PORTIONS OF THIS EXHIBIT IDENTIFIED BY “***” HAVE BEEN DELETED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AND THE FREEDOM OF INFORMATION ACT.
Exhibit 10(n) - 3
AMENDED AND RESTATED
CAVITY DEVELOPMENT AND STORAGE AGREEMENT
BETWEEN
OLIN CORPORATION
AND
BAY GAS STORAGE COMPANY, LTD.
DATED
AS OF MAY 22, 2007

 

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TABLE OF CONTENTS

         
SECTION I: THE SURFACE LEASE; SUBSURFACE RIGHTS
    3  
1.01 The Surface Lease
    3  
1.02 Subsurface Rights
    3  
SECTION II: CAVITY DEVELOPMENT
    4  
2.01 Cavity Development Rights
    4  
2.02 Affirmative Covenants Regarding Cavity Development
    5  
2.03 Exceptions
    7  
2.04 Brine Supply and Disposal Fee
    7  
2.05 Facilities Construction
    8  
2.06 Approval of Cavity Development Activities
    8  
2.07 Termination of Cavity Development Rights
    8  
2.08 Closing of or Change of Process at the McIntosh Plant
    10  
2.09 Alternate Brine Services
    10  
2.10 Other Development
    10  
SECTION III: CAVITY STORAGE
    11  
3.01 Cavity Storage License Rights
    11  
3.02 Service Fees
    11  
3.03 Storage of Other Substances
    15  
3.04 Renewal Term Service Fees
    16  
SECTION IV: REPRESENTATIONS, WARRANTIES, COVENANTS
    16  
4.01 Affirmative Covenants Regarding Leased Land
    16  
4.02 Maintenance Washing of Cavities
    17  
4.03 Right to Inspect
    17  
4.04 Insurance Coverage
    17  
4.05 Environmental
    19  
4.06 Title to Real Property
    20  
SECTION V: INDEMNITY
    21  
5.01 Provisions Required by Cavity Storage Agreement
    21  
5.02 Claims by the Owners
    21  
5.03 Damage to or Contamination of the Leased Land or Salt Thereunder
    23  
5.04 Cavities and Surface Facilities
    23  

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5.05 General Indemnity Provisions
    24  
SECTION VI: FORCE MAJEURE
    26  
6.01 General Protections from Breach
    26  
6.02 Notice of Force Majeure Contingency
    27  
SECTION VII: EFFECTIVE DATE
    27  
SECTION VIII: TERMINATION
    27  
SECTION IX: ENTIRE AGREEMENT, BINDING EFFECT AND MODIFICATION
    27  
SECTION X: ASSIGNMENT: ENCUMBRANCE
    28  
SECTION XI: APPLICABLE LAW
    28  
SECTION XII : SEVERABILITY
    28  
SECTION XIII: COUNTERPARTS
    28  
SECTION XIV: COMPLIANCE WITH LAW
    28  
SECTION XV: NOTICES
    29  

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AMENDED AND RESTATED
CAVITY DEVELOPMENT AND STORAGE AGREEMENT
     THIS AMENDED AND RESTATED CAVITY DEVELOPMENT AND STORAGE AGREEMENT, dated
as of the 22nd day of May, 2007 (the “2007 Amendment Date”), further amends and
restates the Cavity Development and Storage Agreement (“CDSA”) dated the 14th
day of January, 1992 made and entered into between OLIN CORPORATION, a Virginia
corporation qualified to do and doing business in the State of Alabama and whose
principal place of business is 190 Carondolet Plaza, Suite 1530, Clayton, MO
63105 (hereinafter “Olin”), and BAY GAS STORAGE COMPANY, LTD., an Alabama
limited partnership whose principal place of business is 2828 Dauphin Street
(P.O. Box 2248), Mobile, Alabama 36606 (36652-2248) (hereinafter “BGSC”), as the
CDSA has been amended heretofore.
WITNESSETH:
     WHEREAS, BGSC is a company that seeks to develop certain Cavities and
Surface Facilities (as defined in the Surface Lease) on the Leased Land, as that
term is defined below, in Washington County, Alabama (the “Storage Facilities”);
and
     WHEREAS, BGSC has built two cavities (the “First Cavity” and the “Second
Cavity,” respectively), and is in the process of building a third and desires to
build a fourth cavity (the “Fourth Cavity”) and a fifth cavity (the “Fifth
Cavity”) (each of the foregoing five cavities being referred to as a “Cavity”,
and more than one being referred to as “Cavities”) in which to store natural gas
for others at the Storage Facilities; and
     WHEREAS, the first three Cavities have been or are being developed in that
portion of a salt deposit, known as the McIntosh Salt Dome, which underlies
three (3) tracts of land of approximately 1.5 acres each (“Existing Cavity
Sites”) located in Washington County, Alabama, which Existing Cavity Sites are
described on the plats of survey attached hereto as Exhibits A-1 through A-3,
inclusive, and are a portion of real property aggregating twenty (20) acres,
more or less, leased to BGSC pursuant to Section 1.01 hereof (the “Existing
Leased Land”); and
     WHEREAS, the Fourth Cavity and Fifth Cavity are to be developed near the
Existing Cavity Sites on two tracts of land of approximately 2.0 acres each
(“New Cavity Sites;” the Existing Cavity Sites and the New Cavity Sites being
referred to herein as the “Cavity Sites”),

 

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which New Cavity Sites are described on the plats of survey attached hereto as
Exhibits A-4 and A-5 attached hereto, and BGSC shall have the option, described
in Section 1.01(b) hereof, to lease up to 4 acres contiguous to the current
Surface Facility (the “Additional Surface Facility Site”) to expand the Surface
Facilities, the New Cavity Sites and the Additional Surface Facility Site
aggregating up to 8 acres, more or less, all or part of which is to be leased to
BGSC pursuant to Section 1.01 hereof (the “New Leased Land”; the Existing Leased
Land and the New Leased Land being referred to herein as the “Leased Land”); and
     WHEREAS, Olin owns the surface rights and certain mineral rights to the
Leased Land, has acquired the salt mining rights by lease and owns or has
acquired the cavity storage rights in and to all of the McIntosh Salt Dome
underlying the Leased Land under a cavity storage agreement dated October 17,
1984 (the “Cavity Storage Agreement”) between Olin and certain other parties
(“Owners”), a copy of which is recorded in the records of the Office Of the
Judge of Probate of Washington County, Alabama in Real Property Book 250, Pages
352-374, said Cavity Storage Agreement having been amended to add additional
parties pursuant to an Amendment thereto, a copy of which is recorded in the
records of the office of the Judge of Probate of Washington County, Alabama in
Real Property Book 269, Pages 177-185, and further amended with respect to
cavity storage of compressed air pursuant to a Second Amendment thereto, a copy
of which is recorded in the records of the Office of the Judge of Probate of
Washington County, Alabama in Real Property Book 274, Pages 342-360; and
     WHEREAS, Olin and Owners have entered into a Fourth Amendment to the Cavity
Storage Agreement, effective as of May 1, 1991, a complete copy of which
amendment together with letter agreements effecting extensions thereof are
attached hereto as Exhibit B, establishing the monies to be paid to the Owners
with respect to cavity storage of natural gas, and a Fifth Amendment to the
Cavity Storage Agreement, effective as of July 26, 2004, a complete copy of
which is attached hereto as Exhibit B-1, setting forth certain agreements with
respect to the New Third Cavity described in Section 2.01(c) hereof; and
     WHEREAS, Olin and Owners have entered into a Sixth Amendment to the Cavity
Storage Agreement effective as of May 17, 2007, a complete copy of which is
attached hereto as Exhibit B-2, setting forth certain agreements with respect to
the Fourth Cavity and Fifth Cavity; and
     WHEREAS, the First Cavity, the Second Cavity and the Third Cavity have been
developed pursuant to the CDSA, as the same has been heretofore amended by the
First

