Fill and Sign the Precedent Agreement for Firm Natural Gas Storage Service Form

Page 1 of 11 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 conve nience and necessity under Section 7. of the Natural Gas Act (“FERC Certificate”) to c onstruct, 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”). The Service shall be provided pursuant to one or more FSSAs (as defined below) entered into in accordance with the terms of Section 2.(b) below. (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 Page 2 of 11 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 Applicati on and obtain the FERC Certificate, (ii) case the completion of the Energy Cent er on or before the Requested Commencement Date; and, (iii) to provide the Service, in each case on the terms and subject to the conditions set forth in this Agreement. (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.” The effective date of each FSSA shall be the Commencement Date. (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” means, at Customer’s option, (i) a guaranty of Customer’s obligations under this Precedent Agreement in form and substance and from an entity acceptable to Sponsor, or (ii)(A) an irrevocable direct pay letter of credit in form and substance acceptable to Sponsor issued by a bank or other financial institution reasonably acceptable to Sponsor and having a long term credit rating of a least AA- from S&P or the equivalent from Moody’s, or (B) cash collateral delivered to Sponsor, in an amount as set forth below: Date Credit Requirement No later than ten (10) days after execution of the Precedent Agreement An amount equal to total Rates payable in respect of the Service for one (1) year of Service (such amount, the “Initial Credit Amount”) Upon execution of the FSSA(s) (“Long-Term Credit Posting Date”) An amount equal to the maximum credit support then permitted by Sponsor’s FERC Gas Tariff (such Page 3 of 11 amount, the “Long-Term Credit Amount”) Customer shall maintain its creditworthiness (as determined from time to time by Sponsor), either directly or through provisions of Credit Support, for the term of this Precedent Agreement. The Parties agree that Customer’s failure to supply or maintain Credit Support shall i n no way relieve Customer of its other obligations under this Precedent Agreement nor Sponsor’s right to seek damages or performance under this Precedent Agreement. (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 by any Party to effectuate the terms and provisions of this Precedent Agreement. Customer expressly agrees to cooperate with, and to not oppose the efforts of Sponsor to obtain any regulatory or governmental approvals Sponsor deems necessary or desirable to develop, permit, construct, own, or operate the _____ Energy Center, in whole or in part, or otherwise to provide the Service, including but not limited to the following actions: (i) timely filing by Customer of interventions in support of Sponsor’s application before the FERC for its FERC Certificate; and (ii) providing any information reasonably requested by Sponsor in preparing applications for the FERC Certificate or any information requested by any governmental or regulatory body in connection with the application or otherwise in connection with the _____ Energy Center. Notwithstanding the foregoing, nothing in this Agreement shall limit Customer’s right to oppose or not support any applications to the extent they would render Sponsor unable to meet its obligations under this Precedent Agreement. 3. Sponsor’s Conditions Precedent. Notwithstanding the Parties’ execution of the FSSA, Sponsor’s obligation to construct and operate the _____ Energy Center and to provide the Service are expressly subject to the satisfaction or waiver (in each case, and with respect to either satisfaction or waiver, in the sole discretion of Sponsor) of the following: (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. Page 4 of 11 (c) Corporate Approvals. On or before the date that is ninety (90) days after the date on with each of the conditions set forth in Sections 3.(a) and 3.(b) shall have been satisfied or waived (“CP Deadline”), 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: (i) any condition set forth in Sections 3.(a) through 3.(c) is not satisfied or waived on or before the CP Deadline; or, (i) Customer fails to comply with any of its material obligations under this Agreement as and when required, and/or otherwise is in material breach of this Precedent Agreement, and the failure and/or breach continues for a period of thirty (30) days after notice to Customer. Any termination pursuant to this Section 4.(b) shall be effective on Customer’s receipt of Sponsor’s termination notice. Sponsor’s termination notice shall be in writing, shall be delivered to Customer in accordance with the requirements of Section 6.(c), and shall specify whether termination is pursuant to Section 4.(b)(i), or 4.(b)(ii). In the event Sponsor terminates this Precedent Agreement pursuant to clause (i) of this Section 4.(b), Customer shall be entitled to prompt return of any Credit Support provided under the terms of this Agreement. The Parties agree that Sponsor will be materially harmed in the event Customer fails to perform its obligations under the terms of this Agreement, and that the amount of the damages would be extremely difficult or impossible to ascertain, and accordingly, in the event that Sponsor terminates this Precedent Agreement pursuant to clause (ii) of Section 4.