Exhibit 10(p)
PRECEDENT AGREEMENT
FOR FIRM SERVICES ON
MARITIMES & NORTHEAST PIPELINE PROJECT
PHASE II
This PRECEDENT AGREEMENT FOR FIRM SERVICES ("Precedent Agreement") is made
and entered into this 21 day of September, 1996, by and between Maritimes &
Northeast Pipeline, L.L.C., a limited liability company formed under the laws of
the State of Delaware (referred to hereinafter as "Maritimes & Northeast-U.S."),
Maritimes & Northeast Pipeline Management Ltd., a corporation formed under the
Canada Business Corporations Act (referred to hereinafter as "Maritimes &
Northeast-Canada"), and Valley Gas Company, a Rhode-Island corporation (referred
to hereinafter as "Customer"). From time to time herein, Maritimes &
Northeast-U.S. and Maritimes & Northeast-Canada may be referred to jointly and
collectively as "Maritimes & Northeast". Notwithstanding such references,
however, Maritimes & Northeast-U.S. and Maritimes & Northeast-Canada are and
shall remain separate legal entities for tax and other purposes; and to that
end, each of said entities will enter into and maintain its own separate service
agreements with Customer and other customers; and the fact that both entities
are parties to this Precedent Agreement is solely for the purpose of
facilitating and simplifying certain U.S. and Canadian regulatory filings
described below. Maritimes & Northeast and Customer may sometimes be
collectively referred to herein as the "Parties" and singly as a "Party".
WITNESSETH:
WHEREAS, Maritimes & Northeast-U.S. is a limited liability company formed
for the purpose of constructing, owning and operating the below-described Phase
I and Phase II-U.S. Segment of the Pipeline Project, the members of which are
subsidiaries and/or affiliates of PanEnergy Corp., Westcoast Energy, Inc. and
Mobil Corporation; and
WHEREAS, pursuant to a "Canadian Formation Agreement" dated as of January
31, 1996 among PanEnergy Corp., Westcoast Energy, Inc., Mobil Oil Canada
Properties, and Eastern Enterprises, the parties to that agreement have
committed to form a Canadian limited partnership to be called "Maritimes &
Northeast Pipeline, L.P." for the purpose of constructing, owning and operating
the below-described Phase II-Canadian Segment of the Pipeline Project, to which
end said parties have authorized Maritimes & Northeast Pipeline Management Ltd.,
as the General Partner of such to-be-formed Canadian limited partnership, to
enter into this Precedent Agreement for the benefit of such partnership, it
being the intent of such parties that, upon formation of such Canadian limited
partnership, Maritimes & Northeast Pipeline Management Ltd. will assign its
rights and obligations under this Precedent Agreement to such partnership
(following such assignment such partnership shall constitute "Maritimes &
Northeast - Canada" for purposes of this Agreement); and
WHEREAS, Maritimes & Northeast is developing and proposes to construct and
operate a natural gas pipeline project ("Pipeline Project") extending from
Country Harbour, Nova Scotia, Canada, through the Provinces of Nova Scotia and
New Brunswick to the Canada-United States border, and then through the states of
Maine and New Hampshire into the Commonwealth of Massachusetts for delivery of
natural gas from the Sable Offshore Energy Project for various customers which
execute agreements with them; and
WHEREAS, the Pipeline Project is currently proposed to be constructed in
two (2) phases: Phase I will extend from a point of interconnection with
Tennessee Gas Pipeline Company ("Tennessee') near Dracut, Massachusetts, to a
point of interconnection with Granite State Gas Transmission, Inc. near Wells,
Maine; and Phase II will extend from Wells, Maine to an interconnection with the
Sable Offshore Energy Project gas processing plant in Country Harbour, Nova
Scotia, Canada; and
WHEREAS, Phase I is not contingent on Phase II and Phase II may encompass
or incorporate the facilities currently proposed for Phase I; and
WHEREAS, as a result of an "open season" conducted by Maritimes &
Northeast-U.S. from October 23, 1995 through November 21, 1995, Maritimes &