2

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Amendment, Second Amendment, Third Amendment, and Fourth Amendment thereto,
dated as of August 18, 1994, September 28, 2000, March 28, 2003 and July 30,
2004, respectively, and Olin and BGSC desire to amend and restate the CDSA to
provide for development of the Fourth Cavity and Fifth Cavity and the grant of
an option with respect to an Additional Surface Facility Site; and
     WHEREAS, Olin has certain technological and operating expertise in salt
cavity development and operations.
     NOW, THEREFORE, in consideration of the mutual covenants and agreements as
hereinafter contained, and each intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION I: THE SURFACE LEASE; SUBSURFACE RIGHTS
          1.01 The Surface Lease
     (a) Olin has leased to BGSC the surface of the Leased Land pursuant to a
surface lease entered into by Olin and BGSC substantially in the form attached
hereto as Exhibit “C,” and as amended heretofore with respect to the First
Cavity, Second Cavity and Third Cavity, the same has been recorded in the Office
of the Judge of Probate of Washington County, Alabama (the “Surface Lease”). The
Surface Lease shall be further amended in accordance with a Fifth Amendment to
Surface Lease in the form attached hereto as Exhibit C-2 to provide for the New
Leased Land, which amendment will provide for payment by BGSC to Olin of $***.
For the purposes hereof the “Surface Lease” shall mean the same as it has been
and may be amended from time to time, and the “Leased Land” shall include all
real property leased to BGSC pursuant thereto.
     (b) Contemporaneously herewith, Olin has granted to BGSC an option (the
“Surface Facility Option”) pursuant to the Surface Facility Option Agreement in
the form attached hereto as Exhibit F, pursuant to which BGSC may elect to add
to the Leased Land up to 4 acres at a price of $*** on the terms and conditions
specified therein for expansion of the Surface Facility Site.
     1.02 Subsurface Rights
     Olin hereby grants BGSC a license and easement to use and hereby grants,
lets and leases to BGSC the subsurface beneath and within the boundaries of the
Cavity Sites, upon the

3

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terms provided in Section II and in Section III hereof, solely for the purposes
of developing Cavities and storing natural gas beneath, and within the
boundaries of the Cavity Sites. For the purposes hereof the site of each of the
Cavities and any alternate Cavity Site leased to BGSC pursuant to the Surface
Lease or any amendment thereto shall be deemed a “Cavity Site”.
SECTION II: CAVITY DEVELOPMENT
     2.01 Cavity Development Rights
          2.01(a) Olin has granted to BGSC the right to develop the First Cavity
with a Stipulated Capacity of *** barrels, the Second Cavity with a Stipulated
Capacity of *** barrels, and the Third Cavity with a maximum capacity of ***
barrels (subject to adjustment as provided herein, the “Stipulated Capacity” of
the Third Cavity), beneath and within the boundaries of the three (3) Existing
Cavity Sites (the “Existing Cavity Development Rights”).
          2.01(b) In consideration of the payment by BGSC to Olin of the sum of
*** contemporaneously with the execution of this Amended and Restated Cavity
Development and Storage Agreement, Olin hereby grants to BGSC the right to
develop the Fourth Cavity with a capacity of *** barrels (being the Stipulated
Capacity of the Fourth Cavity) and the Fifth Cavity with a capacity of ***
barrels (being the Stipulated Capacity of the Fifth Cavity) beneath and within
the boundaries of the two (2) New Cavity Sites (the “New Cavity Development
Rights”; the Existing Cavity Development Rights, the New Cavity Development
Rights and the Additional Cavity Development Rights being referred to herein as
the “Cavity Development Rights”). Notwithstanding any other provision of this
Agreement, including without limitation Sections 3.02(e)(iii) and
3.02(e)(iv)(D), neither the Fourth Cavity nor the Fifth Cavity shall exceed ***
of its Stipulated Capacity.
          2.01(c) BGSC shall have the rights (the “Additional Cavity Development
Rights”) to: develop increased capacity (“Fillout Capacity”) in any Cavity up to
its Stipulated Capacity; and to develop capacity in excess of the Stipulated
Capacity (capacity in excess of Stipulated Capacity being referred to as
“Chargeable Expanded Capacity”) in either or both of the First Cavity and the
Second Cavity. The maximum Chargeable Expanded Capacity shall be *** barrels. To
the extent that Chargeable Expanded Capacity is created, the Stipulated Capacity
of the New Third Cavity shall be correspondingly reduced.
          2.01(d) The Existing Cavity Development Rights set forth in
Section 2.01(c) may be exercised in such order and at such times (which times
shall be extended for the duration of

4

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any force majeure event described in Section 6.01) prior to the termination of
the New Cavity Development Rights pursuant to Sections 2.07(d) and 2.07(e)
below, subject to the terms hereof, as may be determined by BGSC.
          2.01(e) In the event that, following the expiration of the New Cavity
Development Rights any one or more of the Cavities has not been developed to its
full Stipulated Capacity:
             (i) if Olin’s Brine Services (being the brine supply and disposal
and other services set forth in Section 2.07) are not committed to a third party
and Olin so agrees, BGSC may continue to develop Fillout Capacity in any one or
more of the Cavities, upon notice to Olin of its intent to do so. In such event,
Olin shall provide Brine Services for such development on the same basis as
during the term of the New Cavity Development Rights.
             (ii) if Olin’s Brine Services are committed to a third party or are
otherwise unavailable, BGSC may at its expense drill fresh water wells and
utilize disposal wells in accordance with Section 2.09 to continue development
of Fillout Capacity in any one or more of the Cavities, and Olin will cooperate
in such cavity development as provided therein.
Any capacity created pursuant to this Section 2.01(e) shall be added to
previously-developed capacity for purposes of calculating service fees pursuant
to Section 3.02(e).
          2.02 Affirmative Covenants Regarding Cavity Development
          During the process of Cavity development as provided in the provisions
of Section II of this Agreement, the parties agree that:
          2.02(a) Olin shall deliver to BGSC from Olin’s present injection
water/brine system a supply of injection water/brine having a salt content
averaging approximately *** grams or less per liter and that is acceptable for
treatment in Olin’s present treatment facilities. Olin shall use its best
efforts to deliver such water at an average flow rate of *** gallons per minute
(gpm), provided that such average flow rate shall not take into account downtime
resulting from actions of BGSC or its contractors. Olin shall have the right to
temporarily limit or suspend delivery to BGSC from time to time or at any time
without prior notice whenever Olin deems such action necessary to maintain the
flow of injection water/brine required for the proper operation of Olin’s plant,
provided that Olin shall utilize its best efforts to provide advance notice to
the extent

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practicable of the time and duration of any suspended or limited delivery which
may exceed 48 hours.
          2.02(b) It is anticipated that BGSC will require the entire injection
water/brine flow from Olin’s plant during Cavity development, except during Olin
plant or well maintenance, logging, casing adjustments, or at other reasonable
periods, when no flow will be available. BGSC will have similar flexibility
during its maintenance, logging, casing adjustments, or at other reasonable
periods. Should it be necessary for BGSC to take only a portion of the entire
injection water/brine flow, BGSC shall install and operate (or pay Olin’s
expenses for the installation and operation of) any equipment or system
necessary to control or split the flow between BGSC’s Cavity and Olin’s cavities
without undue interruption of Olin’s operations.
          2.02(c) Olin shall receive all injection water/brine from BGSC Cavity
development and dewatering, except as provided in Section 2.09. Olin’s
acceptance of such injection water/brine shall be at a rate governed by Olin’s
brine requirements, Olin’s plant water balance or Olin’s effluent discharge
limitations, as the case may be. Plant steady state brine requirements have
generally averaged *** to *** gpm. Minimum injection water/brine acceptance
during Olin plant shutdowns for maintenance or other reasons is expected to
range from *** to *** gpm. During catch up operation after a plant shutdown
injection water/brine has been used at a *** gpm rate for periods lasting up to
96 hours.
          2.02(d) Olin shall grant to BGSC necessary rights of way and easements
and BGSC shall install at its own expense such equipment, pumps, piping and
instrumentation necessary to provide additional pumping requirements to support
Olin’s operations during Cavity development. Cavity development shall be done
using the direct circulation method (injection water down the tubing brine
return through the tubing-case annulus) or such other method as may be mutually
agreed upon between the parties so as to minimize depositing and settlement of
solids in the brine return piping, it being understood that reverse circulation
(injection water down the tubing-case annulus, brine return through the tubing)
and solution mining under gas (“SMUG”), have been mutually agreed.
          2.02(e) BGSC will return to Olin the injection water/brine with the
addition of salt or other minerals dissolved or entrained therein during
leaching, but without the addition of water. Subject to the requirements of
Section 2.02(a), should the returned injection water/brine be of such quality
(due to impurities or for any other reason), that, in Olin’s reasonable opinion,
Olin’s present treatment facilities could not accept and treat said injection
water/brine, then BGSC

