UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2015

 

 

RICE MIDSTREAM PARTNERS LP

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36789   47-1557755

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (724) 746-6720

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

Purchase Agreement

On November 4, 2015, Rice Midstream Partners LP (the “Partnership”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) by and between the Partnership and Rice Energy Inc. (“Rice”). Pursuant to the terms of the Purchase Agreement, on November 4, 2015, the Partnership acquired from Rice all of the outstanding limited liability company interests of Rice Water Services (PA) LLC (“PA Water”) and Rice Water Services (OH) LLC (“OH Water”), two wholly-owned indirect subsidiaries of Rice that own and operate Rice’s water services business. The acquired business includes Rice’s Pennsylvania and Ohio fresh water distribution systems and related facilities that provide access to 15.9 MMgal/d of fresh water from the Monongahela River, the Ohio River and other regional water sources in Pennsylvania and Ohio (the “Water Assets”). Rice has also granted the Partnership, until December 31, 2025, (i) the exclusive right to develop water treatment facilities in the areas of dedication defined in the Water Services Agreements (defined below) and (ii) an option to purchase any water treatment facilities acquired by Rice in such areas at Rice’s acquisition cost (collectively, the “Option”). In consideration for the acquisition of the Water Assets and the receipt of the Option, the Partnership paid Rice $200 million in cash, plus an additional amount, if certain of the conveyed systems’ capacities increase by 5.0 MMgal/d on or prior to December 31, 2017, equal to $25 million less the capital expenditures expended by the Partnership to achieve such increase, in accordance with the terms of the Purchase Agreement. The transactions contemplated by the Purchase Agreement are referred to herein as the “Transaction.” The Partnership funded the consideration with borrowings under its revolving credit facility.

The Purchase Agreement includes customary representations and warranties regarding the Water Assets and the Transaction, as well as customary covenants and indemnity provisions. The parties have agreed to indemnify each other with regards to breaches of their respective representations, warranties and covenants set forth in the Purchase Agreement. In addition, the Partnership has agreed to indemnify Rice with respect to certain liabilities related to the business and operations of the Water Assets, subject to certain exceptions as set forth in the Purchase Agreement.

The terms of the Transaction were unanimously approved on behalf of the Partnership by the Board of Directors of Rice Midstream Management LLC, the general partner of the Partnership (the “General Partner”), after the Conflicts Committee of the Board of Directors of the General Partner (the “Conflicts Committee”) unanimously recommended that the Board of Directors of the General Partner approve the Transaction. The Conflicts Committee, composed of independent members of the Board of Directors of the General Partner, retained legal and financial advisors to assist it in evaluating and negotiating the Transaction. In approving the Transaction, the Conflicts Committee based its decisions in part on an opinion from its independent financial advisor that the consideration to be paid by the Partnership is fair to the Partnership and its common unitholders from a financial point of view.

The Purchase Agreement is filed as Exhibit 2.1 to this Current Report on Form 8-K, and the foregoing description of the Purchase Agreement is qualified in its entirety by reference to such exhibit. The above description of the Purchase Agreement is a summary only and is qualified in its entirety by reference to the complete text of the Purchase Agreement. The Purchase Agreement is filed herewith to provide investors with information regarding its terms. It is not intended to provide any other factual information about the parties. In particular, the assertions embodied in the representations and warranties contained in the Purchase Agreement were made as of the date of the Purchase Agreement only and are qualified by information in confidential disclosure schedules provided by the parties to each other in connection with the signing of the Purchase Agreement. These disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Purchase Agreement. Moreover, certain representations and warranties in the Purchase Agreement may have been used for the purpose of allocating risk between the parties rather than establishing matters of fact. Accordingly, you should not rely on the representations and warranties in the Purchase Agreement as characterizations of the actual statements of fact about the parties.

Unit Purchase Agreement

On November 4, 2015, the Partnership entered into a Common Unit Purchase Agreement (the “Unit Purchase Agreement”) with certain institutional investors (the “Investors”) to sell 13,409,961 common units representing


limited partner interests in the Partnership (“Common Units”) in a private placement for gross proceeds of approximately $175.0 million (the “Private Placement”). The Partnership expects to use the proceeds of the Private Placement to repay a portion of the borrowings under the Partnership’s credit facility that were used to fund the consideration for the Transaction. The Private Placement is expected to close on November 10, 2015, subject to customary closing conditions.

The Unit Purchase Agreement contains customary representations, warranties and covenants of the Partnership and the Investors. The Partnership, on the one hand, and each of the Investors (severally and not jointly), on the other hand, have agreed to indemnify each other and their respective affiliates, officers, directors and other representatives against certain losses resulting from any breach of their representations, warranties or covenants contained in the Unit Purchase Agreement, subject to certain limitations and survival periods.

Pursuant to the Unit Purchase Agreement, the Partnership has agreed to enter into a Registration Rights Agreement with the Investors in connection with the closing of the Private Placement, pursuant to which the Partnership will agree to file and maintain a registration statement with respect to the resale of the Common Units on the terms and conditions set forth therein.

The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Common Unit Purchase Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Amended and Restated Water Services Agreements

In connection with the closing of the Transaction, on November 4, 2015, Rice entered into Amended and Restated Water Services Agreements (the “Water Services Agreements”) with PA Water and OH Water, respectively, whereby PA Water and OH Water, as applicable, have agreed to provide certain fluid handling services to Rice, including the exclusive right to provide fresh water for well completions operations in the Marcellus and Utica Shales and to collect and recycle or dispose of flowback, produced water and other fluids for Rice within areas of dedication in defined service areas in Pennsylvania and Ohio. The initial term of the Water Services Agreements is until December 22, 2029 and from month to month thereafter. Under the agreement, Rice will pay (i) a variable fee, based on volumes of water supplied, for freshwater deliveries by pipeline directly to the well site, subject to annual CPI adjustments and (ii) a produced water hauling fee of actual out-of-pocket cost incurred by PA Water and OH Water, plus a 2% margin.

The foregoing description of the Water Services Agreements is not complete and is qualified in its entirety by reference to the text of the Water Services Agreements, which are attached to this Current Report on Form 8-K as Exhibits 10.2 and 10.3 and incorporated in this Item 1.01 by reference.

Relationships

Certain individuals, including officers and directors of Rice and the General Partner, serve as officers and/or directors of more than one of Rice, the Partnership and PA and OH Water. Rice owns 3,623 Common Units and 28,753,623 subordinated units representing limited partner interests in the Partnership. In addition, Rice is the owner of Rice Midstream Holdings LLC, which owns all of the Partnership’s incentive distribution rights and owns and controls (and appoints all the directors of) the General Partner, which owns a non-economic general partner interest in the Partnership.

 

Item 2.02 Results of Operations and Financial Condition.

On November 5, 2015, the Partnership announced its results for the quarter ended September 30, 2015. A copy of the Partnership’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

Item 3.02 Sale of Unregistered Units.

The information regarding the Private Placement set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. The foregoing transactions were undertaken in reliance upon the exemption from the registration requirements in Section 4(a)(2) of the Securities Act of 1933, as amended. The Partnership believes that exemptions other than the foregoing exemption may exist for these transactions.


Item 7.01 Regulation FD Disclosure

On November 5, 2015, the Partnership issued a press release announcing the Transaction and the Private Placement. A copy of the press releases is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

EXHIBIT

  

DESCRIPTION

  2.1*    Purchase and Sale Agreement, dated as of November 4, 2015, by and between Rice Energy Inc. and Rice Midstream Partners LP.
10.1    Common Unit Purchase Agreement, dated as of November 4, 2015, by and among Rice Midstream Partners LP and the Purchasers named therein.
10.2    Amended and Restated Water Services Agreement, dated as of November 4, 2015, by and between Rice Drilling B LLC and Rice Water Services (PA) LLC.
10.3    Amended and Restated Water Services Agreement, dated as of November 4, 2015, by and between Rice Drilling D LLC and Rice Water Services (OH) LLC.
99.1    Press Release dated November 5, 2015 relating to quarterly results.
99.2    Press Release dated November 5, 2015 relating to the Transaction and the Private Placement.

 

* Pursuant to Item 601(b)(2) of Regulation S-K, the Partnership agrees to furnish supplementally a copy of any omitted exhibit or schedule to the U.S. Securities and Exchange Commission upon request.

THE INFORMATION FURNISHED UNDER ITEM 2.02 AND ITEM 7.01 OF THIS CURRENT REPORT, INCLUDING EXHIBITS 99.1 AND 99.2 ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

RICE MIDSTREAM PARTNERS LP
By:   Rice Midstream Management LLC,
  its general partner
By:  

/s/ Daniel J. Rice IV

  Daniel J. Rice IV
  Director, Chief Executive Officer

Dated: November 5, 2015


EXHIBIT INDEX

 

EXHIBIT

  

DESCRIPTION

  2.1*    Purchase and Sale Agreement, dated as of November 4, 2015, by and between Rice Energy Inc. and Rice Midstream Partners LP.
10.1    Common Unit Purchase Agreement, dated as of November 4, 2015, by and among Rice Midstream Partners LP and the Purchasers named therein.
10.2    Amended and Restated Water Services Agreement, dated as of November 4, 2015, by and between Rice Drilling B LLC and Rice Water Services (PA) LLC.
10.3    Amended and Restated Water Services Agreement, dated as of November 4, 2015, by and between Rice Drilling D LLC and Rice Water Services (OH) LLC.
99.1    Press Release dated November 5, 2015 relating to quarterly results.
99.2    Press Release dated November 5, 2015 relating to the Transaction and the Private Placement.

 

* Pursuant to Item 601(b)(2) of Regulation S-K, the Partnership agrees to furnish supplementally a copy of any omitted exhibit or schedule to the U.S. Securities and Exchange Commission upon request.

THE INFORMATION FURNISHED UNDER ITEM 2.02 AND ITEM 7.01 OF THIS CURRENT REPORT, INCLUDING EXHIBITS 99.1 AND 99.2 ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.

Exhibit 2.1

Execution Version

PURCHASE AND SALE AGREEMENT

by and between

RICE ENERGY INC.

and

RICE MIDSTREAM PARTNERS LP

dated as of

November 4, 2015


TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

     2   

ARTICLE II CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS

     10   

2.1

  Conveyances      10   

2.2

  Consideration      10   

2.3

  Earn-Out Payments      10   

2.4

  Transfer Taxes      13   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF RICE

     13   

3.1

  Organization and Existence      13   

3.2

  Authority and Approval; Enforceability      14   

3.3

  No Conflict      14   

3.4

  Consents      15   

3.5

  Laws and Regulations; Litigation      15   

3.6

  Environmental Matters      16   

3.7

  Conveyed Interests      16   

3.8

  Water Assets      17   

3.9

  Permits      19   

3.10

  Brokerage Arrangements      19   

3.11

  Taxes      19   

3.12

  Contracts      20   

3.13

  No Adverse Changes      21   

3.14

  Financial Statements      22   

3.15

  Regulatory Status      22   

3.16

  Bankruptcy      22   

3.17

  Books and Records      23   

3.18

  Insurance      23   

3.19

  No Other Representations or Warranties; Schedules      23   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

     23   

4.1

  Organization and Existence      23   

4.2

  Authority and Approval; Enforceability      23   

4.3

  No Conflict      24   

4.4

  Special Approval      24   

 

i


4.5

  Delivery of Fairness Opinion      25   

4.6

  Brokerage Arrangements      25   

4.7

  Available Funds      25   

4.8

  Investment      25   

4.9

  No Other Representations or Warranties; Schedules      25   

ARTICLE V CERTAIN COVENANTS

     26   

5.1

  Mutual Covenants      26   

5.2

  Conduct of the Business      26   

5.3

  Conduct of Business Standard      28   

5.4

  Independent Investigation      29   

5.5

  Post-Closing Receivables and Payments      29   

5.6

  Further Assurances      29   

5.7

  Tax Covenants      30   

5.8

  Indebtedness and Release of Liens      31   

5.9

  Partnership Option to Purchase Water Treatment Assets      31   

5.10

  Easement Assignment      32   

ARTICLE VI CONDITIONS TO CLOSING

     32   

6.1

  Conditions to Each Party’s Obligation to Effect the Transactions      32   

6.2

  Conditions to the Obligation of the Partnership      32   

6.3

  Conditions to the Obligation of Rice      33   

ARTICLE VII CLOSING

     34   

7.1

  Closing      34   

7.2

  Deliveries by Rice      34   

7.3

  Deliveries by the Partnership      34   

ARTICLE VIII INDEMNIFICATION

     35   

8.1

  Indemnification of Rice and Other Parties      35   

8.2

  Indemnification of the Partnership and Other Parties      35   

8.3

  Indemnification Procedures      35   

8.4

  Calculation and Payment of Damages      37   

8.5

  Waiver of Certain Damages      37   

8.6

  Limitations on Indemnification      37   

8.7

  Survival      38   

8.8

  Mitigation      39   

 

ii


8.9

  Sole Remedy      39   

8.10

  Consideration Adjustment      39   

ARTICLE IX TERMINATION

     39   

9.1

  Events of Termination      39   

9.2

  Effect of Termination      40   

ARTICLE X MISCELLANEOUS

     40   

10.1

  Expenses      40   

10.2

  Notices      40   

10.3

  Governing Law and Venue      41   

10.4

  Public Statements      41   

10.5

  Form of Payment      41   

10.6

  Entire Agreement; Amendments and Waivers      42   

10.7

  Binding Effect and Assignment      42   

10.8

  Severability      42   

10.9

  Interpretation      43   

10.10

  Headings and Schedules      43   

10.11

  Counterparts      44   

10.12

  Determinations by the Partnership      44   

10.13

  Representation by Counsel      44   

10.14

  Disclosure Schedules      44   

10.15

  No Recourse Against Non-Parties      45   

 

iii


EXHIBITS AND SCHEDULES

 

Exhibit A    Form of Assignment of Conveyed Interest
Exhibit B    Form of Amended and Restated Water Services Agreement – OH
Exhibit C    Form of Amended and Restated Water Services Agreement – PA
Exhibit D    Description of Assets
Schedule 3.3    Non-Contravention
Schedule 3.4    Rice Consents
Schedule 3.5    Litigation
Schedule 3.7(b)    Conveyed Interests
Schedule 3.8(b)    Rice Property
Schedule 3.8(c)    Liens
Schedule 3.8(d)    Insufficient Rights of Way
Schedule 3.8(e)    Pending Proceedings
Schedule 3.12(a)    Contracts
Schedule 3.13    Adverse Changes
Schedule 4.3    Non-Contravention
Schedule 5.10    Easements to be Assigned
Schedule 6.1(b)    Closing Condition Consents

 

iv


PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “ Agreement ”) is made and entered into as of November 4, 2015 by and between Rice Energy Inc., a Delaware corporation (“ Rice ”), and Rice Midstream Partners LP, a Delaware limited partnership (the “ Partnership ”). Rice and the Partnership are sometimes referred to in this Agreement individually as a “ Party ” and together as the “ Parties .”

RECITALS:

WHEREAS, Rice is the sole member of Rice Midstream Holdings LLC, a Delaware limited liability company (“ Midstream Holdings ”);

WHEREAS, Midstream Holdings is the sole member of each of (i) Rice Water Services (PA) LLC, a Delaware limited liability company (“ Rice Water PA ”), and (ii) Rice Water Services (OH) LLC, a Delaware limited liability company (“ Rice Water OH ” and together with Rice Water PA, the “ Rice Water Entities ”);

WHEREAS, subject to the terms and conditions of this Agreement, Rice will cause Midstream Holdings to convey 100% of the outstanding limited liability company interests in each of the Rice Water Entities (the “ Conveyed Interests ”) to the Partnership in exchange for the Consideration (as defined herein);

WHEREAS, the Parties acknowledge that from and after the Closing (as defined herein), the Water Assets (as defined herein) will become part of the “Facilities” as such term is defined and used in that certain Employee Secondment Agreement, effective as of December 22, 2014, by and between Rice and the Partnership (as amended, the “ Secondment Agreement ”);

WHEREAS, the Conflicts Committee (the “ Conflicts Committee ”) of the Board of Directors of the General Partner (as defined herein) has (i) received an opinion of Simmons & Company International, the financial advisor to the Conflicts Committee (the “ Partnership Financial Advisor ”), that the Consideration to be paid by the Partnership as consideration for the Conveyed Interests pursuant to this Agreement is fair to the Partnership and its common unitholders (other than the General Partner and its Affiliates ( as defined herein )) from a financial point of view, (ii) determined that the transactions contemplated by the Transaction Documents (as defined herein) are not adverse to the interests of the Partnership and the common unitholders of the Partnership (other than the General Partner and its Affiliates), (iii) granted “Special Approval” with respect to the Transaction Documents and the transactions contemplated thereby pursuant to Section 7.9(d)(i) of the Partnership Agreement (as defined herein), and (iv) recommended that the Board of Directors of the General Partner approve the transactions contemplated by the Transaction Documents;

WHEREAS, the Board of Directors of the General Partner has approved the Transaction Documents and transactions contemplated thereby; and

WHEREAS, at the Closing, on the terms and conditions set forth in this Agreement, each of the events and transactions set forth in Section 2.1 below shall occur.


NOW, THEREFORE, in consideration of the mutual undertakings and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms below:

AAA Rules ” has the meaning set forth in Section 2.3(c) .

Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with, such specified Person through one or more intermediaries or otherwise; provided, however , that (a) with respect to Rice, the term “Affiliate” shall not include any member of the Partnership Group, and (b) with respect to the Partnership Group, the term “Affiliate” shall exclude Rice and its Subsidiaries other than members of the Partnership Group; provided, further , however , after the Closing, each Rice Water Entity will be deemed to be an Affiliate of the Partnership (not of Rice).

Agreement ” has the meaning set forth in the preamble to this Agreement (including all schedules, exhibits and other attachments), as amended, supplemented or otherwise modified from time to time.

Applicable Period ” has the meaning set forth in the definition of Incremental Capacity.

Applicable Person ” has the meaning set forth in the definition of Change of Control.

Annual Financial Statements ” has the meaning set forth in Section 3.14(a) .

Arbitrator ” has the meaning set forth in Section 2.3(c) .

Assignment of Conveyed Interest ” means that certain Assignment of Conveyed Interest in the form attached as Exhibit A hereto.

Business ” means the operations, assets, liabilities and obligations and activities of the Rice Water Entities and/or the Water Assets and/or for which the results are reflected in the Financial Statements, other than assets and operations owned and conducted by Rice and/or its Affiliates (other than, prior to the Closing Date, the Rice Water Entities) to provide services to any Rice Water Entity or any member of the Partnership Group pursuant to the Secondment Agreement, the Omnibus Agreement or the Organizational Documents of the Partnership.

Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in the State of Texas are authorized or obligated to be closed by applicable Laws.

Cap ” has the meaning set forth in Section 8.6(a) .

 

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Change of Control ” means with respect to any Person (the “ Applicable Person ”), any of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Applicable Person’s assets to any other Person, unless immediately following such sale, lease, exchange or other transfer such assets are owned by the Applicable Person or an Affiliate of the Applicable Person; (ii) the dissolution or liquidation of the Applicable Person; (iii) the consolidation or merger of the Applicable Person with or into another Person (other than an Affiliate of the Applicable Person), other than any such transaction where (a) the outstanding Voting Securities of the Applicable Person are changed into or exchanged for Voting Securities of the surviving Person or its parent and (b) the holders of the Voting Securities of the Applicable Person immediately prior to such transaction own, directly or indirectly, not less than a majority of the outstanding Voting Securities of the surviving Person or its parent immediately after such transaction; and (iv) a “person” or “group” (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act), other than Rice or its Affiliates, being or becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of all of the then outstanding Voting Securities of the Applicable Person, except in a merger or consolidation that would not constitute a Change of Control under clause (iii) above

Claim Notice ” has the meaning set forth in Section 8.3(a) .

Closing ” has the meaning set forth in Section 7.1 .

Closing Date ” has the meaning set forth in Section 7.1 .

Code ” means the Internal Revenue Code of 1986, as amended.

Commission ” means the United States Securities and Exchange Commission.

Conflicts Committee ” has the meaning set forth in the recitals to this Agreement.

Consent ” has the meaning set forth in Section 3.4(b) .

Consideration ” means $200 million plus the Earn-Out Payment, if any.

Contract ” means any contract, commitment, instrument, undertaking, lease, sublease, note, mortgage, conditional sales contract, license, sublicense, franchise agreement, indenture, settlement, Permit or other legally binding agreement (whether oral or written).

Control ” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” have correlative meanings.

Conveyed Interests ” has the meaning set forth in the recitals to this Agreement.

Damages ” has the meaning set forth in Section 8.1 .

Deductible ” has the meaning set forth in Section 8.6(a) .

 

-3-


Earn-Out Payment ” has the meaning set forth in Section 2.3(a) .

Earn-Out Report ” has the meaning set forth in Section 2.3(b) .

Earn-Out Report Dispute ” has the meaning set forth in Section 2.3(b) .

Earn-Out Term ” has the meaning set forth in Section 2.3(a) .

Earn-Out Threshold ” has the meaning set forth in Section 2.3(a) .

Effective Date ” means November 1, 2015.

Environmental Laws ” means any and all Laws and Orders concerning or relating to public health and safety, worker/occupational health and safety, and the prevention of pollution or protection of the environment, including those relating to or imposing liability or standards of conduct concerning, the presence, use, manufacturing, refining, production, generation, handling, transportation, treatment, recycling, transfer, storage, disposal, distribution, importing, labeling, testing, processing, discharge, release, threatened release, control, cleanup or other action or failure to act involving Hazardous Materials, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, noise, or radiation.

FERC ” has the meaning set forth in Section 3.15 .

Final Determination ” means (a) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final, (b) a closing agreement made under Section 7121 of the Code (or a comparable agreement under the laws of a state, local or foreign taxing jurisdiction) with the relevant Tax Authority or other administrative settlement with or final administrative decision by the relevant Tax Authority, (c) a final disposition of a claim for refund, or (d) any agreement between Rice and the Partnership which they agree will have the same effect as an item in (a), (b), or (c) for purposes of this Agreement.

Financial Statements ” has the meaning set forth in Section 3.14(a) .

GAAP ” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination, consistently applied.

General Partner ” means Rice Midstream Management LLC, a Delaware limited liability company.

Governmental Approval ” has the meaning set forth in Section 3.4 .

 

-4-


Governmental Authority ” means (a) the United States of America or any state or political subdivision thereof within the United States of America and (b) any court, tribunal, arbitrating body or any governmental or administrative department, commission, board, body, bureau or agency of the United States of America or of any state or political subdivision thereof within the United States of America.

Hazardous Material ” means (a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product or byproduct, (d) any polychlorinated biphenyl, (e) any asbestos or asbestos-containing materials, and (f) any substance, pollutant, contaminant, material, or waste, or combination thereof, whether solid, liquid, or gaseous in nature, subject to regulation, investigation, control, or remediation under any Environmental Law.

Indebtedness ” means (a) all Liabilities (including accrued and unpaid interest) of any Rice Water Entity relating to borrowed money, (b) any other indebtedness or Liability secured by a Lien on (i) any Water Asset other than any Permitted Lien or (ii) any of the Conveyed Interests, (c) all Liabilities of any Rice Water Entity evidenced by bonds, debentures, notes or similar instruments, (d) all Liabilities of any Rice Water Entity as an account party in respect of letters of credit and bankers’ acceptances or similar credit transactions and (e) all Liabilities of any Rice Water Entity guaranteeing any obligations of any other Person of the type described in the foregoing clauses (a) and (d).

Incremental Capacity ” means, with respect to any quarter during the Earn-Out Term, the amount of any increase in the design capacity of the Fresh Water System (as defined in the Water Services Agreement) owned by Rice Water OH as of the last day of such fiscal quarter compared to the Effective Date (the “ Applicable Period ”) attributable to (i) new water use or withdrawal permits received by, or assigned to, the Partnership granting the Partnership the right to take water from the Ohio River or (ii) infrastructure connected to the Ohio River with a corresponding right to take water from the Ohio River, completed and placed into service during the Applicable Period, other than due to any repair, alteration, modification or replacement of damaged, worn-out or obsolete infrastructure of the same type, in each case as determined in good faith by the Partnership.

Incremental Capacity Capex ” means, with respect to any quarter during the Earn-Out Term, the amount of capital expenditures paid or payable by the Partnership as of the last day of such fiscal quarter that are attributable to Incremental Capacity, as determined in good faith by the Partnership.

Indemnity Claim ” has the meaning set forth in Section 8.3(a) .

Interim Balance Sheet ” has the meaning set forth in Section 3.14(a) .

Interim Financial Statements ” has the meaning set forth in Section 3.14(a) .

Law ” means all laws (including common law), statutes, codes, rules, regulations, ordinances, directives, orders, judgments, decrees, injunctions, franchises, permits, certificates, licenses or authentications or any similar provisions having the force or effect of Law of any applicable Governmental Authority.

 

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Liability ” or “ Liabilities ” means any direct or indirect liability, indebtedness, Damage, deficiency, Tax, interest, penalty, amount paid in settlement, judgment, assessment, guaranty or endorsement of or by any Person, in the case of each of the foregoing, whether vested, absolute or contingent, known or unknown, matured or unmatured, asserted or unasserted, accrued or unaccrued, due or to become due, liquidated or unliquidated, and whether contractual, statutory or otherwise.

Lien ” means (i) any claim, mortgage, security interest, deed of trust, pledge, hypothecation, assignment, charge or other encumbrance, lien (statutory or otherwise), right or preferential arrangement of any kind or nature whatsoever in respect of any property or assets (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement) or other similar property interest or encumbrance in respect of any property or asset, and (ii) any easements, rights-of-way, restrictions, restrictive covenants, rights, leases and other encumbrances or other similar interest or right on the title to real or personal property (whether or not of record). For the avoidance of doubt the term “Lien” includes the Rice Midstream Loan Liens.

Litigation ” has the meaning set forth in Section 3.5(a) .

Midstream Holdings ” has the meaning set forth in the recitals to this Agreement.

Non-Party Affiliates ” has the meaning set forth in Section 10.15 .

Omnibus Agreement ” means that certain Omnibus Agreement, effective as of December 22, 2014, by and among Rice, the Partnership, the General Partner, Midstream Holdings and Rice Poseidon Midstream LLC.

Order ” means any order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, consent, approval, award, judgment, injunction, or other similar determination or finding by, before, or under the supervision of any Governmental Authority, arbitrator, or mediator.

Organizational Documents ” means, with respect to any Person, the articles of incorporation, certificate of incorporation, certificate of formation, certificate of limited partnership, bylaws, limited liability company agreement, operating agreement, partnership agreement, stockholders’ agreement, and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of such Person, including any amendments thereto.

Partnership ” has the meaning set forth in the preamble to this Agreement.

Partnership Agreement ” has the meaning set forth in Section 4.4 .

Partnership Closing Certificate ” has the meaning set forth in Section 6.3(c) .

 

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Partnership Financial Advisor ” has the meaning set forth in the recitals to this Agreement.

Partnership Fundamental Representations ” has the meaning set forth in Section 8.7(b) .

Partnership Group ” means, collectively, the Partnership and its Subsidiaries.

Partnership Indemnitees ” has the meaning set forth in Section 8.2 .

Partnership Material Adverse Effect ” means any change, circumstance, effect or condition that, individually or in the aggregate, (a) in any material respect adversely affects, or could reasonably be expected to adversely affect, the Partnership’s ability to satisfy its obligations under the Transaction Documents or (b) does, or could reasonably be expected to, prevent or materially impede or delay the Partnership’s ability to consummate the transactions contemplated by the Transaction Documents.

Party ” or “ Parties ” has the meaning set forth in the preamble to this Agreement.

Permits ” means permits, licenses, certificates, orders, approvals, authorizations, grants, consents, notices, waivers, registrations, filings, accreditations, concessions, warrants, franchises and similar rights and privileges granted by any Governmental Authority.

Permitted Liens ” has the meaning set forth in Section 3.8(b) .

Person ” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or department or political subdivision thereof or other entity.

Proceeding ” means any action, suit, arbitration proceeding, administrative or regulatory investigation, review, audit, proceeding, citation, summons or subpoena of any nature (civil, criminal, regulatory or otherwise) in law or in equity.

Requested Asset ” has the meaning set forth in Section 5.9(a) .

Rice ” has the meaning set forth in the preamble to this Agreement.

Rice Closing Certificate ” has the meaning set forth in Section 6.2(c) .

Rice Fundamental Representations ” has the meaning set forth in Section 8.7(a) .

Rice Guaranty ” means that certain Rice Parent Guaranty, dated November 4, 2015, made by Rice in favor of the Rice Water Entities and their subsidiaries pursuant to which Rice guarantees all of the obligations of Rice Drilling B LLC and Rice Drilling D LLC under the applicable Water Services Agreement.

Rice Indemnitees ” has the meaning set forth in Section 8.1 .

 

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Rice Material Adverse Effect ” means any change, circumstance, effect or condition that, individually or in the aggregate, (a) is, or could reasonably be expected to be, materially adverse to the business, condition (financial or otherwise), assets, liabilities or results of operations of the Rice Water Entities, the Business or the Water Assets taken as a whole, other than any changes (x) in the general state of the industries in which the Business operates or (y) in general economic conditions (including changes in commodity prices or interest rates), financial or securities markets or political conditions, provided , that in the case of clauses (x) and (y), the impact on the Business is not materially disproportionate to the impact on companies engaged in similar lines of business as the Business, (b) in any material respect adversely affects, or could reasonably be expected to adversely affect, Rice’s ability to satisfy its obligations under the Transaction Documents, or (c) does, or could reasonably be expected to, prevent or materially impede or delay Rice’s ability to consummate the transactions contemplated by the Transaction Documents.

Rice Midstream Credit Facility ” means (i) that certain Credit Agreement, dated as of December 22, 2014, among Rice Midstream Holdings, LLC, as borrower, Wells Fargo Bank, N.A., as administrative agent and the lenders and other parties thereto, and (ii) any agreements, documents and/or instruments related thereto, in each case as amended, supplemented or otherwise modified from time to time.

Rice Midstream Loan Liens ” means the Liens on all or any portion of the Water Assets and/or the Conveyed Interests that secure any obligation of any Person under the Rice Midstream Credit Facility.

Rice Property ” has the meaning set forth in Section 3.8(b) .

Rice Special Liabilities ” means (i) Liabilities relating to Indebtedness existing as of the Effective Date, (ii) Liabilities relating to, arising from or otherwise attributable to the Business to the extent relating to, arising from, or otherwise attributable to facts, circumstances or events occurring prior to the Effective Date and (iii) Transaction Costs.

Rice Water Entities ” has the meaning set forth in the recitals to this Agreement.

Rice Water OH ” has the meaning set forth in the recitals to this Agreement.