Northeast-U.S. has entered into certain Precedent Agreements with various
customers for firm transportation service through Phase I of the Pipeline
Project; and Maritimes & Northeast-U.S. has filed an Application for a
Certificate of Public Convenience and Necessity with the Federal Energy
Regulatory Commission ("FERC") pursuant to Section 7(c) of the Natural Gas Act
for authority to "pre-build" Phase I of the Pipeline Project, to be placed in
service as early as November 1, 1997; and
WHEREAS, based upon the results of the recent "Request for Services"
offering of Maritimes & Northeast which ended April 17, 1996, Maritimes &
Northeast now desires to proceed with the development and authorization of Phase
II of the Pipeline Project, subject to the commitment of Customer and other
customers to obtain firm service under the terms of this and other similar
Precedent Agreements for firm service (i) through the Canadian segment of said
Phase II of the Pipeline Project extending from Country Harbour, Nova Scotia,
Canada to a point on the Canadian-U.S. border near St. Stephen, New Brunswick
(the "Phase II Canadian Segment") where it will interconnect with the Phase
II-U.S. Segment described below; (ii) through the U.S. Segment of the Pipeline
Project extending from a point on the Canadian-U.S. border near Woodland, Maine
through an interconnection with Granite State Gas Transmission, Inc. near Wells,
Maine to Dracut, Massachusetts (the "Phase II-U.S. Segment"); and (iii) through
capacity leased by Maritimes & Northeast from Tennessee or constructed by
Maritimes & Northeast between Dracut and Mendon, Massachusetts; and
WHEREAS, Customer desires to obtain firm service from Maritimes &
Northeast-U.S. to be made available from the Phase II-U.S. Segment of the
Pipeline Project, and from Maritimes & Northeast-Canada to be made available
from the Phase II-Canadian Segment of the Pipeline Project.
2
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, and intending to be legally bound, Maritimes &
Northeast-U.S., Maritimes & Northeast-Canada and Customer agree to the
following:
1. This Precedent Agreement is subject to the good faith determination by
Maritimes & Northeast not later than August 1, 1996, that Phase II of the
Pipeline Project satisfies the economic criteria of Maritimes & Northeast for
proceeding with Phase II of the Pipeline Project. Maritimes & Northeast shall
give Customer written notice under this Paragraph 1 no later than August 15,
1996, as to whether it will proceed with Phase II of the Pipeline Project as
provided in this Precedent Agreement or will terminate the project; provided,
however, if Maritimes & Northeast extends the time for making such
determination, any such notice will be given within five (5) days after the end
of such extended period. In connection therewith, the Parties recognize that the
April 17, 1996 Request for Services was a starting point for negotiations and
that Maritimes & Northeast received nominations in excess of planned capacity.
As a result, the MDQ provided in Paragraph 5(a) hereof may be adjusted. The
written notice provided for in this Paragraph 1 shall set forth the adjusted
MDQ, if any, and such adjusted MDQ shall be referenced in Appendix A hereto. If
such adjustment results in a reduction in the MDQ contained in Customer's
original request, Customer may cancel this Precedent Agreement due to such
reduction by written notice to Maritimes & Northeast within seven (7) days of
receipt of the Maritimes and Northeast notice under this Paragraph 1.
2. Subject to the terms and conditions of this Precedent Agreement,
Maritimes & Northeast shall proceed with due diligence to obtain from all
governmental and regulatory authorities within the United States and Canada
having valid jurisdiction over the premises such authorizations and/or
exemptions which it determines are necessary, including without limitation,
authorizations from the FERC (i) for Maritimes & Northeast-U.S. to construct,
own and operate (or cause to be constructed and operated) the Phase II-U.S.
