Document:

Exhibit 10.1

Exhibit 10.1

			
	Term Note

(Multi-Rate Options)
	 	
	 
	$29,100,000.00	 	March 16, 2010

FOR VALUE RECEIVED, CHESAPEAKE UTILITIES COROPORATION (the “Borrower”), with an address at 909
Silver Lake Boulevard, Dover, Delaware 19904, promises to pay to the order of PNC BANK, NATIONAL
ASSOCIATION (the “Bank”), in lawful money of the United States of America in immediately available
funds at its offices located at 222 Delaware Avenue, Wilmington, Delaware 19899, or at such other
location as the Bank may designate from time to time, the principal sum of TWENTY-NINE MILLION ONE
HUNDRED THOUSAND AND 00/100 DOLLARS ($29,100,000.00), together with interest accruing on the
outstanding principal balance from the date hereof, all as provided below.

1. Rate of Interest. Amounts outstanding under this Note will bear interest at a rate or
rates per annum as may be selected by the Borrower from the interest rate options set forth below
(each, an “Option”):

(i) Base Rate Option. A rate of interest per annum which is at all times equal to (A)
the Base Rate plus (B) two hundred twenty-five (225) basis points (2.25%). If and when the
Base Rate (or any component thereof) changes, the rate of interest with respect to any amounts to
which the Base Rate Option applies will change automatically without notice to the Borrower,
effective on the date of any such change. There are no required minimum interest periods for
amounts bearing interest under the Base Rate Option.

(ii) LIBOR Option. A rate per annum equal to (A) LIBOR plus (B) one hundred
twenty-five (125) basis points (1.25%), for the applicable LIBOR Interest Period.

For purposes hereof, the following terms shall have the following meanings:

“Base Rate” shall mean the highest of (A) the Prime Rate, and (B) the sum of the Federal
Funds Open Rate plus fifty (50) basis points (0.50%), and (C) the sum of the Daily
LIBOR Rate plus one hundred (100) basis points (1.0%), so long as a Daily LIBOR Rate
is offered, ascertainable and not unlawful.

“Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on
which commercial banks are authorized or required by law to be closed for business in
Wilmington, Delaware.

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the Bank by
dividing (x) the Published Rate by (y) a number equal to 1.00 minus the LIBOR
Reserve Percentage.

“Federal Funds Open Rate” shall mean, for any day, the rate per annum (based on a year of
360 days and actual days elapsed) which is the daily federal funds open rate as quoted by
ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for
that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that
displays such rate), or as set forth on such other recognized electronic source used for the
purpose of displaying such rate as selected by the Bank (an “Alternate Source”) (or if such
rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or
on any Alternate Source, or if there shall at any time, for any reason, no longer exist a
Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable
replacement rate determined by the Bank at such time (which determination shall be
conclusive absent manifest error); provided however, that if such day is not a Business Day,
the Federal Funds Open Rate for such day shall be the “open” rate on the immediately
preceding Business Day. The rate of interest charged shall be adjusted as of each Business
Day based on changes in the Federal Funds Open Rate without notice to the Borrower.

 

 

 

“LIBOR” shall mean, with respect to any amount to which the LIBOR Option applies for the
applicable LIBOR Interest Period, the interest rate per annum determined by the Bank by
dividing (the resulting quotient rounded upwards, at the Bank’s discretion, to the nearest
1/100th of 1%) (i) the rate of interest determined by the Bank in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) to be the
eurodollar rate two (2) Business Days prior to the first day of such LIBOR Interest Period
for such amount and having a borrowing date and a maturity comparable to such LIBOR Interest
Period by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage.

“LIBOR Interest Period” shall mean, with respect to any amount to which the LIBOR Option
applies, the period of one (1), two (2), three (3), six (6), nine (9) or twelve (12) months
as selected by the Borrower on the date of disbursement of such amount (or the date of
conversion of any amount to the LIBOR Option, as the case may be) and each successive period
selected by the Borrower thereafter; provided that, (i) if a LIBOR Interest
Period would end on a day which is not a Business Day, it shall end on the next succeeding
Business Day unless such day falls in the next succeeding calendar month in which case the
LIBOR Interest Period shall end on the next preceding Business Day, (ii) the Borrower may
not select a LIBOR Interest Period that would end on a day after the Maturity Date (as
hereinafter defined), and (iii) any LIBOR Interest Period that begins on the last Business
Day of a calendar month (or a day for which there is no numerically corresponding day in the
last calendar month of such LIBOR Interest Period) shall end on the last Business Day of the
last calendar month of such LIBOR Interest Period.

“LIBOR Reserve Percentage” shall mean the maximum effective percentage in effect on such day
as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including, without limitation, supplemental, marginal
and emergency reserve requirements) with respect to eurocurrency funding (currently referred
to as “Eurocurrency liabilities”).

“Prime Rate” shall mean the rate publicly announced by the Bank from time to time as its
prime rate. The Prime Rate is determined from time to time by the Bank as a means of
pricing some loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest actually
charged by the Bank to any particular class or category of customers.

“Published Rate” shall mean the rate of interest published each Business Day in the Wall
Street Journal “Money Rates” listing under the caption “London Interbank Offered Rates” for
a one month period (or, if no such rate is published therein for any reason, then the
Published Rate shall be the eurodollar rate for a one month period as published in another
publication selected by the Bank).

LIBOR and the Daily LIBOR Rate shall be adjusted with respect to any amounts to which the LIBOR
Option or Base Rate Option applies, as applicable, on and as of the effective date of any change in
the LIBOR Reserve Percentage. The Bank shall give prompt notice to the Borrower of LIBOR or the
Daily LIBOR Rate as determined or adjusted in accordance herewith, which determination shall be
conclusive absent manifest error.

If the Bank determines (which determination shall be final and conclusive) that, by reason of
circumstances affecting the eurodollar market generally, deposits in dollars (in the applicable
amounts) are not being offered to banks in the eurodollar market for the selected term, or adequate
means do not exist for ascertaining LIBOR, then the Bank shall give notice thereof to the Borrower.
Thereafter, until the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, (a) the availability of the LIBOR Option shall be suspended, and (b)
the interest rate for all amounts then bearing interest under the LIBOR Option shall be converted
at the expiration of the then current LIBOR Interest Period(s) to the Base Rate Option.

 

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In addition, if, after the date of this Note, the Bank shall determine (which determination shall
be final and conclusive) that any enactment, promulgation or adoption of or any change in any
applicable law, rule or regulation, or any change in the interpretation or administration thereof
by a governmental authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request or directive (whether
or not having the force of law) of any such authority, central bank or comparable agency shall make
it unlawful or impossible for the Bank to make or maintain or fund loans based on LIBOR, the Bank
shall notify the Borrower. Upon receipt of such notice, until the Bank notifies the Borrower that
the circumstances giving rise to such determination no longer apply, (a) the availability of the
LIBOR Option shall be suspended, and (b) the interest rate on all amounts then bearing interest
under the LIBOR Option shall be converted to the Base Rate Option either (i) on the last day of the
then current LIBOR Interest Period(s) if the Bank may lawfully continue to maintain or fund loans
based on LIBOR to such day, or (ii) immediately if the Bank may not lawfully continue to maintain
or fund loans based on LIBOR.

The foregoing notwithstanding, it is understood that the Borrower may select different Options to
apply simultaneously to different portions of this Note and may select up to three (3) different
interest periods to apply simultaneously to different portions of this Note bearing interest under
the LIBOR Option. Interest hereunder will be calculated based on the actual number of days that
principal is outstanding over a year of 360 days. In no event will the rate of interest hereunder
exceed the maximum rate allowed by law.

2. Interest Rate Election. Subject to the terms and conditions of this Note, at the end of
each interest period applicable to any amounts hereunder, the Borrower may renew the Option
applicable to such amounts or convert such amounts to a different Option; provided
that, during any period in which any Event of Default (as hereinafter defined) has occurred
and is continuing, any amounts bearing interest under the LIBOR Option shall, at the Bank’s sole
discretion, be converted at the end of the applicable LIBOR Interest Period to the Base Rate
Option, and the LIBOR Option will not be available to Borrower with respect to the conversion or
renewal of any other amounts until such Event of Default has been cured by the Borrower or waived
by the Bank. The Borrower shall notify the Bank of each election of an Option, each conversion
from one Option to another, the amount of the portions hereunder to be allocated to each Option and
where relevant the interest periods therefor. In the case of converting to the LIBOR Option, such
notice shall be given at least three (3) Business Days prior to the commencement of any LIBOR
Interest Period. If no interest period is specified in any such notice for an amount that is to
bear interest under the LIBOR Option, the Borrower shall be deemed to have selected a LIBOR
Interest Period of one month’s duration. If no notice of election, conversion or renewal is timely
received by the Bank with respect to any amount hereunder, the Borrower shall be deemed to have
elected the Base Rate Option therefor. Any such election shall be promptly confirmed in writing by
such method as the Bank may require.

3. Payment of Interest. The Borrower shall pay accrued interest on the unpaid principal
balance of this Note in arrears: (a) for amounts hereunder bearing interest under the Base Rate
Option, on the first day of each calendar quarter during the term hereof, (b) for amounts hereunder
bearing interest under the LIBOR Option, on the last day of the respective LIBOR Interest Period
for such amounts, (c) if any LIBOR Interest Period is longer than three (3) months, then also on
the three (3) month anniversary of such interest period and every three (3) months thereafter, and
(d) for all outstanding amounts, at maturity, whether by acceleration of this Note or otherwise,
and after maturity, on demand until paid in full.

4. Payment of Principal. All principal outstanding under this Note shall be due and
payable in full on March 15, 2011 (the “Maturity Date”). Any unpaid accrued interest shall be due
and payable in full on the Maturity Date.

If any payment under this Note shall become due on a Saturday, Sunday or public holiday under the
laws of the State where the Bank’s office indicated above is located, such payment shall be made on
the next succeeding Business Day and such extension of time shall be included in computing interest
in connection with such payment. The Borrower hereby authorizes the Bank to charge the Borrower’s
deposit account at the Bank for any payment when due hereunder. Payments received will be applied
to charges, fees and expenses (including attorneys’ fees), accrued interest and principal in any
order the Bank may choose, in its sole discretion.

