Exhibit 10.2

 

 

 

CONSTRUCTION AND OWNERSHIP AGREEMENT

between

TRANSCONTINENTAL GAS PIPE LINE COMPANY, LLC

and

MEADE PIPELINE CO LLC

February 14, 2014

 

 

 

In this document, “[*****]” indicates that confidential portions of this
document have been redacted and filed separately with the Securities and
Exchange Commission.

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CONSTRUCTION AND OWNERSHIP AGREEMENT

THIS CONSTRUCTION AND OWNERSHIP AGREEMENT (“Agreement”) is entered into as of
the 14th day of February, 2014 (“Effective Date”), by and between
TRANSCONTINENTAL GAS PIPE LINE COMPANY, LLC (“Transco”), a Delaware limited
liability company, and MEADE PIPELINE CO LLC (“Meade”), a Delaware limited
liability company. Transco and Meade are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Transco and Meade are jointly developing new natural gas pipeline
facilities as part of Transco’s proposed “Atlantic Sunrise Project” (such new
natural gas pipeline facilities, as further described in Exhibit A hereto, are
referred to herein as the “Central Penn Line”);

WHEREAS, Transco and Meade are executing contemporaneously herewith a Lease
Agreement, under which Transco will lease from Meade that portion of the Central
Penn Line owned by Meade, and an Operation and Maintenance Agreement, under
which Transco will provide operation and maintenance services for the Central
Penn Line; and

WHEREAS, Transco and Meade now desire to set forth the terms and conditions for
the construction, ownership and operation of the Central Penn Line.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Transco and Meade hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

 

1.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

“Affiliate” means a Person that Controls, is Controlled by or is under common
Control with the Person in question.

“Agreement” has the meaning given in the introductory paragraph.

“Alternate Representative” has the meaning given in Section 2.1(b).

“Anchor PA” has the meaning given in Section 6.4(a).

“Anchor PA Termination” has the meaning given in Section 6.4(a).

“Anchor Shipper” means the shipper under Transco’s Atlantic Sunrise Project that
has executed a precedent agreement with Transco for 420,000 dt/d of firm
transportation capacity under such project.

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“Atlantic Sunrise Project” means Transco’s proposed natural gas pipeline
expansion project designed to provide new firm transportation capacity from
various supply points in northeast Pennsylvania to delivery points along
Transco’s mainline in southeast Pennsylvania and extending southward to
Transco’s Zone 4/4A Pools at Transco’s Station 85 in Choctaw Co., Alabama.

“Baseline Development Plan” has the meaning given in Section 2.4(a).

“Business Day” means any day other than a Saturday, a Sunday, or a holiday on
which national banking associations in the State of Texas are closed.

“Cabot” means Cabot Oil & Gas Corporation.

“Cabot PA Termination” has the meaning given in Section 6.4(b).

“Cabot Precedent Agreement” means that certain Precedent Agreement (Atlantic
Sunrise Project), dated February 5, 2014, between Transco and Cabot.

“Capital Call” has the meaning given in Section 2.6(c).

“Central Penn Line” has the meaning given in the above Recitals. The Central
Penn Line will consist of both the Central Penn Line North and Central Penn Line
South segments, as further described in Exhibit A. As used herein, the term
“Central Penn Line” shall be subject to the provisions of Section 3.4.

“Central Penn Line North” has the meaning given in Exhibit A.

“Central Penn Line South” has the meaning given in Exhibit A.

“Chairman” has the meaning given in Section 2.1(c).

“Construction Committee” has the meaning given in Section 2.1(a).

“Control” (including the terms “Controlled by” and “under common Control with”)
means the possession, directly or indirectly, and whether acting alone or in
conjunction with others of the authority to direct or cause the direction of the
management or policies of a Person (a voting interest of 50 percent or more
creates a rebuttable presumption of Control.

“CPL-N Original Project Costs” means $631,646,000 (the amount equal to the
Project Costs associated with the Central Penn Line North estimated as of the
Effective Date).

“CPL-S Original Project Costs” means $1,273,571,000 (the amount equal to the
Project Costs associated with the Central Penn Line South estimated as of the
Effective Date).

“CPL Assets” has the meaning given in Section 2.11(a).

 

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“CPL Original Capital Estimate” means $1,905,217,000 (the amount equal to the
sum of the CPL-N Original Project Costs and CPL-S Original Project Costs
estimated as of the Effective Date).

“Default” means:

(a) the failure of a Party (“Non-Funding Party”) to make all or any portion of a
capital contribution by the date required (pursuant to a Capital Call properly
issued hereunder), and the continuance of such failure for a period of fifteen
(15) days following receipt of notice from the other Party that the Non-Funding
Party has failed to make such capital contribution by the date required;
provided, however, that Meade shall not be obligated to fund any Capital Call to
Meade in excess of [****] of Meade’s Original Capital Estimate (a “Major Cost
Overrun Capital Call”); or

(b) the failure of a Party to comply in any material respect with any of its
other obligations under this Agreement, or the failure of any representation or
warranty made by a Party in this Agreement to have been true and correct in all
material respects at the time it was made, in each case if such breach is not
cured by the applicable Party within sixty (60) days of its receiving notice of
such breach from the other Party (or, if such breach is not capable of being
cured within such 60-day period, if such Party fails to promptly commence
substantial efforts to cure such breach or to prosecute such curative efforts to
completion with continuity and diligence).

“Defaulting Party” has the meaning given in Section 6.6.

“Dekatherms” or “dt” has the meaning given in Section 2 of the General Terms and
Conditions of Transco’s Tariff.

“Dispose or Disposition” means, with respect to a Party’s Ownership Share or any
portion thereof, the direct or indirect sale, assignment, transfer, conveyance,
gift, exchange or other disposition of the legal or beneficial interest in such
asset, whether such disposition be voluntary, involuntary or by operation of
Law, including the following: (a) in the case of such asset owned by a natural
person, a transfer of such asset upon the death of its owner, whether by will,
intestate succession or otherwise; (b) in the case of such asset owned by an
entity, (i) a merger or consolidation of such entity (other than where such
entity is the survivor thereof), or (ii) a sale or distribution of such asset,
including in connection with the dissolution, liquidation, winding-up or
termination of such entity (unless, in the case of dissolution, such entity’s
business is continued without the commencement of liquidation or winding-up);
(c) a disposition in connection with, or in lieu of, a foreclosure of an
Encumbrance; but such terms shall not include the creation of an Encumbrance.

“Disposing Party” has the meaning given in Section 3.3(a).

 

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“dt/d” means Dekatherms per day.

“Effective Date” has the meaning given in the introductory paragraph.

“Eligible Expansion” has the meaning given in Section 3.4(a).

“Eligible Expansion Shipper” has the meaning given in Section 3.4(b).

“Eligible Share” has the meaning given in Section 3.4(b).

“Encumbrance” means any lien, pledge, condemnation proceeding, security
interest, mortgage, or similar encumbrance.

“Exchange” means any public exchange, such as the New York Stock Exchange,
American Stock Exchange, The NASDAQ Stock Market or other similar listed
securities exchange.

“Expansion” has the meaning given in Section 3.4(e).

“FERC” means the Federal Energy Regulatory Commission or its successor.

“FERC Application” has the meaning given in Section 2.3(a).

“FERC Authorizations” means the necessary authorizations from the FERC under the
NGA to construct, own and operate the Central Penn Line as contemplated under
this Agreement, the Lease and the Operation and Maintenance Agreement.

“First Threshold Payment Date” has the meaning given in Section 6.7(e)(i).

“Force Majeure” has the meaning given in Section 7.1(a).

“Governmental Authority” means any federal, state, local, municipal or,
governmental department, commission, court, board, bureau, agency or
instrumentality or any judicial, regulatory or administrative body having
jurisdiction as to the matter in question.

“In-Service Date” means the date that the facilities constituting the Central
Penn Line (as described in Exhibit A hereto) are placed in service.

“Law” means any statute, law (including common law), order, rule, regulation,
decree or other legal or regulatory determination, including any of the
foregoing as may be enacted, amended or issued after the execution of this
Agreement.

“Lease” means that certain Lease Agreement, dated of even date herewith, by and
between Transco and Meade, under which Transco will lease from Meade, and Meade
will lease to Transco, Meade’s Ownership Share of the Central Penn Line.

“Lease Reduction Percentage” has the meaning given in Section 3.2(b).

 

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“Lease Term” has the meaning given in the Lease.

“Major Cost Overrun Capital Call” has the meaning given in the definition of
Default.

“Make-Whole Payment” has the meaning given in Section 6.7(e)(i).

“Marketing Period” has the meaning given in Section 6.4(a) and 6.4(b), as
applicable.

“Meade” has the meaning given in the introductory paragraph.

“Meade’s Original Capital Estimate” means $746,136,000 (this amount is equal to
Meade’s Ownership Share of the CPL Original Capital Estimate).

“NGA” means the Natural Gas Act, 15 U.S.C. § 717, et seq., as amended.

“Non-Defaulting Party” has the meaning given in Section 6.6.

“Non-Funding Major Cost Overrun Notice” has the meaning given in Section 3.2.

“Non-Funding Party” has the meaning given in the definition of Default.

“Observer” has the meaning given in Section 2.1(b).

“Operation and Maintenance Agreement” means that certain Operating and
Maintenance Agreement, dated of even date herewith, by and between Transco and
Meade, under which Transco will provide operation and maintenance services for
the Central Penn Line.

“Other Governmental Approvals” has the meaning given in Section 2.3(b).

“Operator” has the meaning given in the Operation and Maintenance Agreement.

“Ownership Share” has the meaning given in Section 3.1(a).

“Party” and “Parties” have the meanings given in the introductory paragraph.

“Person” means any party or individual or any type of corporation, company or
partnership.

“Project Costs” has the meaning given in Section 2.6(a).

“Real Property Rights” has the meaning given in Section 2.3(b).

“Receipt Interconnections” means the proposed points of interconnection between
the Central Penn Line and WFS on the discharge of WFS’ Zick Station in
Susquehanna County, Pennsylvania, at the proposed East Wilcox Station in
Susquehanna County, Pennsylvania, and at the proposed Springville
Interconnection near milepost 30.6 on the Central Penn Line North in Wyoming
County, Pennsylvania.

 

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“Representative” has the meaning given in Section 2.1(b).

“Restricted Expansions” has the meaning given in Section 3.4(d).

“River Road Service Agreement” means the service agreement under Transco’s Rate
Schedule FT providing for firm transportation service of 500,000 dt/d to be
entered into between Transco and Cabot pursuant to the terms and conditions of
the Cabot Precedent Agreement.

“ROFO Offer” has the meaning given in Section 3.3(a).

“ROFO Party” has the meaning given in Section 3.3(a).

“ROFO Period” has the meaning given in Section 3.3(a).

“Second Threshold Payment Date” has the meaning given in Section 6.7(e)(ii).