Segment of the Pipeline Project and to render the services as contemplated in
this Precedent Agreement and in other similar Precedent Agreements with other
customers, (ii) for Maritimes & Northeast-U.S. to perform its obligations as
contemplated in this Precedent Agreement and in other similar Precedent
Agreements with other customers for the Phase II-U.S. Segment of the Pipeline
Project, and (iii) for Section 3 authorization and a Presidential Permit to
site, construct, operate and maintain pipeline facilities at the U.S.-Canada
International Boundary to interconnect the Phase II-U.S. Segment and the Phase
II-Canadian Segment of the Pipeline Project; and authorizations from the
National Energy Board of Canada ("NEB") (i) for Maritimes & Northeast-Canada to
construct and operate (or cause to be constructed and operated), the Phase
II-Canadian Segment of the Pipeline Project and to render the services as
contemplated in this Precedent Agreement and in other similar Precedent
Agreements with other customers, and (ii) for Maritimes & Northeast-Canada to
perform its obligations as contemplated in this Precedent Agreement and in other
similar Precedent Agreements with other customers for the Phase II-Canadian
Segment of the Pipeline Project. Maritimes & Northeast-U.S. and Maritimes &
Northeast-Canada reserve the right to file and prosecute (or cause to be filed
and prosecuted) any and all applications for such authorizations and/or
exemptions, any supplements and amendments thereto, and, if necessary, any court
review, in such manner as they each deem to be in their best interest. Customer
expressly agrees to
3
support and cooperate, and to not oppose, obstruct or otherwise interfere with
in any manner whatsoever the efforts of Maritimes & Northeast-U.S. and Maritimes
& Northeast-Canada to obtain all authorizations and/or exemptions and
supplements and amendments thereto necessary for them to construct, own and
operate (or to cause the construction and operation of) Phase II of the Pipeline
Project as contemplated in this Precedent Agreement and to perform their
obligations as contemplated by this Precedent Agreement.
3. Within sixty (60) days after Customer executes this Precedent Agreement,
Customer will advise Maritimes & Northeast in writing of the facilities, by
in-service date, and/or any other authorization or contractual arrangements
necessary for Customer to utilize the services contemplated under this Precedent
Agreement. Subject to the terms and conditions of this Precedent Agreement,
Customer shall proceed in good faith and with due diligence to obtain from all
governmental and regulatory authorities having competent jurisdiction over the
premises all authorizations and/or exemptions necessary for Customer to
construct and operate (or cause to be constructed and operated) any facilities
and to take any other actions necessary to enable Customer to utilize the
services as contemplated in this Precedent Agreement. Customer reserves the
right to file and prosecute applications for such authorizations and/or
exemptions, any supplements or amendments thereto, and, if necessary, any court
review, in such manner as it deems to be in its best interest; provided,
however, Customer shall pursue such authorizations and/or exemptions and any
supplements and amendments thereto in a manner designed to implement Phase II of
the Pipeline Project in a timely manner and in no event shall Customer take any
action that would obstruct, interfere with or delay the receipt by Maritimes &
Northeast of the authorizations and/or exemptions and supplements and amendments
thereto contemplated hereunder or otherwise jeopardize implementation of Phase
II of the Pipeline Project. Maritimes & Northeast agrees to use reasonable
efforts to assist Customer in obtaining all authorizations and/or exemptions and
any supplements and amendments thereto necessary for Customer to effectuate the
services contemplated in this Precedent Agreement. Customer agrees to proceed
with due diligence to construct, or cause to be constructed, any and all
facilities included in Customer's written notice to Maritimes & Northeast
pursuant to the first sentence of this Paragraph 3 of this Precedent Agreement,
subject to the receipt of necessary authorizations and/or exemptions
contemplated in this Paragraph 3 of this Precedent Agreement.
4. Pursuant to the April 17, 1996 Request for Services, Customer requested
Maritimes & Northeast to share the request submitted by Customer with the Sable
Offshore Energy Project producers on a confidential basis as a first step in
arranging for supplies of gas. Customer shall make its own arrangements for such
gas supplies, either directly or by use of a third party agent, by contracting
with one or more suppliers for such supply. Customer shall proceed in good
faith, either directly or by use of a third party agent, with reasonable efforts
to negotiate and enter into supply agreements with one or more third party
suppliers on or before December 1, 1996, on terms and conditions satisfactory to
Customer. In the event Customer is successful in contracting with such
supplier(s) in the manner aforesaid, Customer shall have the right, on a
one-time basis, on or before August 15, 1997, to assign its rights under this
Precedent Agreement and the related service agreement(s) to such supplier(s);
provided, that such supplier(s) meets the qualifications as a shipper under the
FERC Gas Tariff of Maritimes & Northeast-U.S. and the Tariff established by
Maritimes & Northeast-Canada and filed with the
4
NEB, including the creditworthiness requirements; and provided, further, that
following commencement of service, any subsequent assignment(s) contemplated by
the initial assignee shall be subject to the capacity release requirements and
procedures set forth in such tariffs. In the event Customer is unsuccessful in
contracting with such supplier(s) in the manner aforesaid by December 1, 1996,
Customer may terminate this Precedent Agreement as provided in Paragraph 11
hereof.
