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PGP GAS SUPPLY AGREEMENT NO. 1 PGP GAS SUPPLY AGREEMENT NO.1 BETWEEN FLORIDA GAS UTILITY AND CITY OF CLEARWATER, FLORIDA Dated as of November 1, 2004 / I lV', , '.):f '--^-J - ) t, , -J I TABLE OF CONTENTS Page SECTION 1. Definitions and Explanations ofTerms.................................................3 SECTION 2. Term of Agreement....... ................ .................... ................................... .14 SECTION 3. Gas Supply Service and Pricing........................................................... 14 SECTION 4. Method of Payment. ..... .............. ......................................................... .19 SECTION 5. Scheduling of Deliveries; Title....................................... ......................22 SECTION 6. Point(s) of Delivery.... ........................................................................... 24 SECTION 7. Curtailment............................ .......................... ........ ............................24 SECTION 8. Availability of Gas or Gas Entitlement Shares...................................25 SECTION 9. Insurance................... ........................................................................... 25 SECTION 10. Annual Budget; Accounting. ...............................................................25 SECTION 11. Information to be Made Available. ........... .......................... ................25 SECTION 12. Project Participant Representations and Warranties; Covenants. ............ ...................................... ........ ............................27 SECTION 13. Pledge of Payments. ......... ................................................................... 30 SECTION 14. Event of Default. ............ ....... ................................ .............................. 31 SECTION 15. Continuing Obligation, Right to Discontinue Service........................ 31 SECTION 16. Transfer of Gas Entitlement Shares Following Default....................31 SECTION 17. Other Default by Project Participant. ................................................33 SECTION 18. Default by FGU. ................... ..... ............. ....... ...................................... 33 SECTION 19. Abandonment of Remedy. ...................................................................33 SECTION 20. Waiver of Default. ... ............ .................................... ........... ..... ............33 SECTION 21. Relationship to and Compliance with Other Instruments. ...............34 SECTION 22. Measurement of Gas. .. ...... ....... ......... ................................. ................. 34 SECTION 23. Liability of Parties.......... .............. ........ ......... .......... ............................ 34 SECTION 24. Sale of Project Participant's Excess Gas Entitlement Share. ...........37 SECTION 25. Assignment ofPGP Gas Supply Agreement; Sale of Project Participant's System. .......... ...........................................................38 SECTION 26. Termination or Amendment. .............. .......... .......... ............ ................40 SECTION 27. Force Majeure. ...... .................... ..................................... .................. .... 41 SECTION 28. Project Participant Representative. ............ ........... ........................... 43 SECTION 29. Notice and Computation of Time. ......................................................43 SECTION 32. Severability....... ..... ............... ........... ..... ......... .......... ............................44 Appendix 2 - Appendix 3 - Characteristics of Financial Products Description of System Project Participant Outstanding Obligations Form of Natural Gas Project Sharing Agreement Schedule of Project Participants (Gas Entitlement Share) for Gas Supply Pool No.1 Project Participant's Point or Points of Delivery Form of Opinion of Counsel to Project Participant Exhibit A Exhibit B Exhibit C Exhibit D Appendix 1 - PGP GAS SUPPLY AGREEMENT NO.1 This PGP GAS SUPPLY AGREEMENT NO.1 made and entered into as of November 1, 2004, by and between FLORIDA GAS UTILITY, a public body corporate and politic formed under the Florida Interlocal Cooperation Act ("FGU") and the CITY OF CLEARWATER, FLORIDA, a municipal corporation of the State of Florida ("Project Participant"). WITNESSETH: WHEREAS, FGU was formed by Interlocal Agreement on September 1, 1989, which was subsequently amended by the Amended Interlocal Agreement on June 1, 1992, and thereafter amended and restated by Amended and Restated Interlocal Agreement dated as of July 1,1996, and thereafter amended and restated by Second Amended and Restated Interlocal Agreement dated as of July 27, 1999 (the "Interlocal Agreement"); and WHEREAS, in order to take advantage of perceived opportunities created by the restructuring of natural gas services, FGU was established between and among several public agencies for the purpose of achieving savings through joint services for, or which otherwise benefit, its Members; and WHEREAS, FGU will take or cause to be taken all steps necessary for the acquisition of, and will undertake such contractual arrangements necessary to secure, a suitable supply of Gas or a suitable pricing mechanism including Financial Products, or both, under one or more Gas Production Sharing Agreements or Financial Instruments, and will provide the Gas and pricing mechanism and services pursuant to this Agreement and/or other related or suitable Financial Instruments, and pursuant to agreements similar to this Agreement and related or suitable Financial Instruments with other Project Participants, all as hereinafter defined; and WHEREAS, in order to enable FGU to provide its services hereunder, to pay the Cost of Acquisition and Costs provided for herein, and issue its Bonds to pay the Costs of Acquisition, FGU may have substantially similar PGP Gas Supply Agreements with other Project Participants; and WHEREAS, Article VI of the Interlocal Agreement authorizes the Board of FGU to undertake a Special Project, and it is intended that each of Project Participants shall become a party to substantially similar agreements, such undertakings with respect to PGP Gas Project No.1 shall each be treated as a Special Project. 2 NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, it is agreed by and between the parties hereto as follows: SECTION 1. Definitions and Explanations of Terms. As used herein: A!!gregated Transportation Contracts shall have the meaning ascribed to that term in Section 3(a). Agreement shall mean this PGP Gas Supply Agreement No. 1 and/or any other related or suitable Financial Instruments that may accompany this Agreement or be appropriate for the purposes to be achieved by this Agreement. Annual Bud!!et shall mean the budget adopted by the Board of FGU pursuant to paragraph (a) of Section 10, which itemizes the estimated Costs for the following Contract Year, or, in the case of an amended Annual Budget adopted by the Board or Executive Committee ofFGU, during the remainder of the Contract Year, and Project Participant's share, if any, of such Costs. Approved Rate Tariff shall mean the tariff for the transportation of Gas as approved by FERC or the governmental or other entity charged with this responsibility. Board of FGU shall mean the Board of Directors of FGU or if said Board shall be abolished, its successor board, body, commission or agency succeeding to the principal functions thereof or to whom the power and duties granted or imposed by any Bond Resolution shall be given by law. Board of PGP shall mean the Board of Directors of PGP or if said Board shall be abolished, its successor board, body, commission or agency succeeding to the principal functions thereof or to whom the power and duties granted or imposed by any Bond Resolution shall be given by law. Bond Resolution shall mean the PGP Bond Resolution or the FGU Bond Resolution, as the case may be. Bonds shall mean the PGP Bonds or the FGU Bonds, as the case may be. Commencement Date shall mean the earlier of (i) the first date on which FGU shall make Gas available to any of Project Participants pursuant to the Gas Production Sharing Agreement, (ii) the effective date of any Financial Instrument entered into for the benefit of Project Participant 3 pursuant to this Agreement or the Special Project authorized hereby, or (iii) the effective date of the incurrence by FGU of any obligations under the Gas Production Sharing Agreement. Contract Year shall mean the twelve (12) month period commencing at 12:01 a.m. on October 1 of each year, except that the first Contract Year shall commence on the first to occur of (i) the date which is twelve (12) months prior to the date on which the first principal installment on any of the Bonds is due or (ii) the Commencement Date, and shall expire at 12:01 a.m. the next succeeding October 1. Costs shall mean PGP Costs, FGU Costs and FGU Costs of Acquisition and Services. Debt Service shall mean, with respect to any period, the aggregate of the amounts required by the Bond Resolution to be paid or deposited during said period into any fund or account created by the Bond Resolution for the sole purpose of paying the principal (including sinking fund installments) of, premium, if any, and interest on all Bonds from time to time outstanding as the same shall become due; provided, however, that Debt Service shall not include any amount payable as principal or interest solely as a result of acceleration of maturity of Bonds. Default Share shall mean, as to each Project Participant on each respective date of calculation, (i) that percentage determined by dividing such Project Participant's annual Gas Entitlement Share as shown on Appendix 1, as adjusted by any increased volume of Gas purchased by such Project Participant pursuant to Section 16 and Section 17 below (but in no event shall a Project Participant's Default Share exceed 25% of such Project Participant's Gas Entitlement Share under this Agreement), by the aggregate Gas Entitlement Share of all Project Participants in such year, as shown on Appendix 1, that are not then in default with respect to any payment obligations due hereunder; and (ii) in addition, shall expressly include those payments required to be paid pursuant to clause (ii) of the definition of PGP Defaulted Gas Payments. Designee shall mean FGU as the contractually authorized agent of a Project Participant as defined in the general terms and conditions of Transporter1s Approved Rate Tariff. Directive shall mean an instrument, in writing, executed and delivered by a Project Participant Representative that gives directions to FGU hereunder, or otherwise authorizes actions by FGU hereunder, or implements all or a part of this Agreement, and upon which FGU may rely as being duly authorized, executed and delivered by Project Participant. 4 Division shall mean a Project Participant of FGU, and the associated Point(s) of Delivery of that Project Participant, whose transportation entitlements have been aggregated under one transportation contract held by FGU to which Transporter's Approved Rate Tariff applies. FGT shall mean Florida Gas Transmission Company, and its successors in interest. FGU Bond Resolution shall mean a resolution providing for the issuance of the Bonds, as may be adopted by the Board of FGU, and all amendments and supplements thereto adopted in accordance with the provisions thereof, and shall include any Trust Indenture providing for the issuance of the Bonds, and other related documentation approved by the Board ofFGU or delegated to the Executive Committee ofFGU. FGU Bonds shall mean the bonds, notes or other evidences of indebtedness, or notes issued in anticipation of the issuance thereof, which may be issued from time to time by FGU pursuant to the Bond Resolution to pay any part of the FGU Cost of Acquisition of Gas, whether or not any such issue shall be subordinated as to payment to any other issue, and shall include refunding bonds issued in accordance with this Agreement and the FGU Bond Resolution. FGU Cost of Acquisition and Services shall mean all costs of acquiring, planning, financing, pricing, transporting, storing and implementing the supply of Gas under the Gas Production Sharing Agreement to the extent not included in the definition ofPGP Costs or FGU Costs: (1) interest accruing in whole or in part on FGU Bonds for such period as may reasonably be determined to be necessary in accordance with the provisions of the FGU Bond Resolution; (2) the deposit or deposits required to be made under the FGU Bond Resolution from the proceeds of FGU Bonds into any fund or account established pursuant to the FGU Bond Resolution to meet Debt Service reserve requirements for FGU Bonds or other requirements thereunder; (3) the costs and expenses incurred in the issuance and sale of the FGU Bonds, the proceeds of which have been or will be required to be applied to one or more purposes for which FGU Bonds could be issued, including, without limitation, bond insurance premiums, letter of credit or other credit enhancement fees, and discounts to the underwriters or other purchasers thereof, if any, legal, consulting and financial costs, and amounts required to be paid under any interest rate exchanges or swaps, cash flow exchanges, options, caps, floors or 5 collars, in each case made in connection with the issuance of the FGU Bonds; (4) the payment of principal, premium, if any, and interest when due (whether at the maturity of principal or at the due date of interest or upon redemption) on notes or other evidences of indebtedness from time to time issued in anticipation of the issuance of FGU Bonds, the proceeds of which have been or will be required to be applied to one or more purposes for which FGU Bonds could be issued; (5) all federal, state and local taxes and payments in lieu of taxes required to be paid by FGU with respect to the services rendered pursuant to the Gas Production Sharing Agreement; (6) all costs and expenses relating to claims or judgments (including injury and damage claims) arising out of the acquisition or implementation of the Project or relating to operations for which FGU may be liable under the Gas Production Sharing Agreement or this Agreement; (7) all planning and development costs, engineering fees, contractors' fees, costs of obtaining