“Target In-Service Date” means September 1, 2017.

“Transco” has the meaning given in the introductory paragraph.

“Transco’s Board” has the meaning given in Section 6.3.

“Transco’s Tariff” means Volume No. 1 of Transco’s FERC Gas Tariff on file with
FERC, as amended from time to time.

“Transferee” has the meaning given in Section 5.1(b).

“Updated Development Plan” has the meaning given in Section 2.4(b).

“WFS” means Williams Field Services Company, LLC.

 

1.2 Rules of Interpretation.

References herein to Sections, Exhibits, clauses and paragraphs are references
to sections of, exhibits to, clauses of, and paragraphs of, this Agreement.

Unless otherwise specified, “hereunder,” “herein,” “hereto,” “hereof” and words
of similar import refer to this Agreement as a whole and not to any particular
provision hereof.

Words denoting the singular include the plural and vice versa.

References to any Person shall include such Person’s successors and permitted
assigns in that designated capacity.

References to days, months and years are references to calendar days, months and
years unless otherwise specified.

 

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Words not otherwise defined herein that have well known and generally accepted
technical or trade meanings are used in accordance with such meanings.

Any reference to “dollars” or “$” or to “cents” or “¢” shall be to United States
dollars or cents, respectively.

The use of the words “include,” “includes,” or “including” shall be by way of
example only and shall not be considered in any way to limit the generality of
the description preceding the use of such word.

The words “shall” and “will” shall have equal effect.

This Agreement shall be considered for all purposes as prepared through the
joint efforts of the Parties and shall not be construed against either Party as
a result of the preparation, substitution, submission or other event of
negotiation, drafting or execution hereof.

The headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof.

Unless the context otherwise requires, the use of any of the words “action,”
“claim,” “suit,” “proceeding,” or “judgment,” includes any and all such terms.

Any references to specific section numbers of Transco’s Tariff shall be deemed
to include any renumbering thereof or duly authorized amendments thereto.

ARTICLE II

DESIGN AND CONSTRUCTION

 

2.1 Construction Committee.

(a) Promptly following the Effective Date, the Parties shall form a construction
committee (“Construction Committee”) in accordance with this Section 2.1.

(b) To facilitate the orderly and efficient conduct of Construction Committee
meetings, each Party shall notify in writing the other Party, from time to time,
of the identity of (i) one of its officers, employees, directors or agents (a
“Representative”) and up to three other officers, employees, directors or agents
(each an “Observer”) who, at no cost or expense to the other Party, will
represent it at such meetings, and (ii) at least one, but not more than two, of
its officers, employees or agents, who will represent it at any meeting that the
Party’s Representative is unable to attend (each an “Alternate Representative”).
The term Representative as used herein shall also refer to any Alternate
Representative that is actually performing the duties of the applicable
Representative. A Party may designate a different Representative, Observer or
Alternate Representatives for any meeting of the Construction Committee by
notifying in writing the other Party at least two Business Days prior to the
scheduled date for such meeting; provided, however, that if giving such advance
notice is not feasible, then such new Representative, Observer or Alternate
Representatives shall present written evidence of his or her authority at the
commencement of such meeting.

 

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(c) Transco’s Representative will be the chairman of the Construction Committee
(the “Chairman”) and will preside over meetings of the Construction Committee.
To facilitate efficient meetings of the Construction Committee, Transco shall
send written progress reports monthly to the Construction Committee regarding
the development and construction of the Central Penn Line commencing on the
Effective Date until the In-Service Date. From the Effective Date through the
issuance of the FERC Authorizations to construct the Central Penn Line, the
Construction Committee shall meet quarterly, subject to more or less frequent
meetings upon approval of the Construction Committee. Following the date of
issuance of the FERC Authorizations to construct the Central Penn Line, the
Construction Committee shall meet monthly. Notice of, and an agenda for, all
Construction Committee meetings shall be provided by the Chairman to the Parties
at least one Business Day prior to the date of each meeting. Special meetings of
the Construction Committee may be called at such times, and in such manner, as
any Party reasonably deems necessary. Any Party calling for any such special
meeting shall notify the Representatives of such meeting at least five Business
Days prior to the date of such meeting. The notice and agenda requirements set
forth herein may be shortened by the Construction Committee.

(d) Meetings of the Construction Committee shall be held in person at a location
designated by the Chairman or by means of conference telephone, videoconference
or similar communications equipment by means of which all persons participating
in the meeting can hear each other.

 

2.2 Designation of Transco as Constructor.

The Parties hereby designate Transco as the constructor of the Central Penn
Line. As constructor, Transco shall be responsible for the planning, design,
permitting, procurement, construction and installation of the Central Penn Line.

 

2.3 Acquisition of Governmental Approvals and Real Property Rights.

(a) Transco shall prepare or cause the preparation of, and shall file, the
necessary application (and amendments and exhibits thereto) requesting
authorization from the FERC pursuant to the NGA to construct, own and operate
Transco’s proposed Atlantic Sunrise Project, which shall include a request to
construct, own and operate the Central Penn Line in accordance with the terms of
this Agreement and the Lease (such application and any amendments and exhibits
thereto are collectively referred to as the “FERC Application”). The FERC
Application shall provide that Transco shall be the sole applicant for a
certificate of public convenience and necessity under Section 7(c) of the NGA in
connection with the Central Penn Line, it being expressly understood by the
Parties that Meade shall not, by virtue of the FERC Application or the
authorizations requested therein, be a holder of a certificate of public
convenience and necessity under Section 7(c) of the NGA. Transco shall provide
Meade with a draft copy of the FERC Application prior to filing the FERC
Application with the FERC, and Transco shall, to the extent practicable,
consider any comments timely provided by Meade.

 

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(b) The Parties recognize that in addition to the FERC Authorizations, various
other permits, licenses, authorizations and approvals of Governmental
Authorities (“Other Governmental Approvals”) will be required for construction
and operation of the Central Penn Line. Accordingly, Transco shall seek such
Other Governmental Approvals as may be required for construction and operation
of the Central Penn Line. Unless otherwise required by Law or as otherwise
agreed to by the Parties, Transco will seek to obtain such Other Governmental
Approvals in Transco’s name. In addition, Transco shall seek to obtain in
Transco’s name all of the rights-of-way, easements, leases, consents, fee
ownership, and other real property rights required in connection with the
Central Penn Line (collectively, the “Real Property Rights”). Meade hereby
authorizes Transco to execute all necessary documents and to issue all necessary
assurances and indemnities for the Other Governmental Approvals and Real
Property Rights as may be required; provided, however, that Meade shall have the
opportunity to review and provide reasonable consent to any agreement requiring
any representations, warranties and indemnities of Meade. Transco shall exercise
due diligence in acting and assuming obligations on behalf of the Parties. Meade
agrees to reasonably cooperate with Transco in seeking such Other Governmental
Approvals and Real Property Rights.

 

2.4 Baseline Development Plan.

(a) Promptly following the Effective Date, Transco shall prepare and provide to
Meade (i) a detailed project scope, which shall include a description of tasks,
work and actions required for preparation of construction of the Central Penn
Line, (ii) a project schedule supporting the Target In-Service Date, and (iii) a
funding schedule supporting the CPL Original Capital Estimate with a forecast of
capital requirements (by calendar quarter relating to the Project Costs) (the
items described in (i) through (iii) are hereinafter referred to collectively as
the “Baseline Development Plan”).

(b) Transco shall provide an updated Baseline Development Plan (“Updated
Development Plan”) to Meade at least once each calendar quarter. In addition,
when available, Transco will include in the Updated Development Plan the design
and specifications for the Central Penn Line facilities, which shall be in
accordance with the applicable regulations in 49 C.F.R Parts 192 and 199 and
with sound and prudent practices in the pipeline industry. If there are any
significant variances in any Updated Development Plan from the prior Updated
Development Plan, then the Construction Committee shall meet to review and
discuss such Updated Development Plan in as much detail as reasonably requested
by either Party, and Transco shall consider in good faith any revisions to such
Updated Development Plan proposed by any Representative, including revisions to
address any material increase to the estimated Project Costs.

(c) Without limitation of the foregoing, if at any time the Construction
Committee reasonably determines that (i) the In-Service Date is likely to occur
six (6) months or more after the Target In-Service Date, or (ii) the estimated
total Project Costs are likely to exceed 110% of the CPL Original Capital
Estimate, then the Construction Committee shall convene a meeting at which
Transco shall have in attendance the necessary personnel to fully address the
circumstances causing such delay and/or cost overrun and the Parties shall
discuss in good faith any proposed revisions to the Updated Development Plan.

 

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2.5 Bidding and Negotiating the Construction.

(a) Prior to the bidding or negotiating of any contract or related series of
contracts valued at $10,000,000 or more, Transco shall submit to Meade a list of
the proposed contractors and their respective proposed scopes of work including
the proposed schedule and the estimated costs for each proposed contract. Meade
shall promptly review such information and may propose additions to or deletions
from the list of proposed contractors bidding on the work before Transco bids
and negotiates the contract; provided, however, that if Transco is not agreeable
to such additions or deletions from the list of proposed contractors, then the
Parties shall negotiate in good faith to finalize such list.

(b) Upon request, Transco will provide Meade with a copy of all executed
contracts or related series of contracts valued at $10,000,000 or more for the
construction of the Central Penn Line.

(c) At each meeting of the Construction Committee and at such other times as
reasonably requested by Meade, Transco will provide reasonable progress reports
for the execution of the Central Penn Line project.

(d) In the acquisition of materials and services for construction of the Central
Penn Line, Transco will use reasonable efforts to obtain the agreement of
suppliers and manufacturers that undivided interests in all warranties
applicable to such goods and services will be assignable by Transco to Meade to
the extent of Meade’s Ownership Share. To the extent that such warranties are
not so assignable, Transco will (i) notify Meade of such fact and will
thereafter reasonably cooperate with Meade if Meade seeks to obtain warranties
directly from such suppliers and manufacturers and (ii) provide Meade the
benefit of any warranties Transco retains that relate to Meade’s Ownership Share
of the CPL Assets.