5. (a) Customer and Maritimes & Northeast-U.S. and Maritimes & Northeast
Canada, as appropriate, agree to execute within twenty-five (25) days after the
later of the dates that (i) the FERC issues an order authorizing the Phase
II-U.S. Segment of the Pipeline Project, and (ii) the NEB issues an order
authorizing the Phase II-Canadian Segment of the Pipeline Project: (A) a firm
service agreement under the Rate Schedule MN 151, included in the FERC Gas
Tariff of Maritimes & Northeast-U.S. ("U.S. Service Agreement") which shall
provide for the transportation of up to a Maximum Daily Quantity ("MDQ") of
7,000 dekatherms of natural gas on the Phase II-U.S. Segment of the Pipeline
Project; and (B) a firm service agreement under the NEB Gas Tariff of Maritimes
& Northeast-Canada ("Canadian Service Agreement") which shall provide for the
transportation of an equivalent MDQ of natural gas adjusted for final applicable
fuel usage on the Phase II-Canadian Segment of the Pipeline Project. Service
under the U.S. Service Agreement and under the Canadian Service Agreement will
commence as provided under Paragraph 5(b) of this Precedent Agreement. After
service commences under the respective Service Agreement(s), such service will
continue for a primary term of ten (10) years.
(b) Service under the U.S. Service Agreement and under the Canadian
Service Agreement will commence on the date specified in the written notice to
Customer pursuant to Paragraph 5(c) of this Precedent Agreement, which date will
be the later of.- (i) November 1, 1999; (ii) the date all necessary facilities
comprising the Phase II Pipeline Project are completed and such facilities are
available for active gas service; or (iii) the date by which all of the
conditions precedent set forth in Paragraph 8 of this Precedent Agreement have
been satisfied or waived by the Party for whose benefit the condition was
imposed.
(c) Prior to commencement of service pursuant to the U.S. Service
Agreement and pursuant to the Canadian Service Agreement, Maritimes & Northeast
shall notify Customer in writing that all of the conditions precedent set forth
in Paragraph 8 of this Precedent Agreement have been satisfied or waived, and
that service under the U.S. Service Agreement and under the Canadian Service
Agreement will commence on a date certain, which date will not be prior to
November 1, 1999. As of the date for commencement of service under the U.S.
Service Agreement and under the Canadian Service Agreement, Maritimes &
Northeast-U.S. will stand ready to provide firm transportation service for
Customer pursuant to the terms of the U.S. Service Agreement and Maritimes &
Northeast-Canada will stand ready to provide firm service for Customer pursuant
to the terms of the Canadian Service Agreement; and Customer will pay Maritimes
& Northeast-U.S. for all applicable charges associated with the U.S. Service,
Agreement and will pay Maritimes & Northeast-Canada for all applicable charges
associated with the Canadian Service Agreement.
6. Upon execution of this Precedent Agreement and other satisfactory
Precedent
5
Agreements with other customers, Maritimes & Northeast will undertake the
preliminary design of the necessary Phase II Pipeline Project pipeline
facilities and any other preparatory actions necessary to complete and file the
necessary certificate applications with the FERC for the Phase II-U.S. Segment
facilities and with the NEB for the Phase II-Canadian Segment facilities. Upon
satisfaction of the conditions precedent set forth in Paragraphs 8 (a)(i), 8
(a)(ii), 8 (a)(iv), 8 (a)(vi) and 8 (b)(ii) of this Precedent Agreement, or
waiver of the same by Maritimes & Northeast, Maritimes & Northeast shall proceed
(subject to the continuing commitments of Customer and all other firm
transportation customers committed to Phase II of the Pipeline Project) with due
diligence in the necessary final design of facilities, acquisition of materials,
supplies, properties, rights-of-way and any other necessary preparations to
implement the transportation service contemplated by the U.S. Service Agreement
and the Canadian Service Agreement.