Rice Water PA ” has the meaning set forth in the recitals to this Agreement.

Rights-of-Way ” has the meaning set forth in Section 3.8(d) .

Secondment Agreement ” has the meaning set forth in the recitals to this Agreement.

Service Areas ” has the meaning set forth in the Water Services Agreements as of the date hereof.

Straddle Period ” means any Tax period beginning on or before and ending after the Closing Date.

 

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Subsidiary ” means, with respect to any Person, any other Person in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person; provided, however, that (a) with respect to Rice, the term “Subsidiary” shall not include any member of the Partnership Group and (b) after the Closing each Rice Water Entity will be deemed to be a Subsidiary of the Partnership (not of Rice).

Tax ” or “ Taxes ” means any federal, state, local or foreign income tax, ad valorem tax, excise tax, sales tax, use tax, franchise tax, real or personal property tax, transfer tax, gross receipts tax or other tax, assessment, duty, fee, levy or other governmental charge, together with and including, any and all interest, fines, penalties, assessments, and additions to Tax resulting from, relating to, or incurred in connection with any of those or any contest or dispute thereof.

Tax Authority ” means any Governmental Authority having jurisdiction over the payment or reporting of any Tax.

Tax Proceeding ” has the meaning set forth in Section 5.7(d) .

Tax Return ” means any report, statement, form, return or other document or information required to be supplied to a Tax Authority in connection with Taxes.

Transaction Costs ” means all reasonable documented, out-of-pocket fees and expenses payable to any agent or consultant, including attorneys, brokers, finders, financial and other advisors and accountants relating to the preparation for, or the discussion, negotiation, documentation and closing of, the transactions contemplated by this Agreement; provided, however, that Transaction Costs shall not include any fees and expenses associated with the financing of the Consideration.

Transaction Documents ” means this Agreement, the Water Services Agreements, each of the other documents and certificates to be delivered at Closing pursuant to Section 7.2 and Section 7.3 hereof and the agreements, instruments, documents and certificates contemplated hereby and thereby.

Transfer Taxes ” has the meaning set forth in Section 2.4 .

Voting Securities ” of a Person means securities of any class of such Person entitling the holders thereof to vote in the election of, or to appoint, members of the board of directors or other similar governing body of the Person.

Water Assets ” means all rights, title and interest in and to any assets (a) owned by any Rice Water Entity, (b) recorded on the Interim Balance Sheet and/or (c) as set forth on Exhibit D.

Water Services Agreements ” means those certain Amended and Restated Water Services Agreements, collectively, in the forms attached as Exhibit B and Exhibit C hereto.

Water Treatment Assets ” means any facility, plant or system for the treatment of waste water or other fluid waste, including all related assets, rights, interests (including warranties or similar claims), files and records, easements, rights-of-way, and other similar interests, fee and leasehold interests in real property, Contracts and Permits.

 

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ARTICLE II

CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS

2.1 Conveyances . At the Closing, on the terms and subject to the conditions of this Agreement, Rice shall sell, assign, transfer and convey to the Partnership the Conveyed Interests free and clear of all Liens other than Liens under the Organizational Documents of the Rice Water Entities and restrictions on transfer under applicable securities Laws, in exchange for the Consideration, and the Partnership shall accept the sale, assignment, transfer and conveyance of the Conveyed Interests.

2.2 Consideration . At the Closing, in consideration for the sale and conveyance of the Conveyed Interests, the Partnership shall pay Rice $200,000,000.00, in cash.

2.3 Earn-Out Payments .

(a) Following the Closing and as additional consideration for the conveyance by Rice to the Partnership of the Conveyed Interests, Rice shall be entitled to receive from the Partnership (subject to the terms and conditions of this Section 2.3 ) cash determined in accordance with this Section 2.3 (the “ Earn-Out Payment ”). In addition to the consideration set forth in Section 2.2 above, Rice shall be entitled to a cash payment equal to (i) $25,000,000.00, less the Incremental Capacity Capex, if, on or prior to December 31, 2017 (the “ Earn-Out Term ”), the aggregate amount of Incremental Capacity equals or exceeds 5 MMgal/d (the “ Earn-Out Threshold ”) following the Effective Date.

(b) Within 30 days after the end of each fiscal quarter during the Earn-Out Term, the Partnership shall in good faith prepare and deliver to Rice a report setting forth the Incremental Capacity and the Incremental Capacity Capex incurred in the fiscal quarter as well as any other information that Rice may reasonably request in order to verify such Incremental Capacity and Incremental Capacity Capex (the “ Earn-Out Report ”). The Earn-Out Report and the Incremental Capacity and Incremental Capacity Capex reflected thereon shall be final and binding upon Rice and the Partnership upon the approval of such Earn-Out Report by Rice, in a written notice that specifically states such approval and references this Section 2.3(b) , or the failure of Rice to object in a written notice to the Partnership that specifically references this Section 2.3(b) within 15 days after receipt of the Earn-Out Report by Rice. If Rice does not agree with the Earn-Out Report and the calculation of the Incremental Capacity and Incremental Capacity Capex stated thereon, and Rice and the Partnership cannot mutually agree on the calculation of the Incremental Capacity and Incremental Capacity Capex, then, if based on Rice’s calculation of Incremental Capacity and Incremental Capacity Capex it would be entitled to the Earn-Out Payment, within 45 days following receipt by Rice of the Earn-Out Report, the Partnership and Rice shall resolve such dispute (the “ Earn-Out Report Dispute ”) in accordance with Section 2.3(c) . If no such Earn-Out Payment would be required to be paid based on Rice’s calculation, then any dispute resolution procedure should be deferred until the next quarter. If at any time the

 

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Partnership and Rice resolve the Earn-Out Report Dispute, then notwithstanding the preceding provisions of this Section 2.3(b) and Section 2.3(c) , the dispute resolution procedures in Section 2.3(c) promptly shall be discontinued with respect to such agreed matters and the Earn-Out Report and the Incremental Capacity and Incremental Capacity Capex shall be revised, if necessary to reflect such resolution and thereupon shall become binding upon Rice and the Partnership for purposes hereof. The Earn-Out Payment, if any, that the Partnership becomes obligated to pay to Rice (by wire transfer of immediately available funds to an account or accounts specified by Rice) pursuant to this Section 2.3 shall be paid to Rice within five Business Days of the determination of the Earn-Out Payment becoming final and binding upon the Parties in accordance with Section 2.3(b) .

(c) If Rice and the Partnership are unable to resolve an Earn-Out Report Dispute as contemplated by Section 2.3(b) , then such Earn-Out Report Dispute shall be submitted to mandatory and binding arbitration pursuant to the following conditions:

 

  (i) Procedures . The arbitration shall be conducted pursuant to the Federal Arbitration Act and the Commercial Arbitration Rules of the AAA, as they may be amended from time to time, except as expressly provided in this Section 2.3(c) (the “ AAA Rules ”) with the arbitrators selected pursuant to the procedures set forth in this Section 2.3(c) (each, an “ Arbitrator ”). In resolving the substance of the Earn-Out Report Dispute, the Arbitrators shall apply the laws of the State of Texas provided, however, that no aspect of the 1987 Alternative Dispute Resolution Act shall be applied to the arbitration proceeding.

 

  (ii) Selection of Arbitrators . The Earn-Out Report Dispute will be resolved by a panel of three Arbitrators, unless Rice and the Partnership mutually agree upon the selection of a single Arbitrator. Within 15 days after a failure to resolve any dispute in an Earn-Out Report in accordance with Section 2.3(b) , each of Rice and the Partnership shall appoint one person to serve as an Arbitrator and, within 10 days after the later to occur of such appointments, the two appointed Arbitrators shall mutually agree to appoint a third Arbitrator, failing agreement on which such third Arbitrator shall be appointed by AAA in accordance with its rules. If either Rice or the Partnership does not appoint an Arbitrator within 15 days after such failure to resolve any dispute regarding the calculation of the Incremental Capacity and Incremental Capacity Capex in an Earn-Out Report in accordance with Section 2.3(b) , then the other party may submit an appropriate request to the AAA to initiate proceedings and AAA shall select such Arbitrator in accordance with its rules. Should any Arbitrator refuse or be unable to proceed with arbitration proceedings as called for in this Section 2.3(c) , such Arbitrator shall be replaced by AAA in accordance with Section 2.3(c)(viii) below.

 

  (iii) Place of Arbitration . The arbitration shall be held in Houston, Texas.

 

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  (iv) Conduct of Arbitration . The Arbitrators shall allow reasonable discovery in the forms permitted by the AAA Rules, to the extent consistent with the purposes of the arbitration. Recognizing the express desire of the parties for an expeditious means of dispute resolution, the Arbitrators shall limit or allow the parties to expand the scope of discovery as may be reasonable and necessary under the circumstances. The arbitration hearing shall be commenced promptly and conducted expeditiously. If one party seeks discovery of electronic communications, such as emails, from another party, the Arbitrators shall have the authority to impose reasonable limits on the timing and extent of such discovery, and allow the producing party to recover reasonable expenses and costs associated with that discovery. Unless otherwise agreed by the parties, the arbitration hearing shall be conducted on consecutive days. The Arbitrators must give effect to legal privileges including the attorney-client privilege and work-product immunity. The Arbitrators shall act by majority vote in resolving all Earn-Out Report Disputes.

 

  (v) Arbitration Award . The Arbitrators shall endeavor to render a binding, written decision within 14 days following the completion of the arbitration hearing.

 

  (vi) Binding Nature of the Arbitration Award . The arbitration award shall be binding on the parties, and judgment thereon may be entered in any court of competent jurisdiction, and may not be appealed except to the extent permitted by the Federal Arbitration Act.

 

  (vii) Time of the Essence . The Arbitrators are to be instructed that time is of the essence in the arbitration proceeding.

 

  (viii) Replacement of Arbitrator . Should any Arbitrator refuse or be unable to proceed with arbitration proceedings as called for by this Section 2.3(c) , such Arbitrator shall be replaced in the same manner by which he or she was appointed (e.g., if a party appointed the departing Arbitrator, that party would appoint the departing Arbitrator’s replacement, and if the two Party-appointed Arbitrators appointed the departing Arbitrator, then such party-appointed Arbitrators would appoint the departing Arbitrator’s replacement).

 

  (ix) Confidentiality . To the fullest extent permitted by the Laws of the State of Texas, the arbitration proceedings and award shall be maintained in confidence by the parties.

 

  (x) Expenses . The Arbitrators shall have the authority to award attorneys’ fees and expenses to the prevailing party.

 

  (xi) THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT IN ENTERING INTO THIS SECTION 2.3(C) , THEY ARE KNOWINGLY AND VOLUNTARILY WAIVING THEIR RIGHTS TO A JURY TRIAL.

 

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2.4 Transfer Taxes . To the extent that any sales, use, transfer, purchase, filing, recordation, stamp, registration and similar Taxes (collectively, “ Transfer Taxes ”) are payable as a result of the transactions contemplated by this Agreement, such Transfer Taxes shall be borne fifty percent (50%) by Rice and fifty percent (50%) by the Partnership. To the extent under applicable Law the transferee is responsible for filing Tax Returns or other documentation in respect of Transfer Taxes, the Partnership shall prepare and file all such Tax Returns or other documentation. The Parties shall provide such certificates and other information and otherwise cooperate in good faith to minimize, to the extent permitted under applicable Law, any Transfer Taxes. The Party that is not responsible under applicable Law for paying the Transfer Taxes shall pay its share of the Transfer Taxes to the responsible Party prior to the due date of such Transfer Taxes.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF RICE

Rice hereby represents and warrants to the Partnership that:

3.1 Organization and Existence .

(a) Rice has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted.

(b) Each of the Rice Water Entities has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its formation, with full limited liability company power and authority to own, lease, use and operate the properties and assets it now owns, leases, uses and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted. Each of the Rice Water Entities is duly qualified to transact business and is in good standing as a foreign entity in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing would not, individually or in the aggregate, have a Rice Material Adverse Effect. Rice has delivered to the Partnership correct and complete copies of each of the Rice Water Entity’s Organizational Documents, as amended to date, and there are no amendments, modifications or rescissions with respect thereto. There is no pending, or to the knowledge of Rice, threatened, action for the dissolution, liquidation or insolvency of either Rice Water Entity.

(c) Neither of the Rice Water Entities has any Subsidiaries or owns any ownership interest in any other Person.

 

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3.2 Authority and Approval; Enforceability . Rice has the corporate power and authority to execute and deliver this Agreement and Rice and each of its Subsidiaries has the corporate, limited liability company or other entity power and authority to execute and deliver any other Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it. The execution and delivery by Rice of this Agreement and the execution and delivery by Rice and each of its Subsidiaries of any other Transaction Document to which it is or will be a party, the performance by Rice or its applicable Subsidiary of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite corporate, limited liability company or other entity action of Rice and any applicable Subsidiary of Rice. Each of this Agreement and any other Transaction Document to which Rice or any Subsidiary of Rice is or will be a party constitutes or will constitute, upon execution and delivery by Rice or such applicable Subsidiary of Rice, the valid and binding obligation of Rice or such Subsidiary of Rice, enforceable against Rice or such Subsidiary of Rice in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

3.3 No Conflict . Other than as set forth on Schedule 3.3 , this Agreement, the other Transaction Documents to which Rice or any Subsidiary of Rice is or will be a party, the execution and delivery hereof and thereof by Rice or any Subsidiary of Rice do not and will not, and the fulfillment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not:

(a) conflict with any of the provisions of the Organizational Documents of Rice or any of its Subsidiaries;

(b) conflict with any provision of any Law or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to Rice or any of its Subsidiaries;

(c) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both) or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or give any other Person the right to terminate, modify or cancel, or require any notice, payment or Lien, in each case, any indenture, mortgage, Lien or Contract to which Rice or any of the Rice Water Entities is a party or by which any of them is bound or to which any of the Water Assets are subject;

(d) result in the creation of, or afford any Person the right to obtain, any Lien on the Conveyed Interests (other than Liens under the Organizational Documents of the Rice Water Entities) or Water Assets (other than Permitted Liens); or

 

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(e) result in the revocation, cancellation, suspension or material modification, individually or in the aggregate, of any Governmental Approval possessed by either of the Rice Water Entities that is necessary for the ownership, lease or operation of the Water Assets or the Business as now conducted;

except, in the case of clauses (b) , (c) , (d)  and (e) , as would not, individually or in the aggregate, have a Rice Material Adverse Effect.

3.4 Consents . Except as set forth in Schedule 3.4 , no consent, approval, license, permit, order, waiver, or authorization of, or registration, declaration, or filing with any Governmental Authority (each a “ Governmental Approval ”) or other Person is required to be obtained or made by or with respect to Rice or any of its Subsidiaries in connection with:

(a) the execution, delivery, and performance of this Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby and thereby; or

(b) the enforcement against Rice or any of its Subsidiaries of its obligations under this Agreement or the other Transaction Documents;

except, in each case, as would not, individually or in the aggregate, have a Rice Material Adverse Effect (each of the foregoing, a “ Consent ”).

3.5 Laws and Regulations; Litigation .

(a) Except as set forth in Schedule 3.5 , there are no pending or, to Rice’s knowledge, threatened claims, fines, actions, suits, demands, investigations or proceedings or any arbitration or binding dispute resolution proceeding (collectively, “ Litigation ”) against or by Rice or the Rice Water Entities relating to or affecting the Rice Water Entities, the Business or the Water Assets (other than Litigation under any Environmental Law, which is the subject of Section 3.6 ) that would, individually or in the aggregate, have a Rice Material Adverse Effect. Except as would not, individually or in the aggregate, have a Rice Material Adverse Effect, as of the date hereof, no Litigation is pending or, to Rice’s knowledge, threatened to which Rice or any of its Subsidiaries is or may become a party that questions or involves the validity or enforceability of any of its respective obligations under this Agreement or the other Transaction Documents or seeks to prevent or delay, or seeks damages in connection with, the consummation of the transactions contemplated hereby.

(b) Except as would not, individually or in the aggregate, have a Rice Material Adverse Effect, neither Rice, either of the Rice Water Entities or any of their respective Subsidiaries (i) has violated or is in violation of or in default under any law or regulation or under any order (other than Environmental Laws, which are the subject of Section 3.6 ) of any Governmental Authority applicable to it, (ii) has received written notice of any violation of any Laws applicable to the conduct of the Business as currently conducted or the ownership and use of the Water Assets or (iii) to the knowledge of Rice, is under investigation by any Governmental Authority for potential non-compliance with any Law applicable to the conduct of the Business as currently conducted or the ownership and use of the Water Assets.

 

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3.6 Environmental Matters . Except as would not, individually or in the aggregate, have a Rice Material Adverse Effect,

(a) the Rice Water Entities, and, with respect to the Business or the Water Assets, their respective predecessors, (i) have complied and are in compliance with all Environmental Laws, (ii) are not the subject of any outstanding Order pursuant to any Environmental Law, (iii) have received all Permits required of them under applicable Environmental Laws to occupy or use their facilities and to conduct the Business as presently conducted in light of the current stage of development or construction of the Water Assets, (iv) have complied and are in compliance with all terms and conditions of any such Permits (and all such Permits are in full force and effect), (v) have not received any written or oral notice, report or other information regarding any actual or alleged violation of Environmental Laws or any liabilities, including any investigatory, remedial or corrective liabilities, relating to any of them or their facilities arising under Environmental Laws, (vi) are not subject to any pending Litigation involving any Environmental Law, (vii) have not owned or operated any property or facility with under- or above-ground storage tanks, asbestos-containing material in any form or condition, materials or equipment containing polychlorinated biphenyls or landfills, surface impoundments or disposal areas, and (viii) have not treated, recycled, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, including any Hazardous Material, or owned or operated any property or facility (and no such property or facility is contaminated by any such substances), in a manner that has given or would give rise to liabilities for response costs, corrective action costs, personal injury, property damage or natural resources damages pursuant to Environmental Laws; and

(b) to the knowledge of Rice, no facts, events or conditions relating to the past or present facilities, properties or operations of the Rice Water Entities, will prevent, hinder or limit continued compliance with current Environmental Laws, or give rise to any damages or any other liabilities under current Environmental Laws.

3.7 Conveyed Interests .

(a) The Conveyed Interests (i) constitute 100% of the limited liability company interests in each of the Rice Water Entities and (ii) were duly authorized and validly issued and are fully paid and non-assessable (except as such non-assessability may be affected by Sections 18-607 and 18-804 of the Delaware Limited Liability Company Act). The Conveyed Interests are not subject to and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of local or state law applicable to such interests, the Rice Water Entities’ Organizational Documents, or any Contract to which Rice or any of its Subsidiaries is a party or to which it or any of its properties or assets is otherwise bound.

 

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(b) Other than as set forth on Schedule 3.7(b) , Midstream Holdings has good and valid record and beneficial title to the Conveyed Interests, free and clear of any and all Liens, and, except as provided or created by the Organizational Documents of the Rice Water Entities or applicable securities Laws, the Conveyed Interests are free and clear of any restrictions on transfer, Taxes, or claims. There are no preemptive rights, rights of first refusal or other outstanding rights, options, warrants, conversion rights, equity appreciation rights, redemption rights, purchase rights, agreements, calls, subscription agreements, commitments or other securities exercisable or exchangeable for any equity interests of either of the Rice Water Entities, any other commitments or Contracts providing for the issuance of additional equity interests of either of the Rice Water Entities, or for the repurchase or redemption of the Conveyed Interests, or any Contracts of any kind which may obligate either of the Rice Water Entities to issue, purchase, register for sale, redeem or otherwise acquire any of its equity interests. Immediately after the Closing, the Partnership will have good and valid record and beneficial title to the Conveyed Interests, free and clear of any Liens (other than Liens created after Closing by, through or under the Partnership Group).

(c) Neither of the Rice Water Entities has any outstanding bonds, debentures, notes or other Liabilities the holders of which have the right to vote on any matter (or convertible into or exercisable for securities having the right to vote on any matter) with the holders of the Conveyed Interests.

(d) None of Rice nor the Rice Water Entities is a party to any agreements, arrangements, or commitments obligating it to grant, deliver or sell, or cause to be granted, delivered or sold, the Conveyed Interests, by sale, lease, license or otherwise, other than this Agreement.

(e) There are no voting trusts, proxies or other agreements or understandings to which any of Rice or the Rice Water Entities is bound with respect to the voting of the Conveyed Interests.

(f) Rice has good and valid record and beneficial title to 100% of the limited liability company interests in Midstream Holdings.

3.8 Water Assets .

(a) The Water Assets, when considered together with the services provided by Rice and its Affiliates pursuant to the Omnibus Agreement and the Secondment Agreement are sufficient to conduct the Business in a manner materially consistent with past practices.

(b) Except as set forth in Schedule 3.8(b) , and except as would not have a Rice Material Adverse Effect, each of the Rice Water Entities has valid and indefeasible title in fee to all real property and interests in real property constituting part of the Water Assets and purported to be owned in fee, and good and valid title to the leasehold estates in all other real property and

 

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interests in real property (including rights of way) constituting part of the Water Assets (all such property and interests, together with the Rights-of-Way, the “ Rice Property ”), in each case, free and clear of any Liens except (i) mechanics’, carriers’, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of the Business consistent with past practices that are not yet delinquent or can be paid without penalty or are being contested in good faith and by appropriate proceedings in respect thereof, (ii) Liens for current period Taxes that are not yet due and payable or are being contested in good faith and by appropriate proceedings in respect thereof, and (iii) other imperfections of title or Liens, including Laws and rights reserved to or vested in any Governmental Authority and the terms and conditions of the instruments creating the Rice Property, that, individually or in the aggregate, do not materially impair the value, or interfere with the present use, of the Water Assets or ordinary conduct of the Business (the Liens described in clauses (i), (ii) and (iii) above, being referred to collectively as “ Permitted Liens ”).

(c) Collectively, the Rice Water Entities have good and valid title to all tangible personal property constituting part of the Water Assets. All tangible personal property included in the Water Assets is owned by the Rice Water Entities free and clear of all Liens except Permitted Liens and Liens set forth in Schedule 3.8(c) . All tangible personal property included in the Water Assets is, in the aggregate, in good operating condition and repair (normal wear and tear excepted) and has been maintained in material compliance with applicable laws and regulations, as well as generally accepted industry practice, and is sufficient for the purposes for which it is currently being used or held for use in the Business.

(d) Other than as set forth on Schedule 3.8(d) , the Rice Water Entities have such consents, easements, rights-of-way, permits, real property licenses and surface leases (collectively, “ Rights-of-Way ”) as are sufficient to operate the Business as such Business is being operated as of the Closing Date, except as would not have a Rice Material Adverse Effect. Each of the Rice Water Entities has fulfilled and performed all its material obligations with respect to such Rights-of-Way and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or that would result in any impairment of the rights of the holder of any such Rights-of-Way, except for such revocations, terminations and impairments that would not, individually or in the aggregate, have a Rice Material Adverse Effect.

(e) Other than as set forth on Schedule 3.8(e) , (i) (A) there are no pending Proceedings to modify the zoning classification of, or to condemn or take by power of eminent domain, all or any part of the Rice Property and (B) neither Rice nor the Rice Water Entities have any knowledge of any such threatened Proceeding, which (in either case), if pursued, would have a Rice Material Adverse Effect, (ii) to the extent located in jurisdictions subject to zoning, the Rice Property is currently properly zoned for the existence, occupancy and use of the Water Assets located on such Rice Property, except as would not have a Rice Material Adverse Effect, and (iii) none of the Water Assets and the operations thereof are subject to any conditional use permits or “permitted non-conforming use” or “permitted non-conforming structure” classifications or similar permits or classifications, except as would not, either currently or in the case of a rebuilding of or additional construction of improvements, individually or in the aggregate, have a Rice Material Adverse Effect.

 

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3.9 Permits . Each of the Rice Water Entities holds or has a valid right to use, all Permits (other than environmental Permits, which are the subject of Section 3.6 ) that are necessary for the conduct of the Business and the ownership and operation of the Water Assets, each in compliance with applicable Laws, except for those Permits the failure of which to have would not have a Rice Material Adverse Effect. Each of the Rice Water Entities has complied in all material respects with all terms and conditions of such Permits.

3.10 Brokerage Arrangements . Neither Rice nor any of its Affiliates has entered, directly or indirectly, into any Contract with any Person that would obligate any member of the Partnership Group to pay any commission, brokerage or “finder’s fee” or other similar fee in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby.

3.11 Taxes . Except as would not, individually or in the aggregate, have a Rice Material Adverse Effect:

(a) all Tax Returns that are required to be filed by or with respect to the Rice Water Entities, the Business or the Water Assets on or prior to the Closing Date (taking into account any valid extension of time within which to file) have been or will be timely filed on or prior to the Closing Date and all such Tax Returns are or will be true, correct and complete in all material respects;

(b) all Taxes due and payable by or with respect to the Rice Water Entities, the Business or the Water Assets (whether or not shown on any Tax Return) have been fully paid and all deficiencies asserted or assessments made with respect to such Tax Returns have been paid in full;

(c) no examination, audit, claim, assessment, levy, or administrative or judicial proceeding regarding any of the Tax Returns described in Section 3.11(a) or any Taxes of or with respect to the Rice Water Entities, the Business or the Water Assets are currently pending or have been proposed in writing or have been threatened in writing;

(d) no waivers or extensions of statutes of limitations have been given or requested in writing with respect to any amount of Taxes of or with respect to the Rice Water Entities, the Business or the Water Assets or any Tax Returns of or with respect to the Rice Water Entities, the Business or the Water Assets; and

(e) Each of the Rice Water Entities will, at Closing, be classified as an entity disregarded as separate from its owner for U.S. federal income Tax purposes in accordance with Treasury Regulation Section 301.7701-3.

 

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3.12 Contracts .

(a) Except as set forth on Schedule 3.12(a) or any Contract entered into after the date hereof in compliance with Section 5.2(a)(vii)(G) , none of Rice, the Rice Water Entities and their respective Subsidiaries is a party to or bound by any Contract used in the Business or included among the Water Assets that:

 

  (i) contains any provision or covenant which materially restricts either of the Rice Water Entities from engaging in any lawful business activity or competing with any Person or operate at any location, including any preferential rights, rights of first refusal or rights of first offer granted to third parties;

 

  (ii) (A) relates to the creation, incurrence, assumption, or guarantee of any Indebtedness by either of the Rice Water Entities or (B) creates a capitalized lease, take-or-pay or keepwell obligation;

 

  (iii) is in respect of the formation of any partnership, joint venture or other arrangement or otherwise relates to the joint ownership or operation of the assets owned by either of the Rice Water Entities or which requires either of the Rice Water Entities to invest funds in or make loans to, or purchase any securities of, another Person;

 

  (iv) relates to any commodity or interest rate swap, cap or collar agreements or other similar hedging or derivative transactions;

 

  (v) is a bond, letter of credit, guarantee or security deposit posted (or supported) by or on behalf of either of the Rice Water Entities;

 

  (vi) includes the acquisition of assets or properties or the sale of assets or properties (whether by merger, sale of stock, sale of assets or otherwise) in an amount that exceeds $500,000;

 

  (vii) involves a sharing of profits or losses by either of the Rice Water Entities with any other Person;

 

  (viii) relates to (A) the purchase of materials, supplies, goods, services, equipment or other assets, (B) the purchase, sale, transporting, treating, gathering, processing or storing of water, or the provision of services related thereto, (C) the construction of capital assets, (D) the management of any part or all of the Water Assets or Business, (E) services provided to or in connection with, the Water Assets or the Business, (F) the paying of commissions related to the Business, (G) advertising contracts and (H) other similar types of Contracts of the kind listed in (i) through (vii) above, in the cases of clauses (A), (B), (C), (D), (E), (F), (G) and (H), that provides for annual payments after the date hereof by or to either of the Rice Water Entities in excess of $500,000; and

 

  (ix) otherwise involves the annual payment after the date hereof by or to either of the Rice Water Entities of more than $500,000 and cannot be terminated by either of the Rice Water Entities on 90 days or less notice without payment by such Rice Water Entity of any material penalty.

 

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(b) None of Rice, the Rice Water Entities or their respective Subsidiaries has received any material prepayment, advance payment, deposit or similar payment, and has no material refund obligation, with respect to any water, gas or other hydrocarbons (including liquid products) or products that have been, or will be, purchased, sold, transported, gathered, stored or processed by or on behalf of the Rice Water Entities with respect to the Business and will not have been delivered prior to the Closing Date; and (ii) none of the Partnership, the Rice Water Entities or their respective Subsidiaries has received any material compensation for transportation, gathering, storage or processing services with respect to the Business which would be subject to any refund or create any repayment obligation either by or to the Rice Water Entities after the Closing Date, and to the knowledge of the Partnership and the Rice Water Entities, there is no basis for a claim that any such refund is due with respect to the Business.

(c) Rice has made available to the Partnership a correct and complete copy of each Contract (including any amendments thereto) required to be disclosed on Schedule 3.12(a) . Each Rice Water Entity Contract is in full force and effect and enforceable against the applicable Rice Water Entity and, to Rice’s knowledge, each other party thereto, in accordance with its terms, and none of Rice or the Rice Water Entities, or, to the knowledge of Rice, any other party, is in breach or default thereunder and, to the knowledge of Rice, no event has occurred that upon receipt of notice or lapse of time or both would constitute any breach or default thereunder or would permit termination, modification or acceleration, except, in each case, for such exceptions as would not, individually or in the aggregate, have a Rice Material Adverse Effect.

3.13 No Adverse Changes . Except as set forth in Schedule 3.13 , from December 31, 2014 to the date of this Agreement:

(a) there have been no changes in the Water Assets or Business that would, individually or in the aggregate, have a Rice Material Adverse Effect;

(b) the Business and the Water Assets have been operated and maintained in the ordinary course of business consistent with past practices; and

(c) there has not been any physical damage, destruction or loss individually in excess of $200,000, or in combination with any other physical damage, destruction or loss, in excess of an aggregate of $1,000,000, to any portion of the Water Assets, whether or not covered by insurance.

 

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3.14 Financial Statements .

(a) Rice has made available to the Partnership (i) an unaudited combined balance sheet of the Rice Water Entities as of December 31, 2014, and the related unaudited combined income statement, for the twelve-month period of operations of the Rice Water Entities ending December 31, 2014 (the “ Annual Financial Statements ”); and (ii) an unaudited combined balance sheet of the Rice Water Entities as of the period ended September 30, 2015 (the “ Interim Balance Sheet ”) and the related unaudited combined income statement for the period of operations of the Rice Water Entities then ended (the “ Interim Financial Statements ” and, together with the Annual Financial Statements, the “ Financial Statements ”). The Financial Statements (A) are consistent with the books and records of Rice, (B) have been prepared in accordance with GAAP, except that such Financial Statements do not include a statement of cash flows, a statement of owner’s equity or footnotes, and (C) present fairly, in all material respects, the combined financial position and operating results of the Rice Water Entities as of, and for the periods ended on, the respective dates thereof, except that such Financial Statements do not include a statement of cash flows, a statement of owner’s equity or footnotes.