 

2.6 Project Costs.

(a) The Parties shall each provide funding for the Project Costs for the Central
Penn Line North and Central Penn Line South in proportion to their respective
Ownership Shares as set forth in Exhibit B hereto. The term “Project Costs”
shall mean all costs, expenses, and overheads incurred for the planning, design,
permitting, materials, equipment, supplies, services, insurance, labor,
transportation, construction, installation and all other procurement or work
associated with the Central Penn Line, including:

(i) All payments due under contracts for engineering, construction,
environmental work, construction support, legal services and inspection of the
Central Penn Line;

 

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(ii) Personnel compensation, including employee benefits and expenses of
full-time employees and of contract labor retained directly by Transco, directly
incurred with regard to Transco’s duties and obligations hereunder;

(iii) The pro-rata share of personnel compensation, on a time devoted basis,
including employee benefits and expenses of Transco’s employees who render
part-time service, directly incurred with regard to Transco’s duties and
obligations hereunder;

(iv) Material, equipment, supplies, and services purchased or furnished for
construction of the Central Penn Line, net of discounts, including
transportation costs; provided, however, that all materials, equipment and
supplies furnished out of stock accounts and not purchased specifically for the
Central Penn Line shall be charged at book cost plus [****] percent to cover
applicable purchase and storage expenses to the extent that such total amount
does not exceed the current market rate for such material equipment and
supplies;

(v) Any natural gas required for installation, purging, testing and line pack
for the Central Penn Line;

(vi) Charges for the use of equipment, such charges to be at the standard use
rate for owned equipment and at the prevailing commercial rate for leased
equipment;

(vii) Taxes assessed or levied upon or in connection with the construction of
the Central Penn Line;

(viii) Permits, fees, and all other charges paid to any governmental entity for
the right or privilege of constructing the Central Penn Line;

(ix) The costs and expenses incurred in seeking and obtaining regulatory and
environmental authorizations and any certificates, permits, licenses, and other
approvals required by Governmental Authorities;

(x) Insurance costs, including premiums, deductible and retentions, for those
insurance policies required to be carried by Transco in connection with the
construction of the Central Penn Line, including the insurance specified in
Section 2.12(a);

(xi) Inspection, testing and start-up costs, including travel-related expenses;

(xii) All costs and payments in connection with the Real Property Rights;

 

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(xiii) If applicable, any costs and expenses associated with demobilization of
work and cancellation of work; and

(xiv) Costs incurred by Transco for other overhead expenses including, but not
limited to, office supplies and expenses, office rentals and other space cost,
salaries and wages, bonuses and expenses for personnel who render capital
related work for the benefit of Transco (in the performance of its obligations
hereunder), allocated to the Central Penn Line based on its percentage share of
Transco’s total amount of direct capital cost for the given month.

(b) Promptly following the Effective Date, Transco shall submit to Meade a
notice setting forth the Project Costs that Transco has incurred to-date, each
Party’s share of such costs, a description (in reasonable detail) of the work
associated with such costs, and an invoice for Meade’s share of such costs.
Meade shall pay to Transco (to the account specified in such invoice) the full
amount of such invoice within thirty (30) days of its receipt of such invoice.

(c) Transco shall issue or cause to be issued a written demand to each Party for
the making of capital contributions at such times and in such amounts as Transco
shall reasonably determine are required for the Project Costs (each such written
demand is referred to herein as a “Capital Call”). Such capital contributions
shall be made in cash. Each Capital Call issued pursuant to this Section shall
indicate whether it pertains to the Central Penn Line North or the Central Penn
Line South, and shall contain the following information:

(i) The total amount of capital contributions requested from the Parties;

(ii) The amount of capital contribution requested from the Party to whom the
request is addressed, such amount to be calculated in proportion to the
Ownership Share of such Party;

(iii) The purpose for which the funds are to be applied (in reasonable detail);
and

(iv) The date by which payments of the capital contribution shall be made (which
date shall not be less than eight (8) Business Days following the date the
Capital Call is given or, in the case of a Major Cost Overrun Capital Call,
which date shall not be less than twenty (20) days following the date the
Capital Call is given, unless in either such case a sooner due date is mutually
agreed to by the Parties) and the method of payment, provided that such date and
method shall be the same for each Party.

(d) Subject to Section 6.4, each Party agrees that it shall make payment of its
respective capital contributions in accordance with Capital Calls issued
pursuant to Section 2.6(c); provided, however, that Meade shall not be required
to fund a Major Cost Overrun Capital Call.

 

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(e) Together with each Capital Call, Transco shall deliver to Meade a statement
showing, for the Project in total and for the Central Penn Line North and
Central Penn Line South, respectively, the following: the aggregate amount of
capital contributions made prior to such Capital Call; the aggregate amount
applied by Transco to pay the Project Costs; and an estimate of the total
Project Costs anticipated to be incurred.

(f) As soon as practical after Transco has completed its final accounting of the
Project Costs, Transco shall render to Meade a final notice of the actual
Project Costs and an itemized inventory of the real and personal property
related to the Central Penn Line showing the cost of all material items of such
facilities and all services purchased by Transco. Such itemized inventory shall
show the total Project Costs and the portion thereof contributed by each Party.
Upon reasonable request by Meade, Transco shall furnish copies of source
documents supporting the Project Costs, provided that such documents are
requested within two years after the date of Transco’s final notice. If Meade’s
share of the actual Project Costs exceeds the amounts funded by Meade hereunder,
then Transco will include with such final notice an invoice for the amount owed
by Meade and Meade shall pay the full amount of such invoice to Transco within
thirty (30) days of the date of the invoice. If Meade’s share of the actual
Project Costs is less than the amounts funded by Meade hereunder, then Transco
will include with such final notice a refund for the amount of Meade’s
overpayments. Notwithstanding the foregoing, the Parties expressly acknowledge
and agree that there may be Project Costs incurred or invoiced after the
completion of the final accounting and that the Parties shall be responsible for
payment of all such costs pursuant to the terms hereof.

 

2.7 Interconnections.

(a) The facilities comprising the Receipt Interconnections shall be set forth in
interconnect agreements between Transco and WFS at such points, provided that
Meade shall have the right to be a party to such interconnect agreements. If
Meade elects to be a party to such interconnect agreements, then Transco shall
negotiate the agreements with WFS and shall provide Meade with a reasonable
opportunity to review and provide comments on the agreements prior to execution;
provided, however, that in no event shall Meade unduly withhold, delay or
condition its acceptance of such interconnect agreements. The facilities at the
Receipt Interconnections to be considered as part of the Central Penn Line shall
be as set forth in such interconnect agreements; the cost of such facilities
shall be included in the Project Costs and shall be constructed, owned and
operated as set forth in this Agreement.

(b) The point of demarcation between the facilities comprising the Central Penn
Line and the facilities comprising Transco’s mainline at the terminus of the
Central Penn Line in Lancaster County, Pennsylvania shall be at the isolating
flange located immediately downstream of the regulator station to be constructed
as part of the Central Penn Line. If this Agreement remains in effect following
the termination of the Lease, then the Parties shall negotiate in good faith an
interconnect and reimbursement agreement under which (i) a measuring facility
shall be installed at the interconnection

 

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between the Central Penn Line and Transco’s mainline in Lancaster County,
Pennsylvania, and (ii) Meade shall reimburse Transco for all costs, expenses,
overheads and tax-related charges incurred for the planning, design, permitting,
materials, equipment, supplies, services, insurance, labor, transportation,
construction, installation and all other procurement or work associated with
such measuring facility.

 

2.8 Commencement of Construction.

Subject to the other provisions of this Agreement, Transco shall proceed with
construction of the Central Penn Line with reasonable diligence following the
receipt and acceptance by Transco of all necessary rights and regulatory
approvals authorizing the construction of such facilities. Transco shall cause
the Central Penn Line to be constructed, installed, tested and placed in service
(and shall provide such supervisory, administrative, technical and other
services as shall be required therefor) subject to the provisions of the
approved design specifications and construction contract(s), in compliance with
the requirements of all applicable and valid federal, state and local laws,
orders and regulations of Governmental Authorities, in accordance with sound and
prudent natural gas pipeline industry practices, and in accordance with the
terms and conditions of this Agreement. Transco shall perform its services and
fulfill its responsibilities hereunder, and shall require all consultants,
contractors, subcontractors, and materialmen furnishing labor, material or
services for the design, construction, installation and testing of the Central
Penn Line to carry out their responsibilities, in a good and workmanlike manner.
Meade shall have the right at any time to inspect or cause to be inspected, at
its sole cost, the construction, installation, and testing activities and the
equipment and materials to be used in the construction of the Central Penn Line.

 

2.9 Inspection.

Transco will advise Meade in writing approximately fifteen (15) days in advance
of the projected In-Service Date, and Meade will have the right to jointly
inspect the Central Penn Line to determine that the facilities have been
installed properly and are operational in accordance with the approved design
and specifications.

 

2.10 Documentation.

(a) As soon as reasonably practicable following the In-Service Date, Transco
will provide to Meade final “as built” drawings.

(b) Transco shall retain, and shall provide to Meade as soon as reasonably
practicable following the In-Service Date, copies of all documentation required
pursuant to applicable regulations for the ownership and operation of such
facilities. Such documentation may include, without limitation, material
warranties, mill test records, radiographic inspection records, hydrostatic
testing records, construction reports, welding procedures and qualification
tests.

 

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2.11 Title and Risk of Loss.

(a) Transco and Meade shall each own an undivided interest in the work product,
Real Property Rights, pipeline, compressors and any other tangible and
intangible assets constituting the Central Penn Line, including the assets
identified on Exhibit A (the “CPL Assets”), as set forth in Section 3.1 below,
regardless of the name or names in which legal title to all or any part of the
Central Penn Line may be held (except as otherwise specifically agreed to by the
Parties and except as provided in Section 3.4). As soon as is commercially
practicable, Meade and/or Transco will execute such documents required to
evidence each Party’s legal title to their respective Ownership Share in the CPL
Assets.

(b) During the Lease Term, Transco shall be responsible for the risk of loss of
the Central Penn Line or any part thereof. At all other times, each Party shall
be responsible for the risk of loss of the Central Penn Line or any part thereof
in proportion to its respective Ownership Share, subject to each Party’s
respective obligations under the Operation and Maintenance Agreement, including
Section 8.2 of the Operation and Maintenance Agreement.

 

2.12 Insurance and Claims.

(a) During construction of the Central Penn Line and prior to the In-Service
Date, Transco shall carry and maintain or cause to be carried and maintained for
the Central Penn Line the insurance described below for the benefit of and on
behalf of Transco and Meade and their respective Affiliates. To the extent that
such insurance does not cover the total amount of any loss, then each Party
shall be responsible for the amount of such uninsured loss in proportion to its
respective Ownership Share of the portion of the Central Penn Line in question.

(i) Builder’s Risk insurance covering physical loss and/or damage to the work on
the Central Penn Line for the entire construction period insuring on an all risk
policy form and a replacement cost value basis, including coverage during
pre-commissioning, commissioning, testing, start-up, transit, including ocean
marine cargo coverage (unless such coverage is furnished by applicable supplier)
and offsite storage. The Parties, through their respective risk management and
insurance representatives, shall reasonably consult and negotiate in good faith
to determine the limits, deductible and retention amounts and coverage of such
insurance.

(ii) Third Party Liability insurance with limits per occurrence and annual
aggregate of $[****] providing coverage for bodily injury and property damage,
including premises-operations, personal injury liability, blanket contractual
liability, broad form property damage, independent contractors,
products/completed operations, cross liability, sudden and accidental pollution,
explosion, collapse and underground exposures, and non-owned auto liability.