 

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5. Late Payments; Default Rate. If the Borrower fails to make any payment of principal,
interest or other amount coming due pursuant to the provisions of this Note within fifteen (15)
calendar days of the date due and payable, the Borrower also shall pay to the Bank a late charge
equal to the lesser of five percent (5%) of the amount of such payment or $100.00 (the “Late
Charge”). Such fifteen (15) day period shall not be construed in any way to extend the due date of
any such payment. Upon maturity, whether by acceleration, demand or otherwise, and at the Bank’s
option upon the occurrence of any Event of Default (as hereinafter defined) and during the
continuance thereof, amounts outstanding under this Note shall bear interest at a rate per annum
(based on the actual number of days that principal is outstanding over a year of 360 days) which
shall be three percentage points (3%) in excess of the interest rate in effect from time to time
under this Note but not more than the maximum rate allowed by law (the “Default Rate”). The
Default Rate shall continue to apply whether or not judgment shall be entered on this Note. Both
the Late Charge and the Default Rate are imposed as liquidated damages for the purpose of defraying
the Bank’s expenses incident to the handling of delinquent payments, but are in addition to, and
not in lieu of, the Bank’s exercise of any rights and remedies hereunder, under the other Loan
Documents or under applicable law, and any fees and expenses of any agents or attorneys which the
Bank may employ. In addition, the Default Rate reflects the increased credit risk to the Bank of
carrying a loan that is in default. The Borrower agrees that the Late Charge and Default Rate are
reasonable forecasts of just compensation for anticipated and actual harm incurred by the Bank, and
that the actual harm incurred by the Bank cannot be estimated with certainty and without
difficulty.

6. Prepayment. The Borrower shall have the right to prepay any amount hereunder at any
time and from time to time, in whole or in part; subject, however, to payment of any break funding
indemnification amounts owing pursuant to paragraph 7 below.

7. Yield Protection; Break Funding Indemnification. The Borrower shall pay to the Bank on
written demand therefor, together with the written evidence of the justification therefor, all
direct costs incurred, losses suffered or payments made by Bank by reason of any change in law or
regulation or its interpretation imposing any reserve, deposit, allocation of capital, or similar
requirement (including without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) on the Bank, its holding company or any of their respective assets. In addition,
the Borrower agrees to indemnify the Bank against any liabilities, losses or expenses (including,
without limitation, loss of margin, any loss or expense sustained or incurred in liquidating or
employing deposits from third parties, and any loss or expense incurred in connection with funds
acquired to effect, fund or maintain any amounts hereunder (or any part thereof) bearing interest
under the LIBOR Option which the Bank sustains or incurs as a consequence of either (i) the
Borrower’s failure to make a payment on the due date thereof, (ii) the Borrower’s revocation
(expressly, by later inconsistent notices or otherwise) in whole or in part of any notice given to
Bank to request, convert, renew or prepay any amounts bearing interest under the LIBOR Option, or
(iii) the Borrower’s payment or prepayment (whether voluntary, after acceleration of the maturity
of this Note or otherwise) or conversion of any amounts bearing interest under the LIBOR Option on
a day other than the regularly scheduled due date therefor. A notice as to any amounts payable
pursuant to this paragraph given to the Borrower by the Bank shall, in the absence of manifest
error, be conclusive and shall be payable upon demand. The Borrower’s indemnification obligations
hereunder shall survive the payment in full of all amounts payable hereunder.

8. Other Loan Documents. This Note is issued in connection with a letter agreement between
the Borrower and the Bank, dated on or before the date hereof, and the other agreements and
documents executed and/or delivered in connection therewith or referred to therein, the terms of
which are incorporated herein by reference (as amended, modified or renewed from time to time,
collectively the “Loan Documents”), and is secured by the property (if any) described in the Loan
Documents and by such other collateral as previously may have been or may in the future be granted
to the Bank to secure this Note.

 

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9. Events of Default. The occurrence of any of the following events will be deemed to be
an “Event of Default” under this Note: (i) the nonpayment when due of any principal, interest or
other indebtedness under this Note or under the Second Amended and Restated Committed Line of
Credit Note (Multi-Rate Options) in the original principal amount of $30,000,000 dated January 13,
2010, made by the Borrower in favor of the Bank or under the Sixth Amended and Restated
Discretionary Line of Credit Demand Note (As-Offered Rate) in the original principal amount of
$20,000,000 dated January 13, 2010, made by the Borrower in favor of the Bank; (ii) the occurrence
of any event of default or any default and the lapse of any notice or cure period, or any Obligor’s
failure to observe or perform any covenant or other agreement, under or contained in any Loan
Document or any other document now or in the future evidencing or securing any debt, liability or
obligation of any Obligor to the Bank; (iii) the filing by or against any Obligor of any proceeding
in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar
proceeding (and, in the case of any such proceeding instituted against any Obligor, such proceeding
is not dismissed or stayed within 30 days of the commencement thereof, provided that the Bank shall
not be obligated to advance additional funds hereunder during such period); (iv) any assignment by
any Obligor for the benefit of creditors, or any levy, garnishment, attachment or similar order is
issued against any property of any Obligor held by or deposited with the Bank; (v) a default with
respect to any other indebtedness of any Obligor for borrowed money in excess of $5,000,000
individually or in the aggregate, if the effect of such default is to cause or permit the
acceleration of such debt; (vi) the commencement of any foreclosure or forfeiture proceeding,
execution or attachment against any collateral securing the obligations of any Obligor to the Bank;
(vii) the entry of one or more final judgments against any Obligor in excess of $5,000,000
individually or in the aggregate and the failure of such Obligor to discharge the judgments within
thirty (30) days of the entry thereof; (viii) any material adverse change in any Obligor’s
business, assets, operations, financial condition or results of operations; (ix) any Obligor ceases
doing business as a going concern; (x) any representation or warranty made by any Obligor to the
Bank in any Loan Document or any other documents now or in the future evidencing or securing the
obligations of any Obligor to the Bank, is false, erroneous or misleading in any material respect;
(xi) if this Note or any guarantee executed by any Obligor is secured (other than the security
described in section 5 of the Working Cash Sweep Rider of even date herewith), the failure of any
Obligor to provide the Bank with additional collateral if in the Bank’s opinion at any time or
times, the market value of any of the collateral securing this Note or any guarantee has
depreciated below that required pursuant to the Loan Documents or, if no specific value is so
required, then in an amount reasonably deemed by the Bank as necessary to secure the Loan evidenced
by this Note; (xii) the revocation or attempted revocation, in whole or in part, of any guarantee
by any Obligor; or (xiii) the death, incarceration, indictment or legal incompetency of any
individual Obligor or, if any Obligor is a partnership or limited liability company, the death,
incarceration, indictment or legal incompetency of any individual general partner or member. As
used herein, the term “Obligor” means any Borrower and any guarantor of, or any pledgor, mortgagor
or other person or entity providing collateral support for, the Borrower’s obligations to the Bank
existing on the date of this Note or arising in the future.

Upon the occurrence of an Event of Default: (a) the Bank shall be under no further obligation to
make advances hereunder; (b) if an Event of Default specified in clause (iii) or (iv) above shall
occur, the outstanding principal balance and accrued interest hereunder together with any
additional amounts payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding principal balance and
accrued interest hereunder together with any additional amounts payable hereunder, at the Bank’s
option and without demand or notice of any kind, may be accelerated and become immediately due and
payable; (d) at the Bank’s option, this Note will bear interest at the Default Rate from the date
of the occurrence of the Event of Default; and (e) the Bank may exercise from time to time any of
the rights and remedies available under the Loan Documents or under applicable law.

10. [INTENTIONALLY DELETED]

11. Right of Setoff. In addition to all liens upon and rights of setoff against the
Borrower’s money, securities or other property given to the Bank by law, the Bank shall have, with
respect to the Borrower’s obligations to the Bank under this Note and to the extent permitted by
law, a contractual possessory security interest in and a contractual right of setoff against, and
the Borrower hereby grants the Bank a security interest in, and hereby assigns, conveys, delivers,
pledges and transfers to the Bank, all of the Borrower’s right, title and interest in and to, all
of the Borrower’s deposits, moneys, securities and other property now or hereafter in the
possession of or on deposit with, or in transit to, the Bank or any other direct or indirect
subsidiary of The PNC Financial Services Group, Inc., whether held in a general or special account
or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise,
excluding, however, all IRA, Keogh, and trust accounts. Every such security interest and right of
setoff may be exercised without demand upon or notice to the Borrower. Every such right of setoff
shall be deemed to have been exercised immediately upon the occurrence of an Event of Default
hereunder without any action of the Bank, although the Bank may enter such setoff on its books and
records at a later time.

 

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12. Indemnity. The Borrower agrees to indemnify each of the Bank, each legal entity, if
any, who controls, is controlled by or is under common control with the Bank, and each of their
respective directors, officers and employees (the “Indemnified Parties”), and to defend and hold
each Indemnified Party harmless from and against any and all claims, damages, losses, liabilities
and expenses (including all fees and charges of internal or external counsel with whom any
Indemnified Party may consult and all expenses of litigation and preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified Party by any person,
entity or governmental authority (including any person or entity claiming derivatively on behalf of
the Borrower), in connection with or arising out of or relating to the matters referred to in this
Note or in the other Loan Documents or the use of any advance hereunder, whether (a) arising from
or incurred in connection with any breach of a representation, warranty or covenant by the
Borrower, or (b) arising out of or resulting from any suit, action, claim, proceeding or
governmental investigation, pending or threatened, whether based on statute, regulation or order,
or tort, or contract or otherwise, before any court or governmental authority; provided,
however, that the foregoing indemnity agreement shall not apply to any claims, damages,
losses, liabilities and expenses solely attributable to an Indemnified Party’s gross negligence or
willful misconduct. The indemnity agreement contained in this Section shall survive the
termination of this Note, payment of any amounts hereunder and the assignment of any rights
hereunder. The Borrower may participate at its expense in the defense of any such action or claim.
No Indemnified Party will settle any claim for which indemnification hereunder has been or will be
sought without the prior written consent of the Borrower, which consent shall not be unreasonably
withheld or delayed. In the event the Borrower participates in the defense of any such action or
claim, the Borrower will not, without the prior written consent of the Bank, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim, action, suit,
proceeding or investigation or agree to any fine where any Indemnified Party is an actual or
potential party unless such settlement, compromise, consent or agreement includes an unconditional
release of each Indemnified Party hereunder from all liability arising out of such claim, action,
suit, proceeding or investigation, and does not impose an injunction, equitable relief, prohibition
or restriction of any kind on the Indemnified Party.

