Table of Contents

 

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ARTICLE I	DEFINITIONS AND ACCOUNTING TERMS		1
Section 1.01		Certain Defined Terms	1
Section 1.02		Computation of Time Periods	18
Section 1.03		Accounting Terms	18
Section 1.04		Miscellaneous	19
ARTICLE II	THE HEDGING FACILITY		19
Section 2.01		Natural Gas Hedging Transactions	19
Section 2.02		Sleeved Natural Gas Hedging Transactions	20
Section 2.03		MxEnergy-VPEM Natural Gas Hedging Transactions	21
Section 2.04		SESCo Hedging Transactions	21
Section 2.05		Natural Gas Put Options	22
Section 2.06		Restrictions on Commitments; Hedging Position and Related Covenants; Hedging Disclosures; Exclusivity of Facility	23
Section 2.07		Extension and Termination of Commitments; Termination of Agreement	24
Section 2.08		Fees	25
Section 2.09		Existing Hedge Provider – Counterparty Hedging Transactions	26
Section 2.10		Increased Costs	26
Section 2.11		Payments and Computations	27
ARTICLE III	CONDITIONS PRECEDENT		27
Section 3.01		Initial Conditions Precedent	27
Section 3.02		Conditions Precedent to MxEnergy-VPEM Novation Transactions	32
Section 3.03		Conditions Precedent to Each Hedging Transaction	33
ARTICLE IV	REPRESENTATIONS AND WARRANTIES		33
Section 4.01		Existence; Subsidiaries	33
Section 4.02		Power and Authority	34
Section 4.03		Authorization and Approvals	34
Section 4.04		Enforceable Obligations	34
Section 4.05		Financial Statements; No Material Adverse Effect	35
Section 4.06		Disclosure	35

 

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Section 4.07		Litigation		35
Section 4.08		Compliance with Laws		36
Section 4.09		No Default		36
Section 4.10		Subsidiaries; Corporate Structure		36
Section 4.11		Condition of Properties		36
Section 4.12		MxEnergy – VPEM Hedging Transactions		36
Section 4.13		Insurance		37
Section 4.14		Taxes		37
Section 4.15		Security Interests		37
Section 4.16		Solvency		38
Section 4.17		Senior Obligations		39
Section 4.18		Investment Company Act		39
Section 4.19		Names and Locations		39
Section 4.20		Revisions or Updates to the Schedules		39
Section 4.21		SESCo Acquisition		39
ARTICLE V	AFFIRMATIVE COVENANTS			40
Section 5.01		Preservation of Existence, Etc		40
Section 5.02		Compliance with Laws, Etc		40
Section 5.03		Maintenance of Property		41
Section 5.04		Maintenance of Insurance		41
Section 5.05		Payment of Taxes, Etc		41
Section 5.06		Reporting Requirements		42
Section 5.07		Other Notices		44
Section 5.08		Books and Records; Inspection		45
Section 5.09		Nature of Business		45
Section 5.10		Risk Management Policy		46
Section 5.11		Additional Guarantors		46
Section 5.12		Further Assurances		46
Section 5.13		Account Control Agreement		46
ARTICLE VI	NEGATIVE COVENANTS			47

 

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Section 6.01		Credit Agreement Negative and Financial Covenants		47
Section 6.02		Limitation on Natural Gas Hedge Agreements		47
Section 6.03		Limitation on Speculative Hedge Agreements and Positions		47
Section 6.04		Additional Limitations on Liens; Hedging Facility Collateral		47
Section 6.05		Additional Limitations on Dispositions of Collateral Account Property		48
Section 6.06		Restrictive Agreements		48
Section 6.07		Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities		48
Section 6.08		Subordinated Debt		48
ARTICLE VII	SPECIFIED EVENTS			48
Section 7.01		Specified Events		48
Section 7.02		Rights and Remedies		49
Section 7.03		Non-Exclusivity of Rights and Remedies		49
Section 7.04		Collateral Account		50
ARTICLE VIII	THE GUARANTY			50
Section 8.01		Guaranteed Obligations		50
Section 8.02		Nature of Guaranty		50
Section 8.03		Hedge Provider’s Rights		51
Section 8.04		Guarantor’s Waivers		51
Section 8.05		Maturity of Obligations, Payment		52
Section 8.06		Hedge Provider’s Expenses		52
Section 8.07		Liability		52
Section 8.08		Events and Circumstances Not Reducing or Discharging any Guarantor’s Obligations		53
Section 8.09		Subordination of All Guarantor Claims.		55
Section 8.10		Claims in Bankruptcy		56
Section 8.11		Payments Held in Trust		56
Section 8.12		Benefit of Guaranty		56
Section 8.13		Reinstatement		56
Section 8.14		Liens Subordinate		57

 