6

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shall either: treat the injection water/brine to render it equivalent (in Olin’s
sole determination) to Olin’s existing raw brine; or, if other treatment is
deemed necessary by Olin, reimburse Olin upon demand for the extra treatment
costs incurred by Olin calculated at Olin’s cost; or utilize disposal wells in
accordance with Section 2.09.
          2.02(f) Olin shall receive, store and withdraw all blanket oil for
BGSC in Olin’s facilities as required for development of the Cavities. Blanket
oil must be #2 diesel oil of a sulfur content that does not exceed Olin’s
environmental permit requirements and must meet all other Olin specifications
provided to BGSC. Any expense incurred by Olin in connection with the receipt,
storage or withdrawal of blanket oil hereunder will be borne by BGSC.
          2.02(g) Olin shall timely grant to BGSC pipeline rights of way and
easements over Olin’s lands during the leaching, dewatering and maintenance
washing processes over which BGSC may construct at BGSC’s expense pipelines and
equipment to accomplish the purposes of the Agreement. Each such BGSC pipeline
and equipment if not removed by BGSC at BGSC’s expense immediately after it is
no longer useful for solution mining or maintenance washing pursuant to this
Agreement, shall be removed by Olin at BGSC’s expense.
          2.02(h) Olin shall timely grant to BGSC gas transmission pipeline
easements for natural gas pipelines owned by BGSC.
          2.03 Exceptions
          Nothing contained in this Agreement shall require Olin to provide the
services described in Section 2.02:
               (a) after the Cavity Development Rights have terminated pursuant
to the terms of Section 2.07 hereof; or
               (b) if providing such services would unreasonably impair Olin’s
ability to use its injection water/brine systems at its McIntosh plant for its
own commercial purposes.
          2.04 Brine Supply and Disposal Fee
          2.04(a) BGSC has paid Olin for the Brine Services a fixed fee (“Brine
Fee”) for each of the First Cavity, the Second Cavity and the Third Cavity
developed hereunder. The Brine Fee

7

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for each of the Fourth Cavity and the Fifth Cavity to be developed hereunder
shall be $*** per Cavity. BGSC shall pay to Olin the applicable Brine Fee
(i) with respect to the Fourth Cavity on or before the earlier of ***, and
(ii) with respect to the Fifth Cavity, on or before ***.
          2.04(b) In the event that Olin provides an alternate Cavity Site to
BGSC pursuant to Article I of the Surface Lease and BGSC develops a Cavity on
such alternate Cavity Site, BGSC shall not be obligated to pay a Brine Fee for
the Cavity developed on such alternate Cavity Site to the extent that a Brine
Fee was previously paid with respect to the cavity which was to be developed on
the Cavity Site replaced by such alternate Cavity Site.
               2.05 Facilities Construction
          The Storage Facilities will be constructed and each Cavity will be
developed and leached under, and in accordance with, Olin’s existing UIC and
other applicable permits to the extent that UIC regulations and state laws allow
for such use and said permits are not revoked or otherwise amended to prevent
such use. Olin shall, to the extent possible, ensure that said permits remain
valid. Should BGSC not be able to utilize Olin’s permits for whatever reason,
BGSC shall use its best efforts to obtain its own permits as soon as practicable
and Olin shall cooperate with BGSC in such effort, provided that in so
cooperating Olin shall not be required to incur any external expense. BGSC shall
monitor and record injection and return flows, and Cavity head and oil pad
pressures during the leaching process, and supply these records monthly so that
the reporting requirements under the Olin UIC permit and all other applicable
permits will be met. BGSC shall not exceed the permitted operating pressures
(max .9 psi per foot gradient).
          2.06 Approval of Cavity Development Activities
          All Cavity development activities by BGSC, including but not limited
to the design of casings, the drilling program and the leaching program, must be
approved in advance by Olin. BGSC shall not, nor shall BGSC permit any
contractor to, develop or attempt to develop a Cavity without Olin’s technical
assistance and prior written approval of each aspect of such development and
operation. The approval required herein shall not be unreasonably withheld, and
Olin agrees to act promptly on any request for approval; any request to which no
response is received within 30 days shall be deemed approved.
          2.07 Termination of Cavity Development Rights
          The Cavity Development Rights shall terminate as hereinafter set forth
after thirty (30) days written notice upon the occurrence of any of the
following:

8

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          2.07(a) Should BGSC fail to make any payment due from BGSC to Olin
pursuant to this Agreement within thirty (30) days after receipt of written
notice of default given by Olin to BGSC, regardless of the cause of such failure
(including, without limitation, any force majeure conditions as otherwise
provided for in Section VI hereof), then the Cavity Development Rights shall
terminate at the expiration of the thirty-day notice period.
          2.07(b) Should the Surface Lease terminate pursuant to any of the
provisions contained in paragraph 5.01 thereof, then the Cavity Development
Rights shall terminate on the date the Surface Lease terminates.
          2.07(c) Should BGSC fail to pay the Brine Fee or begin spudding for
(either of which shall constitute “Commence”) the Fourth Cavity before
expiration of the “Fourth Cavity Commencement Period” or the Fifth Cavity before
expiration of the “Fifth Cavity Commencement Period,” as defined in
Sections 2.07(d)(i) and 2.07(d)(ii), respectively, then the New Cavity
Development Rights shall terminate with respect to unbuilt Cavities upon
expiration of the applicable Commencement Period. Each said Commencement Period
shall extend for the periods specified in Sections 2.07(d)(i) and 2.07(d)(ii).
In the event that Olin’s brine capacity becomes permanently unavailable,
including without limitation because of circumstances specified in section 2.08,
Olin shall use its best efforts to seek an extension of the applicable
Commencement Period(s) from Owners for an additional time period to permit BGSC
to develop an alternate source of such services.
          2.07(d)(i) The “Fourth Cavity Commencement Period” shall begin on ***
and shall extend for *** from the date the Third Cavity is placed in service
subject to further extension as provided in Section 2.07(c). The New Cavity
Development Rights with respect to the Fourth Cavity will expire *** after the
Fourth Cavity is Commenced.
          (ii) The “Fifth Cavity Commencement Period” shall begin on *** and
shall extend for a period not to exceed *** from the earlier of (x) the actual
in service date of the Fourth Cavity or (y) the date *** after the Fourth Cavity
is Commenced, subject to further extension as provided in Section 2.07(c). The
New Cavity Development Rights with respect to the Fifth Cavity will expire on
the date *** after the Fifth Cavity is Commenced.
(iii) In the event that Olin’s brine capacity becomes permanently unavailable,
including without limitation because of circumstances specified in section 2.08,
Olin

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shall use its best efforts to seek an extension of the New Maximum Development
Period from Owners for an additional time period to permit BGSC to develop an
alternate source of such services. The foregoing shall not limit BGSC’s option
to utilize a disposal well or wells in accordance with Section 2.09.
          2.07(e) If the Fourth Cavity or Fifth Cavity is Commenced within the
applicable Development Period, the Existing Cavity Development Rights shall
terminate *** after the later of the time the Fourth Cavity or Fifth Cavity, as
the case may be, is Placed in Service.
          2.08 Closing of or Change of Process at the McIntosh Plant.
Notwithstanding anything contained in this Agreement to the contrary but subject
to Section 2.04(b) hereof, Olin may at any time during the term of the Cavity
Development Rights give BGSC notice that it has closed, or that it intends to
close, its McIntosh plant or intends to change the process at said plant so as
to eliminate or substantially reduce the plant’s requirement for brine. Should
Olin give such notice to BGSC, Olin shall only be obligated to provide the
Cavity development services described in Section 2.02 hereof for a period of at
least sixty (60) days following the date of such notice, it being understood
that Olin shall use its best efforts to provide such notice as far in advance as
practicable. If such notice is given after any Brine Fee has been paid, Olin
shall refund an equitable portion of such Brine Fee.
          2.09 Alternate Brine Services. In the event that Olin cannot provide
Brine Services, or if BGSC shall for any other reason so determine, BGSC shall
have the right at BGSC’s expense to drill and operate one or two fresh water
wells (or if agreed by Olin, to use Olin’s fresh water supply) and to drill and
operate one or two disposal wells and associated settling ponds to enable it to
continue to exercise the Cavity Development Rights. Such fresh water and/or
disposal well(s) shall be located on property specified in an option agreement
granted by Olin to BGSC of even date herewith in the form of Exhibit E, which
shall grant to BGSC the option to purchase specifically identified property for
such use at a purchase price of $*** (the “Option”). Upon exercise of the Option
by BGSC, Olin shall provide rights of way and easements for the purposes of such
fresh water and/or disposal well(s) as provided in Section 2.02(g). Olin shall
utilize its best efforts to allow BGSC to make use of Olin permits for such
purpose and shall otherwise assist BGSC in obtaining any required permissions or
permits for such purpose.
          2.10 Other Development. Olin acknowledges that BGSC’s rights to Brine
Services (including for maintenance washing as provided in Section 4.02) shall
have priority over non-plant uses of Olin’s Brine Services to the extent so
provided in this Agreement. BGSC

