Precedent Agreement for Firm Natural Gas Storage Service

Precedent Agreement for Firm Natural Gas Storage Service

This Precedent Agreement for Firm Natural Gas Storage Service (the “Precedent Agreement” or “Agreement”), is entered into as of , by and between (the “Sponsor”), and (the “Customer”). Sponsor and Customer are sometimes referred to individually as “Party,” and collectively as the “Parties.”

Sponsor plans to develop a new salt-cavern natural gas storage facility in , with a planned working capacity of (the “ Energy Center”).

On , Sponsor filed an application (the “FERC Certificate Application”) with the Federal Energy Regulatory Commission (“FERC”) requesting a certificate of public convenience and necessity under Section 7. of the Natural Gas Act (“FERC Certificate”) to construct, own, and operate the Energy Center.

Customer and Sponsor now wish to enter into an agreement pursuant to which, on the satisfaction of the conditions precedent enumerated below, they will execute a firm storage service agreement on the terms described in this Precedent Agreement.

In consideration of the understandings and mutual covenants assumed by each Party, and other valuable consideration, the receipt and sufficiency of which is acknowledged, Sponsor and Customer agree as follows:

AGREEMENT

1. Service; Rates; Duration.

(a) Service. Subject to the conditions set forth in this Agreement, including, without limitation, the conditions set forth in Section 3., Customer shall purchase, and Sponsor shall provide, the firm natural gas storage services set forth on Exhibit “A” (the “Service”).

(b) Rates. The storage rates (the “Rates”) Customer shall pay for the Service shall be negotiated rates for the duration of the term of the Service as set forth on Exhibit “A.”

(c) Duration. Subject to the terms and conditions set forth in this Agreement, the Service shall commence on the date (the “Commencement Date”) that is the later of (i) the date set forth on Exhibit “A” (the “requested Commencement Date”), and (ii) the date (the “Completion Date”) specified in a notice delivered to Customer by Sponsor indicating that the Energy Center has been successfully tested in accordance with applicable regulation and is able and authorized to initiate and maintain reliable service to Customer, and shall continue thereafter for a period of ( ) years.

(d) Earlier Service. Notwithstanding the provisions of Section 1.(c) above, if the Completion Date shall occur before the Requested Commencement Date, Customer shall have the right, but not the obligation, to agree to advance the Commencement Date to the Completion Date subject to Sponsor having available capacity to provide the requested service.

2. Certain Covenants.

(a) Completion of the Energy Center; Provision of Service. Sponsor agrees to use commercially reasonable efforts to (i) prosecute the FERC Certificate Application and obtain the FERC Certificate, (ii) case the completion of the Energy Center on or before the Requested Commencement Date; and, (iii) to provide the Service.

(b) Execution of Firm Storage Service Agreement(s). Within thirty (30) days after notice from Sponsor pursuant to Section 3.(d) of satisfaction or waiver of each of the conditions precedent set forth in Section 3.(a), 3.(b), and 3.(c), Customer and Sponsor shall execute one or more Firm Storage Service Agreements (each an “FSSA”) materially in the form set forth in Exhibit “B.”

(c) Customer Credit Support. If prior to execution of this Precedent Agreement, Customer shall not have demonstrated its creditworthiness to the satisfaction of Sponsor, then at the times as set forth below, Customer shall deliver to Sponsor Credit Support for its obligations under this Agreement.

Credit Support Type: Guaranty Letter of Credit Cash Collateral

Initial Credit Amount:

Long-Term Credit Amount:

(d) Sponsor Credit Support. Sponsor’s obligations in respect of the Default Payment pursuant to Section 4.(c) shall be guaranteed by pursuant to a guaranty in form and substance reasonably acceptable to Customer.

(e) Cooperation. Each Party agrees to execute and deliver all other and additional instruments and documents, and to do other acts as may be reasonably requested.

3. Sponsor’s Conditions Precedent.

(a) Energy Center Economically Viable. Sponsor shall have determined that undertaking the Energy Center and providing the Service is economically viable.

(b) Regulatory Approvals. Sponsor shall have received and accepted the FERC Certificate, including the authorization for market-based rates, as well as each other federal, state, local, and municipal permit or authorization necessary to construct and operate the Energy Center.

(c) Corporate Approvals. On or before the date that is ninety (90) days after the date on which each of the conditions set forth in Sections 3.(a) and 3.(b) shall have been satisfied or waived, all aspects of the Energy Center and provision of the Service shall have been authorized by all necessary action on the part of Sponsor and its affiliates.

(d) Notice. Sponsor shall promptly notify Customer on satisfaction, waiver, or failure of the conditions set forth in Sections 3.(a) through 3.(c).

4. Term; Termination.

(a) Term. This Precedent Agreement shall be effective as of the date stated above, and shall remain in effect until the date on which it is terminated in accordance with the terms set forth in this Paragraph 4.

(b) Termination by Sponsor. Sponsor may terminate this Precedent Agreement in the event that: conditions not met customer breach

Default Payment:

(c) Termination by Customer. Customer may terminate this Precedent Agreement if Sponsor fails to comply with any material obligations under the terms of this Agreement.

(d) Termination Upon Effective Date of FSSA. Unless otherwise terminated, this Precedent Agreement shall terminate on the Commencement Date.

(e) Effect of Termination. Termination of the Precedent Agreement shall not relieve any Party from any right, liability, other obligation, any remedy, or limitation or remedies, which has accrued or been incurred prior to the date of the termination.

5. Representations and Warranties.

Each Party represents and warrants to each other as follows:

(a) The Party is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization.

(b) The execution, delivery, and performance of this Precedent Agreement by the Party has been duly authorized by all necessary action on the part of the Party.

(c) This Precedent Agreement has been duly executed and delivered by the Party.

(d) No governmental authorization, approval, order, license, permit, franchise or consent is required in connection with execution and delivery.

(e) There is no pending or threatened action or proceeding affecting the Party that would materially and adversely affect performance.

6. Miscellaneous.

(a) Limitation of Liability; Remedies Exclusive.

(b) Assignment.

(c) Notices.

(d) Entire Agreement.

(e) Modifications.

(f) Governing Law. State of

(g) Compliance with Law.

(h) Dispute Resolution.

Arbitration location:

(i) Waiver.

(j) Drafting.

(k) Exhibits.

(l) Counterpart Execution.

(m) Severability.

(n) Confidentiality.

(o) Additional Provisions.

(p) Gas Quality. All natural gas delivered by Customer and each other customer using the Energy Center shall meet the most restrictive quality specifications of any downstream or interconnecting pipeline.

The Parties have executed this Precedent Agreement as of the first date stated above.