governmental or regulatory permits, licenses and approvals, costs of real property, labor, materials, equipment, supplies, training and testing costs, insurance premiums, legal, consulting and financing costs, administrative and general costs, and all other costs properly allocable to 'the acquisition and implementation of the Project or relating to operations for which FGU may incur on its own behalf, or for which FGU may be liable under the Gas Production Sharing Agreement; (8) (i) all other costs incurred in connection with and properly chargeable to, the acquisition or implementation of the Project, including any prepayment of capital or operating expenses required to be paid by FGU under the Gas Production Sharing Agreement, and (ii) amounts required to be paid for which FGU may be liable under the Gas Production Sharing Agreement in respect of commodity swaps, balancing contracts, hedging arrangements and other similar agreements related to the supply of Gas hereunder; and Financial Products authorized hereunder or by Financial Instruments, implemented in accordance with FGU's obligations under the Gas Production Sharing Agreement; and (9) the allowance for working capital or any other reserve requirements for which FGU is liable under the Gas Production Sharing Agreement and for which may be required by FGU under this 6 Agreement, and all costs relating thereto, and the cost of credit facilities or enhancements, in such amounts as FGU shall be obligated for under the Gas Production Sharing Agreement or this Agreement. FGU Costs shall mean, to the extent not included in the definition of PGP Costs or FGU Cost of Acquisition and Services, all costs that are paid or incurred by FGU directly or indirectly with respect to the purchase, pricing, supply, storage or transportation of Gas to Project Participants under and pursuant to the Gas Production Sharing Agreement, Financial Instruments and costs as defined in the Gas Production Sharing Agreement that include any and all operating and maintenance costs or other such expenditures including contingency reserves and any ongoing requirements for capital expenditures not included within the FGU Costs of Acquisition, to the extent that FGU may be obligated therefor under the Gas Production Sharing Agreement, as hereinafter provided, including without limitation, the following items of cost: (1) the amount required or related to the purchase of Gas for which FGU may be liable under the Gas Production Sharing Agreement (excluding, however, amounts that FGU shall have paid for by the FGU Prepayment, as defined in the Gas Production Sharing Agreement), including any amounts required to be paid under the FGU Bond Resolution, for such Gas sold to FGU, to be paid or deposited during such Month into any fund or account established by the FGU Bond Resolution, for the payment of Debt Service on FGU Bonds; (2) the amount required for the purchase of Gas for which FGU shall be obligated for under the Gas Production Sharing Agreement to be paid or deposited during such Month into any fund or account established by the Gas Production Sharing Agreement or the FGU Bond Resolution (other than funds and accounts referred to in clause (1) above), including any amounts required to be paid or deposited by reason of the transfer of moneys from such funds or accounts to the funds or accounts referred to in clause (1) above; (3) FGU's pro rata share of the fees and expenses of the trustee, remarketing agent, credit or liquidity provider, provider of insurance and other parties to the financing under the Gas Production Sharing Agreement or this Agreement; (4) the costs, as determined in accordance with the Pricing Policy adopted by the Board of FGU, of (i) Gas supply (to the extent not covered through the payments described in clause (1) above) as follows: 7 (i) Gas supply purchased by Project Participant under this Agreement pursuant to the Gas Production Sharing Agreement, or any other instrument; (ii) Gas transportation to the Point(s) of Delivery of the Gas pursuant to the Transportation Contracts; and (iii) FGU service charges for its administrative services provided hereunder; (iv) adjustments, and an equitably allocated portion of all FGU's other expenses; and (v) any additional amount which must be paid by FGU during such Month in order to meet its requirements with respect to any rate covenant under the FGU Bond Resolution with respect to Debt Service coverage for the FGU Bonds, or with respect to the Gas Production Sharing Agreement; (5) amounts required to be paid by FGU under the Gas Production Sharing Agreement, including FGU's share of any hedging requirements undertaken by PGP in its own name or for FGU at its request (subject, however, to the provisions of Section 3(f) below), including Financial Instruments entered into in respect of Financial Products for such purposes; unless expressly otherwise provided to the contrary in the Financial Instrument or the Gas Production Sharing Agreement, payments on such obligations shall be allocated to Project Participant in accordance with the Financial Derivatives Policy adopted from time to time by the Board of FGU; (6) any additional amount not specified in the other items of this definition which must be paid by FGU pursuant to the Gas Production Sharing Agreement during such Month which are either properly allocable to the Project or as determined in accordance with the Pricing Policy adopted by the Board of FGU, including, without limitation, costs imposed or permitted by any regulatory agency or which are paid or incurred in connection with the supply of Gas or services thereunder or the provision of services by FGU for Project Participants; (7) all costs and expenses (including, but not limited to, legal fees and expenses) relating to personal injury and damage claims and extraordinary costs, expenses or assessments required to be paid by FGU pursuant to the Gas Production Sharing Agreement or this Agreement, in connection with the Project, or the delivery of Gas hereunder or thereunder; 8 (8) any reserves required by FGU to meet obligations pursuant to the Gas Production Sharing Agreement and this Agreement, necessary for payment of those items of costs and expenses incurred in the delivery of services, to the extent not covered by any preceding clause; and (9) debt service (including principal, interest and premiums) and all related charges on any line of credit, letter of credit, working capital or other loans for which FGU shall be obligated pursuant to the Gas Production Sharing Agreement. Payments on such obligations shall be allocated to Project Participant in accordance with the Debt Obligation Policy adopted by the Board ofFGU. (10) Notwithstanding the foregoing, if an item of cost or expense referred to above or any part thereof shall relate to less than all of Project Participants (such as current transportation costs, or the cost of replacement Gas as described in the definition of Gas) or shall clearly not be applicable to a Project Participant, such item shall only be included as an item of FGU Cost with respect to those Project Participants to which such cost or expense relates. FGU Defaulted Gas Payment shall mean all payments of Costs due under the PGP Gas Supply Agreement that were not paid when due by a Project Participant and shall include, without limitation, all payments made and collection costs incurred by FGU in connection with such default; replenishments of any withdrawals from any debt service reserve fund or any other funds under the Bond Resolution arising from such default; fees, costs and expenses of FGU, trustees, bond insurers, letter of credit providers and others in connection with actions required or permitted to be taken under the Bond Resolution (including, without limitation, the cost of preparing and filing any material event disclosure), and attorneys fees and costs attributable to any of the foregoing. Financial Instrument shall mean an agreement entered into with respect to the purchase or pricing of Gas or other services provided under this Agreement that provides for Financial Products by and between the parties thereto that may include FGU, or Project Participants, or both, any other Project Participant and any third parties or counterparties; provided that a Project Participant or Project Participant Representative is required to authorize a Financial Instrument that obligates only such Project Participant. Financial Products shall mean futures contracts, commodity swaps and hedging arrangements related to the pricing or supply of Gas or other services provided hereunder, interest rate swaps (relating to debt used to 9 acquire or prepay the cost of Gas), in either case, whether entered into by FGU, or by Project Participant and/or FGU, including balancing or similar agreements or interest rate exchanges or swaps, cash flow exchanges, options, caps, floors or collars implemented in accordance with the Financial Derivatives Policy adopted by the Board of FGU. Such Financial Products may consist of those products described in Exhibit A and may have characteristics similar to those set forth in Exhibit A hereto. Fiscal Year shall mean the twelve (12) month period commencing at 12:01 a.m. on October 1 of each year, or with respect to a Special Project, as may be specified for that project. Gas shall mean pipeline quality natural gas (i) supplied pursuant to the Gas Production Sharing Agreement for PGP Gas Project No.1 which shall be purchased with Costs related to the supply or delivery of Gas, whether or not Gas shall be physically delivered, and (ii) any gas furnished to replace undelivered Gas. Gas Entitlement Share shall mean, with respect to each Project Participant, its annual percentage of Gas required to be paid as a Cost under the Gas Production Sharing Agreement and under this Agreement, as shown opposite the name of such Project Participant in the Schedule of Project Participants set forth on Appendix 1 hereto, as the same may be adjusted from time to time in accordance with the provisions hereof. Gas Production Sharing Agreement shall mean the Natural Gas Production Sharing Agreement for Gas Supply Pool No.1, between FGU and PGP dated as of November 1, 2004, for the acquisition of Gas to be delivered hereunder to Project Participants, in substantially the form attached hereto as Exhibit D. Member or Members shall mean, as the context shall require, the Members of FGU who are parties to this PGP Gas Supply Agreement and PGP Gas Supply Agreements substantially similar to this Agreement and who are also Project Participants under this Agreement, an initial list of such Members of which is set forth in Appendix 1 hereto; and shall mean, as the context shall require, a Member ofPGP. Month shall mean a calendar month. Nominated Quantitv shall mean the quantity of Gas in MMBtu per day that the Project Participant has requested FGU to acquire and sell to the Member under the terms and conditions of this Agreement each day. The Project Participant shall establish a Nominated Quantity for the Summer Season and a Nominated Quantity for the Winter Season. The average of the Nominated Quantity for the Summer Season and the Nominated Quantity for 10 the Winter Season shall be referred to in this Agreement as the "Annual Nominated Quantity" and shall be reflected on Appendix 1 hereto. PGP shall mean Public Gas Partners, Inc., a Georgia nonprofit corporation. PGP Bond Resolution shall mean a resolution providing for the issuance of the Bonds, as may be adopted by the Board of PGP, and all amendments and supplements thereto adopted in accordance with the provisions thereof, and shall include any Trust Indenture providing for the issuance of the PGP Bonds, and other related documentation approved by the Board ofPGP. PGP Bonds shall mean the bonds, notes or other evidence of indebtedness, or notes issued in anticipation of the issuance of bonds, which may be issued from time to time by PGP pursuant to the PGP Bond Resolution to pay any part of the PGP Cost of Acquisition of PGP Gas, whether or not any such issue shall be subordinated as to payment to any other issue of bonds, and shall include refunding bonds issued in accordance with the PGP Bond Resolution. PGP Costs shall mean all costs that are required to be paid or incurred by FGU, directly or indirectly, under and pursuant to the Gas Production Sharing Agreement and shall specifically include "Costs" as defined in Section 2.4 of the Gas Production Sharing Agreement as follows: (defined terms shall have the meaning set forth in the Gas Production Sharing Agreement): "'Costs' means any and all costs or other expenditures incurred with respect to Gas Supply Pool No.1, whether they are incurred by Public Gas Partners directly in connection with Gas Supply Pool No. 1 or are incurred by Public Gas Partners generally or in connection with more than one Project and are allocated to Gas Supply Pool No.1, and whether or not they are Individual Costs, including without limitation: operating and maintenance costs; capital expenditures; amounts payable by Public Gas Partners with respect to any debt or other obligations of Public Gas Partners issued or incurred to finance its acquisition of reserves or any other interests in, or contractual rights to, natural gas and its production, including but not limited to all costs of issuance, credit enhancement, interest rate swaps or other arrangements (including but not limited to ongoing payments and any termination or unwind payments), remarketing, and disclosure, all fees relating to trustees, paying and other agents, whether initial or ongoing, and all required reserves or deposits or other costs associated with the issuance or incurrence of any such debt; fees and expenses paid to the Manager and any other amounts payable by Public Gas Partners under the Services Contract; deposits; royalties; indemnities; environmental or other fines or liabilities; Losses; costs incurred by Public Gas Partners in its prosecution of any legal 11 claim or other action to enforce its rights or otherwise in connection with or relating to its interests in gas properties or contractual rights acquired under Gas Supply Pool No.1; severance, ad valorem, or similar taxes; gathering, compression, transportation, and balancing charges and penalties or other similar charges; fuel and lost and unaccounted