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Section 8.15		Guarantor’s Enforcement Rights		57
Section 8.16		Limitation		57
Section 8.17		Contribution Rights		57
Section 8.18		Release of Guarantors		58
ARTICLE IX	MISCELLANEOUS			58
Section 9.01		Amendments, Etc		58
Section 9.02		Notices, Etc		58
Section 9.03		No Waiver; Cumulative Remedies		60
Section 9.04		Costs and Expenses		60
Section 9.05		Indemnification		60
Section 9.06		Successors and Assigns		61
Section 9.07		Confidentiality		61
Section 9.08		Execution in Counterparts		62
Section 9.09		Survival of Representations, etc		62
Section 9.10		Severability		62
Section 9.11		Interest Rate Limitation		62
Section 9.12		Governing Law		63
Section 9.13		Submission to Jurisdiction		63
Section 9.14		Waiver of Jury Trial		64
Section 9.15		Entire Agreement		64

 

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EXHIBITS:
Exhibit A	-	Form of ISDA Master Agreement
Exhibit B	-	Form of ISDA Schedule
Exhibit C	-	Form of ISDA Credit Support Annex
Exhibit D	-	Form of Security Agreement
Exhibit E	-	Form of Pledge Agreement
Exhibit F	-	Form of Closing Certificate
Exhibit G	-	Form of Legal Opinion

 

SCHEDULES:
Schedule 1.01(a)	-	Guarantors
Schedule 1.01(b)	-	Natural Gas Hedging Transaction Geographic Delivery Locations
Schedule 1.01(c)	-	Existing Hedge Provider-Counterparty Hedging Transactions
Schedule 4.01	-	Licensed Jurisdictions
Schedule 4.10	-	Subsidiaries
Schedule 4.12(a)		MxEnergy-VPEM Financially-Settled Hedging Transactions
Schedule 4.13	-	Insurance
Schedule 4.19	-	Locations
Schedule 9.02	-	Addresses for Notices

 

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MASTER TRANSACTION AGREEMENT

 

This Master Transaction Agreement dated as of August 1, 2006 (this “ Agreement ”) by and among SOCIÉTÉ GÉNÉRALE, as Hedge Provider (together with its successors and permitted assigns, the “ Hedge Provider ”), MXENERGY INC., a Delaware corporation (the “ Counterparty ”), and the Guarantors specified herein.

 

WHEREAS, the Counterparty desires that the Hedge Provider establish a committed exclusive natural gas hedging facility and enter into hedging transactions with the Counterparty in respect of the Counterparty’s fixed price natural gas trading and inventory positions, and other hedging transactions as further provided herein; and

 

WHEREAS, the Hedge Provider has agreed to establish such a hedging facility for the Counterparty and to enter into such hedging transactions with the Counterparty on the terms set forth herein and in the other Transaction Documents (as defined herein).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Hedge Provider, the Counterparty and the Guarantors hereby agree as follows:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.01          Certain Defined Terms . Any terms used in this Agreement that are defined in Article 9 of the Uniform Commercial Code as adopted in the State of New York (“ UCC ”) shall have the meanings assigned to those terms by the UCC as of the date of this Agreement. As used in this Agreement, the terms defined above shall have the meanings set forth therein and the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“ Acceptable Security Interest ” means, with respect to any Property of any Person, any Lien on such Property which (a) exists in favor of the Hedge Provider; (b) secures the payment and performance of the Obligations; and (c) is perfected and valid and enforceable against the Transaction Party that created such security interest in preference to any Liens or other rights of any Person therein, except as expressly provided in this Agreement or in the Intercreditor Agreement.

 

“ Account Control Agreement ” means a securities account control agreement among the Hedge Provider, the Counterparty, and the Custodian, in form and substance satisfactory to the Hedge Provider.

 

“ Additional Termination Event ” has the meaning specified in the ISDA Master Agreement and the ISDA Schedule.

 

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“ Administrative Agent ” means Société Générale, in its capacity as administrative agent for the Lenders under the Credit Agreement and the other Loan Documents, and any successor in such capacity appointed pursuant to the Credit Agreement.

 

“ Affected Party ” has the meaning specified in the ISDA Master Agreement.

 

“ Affected Transaction ” has the meaning specified in the ISDA Master Agreement.

 

“ Affiliate ” of any Person, means any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term “control” (including the terms “controlled by” or “under common control with”) means the possession, directly or indirectly, of the power to (a) vote or direct the voting of 10% or more of the outstanding shares of Voting Stock of such Person or (b) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.

 

“ Aggregate Fixed Price Open Position ” means, as at any date of determination and for any period, the sum of the aggregate notional volumes of natural gas forecasted by the Counterparty to be covered by or subject to Natural Gas Hedging Transactions between the Hedge Provider and the Counterparty for such period, as agreed to by the Hedge Provider.

 

“ Amendment No. 1 to Intercreditor Agreement ” means Amendment No. 1 to Intercreditor and Subordination Agreement, dated on or about the Closing Date, among the Administrative Agent, VPEM, Sowood, the Hedge Provider, the Counterparty and the other Transaction Parties specified therein.