 

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(iii) The Parties, through their respective risk management and insurance
representatives, shall reasonably consult and negotiate in good faith to
determine any other insurance to be maintained during construction of the
Central Penn Line.

(b) Following the In-Service Date, the Operator shall carry and maintain or
cause to be carried and maintained for the Central Penn Line the insurance as
set forth in the Operation and Maintenance Agreement.

(c) The conditions described below shall apply to the insurance acquired under
Section 2.12(a).

(i) The Parties and their Affiliates will be insureds.

(ii) The Parties will be loss payees with respect to their interests in the
property insured under all property policies.

(iii) Waiver of all of insurers’ rights of subrogation or recovery shall apply
to all insureds.

(iv) Other appropriate Persons shall be named additional insureds and provided
waivers of all of insurers’ rights of subrogation or recovery as necessary for
construction of the Central Penn Line.

(v) Upon request of a Party, certificates of insurance, copies of policies
and/or other documents relevant to such insurance shall be delivered evidencing
any or all of the insurance provided and maintained hereunder. If insurance is
included in policies pursuant to item (vii) below, copies of policies and/or
other documents will be provided in a reasonably redacted form to preserve
confidentiality.

(vi) Transco shall handle or cause to be handled any and all claims arising out
of the construction and operation of the Central Penn Line and that pertains to
the insurance Transco is responsible to provide and maintain.

(vii) Transco may obtain all or part of the Property and/or Third Party
Liability insurance under an insurance policy (policies) that insures other
operations, businesses, companies, assets or properties of Transco or its
Affiliates.

(d) Transco shall require that all contractors and subcontractors performing
construction work on the Central Penn Line carry and maintain the types and
amounts of insurance as determined by Transco in accordance with customary
requirements of the nature of the work to be performed.

(e) Transco shall require that all contractors and subcontractors present
evidence of their compliance with a drug-free work environment in compliance
with all applicable regulations of the Department of Transportation.

 

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ARTICLE III

OWNERSHIP

 

3.1 Ownership Interests.

(a) Subject to Section 3.4, each Party shall have an undivided ownership
interest in the CPL Assets as set forth in Exhibit B hereto (referred to herein
as a Party’s “Ownership Share”). Transco shall (i) assign to Meade its Ownership
Share of the CPL Assets (other than the Real Property Rights, which shall be
assigned pursuant to Section 3.1(b)) acquired on or prior to the In-Service Date
as soon as commercially practicable (but in no event later than the In-Service
Date), and (ii) assign to Meade its Ownership Share of the CPL Assets acquired
after the In-Service Date as soon as commercially practicable.

(b) Transco shall use commercially reasonable efforts to include in the
agreements for the Real Property Rights the right to partially assign the Real
Property Rights to Meade, and, promptly following execution of such agreements
which include such assignment rights, Transco shall enter into the necessary
partial assignment agreements with Meade to reflect ownership of the Real
Property Rights by the Parties in proportion to their respective Ownership
Shares. For those Real Property Rights agreements for which Transco is unable,
despite its use of commercially reasonable efforts, to include the right to
partially assign the Real Property Rights to Meade, Transco and Meade shall
negotiate in good faith a mutually agreeable alternative to such assignment.

(c) The line pack gas necessary for operating the Central Penn Line will be
acquired and owned by the Parties in proportion to their respective Ownership
Shares.

(d) Each Party shall be responsible for any taxes and fees of any Governmental
Authority associated with its ownership interest in the Central Penn Line.

 

3.2 Major Cost Overrun Capital Calls.

(a) In the event Meade elects not to fund a Major Cost Overrun Capital Call,
Meade shall send written notice (the “Non-Funding Major Cost Overrun Notice”) to
Transco of its intent not to fund such Major Cost Overrun Capital Call on or
before the date payment of such Major Cost Overrun Capital Call is otherwise
required under Section 2.6(c)(iv). The election by Meade not to fund a Major
Cost Overrun Capital Call shall be irrevocable and shall apply to all future
Major Cost Overrun Capital Calls.

(b) Upon receipt of the Non-Funding Major Cost Overrun Notice, Transco shall
have the option, to be exercised within [****] days of receiving the Non-Funding
Major Cost Overrun Notice, to either: (i) purchase Meade’s Ownership Share at a
price equal to [****]% of the amount paid by Meade for the Project Costs (such
purchase price shall be payable in cash); or (ii) fund all of the remaining
costs of the Central Penn Line, in which event the rent payable to Meade under
the Lease shall be reduced by an amount equal to the product of the Monthly
Lease Charge (as defined in the Lease) multiplied by the lease reduction
percentage (the “Lease Reduction Percentage”), which shall be equal to “X”,
where X = “D” divided by “A” (as defined below).

 

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  •  

“A” equals Meade’s Original Capital Estimate;

 

  •  

“B” equals the Project Costs funded by Meade as of and through the date of the
Non-Funding Major Cost Overrun Notice;

 

  •  

“C” equals Meade’s Ownership Share of the total actual Project Costs incurred to
complete the Central Penn Line; and

 

  •  

“D” equals C minus B, or Meade’s Ownership Share of the total actual Project
Costs funded by Transco from and after the date of the Non-Funding Major Cost
Overrun Notice to complete the Central Penn Line.

For example if:

(i) Meade’s Ownership Share of the total actual Project Costs incurred to
complete the Central Penn Line is $[****] (or “C” above) which represents
[****]% of Meade’s Original Capital Estimate; (ii) as of and through the date of
the Non-Funding Major Cost Overrun Notice, Meade has funded $[****] (or “B”
above) which represents [****]% of Meade’s Original Capital Estimate; and
(iii) from and after the date of the Non-Funding Major Cost Overrun Notice,
Transco funds the remaining $[****] (or “D” above) otherwise payable by Meade,
then the Lease Reduction Percentage would be[****]% ($[****] (D) divided by
$746,136,000 (A)).

(c) If Transco elects to purchase Meade’s Ownership Share of the CPL Assets
pursuant to Section 3.2(b), then Transco shall purchase such assets for cash
within ten (10) Business Days of exercising such purchase option and Meade shall
assign its Ownership Share of the CPL Assets to Transco pursuant to the title
transfer process referenced in Section 6.7(d).

(d) If Transco elects not to exercise either of the rights set forth in
Section 3.2(b), then the Parties shall discuss in good faith any revisions to
the Updated Development Plan and/or reasonable alternatives to the Central Penn
Line project in general.

 

3.3 Right of First Offer.

(a) If at any time Meade or a member of Meade (for purposes of this Section 3.3,
the term “Ownership Share” shall include such member’s membership interest in
Meade), wishes to Dispose of all or a portion of its Ownership Share to any
Person other than to an existing member of Meade or an Affiliate of an existing
member of Meade, then Meade or its member, as applicable (the “Disposing Party”)
must first offer to Dispose of its Ownership Share (the “ROFO Offer”) to Transco
(the “ROFO Party”) by delivering written notice to the ROFO Party of the
purchase price (payable in cash) and proposed terms of sale at which it is
willing to sell such Ownership Share. If at any time Transco wishes to Dispose
of all or a portion of its Ownership Share to any Person other than its
Affiliate, then Transco (the “Disposing Party”) must first offer to Dispose of
its

 

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Ownership Share (the “ROFO Offer”) to Meade (the “ROFO Party”) by delivering
written notice to the ROFO Party of the purchase price (payable in cash) and
proposed terms of sale at which it is willing to sell such Ownership Share. The
ROFO Party shall have thirty (30) days after receipt of such written notice
(“ROFO Period”) to notify the Disposing Party of either (i) its acceptance of
the ROFO Offer or (ii) that the ROFO Party will not make an offer to purchase
such Ownership Share (if the ROFO Party fails to deliver such notice within the
ROFO Period, then the ROFO Party shall be deemed to have elected not to make an
offer to purchase such Ownership Share).

(b) If the ROFO Party accepts the ROFO Offer, closing shall occur promptly (and
no later than sixty (60) days following acceptance), and shall be held at the
principal place of business of the Disposing Party, unless the Parties mutually
agree upon a different place or date. At the closing, (i) the Disposing Party
shall execute and deliver to the ROFO Party (A) an assignment of the Ownership
Share, in form and substance reasonably acceptable to the ROFO Party, containing
a special warranty of title as to such portion of the Ownership Share (including
that such portion of the Ownership Share is free and clear of all Encumbrances)
and (B) any other instruments reasonably requested by the ROFO Party to give
effect to the purchase, and (ii) the ROFO Party shall deliver the purchase price
to the Disposing Party in immediately available funds.

(c) If the ROFO Party does not accept the ROFO Offer, then, for a period of
[****] days immediately following the ROFO Period, the Disposing Party shall
have the right to transfer the offered Ownership Share to any third party
transferee at a price not less than the price in the ROFO Offer and on such
other terms and conditions not more favorable in any material respect to the
third party transferee than those offered in the ROFO Offer. If, however, the
Disposing Party fails to so Dispose of the Ownership Share within such
[****]-day period, then any Disposition after the expiration of such [****]-day
period shall again become subject to the right of first offer set forth in this
Section 3.3.

(d) Notwithstanding the foregoing: (i) no issuance, sale, assignment, transfer,
conveyance, gift, exchange or other disposition (including through merger,
acquisition, consolidation or other business combination transaction) of any
equity interest in any entity the equity securities of which are listed on an
Exchange shall constitute a Disposition; (ii) Transco, or any member of Meade or
any parent of Transco or parent of a member of Meade the equity securities of
which are listed on an Exchange, shall at all times have the right, without any
restriction hereunder, to Dispose of its Ownership Share through a merger,
acquisition, consolidation or other business combination transaction; (iii) the
sale, assignment, transfer, conveyance, gift, exchange or other disposition of
the Ownership Share to a partnership or limited liability company in connection
with the public offering of partnership interests or membership interests in
such partnership or limited liability company shall not constitute a
Disposition; (iv) no sale, assignment, transfer, conveyance, gift, exchange or
other disposition (including through merger, acquisition, consolidation or other
business combination transaction) of a limited partnership interest in Vega
Energy Partners, Ltd. or EIF United States Power Fund IV, L.P. shall constitute
a Disposition in Meade or any member of Meade so long as the general partner of
Vega Energy Partners, Ltd., MMC, LLC, or EIF United States Power Fund IV, L.P.,
EIF US Power IV, LLC, remains in Control of Vega Energy Partners, Ltd. or EIF
United States Power

 

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Fund IV, L.P.; (v) no issuance, offering or recapitalization of Vega Energy
Partners, Ltd. or EIF United States Power Fund IV, L.P. shall constitute a
Disposition so long as the general partner of Vega Energy Partners, Ltd , MMC,
LLC, or EIF United States Power Fund IV, L.P., EIF US Power IV, LLC, remains in
Control of Vega Energy Partners, Ltd. or EIF United States Power Fund IV, L.P.;
and (vi) no sale, assignment, transfer, conveyance, gift, exchange or other
disposition (including through merger, acquisition, consolidation or other
business combination transaction) by Vega Energy Partners, Ltd. or EIF United
States Power Fund IV, L.P. to their respective Affiliates of an indirect equity
interest in any member of Meade shall constitute a Disposition.