for gas; ongoing payments, termination payments, or unwind costs for hedges undertaken for the benefit of the Members; and other costs, expenses, and charges of any kind or nature that Public Gas Partners incurs in connection with the production, acquisition, and delivery to the Member of the gas produced from its interests or otherwise acquired by Public Gas Partners as part of Gas Supply Pool No. 1." Such Costs that include hedging, swaps or other similar arrangements may have characteristics similar to those set forth for Financial Products. Any such Costs may be allocated specifically to one Member or a subset of all of the Members, but not to all of the Members, and shall be designated "Individual Costs" as defined in Section 2.11 of the Gas Production Sharing Agreement. PGP Defaulted Gas Payments shall mean (i) all payments required to be made by a Member under the Gas Production Sharing Agreement, which shall be required to be paid by a Project Participant, and (ii) which shall specifically include those payments required by Section 14.6 of the Gas Production Sharing Agreement for a "step-up" obligation by FGU as a Member in the amount not to exceed 25% of its Participation Share, if another Member of PGP shall fail to take its allocation of Gas, for which Project Participant shall be obligated to accept and pay its pro rata share of any such step-up obligation of FGU under the Gas Production Sharing Agreement, as a part of its Default Share. Such Project Participant's right to Gas shall be governed by Article 14 and the related provisions of the Gas Production Sharing Agreement. PGP Gas Proiect No.1 shall mean the Gas to be provided pursuant to a PGP Gas Purchase Agreement for Project Participants. PGP Gas Supply Agreement shall mean this PGP Gas Supply Agreement No.1 and, as appropriate, the substantially similar PGP Gas Supply Agreements between FGU and Project Participants and any substantially similar contract entered into by FGU in connection with any transfer of a Project Participant's Gas Entitlement Share pursuant to Section 16, any assignment of such Gas Entitlement Share pursuant to paragraph (c) of Section 25 or any assignment of such Gas Entitlement Share with the consent of FGU in accordance with paragraph (a) of Section 25. Point or Points of Deliverv shall mean the point or points of delivery specified in Appendix 2 hereto or such other point or points of delivery from time to time agreed to between Project Participant and FGU. 12 Prepayment shall mean the lump sum prepayment required under the Gas Production Sharing Agreement for FGU's ownership interest in the PGP Gas, as defined in the Gas Production Sharing Agreement. Proiect or PGP Gas Project No.1 shall mean the planning, financing, acquiring and placing in operation of the Gas Production Sharing Agreement and the delivery of services and/or Gas under that Agreement or this Agreement, whether or not Gas is actually available for delivery. Proiect Participants shall mean the parties, including Project Participant, other than FGU, to this Agreement and the Agreements substantially similar to this Agreement for which Bonds or other sources of financing may be required for a special project for such purpose. An initial list of Project Participants is set forth in Appendix 1 hereto and which are Project Participants for PGP Gas Project No. 1. Proiect Participant Representative shall mean Project Participant Representative as defined in Section 28 hereof. Summer Season shall mean the six months of April through September. System shall mean and refer to a Project Participant's enterprise system, as more particularly described in Exhibit B hereto, which describes those facilities that require or permit the utilization or local distribution of gas, and any additions or improvements thereto, and all other gas utilization or distribution enterprise systems that may be constructed or acquired by Project Participant. Transportation Contracts shall mean the contract or contracts for the transportation of Gas between FGU, or FGU on behalf of Project Participant, or contracts between Project Participant with the designation of FGU as Project Participant's agent, and Transporter. Transporter shall mean Florida Gas Transmission Company, Gulfstream Natural Gas Systems, L.L.C., or any other company legally authorized to transport Gas, and its successors in interest. Winter Season shall mean the six months of October through March. Words not defined herein may have the meanings ascribed to such words in the Gas Production Sharing Agreement. 13 SECTION 2. Term of Agreement. The provisions of this Agreement pertaining to PGP Gas Project No.1 shall become effective upon the Commencement Date with respect to any Project Participant who shall have executed and delivered this Agreement, and shall, unless this Agreement is terminated pursuant to Section 26 hereof, continue until the last to occur of the following: (i) the date the principal of, premium, if any, and interest on all Bonds have been paid in full, (ii) the date that funds which, together with interest eamings from the investment thereof, have been set aside in irrevocable escrow for the payment thereof, all in accordance with the terms of the Bond Resolution, (iii) FGU shall have received all rights and benefits under the Gas Production Sharing Agreement, and (iv) the Gas Production Sharing Agreement shall have been terminated and all obligations of FGU thereunder satisfied. Notwithstanding the foregoing, if each Project Participant initially listed on the Schedule of Project Participants, has executed and delivered its respective Gas Supply Agreement, the subsequent determination that any such Project Participant failed to duly and validly execute and deliver its Gas Supply Agreement, or if any other Gas Supply Agreement, or any portion thereof, shall be deemed invalid or unenforceable for any other reason whatsoever, such determination shall in no way affect the commencement, term or enforceability of this Agreement or Project Participant's obligations hereunder. Neither termination nor expiration of this Agreement shall affect any accrued liability or obligation hereunder. SECTION 3. Gas Supply Service and Pricing. (a) Certain of Project Participants have, pursuant to separate agreements with FGU, aggregated their firm transportation entitlements with other Project Participants (referred to herein as the "Aggregated Transportation Contracts") and have authorized FGU to administer that capacity in the delivery of Gas to each Project Participant. Certain other Project Participants have designated FGU as their agent for the utilization of their respective gas transportation entitlements for the delivery of Gas hereunder. (i) FGU is hereby authorized, and shall be responsible for utilizing those firm transportation entitlements, to the extent available under the respective Transportation Contracts, to cause Project Participant's Gas to be transported to Project Participant's Point(s) of Delivery and for all operational decisions and arrangements associated with the transportation of Gas on or upstream of Transporter's 14 pipeline, including but not limited to, transportation along pipelines other than Transporter, selection of Point(s) of Delivery, scheduling, balancing and dispatching of Gas on such pipelines other than Transporter, as well as on Transporter's pipeline. (ii) The administration of the Aggregated Transportation Contract(s) shall be governed solely in accordance with the Pricing Policy adopted by the Board of FGU. (iii) It is understood that the Aggregated Transportation Contract(s) will be operated in a manner which will preserve to each Division, with Project Participant being a Division, a priority right to the use of the firm transportation entitlements which would have been assigned to it in the absence of the Aggregated Transportation Contract(s). Only when Project Participant's capacity rights are not required to meet the requirements of Project Participant, will they be made available to other Divisions in accordance with the Pricing Policy adopted by the Board of FGU. Aggregated Transportation Contract(s) capacity not required by any Division may be temporarily relinquished or otherwise utilized by FGU under the terms of the Approved Rate Tariff and in accordance with the Pricing Policy adopted by the Board ofFGU. (iv) Project Participant shall assume full responsibility for payment of actual transportation charges, including demand charges, incurred by the Aggregated Transportation Contract(s) for the benefit of Project Participant. To the extent another Division or customer of FGU may make actual use of Project Participant's transportation rights, a reallocation of demand costs shall be made by FGU in accordance with the Pricing Policy adopted by the Board ofFGU. (v) Because Project Participant requirements change from time to time, FGU will assist in acquiring and/or disposing of transportation entitlements for Project Participant. To the extent Project Participant and FGU agree, FGU will request an allocation of such capacity in its own name; provided, however, that a sub-allocation of such incremental transportation entitlement will also be made to the requesting Project Participant's Division, which shall be binding in the event of later withdrawals of Project Participants or entitlements, or dissolution. (vi) All contracts involving a substantial change in the burdens or benefits of Project Participant entered into with Transporter in the name of the Aggregated Transportation Contract(s) 15 for the benefit of Project Participant will be subject to approval In advance by both FGU and Project Participant. (vii) Project Participant may retain its Transportation Contracts with Transporter or other pipeline supplier rather than aggregate some or all of its transportation entitlements as provided above. In this case, the relationship between Project Participant and FGU shall be that of principal and agent and FGU shall in all such cases serve as Designee. FGU shall administer the retained transportation contracts in accordance with its terms as Designee for Project Participant and shall serve in such capacity for the purpose of the administration of such contracts and shall perform the services as provided herein with respect to such Transportation Contracts, in accordance with instructions received from Project Participant. (viii) Project Participant will provide engineering information and support as reasonably requested by Transporter or FGU in order to assure appropriate design, configuration, and installation of facilities in accordance with generally accepted industry standards necessary to serve Project Participant's Point(s) of Delivery. (ix) If Project Participant is temporarily or permanently unable to utilize all or any portion of its share of the Aggregated Transportation Contract(s), the following provisions shall apply: (1) As provided in the Transportation Policy, FGU may utilize that portion of Project Participant's unused capacity for use by other FGU Project Participants or customers. These other FGU Project Participants or customers shall reimburse Project Participant for use of such capacity, as provided in the Pricing Policy adopted by the Board of FGU. (2) To the extent FGU is unable to utilize such excess Project Participant capacity, FGU will, as permitted by the Approved Rate Tariff and applicable FERC regulations and agreements, assist and cooperate with Project Participant to dispose of such excess transportation entitlement so as to avoid or minimize any payment obligations by Project Participant to Transporter or others. (3) Nothing herein shall relieve Project Participant from its obligation to reimburse FGU for costs and expenses incurred by FGU for the released excess capacity for which FGU is not otherwise reimbursed by third parties. 16 (x) Unless otherwise agreed to by FGU and Project Participant, Project Participant and FGU anticipate that Transporter and third parties will rely on FGU for all purposes connected with servicing the transportation and purchasing of Gas for Project Participant on Transporter's system or otherwise, including, but not limited to, the furnishing and receipt of information concerning daily nominations, scheduling, balancing, Point(s) of Delivery, invoice payment, accounting, third party transportation, and communications with Project Participant, and that operational conditions may allow limited time for communications concerning such matters. To facilitate this process, and except with respect to services covered by the Aggregated Transportation Contract(s), Project Participant agrees to name and hereby designates FGU, or a representative of FGU, as Project Participant's designee to perform Project Participant's obligations with respect to nominations, scheduling and payment under the various Transporter transportation rate schedules under which Project Participant arranges transportation service for Gas purchased from FGU hereunder. (xi) Notwithstanding the foregoing, FGU's responsibilities to arrange for transportation of Gas to Project Participant's Point(s) of Delivery shall be limited to Project Participant's transportation entitlements made available to FGU hereunder and Project Participant shall ultimately be responsible for securing transportation rights with respect to Gas to be delivered hereunder. (xii) Project Participant agrees that, except for (i) any obligations it may have under any other projects for which payments for gas have been pledged for payment of debt services on any indebtedness, such as its Gas Supply Contract dated as of November 1, 1998, (ii) any other PGP Gas, and (iii) any other contractual obligations in existence on the date hereof as set forth on Exhibit C hereto (collectively, "Other Gas Projects"), it will satisfy all of its gas requirements for its System from its Other Gas Projects, including the PGP Gas Project No.1, before it satisfies its gas requirements from any other source. (b) FGU agrees to sell and does hereby sell and Project Participant of PGP Gas Project No.1 does hereby agree to purchase and does hereby purchase Project Participant's Nominated Quantity expressed as a percentage of the Nominated Quantities of all other Project Participants which shall be its Gas Entitlement Share pursuant to this Agreement. The Project Participant