 

“ Applicable Hedging Transaction Spread ” means, with respect to any Natural Gas Hedging Transaction of any term to maturity, the execution/credit spread to be paid by the Counterparty to the Hedge Provider for or in respect of such transaction, expressed in cents per MMBtu, set forth opposite such term to maturity below:

 

All Spreads in Cents/MMBtu

 

Term to Maturity (x)		Nymex		Additional Basis		Basis Alone
x<=6 months		1.00		0.25		1.00
6 months < x <= 18 months		1.50		0.50		1.50
18 months < x <= 30 months		2.00		0.75		2.00
30 months < x <= 60 months		2.50		1.00		2.50

 

“ Attributable Indebtedness ” means, on any date, (a) in respect of any Capital Lease or any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

 

“ Audited Financial Statements ” means the audited consolidated balance sheet of (a) the Counterparty and its Subsidiaries for each of the fiscal years ended June 30, 2002, 2003, and

 

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2004 and the Parent and its Subsidiaries for the fiscal year ended June 30, 2005 and (b) SESCo for each of the fiscal years ended December 31, 2003, 2004 and 2005, in each case, together with the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Counterparty, the Parent and its Subsidiaries and SESCo, as applicable, including the notes thereto and including an unaudited reconciliation from GAAP to Non-GAAP Financial Reporting accounting.

 

“ Bcf ” means billion cubic feet of natural gas.

 

“ Beneficial Owner ” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Securities and Exchange Act of 1934, as amended.

 

“ Borrowers ” means MxEnergy Inc., a Delaware corporation and MxEnergy Electric Inc., a Delaware corporation, and their permitted successors.

 

“ Bridge Commitment Letter ” means that certain Bridge Commitment Letter dated as of May 12, 2006 between the Parent and Deutsche Bank AG Cayman Islands Branch and Morgan Stanley Senior Funding, Inc., as the lenders.

 

“ Bridge Loan Transaction ” means the $190,000,000 senior, unsecured bridge loan transaction contemplated by the terms and conditions of the term sheet attached to the Bridge Commitment Letter.

 

“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, New York and, if such day relates to any Eurodollar Advance, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

 

“ Capital Lease ” of a Person means any lease of any Property by such Person as lessee that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.

 

“ Cash Equivalents ” means:

 

(a)           direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

 

(b)           investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

 

(c)           investments in certificates of deposit, banker’s acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of

 

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America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

 

(d)           fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (c) above; and

 

(e)           investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above.

 

“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption of taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority (other than any request, guideline or directive that provides that compliance is optional and that there is no penalty or charge of any kind for failure to comply).

 

“ Change of Control ” means the occurrence of any of the following events:

 

(a)           prior to the consummation of an Initial Public Offering, (i) the failure of either Jeffrey Mayer or Carole R. Artman-Hodge (each, a “ Key Executive ”) to be employed by the Parent on a full-time basis in his or her capacity as President and Chief Executive Officer, and Executive Vice President, respectively, and involved in the day-to-day operations of the Parent and its Subsidiaries and (ii) if such failure is due to death, accident, illness, or legal incapacity of one of the Key Executives and the other Key Executive remains employed as required under the foregoing clause (i), the Key Executive failing to be employed is not replaced within 90 days after such failure with an executive consented to by the Majority Banks in writing;

 

(b)           the failure of the Counterparty to be a Wholly-Owned Subsidiary of the Parent;

 

(c)           except for the consummation of an Initial Public Offering, the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Parent and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Securities and Exchange Act of 1934, as amended, but excluding any employee benefit plan of the Parent or any of its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan);

 

(d)           except for the consummation of an Initial Public Offering, the consummation of any transaction (including any merger or consolidation) the result of which is that any “person” (as defined above) (other than Sowood, Charterhouse Financial, Greenhill Capital Partners, Jeffrey Mayer or Carole R. Artman-Hodge (or any of their Affiliates)) becomes the Beneficial Owner, directly or indirectly, of more than 25% of the Voting Stock of the Parent, measured by voting power rather than number of shares;

 

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(e)           prior to the consummation of an Initial Public Offering, Sowood fails to be the Beneficial Owner, directly or indirectly, of at least 20% of the Voting Stock of the Parent;

 

(f)            prior to the consummation of an Initial Public Offering, the first day on which a majority of the members of the Board of Directors of the Parent are not Continuing Directors; or

 

(g)           the Parent consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Parent, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Parent or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Parent outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance).

 

“ Closing Date ” means August 1, 2006.

 

“ Code ” means the United States Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any successor statute and all rules and regulations promulgated thereunder.

 

“ Collateral ” means the collective reference to any Collateral Account, all Collateral Account Property, all First Lien Collateral, all Second Lien Collateral and all products and proceeds of any of the foregoing.

 

“ Collateral Account ” means any deposit account or securities account established by the Hedge Provider or the Hedge Provider with the Custodian and otherwise subject to this Agreement, the ISDA Credit Support Annex and, if desired by the Hedge Provider, an Account Control Agreement.

