural gas in the Stagecoach storage field should drop to a level that could jeopardize CNYOG's ability to meet its firm withdrawal obligations. Capitalized terms used in this Letter Agreement but not defined herein shall have the meanings given them in the FERC Gas Tariff, Original Volume No. 1 of Central New York Oil And Gas Company, LLC filed with the Federal Energy Regulatory Commission, effective December 1, 2001, as it may be supplemented and amended from time to time. By execution of this Letter Agreement, each of the parties agrees as follows: Whenever the aggregate total of all Working Storage Gas and Base Gas in Stagecoach is less than 5,000,000 dt, and NJRES's Working Storage Gas balance (pursuant to its ISS Service Agreement with CNYOG dated January 9, 2002) is less than Mr. Rick Gardner Page 2 2,000,000 dt, and as the result of such diminished inventory of Gas in Storage CNYOG determines and gives notice to eCORP by way of an OFO that it may be operationally unable to fulfill all of the firm withdrawal nominations properly made under FSS Service Agreements, eCORP may require NJRES to tender at the Point of Injection/Withdrawal quantities of Gas for injection into Stagecoach Storage (at a minimum rate of 1,000 dt per day) at a total daily rate equivalent to the difference between (i) the lesser of (x) 91,213 dt per day or (y) the aggregate of all firm quantities of Gas nominated for withdrawal from Storage under FSS Service Agreements and (ii) the maximum physical withdrawal rate operationally achievable from Stagecoach, assuming that CNYOG is using all operational tools available to meet such firm withdrawal obligations (for example, and not by way of limitation, all compression and withdrawal wells). Such requirement to tender Gas for injection (and any OFO triggering it) shall remain in effect until either NJRES's Working Storage Gas inventory pursuant to its ISS Service Agreement has reached 2,000,000 dt or the aggregate total of all Working Storage Gas and Base Gas in Storage in Stagecoach is not less than 5,000,000 dt, whichever occurs first. The parties further agree that the Gas tender requirement set forth in this Letter Agreement shall not be effective on any Day (i) that CNYOG is able to deliver 91,213 dt or more from the Stagecoach field or (ii) that the inability of CNYOG to meet its firm withdrawal obligations on that Day is due to any event of force majeure, or to scheduled or unscheduled maintenance activity at the Stagecoach field, or to an act of negligence or willful misconduct by Stagecoach or any of its employees or agents. The rights and obligations set forth in this Letter Agreement shall not be assignable or otherwise transferable by either party without the prior written consent of the other party. This Letter Agreement shall remain in effect during the term of the M&M Agreement and ISS Service Agreement, and shall terminate automatically in the event that either the M&M Agreement or the ISS Service Agreement is terminated for any reason. Mr. Rick Gardner Page 3 Please signify your agreement with the provisions of this Letter Agreement by signing and returning one copy to me. Yours truly, Jack F. Browder, Chief Operating Officer Accepted and agreed to this 9th day of January, 2002. NJR Energy Services Company By: _________________________ Name: _______________________ Title: ______________________ -----END PRIVACY-ENHANCED MESSAGE-----