 

3.4 Expansions.

(a) As used herein, the term “Eligible Expansion” means (i) an expansion of the
Central Penn Line which will increase the firm transportation capacity of all or
a portion of the Central Penn Line, and/or (ii) the construction of an
interconnection(s) (other than the Receipt Interconnections) on the Central Penn
Line. If Transco desires to pursue or develop an Eligible Expansion, then
Transco shall notify Meade thereof. As part of such notification, Transco shall
provide the following information about the Eligible Expansion: (A) a
description of the facilities to be installed; (B) the total estimated cost of
the facilities; (C) the amount of firm transportation capacity to be added;
(D) flow diagrams for such capacity; (E) the proposed project schedule,
including the expected construction period and target in-service date; and (F) a
brief description of the approvals required of any Governmental Authority.

(b) As to any Eligible Expansion, Meade shall have the option, exercisable
within [****] days after receipt of such notification from Transco, to
participate in such Eligible Expansion as an owner of an undivided ownership
interest in the Eligible Expansion facilities up to, but not exceeding, Meade’s
Eligible Share of the ownership interest in such facilities. If Cabot, Meade,
Vega Energy Partners, Ltd., WGL Holdings, EIF USPV, L.P., or any other investor
in Meade or their respective affiliates or successors (each an “Eligible
Expansion Shipper”) has executed a binding precedent agreement for firm
transportation service under such Eligible Expansion, then the term “Eligible
Share” shall mean the lower of (i) [****]%, or (ii) the percentage equivalent of
a fraction, the numerator of which is the sum of the firm transportation
capacity (measured in dt/d) subscribed in total by the Eligible Expansion
Shippers under the Eligible Expansion and the denominator of which is the total
firm transportation capacity (measured in dt/d) under the Eligible Expansion. If
no Eligible Expansion Shipper has executed a binding precedent agreement for
firm transportation service under such Eligible Expansion, then the term
“Eligible Share” shall mean [****]%. If such option is triggered and Meade
exercises such option within such [****]-day period, then the Parties shall
negotiate in good faith an overall plan for such Eligible Expansion. Transco
shall have the right but not the obligation to construct and operate (or cause
the construction and operation) of any Eligible Expansion and to lease from
Meade the undivided joint ownership interest in the Eligible Expansion
facilities owned by Meade on mutually agreeable terms setting forth each Party’s
rights as it relates to such Eligible

 

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Expansion. In that regard, the Parties shall negotiate in good faith to reach
such mutually agreeable terms. If despite their good faith efforts the Parties
are unable to reach mutual agreeable terms within [****] days following the date
that Meade exercises such option, but Meade nevertheless desires to participate
as an owner of an undivided ownership interest in the Eligible Expansion
facilities, then (y) Meade’s participation in such Eligible Expansion shall be
as an interstate gas pipeline company subject to the jurisdiction of the FERC,
and (z) Meade’s pipeline capacity rights on the Central Penn Line under such
Eligible Expansion shall equal Meade’s Eligible Share of the pipeline capacity
to be added on the Central Penn Line under such Eligible Expansion.

(c) If Meade does not exercise such option within such [****]-day period, then
Transco may proceed with such Eligible Expansion, and the following shall apply:
(i) Meade shall not oppose, obstruct, or otherwise interfere with, in any manner
whatsoever, the efforts of Transco to obtain the necessary governmental
authorizations for such Eligible Expansion or to develop, construct, install,
and operate such Eligible Expansion, provided, however, that the foregoing shall
not be construed to prohibit Meade or its Affiliates from competing with the
Central Penn Line or such Eligible Expansion; and (ii) except to the extent
otherwise agreed to in writing by the Parties, (A) Meade shall not have any
right to approve, own, participate in, construct, or install (or cause to be
constructed or installed) such Eligible Expansion, (B) Meade shall not be
required to pay any development, construction, or installation costs for such
Eligible Expansion, and (C) Transco or its designee shall own the facilities and
pipeline capacity associated with such Eligible Expansion.

(d) Any expansion of the Central Penn Line that would not qualify as an Eligible
Expansion shall be deemed “Restricted Expansions.” Transco shall have the right
at any time, in its sole discretion and without the need to obtain Meade’s
consent, to construct, install, own and operate any Restricted Expansions. Meade
shall not oppose, obstruct, or otherwise interfere with, in any manner
whatsoever, the efforts of Transco to obtain the necessary governmental
authorizations for any Restricted Expansions or to develop, construct, install,
and operate any Restricted Expansions; provided, however, that the foregoing
shall not be construed to prohibit Meade or its Affiliates from competing with
the Central Penn Line or any Restricted Expansions. Except to the extent
otherwise agreed to in writing by the Parties, (i) Meade shall not have any
right to approve, own, participate in, construct, or install (or cause to be
constructed or installed) any Restricted Expansions, (ii) Meade shall not be
required to pay any development, construction, or installation costs for any
Restricted Expansions, and (iii) Transco or its designee shall own the
facilities and pipeline capacity associated with any Restricted Expansions.

(e) Upon the completion of any Eligible Expansion or Restricted Expansion
(collectively, “Expansion”), the Parties agree to promptly amend this Agreement
to reflect any changes hereto reasonably required in connection with such
Expansion, including (i) amending Exhibits B and C hereto to reflect the
ownership interests of the Party(ies) participating in the Expansion, the
Ownership Shares as set forth in the original Exhibit B, the capacity rights in
the expanded Central Penn Line (if applicable), and the date each such ownership
interests became effective, and (ii) addressing the ownership of any line pack
gas and Real Property Rights associated with such Expansion.

 

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(f) Each Expansion shall be designed such that the Expansion will not affect a
non-participating Party’s undivided ownership rights hereunder. Construction of
any Expansion must not impair the ability of the non-participating Party to
fully use its capacity rights under this Agreement other than for temporary
interruptions to install the facilities required for such Expansion.

(g) This Section 3.4 sets forth the exclusive procedures for pursuing an
Expansion, and neither Party shall have the right to pursue or develop an
Expansion except in strict compliance with this Section 3.4.

ARTICLE IV

CAPACITY RIGHTS

 

4.1 Parties’ Rights to Capacity on Central Penn Line.

During the Lease Term, Transco will have rights to 100% of the pipeline capacity
of the Central Penn Line. Upon termination of the Lease, the Parties shall have
the capacity rights set forth on Exhibit C hereto.

 

4.2 Operating Costs.

(a) The Parties acknowledge that the Operation and Maintenance Agreement sets
forth the responsibilities of the Parties with regard to the costs to operate
and maintain the Central Penn Line. Except as otherwise mutually agreed, the
costs to operate and maintain any Expansion facilities shall be borne by Transco
and any other party participating in the Expansion in proportion to their
respective ownership percentages in the Expansion facilities.

(b) Gas and electric power used for compression of the gas and gas lost or
unaccounted for will be allocated solely to Transco during the Lease Term. Upon
termination of the Lease, subject to the receipt of the necessary abandonment
and certificate authorizations from the FERC, gas and electric power used for
compression of the gas and gas lost or unaccounted for will be allocated to each
Party based on the quantity of gas delivered in a given month through such
Party’s capacity in the Central Penn Line (as such capacity may be increased
pursuant to any Expansions), without regard to receipt or delivery points.

ARTICLE V

OPERATION AND MAINTENANCE

 

5.1 Operation and Maintenance Agreement.

(a) Beginning on the In-Service Date, Transco shall operate and maintain such
facilities pursuant to the terms and conditions of the Operation and Maintenance
Agreement.

 

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(b) Notwithstanding the foregoing, if pursuant to the applicable provisions of
this Agreement Transco transfers all of its Ownership Share in the Central Penn
Line to a Person that is not an Affiliate of Transco (“Transferee”), then Meade
shall have the right to either assume the role of operator of the Central Penn
Line or designate an Affiliate of Meade to be the new operator for the Central
Penn Line. If Meade does not elect to become the new operator of the Central
Penn Line and does not designate an Affiliate of Meade to become the new
operator, then a third party operator shall be promptly selected by mutual
consent of Meade and the Transferee. The new operator determined in accordance
with the foregoing shall perform the operation services for the Central Penn
Line pursuant to such terms and conditions as shall be set forth in a mutually
agreeable operating agreement between Meade, the Transferee and the new
operator.

ARTICLE VI

TERM AND TERMINATION

 

6.1 Term.

This Agreement shall be effective as of the Effective Date and shall remain in
force and effect unless and until terminated in accordance with the terms
hereof. No Party shall have the right to unilaterally terminate or withdraw from
this Agreement except as expressly set forth in this Article VI.

 

6.2 Termination for Insufficient Economic Support.

Transco may terminate this Agreement immediately upon written notice to Meade if
Transco is unable to secure binding agreements relating to Transco’s commercial
development of the Atlantic Sunrise Project that are sufficient, in Transco’s
sole determination, to economically justify Transco proceeding with the Atlantic
Sunrise Project; provided that such termination right must be exercised, if at
all, by Transco delivering notice of termination to Meade on or before
February 17, 2014, or else such termination right shall be waived.

 

6.3 Termination for Lack of Board Approvals.

Transco shall seek in good faith the necessary approvals from its management
committee and the board(s) of directors of its parent company(ies) (such
committee and board(s) are collectively referred to herein as “Transco’s Board”)
to construct, own and operate the Atlantic Sunrise Project facilities necessary
to provide firm transportation service under the Anchor PA and the Cabot
Precedent Agreement. Transco shall provide prompt notice to Meade of the
decision by Transco’s Board on such request for such necessary approvals.
Transco may terminate this Agreement immediately upon written notice to Meade if
Transco is unable to secure such necessary approvals; provided that such
termination right must be exercised, if at all, by Transco delivering notice of
termination to Meade on or before the earlier of March 4, 2014 or the tenth
(10th) Business Day following Meade’s receipt of Transco’s notice that Transco’s
Board has denied such approvals, or else such termination right shall be waived.

 

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6.4 Termination in Connection with Anchor PAs.