13. Miscellaneous. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing (except as may be
agreed otherwise above with respect to borrowing requests) and will be effective upon receipt.
Notices may be given in any manner to which the parties may separately agree, including electronic
mail. Without limiting the foregoing, first-class mail, facsimile transmission and commercial
courier service are hereby agreed to as acceptable methods for giving Notices. Regardless of the
manner in which provided, Notices may be sent to a party’s address as set forth above or to such
other address as any party may give to the other for such purpose in accordance with this
paragraph. No delay or omission on the Bank’s part to exercise any right or power arising
hereunder will impair any such right or power or be considered a waiver of any such right or power,
nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights and
remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank
may have under other agreements, at law or in equity. No modification, amendment or waiver of, or
consent to any departure by the Borrower from, any provision of this Note will be effective unless
made in a writing signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. The Borrower agrees to pay on demand,
to the extent permitted by law, all costs and expenses incurred by the Bank in the enforcement of
its rights in this Note and in any security therefor, including without limitation reasonable fees
and expenses of the Bank’s counsel. If any provision of this Note is found to be invalid, illegal
or unenforceable in any respect by a court, all the other provisions of this Note will remain in
full force and effect. The Borrower and all other makers and indorsers of this Note hereby forever
waive presentment, protest, notice of dishonor and notice of non-payment. The Borrower also waives
all defenses based on suretyship or impairment of collateral. If this Note is executed by more
than one Borrower, the obligations of such persons or entities hereunder will be joint and several.
This Note shall bind the Borrower and its heirs, executors, administrators, successors and
assigns, and the benefits hereof shall inure to the benefit of the Bank and its successors and
assigns; provided, however, that the Borrower may not assign this Note in whole or
in part without the Bank’s written consent and the Bank at any time may assign this Note in whole
or in part.

 

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This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State
where the Bank’s office indicated above is located. This Note will be interpreted and the
rights and liabilities of the Bank and the Borrower determined in accordance with the laws of the
State where the Bank’s office indicated above is located, excluding its conflict of laws
rules. The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state or
federal court in the county or judicial district where the Bank’s office indicated above is
located; provided that nothing contained in this Note will prevent the Bank from bringing any
action, enforcing any award or judgment or exercising any rights against the Borrower individually,
against any security or against any property of the Borrower within any other county, state or
other foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the venue
provided above is the most convenient forum for both the Bank and the Borrower. The Borrower
waives any objection to venue and any objection based on a more convenient forum in any action
instituted under this Note.

14. Authorization to Obtain Credit Reports. By signing below, each Borrower who is an
individual provides written authorization to the Bank or its designee (and any assignee or
potential assignee hereof) to obtain the Borrower’s personal credit profile from one or more
national credit bureaus. Such authorization shall extend to obtaining a credit profile in
considering this Note and subsequently for the purposes of update, renewal or extension of such
credit or additional credit and for reviewing or collecting the resulting account.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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15. WAIVER OF JURY TRIAL. The Borrower irrevocably waives any and all rights the
Borrower may have to a trial by jury in any action, proceeding or claim of any nature relating to
this Note, any documents executed in connection with this Note or any transaction contemplated in
any of such documents. The Borrower acknowledges that the foregoing waiver is knowing and
voluntary.

The Borrower acknowledges that it has read and understood all the provisions of this Note,
including the confession of judgment and the waiver of jury trial, and has been advised by counsel
as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above, with
the intent to be legally bound hereby.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WITNESS / ATTEST:	 	CHESAPEAKE UTILITIES CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 
(SEAL)	 	 
	Print Name:
	 	 	 	 	 	Print Name:	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 
	Title: 
	 	 	 	 	 	 	 	Title: 	 	 	 	 	 	 
	 

	 
	 	 	 	 	 

	 	 
	(Include title only if an officer of entity signing to the right)	 	 	 	 	 	 	 	 	 	 

 

- 8 -Exhibit 10.2

Exhibit 10.2

PRECEDENT AGREEMENT

This
PRECEDENT AGREEMENT (“Precedent Agreement”) is made and
entered into this _____ day of April, 2010, by and between Texas Eastern Transmission, LP, a Delaware limited partnership
(“Texas Eastern” or “Pipeline”), and Chesapeake Utilities Corporation (“Customer”). Pipeline and
Customer are sometimes referred to herein individually as a “Party,” or collectively as the
“Parties.”

W I T N E S S E T H:

WHEREAS, Pipeline owns and operates an interstate natural gas transmission system extending
from the State of Texas and offshore Louisiana through the Appalachian area to the Eastern Seaboard
in the Philadelphia, New Jersey and New York areas;

WHEREAS, Pipeline proposes to expand its interstate natural gas transmission system by
constructing, owning and operating certain pipeline, compression and related facilities to provide
expansion transportation service from receipt point(s) in the Appalachian production region in West
Virginia, Ohio and Pennsylvania that span both of Texas Eastern’s market zones M2 and M3, to
delivery points across Texas Eastern’s market area including, but not limited to, Lambertville,
N.J., Transco Station 195 in York County, PA, Dominion Transmission at Chambersburg, PA and
Columbia Gas Transmission near Marietta or Eagle, Pa. (the “Project”);

WHEREAS, Customer submitted a service request pursuant to a “Non-Binding Open Season”
conducted by Pipeline from August 1, 2008 through August 29, 2008, and a service request pursuant
to a Binding Open Season from November 17, 2009 through December 1, 2009, and Customer desires to
obtain firm transportation service from Pipeline as part of the Project for certain quantities of
Customer’s natural gas; and

 

 

 

WHEREAS, subject to the terms and conditions of this Precedent Agreement, Pipeline is willing
to construct the Project and provide the firm transportation service Customer desires;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and
intending to be legally bound, Pipeline and Customer agree to the following:

1. Subject to the terms and conditions of this Precedent Agreement, Pipeline shall proceed
with due diligence to obtain from all governmental and regulatory authorities having competent
jurisdiction over the premises, including, but not limited to, the Federal Energy Regulatory
Commission (“Commission” or “FERC”), the authorizations and/or exemptions Pipeline determines are
necessary: (i) for Pipeline to construct, own, operate, and maintain the Project facilities
necessary to provide the firm transportation service contemplated herein; and (ii) for Pipeline to
perform its obligations as contemplated in this Precedent Agreement. Pipeline reserves the right
to file and prosecute any and all applications for such authorizations and/or exemptions, any
supplements or amendments thereto, and, if necessary, any court review, which are consistent with
this Precedent Agreement in a manner it deems to be in its best interest. During the term of this
Precedent Agreement, Customer agrees to support and cooperate with, and to not oppose, obstruct or
otherwise interfere with in any manner, the efforts of Pipeline to obtain all authorizations and/or
exemptions and supplements and amendments thereto necessary for Pipeline to construct, own,
operate, and maintain the Project facilities and to provide the firm transportation service
contemplated in this Precedent Agreement and to perform its obligations as contemplated by this
Precedent Agreement.

 

-2-

 

2. Within thirty (30) days after execution of this Precedent Agreement, Customer will advise
Pipeline in writing of: (i) any facilities which Customer must construct, or cause to
be constructed, in order for Customer to utilize the firm transportation service contemplated
in this Precedent Agreement; and (ii) any necessary or desirable governmental, contractual and/or
regulatory authorizations, approvals, certificates, permits and/or exemptions associated with the
facilities identified pursuant to (i) above (“Customer’s Authorizations”).

3. Subject to the terms and conditions of this Precedent Agreement, Customer shall proceed
with due diligence to obtain Customer’s Authorizations. Customer reserves the right to file and
prosecute applications for Customer’s Authorizations, and, if necessary, any court review, in a
manner it deems to be in its best interest; provided, however, Customer shall pursue Customer’s
Authorizations in a manner designed to implement the firm transportation service contemplated
herein in a timely manner. Pipeline agrees to use reasonable efforts to assist Customer in
obtaining Customer’s Authorizations. Customer agrees to promptly notify Pipeline in writing when
each of the required authorizations, approvals and/or exemptions are received, obtained, rejected
or denied. Customer shall also promptly notify Pipeline in writing as to whether any such
authorizations, approvals and/or exemptions received or obtained are acceptable to Customer.

4. (A) To effectuate the firm transportation service contemplated herein, Customer and
Pipeline agree that no later than thirty (30) days after the date on which all of the conditions
precedent set forth in Paragraph 8, except for the condition precedent in Paragraph 8(A)(v), of
this Precedent Agreement have been satisfied or waived, they will execute two firm transportation
service agreements one in the name of Chesapeake Utilities Corporation d/b/a Chesapeake Utilities
Corporation – Delaware

 

-3-

 

Division (“Delaware Service Agreement”) and one in the name of Chesapeake
Utilities Corporation d/b/a/ Chesapeake Utilities Corporation –
Maryland Division (“Maryland Service Agreement”), collectively the “Service Agreements” under
Pipeline’s Rate Schedule FT-1, which shall specify:

(1) in the case of the Delaware Service Agreement, a Maximum Daily Quantity (“MDQ”) of 30,000
dekatherms per day (“Dth/d”) exclusive of fuel requirements, effective on the Service Commencement
Date (as determined in accordance with Paragraph 5 of this Precedent Agreement), and in the case of
the Maryland Service Agreement, an MDQ of 10,000 Dth/d, exclusive of fuel requirements, effective
on the Service Commencement Date (as determined in accordance with Paragraph 5 of this Precedent
Agreement); and,

(2) in both Service Agreements: (i) a primary term of fifteen (15) years commencing on the
Service Commencement Date (“Primary Term”), (ii) a Primary Point of Receipt at Clarington, Ohio,
(iii) a Primary Point of Delivery at ESNG-Honeybrook, PA, and (iv) incorporate security
requirements consistent with the provisions set forth in Paragraph 13 below. The rate that will
apply to service under the Service Agreements shall be a Natural Gas Act Section 7(c) initial rate,
plus applicable fuel retainage and all other applicable usage charges, charges and surcharges,
unless the Parties otherwise mutually agree to a negotiated or discounted rate as further defined
in Exhibits A and A-1.

(B) Pipeline and Customer have agreed to the following with regard to the negotiated rate for
service under the Service Agreements.

(1) Subject to the terms and conditions set forth herein and in the form of negotiated rate
agreements attached hereto as Exhibits A and A-1, Customer shall pay Pipeline a negotiated rate for
service under the Service Agreements during the Primary Term thereof based upon
Pipeline’s reasonable good faith estimate of the capital costs associated with constructing
the Project facilities and all other costs associated with providing the service contemplated
herein.

 

-4-

 

(2) Pipeline and Customer acknowledge that the Project is expected to involve an expansion of
Pipeline’s mainline system of up to 190,000 Dth/d in its Zones M2 and M3, although the final scope
of the expansion facilities is not known with precision at this time. For this reason, the
estimated capital costs associated with construction of the Project facilities and the estimated
Reservation Rate for service under the Service Agreements are represented by blanks in the attached
Exhibits A and A-1 form of negotiated rate agreements that will be filled in at a future time.
Pipeline currently estimates that the negotiated Reservation Rate for service under the Service
Agreements will be [ * ].