(b) Neither of the Rice Water Entities has any Liability material to the Water Assets or the Business except for (i) Liabilities set forth in the Financial Statements, (ii) Liabilities relating to the Business that have arisen since and including October 1, 2015 in the ordinary course of business consistent with past practice, (iii) Liabilities or obligations arising under executory Contracts entered into in the ordinary course of business consistent with past practices, (iv) Liabilities not required to be presented by GAAP in unaudited financial statements, (v) Liabilities or obligations under this Agreement and (vi) other Liabilities or obligations which in the aggregate would not have a Rice Material Adverse Effect.

(c) The financial and operating model provided to the Committee and the Partnership Financial Advisor, including the level of capital expenditures necessary to operate the Business, has been prepared in good faith by Rice and based on assumptions believed by Rice to be reasonable (it being understood that forecasts are subject to uncertainties and contingencies and that no representation or warranty is given that any forecast will be realized).

3.15 Regulatory Status . Neither of the Rice Water Entities is (a) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder or (b) a “holding company,” a “subsidiary company” of a “holding company,” an “affiliate” of a “holding company,” a “public utility” or a “public-utility company,” as each such term is defined in the Public Utility Holding Company Act of 2005. Neither of the Rice Water Entities has been operated or provided services as a “natural gas company” subject to the jurisdiction of the Federal Energy Regulatory Commission (“ FERC ”) under the Natural Gas Act of 1938, as amended. Neither of the Rice Water Entities has utilized its facilities to provide service as a common carrier subject to the jurisdiction of FERC under the Interstate Commerce Act as such statute is implemented by FERC pursuant to the Department of Energy Organization Act of 1977.

3.16 Bankruptcy . There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to the knowledge of Rice or the Rice Water Entities, threatened against Rice or any of its Subsidiaries.

 

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3.17 Books and Records . The books and records of each of the Rice Water Entities and the Business that are necessary for the ownership and operation of the Water Assets have been maintained in accordance with prudent industry practice and such books and records have been made available to the Partnership.

3.18 Insurance . Rice or its Affiliates maintain policies of fire and casualty, liability and other forms of property and liability insurance related to the Water Assets and the Business in such amounts, with such deductibles, and against such risks and losses as are, in their judgment, reasonable for the Business and the Water Assets. All such policies are in full force and effect, all premiums due and payable thereon have been paid, and no notice of cancellation or termination has been received with respect to any such policy that has not been replaced on substantially similar terms prior to the date of such cancellation.

3.19 No Other Representations or Warranties; Schedules . Except as set forth in this Article III , neither Rice nor any of its Affiliates or Subsidiaries makes any other express or implied representation or warranty with respect to the Conveyed Interests, the Water Assets or the transactions contemplated by this Agreement, and disclaims any other representations or warranties. The disclosure of any matter or item in any schedule to this Agreement shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

The Partnership hereby represents and warrants to Rice that:

4.1 Organization and Existence . The Partnership has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, with full limited partnership power and authority to own the Conveyed Interests and the Water Assets.

4.2 Authority and Approval; Enforceability . The Partnership has the requisite power and authority to execute and deliver this Agreement and any other Transaction Document to which it is or will be a party, to consummate the transactions contemplated hereby and thereby and to perform all the terms and conditions hereof and thereof to be performed by it. The execution and delivery by the Partnership of this Agreement and any other Transaction Document to which it is or will be a party, the performance by it of all the terms and conditions hereof and thereof to be performed by it and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite action of the Partnership. Each of this Agreement and any other Transaction Document to which the Partnership is or will be a party constitutes or will constitute,

 

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upon execution and delivery by the Partnership, the valid and binding obligation of the Partnership, enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

4.3 No Conflict . Other than as set forth on Schedule 4.3 , this Agreement, the other Transaction Documents to which the Partnership is or will be a party and the execution and delivery hereof and thereof by the Partnership do not and will not, and the fulfillment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not:

(a) conflict with any of the provisions of the Organizational Documents of the Partnership;

(b) conflict with any provision of any Law or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to the Partnership;

(c) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both) or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or give any other Person the right to terminate, in each case, any indenture, mortgage, Lien or Contract to which the Partnership is a party or by which any of them is bound or to which any of their properties or assets is subject;

(d) result in the creation of, or afford any Person the right to obtain, any material Lien on the capital stock or other equity interests, property or assets of the Partnership; or

(e) result in the revocation, cancellation, suspension or material modification, individually or in the aggregate, of any Governmental Approval possessed by the Partnership that is necessary for the ownership, lease or operation of its properties and other assets in the conduct of its business as now conducted;

except, in the case of clauses (b) , (c) , (d)  and (e) , as would not have, individually or in the aggregate, a Partnership Material Adverse Effect.

4.4 Special Approval . The Conflicts Committee has determined that the transactions contemplated by this Agreement and the Transaction Documents are not adverse to the interests of the Partnership and the unitholders of the Partnership (other than the General Partner and its Affiliates), with such determination being “Special Approval” as defined in the Amended and Restated Agreement of Limited Partnership of the Partnership (the “ Partnership Agreement ”).

 

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4.5 Delivery of Fairness Opinion . The Partnership Financial Advisor has delivered an opinion to the Conflicts Committee that the Consideration to be paid by the Partnership, as consideration for the Conveyed Interests pursuant to this Agreement is fair to the Partnership and its unitholders (other than the General Partner and its Affiliates) from a financial point of view.

4.6 Brokerage Arrangements . The Partnership has not entered, directly or indirectly, into any Contract with any Person that would obligate Rice or any of its Affiliates to pay any commission, brokerage or “finder’s fee” or other similar fee in connection with this Agreement or the transactions contemplated hereby.

4.7 Available Funds . The Partnership will have at Closing sufficient cash to enable it to make payment in immediately available funds of the Consideration when due and any other amounts to be paid by it hereunder.

4.8 Investment . The Partnership is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act. The Partnership is not acquiring the Conveyed Interests with a view to or for sale in connection with any distribution thereof or any other security related thereto within the meaning of the Securities Act. The Partnership is familiar with investments of the nature of the Conveyed Interests, understands that this investment involves substantial risks, has adequately investigated the Conveyed Interests and the Business, and has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in acquiring the Conveyed Interests, and is able to bear the economic risks of such investment. The Partnership has had the opportunity to visit with Rice and meet with the officers of Rice and other representatives to discuss the Water Assets, business, assets, liabilities, financial condition, and operations of the Rice Water Entities, has received all materials, documents and other information that the Partnership deems necessary or advisable to evaluate the Water Assets, Business or the Conveyed Interests, and has made its own independent examinations, investigations, analyses and evaluations of the Water Assets, the Business and the Conveyed Interests, including their own estimate of the value of the Conveyed Interests. The Partnership has undertaken such due diligence (including a review of the properties, liabilities, books, records and contracts of the Partnership) as it deems adequate.

4.9 No Other Representations or Warranties; Schedules . Except as set forth in this Article IV , the Partnership makes no other express or implied representation or warranty with respect to the transactions contemplated by this Agreement, and disclaims any other representations or warranties. The disclosure of any matter or item in any schedule to this Agreement shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed.

 

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ARTICLE V

CERTAIN COVENANTS

5.1 Mutual Covenants . Subject to the terms and conditions of this Agreement, each of Rice and the Partnership will cooperate with the other and use (and will cause each of its Subsidiaries to use) its commercially reasonable efforts to (i) take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to cause the conditions to the Closing to be satisfied as promptly as practicable and to consummate and make effective, in the most expeditious manner reasonably practicable, the transactions contemplated by this Agreement, including preparing and filing promptly and fully all documentation to effect all necessary filings, notifications, notices, petitions, statements, registrations, submissions of information, applications and other documents with or to applicable Governmental Authorities, (ii) obtain promptly all approvals, consents, waivers, clearances, expirations or terminations of waiting periods, registrations, permits, authorizations and other confirmations from any Governmental Authority or third party necessary, proper or advisable to consummate the transactions contemplated by this Agreement, and (iii) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated by this Agreement.

5.2 Conduct of the Business . Rice covenants and agrees that from and after the execution of this Agreement and until the Closing, except (i) as expressly contemplated by this Agreement, (ii) as required by applicable Law or (iii) subject to Section 5.3 , with the prior written consent of the Partnership:

(a) Rice will not, and will not permit any of its Subsidiaries to:

 

  (i) sell, transfer, assign, convey or otherwise dispose of any of the Conveyed Interests;

 

  (ii) conduct any of the Business through any Person other than the Rice Water Entities (other than as contemplated by the Secondment Agreement and the Omnibus Agreement);

 

  (iii) allow any Permits material to the Business to terminate or lapse other than expirations in accordance with their respective terms, in which case Rice shall (and shall cause the applicable subsidiary to) use its commercially reasonable efforts to obtain an extension or replacement of such expired Permit if necessary for the Business

 

  (iv) amend the Organizational Documents of any Rice Water Entity;

 

  (v) utilize any Water Asset for any purpose other than in the ordinary course of business (including emergency operations) consistent with past practices in connection with the Business;

 

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  (vi) permit any Lien to be imposed or granted or to exist on the Conveyed Interests other than the Rice Midstream Loan Liens that will be released at Closing and Permitted Liens;

 

  (vii) permit any of the Rice Water Entities to:

 

  (A) sell, transfer, assign, convey or otherwise dispose of any of the Water Assets except sales of inventory for fair value in the ordinary course of operating the Business consistent with past practices;

 

  (B) acquire (including by merger, consolidation or acquisition of equity interest) any Person, make an investment in or a loan to any Person (other than intercompany advances made in the ordinary course of business consistent with past practices), or acquire (including making capital expenditures or leasing (other than leases of equipment made in the ordinary course of operating the Business consistent with past practices cancelable by Rice or the Rice Water Entities upon 90 days’ or less prior notice without penalty)) any assets with an aggregate value in excess of $2,500,000 individually or in combination with any other assets acquired pursuant to this clause (B);

 

  (C) enter into any joint venture, partnership or similar arrangement;

 

  (D) incur, permit to exist, issue, repay, redeem or repurchase any Indebtedness or capital leases or issue any debt securities or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any Person, or make any loans or advances, or delay or postpone beyond the applicable due date the payment of accounts payable or other liabilities other than (A) endorsements of checks for deposit, (B) causing the issuance of letters of credit and performance bonds in the ordinary course of operating the Business consistent with past practice, and (C) Indebtedness under the Rice Midstream Credit Facility for which the Rice Water Entities are released of any and all obligations and Liabilities at Closing;

 

  (E) permit any Lien to be imposed or granted or to exist on the Water Assets other than the Rice Midstream Loan Liens that will be released at Closing and Permitted Liens;

 

  (F) issue, sell, pledge, dispose of, grant, encumber or otherwise transfer, or authorize the issuance, sale, pledge, disposition, grant, repurchase, redemption, encumbrance or other transfer, of any equity interest or make any commitment with respect to any equity interest or declare, set aside or make any distributions or dividends, or make any capital contributions, in respect of any equity interest, except for distributions in respect of the Conveyed Interests of cash, cash equivalents and trade receivables;

 

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  (G) enter into, extend, amend (or waive any right under) in any material respect, or terminate before the expiration of the term thereof, (A) any Contract to which it is a party that is material to the Business, other than to the extent any such Contract terminates in accordance with its terms in the ordinary course of operating the Business consistent with past practices, (B) any Contract of the type described in Section 3.12(a) , or (C) any other Contract that is not entered into in the ordinary course of operating the Business consistent with past practices;

 

  (H) cancel or compromise any debt or claim, initiate or settle any action, litigation, complaint, rate filing or administrative proceeding involving payment by any Rice Water Entity or to any Rice Water Entity, where the terms of all such settlements, cancellations, compromises or agreements are in excess of $100,000 in the aggregate or adversely impact the Conveyed Interests, the Water Assets or the Business after such settlement or agreement; and

 

  (viii) enter into any contract, agreement or commitment to do any of the foregoing.

(b) Rice will, and will cause each of the Rice Water Entities to, use commercially reasonable efforts to maintain the applicable Water Assets in all material respects in such working order and condition as is consistent with past practice;

(c) Rice will, and will cause each of the Rice Water Entities to, use commercially reasonable efforts to conduct the Business in all material respects in the ordinary course of operating the Business consistent with past practices, including preserving intact the goodwill and relationships with customers, suppliers and others having business dealings with them with respect thereto;

(d) Rice will, and will cause the Rice Water Entities to, comply in all material respects with all applicable Laws relating to them; and

(e) Rice will, and will cause the Rice Water Entities to, use commercially reasonable efforts to maintain in full force without interruption its present insurance policies or comparable insurance coverage of the Business and the Water Assets.

5.3 Conduct of Business Standard . Notwithstanding anything in Section 5.2 to the contrary, (i) with respect to Sections 5.2(a)(ii) , 5.2(a)(iii) and 5.2(a)(vii) (other than (A)-(C) and (F)) , the Partnership shall not unreasonably withhold, condition or delay its consent and (ii) with respect to the remainder of Section 5.2 , the Partnership may grant or deny granting its consent in its absolute and unfettered discretion.

 

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5.4 Independent Investigation . Each Party acknowledges that in making the decision to enter into this Agreement and to consummate the transactions contemplated hereby, it has relied solely on its own independent investigation of the Business, the Conveyed Interests and the Water Assets and upon the express written representations, warranties and covenants in this Agreement. Without diminishing the scope of the express written representations, warranties and covenants of the Parties and without affecting or impairing its right to rely thereon, EACH PARTY ACKNOWLEDGES THAT NEITHER THE OTHER PARTY NOR ANY OF ITS AFFILIATES OR REPRESENTATIVES HAS MADE ANY REPRESENTATION OR WARRANTY OTHER THAN THOSE CONTAINED HEREIN, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE WATER ASSETS OR THE BUSINESS (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS).

5.5 Post-Closing Receivables and Payments . It is the intention of the Parties that (a) Rice receives all benefits of, and bears all risk relating to, arising from, or otherwise attributable to, all facts, circumstances and events occurring prior to the Effective Date, and (b) the Partnership receives all benefits of, and bears all risk relating to, arising from, or otherwise attributable to, all facts, circumstances and events occurring after the Effective Date. Should Rice or any of its Subsidiaries receive any payments or make any payments related to the Rice Water Entities or the Business arising from, or otherwise attributable to, the period after the Effective Date, then Rice shall or shall cause its applicable Subsidiary to, within thirty (30) days of receipt or disbursement of such payments, forward such payments to, or seek reimbursement for such payments from, the Rice Water Entities, or otherwise keep the Rice Water Entities whole with respect to the same. Should the Partnership or any of its Subsidiaries receive any payments or make any payments related to the Rice Water Entities or the Business arising from, or otherwise attributable to, the period prior to the Effective Date, then the Partnership shall or shall cause its applicable Subsidiary to, within thirty (30) days of receipt or disbursement of such payments, forward such payments to, or seek reimbursement of such payments from, Rice, or otherwise keep Rice whole with respect to the same.

5.6 Further Assurances . On and after the Closing Date, the Parties shall cooperate and use their respective commercially reasonable efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to make effective the transactions contemplated by this Agreement and the other Transaction Documents, including the execution of any additional assignment or similar documents or instruments of transfer of any kind, the obtaining of consents which may be reasonably necessary or appropriate to carry out any of the provisions hereof and the taking of all such other actions as such Party may reasonably be requested to take by the other Party from to time to time, consistent with the terms of this Agreement or the other Transaction Documents, in order to effectuate the provisions and purposes of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby.

 

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5.7 Tax Covenants .

(a) The Parties agree that Rice shall bear the liability for any Taxes imposed on or incurred by or with respect to the Rice Water Entities, the Business or the Water Assets for any taxable period ending on or prior to the Effective Date and the portion of any Straddle Period ending on and including the Effective Date. The Parties further agree that the Partnership and its partners shall bear the liability for any Taxes imposed on or incurred by or with respect to the Rice Water Entities, the Business or the Water Assets for any taxable period beginning after the Effective Date and the portion of any Straddle Period beginning after the Effective Date.

(b) Proration of Straddle Period Taxes . In the case of Taxes that are payable with respect to any Straddle Period, the portion of any such Taxes that is attributable to the portion of such Straddle Period ending on the Effective Date will be:

 

  (i) in the case of property or ad valorem or franchise Taxes or any other Taxes that are imposed on a periodic basis and which are measured by, or based solely upon capital, debt or a combination of capital and debt, deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period), multiplied by a fraction the numerator of which is the number of calendar days in the portion of the period ending on and including the Effective Date and the denominator of which is the number of calendar days in the entire period; and

 

  (ii) in the case of all other Taxes, deemed equal to the amount which would be payable if the relevant Straddle Period ended on and included the Effective Date; provided that exemptions, allowances, or deductions that are calculated on an annual basis (including depreciation and amortization deductions) will be allocated between the portion of the Straddle Period ending on and including the Effective Date and the portion of the Straddle Period beginning after the Effective Date in proportion to the number of days in each period.

(c) With respect to any Tax Return attributable to a Straddle Period that is required to be filed after the Effective Date by the Rice Water Entities, the Business or with respect to the Water Assets, the Partnership shall cause such Tax Return to be prepared, cause to be included in such Tax Return all items of income, gain, loss, deduction and credit required to be included therein, furnish a copy of such Tax Return to Rice, cause such Tax Return to be filed timely with the appropriate Tax Authority, and the Partnership shall be responsible for the timely payment of all Taxes due with respect to the period covered by such Tax Return (but shall have a right to recover from Rice the amount of Taxes attributable to the portion of the Straddle Period ending on and including the Effective Date pursuant to Section 5.7(a) ).

 

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(d) The Parties shall cooperate fully, and cause their Affiliates to cooperate fully, as and to the extent reasonably requested by the other Party, (i) to accomplish the apportionment of Tax liability described in this Section 5.7 , (ii) to respond to requests for the provision of any information or documentation within the knowledge or possession of such Party as reasonably necessary to facilitate compliance with financial reporting obligations arising under FASB Statement No. 109 (including compliance with Financial Accounting Standards Board Interpretation No. 48), and (iii) in connection with any audit, litigation or other proceeding (each a “ Tax Proceeding ”) with respect to Taxes. Such cooperation shall include access to, the retention and (upon the other Party’s request) the provision of records and information which are reasonably relevant to any Tax Return or Tax Proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Partnership and Rice will use their respective commercially reasonable efforts to retain all books and records with respect to Tax matters pertinent to the Water Assets relating to any taxable period beginning before the Effective Date until the later of six years after the Effective Date or the expiration of the applicable statute of limitations of the respective taxable periods (including any extensions thereof), and to abide by all record retention agreements entered into with any Tax Authority. Each of the Partnership and Rice agrees, upon request, to use their respective commercially reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate, to the extent permitted by applicable Law, any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

5.8 Indebtedness and Release of Liens . Rice shall use commercially reasonable efforts to, as soon as reasonably practical but no later than the Closing Date, (i) repay in full and discharge or otherwise obtain a release of any obligations with respect to any Indebtedness and (ii) obtain a release of all Liens set forth on Schedule 3.8(c) ; in each case, without any post-Closing liability or expense to the Partnership, the Rice Water Entities, the Conveyed Interests or the Business and shall provide proof of such payment, discharge, satisfaction and/or release, as applicable, in full in a form reasonably acceptable to the Partnership at the Closing.

5.9 Partnership Option to Purchase Water Treatment Assets .

(a) Rice hereby agrees that it and its Controlled Affiliates shall not construct any Water Treatment Asset in the Service Areas from the date hereof until December 31, 2025; provided, however, that if Rice notifies the Partnership of its desire to construct any Water Treatment Asset (the “ Requested Asset ”) in the Service Areas, the Partnership shall inform Rice in writing within 30 days of receipt of such notice whether the Partnership desires to construct the Water Treatment Asset. If the Partnership declines to construct the Requested Asset, the Partnership will be deemed to have waived its right under this Section 5.9(a) with respect to such Requested Asset, and Rice shall be entitled to construct such Requested Asset.

(b) In the event Rice or any of its Controlled Affiliates acquires any Water Treatment Asset in the Service Areas from the date hereof until December 31, 2025, the Partnership shall have the option, for a period of six months following the date of completion of such acquisition, to purchase from Rice, in its sole discretion, such Water Treatment Asset for an amount of cash

 

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equal to Rice’s acquisition cost, as determined in good faith by Rice, including Rice’s out-of-pocket transaction costs related to such acquisition. Rice or its applicable Controlled Affiliate will transfer valid title to any such purchased Water Treatment Assets free and clear of any Liens other than Permitted Liens and subject to customary terms and conditions.

(c) In the event the Partnership constructs or acquires from Rice any Water Treatment Asset pursuant to this Section 5.9 and Rice notifies the Partnership of its desire to receive the services of such Water Treatment Asset, the Partnership and Rice shall negotiate the applicable fees and any other terms of any service related thereto in good faith

(d) This Section 5.9 shall survive the termination of this Agreement, provided that this Section 5.9 shall only apply to Rice and its Subsidiaries, as opposed to Rice and its Controlled Affiliates, in the event of a Change of Control of Rice.

5.10 Easement Assignment . Rice shall cause its Subsidiaries to assign those certain easements as set forth on Schedule 5.10 to the Partnership or its designees as appropriate.

ARTICLE VI

CONDITIONS TO CLOSING

6.1 Conditions to Each Party’s Obligation to Effect the Transactions . The respective obligation of each Party to proceed with the Closing is subject to the satisfaction or waiver by each of the Parties (subject to applicable Laws) on or prior to the Closing Date of all of the following conditions:

(a) no Party shall be subject to any decree, order or injunction of a court of competent jurisdiction that prohibits the consummation of the transactions contemplated by this Agreement and the other Transaction Documents and no Law enacted, entered, or issued by any Governmental Authority, preventing the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, shall be in effect; and

(b) the consents listed on Schedule 6.1(b) shall have been obtained.

6.2 Conditions to the Obligation of the Partnership . The obligation of the Partnership to proceed with the Closing is subject to the satisfaction or waiver by the Partnership on or prior to the Closing Date of the following conditions:

(a) Rice shall have performed, in all material respects, the covenants and agreements contained in this Agreement required to be performed by it on or prior to the Closing Date;

 

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(b) (i) the Rice Fundamental Representations shall be true and correct (without regard to qualifications as to materiality or Rice Material Adverse Effect or similar qualifications contained therein) in all material respects as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), and (ii) the other representations and warranties of Rice made in this Agreement shall be true and correct (without regard to qualifications as to materiality or Rice Material Adverse Effect or similar qualifications contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (ii)  where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Rice Material Adverse Effect;

(c) Rice shall have delivered to the Partnership a certificate, in a form reasonably acceptable to the Partnership, dated the Closing Date and signed by an authorized officer of Rice confirming the foregoing matters set forth in clauses (a)  and (b)  of this Section 6.2 (the “ Rice Closing Certificate ”);

(d) Rice shall have delivered or caused the delivery of the Closing deliverables set forth in Section 7.2 ; and

(e) between the date hereof and the Closing Date, there shall not have been a Rice Material Adverse Effect.

6.3 Conditions to the Obligation of Rice . The obligation of Rice to proceed with the Closing is subject to the satisfaction or waiver by Rice on or prior to the Closing Date of the following conditions:

(a) the Partnership shall have performed, in all material respects, the covenants and agreements contained in this Agreement required to be performed by it on or prior to the Closing Date;

(b) (i) the Partnership Fundamental Representations shall be true and correct (without regard to qualifications as to materiality, Partnership Material Adverse Effect or similar qualifications contained therein) in all material respects as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), and (ii) the other representations and warranties of the Partnership made in this Agreement shall be true and correct (without regard to qualifications as to materiality or Partnership Material Adverse Effect or similar qualifications contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (ii) where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Partnership Material Adverse Effect;

(c) the Partnership shall have delivered to Rice a certificate, in a form reasonably acceptable to Rice, dated the Closing Date and signed by an authorized officer of the General Partner confirming the foregoing matters set forth in clauses (a)  and (b)  of this Section 6.3 (the “ Partnership Closing Certificate ”); and

(d) the Partnership shall have delivered or caused the delivery of the Closing deliverables set forth in Section 7.3 .

 

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ARTICLE VII

CLOSING

7.1 Closing . Subject to the terms and conditions of this Agreement and unless otherwise agreed in writing by Rice and the Partnership, the closing (the “ Closing ”) of the transactions contemplated by this Agreement will be held at the offices of Vinson & Elkins L.L.P., 1001 Fannin Street, Suite 2500, Houston, Texas immediately following the date of fulfillment or waiver (in accordance with the provisions hereof) of the last to be fulfilled or waived of the conditions set forth in Sections 6.1 , 6.2 and 6.3 (other than those conditions that by their nature are to be fulfilled at the Closing, but subject to the fulfillment or waiver of such conditions). The date on which the Closing occurs is referred to as the “ Closing Date .”

7.2 Deliveries by Rice . At the Closing, Rice will deliver (or cause to be delivered) to the Partnership the following:

(a) a counterpart to the Assignment of Conveyed Interests, duly executed by Rice;

(b) counterparts to each of the Water Services Agreements, duly executed by Rice Drilling B LLC and Rice Drilling D LLC, as applicable;

(c) the Rice Guaranty, duly executed;

(d) the Rice Closing Certificate, duly executed by an officer of Rice;

(e) a certification of non-foreign status executed by Rice in the form prescribed in Treasury Regulations Section 1.1445-2(b)(2);

(f) releases of the Liens listed on Schedule 3.8(c) in a form reasonably acceptable to the Partnership; and

(g) evidence of payment, satisfaction or release of all Liabilities relating to all Indebtedness, including under the Rice Midstream Credit Facility, in a form reasonably acceptable to the Partnership, including releases of all guarantees relating thereto.

7.3 Deliveries by the Partnership . At the Closing, the Partnership and the General Partner will deliver (or cause to be delivered) to Rice the following:

(a) the Consideration, by wire transfer of immediately available funds to an account specified by Rice;

(b) a counterpart to the Assignment of Conveyed Interests, duly executed by the Partnership;

 

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(c) counterparts to each of the Water Services Agreements, duly executed by the applicable Rice Water Entity; and

(d) the Partnership Closing Certificate, duly executed by an officer of the General Partner.

ARTICLE VIII

INDEMNIFICATION

8.1 Indemnification of Rice and Other Parties . From and after the Closing Date, subject to the other provisions of this Article VIII , the Partnership shall indemnify and hold Rice and its Affiliates and their directors, officers, employees, agents and representatives (together with Rice, the “ Rice Indemnitees ”) harmless from and against any and all damages, losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including court costs and reasonable attorneys’, accountants’ or other experts’ fees and reasonable expenses of investigation, defending and prosecuting Litigation (collectively, the “ Damages ”), suffered by the Rice Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach, violation or inaccuracy of a representation or warranty of the Partnership in this Agreement or any certificate delivered pursuant hereto (except for with respect to Section 3.13(a) , without regard to qualifications as to materiality or Rice Material Adverse Effect or similar qualifications contained therein), or (b) any breach of any agreement or covenant under this Agreement on the part of the Partnership.

8.2 Indemnification of the Partnership and Other Parties . From and after the Closing Date, subject to the other provisions of this Article VIII , Rice shall indemnify and hold the General Partner, the members of the Partnership Group and their respective directors, officers, employees, agents and representatives (together with the Partnership, the “ Partnership Indemnitees ”) harmless from and against any and all Damages suffered by the Partnership Indemnitees as a result of, caused by, arising out of, or in any way relating to (a) any breach, violation or inaccuracy of a representation or warranty of Rice in this Agreement or any certificate delivered pursuant hereto (without regard to qualifications as to materiality or Partnership Material Adverse Effect or similar qualifications contained therein), (b) any breach of any agreement or covenant in this Agreement on the part of Rice or (c) the Rice Special Liabilities.

8.3 Indemnification Procedures .

(a) Each indemnified party agrees that promptly after it becomes aware of facts giving rise to a claim by it for indemnification pursuant to this Article VIII by any third party with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, such indemnified party must assert its claim for indemnification under this Article VIII (each, an “ Indemnity Claim ”) by providing a written notice (a “ Claim Notice ”) to the indemnifying party allegedly required to provide indemnification protection under this Article VIII specifying, in reasonable detail, the nature and basis for such Indemnity Claim ( e.g. ,

 

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the underlying representation, warranty, covenant or agreement alleged to have been breached). Such notice shall include a demand for indemnification under this Agreement. Notwithstanding the foregoing, an indemnified party’s failure to send or delay in sending a third party Claim Notice will not relieve the indemnifying party from liability hereunder with respect to such Indemnity Claim except to the extent the indemnifying party is prejudiced by such failure or delay and except as is otherwise provided herein. Except as specifically provided herein, each indemnified party’s rights and remedies set forth in this Agreement will survive the Closing.

(b) In the event of the assertion of any third-party Indemnity Claim for which, by the terms hereof, an indemnified party seeks indemnification from an indemnifying party, the indemnifying party will have the right, at such indemnifying party’s expense, to assume the defense of same, including the appointment and selection of counsel on behalf of the indemnified party so long as such counsel is reasonably acceptable to the indemnified party. If the indemnifying party elects to assume the defense of any such third-party Indemnity Claim, it shall within 20 business days of its receipt of the Claim Notice notify the indemnified party in writing of its intent to do so. Any such contest may be conducted in the name and on behalf of the indemnifying party or the indemnified party as may be appropriate. The indemnifying party will have the right to settle or compromise or take any corrective or remediation action with respect to any such Indemnity Claim by all appropriate proceedings, which proceedings will be prosecuted by the indemnifying party to a final conclusion or settled at the discretion of the indemnifying party. The indemnified party will be entitled, at its own cost, to participate with the indemnifying party in the defense of any such Indemnity Claim. If the indemnifying party assumes the defense of any such third-party Indemnity Claim but fails to reasonably prosecute such Indemnity Claim, or if the indemnifying party does not assume the defense of any such Indemnity Claim, the indemnified party may assume control of such defense and in the event it is determined pursuant to the procedures set forth in this Article VIII that the Indemnity Claim was a matter for which the indemnifying party is required to provide indemnification under the terms of this Article VIII , the indemnifying party will bear the reasonable costs and expenses of such defense (including reasonable attorneys’ fees and expenses).

(c) If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any third-party Indemnity Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the third-party Indemnity Claim, or any cross-complaint against any person, and the indemnifying party will reimburse the indemnified party for reasonable expenses incurred by it in so cooperating. At no cost or expense to the indemnified party, the indemnifying party shall reasonably cooperate with the indemnified party and its counsel in contesting any third-party Indemnity Claim.