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acknowledges that, subject to BGSC’s rights under this Agreement, Olin and the
Owners may negotiate and enter into agreements with other parties for
development of facilities in the McIntosh Salt Dome. BGSC agrees to negotiate in
good faith with Olin and such other interested parties for rights to use BGSC’s
transmission or pipeline infrastructure.
SECTION III: CAVITY STORAGE
          3.01 Cavity Storage License Rights
          Olin hereby grants BGSC the exclusive right for the term of the
Surface Lease to store natural gas in the Cavities developed pursuant to
Section II of this Agreement (the “Cavity Storage Right”).
          3.02 Service Fees
          3.02(a) For the first Cavity, BGSC shall pay to Olin *** payments at
the rate of *** multiplied by the Actual Capacity of the first Cavity, but not
less than ***, per year (subject to adjustment pursuant to Sections 3.02(c) and
(e) hereof) payable in advance. The first annual payment shall be due upon the
date the first Cavity is Completed. Thereafter, for ***, the payments (as
adjusted annually) shall be paid on or before the anniversary of the date the
first Cavity was Completed.
          3.02(b)(i) For each additional Cavity developed hereunder, BGSC shall
pay to Olin *** payments at the rate of *** multiplied by the Actual Capacity of
the corresponding additional Cavity, but not less than ***, per year (subject to
adjustment pursuant to Sections 3.02(d) and (e) hereof) payable in advance. The
first annual payment for each Additional Cavity shall be due upon the date the
respective additional Cavity is Completed. Thereafter, for ***, the payments (as
adjusted annually) shall be paid on or before the anniversary of the date each
respective additional Cavity was Completed.
          3.02(b)(ii) Notwithstanding the provisions of subsection 3.02(b)(i)
and 3.02(d), with respect to the “Aggregate 1-2-3 Capacity” (being the Actual
Capacity of the Third Cavity after it is Placed in Service, plus the amount, if
any, of Chargeable Expanded Capacity developed in the First Cavity, plus the
amount, if any, of Chargeable Expanded Capacity developed in the Second Cavity)
BGSC shall pay to Olin annual cash payments at the rate of *** multiplied by
***, but not less than ***, per year (subject to adjustment pursuant to
Section 3.02(e)) payable in advance. The first payment for the Aggregate 1-2-3
Capacity (“Prorated 1-2-3 Payment”) shall

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be due upon the earlier of (x) the date the Third Cavity is Placed in Service,
or (y) the date any Chargeable Expanded Capacity is developed and available for
commercial storage, or (z) the date *** (which period shall be extended for the
duration of any circumstance described in Section 6.01) from the date of ***
(payments pursuant to this Section 3.02(b)(ii)(z) are to be based on Actual
Capacity of the Third Cavity regardless of whether it has been Placed in
Service, and are to be subject to the minimum payments specified in
Section 3.02(e)(iii)(y) as though the Third Cavity has been Placed in Service).
The Prorated 1-2-3 Payment shall be prorated to reflect the fraction of a year
represented by the period beginning on the date the Prorated 1-2-3 Payment is
due and ending on the date the First Full-year 1-2-3 Payment described below is
due. Thereafter, payments (as adjusted annually) shall be paid as follows: the
next payment (the “First Full-year 1-2-3 Payment”) shall be made on the date on
which payment pursuant to Section 3.02(a) is due, and subsequent payments shall
be paid on or before each subsequent anniversary of such date. Annual payment of
such fees shall be made for so long as the Cavity to which such fee relates
remains in service.
               3.02(b)(iii) Notwithstanding the provisions of subsection
3.02(b)(i) and 3.02(d), with respect to the “Aggregate 4-5 Capacity” (being the
Actual Capacity of the Fourth Cavity and the Fifth Cavity after one or both are
Placed in Service), BGSC shall pay to Olin annual cash payments at the rate of
*** multiplied by ***, but, with respect to Cavities actually in service, not
less than ***, per year (subject to adjustment pursuant to Section 3.02(e)(iii))
payable in advance. The first payment for the Aggregate 4-5 Capacity (“Prorated
4-5 Payment”) shall be due on the earlier of (x) the date the Fourth Cavity is
Placed in Service or (y) the date ***. The Prorated 4-5 Payment shall be
prorated to reflect the fraction of a year represented by the period beginning
on the date the Prorated 4-5 Payment is due and ending on the date the First
Full-year 4-5 Payment described below is due. Thereafter, payments (as adjusted
annually) shall be paid as follows: the next payment (the “First Full-year 4-5
Payment”) shall be made on the date on which payment pursuant to Section 3.02(a)
is due, and subsequent payments shall be paid on or before each subsequent
anniversary of such date. Annual payment of such fees shall be made for so long
as the Cavity to which such fee relates remains in service.
          3.02(c) If the volume of the First Cavity is a volume other than the
Stipulated Capacity, the $*** minimum annual payment for the First Cavity under
Section 3.02(a) shall be adjusted upward or downward in equal proportion to the
percentage of positive or negative variance of the First Cavity’s Actual
Capacity from the Stipulated Capacity. Sample calculations for such

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adjustment are set forth in Examples 1 and 2, in Exhibit “D” annexed hereto and
made a part hereof.
          3.02(d) If the volume of the Second Cavity is a volume other than the
Stipulated Capacity, the $*** minimum annual payment for such Cavity shall be
adjusted upward or downward in equal proportion to the percentage of positive or
negative variance of the respective additional Cavity’s Actual Capacity from the
Stipulated Capacity. Sample calculations for such adjustment are set forth in
Examples 3 and 4, in Exhibit “D” annexed hereto and made a part hereof.
          3.02(e)(i) The rates specified in Sections 3.02(a) and 3.02(b)(i)
hereof of *** per barrel and *** per barrel, respectively, shall be subject to
increase or decrease as of the date the First Cavity is Completed and the Second
Cavity is Completed, respectively, and on each anniversary of such dates
thereafter for as long as annual payments are to be made pursuant to
Sections 3.02(a) and 3.02(b)(i), in equal proportion to any increase or decrease
in the Consumer Price Index, All Items, All Urban Consumers (base:
1982-1984=100) (or any comparable index which may replace it), as published by
the United States Department of Labor, Bureau of Labor Statistics (or any
successor governmental agency) for the third month preceding the month in which
the respective Cavity is Completed, and for the like preceding month of each
subsequent year, as compared to the same index for the month of May, 1991.
          3.02(e)(ii) The rate specified in Section 3.02(b)(ii) hereof of ***
per barrel (which applies to all Aggregate 1-2-3 Capacity irrespective of
whether such Aggregate 1-2-3 Capacity is developed in any one or more of the
First Cavity, the Second Cavity or the Third Cavity), as well as each minimum
payment made under Section 3.02(e)(iv)(C), if applicable, shall be subject to
increase or decrease on each anniversary of the date the first payment is made
pursuant to Section 3.02(b)(ii) and thereafter for as long as annual payments
are to be made pursuant to Section 3.02(b)(ii), in equal proportion to any
increase or decrease in the Consumer Price Index, All Items, All Urban Consumers
(base: 1982-1984=100) (or any comparable index which may replace it), as
published by the United States Department of Labor, Bureau of Labor Statistics
(or any successor governmental agency) for the third month preceding the month
in which the payment is due, and for the like month of each subsequent year, as
compared to the same index for the third month preceding the date the first
payment is made pursuant to Section 3.02(b)(ii), provided that the increase in
any one year shall not exceed ***.