(3) No later than June 30, 2010, Pipeline shall provide Customer with a good faith estimate of
the capital costs associated with construction of the Project facilities and the related negotiated
Reservation Rate. At the same time that Pipeline provides such capital cost estimate and
negotiated Reservation Rate to Customer, Pipeline shall also tender to Customer two (2) negotiated
rate agreements, in the form set forth in Exhibits A and A-1 hererto, with the blanks for capital
costs, negotiated Reservation Rate and the formula for the adjustment to the negotiated Reservation
Rate filled in a manner consistent with such capital cost estimate and negotiated Reservation Rate.
Pipeline and Customer shall promptly execute such negotiated rate agreements; provided, however,
Customer shall not be obligated to execute the negotiated rate agreements, if the negotiated
Reservation Rates set forth therein are higher than the range of negotiated Reservation Rates
provided in clause (2) of this Paragraph 4(B) and such higher
negotiated Reservation Rates cause the value of the commercial transaction with respect to the
natural gas to be transported under the Service Agreements to be uneconomic to Customer, as
determined by Customer in its good faith reasonable discretion.

 

	 	 	 
	*	 	This confidential portion has been omitted and filed
separately with the Securities and Exchange Commission.

 

-5-

 

(4) In the event that Customer has elected not to execute the negotiated rate agreements in
accordance with the proviso in the last sentence of clause (3) of this Paragraph 4(B), Pipeline and
Customer shall promptly meet and work in a good faith attempt to agree upon a negotiated
Reservation Rate that is commercially acceptable to both Parties. If after a reasonable time, the
Parties are unable to agree upon a mutually acceptable negotiated Reservation Rate, either Party
shall have the right to terminate this Precedent Agreement and the Service Agreements by providing
the other Party with thirty (30) days prior written notice of its intent to terminate such
agreements. If this Precedent Agreement and the Service Agreements are terminated in accordance
with this Paragraph 4(B), Customer shall, at the option and election of Pipeline, reimburse
Pipeline for Customer’s proportionate share (as prorated based on total Project MDQs of 190,000
dths/d) of Pipeline’s Pre-service Costs incurred to the date of such termination.

5. Upon satisfaction or waiver of all the conditions precedent set forth in Paragraph 8 of
this Precedent Agreement, Pipeline shall notify Customer of such fact, and that service under the
Service Agreements will commence on a date certain, which date will be the later of: (i) November
1, 2012, or (ii) the date that all of the conditions precedent set forth in Paragraph 8 of this
Precedent Agreement are satisfied or waived (“Service Commencement Date”). On and after the date
on which Pipeline has notified Customer that service under the Service Agreements will commence,
Pipeline shall provide firm transportation service for Customer pursuant to the
terms of the Service Agreements and Customer will pay Pipeline for all applicable charges
required by the Service Agreements.

 

-6-

 

6. Pipeline will undertake the design of the Project facilities and any other preparatory
actions necessary for Pipeline to complete and file its certificate application(s) related to the
Project with the Commission. Prior to satisfaction of the conditions precedent set forth in
Paragraph 8 of this Precedent Agreement (with the exception of 8(A)(v)), Pipeline shall have the
right, but not the obligation, to proceed with the necessary design of facilities, acquisition of
materials, supplies, properties, rights-of-way and any other necessary preparations to implement
the firm transportation service under the Service Agreement as contemplated in this Precedent
Agreement.

7. Upon satisfaction of the conditions precedent set forth in Paragraphs 8(A), except for
8(A)(v), and 8(B)(i) of this Precedent Agreement, or waiver of the same by Pipeline or Customer, as
applicable, Pipeline shall proceed (subject to the continuing commitments of all customers
executing precedent agreements and service agreements for service utilizing the firm transportation
capacity to be made available by the Project) with due diligence to construct the authorized
Project facilities and to implement the firm transportation service contemplated in this Precedent
Agreement on November 1, 2012. Notwithstanding Pipeline’s due diligence, if Pipeline is unable to
commence the firm transportation service for Customer as contemplated herein on November 1, 2012,
Pipeline will continue to proceed with due diligence to complete arrangements for such firm
transportation service, and commence the firm transportation service for Customer at the earliest
practicable date thereafter. Pipeline will neither be liable nor will this Precedent Agreement or
the Service Agreements be subject to cancellation if Pipeline is unable
to complete the construction of such authorized Project facilities and commence the firm
transportation service contemplated herein by November 1, 2012.

 

-7-

 

8. Commencement of service under the Service Agreements and Pipeline’s and Customer’s rights
and obligations under the Service Agreements are expressly made subject to satisfaction of the
following conditions precedent:

(A) Pipeline’s (only Pipeline shall have the right to waive the conditions precedent set forth
in this Paragraph 8(A)):

	 	(i)	 	receipt and acceptance by March 1, 2012, of all necessary certificates
and authorizations from the Commission to construct, own, operate and maintain the
Project facilities, all as described in Pipeline’s certificate application as it
may be amended from time to time, necessary to provide the firm transportation
service contemplated herein and in the Service Agreements;

	 	(ii)	 	receipt of approval, within thirty (30) days after Pipeline’s
acceptance of the certificates and authorizations specified in Paragraph 8(A)(i),
from its Board of Directors, or similar governing body, to expend the capital
necessary to construct the Project facilities;

	 	(iii)	 	receipt of all necessary governmental authorizations, approvals, and
permits required to construct the Project facilities necessary to provide the firm
transportation service contemplated herein and in the Service Agreements other than
those specified in Paragraph 8(A)(i);

 

-8-

 

	 	(iv)	 	procurement of all necessary rights-of-way, easements or permits in
form and substance acceptable to Pipeline;

	 	(v)	 	completion of construction of the necessary Project facilities, and all
other facilities required to render firm transportation service for Customer
pursuant to the Service Agreements and Pipeline being ready and able to place such
facilities into gas service; provided however, satisfaction of this condition
precedent is not conditioned upon completion of the Interconnection Facilities, as
defined below;

	 	(vi)	 	the receipt by Eastern Shore Natural Gas Company (“Eastern Shore”) by
December 1, 2010 to be in service by 2011, of all necessary certificates, and
authorizations from the Commission to construct and operate the interconnection
facilities, all as described in Eastern Shore’s certificate application as it may
be amended from time to time, necessary to interconnect the pipeline systems of
Pipeline and Eastern Shore in or near Honeybrook, Pennsylvania (“the
Interconnection Facilities”); and

	 	(vii)	 	Eastern Shore, by March 1, 2011, has commenced construction of the Interconnection
Facilities.

 

-9-

 

(B) Customer’s (only Customer shall have the right to waive the conditions precedent set forth
in this Paragraph 8(B)):

	 	(i)	 	receipt and acceptance by April 1, 2010, of all Customer’s
Authorizations.

	 	(ii)	 	the receipt by Eastern Shore Natural Gas Company (“Eastern Shore”) by
December 1, 2010 to be in service by 2011 of all necessary certificates and
authorizations from the Commission to construct and operate the Interconnection
Facilities.; and

	 	(v)	 	Eastern Shore, by March 1, 2011, has commenced construction of the
Interconnection Facilities.

(C) Unless otherwise provided for herein, the Commission authorization(s) and approval(s)
contemplated in Paragraph 1 of this Precedent Agreement must be issued in form and substance
reasonably satisfactory to both Parties hereto. For purposes of this Precedent Agreement, such
Commission authorization(s) and approval(s) shall be deemed satisfactory if issued or granted in
form and substance as requested, or if issued in a manner acceptable to Pipeline and such
authorization(s) and approval(s), as issued, will not have a material adverse effect on Customer.
Customer shall notify Pipeline in writing not later than fifteen (15) days after the issuance of
the Commission certificate(s), authorization(s) and approval(s), including any order issued as a
preliminary determination on non-environmental issues, contemplated in Paragraph 1 of this
Precedent Agreement if such certificate(s), authorization(s) and approval(s) are not satisfactory
to Customer. All other governmental authorizations, approvals, permits and/or exemptions that
Pipeline must obtain must be issued in form and substance reasonably acceptable to Pipeline. All
governmental approvals that Pipeline is required by this Precedent Agreement to obtain must be duly
granted by the Commission or other governmental agency or authority having jurisdiction, and must
be final and no longer subject to rehearing or appeal;
provided, however, Pipeline may waive the requirement that such authorization(s) and
approval(s) be final and no longer subject to rehearing or appeal.

 

-10-

 

9. If Customer (i) terminates this Precedent Agreement for any reason; (ii) otherwise fails to
perform, in whole or in part, its material duties and obligations hereunder; or (iii) during the
term of this Precedent Agreement, interferes with or obstructs the receipt by Pipeline of the
authorizations and/or exemptions contemplated by and consistent with this Precedent Agreement as
requested by Pipeline and, as a result of such actions by Customer, Pipeline does not receive the
authorizations and/or exemptions in form and substance as requested by Pipeline or does not receive
such authorizations and/or exemptions at all, then in any of the above events, Customer shall, at
the option and election of Pipeline, reimburse Pipeline within 30 days of Pipeline’s invoice for
Customer’s proportionate share (as prorated based on initial MDQs among all customers taking
actions described in this Paragraph 9) of Pre-service Costs as hereinafter defined. The term,
“Pre-service Costs” for all purposes in this Precedent Agreement shall include, but will not be
limited to, those expenditures and/or costs incurred, accrued, allocated to, or for which Pipeline
is contractually obligated to pay associated with engineering, construction, materials and
equipment, environmental, regulatory, and/or legal activities, allowance for funds used during
construction, negative salvage, internal overhead and administration and any other costs incurred
in furtherance of Pipeline’s efforts to develop and construct the Project and to satisfy its
obligations under this Precedent Agreement and all other precedent agreements for service on the
Project facilities including, without limitation, the federal and state income tax liability, if
any, to Pipeline associated with its receipt of such reimbursement amount. Pipeline shall use
commercially reasonable efforts to mitigate Pre-service Costs. If Customer terminates this
Precedent Agreement and the Service Agreements in accordance with the provisions of
Paragraph 4(B)(4), and if Customer, at the option and election of Pipeline, is assessed
Customer’s proportionate share (as prorated based on total Project MDQs of 190,000dths/d) of
Pipeline’s Pre-service Costs incurred to the date of such termination, Customer shall not be
assessed any additional Pre-service Costs pursuant to Paragraph 9.

 

-11-

 

NOTWITHSTANDING THE FOREGOING, THE PARTIES HERETO AGREE THAT NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY FOR ANY PUNITIVE, SPECIAL, EXEMPLARY, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR BUSINESS INTERRUPTIONS) ARISING OUT OF OR IN ANY
MANNER RELATED TO THIS PRECEDENT AGREEMENT, AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF OR
THE SOLE, CONCURRENT OR CONTRIBUTORY NEGLIGENCE (WHETHER ACTIVE OR PASSIVE), STRICT LIABILITY
(INCLUDING, WITHOUT LIMITATION, STRICT STATUTORY LIABILITY AND STRICT LIABILITY IN TORT) OR OTHER
FAULT OF EITHER PARTY. THE IMMEDIATELY PRECEDING SENTENCE SPECIFICALLY PROTECTS EACH PARTY AGAINST
SUCH PUNITIVE, EXEMPLARY, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES EVEN IF WITH RESPECT TO THE
NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR RESPONSIBILITY
OF SUCH PARTY; AND ALL RIGHTS TO RECOVER SUCH DAMAGES OR PROFITS ARE HEREBY WAIVED AND RELEASED.

