Natural Gas Asset Management Agreement by and between Roanoke Gas Company and Sequent Energy Management, L.P. effective as of April 1, 2018

This Natural Gas Asset Management Agreement (the "Agreement") is made and entered into effective as of April 1, 2018, (the "Effective Date") by and between Roanoke Gas Company ("Counterparty"), a Virginia corporation, and Sequent Energy Management, L.P. ("Manager"), a Georgia limited partnership. Counterparty and Manager are sometimes hereinafter referred to collectively as the “Parties” and singularly as a “Party”.

WHEREAS, Counterparty has certain Firm natural gas transportation and storage rights and gas supply inventories as listed in Exhibit A and utilizes such transportation, storage rights and gas supply inventories (hereafter referred to collectively as the “Asset Portfolio”) to provide a secure and reliable source of natural gas supply available for delivery to Counterparty to serve its firm customers;

WHEREAS, Counterparty’s need to utilize the Asset Portfolio to serve its customers varies on a monthly, daily, and seasonal basis depending on a variety of factors;

WHEREAS, Counterparty desires to optimize the use of such Asset Portfolio;

WHEREAS, Counterparty has chosen Manager to assist Counterparty in optimizing the use of such Asset Portfolio by arranging for provision of Counterparty’s gas supply requirements while having the right to otherwise use and maximize the Asset Portfolio when not required to meet Counterparty’s needs, and

WHEREAS, in order to accomplish the results described above, Manager is prepared to provide to Counterparty services substantially the same as those embedded in such Asset Portfolio;

NOW, THEREFORE, in consideration of the mutual covenants and obligations contained in this Agreement, Counterparty and Manager agree as follows:

The terms set forth below shall have the meaning ascribed to them below. Other terms are also defined elsewhere in this Agreement, and shall have the meanings ascribed to them therein.

“Agreement” shall mean this document and all attachments and exhibits hereto, as each of the same may be amended from time to time.

    

“Asset Manager” or “Manager” shall mean Sequent Energy Management, L.P.

“Asset Portfolio” shall have the meaning set forth in the Preamble of this Agreement.

“Bankruptcy Default” shall mean, with respect to either Party, such Party (or its Guarantor, if applicable) (i) makes an assignment or any general arrangement for the benefit of creditors; (ii) files a petition or otherwise commences, authorizes, or acquiesces in the commencement of a bankruptcy proceeding against it; (iii) otherwise becomes bankrupt or insolvent (however evidenced); or (iv) becomes unable to pay its debts as they fall due.

“Baseload Gas” shall mean a Firm, fixed volume of Gas which Counterparty commits to purchase each Day of a given Month, and which Manager commits to deliver and sell at a price calculated according to the methodology set forth in Article IV and as shown in Exhibit G.

“Best Efforts” shall mean a Party’s commercially reasonable, diligent efforts.

“British Thermal Unit (Btu)” shall mean the amount of heat required to raise the temperature of one (1) pound of pure water one (1) degree Fahrenheit at sixty (60) degrees Fahrenheit measured on a dry basis at fourteen and seventy-three hundredths (14.73) pounds per square inch absolute (psia). For reporting purposes, Btu conversion factors of not less than three (3) decimal places shall be used.

“Business Day” shall mean a calendar day on which both Parties are open for business.

“Capacity Release” shall mean those contract rights released to Manager, as specifically set forth in Section 2.01 of this Agreement, and for which Manager is designated agent, as provided in Section 3.01.

"Central Clock Time" and "CCT" shall mean Central Daylight Time when daylight savings time is in effect and Central Standard Time when daylight savings time is not in effect.

“Contract Year” shall mean each twelve-month period from April 1^st to March 31^st during the Term (including any renewal term as described in Section 9.01).

“Counterparty City Gate” or “City Gate” shall mean any interconnection between the facilities of a Transporter and the facilities of Counterparty.

“Counterparty Storage Account” shall mean the account created by Manager, pursuant to Section 4.02, to record the initial Gas inventory assigned by agency agreement to Manager by Counterparty and all subsequent SVIVS and SVWVS.

“Counterparty Storage Volume” shall mean the total storage volume contractual rights of the Counterparty under the Storage Agreements.

“Day” or “Gas Day” shall mean a period of twenty-four (24) consecutive hours beginning and ending at nine o'clock (9:00) a.m. CCT, or such other time as may be specified in the applicable Transporter's Tariff.

“Delivery Point(s)” shall mean any point or points on a Transporter's pipeline system at which Counterparty has the right to receive Gas at the Citygates or at a Storage Facility, such point or points to be designated by Counterparty from time to time pursuant to the nomination process.

“DTH means dekatherm, which is equivalent to an MMBtu.

“Effective Date” shall mean the Day on which this Agreement becomes effective, as set forth in the Preamble of this Agreement.

“FERC” shall mean the Federal Energy Regulatory Commission or any successor regulatory agency or body which has authority to regulate the rates and/or the services of the Parties.

“Firm” means that either Party may only interrupt its performance to the extent caused by an applicable Force Majeure event or the non-performance of the other Party.

