Exhibit 10.4
December 6, 1999
Union Pacific Resources Inc.
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and
Project Orange Associates, L.P.
c/o G.A.S. Orange Associates LLC
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Dear Sirs:
Re: Replacement of Restated Gas Purchase and Sale Agreement dated March 18,
1991 (the "Gas Supply Agreement") between Project Orange Associates, L.P.
(the "Buyer"), Noranda Inc. ("Noranda") and Canadian Hunter Exploration
Ltd. ("Old Hunter")
The purpose of this letter agreement ("Letter Agreement") is to set forth the
understanding of the Buyer, Canadian Hunter Exploration Ltd. ("CHEL") (which is
the successor by amalgamation to Old Hunter) and Union Pacific Resources Inc.
("UPRI") (which is the successor to North Canadian Oils Limited and North
Canadian Marketing Inc.) concerning the amendment and restatement, and partial
assignment to UPRI, of the Gas Supply Agreement.
By virtue of an Assignment, Amendment and Release Agreement dated the date
hereof, in respect of the Gas Supply Agreement between Noranda as Assignor, CHEL
as Assignee and the Buyer, CHEL has become a party to the Gas Supply Agreement
in the place and stead of Noranda and Old Hunter (as so assigned the "Assigned
Gas Supply Agreement"). The Buyer, CHEL and UPRI hereby agree that effective
January 1, 2000 (subject only to Section 8 hereof) the Assigned Gas Supply
Agreement will be replaced by two agreements, the first of which will be between
CHEL and the Buyer (the "CHEL Supply Agreement") and the second of which will be
between UPRI and the Buyer (the "UPRI Supply Agreement"). CHEL will not have
any liability under the UPRI Supply Agreement and UPRI will not have any
liability under the CHEL Supply Agreement and
the liability of CHEL and UPRI hereunder shall be separate and not joint and
several for so long as this Letter Agreement is applicable in the circumstances
described in Section 5(b) hereof, as if the CHEL Supply Agreement and the UPRI
Supply Agreement had been executed and delivered.
1. The terms of the CHEL Supply Agreement will be identical to the Assigned
Gas Supply Agreement with the following exceptions:
(a) for the purpose of establishing the term, the Initial Delivery Day
shall be deemed to have been June 1, 1992;
(b) the Maximum Daily Quantity from and after the effective date of the
CHEL Supply Agreement shall be 17,500 MMBtu;
(c) for the purpose of establishing the Unconsumed Entitlement, the
Maximum Entitlement on the Initial Delivery Day shall be deemed to
have been or 69,999,600 MMBtu;
(d) the introductory phrase of Section 2.2 will be modified to reflect
that Buyer shall be entitled to purchase gas from CHEL and UPRI under
the CHEL Supply Agreement and the UPRI Supply Agreement, respectively
and the quantity of Gas referred to in Section 2.2(e)(y) shall be
10,062 MMBtu;
(e) the quantities of natural gas referred to in Sections 2.3(b)(i) and
(ii) and 2.3(c)(i) and (ii) shall be 58.333% of those quantities set
forth in the same clauses of the Gas Supply Agreement;
(f) there being no Deferral Balance, there shall be no further deferral of
payments as contemplated in Section 3.7 of the Assigned Gas Supply
Agreement, and Section 3.7 and any other references to the Deferral
Balance or the Deferral Account shall therefore not appear in the CHEL
Supply Agreement, mutatis mutandis;
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(g) the reference in Section 8.6(c) to Noranda Financial Statements shall
be changed to a reference to CHEL Financial Statements;
(h) references to the Deferral Account and the Deferral Balance in Section
12.2 and elsewhere shall be deleted;
(i) Section 14.3 shall be deleted;
(j) Section 14.4 shall be deleted;
(k) Section 14.6 shall be modified, as appropriate, to reflect CHEL being
the successor to Noranda;
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(l) the quantities set forth in Section 15.1(x) and (y) of the CHEL Supply
Agreement shall be equal to 58.333% of the quantities set forth in
Section 15.1 of the Gas Supply Agreement;
(m) the addresses for notices under the CHEL Supply Agreement in Section
17.6 shall be as follows:
Buyer: Project Orange Associates, L.P.
c/o G.A.S. Orange Associates, LLC
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Attention: President
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CHEL: Canadian Hunter Exploration Ltd.
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Attention: Treasurer
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(n) the CHEL Supply Agreement shall be governed by and construed under the
laws in force in the Province of Alberta, Canada.
2. The terms of the UPRI Supply Agreement will be identical to the CHEL Supply
Agreement with the following exceptions:
(a) for the purpose of establishing the term, the Initial Delivery Day shall be
deemed to have been June 1, 1992;
(b) the Maximum Daily Quantity on the effective date of the UPRI Supply
Agreement shall be 12,500 MMBtu;
(c) for the purpose of establishing the Unconsumed Entitlement, the Maximum
Entitlement on the Initial Delivery Day shall be deemed to have been
50,000,400 MMBtu;
(d) the quantity of Gas referred to in Section 2.2(e)(y) shall be 7,188 MMBtu;
(e) the quantities of natural gas referred to in Sections 2.3(b)(i) and (ii)
and 2.3(c)(i) and (ii) shall be 41.667% of those quantities set forth in
the same clauses of the Gas Supply Agreement;
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(f) the reference in Section 8.6(c) to CHEL Financial Statements shall be
changed to a reference to UPRI Financial Statements;
(g) Section 14.6 shall be modified to reflect the administration by CHEL of the
nominations, transportation services and accounting and that payments due
to UPRI will be made to CHEL as UPRI's agent;
(h) the quantities set forth in Section 15.1(x) and (y) of the UPRI Supply
Agreement shall be equal to 41.667% of the quantities set forth in Section
15.1 of the Gas Supply Agreement;
(i) the addresses for notices under the UPRI Supply Agreement in Section 17.6
shall be as follows:
Buyer: Project Orange Associates, L.P.
c/o G.A.S. Orange Associates LLC
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Attention: President
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UPRI: Union Pacific Resources Inc.