 

“ Collateral Account Property ” means all U.S. government securities constituting Eligible Collateral (as defined in the ISDA Credit Support Annex) of the Counterparty in its capacity as Pledgor under the ISDA Credit Support Annex and all other Property of the Counterparty held or maintained in any Collateral Account from time to time in accordance with this Agreement, the ISDA Credit Support Annex and any Account Control Agreement.

 

“ Commitment Termination Date ” means August 1, 2008 or such later date to which the Commitment Termination Date may be extended from time to time pursuant to and in accordance with Section 2.07 .

 

“ Commitment Extension Agreement ” means an agreement between the Counterparty and the Hedge Provider to extend the maturity of one or more of the Commitments of the Hedge Provider set forth in Article II of this Agreement, in form and substance satisfactory to the Hedge Provider.

 

“ Commitment Extension Effective Date ” has the meaning specified in Section 2.07(a) .

 

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“ Commitments ” means the commitments of the Hedge Provider to (a) enter into Natural Gas Hedging Transactions with the Counterparty pursuant and in accordance with Section 2.01 , (b) enter into and provide Sleeved Natural Gas Hedging Transactions with and for the benefit of the Counterparty pursuant to Section 2.02 , (c) novate one or more of the MxEnergy-VPEM Financially-Settled Hedging Transactions pursuant to and in accordance with Section 2.03 , and (d) enter into SESCo Hedging Transactions with the Counterparty pursuant to Section 2.04 , in each case subject to the conditions and limitations set forth in this Agreement.

 

“ Confirmation ” has the meaning specified in the ISDA Master Agreement (including, without limitation, each confirmation evidencing any Existing Hedge Provider – Counterparty Hedging Transaction).

 

“ Continuing Directors ” means, as of any date of determination, any member of the Board of Directors of the Parent who (a) was a member of such Board of Directors on the Closing Date or (b) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

 

“ Credit Agreement ” means the First Amended and Restated Credit Agreement dated as of August 1, 2006 among the Borrowers, the Guarantors, the Lenders, and the Administrative Agent.

 

“ Debt ,” means, for any Person, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

 

(b)           obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business);

 

(c)           Capital Leases;

 

(d)           all obligations of such Person in respect of letters of credit, bankers’ acceptances, bank guarantees, surety bonds or similar instruments which are issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable;

 

(e)           net obligations of such Person under any Hedge Agreement;

 

(f)            Off-Balance Sheet Liabilities;

 

(g)           indebtedness secured by a Lien on Property now or hereafter owned or acquired by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse (provided, that if such Person has not assumed or otherwise become liable in respect of such Debt, such Debt shall be deemed to be in an amount equal to the lesser of the amount of such Debt and the fair market value of the Property encumbered by such Lien); and

 

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(h)           all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Debt of any Person shall include the Debt of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Debt is expressly made non-recourse to such Person. The amount of any net obligation under any Hedge Agreement on any date shall be deemed to be the Hedge Termination Value thereof as of such date. The amount of any Capital Lease or Off-Balance Sheet Liability as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

 

“ Defaulting Party ” has the meaning specified in the ISDA Master Agreement.

 

“ Dollars ” and “ $ ” means the lawful money of the United States of America.

 

“ Domestic Subsidiary ” means a Subsidiary that is organized or incorporated under the laws of the United States or a State thereof.

 

“ End User ” means each retail residential, commercial, wholesale or industrial buyer of natural gas from the Counterparty or any of its Subsidiaries.

 

“ End User Positions ” means, on any date of determination, all natural gas sale, supply and delivery agreements and obligations of the Counterparty or any of its Subsidiaries with and to each End User on such date of determination.

 

“ Environmental Law ” means all former, current and future Federal, state, local and foreign laws (including common law), treaties, regulations, rules, ordinances, codes, decrees, judgments, directives, orders (including consent orders), and agreements in each case, relating to protection of the environment, natural resources, human health and safety or the presence, Release of, or exposure to, Hazardous Materials, or the generation, manufacture, processing, distribution, use, treatment, storage, transport, recycling or handling of, or the arrangement for such activities with respect to, Hazardous Materials.

 

“ Equity Interests ” shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, or any obligations convertible into or exchangeable for, or giving any person a right, option or warrant to acquire, such equity interests or such convertible or exchangeable obligations.

 

“ Excepted Liens ” has the meaning specified in the Credit Agreement as in effect on the Closing Date.

 

“ Event of Default ” has the meaning specified in the ISDA Master Agreement.

 

“ Existing VPEM Credit Support ” has the meaning specified in the VPEM Release Agreement.

 

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“ Existing Hedge Provider–Counterparty Hedging Transactions ” means the collective reference to the Hedging Transactions between the Hedge Provider and the Counterparty described on Schedule 1.01(c) attached hereto.

 

“ Facility Anniversary Date ” means the Closing Date and the last Business Day of each subsequent 364-day period occurring after the Closing Date, provided that if any such day is not a Business Day, the Facility Anniversary Date shall be the Business Day immediately preceding such day.

