EXHIBIT B
CREDIT SUPPORT ANNEX
Wacker will satisfy the creditworthiness requirements set forth in this Exhibit B.
(A) Wacker shall at all times during the effectiveness of this Precedent Agreement and
the FT-A Agreement provide, or cause to be provided within seven (7) days of the Effective Date
of this Precedent Agreement, a guaranty (a “Guaranty”) from Wacker’s parent company or from
a third party (a “Guarantor”), provided such Guarantor is determined by East Tennessee to be
Creditworthy (as defined below) and Guarantor remains Creditworthy for so long as it
guarantees Wacker’s payment obligations. The Guaranty shall: (i) guarantee all payment
obligations of Wacker under this Precedent Agreement and the FT-A Agreement, (ii) remain in
effect until all payment obligations under this Precedent Agreement and FT-A Agreement have
been satisfied in full, and (iii) be in a form acceptable to East Tennessee, which for purposes
herein shall mean in form and content substantially similar to Annex 1 hereto. East Tennessee
may require Wacker to provide, or cause to be provided, a replacement guaranty from a
Creditworthy guarantor if the original Guarantor is, at any time, no longer Creditworthy.
(B) Wacker (and/or its Guarantor) will be considered Creditworthy (“Creditworthy”) if
Wacker (and/or its Guarantor) has and maintains: (i) a long-term senior unsecured debt rating
from (a) Moody’s Investors Service, Inc. (“Moody’s”) of Baa3 or higher, or (b) Standard &
Poor’s (“S&P”) of BBB- or higher and, with respect to each rating, not on negative credit watch
or outlook, and (ii) a sufficient open line of credit. In the event of ratings by both rating agencies
and one of the credit ratings meets or exceeds the foregoing requirements and the other rating
does not, the lower rating will apply. Alternatively, Wacker (and/or its Guarantor) may be
accepted as Creditworthy by East Tennessee if East Tennessee determines that, notwithstanding
the absence of the rating requirements in this Paragraph (B), the financial position of Wacker is
and remains acceptable to East Tennessee during the term of the Precedent Agreement and the
FT-A Agreement.
(C) If at any time and from time to time during the effectiveness of this Precedent
Agreement and/or the FT-A Agreement East Tennessee determines that Wacker (and/or its
Guarantor) is no longer Creditworthy, then Wacker will provide or cause to be provided, in
addition to the Guaranty at its sole cost, (i) a standby irrevocable letter of credit (a “Letter of
Credit”) from a Qualified Institution which meets all of the requirements set forth in this
Paragraph B, or (ii) a cash deposit with East Tennessee in the amount(s) that corresponds to the
applicable time period specified in the table below and shall remain in effect until all payment
obligations under this Precedent Agreement, Negotiated Rate Agreement and FT-A Agreement
have been satisfied in full. The cash deposit will accrue interest payable to Wacker at the
interest rate specified in East Tennessee’s FERC Gas Tariff which is currently calculated
monthly at the most recently established 91-day Treasury Bill auction rate, as published in The
Wall Street Journal. For purposes hereof, a “Qualified Institution” shall mean a major U.S.
commercial bank, or the U.S. branch offices of a foreign bank, which is not Wacker (or a
subsidiary or affiliate of Wacker) and which has assets of at least $10 billion dollars and a credit
rating of at least “A-” by S&P, or “A3” by Moody’s. East Tennessee may require Wacker at its
cost to substitute a Qualified Institution if the Letter of Credit provided is, at any time, from a
financial institution which is no longer a Qualified Institution. The Letter of Credit shall: (i)
remain in effect until all payment obligations under this Precedent Agreement, Negotiated Rate
Agreement and FT-A Agreement have been satisfied in full, (ii) be in a form acceptable to East
Tennessee, which for purposes herein shall mean in form and content substantially similar to
Annex 2 of this Exhibit B, and (iii) be in the amount that corresponds to the applicable time
period specified in the following table:
Period
1
2
From
On or within 7 days
from the Effective
Date of the Precedent
Agreement
December 1, 2012
To
Letter of Credit or Cash Amount
November 30,
2012
$1,500,000
February 28, 2013
$3,000,000
th
3
March 1, 2013
4
The first day after the
st
first (1 ) anniversary
of the Interim
Commencement Date
5
The first day after the
nd
second (2 )
anniversary of the
Interim
Commencement Date
6
The first day after the
rd
third (3 ) anniversary
of the Interim
Commencement Date
End of the first (1 )
anniversary of the
Interim
Commencement
Date
End of the second
nd
(2 ) anniversary of
the Interim
Commencement
Date
End of the third
rd
(3 ) anniversary of
the Interim
Commencement
Date
Term of the FT-A
Agreement
$4,800,000
$4,200,000
$3,700,000
The lesser of 36 months or the remaining
term of the FT-A Agreement’s Reservation
Charges ( defined as the Monthly Demand
Rate per Dth times the Project MDQ or
Interim MDQ, as applicable)
(D) The requirements set forth in this Exhibit B shall be in addition to, and not in lieu of,
any credit requirements found in the General Terms and Conditions of East Tennessee’s FERC
Gas Tariff, which are applicable to Wacker with respect to service under the FT-A Agreement.
(E) Notwithstanding anything in this Exhibit B to the contrary, if at any time and from
time to time during the effectiveness of this Precedent Agreement and/or the FT-A Agreement
East Tennessee determines that Wacker is not satisfying the requirements in this Exhibit B, East
Tennessee shall notify Wacker in writing, and Wacker shall satisfy, or cause to be satisfied, such
requirement(s) as soon as reasonably practicable, but in no event later than the close of the
seventh (7th) business day following receipt of such notice from East Tennessee.
(F) The failure of Wacker to timely satisfy or maintain the requirements set forth in this
Exhibit B shall in no way relieve Wacker of its other obligations under this Precedent Agreement
and/or the FT-A Agreement, nor shall it affect East Tennessee’s right to seek damages or
performance under this Precedent Agreement and/or the FT-A Agreement. Further, East
Tennessee shall have the right, but not the obligation, to suspend or terminate performance under
this Precedent Agreement and/or FT-A Agreement, upon ten (10) days prior written notice by
East Tennessee to Wacker following the seven (7) business day notice period set forth in this
Section E hereinabove.
(G) This Exhibit B shall survive the termination of this Precedent Agreement and shall
remain in effect until all payment obligations under this Precedent Agreement and the FT-A
Agreement have been satisfied in full.
(H) In the event Wacker assigns this Precedent Agreement and/or the FT-A Agreement
in accordance with the applicable assignment provision(s), or in the event Wacker releases all or
a portion of Wacker’s capacity under the FT-A Agreement whether in a temporary or permanent
basis in accordance with the General Terms & Conditions of East Tennessee’s FERC Gas Tariff,
the assignee and/or the replacement customer, as applicable, shall be required to satisfy the
requirements of this Exhibit B until all payment obligations under this Precedent Agreement and
the FT-A Agreement have been satisfied in full.