“Force Majeure”, as employed within this Agreement, shall mean acts of God, including epidemics, landslides, lightning, earthquakes, hurricanes, storms, fires, floods, washouts and other similar unusual and severe natural calamities; acts of the public enemy, wars, blockades, insurrections, riots, civil disturbances, arrests and any laws, orders, rules, regulations, acts, restraints of any government or governmental body or authority, civil or military, which have the effect of prohibiting or substantially impairing performance of a Party's obligations hereunder; strikes, lockouts, or other labor disturbances; explosions, breakage or accidents to wells, machinery or lines of pipe; the necessity for making non-routine repairs or alterations to machinery or lines of pipe, freezing of lines of pipe; inability to obtain materials, supplies, permits, or labor to perform or comply with any obligation or condition of this Agreement; the unavailability, interruption or curtailment of services provided by a Service Provider under any of the contract rights released to Manager pursuant to this Agreement or under any other contract for Firm transportation or storage service engaged by Manager for delivery of Gas to Counterparty. Force Majeure shall not include the unavailability of capacity under any released contract to the extent the unavailability is the result of Manager utilizing the capacity to deliver Gas to a third party, the inability to inject or to withdraw Gas to the extent such inability is the result of the actual storage inventory under such Storage Agreements being inadequate for such purposes as a result of acts or omissions by Manager, or any other cause, whether of the kind herein enumerated or otherwise, not within the control of the Party claiming suspension and which by the exercise of due diligence such Party is unable to prevent or overcome. Force Majeure shall also not include: (1) failure or loss of Counterparty's market(s), (2) the inability of Manager to perform its obligations at a profit, (3) any unanticipated increases in Manager's cost of Gas, or (4) the loss of any particular source of supply, unless caused by an event of Force Majeure affecting a geographic region.

“Gas” or “Natural Gas” shall mean any mixture of hydrocarbons or of hydrocarbons and non-combustible gases, in a gaseous state, consisting essentially of methane, which is of pipeline quality.

“Initial Storage Inventory” shall mean and have the definition as provided in Section 4.02(d).

“Intra-Day Gas” shall mean that volume of Gas which Counterparty may request for delivery during any particular Gas delivery Day after 8:00 a.m. CCT on the last Business Day prior to the Day(s)

of Gas flow. If the Parties agree to a quantity of Intra-Day Gas, the obligations of the Parties shall be Firm. The price for Intra-Day Gas shall be a negotiated price based on then-current market prices.

“MMBtu” shall mean one million (1,000,000) British Thermal Units.

“Month” shall mean a period beginning at nine o'clock (9:00) a.m. CCT, on the first Day of a calendar month and shall end at the aforesaid time on the first Day of the next succeeding calendar month, or such other period as may be agreed to by the Parties.

“Physical Storage Balance” shall mean the actual DTH balance of the aggregated pipeline Storage Agreements.

“Service Provider(s)” shall mean either a Storage Provider or a Transporter, or both, individually or collectively, as the context requires.

“Storage Agreements” shall mean those agreements for storage services as listed in Exhibit A.

“Storage Virtual Injection Volumes” or “SVIVS” shall mean volumes of Baseload Gas which Manager is deemed to inject into Counterparty's Storage Accounts. SVIVS are reported volumes of Gas owed by Manager to Counterparty as set forth in Section 4.02(d) of this Agreement.

“Storage Virtual Withdrawal Volumes” or “SVWVS” shall mean volumes of Baseload Gas to be delivered to and received by Counterparty on a Firm basis and deemed withdrawn from the reported volumes of Gas held in Counterparty Storage Accounts pursuant to Section 4.02 (c).

“Storage Facilities” shall mean, collectively, the storage facilities covered by the Storage Agreements.

“Storage Provider” means any provider of storage services, including, but not limited to, a provider of storage services under the Storage Agreements.

“Storage Reserve” shall be the logical (contractual) position in the Counterparty Storage Account on April 1 of each year.

“Summer Refill Quantity” shall have the meaning set forth in Section 4.02(d).

“Swing Gas” shall mean a quantity of Gas (either positive or negative) which Counterparty may nominate for delivery no later than 8:00 a.m. CCT on the last Business Day prior to the day(s) of Gas flow. Upon a proper nomination, the Parties’ obligations to deliver and receive Swing Gas shall be Firm, and Manager shall commit to deliver and receive Swing Gas at a price using the methodology set forth in Article IV and as shown in Exhibit G.

“Tariff” shall mean the applicable FERC approved tariff of any Service Provider or the applicable Public Service Commission approved tariff of Counterparty.

“Term” shall have the meaning set forth in Section 9.01.

“Transporter” shall mean any pipeline transporter of Natural Gas.

“Utilization Fee” means the payment from Manager to Counterparty pursuant to Section 7.03.

“Unit of Measurement” means one million (1,000,000) British Thermal Units (MMBtus) on a dry basis.

“Weighted Average Storage Variable Costs” shall mean those costs identified on Exhibit H as variable cost components of storage injections and withdrawals.

“Weighted Average Transportation Variable Costs” shall mean the weighted average of all applicable variable pipeline transportation charges and surcharges, including fuel, for each transportation contract released to Manager, assuming full utilization of those assets. An example is set forth on Exhibit F.

“Year” shall mean a period of three hundred sixty-five (365) consecutive calendar days provided, however, that any such year that contains a date of February 29th shall consist of three hundred sixty-six (366) consecutive calendar days.

It is the Parties’ intent that this Agreement qualifies as an “asset management arrangement” as defined in the Federal Energy Regulatory Commission’s (“FERC”) Order No. 712 and its regulations, as amended, set out in 18 CFR §284.8 (“Order No. 712”). Counterparty shall release to Manager the portion of Counterparty's right, title and interest in and to those contracts and agreements for Firm transportation and storage transportation capacity listed in Exhibit A and identified as “Transportation Released to Asset Manager,” and any and all amendments or modifications thereto. Such releases will be in the form of non-biddable, pre-arranged releases and will be made in a manner consistent with (a) FERC’s capacity release regulations, and (b) applicable Tariffs. Counterparty’s LNG facility at Daleville, VA shall be used solely by Counterparty and is not included in the Asset Portfolio under this Agreement to be managed by Manager. The releases are on more than one pipeline and are intended to represent, in so far as operationally feasible, all of Counterparty's transportation and storage transportation assets.