shall designate on Appendix 1 hereto, its Summer Season volume of Gas and its Winter Season volume of Gas. The average of the Nominated Quantity for the Summer Season and the Nominated Quantity for 17 the Winter Season shall be referred to in this Agreement as the "Annual Nominated Quantity." FGU shall be authorized to complete the Gas Entitlement Share when all PGP Gas Supply Agreements have been executed and delivered to FGU. (c) Project Participant shall, in accordance with and subject to the provisions of Section 4 hereof, pay FGU for its Gas Entitlement Share periodically as billed and required, during the term of this PGP Gas Supply Agreement, to be delivered in the Nominated Quantity as provided in Appendix 1 hereto, an amount determined by multiplying the Costs applicable to all Project Participants by Project Participant's applicable Gas Entitlement Share, plus the items of cost specifically allocable to Project Participant individually under the definition of the FGU Costs with respect to, among other things, replacement Gas and current transportation charges, in each case, regardless of the actual amount of Gas scheduled or tendered for delivery or delivered, and whether or not any Gas is produced or otherwise delivered, and regardless of any transportation actually utilized, and regardless of any amount that may have been included in the Annual Budget or any amendment thereto. (d) In addition to all Project Participant's payment obligations with respect to its respective Gas Entitlement Share, if there has been an FGU Defaulted Gas Payment or a PGP Defaulted Gas Payment, each Project Participant shall also pay the Default Share. (e) If Project Participant's scheduled deliveries of Gas fluctuate seasonally as shown on Appendix 1, FGU will manage Project Participant's cash flow during the year so that Project Participant's cash flow requirements with respect to payment of Costs more closely match the percentage of Gas it receives on such seasonal basis. FGU agrees to cover such payments to the extent of its available working capital as determined from time to time by FGU in its sole discretion. However, notwithstanding FGU's agreement, nothing contained herein shall relieve Project Participant of its payment obligations otherwise required under Section 3(c) and (d) above and Section 4( d) below. (f) FGU agrees that without the prior written consent of Project Participant, it will not undertake or engage in any activity described in clause (ii) of subparagraph (8) of the definition of FGU Cost of Acquisition and Services of Section 1, or in subparagraph (5) of the definition of FGU Costs of Section 1 of this Agreement; provided, however, that FGU is not required to obtain such prior written consent with respect to such PGP Costs. 18 SECTION 4. Method of Payment. In the event of any dispute as to any portion of any periodic statement, Project Participant shall nevertheless pay the full amount of the disputed charges when due and shall give written notice of the dispute to FGU not later than thirty (30 ) days after the date such payment is due. Such notice shall identify the disputed bill, state the amount in dispute and set forth a full statement of the grounds on which such dispute is based. No adjustment shall be considered or made for disputed charges unless notice is given as aforesaid. FGU shall give consideration to such dispute and shall advise Project Participant with regard to its position relative thereto within thirty (30) days following receipt of such written notice. Upon final determination (whether by agreement, arbitration, adjudication or otherwise) of the correct amount, any difference between such correct amount and such full amount shall be properly reflected in the statement next submitted to Project Participant after such determination. (a) As soon as possible after the execution of this Agreement, the Executive Committee of FGU shall adopt and mail to Project Participant an amendment to the Annual Budget for the Contract Year which begins on the Commencement Date, and thereafter, at FGU's annual meeting each year, the Board of FGU shall adopt and mail to Project Participant an Annual Budget for the next ensuing Contract Year, in each case which shall provide an estimate of Project Participant's periodic payments hereunder and serve as a basis for Project Participant's payments hereunder for Costs for such Contract Year. During each Contract Year, FGU may from time to time amend the Annual Budget to take into account extraordinary receipts, credits or costs substantially affecting the Costs. Neither the Annual Budget, nor amendments thereto, shall be binding on FGU or affect the amount Project Participant is obligated to pay hereunder. (b) As soon as the billing information is available, FGU shall render to Project Participant, by mail, courier or facsimile or other electronic transmission, a periodic statement showing, in each case with respect to the prior statement (i) the amount payable by Project Participant in respect of Costs and its Default Share, (ii) the amount, if any, reasonably determined by FGU on a periodic basis, and any amounts determined in accordance with of this Section 4(b) on an annual basis, to be credited to or paid by Project Participant with respect to any adjustment for actual Costs incurred during the next preceding period or Contract Year, (iii) the credits, if any, against Project Participant's share of Costs determined in accordance with this Section 4(b), and (iv) any other amounts (except amounts in respect of Costs and Default Share which are intended to be billed exclusively pursuant to clause (i) above) payable by or credited to such Project Participant pursuant to this Agreement or the Bond Resolution not otherwise shown; and such 19 Project Participant shall pay the total of such amounts at the times specified below. FGU will provide a calendar of invoice and due dates at the beginning of each fiscal year, to the extent feasible. If payment in full is not made on or before the close of business on the due date, a delayed-payment charge on the unpaid amount due for each day overdue may be imposed at the prime rate of interest as published from time to time by the Wall Street Journal and in effect in the calendar month for which the unpaid balance shall be received, plus 2%, or the maximum rate lawfully payable by Member, whichever is less. If said due date is a Saturday, Sunday or a holiday, the next preceding business day shall be the last day on which payment may be made without the addition of the delayed-payment charge. Failure by Member to pay the full amount due by the due date may result in the discontinuance of gas supply service by FGU as set forth in Section 15 below. All statements will be trued up as provided in the Gas Production Sharing Agreement. (c) On or before one hundred fifty (150) days after the end of each Contract Year, and at such other times as it shall deem desirable, FGU will submit to Project Participant a detailed statement of the actual aggregate Costs and Default Share due hereunder and any adjustment thereof or credit thereto pursuant to Section 4(b) above and Project Participant's share thereof, and all other amounts, if any, payable by or credited to Project Participant pursuant hereto during such Contract Year or for such number of months as FGU deems appropriate, and adjustments of the aggregate Costs, if any, for any prior Contract Year and any adjustment thereof or credit thereto pursuant to Section 4(b) above, based on the annual audit of accounts provided for in Section 10 hereof or, if for a period other than a full Contract Year, on such other information as FGU deems reliable. If, on the basis of the statements submitted as provided in Section 4(b) above, the actual aggregate Costs and any adjustment thereof or credit thereto pursuant to Section 4(b) and other amounts payable for any Contract Year exceed the estimate thereof on the basis of which Project Participant has been billed, the amount of such deficiency shall be divided into six, or fewer, as determined by the Executive Committee of FGU in its sole discretion, equal installments and added to Project Participant's periodic statement for each of the next succeeding six or fewer months, as appropriate, as provided in Section 3(d). If, on the basis of the statement submitted pursuant to this paragraph, the actual aggregate Costs and any adjustment thereof or credit thereto pursuant to Section 3(d), or other amounts payable for any Contract Year are less than the estimate therefor on the basis of which such Project Participant has been billed, the amount of such excess shall be divided into six, or fewer, as determined by the Executive Committee of FGU in its sole discretion, equal installments and credited to Project Participant's statement for each of the next succeeding six (6) or fewer months, as appropriate. Notwithstanding the foregoing, actual costs as compared to amounts billed by PGP will be trued up within one hundred twenty (120) days of the end of the Fiscal Year of PGP 20 and shall be payable within sixty (60) days from receipt of invoices, all in the manner provided by the Gas Production Sharing Agreement. (d) The obligation of Project Participant to make payments under this Agreement shall not be subject to any reduction, whether by offset, counterclaim, or otherwise, and shall not be otherwise conditioned upon performance of FGU or PGP under this Agreement, the Gas Production Sharing Agreement or any other agreement or instrument or the validity or enforceability of this Agreement, the Gas Production Sharing Agreement, or any other agreement between FGU and any other Project Participant. The obligation of Project Participant to make the payments under this Agreement for its share of Costs and other amounts, shall constitute an obligation of Project Participant payable as an operating expense of Project Participant's System solely from the revenues and other available funds of the System. (e) The obligation of Project Participant to make payments under this Agreement shall not constitute a debt of Project Participant within the meaning of any constitutional or statutory provision or limitation or a general obligation of or pledge of the full faith and credit of Project Participant, and neither Project Participant nor the State of Florida or any agency or political subdivision thereof shall ever be obligated or compelled to levy ad valorem taxes to make the payments provided for under this Agreement, and the obligation of Project Participant to make payments pursuant to this Agreement shall not give rise to or constitute a lien upon any tangible property of Project Participant or any tangible property located within its boundaries or service area. (f) Notwithstanding the foregoing, if the obligations of Project Participant to make payments under Section 4(d) of this Agreement or any part of the obligation under any Financial Instrument, would not be legally permissible, or would not be treated as, or otherwise be accorded the status of, operation and maintenance payments under the provisions of Project Participant's indentures, bond resolutions or other bond documents entered into in connection with the financing of Project Participant's System, such part of such obligations that are precluded such status will be incurred and accorded the treatment in accordance with the provisions of paragraph (g) below. (g) Such part of such obligations for the payment of services hereunder or under the Bonds or a Financial Instrument that is not treated as, or otherwise accorded the status of, operation and maintenance costs of Project Participant's System for the reasons set forth in Section 4(f) above, shall constitute an obligation payable solely from the revenues and other funds of Project Participant's System, which are hereby pledged for such purpose, subject and subordinate to the following obligations of Project 21 Participant that would expressly preclude Project Participant from making the payments required hereunder senior to such obligations (i) operation, maintenance, renewal and replacement expenses of Project Participant's System, (ii) bonds (as well as bond anticipation notes), notes or other obligations for money borrowed, now outstanding or hereafter issued, for System purposes payable from revenues of Project Participant's System, (iii) subordinated bonds, notes or other obligations of the System payable from revenues of Project Participant's System and senior in credit to, or subject to a negative pledge with respect to, the obligations of the type imposed hereby, in each case, outstanding on the date of execution of this Agreement by Project Participant, and (iv) payments required to be made into or from funds established under the ordinances or resolutions authorizing bonds, notes or other obligations referred to in clauses (ii) or (iii) hereof. All such obligations in existence on the date hereof shall be listed on Exhibit C hereto, and all further obligations shall be listed on an amended Exhibit C and delivered to FGU. (h) If at any time Project Participant has revenue bonds outstanding payable from or secured by a pledge of net revenues of its System, Project Participant agrees that, in connection with any financial tests or conditions for the issuance of additional revenue bonds or other obligations payable from and secured by a pledge of net revenues of its System, Project Participant shall treat all payments made or estimated to be made to FGU under this Agreement as operating expenses for purposes of computing the amount of net revenues available for the payment of such outstanding revenue bonds and such additional revenue bonds. If FGU is entitled to payments under or in respect of the Gas Production Sharing Agreement (other than payments intended to reimburse FGU for its costs and expenses and other than payments required under any applicable document), or the Bond Resolution to be used in accordance with the Bond Resolution to pay Debt Service on the Bonds or other costs and expenses of Gas Project No.1), FGU shall distribute such payments or Gas credits to each Project Participant in proportion to its respective Gas Entitlement Share or provide replacement Gas as requested by Project Participant, in each case, after deducting therefrom any amounts otherwise due by such Project Participants