AMENDED AND RESTATED ENERGY MARKETING AGREEMENT

 

 

TABLE OF CONTENTS

 

Article 1 Definitions		1
Article 2 Nature of Relationship		4
Article 3 Purchase Transactions		6
Article 4 Sale Contracts		9
Article 5 Provision of Credit; Original Agreement Security Interest		10
Article 6 Reporting Obligations		11
Article 7 Fees		12
Article 8 Lender Financing		12
Article 9 Right to Net		13
Article 10 New Opportunities and Non-Solicitation		13
Article 11 Representations and Warranties		13
Article 12 Indemnification		14
Article 13 Limitation of Liability		15
Article 14 Events of Default; Remedies		15
Article 15 Guaranty		17
Article 16 Miscellaneous		17

 

Exhibits

 

Exhibit 1	ISDA Agreement & Schedule
Exhibit 2	Master Agreement
Exhibit 3	“Sale Contract” – End-user Base Agreement & Ordering Exhibit
Exhibit 4	Security Agreement
Exhibit 5	Master Netting Agreement
Exhibit 6	Approved Local Distribution Companies
Exhibit 7	Notices
Exhibit 8	Transfer Price Schedule
Exhibit 9	Form of Standby Letter of Credit
Exhibit 10	Form of Dominion Guaranty

 

 

THIS AMENDED AND RESTATED ENERGY MARKETING AGREEMENT together with all exhibits and any written supplements hereto (this “Agreement”) is made and entered into as of this 15th day of December 2005 (the “Effective Date”), by and between VIRGINIA POWER ENERGY MARKETING, INC., a Virginia corporation (“Provider”), and MxEnergy Inc., a Delaware corporation (“Client”). Each of Provider and Client may be referred to herein individually as a “Party” or collectively as “Parties”.

 

WHEREAS , Provider is engaged in the business of purchasing and selling natural gas;

 

WHEREAS, Client is engaged in the retail aggregation of natural gas customers;

 

WHEREAS , the Parties previously entered into an Energy Marketing Agreement dated as of the 18th day of September 2002 (the “Original Agreement”), pursuant to which the Client agreed to purchase natural gas from Provider, and Provider agreed to provide to Client certain credit facilities to assist Client in the purchase of natural gas from Provider and in Client’s sale of natural gas to its various retail customers; and

 

WHEREAS , the Parties now desire to amend and restate the Original Agreement in its entirety as hereinafter provided.

 

NOW, THEREFORE , in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend and restate the Original Agreement in its entirety to read as follows:

 

ARTICLE 1
DEFINITIONS

 

1.1                                  “Affiliate” means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Client (a “Controlling Person”) or (ii) any Person (other than the Client) which is controlled by or is under common control with a Controlling Person. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

 

1.2                                  “Approved Third Party Seller” has the meaning set forth in Section 3.2(C).

 

1.3                                  “Bankrupt” or “Bankruptcy” means, with respect to a Person, (i) the commencement of any voluntary or involuntary case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to such Person, or

 

 

seeking to adjudicate such Person a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to such Person or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it, or for all or any substantial part of its assets, (ii)  the making of a general assignment for the benefit of such Person’s creditors; (iii) the inability of such Person to, or the admission by such Person of its inability to, pay its debts as they become due.

 

1.4                                  “Business Day” means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time for the relevant Party’s principal place of business. The relevant Party, in each instance unless otherwise specified, shall be the Party to whom the notice, Payment or delivery is being sent and by whom the notice or Payment or delivery is to be received.

 

1.5                                  “Commercial Customer” means an entity that is neither a residential nor industrial purchaser of natural gas up to a total aggregate amount of  50,000 MMBtu per year.

 

1.6                                  “Customer” means (1) any residential purchaser of natural gas; (2) any Small Commercial Customer; (3) any Industrial Customer or (4) any Governmental Entity residing in the Specified Geographic Region and who agrees to purchase natural gas from Client.

 

1.7                                  “Event of Default” has the meaning set forth in Section 14.1.

 

1.8                                  “Governmental Entity” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative or regulatory agency or commission or other governmental authority or instrumentality, domestic or foreign.

 

1.9                                  “Industrial Customer” means any entity that is a purchaser of natural gas in excess of a total aggregate amount of 50,000 MMBtu per year.