 

-12-

 

10. (A) If the conditions precedent set forth in Paragraph 8 of this Precedent Agreement,
excluding the condition precedent set forth in Paragraph 8(A)(v) have not been fully
satisfied, or waived by Pipeline or Customer, as applicable, by the earlier of the applicable
dates specified therein or within one (1) year after the date specified in Paragraph 5(i), and this
Precedent Agreement has not been terminated pursuant to Paragraphs 11 or 12 hereof, then either
Pipeline or Customer may thereafter terminate this Precedent Agreement (and the Service Agreements,
if executed) by giving ninety (90) days prior written notice of its intention to terminate to the
non-terminating Party; provided, however, if the conditions precedent are satisfied, or waived by
Pipeline or Customer, as applicable, within such ninety (90) day notice period, then termination of
such agreements will not become effective.

(B) Notwithstanding any other provision of this Precedent Agreement, if Pipeline has
not completed construction of the Project facilities and made such facilities available for
service by November 1, 2013, and the conditions precedent set forth in Paragraph 8(B) hereof
have been satisfied, Customer and Pipeline shall cause their senior management to meet
promptly to resolve any timing issues and if after ninety (90) days no resolution has been
reached, then Customer shall have the right to terminate this Precedent Agreement (and the
Service Agreements and the Negotiated Rate Agreements) by providing ninety (90) days prior
written notice of its intention to terminate this Precedent Agreement to Pipeline; provided,
however, if Pipeline completes construction of the Project facilities and makes such
facilities available for service during such ninety (90)-day period, then termination of
this Precedent Agreement (and the Service Agreements and the Negotiated Rate Agreements)
will not be effective; further, in the event the delay in meeting the November 1, 2013
in-service date is due to issues arising out of or directly related to any horizontal
directional drilling activities or legal appeals or other legal or regulatory activities
that have resulted in a delay in the issuance of any
necessary permit or authorization, then in such event the November 1, 2013 date shall
be extended to November 1, 2014. If this Precedent Agreement terminates in accordance with
this Paragraph 10(B), then, notwithstanding any other provision of this Precedent Agreement,
Customer shall have no obligation to pay Pipeline Pre-service Costs under Paragraph 9
hereof.

 

-13-

 

11. In addition to the provisions of Paragraph 10 hereof, Pipeline may terminate this
Precedent Agreement at any time upon fifteen (15) days prior written notice to Customer, if: (i)
Pipeline, in its sole discretion, determines for any reason that the Project contemplated herein is
no longer economically viable, or (ii) substantially all of the other precedent agreements,
service agreements or other contractual arrangements for the firm service to be made available by
the Project are terminated, other than by reason of commencement of service.

12. If this Precedent Agreement is not terminated pursuant to Paragraphs 10 or 11 hereof, it
will terminate by its express terms on the Service Commencement Date, and thereafter Pipeline’s and
Customer’s rights and obligations related to the transportation service contemplated herein shall
be determined pursuant to the terms and conditions of such Service Agreements and Pipeline’s FERC
Gas Tariff, as effective from time to time. Notwithstanding any termination of this Precedent
Agreement pursuant to Paragraphs 10, 11 or 12 hereof, to the extent that a provision of this
Precedent Agreement contemplates that one or both Parties may have further rights and/or
obligations hereunder following such termination, the provision shall survive such termination as
necessary to give full effect to such rights and/or obligations.

 

-14-

 

13. Customer shall satisfy the creditworthiness requirements as set forth in this Paragraph 13
within 7 days from the effective date of this Precedent Agreement, or from the date
of any subsequent request from Pipeline. Customer shall at all times during the effectiveness
of this Precedent Agreement and the Service Agreement meet the creditworthiness requirements set
forth in the table below:

Credit Requirements

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Creditworthiness
Conditions	 	Category A1	 	Category B2	 	Category C3	 	Category D4
	Customer or Guarantor’s S&P or Moody’s or Fitch Rating
	 	BBB/Baa2/BBB or higher	 	BBB-/Baa3/BBB-	 	BB+ to BB-/Ba1 to Ba3 /BB+ to BB-	 	B+/B1/B+ or lower
	Other Conditions
	 	See “Rating” definition in 13(A)	 	 	 	 
	Letter of Credit Requirement (as fixed amount
or months of reservation
charges under the Service Agreement)

	On or about the effective date of the Precedent Agreement
	 	0	 	$100,000	 	$100,000	 	$100,000
	When pro-rata share of Pre-service Costs exceeds $100,000
	 	0	 	Pro-rata share of Pre-service Costs, save
that such amount will not be less than $100,000 or greater than the amount required below
	From and after the Service Commencement Date
	 	0	 	lesser of 3 months or remaining term of Service Agreement	 	lesser of 24 months or remaining term of Service Agreement	 	lesser of 30 months or remaining term of Service Agreement

	 	 	 
	1	 	A Category A customer meeting all creditworthiness conditions is
considered Creditworthy (“Creditworthy”). No additional credit support is
required.

	 
	2	 	Category B will apply to a customer that meets the creditworthiness
requirements of Category B but not Category A, A Category B customer that
does not have a sufficient open credit line shall (a) post a “Guaranty”, as
hereinafter defined, from a “Guarantor”, as hereinafter defined, meeting
Category A creditworthiness conditions, or (b) provide a “Letter of Credit” ,
as hereinafter defined, in the amount required for Category B.

 

-15-

 

	 	 	 
	3	 	A customer in Category C shall (a) post a Guaranty from a Guarantor
meeting Category A creditworthiness conditions, (b) provide a Guaranty from a
Guarantor meeting Category B creditworthiness conditions, and a Letter of
Credit in the amount required for Category B, or (c) provide a Letter of Credit
in the amount required for Category C.

	 
	4	 	A customer in Category D shall (a) post a Guaranty from a Guarantor
meeting Category A creditworthiness conditions, (b) provide a Guaranty from a
Guarantor meeting Category B creditworthiness conditions, and a Letter of
Credit in the amount required for Category B, (c) provide a Guaranty from a
Guarantor meeting Category C creditworthiness conditions, and a Letter of
Credit in the amount required for Category C, or (d) provide a Letter of Credit
in the amount required for Category D.

In the event Customer does not have the external credit rating listed in the table above, Customer
may qualify as the equivalent of a Category B if it meets and maintains throughout the term of the
service agreement all three of the following conditions:

	 	1.)	 	Tangible Net Worth of $100 million or greater.  

	 	2.)	 	Fixed Charge Coverage Ratio of 150% or greater.   If any future indebtedness covenants
have or reasonably imply a Fixed Charge Coverage Ratio limit greater than 120%, this 150%
 limit will adjust upwards so as to maintain at least a 30% gap. 

	 	3.)	 	Funded Indebtedness of the Customer (including Current and Funded Indebtedness of
Customer’s subsidiaries) as a percent of Total Capitalization of no more than 60%.  If any
future indebtedness covenants have or reasonably imply a Current and Funded Indebtedness as
a percent of Total Capitalization limit of less than 65%, this 60% limit will adjust
downwards so as to maintain at least a 5% gap.

Customer meeting two out of the three conditions above qualifies as a Category C equivalent.
Customer meeting less than two out of the three conditions above qualifies as a Category D
equivalent.

Customer qualifying for credit under this equivalent rating option shall provide financial
information and reports to Pipeline including, but not limited to, quarterly covenant compliance
reports, bond, note and credit facility agreements, and detailed financial statements.

(A) For the purposes of this Paragraph 13:

“Rating” – shall mean long-term senior unsecured debt rating from Moody’s Investors Service,
Inc. (“Moody’s”) or Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies,
Inc. (“S&P), or Fitch Ratings (“Fitch”). If the entity is rated by two rating agencies,
the lower rating shall apply to the minimum requirement of the applicable Category A, B or C.
If the entity is rated by three rating agencies, at least two ratings shall meet the minimum
requirement of the applicable Category A, B or C.

 

-16-

 

“Guaranty” – shall mean that Customer’s parent company or a third party meeting the
creditworthiness conditions of Category A, B, or C (“Guarantor”): (i) guarantees all payment
obligations of Customer under this Precedent Agreement and the Service Agreements, (ii) remains in
effect until all payment obligations under this Precedent Agreement and Service Agreements have
been satisfied in full, and (iii) shall be in a form acceptable to Pipeline, which for purposes
herein shall mean in form and content acceptable to Pipeline in its reasonable discretion. The
Guarantor must meet the creditworthiness conditions of Category A, B or C for so long as it
guarantees Customer’s payment obligations. Pipeline may require Customer to provide, or cause to
be provided, a replacement Guaranty from a replacement Guarantor if the original Guarantor is, at
any time, no longer meeting the creditworthiness conditions of Category A, B or C.

“Letter of Credit” – shall mean a standby irrevocable letter of credit from a “Qualified
Financial Institution” , as defined below, which shall be: (i) issued for an annual period (ii)
automatically renewed annually, until all payment obligations under this Precedent Agreement and
the Service Agreements have been satisfied in full, (iii) in a form acceptable to Pipeline, which
for purposes herein shall mean in form and content substantially similar to Exhibit B hereto, and
(iv) be provided at no cost to Pipeline.

“Qualified Financial Institution” – shall mean a major U.S. commercial bank, or the U.S.
branch office of a foreign bank, which is not the Customer or Customer’s Guarantor (or a subsidiary
or affiliate of the Customer or Customer’s Guarantor) and which has assets of at least
$10 billion dollars and a credit rating of at least “A” by S&P, or “A3” by Moody’s. Pipeline may
require Customer, at no cost to Pipeline, to substitute a Qualified Financial Institution if the
Letter of Credit provided is, at any time, from a financial institution which is no longer a
Qualified Financial Institution.

““Tangible Net Worth” – shall mean Stockholder Equity less Intangibles, Pension, Other
Deferred Charges, Other Regulatory Assets and Non-Current Receivables.

“Fixed Charge Coverage ratio” – shall mean Interest Expense and Lease Rental Expense divided
by Net Income before Interest Expense, Taxes, Lease Rental Expense, and any Net Gain or Loss on
Sale of Investment or Fixed Assets.