Counterparty shall not enter, terminate or materially modify or amend any contract or agreement that is included in the Asset Portfolio without prior consultation with Manager. Manager understands that Counterparty shall continue to monitor its load patterns and forecasts during the Term. To the extent Counterparty determines that it needs to enter into a new contract or agreement, that it needs to remove, terminate or modify an existing contract or agreement, or if any other material change in the Asset Portfolio occurs, and such addition, removal, termination or change results in altered

rights to deliver or store Gas, the Parties will use good faith efforts to negotiate any appropriate and comparable adjustments hereto, including, without limitation, prospective adjustments to the Utilization Fee. If the Parties are unable to reach agreement, the appropriate adjustments shall be submitted to arbitration pursuant to Article XVI.

The Capacity Release shall be accomplished in a manner that shall provide Manager with the appropriate capacity for the Term of this Agreement (including any renewal term as described in Section 9.01). The Capacity Releases described in this Article II will be posted by Counterparty as zero demand rate releases or, if the Transporter’s electronic bulletin board will not accept a zero value, then the smallest value that will be accepted. The releases may be revoked pursuant to Article IX if there is a material breach or early termination of this Agreement. Upon revocation, Counterparty reassumes all rights and obligations that had been released to Manager.

Counterparty shall designate Manager as agent for its storage capacity and all gas balances in storage as of March 31, 2018. The inventory of Gas in each Storage Facility is listed in Exhibit C. Manager shall provide agency service and provide for utilization of storage assets as set forth in paragraph 4.02.

Manager is hereby appointed agent for the management of the Storage Agreements for the Term of this Agreement (including any renewal term as described in Section 9.01). The agency appointment may be revoked pursuant to Article IX if there is a material breach or early termination of this Agreement. Upon revocation, Counterparty reassumes management of all rights and obligations that relate to the Storage Agreements.

capacity released to Manager, as provided in this Agreement. Subject to this supply obligation and the constraints of the relevant Tariffs, Manager shall have the right to manage the released assets in any manner it chooses. Gas sold to Counterparty shall be priced at a single delivered price for Baseload Gas, a single delivered price for Swing Gas, and a single delivered price for Intra-Day Gas. The price for Baseload Gas shall be determined monthly; the price for Swing Gas shall be determined daily, and the price for Intra-Day Gas shall be determined at the applicable day and hour of an Intra-Day request. The price for Baseload Gas shall be determined by adding (1) the Baseload Gas Commodity Charge and (2) the Weighted Average Transportation Variable Costs and Weighted Average Transportation Fuel Costs as shown on Exhibit G for the Baseload Gas Price Calculation. The price for positive Swing Gas shall be determined by adding the Swing Gas Commodity Charge and (2) the Weighted Average Transportation Variable Costs and Weighted Average Transportation Fuel Costs as shown on Exhibit G for the Swing Gas Price Calculation. If Swing Gas is negative the credit price for Swing Gas shall be determined by adding (1) the Weighted Average Transportation Variable Costs and the Weighted Average Transportation Fuel Costs for Baseload Gas as shown on Exhibit G to (2) the Swing Gas Commodity Charge, and (3) subtracting $0.03. For Baseload Gas, the Baseload Gas Commodity Charge shall be the weighted average of the first-of-month indices for Base-load Pricing as allocated on Exhibit B. For Swing Gas, the Swing Gas Commodity Charge shall be the weighted average of the daily indices for Swing Pricing as allocated on Exhibit B. An example of Baseload Gas and Swing Gas price calculations are attached as Exhibit G. Any requirements for intra day shall be priced at market determined at the applicable day and hour of an Intra-Day request. If there is no single price published for one of the locations specified in Exhibit B on a particular Day, then the Manager and Counterparty shall promptly negotiate a price that most fairly represents then current market conditions. In addition, if: (i) an index included in Exhibit B or otherwise used in this Agreement is no longer published, or (ii) a new index is published that is more representative than the existing index of (more proximate to) the pricing points (“New Index”), then either Party may provide written notice of such event to the other Party and the Parties shall then negotiate in good faith to agree upon the appropriate replacement index in the case of (i), or whether to utilize the New Index in the case of (ii), for this Agreement.  If the Parties are unable to mutually agree upon the applicable index for this Agreement within five (5) Business Days after the other Party’s receipt of such notice, then at the written election of either Party, this Agreement will terminate within thirty (30) Business Days after such election.

Manager shall allow a daily variance of 7,000 dekatherms (DTH) +/- from scheduled volumes off TCO, unless the variance is over the maximum daily quantity (MDQ) or over the maximum daily injection quantity (MDIQ). For quantities within this tolerance, Counterparty shall be subject to the following “cash out” schedule:

For quantities in excess of the agreed to Daily Balancing Tolerance and still within pipeline contracts and not on days of pipeline restrictions, Counterparty shall be subject to the following “cash out” schedule:

Manager shall provide Counterparty with a report detailing the balancing conducted pursuant to this Section by e-mail or facsimile upon request by the Counterparty. Such report shall be substantially in the form of Exhibit J.

Any TCO balancing in excess of the daily tolerances listed in the sections above will be a negotiated price between the Manager and Counterparty.