 

1.10                            “Intercreditor Agreement” means that certain Subordination and Intercreditor Agreement dated as of December __, 2005 by and among Societe Generale, as Administrative Agent, Virginia Power Energy Marketing, Inc., Sowood Commodity Partners Fund, LP, MxEnergy Holdings Inc., MxEnergy, Inc., MxEnergy Electric Inc. and Other Loan Parties

 

1.11                            “ISDA Agreement & Schedule” means the International Swaps and Derivatives Association Agreement and accompanying Schedule, excluding the Credit Support Annex, executed concurrently with the Original Agreement and a copy of which is attached hereto as Exhibit 1.

 

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1.12                            “Local Distribution Company” (“LDC”) means any of the approved local natural gas utilities listed in Exhibit 6.

 

1.13                            “Lockbox Agreement” means the executed controlled account agreement attached as Exhibit 5 to the Original Agreement.

 

1.14                            “Master Agreement” means the North American Energy Standards Board, Inc. (“NAESB”) Base Contract for Sale and Purchase of Natural Gas version April 19, 2002 executed concurrently with the Original Agreement and a copy of which is attached hereto as Exhibit 2.

 

1.15                            “Monthly Purchase Obligations” means, with respect to a specified calendar month, the aggregate Purchase Obligations incurred for such month.

 

1.16                            “Monthly Sale Obligations” means, with respect to a specified calendar month, the aggregate Sale Obligations incurred for such month.

 

1.17                            “MMBtu” means one million British Thermal Units.

 

1.18                            “Payment” or “Payment Obligations” means, as the context may require, (i) any and all obligations incurred by a Party to transfer cash to the other Party, whether by netting or otherwise, under the Master Agreement, the ISDA Agreement & Schedule and any repayment or prepayment of an extension of credit under the aforementioned agreements or (ii) any and all obligations incurred by a Party to transfer cash to a third party in connection with its obligations under this Agreement.

 

1.19                            “Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

1.20                            “Purchase Transaction” means an agreement for the purchase of natural gas, whether physical or financial and/or transportation capacity by Client from Provider, which such agreement has been entered into pursuant to and is governed by a written contract in a form, which has been negotiated between Provider and Client.

 

1.21                            “Purchase Obligation” means an obligation to purchase natural gas, whether physical or financial and/or associated transportation capacity incurred by Client pursuant to a Purchase Transaction. Such obligations may be expressed in MMBtu’s, in dollars or as a percentage of monthly volume.

 

1.22                            “Residential Customer” means any purchaser of natural gas for personal, non-commercial, non-industrial consumption from Client.

 

1.23                            “Sale Contract” means an agreement for the sale of natural gas by Client to a Customer, which has been entered into pursuant to and is governed by a

 

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contract substantially similar to Exhibit 3.

 

1.24                            “Sale Obligation” means an obligation to sell natural gas incurred by Client pursuant to a Sale Contract. Such obligations may be expressed in MMBtu’s, dollars, therms or cents.

 

1.25                            “Security Agreement” means the Security Agreement dated as of the date of the Original Agreement between the Client and the Provider, attached hereto as Exhibit 4, as may be amended, supplemented or modified from time to time.

 

1.26                            “Specified Geographic Region” means the geographic area that encompasses the respective Provider approved service territories of the Local Distribution Companies listed in Exhibit 6.

 

1.27                            “Speculative Trading” means (i) any and all Trading, whether exchange based or over-the-counter, engaged in for the purpose of financial gain only or (ii) any and all Trading (a) not directly related to hedging, mitigating or locking in risks or (b) that creates a risk position with regard to market price or volume. Notwithstanding the foregoing, Speculative Trading shall not include transactions by Client, whereby Client locks in a price spread between physical locations or points in time using its transportation or storage assets as the basis for such transaction with the intent of such transactions being the optimization its transportation or storage assets.

 

1.28                            “Third Party Purchaser” means an entity that is not a Customer and that agrees to purchase natural gas and/or transportation capacity from Client.

 

1.29                            “Third Party Seller” means a Person other than Provider that Client desires to purchase natural gas and/or transportation capacity from.

 

1.30                            “Trading” means the buying or selling of natural gas, including without limitation incurring any obligation to buy or sell natural gas whether contingent or actual.

 

ARTICLE 2
NATURE OF RELATIONSHIP

 

The purpose of this Agreement is to establish a relationship between the Parties whereby (i) Provider will (a) sell Client its natural gas requirements, physical and financial, except as otherwise provided in this Agreement and (b) reduce the various forms of credit support and other capital-related services as provided for in the Original Agreement to Client and, in exchange, (ii) Client will (a) purchase its natural gas requirements, physical and financial, from Provider, except as otherwise provided in this Agreement and (b) pay Provider fees for such commodities. Without limiting the generality of the foregoing, the Parties agree to the following:

 

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2.1                                  It is expressly understood and agreed that the relationship between Provider and Client described herein or established hereby is not a joint venture or a partnership.