(d) Notwithstanding anything to the contrary in this Agreement, the indemnifying party will not be permitted to settle, compromise, take any corrective or remedial action or enter into an agreed judgment or consent decree, in each case, that subjects the indemnified party to any injunctive or other non-monetary relief or any criminal liability, requires an admission of guilt or wrongdoing on the part of the indemnified party or imposes any continuing obligation on or requires any payment from the indemnified party without the indemnified party’s prior written consent.

 

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8.4 Calculation and Payment of Damages .

(a) In calculating amounts payable to an indemnified party for a claim for indemnification hereunder, the amount of any indemnified Damages shall be determined without duplication of any other Damages for which an indemnification claim has been made or could be made under any other representation, warranty, covenant or agreement and shall be computed net of (i) payments actually recovered under any insurance policy with respect to such Damages or (ii) any prior or subsequent actual recovery from any Person other than the applicable indemnifying party with respect to such Damages.

(b) The indemnification required hereunder shall be made by periodic payments of the amount thereof during the course of the investigation or defense, within 10 days as and when reasonably specific bills are received or loss, liability, claim, damage or expense is incurred and reasonable evidence thereof is delivered.

8.5 Waiver of Certain Damages . Notwithstanding any other provision of this Agreement, in no event shall any Party be liable pursuant to this Article VIII for punitive, special, indirect, consequential, remote, speculative or lost profits damages of any kind or nature, regardless of the form of action through which such damages are sought, except for any such damages for fraud or recovered by any third party against an indemnified party in respect of which such indemnified party would otherwise be entitled to indemnification pursuant to the terms hereof.

8.6 Limitations on Indemnification .

(a) To the extent the Partnership Indemnitees are entitled to indemnification for Damages pursuant to Section 8.2(a) , Rice shall not be liable for those Damages unless the aggregate amount of Damages exceeds one percent of the Consideration (the “ Deductible ”), and then only to the extent of any such excess; provided, however, that Rice shall not be liable for Damages pursuant to Section 8.2(a) that exceed, in the aggregate, fifteen percent of the Consideration (the “ Cap ”) less the Deductible.

(b) Notwithstanding clause (a) above, (i) to the extent the Partnership Indemnitees are entitled to indemnification for Damages for claims arising from fraud or Damages for Taxes arising from a breach, violation or inaccuracy of the representations or warranties in Section 3.11 , Rice shall be fully liable for such Damages without regard to the Deductible or the Cap and (ii) to the extent the Partnership Indemnitees are entitled to indemnification for Damages for claims arising from a breach, violation or inaccuracy of a Rice Fundamental Representation, Rice shall be fully liable for such Damages without regard to the Deductible or the Cap.

(c) To the extent the Rice Indemnitees are entitled to indemnification for Damages pursuant to Section 8.1(a) , the Partnership shall not be liable for those Damages unless the aggregate amount of Damages exceeds the Deductible; provided, however , that the Partnership shall not be liable for Damages pursuant to Section 8.1(a) that exceed, in the aggregate, the Cap less the Deductible.

 

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(d) Notwithstanding clause (c) above, (i) to the extent the Rice Indemnitees are entitled to indemnification for Damages for claims arising from fraud, the Partnership shall be fully liable for such Damages without regard to the Deductible or the Cap and (ii) to the extent the Rice Indemnitees are entitled to indemnification for Damages for claims arising from a breach, violation or inaccuracy of a Partnership Fundamental Representation, the Partnership shall be fully liable for such Damages without regard to the Deductible or the Cap.

(e) Notwithstanding anything to the contrary in this Agreement, if (x) the Partnership obtains knowledge of the breach or violation of, or inaccuracy with respect to, any representation or warranty of Rice under this Agreement (regardless of whether such knowledge is obtained by inspection or investigation conducted by or on behalf of the Partnership or its directors, officers, employees, or representatives at any time and regardless of whether notice of such knowledge has been given to Rice), and nonetheless proceeds to the Closing, the Partnership shall not be deemed to have waived any rights and remedies set forth in this Agreement with respect to such breach or inaccuracy, or (y) Rice obtains knowledge of the breach or violation of, or inaccuracy with respect to, any representation or warranty of the Partnership under this Agreement (regardless of whether such knowledge is obtained by inspection or investigation conducted by or on behalf of Rice or its directors, officers, employees, or representatives at any time and regardless of whether notice of such knowledge has been given to the Partnership), and nonetheless proceeds to the Closing, Rice shall not be deemed to have waived any rights and remedies set forth in this Agreement with respect to such breach or inaccuracy.

8.7 Survival .

(a) The liability of Rice for the breach, violation or inaccuracy of any of the representations and warranties of Rice set forth in Sections 3.1 , 3.2 , 3.3(a) , 3.7 , 3.10 and 3.11 (the “ Rice Fundamental Representations ”) shall be limited to claims for which the Partnership delivers written notice to Rice on or before the date that is ninety (90) days after the expiration of the applicable statute of limitations. The liability of Rice for the breach, violation or inaccuracy of any of the representations and warranties of Rice set forth in Article III other than the Rice Fundamental Representations shall be limited to claims for which the Partnership delivers written notice to Rice on or before the date that is 12 months after the Closing Date.

(b) The liability of the Partnership for the breach, violation or inaccuracy of any of the representations and warranties of the Partnership set forth in Sections 4.1 , 4.2 , 4.3(a) , 4.4 , 4.5 , 4.6 and 4.7 (the “ Partnership Fundamental Representations ”) shall be limited to claims for which Rice delivers written notice to the Partnership on or before the date that is ninety (90) days after the expiration of the applicable statute of limitations. The liability of the Partnership for the breach, violation or inaccuracy of any of the representations and warranties of the Partnership set forth in Article IV other than the Partnership Fundamental Representations shall be limited to claims for which Rice delivers written notice to the Partnership on or before the date that is 12 months after the Closing Date.

 

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(c) Notwithstanding anything to the contrary in this Section 8.7 , if an indemnified party delivers written notice in reasonable detail to an indemnifying party of a claim for indemnification on or prior to the applicable expiration date for such claim, such claim shall survive until finally resolved.

8.8 Mitigation . The Parties agree that an indemnified party’s right to recourse under this Article VIII for any Damages shall be limited to the extent that such indemnified party would not have suffered such Damages had such indemnified party exercised commercially reasonable efforts to mitigate such Damages following the actual discovery by such indemnified party of the fact, event or circumstance giving rise to such Damages.

8.9 Sole Remedy . After the Closing, no Party shall have liability under this Agreement or the transactions contemplated hereby except as is provided in this Article VIII (other than claims or causes of action arising from fraud, and other than claims for specific performance or claims arising under any Transaction Documents (other than this Agreement) (which claims shall be subject to the liability provisions of such Transaction Documents)).

8.10 Consideration Adjustment . The Parties agree to treat any payments made pursuant to this Article VIII as an adjustment to the Consideration for all Tax purposes, except as otherwise required by applicable Law following a Final Determination.

ARTICLE IX

TERMINATION

9.1 Events of Termination . This Agreement may be terminated at any time prior to the Closing:

(a) by mutual written consent of Rice and the Partnership;

(b) by either Rice or the Partnership in writing after January 4, 2016 if the Closing has not occurred by that date, provided that as of such date the terminating Party (and, in the case of the Partnership, the General Partner) is not in material breach, violation or inaccuracy of its representations, warranties or covenants under this Agreement;

(c) by either Rice or the Partnership in writing without prejudice to other rights and remedies the terminating Party or its Affiliates may have (provided the terminating Party and its Affiliates are not otherwise in material default or breach of this Agreement, or have not failed or refused to close without justification hereunder), if the other Party or its Affiliates shall have

 

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(i) materially failed to perform its covenants or agreements contained herein required to be performed by such Party or its Affiliates on or prior to the Closing Date or (ii) materially breached or violated (including inaccuracies) any of its representations or warranties contained herein; provided, however, that in the case of clauses (i) or (ii), the breaching Party shall have a period of 30 days following written notice from the non-defaulting Party to cure any breach of this Agreement if the breach is curable; or

(d) by either Rice or the Partnership in writing, if there shall be any order, writ, injunction or decree of any Governmental Authority binding on the Parties that prohibits or restrains any Party from consummating the transactions contemplated hereby; provided , however , that the applicable Party shall have used its commercially reasonable efforts to have any such order, writ, injunction or decree removed but it shall not have been removed within 30 days after entry by the Governmental Authority.

9.2 Effect of Termination . In the event of the termination of this Agreement by a Party as provided in Section 9.1 , this Agreement shall thereafter become void except for this Section 9.2 , Section 5.6 and Article X . Nothing in this Section 9.2 shall be deemed to release any Party from any liability for breach, violation, or inaccuracy of any of its representations, warranties covenants or other obligations occurring prior to such termination by such Party or to impair any rights of any Party under this Agreement.

ARTICLE X

MISCELLANEOUS

10.1 Expenses . Unless otherwise specifically provided in this Agreement, each Party shall pay its own expenses incident to this Agreement or the other Transaction Documents and all action taken in preparation for effecting the provisions of this Agreement and the other Transaction Documents.

10.2 Notices . Unless otherwise specifically provided in this Agreement, any notice, request, instruction, correspondence or other document to be given under or in relation to this Agreement shall be made in writing and shall be deemed to have been properly given if: (i) personally delivered (with written confirmation of receipt); or (ii) delivered by a recognized overnight delivery service (delivery fees prepaid), in either case to the appropriate address set forth below:

If to Rice or any Subsidiary of Rice, addressed to:

Rice Energy Inc. (or applicable Subsidiary)

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: Will Jordan, General Counsel

Email: will.jordan@riceenergy.com

 

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If to the Partnership, addressed to:

Conflicts Committee of Rice Midstream Management LLC

c/o Rice Midstream Management LLC

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: Chairman

(with a copy, which shall not constitute notice, to:)

Akin Gump Strauss Hauer & Feld LLP

1111 Louisiana, Suite 4400

Houston, Texas 77002

Attention:   J. Vincent Kendrick

                   Eric L. Muñoz

Telephone: (713) 220-5839 (J. Vincent Kendrick)

                   (713) 250-2226 (Eric L. Muñoz)

Fax:            (713) 236-0822

Any Party may change any address to which notice is to be given to it by giving notice as provided above of such change of address.

10.3 Governing Law and Venue . This Agreement shall be governed and construed in accordance with the substantive laws of the State of Texas without reference to principles of conflicts of law that would result in the application of the laws of another jurisdiction. The courts of the State of Texas, or the federal courts located in the Southern District of Texas shall be the exclusive venue for any dispute regarding this Agreement.

10.4 Public Statements . Prior to the Closing, the Parties shall consult with each other and no Party shall issue any public announcement or statement with respect to the transactions contemplated hereby without the consent of the other Parties, which shall not be unreasonably withheld or delayed, unless the Party desiring to make such announcement or statement, after seeking such consent from the other Parties, obtains advice from legal counsel that such a public announcement or statement may be required by applicable law or securities exchange regulations.

10.5 Form of Payment . All payments hereunder shall be made in United States dollars and, unless the Parties making and receiving such payments shall agree otherwise or the provisions hereof provide otherwise, shall be made by wire or interbank transfer of immediately available funds on the date such payment is due to such account as the Party receiving payment may designate at least three business days prior to the proposed date of payment.

 

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10.6 Entire Agreement; Amendments and Waivers . This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto, (a) constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior oral agreements and understandings among the Parties with respect to the subject matter hereof and (b) are not intended to confer upon any other Person any rights or remedies hereunder except as Article VIII or Section 10.15 contemplates or except as otherwise expressly provided herein or therein. Each Party agrees that (i) no other Party (including its agents and representatives) has made any representation, warranty, covenant or agreement to or with such Party relating to this Agreement or the transactions contemplated hereby, other than those expressly set forth in the documents and instruments and other agreements specifically referred to in clause (i)  above herein or delivered pursuant hereto, including the exhibits and schedules hereto and (ii) such Party has not relied upon any representation, warranty, covenant or agreement relating to this Agreement or the transactions contemplated hereby other than those referred to in clause (i) above. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the Parties. Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant, agreement or condition in this Agreement or any Transaction Document may be waived by the Party or Parties entitled to the benefits thereof only by a written instrument signed by the Party or Parties granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

10.7 Binding Effect and Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns, but neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned, by any Party without the prior written consent of the other Parties. Provided that the Partnership may assign all or any of its rights and/or obligations (i) to a Subsidiary, (ii) by way of a merger or consolidation or a sale of all or substantially all of its assets, or (iii) pursuant to granting a Lien to financiers in a bona fide lending transaction or in connection with any foreclosure, power of sale or settlement thereof; provided no such assignment shall relieve the Partnership of any of its obligations under this agreement.

10.8 Severability . If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, the Parties shall meet promptly and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect and will not be affected or impaired in any way thereby.

 

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10.9 Interpretation .

(a) The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and therefore waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.

(b) The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words “this Article,” “this Section” and “this clause,” and words of similar import, refer only to the Article, Section or clause hereof in which such words occur. The word “or” is exclusive, and the word “including” (in its various forms) means including without limitation.

(c) Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.

(d) References herein to any Person shall include such Person’s successors and assigns; provided, however, that nothing contained in this clause (d) is intended to authorize any assignment or transfer not otherwise permitted by this Agreement.

(e) References herein to any Law shall be deemed to refer to such Law as amended, reenacted, supplemented or superseded in whole or in part and in effect from time to time and also to all rules and regulations promulgated thereunder.

(f) References herein to any Contract mean such Contract as amended, supplemented or modified (including any waiver thereto) in accordance with the terms thereof.

(g) Each representation, warranty, covenant and agreement contained in this Agreement will have independent significance, and the fact that any conduct or state of facts may be within the scope of two or more provisions in this Agreement, whether relating to the same or different subject matters and regardless of the relative levels of specificity, shall not be considered in construing or interpreting this Agreement.

(h) Unless otherwise expressly provided herein to the contrary, accounting terms shall have the meaning given by GAAP.

10.10 Headings and Schedules . The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The schedules referred to herein are attached hereto and incorporated herein by this reference, and the matters disclosed in those schedules shall be deemed to qualify the representation or warranty to which they expressly relate and any other representation or warranty, but only to the extent that it is readily apparent on its face that such disclosure is applicable to such other representation or warranty. The Parties acknowledge and agree that (a) the schedules may include certain items and information solely for informational purposes for the convenience of the Parties and (b) the disclosure by any Party of any matter in any schedule shall not be deemed to constitute an acknowledgment by such Party that the matter is required to be disclosed by the terms of this Agreement or that the matter is material.

 

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10.11 Counterparts . This Agreement may be executed in two or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

10.12 Determinations by the Partnership . With respect to any notice, consent, approval or waiver that is required to be or may be taken or given by the Partnership (a) pursuant to the terms of this Agreement on or prior to the Closing Date or (b) pursuant to Article VIII after the Closing Date, such notice, consent, approval or waiver shall be taken or given only by the Conflicts Committee on behalf of the Partnership.

10.13 Representation by Counsel . Each Party agrees that it has been represented by independent counsel of its choice during the negotiation and execution of this Agreement and the documents referred to herein, and that it has executed the same upon the advice of such independent counsel. Each Party and its counsel cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the Parties and may not be construed against any Party by reason of its preparation. Therefore, the Parties waive the application of any Law providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.

10.14 Disclosure Schedules . The inclusion of any information (including dollar amounts) in any schedule hereto shall not be deemed to be an admission or acknowledgment by a Party that such information is required to be listed on such schedule or is material to or outside the ordinary course of the business of such Party or the Person to which such disclosure relates. The information contained in this Agreement, the Exhibits and the Schedules is disclosed solely for purposes of this Agreement, and no information contained in this Agreement, the Exhibits or the Schedules shall be deemed to be an admission by any Party to any third Person of any matter whatsoever (including any violation of a legal requirement or breach of contract). The disclosure contained in any section of a disclosure schedule may be incorporated by reference into any other disclosure schedule section contained therein, and shall be deemed to have been so incorporated into any other disclosure schedule section so long as it is readily apparent that the disclosure is applicable to such other disclosure schedule.

 

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10.15 No Recourse Against Non-Parties . All claims or causes of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement, may be made only against the entities that are expressly identified as Parties. No Person who is not a named Party to this Agreement, including any director, officer, employee, member, partner (general or limited), securityholder, Affiliate, agent, attorney or representative of any named Party to this Agreement (“ Non-Party Affiliates ”), shall have any liability (whether in contract or in tort, in law or in equity, or based upon any theory that seeks to impose liability of an entity party against its owners or Affiliates) for any obligations or liabilities arising under, in connection with or related to this Agreement or for any claim based on, in respect of, or by reason of this Agreement or its negotiation or execution; and each Party hereto waives and releases all such liabilities, claims and obligations against any such Non-Party Affiliates. Non-Party Affiliates are expressly intended as third-party beneficiaries of this provision of this Agreement.

[Signature page follows]

 

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above.

 

RICE ENERGY INC.
By:  

/s/ Daniel J. Rice IV

Name:   Daniel J. Rice IV
Title:   Chief Executive Officer
RICE MIDSTREAM PARTNERS LP
By:   Rice Midstream Management LLC, its general partner
By:  

/s/ Rob Wingo

Name:   Rob Wingo
Title:   Senior Vice President, Chief Operating Officer

Signature page to Purchase and Sale Agreement

Exhibit 10.1

 

 

 

COMMON UNIT PURCHASE AGREEMENT

by and among

RICE MIDSTREAM PARTNERS LP

and

THE PURCHASERS NAMED ON SCHEDULE A HERETO

 

 

 


TABLE OF CONTENTS

 

ARTICLE I   
DEFINITIONS   

Section 1.1

 

Definitions

     1   
ARTICLE II   
AGREEMENT TO SELL AND PURCHASE   

Section 2.1

 

Sale and Purchase

     6   

Section 2.2

 

Closing

     6   

Section 2.3

 

Mutual Conditions

     7   

Section 2.4

 

Each Purchaser’s Conditions

     7   

Section 2.5

 

The Partnership’s Conditions

     8   

Section 2.6

 

Partnership Deliveries

     8   

Section 2.7

 

Purchaser Deliveries

     9   

Section 2.8

 

Independent Nature of Purchasers’ Obligations and Rights

     9   
ARTICLE III   
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP   

Section 3.1

 

Formation and Qualification of the Partnership Entities

     9   

Section 3.2

 

Purchased Units; Capitalization

     10   

Section 3.3

 

No Conflicts

     12   

Section 3.4

 

No Defaults

     12   

Section 3.5

 

Authority

     13   

Section 3.6

 

No Consents

     13   

Section 3.7

 

Authorization, Execution and Delivery of the Common Unit Purchase Agreement

     13   

Section 3.8

 

Authorization, Execution, Delivery and Enforceability of the Registration Rights Agreement

     13   

Section 3.9

 

Authorization, Execution, Delivery and Enforceability of the Contribution Agreement

     14   

Section 3.10

 

Valid Issuance; No Options or Preemptive Rights of Common Units

     14   

Section 3.11

 

No Registration Rights

     14   

Section 3.12

 

Periodic Reports

     14   

Section 3.13

 

Financial Statements

     15   

Section 3.14

 

Independent Registered Public Accounting Firm

     15   

Section 3.15

 

Litigation

     15   

Section 3.16

 

No Material Adverse Changes

     15   

Section 3.17

 

Title to Properties

     15   

Section 3.18

 

Rights of Way

     16   

Section 3.19

 

License and Permits

     16   

 

i


Section 3.20

 

Intellectual Property

     16   

Section 3.21

 

Insurance

     16   

Section 3.22

 

No Labor Dispute; No Notice of Labor Law Violations

     17   

Section 3.23

 

Environmental Compliance

     17   

Section 3.24

 

Tax Returns

     17   

Section 3.25

 

No Employment Law Violations

     18   

Section 3.26

 

No Unlawful Payments

     18   

Section 3.27

 

Compliance with Money Laundering Laws

     18   

Section 3.28

 

OFAC

     18   

Section 3.29

 

Certain Fees

     19   

Section 3.30

 

No Side Agreements

     19   

Section 3.31

 

No Registration

     19   

Section 3.32

 

No Integration

     19   

Section 3.33

 

MLP Status

     19   

Section 3.34

 

Qualifying Income of Conveyed Assets

     19   

Section 3.35

 

Investment Company

     19   

Section 3.36

 

Disclosure Controls

     20   

Section 3.37

 

Accounting Controls

     20   

Section 3.38

 

Placement Agent Reliance

     20   

Section 3.39

 

Absence of Price Manipulation

     20   

Section 3.40

 

Conveyance

     21   
ARTICLE IV   
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS   

Section 4.1

 

Existence

     21   

Section 4.2

 

Authorization, Enforceability

     21   

Section 4.3

 

No Breach

     21   

Section 4.4

 

Certain Fees

     22   

Section 4.5

 

No Side Agreements

     22   

Section 4.6

 

Investment

     22   

Section 4.7

 

Nature of Purchaser

     22   

Section 4.8

 

Restricted Securities

     22   

Section 4.9

 

Legend

     23   

Section 4.10

 

Company Information

     23   

Section 4.11

 

Placement Agent Reliance

     23   

Section 4.12

 

Short Selling

     23   
ARTICLE V   
COVENANTS   

Section 5.1

 

Taking of Necessary Action

     23   

Section 5.2

 

Other Actions

     24   

Section 5.3

 

Expenses

     24   

 

ii


ARTICLE VI   
INDEMNIFICATION   

Section 6.1

 

Indemnification by the Partnership

     24   

Section 6.2

 

Indemnification by Purchasers

     25   

Section 6.3

 

Indemnification Procedure

     25   
ARTICLE VII   
MISCELLANEOUS   

Section 7.1

 

Interpretation and Survival of Provisions

     26   

Section 7.2

 

Survival of Provisions

     27   

Section 7.3

 

No Waiver; Modifications in Writing

     27   

Section 7.4

 

Binding Effect; Assignment

     28   

Section 7.5

 

Confidentiality

     28   

Section 7.6

 

Communications

     28   

Section 7.7

 

Removal of Legend

     29   

Section 7.8

 

Entire Agreement

     29   

Section 7.9

 

Governing Law

     30   

Section 7.10

 

Execution in Counterparts

     30   

Section 7.11

 

Termination

     30   

Section 7.12

 

Recapitalization, Exchanges, Etc. Affecting the Common Units

     30   

Schedule A — List of Purchasers and Commitment Amounts

Exhibit A — Form of Registration Rights Agreement

Exhibit B — Form of Opinion of Vinson & Elkins L.L.P.

 

iii


COMMON UNIT PURCHASE AGREEMENT

This COMMON UNIT PURCHASE AGREEMENT, dated as of November 4, 2015 (this “ Agreement ”), is by and among RICE MIDSTREAM PARTNERS LP, a Delaware limited partnership (the “ Partnership ”), and each of the purchasers listed on Schedule A hereof (each a “ Purchaser ” and collectively, the “ Purchasers ”).

WHEREAS, the Partnership and Rice Energy Inc., a Delaware corporation (“ Rice ”) entered into a Purchase and Sale Agreement, dated as of November 4, 2015 (the “ PSA ”), pursuant to which Rice caused Rice Midstream Holdings LLC, a Delaware limited liability company and wholly owned subsidiary of Rice, to convey 100% of the outstanding limited liability company interests in each of (i) Rice Water Services (PA) LLC, a Delaware limited liability company (“ Rice Water PA ”), and (ii) Rice Water Services (OH) LLC, a Delaware limited liability company (“ Rice Water OH ” and together with Rice Water PA, the “ Rice Water Entities ”), to the Partnership, in exchange for consideration of $200 million in cash, plus an additional amount, if certain of the conveyed system capacities are increased by 5.0 MMgal/d on or prior to December 31, 2017, equal to $25 million less the capital expenditures expended to achieve such increase in accordance with the PSA (the “ Conveyance ”), the closing of which occurred prior to the execution of this Agreement.

WHEREAS, the Partnership desires to sell to the Purchasers, and the Purchasers desire to purchase from the Partnership, certain Common Units (as defined below), in accordance with the provisions of this Agreement; and

WHEREAS, the Partnership and the Purchasers will enter into a registration rights agreement (the “ Registration Rights Agreement ”), substantially in the form attached hereto as Exhibit A , pursuant to which the Partnership will provide the Purchasers with certain registration rights with respect to the Common Units acquired pursuant hereto.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Partnership and each of the Purchasers, severally and not jointly, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions . As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

Agreement ” has the meaning set forth in the introductory paragraph.


Business Day ” means a day other than (i) a Saturday or Sunday or (ii) any day on which banks located in the State of Texas are authorized or obligated to close.

Closing ” has the meaning specified in Section 2.2 .

Closing Date ” has the meaning specified in Section 2.2 .

Code ” has the meaning specified in Section 3.24 .

Commission ” means the United States Securities and Exchange Commission.

Common Unit Price ” has the meaning specified in Section 2.1(b) .

Common Units ” means common units representing limited partnership interests in the Partnership.

Consent ” has the meaning set forth in Section 3.6

Conveyance ” has the meaning set forth in the recitals hereto.

Delaware LLC Act ” means the Delaware Limited Liability Company Act.

Delaware LP Act ” means the Delaware Revised Uniform Limited Partnership Act.

Enforceability Exceptions ” has the meaning specified in Section 3.7 .

Environmental Laws ” has the meaning specified in Section 3.23 .

ERISA ” has the meaning specified in Section 3.24 .

Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

Existing Registration Rights Agreement ” means the Registration Rights Agreement dated December 22, 2014 between the Partnership and RMH.

GAAP ” means U.S. generally accepted accounting principles.

General Partner ” means Rice Midstream Management LLC, a Delaware limited liability company.

General Partner Interest ” has the meaning specified in Section 3.2(d) .

General Partner LLC Agreement ” means the Amended and Restated Limited Liability Company Agreement of the General Partner, dated as of December 22, 2014.

Governmental Authority ” means, with respect to a particular Person, any country, state, county, city and political subdivision in which such Person or such Person’s property is located or that exercises valid jurisdiction over any such Person or such Person’s property, and any

 

2


court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authority that exercises valid jurisdiction over any such Person or such Person’s property. Unless otherwise specified, all references to Governmental Authority herein with respect to the Partnership mean a Governmental Authority having jurisdiction over the Partnership, its Subsidiaries or any of their respective properties or assets.

Incentive Distribution Rights ” means all of the incentive distribution rights representing limited partner interests in the Partnership.

Investment Company Act ” has the meaning specified in Section 3.33 .

Law ” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law, rule or regulation.

Lien ” means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purpose of this Agreement, a Person shall be deemed to be the owner of any property that it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person in a transaction intended to create a financing.

Material Adverse Effect ” has the meaning specified in Section 3.1 .

Money Laundering Laws ” has the meaning specified in Section 3.27 .

NYSE ” means The New York Stock Exchange, Inc.

OFAC ” has the meaning specified in Section 3.28 .

Operating Company ” means Rice Midstream OpCo LLC, a Delaware limited liability company.

Operating Company LLC Agreement ” means the Limited Liability Company Agreement of the Operating Company dated as of December 2, 2014.

Operative Documents ” means, collectively, this Agreement and the Registration Rights Agreement and any amendments, supplements, continuations or modifications thereto.

Organizational Documents ” has the meaning specified in Section 3.9 .

Partnership ” has the meaning set forth in the introductory paragraph.

Partnership Agreement ” means the Amended and Restated Agreement of Limited Partnership of the Partnership dated as of December 22, 2014.

 

3


Partnership Entities ” and each a “ Partnership Entity ” means the Partnership, the General Partner, the Operating Company and Rice Poseidon and, after giving effect to the Conveyance, the Rice Water Entities.

Partnership Related Parties ” has the meaning specified in Section 6.2 .

Permits ” has the meaning specified in Section 3.19 .

Person ” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other form of entity.

Placement Agent ” means Barclays Capital Inc.

Placement Agent Engagement Letter ” means that certain Placement Agent Engagement Letter, dated as of October 27, 2015, between the Partnership and the Placement Agent.

PSA ” has the meaning set forth in the recitals hereto.

Purchase Price ” means, with respect to a particular Purchaser, the amount set forth opposite such Purchaser’s name under the column titled “Purchase Price” set forth on Schedule A hereto, as adjusted in accordance with Section 7.12 , if applicable, provided that in no event shall the Purchase Price applicable to such Purchaser be increased without the prior written consent of such Purchaser.

Purchased Units ” means, with respect to a particular Purchaser, the number of Common Units equal to the aggregate Purchase Price set forth opposite such Purchaser’s name under the column titled “Purchase Price” set forth on Schedule A hereto divided by the Common Unit Price.

Purchaser ” and “ Purchasers ” have the meanings set forth in the introductory paragraph.

Purchaser Related Parties ” has the meaning specified in Section 6.1 .

REA ” means Rice Energy Appalachia LLC, a Delaware limited liability company.

Registration Rights Agreement ” has the meaning set forth in the recitals hereto.

Registration Statement ” has the meaning set forth in the Registration Rights Agreement.

Representatives ” of any Person means the Affiliates, officers, directors, managers, employees, agents, counsel, accountants, investment bankers and other representatives of such Person.

Revolving Credit Facility ” means the Credit Agreement, dated as of December 22, 2014, among the Partnership, as parent guarantor, the Operating Company as borrower, Wells Fargo Bank, National Association, as administrative agent, certain lenders party thereto and the other parties thereto, and any amendments thereto.

 

4


Rice ” has the meaning set forth in the recitals hereto.

Rice Poseidon ” means Rice Poseidon Midstream LLC, a Delaware limited liability company.

Rice Poseidon LLC Agreement ” has the meaning specified in Section 3.2(j) .

Rice Water Entities ” has the meaning set forth in the recitals hereto.

Rice Water LLC Agreements ” has the meaning specified in Section 3.2(k) .

Rights-of-way ” has the meaning specified in Section 3.18 .

RMH ” means Rice Midstream Holdings LLC, a Delaware limited liability company, which is the owner of the General Partner and is a wholly owned subsidiary of Rice.

Sanctions ” has the meaning specified in Section 3.28 .

SEC Reports ” means reports and statements filed by the Partnership under the Exchange Act and statements filed by the Partnership under the Securities Act (in the form that became effective), including all amendments, exhibits and schedules thereto.

Securities Act ” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

Short Sales ” means, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and forward sale contracts, options, puts, calls, short sales, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements, and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.

Sponsor Units ” has the meaning specified in Section 3.2(h) .

Subordinated Units ” has the meaning set forth in the Partnership Agreement.

Subsidiary ” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.

 

5


Walled Off Person ” has the meaning specified in Section 4.12 .

Water Assets ” has the meaning given to such term in the PSA.