(a) If Transco’s precedent agreement with the Anchor Shipper (referred to herein
as the “Anchor PA”) is terminated after February 28, 2014 but prior to the
In-Service Date (“Anchor PA Termination”) and no substitute shipper(s) contracts
for capacity in the amount of such terminated Anchor PA within [****] days of
such termination (as used in this Section 6.4(a), “Marketing Period”) and
Transco elects not to go forward with the construction of the Central Penn Line,
then Transco shall have the right to terminate this Agreement upon written
notice to Meade; provided that such termination right must be exercised, if at
all, within [****] days following the effective date of the Anchor PA
Termination or else such right shall be waived; provided, further, that prior to
Transco exercising such termination right, the Parties shall negotiate in good
faith reasonable alternatives to the current design of the Central Penn Line and
the terms and conditions of this Precedent Agreement that would effectively
replace the Anchor Shipper’s subscription under the Atlantic Sunrise Project.
The Parties shall have no obligation hereunder to fund Capital Calls during the
Marketing Period. Transco shall provide notice to Meade of the Anchor PA
Termination promptly following the Anchor PA Termination. Exhibit D hereto
provides a description of the rights set forth in the Anchor PA under which such
agreement may be terminated after February 28, 2014 but prior to the In-Service
Date.

(b) If the Cabot Precedent Agreement is terminated after February 28, 2014 but
prior to the In-Service Date (“Cabot PA Termination”) and no substitute
shipper(s) contracts for capacity in the amount of the capacity set forth in the
Cabot Precedent Agreement within [****] days of such termination (as used in
this Section 6.4(b), “Marketing Period”), then Transco shall have the right to
terminate this Agreement upon written notice to Meade; provided that such
termination right must be exercised, if at all, within [****] days following the
effective date of the Cabot PA Termination or else such right shall be waived;
provided, further, that prior to Transco exercising such termination right, the
Parties shall negotiate in good faith reasonable alternatives to the current
design of the Central Penn Line and the terms and conditions of this Precedent
Agreement that would effectively replace Cabot’s subscription under the Atlantic
Sunrise Project. The Parties shall have no obligation hereunder to fund Capital
Calls during the Marketing Period. Transco shall provide notice to Meade of the
Cabot PA Termination promptly following the Cabot PA Termination. Exhibit D
hereto provides a description of the rights set forth in the Cabot Precedent
Agreement under which such agreement may be terminated after February 28, 2014
but prior to the In-Service Date.

 

6.5 Termination in Connection with FERC Authorizations.

If the FERC Authorizations issued for the Central Penn Line include a condition
requiring Meade to be a natural gas company subject to the jurisdiction of the
FERC under the NGA, then the Parties shall negotiate in good faith reasonable
modifications to the Project structure to address such condition. Such
negotiations shall include the

 

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practical considerations of Meade complying with such condition and establishing
itself as a natural gas company subject to the jurisdiction of the FERC. If
Meade elects to comply with such condition (such election by Meade shall be at
its sole discretion), then the Parties shall promptly negotiate in good faith
any revisions to this Agreement, the Lease and the Operation and Maintenance
Agreement reasonably necessary to effectuate such election by Meade. If within
[****] days following the date of the FERC order issuing the FERC Authorizations
for the Central Penn Line, Meade has not elected to comply with such condition
or if the Parties have failed to reach mutual agreement regarding a resolution,
then either Party may terminate this Agreement upon written notice to the other
Party, provided that such termination right must be exercised, if at all, within
[****] days following the date of the FERC order issuing the FERC Authorizations
for the Central Penn Line or else such termination right shall be waived.

 

6.6 Termination in Connection with Default.

If a Party commits a Default and such Default is not cured within the time
period, if any, applicable to such Default as set forth herein, then the other
Party (“Non-Defaulting Party”) may terminate this Agreement upon written notice
to the Party in Default (“Defaulting Party”), provided that such termination
right must be exercised, if at all, within [****] days following the date that
such termination right becomes available, or else such right shall be waived.

 

6.7 Effect of Termination.

(a) If this Agreement is terminated by Transco in accordance with Section 6.2 or
Section 6.3, then Transco shall promptly refund to Meade in cash any amounts
paid by Meade for the Project Costs.

(b) If this Agreement is terminated in accordance with Section 6.4 or
Section 6.5 and, in either case, Transco elects not to go forward with the
construction of the Central Penn Line, then Transco shall have the right but not
the obligation to purchase Meade’s Ownership Share in the CPL Assets; provided
that such purchase right must be exercised, if at all, by Transco providing
written notice thereof to Meade within [****] days following the effective date
of termination of this Agreement, or else such right shall be waived. If such
purchase right of Transco is waived, then Meade shall have the right but not the
obligation to purchase Transco’s Ownership Share in the CPL Assets; provided
that such purchase right must be exercised, if at all, by Meade providing
written notice thereof to Transco within [****] days following the effective
date of waiver of Transco’s purchase right, or else Meade’s purchase right shall
be waived. If the purchasing Party timely delivers written notice to the
non-purchasing Party, then the purchasing Party’s purchase right shall be deemed
exercised, and the closing of the purchase of the non-purchasing Party’s
Ownership Share in the CPL Assets shall occur promptly following such exercise.
The purchase price for such CPL Assets shall equal the amount paid by the
non-purchasing Party for the Project Costs. At the closing: (i) the
non-purchasing Party shall execute and deliver to the purchasing Party (A) an
assignment of the Ownership Share in form and substance reasonably acceptable to
the purchasing Party, containing a special warranty of title as to such portion
of the Ownership Share

 

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(including that such portion of the Ownership Share is free and clear of all
Encumbrances), and (B) any other instruments reasonably requested by the
purchasing Party to give effect to the purchase; and (ii) the purchasing Party
shall deliver the purchase price to the non-purchasing Party in
immediately-available funds.

(c) If this Agreement is terminated in accordance with Section 6.4(b) or
Section 6.5 and, in either case, Transco elects to go forward with the
construction of the Central Penn Line, then Transco shall have the obligation to
purchase the Ownership Share of Meade in the CPL Assets. The purchase price for
such CPL Assets shall equal the amount paid by Meade for the Project Costs. At
the closing: (i) Meade shall execute and deliver to Transco (A) an assignment of
the Ownership Share in form and substance reasonably acceptable to Transco,
containing a special warranty of title as to such portion of the Ownership Share
(including that such portion of the Ownership Share is free and clear of all
Encumbrances), and (B) any other instruments reasonably requested by Transco to
give effect to the purchase; and (ii) Transco shall deliver the purchase price
to Meade in immediately-available funds.

(d) If this Agreement is terminated in accordance with Section 6.6, then (i) if
Meade was the Defaulting Party giving rise to the termination and Transco elects
to go forward with the construction of the Central Penn Line, Transco shall have
the obligation to purchase the Ownership Share of Meade in the CPL Assets,
(ii) if Meade was the Defaulting Party giving rise to the termination but
Transco does not elect to go forward with the construction of the Central Penn
Line, Transco shall have the right, but not the obligation, to purchase the
Ownership Share of Meade in the CPL Assets, and (iii) if Transco was the
Defaulting Party giving rise to the termination, Meade shall have the right but
not the obligation to purchase the Ownership Share of Transco in the CPL Assets;
provided that, in each of (ii) and (iii) above, such purchase right must be
exercised, if at all, by the Non-Defaulting Party providing written notice
thereof to the Defaulting Party within [****] days following the effective date
of termination of this Agreement, or else such right shall be waived. The
closing of the purchase of the Defaulting Party’s Ownership Share in the CPL
Assets under this Section 6.7(d) shall take place within [****] days following
the effective date of termination of this Agreement. At the closing: the
Defaulting Party shall execute and deliver to the Non-Defaulting Party (A) an
assignment of such Party’s Ownership Share in the CPL Assets in form and
substance reasonably acceptable to the Non-Defaulting Party, containing a
special warranty of title as to such portion of the Ownership Share in the CPL
Assets (including that such portion of the Ownership Share is free and clear of
all Encumbrances), and (B) any other instruments reasonably requested by the
Non-Defaulting Party to give effect to the purchase. Transco agrees to use
reasonable efforts to assist Meade in seeking the assignment of the FERC
Authorizations to Meade in the event of a Transco Default under Section 6.6 and
Meade’s election of its remedy under Section 6.7(d)(iii).

(e) If this Agreement is terminated in accordance with Section 6.6 and Transco
purchases Meade’s Ownership Share in the CPL Assets pursuant to
Section 6.7(d)(i) above, then the following shall apply:

 

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(i) if Meade’s Default giving rise to such termination occurs on or before the
date that the total amount that Meade has paid toward the Project Costs equals
[****]% of Meade’s Original Capital Estimate (the “First Threshold Payment
Date”), then Meade shall make a payment to Transco in the amount of Limit
redaction to the amount $[****] minus the amount paid by Meade for the Project
Costs (the “Make-Whole Payment”) and the purchase price to be paid by Transco
for Meade’s Ownership Share in the CPL Assets shall be zero;

(ii) if Meade’s Default giving rise to such termination occurs after the First
Threshold Payment Date but on or before the date that the total amount that
Meade has paid toward the Project Costs equals [****]% of Meade’s Original
Capital Estimate (the “Second Threshold Payment Date”), then the amount of the
Make-Whole Payment shall be zero and the purchase price to be paid by Transco
for Meade’s Ownership Share in the CPL Assets shall be the amount paid by Meade
for the Project Costs minus $[****];

(iii) if Meade’s Default giving rise to the termination occurs after the Second
Threshold Payment Date, then the Make-Whole Amount shall be zero and the
purchase price to be paid by Transco for Meade’s Ownership Share in the CPL
Assets shall be [****]% of the amount paid by Meade for the Project Costs;

(iv) promptly following the determination of the Make-Whole Payment, Transco
shall submit to Meade an invoice for the amount of the Make-Whole Payment, and
Meade shall pay to Transco (to the account specified in such invoice) the full
amount of such invoice within thirty (30) days of its receipt of such invoice;

(v) on or before February 28, 2014, Meade shall present to Transco either (i) an
unconditional and irrevocable guarantee of payment from Meade’s creditworthy
members in a form mutually agreeable to the Parties, (ii) a letter of credit in
form and substance mutually agreeable to the Parties and from a bank reasonably
acceptable to Transco, or (iii) an escrow agreement mutually agreeable to the
Parties, which, in each case, shall be for the period from the Effective Date
until the First Threshold Payment Date and, in the aggregate, shall be in an
amount equal to the Make-Whole Payment; provided however, that in each case of
(i), (ii) and (iii) above, the payment obligations of Meade’s members shall be
several and not joint and no member of Meade shall be liable for any failure to
pay or other default of any other member of Meade;

(vi) the parties intend the Make-Whole Payment to be liquidated damages
constituting compensation and not a penalty.

(f) If this Agreement is terminated in accordance with Section 6.6 and either
Transco purchases Meade’s Ownership Share in the CPL Assets pursuant to
Section 6.7(d)(ii) above or Meade purchases Transco’s Ownership Share in the CPL
Assets pursuant to Section 6.7(d)(iii) above, then the following shall apply:
from the Effective Date to the Second Threshold Payment Date, the purchase price
for the CPL Assets shall

 

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be [****]% of the amount paid by the Defaulting Party for the Project Costs;
following the Second Threshold Payment Date, the purchase price for such CPL
Assets shall be [****]% of the amount paid by the Defaulting Party for the
Project Costs.