 

“ FERC ” means the Federal Energy Regulatory Commission.

 

“ Financial Officer ” for any Person means the chief financial officer, treasurer or senior financial officer of such Person, as applicable.

 

“ First Lien Collateral ” means all Collateral (as defined in the Security Agreement) and all Eligible Collateral (as defined in the ISDA Credit Support Annex) that is subject to a first priority Lien in favor of the Hedge Provider in accordance with this Agreement and the Security Documents.

 

“ First Lien Negative Covenants ” has the meaning specified in Section 6.01 .

 

“ First Purchaser Lien ” means all accounts and inventory which are subject to a Lien securing the obligations of a “first purchaser” of oil and gas production as provided in Texas Bus. & Com. Code Section 9.343, or any other similar law in any other jurisdiction, except for inventory which has been purchased by the Counterparty or any of its Subsidiaries pursuant to a Letter of Credit issued pursuant to the Credit Agreement.

 

“ Fixed Price Natural Gas Positions ” means all fixed price natural gas purchase, sale, supply and inventory transactions and agreements between the Counterparty and any End User or any other Person from time to time in the ordinary course of business.

 

“ Fixed Price Natural Gas Volumes ” means, on any date of determination, the sum of the aggregate volumes of natural gas covered by or subject to agreements between the Counterparty and its End Users or any other Person which provide for fixed-price sales of natural gas to such End Users or such other Person on such date of determination, as determined by the Hedge Provider.

 

“ Foreign Subsidiary ” means any Subsidiary that is not a Domestic Subsidiary.

 

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis.

 

“ Governmental Authority ” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

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“ Governmental Proceedings ” means any action or proceedings by or before any Governmental Authority, including, without limitation, the promulgation, enactment or entry of any Legal Requirement.

 

“ Guarantors ” means (a) the Parent and each of its Subsidiaries listed on Schedule 1.01(a) and (b) any other Person that becomes a guarantor of all or a portion of the Obligations.

 

“ Guarantee ” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Debt payable by another Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt of the payment or performance of such Debt, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Debt, or (iv) entered into for the purpose of assuring in any other manner the owner of such Debt of the payment or performance thereof or to protect such owner against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Debt of any other Person, whether or not such Debt is assumed by such Person; provided , however , that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

 

“ Hazardous Material ” means (a) any petroleum products or byproducts and all other hydrocarbons, coal ash, radon gas, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance or waste that is prohibited, limited or regulated by or pursuant to any Environmental Law.

 

“ Hedge Agreement ” means (a) any and all rate swap transactions, basis swaps, credit derivatives transactions, forward rate transactions, commodity swaps, commodity options, forward purchase and sale transactions, forward commodity contracts, commodity futures contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), in each case whether over-the-counter or exchange-traded, financially settled or physically settled, and whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International

 

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Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, any North American Energy Standards Board (“ NAESB ”) Base Contract for the Sale/Purchase of Natural Gas (together with any NAESB agreement, instrument, annex, addendum or other document relating thereto) or any other master agreement (any such master agreement, together with any related schedules, a “ Master Agreement ”), including any such obligations or liabilities under any Master Agreement.

 

“ Hedge Reconciliation Report ” means a report, in form and substance satisfactory to the Hedge Provider, describing in reasonable detail all of the Counterparty’s and its Subsidiaries’ then existing forward physical natural gas fixed price End User Positions and Inventory Positions, together with a reconciliation of each such End User Position and Inventory Position against any Hedge Agreement entered into by the Counterparty with any Person for the purpose of hedging (dynamically or otherwise) risks arising from such End User Position or such Inventory Position (as applicable).

 

“ Hedge Termination Value ” means, in respect of any one or more Hedge Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Agreements, (a) for any date on or after the date such Hedge Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark to market value(s) for such Hedge Agreements, as determined based upon one or more mid market or other readily available quotations provided by any recognized dealer in such Hedge Agreements.

 

“ Hedging Facility ” means the hedging commitments established by the Hedge Provider and the Counterparty under this Agreement.

 

“ Hedging Facility Collateral ” means, at any time, the collective reference to (i) all cash transferred by the Counterparty to and held by the Hedge Provider or the Custodian pursuant to the ISDA Credit Support Annex at such time and subject to a first priority perfected Lien in favor of the Hedge Provider at such time, (ii) all Collateral Account Property deposited and maintained in the Collateral Account at such time and subject to a first priority perfected Lien in favor of the Hedge Provider at such time and (iii) the undrawn amount(s) of one or more Letter(s) of Credit issued by an acceptable issuing bank to and for the benefit of the Hedge Provider and for the account of the Counterparty in accordance with the ISDA Credit Support Annex existing at such time, valued in accordance with the ISDA Credit Support Annex and not subject to any Letter of Credit Default at such time.