Storage injections (SVIVS) and withdrawals (SVWVS) are understood by the Parties to be paper transactions that may differ from the actual physical volumes held in storage at any point in time. Manager has the right, subject to Counterparty's right to receive SVWVS (which volumes may be supplied from other sources) and limitations contained in the Tariffs, to actually inject, withdraw and sell Gas from the Counterparty’s Storage Facilities as it sees fit; provided, however, that Manager complies with the delivery requirements of the Firm Sales Service provided in Section 4.01.

the above, the difference between Counterparty’s Storage Account and the Physical Storage Balance shall not exceed twenty-five percent (25%), except without limit, the Physical Storage Balance may exceed the Counterparty's Storage Account. In the event that the difference between Counterparty’s Storage Account and the Physical Storage Balance does exceed twenty-five percent (25%), Manager shall make necessary physical adjustments with thirty (30) days so as to get the Physical Storage Balance back within twenty-five percent (25%). Also, at the sole discretion of Counterparty, the Counterparty shall have the right to allow the Manager to exceed or remain outside the tolerance level, if the Manager satisfactorily demonstrates to Counterparty that such exception does not prohibit the Manager from meeting all operational requirements of Counterparty.

(c)    Storage Withdrawals

The Counterparty Storage Account shall be established and invoiced (on paper) at a withdrawal level equal to eighty-five percent (85%) of the Counterparty Storage Volume each winter. Monthly withdrawal percentages are identified in Exhibit D1. The price for the SVWVS quantity of Baseload Gas delivered to Counterparty each Month will equal the Weighted Average Storage Variable Costs for withdrawals. The remaining inventory of ten percent (10%) will be reserved and said levels will be in place (on paper) on April 1. This reserve, hereto referred to as Storage Reserve, shall be a logical (contractual) position in the Counterparty Storage Account. Manager shall manage all withdrawal levels within the operating guidelines of the pipeline ratchet requirements.

During the Months of November through March, Manager shall invoice the Counterparty a ratable daily amount of Baseload Gas over the respective month according to the schedule in Exhibit D1, including appropriate storage withdrawal charges as reflected in Exhibit H. For the initial withdrawal season, the percentages in Exhibit D1 shall be proportionally adjusted to reflect a physical storage volume differing from the Initial Storage Inventory.

(d)    Storage Injections

Counterparty Storage Account levels shall be at ninety-five (95%) by November 1 of each year, and is defined as “Initial Storage Inventory”.

The “Summer Refill Quantity” shall be defined as eighty-five percent (85.0%) of the Initial Storage Inventory. Seventy-five percent (75.0%) of the Summer Refill Quantity shall be billed to Counterparty on a ratable monthly basis (1/7) during the period April 1 through October 31, herein referred to as Initial Storage Refill. Twenty-five percent (25.0%) of the Summer Refill Quantity shall be billed in any one, or number of, summer months but always remaining within the monthly pipeline tariff requirements. Manager shall notify Counterparty within three (3) business days of the following month of any additional storage quantity to be billed (in excess of the Initial Storage Refill) in that respective month to the Counterparty’s Storage Account. The prices for each Month's Gas shall be determined by the same method as for Baseload Gas, using the prices set forth in the Inside F.E.R.C. Gas Market Report, plus applicable Weighted Average Storage Variable Costs for injections.

Manager and Counterparty shall comply with all terms and provisions of the agreements comprising the Asset Portfolio and all pertinent statutes, rules, orders, Tariffs and regulations with respect thereto. For purposes of this Agreement, Manager's rights under the Capacity Release shall include, without limitation, the injection of Gas into the Storage Facilities, the withdrawal of Gas from the Storage Facilities, the transportation of Gas to and from all applicable receipt and delivery points subject to the Capacity Release, and any other use which Manager sees fit, provided such use is allowable under the applicable statutes, rules, Tariffs, orders and regulations.

Subject to Section 15.05 of this Agreement and except as provided in Section 4.02(e), Manager shall indemnify Counterparty and hold Counterparty harmless from all liability and expense on account of Manager's use of rights released under the Capacity Release, including, without limitation, any violation or breach by Manager of the agreements released, applicable Tariffs or pertinent statutes, rules, orders and regulations, to the extent that such liability or expense is not the result of Counterparty negligence or willful misconduct.

Manager shall manage the transferred Counterparty Storage Volume and Capacity Release in a prudent manner consistent with all applicable Tariffs and the operational requirements detailed on Exhibit D.

Manager shall provide Gas delivered to the Counterparty Delivery Points on the applicable Transporters up to the volumes and reliability of deliveries that Counterparty would have received had these agreements not been released to Manager, subject to the terms of this Agreement and constraints of applicable Transporter tariffs. In the event a Service Provider(s) makes any changes to its Tariff or to its operating practices, including changes to the Manager’s ability to segment capacity or to utilize secondary firm transportation, that is binding on Manager or Counterparty and such changes materially and adversely affects such Party’s ability to perform its obligations hereunder, either Party may provide written notice of such event to the other Party and the Parties shall negotiate in good faith an amendment to this Agreement or other appropriate action the effect of which is to restore each party, as closely as possible, to its same position as prior to such change. If the parties are unable to mutually agree upon such an applicable amendment to this Agreement or other appropriate action within the earlier to occur of (i) ten (10) Business Days after the other party’s receipt of such notice from the Noticing Party, and (ii) five (5) Business Days after the other party’s receipt of such notice from the Noticing Party if implementation of such change has taken effect, then at the written election of either Party, this Agreement will terminate within thirty (30) Business Days after such election.