 

2.2                                  Client agrees that it will be solely responsible for conducting and managing its day-to-day business activities and shall use commercially reasonable efforts to market natural gas under this Agreement.

 

2.3                                  Client shall be named as the purchaser in all Purchase Transactions and the seller in all Sale Contracts, and Client shall be solely responsible for the performance of its obligations under such contracts. Except for obligations undertaken by Provider pursuant to Purchase Transactions between Provider and Client, Provider specifically disclaims any and all liability under such contracts and Client acknowledges and agrees that Provider shall have no liability under such contracts.

 

2.4                                  Provider will provide Client the opportunity to purchase financial and physical hedges and derivatives including New York Mercantile Exchange (“NYMEX”) futures, basis, weather derivatives, call options, and put options, only for the benefit of Customers and potential Customers and shall have the same opportunity regarding storage transactions and as further provided for herein pursuant to the terms of the ISDA Agreement & Schedule and the Master Agreement. Client shall not transact any Speculative Trading and any such transaction shall be an Event of Default. Client shall provide to Provider documentation on a monthly basis to demonstrate and/or substantiate that all Purchase Obligations are aligned with offsetting Sales Contracts, provided, however, that from time to time Client may enter into such Purchase Obligations for the purpose of supplying potential Sales Contracts, which Client has a reasonable likelihood of signing during such time period.

 

2.5                                  Neither Party shall be subject to, nor call the other Party for, margining with respect to fixed-price hedges or physical fixed price supply. Client acknowledges that Provider and/or Provider’s Affiliates conduct all risk management activities on their own behalf. Client further recognizes that neither Provider nor any of its Affiliates is currently registered as an “investment advisor” with the Securities and Exchange Commission or any state or federal regulatory agency or as a “commodity trading advisor” with the Commodity Futures Trading Commission or the National Futures Association, and neither Provider nor any of its Affiliates holds itself out generally to the public or to Client as such.

 

2.6                                  Client agrees not to misrepresent to third parties its relationship with Provider, as such relationship is described in this Agreement. Provider shall have the right to review and approve any and all Client press releases mentioning, making reference to Provider or implying that Provider is associated with Client. In the event that Provider determines in its sole,

 

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reasonably exercised discretion that Client has misrepresented its relationship with Provider under this Agreement, such misrepresentation shall be an Event of Default hereunder.

 

2.7                                  It is expressly understood and agreed that nothing in this Agreement changes the employment relationship between Client and its employees, nor does it change the employment relationship between Provider and its employees. Client’s employees, contractors, and agents are not employees, contractors and agents of Provider, and it is the Parties’ intent that nothing in this Agreement or in any other agreement shall be deemed to constitute or be construed as making Client’s employees, contractors and agents employees, contractors or agents of Provider. In addition, nothing in this Agreement or any other agreement shall be construed to create a joint or co-employment relationship between the Parties. Client is solely responsible for any employment related costs and expenses associated with its employees including, but not limited to, recruiting, taxes, benefits, workers compensation, unemployment insurance, equipment, tools, materials, and supplies.

 

2.8                                  During the term of this Agreement, Provider and Client will discuss regularly (at a minimum of once quarterly) the various array of alternative risk type services that could be potentially overlaid with the Customer base of Client. The purchase of any type of risk product from Provider will be at the sole discretion of Client.

 

2.9                                  Client shall first consult with Provider in the event that Client is contemplating filing for Bankruptcy, and the Parties shall mutually agree as to the more beneficial course of action. Should an involuntary petition in Bankruptcy be filed against Client, Client shall immediately discharge and satisfy any debt obligations with respect to such Bankruptcy petition.

 

2.10                            Client shall immediately provide written notice to Provider in the event of any material change in Client’s business, including without limitation, any litigation or threat of litigation, any Commercial or Industrial Customer of Client that is involved in Bankruptcy or threat of Bankruptcy or any event obligating Client to file a claim or notice under its insurance policies as set forth in such policies; provided that the event associated with the material change must have an actual or reasonable potential minimum threshold risk of loss of one million dollars ($1,000,000).

 

ARTICLE 3
PURCHASE TRANSACTIONS

 

3.1                                  In order to purchase its natural gas requirements, physical and financial, Client shall enter into Purchase Transactions with Provider pursuant to the terms of confirmations, the Master Agreement and the ISDA Agreement and Schedule, as applicable.