 

“ Hedging Transaction ” means any “Transaction” (as such term is defined in the ISDA Master Agreement) in effect from time to time between the Hedge Provider and the Counterparty (including, without limitation, each Transaction between the Hedge Provider and the Counterparty of the type described in Sections 2.01 , 2.02 , 2.03 or 2.04 and each Existing Hedge Provider – Counterparty Hedging Transaction).

 

“ High Yield Notes Offering” means a private offering of unsecured debt securities with gross cash proceeds to the Parent of at least $190,000,000 and which such debt securities: (i) contain a maturity date that is at least one year after the Maturity Date, (ii) do not provide for any

 

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scheduled repayment of any principal amount thereof prior to maturity; (iii) contain market high-yield covenants (any such high-yield covenants being more restrictive than those contained in this Agreement shall be automatically incorporated herein); and (iv) contain a market interest rate.

 

“ Imbalances ” means, for any period, the difference between the amount of natural gas delivered by the Counterparty and its Subsidiaries to an LDC during such period and the amount of natural gas consumed by End Users that such LDC supplies during the same period.

 

“ Initial Hedging Facility Collateral Requirement ” means (i) the sum of all cash transferred by the Counterparty to and held by the Hedge Provider or the Custodian pursuant to the ISDA Credit Support Annex and subject to a first priority perfected Lien in favor of the Hedge Provider, plus (ii) the sum of the aggregate value of all Collateral Account Property deposited and maintained in the Collateral Account on or prior to the Closing Date, valued in accordance with the ISDA Credit Support Annex and subject to a first priority perfected Lien in favor of the Hedge Provider, plus (iii) the sum of the stated face amount(s) of one or more Letter(s) of Credit issued to and for the benefit of the Hedge Provider and for the account of the Counterparty in accordance with the ISDA Credit Support Annex on or prior to the Closing Date, valued in accordance with the ISDA Credit Support Annex and not subject to any Letter of Credit Default, being equal to $25,000,000 on the Closing Date.

 

“ Initial Management Fee ” has the meaning specified in Section 2.08(a).

 

“ Initial Public Offering ” means an underwritten public offering of shares of the Parent wherein the aggregate net proceeds is at least $50,000,000.

 

“ Intercreditor Agreement ” means the Subordination and Intercreditor Agreement dated as of December 19, 2005 among the Administrative Agent, VPEM, Sowood, and the Transaction Parties specified therein, as amended by Amendment No. 1 to Intercreditor Agreement.

 

“ Inventory Positions ” means, on any date of determination, all natural gas inventory owned by the Counterparty or any of its Subsidiaries on such date of determination.

 

“ ISDA Credit Support Annex ” means the Credit Support Annex to Schedule to ISDA Master Agreement, dated on or about the Closing Date, between the Hedge Provider, as Party A, and the Counterparty, as Party B, including Paragraph 13 thereto, all in substantially the form of Exhibit C .

 

“ ISDA Documents ” means the collective reference to the ISDA Master Agreement, the ISDA Schedule, the ISDA Credit Support Annex, and each Confirmation between the Hedge Provider and the Counterparty entered into from time to time under the ISDA Master Agreement.

 

“ ISDA Master Agreement ” means the ISDA Master Agreement, dated on or about the Closing Date, between the Hedge Provider, as Party A, and the Counterparty, as Party B, in substantially the form of Exhibit A , as amended, modified and supplemented by the ISDA Schedule and the ISDA Credit Support Annex.

 

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“ ISDA Schedule ” means the Schedule to ISDA Master Agreement, dated on or about the Closing Date, between the Hedge Provider, as Party A, and the Counterparty, as Party B, in substantially the form of Exhibit B .

 

“ LDC ” means a local distribution company that supplies natural gas or electricity beyond the “citygate” or other specified delivery point to the End User on behalf of the Counterparty or any of its Subsidiaries.

 

“ LDC Residual Contract Right ” means, as at any date of determination, the Counterparty’s or any of its Subsidiaries’ enforceable right to receive payment for its natural gas that an LDC holds, or to obtain the return of its natural gas from, an LDC, existing on such date.

 

“ Legal Requirement ” means, as to any Person, any law, statute, ordinance, decree, award, requirement, order, writ, judgment, injunction, rule, regulation (or official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority which is binding on such Person.

 

“ Lenders ” means the lenders listed on the signature pages of the Credit Agreement and any other Person that has become a party to the Credit Agreement pursuant to the terms thereof.

 

“ Letter of Credit ” has the meaning specified in the ISDA Credit Support Annex.

 

“ Letter of Credit Default ” has the meaning specified in the ISDA Credit Support Annex.

 

“ Lien ” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien (statutory or other), pledge, assignment, preference, deposit arrangement, encumbrance, charge, security interest, priority or other security or preferential arrangement of any kind or nature whatsoever, whether voluntary or involuntary in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“ Loan Documents ” has the meaning specified in the Credit Agreement.