Counterparty shall provide to Manager the daily usage forecasts for each upcoming Day, Month and/or season, as applicable by 7:30 am CCT on the previous Day, consistent with the applicable nomination deadlines. The nomination deadline for Baseload Gas is set forth in Exhibit E, and the nomination deadlines for Swing Gas and Intra-Day Gas are set forth in Exhibit E. The Parties acknowledge that FERC continues to promote the coordination of the gas and electric industries through the promulgation of regulations, the development of standards by North American Energy Standards Board, Inc., and the issuance of pipeline tariff compliance orders which may include, but are not limited to, the addition of nomination cycles, changes in the nomination timelines, and other scheduling and confirmation procedures.  In the event that any such changes materially impact any provision of this Agreement, the Parties shall negotiate appropriate amendments to the nomination deadlines in Exhibit E and other appropriate provisions hereof in order to conform to such changes.

Based on the Counterparty forecasts, Manager shall prioritize, make and confirm all supply contract and pipeline nominations required to effect the delivery of Gas to the applicable Delivery Point(s). All nominations shall be made by verbal agreement via telephonic means or by electronic mail. The Parties agree to the following procedures in the event the Parties reach verbal agreement regarding the nomination of Gas by Counterparty. Any oral agreement shall be binding unless superseded by a written confirmation, which may be in the form of a telephonic facsimile transmission (“Fax”). The telephones of the Parties may be monitored by recording equipment. The Parties hereby consent to such recordings and any such recordings shall serve as the best evidence of any oral agreement. Upon request by either party, Counterparty and/or Manager shall send a written confirmation to the other generally in the form of Exhibit K, by Fax or other electronic transmission, reflecting the agreed-upon terms of the particular transaction. The Parties shall resolve any discrepancies in such confirmations as soon as reasonably possible, so they can agree in writing to a confirmation.

As a material inducement to entering into this Agreement, Manager represents and warrants to Counterparty as of the date of the execution and delivery of this Agreement and throughout the Term hereof as follows:

accordance with Section 5.05) is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Agreement (including any confirmation accepted in accordance with Section 5.05).

As a material inducement to entering into this Agreement, Counterparty represents and warrants to Manager as of the date of execution and delivery of this Agreement and throughout the Term hereof as follows:

agreement or instrument to which Counterparty is a party or is bound; other than consents that may be required from the Service Providers, which consents, to the extent required, Counterparty shall pursue the obtaining of with reasonable diligence from the appropriate parties; provided however, that if, after the execution hereof, any other third party consents are deemed to be necessary in order to effectuate the purposes and intent of this Agreement, then Counterparty shall use its best efforts to promptly obtain such consents.

To the extent that any transaction entered into under this this Agreement may constitute a “commodity option transaction” as such term is used in Part 32 of the CFTC regulations, the Parties

agree that such commodity option meets the conditions contained in CFTC Regulation 32.3(a) (“Trade Option”) and:

Each Month during the term of this Agreement, Manager shall remit to Counterparty any and all pipeline refunds associated with the Capacity Release as set forth in Sections 2.03(c) and 3.03(c).

Manager and Counterparty shall cooperate to ensure that each Service Provider timely furnishes Counterparty with copies of the pertinent invoices and statements, along with supporting documentation and calculations, setting forth the amount Counterparty is required to pay to each such Service Provider in accordance with Sections 2.03(a) and 3.03(a).

Each Month during the term hereof, Manager shall pay to Counterparty a Utilization Fee of the sum shown on Exhibit M.

 

A preliminary statement, based on the best available information, shall be delivered by Manager to the Counterparty for informational purposes by the end of the third business day following each Month during the Term. Manager shall invoice Counterparty for Gas sold to Counterparty, whether

that Gas is Firm sales service pursuant to Section 4.01 or Summer Refill Quantity pursuant to Section 4.02. Invoices shall be rendered each Month for Gas delivered (or in the case of Summer Refill Quantity, deemed to be delivered) in the preceding Month, and for any other applicable charges (such as injection fees), providing supporting documentation acceptable in industry practice to support the amount charged. If the actual quantity is not known by the billing date, billing shall be prepared based on the quantity of Gas scheduled to be delivered. The invoice shall then be adjusted to the actual quantity on the following Month's billing, or as soon thereafter as actual information is available. Counterparty shall remit the invoiced amount on the later of (a) the twenty-fifth (25th ) day of the Month after delivery or (b) ten (10) days after the invoice date. If the amount of an invoice is disputed in good faith, the Counterparty shall pay the undisputed portion. Interest on late payments of undisputed amounts shall accrue at the rate of the then effective prime rate of interest published under "Money Rate" by the Wall Street Journal, plus two percent (2%) per annum from the due date until the date of payment. Payment shall be in immediately available funds to the bank accounts set forth in this Agreement. The Parties agree to discharge mutual debts and payment obligations due and owing to each other whether arising under this Agreement or any other agreement, but limited to natural gas transactions only, between the Parties through netting. Therefore, all amounts owed by one Party to the other Party during any given month arising from natural gas transactions shall be netted against the amount owed by the other Party under such transactions. The Party owing the greater amount shall pay the difference to the other Party and notify the other Party of the amount netted using the invoice and payment procedures described herein.