7. Upon satisfaction of the conditions precedent set forth in Paragraphs 8
(a)(i), 8 (a)(iii), 8 (a)(iv), 8 (a)(vi), 8 (b)(i) and 8 (b)(iii) of this
Precedent Agreement, or waiver of the same by Maritimes & Northeast, Maritimes &
Northeast shall proceed (subject to the continuing commitments of Customer and
other firm transportation customers committed to Phase II of the Pipeline
Project) with due diligence to construct the authorized Phase II Pipeline
Project pipeline facilities necessary to implement the firm transportation
service contemplated in the Precedent Agreement on or about November 1, 1999.
Notwithstanding Maritimes & Northeast's due diligence, if Maritimes & Northeast
is unable to commence the transportation service for Customer as contemplated
herein by November 1, 1999, Maritimes & Northeast will continue to proceed with
due diligence to complete arrangements for such transportation service, and
commence the transportation service for Customer at the earliest practicable
date thereafter. Maritimes & Northeast will neither be liable nor will this
Precedent Agreement or the U.S. Service Agreement or the Canadian Service
Agreement be subject to cancellation if Maritimes & Northeast is unable to
complete the construction of such authorized and necessary Phase II Pipeline
Project pipeline facilities and commence the firm transportation service
contemplated herein by November 1, 1999.
8. The commencement of service under the U.S. Service Agreement and under
the Canadian Service Agreement and the rights and obligations of Maritimes &
Northeast-U.S. and Customer under the U.S. Service Agreement and of Maritimes &
Northeast-Canada and Customer under the Canadian Service Agreement are expressly
made subject to satisfaction of the following conditions precedent; provided,
however, that any such condition may be waived by the Party for whose benefit
the condition is imposed:
(a) Conditions Precedent of Maritimes & Northeast:
i) Receipt and acceptance by Maritimes & Northeast-U.S.
by March 1, 1998, of all necessary certificates and other authorizations,
including without limitation authorizations from the FERC for the Phase II-U.S.
Segment and receipt and acceptance by Maritimes & Northeast-Canada by July 1,
1998 of all necessary certificates and other authorizations, including without
limitation authorization from the NEB for the Phase II-Canadian Segment of the
Pipeline Project, authorizations of initial rates as contemplated in Paragraph 9
(b) of this Precedent Agreement, authorizations to construct and operate Phase
II of the Pipeline
6
Project pipeline facilities and to provide transportation for Customer under the
U.S. Service Agreement and under the Canadian Service Agreement as contemplated
in this Precedent Agreement and for other customers under other Service
Agreements; and
ii) Receipt and acceptance by Maritimes & Northeast by
October 1, 1998, of a financial commitment or commitments from financial
institutions acceptable to each of them to make the capital expenditures
necessary to enable them to construct Phase II of the Pipeline Project to
provide transportation for Customer under the U.S. Service Agreement and under
the Canadian Service Agreement as contemplated in this Precedent Agreement and
under other Service Agreements; and
iii) Receipt by Maritimes & Northeast of all other
necessary governmental authorizations, approvals, permits and exemptions to
construct Phase II of the Pipeline Project and perform the services as
contemplated in this Precedent Agreement and the U.S. Service Agreement and the
Canadian Service Agreement; and
iv) Receipt of an affirmative vote of the Management
Committee of Maritimes & Northeast-U.S. and of Maritimes & Northeast-Canada to
construct the authorized Phase II Pipeline Project pipeline facilities
subsequent to receipt of the authorizations contemplated in Paragraph 8 (a)(i)
of this Precedent Agreement; and
v) Completion by Maritimes & Northeast of construction
of the Phase II Pipeline Project pipeline facilities required to render firm
transportation service for Customer pursuant to the U.S. Service Agreement and
the Canadian Service Agreement with Customer, and Maritimes & Northeast being
ready and able to place such facilities into gas service; and
vi) Receipt by the Sable Island Energy Project producers
of all governmental authorizations and exemptions necessary to construct the
facilities required to deliver gas to the Phase II of the Pipeline Project
facilities at Country Harbour, Nova Scotia, Canada; and vii) Completion by the
Sable Island Energy Project producers of construction of thefacilities required
to deliver gas to the Phase II of the Pipeline Project pipeline facilities at
Country Harbour, Nova Scotia, Canada.