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          3.02(e)(iii) The rate specified in Section 3.02(b)(iii) hereof of ***
per barrel (which applies to all Aggregate 4-5 Capacity irrespective of whether
such Aggregate 4-5 Capacity is developed in the Fourth Cavity or the Fifth
Cavity), as well as each minimum payment made under Section 3.02(e)(iv)(D), if
applicable, shall be subject to increase or decrease on each anniversary of the
date the first payment is made pursuant to Section 3.02(b)(iii) and thereafter
for as long as annual payments are to be made pursuant to Section 3.02(b)(iii),
in equal proportion to any increase or decrease in the Consumer Price Index, All
Items, All Urban Consumers (base: 1982-1984=100) (or any comparable index which
may replace it), as published by the United States Department of Labor, Bureau
of Labor Statistics (or any successor governmental agency) for the third month
preceding the earlier of the month in which the payment is due or the month in
which the third anniversary of the 2007 Amendment Date occurs, and for the like
month of each subsequent year, as compared to the same index for the third month
preceding the date the first payment is made pursuant to Section 3.02(b)(iii),
provided that the increase in any one year shall not exceed ***, except in years
in which BGSC receives in the aggregate from all its customer contracts for
storage in the Fourth Cavity or Fifth Cavity more than *** as a CPI adjustment
to its rates, in which years an increase will be the same as such aggregate CPI
increase received by BGSC.
          3.02(e)(iv) However, in no event shall:
               3.02(e)(iv)(A) the service fees payable by BGSC under
Section 3.02(a) hereof with respect to the First Cavity be less than *** per
barrel of Actual Capacity up to the Stipulated Capacity nor less than $*** per
year;
               3.02(e)(iv)(B) the service fees payable by BGSC under
Section 3.02(b)(i) hereof with respect to the Second Cavity be less than *** per
barrel of Actual Capacity up to the Stipulated Capacity nor less than $*** per
year (subject to adjustment pursuant to Sections 3.02(c) and 3.02(d) hereof,
respectively, with respect to the First Cavity and Second Cavity, provided that
such volume adjustment shall not apply to Chargeable Expanded Capacity);
               3.02(e)(iv)(C) the service fees payable by BGSC under
Section 3.02(b)(ii) hereof with respect to the Aggregate 1-2-3 Capacity be less
than (x) *** per barrel of Aggregate 1-2-3 Capacity (which applies to all
Aggregate 1-2-3 Capacity irrespective of whether such Aggregate 1-2-3 Capacity
is developed in any one or more of the First Cavity, the Second Cavity or the
Third Cavity)), nor less than (y) $*** per year for the first payment after the
earlier of the dates specified in Sections 3.02(b)(ii)(x) and 3.02(b)(ii)(z)
(the earlier of such dates being

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referred to as the “Start Date”), $*** per year for the second payment after the
Start Date, $*** per year for the third payment after the Start Date, and $***
per year thereafter;
               3.02(e)(iv)(D) the service fees payable by BGSC under
Section 3.02(b)(iii) hereof with respect to the Aggregate 4-5 Capacity be less
than *** per barrel of Aggregate 4-5 Capacity (which applies to all Aggregate
4-5 Capacity irrespective of whether such Aggregate 4-5 Capacity is developed in
the Fourth Cavity or the Fifth Cavity);
               3.02(e)(iv)(E) the aggregate of service fees payable by BGSC in
accordance with Sections 3.02(e)(iv)(C) and (D) above be less than ***” as
described in Schedule 1 attached hereto and made a part hereof.
               3.02(e)(v) By way of example, if the First Cavity is Completed in
November 1993 and the said Consumer Price Index for August 1993 is six (6%)
percent higher than the said Consumer Price Index for May 1991, the amount
payable to Olin for the annual period from November 1993 through October 1994,
inclusive, for the first cavity under Section 3.02(a) shall be *** per barrel of
Actual Capacity rather than *** per barrel of Actual Capacity, but in no event
less than the sum of $*** for the year (subject to adjustment pursuant to
Section 3.02(c) hereof).
               3.02(e)(vi) The service fees payable with respect to Caverns 4
and 5 pursuant hereto shall be based on the greater of Actual or Stipulated
Capacity.
          3.02(f) For purposes of this Section III, the term “Stipulated
Capacity” shall mean the Stipulated Capacity of each of the First Cavity and the
Second Cavity as specified in Section 2.01(c) and the term “Actual Capacity”
shall be defined as actual physical capacity, as expressed in barrels and as
finally determined by a third party mutually agreeable to both Olin and BGSC,
for each of the Cavities on the Leased Land.
          3.02(g) For purposes of this Agreement, the terms “Completed” and
“Placed in Service”, when used in reference to a Cavity, shall mean that the
same has been leached and is ready to accept natural gas for “Commercial Cavity
Storage” as such term is defined in the Cavity Storage Agreement.
          3.03 Storage of Other Substances
          Should BGSC, its successors or assigns ever desire to store in the
Cavities any substance other than natural gas as set forth in Section 3.01
hereof, BGSC must receive Olin’s

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prior written consent. Absent such consent, BGSC shall not store such other
substances in the Cavities. Nothing contained herein shall require Olin to grant
such consent to BGSC.
          3.04 Renewal Term Service Fees
          Should BGSC renew and extend the Surface Lease beyond the initial
50 year term, as provided in Article II thereof, BGSC shall pay an additional
fee for the storage rights granted under this Article III (“Renewal Service
Fee”) to be calculated as follows:
               (a) A “Base Amount” shall be determined, which shall be the sum
of $*** for the First Cavity which is Completed and $*** for the Second Cavity
which is Completed (each as may have been adjusted pursuant to Sections 3.02(c)
and (d) hereof);
               (b) The Base Amount so determined shall be adjusted upwards by
multiplying the Base Amount by a fraction, the numerator of which shall be the
Consumer Price Index, All Items, All Urban Consumers (base: 1982-1984=100) or
its successor index, as published by the United States Department of Labor,
Bureau of Labor Statistics, or its successor agency (“CPI”) for the year 2041
and the numerator of which shall be the CPI for the year 1991, to determine the
“CPI-Adjusted Amount”; and
               (c) the CPI-Adjusted Amount shall be divided by fifty (50) and
then multiplied by the number of renewal years to produce the Renewal Service
Fee.
     No Renewal Service Fee shall be payable with respect to *** and *** for
which fees are payable pursuant to ***.
SECTION IV: REPRESENTATIONS, WARRANTIES, COVENANTS
     Olin and BGSC hereby covenant and agree that, so long as this Agreement
shall remain in force and effect, they will comply with the following covenants:
          4.01 Affirmative Covenants Regarding Leased Land
     (a) BGSC intends to and will only use the Leased Land to build and operate
the Storage Facilities. Except as permitted hereunder or under the Surface
Lease, BGSC shall not build upon, operate upon or otherwise utilize the Leased
Land in any way so as to diminish the value to Olin of the salt reserve in the
McIntosh Salt Dome other than that underlying said Leased Land or threaten the
continued use of said reserve as a future source of salt to Olin upon

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termination of the Surface Lease or interfere with Olin’s ability to pump brine
from any existing or future cavity other than Cavities on the Leased Land.
     (b) Upon termination of the Surface Lease pursuant to the terms thereof, or
if a Cavity shall become “Nonoperational,” BGSC shall at BGSC’s expense and at
Olin’s option, subject to Sections 5.03(e) and 5.04 of the Surface Lease:
          (i) plug the entrance to the affected Cavity or Cavities in compliance
with Olin’s reasonable specifications; or
          (ii) turn over the operation of the affected Cavity or Cavities to
Olin with casing in place and unplugged.
     For purposes of this Section 4.01, “Nonoperational” shall mean such Cavity
has not been used for commercial operations (being the injection, withdrawal or
storage of gas for commercial storage purposes) at any time during a period of
not less than sixty (60) consecutive months.
     4.02 Maintenance Washing of Cavities
     Olin shall provide at BGSC’s expense, to be calculated at Olin’s cost, the
services specified in Section 2.02 to permit maintenance washing of Completed
Cavities upon request of BGSC.
     4.03 Right to Inspect
     Olin shall have the right to inspect the Storage Facilities during
reasonable business hours.
     4.04 Insurance Coverage
     (a) During development of the First Cavity, BGSC shall acquire and
maintain, or require its contractors to acquire and maintain, the following
insurance coverages:
          (i) Workers’ Compensation Insurance in compliance with Alabama
statutory requirements including insurance for occupational diseases, providing
for the payment of statutory benefits as required by law, covering all persons
employed by BGSC’s contractors;