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Attention: Vice President, Marketing
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(j) the UPRI Supply Agreement shall be governed by and construed under the laws
enforced in the Province of Alberta, Canada.
3. The Parties agree that the Unconsumed Entitlement under the Gas Supply
Agreement was 70,236,028 MMBtu as at November 1, 1999 and that if the CHEL
Supply Agreement and UPRI Supply Agreement had been in force on that date,
the Unconsumed Entitlements thereunder would have been 40,970,782 MMBtu and
29,265,246 MMBtu, respectively.
4. In consideration of the foregoing:
(a) CHEL has paid US $291,665 to the Buyer, the receipt and sufficiency of
which are hereby acknowledged; and
(b) UPRI has paid US $208,335 to the Buyer, the receipt and sufficiency of
which are hereby acknowledged.
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5. Assuming the conditions precedent set forth in paragraph 8 hereof have been
met, effective January 1, 2000:
(a) if the CHEL Supply Agreement and the UPRI Supply Agreement have been
executed and delivered, then as of such date the CHEL Supply Agreement
and the UPRI Supply Agreement will be deemed to replace, amend and
restate in all respects the Assigned Gas Supply Agreement.
(b) If the CHEL Supply Agreement and the UPRI Supply Agreement have not
then been executed and delivered, then this Letter Agreement shall be
effective to govern the gas purchase and sale arrangement among, and
the respective rights, duties and obligations of, the parties, and
shall for such purpose constitute an amendment to the Assigned Gas
Supply Agreement, until such time as the CHEL Supply Agreement and the
UPRI Supply Agreement have been executed and delivered. In case of
any inconsistencies between this Letter Agreement and the Assigned Gas
Supply Agreement in such event, the terms of this Letter Agreement
shall be controlling.
6. The Buyer, CHEL and UPRI each acknowledge and agree that the foregoing
terms reflect their mutual understanding as of the date hereof of the
changes that will be necessary and appropriate to effectuate the CHEL
Supply Agreement and the UPRI Supply Agreement in replacement of the
Assigned Gas Supply Agreement, leaving Buyer and CHEL in the same position,
economic and otherwise, as they are in under the Gas Supply Agreement as in
effect on the date hereof (except to the extent of the changes agreed to in
connection with paragraphs 1 and 2); provided, however, that UPRI and CHEL
will have separate and not joint and several liability. Nonetheless, the
Parties understand and agree to cooperate fully to incorporate any other
changes to the Assigned Gas Supply Agreement that they mutually determine
to be necessary and appropriate between the date hereof and the date the
CHEL Supply Agreement and UPRI Supply Agreement are executed and delivered.
7. It is the intention of the parties that this Letter Agreement is a binding
contract. CHEL and the Buyer, and UPRI and the Buyer, respectively, will
use their best efforts to enter into formal agreements reflecting the
above, reflecting the terms hereof, on or before December 31, 1999.
8. The following additional actions shall be taken, and the following
additional documents shall be delivered to or as directed by Buyer, as
conditions precedent to the effectiveness of the CHEL Supply Agreement and
the UPRI Supply Agreement:
(a) Buyer shall as soon as practicable submit to the U.S. Department of Energy
("DOE") an application seeking expedited approval of an
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amendment to Buyer's authorization for the importation of natural gas, and
as a condition to the effectiveness of the CHEL Supply Agreement and the
UPRI Supply Agreement, Buyer shall have received from DOE a binding Order
approving such amendment;
(b) A Consent and Agreement from UPRI in favor of Buyer's lenders substantially
in the form executed by CHEL in connection with the closing of the offering
of Buyer's Senior Secured Notes issued December 6, 1999 (the "Closing"),
modified as appropriate for UPRI;
(c) An opinion of Alberta counsel to UPRI in customary form as to the
enforceability of the UPRI Supply Agreement against UPRI and other
customary matters, addressed to said lenders;
(d) A revised Consent and Agreement from CHEL in favor of the lenders, bringing
forward the Consent and Agreement of CHEL provided in connection with the
Closing;
(e) An opinion from Alberta counsel to CHEL, in customary form as to the
enforceability of the CHEL Supply Agreement against CHEL and other
customary matters, addressed to said lender; and
(f) Buyer shall have received evidence reasonably satisfactory to it that firm
gas transportation arrangements with TransCanada Pipelines Limited shall be
in place with respect to all deliveries to be made under the CHEL Supply
Agreement and the UPRI Supply Agreement at no additional cost to Buyer over
and above Buyer's existing costs for such arrangements under the Assigned
Gas Supply Agreement as in effect on the date of the Closing.
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If the foregoing accurately reflects your understanding of our agreement, please
so indicate by signing this letter in the space provided below and returning an
executed copy to each other party to this letter.
Yours truly,
CANADIAN HUNTER EXPLORATION LTD.
Per: /s/ ▇▇▇▇ ▇▇▇▇▇
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Per: /s/
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ACKNOWLEDGED AND AGREED TO
this 6th day of December, 1999.
UNION PACIFIC RESOURCES INC.
Per: /s/
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ACKNOWLEDGED AND AGREED TO
this 6th day of December, 1999
PROJECT ORANGE ASSOCIATES, L.P., , by its
general partner, G.A.S. ORANGE ASSOCIATES,
LLC
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President
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