(b) Conditions Precedent of the Customer:
i) Receipt by Customer of the necessary governmental
authorizations, approvals, permits and exemptions to construct the facilities
contained in Customer's Notice under Paragraph 3 of this Precedent Agreement for
the relevant service; and
ii) Completion by Customer of construction of the
facilities contained in Customer's Notice under Paragraph 3 of this Precedent
Agreement for the relevant service; and
iii) Completion by Customer of necessary gas supply
arrangements
7
pursuant to Paragraph 4 of this Precedent Agreement on terms and conditions
satisfactory to Customer.
9. (a) All governmental permits, certificates, exemptions and other
authorizations required in Paragraph 8 (a) of this Precedent Agreement must be
in form and substance, satisfactory to Maritimes & Northeast,. and with respect
to the FERC and NEB authorizations, must be satisfactory to all Parties,
including mutually satisfactory rate treatment and rate levels. Customer shall
notify Maritimes & Northeast in writing not later than ten (10) days after the
issuance of each of the respective FERC and NEB orders issuing the certificates,
including any orders issued as a preliminary determination on non-environmental
issues, contemplated in Paragraph 2 of this Precedent Agreement, if such
certificate is not satisfactory to Customer. All governmental approvals and
exemptions required by this Precedent Agreement must be duly granted
respectively by the FERC and the NEB, and/or other governmental agency or
authority having valid jurisdiction, and must be final and nonappealable; but
with respect to the authorization from the FERC and the NEB, the Parties may
waive the condition that any such approval or exemption be final and
nonappealable.
(b) In connection with the Phase II Pipeline Project initial rate
design methodology, Customer expressly agrees: (i) with this rate design
methodology; (ii) to support such rate design methodology; and (iii) to pay
Maritimes & Northeast-U.S. and Maritimes & Northeast-Canada, as applicable, the
initial rates as contemplated herein.
10. The Parties expressly agree that the execution of this Precedent
Agreement and the performance of the transportation services contemplated in
this Precedent Agreement are without prejudice to any rights or obligations the
Parties have to each other under separate and distinct agreements.
11. If the conditions precedent set forth in Paragraph 8 (a)(i), 8 (a)(ii)
and 8 (b)(iii) of this Precedent Agreement have not been fully satisfied, or
waived by the Party for whose benefit such condition was imposed, by the
applicable dates specified therein, then, any Party may thereafter terminate
this Precedent Agreement by giving ninety (90) days prior written notice of its
intention to terminate to the non-terminating Party; but if the conditions
precedent are satisfied or waived within said ninety (90) day notice period,
then termination will not be effective. In addition, and notwithstanding other
provisions hereof, Maritimes & Northeast may terminate this Precedent Agreement
at any time upon fifteen (15) days' prior written notice given to Customer if
termination by customers, other than by reason of commencement of service, of
other precedent agreements and service agreements for service from Maritimes &
Northeast renders the Pipeline Project uneconomic, as determined by Maritimes &
Northeast.
12. If this Precedent Agreement is not terminated pursuant to Paragraph 11
hereof, then this Precedent Agreement will terminate by its express terms on the
date of commencement of service under the U.S. Service Agreement and the
Canadian Service Agreement referenced in Paragraph 5 of this Precedent
Agreement, and thereafter the Parties' rights and obligations related to the
transportation transactions contemplated herein shall be determined pursuant to
the terms
8
and conditions of the U.S. Service Agreement and the Canadian Service Agreement
and the terms and conditions of the FERC and NEB Rate Schedules specified in
Paragraph 5 (a) hereof, as effective from time to time, and the General Terms
and Conditions of the FERC and NEB Gas Tariffs, as effective from time to time.
13. This Precedent Agreement may not be modified or amended unless the
Parties execute written agreements to that effect.
14. Any company which succeeds by purchase, merger, or consolidation of
title to the properties, substantially as an entirety, of Maritimes &
Northeast-U.S., Maritimes & Northeast-Canada or the Customer, will be entitled
to the rights and will be subject to the obligations of its predecessor in title
under this Precedent Agreement. Otherwise, except as provided in Paragraph 4
hereof, assignment of this Precedent Agreement or any of the rights or
obligations hereunder may not be made unless the written consent of the other
Party is first obtained; provided, however, upon formation of the Canadian
limited partnership referred to in the recitals to this Precedent Agreement,
Maritimes & Northeast-Canada may assign its rights and obligations hereunder to
such partnership without any need to obtain the written consent of any other
Party. No Party will be relieved, by virtue of any such assignment, of its
obligations and liabilities hereunder without the express written consent of the
other Party.
15. (a) Any dispute arising out of or relating to this Precedent Agreement,
whether in contract, tort, under statutory law, or otherwise, and including
without limitation any dispute arising from an assertion of the rights of
Maritime & Northeast under Paragraph 9, which can not be resolved after
discussion between the Parties or by voluntary non-binding mediation in
conformity with applicable procedures of the Texas Alternate Dispute Resolution
Procedures Act, Texas Civil Practices and Remedies Code, Title 7, Ch. 154, shall
be submitted to binding arbitration. Either Party may commence such arbitration
proceedings by serving written notice on the other. The notice shall contain the
name of one arbitrator and a statement of the matter in dispute. The Party
receiving such notice shall have fifteen (15) days to respond in writing, naming
a second arbitrator and designating any other matter for arbitration. The two
named arbitrators shall select a third arbitrator. If the two named arbitrators
fail to select a third arbitrator within fifteen (15) days after the second
arbitrator was named, the third arbitrator shall be selected in accordance with
the commercial arbitration rules of the American Arbitration Association. All
arbitrators shall be qualified by education or experience to decide matters
relating to the questions in dispute. In addition, the arbitrators shall have
professional experience in the natural gas industry and shall not be evidently
partial under the standards of section 10(b) of the Federal Arbitration Act, 9
U.S.C. Section 10(b). The third arbitrator shall not have been previously
employed by either Party. The arbitration shall be held at a location to be
mutually agreed to, and failing agreement, in Houston, Texas. At any time after
the naming of the second arbitrator, the Parties may engage in discovery. Each
Party shall be permitted to serve on the other Party requests for production of
documents relevant to any dispute which is the subject of the arbitration and
one set of interrogatories addressing any issues relevant to any dispute which
is the subject of the arbitration, which requests and interrogatories shall be
answered or otherwise responded to within 20 days after service. Each Party
shall also have the right to take four depositions. Additional discovery may be
ordered by a majority of the arbitrators upon application by one or both of the
Parties on a showing of good cause. Any discovery disputes shall be resolved by
the decision of a
9
majority of the arbitrators.
(b) After presentation of evidence has been concluded, each party shall
submit to the arbitrators a final offer of its proposed resolution of the
dispute. No responses to a final offer may be submitted. The arbitrators shall
approve the final offer of one Party, without modification, and reject that of
the other. In considering the evidence and deciding which final offer to
approve, the arbitrators shall be guided by the criteria described in the
appropriate section of this Precedent Agreement.
(c) The decision of the arbitrators shall be rendered on or before 120
days following the notice of arbitration. The arbitrators' decision shall be
deemed to be part of this Precedent Agreement and incorporated by reference
herein.
(d) If at any time prior to rendition of the decision of the
arbitrators, an arbitrator named by one of the Parties becomes unable or
unwilling to serve, the Party that named that arbitrator shall select a
replacement arbitrator within 10 days after receiving notice of the arbitrator's
inability or unwillingness to serve. If at any time prior to rendition of the
decision of the arbitrators the third arbitrator becomes unable or unwilling to
serve, a replacement arbitrator shall be selected utilizing the same procedures
for selection of the third arbitrator set forth above, except that the 15 day
period for selection of the third arbitrator shall run from the date both named
arbitrators receive notice of the third arbitrator's inability or unwillingness
to serve. The naming or selection of a replacement arbitrator shall have no
effect on the conduct of the proceedings unless the arbitration hearing has
already commenced, in which case the hearing will be recommenced as if no
portion of the hearing had been conducted.
(e) Each Party shall pay its own costs incurred in connection with
arbitration Proceedings, except for the fees and expenses of the third
arbitrator, which shall be equally divided between the Parties. The decision of
the arbitrators shall be final, conclusive and binding on both Parties. Judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that it is necessary to enforce such award,
all costs of enforcement, including reasonable attorney's fees (for in-house or
outside counsel) shall be payable by the Party against whom such award is
enforced.
(f) The substantive law chosen in Paragraph 17, as well as applicable
federal law, will apply to the proceedings in arbitration. The Federal
Arbitration Act, 9 U.S.C. Section 1, et seq., shall govern the enforceability of
this paragraph 15, and to the extent not inconsistent with the provisions
hereof, it shall also govern the procedures to apply in arbitration and the
enforcement, vacation, or modification of any award. The Parties stipulate that
this Precedent Agreement evidences a transaction "involving commerce" as that
phrase is used in 9 U.S. C. Section 2.
16. The recitals and representations appearing first above are hereby
incorporated in and made a part of this Precedent Agreement.
17. The Precedent Agreement shall be governed by and construed, interpreted
and performed in accordance with the laws
10
of the State of Texas, without recourse to any laws governing the conflict of
laws.
18. Except as herein otherwise provided, any notice, request, demand,
statement, or bill provided for in this Precedent Agreement, or any notice which
either Party desires to give to the other, must be in writing and will be
considered duly delivered when mailed by registered or certified mail to the
other Party's Post Office address set forth below:
Maritimes & Northeast-U.S.: Attn:
5400 Westheimer Court
Houston, Texas 77056
Maritimes & Northeast-Canada: Attn:
50 Keil Drive North
Chatham, Ontario N7M 5Ml
Customer: 1595 Mendon Road
Cumberland, RI 02864
or at such other address as either Party designates by written notice. Routine
communications, including monthly statements, will be considered duly delivered
when mailed by either registered, certified, or ordinary mail. For purposes
hereof, any notice required to be given by Customer to Maritimes & Northeast
shall be delivered to each of Maritimes & Northeast-U.S. and Maritimes &
Northeast-Canada.
11
IN WITNESS WHEREOF, the Parties hereto have caused this Precedent Agreement
to be duly executed in several counterparts by their duly authorized officers as
of the day and year first above written.
MARITIMES & NORTHEAST PIPELINE, L.L.C.
BY: ______________________________________
TITLE:_____________________________________
M & N Management Company
Managing Member
MARITIMES & NORTHEAST PIPELINE
MANAGE LTD.
BY: _______________________________________
TITLE: ____________________________________
VALLEY GAS COMPANY
BY: _______________________________________
TITLE: ____________________________________
Signature page for Precedent Agreement dated September 21, 1996 between
Maritimes & Northeast Pipeline, L.L.C., Maritimes & Northeast Pipeline
Management Ltd. and Valley Gas Company.
jsg\01752agt-96
12
APPENDIX A
TO
PRECEDENT AGREEMENT FOR FIRM
OR INTERRUPTIBLE SERVICE
FROM PHASE II OF
MARITIMES & NORTHEAST PIPELINE, L.L.C.
MDQ Contained in Adjusted
Customer's Original Request MDQ
MMBtu MMBtu
_______________________________ _______________________
[This Appendix A may be developed in the event Maritimes & Northeast Pipeline is
required to adjust Customer's MDQ as contemplated in Paragraph 1 of the
Precedent Agreement.]
rgr\maritime\appendxa.pre
13