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          (ii) Employer’s Liability Insurance with a minimum limit of $2,000,000
per occurrence;
          (iii) Comprehensive General Liability Insurance providing coverage
with a minimum single limit for bodily injury and property damage of $5,000,000
per occurrence, such coverage to include contractual liability and products
liability (including completed operations) and specialized coverage with respect
to liability of BGSC arising from explosion, collapse and underground damage
(XCU);
          (iv) Comprehensive Automobile Liability Insurance providing coverage
with a minimum limit of $2,000,000 per occurrence; and
          (v) Control of Cavity (COW Insurance) including sudden and accidental
insurance coverage with coverage of at least $5,000,000.00 per occurrence.
     (b) Upon completion of the First Cavity and during the remainder of the
term of this Agreement, BGSC shall acquire and maintain or require its
contractors to acquire and maintain, the following insurance coverages:
          (i) Workers’ Compensation Insurance in compliance with Alabama
statutory requirements including insurance for occupational diseases, providing
for the payment of statutory benefits as required by law, covering all persons
employed by BGSC’s contractors;
          (ii) Employer’s Liability Insurance with a minimum limit of $2,000,000
per occurrence;
          (iii) Comprehensive General Liability Insurance providing coverage
with a minimum single limit for bodily injury and property damage of $10,000,000
per occurrence, such coverage to include contractual liability and products
liability (including completed operations) and specialized coverage with respect
to liability of BGSC arising from sudden and accidental pollution, and
explosion, collapse and underground damage (XCU).
          (iv) Comprehensive Automobile Liability Insurance providing coverage
with a minimum limit of $2,000,000 per occurrence; and

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     (c) To the extent that any of the insurance policies contemplated above
provide coverage on a “claims made” basis rather than an “occurrence” basis,
upon the expiration, termination or cessation of this Agreement, BGSC shall use
its best efforts to obtain endorsements to such “claims made” policies providing
coverage for claims (i) which are made during the five (5) years following such
expiration, termination or cessation of this Agreement with respect to
occurrences prior to such expiration, termination or cessation of this
Agreement, and (ii) which would otherwise have been covered by such policies.
     (d) The insurance companies providing the above coverages shall be of sound
financial condition. Mutual insurance companies providing coverages to the
utility industry shall be deemed to meet the standard set forth in the preceding
sentence.
     (e) The insurance policies required by Sections 4.04 (a) (iii) and (b)(iii)
shall name the owners as additional insureds.
     (f) Olin and BGSC shall confer periodically, but no less frequently than
every five (5) years, with respect to the adequacy of the insurance coverages
provided above. BGSC shall obtain such additional coverages and/or higher limits
of coverage as may be from time to time agreed between Olin and BGSC.
     (g) A thirty (30) day written notice of cancellation or material change
clause shall be included in all policies of insurance.
     (h) Evidence of all insurance and/or cancellations or material change
thereof shall be provided to Olin prior to any use by BGSC of the Leased Land
pursuant to this Agreement. Also, evidence of any cancellation or material
change in insurance coverage shall be provided to Olin upon receipt by BGSC.
     4.05 Environmental
     Olin represents and warrants to BGSC that it has provided to BGSC through
BGSC’s environmental consultant, BCM Converse, all information requested by BCM
Converse and known to Olin with respect to environmental conditions on or
affecting the Leased Land. Except as so disclosed, there are and shall be no
environmental conditions existing prior to the Effective Date on or affecting
the Leased Land caused by or resulting from the actions or failure to act of
Olin or any other person or entity (other than BGSC, its employees, agents or

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contractors), which would cause BGSC to be required to incur any Costs (as
defined in Section 5.02 (a) hereof) against which BGSC is not indemnified under
Section 5.03(b) hereof.
     4.06 Title to Real Property
     (a) Olin represents and warrants to BGSC that it owns or has acquired all
real property rights and interest in and to the surface and the subsurface of
the Leased Land necessary to BGSC’s undisturbed use of the Leased Land in
accordance with this Agreement and the Surface Lease, and has full authority to
convey to BGSC the rights and interests conveyed or granted to BGSC pursuant to
this Agreement and the Surface Lease.
     (b) Olin warrants and covenants to BGSC that BGSC, on paying the charges
herein provided for and observing and keeping the covenants, conditions and
terms of this Agreement on BGSC’s part to be kept or performed, shall lawfully
and quietly hold, occupy and enjoy the Cavity Sites during the term hereof
without hinderance of or molestation by Olin or any other person or entity
claiming an interest in the Cavity Sites.
     (c) BGSC’s sole and exclusive remedy against Olin in the event of any
breach of the warranties or covenants provided in Section 4.06(a) above or in
Sections 1.02 or 1.03(a) of the Surface Lease, shall be the recovery of monetary
damages by BGSC limited to ***. Notwithstanding the foregoing sentence, if BGSC
discovers such a breach prior to completion of a Cavity, in lieu of paying such
damages, Olin shall at BGSC’s option provide to BGSC an alternative site for the
affected Cavity Site, in accordance with the provisions of the Surface Lease.
     (d) BGSC shall promptly notify Olin of any claim of breach of the
warranties or covenants provided in Section 4.06 above.
If discovery of such breach occurs after completion of a Cavity, Olin shall
promptly utilize its best efforts to cure the defect giving rise to such breach,
but in the event such breach is not cured within a reasonable time Olin shall
provide an alternate site to BGSC in accordance with the provisions of the
Surface Lease. All reasonable costs of Olin’s effort to cure such defect shall
be borne half by Olin and half by BGSC; provided that in the event of
disagreement between BGSC and Olin as to the reasonableness of any such costs,
BGSC and Olin shall submit the dispute to binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association and
shall bear equally the cost of the arbitration, with the decision of the
arbitrator(s) to be enforceable in any court of competent jurisdiction.

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SECTION V: INDEMNITY
     5.01 Provisions Required by Cavity Storage Agreement
     (a) BGSC, its successors and assigns will defend, indemnify and hold the
owners harmless from and against any and all claims, demands, suits, damages,
costs, liabilities or other expenses (including reasonable attorney’s fees,
costs and disbursements) whether for property or environmental damage, bodily
injury including death, governmental fines or penalties (including, but without
limitation, violations of operating permits) arising from or relating to the
design, engineering, construction, operation or existence of the Storage
Facilities or any parts or appurtenances thereof, or any other use by BGSC, its
successors and assigns, of the Leased Land or the rights and licenses granted by
Olin herein.
     (b) To the extent that the Owners, their heirs, executors, administrators,
successors or assigns are entitled to any portion of the fees to be paid by BGSC
under this Agreement, or have any property rights that would be injured by a
breach of this Agreement by BGSC or Olin, said Owners, etc. shall be considered
third party beneficiaries of this Agreement by all parties hereto and shall
retain the right to file suit in a court of competent jurisdiction against BGSC
for any and all damages arising from BGSC’s breach of this Agreement and against
Olin for any and all damages arising from Olin’s breach of this Agreement
including any and all expenses associated therewith, including a reasonable
attorney’s fee, costs and disbursements.
     5.02 Claims by the Owners
     (a) BGSC, its successors and assigns shall defend, indemnify and hold Olin,
its officers, agents and employees (“Olin Parties”) harmless from and against
any and all claims, demands, suits, damages, costs, liabilities, or other
expenses (including reasonable attorney’s fees, costs and disbursements)
(“Costs”) which arise from any dispute or litigation instigated by the Owners,
their heirs, executors, administrators, successors or assigns, but only to the
extent such Costs result from a breach by BGSC of this Agreement or the Surface
Lease, including, without limitation, the storage of any substance other than
those permitted by Section 3.01 hereof, or the failure to make payments when due
hereunder or thereunder.
     (b) Notwithstanding any implication to the contrary which may arise under
Section 5.01 hereof, Olin, its successors and assigns shall defend, indemnify
and hold BGSC, its officers, agents and employees (“BGSC Parties”) harmless from
and against any and all Costs which arise from any dispute or litigation
instigated by the Owners, their heirs, executors,