hereunder. FGU shall distribute such payments or Gas credits to each Project Participant after deducting therefrom any amounts otherwise due by such Project Participant hereunder, all in accordance with the Pricing Policy adopted by the Board ofFGU. SECTION 5. Scheduling of Deliveries; Title. (a) All of the provisions of this Section 5 are subject to the provisions of the Gas Production Sharing Agreement, and in the event of any 22 inconsistencies between this Section 5 and the provIsIons of the Gas Production Sharing Agreement goveming scheduling, the terms of the Gas Production Sharing Agreement shall govern. (b) The quantity to be supplied by FGU shall be stated on a daily basis and nominated monthly by Project Participant, as otherwise agreed to in accordance with the provisions hereof, or with respect to Project Participant, in accordance with its Gas Entitlement Share. (c) It will be Project Participant's responsibility to notify FGU of any variations in Project Participant's daily Gas usage rate. Project Participant will provide FGU with its natural gas requirements in such a manner to allow FGU to effectively arrange for the required Gas transportation and associated services and as required by the Gas Production Sharing Agreement, in a timely and cost effective manner for Project Participant. The actual details of such daily and monthly information requirements will be mutually agreed upon by the parties and may change from time to time to meet varYing conditions. (d) Project Participant shall advise FGU of any change in any of the gas requirements at Project Participant's Point(s) of Delivery as soon as is reasonably possible to allow FGU to make necessary adjustments in other Project Participants' or customers' gas volume nominations to avoid imbalances and penalties and to fully comply with the Gas Production Sharing Agreement. (e) FGU will promptly notify Project Participant of all pipeline operating conditions, including but not limited to operational flow orders and alert days for which Project Participant may be subject to costs or penalties as a result of noncompliance. If Project Participant does not fully comply with such operational requirements, Project Participant will assume full liability for any noncompliance. (f) Title to the Gas transported for Project Participant with its own transportation contracts will pass to such Project Participant upon and concurrently with the purchase thereof by FGU from PGP. Title to Gas purchased for transportation under the Aggregate Transportation Contracts will pass upon delivery by FGU to Project Participant at Project Participant's Point(s) of Delivery. (g) Although PGP or FGU may hold title to the Gas during the transportation process to Project Participant's Point(s) of Delivery under paragraph (e) above, Project Participant shall bear the full risk of loss for all such Gas during such transportation by FGU on Transporter's system or otherwise, including but not limited to, injury, loss or damage caused by the 23 Gas during the transportation thereof and any economic or consequential damages to Project Participant for failure to deliver Gas or otherwise. Project Participant agrees, to the extent permitted by law, and pro rata with other Project Participant to the extent of its Gas provided hereunder, and/or its Gas Entitlement Share, in effect on the date of occurrence of the event giving rise to the claim, to indemnify and hold PGP or FGU harmless from any and all losses or damages sustained by PGP or FGU under this Agreement, the Gas Production Sharing Agreement, or otherwise, including any and all suits, actions, damages, losses, and expenses arising out of adverse claims of any persons, including Project Participant, to such Gas or the title thereto, regardless of the party responsible for its delivery, or to royalties, taxes, license fees, or charges thereon, and from any and all liability to any persons, including Project Participant, or for any property damage, occasioned by PGP or FGU holding title to Gas for benefit of Project Participant. (h) Except as otherwise expressly stated herein, neither the scheduling by Project Participant, nor the delivery by FGU of Gas in quantities less than Project Participant's Gas to be purchased hereunder or its Gas Entitlement Share, or the curtailment by FGU or the under utilization by Project Participant of its transportation entitlements under any other agreement with FGU or otherwise, shall relieve Project Participant of its payment obligations under this Agreement, including those set forth in Sections 3 and 4 hereof. SECTION 6. Point(s) of Delivery. Gas scheduled by Project Participant pursuant to Section 5 of this Agreement will be delivered at Project Participant's Point or Points of Delivery, which such party shall designate to FGU in writing. The quantity of Gas actually delivered to Project Participant shall be adjusted to take into account Gas used or consumed in the transportation thereof to the Points of Delivery. SECTION 7. Curtailment. It is understood that, in the event of a capacity curtailment on the Transporter's system or other transportation system used by FGU which causes an interruption of transportation service, curtailment shall be implemented in accordance with Transporter's currently effective curtailment plan. 24 SECTION 8. Availability of Gas or Gas Entitlement Shares. Except as provided otherwise by this Agreement, and subject to the provisions of the Gas Production Sharing Agreement and any applicable Transportation Contracts or other transportation arrangements, Project Participant's Gas Entitlement Share, as the case may be, shall be made available in accordance with this Agreement during the term hereof. SECTION 9. Insurance. FGU shall carry such insurance as shall be carried in accordance with customary industry standards. SECTION 10. Annual Budget; Accounting. (a) At FGU's annual meeting each year, the Board of FGU shall adopt an Annual Budget for the next ensuing Fiscal Year and shall deliver the Annual Budget to each Project Participant prior to the beginning of each Fiscal Year. During each Fiscal Year, FGU, by action of its Executive Committee, may from time to time amend the Annual Budget. (b) FGU agrees to keep accurate records and accounts in accordance with generally accepted accounting principles, consistently applied. Said accounts shall be audited annually by a firm of certified public accountants, experienced in govemmental accounting and electric and gas utility company accounting and of suitable reputation, to be employed by FGU. A copy of each annual audit, including all written comments and recommendations of such accountants, shall be furnished by FGU to Project Participant not later than one hundred fifty (150) days after the end of each Fiscal Year. Project Participant shall have the right to audit the books and records of FGU from time to time, upon reasonable notice, to the extent necessary to verify the Costs and, with respect to Project Participant, payable hereunder. SECTION 11. Information to be Made Available. (a) Based, in each case, upon the data most recently available to FGU pursuant to the Gas Production Sharing Agreement or Financial Instruments, FGU will fumish or otherwise make available to Project Participant all information related to Gas supply or pricing of Gas, which FGU receives under the Gas Production Sharing Agreement or any Financial Instrument and all transportation costs under the Transportation Contracts, where available to FGU, and will prepare and issue to Project Participant reports each quarter of the Fiscal Year on the status of the Annual Budget. (b) Project Participant shall, upon request, furnish to FGU all such information, certificates, certified copies of official proceedings, engineering 25 reports, feasibility reports, information relating to its system, Transportation Contracts, financial statements, opinions of counsel (including the opinion required by subsection (c) hereof), official statements and other documents as FGU shall be reasonably requested to deliver pursuant to the services provided under this Agreement. (c) Project Participant shall at the time requested by FGU, cause an OpInIOn or opinions (i) in substantially the form attached hereto as Appendix 3 to be delivered by one or more attomeys or firms of attorneys satisfactory to FGU with respect to the authorization, execution and validity of this Agreement or any Financial Instrument, as it relates to Project Participant, and, if Project Participant shall have bonds or other obligations outstanding secured by a pledge of revenues of its System, the legality under the terms and conditions of the ordinance, resolution, indenture or other contractual arrangement with the holders of such bonds, of the performance by Project Participant of its covenants and agreements under this Agreement, and (ii) in such other form as may be required under the Gas Production Sharing Agreement, Financial Instrument or this Agreement and with respect to Project Participant, the Bond Resolution or bond purchase agreement executed in connection with the sale and delivery of the Bonds. (d) Project Participant shall provide to FGU, or its designees, on a timely basis and in such form as shall be reasonably requested by either, any and all documents, releases, financial statements and other information necessary to enable FGU to comply with any disclosure or other reporting requirement, including but not limited to Rule 15c2-12 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934 (the "Rule"), no~ or hereafter imposed by the United States of America, the State of Florida, or any political subdivision or agency of either having jurisdiction over the issuance of any debt obligations for the acquisition of gas, by law, judicial decision, regulation, rule or policy. Such information shall be provided by Project Participant from time to time promptly following the occurrence of a "material event" as described in the Rule, and as otherwise may be requested by FGU, or its designees, but in any case, no less frequently than shall enable FGU or the underwriters or broker/dealers of the obligations of FGU, or such Project Participant, to comply with any such law, judicial decision, regulation, rule or policy. In addition to the foregoing, Project Participant will provide to FGU, or its designee, annually, promptly upon its preparation, but no later than one hundred fifty (150) days after the end of its Fiscal Year, a copy of its annual audit and such other financial and other records as may be required by the issuer of any credit facility or bond insurance policy or other security instrument securing all or any part of FGU'sbonds or other indebtedness. 26 Project Participant further agrees to enter into a continuing disclosure agreement or other undertaking as may be reasonably required by the original purchaser of those obligations contemplated pursuant to the Bond Resolution, in order to comply with the Rule. SECTION 12. Project Participant Representations and Warranties; Covenants. (a) Additional Bonds may be sold and issued in accordance with the provisions of the Bond Resolution at any time and from time to time (i) if, for any reason, the proceeds derived from the sale of Bonds prior to such time shall be insufficient for the purpose of paying Costs or (ii) to refund all or a part of the Bonds previously issued thereunder in accordance with clause (c) below. (b) Any such additional Bonds shall be secured by the pledge, made pursuant to the provisions of Section 13 hereof, of the payments required to be made by Project Participant under Sections 3 and 4 of this Agreement and all other payments attributable to the Project to be made in accordance with or pursuant to any other provision of this Agreement, as such payments may be increased, decreased and/or extended by reason of the issuance of such additional Bonds, and such additional Bonds may be issued in amounts sufficient to pay the full amount of such Costs referred to in clause (a) above and to provide such reserves as may be reasonably determined to be desirable. Any such additional Bonds issued in accordance with the provisions of this Section 12 and secured by the pledge of payments to be made in accordance with the provisions of this Section 12 and Section 13 hereof, may rank pari passu as to the security afforded by the provisions of this Agreement with all Bonds theretofore issued pursuant to and secured in accordance with the provisions of this Agreement or the Bond Resolution. (c) In the event Costs may be reduced by the refunding of any Bonds then outstanding or in the event it shall otherwise be advantageous to refund any Bonds, Refunding Bonds may be issued and sold in accordance with the Bond Resolution to be secured by the pledge, made pursuant to the provisions of Section 13 hereof, of this Agreement and of the payments required to be made by Project Participant under Sections 3 and 4 of this Agreement and all other payments to be made in accordance with or pursuant to any other provision of this Agreement. Any such Refunding Bonds issued in accordance with the provisions of this Section 12 and secured by the pledge of such payments may rank pari passu as to the security afforded by the provisions of this Agreement with all Bonds theretofore issued pursuant to and secured in accordance with the provisions of this Agreement. 