ARTICLE II

AGREEMENT TO SELL AND PURCHASE

Section 2.1 Sale and Purchase .

(a) Subject to the terms and conditions hereof, the Partnership hereby agrees to issue and sell to each Purchaser and each Purchaser hereby agrees, severally and not jointly, to purchase from the Partnership, its respective Purchased Units, and each Purchaser agrees, severally and not jointly, to pay the Partnership the Common Unit Price for each Purchased Unit as set forth in paragraph (b) below. The respective obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and the failure or waiver of performance under this Agreement by any Purchaser does not excuse performance by any other Purchaser or by the Partnership with respect to the other Purchasers. It is expressly understood and agreed that each provision contained in this Agreement is between the Partnership and a Purchaser, solely, and not between the Partnership and the Purchasers collectively and not between and among the Purchasers.

(b) The amount per Common Unit each Purchaser will pay to the Partnership to purchase the Purchased Units (the “ Common Unit Price ”) hereunder shall be $13.05.

Section 2.2 Closing . Subject to the terms and conditions hereof, the consummation of the purchase and sale of the Purchased Units hereunder (the “ Closing ”) shall take place on November 10, 2015 or as mutually agreed otherwise by the parties following the satisfaction or waiver of the conditions set forth in Sections 2.3 , 2.4 and 2.5 (other than those conditions that are by their terms to be satisfied at the Closing) (the date of such closing, the “ Closing Date ”) at the offices of Vinson & Elkins L.L.P., 1001 Fannin Street, Suite 2500 Houston, Texas 77002, or such other location as mutually agreed by the parties. The parties agree that the Closing may occur via delivery of facsimiles or photocopies of the Operative Documents and the closing deliverables contemplated hereby and thereby. Unless otherwise provided herein, all proceedings to be taken and all documents to be executed and delivered by all parties at the Closing will be deemed to have been taken and executed simultaneously, and no proceedings will be deemed to have been taken or documents executed or delivered until all have been taken, executed or delivered.

 

6


Section 2.3 Mutual Conditions . The respective obligations of each party to consummate the purchase and issuance and sale of the Purchased Units shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by a party on behalf of itself in writing, in whole or in part, to the extent permitted by applicable Law):

(a) No Law shall have been enacted or promulgated, and no action shall have been taken, by any Governmental Authority of competent jurisdiction that temporarily, preliminarily or permanently restrains, precludes, enjoins or otherwise prohibits the consummation of the transactions contemplated hereby or makes the transactions contemplated hereby illegal; and

(b) There shall not be pending any suit, action or proceeding by any Governmental Authority seeking to restrain, preclude, enjoin or prohibit the transactions contemplated by this Agreement.

Section 2.4 Each Purchaser’s Conditions . The obligation of each Purchaser to consummate the purchase of its Purchased Units shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by a particular Purchaser on behalf of itself in writing with respect to its Purchased Units, in whole or in part, to the extent permitted by applicable Law):

(a) The Partnership shall have performed and complied with the covenants and agreements contained in this Agreement that are required to be performed and complied with by the Partnership on or prior to the Closing Date;

(b) (i) The representations and warranties of the Partnership contained in this Agreement that are qualified by materiality or a Material Adverse Effect shall be true and correct when made and as of the Closing Date and (ii) all other representations and warranties of the Partnership shall be true and correct in all material respects when made and as of the Closing Date, in each case as though made at and as of the Closing Date (except that representations and warranties made as of a specific date shall be required to be true and correct as of such date only);

(c) The NYSE shall have authorized, upon official notice of issuance, the listing of the Purchased Units;

(d) No notice of delisting from the NYSE shall have been received by the Partnership with respect to the Common Units;

(e) The Common Units shall not have been suspended by the Commission or the NYSE from trading on the NYSE nor shall suspension by the Commission or the NYSE have been threatened in writing by the Commission or the NYSE;

(f) No Material Adverse Effect shall have occurred and be continuing;

(g) The Partnership shall have delivered, or caused to be delivered, to the Purchasers at the Closing, the Partnership’s closing deliveries described in Section 2.6 ; and

(h) The Partnership shall have executed and delivered the Registration Rights Agreement.

 

7


Section 2.5 The Partnership’s Conditions . The obligation of the Partnership to consummate the issuance and sale of the Purchased Units to a Purchaser shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions with respect to such Purchaser (any or all of which may be waived by the Partnership in writing, in whole or in part, to the extent permitted by applicable Law):

(a) The representations and warranties of such Purchaser contained in this Agreement that are qualified by materiality shall be true and correct when made and as of the Closing Date and all other representations and warranties of such Purchaser shall be true and correct in all material respects as of the Closing Date (except that representations of such Purchaser made as of a specific date shall be required to be true and correct as of such date only); and

(b) Such Purchaser shall have delivered, or caused to be delivered, to the Partnership at the Closing such Purchaser’s closing deliveries described in Section 2.7 .

Section 2.6 Partnership Deliveries . At the Closing, subject to the terms and conditions hereof, the Partnership will deliver, or cause to be delivered, to each Purchaser:

(a) evidence of the Purchased Units credited to book-entry accounts maintained by the transfer agent of the Partnership, bearing the legend or restrictive notation set forth in Section 4.9 , free and clear of all Liens, other than transfer restrictions under the Partnership Agreement and applicable federal and state securities laws;

(b) the Registration Rights Agreement in the form attached to this Agreement as Exhibit A , which shall have been duly executed by the Partnership;

(c) A certificate of the Secretary of State of the State of Delaware, dated a recent date, to the effect that each of the Partnership Entities is in good standing;

(d) An opinion addressed to the Purchasers from Vinson & Elkins L.L.P., legal counsel to the Partnership, dated as of the Closing, in the form and substance attached hereto as Exhibit B ;

(e) A certificate, dated the Closing Date and signed by each of the Chief Executive Officer and the Chief Financial Officer of the General Partner, on behalf of the Partnership, in their capacities as such, stating that:

(i) The Partnership has performed and complied with the covenants and agreements contained in this Agreement that are required to be performed and complied with by the Partnership on or prior to the Closing Date; and

(ii) The representations and warranties of the Partnership contained in this Agreement that are qualified by materiality or Material Adverse Effect are true and correct as of the Closing Date and all other representations and warranties of the Partnership are, individually and in the aggregate, true and correct in all material respects as of the Closing Date (except that representations and warranties made as of a specific date shall be required to be true and correct as of such date only); and

(f) A certificate of the Secretary or Assistant Secretary of the General Partner, on behalf of the Partnership, certifying as to (1) the Certificate of Limited Partnership of the

 

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Partnership and the Partnership Agreement, (2) board resolutions authorizing the execution and delivery of the Operative Documents and the consummation of the transactions contemplated thereby, including the issuance of the Purchased Units, and (3) its incumbent officers authorized to execute the Operative Documents, setting forth the name and title and bearing the signatures of such officers.

Section 2.7 Purchaser Deliveries . At the Closing, subject to the terms and conditions hereof, each Purchaser will deliver, or cause to be delivered, to the Partnership:

(a) Payment to the Partnership of the Purchase Price set forth opposite such Purchaser’s name under the column titled “Purchase Price” on Schedule A hereto by wire transfer of immediately available funds to an account designated by the Partnership in writing at least two Business Days prior to the Closing Date; provided that such delivery shall be required only after delivery of the Purchased Units as set forth in Section 2.6(a) ; and

(b) The Registration Rights Agreement in the form attached to this Agreement as Exhibit A , which shall have been duly executed by such Purchaser.

Section 2.8 Independent Nature of Purchasers’ Obligations and Rights . The obligations of each Purchaser under any Operative Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Operative Document. Nothing contained herein or in any other Operative Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchasers are in any way acting in concert or as a group for purposes of Section 13(d) of the Exchange Act or otherwise with respect to such obligations or the transactions contemplated by the Operative Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Operative Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

The Partnership represents and warrants to each Purchaser as follows:

Section 3.1 Formation and Qualification of the Partnership Entities . Each of the Partnership Entities has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, is duly qualified to do business and is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to be so qualified, in good standing or have such power or authority would not, individually or in the aggregate, (A) have a material adverse effect on the business, properties, management,

 

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financial position or results of operations of the Partnership Entities taken as a whole; (B) materially impair the ability of any of the Partnership Entities to consummate the Conveyance or to perform their respective obligations under this Agreement or the other Operative Documents (each of clause (A) and (B), a “ Material Adverse Effect ”); or (C) subject the limited partners of the Partnership to any material liability or disability. Each of the Partnership Entities has all power and authority necessary to own or hold its properties and to conduct the business in which it is engaged. The Partnership does not own or control, directly or indirectly, any corporation, association or other entity other than the Operating Company and Rice Poseidon, and after giving effect to the Conveyance, the Rice Water Entities.

Section 3.2 Purchased Units; Capitalization .

(a) On the Closing Date, the Purchased Units shall have those rights, preferences, privileges and restrictions governing the Common Units as set forth in the Partnership Agreement.

(b) General Partner . The General Partner has, and at the Closing Date will have, full limited liability company power and authority to serve as general partner of the Partnership. The General Partner is the sole general partner of the Partnership.

(c) Ownership of RMH . REA owns, and Rice indirectly owns, and on the Closing Date, REA will own, and Rice will indirectly own, 100% of the issued and outstanding limited liability company interests of RMH free and clear of any Liens.

(d) Common Units Held. As of the date hereof, the issued and outstanding partnership interests of the Partnership consist of (i) 28,753,788 Common Units and 28,753,623 Subordinated Units and the Incentive Distribution Rights, which are the only limited partner interests of the Partnership issued and outstanding (other than limited partner interests issued under the Partnership’s Long-Term Incentive Plan), and (ii) the General Partner Interest; all of such Common Units have been duly authorized and validly issued pursuant to the Partnership Agreement and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act).

(e) Ownership of the General Partner . RMH owns, and on the Closing Date will own, 100% of the limited liability company interests in the General Partner; such limited liability company interests have been duly authorized and validly issued in accordance with the General Partner LLC Agreement and will be fully paid (to the extent required under the General Partner LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and such limited liability company interests are, and will be, owned free and clear of any Liens.

(f) Ownership of the General Partner Interest in the Partnership . The General Partner is, and on the Closing Date will be, the sole general partner of the Partnership, with a noneconomic general partner interest in the Partnership (the “ General Partner Interest ”); such General Partner Interest has been duly authorized and validly issued in accordance with the Partnership Agreement; and the General Partner owns such General Partner Interest free and clear of all Liens (except for (i) restrictions on transferability contained in the Partnership Agreement and (ii) Liens created or arising under the Delaware LP Act).

 

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(g) Ownership of the Incentive Distribution Rights . RMH owns, and on the Closing Date will own, all of the Incentive Distribution Rights; the Incentive Distribution Rights and the limited partner interests represented thereby have been duly authorized and validly issued in accordance with the Partnership Agreement and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and RMH owns such Incentive Distribution Rights free and clear of all Liens (except for (i) restrictions on transferability contained in the Partnership Agreement and (ii) Liens created or arising under the Delaware LP Act).

(h) Ownership of the Sponsor Units . RMH owns, and on the Closing Date will own, 3,623 Common Units and 28,753,623 Subordinated Units (collectively, the “ Sponsor Units ”); the Sponsor Units and the limited partner interests represented thereby have been duly authorized and validly issued in accordance with the Partnership Agreement and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and RMH owns such Sponsor Units free and clear of all Liens (except for (i) restrictions on transferability contained in the Partnership Agreement, (ii) Liens created or arising under the Delaware LP Act and (iii) Liens created or arising under Rice’s revolving credit facility or RMH’s revolving credit facility).

(i) Ownership of Operating Company . The Partnership owns, and on the Closing Date will own, 100% of the limited liability company interests in the Operating Company; such limited liability company interests have been duly authorized and validly issued in accordance with the Operating Company LLC Agreement and are fully paid (to the extent required under the Operating Company LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and such limited liability company interests are owned free and clear of all Liens (except for (i) restrictions on transferability contained in the Operating Company LLC Agreement, (ii) Liens created or arising under the Delaware LLC Act and (iii) Liens created or arising under the Revolving Credit Facility).

(j) Ownership of Rice Poseidon . The Operating Company owns, and on the Closing Date will own, 100% of the limited liability company interests in Rice Poseidon; such limited liability company interests have been duly authorized and validly issued in accordance with the limited liability company agreement of Rice Poseidon (the “ Rice Poseidon LLC Agreement ”) and are fully paid (to the extent required under the Rice Poseidon LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and such limited liability company interests are owned free and clear of all Liens (except for (i) restrictions on transferability contained in the Rice Poseidon LLC Agreement, (ii) Liens created or arising under the Delaware LLC Act and (iii) Liens created or arising under the Revolving Credit Facility).

 

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(k) Ownership of the Rice Water Entities . On the Closing Date, the Operating Company will own 100% of the limited liability company interests in the Rice Water Entities; such limited liability company interests will have been duly authorized and validly issued in accordance with the limited liability company agreements of the Rice Water Entities (the “ Rice Water LLC Agreements ”) and will be fully paid (to the extent required under the Rice Water LLC Agreement) and nonassessable (except to the extent such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and such limited liability company interests will be owned free and clear of all Liens (except for (i) restrictions on transferability contained in the Rice Water LLC Agreements, (ii) Liens created or arising under the Delaware LLC Act and (iii) Liens created or arising under the Revolving Credit Facility).

(l) No Other Subsidiaries . On the Closing Date, the General Partner will not own, directly or indirectly, any equity or long-term debt securities of any corporation, partnership, limited liability company, joint venture, association or other entity, other than the Partnership, the Operating Company, Rice Poseidon and the Rice Water Entities. On the Closing Date, after giving effect to the Conveyance, the Partnership will not own, directly or indirectly, any equity or long-term debt securities of any corporation, partnership, limited liability company, joint venture, association or other entity, other than the Operating Company, Rice Poseidon and the Rice Water Entities.

Section 3.3 No Conflicts . The execution, delivery and performance by the Partnership Entities of this Agreement and each of the other Operative Documents to which they are a party, the issuance and sale of the Purchased Units, and any other transactions contemplated by this Agreement and the other Operative Documents and the application of the proceeds from the sale of the Purchased Units will not, and the consummation of the Conveyance did not, (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of any of the Partnership Entities pursuant to, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which any of the Partnership Entities is a party or by which any of the Partnership Entities is bound or to which any of the property, right or assets of any of the Partnership Entities is subject; (ii) result in any violation of the provisions of the Organizational Documents of any of the Partnership Entities; or (iii) result in any violation of any law or statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, have a Material Adverse Effect.

Section 3.4 No Defaults . None of the Partnership Entities is (i) in violation of its Organizational Documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which any of the Partnership Entities is a party or by which any of the Partnership Entities is bound or to which any of the property or assets of any of the Partnership Entities is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority; except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

 

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Section 3.5 Authority . Each of the Partnership Entities has all requisite limited liability company or limited partnership power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each of the Partnership Entities has full limited liability company or limited partnership power and authority to execute and deliver each of the Operative Documents to which such Partnership Entity is a party and to perform its obligations thereunder. The Partnership has all requisite limited partnership power and authority to issue, sell and deliver the Purchased Units, in accordance with and upon the terms and conditions set forth in this Agreement and the Partnership Agreement. On the Closing Date, all limited partnership or limited liability company action, as the case may be, required to be taken by the General Partner or the Partnership for the authorization, issuance, sale and delivery of the Purchased Units, the execution and delivery of the Operative Documents and the consummation of the transactions contemplated hereby, shall have been validly taken.

Section 3.6 No Consents . No consent, approval, authorization or order of, or filing, registration or qualification (“ consent ”) with any Governmental Authority is required for (i) the execution, delivery and performance by any of the Partnership Entities of any of the Operative Documents; (ii) the issuance and sale of the Purchased Units; (iii) the consummation of the Conveyance or any other transactions contemplated by this Agreement, the PSA or the other Operative Documents; or (iv) the application of the proceeds from the sale of the Purchased Units, except (A) such as have been, or prior to the Closing Date will be, obtained or made, (B) for the registration of the Purchased Units under the Securities Act and consents as may be required under the Exchange Act, applicable state securities laws, and the rules of the Financial Industry Regulatory Authority, Inc. in connection with the purchase and sale of the Purchased Units by the Purchasers, and (C) for such consents that, if not obtained, have not or would not, individually or in the aggregate, have a Material Adverse Effect.

Section 3.7 Authorization, Execution and Delivery of the Common Unit Purchase Agreement . This Agreement has been duly authorized and validly executed and delivered by or on behalf of the Partnership and constitutes a valid and legally binding agreement of the Partnership, enforceable against the Partnership in accordance with its terms; provided , that the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles (whether considered in a proceeding at law or in equity) relating to enforceability and (B) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing (collectively, the “ Enforceability Exceptions ”).

Section 3.8 Authorization, Execution, Delivery and Enforceability of the Registration Rights Agreement . On the Closing Date, the Registration Rights Agreement will have been duly authorized, executed and delivered by the Partnership Entities party thereto and will be a valid and legally binding agreement of such Partnership Entity, enforceable against such Partnership Entity in accordance with its terms, subject to the Enforceability Exceptions.

 

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Section 3.9 Authorization, Execution, Delivery and Enforceability of the Contribution Agreement .

(a) Prior to the execution and delivery hereof by the Purchasers, the PSA will have been duly authorized, executed and delivered by (i) the Partnership and (ii) to the knowledge of the Partnership, Rice. Assuming the due authorization of the parties thereto other than the Partnership, the PSA will constitute a valid and legally binding agreement of the Partnership and Rice, enforceable against the Partnership and Rice in accordance with its terms, subject to the Enforceability Exceptions.

(b) The final terms of the PSA conform in all material respects to the description thereof contained in the materials provided by the Partnership to the Purchasers.

Section 3.10 Valid Issuance; No Options or Preemptive Rights of Common Units . The Purchased Units to be issued and sold by the Partnership and the limited partner interests represented thereby have been duly authorized in accordance with the Partnership Agreement and, when issued and delivered to the Purchasers against payment therefor in accordance with the terms hereof, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and non-assessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act). Except as provided in the Operative Documents and the Partnership Agreement, there are no options, warrants, preemptive rights, rights of first refusal or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, any equity securities of any of the Partnership Entities pursuant to any of their certificate of limited partnership, formation or incorporation, agreement of limited partnership, limited liability company agreement, bylaws or any other organizational documents (the “ Organizational Documents ”). Except as provided for in the Partnership Agreement, the Registration Rights Agreement and the Existing Registration Rights Agreement, neither the filing of the Registration Statement pursuant to the Registration Rights Agreement nor the offering or sale of the Common Units as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Common Units or other securities of the Partnership.

Section 3.11 No Registration Rights . Except as contemplated by this Agreement and the Registration Rights Agreement or pursuant to the Partnership Agreement or the Existing Registration Rights Agreement, there are no contracts, agreements or understandings between any of the Partnership and any Person granting such Person the right to require the Partnership to file a registration statement under the Securities Act with respect to any securities of the Partnership owned or to be owned by such person or to require the Partnership to include such securities in the Registration Statement or in any securities registered or to be registered pursuant to any registration statement filed by or required to be filed by the Partnership under the Securities Act.

Section 3.12 Periodic Reports . The SEC Reports have been filed with the Commission on a timely basis. The SEC Reports, including, without limitation, any audited or unaudited financial statements and any notes thereto or schedules included therein, at the time filed (or in the case of registration statements, solely on the dates of effectiveness) (except to the extent corrected by a subsequent SEC Report) (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be.

 

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Section 3.13 Financial Statements . The historical financial statements of the Partnership (including the related notes and supporting schedules) included in the SEC Reports comply as to form in all material respects with the requirements of Regulation S-X under the Securities Act and present fairly in all material respects the financial condition, results of operations and cash flows of the entities purported to be shown thereby at the dates and for the periods indicated and have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved.

Section 3.14 Independent Registered Public Accounting Firm . Ernst & Young LLP, which has certified certain financial statements of the Partnership and its subsidiaries is an independent public accounting firm with respect to the Partnership and its subsidiaries within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.

Section 3.15 Litigation . There are no legal or governmental proceedings pending to which any of the Partnership Entities is a party or to which any property or assets of the Partnership Entities is the subject that could reasonably be expected to have a Material Adverse Effect; and to the knowledge of the Partnership Entities, no such proceedings are threatened or contemplated by any Governmental Authority or by others.

Section 3.16 No Material Adverse Changes . Except for such exceptions that would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, since the date of the most recent audited financial statements included in the SEC Reports, (i) there has not been any adverse change, or any development that would reasonably be expected to result in an adverse change, in or affecting the business, properties, management, financial position or results of operations of the Partnership Entities taken as a whole; (ii) none of the Partnership Entities has entered into any transaction or agreement that is material to the Partnership Entities taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Partnership Entities taken as a whole, other than in each case in the ordinary course of business; and (iii) none of the Partnership Entities has sustained any loss or interference with its business or operation from fire, explosion, flood or other calamity, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority; except in each case as otherwise disclosed in the SEC Reports and except as contemplated by the Operative Documents.

Section 3.17 Title to Properties . Except with respect to rights-of-way (as defined below), which are the subject of Section 3.17 , each of the Partnership Entities has good and marketable title to, or valid rights to lease or otherwise use, all items of real property and personal property that are material to the conduct of the respective businesses of the Partnership Entities, in each case free and clear of all Liens except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Partnership Entities or (ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

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Section 3.18 Rights of Way . Each of the Partnership Entities, directly or indirectly, has such consents, easements, rights-of-way, permits or licenses from each person (collectively, “ rights-of-way ”) as are necessary to conduct its business in the manner described in the SEC Reports, if any, except for (i) qualifications, reservations and encumbrances with respect thereto that would not have a Material Adverse Effect and (ii) such rights-of-way that, if not obtained, would not have, individually or in the aggregate, a Material Adverse Effect; each of the Partnership Entities has fulfilled and performed, in all material respects, its obligations with respect to such rights-of-way and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such rights-of-way, except for such revocations, terminations and impairments that, individually or in the aggregate, would not have a Material Adverse Effect; and none of such rights-of-way contains any restriction that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.19 License and Permits . Except with respect to permits related to Environmental Law (as defined below), which are the subject of Section 3.22 , each of the Partnership Entities possesses permits, licenses, patents, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities (“ Permits ”) as are necessary under the applicable law for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the SEC Reports, except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and none of the Partnership Entities has received notice of any revocation or modification of any such Permits or has any reason to believe that any such Permits will not be renewed in the ordinary course.

Section 3.20 Intellectual Property . Each of the Partnership Entities own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.21 Insurance . Except as would not reasonably be expected to have a Material Adverse Effect, each of the Partnership Entities carries or is covered by insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is reasonably adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. All policies of insurance of the Partnership Entities are in full force and effect; each of the Partnership Entities are in compliance with the terms of such policies in all material respects; and none of the Partnership Entities has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance; there are or will be no claims by any of the Partnership Entities under any such policy or instrument as to which any insurance company is denying

 

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liability or defending under a reservation of rights clause; and none of the Partnership Entities has been notified in writing that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.

Section 3.22 No Labor Dispute; No Notice of Labor Law Violations . No labor disturbance by, or dispute with, the employees of the Partnership Entities exists or, to the knowledge of each of the Partnership Entities, is threatened or imminent that could reasonably be expected to have a Material Adverse Effect.

Section 3.23 Environmental Compliance . (i) The Partnership Entities (i) are, and at all times prior hereto were, in compliance with all laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal requirements of any governmental authority, including without limitation any international, foreign, national, state, provincial, regional, or local authority, relating to pollution, the protection of human health or safety, the environment, or natural resources, or to use, handling, storage, manufacturing, transportation, treatment, discharge, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants (“ Environmental Laws ”) applicable to such entity, which compliance includes, without limitation, obtaining, maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their respective businesses, and (ii) has not received notice or otherwise has knowledge of any actual or alleged violation of Environmental Laws, or of any actual or potential liability for or other obligation concerning the presence, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except in the case of clause (i) or (ii) where such non-compliance, violation, liability, or other obligation would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as described in the SEC Reports, (x) there are no proceedings that are pending, or known to be contemplated, against any of the Partnership Entities under Environmental Laws in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (y) the Partnership Parties are not aware of any issues regarding compliance with Environmental Laws, including any pending or proposed Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could reasonably be expected to have a Material Adverse Effect, and (z) none of the Partnership Parties anticipates material capital expenditures relating to Environmental Laws other than those incurred in the ordinary course of business.

Section 3.24 Tax Returns . Each of the Partnership Entities has filed all federal, state, local and foreign tax returns required to be filed through the date hereof, subject to permitted extensions, and have paid all taxes due, and, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, there is no tax deficiency that has been determined adversely to any of the Partnership Entities, nor does the Partnership have any knowledge of any tax deficiencies that have been, or could reasonably be expected to be asserted against the Partnership, that could, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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Section 3.25 No Employment Law Violations . Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), that is maintained, administered or contributed to by the Partnership or any of its affiliates for employees or former employees of the Partnership and its affiliates has been maintained in compliance in all material respects with its terms and the requirements of any applicable statutes, orders, rules and regulations, including, but not limited to, ERISA and the Internal Revenue Code of 1986, as amended (the “ Code ”); no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption, and transactions which, individually or in the aggregate, would not have a Material Adverse Effect, and no such plan is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA; and neither the Partnership nor any of its subsidiaries has any reasonable expectation of incurring any liabilities under Title IV of ERISA.

Section 3.26 No Unlawful Payments . None of the Partnership Entities nor, to the knowledge of the Partnership Entities, any director, officer, agent, employee or other person associated with or acting on behalf of the Partnership Entities, has (i) used its funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; (iv) violated or is in violation of any provision of the Bribery Act 2010 of the United Kingdom; or (v) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

Section 3.27 Compliance with Money Laundering Laws . The operations of the Partnership Entities are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “ Money Laundering Laws ”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Partnership Entities with respect to the Money Laundering Laws is pending or, to the knowledge of the Partnership Entities, threatened.

Section 3.28 OFAC . None of the Partnership Entities nor, to the actual knowledge of the Partnership Entities, any director, officer, agent, employee or affiliate of the Partnership Entities is currently the subject or the target of any sanctions (“ Sanctions ”) administered or enforced by the U.S. Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”); and the Partnership will not directly or indirectly use the proceeds of the offering of the Common Units hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund any activities of or business with any person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or (ii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as placement agent, underwriter, advisor, investor or otherwise) of Sanctions.

 

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Section 3.29 Certain Fees . Other than as described in the Placement Agent Engagement Letter, none of the Partnership Entities is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or the Purchasers for a brokerage commission, finders’ fee or like payment in connection with the offering and sale of the Purchased Units. The Partnership agrees that it will indemnify and hold harmless each Purchaser from and against any and all claims, demands or liabilities for broker’s, finder’s, placement or other similar fees or commissions incurred by the Partnership in connection with the purchase of the Purchased Units or the consummation of the transactions contemplated by this Agreement.

Section 3.30 No Side Agreements . There are no agreements by, among or between the Partnership or any of its Affiliates, on the one hand, and any Purchaser or any of their Affiliates, on the other hand, with respect to the transactions contemplated hereby other than the Operative Documents nor promises or inducements for future transactions between or among any of such parties.

Section 3.31 No Registration . Assuming the accuracy of the representations and warranties of the Purchaser contained in Section 4.6 and Section 4.7 , the issuance and sale of the Purchased Units pursuant to this Agreement is exempt from registration requirements of the Securities Act, and neither the Partnership nor, to the knowledge of the Partnership, any authorized Representative acting on its behalf has taken or will take any action hereafter that would cause the loss of such exemption.

Section 3.32 No Integration . The Partnership has not, directly or through any agent, issued, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act), that is or will be integrated with the issuance and sale of the Purchased Units contemplated by this Agreement pursuant to the Securities Act, the rules and regulations thereunder or the interpretations thereof by the Commission.

Section 3.33 MLP Status . The Partnership is properly treated as a partnership for United States federal income tax purposes and more than 90% of the Partnership’s current gross income is qualifying income under 7704(d) of the Internal Revenue Code of 1986, as amended.

Section 3.34 Qualifying Income of Conveyed Assets . The Partnership expects that more than 90% of the combined gross income of the Partnership, the Rice Water Entities and the operations conducted with the Water Assets in 2015 after the closing of the transaction contemplated by the PSA and in 2016 will be “qualifying income” under Section 7704(d) of the Internal Revenue Code of 1986, as amended.

Section 3.35 Investment Company . None of the Partnership Entities is and, as of the Closing Date after giving effect to the offer and sale of the Purchased Units and the application of the proceeds therefrom, none of them will be, (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “ Investment Company Act ”) or (ii) a “business development company” (as defined in Section 2(a)(48) of the Investment Company Act).

 

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Section 3.36 Disclosure Controls . The Partnership Entities maintain an effective system of disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that is designed to ensure that information required to be disclosed by the Partnership Entities in reports that the Partnership files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Partnership’s management, including the principal executive officer(s) and principal financial officer(s) of the General Partner, as appropriate to allow timely decisions regarding required disclosure to be made. As of the date of the Partnership’s most recent audited financial statements included in an SEC Report, the Partnership’s disclosure controls and procedures were effective in all material respects to perform the functions for which they were established.

Section 3.37 Accounting Controls . The Partnership Entities maintain systems of “internal control over financial reporting” (as such term is defined in Rule 15d-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and that has been designed by, or under the supervision of, the General Partner’s principal executive officer(s) and principal financial officer(s), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of the Partnership’s consolidated financial statements in conformity with U.S. generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (v) interactive data in eXtensible Business Reporting Language is prepared in accordance with the Commission’s rules and guidelines applicable thereto. As of the date of the most recent balance sheet of the Partnership and its consolidated subsidiaries reviewed or audited by KPMG LLP, there were no material weaknesses or significant deficiencies in the internal controls of the Partnership Entities.

Section 3.38 Placement Agent Reliance . The Partnership acknowledges that the Placement Agent may rely upon the representations and warranties made by the Partnership to each Purchaser in this Agreement.

Section 3.39 Absence of Price Manipulation . Neither the Partnership nor, to the knowledge of the Partnership, any of its Affiliates or its or their respective directors or officers, has taken or will take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Units to facilitate the sale or resale of the Purchased Units in violation of Regulation M under the Exchange Act.