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administrators, successors or assigns (“Owner Parties”) to the extent such Costs
do not result from a breach by BGSC of (i) this Agreement or the Surface Lease,
(ii) a contract obligation of BGSC to Owner Parties, or (iii) a legal duty owed
to Owner Parties.
     (c) In the event BGSC effects an out-of-court settlement with the Owners of
any dispute or litigation arising under this Section V, which results in BGSC
paying Costs without admitting that it has breached this Agreement or the
Surface Lease, then BGSC and Olin shall use the following procedure to determine
the amount, if any, of such Costs subject to Section 5.02(b) hereof:
          (i) Within ninety (90) days of the consummation of such settlement,
BGSC may provide Olin with notice of such settlement, which notice shall be
accompanied by a written statement describing the dispute or litigation, the
relevant facts upon which the dispute is based, a proposed allocation of such
Costs, any factual data, analysis or opinion supporting BGSC’s proposed
allocation, all supporting documentation on which BGSC relies, and the name,
address and telephone number of BGSC’s representative. Within thirty (30) days
of Olin’s receipt of such notice, Olin shall notify BGSC whether it accepts or
rejects BGSC’s proposed allocation. Failure by Olin to provide such notice
within such time shall be deemed an acceptance of BGSC’s proposed allocation.
          (ii) In the event Olin rejects BGSC’s proposed allocation, the parties
agree to submit the dispute to binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and to bear
equally the costs of the arbitration, with the decision of the arbitrator(s) to
be enforceable in any court of competent jurisdiction.
          (iii) At all times the sole basis for such allocation shall be the
comparative fault of BGSC and Olin which resulted, or may have resulted, in the
owners instigating the dispute or litigation against BGSC and/or Olin. The
purpose and scope of the arbitration shall be limited to issues related to an
equitable allocation of Costs. BGSC and Olin will cause their respective
representatives to use their best efforts to attempt to resolve the dispute.
          (iv) At Olin’s request, Olin may inspect and copy BGSC’s files and
records concerning the dispute or litigation with the Owners upon Olin’s
execution of a suitably worded confidentiality and non-disclosure agreement. The
disclosure of such files and records to Olin shall not be deemed a waiver of the
attorney-client privilege or work product immunity or any

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other privilege. The parties may extend any of the time periods referenced in
this Section 5.02(c) to afford Olin a reasonable opportunity to inspect and copy
such files and records.
          (v) It is expressly agreed that the failure of the parties to agree
upon an allocation of costs shall not relieve either party from any obligation
set forth in this Agreement or the Surface Lease, or any related agreements
between the parties. In addition, the parties expressly state their mutual
determination that the failure to agree upon an allocation of Costs shall not
hinder or delay the cooperation of the parties in any other BGSC-related matter,
notwithstanding the pendency of any such dispute.
     5.03 Damage to or Contamination of the Leased Land or Salt Thereunder
     (a) BGSC, its successors and assigns shall defend, indemnify and hold Olin
harmless from and against any and all Costs which arise from or are caused by
any act or failure to act by BGSC, its employees, agents or contractors which
(i) result in contamination of or other damage to the Leased Land or the salt
deposits under said Leased Land; or (ii) arise from the design, engineering,
construction, operation or existence of the Storage Facilities or any parts or
appurtenances thereof, or any other use by BGSC, its successors and assigns of
the Leased Land or the rights and licenses granted by Olin herein. For purposes
of this Section V, it is understood by the parties that activities expressly
permitted to be performed by BGSC, its employees, agents or contractors under
this Agreement or the Surface Lease shall not constitute contamination of or
other damage to the Leased Land or the salt deposits under the Leased Land.
     (b) Olin, its successors and assigns shall defend, indemnify and hold BGSC
Parties harmless from and against any and all Costs which arise from or are
caused by: (1) any act or failure to act by Olin, its employees, agents or
contractors which result in (i) contamination of the surface or subsurface of
the Leased Land or (ii) other damage to the surface or subsurface of the Leased
Land or any Cavity, either of which adversely and materially affects, or
threatens to affect, BGSC’s quiet enjoyment of the Leased Land under this
Agreement or the Surface Lease; or (2) any breach of the representations,
warranties or covenants set out herein.
     5.04 Cavities and Surface Facilities
     BGSC, its successors and assigns will defend, indemnify and hold Olin
Parties harmless from and against any and all Costs whether for property or
environmental damage, bodily injury including death, governmental fines or
penalties (including, but without limitation, violations of

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operating permits) arising from or relating to the design, engineering,
construction, operation or existence of the Storage Facilities or any parts or
appurtenances thereof, or any other use by BGSC, its successors and assigns, of
the Leased Land or the rights and licenses granted by Olin herein.
     5.05 General Indemnity Provisions
     The obligations and liabilities of Olin and BGSC under this Section V shall
be subject to the following terms and conditions:
     (a) the party claiming a right to indemnification (the “Indemnified Party”)
shall provide the party against whom a claim is asserted (the “Indemnifying
Party”) prompt notice of any claim or facts that have given or may give rise to
a claim for indemnification, including in the event of a claim under
Section 5.02 any inquiry or investigation by a governmental agency or any
investigation undertaken voluntarily by the Indemnified Party and which the
Indemnified Party believes may give rise to a claim for indemnification;
     (b) the Indemnified Party shall provide reasonable access to the subject
property as may be necessary or appropriate to enable the Indemnifying Party and
its employees, agents, attorneys, consultants and contractors to evaluate the
claim and take remedial or other appropriate action;
     (c) the Indemnified Party shall make available to the Indemnifying Party or
its representatives all information, records and other materials in the
possession or control of the Indemnified Party which are reasonably required by
the Indemnified Party for its use in connection with any claim, investigation or
remedial action and shall otherwise cooperate and assist the Indemnifying Party
in connection with such claim investigation or remedial action (including, where
appropriate, providing testimony in connection with any litigation).
     (d) the Indemnifying Party shall have the responsibility of defending,
remedying, compromising, and settling any claim made by or against the
Indemnified Party and shall have the right to employ and control its own
attorneys, consultants and contractors in connection therewith. The Indemnifying
Party shall have full control over any actions (including, without limitation,
any remedial action, negotiation or litigation) in connection with any such
claim; provided, however, that if a remedial or other action would materially
and adversely affect the Indemnified Party’s business operations at the said
premises, the prior consent of the Indemnified Party shall be necessary (which
consent shall not unreasonably be withheld); and

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provided further, that the Indemnifying Party shall not compromise or settle any
claim without the consent of the Indemnified Party (which consent shall not
unreasonably by withheld);
     (e) in the event the Indemnified Party refuses to consent to any settlement
recommended by the Indemnifying Party and elects to contest any claim, the
Indemnifying Party’s liability for the claim shall not exceed the amount for
which the claim could have been so settled plus indemnified expenses incurred by
the Indemnified Party up to the date of such refusal;
     (f) in the event the Indemnifying Party fails to proceed diligently and in
good faith with respect to a claim for indemnification, the Indemnified Party
may take appropriate action, including but not limited to employing its own
attorneys, consultants and contractors and undertaking remedial action, without
prejudice to its rights to indemnification; provided, however, that the
Indemnified Party shall at all times have the right at its own expense to employ
attorneys, consultants and contractors, in addition to those employed by the
Indemnifying Party;
     (g) if and to the extent any indemnification obligation of an Indemnifying
Party hereunder is or has been increased as a result of facts or omissions
taken, omitted or made by or on behalf of an Indemnified Party, such
indemnification obligation shall be reduced by the amount of such
indemnification obligation that is attributable to such acts or omissions;
     (h) no party to this Agreement shall be entitled to indemnification on
account of the effect upon its business operations (including without
limitation, business interruptions or loss of profits), caused by or resulting
from non-negligent actions taken by a party pursuant to its obligations
hereunder to take remedial or other appropriate action; and
     (i) effective upon being indemnified as provided in this Section V, and
Indemnified Party hereunder (i) transfers and assigns to an Indemnifying Party
all rights and claims the Indemnified Party has or may have against third
parties for reimbursement or contribution; (ii) agrees to execute such
instruments and take such other actions as may be necessary or appropriate to
transfer and assign the foregoing rights or claims to the latter; and
(iii) agrees to take such reasonable actions when and as necessary or
appropriate to assist the latter to obtain reimbursement or contribution from
third parties.

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SECTION VI: FORCE MAJEURE
     6.01 General Protections from Breach
     Failure of either party to perform any obligation or to take any action
hereunder when due shall not, except to the extent otherwise provided herein,
subject said party to any liability to the other, if occasioned by:
     (a) Acts of God or the public enemy, fire, explosion, hurricane, flood,
drought, war, riot, sabotage, accident, embargo, destruction of Olin or BGSC
facilities, including BGSC owned pipelines, production facilities or injection
water/brine transportation facilities; the threat of physical harm or damage
resulting in the evacuation or shut down of Olin or BGSC owned facilities
necessary for the production or delivery or receipt or use of gas or injection
water/brine; breakage or accident to Olin or BGSC owned machinery, pipelines or
facilities in which the gas or injection water/brine is produced, delivered,
received, or used; the necessity for testing or for making repairs or
alterations to Olin or BGSC owned cavities, machinery, facilities or pipelines
through which the gas or injection water/brine is moved; or the partial or
entire failure of Olin or BGSC owned processing, dewatering or transportation
facilities involved in the injection water/brine system, including Olin or BGSC
owned product manufacturing facilities, or other Olin or BGSC owned facilities
in which the injection water/brine is otherwise used.
     (b) Interruption of or delay in transportation, inadequacy or shortage or
failure of normal sources of supply of materials or equipment breakdowns, labor
trouble from whatever cause arising including strikes and lockouts and whether
or not the demands of the employees involved are reasonable and within said
party’s power to concede, or
     (c) Voluntary or involuntary compliance with any order, action, or
direction of any court, governmental officer, department, agency, authority, or
committee thereof, having or asserting jurisdiction or the refusal to provide or
withdrawal of any necessary order, certificate or permit by any court or
governmental authority or agency having or asserting jurisdiction, which renders
it impossible or not profitable for either party to perform hereunder.
     (d) Without limiting the generality of the foregoing circumstances, any
circumstances of like or different character beyond the reasonable control of
the party so failing.