27 (d) Project Participant covenants that it will not make any sales of its Gas Entitlement Share, or take any other action or omit to take any action, which, if taken or omitted, would adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes. Without limiting the foregoing, because the sale of Gas from its Gas Entitlement Share to persons other than state or local governments pursuant to certain contracts may adversely affect the exclusion of interest from gross income for Federal income tax purposes, Project Participant covenants that Project Participant has entered into no contracts of more than thirty (30) days' duration for the sale of Gas to persons other than state or local governments except contracts provided to FGU and that no such contracts shall be entered into unless it shall have been determined that such contracts will not adversely affect the exclusion of interest on the Bonds from gross income for Federal income tax purposes, of any holder thereof. (e) Project Participant agrees (a) to maintain its System in good repair and operating condition; (b) to cooperate with FGU in the performance of the respective obligations of such Project Participant and FGU under this Agreement, the Gas Production Sharing Agreement and all Financial Instruments; and (c) to establish, levy and collect rents, rates and other charges for the products and services provided by its System, which rents, rates, and other charges shall be at least sufficient (i) to meet the operation and maintenance expenses of such System, (ii) to comply with all covenants pertaining thereto contained in, and all other provisions of, any resolution, trust indenture, or other security agreement relating to any bonds or other evidence of indebtedness issued or to be issued by Project Participant, including, without limitation, all deposit requirements to pay debt service, fund debt service and operating reserves and to pay ongoing project costs hereunder, (iii) to generate funds sufficient to fulfill the terms of all other contracts and agreements made by Project Participant, including, without limitation, this Agreement and to fulfill its pro rata obligations of FGU under the Gas Production Sharing Agreement, and Financial Instruments, and to budget, appropriate and make all payments required hereunder in each fiscal year of Project Participant during the term hereof, and (iv) to pay all other amounts payable from or constituting a lien or charge on the revenues of its System. (f) Project Participant further agrees that for good and valuable consideration and for the purpose of obtaining a source of gas supply upon favorable terms and price it will not take any action, except as permitted by Section 25(c) hereof which, if Project Participant is a Member, will lead to its withdrawal as a Member of FGU or if a Project Participant of PGP Gas Project No.1 and not a Member, will lead to a withdrawal or other termination of its status as a Project Participant during the term of this Agreement; and that if a Member of FGU it will not vote for or otherwise 28 participate in any action to dissolve or otherwise terminate the existence of FGU or if a Project Participant, the status of such Project, during the term of this Agreement. (g) Project Participant hereby represents that it has not entered into, nor is it a party, directly or indirectly to, any contract, agreement or understanding, whether oral or written, the provisions of which would or might be breached by Project Participant's execution of this Agreement or the performance by it of its obligations hereunder. (h) Project Participant hereby covenants that, unless and until it shall sell all or substantially all of its System in accordance with the provisions of Section 25(c) hereof, it will maintain its present existence as a public body to the full extent permitted by its charter and other governing instruments, the Constitution and laws of the State of Florida. (i) Project Participant hereby makes the following representations and warranties to FGU: (1) Project Participant is a municipality, duly organized and validly existing under the laws of the State of Florida and in good standing under the laws of the State of Florida, and has the power and authority to own its properties, to carryon its business as now being conducted, and to execute, deliver, and perform this Agreement. (2) The execution, delivery, and performance by Project Participant of this Agreement have been duly authorized by all necessary corporate action of Project Participant and do not and will not require, subsequent to the execution of this Agreement by Project Participant, any consent or approval of the governing body or any officers of Project Participant, any consent or approval of any third party, or any other govemmental consents or approvals. (3) This Agreement is the legal, valid, and binding obligation of Project Participant, enforceable in accordance with its terms, except as such enforceability may be subject to (i) the exercise of judicial discretion in accordance with general principles of equity and (ii) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights. (4) There is no action, suit, proceeding, inquiry, or investigation at law or in equity, before or by a court, a public board, or another body, pending (i.e., as to which Project Participant has received service of process) or, to Project Participant's knowledge, threatened, against or affecting Project Participant (or, to Project Participant's knowledge, any meritorious basis therefor) (i) attempting 29 to limit, enJOIn, or otherwise restrict or prevent Project Participant from functioning, or contesting or questioning the existence of Project Participant, or the titles of the present officers of Project Participant to their offices; or (ii) wherein an unfavorable decision, ruling, or finding would (a) materially adversely affect the existence or powers of this Agreement or any other agreement or instrument to which Project Participant is a party and which is used or contemplated for use in the consummation of the transactions contemplated by this Agreement, or (b) materially adversely affect (1) the financial condition or results of operations of Project Participant or (2) the transactions contemplated by this Agreement. (5) The execution and delivery by Project Participant of this Agreement and its compliance with its provisions will not conflict with or constitute on Project Participant's part a violation of, breach of, or default under (i) any of Project Participant's governing instruments, (ii) any Constitutional provision or statute, indenture, mortgage, lease, resolution, note agreement, or other agreement or instrument to which Project Participant is a party or by which Project Participant is bound, or (iii) any order, rule or regulation of any court or governmental agency or other body having jurisdiction over Project Participant or any of its properties. (6) Any certificate signed by an authorized officer of Project Participant delivered in accordance with this Agreement or the Gas Production Sharing Agreement shall be deemed a representation and warranty by Project Participant as to the statements made therein. SECTION 13. Pledge of Payments. All right, title and interest of FGU in, to and under this Agreement and all payments required,to be made by Project Participant pursuant to the provisions of Sections 3 and 4 hereof, and all other payments to be made in accordance with or pursuant to any other provision of this Agreement, may be pledged and assigned, in whole or in part, for the payment of Bonds, subject to application in accordance with the provisions of the Bond Resolution or for other such payments required to be made by FGU pursuant to the Gas Production Sharing Agreement or, if permitted by the Bond Resolution or such agreement, any Financial Instrument, to secure the payment of Bonds and any obligations of Project Participant authorized by this Agreement, Financial Products or Costs, and Project Participant hereby expressly acknowledges and consents thereto. In this regard, the assignment and pledge may expressly provide for the order and priority of the pledge for the payment of Costs and for the payment of the specified obligations of either FGU, PGP or Project Participants. 30 SECTION 14. Event of Default. Failure of Project Participant to make to FGU when due any of the payments for which provision is made in this Agreement shall constitute an immediate default on the part of Project Participant. SECTION 15. Continuing Obligation, Right to Discontinue Service. In the event of any default referred to in Section 14 hereof, Project Participant shall not be relieved of its liability for payment of the amounts in default and FGU shall have the right to recover from Project Participant any amount in default. In enforcement of any such right of recovery, FGU may bring any suit, action, or proceeding in law or in equity, including mandamus, injunction, specific performance, declaratory judgment, or any combination thereof, as may be necessary or appropriate to enforce any covenant, agreement or obligation to make any payment for which provision is made in or contemplated by this Agreement or Financial Instrument, against Project Participant, and FGU may, upon five (5) days written notice to Project Participant, cease and discontinue, either permanently or on a temporary basis, providing all or any portion of the Gas sold hereunder or Project Participant's Gas Entitlement Share. SECTION 16. Transfer of Gas Entitlement Shares Following Default. In the event of a default by Project Participant and permanent discontinuance of service under this Agreement pursuant to Section 15, FGU is hereby appointed the agent of Project Participant for the purpose of disposing of Project Participant's Gas Entitlement Share and as such agent, FGU shall proceed to dispose of the defaulting Project Participant's Gas Entitlement Share as follows: (a) FGU shall, as soon as possible, terminate any spot, short term or terminable supply of Gas that Project Participant may otherwise have the right to receive from FGU that Project Participant has not otherwise paid for. (b) FGU shall then, with respect to long term or non-terminable Gas, pursuant to the Gas Production Sharing Agreement and this Agreement, offer to transfer to all other nondefaulting Project Participants, a pro rata portion of the defaulting Project Participant's Gas Entitlement Share which shall have been discontinued by reason of such default. Any part of such Gas Entitlement Share of a defaulting Project Participant which shall be declined by any nondefaulting Project Participant shall be reoffered pro rata to the nondefaulting Project Participant which have accepted in full the first such offer; such reoffering shall be repeated until the defaulting Project Participant's Gas Entitlement Share has been reallocated in full or until all nondefaulting Project Participant have declined to take any portion or 31 additional portion of the defaulting Project Participant's Gas Entitlement Share. (c) In the event less than all of a defaulting Project Participant's Gas Entitlement Share shall be accepted by the other nondefaulting Project Participants, pursuant to clause (b) above, FGU shall, to the extent permitted by law, use its reasonable best efforts to sell the remaining portion of a defaulting Project Participant's Gas Entitlement Share for the remaining term of the defaulting Project Participant's PGP Gas Supply Agreement with FGU. The purchases shall be reasonably acceptable to any credit provider with respect to the Bonds, and the agreement for such sale shall contain such terms and conditions as will not adversely affect the security for the Bonds afforded by the PGP Gas Supply Agreement of such defaulting Project Participant, including provisions for discontinuance of service upon default and as are otherwise acceptable to FGU, and such purchases shall, in the determination of FGU, not adversely affect the exclusion from gross income for Federal income tax purposes of interest on the Bonds; in the event of default and discontinuance of service under such agreement, the Gas Entitlement Share sold pursuant to such agreement shall be offered and transferred as provided for defaulting Project Participants in this Section 16. (d) Any portion of the Gas Entitlement Share of a defaulting Project Participant transferred pursuant to this Section to a nondefaulting Project Participant in accordance with clause (c) above, shall become a part of and shall be added to the Gas Entitlement Share of each transferee Project Participant effective on and as the date of transfer, and the transferee Project Participant shall be obligated to pay for its Gas Entitlement Share increased as aforesaid, as if the Gas Entitlement Share of the transferee Project Participant in the PGP Gas Supply Agreement with FGU had been stated originally to increase as aforesaid on the effective date of the transfer. (e) In the event less than all of a defaulting Project Participant's Gas Entitlement Share shall be sold or transferred pursuant to the foregoing clauses of this Section 16, FGU shall, to the extent permitted by law, use its reasonable best efforts to sell the remaining portion of a defaulting Project Participant's Gas Entitlement Share on such terms and conditions as are acceptable to FGU. The defaulting Project Participant shall remain liable for all payments to be made on its part pursuant to this Agreement, except that the obligation of the defaulting Project Participant to pay FGU shall be reduced to the extent that payments shall be received by FGU for that portion of the defaulting Project Participant's Gas Entitlement Share which may be transferred or sold as provided in this Section 16. 32 Each nondefaulting Project Participant whose payments hereunder are increased as a result of the defaulting Project Participant's (or its successor's) failure to take its Gas Entitlement Share or to make any required payments hereunder shall have a cause of action against such defaulting Project Participant for the amount of damages suffered as a result of default. FGU shall reasonably cooperate with such nondefaulting Project Participant in any action brought against the defaulting Project Participant upon the receipt of an indemnification agreement satisfactory to FGU of any costs and expenses it may incur in connection with such action. SECTION 17. Other Default by Project Participant. In the event of any default by Project Participant under any other covenant, agreement or obligation of this Agreement other than Section 14 hereof, which shall be governed by Sections 15 and 16 hereof, FGU may bring any suit, action, or proceeding in law or in equity, including mandamus, injunction, specific performance, declaratory judgment, or any combination thereof, as may be necessary or appropriate to enforce any covenant, agreement or obligation of this Agreement against Project Participant. Such remedies shall be in addition to all other remedies provided for herein. SECTION 18. Default by FGU. In the event of any default by FGU under any covenant, agreement or obligation of this Agreement, Project Participant's remedy for such default shall be limited to mandamus, injunction, action for specific performance or any other available equitable remedy designed to enforce any covenant, obligation or agreement of FGU hereunder as may be necessary or appropriate. SECTION 19. Abandonment of Remedy. In case any proceeding taken on account of any default shall have been discontinued or abandoned for any reason, the parties to such proceedings shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of FGU and Project Participant shall continue as though no such proceedings had been taken. SECTION 20. Waiver of Default. Any waiver at any time by either FGU or Project Participant of its rights with respect to any default of the other party hereto, or with respect to any other matter arising in connection with this Agreement, shall not be a waiver with respect to any subsequent default, right or matter. 