 

“ Management Fee ” means (a) with respect to the management fee to be paid on or about the Closing Date, the Initial Management Fee, and (b) thereafter with respect to any management fee to be paid on any Facility Anniversary Date, the management fee set forth below which shall be based on the forecasted Aggregate Fixed Price Open Position for the twelve-month period succeeding such Facility Anniversary Date, as further described in Section 2.08:

 

 

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“ Material Adverse Effect ” shall mean a material adverse effect upon (a) the business, results of operations, prospects, Properties or condition (financial or otherwise) of the Parent and its Subsidiaries taken as a whole, (b) the ability of the Counterparty or the Transaction Parties taken as a whole to perform its or their respective material obligations under the Transaction Documents to which it is a party or (c) the validity or enforceability against any Transaction Party of any of the Transaction Documents or any of the material rights or remedies of the Hedge Provider thereunder.

 

“ Maximum Rate ” means the maximum nonusurious interest rate under applicable law (determined under such laws after giving effect to any items which are required by such laws to be construed as interest in making such determination, including without limitation if required by such laws, certain fees and other costs).

 

“ MMBtu ” means million British thermal units of natural gas.

 

“ Moody’s ” means Moody’s Investors Service, Inc., or any successor that is a nationally recognized statistical rating organization.

 

“ MxEnergy-Counterparty Hedging Transactions ” means, on any date, the collective reference to each natural gas Hedge Agreement in effect between the Counterparty and any other Person (other than VPEM and the Hedge Provider).

 

“ MxEnergy-VPEM Financially-Settled Hedging Transactions ” means, on any date, the collective reference to each natural gas Hedge Agreement in effect between VPEM and the Counterparty on such date, the terms of which require cash payments to be made by VPEM or the Counterparty in satisfaction of obligations arising from time to time thereunder.

 

“ MxEnergy-VPEM Novation Agreement ” means the ISDA Novation Agreement among the Hedge Provider, the Counterparty and VPEM, in form and substance satisfactory to the Hedge Provider, providing for the novation of one or more MxEnergy-VPEM Financially-Settled Hedging Transactions, as determined by the Hedge Provider.

 

“ MxEnergy-VPEM Novation Hedging Transactions ” has the meaning specified in Section 2.03 .

 

“ Natural Gas Hedging Position Volumes ” means, at any date of determination, the sum of the aggregate notional volumes of natural gas covered by or subject to (a) all Natural Gas Hedging Transactions between the Hedge Provider and the Counterparty in effect on such date of determination, as determined by the Hedge Provider and (b) all MxEnergy-VPEM Financially-Settled Hedging Transactions that have been novated in accordance with Section 2.03 and are in effect on such date of determination, as determined by the Hedge Provider.

 

“ Natural Gas Hedging Transactions ” means cash-settled options for natural gas between the Hedge Provider and the Counterparty based on NYMEX prices for natural gas and cash-

 

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settled swaps for natural gas between the Hedge Provider and the Counterparty based on prices for natural gas relating to one or more geographic delivery locations described in Schedule 1.01(b) attached hereto and other natural gas or other derivative products agreed upon by the Hedge Provider and the Counterparty in writing from time to time.

 

“ Natural Gas Put Option Amounts ” has the meaning specified in Section 2.05 .

 

“ Natural Gas Put Options ” has the meaning specified in Section 2.05 .

 

“ Non-GAAP Financial Reporting ” means financial reporting in accordance with GAAP that has been adjusted to exclude (a) non-cash gains, losses or adjustments under FASB Statement 133 (as amended, supplemented and in effect from time to time), (b) settled hedge amounts related to purchases of inventory prior to the inventory being sold to the end customer, and (c) other non-cash charges.

 

“ NYMEX ” means the New York Mercantile Exchange, and any successor thereto.

 

“ Obligations ” means all debts, liabilities, obligations, covenants and duties of, any Transaction Party arising under this Agreement or any other Transaction Document with respect to the Hedge Provider, including any Hedging Transaction to which the Hedge Provider is a party, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Transaction Party or any Affiliate thereof of any proceeding under any law relating to bankruptcy, insolvency or reorganization or relief of debtors naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

 

“ Off-Balance Sheet Liability ” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) Synthetic Lease Obligations, or (c) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, other than any lease that constitutes an Operating Lease.

 

“ Operating Lease ” of a Person means any lease of Property (other than a Capital Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more.

 

“ Parent ” means MxEnergy Holdings Inc., a Delaware corporation, and any permitted successor thereto.

 

“ Permitted Liens ” has the meaning specified in the Credit Agreement as in effect on the date hereof.

 

“ Person ” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

 

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“ Pledge Agreement ” means the Pledge Agreement dated on or about the Closing Date in substantially the form of Exhibit E among one or more of the Transaction Parties as pledgors and the Hedge Provider as secured party, and each other document, instrument or agreement executed by any Transaction Party in connection therewith.

 

“ Potential Event of Default ” has the meaning specified in the ISDA Master Agreement.