 

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Section 3.40 Conveyance . The PSA is legally sufficient to transfer or convey to the Partnership (i) all of the transferor’s right, title and interest in and to the Rice Water Entities and the Water Assets and (ii) all of the ownership interests, assets and rights in and to the Rice Water Entities and the Water Assets purported to be transferred thereby, subject to the conditions, reservations, encumbrances and limitations contained in the PSA. The Partnership, upon consummation of the transactions contemplated by the PSA, directly or indirectly succeeded in all material respects to the Rice Water Entities and the Water Assets. Furthermore, prior to the execution and delivery hereof by the Purchasers, the Conveyance as contemplated by the PSA has occurred.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each Purchaser, severally and not jointly, hereby represents and warrants to the Partnership that:

Section 4.1 Existence . Such Purchaser is duly organized and validly existing and in good standing under the Laws of its jurisdiction of organization, with all requisite power and authority to own, lease, use and operate its properties and to conduct its business as currently conducted, except where the failure to have such power or authority would not prevent the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement.

Section 4.2 Authorization, Enforceability . Such Purchaser has all necessary corporate, limited liability company or partnership power and authority to execute, deliver and perform its obligations under this Agreement and the Registration Rights Agreement and to consummate the transactions contemplated thereby, and the execution, delivery and performance by such Purchaser of this Agreement and the Registration Rights Agreement has been duly authorized by all necessary action on the part of such Purchaser; and this Agreement and the Registration Rights Agreement constitute the legal, valid and binding obligations of such Purchaser, enforceable in accordance with their terms, subject to the Enforceability Exceptions.

Section 4.3 No Breach . The execution, delivery and performance of this Agreement and the Registration Rights Agreement by such Purchaser and the consummation by such Purchaser of the transactions contemplated hereby and thereby will not (a) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement to which such Purchaser is a party or by which such Purchaser is bound or to which any of the property or assets of such Purchaser is subject, (b) conflict with or result in any violation of the provisions of the Organizational Documents of such Purchaser, or (c) violate any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over such Purchaser or the property or assets of such Purchaser, except in the cases of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement.

 

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Section 4.4 Certain Fees . No fees or commissions are or will be payable by such Purchaser to brokers, finders, or investment bankers with respect to the purchase of any of the Purchased Units or the consummation of the transaction contemplated by this Agreement. Such Purchaser agrees that it will indemnify and hold harmless the Partnership from and against any and all claims, demands, or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by such Purchaser in connection with the purchase of the Purchased Units or the consummation of the transactions contemplated by this Agreement.

Section 4.5 No Side Agreements . There are no other agreements by, among or between such Purchaser and any of its Affiliates, on the one hand, and the Partnership or any of its Affiliates, on the other hand, with respect to the transactions contemplated hereby other than the Operative Documents nor promises or inducements for future transactions between or among any of such parties.

Section 4.6 Investment . The Purchased Units are being acquired for such Purchaser’s own account, the account of its Affiliates, or the accounts of clients for whom such Purchaser exercises discretionary investment authority (all of whom such Purchaser hereby represents and warrants are “accredited investors” within the meaning of Rule 501(a) of Regulation D promulgated by the Commission pursuant to the Securities Act), not as a nominee or agent, and with no present intention of distributing the Purchased Units or any part thereof, and such Purchaser has no present intention of selling or granting any participation in or otherwise distributing the same in any transaction in violation of the securities laws of the United States or any state, without prejudice, however, to such Purchaser’s right at all times to sell or otherwise dispose of all or any part of the Purchased Units under a registration statement under the Securities Act and applicable state securities laws or under an exemption from such registration available thereunder (including, without limitation, if available, Rule 144 promulgated thereunder). If such Purchaser should in the future decide to dispose of any of the Purchased Units, the Purchaser understands and agrees (a) that it may do so only in compliance with the Securities Act and applicable state securities law, as then in effect, including a sale contemplated by any registration statement pursuant to which such securities are being offered, or pursuant to an exemption from the Securities Act, and (b) that stop-transfer instructions to that effect will be in effect with respect to such securities.

Section 4.7 Nature of Purchaser . Such Purchaser represents and warrants to, and covenants and agrees with, the Partnership that, (a) it is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated by the Commission pursuant to the Securities Act and (b) by reason of its business and financial experience it has such knowledge, sophistication and experience in making similar investments and in business and financial matters generally so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Units, is able to bear the economic risk of such investment and, at the present time, would be able to afford a complete loss of such investment.

Section 4.8 Restricted Securities . Such Purchaser understands that the Purchased Units are characterized as “restricted securities” under the federal securities Laws inasmuch as they are being acquired from the Partnership in a transaction not involving a public offering and that under such Laws and applicable regulations such securities may not be resold absent registration under the Securities Act or an exemption therefrom. In this connection, such Purchaser represents that it is knowledgeable with respect to Rule 144 of the Commission promulgated under the Securities Act.

 

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Section 4.9 Legend . Such Purchaser understands that the book entry evidencing the Purchased Units will bear the legend required by the Partnership Agreement as well as a legend substantively consistent with the following legend: “These securities have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”). These securities may not be sold or offered for sale except pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from registration thereunder, in each case in accordance with all applicable securities laws of the states or other jurisdictions, and in the case of a transaction exempt from registration, such securities may only be transferred if the transfer agent for such securities has received documentation satisfactory to it that such transaction does not require registration under the Securities Act.”

Section 4.10 Company Information . Such Purchaser acknowledges and agrees that the Company has provided or made available to such Purchaser (through EDGAR, the Company’s website or otherwise) all SEC Reports, as well as all press releases or investor presentations issued by the Company through the date of this Agreement that are included in a filing by the Company on Form 8-K or clearly posted on the Company’s website.

Section 4.11 Placement Agent Reliance . Such Purchaser agrees that the Placement Agent may rely upon the representations and warranties made by such Purchaser to the Company in this Agreement.

Section 4.12 Short Selling . Such Purchaser represents that it has not entered into any Short Sales of the Common Units owned by it since the time it first began discussions with the Partnership or the Placement Agent about the transactions contemplated by this Agreement; provided , however , subject to such Purchaser’s compliance with its obligations under the U.S. federal securities laws and its internal policies, the above shall not apply, in the case of a Purchaser that is a large multi-unit investment or commercial banking organization, to activities in the normal course of trading units of such Purchaser; provided , further , that subject to such Purchaser’s compliance with its obligations under the U.S. federal securities laws and its internal policies: (a) such Purchaser, for purposes hereof, shall not be deemed to include any employees, subsidiaries or Affiliates that are effectively walled off by appropriate “Chinese Wall” information barriers approved by such Purchaser’s legal or compliance department (and thus have not been privy to any information concerning this transaction) (a “Walled Off Person”) and (b) the foregoing representations in this paragraph shall not apply to any transaction by or on behalf of such Purchaser that was effected by a Walled Off Person in the ordinary course of trading without the advice or participation of such Purchaser or receipt of confidential or other information regarding this transaction provided by such Purchaser to such entity.

ARTICLE V

COVENANTS

Section 5.1 Taking of Necessary Action . Each of the parties hereto shall use its commercially reasonable efforts promptly to take or cause to be taken all action and

 

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promptly to do or cause to be done all things necessary, proper or advisable under applicable Law and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, the Partnership and each Purchaser shall use its commercially reasonable efforts to make all filings and obtain all consents of Governmental Authorities that may be necessary or, in the reasonable opinion of the other parties, as the case may be, advisable for the consummation of the transactions contemplated by the Operative Documents. The Partnership shall promptly and accurately respond, and shall use its commercially reasonable efforts to cause its transfer agent to respond, to reasonable requests for information (which is otherwise not publicly available) made by a Purchaser or its auditors relating to the actual holdings of such Purchaser or its accounts; provided, that the Partnership shall not be obligated to provide any such information that could reasonably result in a violation of applicable law or conflict with the Partnership’s insider trading policy or a confidentiality obligation of the Partnership. The Partnership shall use its commercially reasonable efforts to cause its transfer agent to reasonably cooperate with each Purchaser to ensure that the Purchased Units are validly and effectively issued to such Purchaser and that such Purchaser’s ownership of the Purchased Units following the Closing is accurately reflected on the appropriate books and records of the Partnership’s transfer agent.

Section 5.2 Other Actions . The Partnership shall file prior to the Closing a supplemental listing application with the NYSE to list the Purchased Units.

Section 5.3 Expenses . The Partnership shall pay up to $75,000 of legal fees of Baker Botts L.L.P., counsel to the Purchasers, incurred in connection with the negotiation, execution, delivery and performance of this Agreement and Registration Rights Agreement and the transactions contemplated hereby and thereby, provided that any request for such payment is accompanied by a satisfactory written invoice for such expenses. If any action at law or equity is necessary to enforce or interpret the terms of any Operative Document, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled. Any legal fees of Baker Botts L.L.P. in excess of $75,000 shall be paid pro rata by all the Purchasers in proportion to the number of Purchased Units purchased by each.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnification by the Partnership . The Partnership agrees to indemnify each Purchaser and its Representatives (collectively, “ Purchaser Related Parties ”) from, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, including, without limitation, the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them as a result of, arising out of, or in any way related to the breach of any

 

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of the representations, warranties or covenants of the Partnership contained herein, provided that such claim for indemnification relating to a breach of the representations or warranties is made prior to the expiration of the survival period for such representations or warranties; and provided further , that no Purchaser Related Party shall be entitled to recover special, consequential (including lost profits) or punitive damages. Notwithstanding anything to the contrary, consequential damages shall not be deemed to include diminution in value of the Purchased Units, which is specifically included in damages covered by Purchaser Related Parties’ indemnification above.

Section 6.2 Indemnification by Purchasers . Each Purchaser agrees, severally and not jointly, to indemnify the Partnership, the General Partner and their respective Representatives (collectively, “ Partnership Related Parties ”) from, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, including, without limitation, the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of such Purchaser contained herein, provided that such claim for indemnification relating to a breach of the representations and warranties is made prior to the expiration of such representations and warranties; and provided further , that no Partnership Related Party shall be entitled to recover special, consequential (including lost profits or diminution in value) or punitive damages.

Section 6.3 Indemnification Procedure . Promptly after receipt by an indemnified party under this Article VI of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Article VI , notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under Sections 6.1 or 6.2 of this Article VI except to the extent it has been materially prejudiced (through the forfeiture of substantive rights and defenses) by such failure and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Article VI . If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Article VI for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the indemnified party shall have the right to employ counsel to represent jointly the indemnified party and those other indemnified parties and their respective directors, officers, employees and controlling persons who may be subject to liability arising

 

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out of any claim in respect of which indemnity may be sought under this Article VI if (i) the indemnified party and the indemnifying party shall have so mutually agreed; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party and its directors, officers, employees and controlling persons shall have reasonably concluded that there may be legal defenses available to them that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnified parties or their respective directors, officers, employees or controlling persons, on the one hand, and the indemnifying party, on the other hand, and representation of both sets of parties by the same counsel would be inappropriate due to actual or potential differing interests between them, and in any such event the fees and expenses of such separate counsel shall be paid by the indemnifying party. No indemnifying party shall (x) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to, or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, or (y) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel to the extent required by Sections 6.1 and 6.2 hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request or disputed in good faith the indemnified party’s entitlement to such reimbursement prior to the date of such settlement.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Interpretation and Survival of Provisions . Article, Section, Schedule, and Exhibit references are to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any party has an obligation under the

 

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Operative Documents, the expense of complying with that obligation shall be an expense of such party unless otherwise specified. Whenever any determination, consent, or approval is to be made or given by any Purchaser, such action shall be in such Purchaser’s sole discretion unless otherwise specified in this Agreement. If any provision in the Operative Documents is held to be illegal, invalid, not binding, or unenforceable, such provision shall be fully severable and the Operative Documents shall be construed and enforced as if such illegal, invalid, not binding, or unenforceable provision had never comprised a part of the Operative Documents, and the remaining provisions shall remain in full force and effect. The Operative Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and shall not be construed against the drafter.

Section 7.2 Survival of Provisions . The representations and warranties set forth in Sections 3.1 , 3.2 , 3.5 , 3.7, 3.8, 3.9 , 3.10 , 3.29 , 3.31 , 3.38 and 3.40 shall survive indefinitely, Sections 3.11 , 3.16 , 3.17 , 3.18 , 3.19 , 3.20 , 3.21 , 3.22 , 3.23 , 3.24 , 3.25 , 3.26 , 3.27 , 3.28 , 3.30 , 4.4 , 4.5 , 4.7 , 4.8 , 4.9 and 4.11 hereunder shall survive the execution and delivery of this Agreement for two years, and the other representations and warranties set forth herein shall survive for a period of twelve (12) months following the Closing Date regardless of any investigation made by or on behalf of the Partnership or any Purchaser. The covenants made in this Agreement shall survive the Closing of the transactions described herein and remain operative and in full force and effect regardless of acceptance of any of the Purchased Units and payment therefor and repayment, conversion, exercise or repurchase thereof. All indemnification obligations of the Partnership and the Purchasers pursuant to this Agreement and the provisions of Article VI shall remain operative and in full force and effect unless such obligations are expressly terminated in a writing by the parties, regardless of any purported general termination of this Agreement.

Section 7.3 No Waiver; Modifications in Writing .

(a) Delay . No failure or delay on the part of any party in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

(b) Specific Waiver . Except as otherwise provided herein, no amendment, waiver, consent, modification, or termination of any provision of this Agreement or any other Operative Document shall be effective unless signed by each of the parties hereto or thereto affected by such amendment, waiver, consent, modification, or termination. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Partnership from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Partnership in any case shall entitle the Partnership to any other or further notice or demand in similar or other circumstances.

 

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Section 7.4 Binding Effect; Assignment .

(a) Binding Effect . This Agreement shall be binding upon the Partnership, the Purchasers, and their respective successors and permitted assigns. Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns.

(b) Assignment of Rights . All or any portion of the rights and obligations of any Purchaser under this Agreement may be transferred by such Purchaser to any Affiliate of such Purchaser without the consent of the Partnership. No portion of the rights and obligations of any Purchaser under this Agreement may be transferred by such Purchaser to a non-Affiliate without the written consent of the Partnership (which consent shall not be unreasonably withheld by the Partnership).

Section 7.5 Confidentiality . Notwithstanding anything herein to the contrary, to the extent that any Purchaser has executed or is otherwise bound by a confidentiality agreement in favor of the Partnership, such Purchaser shall continue to be bound by such confidentiality agreement in accordance with the terms thereof.

Section 7.6 Communications . All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses:

(a) If to any Purchaser, to the respective address listed on Schedule A to the Registration Rights Agreement; and

(b) If to the Partnership:

Rice Midstream Partners LP

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attention: Will Jordan, General Counsel

with a copy to:

Vinson & Elkins L.L.P.

1001 Fannin Street

Suite 2500

Houston, Texas 77002

Attention: Douglas E. McWilliams

Facsimile: (713) 615-5725

or to such other address as the Partnership or such Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; at the time of transmittal, if sent via electronic mail; upon actual receipt if sent by certified mail, return receipt requested, or regular mail, if mailed; when receipt acknowledged, if sent via facsimile; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

 

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Section 7.7 Removal of Legend . The Partnership, at its sole cost, shall remove the legend described in Section 4.9 (or instruct its transfer agent to so remove such legend) from the certificates evidencing Purchased Units issued and sold to each Purchaser pursuant to this Agreement if (i) such Purchased Units are sold pursuant to an effective registration statement under the Securities Act, (ii) such Purchased Units are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the Partnership), or (iii) such Purchased Units are eligible for sale under Rule 144, without the requirement for the Partnership to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such securities and without volume or manner of sale restrictions. In connection with a sale of the Purchased Units by a Purchaser in reliance on Rule 144, the applicable Purchaser or its broker shall deliver to the transfer agent and the Partnership a customary broker representation letter providing to the transfer agent and the Partnership any information the Partnership deems reasonably necessary to determine that the sale of the Purchased Units is made in compliance with Rule 144, including, as may be appropriate, a certification that the Purchaser is not an Affiliate of the Partnership and regarding the length of time the Purchased Units have been held. Upon receipt of such representation letter, the Partnership shall promptly direct its transfer agent to remove the legend referred to in Section 4.9 from the appropriate book-entry accounts maintained by the transfer agent, and the Partnership shall bear all costs associated therewith. After any Purchaser or its permitted assigns have held the Purchased Units for such time as non-Affiliates are permitted to sell without volume limitations under Rule 144, if the certificate for such Purchased Units still bears the restrictive legend referred to in Section 4.9 , the Partnership agrees, upon request of the Purchaser or permitted assignee, to take all steps necessary to promptly effect the removal of the legend described in Section 4.9 from the Purchased Units, and the Partnership shall bear all costs associated therewith, regardless of whether the request is made in connection with a sale or otherwise, so long as such Purchaser or its permitted assigns provide to the Partnership any information the Partnership deems reasonably necessary to determine that the legend is no longer required under the Securities Act or applicable state laws, including a certification that the holder is not an Affiliate of the Partnership (and a covenant to inform the Partnership if it should thereafter become an Affiliate and to consent to exchange its certificates for certificates bearing an appropriate restrictive legend) and regarding the length of time the Purchased Units have been held.

Section 7.8 Entire Agreement . This Agreement, the other Operative Documents and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein or the other Operative Documents with respect to the rights granted by the Partnership or any of its Affiliates or any Purchaser or any of its Affiliates set forth herein or therein. This Agreement, the other Operative Documents and the other agreements and documents referred to herein or therein supersede all prior agreements and understandings between the parties with respect to such subject matter.

 

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Section 7.9 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of laws principles (other than Section 5-1401 of the General Obligations Law).

Section 7.10 Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

Section 7.11 Termination .

(a) Notwithstanding anything herein to the contrary, this Agreement may be terminated at any time at or prior to the Closing by any Purchaser (with respect to such Purchaser only), upon a breach in any material respect by the Partnership of any covenant or agreement set forth in this Agreement.

(b) Notwithstanding anything herein to the contrary, this Agreement shall automatically terminate at any time at or prior to the Closing

(i) if a statute, rule, order, decree or regulation shall have been enacted or promulgated, or if any action shall have been taken by any Governmental Authority of competent jurisdiction that permanently restrains, permanently precludes, permanently enjoins or otherwise permanently prohibits the consummation of the transactions contemplated by this Agreement or makes the transactions contemplated by this Agreement illegal; or

(ii) if the Closing shall not have occurred by November 13, 2015.

(c) In the event of the termination of this Agreement as provided in this Section 7.11 , this Agreement shall forthwith become null and void. In the event of such termination, there shall be no liability on the part of any party hereto, except as set forth in Article VI  of this Agreement.

Section 7.12 Recapitalization, Exchanges, Etc. Affecting the Common Units . The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all equity interests of the Partnership or any successor or assign of the Partnership (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Common Units, and shall be appropriately adjusted for combinations, unit splits, recapitalizations and the like occurring after the date of this Agreement and prior to the Closing.

[Signature pages follow.]

 

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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

 

RICE MIDSTREAM PARTNERS LP
By:   RICE MIDSTREAM MANAGEMENT LLC
  (its General Partner)
By:  

/s/ Daniel J. Rice IV

  Name:   Daniel J. Rice IV
  Title:   Chief Executive Officer

 

Signature Page to Common Unit Purchase Agreement


NUVEEN ALL CAP ENERGY MLP OPPORTUNITY FUND
By:  

/s/ Quinn T. Kiley

  Name:   Quinn T. Kiley
  Title:   Portfolio Manager
AT MLP FUND, LLC
By:  

/s/ Chris Linder

  Name:   Chris Linder
  Title:   Senior Vice President
PURCHASERS:
Brookfield Global Listed Infrastructure Master Fund LP
Brookfield Global Listed Infrastructure Long Short UCITS Fund
Brookfield Global Infrastructure Securities Income Fund
Brookfield Real Assets Securities Fund
Brookfield Real Assets Securities UCITS Fund
JNL/Brookfield Global Infrastructure and MLP Fund
Northern Multi-Manager Global Listed Infrastructure Fund
Brookfield Global Listed Infrastructure UCITS Fund
Brookfield Global Listed Infrastructure Fund
Ohana Holdings, LLC
Sanofi-Aventis US Pension Trust
By:   BROOKFIELD INVESTMENT MANAGEMENT INC., on behalf of and solely as investment advisor to the Purchasers listed above
By:  

/s/ Jonathan C. Tyras

  Name:   Jonathan C. Tyras
  Title:   Chief Financial Officer and General Counsel

 

Signature Page to Common Unit Purchase Agreement


CENTER COAST MLP & INFRASTRUCTURE FUND
CENTER COST CAPITAL PARTNERS, LP
CENTER COAST CAPITAL ADVISORS
By:  

/s/ Rob Chisholm

  Name:   Rob Chisholm
  Title:   Portfolio Manager
CLEARBRIDGE ENERGY MLP OPPORTUNITY FUND INC
By:   ClearBridge Investments, LLC, as discretionary manager
By:  

/s/ Scott Glasser

  Name:   Scott Glasser
  Title:   co-CIO
COHEN & STEERS GLOBAL INFRASTRUCTURE FUND, INC.
By:  

/s/ Francis C. Poli

  Name:   Francis C. Poli
  Title:   Secretary
COHEN & STEERS MLP INCOME & ENERGY OPPORTUNITY FUND, INC.
By:  

/s/ Francis C. Poli

  Name:   Francis C. Poli
  Title:   Secretary
COHEN & STEERS MLP & ENERGY OPPORTUNITY FUND, INC.
By:  

/s/ Francis C. Poli

  Name:   Francis C. Poli
  Title:   Secretary

 

Signature Page to Common Unit Purchase Agreement


COHEN & STEERS INFRASTRUCTURE FUND, INC.
By:  

/s/ Francis C. Poli

  Name:   Francis C. Poli
  Title:   Secretary
CUSHING FUND, LP
By:   Cushing Asset Management, LP, its general partner
By:   Swank Capital, LLC, its General Partner
By:  

/s/ Jerry V. Swank

  Name:   Jerry V. Swank
  Title:   Managing Member
CUSHING MLP OPPORTUNITY, LP
By:   Cushing Asset Management, LP, its general partner
By:   Swank Capital, LLC, its General Partner
By:  

/s/ Jerry V. Swank

  Name:   Jerry V. Swank
  Title:   Managing Member
SWANK MLP CONVERGENCE FUND, LP
By:   Cushing Asset Management, LP, its general partner
By:   Swank Capital, LLC, its General Partner
By:  

/s/ Jerry V. Swank

  Name:   Jerry V. Swank
  Title:   Managing Member

 

Signature Page to Common Unit Purchase Agreement


CUSHING MLP MARKET NEUTRAL FUND, LP
By:   Cushing Asset Management, LP, its general partner
By:   Swank Capital, LLC, its General Partner
By:  

/s/ Jerry V. Swank

  Name:   Jerry V. Swank
  Title:   Managing Member
EAGLE INCOME APPRECIATION PARTNERS, LP
By:  

/s/ Steven S. Russo

  Name:   Steven S. Russo
  Title:   Senior Partner
EAGLE INCOME APPRECIATION II, LP
By:  

/s/ Steven S. Russo

  Name:   Steven S. Russo
  Title:   Senior Partner
GOLDMAN SACHS MLP ENERGY INFRASTRUCTURE FUND
By:   Goldman Sachs Asset Management, L.P., its Investment Adviser
By:  

/s/ Kyri Loupis

  Name:   Kyri Loupis
  Title:   Managing Director

 

Signature Page to Common Unit Purchase Agreement


MTP ENERGY MASTER FUND LTD
By:   MTP Energy Management LLC, its Investment Advisor
By:   Magnetar Financial LLC, its sole member
By:  

/s/ Michael Turro

  Name:   Michael Turro
  Title:   Chief Compliance Officer
OPPENHEIMER STEELPATH MLP SELECT 40 FUND
By:  

/s/ Stuart Cartner

  Name:   Stuart Cartner
  Title:   SVP & Portfolio Manager
SALIENT MLP FUND L.P.
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director
HEB BRAND SAVINGS AND RETIREMENT PLAN TRUST
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director

 

Signature Page to Common Unit Purchase Agreement


SALIENT MLP TOTAL RETURN FUND, L.P.
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director
COMMONWEALTH OF PENNSYLVANIA PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director
OHIO POLICE AND FIRE PENSION FUND
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director
POLICE & FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director

 

Signature Page to Common Unit Purchase Agreement


KAISER FOUNDATION HOSPITALS
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director
SALIENT MLP & ENERGY INFRASTRUCTURE FUND II
By:   Salient Capital Advisors, LLC
  Its Investment Manager
By:  

/s/ Gregory A. Reid

  Name:   Gregory A. Reid
  Title:   Managing Director
TORTOISE ENERGY INFRASTRUCTURE CORP. (TYG)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager
TORTOISE MLP FUND (NTG)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager
TORTOISE MLP & PIPELINE FUND (TORTX)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager

 

Signature Page to Common Unit Purchase Agreement


TORTOISE VIP MLP & PIPELINE PORTFOLIO (TVPIX)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager
TORTOISE PIPELINE & ENERGY FUND (TTP)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager
TORTOISE ENERGY INDEPENDENCE FUND (NDP)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager
TORTOISE POWER & INFRASTRUCTURE FUND (TPZ)
By:  

/s/ Matt Sallee

  Name:   Matt Sallee
  Title:   Managing Director / Portfolio Manager
TRIANGLE PEAK PARTNERS II, LP
By:   Triangle Peak Partners II General Partner, LLC
Its:   General Partner
By:  

/s/ Michael C. Morgan

  Name:   Michael C. Morgan
  Title:   Managing Member

 

Signature Page to Common Unit Purchase Agreement


TPP II ANNEX FUND, LP
By:   Triangle Peak Partners II General Partner, LLC
Its:   General Partner
By:  

/s/ Michael C. Morgan

  Name:   Michael C. Morgan
  Title:   Managing Member
ZP ENERGY FUND, L.P.
By:  

/s/ Stuart J. Zimmer

  Name:   By ZP Energy GP, LLC, its General Partner
  Title:   By Stuart J. Zimmer, Managing Member

 

Signature Page to Common Unit Purchase Agreement


Schedule A – List of Purchasers and Commitment Amounts

 

Purchaser

   Purchased Units      Commitment Amount  

Nuveen All Cap Energy MLP Opportunity Fund

     384,000       $ 5,011,200.00   

AT MLP Fund, LLC

     1,149,500       $ 15,000,975.00   

Brookfield Global Listed Infrastructure Master Fund LP

     281,566       $ 3,674,436.30   

Brookfield Global Listed Infrastructure Long Short UCITS Fund

     28,059       $ 366,169.95   

Brookfield Global Infrastructure Securities Income Fund

     179,143       $ 2,337,816.15   

Brookfield Real Assets Securities Fund

     3,127       $ 40,807.35   

Brookfield Real Assets Securities UCITS Fund

     1,355       $ 17,682.75   

JNL/Brookfield Global Infrastructure and MLP Fund

     366,411       $ 4,781,663.55   

Northern Multi-Manager Global Listed Infrastructure Fund

     239,906       $ 3,130,773.30   

Brookfield Global Listed Infrastructure UCITS Fund

     239,111       $ 3,120,398.55   

Brookfield Global Listed Infrastructure Fund

     156,620       $ 2,043,891.00   

Ohana Holdings, LLC

     19,065       $ 248,798.25   

Sanofi-Aventis US Pension Trust

     18,898       $ 246,618.90   

Center Coast MLP & Infrastructure Fund

     191,571       $ 2,500,001.55   

Center Coast Capital Partners, LP

     76,629       $ 1,000,008.45   

Clearbridge Energy MLP Opportunity Fund Inc

     384,000       $ 5,011,200.00   

Cohen & Steers Global Infrastructure Fund, Inc.

     47,500       $ 619,875.00   

Cohen & Steers MLP Income & Energy Opportunity Fund, Inc.

     220,300       $ 2,874,915.00   

Cohen & Steers MLP & Energy Opportunity Fund, Inc.

     26,000       $ 339,300.00   

Cohen & Steers Infrastructure Fund, Inc.

     473,200       $ 6,175,260.00   

Cushing Fund, LP

     22,500       $ 293,625.00   

Cushing MLP Opportunity, LP

     62,500       $ 815,625.00   

Swank MLP Convergence Fund, LP

     16,500       $ 215,325.00   

Cushing MLP Market Neutral Fund, LP

     18,500       $ 241,425.00   

Eagle Income Appreciation Partners, LP

     341,000       $ 4,450,050.00   

Eagle Income Appreciation II, LP

     579,000       $ 7,555,950.00   

Goldman Sachs MLP Energy Infrastructure Fund

     1,303,000       $ 17,004,150.00   

MTP Energy Master Fund Ltd

     1,000,000         13,050,000.00   

Oppenheimer Steelpath MLP Select 40 Fund

     614,000       $ 8,012,700.00   

Salient MLP Fund L.P.

     529,488       $ 6,909,818.40   

HEB Brand Savings and Retirement Plan Trust

     102,318       $ 1,335,249.90   

Salient MLP Total Return Fund, L.P.

     222,832       $ 2,907,957.60   

Commonwealth of Pennsylvania Public School Employees’ Retirement System

     233,273       $ 3,044,212.65   

Ohio Police and Fire Pension Fund

     70,698       $ 922,608.90   

Police & Fire Retirement System of the City of Detroit

     26,847       $ 350,353.35   

Kaiser Foundation Hospitals

     64,135       $ 836,961.75   

Salient MLP & Energy Infrastructure Fund II

     666,409       $ 8,696,637.45   

Tortoise Energy Infrastructure Corp. (TYG)

     820,025       $ 10,701,327.98   

Tortoise MLP Fund (NTG)

     434,280       $ 5,667,351.71   

Tortoise MLP & Pipeline Fund (TORTX)

     228,143       $ 2,977,263.37   

Tortoise VIP MLP & Pipeline Portfolio (TVPIX)

     369       $ 4,813.04   

Tortoise Pipeline & Energy Fund (TTP)

     42,736       $ 557,706.37   

Tortoise Energy Independence Fund (NDP)

     40,357       $ 526,656.16   

Tortoise Power & Infrastructure Fund (TPZ)

     28,091       $ 366,581.37   

Triangle Peak Partners II, LP

     230,000       $ 3,001,500.00   

TPP II Annex Fund, LP

     269,000       $ 3,510,450.00   

ZP Energy Fund, L.P.