33 SECTION 21. Instruments. Relationship to and Compliance with Other (a) It is recognized by the parties hereto that FGU, in undertaking, or causing to be undertaken, the planning, acquisition, and supply of Gas hereunder, may be required to comply with the applicable requirements of the Bond Resolution, the Gas Production Sharing Agreement, the Financial Instruments and all licenses, permits and regulatory approvals necessary therefor, and it is therefore agreed that the performance of FGU under this Agreement is made subject to the terms and provisions of the Bond Resolution, the Gas Production Sharing Agreement, Financial Instruments and all such licenses, permits and regulatory approvals. (b) FGU covenants and agrees to use its best efforts for the benefit of Project Participant to comply in all material respects with all terms, conditions and covenants of the Gas Production Sharing Agreement and all licenses, permits and regulatory approvals relating thereto. FGU shall diligently pursue all rights and remedies set forth in the Gas Production Sharing Agreement and Project Participant shall fully cooperate with FGU in such endeavor, perform such obligations as may be required by Project Participant to enable FGU to do so, and pay all of the Costs for which it shall be obligated hereunder. SECTION 22. Measurement of Gas. All Gas delivered hereunder shall be metered at the Point(s) of Delivery by meters operated by Transporter, or as the parties shall otherwise agree. SECTION 23. Liability of Parties. (a) Except as otherwise herein provided, FGU and Project Participant shall each assume full responsibility and liability for the maintenance and operation of their respective properties and each shall, to the extent permitted by law, indemnify and save harmless the other from all liability and expense on account of any and all damages, claims, or actions, including injury to or death of persons arising from any act or accident in connection with the installation, presence, maintenance and operation of the property and equipment of the indemnifying party and not caused by the negligence of the other party; provided that any liability which is incurred by FGU hereunder and not covered, or not covered sufficiently, by insurance shall be paid solely from the revenues of FGU derived from sales of Gas and other services under this Agreement, and any payments made by FGU, or which FGU is obligated to make, to satisfy such liability shall become part of Costs. The indemnification provided for herein shall include any liability or 34 obligations for which FGU is obligated to indemnify PGP pursuant to the Gas Production Sharing Agreement. (b) For purposes of any indemnification under this Section 23, (1) promptly after the party seeking indemnification (the "Indemnified Party") learns of any event or circumstance, including, without limitation, any claim or assertion by a third party that, in the judgment of the Indemnified Party, may give rise to a claim for indemnification hereunder (each such claim being referred to as a "Loss" and collectively as "Losses"), the Indemnified Party shall deliver to the party from which indemnification is sought (the "Indemnifying Party") a certificate (the "Certificate"), which Certificate shall: (i) state that the Indemnified Party has incurred or anticipates that it will incur a Loss for which such Indemnified Party is entitled to indemnification pursuant to this Agreement; and (ii) specify in reasonable detail each individual item of Loss included in the amount so stated, the date such item arose or was incurred, the basis for any anticipated Loss or Losses and the nature of the claim to which the Loss is related and the computation of the amount to which such Indemnified Party claims to be entitled hereunder; provided, however, that any failure or delay by the Indemnified Party in delivering a Certificate to the Indemnifying Party shall not affect the Indemnified Party's right to indemnification under this Section 23, except to the extent that the Indemnifying Party is able to establish damages resulting directly from such failure or delay. (2) If the Indemnifying Party objects to the claim for the indemnification by an Indemnified Party in respect of any Loss, the Indemnifying Party shall, within thirty (30) days after receipt by the Indemnifying Party of such Certificate, deliver to the Indemnified Party a written notice to such effect and the Indemnifying Party and the Indemnified Party shall, within the 30-day period beginning on the date of receipt by the Indemnified Party of such written objection, attempt in good faith to agree upon the rights of the respective parties with respect to each of such claim to which the Indemnifying Party shall have so objected. If the Indemnified Party and the Indemnifying Party shall succeed in reaching agreement on their respective rights with respect to any of such claims, the Indemnified Party and the 35 Indemnifying Party shall promptly prepare and sign a memorandum setting forth such agreement. (3) Notwithstanding any prOVISIOn hereof, if any claim for any Loss is asserted against FGU hereunder, FGU may, at its option, assume the defense of the Indemnified Party against such claim or may undertake any remedial action required in connection therewith or both (including the employment of counsel, and the payment of expenses), provided, however, that any failure or delay by the Indemnified Party in delivering such written notification to FGU of any such occurrence, event or circumstance, other than the filing of any such claim, action or proceeding, shall not affect the Indemnified Party's right to indemnification under this Section 23, except to the extent that FGU is able to establish its damages resulting directly from such failure or delay. (4) Until the Indemnifying Party shall have assumed the defense of the Indemnified Party against such claim following the delivery of such notice, the Indemnified Party may, but shall not be obligated to, undertake the defense of such claim on behalf of and for the account and risk of the Indemnifying Party, and if such Indemnified Party is entitled to indemnification under this Section 23, all legal or other expenses reasonably incurred by the Indemnified Party shall be borne by the Indemnifying Party. (5) Any Indemnified Party shall have the right to employ separate counsel in any such action or claim and to participate in the defense thereof, but except with respect to FGU, the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless (D the Indemnifying Party shall have failed, within ten (10) days after having been notified by the Indemnified Party of the existence of such claim as provided in the preceding sentence, to assume the defense of such claim or to notify the Indemnified Party in writing that it will assume the defense of such claim, or (ii) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party, and in each case above, FGU whether as an Indemnifying Party or an Indemnified Party shall have the right to assume full control of the defense of the claim or Loss in the manner provided below. (6) An appealable final judgment will not give rise to an indemnification payment obligation if and only to the extent that the Indemnifying Party diligently undertakes an appeal of such final judgment and posts a supersedeas bond or takes other action which prevents the execution of the final judgment pending the appeal. 36 Notwithstanding the foregoing (x) any liability or Loss incurred by FGU hereunder shall be paid in the manner provided above from the revenues of FGU derived from sale of Gas or other services hereunder, as a part of the Costs; (y) FGU shall in all events, at its option, have the right to assume the defense of any claim for any Loss whether against the Indemnifying Party or as an Indemnified Party and shall be entitled to be reimbursed for the full amount of any such costs of defense including fees and expenses of counsel in trial or on appeal; and (z) as a part of its control of the defense of any claim for Loss, FGU shall have the full right and authority to compromise or settle any such claim or Loss for and on behalf of and for the account and risk of the Indemnifying Party, the Indemnified Party and/or itself. (7) After any such claim has been filed or initiated, each party shall make available to the other and its attorneys and accountants all pertinent information under its control relating to such claim which is not confidential or proprietary in nature or which is made available under the terms of a confidentiality agreement or is delivered or obtained under appropriate protective orders satisfactory to such party and the parties agree to render to each other such assistance as they may reasonably require of each other in order to facilitate the proper and adequate defense of any such claim. (8) In no event shall the indemnification obligations of the Indemnifying Party under this Section 23, whether based on contract, warranty, tort (including negligence), strict liability or otherwise, extend to or include special, incidental, consequential or punitive damages of any kind whatsoever, except to the extent that the I Indemnified Party is obligated to pay any of such damages to a third party under any claim for which such indemnification is sought. SECTION 24. Sale of Project Participant's Excess Gas Entitlement Share. In the event Project Participant shall determine that all or any part of the Gas which can be supplied from Project Participant's Gas Entitlement Share are in excess of the requirements of Project Participant, or unless at the written request of Project Participant, FGU shall use its best efforts to sell and transfer on behalf of such Project Participant for any period of time all or any part of such excess Gas to such other Project Participant or Project Participants as shall agree to take such excess Gas, at such prices as may be agreed to, provided, however, that in the event the other Project Participants do not agree to take the entire amount of such excess, FGU shall have the right, to the extent permitted by law, to dispose of such excess to other parties. If all or any portion of such excess of the Gas sold hereunder or 37 Project Participant's Gas Entitlement Share, is sold pursuant to this Section 24, Project Participant's Gas and/or Gas Entitlement Share and resulting payments hereunder shall not be reduced, and Project Participant shall remain liable to FGU to pay the full amount due as if such sale had not been made; except that such liability shall be discharged to the extent that FGU shall receive payment for such excess from the purchaser or purchasers thereof and that any amounts received by FGU as payment for such excess which is greater than the liability owed by Project Participant to FGU in respect of such excess shall be promptly paid by FGU to Project Participant. Project Participant shall not take any action or fail to take any action which would adversely affect the exclusion from gross income for Federal income tax purposes of interest on any tax-exempt bonds of FGU, from the gross income of the holders thereof and/or Project Participant. SECTION 25. Assignment of PGP Gas Supply Agreement; Sale of Project Participant's System. (a) This Agreement shall inure to the benefit of and shall be binding upon the respective successors and assigns of the parties to this Agreement; provided, however, that, except as provided in Section 16 hereof, in the event of a default, and except for the assignment and pledge authorized by Section 13 hereof and by paragraph (b) of this Section 25 and for the assignments authorized by paragraph (c) of this Section 25, neither this Agreement nor any interest herein shall be transferred or assigned by either party hereto except with the consent in writing of the other party hereto. (b) Project Participant acknowledges and agrees that FGU may assign and pledge to the trustee designated in the Bond Resolution or any party to which it may be obligated under this Agreement, the Gas Production Sharing Agreement or under the Financial Instruments, all or any part of its right, title, and interest in, to and under this Agreement, and all payments to be made to FGU under the provisions of this Agreement as security for the payment of the principal (including sinking fund installments) of, premium, if any, and interest on Bonds, obligations thereunder, and may deliver possession of this Agreement to an agent of such party in connection therewith, and, upon such assignment and pledge, FGU may grant to such party any rights and remedies herein provided to FGU, and thereupon any reference herein to FGU shall be deemed, with the necessary changes in detail, to include such trustee which shall be a third party beneficiary of the covenants and agreements of Project Participant herein contained. (c) Project Participant agrees that, except as otherwise provided herein, it will not sell, lease, abandon or otherwise dispose of all or substantially all of its System except upon ninety (90) days prior written notice to FGU and, in any event, will not sell, lease, abandon or otherwise 38 dispose of the same unless the following conditions are met: (i) Project Participant shall, subject to the terms and conditions of the Gas Production Sharing Agreement, assign this Agreement and its rights and interest hereunder to the purchaser or lessee of said System, if any, and any such purchaser or lessee shall assume all obligations of Project Participant under this Agreement and shall have the financial capacity to do so; and (ii) FGU shall be permitted by then applicable law to sell Gas