 

“ Pro Forma Financial Statements ” means (a) the unaudited pro forma consolidated balance sheet of the Parent, its Subsidiaries and SESCo as of March 31, 2006 prepared in accordance with GAAP and (b) non-GAAP Financial Reporting consolidated balance sheets of the Parent, its Subsidiaries and SESCo as of March 31, 2006, including a reconciliation to GAAP, in each case giving effect to transactions under, and consummated in connection with, this Agreement, the High Yield Notes Offering, the Bridge Loan Transaction, and the SESCo Acquisition Agreement.

 

“ Projections ” means the Parent’s forecasted consolidated annual spread with monthly breakdowns: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, in each case for fiscal years 2007, 2008, and 2009 incorporating the SESCo Acquisition Transaction, the Bridge Loan Transaction, and the High Yield Notes Offering, together with supporting details.

 

“ Property ” of any Person means any interest of such Person in any property or asset (whether real, personal or mixed, tangible or intangible).

 

“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

 

“ Responsible Officer ” for any Person means, the Chief Executive Officer, President, Chief Financial Officer, any Executive or Senior Vice President, Vice President, Treasurer or any other member of senior management of such Person.

 

“ Risk Management Policy ” has the meaning set forth in Section 3.01(a)(xv) and shall include any amendment, modification or waiver thereto that is approved by the Hedge Provider in its sole discretion.

 

“ S&P ” means Standard & Poor’s Rating Agency Group, a division of McGraw-Hill Companies, Inc., or any successor that is a nationally recognized statistical rating organization.

 

“ SEC ” means the Securities and Exchange Commission, and any successor entity.

 

“ Second Lien Collateral ” means the collective reference to all Collateral (as defined in the Security Agreement) and all Collateral (as defined in the Pledge Agreement), other than the First Lien Collateral.

 

“ Secured Counterparty ” has the meaning set forth in the Intercreditor Agreement.

 

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“ Security Agreement ” means the Security Agreement in substantially the form of Exhibit D among one or more of the Transaction Parties as grantors and the Hedge Provider as secured party, and each other document, instrument or agreement executed by any Transaction Party in connection therewith.

 

“ Security Documents ” means the collective reference to Section 7.04 of this Agreement, Article VIII of this Agreement, the ISDA Credit Support Annex, the Security Agreement, the Pledge Agreement, the Intercreditor Agreement, any Account Control Agreement, each Letter of Credit issued for the benefit of the Hedge Provider pursuant to the ISDA Credit Support Annex and each other document, instrument or agreement executed or delivered in connection therewith to secure the payment or performance of all or any portion of the Obligations or to perfect, preserve or protect any Lien created by any of the foregoing.

 

“ SESCo ” means Shell Energy Services Company, L.L.C., a Delaware limited liability company.

 

“ SESCo Acquisition Agreement ” means the Asset Purchase Agreement dated as of May 12, 2006, between SESCo and the Counterparty, as in effect on the date hereof.

 

“ SESCo Acquisition Transaction ” means the transactions contemplated by the SESCo Acquisition Agreement.

 

“ SESCo Hedging Transaction ” has the meaning specified in Section 2.04 .

 

“ Shareholders’ Equity ” means, as of any date of determination, consolidated shareholders equity of the Parent and its Subsidiaries as of that date determined in accordance with GAAP.

 

“ Sowood ” means Sowood Commodity Partners Fund LP, a Delaware limited partnership.

 

“ Sleeved Natural Gas Hedging Transaction ” means the collective reference to (i) a natural gas Hedge Agreement entered into between the Hedge Provider and any Specified Counterparty (arranged by the Counterparty in consultation with the Hedge Provider) and (ii) a back-to-back offsetting Natural Gas Hedging Transaction entered into between the Hedge Provider and the Counterparty containing the same or substantially similar terms as the natural gas Hedge Agreement between the Hedge Provider and the Specified Counterparty referenced in clause (i) above.

 

“ Specified Counterparty ” means any Person selected by the Counterparty and acceptable to the Hedge Provider in its sole discretion to enter into a Hedge Agreement with the Hedge Provider as part of any Sleeved Natural Gas Hedging Transaction.

 

“ Specified Events ” has the meaning set forth in Section 7.01 .

 

“ Subordinated Indebtedness ” means any Debt of the Parent or any of its Subsidiaries (including the Counterparty) that is contractually subordinated to the Obligations on terms and in form and substance reasonably acceptable to the Hedge Provider.

 

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“ Subsidiary ” of a Person means any corporation, association, partnership or other business entity of which more than 50% of the outstanding Equity Interests having by the terms thereof ordinary voting power under ordinary circumstances to elect a majority of the board of directors or Persons performing similar functions (or, if there are no such directors or Persons, having general voting power) of such entity (irrespective of whether at the time Equity Interests of any other class or classes of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person. Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Parent.

 

“ Synthetic Lease Obligation ” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of Property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

 

“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“ Termination Event ” has the meaning specified in the ISDA Master Agreement (and shall for the avoidance of doubt include each Additional Termination Event).

 

“ Transaction ”