AGENCY AGREEMENT
This Agency Agreement ("Agency Agreement") dated the 1st day of December,
1996, is entered into between Public Service Company of North Carolina, Inc., a
North Carolina corporation ("Principal"), and Sonat Public Service Company
L.L.C., a Delaware limited liability company ("SPSC").
WHEREAS, Principal is a party to numerous firm transportation and storage
contracts providing for transportation and storage of natural gas on its behalf
by various interstate pipeline companies (including any such contracts to which
Principal shall be party during the term of this Agency Agreement, collectively
the "Contracts"); and
WHEREAS, from time to time Principal has unused firm transportation and/or
storage capacity under its Contracts ("Unused Capacity") that it desires to
release temporarily to third parties in accordance with the rules and
regulations of the Federal Energy Regulatory Commission ("FERC"); and
WHEREAS, in view of SPSC's expertise in the utilization and marketing of
interstate pipeline capacity, Principal desires to have SPSC handle the
marketing of Principal's Unused Capacity on its behalf.
NOW, THEREFORE, the parties hereby agree as follows:
1. Subject to the provisions of Section 3 hereof, Principal hereby appoints
and authorizes SPSC as its sole and exclusive agent for marketing Principal's
Unused Capacity to third parties in accordance with the FERC's rules and
regulations and the tariffs of the applicable interstate pipelines. As agent for
Principal, SPSC shall have the authority to perform all functions necessary to
carry out its responsibilities hereunder, including but not limited to, the
authority to post all Unused Capacity for bid on the electronic bulletin board
of the applicable interstate pipeline and to specify all of the terms applicable
to the proposed release of capacity.
In addition to the foregoing, Principal and SPSC expressly recognize and
agree that SPSC shall have the right to itself acquire from time to time some or
all of Principal's Unused Capacity and that it shall be entitled to do so on a
prearranged basis in accordance with the FERC's rules and regulations, provided
that SPSC is willing to pay Principal an amount for such Unused Capacity that is
not less than the gross compensation received in connection with the same or
similar transactions between Principal and non-affiliated parties.
2. SPSC hereby acknowledges and agrees that Principal shall have the sole
and exclusive right to determine:
(a) the time period for the release of any Unused Capacity;
(b) the location and path of any Unused Capacity to be released;
(c) the quantity of Unused Capacity to be released at any time;
(d) any and all conditions on which such Unused Capacity may be recalled
by Principal;
(e) the methodology to be used to select the successful bidder other than
the methodology specified in the applicable pipeline's tariff;
(f) any applicable rate requirements such as minimum rates, volumetric
rates or reservation rates.
3. SPSC hereby agrees that during the term of this Agency Agreement it will
undertake to market Principal's Unused Capacity in such a manner as to maximize
the revenues received by Principal in connection with all Unused Capacity
released by Principal. Principal hereby agrees that in the event and to the
extent it chooses to release any of its Unused Capacity, SPSC will have the sole
and exclusive right to remarket such Unused Capacity pursuant to the terms of
this Agency Agreement; provided, however, that in the event that Principal has
the opportunity to utilize its Unused Capacity to make a "secondary market
transaction" (as defined in the North Carolina Utilities Commission ("NCUC")
December 22, 1995 "Order Approving Stipulation" in Docket No. G-100, Sub 67), it
shall promptly advise SPSC of such opportunity and SPSC, as its agent, shall be
obligated to implement that transaction unless SPSC has an alternative secondary
market transaction which would utilize the same capacity and which would yield a
higher rate than the transaction proposed by Principal.
4. Principal hereby agrees to cooperate with SPSC in developing such
procedures, to furnish to SPSC such information, and to execute such further
agreements as may be reasonably necessary in order for SPSC to fulfill its
obligations as agent under this Agency Agreement. SPSC shall be entitled to rely
and shall be fully protected in relying on all information provided to it by
Principal in connection with its responsibilities hereunder.