Counterparty and its outside accountants shall have the right, upon reasonable notice and at reasonable times during normal business hours, to enter Manager's offices and inspect and copy Manager's records and books of account, but only to the extent necessary to audit any statement provided to Counterparty by Manager, and to assure that amounts paid or billed to Counterparty are correct in all respects. Manager and its outside accountants shall have the right, upon reasonable notice and at reasonable times during normal business hours, to enter Counterparty's offices and inspect and copy Counterparty's records and books of account, but only to the extent necessary to audit any statement provided to Manager by Counterparty, and to assure that amounts paid or billed to Manager are correct in all respects. Each Party shall bear all the costs of performing its audit. Such right to audit shall be available for the terms of this Agreement and for two (2) years thereafter. All audits shall be on a confidential basis and shall require the execution of a confidentiality agreement prior to commencement.

Prior to the commencement of performance, or at any time during the term of this Agreement, either Party may require the other to provide financial information reasonably needed to ascertain the

other Party's ability to pay any amounts that may become due from such party under this Agreement or to meet any other obligation which may accrue, including without limitation the obligation to pay damages in the event of failure to perform. If either Party's creditworthiness becomes unsatisfactory in this regard, then the dissatisfied party (the “Unsecured Party”) may require assurance of the other Party's ability to pay or require different terms of payment. The Unsecured Party may suspend deliveries or receipts hereunder or terminate this Agreement if, in the sole opinion of the Unsecured Party, the other Party fails to deliver the requested credit information or assurance of its ability to pay within two (2) Business Days of such request. Such assurance may, at the option of the Unsecured Party, include (i) the required posting of a letter of Credit (acceptable to the Unsecured Party and the issuing bank); (ii) cash prepayments; (iii) corporate guaranty or (iv) other security acceptable to the Unsecured Party.

Within five (5) Business Days of the execution of this Agreement, Counterparty will provide a parent guaranty (the “Counterparty Guaranty”) to Manager in a form and for an amount reasonable acceptable to Manager from RGC Resources, Inc. (“Counterparty Guarantor”), or other guarantor reasonably acceptable to Manager. Within five (5) Business Days of the execution of this Agreement, Manager will provide a parent guaranty (the “Manager Guaranty”) to Counterparty in a form and for an amount reasonable acceptable to Counterparty from Southern Company Gas (“Manager Guarantor”), or other guarantor reasonably acceptable to Counterparty.

This Agreement shall be effective as of April 1, 2018 and shall continue through and including March 31, 2021 (the “Term”). This Agreement may be renewed for twelve (12) months at the end of the Term, when both Parties notify the other in writing at least ninety (90) days before the end of the Term of its intent to renew. This Agreement shall terminate upon any date on which any federal or state statute, regulation, order or judicial decision renders this Agreement, or the Agreements comprising the Capacity Release, illegal, null or void. This Agreement may be terminated before the expiration of the Term upon either a Manager Default or a Counterparty Default, as defined herein. Termination prior to the expiration of the Term shall be effected by a written notice from the terminating Party, stating the reason for the termination, including, if applicable, the failure of the other Party to cure within the applicable period, and the effective date of termination.

Termination of this Agreement for any reason shall not operate to waive any right or claim that either Party may have against the other under this Agreement or otherwise.

At the end of the full term of the Agreement, physical storage gas returned to the control of the Counterparty shall be equal to the Storage Reserve. Should the Counterparty desire to have storage at a level above the Storage Reserve, the Manager will work with Counterparty and provide on a best efforts basis.

When this Agreement terminates, whether pursuant to Sections 9.02 or 12.04 or due to the expiration of the Term, the Parties shall reconcile the Storage Accounts as follows. If the volume of Gas physically present in inventory is less than the Counterparty Storage Account, Manager shall provide Counterparty with Gas, at no charge, sufficient to make up the difference between the Gas physically present and the Counterparty Storage Account, either by in place transfer or injection at the maximum injection rate, but in all events, the difference shall be made up within thirty (30) days of the date of termination. If the volume of Gas physically present is more than the Counterparty Storage Inventory, then Counterparty, at its option, may either pay for the Gas in place, at the Gas Daily price for the applicable area on the date of termination, or require Manager to remove the Gas within thirty (30) days of the date of termination via in place transfer to a third party or withdrawal. The Parties shall work together to avoid any penalties resulting from over-injection or over-withdrawals, and Manager shall be responsible for any such penalties.

Title to Gas delivered to Counterparty under the provisions of Article IV shall pass from Manager to Counterparty at and when delivered to the Delivery Point. The Party who has title to the Gas at any time shall be deemed to be in control and possession of the Gas, and shall be responsible for any damage or injury caused thereby, and (ii) all charges, expenses, fees, taxes, damages, injuries, and other costs incurred in connection with or attributable to the purchase and handling of Gas.

At the time title to Gas passes from one Party to the other, the Party passing title warrants to the other that it has good title to the Gas and that the Gas is free from all liens and adverse claims.

Each Party agrees to indemnify and hold the other Party harmless from, and with respect to, all suits, actions, debts, accounts, damages, costs, losses and expenses (including, but not limited to, reasonable attorneys' fees) arising from or out of any adverse claims of any and all persons with respect to title to Gas passing under this Agreement which attach before title passes to the other

Party. Each Party shall give the other notice of any suit, action, debt, account, damage, cost, loss, or expense covered by this Section 10.02, and the Party warranting title shall have the option to assume the defense or settlement, or both, of any such contingency.