(b), as liquidated damages, Customer shall, within five (5) days after receipt by Customer of Sponsor’s termination notice, pay to Sponsor by wire transfer of immediately available funds, an amount equal to: (1) the Initial Credit Amount if such termination is on or prior to the Long- Term Credit Posting Date; or, (2) the Long-Term Credit Amount otherwise (the “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, as and when required, and/or otherwise is in material breach of this Precedent Agreement and that failure and or breach continues for a period of Page 5 of 11 thirty (30) days after notice to Sponsor. Any termination pursuant to this Section 4.(c) shall be effective on Sponsor’s receipt of Customer’s termination notice. Customer’s termination notice shall be in writing, and shall be delivered to Sponsor in accordance with the requirement of Section 6.(c). The Parties agree that Customer will be materially harmed in the event that Sponsor fails to perform its obligations under the terms of this Agreement, and that the amount of the damages would be extremely difficult or impossible to ascertain, and accordingly, in the event the Customer terminates this Precedent Agreement pursuant to this Section 4.(c), as liquidated damages, Sponsor shall promptly return all Credit Support, and Sponsor shall within five (5) days after receipt by Sponsor of Customer’s termination notice, pay to Customer by wire transfer of immediately available funds an amount equal to the Default Payment. The Parties agree that Customer will be materially harmed in the event tha t Sponsor fails to perform its obligations, and that the amount of the damages would be extremely difficult or impossible to ascertain, and accordingly, in the event the Customer terminates this Precedent Agreement pursuant to this Section 4.(c), as liquidated damages, Sponsor shall promptly return all Credit Support, and Sponsor shall within five (5) days after receipt by Sponsor of Customer’s termination notice, pay to Customer by wire transfer of immediately available funds an amount equal to the Default Payment. (d) Termination Upon Effective Date of FSSA. Unless otherwise terminated in accordance with Section 4.(b) or 4.(c), 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. In the event this Precedent Agreement is terminated pursuant to Section 4.(b) or Section 4.(c), the FSSA shall automatically terminate without liability to a ny Party other than as set forth in this Precedent Agreement. 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, and is in good standing in each other’s jurisdiction where the failure to so qualify would have a material adverse effect on the business or financial condition of that Party. (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 in accordance with the Party’s charter documents and do not and will not require the consent of any trustee or holder of any indebtedness or other obligation of the Party or any other party to any other agreement with the Party. Page 6 of 11 (c) This Precedent Agreement has been duly executed and delivered by the Party. This Precedent Agreement constitutes the legal, valid, binding, and enforceable obligation of the Party, except as the enforceability may be limited by bankruptc y, insolvency, reorganization, moratorium, or other similar laws of general application relating to or affecting creditor’s rights generally and by general equitable principles. (d) No governmental authorization, approval, order, license, permit, franchise or consent, and no registration, declaration or filing with any governmental authority is required on the Party in connection with the execution and delivery of this Precedent Agreement. (e) There is no pending or, to the best of the Party’s knowledge, threatened action or proceeding affecting the Party before any court, government authority or arbitrator that could reasonably be expected to materially and adversely affect the financial condition or operations of the Party or the ability of the Party to perform its obligations under this Agreement, or that purports to affect the legality, vali dity or enforceability of this Precedent Agreement. 6. Miscellaneous. (a) Limitation of Liability; Remedies Exclusive. No Party shall be liable to any other Party under this Precedent Agreement or under the FSSA for any special, indirect, incidental, punitive, or consequential damages of any nature however arising, including, without limitation, any lost profits, even if the Party has been made aware of the possibility of the damages. Unless otherwise explicitly stated, wherever a remedy is specified in this Precedent Agreement, the specified remedy shall be the sole and exclusive remedy available to the exclusion of any other rights, powers, privileges, or remedies provided by law. For the sake of clarity, termination by Sponsor pursuant to Section 4.(b) or termination by Customer pursuant to Section 4.(c), and the remedies in the event of termination set forth in this Agreement, shall be the sole remedies available to the Party for events gi ving rise to a termination right under this Agreement. (b) Assignment. No Party shall sell, assign, pledge, encumber, or otherwise transfer (collectively “Transfer”) this Precedent Agreement or any of its rights or obligations under this Agreement, other than in accordance with the terms of this Section 6.