5. This Agency Agreement shall become effective as of the date first stated
above and shall remain in full force and effect for a period of ten years from
said date. Notwithstanding the foregoing, Principal shall be entitled to
terminate this Agreement (i) in the event and effective on the date that neither
PSNC Production Corporation nor any other affiliate of Principal (a "PSNC
Affiliate") holds a membership interest in SPSC (such date shall be referred to
herein as the "Withdrawal Date") provided that Principal has given SPSC written
notice no less than five days prior to the Withdrawal Date of its intent to
terminate this Agreement on the Withdrawal Date or (ii) in the event that the
NCUC by final and unappealable order (excluding any order approving a settlement
voluntarily entered into by Principal other than a settlement voluntarily
entered into by Principal which was previously discussed with SPSC and which
both Principal and SPSC previously agreed was in their mutual best interests)
requires Principal to absorb any of the costs of Principal's Unused Capacity
rights as a result of any actions or omissions to act by SPSC hereunder, said
termination to be effective as of the effective date of the NCUC's final
unappealable order. Principal agrees that it shall use all reasonable efforts to
oppose any action by the NCUC that would require Principal to absorb any of the
costs of Principal's Unused Capacity
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rights. In the event of any termination of this Agency Agreement in accordance
with the preceding sentence, any capacity release which is in place as of the
date of such termination will continue in effect for its original duration
notwithstanding the termination of this Agency Agreement.
6. In consideration for SPSC's agreement to act as agent for Principal
under this Agency Agreement, Principal agrees that it shall pay SPSC each month
during the term of this Agency Agreement an amount equal to 25% of the net
compensation (as defined in the NCUC's December 22, 1995 "Order Approving
Stipulation" in Docket No. G-100, Sub 67) earned by it for all secondary market
transactions associated with Principal's Unused Capacity rights on interstate
pipeline companies during such month, calculated in accordance with the "Order
Approving Stipulation" issued by the North Carolina Utilities Commission in
Docket No. G-100, Sub 67, on December 22, 1995, provided, however, that in he
event that the NCUC at any time reduces below 25% percent the percentage of net
compensation from secondary market transactions that natural gas companies such
as Principal may retain for their shareholders, then the amount that Principal
shall be required to pay to SPSC as compensation for its services under this
Agency Agreement shall be reduced to such percentage of the net compensation
received by Principal during each month from all secondary market transactions
associated with Principal's Unused Capacity rights (as calculated above) that is
equal to the percentage of net compensation from secondary market transactions
which may be retained by natural gas companies such as Principal for their
shareholders at such time.
7. This Agency Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to its conflicts
of laws rules. Each party hereto expressly consents to the non-exclusive
jurisdiction of the state courts located in the State of Delaware in all
disputes arising under or related to this Agreement. Each party hereto hereby
waives any objection it may have to the venue of any action, suit or proceeding
brought in such courts or the convenience of the forum. Service of process on
each party in any action arising under or related to this Agreement shall be
effective if delivered or sent to such party in accordance with Section 9
hereof.
8. Principal hereby agrees that SPSC and all of its officers, committee
members, owners and representatives shall have no liability to Principal for and
shall, to the fullest extent permitted by applicable law, be indemnified and
held harmless by Principal from any and all losses, liabilities, damages, costs
and expenses (including all reasonable attorney's fees and all costs of suit)
resulting from or arising out of any act or omission to act hereunder unless
such act or omission to act constitutes gross negligence, willful misconduct or
bad faith.
9. All notices, requests, demands, and other communications required or
permitted to be given or delivered under or by reason of the provisions of this
Agreement shall be in writing and shall be given by certified or registered
mail, postage prepaid, or delivered by hand or by nationally recognized air
courier service, or in the form of a telecopy or telegram, directed to the
address or telecopy number of such party set forth below:
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If to Principal:
Public Service Company of North Carolina Inc.
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Attention: ▇▇▇▇▇ ▇▇▇▇, Senior Vice President
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to SPSC:
Sonat Public Service Company L.L.C.
c/o Sonat Marketing Company L.P.
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or
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Attention: ▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice shall become effective when received by the addressee, provided
that any notice or communication that is received other than during normal
business hours of the recipient shall be deemed to have been given at the
opening of business on the next business day of the recipient. From time to time
any party hereto may designate a new address or telecopy number for purposes of
notice hereunder by notice to the other party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agency
Agreement as of the date hereinabove first stated.
PUBLIC SERVICE COMPANY SONAT PUBLIC SERVICE
OF NORTH CAROLINA, INC. COMPANY L.L.C.
By: By:
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Name: Name:
Title: Title:
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