“Funded Indebtedness” – shall mean Long Term Debt, current portion of Long Term Debt, Long
Term Lease Obligation and current portion of Long Term Lease Obligation.

“Total Capitalization” – shall mean Long Term Debt, current portion of Long Term Debt, Long
Term Lease Obligation, current portion of Long Term Lease Obligation, plus Stockholder Equity.

For purposes of this paragraph 13, “Customer’s pro-rata share of Pre-service Costs” will be
determined by an estimated cost and commitments schedule.

(B) The requirements set forth in this Paragraph 13 shall be in addition to and not in lieu
of any requirements under Pipeline’s FERC Gas Tariff, which are applicable to Customer with respect
to service on and after the Service Commencement Date under the Service Agreements.

(C) If at any time and from time to time during the effectiveness of this Precedent Agreement
and/or the Service Agreements. Pipeline determines that Customer is not satisfying the requirements
in this Paragraph 13, Pipeline shall notify Customer in writing, and Customer
shall satisfy, or cause to be satisfied, such requirement(s) as soon as reasonably
practicable, but in no event later than the close of the seventh (7th) business day
following receipt of such notice from Pipeline.

 

-17-

 

(D) The failure of Customer to timely satisfy or maintain the requirements set forth in this
Paragraph 13 shall in no way relieve Customer of its other obligations under this Precedent
Agreement and/or the Service Agreements, nor shall it affect Pipeline’s right to seek damages or
performance under this Precedent Agreement and/or the Service Agreements. Further, if Customer
fails to timely satisfy or maintain the requirements of this Paragraph 13, Pipeline shall have the
right, but not the obligation, to suspend performance under this Precedent Agreement, or to
terminate this Precedent Agreement, upon ten (10) days prior written notice by Pipeline.

(E) This Paragraph 13 shall survive the termination of this Precedent Agreement and shall
remain in effect until all payment obligations under this Precedent Agreement and the Service
Agreements have been satisfied in full.

(F) In the event Customer assigns this Precedent Agreement and/or the Service Agreements in
accordance with the applicable assignment provisions(s), or in the event Customer permanently
releases all or a portion of Customer’s capacity under the Service Agreements in accordance with
Section 3.14 of the General Terms & Conditions of Pipeline’s FERC Gas Tariff, the assignee and/or
the permanent replacement customer, as applicable, shall be required to satisfy the requirements of
this Paragraph 13 until all payment obligations under this Precedent Agreement and the Service
Agreements have been satisfied in full.

14. This Precedent Agreement may not be modified or amended unless the Parties execute written
agreements to that effect.

 

-18-

 

15. Any company which succeeds by purchase, merger, or consolidation of title to the
properties, substantially as an entirety, of Pipeline or Customer, will be entitled to the rights
and will be subject to the obligations of its predecessor in title under this Precedent Agreement.
Otherwise, neither Customer nor Pipeline may assign any of its rights or obligations under this
Precedent Agreement without the prior written consent of the other Party hereto. Further in the
event of any assignment of this Precedent Agreement or the Service Agreements by Customer or a
permanent release of all or any portion of Customer’s capacity under the Service Agreements,
Customer’s assignee or permanent replacement shipper, as the case may be, shall be required to
comply with the provisions of Paragraph 13 for the remaining term of this Precedent Agreement
and/or the Service Agreements.

16. Except as expressly provided for in this Precedent Agreement, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person not a Party hereto
any rights, remedies or obligations under or by reason of this Precedent Agreement.

17. Each and every provision of this Precedent Agreement shall be considered as prepared
through the joint efforts of the Parties and shall not be construed against either Party as a
result of the preparation or drafting thereof. It is expressly agreed that no consideration shall
be given or presumption made on the basis of who drafted this Precedent Agreement or any specific
provision hereof.

18. The recitals and representations appearing first above are hereby incorporated in and made
a part of this Precedent Agreement.

19. This Precedent Agreement shall be governed by, construed, interpreted, and performed in
accordance with the laws of the State of Texas, without recourse to any laws governing the conflict
of laws.

 

-19-

 

20. Except as herein otherwise provided, any notice, request, demand, statement, or bill
provided for in this Precedent Agreement, or any notice which either Party desires to give to the
other, must be in writing and will be considered duly delivered when mailed by registered or
certified mail, or overnight courier, to the other Party’s post office address set forth below:

	 	 	 
	Pipeline:

	 	Texas Eastern Transmission, LP

5400 Westheimer Court

Houston, Texas 77056

Attn: Vice President, Northeast Marketing and Business Development

Phone: (713) 627-5400

Fax: (713) 989-3190
	 
	 	 
	Customer:

	 	Chesapeake Utilities Corporation

350 South Queen Street

Dover, Delaware 19904

Attn: Jennifer Clausius

Phone: 302-736-7818

Fax: 302-734-6011

or at such other address as either Party designates by written notice. Routine communications,
including monthly statements, will be considered duly delivered when mailed by registered mail,
certified mail, ordinary mail, or overnight courier.

21. When used in this Precedent Agreement, and unless otherwise defined herein, capitalized
terms shall have the meanings set forth in Pipeline’s FERC Gas Tariff on file with the Commission,
as amended from time to time.

 

-20-

 

22. Customer represents and warrants that neither the execution, delivery and performance of
this Precedent Agreement, the Service Agreements, the Negotiated Rate Agreements by Customer nor
the consummation of the transactions contemplated by this Precedent Agreement, the Service
Agreements or the Negotiated Rate Agreements , (A) conflicts
or will conflict with or constitutes or will constitute a violation of the partnership agreement,
limited liability company agreement, certificate of formation or conversion, certificate or
articles of incorporation, bylaws or other constituent document (collectively, the “Organizational
Documents”) of Customer, (B) conflicts or will conflict with or constitutes or will constitute a
breach or violation of, or a default (or an event that, with notice or lapse of time or both, would
constitute such a default) under any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which any Customer any of its subsidiaries (collectively, the
“Customer Entities”) is a party or by which any of them or any of their respective properties may
be bound, or (C) violates or will violate any statute, law or regulation or any order, judgment,
decree or injunction of any court or governmental agency or body directed to any of the Customer
Entities or any of their properties in a proceeding to which any of them or their property is a
party.

IN WITNESS WHEREOF, the Parties hereto have caused this Precedent Agreement to be duly
executed by their duly authorized officers as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	Texas Eastern Transmission, LP

	 	Chesapeake Utilities Corporation
	 	 
	by its General Partner

	 	 	 	 	 	 
	Spectra Energy Transmission Services, LLC

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	Title:

	 	 	 	Title:	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 

 

-21-

 

	 	 	 	 	 
	Texas Estern Transmission, LP
5400 Westheimer Court
Houston, TX 77056-5310

713.627.5400 main

	 	Mailing Address:
P.O. Box 1642
Houston, TX 77251-1642
	 	

EXHIBIT A

April 7, 2010

Chesapeake Utilities Corporation

350 South Queen Street

Dover, DE 19904

Attn: Jennifer Clausius

	Re:	 	Rate Schedule FT-1 Service Agreement between Texas Eastern and Customer dated on or about the
date hereof — Negotiated Rate Agreement

Dear Jennifer:

By this transmittal letter, Texas Eastern Transmission, LP (“Texas Eastern” or “Pipeline”) and
Chesapeake Utilities Corporation (“Customer”) are implementing a negotiated rate applicable to
service under the above-referenced Rate Schedule FT-1 Service Agreement.

Texas Eastern and Customer hereby agree that the provisions on the attached pro forma tariff
sheet(s) reflect the terms of their agreement, including the effectiveness of the negotiated rate.
After execution of this letter by both Texas Eastern and Customer, Texas Eastern shall file the
tariff sheet(s) with the Commission containing rate-related provisions identical to those
provisions on the attached pro forma tariff sheet(s) in accordance with Section 29.7 of the General
Terms and Conditions of the Texas Eastern tariff.

If the foregoing accurately sets forth your understanding of the matter covered herein, please
so indicate by having a duly authorized representative sign in the space provided below and
returning an original signed copy to the undersigned.

Sincerely,

Texas Eastern Transmission, LP

By its General Partner

Spectra Energy Transmission Services, LLC

 

ACCEPTED AND AGREED TO

THIS
 _____ 
DAY OF APRIL, 2010

CHESAPEAKE UTILITIES CORPORATION

	 	 	 
	 

Name:

	 	 
	Title:
	 	 

www.spectraenergy.com

 

 

 

			
	TEXAS EASTERN TRANSMISSION, LP	 	 
	FERC Gas Tariff
	 	Pro Forma Sheet No.
 _____ 

	Seventh Revised Volume No. 1	 	 

STATEMENT OF NEGOTIATED RATES 1/ 2/ 3/

Customer Name: Chesapeake Utilities Corporation – Delaware Division

Service Agreement: [tbd]

Term of Negotiated Rate: The term of this negotiated rate commences on the Service
Commencement Date (as such term is defined in the Service Agreement) and continues for the
“Primary Term,” (as such term is defined in the Service Agreement).

Rate Schedule: FT-1

MDQ: 30,000 Dth/d

Reservation Rate: During the Primary Term, Customer shall pay a “Negotiated Reservation
Rate” equal to a fixed monthly Reservation Charge of [$ ]. Such Negotiated Reservation Rate
shall be stated per Dth, per month of Customer’s MDQ under the Service Agreement and will be
adjusted as set forth in footnote 3 below. Customer shall also be responsible for any ASA
(defined below) reservation surcharge applicable to Customer’s Service Agreement under Rate
Schedule FT-1.

Usage Rate: During the Primary Term, shall be as follows:

(a) with respect to service from any Primary Receipt Point to any Primary Delivery Point, as such
points are described below, and with respect to service provided from a Receipt Point to a
Delivery Point located entirely within the “Transportation Path” (as defined in Pipeline’s FERC
Gas Tariff), the Usage Charge shall be $0.00/Dth delivered, and Customer shall also be responsible
for and pay the Applicable Shrinkage Adjustment (“ASA”) charge, the applicable ACA charge, ASA
usage surcharge, EPC adjustment and all other charges and surcharges applicable to Customer’s
Service Agreement under Rate Schedule FT-1 (provided, with respect to the applicable ASA charge,
the charge is currently estimated to be 1.98%, but it will be the applicable incremental ASA
charge in effect from time to time under Pipeline’s FERC Gas Tariff for the Project and in
particular Customer’s Service Agreement);and while Customer may not nominate more than Customer’s
MDQ, in the event actual quantities exceed the MDQ then with respect to service for such
quantities above Customer’s MDQ, customer shall pay Pipeline, for all gas quantities transported,
a usage rate, which shall be a negotiated rate equal to the maximum applicable Usage-2 Charge
under Texas Eastern’s Rate Schedule FT-1 for this Project multiplied by the quantity of gas, in
Dekatherms, delivered in the applicable day, and Customer shall also pay the applicable ASA
charge, ACA charge, ASA usage surcharge, EPC adjustment and all other charges and surcharges
applicable to the Service Agreement under Rate Schedule FT-1.

(b) with respect to service provided from a Receipt Point to a Delivery Point where one or both
such points are located outside of the Transportation Path, the usage rate shall be the maximum
applicable system Usage Charge under Texas Eastern’s Rate Schedule FT-1 multiplied by the quantity
of gas, in Dekatherms, delivered in the applicable day, and Customer shall also pay the applicable
system ASA charge, ACA charge, ASA usage surcharge, EPC adjustment and all other system charges
and surcharges applicable to the Service Agreement under Rate Schedule FT-1.

Primary Receipt Points: Interconnection of Pipeline and Kinder Morgan REX Clarington,
Monroe County, OH (Meter #73580)

Primary Delivery Points: at a proposed new interconnect to be established with Eastern
Shore Natural Gas at Honeybrook, PA (Meter # ).

Recourse Rate(s): The Recourse Rate(s) applicable to this service is the applicable
maximum rate(s) stated on Texas Eastern’s Tariff Sheets at the applicable time.

	 	 	 
	Issued by: D. A. McCallum, Director, Rates and Tariffs
	 	 
	Issued on:

	 	Effective on:

 

 

 

			
	TEXAS EASTERN TRANSMISSION, LP	 	 
	FERC Gas Tariff
	 	Pro Forma Sheet No.
 _____ 

	Seventh Revised Volume No. 1	 	 

1/ This agreement conforms to the applicable form of service agreement.

2/ This negotiated rate shall apply only to service under Contract No. [tbd] and using the points
designated herein, as further described herein; provided, if Customer amends the Service Agreement
to change one or more of its primary points listed above pursuant to the provisions of Pipeline’s
FERC Gas Tariff, Pipeline shall have the option to terminate this negotiated rate by providing
Customer with written notice of Pipeline’s intent to terminate the negotiated rate and, in such
case, Pipeline’s maximum recourse rates referenced above shall apply for the remaining term of the
Service Agreement, unless and until otherwise agreed in writing between Customer and Pipeline;
provided, further that following the term of this negotiated rate as such term is described above,
Pipeline’s maximum recourse rates referenced above shall apply for any remaining term under the
Service Agreement.

3/ Pipeline and Customer acknowledge that the Capital Costs attributable to the Project facilities
which underlie the monthly Reservation Charge described in the Reservation Rate section above are
reasonably estimated to be $[tbd dollars]. Such estimate of Capital Costs is expected to be
substantially the same as the estimated Project capital costs reflected in the Exhibit K included
with the certificate application filed by Pipeline with the Federal Energy Regulatory Commission
(“Commission”) for the Project. The monthly Reservation Charge shall be adjusted, pursuant to the
formula set forth in this footnote 3, solely to reflect any differences between the estimated
$[tbd] and the amount of Capital Costs attributable to the Project facilities reflected by
Pipeline in an amended Exhibit K that is filed by Pipeline with the Commission in the certificate
proceeding regarding the Project. Pipeline shall prepare such amended Exhibit K in accordance
with Section 157.14(a)(13) of Title 18 of the Code of Federal Regulations and such amended Exhibit
K shall reflect Pipeline’s reasonable good faith estimate at the time of the total Capital Costs
attributable to the Project, and Pipeline shall file such amended Exhibit K at least thirty (30)
days, but no more than sixty (60) days, prior to the in-service date of the Project, as such
in-service date is estimated to occur by Pipeline at the time (“Amended Exhibit K”).

Such monthly Reservation Charge shall be adjusted by an amount per Dth of MDQ equal to $0.3042
(equivalent to $0.01 per Dth per Day) for each $[tbd] million increment of Capital Costs as
reflected in the Amended Exhibit K above or below the estimated $[tbd] amount (to be clear, the
Reservation Charge adjustment will occur to the fourth decimal point and thus the rate may be
adjusted in increments as small as $0.0001 per Dth per Day); provided, if the Capital Costs
reflected in the Amended Exhibit K exceed 15% above the estimated Capital Costs of $[tbd], then
the amount used for the Reservation Charge adjustment shall be deemed to be 1.15 multiplied by the
estimated Capital Costs, and if the Capital Costs reflected in the Cost Report are more than 10%
below the estimated Capital Costs of $[tbd], then the amount used for the Reservation Charge
adjustment shall be deemed to be .90 multiplied by the estimated Capital Costs.

For purposes of this Negotiated Rate Agreement, (1) the term “Project” shall mean the Project as
generally described in the recitals to the Precedent Agreement between the Parties regarding
construction of facilities necessary to provide the service contemplated in the Service Agreement,
and as more specifically described in the certificate application, as amended, related to such
facilities on file with the Commission, and(2) the term “Capital Costs” means the total capital
costs incurred by Pipeline for the development and construction of the Project, including, without
limitation, the allowance for funds used during construction, as such costs are reflected in the
Amended Exhibit K, including all costs incurred to the date of the Amended Exhibit K and estimated
to be incurred for final completion of the applicable project.

	 	 	 
	Issued by: D. A. McCallum, Director, Rates and Tariffs
	 	 
	Issued on:

	 	Effective on:

 

 

 

			
	TEXAS EASTERN TRANSMISSION, LP	 	 
	FERC Gas Tariff
	 	Pro Forma Sheet No.
 _____ 

	Seventh Revised Volume No. 1	 	 

4/ Texas Eastern and Customer agree that Contract No. [tbd] is a ROFR Agreement and will remain a
ROFR Agreement following the end of the Negotiated Rate Term.

5/ Texas Eastern and Customer agree that in the event any carbon emissions tax or other greenhouse
gas assessment is imposed on Texas Eastern as a surcharge, or other form of rate recovery, during
the term of this Negotiated Rate Agreement, then Customer shall agree to modify the negotiated
rate set forth herein to include Customer’s ratable share of such amounts. Further, if Texas
Eastern is required to incur additional expense to comply with any greenhouse gas laws, rules or
regulations, then Customer shall agree to modify the negotiated rate set forth herein to include
Customer’s ratable share of such additional expense.

	 	 	 
	Issued by: D. A. McCallum, Director, Rates and Tariffs
	 	 
	Issued on:

	 	Effective on:

 

 

 

	 	 	 	 	 
	Texas Estern Transmission, LP
5400 Westheimer Court
Houston, TX 77056-5310

713.627.5400 main

	 	Mailing Address:
P.O. Box 1642
Houston, TX 77251-1642
	 	

EXHIBIT A-1

April 7, 2010

Chesapeake Utilities Corporation

350 South Queen Street

Dover, DE 19904

Attn: Jennifer Clausius

	Re:	 	Rate Schedule FT-1 Service Agreement between Texas Eastern and Customer dated on or about the
date hereof — Negotiated Rate Agreement

Dear Jennifer:

By this transmittal letter, Texas Eastern Transmission, LP (“Texas Eastern” or “Pipeline”) and
Chesapeake Utilities Corporation (“Customer”) are implementing a negotiated rate applicable to
service under the above-referenced Rate Schedule FT-1 Service Agreement.

Texas Eastern and Customer hereby agree that the provisions on the attached pro forma tariff
sheet(s) reflect the terms of their agreement, including the effectiveness of the negotiated rate.
After execution of this letter by both Texas Eastern and Customer, Texas Eastern shall file the
tariff sheet(s) with the Commission containing rate-related provisions identical to those
provisions on the attached pro forma tariff sheet(s) in accordance with Section 29.7 of the General
Terms and Conditions of the Texas Eastern tariff.

If the foregoing accurately sets forth your understanding of the matter covered herein, please
so indicate by having a duly authorized representative sign in the space provided below and
returning an original signed copy to the undersigned.

Sincerely,

Texas Eastern Transmission, LP

By its General Partner

Spectra Energy Transmission Services, LLC

 

ACCEPTED AND AGREED TO

THIS
 _____ 
DAY OF APRIL, 2010

CHESAPEAKE UTILITIES CORPORATION

	 	 	 
	 

Name:

	 	 
	Title:
	 	 

www.spectraenergy.com

 

 

 

			
	TEXAS EASTERN TRANSMISSION, LP	 	 
	FERC Gas Tariff
	 	Pro Forma Sheet No.
 _____ 

	Seventh Revised Volume No. 1	 	 

STATEMENT OF NEGOTIATED RATES 1/ 2/ 3/

Customer Name: Chesapeake Utilities Corporation — Maryland Division

Service Agreement: [tbd]

Term of Negotiated Rate: The term of this negotiated rate commences on the Service
Commencement Date (as such term is defined in the Service Agreement) and continues for the
“Primary Term,” (as such term is defined in the Service Agreement).

Rate Schedule: FT-1

MDQ: 10,000 Dth/d

Reservation Rate: During the Primary Term, Customer shall pay a “Negotiated Reservation
Rate” equal to a fixed monthly Reservation Charge of [$ ]. Such Negotiated Reservation Rate
shall be stated per Dth, per month of Customer’s MDQ under the Service Agreement and will be
adjusted as set forth in footnote 3 below. Customer shall also be responsible for any ASA
(defined below) reservation surcharge applicable to Customer’s Service Agreement under Rate
Schedule FT-1.

Usage Rate: During the Primary Term, shall be as follows:

(a) with respect to service from any Primary Receipt Point to any Primary Delivery Point, as such
points are described below, and with respect to service provided from a Receipt Point to a
Delivery Point located entirely within the “Transportation Path” (as defined in Pipeline’s FERC
Gas Tariff), the Usage Charge shall be $0.00/Dth delivered, and Customer shall also be responsible
for and pay the Applicable Shrinkage Adjustment (“ASA”) charge, the applicable ACA charge, ASA
usage surcharge, EPC adjustment and all other charges and surcharges applicable to Customer’s
Service Agreement under Rate Schedule FT-1 (provided, with respect to the applicable ASA charge,
the charge is currently estimated to be 1.98%, but it will be the applicable incremental ASA
charge in effect from time to time under Pipeline’s FERC Gas Tariff for the Project and in
particular Customer’s Service Agreement);and while Customer may not nominate more than Customer’s
MDQ, in the event actual quantities exceed the MDQ then with respect to service for such
quantities above Customer’s MDQ, customer shall pay Pipeline, for all gas quantities transported,
a usage rate, which shall be a negotiated rate equal to the maximum applicable Usage-2 Charge
under Texas Eastern’s Rate Schedule FT-1 for this Project multiplied by the quantity of gas, in
Dekatherms, delivered in the applicable day, and Customer shall also pay the applicable ASA
charge, ACA charge, ASA usage surcharge, EPC adjustment and all other charges and surcharges
applicable to the Service Agreement under Rate Schedule FT-1.