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          6.02 Notice of Force Majeure Contingency
     In the event either party hereto is prevented or delayed in the performance
of any of its obligations under this Agreement (other than the payment of money)
due to force majeure, such party shall give prompt notice to the other of the
commencement, expected duration and termination of any such force majeure
contingency. Except as otherwise provided below, such party’s nonperformance
shall be excused and the time for performance extended for the period of delay
or inability to perform due to such force majeure. Notwithstanding the
foregoing, whenever the total of all periods of delay or inability to perform
due to force majeure asserted by BGSC or by Olin or by both BGSC and Olin equals
*** months in any *** period, either party (but not the nonperforming party)
shall have the right to either terminate the Surface Lease and the Cavity
Development Rights by sending a notice of termination to the other, or continue
to excuse the others nonperformance and extend the time for such party’s
performance for the period or periods of any delay or inability to perform due
to force majeure.
SECTION VII: EFFECTIVE DATE
     This Agreement shall become effective as of the day and date hereof (the
“Effective Date”).
SECTION VIII: TERMINATION
     This Agreement shall terminate upon the termination of the Lease, except
for the obligations contained in Section 4.01(b), and in Section V, which shall
survive the termination of this Agreement.
SECTION IX: ENTIRE AGREEMENT, BINDING EFFECT AND MODIFICATION
     This Agreement and the documents executed and delivered pursuant hereto,
constitute the entire agreement between the parties and there are no
understandings, representations or warranties of any kind, express or implied,
not expressly set forth herein. This Agreement shall inure to the benefit of,
and shall be binding upon, the respective successors and permitted assigns
(under Section X hereof) of the Parties hereto. No modification of this
Agreement shall be of any force or effect unless such modification is in writing
and signed on behalf of each party hereto and no modification shall be effected
by the acknowledgement or acceptance of receipts or other forms containing terms
or conditions at variance with those set forth herein.

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SECTION X: ASSIGNMENT; ENCUMBRANCE
     (a) BGSC may not assign its rights under this Agreement without the express
written consent of Olin, which consent shall not be unreasonably withheld;
provided, however, that BGSC may not assign its rights under this Agreement to
any business or entity that is owned or partially owned by a competitor or
potential competitor of Olin that intends to exploit or utilize the salt
reserves underlying the Leased Land (such status or intent being determined as
of the date of such proposed assignment).
     (b) Notwithstanding the foregoing, BGSC may assign, mortgage or otherwise
encumber its rights and interests hereunder to secure its obligation to repay
funds borrowed by BGSC for construction and development of the Storage
Facilities.
SECTION XI: APPLICABLE LAW
     This Agreement shall be deemed to have been made and executed in the State
of Alabama, an any dispute arising out of this Agreement shall be resolved in
accordance with the substantive laws of the State of Alabama which shall govern
the construction of this Agreement and rights and remedies of parties hereto.
SECTION XII: SEVERABILITY
     If any provision of this Agreement shall be held invalid under any
applicable laws, such invalidity shall not effect any other portion of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.
SECTION XIII: COUNTERPARTS
     This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument.
SECTION XIV : COMPLIANCE WITH LAW
     BGSC and Olin shall each comply with all statutes, ordinances, and
regulations of all federal, state, county, and municipal or local governments,
and of any and all of the departments and bureaus thereof applicable to the
performance of, its rights and obligations under this Agreement. BGSC and Olin
shall each obtain at its expense all licenses and permits that may be required
for development of the Cavities and to conduct BGSC’s operations.

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SECTION XV: NOTICES
     Any notices, consents or approvals required or permitted by this Agreement
shall be in writing and shall be deemed delivered if delivered in person or if
sent by first class mail, postage prepaid, as follows, unless such address is
changed by written notice hereunder:

  (a)   If to Olin:
Olin Chlor Alkali Products
490 Stuart Road Northeast
Cleveland, Tennessee 37312
Attn.: Harry Bridges     (b)   If to BGSC:
Bay Gas Storage Company, Ltd.
P.O. Box 1368
Mobile, Alabama 36633
Attn.: General Manager

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

                      OLIN CORPORATION    
 
                    By:   /s/ John McIntosh                           John
McIntosh             Its: President,             Olin Chlor Alkali Products    
 
                    WITNESS:         /illegible/              
 
                    BAY GAS STORAGE COMPANY, LTD.         By:   ENERGYSOUTH
STORAGE             SERVICES, INC., f/k/a             MGS STORAGE SERVICES, INC.
            as General Partner of Bay Gas             Storage Company, Ltd.    
 
               
 
      By :

Its:   /s/ Charles P. Huffman
 
Charles P. Huffman
Vice President    
 
                    WITNESS:         /s/ G. Edgar Downing, Jr.              

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STATE OF TENNESSEE
COUNTY OF BRADLEY
     I, the undersigned authority, in and for said County in said State, hereby
certify that John McIntosh, whose name as President, Olin Chlor Alkali Products
and an officer of Olin Corporation, a Virginia corporation, is signed to the
foregoing instrument and who is known to me, acknowledged before me on this day
that being informed of the contents of said instrument, he as such officer and
with full authority, executed the same voluntarily for and as the act of said
corporation.
     Given under my hand and seal this 17th day of May, 2007.

         
 
  /s/ Peggy A. Dover
 
Notary Public, Tennessee    

[AFFIX NOTARIAL SEAL]
My commission Expires: 4-12-2010
STATE OF ALABAMA
COUNTY OF MOBILE
     I, the undersigned authority, in and for said County in said State, hereby
certify that Charles P. Huffman, whose name as Vice President of EnergySouth
Storage Services, Inc., an Alabama corporation, which is the General Partner of
Bay Gas Storage Company, Ltd., an Alabama limited partnership, are signed to the
foregoing instrument and who is known to me, acknowledged before me on this day
that being informed of the contents of said instrument, he as such officer and
with full authority, executed the same voluntarily for and as the act of said
corporation, acting as the General Partner of Bay Gas Storage Company, Ltd.
     Given under my hand and seal this 14th day of May, 2007.

         
 
  /s/ Martha Cooper Loper
 
Notary Public    

[AFFIX NOTARIAL SEAL]
My Commission Expires:

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EXHIBIT INDEX; SCHEDULES

     
Exhibit A-1
  First Cavity Site Plat(1) (5)
Exhibit A-2
  Second Cavity Site Plat(2) (5)
Exhibit A-3
  Third Cavity Site Plat(3) (5)
Amended Exhibit A-3
  New Third Cavity Site Plat(4)
Exhibit A-4
  Fourth Cavity Site Plat(6)
Exhibit A-5
  Fifth Cavity Site Plat(6)
Exhibit B
  Fourth Amendment and Letter Agreements(5)
Exhibit B-1
  Fifth Amendment to Cavity Storage Agreement(4)
Exhibit B-2
  Sixth Amendment to Cavity Storage Agreement(6)
Exhibit C
  Form of Surface Lease(5)
Exhibit C-1
  Fourth Amendment to Surface Lease(4)
Exhibit C-2
  Fifth Amendment to Surface Lease(6)
Exhibit D
  Sample Calculations for Service Fees(5)
Exhibit E
  Option Agreement(4)
Exhibit F
  Surface Facility Option Agreement(6) (7)

 

(1)   amended by First Amendment to CDSA dated August 18, 1994   (2)   amended
by Second Amendment to CDSA dated September 28, 2000 and by Third Amendment to
CDSA dated March 28, 2003.   (3)   replaced by Fourth Amendment to CDSA   (4)  
per Fourth Amendment to CDSA   (5)   appended to original CDSA   (6)   per 2007
Amendment to CDSA   (7)   including Exhibit B (Option) thereto, being form of
Sixth Amendment to Surface Lease

 

     
Schedule 1
                                              New EBITDA

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