(b). From and after the date that the FSSA is executed, any Party may Transfer its right, title, and interest in this Precedent Agreement and/or the FSSA, in whole or in part, with the consent of the Sponsor in the case of a Transfer by Customer and with the consent of Customer in the case of a Transfer by Sponsor, which consent may not be unreasonably withheld or delayed; provided that any Transfer to an Affiliate of a Party shall not require the consent of any other Party; provided further, that any assignee or transferee, including without limitation Affiliate assignees or transferees, shall assume in writing all of the transferring Page 7 of 11 party’s rights and obligations under this Precedent Agreement, including without limitation, the obligation to satisfy the credit conditions set forth in Section 2.(c) and Section 2.(d). As used in this Agreement, “Affiliate” means, with respect to any natural person, corporation, general partnership, limited partnership, limited liability company, firm, association, Governmental Authority, or any other entity whether acting in an individual, fiduciary, or other capacity (“Person”), any other Person which directly or indirectly (i) owns or controls the Person, (ii) is owned or controlled by the Person, or (iii) is under common ownership or control with the Person. For purposes of this definition, “control” shall mean the power to direct the management or policies of the Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, any Party to this Precedent Agreement may assign this Precedent Agreement and its rights as security for indebtedness, and each Party agrees to timely execute and deliver documents and certificates as are reasonably requested by the assigning Party or its lenders in connection with any collateral assignment and are reasonably acceptable to the non-assigning Party. (c) Notices. All notices required or permitted under this Precedent Agreement shall be in writing and sent to: Sponsor: Customer: Any Party may change its address by written notice to that effect to the other Parties. Notices shall be deemed to have been effectively given on: (i) the first business day at the recipient’s office following the day when the notice properly addressed and postpaid had been delivered to recipient’s address by certified U.S. mail, return receipt requested, or by a nationally recognized overnight courier; and (ii) the first business day at the recipient’s office following the day when the sender of the notice received confirmation from its facsimile machine that t he notice was successfully transmitted. It is expressly understood and agreed, however, that any notices shall first be delivered by facsimile or other similar means, in accordance with the dates and time provided, and shall be mailed a s soon as practicable thereafter. (d) Entire Agreement. This Precedent Agreement sets forth all understandings and agreements between the Parties with respect to the subject matter of it, and all prior agreements, understandings, and representations, whether written or oral, are merged into and superseded by this Precedent Agreement. (e) Modifications. The Precedent Agreement may only be amended by an instrument in writing executed by all Parties. Page 8 of 11 (f) Governing Law. This Precedent Agreement, and any actions, claims, demands or settlements hereunder shall be governed by and construed in accordance with the laws of the State of _____ without reference to any conflicts of law principles which might require the application of the laws of any other jurisdiction. (g) Compliance with Law. This Precedent Agreement and the obligations of the Parties are subject to all applicable laws, regulations, rules, and orders of all governmental and regulatory bodies having jurisdiction. (h) Dispute Resolution: Any disputes, controversies, or claims that arise between the Parties (the “Disputing Parties”) under this Precedent Agreement (a “Dispute”) shall be resolved by means of the procedure established as follows: (i) Notice of Dispute. Any Disputing Party shall give notice to the other Disputing Parties in writing that a Dispute has arisen (“Dispute Notice”). (ii) Informal Dispute Resolution. If the Disputing Parties have failed to resolve the Dispute within fifteen (15) business days after the Dispute Notice was given, the Disputing Parties shall seek to resolve the Dispute by negotiation between the executive officers of each Disputing Party. The executive officers shall endeavor to meet and attempt to amicably resolve the Dispute. If the Disputing Parties are unable to resolve the Dispute through negotiation within thirty (30) business days after the Dispute Notice was given, then the Dispute shall be finally resolved through arbitration in accordance with provisions of clause (iii) below. (iii) Arbitration. Any Dispute that is not settled pursuant to clause (ii) above shall be finally settled by arbitration in accordance with the _____ Arbitration Rules in effect at the time of the Dispute Notice (except as they may be modified by the terms of this Agreement or by mutual agreement of the Disputing Parties), as follows: (1) The place of arbitration shall be ______, and the language of the arbitration shall be the English language. The Disputing Party initiating recourse to arbitration shall give the other Disputing Party a notice of arbitration (“Notice of Arbitration”) as provided under the _____ Arbitration Rules. (2) The arbitration proceeding shall be conducted by a tribunal (the “Tribunal”) comprised of three (3) arbitrators. Within fifteen (15) business days after receipt of the Notice of Arbitration, each Disputing Party shall nominate one arbitrator. Within thirty (30) Business Days after receipt of the Notice of Arbitration, the two appointed arbitrators shall appoint the third arbitrator, who shall serve as president