Either Party may pledge or mortgage this Agreement, the Counterparty Storage Accounts or the Capacity Release as security for its indebtedness only with the prior written consent of the other Party, such consent not to be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective Parties hereto, and the covenants, conditions, rights and obligations of the Agreement shall run for the full term of this Agreement. No assignment of this Agreement, in whole or in part, shall be made without the prior written consent of the non-assigning Party, which consent shall not be unreasonably withheld, provided however, either Party may transfer its interest to any affiliate by assignment, merger or otherwise without prior written consent of the other Party as long as such entity has a credit status which, in the non-assigning Party's sole opinion, is at least as sound as that of the assignor. In the event of an assignment of this Agreement, the Counterparty Storage Accounts or the Capacity Release, the assignor shall not be relieved from the performance of its obligations under this Agreement absent a written release issued by the non-assigning Party. Any other assignment of this Agreement, the Counterparty Storage Accounts or the Capacity Release other than those specifically permitted by the foregoing parts of this Section 11.01 shall be null and void unless the written consent of the other Party shall first have been obtained by the assigning Party.

This Agreement shall be subject to all valid and applicable laws of the United States and to the applicable valid rules, regulations or orders of any regulatory agency or governmental authority having jurisdiction over the Parties or this Agreement. The Parties shall be entitled to regard all applicable laws, rules and regulations (federal, state or local) as valid and may act in accordance therewith until such time as the same may be declared invalid by a final, non-appealable judgment of a court of competent jurisdiction.

Upon execution of this Agreement, each of the Parties agree to seek such certificates, permits, licenses, authorizations and consents (whether from governmental or regulatory agencies, or from

private parties) which are deemed reasonably necessary to perform the obligations of each Party under this Agreement.

Upon execution of this Agreement, and from time to time throughout its term, each of the Parties shall make all filings on its own behalf which are required by any regulatory bodies having jurisdiction over this Agreement and, upon request of the other Party, shall promptly provide copies of such filings to the other Party.

Either Party may terminate this Agreement in the event that the FERC, the public service commission regulating Counterparty, or a legislative body changes its statutes, regulations or orders so as (1) to significantly restrict the transactions contemplated in this Agreement, (2) to require Counterparty to assign to its customers portions of the assets included in the Capacity Release, or (3) to significantly and materially modify the nature of the services provided by the Service Providers; provided however, that the Parties shall first endeavor to mutually agree on revisions to this Agreement to comply with such regulatory changes. In the event the Parties elect to terminate this Agreement pursuant to this Section 12.04, such termination shall be effected as set forth in Section 9.02(d).

If either Party is rendered unable, wholly or in part, by Force Majeure to perform its obligations under this Agreement, other than the obligation to make payments then or subsequently due, it is mutually agreed that performance of the respective obligations of the Parties, so far as they are affected by such Force Majeure, shall be suspended without liability from the inception of any such inability until it is corrected, but for no longer period. In order to suspend by reason of Force Majeure, the Party claiming such inability shall promptly notify the other Party of the full particulars after the occurrence of the event relied on, and promptly correct the inability to the extent it may be corrected through the exercise of reasonable diligence. No Party shall, however, be required against its will to settle any labor disputes.

Each Party agrees that the existence of this Agreement may be considered public information and either Party may disclose the fact that it has entered into this Agreement and the general purposes of the Agreement; however, any press releases or other public announcements shall be approved by the other Party before issuance. Furthermore, each Party shall maintain all specific parts and

contents of this Agreement in strict confidence and shall not cause or permit disclosure thereof to any third party without the express written consent of the other Party; provided, however, that no specific written consent is required if (i) such information has already become public through no act or omission on the part of either Party, (ii) such disclosure is reasonably required in order to arrange for the Capacity Release and to effectuate the transportation of Gas, or (iii) either Party is required to make such disclosure by order or regulation of any court or agency exercising jurisdiction over the Parties or the subject matter hereof. Counterparty reserves the right to disclose this Agreement and the terms hereof if Counterparty determines, in Counterparty's reasonable discretion, that such disclosure to its regulatory commissions is advisable, in which case Counterparty shall use its best efforts to have this Agreement and the terms hereof disclosed only pursuant to an agreement whereby the viewing party or parties agree to maintain the confidentiality of the Agreement and terms hereof. Each Party hereby consents to the disclosure of this Agreement to the outside auditors of the other Party, provided that such auditors agree to maintain the confidentiality of this Agreement. In the event that this Agreement or any of the terms hereof are required to be disclosed pursuant to the provisions of this Section 14.01, the Party who is required to make such disclosure shall as soon as reasonably possible notify the other Party hereto of the requirement of such disclosure, and the non-disclosing Party shall be entitle to take all reasonable actions to prevent or to minimize such disclosure if, in the non-disclosing Party's sole reasonable judgment, such disclosure would be materially detrimental to such Party.

No waiver by either Party of any one or more defaults by the other in the performance of any provisions of this Agreement shall operate or be construed as a waiver of any other default or defaults, whether of a like or of a different character.

This Agreement shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of law.

This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof, supercedes all prior agreements and understandings, whether oral or written, which the Parties may have had in connection herewith, and may not be modified or amended except by written agreement executed by authorized representatives of each of the Parties.

If any provision of this Agreement is determined to be invalid, illegal or otherwise unenforceable for any reason by a governmental authority or a court of competent Jurisdiction, and in the event that the overriding purpose of this Agreement is frustrated by such determination, then the terms

and conditions of this Agreement shall remain in full force and effect to the fullest extent permitted by applicable law. In the event this Agreement remains in full force and effect, the Parties agree to make a good faith effort to replace the affected provisions with amended provisions that comply with the governmental or judicial rulings as aforesaid.

EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY CHARACTER, INCLUDING BUT NOT LIMITED TO LOSS OF USE, LOST PROFITS (PAST AND FUTURE), ADDITIONAL OUT OF POCKET EXPENSES INCURRED BY EITHER PARTY, OR TORT, CONTRACT OR OTHER CLAIMS RESULTING FROM, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY INCIDENT TO ANY ACT OR OMISSION OF EITHER PARTY RELATED TO THE PROVISIONS OF THIS AGREEMENT, IRRESPECTIVE OF WHETHER CLAIMS OR ACTIONS FOR SUCH DAMAGES ARE BASED UPON CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER REMEDY AT LAW OR EQUITY.

Counterparty and Manager recognize the inherent inaccuracies in the measurement and allocation of Gas. Such inaccuracies may at times occur through no fault of Counterparty or Manager such as in the case of allocations after actual deliveries that are the result of measurement inaccuracies, or unpreventable variations in rates of flow at the Delivery Points, and may result in failure to deliver or receive the daily nominated volume (such inaccuracies are hereinafter called “Measurement and Allocation Inaccuracies”). To the extent the actual quantities delivered or received vary from the daily nominated volume due to Measurement and Allocation Inaccuracies, the Parties agree that Counterparty's obligations to purchase and receive and Manager's obligation sell and deliver, insofar as liquidated damages and rights to termination of this Agreement are concerned, shall be deemed to be fulfilled to the extent that, on a daily and monthly basis, such deliveries and receipts are within the applicable Transporter's Tariff for tolerances regarding imbalances to the extent such tolerances do not impose a penalty or similar charge with respect to such imbalances.

All notices required to be sent shall be sent to the Parties at the following addresses, telephone numbers and fax numbers:

To Manager:        Sequent Energy Management, L.P.

1200 Smith Street, Suite 900

Houston, TX 77002

Notices/Correspondence:

Attn: Contract Administration

Telephone: 832 ###-###-####

Fax: 832 ###-###-####

Invoices:

Attn: Gas Accounting

Telephone: 832 ###-###-####    

Fax:     ###-###-####

        

Notices/Correspondence:

Attn: Paul Schneider

Invoices:

Attn: David Garcia

Each Party agrees that it has a duty to mitigate damages and covenants that it shall use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party's performance or non-performance of this Agreement.

Each Party shall use reasonable efforts to administer this Agreement and implement the provisions in accordance with the intent to minimize the imposition of taxes.

Each Party herein waives its respective right to any jury trial with respect to any litigation arising under, or in connection with, this Agreement.

This Agreement shall not be construed to create any third party beneficiary relationship in favor of anyone not a party to this Agreement. In addition, the Parties waive and disclaim any third party beneficiary status as to any of the contracts of the other Party.

The Parties acknowledge and agree that this Agreement and each nomination documented by a confirmation notice in accordance with Section 5.05 constitutes a “forward contract” within the meaning of the United States Bankruptcy Code.

No more than once during the Term, Counterparty may notify Manager that Counterparty would like to replace the fixed Utilization Fee with a revenue sharing arrangement. Any such notice shall be made no later than four (4) months prior to the end of the then current Contract Year. Following receipt of such notification, Manager shall provide a proposed revenue sharing mechanism to Counterparty for the remaining Contract Years and the Parties shall negotiate in good faith to agree upon a revenue sharing arrangement and any such other amendments to this Agreement that may be required to implement a revised structure. If the Parties are unable to mutually agree upon such terms within six (6) weeks after Counterparty’s receipt of such proposal from Manager, the existing Utilization Fee shall remain in place for the remainder of the Term (including any renewal term as described in Section 9.01).

In the event of a dispute involving an amount under $1,000,000 or in the event the Parties need to re-negotiate portions of this Agreement due to events described in Section 2.01 but are unable to reach agreement, the matter shall be submitted upon the request of either Party to binding arbitration by one (1) qualified arbitrator who has not been previously employed by either Party or its affiliates, and does not have a direct or indirect interest in either Party or the subject matter of the arbitration. Such arbitrator shall either be mutually selected by the Parties within thirty (30) days after written notice from either Party requesting arbitration, or failing agreement, shall be selected under the expedited rules of the American Arbitration Association (“AAA”). Such arbitration shall be held in alternating location of the home offices of the Parties, beginning with Manager's home office, or in any other mutually agreeable location. The rules of the AAA shall apply to the extent not inconsistent with the rules herein specified. Either Party may initiate arbitration by written notice to the other Party. The arbitration shall be conducted according to the following: (a) not later than seven (7) days prior to the hearing date set by the arbitrator, each Party shall submit a brief with a single proposal for settlement, (b) the hearing shall be conducted on a confidential basis without continuance or adjournment, (c) the arbitrator shall be limited to selecting one (1) of the settlement proposals submitted by the Parties, (d) each Party shall divide equally the cost of the arbitrator and the hearing, (e) each Party shall be responsible for its own costs and those of its counsel and representatives, and (f) evidence concerning the financial position or organizational make-up of the Parties, any offer made or the details of any negotiation prior to arbitration, and the cost to the Parties of their representatives and counsel shall not be permissible. The arbitrated award shall not include any consequential or punitive damages.

Each Party understands that this Agreement contains an agreement to arbitrate with respect to certain disputes arising under this Agreement. After signing this Agreement, each Party understands that it shall not be able to bring a lawsuit concerning any dispute that may arise that is covered by this arbitration provision. Instead, each Party agrees to submit such dispute to an impartial arbitrator. Any monetary award of the arbitrator may be enforced by the Party in whose favor such monetary award is made in any court of competent jurisdiction.

IN WITNESS WHEREOF, by execution in duplicate originals, the Parties hereto have caused this Agreement to be effective as of the day and year first above written: