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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




 









 





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”),



 









 







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









 







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









 







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









 






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


5









 






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









 






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









 






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









 








          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


9









 






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

10









 








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

11









 








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

12









 








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 ***.




13









 








          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



14









 







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


15









 






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



16









 







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;




17









 








          (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




18









 








     (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



19









 







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.




20









 








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,



21









 







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

22









 








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



23









 







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



24









 







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:




31









 








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







32