of the Tribunal. In the event that either Disputing Party fails to timely designate its arbitrator or the party- Page 9 of 11 appointed arbitrators are unable to agree on the third arbitrator, the appointing authority shall be _____, and the presiding arbitrator shall be appointed in accordance with the _____ Arbitration Rules. (3) After the statement of defense has been submitted and before any subsequent substantive submission, each Disputing Party shall have the right to request the other Disputing Party and any nonparties to produce certain specified documents or categories of documents. In making any determination regarding the scope of production, including the production of documents, the Tribunal shall be guided by the _____ Rules on the Taking of Evidence. (4) Initially, and unless the Tribunal directs otherwise, each Disputing Party shall bear its own expenses in connection with any arbitration, including reasonable attorneys’ fees, and shall share equally the costs of arbitration. As part of the arbitration award, the Tribunal shall decide how the Disputing Parties shall bear the costs of arbitration. In accordance with the _____ Arbitration Rules, the Tribunal may require the unsuccessful Disputing Party to bear all or part of the other Disputing Party’s reasonably incurred costs and legal fees associated with the arbitration. (5) In no event shall the Tribunal be empowered to award any special, indirect, incidental, punitive or consequential damages of any nature however arising, including without limitation any lost profits, even if such Party has been made aware of the possibility of damages. (iv) Notwithstanding the foregoing, the parties may not challenge, through arbitration or in any other forum, the matters set forth in Exhibit “A” or Exhibit “B.” (i) Waiver. Unless otherwise specifically indicated, any waiver, consent, or approval of any kind or character by any Party of any term or condition set forth in this Precedent Agreement, or of any breach or default under it, shall be given or withheld in the sole discretion of the waiving, consenting, or approving Party, and all waivers, consents, or approvals shall be in writing. No delay or omission to exercise any right, power, or remedy accruing to any Party as the result of any breach or default under this Agreement shall impair any right, power, or remedy, nor shall it be construed to be a waiver of any breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed or otherwise constitute a waiver of any other breach or default theretofore or thereafter occurring. Page 10 of 11 (j) Drafting. For the purposes of contractual interpretation, the terms, conditions, and provisions of this Precedent Agreement shall not be construed against any Party as a result of the preparation or drafting of it. (k) Exhibits. The following Exhibits are attached and expressly made part of this Precedent Agreement: Exhibit “A”: Service and Rates Exhibit “B”: Form of FSSA (l) Counterpart Execution. This Precedent Agreement may be executed in counterparts, and all executed counterparts shall form part of this Precedent Agreement. A signature delivered by facsimile shall be deemed to be an origina l signature for purposes of this Precedent Agreement. (m) Severability. In the event any of the provisions of this Precedent Agreement are held to be unenforceable or invalid by a court of competent jurisdiction, the Parties shall negotiate an equitable adjustment to the provisions of this Precedent Agreement with a view toward effecting, to the extent possible, the original purpose of this Precedent Agreement, and the validity and enforceability of the remaining provisions, or portions or applications, shall not be affected. (n) Confidentiality. The Precedent Agreement and the terms set forth in it are confidential and the Parties agree not to disclose its terms other than as otherwi se set forth in this Agreement and in the Confidentiality Agreement signed by the parties, if any, and as required by applicable law or any securities exchange; provided that each Party may disclose the terms to: (i) each of their and their respective Affiliates’ officers, employees, agents, lenders, and other advisors that have a bona fide need to know the information and that have agreed to use this information only for the purposes intended, and to agree to keep the information confidential; and, (ii) after the date that is 30 days after the notice to C ustomer that Sponsor has received and accepted the FERC Certificate, to potential assignees of all or part of Customer’s rights and obligations under this Agreement, and have agreed to use this information only for the purposes of evaluating an assignment and to agree to keep the information confidential. The provision of this Section 6.(n) shall survive until the date that is one calendar year after the notice to Customer that Sponsor has received and accepted the FERC Certificate , provided, however, that the Parties acknowledge that Sponsor may file this Precedent Agreement with the FERC as necessary or desirable to support its certificate application. (o) Additional Provisions. Any additional provisions set forth in an Addendum are incorporated by this reference. In the event of any conflict between the terms of this Precedent Agreement and the terms of an Addendum, the terms of the Addendum shall prevail. This Precedent Agreement is entered into in reliance of Page 11 of 11 the fact that this Precedent Agreement and an Addendum form a single agreement. (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. Sponsor Customer