to said purchaser or lessee, if any; and (iii) FGU shall by appropriate action determine, in its sole discretion, that such sale, lease, abandonment or other disposition will not adversely affect the then existing ratings on the Bonds or FGU's ability to meet its obligations under the Gas Production Sharing Agreement or the Bond Resolution and will not adversely affect the value of this Agreement as security for the payment of Bonds and interest thereon or the Gas Production Sharing Agreement, or affect the exclusion from gross income of interest on the Bonds for federal income tax purposes or the exclusion of such interest as to bonds or other obligations which could be issued in the future. Notwithstanding the foregoing, but subject to the provisions of clause (iii) above, Project Participant may sell, lease, abandon or otherwise dispose of all or substantially all of its System and may assign this PGP Gas Supply Agreement and its rights and interests hereunder and be relieved of its obligations under this PGP Gas Supply Agreement upon the payment of sufficient funds, as determined by FGU, to cause the purchase of a pro rata part of the outstanding Bonds equal to Project Participant's then existing Gas Entitlement Share. (d) Project Participant, in making or accepting such assignment, shall agree to assume any costs incurred in reporting the assignment as a "material event" or such other event pursuant to the Rule or any successor provision, or any law, judicial decision, regulation, rule or policy now or hereafter imposed by the United States of America, the State of Florida, or any political subdivision or agency of either having jurisdiction over such matters, requiring any such reporting. (e) Notwithstanding any other provision of this Section 25, Project Participant agrees that it will not assign or transfer any of its rights hereunder without first obtaining and delivering to FGU and the bond trustee serving as such under the Bond Resolution, an opinion of counsel nationally recognized as experts on the subject of municipal bonds and acceptable to the Trustee and FGU, to the effect that such transfer will not cause interest on the Bonds to be includable in gross income of the holders thereof for federal income tax purposes. 39 SECTION 26. Termination or Amendment. (a) This Agreement shall not be terminated by either party under any circumstance, whether based upon the default of the other party under this Agreement or any other instrument or otherwise except as specifically provided in this Agreement. (b) This Agreement shall not be terminated, amended, modified, or otherwise altered in any manner that will adversely affect the security for any obligations authorized by FGU afforded by the provisions of this Agreement upon which the owners from time to time of the Bonds or PGP shall have relied as an inducement to purchase and hold the Bonds or enter into the Gas Production Sharing Agreement, so long as any of the Bonds or such obligations or the obligations of the Gas Production Sharing Agreement or Financial Instruments entered into by FGU, in its name, or on behalf of some or all of Project Participants shall rely thereupon. So long as any of such obligations are outstanding or until adequate provisions for the payment thereof have been made in accordance with the provisions of the instruments authorizing such obligations, this Agreement or Financial Instruments, shall not be terminated, amended, modified, or otherwise altered in any manner which will reduce the payments pledged as security for such obligations or extend the time of such payments provided herein or which will in any manner impair or adversely affect the rights of the owners from time to time of such obligations. (c) No PGP Gas Supply Agreement entered into between FGU and another Project Participant may be amended so as to provide terms and conditions substantially different from those herein contained, except upon written notice to and written consent or waiver by each of the other Project Participants, and upon similar amendment being made to the PGP Gas Supply Agreement of any other Project Participants requesting such amendment after receipt by such Project Participant of notice of such amendment. In such event, no such amendment shall cause any increase in Costs or other increased obligations or burdens to those Project Participants who do not sign substantially similar amendments. (d) It is recognized by FGU and Project Participant that in the future, conditions may arise which will cause certain of the provisions of Sections 5, 6, 7 and 25 hereof to be inappropriate. In such event, FGU and Project Participant agree to negotiate in good faith and amend such provisions to reflect conditions prevailing at such times, provided that such amendments shall not (i) adversely affect the payment of Debt Service on the Bonds or the obligations under the Gas Production Sharing Agreement, and (ii) in the opinion of FGU's then existing bond counsel, adversely affect the 40 exclusion of interest on the Bonds from gross income for federal income tax purposes. SECTION 27. Force Majeure. (a) In the event that either PGP, FGU or Project Participant ("Party" or "Parties"), is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement or any subsequent service agreement between the Parties contemplated herein, other than the obligation of Project Participant to make payments due hereunder, including the payment of Costs and other amounts due under Sections 3 and 4, it is agreed that with respect to PGP, the terms and provisions of the Gas Production Sharing Agreement shall apply, and with respect to this Agreement, upon such Party giving notice and full particulars of such force majeure in writing to the other Party as soon as possible after the occurrence of the cause relied on, then the obligations of the Party giving such notice (other than the obligation to make payments due), so far as they are affected by such force majeure, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall as far as possible be remedied with all reasonable dispatch. It is further agreed that except for the obligation to make payments due, neither FGU nor Project Participant shall be liable to the other for any damage occasioned by force maJeure. (b) In the event of any nonperformance caused by any of the forces described in clause (c) the Party affected shall within twenty-four (24) hours promptly notify the other Party verbally, and within two (2) working days of nonperformance provide the other Party with written confirmation of the nature, cause, date of commencement and anticipated extent of such nonperformance. (c) The term "force majeure" shall have the meaning as set forth in the Gas Production Sharing Agreement, to the extent applicable to the parties hereto, and as employed in this Agreement shall mean acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, freezes, washouts, arrests and restraints of governments and people, civil disturbances, explosions, breakage or accidents to machinery or lines of pipe, the necessity for making repairs or alterations to machinery or lines of pipe (other than regularly scheduled or routine maintenance), freezing of wells or lines of pipe, planned or unplanned outages, disruptions or curtailments by Transporter, Project Participant or other parties in the transportation of the Gas, partial or entire failure of source of supply, acts of civil or military authority (including, but not limited to, courts or administrative or regulatory agencies), and any other similar or 41 related cause, whether or not enumerated herein, and whether caused or occasioned by or happening on account of the act or omission of FGU or Project Participant or any other person or concern, not reasonably within the control of the Party claiming suspension and which by the exercise of due diligence such Party is unable to prevent or overcome; such term shall likewise include, without limitation; (1) in those instances where either Party is required to obtain servitude, rights of way grants, permits or licenses to enable such Party to fulfill its obligations hereunder, the inability of such Party to acquire, or the delays on the part of such Party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such servitude, rights of way grants, permits or licenses; and (2) in those instances where either Party is required to furnish materials and supplies for the purpose of constructing or maintaining facilities or is required to secure grants or permissions from any governmental agency to enable such Party to fulfill its obligations hereunder, the inability of such Party to acquire, or the delays on the part of such Party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such materials and supplies, permits and permissions. (d) The settlement of strikes or lockouts shall be entirely within the discretion of the Party having the difficulty, and the above requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing Party when such course is inadvisable in the discretion of the Party having the difficulty. (e) If a force majeure prevents or curtails PGP's or FGU's delivery of Gas under the Gas Production Sharing Agreement, FGU shall use reasonable efforts to locate and make available to Project Participant Gas from an alternative source at the then prevailing prices as FGU may reasonably determine, until the force majeure affecting the supply of Gas has ended. (f) Consistent with Section 4(d), a force majeure affecting the supply of Gas or its transportation or delivery to Project Participant shall not relieve Project Participant of its payment obligations under this Agreement including, without limitation, its obligations under Section 3(b) and the payment for any replacement Gas, at the then prevailing price. 42 SECTION 28. Project Participant Representative. Project Participant shall appoint from time to time by motion or resolution of its governing body and provide to FGU evidence thereof, and written notice of the name, mailing address, telephone number and facsimile transmission number of one or more employees or agents with authority to give instructions required by this Agreement and otherwise exercise decisions by Project Participant required under this Agreement (the "Project Participant Representative"). (a) Project Participant Representative, or its designee as provided below, shall represent Project Participant in giving and receiving notices and directives regarding the routine operational decisions, which decisions may be relied upon by FGU and shall be contractually binding upon Project Participant. (b) Project Participant Representative may also, if so stated, represent Project Participant in giving and receiving notices, Directives, taking actions or making decisions required or that may be exercisable under this Agreement or Financial Products provided by any Financial Instrument hereunder, in each case, for and on behalf of Project Participant. Such Financial Products may involve those risks and have characteristics similar to those set forth in Exhibit A hereto. The decisions of Project Participant Representative may be relied upon by FGU and such action and the due authorization, execution and delivery of such Directives shall be contractually binding upon Project Participant. (c) Project Participant Representative may from time to time designate an operational representative to discharge its duties and obligations as set forth in subsection (1) above. (d) Notices and directives between Project Participant Representative, its designee, and FGU may be transmitted orally when not required to be in writing, provided that all such notices and directives shall be promptly confirmed by a written notice as authorized by this Agreement. SECTION 29. Notice and Computation of Time. Any notice or demand under this Agreement shall be in writing, and shall be deemed given in writing and properly given if sent by (i) telegraphic, cable or wireless transmission (including by telecopy, facsimile, e-mail or other electronic transmission, with appropriate hard copy being made available) or (ii) delivery to an ovemight courier or delivery service company in a sealed prepaid wrapper, or (iii) certified mail, postage prepaid, in each case to the number or address set forth below, or to such other number or 43 address as a party hereto may give the other by notice given in accordance with the provisions in this section. To FGU: Florida Gas Utility Attn: General Manager 4619 NW 53rd Avenue Gainesville, Florida 32606 To Project Participant: Clearwater Gas System 400 N. Myrtle Avenue Clearwater, FL 33755 Attention: Mr. Brian Langille Unless otherwise specified herein, a notice is considered effectively given when it is received by the intended recipient, or when the intended recipient refuses delivery. If a notice is mailed by certified mail, or sent by courier or delivery service, to the address of the intended recipient specified above (or such other address as the intended recipient has previously specified in a written notice pursuant to the provisions hereof), the notice. shall be presumed to have been received or refused by the intended recipient on the date indicated on the receipt or return invoice. SECTION 31. Applicable Law; Construction. This Agreement is made under and shall be governed by the laws of the State of Florida. Headings herein are for convenience only and shall not influence the construction hereof. SECTION 32. Severability. If any section, paragraph, clause or provision of this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid, the remainder of this Agreement shall remain in full force and effect as though such section, paragraph, clause or provision or any part thereof so adjudicated to be invalid had not been included herein. (Remainder of page intentionally left blank.) 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their proper officers respectively, being thereunto duly authorized, and their respective seals to be hereto affixed, as of the day and year first above written. FLORIDA GAS UTILITY Attest: ~~~ By: ,dMJ Title: _ ~K (Seal) CITY OF CLEARWATER, FLORIDA Project Participant CountersIgned: &:A>r Mayor-Commissioner By#j[)A4AA-t5.~.. --rr WIt-- {....l fIh-'1 B, /!tJ L' {t/{ .Il City Manager [!tv Ut L, p;wski istant City Attorney Attest: C~[)f~. Qor~ City ~lerk -::.~~> . ../'- ,;.--- # 2224887_v2 45