     958,000       $ 12,501,900.00   

Total

     13,409,961       $ 174,999,991   

 

Schedule A to Common Unit Purchase Agreement


Exhibit A – Form of Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

RICE MIDSTREAM PARTNERS LP

AND

THE PURCHASERS NAMED ON SCHEDULE A HERETO


TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

     1   

Section 1.01

 

Definitions

     1   

Section 1.02

 

Registrable Securities

     3   

ARTICLE II REGISTRATION RIGHTS

     3   

Section 2.01

 

Registration

     3   

Section 2.02

 

Piggyback Rights

     5   

Section 2.03

 

Delay Rights

     7   

Section 2.04

 

Underwritten Offerings

     8   

Section 2.05

 

Sale Procedures

     8   

Section 2.06

 

Cooperation by Holders

     12   

Section 2.07

 

Restrictions on Public Sale by Holders of Registrable Securities

     12   

Section 2.08

 

Expenses

     12   

Section 2.09

 

Indemnification

     13   

Section 2.10

 

Rule 144 Reporting

     15   

Section 2.11

 

Transfer or Assignment of Registration Rights

     15   

ARTICLE III MISCELLANEOUS

     16   

Section 3.01

 

Communications

     16   

Section 3.02

 

Successor and Assigns

     16   

Section 3.03

 

Assignment of Rights

     17   

Section 3.04

 

Recapitalization, Exchanges, Etc. Affecting the Units

     17   

Section 3.05

 

Aggregation of Registrable Securities

     17   

Section 3.06

 

Specific Performance

     17   

Section 3.07

 

Counterparts

     17   

Section 3.08

 

Headings

     17   

Section 3.09

 

Governing Law

     17   

Section 3.10

 

Severability of Provisions

     17   

Section 3.11

 

Entire Agreement

     18   

Section 3.12

 

Amendment

     18   

Section 3.13

 

No Presumption

     18   

Section 3.14

 

Obligations Limited to Parties to Agreement

     18   

Section 3.15

 

Independent Nature of Purchaser’s Obligations

     18   

Section 3.16

 

Interpretation

     19   

Schedule A – Purchaser List; Notice and Contact Information; Opt-Out

 

i


REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of November 10, 2015, by and among Rice Midstream Partners LP, a Delaware limited partnership (the “ Partnership ”), and each of the Persons set forth on Schedule A to this Agreement (each, a “ Purchaser ” and collectively, the “ Purchasers ”).

WHEREAS, this Agreement is made and entered into in connection with the Closing of the issuance and sale of the Purchased Units pursuant to the Common Unit Purchase Agreement, dated as of November 4, 2015, by and among the Partnership and the Purchasers (the “ Common Unit Purchase Agreement ”); and

WHEREAS, the Partnership has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Purchasers pursuant to the Common Unit Purchase Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions . Capitalized terms used herein without definition shall have the meanings given to them in the Common Unit Purchase Agreement. The terms set forth below are used herein as so defined:

Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

Agreement ” has the meaning specified therefor in the introductory paragraph of this Agreement.

Commission ” means the U.S. Securities and Exchange Commission.

Common Unit Price ” has the meaning given to such term in the Common Unit Purchase Agreement.

Common Unit Purchase Agreement ” has the meaning specified therefor in the recitals of this Agreement.

Effectiveness Period ” has the meaning specified therefor in Section 2.01(a) of this Agreement.

 

1


Existing Registration Rights Agreement ” means the Registration Rights Agreement by and between the Partnership and Rice Midstream Holdings LLC, dated as of December 22, 2014.

General Partner ” means Rice Midstream Management LLC, a Delaware limited liability company.

Holder ” means the record holder of any Registrable Securities.

Included Registrable Securities ” has the meaning specified therefor in Section 2.02(a) of this Agreement.

Liquidated Damages ” has the meaning specified therefor in Section 2.01(b) of this Agreement.

Liquidated Damages Multiplier ” means, with respect to a particular Purchaser, the product of the Common Unit Price times the number of Purchased Units purchased by such Purchaser that may not be disposed of without restriction and without the need for current public information pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act.

Losses ” has the meaning specified therefor in Section 2.09(a) of this Agreement.

Managing Underwriter ” means, with respect to any Underwritten Offering, the book-running lead manager or managers of such Underwritten Offering.

Opt-Out Notice ” has the meaning specified therefor in Section 2.02(a) of this Agreement.

Parity Securities ” has the meaning specified therefor in Section 2.02(b) of this Agreement.

Partnership ” has the meaning specified therefor in the introductory paragraph of this Agreement.

Person ” means an individual or a corporation, limited liability company, partnership, firm, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

Purchased Units ” has the meaning given to such term in the Common Unit Purchase Agreement.

Purchaser ” and “ Purchasers ” have the meanings specified therefor in the introductory paragraph of this Agreement.

Registrable Securities ” means (i) the Common Units to be acquired by the Purchasers pursuant to the Common Unit Purchase Agreement and (ii) any Common Units issued as Liquidated Damages pursuant to Section 2.01(b) of this Agreement, and also includes any type of interest issued to the Holders pursuant to Section 3.04 .

 

2


Registration Expenses ” has the meaning specified therefor in Section 2.08(b) of this Agreement.

Registration Statement ” has the meaning specified therefor in Section 2.01(a) of this Agreement.

Selling Expenses ” has the meaning specified therefor in Section 2.08(b) of this Agreement.

Selling Holder ” means a Holder who is selling Registrable Securities pursuant to a registration statement.

Selling Holder Indemnified Persons ” has the meaning specified therefor in Section 2.09(a) of this Agreement.

Underwritten Offering ” means an offering (including an offering pursuant to a Registration Statement) in which Common Units are sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.

Section 1.02 Registrable Securities . Any Registrable Security will cease to be a Registrable Security (a) when a registration statement covering such Registrable Security becomes or has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security has been disposed of pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act; (c) when such Registrable Security is held by the Partnership or one of its subsidiaries or Affiliates; (d) when such Registrable Security has been sold or disposed of in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities pursuant to Section 2.11 hereof or (e) when such Registrable Security becomes eligible for resale without restriction and without the need for current public information pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act.

ARTICLE II

REGISTRATION RIGHTS

Section 2.01 Registration .

(a) Effectiveness Deadline . Following the date hereof, but no later than 30 days following the Closing Date, the Partnership shall prepare and file a registration statement under the Securities Act to permit the public resale of Registrable Securities then outstanding from time to time as permitted by Rule 415 (or any similar provision then in effect) of the Securities Act with respect to all of the Registrable Securities (the “ Registration Statement ”). The Registration Statement filed pursuant to this Section 2.01(a) shall be on such appropriate registration form or forms of the Commission as shall be selected by the Partnership so long as it permits the continuous offering of the Registrable Securities pursuant to Rule 415 (or any similar provision then in effect) under the Securities Act at then-prevailing market prices. The Partnership shall use its commercially reasonable efforts to cause the Registration Statement to become effective

 

3


on or as soon as practicable after filing. Any Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders of any and all Registrable Securities covered by such Registration Statement. The Partnership shall use its commercially reasonable efforts to cause the Registration Statement filed pursuant to this Section 2.01(a) to be effective, supplemented and amended to the extent necessary to ensure that it is available for the resale of all Registrable Securities by the Holders until all Registrable Securities covered by such Registration Statement have ceased to be Registrable Securities (the “ Effectiveness Period ”). The Registration Statement when effective (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Registration Statement or documents incorporated therein by reference, in the light of the circumstances under which a statement is made). As soon as practicable following the date that the Registration Statement becomes effective, but in any event within two (2) Business Days of such date, the Partnership shall provide the Holders with written notice of the effectiveness of the Registration Statement.

(b) Failure to Go Effective . If the Registration Statement required by Section 2.01(a) is not declared effective within 90 days of the Closing Date, then each Holder shall be entitled to a payment (with respect to the Purchased Units of each such Holder), as liquidated damages and not as a penalty, of 0.25% of the Liquidated Damages Multiplier per 30-day period, that shall accrue daily, for the first 30 days following the 90 th day, increasing by an additional 0.25% of the Liquidated Damages Multiplier per 30-day period, that shall accrue daily, for each subsequent 30 days, up to a maximum of 1.00% of the Liquidated Damages Multiplier per 30-day period (the “ Liquidated Damages ”) payable within ten (10) Business Days after the end of each such 30-day period. Notwithstanding anything to the contrary contained herein, in no event shall the aggregate of all Liquidated Damages payable by the Partnership hereunder exceed 5.00% of the aggregate price at which the Partnership offered the Purchased Units for sale pursuant to the Common Unit Purchase Agreement. Any Liquidated Damages shall be paid to each Holder in immediately available funds; provided , however , if the Partnership certifies that it is unable to pay Liquidated Damages in cash because such payment would result in a breach under a credit facility or other debt instrument, then the Partnership shall pay such Liquidated Damages using as much cash as is permitted without causing a breach of or default under such credit facility or other debt instrument and may pay the balance of any such Liquidated Damages in kind in the form of the issuance of additional Common Units. Upon any issuance of Common Units as Liquidated Damages, the Partnership shall promptly (i) prepare and file an amendment to the Registration Statement prior to its effectiveness adding such Common Units to such Registration Statement as additional Registrable Securities and (ii) prepare and file a supplemental listing application with the NYSE (or such other national securities exchange on which the Common Units are then listed and traded) to list such additional Common Units. The determination of the number of Common Units to be issued as Liquidated Damages shall be equal to the amount of Liquidated Damages divided by the volume-weighted average closing price of the Common Units on the NYSE, or any other national securities exchange on which the Common Units are then traded, for the ten (10) trading days immediately preceding the date on which the Liquidated Damages payment is due, less a discount to such average closing price of 2.00%. The payment

 

4


of Liquidated Damages to a Holder shall cease at the earlier of (i) the Registration Statement becoming effective or (ii) when such Holder no longer holds Registrable Securities, assuming that each Holder is not an Affiliate of the Partnership, and any payment of Liquidated Damages shall be prorated for any period of less than 30 days in which the payment of Liquidated Damages ceases. If the Partnership is unable to cause a Registration Statement to go effective within 90 days after the Closing Date as a result of an acquisition, merger, reorganization, disposition or other similar transaction, then the Partnership may request a waiver of the Liquidated Damages, and each Holder may individually grant or withhold its consent to such request in its discretion.

Section 2.02 Piggyback Rights .

(a) Participation . If the Partnership proposes to file (i) a shelf registration statement other than the Registration Statement contemplated by Section 2.01(a) , (ii) a prospectus supplement to an effective shelf registration statement, other than the Registration Statement contemplated by Section 2.01(a) of this Agreement and Holders may be included without the filing of a post-effective amendment thereto, or (iii) a registration statement, other than a shelf registration statement, in each case, for the sale of Common Units in an Underwritten Offering for its own account and/or another Person, then as soon as practicable following the engagement of counsel by the Partnership to prepare the documents to be used in connection with an Underwritten Offering, the Partnership shall give notice (including, but not limited to, notification by electronic mail) of such proposed Underwritten Offering to each Holder (together with its Affiliates) holding at least $15 million of the then-outstanding Registrable Securities (based on the Common Unit Price) and such notice shall offer such Holders the opportunity to include in such Underwritten Offering such number of Registrable Securities (the “ Included Registrable Securities ”) as each such Holder may request in writing; provided, however , that if the Partnership has been advised by the Managing Underwriter that the inclusion of Registrable Securities for sale for the benefit of the Holders will have an adverse effect on the price, timing or distribution of the Common Units in the Underwritten Offering, then (A) if no Registrable Securities can be included in the Underwritten Offering in the opinion of the Managing Underwriter, the Partnership shall not be required to offer such opportunity to the Holders or (B) if any Registrable Securities can be included in the Underwritten Offering in the opinion of the Managing Underwriter, then the amount of Registrable Securities to be offered for the accounts of Holders shall be determined based on the provisions of Section 2.02(b) . Any notice required to be provided in this Section 2.02(a) to Holders shall be provided on a Business Day pursuant to Section 3.01 hereof and receipt of such notice shall be confirmed and kept confidential by the Holder until such proposed Underwritten Offering is (i) publicly announced or (ii) such Holder receives notice that such proposed Underwritten Offering has been abandoned, which such notice shall be provided promptly by the Partnership to each Holder. Each such Holder shall then have two (2) Business Days (or one (1) Business Day in connection with any overnight or bought deal Underwritten Offering) after notice has been delivered to request in writing the inclusion of Registrable Securities in the Underwritten Offering. If no written request for inclusion from a Holder is received within the specified time, each such Holder shall have no further right to participate in such Underwritten Offering. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Partnership shall determine for any reason not to undertake or to delay such Underwritten Offering, the Partnership may, at its election, give written notice of

 

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such determination to the Selling Holders and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering. Any Selling Holder shall have the right to withdraw such Selling Holder’s request for inclusion of such Selling Holder’s Registrable Securities in such Underwritten Offering by giving written notice to the Partnership of such withdrawal at or prior to the time of pricing of such Underwritten Offering. Any Holder may deliver written notice (an “ Opt-Out Notice ”) to the Partnership requesting that such Holder not receive notice from the Partnership of any proposed Underwritten Offering; provided, however , that such Holder may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from a Holder (unless subsequently revoked), the Partnership shall not be required to deliver any notice to such Holder pursuant to this Section 2.02(a) and such Holder shall no longer be entitled to participate in Underwritten Offerings by the Partnership pursuant to this Section 2.02(a). The Holders indicated on Schedule A hereto as having opted out shall each be deemed to have delivered an Opt-Out Notice as of the date hereof.

(b) Priority . If the Managing Underwriter or Underwriters of any proposed Underwritten Offering advises the Partnership that the total amount of Registrable Securities that the Selling Holders and any other Persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have an adverse effect on the price, timing or distribution of the Common Units offered or the market for the Common Units, then the Common Units to be included in such Underwritten Offering shall include the number of Registrable Securities that such Managing Underwriter or Underwriters advises the Partnership can be sold without having such adverse effect, with such number to be allocated (i) first, to the Partnership, (ii) second, to holders of registration rights pursuant to the Existing Registration Rights Agreement in accordance therewith and (iii) third, pro rata among the Selling Holders who have requested participation in such Underwritten Offering and, except as provided in clauses (i) and (ii), any other holder of securities of the Partnership having rights of registration that are neither expressly senior nor subordinated to the Registrable Securities (the “ Parity Securities ”). The pro rata allocations for each Selling Holder who has requested participation in such Underwritten Offering shall be the product of (a) the aggregate number of Registrable Securities proposed to be sold in such Underwritten Offering multiplied by (b) the fraction derived by dividing (x) the number of Registrable Securities owned on the Closing Date by such Selling Holder by (y) the aggregate number of Registrable Securities owned on the Closing Date by all Selling Holders plus the aggregate number of Parity Securities owned on the Closing Date by all holders of Parity Securities that are participating in the Underwritten Offering.

(c) Termination of Piggyback Registration Rights . Each Holder’s rights under Section 2.02 shall terminate upon such Holder (together with its Affiliates) ceasing to hold at least $15 million of Registrable Securities (based on the Common Unit Price). Each Holder shall notify the Partnership in writing when such Holder holds less than $15 million of Registrable Securities (based on the Common Unit Price).

 

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Section 2.03 Delay Rights .

Notwithstanding anything to the contrary contained herein, the Partnership may, upon written notice to any Selling Holder whose Registrable Securities are included in the Registration Statement or other registration statement contemplated by this Agreement, suspend such Selling Holder’s use of any prospectus which is a part of the Registration Statement or other registration statement (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to the Registration Statement or other registration statement contemplated by this Agreement but may settle any previously made sales of Registrable Securities) if, in the General Partner’s good faith determination, such use would (a) materially interfere with a significant acquisition, reorganization, financing or other similar transaction involving the Partnership, (b) require premature disclosure of material information that the Partnership has a bona fide business purpose for preserving as confidential or (c) render the Partnership unable to comply with applicable securities laws; provided, however, in no event shall the Selling Holders be suspended from selling Registrable Securities pursuant to the Registration Statement or other registration statement for a period that exceeds an aggregate of 60 days in any 180-day period or 105 days in any 365-day period, in each case, exclusive of days covered by any lock-up agreement executed by a Selling Holder in connection with any Underwritten Offering. Upon disclosure of such information or the termination of the condition described above, the Partnership shall provide prompt notice to the Selling Holders whose Registrable Securities are included in the Registration Statement or other registration statement contemplated by this Agreement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement.

If (i) the Selling Holders shall be prohibited from selling their Registrable Securities under the Registration Statement or other registration statement contemplated by this Agreement as a result of a suspension pursuant to the immediately preceding paragraph in excess of the periods permitted therein or (ii) the Registration Statement or other registration statement contemplated by this Agreement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 30 Business Days by a post-effective amendment thereto, a supplement to the prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or l5(d) of the Exchange Act, then, until the suspension is lifted or a post-effective amendment, supplement or report is filed with the Commission, but not including any day on which a suspension is lifted or such amendment, supplement or report is filed and declared effective, if applicable, the Partnership shall pay the Selling Holders an amount equal to the Liquidated Damages, following the earlier of (x) the date on which the suspension period exceeded the permitted period and (y) the thirty-first (31 st ) Business Day after the Registration Statement or other registration statement contemplated by this Agreement ceased to be effective or failed to be useable for its intended purposes, as liquidated damages and not as a penalty (for purposes of calculating Liquidated Damages, the date in (x) or (y) above shall be deemed the “90th day,” as used in the definition of Liquidated Damages). For purposes of this paragraph, a suspension shall be deemed lifted on the date that notice that the suspension has been terminated is delivered to the Selling Holders. Liquidated Damages pursuant to this paragraph shall cease to accrue upon the Purchased Units of such Holder becoming eligible for resale without restriction and without the need for current public information under any section of Rule 144 (or any similar provision then in effect) under the Securities Act, assuming that each Holder is not an Affiliate of the Partnership, and any payment of Liquidated Damages shall be prorated for any period of less than 30 days in which the payment of Liquidated Damages ceases.

 

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Section 2.04 Underwritten Offerings .

(a) General Procedures . In connection with any Underwritten Offering under this Agreement, the Partnership shall be entitled to select the Managing Underwriter or Underwriters. In connection with an Underwritten Offering contemplated by this Agreement in which a Selling Holder participates, each Selling Holder and the Partnership shall be obligated to enter into an underwriting agreement that contains such representations, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of securities. No Selling Holder may participate in such Underwritten Offering unless such Selling Holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement. Each Selling Holder may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Partnership to and for the benefit of such underwriters also be made to and for such Selling Holder’s benefit and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to its obligations. No Selling Holder shall be required to make any representations or warranties to or agreements with the Partnership or the underwriters other than representations, warranties or agreements regarding such Selling Holder, its authority to enter into such underwriting agreement and to sell, and its ownership of, the securities being registered on its behalf, its intended method of distribution and any other representation required by Law. If any Selling Holder disapproves of the terms of an underwriting, such Selling Holder may elect to withdraw therefrom by notice to the Partnership and the Managing Underwriter; provided, however , that such withdrawal must be made up to and including the time of pricing of such Underwritten Offering. No such withdrawal or abandonment shall affect the Partnership’s obligation to pay Registration Expenses. The Partnership’s management may but shall not be required to participate in a roadshow or similar marketing effort in connection with any Underwritten Offering.

(b) No Demand Rights . Notwithstanding any other provision of this Agreement, no Holder shall be entitled to any “demand” rights or similar rights that would require the Partnership to effect an Underwritten Offering solely on behalf of the Holders.

Section 2.05 Sale Procedures . In connection with its obligations under this Article II , the Partnership will, as expeditiously as possible:

(a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus or prospectus supplement used in connection therewith as may be necessary to keep the Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement;

(b) if a prospectus or prospectus supplement will be used in connection with the marketing of an Underwritten Offering from the Registration Statement and the Managing

 

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Underwriter at any time shall notify the Partnership in writing that, in the sole judgment of such Managing Underwriter, inclusion of detailed information to be used in such prospectus or prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, the Partnership shall use its commercially reasonable efforts to include such information in such prospectus or prospectus supplement;

(c) furnish to each Selling Holder (i) as far in advance as reasonably practicable before filing the Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing the Registration Statement or such other registration statement or supplement or amendment thereto, and (ii) such number of copies of the Registration Statement or such other registration statement and the prospectus or prospectus supplement included therein and any supplements and amendments thereto as such Selling Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Registration Statement or other registration statement;

(d) if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by the Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an Underwritten Offering, the Managing Underwriter, shall reasonably request; provided, however , that the Partnership will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject;

(e) promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered by any of them under the Securities Act, of (i) the filing of the Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement or any other registration statement or any post-effective amendment thereto, when the same has become effective; and (ii) the receipt of any written comments from the Commission with respect to any filing referred to in clause (i)  and any written request by the Commission for amendments or supplements to the Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto;

(f) promptly notify each Selling Holder of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in the Registration Statement or any other registration statement contemplated by this Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus or prospectus supplement contained therein, in the light of the circumstances under which a

 

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statement is made); (ii) the issuance or express threat of issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (iii) the receipt by the Partnership of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Partnership agrees to as promptly as practicable amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other commercially reasonable action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;

(g) upon request and subject to appropriate confidentiality obligations, furnish to each Selling Holder copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Registrable Securities;

(h) in the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel for the Partnership dated the date of the closing under the underwriting agreement and (ii) a “comfort” letter, dated the pricing date of such Underwritten Offering and a letter of like kind dated the date of the closing under the underwriting agreement, in each case, signed by the independent public accountants who have certified the Partnership’s financial statements included or incorporated by reference into the applicable registration statement, and each of the opinion and the “comfort” letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus and any prospectus supplement included therein) as have been customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters in Underwritten Offerings of securities by the Partnership and such other matters as such underwriters and Selling Holders may reasonably request;

(i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(j) make available to the appropriate representatives of the Managing Underwriter and Selling Holders access to such information and Partnership personnel as is reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act; provided , that the Partnership need not disclose any non-public information to any such representative unless and until such representative has entered into a confidentiality agreement with the Partnership;

(k) cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Partnership are then listed;

 

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(l) use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Partnership to enable the Selling Holders to consummate the disposition of such Registrable Securities;

(m) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement;

(n) enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders or the underwriters, if any, in order to expedite or facilitate the disposition of such Registrable Securities; and

(o) if requested by a Selling Holder, (i) incorporate in a prospectus or prospectus supplement or post-effective amendment to the Registration Statement or any other registration statement contemplated by this Agreement such information as such Selling Holder reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering and (ii) make all required filings of such prospectus or prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus or prospectus supplement or post-effective amendment.

The Partnership shall not name a Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act in any registration statement without such Holder’s consent. If the staff of the Commission requires the Partnership to name any Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act, and such Holder does not consent thereto, then such Holder’s Registrable Securities shall not be included on the Registration Statement (or any other registration statement contemplated by this Agreement), such Holder shall no longer be entitled to receive Liquidated Damages under this Agreement with respect thereto, the Partnership shall have no further obligations hereunder with respect to Registrable Securities held by such Holder and such Holder shall have been deemed to have terminated this Agreement with respect to such Holder.

Each Selling Holder, upon receipt of notice from the Partnership of the happening of any event of the kind described in subsection (f)  of this Section 2.05 , shall forthwith discontinue offers and sales of the Registrable Securities by means of a prospectus or prospectus supplement until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus or prospectus supplement contemplated by subsection (f ) of this Section 2.05 or until it is advised in writing by the Partnership that the use of the prospectus or prospectus supplement may be resumed and has received copies of any additional or supplemental filings incorporated by reference in the prospectus or prospectus supplement, and, if so directed by the Partnership, such Selling Holder will, or will request the Managing Underwriter or Underwriters, if any, to deliver to the Partnership (at the Partnership’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus or prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.

 

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Section 2.06 Cooperation by Holders . The Partnership shall have no obligation to include Registrable Securities of a Holder in the Registration Statement or in an Underwritten Offering pursuant to Section 2.02(a) who has failed to timely furnish such information that the Partnership determines, after consultation with its counsel, is reasonably required in order for the registration statement or prospectus or prospectus supplement, as applicable, to comply with the Securities Act.

Section 2.07 Restrictions on Public Sale by Holders of Registrable Securities . Each Holder of Registrable Securities agrees, if requested by the underwriters of an Underwritten Offering, to enter into a customary letter agreement with such underwriters providing such Holder will not effect any public sale or distribution of Registrable Securities during the 60 calendar day period beginning on the date of a prospectus or prospectus supplement filed with the Commission with respect to the pricing of any Underwritten Offering, provided that (i) the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction generally imposed by the underwriters on the Partnership or the officers, directors or any other Affiliate of the Partnership on whom a restriction is imposed and (ii) the restrictions set forth in this Section 2.07 shall not apply to any Registrable Securities that are included in such Underwritten Offering by such Holder. In addition, this Section 2.07 shall not apply to any Holder that is not entitled to participate in such Underwritten Offering, whether because such Holder delivered an Opt-Out Notice prior to receiving notice of the Underwritten Offering or because such Holder holds less than $15 million of the then-outstanding Registrable Securities.

Section 2.08 Expenses .

(a) Expenses . The Partnership will pay all reasonable Registration Expenses as determined in good faith, including, in the case of an Underwritten Offering, whether or not any sale is made pursuant to such Underwritten Offering. Each Selling Holder shall pay its pro rata share of all Selling Expenses in connection with any sale of its Registrable Securities hereunder. In addition, except as otherwise provided in Section 2.09 hereof, the Partnership shall not be responsible for professional fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder.

(b) Certain Definitions . “ Registration Expenses ” means all expenses incident to the Partnership’s performance under or compliance with this Agreement to effect the registration of Registrable Securities on the Registration Statement pursuant to Section 2.01(a) or an Underwritten Offering covered under this Agreement, and the disposition of such Registrable Securities, including, without limitation, all registration, filing, securities exchange listing and NYSE fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, fees of transfer agents and registrars, all word processing, duplicating and printing expenses, any transfer taxes and the fees and disbursements of counsel and independent public accountants for the Partnership, including the expenses of any special audits or “comfort” letters required by or incident to such performance and compliance. “ Selling Expenses ” means all underwriting fees, discounts and selling commissions or similar fees or arrangements allocable to the sale of the Registrable Securities.

 

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Section 2.09 Indemnification .

(a) By the Partnership . In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Partnership will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, employees and agents and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees or agents (collectively, the “ Selling Holder Indemnified Persons ”), against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “ Losses ”), joint or several, to which such Selling Holder Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus or prospectus supplement, in the light of the circumstances under which such statement is made) contained in the Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus, preliminary prospectus supplement, free writing prospectus or final prospectus or prospectus supplement contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or prospectus supplement, in the light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings; provided, however , that the Partnership will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder Indemnified Person in writing specifically for use in the Registration Statement or such other registration statement contemplated by this Agreement, preliminary prospectus, preliminary prospectus supplement, free writing prospectus, or final prospectus or prospectus supplement contained therein, or any amendment or supplement thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder Indemnified Person, and shall survive the transfer of such securities by such Selling Holder.

(b) By Each Selling Holder . Each Selling Holder agrees severally and not jointly to indemnify and hold harmless the Partnership, the General Partner, its directors, officers, employees and agents and each Person, if any, who controls the Partnership within the meaning of the Securities Act or of the Exchange Act, and its directors, officers, employees and agents, to the same extent as the foregoing indemnity from the Partnership to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in the Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus, preliminary prospectus supplement, free writing prospectus or final prospectus or prospectus supplement contained therein, or any amendment or supplement thereof; provided, however , that the liability of each Selling Holder shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification.

(c) Notice . Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be

 

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made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability that it may have to any indemnified party other than under this Section 2.09 . In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.09 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however , that, (i) if the indemnifying party has failed to assume the defense or employ counsel reasonably acceptable to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnifying party shall settle any action brought against any indemnified party with respect to which such indemnified party is entitled to indemnification hereunder without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnified party.

(d) Contribution . If the indemnification provided for in this Section 2.09 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified party or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations; provided, however , that in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Selling Holder from the sale of Registrable Securities giving rise to such indemnification. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and

 

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other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss that is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

(e) Other Indemnification . The provisions of this Section 2.09 shall be in addition to any other rights to indemnification or contribution that an indemnified party may have pursuant to law, equity, contract or otherwise.

Section 2.10 Rule 144 Reporting . With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Partnership agrees to:

(a) use commercially reasonable efforts to make and keep public information regarding the Partnership available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the date hereof;

(b) use commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Partnership under the Securities Act and the Exchange Act at all times from and after the date hereof; and

(c) so long as a Holder owns any Registrable Securities, furnish, (i) to the extent accurate, forthwith upon request, a written statement of the Partnership that it has complied with the reporting requirements of Rule 144 under the Securities Act, and (ii) unless otherwise available via EDGAR, to such Holder forthwith upon request a copy of the most recent annual or quarterly report of the Partnership, and such other reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration.

Solely for purposes of this Section 2.10 , the term “Registrable Securities” shall be read without regard to the limitation set forth in Section 1.02(e) .

Section 2.11 Transfer or Assignment of Registration Rights . The rights to cause the Partnership to register Registrable Securities granted to the Purchasers by the Partnership under this Article II may be transferred or assigned by any Purchaser to one or more transferees or assignees of Registrable Securities; provided, however, that (a) unless the transferee or assignee is an Affiliate of, and after such transfer or assignment continues to be an Affiliate of, such Purchaser, the amount of Registrable Securities transferred or assigned to such transferee or assignee shall represent at least $15 million of Registrable Securities (based on the Common Unit Price), (b) the Partnership is given written notice prior to any said transfer or assignment, stating the name and address of each such transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned, (c) each such transferee or assignee assumes in writing responsibility for its portion of the obligations of such Purchaser under this Agreement and (d) the transferor or assignor is not relieved of any obligations or liabilities hereunder arising out of events occurring prior to such transfer.

Section 2.12 Limitation on Subsequent Registration Rights. From and after the date hereof, the Partnership shall not, without the prior written consent of the Holders of a majority of

 

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the Registrable Securities, enter into any agreement with any current or future holder of any securities of the Partnership that would allow such current or future holder to require the Partnership to include securities in any registration statement filed by the Partnership on a basis other than pari passu with, or expressly subordinate to the rights of, the Holders of Registrable Securities hereunder.

ARTICLE III

MISCELLANEOUS

Section 3.01 Communications . All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, electronic mail, courier service or personal delivery:

(a) if to a Purchaser, to the respective address listed on Schedule A hereof;

(b) if to a transferee of a Purchaser, to such Holder at the address provided pursuant to Section 2.11 above; and

(c) if to the Partnership:

Rice Midstream Partners LP

c/o Rice Midstream Management LLC

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attention: General Counsel

Facsimile: 724.746.6725

Electronic Mail: will.jordan@riceenergy.com

with a copy to:

Vinson & Elkins L.L.P.

1001 Fannin Street

Suite 2500

Houston, Texas 77002

Attention: Doug McWilliams

Facsimile: 713.615.5725

Electronic Mail: dmcwilliams@velaw.com

All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent via Internet electronic mail; and when actually received, if sent by courier service or any other means.

Section 3.02 Successor and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.

 

16


Section 3.03 Assignment of Rights . All or any portion of the rights and obligations of any Purchaser under this Agreement may be transferred or assigned by such Purchaser only in accordance with Section 2.11 hereof.

Section 3.04 Recapitalization, Exchanges, Etc. Affecting the Units . The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all units of the Partnership or any successor or assign of the Partnership (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, unit splits, recapitalizations, pro rata distributions of units and the like occurring after the date of this Agreement.