(g) Sections 6.7(d) and (f) set forth Meade’s exclusive remedy for Transco’s
Default giving rise to termination under Section 6.6, and Sections 6.7(d),
(e) and (f) set forth Transco’s exclusive remedies for Meade’s Default giving
rise to termination under Section 6.6. Otherwise, termination of this Agreement
shall not relieve either Party from any obligation already accrued prior to the
date of such termination nor shall such termination deprive a Party of any
remedy at law otherwise available to it.

(h) Any provision of this Agreement that must survive termination hereof in
order to give proper effect to its intent shall survive the expiration or
earlier termination of this Agreement for the period specified in the applicable
provision or, if no period is specified, for the period required in order to
give effect to its intent.

 

6.8 Abandonment.

(a) If at any time the Parties mutually agree to terminate the use of the
Central Penn Line, the facilities and equipment comprising the Central Penn Line
shall be abandoned and, if applicable, disposed of in a mutually agreeable
manner, with costs incurred or revenues received from such abandonment and
disposition to be shared based on each Party’s Ownership Share.

(b) Except for any request for pre-granted abandonment as may be set forth in
the FERC Application, a Party may not file an application with the FERC to
abandon its ownership interest or capacity entitlement hereunder without the
prior written agreement of the other Party; provided, however, that a Party may
file such an abandonment application to implement any Disposition permitted
hereunder.

ARTICLE VII

MISCELLANEOUS

 

7.1 Force Majeure.

(a) Transco shall not be deemed in breach of any of its obligations under this
Agreement because of any delay, inability or failure, whether in whole or in
part, in performance of such obligations (other than failure to pay money when
due) to the extent such delay, inability or failure is due to an event of Force
Majeure. As used in this Agreement, the term “Force Majeure” shall mean acts of
God, strikes, lockouts, industrial disturbances, acts of the public enemy or
terrorists, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, droughts, tornados, hurricanes, storms,
crevasses, floods, washouts, arrests, the order of any Governmental Authority,
quarantines, expropriation or confiscation, vandalism, sabotage, civil
disturbances, relocation of facilities, explosions, breakage or accidents to
machinery or lines of pipe, freezing of or damage to wells or delivery
facilities, National Weather Service warnings or advisories, whether official or
unofficial, that result in the evacuation of facilities, well

 

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blowouts, failure of surface equipment or pipelines, accidents, breakdowns,
inability to obtain or unavoidable delay in obtaining material, equipment,
supplies, permits, rights-of-way or labor to perform or to comply with any
obligation or condition of this Agreement, or any other causes, whether of the
kind enumerated in this Agreement or otherwise, that are not reasonably within
the control Transco. Nothing herein shall be construed to require Transco to
settle any strikes, lockouts, industrial disturbance or disagreements with
landowners by acceding to the demands of any opposing party when such course is
inadvisable in the discretion of Transco.

(b) As soon as practical after the occurrence of an event of Force Majeure
affecting the Central Penn Line, Transco shall submit to Meade a written report
describing in as much detail as then possible: (i) the nature and causation of
the event of Force Majeure; (ii) the effects of the event of Force Majeure on
the construction of the Central Penn Line; (iii) the actions needed to be taken
to overcome the effects of the Force Majeure and estimates of the costs entailed
in and time required for overcoming the effects of the event of Force Majeure;
(iv) the extent to which Transco could continue to pursue construction of the
Central Penn Line and additional costs which would be incurred in so doing; and
(v) any changes to this Agreement or the manner of constructing the Central Penn
Line which would be needed to provide for the orderly construction of the
Central Penn Line and administration of this Agreement during the continuation
of the effects of the event of Force Majeure after such effects have been
overcome. Promptly following Meade’s receipt of said report, Meade and Transco
shall negotiate in good faith and attempt to reach agreement on all such
matters. Pending agreement on all such matters, Transco shall continue to pursue
construction of the Central Penn Line to the extent reasonable under this
Agreement, but Transco shall not be obligated to assume any different or
additional obligations or liabilities or to incur any Project Costs not funded
or reimbursable by Meade hereunder unless and until all such matters are agreed
to and incorporated into this Agreement.

 

7.2 Audit.

All Project Costs will be accumulated and recorded in accordance with the FERC’s
Uniform System of Accounts. Meade shall have the right, during normal business
hours and upon at least thirty (30) days advance written notice to Transco, to
audit Transco’s books and records relating to the Project Costs to verify the
same, and Transco shall retain all accounts and records relating to the Project
Costs for a two year period following the date the final invoice is rendered to
Meade pursuant to Section 2.6(f) hereunder and as otherwise required by
Governmental Authorities having jurisdiction; provided, however, that any such
audit must be completed within two years following the date of the final invoice
referenced above or else such right to audit shall be waived. The Parties agree
that payments theretofore made by Meade shall be adjusted upward or downward,
and appropriate compensating payments promptly made by the owing Party,
contractor or vendor, to correct any errors detected by such audit and agreed to
by Transco.

 

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7.3 Notices.

(a) All notices and other communications by a Party shall be in writing and
shall be sent by one (1) of the following means: electronic mail, facsimile
transmission, hand delivery or courier to the other Party at the electronic or
physical addresses/fax transmission numbers as provided in this Section:

If to Transco:

Transcontinental Gas Pipe Line Company, LLC

Attention: Vice President, Commercial Operations

P.O. Box 1396

Houston, Texas 77251-1396

Fax Number: (713) 215-4269

or at such other address as may be designated by Transco from time to time by
written notice.

If to Meade:

Meade Pipeline Co LLC

c/o WGL Midstream, Inc.

Attention: Anthony M. Nee, President

101 Constitution Ave, NW

Washington, D.C. 20080

Fax Number: (202) 842-2880

or at such other address as may be designated by Meade from time to time by
written notice.

(b) For all purposes of this Agreement, a notice or communication will be deemed
delivered on the day that the notification as set forth in subparagraph
(a) above has occurred, as follows:

(i) if delivered by hand or sent by courier, on the day it is delivered unless
(A) that day is not a Business Day, or (B) if delivered after the close of
business on a Business Day, in either of which cases it is deemed effective on
the next succeeding Business Day; and

(ii) if sent by electronic mail or facsimile transmission, on the date
transmitted, provided that confirmation of receipt is obtained by the sender,
unless the date of transmission is not a Business Day or if it was received
after the receiving Party’s regular business hours, in which case it is deemed
effective on the next succeeding Business Day.

 

7.4 Representations and Warranties.

Each Party represents and warrants, on its own behalf, that (i) it is duly
formed or organized, validly existing and in good standing under the laws of the
jurisdiction of its formation or incorporation and has full company or corporate
power to execute, deliver

 

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and perform this Agreement, (ii) except as otherwise expressly set forth herein,
its execution, delivery and performance of this Agreement have been duly
authorized by all necessary company or corporate and governmental action and do
not contravene any provision of law or of its constitutional documents or any
contractual restriction binding on it or its assets, (iii) it is legally bound
by the terms of this Agreement and the terms of this Agreement are enforceable
against it in accordance with the terms hereof, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles, and
(iv) there is no pending or, to the best of such Party’s knowledge, threatened
action or proceeding affecting such Party before any court, government authority
or arbitrator that could reasonably be expected to materially and adversely
affect the ability of such Party to perform its obligations hereunder, or that
purports to affect the legality, validity or enforceability of this Agreement.

 

7.5 Choice of Law.

THIS AGREEMENT AND ANY CLAIMS HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAWS
RULES OR PRINCIPLES THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION. ANY SUIT BROUGHT WITH RESPECT TO OR RELATING TO THIS AGREEMENT
SHALL BE BROUGHT IN THE COURTS OF HARRIS COUNTY, TEXAS OR THE SOUTHERN DISTRICT
OF TEXAS, HOUSTON DIVISION.

 

7.6 Disputes.

Any dispute between the Parties arising under this Agreement shall be resolved
in accordance with the provisions of this Section. The Parties shall initially
attempt to resolve a dispute by the following informal dispute resolution
process. Each Party shall designate in writing to the other Party a
representative who shall be authorized to resolve any dispute with due
consideration of law, equity and good faith. Each dispute shall be initially
referred by written notice to such designated representative for resolution. If
the designated representatives are unable to resolve any such dispute within
thirty (30) days of such referral, each Party shall designate in writing to the
other Party an officer who shall be authorized to resolve the dispute, and such
officers shall attempt to resolve such dispute within a further period of
fifteen (15) days. The Parties shall attempt to resolve all disputes promptly,
equitably and in good faith, and shall provide each other in a timely manner
reasonable documentation relating to the dispute. Neither Party shall be under
an obligation to provide any privileged or confidential documents that it is not
otherwise obligated to provide under this Agreement and each Party may seek
equitable relief as it determines in its sole judgment is necessary. Unless the
Parties otherwise agree, if the period of forty five (45) days referred to above
has expired and the dispute remains unresolved, the Parties may, by mutual
agreement, submit the dispute to arbitration or, if no such agreement is
reached, either Party may submit the dispute to the appropriate court or
Governmental Authority.

 

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7.7 Limitation of Liability.

Neither Party shall be liable to the other Party for consequential, incidental,
indirect, exemplary, special or punitive damages (including lost profits, loss
of production or other damages attributable to business interruption) arising in
connection with this Agreement.

 

7.8 No Waiver.

No waiver by a Party of any default by the other Party in the performance of any
provision, condition or requirement in this Agreement shall be deemed to be a
waiver of, or in any manner release the other Party from, performance of any
other provision, condition or requirement in this Agreement, nor shall such
waiver be deemed to be a waiver of, or in any manner a release of, the
defaulting Party from future performance of the same provision, condition or
requirement. Except to the extent otherwise expressly set forth herein, any
delay or omission of any Party to exercise any right in this Agreement shall not
impair the exercise of any such right or any like right accruing to it
thereafter.

 

7.9 Assignment.

(a) A Disposing Party may, without the consent of the other Party, assign this
Agreement to any third party transferee provided that the requirements of
Section 3.3 hereof have been fully complied with by the Disposing Party. The
Disposing Party shall provide written notice of such assignment to the other
Party as soon as practicable after such assignment.

(b) Except as provided in Section 7.9(a) above or pursuant to an Encumbrance,
any purported assignment of this Agreement by either Party shall be null and
void ab initio without the prior written consent of the other Party, which
consent may be withheld in the sole discretion of the non-assigning Party.

(c) This Agreement and all of the rights, duties and obligations herein
established shall extend to and be binding upon and shall inure to the benefit
of the respective successors and permitted assigns of the Parties.

7.10 Entire Agreement.

This Agreement represents the entire agreement between the Parties with respect
to the construction and ownership of the Central Penn Line, and the obligations
of the Parties expressed in this Agreement are the sole and exclusive
obligations of the Parties with respect to the subject matter of this Agreement.
Neither Party accepts or has imposed upon it, by virtue of this Agreement or
otherwise, any implied obligations or covenants with respect to the subject
matter of this Agreement.