(b) with respect to service provided from a Receipt Point to a Delivery Point where one or both
such points are located outside of the Transportation Path, the usage rate shall be the maximum
applicable system Usage Charge under Texas Eastern’s Rate Schedule FT-1 multiplied by the quantity
of gas, in Dekatherms, delivered in the applicable day, and Customer shall also pay the applicable
system ASA charge, ACA charge, ASA usage surcharge, EPC adjustment and all other system charges
and surcharges applicable to the Service Agreement under Rate Schedule FT-1.

Primary Receipt Points: Interconnection of Pipeline and Kinder Morgan REX Clarington,
Monroe County, OH (Meter #73580)

Primary Delivery Points: at a proposed new interconnect to be established with Eastern
Shore Natural Gas at Honeybrook, PA (Meter # ).

Recourse Rate(s): The Recourse Rate(s) applicable to this service is the applicable
maximum rate(s) stated on Texas Eastern’s Tariff Sheets at the applicable time.

	 	 	 
	Issued by: D. A. McCallum, Director, Rates and Tariffs
	 	 
	Issued on:

	 	Effective on:

 

 

 

			
	TEXAS EASTERN TRANSMISSION, LP	 	 
	FERC Gas Tariff
	 	Pro Forma Sheet No.
 _____ 

	Seventh Revised Volume No. 1	 	 

1/ This agreement conforms to the applicable form of service agreement.

2/ This negotiated rate shall apply only to service under Contract No. [tbd] and using the points
designated herein, as further described herein; provided, if Customer amends the Service Agreement
to change one or more of its primary points listed above pursuant to the provisions of Pipeline’s
FERC Gas Tariff, Pipeline shall have the option to terminate this negotiated rate by providing
Customer with written notice of Pipeline’s intent to terminate the negotiated rate and, in such
case, Pipeline’s maximum recourse rates referenced above shall apply for the remaining term of the
Service Agreement, unless and until otherwise agreed in writing between Customer and Pipeline;
provided, further that following the term of this negotiated rate as such term is described above,
Pipeline’s maximum recourse rates referenced above shall apply for any remaining term under the
Service Agreement.

3/ Pipeline and Customer acknowledge that the Capital Costs attributable to the Project facilities
which underlie the monthly Reservation Charge described in the Reservation Rate section above are
reasonably estimated to be $[tbd dollars]. Such estimate of Capital Costs is expected to be
substantially the same as the estimated Project capital costs reflected in the Exhibit K included
with the certificate application filed by Pipeline with the Federal Energy Regulatory Commission
(“Commission”) for the Project. The monthly Reservation Charge shall be adjusted, pursuant to the
formula set forth in this footnote 3, solely to reflect any differences between the estimated
$[tbd] and the amount of Capital Costs attributable to the Project facilities reflected by
Pipeline in an amended Exhibit K that is filed by Pipeline with the Commission in the certificate
proceeding regarding the Project. Pipeline shall prepare such amended Exhibit K in accordance
with Section 157.14(a)(13) of Title 18 of the Code of Federal Regulations and such amended Exhibit
K shall reflect Pipeline’s reasonable good faith estimate at the time of the total Capital Costs
attributable to the Project, and Pipeline shall file such amended Exhibit K at least thirty (30)
days, but no more than sixty (60) days, prior to the in-service date of the Project, as such
in-service date is estimated to occur by Pipeline at the time (“Amended Exhibit K”).

Such monthly Reservation Charge shall be adjusted by an amount per Dth of MDQ equal to $0.3042
(equivalent to $0.01 per Dth per Day) for each $[tbd] million increment of Capital Costs as
reflected in the Amended Exhibit K above or below the estimated $[tbd] amount (to be clear, the
Reservation Charge adjustment will occur to the fourth decimal point and thus the rate may be
adjusted in increments as small as $0.0001 per Dth per Day); provided, if the Capital Costs
reflected in the Amended Exhibit K exceed 15% above the estimated Capital Costs of $[tbd], then
the amount used for the Reservation Charge adjustment shall be deemed to be 1.15 multiplied by the
estimated Capital Costs, and if the Capital Costs reflected in the Cost Report are more than 10%
below the estimated Capital Costs of $[tbd], then the amount used
for the Reservation Charge adjustment shall be deemed to be .90 multiplied by the estimated
Capital Costs.

For purposes of this Negotiated Rate Agreement, (1) the term “Project” shall mean the Project as
generally described in the recitals to the Precedent Agreement between the Parties regarding
construction of facilities necessary to provide the service contemplated in the Service Agreement,
and as more specifically described in the certificate application, as amended, related to such
facilities on file with the Commission, and(2) the term “Capital Costs” means the total capital
costs incurred by Pipeline for the development and construction of the Project, including, without
limitation, the allowance for funds used during construction, as such costs are reflected in the
Amended Exhibit K, including all costs incurred to the date of the Amended Exhibit K and estimated
to be incurred for final completion of the applicable project.

	 	 	 
	Issued by: D. A. McCallum, Director, Rates and Tariffs
	 	 
	Issued on:

	 	Effective on:

 

 

 

			
	TEXAS EASTERN TRANSMISSION, LP	 	 
	FERC Gas Tariff
	 	Pro Forma Sheet No.
 _____ 

	Seventh Revised Volume No. 1	 	 

4/ Texas Eastern and Customer agree that Contract No. [tbd] is a ROFR Agreement and will remain a
ROFR Agreement following the end of the Negotiated Rate Term.

5/ Texas Eastern and Customer agree that in the event any carbon emissions tax or other greenhouse
gas assessment is imposed on Texas Eastern as a surcharge, or other form of rate recovery, during
the term of this Negotiated Rate Agreement, then Customer shall agree to modify the negotiated
rate set forth herein to include Customer’s ratable share of such amounts. Further, if Texas
Eastern is required to incur additional expense to comply with any greenhouse gas laws, rules or
regulations, then Customer shall agree to modify the negotiated rate set forth herein to include
Customer’s ratable share of such additional expense.

	 	 	 
	Issued by: D. A. McCallum, Director, Rates and Tariffs
	 	 
	Issued on:

	 	Effective on:

 

 

 

EXHIBIT B

IRREVOCABLE STANDBY LETTER OF CREDIT

	 	 	 
	Letter of Credit No:                     

	 	Date:                     , 2010
	 
	 	 
	 

	 	Date of Expiry:                     ,
201_____ 

	 
	 	 
	Beneficiary:

	 	Account Party:
	Texas Eastern Transmission, LP

	 	Chesapeake Utilities Corporation
	5400 Westheimer Court

	 	350 South Queen Street
	Houston, TX 77056

	 	Dover, DE 19904

Attn: Credit Director

[Name of Bank] (“Issuing Bank”) hereby establishes this Irrevocable and Transferable Standby Letter
of Credit No.                      in favor of Texas Eastern Transmission, LP (“Beneficiary”) for the account
of Chesapeake Utilities Corporation (“Account Party”) for the aggregate amount of up to (dollar
amount) available to Beneficiary by presenting sight draft(s) to Issuing Bank when accompanied by a
signed and dated statement by a purported officer of Beneficiary certifying one or more of the
following, as applicable:

	 	1.	 	“The amount drawn herein is to satisfy obligations of Account Party
between Beneficiary and Account Party. Wherefore, the undersigned Beneficiary does
hereby demand payment of $                    . Beneficiary further certifies that
supporting documents when required were presented to Account Party and that Account
Party has not satisfied its obligations.” And / or

	 	2.	 	“This Letter of Credit will expire in less than thirty (30) days and
Beneficiary has not received an extension of said Letter of Credit or other
acceptable replacement collateral from Account Party. Wherefore, the undersigned
Beneficiary does hereby demand payment of $                    . Upon timely receipt of an
amendment extending this Letter of Credit, this drawing is to be considered
automatically rescinded.” And / or

	 	3.	 	“Issuing Bank no longer has one of the following: an individual rating
of at least “A-” from Fitch Investor Service, Inc., or a long-term senior unsecured
debt rating of at least “A-” by Standard & Poor’s Rating Group, or a long-term
senior unsecured debt rating of at least “A3” by Moody’s Investor Services, Inc.,
and Account Party has not caused a replacement Letter of Credit from an alternate
financial institution acceptable to Beneficiary to be issued to Beneficiary.
Wherefore, the undersigned Beneficiary does hereby demand payment of
$                                        .”

 

 

 

SPECIAL TERMS AND CONDITIONS

	1.	 	Partial and multiple drawings are allowed hereunder. The amount that may be drawn by
Beneficiary under this Letter of Credit shall be automatically reduced by the amount of any
payments made through Issuing Bank referencing this Letter of Credit.

	2.	 	This Letter of Credit shall automatically extend without amendment for periods of one year
each from the present or any future expiry date unless Issuing Bank notifies Beneficiary in
writing at least sixty (60) days prior to such present or future expiry date, as applicable,
that Issuing Bank elects not to further extend this Letter of Credit.

	3.	 	This letter of Credit is transferable without charge any number of times, but only (a) to a
party which succeeds to or is assigned and assumes in writing the rights and obligations of
the transferor under that certain Precedent Agreement dated as of April
 _____, 2010, between
Texas Eastern Transmission, LP, the initial Beneficiary, and the Account Party (the
“Agreement”) in accordance with or as permitted by the terms of the Agreement and only in
connection with such succession or assignment, (b) in the amount of the full unutilized
balance hereof and not in part, and (c) with the written approval of Account Party which
consent shall not be unreasonably withheld, conditioned or delayed.

	4.	 	The term “Beneficiary” includes any successor by operation of law of the named beneficiary to
this Letter of Credit, including, without limitation, any liquidator, any rehabilitator,
receiver or conservator.

	5.	 	Presentations for drawing may be delivered in person, by mail, by express delivery, or by
facsimile.

	6.	 	All Bank charges are for the account of Account Party.

	7.	 	Article 36 under UCP 600 is modified as follows: If the Letter of Credit expires while the
place for presentation is closed due to events described in said Article, the expiry date of
this Letter of Credit shall be automatically extended without amendment to a date thirty (30)
calendar days after the place for presentation reopens for business.

Issuing Bank hereby agrees with Beneficiary that documents presented for drawing in compliance with
the terms of this Letter of Credit will be duly honored upon presentation at Issuing Bank’s
counters if presented on or before the expiry date.

Unless otherwise expressly stated herein, this Letter of Credit is subject to the Uniform Customs
and Practice for Documentary Credits (“UCP”), 2007 Revision, International Chamber of Commerce
Publication No. 600. Matters not covered by the UCP shall be governed and construed in accordance
with the laws of the state of New York.

ISSUING BANK SIGNATURE

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