 

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3.2                                  Client shall purchase its natural gas (i) directly from Provider (under terms upon which Client and Provider mutually agree and pursuant to the Master Agreement and the ISDA Agreement & Schedule, as applicable) to serve or for the benefit of Client’s Customers, as the case may be, in the Specified Geographic Region, (ii) indirectly from Approved Third Party Sellers through Provider pursuant to the arrangement described in Sections 3.2(A) – (D) below or (iii) directly from a Third Party Seller pursuant to the arrangement described in Section 3.3. For all physical and financial natural gas purchased from Provider directly, Client shall pay in accordance with the Transfer Price Schedule set forth in Exhibit 8.

 

(A)          Client may elect to purchase from Approved Third Party Sellers, as defined in Section 3.2(C)), pursuant to the conditions set forth in Section 3.2(B) and the following condition. If Client receives an offer to buy natural gas, physical or financial, (on terms identical, including delivery point, delivery period and volume, excepting price, to the terms offered by Provider) from an Approved Third Party Seller of natural gas that is more than $0.04 per MMBtu or equivalent heating value unit less than Provider’s then current Offer (defined in Exhibit 8) to sell natural gas, physical or financial, to Client (the “Approved Third Party Offer”), Client shall introduce such Approved Third Party Seller to Provider and Provider will then purchase the Approved Third Party Offer and Provider shall resell such Approved Third Party Offer to Client at the Approved Third Party Offer plus $0.02 per MMBtu or equivalent heating value unit. Sections 3.2(A)-(D) and 3.3 shall be the sole and exclusive remedy to Client for the purchase of Client’s natural gas, physical or financial, requirements with respect to pricing disputes between Provider and Client.

 

(B)           The following additional conditions shall apply to the purchase of natural gas, physical or financial, from an Approved Third Party Seller (any consent required under this Section 3.2(B) shall not be unreasonably withheld):

 

(i)            natural gas purchased under a transaction with an Approved Third Party Seller shall be purchased on an index related basis if requested for a term of one year or less, provided that such request is made by one of Client’s approved supply personnel as specified by Client to Provider in writing from time to time, except as otherwise provided in Section 3.2(B)(ii);

 

(ii)           natural gas cannot be purchased on a fixed price basis unless it is either a day-to-day purchase, consent is provided by Provider or Client is selling such natural gas to a Customer on terms and conditions, including without limitation quantity and pricing, that mirror the subject fixed priced purchase agreement;

 

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(iii)          no natural gas purchase shall be entered into for a volume of greater than ten thousand (10,000) MMBtus per day without the consent of Provider;

 

(iv)          Provider will verbally confirm the quantity of natural gas under an Approved Third Party Seller transaction after Client provides notice to Provider that such transaction terms are agreed to. Provider will then enter into the transaction and will be the confirming party in such transaction;

 

(v)           all transactions must be communicated in writing to Provider from Client within two (2) hours of entering into the respective transaction and no later than two (2) hours of the nomination deadline;

 

(vi)          no intraday natural gas will be provided by Provider for Client if the Approved Third Party Seller’s natural gas is curtailed by Force Majeure (as defined in the Master Agreement), unless Provider agrees to provide such intraday natural gas; and

 

(vii)         Client shall not enter into transactions for the purchase of natural gas with more than 12 Approved Third Party Sellers outstanding at any one time.

 

(C)           Prior to negotiating a purchase with any Third Party Seller, Client shall provide the name of such Third Party Seller to Provider. Provider may investigate the creditworthiness of each such Third Party Seller and shall notify Client in writing of those Third Party Sellers that satisfy Provider’s credit requirements (the “Approved Third Party Sellers”) and those that do not satisfy Provider’s credit requirements (the “Unapproved Third Party Sellers”). Provider shall have the right to change its credit requirements at any time and such right shall be exercisable by Provider in its sole discretion and without prior notice to Client. Provider shall have the right, upon written notice to Client, to change the status of any Third Party Seller from an Approved Third Party Seller to an Unapproved Third Party Seller or vice versa. There will be no Approved Third Party Seller natural gas purchase unless a fully executed contract, in a form substantially similar to the Master Agreement or the ISDA Agreement & Schedule, as the case may be, exists between Provider and Third Party Seller.

 

(D)          Provider shall use reasonable efforts to notify Client of the initial status of any Third Party Seller within two (2) Business Da