 

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7.11 No Modifications.

No modifications of the terms and provisions of this Agreement shall be
effective except by the execution of a supplementary written agreement executed
by both Parties.

 

7.12 Subject to Laws.

This Agreement and the obligations of the Parties are subject to all Laws of
Governmental Authorities having jurisdiction, and, in the event of conflict,
such Laws of Governmental Authorities having jurisdiction shall control.

 

7.13 No Joint Venture or Partnership.

Nothing in this Agreement shall be construed to create a joint venture or
partnership between the Parties or to constitute one Party as the agent of the
other for any purpose.

 

7.14 No Third Party Beneficiaries.

Nothing in this Agreement is intended to confer, or shall be construed as
conferring, upon any Person other than the Parties and permitted assigns any
right, remedy or claim under this Agreement.

 

7.15 Severability.

If a Governmental Authority of competent jurisdiction declares any provision of
this Agreement unenforceable, then that provision shall be severed from this
Agreement and this Agreement shall otherwise remain in full force and effect and
be construed as if it did not contain the severed provision; provided, however,
that if severing such provision from this Agreement has a material adverse
effect on the rights or obligations of either Party as set forth in this
Agreement, then the Parties agree to negotiate in good faith replacement terms
that are consistent with the Governmental Authority’s declaration or directive
and that maintain the relative economic positions of, and risks to, the Parties
as reflected in this Agreement as of the Effective Date.

 

7.16 Waiver of Trial by Jury.

To the extent permitted by Law, the Parties hereby waive all rights to trial by
jury on any cause of action directly or indirectly involving the terms,
covenants or conditions of this Agreement or any matters whatsoever arising out
of, or in any way connected with, this Agreement. This Section shall survive the
termination or expiration of this Agreement.

 

7.17 Counterparts.

This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.

 

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7.18 Further Assurances.

The Parties agree to execute all other additional instruments and documents, and
to do all other acts, as may be reasonably necessary to effectuate the terms and
provisions of this Agreement but which do not impose on either Party any
obligation or liability which is inconsistent with, in addition to, or in
conflict with, any provision of this Agreement.

[Signature page follows.]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.

 

TRANSCONTINENTAL GAS PIPE LINE

COMPANY, LLC

By:      

Rory L. Miller

 

Senior Vice President

 

MEADE PIPELINE CO LLC

By: WGL Midstream, Inc., its Managing Member

By:      

Anthony M. Nee

 

President

 

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EXHIBIT A

DESCRIPTION OF CENTRAL PENN LINE

The Central Penn Line shall consist of the following natural gas pipeline
facilities and equipment. The Parties acknowledge that the specific references
below to mileage and locations reflect Transco’s estimates as of the Effective
Date and that the actual mileages and locations will not be known until Transco
has completed construction of such facilities. Accordingly, promptly following
the In-Service Date, the Parties shall enter into an amendment to this
Agreement, if necessary, to revise this Exhibit A to set forth the actual
mileages and locations of the Central Penn Line.

The Central Penn Line will provide transportation of natural gas from
Susquehanna County, Pennsylvania to Transco’s mainline in Lancaster County,
Pennsylvania. The facilities will include approximately 177 miles of contiguous
greenfield pipeline, two (2) compressor stations, three (3) measurement
facilities, and other appurtenant underground and aboveground facilities.

The Central Penn Line consists of two connected pipeline segments as further
described below:

Central Penn Line North

The Central Penn Line North pipeline facilities will provide transportation of
natural gas from the discharge of WFS’s Zick Station in Susquehanna County to a
point of interconnection with the Central Penn Line South segment in Columbia
County, Pennsylvania. The Central Penn Line North facilities will include:

 

  •  

Approximately 56 miles of thirty (30)-inch diameter pipeline;

 

  •  

One compressor station;

 

  •  

Proposed measurement and regulator stations on the Central Penn Line North at
(1) the discharge side of WFS’s Zick Station in Susquehanna County,
Pennsylvania, (2) the suction side of Transco’s proposed East Wilcox Station in
Susquehanna County, Pennsylvania, and (3) the proposed Springville
Interconnection near milepost 30.6 in Wyoming County, Pennsylvania; and

 

  •  

Appurtenant underground and aboveground facilities.

Central Penn Line South

The Central Penn Line South pipeline facilities will provide transportation of
natural gas from the Central Penn Line North pipeline to an interconnection with
Transco’s mainline in Lancaster County, Pennsylvania at a point called “River
Road.” The Central Penn Line South facilities will include:

 

  •  

Approximately 121 miles of forty-two (42)-inch diameter pipeline;

 

  •  

One compressor station;

 

  •  

A regulator station at the interconnection between the Central Penn Line South
and Transco’s mainline at “River Road”; and

 

  •  

Appurtenant underground and aboveground facilities.

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EXHIBIT B

OWNERSHIP SHARES

 

Segment of Central Penn Line:

  

Ownership Share:

      

Transco

   

Meade

 

Central Penn Line North

     41.18 %      58.82 % 

Central Penn Line South

     70.59 %      29.41 % 

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EXHIBIT C

CAPACITY RIGHTS

1. During the Lease Term, Transco will have full possessory and operational
rights to the Central Penn Line, including 100% of the pipeline capacity of the
Central Penn Line.

2. Subject to the terms and conditions of this Agreement and the receipt of the
necessary authorizations from the FERC, upon termination of the Lease (i) Meade
shall have the right to 500,000 dt/d of capacity on the Central Penn Line,
(ii) Transco shall have the right to all remaining capacity on the Central Penn
Line, and (iii) the Parties shall negotiate in good faith revisions to this
Agreement to set forth the terms and conditions governing the orderly
utilization by the Parties of their respective capacities in the Central Penn
Line.

3. The daily design capacity of the Central Penn Line and any Expansions (and
the engineering design data supporting such capacity) shall be as set forth in
the respective applications for certificates of public convenience and necessity
filed with the FERC for the Central Penn Line and any such Expansions.

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EXHIBIT D

ANCHOR PA AND CABOT PRECEDENT

AGREEMENT TERMINATION RIGHTS

Transco represents and warrants that the following is a complete and accurate
restatement of the rights set forth in each Anchor PA under which such
agreements may be terminated after February 28, 2014 but prior to the In-Service
Date. The “Buyer” is the shipper under the Atlantic Sunrise Project and the
“Seller” is Transco.

Either Party may terminate this Precedent Agreement immediately upon written
notice to the other Party if Seller has not filed the FERC Application on or
before July 1, 2016; provided that such termination right must be exercised, if
at all, by the terminating Party delivering written notice of termination to the
other Party on or before July 16, 2016, or else such termination right shall be
waived.

Seller may terminate this Precedent Agreement and the Service Agreement
immediately upon written notice to Buyer if (A) the FERC rejects the FERC
Application, or (B) the FERC denies the FERC Authorization requested in the FERC
Application, or (C) the FERC issues an order on the FERC Application (as the
same may be amended) that (I) does not grant the FERC Authorization
substantially in form and substance as requested by Seller and (II) has a
material adverse effect on the rights or obligations of Seller, in Seller’s
reasonable discretion (each event described in (A), (B) and (C) is referred to
respectively as a “FERC Event”). With respect to each such FERC Event, the
foregoing termination right must be exercised, if at all, by Seller delivering
notice of termination to Buyer on or before the date that is sixty (60) days
after such FERC Event occurs, or else such termination right shall be waived;
provided that if any person seeks rehearing and/or appeal of any such FERC
Event, then such sixty (60)-day period shall not begin to run until the date
that the FERC order on such rehearing or appeal becomes final and no longer
subject to further rehearing or appeal.

Buyer may terminate this Precedent Agreement if the certificate of public
convenience and necessity issued by the FERC and accepted by Seller for the
Atlantic Sunrise Project includes a material change to the TCQ, Primary Term or
Negotiated Reservation Rate or deletion of the Point of Receipt or any Points of
Delivery described on Attachment A hereto (“Buyer Material Adverse Effect”);
provided that such termination right must be exercised, if at all, within twenty
(20) days from the date that Seller provides notice to Buyer of the Buyer
Material Adverse Effect, and in any event prior to Buyer’s execution and
delivery of the Service Agreement, or else such termination right shall be
waived.

Either Party may terminate this Precedent Agreement and the Service Agreement
immediately upon written notice to the other Party if Seller has not commenced
construction of the Atlantic Sunrise Project facilities on or before
September 1, 2017; provided that such termination right must be exercised, if at
all, by the terminating Party delivering written notice of termination to the
other Party on or before September 16, 2017, or else such right shall be waived.
Seller

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shall be deemed to have “commenced construction” of the Atlantic Sunrise Project
facilities when Seller has received the FERC authorizations to commence
construction and has subsequently released a construction contractor to commence
construction of the Atlantic Sunrise Project facilities. Seller shall deliver
prompt written notice to Buyer of (A) Seller’s receipt of such FERC
authorizations and (B) such commencement of construction.

Either Party may terminate this Precedent Agreement and the Service Agreement
immediately upon written notice to the other Party if the Effective Date of the
Service Agreement does not occur on or before November 1, 2018; provided that
such termination right must be exercised, if at all, by the terminating Party
delivering notice of termination to the other Party on or before November 16,
2018, or else such termination right shall be waived.

Seller may terminate this Precedent Agreement and the Service Agreement
immediately upon written notice to Buyer if (A) Buyer, in Seller’s reasonable
judgment, fails to meet the creditworthiness requirements set forth in Paragraph
6 below, and (B) Buyer fails to provide security in accordance with Paragraph 6
below.

Seller may terminate this Precedent Agreement and Service Agreement immediately
upon written notice to Buyer if the precedent agreement between Seller and any
“Anchor Shipper” under the Atlantic Sunrise Project (as defined in Seller’s Open
Season announcement for the Atlantic Sunrise Project) is terminated for any
reason prior to the Effective Date of the Service Agreement (“Anchor PA
Termination”) and, as a result of the Anchor PA Termination, Seller elects not
to continue development of the Atlantic Sunrise Project; provided that such
termination right must be exercised, if at all, by Seller delivering notice of
termination to Buyer within sixty (60) days following the Anchor PA Termination,
or else such termination right shall be waived; provided, further, that prior to
Seller exercising such termination right, the Parties shall negotiate, in good
faith, reasonable alternatives to the current Atlantic Sunrise Project design
and the terms and conditions of this Precedent Agreement that would effectively
replace such Anchor Shipper’s capacity subscription under the Atlantic Sunrise
Project. Seller shall provide notice to Buyer of the Anchor PA Termination
within five (5) Business Days following the Anchor PA Termination, provided that
failure to give such notification on a timely basis shall not affect Seller’s
termination right provided hereunder except to the extent that Buyer shall have
been actually prejudiced as a result of such failure.

 

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