Section 3.05 Aggregation of Registrable Securities . All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights and applicability of any obligations under this Agreement.

Section 3.06 Specific Performance . Damages in the event of breach of this Agreement by a party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity that such Person may have.

Section 3.07 Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

Section 3.08 Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 3.09 Governing Law . THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.

Section 3.10 Severability of Provisions . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

 

17


Section 3.11 Entire Agreement . This Agreement, the Common Unit Purchase Agreement and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties, representations or undertakings, other than those set forth or referred to herein with respect to the rights granted by the Partnership set forth herein. This Agreement and the Common Unit Purchase Agreement supersede all prior agreements and understandings between the parties with respect to such subject matter.

Section 3.12 Amendment . This Agreement may be amended only by means of a written amendment signed by the Partnership and the Holders of a majority of the then outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder.

Section 3.13 No Presumption . If any claim is made by a party relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.

Section 3.14 Obligations Limited to Parties to Agreement . Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Purchasers (and their permitted transferees and assignees) and the Partnership shall have any obligation hereunder and that, notwithstanding that one or more of the Purchasers may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the Purchasers or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable Law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the Purchasers or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of the Purchasers under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any transferee or assignee of a Purchaser hereunder.

Section 3.15 Independent Nature of Purchaser’s Obligations. The obligations of each Purchaser (and their permitted transferees and assignees) under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant thereto, shall be

 

18


deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

Section 3.16 Interpretation . Article and Section references to this Agreement, unless otherwise specified. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any determination, consent or approval is to be made or given by a Purchaser under this Agreement, such action shall be in such Purchaser’s sole discretion unless otherwise specified.

[Signature pages to follow]

 

19


IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

 

RICE MIDSTREAM PARTNERS LP
By:   RICE MIDSTREAM MANAGEMENT LLC
  (its General Partner)
By:  

 

  Name:
  Title:

 

Signature Page to Registration Rights Agreement


[PURCHASER]
By:  

 

  Name:
  Title:

 

Signature Page to Registration Rights Agreement


Schedule A – Purchaser Name; Notice and Contact Information

 

Purchaser Name

[Please list each fund]

  

Notice and Contact

Information

[Please provide address,

phone and email]

  

Tax I.D. Number

[Please provide for

each fund]

  

Opt-Out Election per

Section 2.02(a)

[Please indicate “Yes-

Opt Out” or “No-Not

Opting Out”]

        
        
        
        
        
        

 

Schedule A to Exhibit A of the Common Unit Purchase Agreement


Exhibit B – Form of Opinion of Vinson & Elkins L.L.P.

Based on the foregoing and subject to the limitations and qualifications set forth herein, we are of the opinion that:

 

  (a) Each of the Partnership Entities has been duly formed and is validly existing as a limited partnership or limited liability company, as applicable, in good standing under the laws of the State of Delaware, with all limited partnership or limited liability company, as the case may be, power and authority necessary to (A) conduct its business as described in the SEC Reports, and (B) enter into and perform its obligations under the PSA, the Purchase Agreement and the Registration Rights Agreement;

 

  (b) Each of the Partnership Entities is duly qualified to do business as a foreign limited liability company or limited partnership, as applicable, in good standing in all jurisdictions listed on Annex A hereto;

 

  (c) The General Partner is the sole general partner of the Partnership and owns a noneconomic general partner interest in the Partnership; the General Partner Interest has been duly authorized and validly issued in accordance with the Partnership Agreement, is fully paid (to the extent required under the Partnership Agreement) and conforms in all material respects to the description thereof contained in the SEC Reports; and the General Partner Interest is owned free and clear of any Liens (1) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the General Partner as debtor is on file in the office of the Delaware Secretary of State or (2) otherwise known to us, without independent investigation, other than (A) restrictions on transferability contained in the Partnership Agreement and (B) Liens created by or arising under the Delaware LP Act;

 

  (d) As of the date hereof, immediately after the offer, issuance and sale of the Purchased Units to the Purchasers in accordance with the Purchase Agreement, the issued and outstanding limited partner interests in the Partnership (other than limited partner interests issued under the Partnership’s Long-Term Incentive Plan) consist of (1) the 28,757,246 Sponsor Units (consisting of 3,623 Common Units and 28,753,623 Subordinated Units) held by Rice Midstream Holdings LLC, a Delaware limited liability company (“ RMH ”), (2) [●] Common Units held by investors other than RMH (including the [●] Purchased Units issued and sold to the Purchasers pursuant to the Purchase Agreement), and (3) the Incentive Distribution Rights issued to RMH; and such limited partner interests conform in all material respects to the descriptions thereof contained in the SEC Reports; other than as described in any SEC Report, the equity holders of the Partnership have no preemptive rights with respect to the Common Units under federal law, the Delaware LP Act or any agreement or instrument filed as an exhibit to an SEC Report;

 

Exhibit B to Common Unit Purchase Agreement


  (e) RMH owns all of the Incentive Distribution Rights and all of the Sponsor Units; the Incentive Distribution Rights and the Sponsor Units, and the limited partner interests represented thereby, have been duly authorized and validly issued in accordance with the Partnership Agreement and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and the Incentive Distribution Rights and the Sponsor Units are owned free and clear of any Liens (1) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming RMH as debtor is on file in the office of the Delaware Secretary of State or (2) otherwise known to us, without independent investigation, other than (A) restrictions on transferability contained in the Partnership Agreement, (B) Liens created by or arising under the Delaware LP Act and (C) pledges of equity interests in connection with Antero’s revolving credit facility;

 

  (f) The Purchased Units to be issued and sold by the Partnership, and the limited partner interests represented thereby, have been duly authorized for issuance and sale to each Purchaser in accordance with the Purchase Agreement and the Partnership Agreement and, when issued and delivered to the Purchasers against payment therefor in accordance with the terms of the Purchase Agreement, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware LP Act);

 

  (g) The Partnership is the sole member of Rice OpCo and owns 100% of the limited liability company interests in Rice OpCo; such limited liability company interests have been duly authorized and validly issued in accordance with the Rice OpCo LLC Agreement and are fully paid (to the extent required under the Rice OpCo LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and such limited liability company interests are owned free and clear of any Liens (1) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the Partnership as debtor is on file in the office of the Delaware Secretary of State or (2) otherwise known to us, without independent investigation, other than (A) restrictions on transferability contained in the Rice OpCo LLC Agreement and (B) Liens created by or arising under the Delaware LLC Act;

 

  (h) Rice OpCo is the sole member of Rice Poseidon and owns 100% of the limited liability company interests in Rice Poseidon; such limited liability company interests have been duly authorized and validly issued in accordance with the Rice Poseidon LLC Agreement and are fully paid (to the extent required under the Rice Poseidon

 

Exhibit B to Common Unit Purchase Agreement


  LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and such limited liability company interests are owned free and clear of all Liens (1) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming Rice OpCo as debtor is on file in the office of the Delaware Secretary of State or (2) otherwise known to us, without independent investigation, other than (A) restrictions on transferability contained in the Rice Poseidon LLC Agreement and (B) Liens created by or arising under the Delaware LLC Act;

 

  (i) After giving effect to the Conveyance, the Partnership is the sole member of the Rice Water Entities and owns 100% of the limited liability company interests in the Rice Water Entities; such limited liability company interests have been duly authorized and validly issued in accordance with the Rice Water LLC Agreements and are fully paid (to the extent required under the Rice Water LLC Agreements) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and, after giving effect to the Conveyance, such limited liability company interests will be owned by the Partnership free and clear of any Liens (1) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the Partnership as debtor is on file in the office of the Delaware Secretary of State or (2) otherwise known to us, without independent investigation, other than (A) restrictions on transferability contained in the Rice Water LLC Agreements and (B) Liens created by or arising under the Delaware LLC Act;

 

  (j) Each of the PSA, the Purchase Agreement and the Registration Rights Agreement has been duly authorized, executed and delivered by the Partnership Entities party thereto; assuming the due authorization, execution and delivery by the Purchasers, the Registration Rights Agreement constitutes a valid and legally binding agreement of the Partnership Entities party thereto, enforceable against the Partnership Entities party thereto in accordance with its terms, subject to the Enforceability Exceptions;

 

  (k)

The offering, issuance and sale of the Purchased Units, the execution, delivery and performance of the PSA, the Purchase Agreement and the Registration Rights Agreement by the Partnership Entities party thereto, the consummation of the Conveyance or any other transactions contemplated by the Purchase Agreement or the Registration Rights Agreement and the application of the proceeds from the sale of the Purchased Units, in each case, do not and will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, or result in the imposition of any Lien upon any property or assets of the Partnership Entities pursuant to (1) the Organizational Documents of any of the Partnership Entities, (2) the Delaware LLC Act, the Delaware LP Act or applicable U.S. federal law or any order, judgment, decree or injunction known to us of any U.S. federal or Delaware court or governmental agency or body having jurisdiction over the Partnership

 

Exhibit B to Common Unit Purchase Agreement


  Entities or any of their properties in a proceeding in which any of them or their respective properties is a party or (3) any agreement or instrument filed as an exhibit to the SEC Reports; except in the case of clauses (2) and (3) for such breaches, violations, defaults and Liens as would not, individually or in the aggregate, have a Material Adverse Effect, it being understood with respect to clause (2) above, we express no opinion as to the application of any federal or state securities or Blue Sky laws or federal or state antifraud laws, rules or regulations;

 

  (l) No consent, approval, authorization or order of, or filing with, any person (including any governmental agency or body or any court) is required to be obtained or made by any of the Partnership Entities in connection with the Conveyance or the execution, delivery and performance by the Partnership Entities of the PSA, the Purchase Agreement and the Registration Rights Agreement, except (A) for the approvals required by the Commission in connection with the Partnership’s obligations under the Registration Rights Agreement, (B) such as have been obtained or made, or (C) such as may be required under federal or state securities laws or by the FINRA rules, in each case except where the failure to obtain such consent, approval, authorization or order of, or filing with, would not reasonably be expected to materially impair the ability of the Partnership Entities to consummate the Conveyance or the transactions contemplated by the PSA, the Purchase Agreement or the Registration Rights Agreement;

 

  (m) Assuming the accuracy of the representations and warranties of each of the Purchasers and the Partnership contained in the Purchase Agreement, the sale and issuance of the Purchased Units by the Partnership to the Purchasers solely in the manner contemplated by the Purchase Agreement are exempt from the registration requirements of the Securities Act; provided, that, we express no opinion as to any subsequent sale or resale; and

 

  (n) None of the Partnership Entities is now and, after giving effect to the issuance and sale of the Purchased Units by the Partnership and the application of the proceeds therefrom, none of the Partnership Entities will be required to register as an “investment company” within the meaning of the Investment Company Act.

The opinions set forth above are subject in all respects to the following:

(i) In rendering the opinions expressed in paragraphs (a) and (b) concerning “good standing” or due qualification or registration as a foreign limited liability company or limited partnership, we have relied solely on the review of certificates provided by the Secretary of State of the states listed on Annex A hereto.

(ii) The opinions expressed herein are limited to matters arising under the federal laws of the United States of America and, as applicable, the laws of the State of New York and the Delaware LP Act, the Delaware LLC Act and the Delaware General Corporation Law.

 

Exhibit B to Common Unit Purchase Agreement


We express no opinion as to any matter other than as expressly set forth above, and no opinion on any other matter may be inferred or implied herefrom. The opinions expressed herein are given as of the date hereof, and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth herein.

This letter is delivered at the request of the Partnership to the Purchasers in connection with the purchase by them of the Purchased Units pursuant to the Purchase Agreement as described above in this letter and, except as provided herein, may not be furnished to or relied upon by any other person or for any other purpose without our prior written consent; provided, however, that the Placement Agent may rely on the opinions expressed herein in accordance with the terms of the Placement Agent Engagement Letter.

 

Exhibit B to Common Unit Purchase Agreement

Exhibit 10.2

Execution Version

AMENDED AND RESTATED WATER SERVICES AGREEMENT

BY AND BETWEEN

RICE DRILLING B LLC

AND

RICE WATER SERVICES (PA) LLC

DATED AS OF

November 4, 2015


TABLE OF CONTENTS

 

ARTICLE 1

  DEFINITIONS      1   

ARTICLE 2

  PRODUCER COMMITMENTS      7   

Section 2.1

  Producer Commitments      7   

Section 2.2

  Producer Take Points      8   

Section 2.3

  Covenant Running with the Land      8   

ARTICLE 3

  SERVICES; WATER FACILITIES EXPANSION AND CONNECTION OF DELIVERY POINTS      8   

Section 3.1

  Service Provider Service Commitment      8   

Section 3.2

  Priority of Fresh Water Services      9   

Section 3.3

  Rights to Take Fresh Water at the Take Points      9   

Section 3.4

  Right of Producer to Supplement Fresh Water Supplies      9   

Section 3.5

  Development Plan; Fresh Water Facilities Plan; Exchange and Review of Information      10   

Section 3.6

  Expansion of Fresh Water System; Connection of Well Pads      11   

Section 3.7

  Installation and Operation of High-Rate Transfer Facilities      14   

Section 3.8

  Right of Way and Access      15   

Section 3.9

  Cooperation      15   

ARTICLE 4

  CERTAIN PROVISIONS REGARDING PRODUCED WATER SERVICES      16   

Section 4.1

  Access to Produced Water Receipt Points      16   

Section 4.2

  Dispatch Procedures      16   

Section 4.3

  Designated Receiving Facilities      16   

Section 4.4

  Non-Conforming Produced Water      17   

Section 4.5

  Transportation Services Equipment      17   

Section 4.6

  Contract Carrier Status      17   

ARTICLE 5

  TERM      18   

Section 5.1

  Term      18   

ARTICLE 6

  FEES AND CONSIDERATION      18   

Section 6.1

  Fees      18   

ARTICLE 7

  CERTAIN RIGHTS AND OBLIGATIONS OF PARTIES      20   

Section 7.1

  Operational Control of Service Provider’s Facilities      20   

Section 7.2

  Maintenance      20   

Section 7.3

  Third Party Services; Capacity Allocations on the Fresh Water Facilities      20   

Section 7.4

  Water Treatment Asset      21   

ARTICLE 8

  DELIVERY RATES      21   

Section 8.1

  Delivery Rates      21   

Section 8.2

  Producer Facilities      21   

 

i


ARTICLE 9

  NOMINATION      21   

Section 9.1

  Fresh Water Delivery Nominations      21   

Section 9.2

  Changes in Fresh Water Delivery Rates      21   

ARTICLE 10

  MEASUREMENT EQUIPMENT AND PROCEDURES      22   

Section 10.1

  Equipment      22   

Section 10.2

  Notice of Measurement Facilities Inspection and Calibration      22   

Section 10.3

  Measurement Accuracy Verification      22   

Section 10.4

  Special Tests      23   

Section 10.5

  Metered Flow Rates in Error      23   

Section 10.6

  Record Retention      23   

ARTICLE 11

  NOTICES      24   

Section 11.1

  Notices      24   

ARTICLE 12

  PAYMENTS      25   

Section 12.1

  Invoices      25   

Section 12.2

  Right to Suspend on Failure to Pay      25   

Section 12.3

  Audit Rights      26   

Section 12.4

  Payment Disputes      26   

Section 12.5

  Interest on Late Payments      26   

Section 12.6

  Excused Performance      26   

ARTICLE 13

  FORCE MAJEURE      26   

Section 13.1

  Suspension of Obligations      26   

Section 13.2

  Definition of Force Majeure      27   

Section 13.3

  Settlement of Strikes and Lockouts      27   

Section 13.4

  Payments for Fresh Water Made Available      27   

ARTICLE 14

  INDEMNIFICATION      27   

Section 14.1

  Service Provider      27   

Section 14.2

  Producer      28   

ARTICLE 15

  CUSTODY AND TITLE      28   

Section 15.1

  Custody of Fresh Water      28   

Section 15.2

  Custody of Produced Water      29   

Section 15.3

  Title to Produced Water      29   

ARTICLE 16

  PAYMENTS FOR FRESH WATER; TAXES      29   

Section 16.1

  Payments for Fresh Water; Taxes      29   

ARTICLE 17

  MISCELLANEOUS      30   

Section 17.1

  Rights      30   

Section 17.2

  Applicable Laws      30   

Section 17.3

  Governing Law; Jurisdiction      30   

Section 17.4

  Successors and Assigns      30   

Section 17.5

  Severability      31   

Section 17.6

  Confidentiality      32   

 

ii


Section 17.7

  Entire Agreement, Amendments and Waiver      33   

Section 17.8

  Limitation of Liability      33   

Section 17.9

  Headings      34   

Section 17.10

  Rights and Remedies      34   

Section 17.11

  No Partnership      34   

Section 17.12

  Rules of Construction      34   

Section 17.13

  No Third Party Beneficiaries      34   

Section 17.14

  Further Assurances      34   

Section 17.15

  Counterpart Execution      34   

 

Exhibit A    Form of Connection Notice
Exhibit B    Initial Development Plan
Exhibit C    Initial Required Connection Wells
Exhibit D    Rice Guaranty
Exhibit E    Example Minimum Fresh Water Calculation

 

iii


AMENDED AND RESTATED WATER SERVICES AGREEMENT

This Amended and Restated Water Services Agreement (this “ Agreement ”), dated as of November 4, 2015 (the “ Effective Date ”), is by and between RICE DRILLING B LLC , a Delaware limited liability company (“ Producer ”), and RICE WATER SERVICES (PA) LLC , a Delaware limited liability company (“ Service Provider ”). Producer and Service Provider may be referred to herein individually as a “ Party ” or collectively as the “ Parties .”

RECITALS

A. Producer owns Interests and intends to drill and complete Wells for the production of Hydrocarbons in the Service Area.

B. Producer requires supplies of Fresh Water in its areas of operation for hydraulic fracturing operations and other purposes and has the right to take Fresh Water from various rivers and other Fresh Water sources to use for such purposes in its operations in the Service Area and may from time to time have rights to take Fresh Water from other sources for such operations and operations in other areas.

C. Service Provider owns and operates the Fresh Water System, which is being used to take Fresh Water from Take Points and to make available such Fresh Water to Producer in its areas of operation in the Service Area. Service Provider anticipates the expansion of the Fresh Water System to make available Fresh Water to additional locations in the Service Area. Service Provider also anticipates obtaining additional rights to take Fresh Water from rivers and other Fresh Water sources to make available to Producer and its other customers via the Fresh Water System.

D. Producer and Service Provider have entered into that certain Water Services Agreement dated December 22, 2014 (the “ Original Agreement ”), pursuant to which Producer contracted with Service Provider to provide certain Services utilizing the Fresh Water System in the Service Area, and Service Provider agreed to provide such Services to Producer, in each case in accordance with the terms and conditions of the Original Agreement.

E. Producer and Service Provider now desire to expand the scope of the Services covered by the Original Agreement to include additional Fresh Water and Produced Water handling services. Accordingly, the Parties are entering into this Agreement, which shall amend and restate the Original Agreement in its entirety.

NOW THEREFORE, in consideration of the premises and mutual covenants set forth in this Agreement, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used, but not otherwise defined, in this Agreement shall have the respective meanings given to such terms set forth below:

 

1


Affiliate . Any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with another Person. Affiliated shall have the correlative meaning. The term “control” (including its derivatives and similar terms) shall mean possessing the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise. Any Person shall be deemed to control any specified Person if such Person owns fifty percent (50%) or more of the voting securities of the specified Person, or if the specified Person owns fifty percent (50%) or more of the voting securities of such Person, or if fifty percent (50%) or more of the voting securities of the specified Person and such Person are under common control. Notwithstanding the foregoing, for purposes of this Agreement neither Service Provider, Rice Midstream Management, LLC, a Delaware limited liability company (the “ General Partner ”), the Partnership, nor any of their subsidiaries shall be Affiliates of Producer, and neither Producer nor any of its subsidiaries (other than Service Provider, the General Partner, the Partnership and their subsidiaries) shall be Affiliates of Service Provider.

Aggregate Shortfall Volume . As defined in Section 6.1(b) .

Agreement . As defined in the preamble hereof.

Applicable Law. Any applicable law, statute, regulation, rule, code, administrative order or enforcement action (whether national, local, municipal, territorial, provincial, or federal) of any Governmental Authority, including any Environmental Law, to the extent they apply to the Services or the Parties.

AST. An above-ground storage tank.

Attributable Produced Water. Produced Water produced from a Well operated by Producer or a Rice Entity located on the Service Area Properties and attributable to either (i) Producer’s or such Rice Entity’s interest in such Well or (ii) the interest of non-operating parties in such Well, to the extent that Producer or such Rice Entity (as operator) has the right to dispose of, and is responsible for the disposition of, such Produced Water.

Barrel. Forty-two Gallons.

Business Day. Any calendar Day on which commercial banks in New York City are open for business.

Completion Deadline. As defined in Section 3.6(f) .

Confidential Information. As defined in Section 17.6(a) .

Connection Notice. As defined in Section 3.6(b) .

Contract Year . Each of (i) the period from December 22, 2014, through December 31, 2015, and (ii) each calendar year thereafter.

CPI . As defined in Section 6.1(c) .

 

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Day . A period commencing at 10:00 a.m., Eastern Standard Time, on a calendar day and ending immediately prior to 10:00 a.m., Eastern Standard Time, on the next succeeding calendar day. Daily shall have the correlative meaning.

Delivery Fee . As defined in Section 6.1(a)(i) .

Designated Receiving Facility. As defined in Section 4.3(a) .

Development Plan. As defined in Section 3.5(a) .

Effective Date. As defined in the preamble of this Agreement.

Environmental Laws . Any and all Applicable Laws concerning or relating to public health and safety, worker/occupational health and safety, and the prevention of pollution or protection of the environment, including those relating to, or imposing liability or standards of conduct concerning, the presence, use, manufacturing, refining, production, generation, handling, transportation, treatment, recycling, transfer, storage, disposal, distribution, importing, labeling, testing, processing, discharge, release, threatened release, control, cleanup or other action or failure to act involving Hazardous Materials, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, noise, or radiation.

Firm Service . Services that are accorded the highest priority on the Fresh Water System with respect to capacity allocations, interruptions, or curtailments, specifically including the Fresh Water Services provided to Producer hereunder. Firm Services will be the last curtailed on the relevant part of the Fresh Water System in the event of an interruption or curtailment, and all Firm Services will be treated equally in the event an allocation is necessary.

Force Majeure. As defined in Section 13.2 .

Frac Water . Fresh Water or, when applicable, Fresh Water mixed with Produced Water in accordance with Producer’s instructions as contemplated in Section 3.1(d) .

Frac Water Delivery Point . The water inlet flange of the mixing tanks or the hydration unit being utilized by Producer and its other contractors in hydraulic fracturing operations on a Well Pad.

Fresh Water . Raw fresh water. For the avoidance of doubt, “ Fresh Water ” does not include recycled flowback water or Produced Water.

Fresh Water Facilities . Collectively, the Fresh Water System and the High-Rate Transfer Facilities, including any additional System Segments constructed after the date hereof, as such Fresh Water Facilities are expanded after the date hereof.

Fresh Water Measurement Point . The inlet to Service Provider’s Measurement Facilities located at the inlet to the High-Rate Transfer Facilities located at or in the vicinity of each Well Pad where Fresh Water is measured as or before it goes into the High-Rate Transfer Facilities.

 

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Fresh Water Services. Those Services that are described in Section 3.1(a) through Section 3.1(d) .

Fresh Water System. The Fresh Water facilities owned by Service Provider as of the date hereof upstream of the interconnection with the High-Rate Transfer Facilities, together with any additional System Segments constructed after the date hereof, as such Fresh Water facilities are expanded after the date hereof, including, in each case, to the extent now in existence or constructed or installed in the future, all underground Fresh Water pipelines, Impoundment Facilities, pumping stations, Take Point Facilities, Measurement Facilities, rights of way (whether for underground or surface use), fee parcels, surface rights, and permits, and all appurtenant facilities.

Fresh Water Facilities Plan. As defined in Section 3.5(b) .

Gallon. One U.S. gallon, which is equal to 231 cubic inches.

Gas. Any mixture of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons and inert and noncombustible gases, that is extracted from beneath the surface of the earth.

Governmental Approval. Any permit, license, consent, clearance, certificate, approval, authorization or similar document or authority which any Applicable Law or Governmental Authority requires either Party to hold or obtain in order for the Services to be performed, including any that are required to take Fresh Water from the Take Points.

Governmental Authority. Any federal, state, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.

Guarantor. Rice Energy.

Hazardous Materials. (a) Any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product or byproduct, (d) any polychlorinated biphenyl, (e) any asbestos or asbestos-containing materials, and (f) any substance, pollutant, contaminant, material, or waste, or combination thereof, whether solid, liquid, or gaseous in nature, subject to regulation, investigation, control, or remediation under any Environmental Law.

High-Rate Transfer Facilities. Facilities of Service Provider and its subcontractors located at or in the vicinity of a Well Pad used to perform High-Rate Transfer Services at such Well Pad, including, as applicable, ASTs, high-rate transfer pumps, facilities and equipment for mixing Fresh Water with Produced Water, associated hoses and lines, and all related equipment and facilities used to transfer Fresh Water from the Fresh Water System, mix such Fresh Water with Produced Water when applicable, and transfer Frac Water to the Frac Water Delivery Points at the required rates of flow.

 

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High-Rate Transfer Services. As defined in Section 3.1(d) .

Hydrocarbons. Gas and/or Liquid Hydrocarbons.

Impoundment Facility. Each impoundment or retention area or other similar facility that is part of the Fresh Water System and is used to temporarily store Fresh Water upstream of the High-Rate Transfer Facilities prior to its being made available at a Frac Water Delivery Point.

Initial Development Plan. The Development Plan previously provided by Producer to Service Provider and identified as the initial Development Plan and attached as Exhibit B .

Interests. Oil and gas leasehold interests and oil and gas mineral fee interests, including working interests, overriding royalty interests, net profits interests, carried interests, and similar rights and interests.

Interruptible Service. Service that is accorded the lowest priority on the Fresh Water System with respect to capacity allocations, interruptions, or curtailments. Interruptible Service will be the first curtailed on the Fresh Water System in the event of an interruption or curtailment.

Liquid Hydrocarbons. Oil, condensate, natural gasoline and all the liquid hydrocarbon production from wells, or a blend of such.

Maintenance. As defined in Section 7.2 .

Measurement Facilities. Any facility or equipment used to measure the volume of Fresh Water or Produced Water, which may include meter tubes, isolation valves, tank strappings, recording devices, communication equipment, buildings and barriers.

Measurement Points. Each Fresh Water Measurement Point and Produced Water Measurement Point.

Minimum Flow Rate. As defined in Section 8.1 .

Month. A period commencing at 10:00 a.m., Eastern Standard Time, on the first Day of a calendar month and extending until 10:00 a.m., Eastern Standard Time, on the first Day of the next succeeding calendar month. Monthly shall have the correlative meaning.

Original Agreement. As defined in the recitals of this Agreement.

Parties. As defined in the preamble of this Agreement.

Partnership. Rice Midstream Partners L.P., a Delaware limited partnership.

Party. As defined in the preamble of this Agreement.

Person. An individual, a corporation, a partnership, a limited partnership, a limited liability company, an association, a joint venture, a trust, an unincorporated organization, or any other entity or organization, including a Governmental Authority.

 

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Planned Well . As defined in Section 3.5(a) .

Produced Water. Water produced from Wells alongside Hydrocarbons (whether or not treated at a water treatment facility), including water separated from Hydrocarbons at the wellhead upstream of a Produced Water Receipt Point located at a Well Pad through conventional mechanical separation equipment and held in tanks owned by Producer at the Well Pad, including flowback water, drilling fluids, and other fluid wastes produced from such Wells, and including in each case all materials (including Hydrocarbons) contained in such water.

Produced Water Measurement Point. The inlet to Service Provider’s Measurement Facilities at the truck unloading facility located at or in the vicinity of each Well Pad where Produced Water that is to be mixed with Fresh Water in accordance with Producer’s instructions is measured as or before it goes into the High-Rate Transfer Facilities.

Produced Water Quality Standards. As defined in Section 4.4 .

Produced Water Receipt Point. The outlet flange of the Producer’s Produced Water tankage located at or nearby or assigned to a Well, downstream of the Producer’s separation equipment.

Produced Water Services. Those Services described in Section 3.1(e) and Section 3.1(f) .

Producer. As defined in the preamble of this Agreement.

Producer Group . As defined in Section 14.1(b) .

Reimbursable Produced Water Services Costs. As defined in Section 6.1(a)(iii) .

Required Connection Wells. As defined in Section 3.1(a) .

Rice Energy. Rice Energy, Inc., a Delaware corporation.

Rice Entity. Means Rice Energy, Inc., a Delaware corporation, and each Affiliate of Producer that is a direct or indirect subsidiary of Rice Energy Inc.

Rice Guaranty. The Guaranty dated as of the Effective Date made by Guarantor in favor of Service Provider in the form of Exhibit D .

Service Area. Washington and Greene Counties, Pennsylvania.

Service Area Properties. All Interests now owned or hereafter acquired by Producer or any Rice Entity and located wholly or partly within the Service Area or pooled, unitized or communitized with Interests located wholly or partly within the Service Area; provided that Service Area Properties shall not include any Interests that are unitized or pooled with the properties of third parties that are not Service Area Properties if neither Producer nor a Rice Entity is the operator of such unit.

Services . As defined in Section 3.1 .

 

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Service Provider. As defined in the preamble of this Agreement.

Service Provider Group. As defined in Section 14.2(b) .

Supplemental Water Fee. As defined in Section 6.1(a)(ii) .

System Segment. A physically separate segment of the Fresh Water System that connects one or more Take Points to one or more Impoundment Facilities, together with any underground Fresh Water lines downstream of such Impoundment Facilities and any rights of way downstream of such Impoundment Facilities for surface Fresh Water lines, including all underground Fresh Water pipelines, Impoundment Facilities, pumping stations, Take Point Facilities, Measurement Facilities, rights of way, fee parcels, surface rights, and permits, and all appurtenant facilities.

Take Point. Those points from which, in accordance with agreements with the holders of water rights and/or Applicable Laws and required Governmental Approvals, Producer or Service Provider has procured the right for Service Provider to take Fresh Water to make available to Producer for use in accordance with this Agreement.

Take Point Facilities. All facilities located at any Take Point that are necessary for Service Provider to take Fresh Water from the Fresh Water source at such Take Point.

Target Commencement Date. As defined in Section 3.6(b) .

Transportation Services. As defined in Section 3.1(e) .

Two Mile Perimeter. As defined in Section 3.1(a) .

USDOT. The United States Department of Transportation.

Water Facilities. The Fresh Water Facilities and any facilities owned by Service Provider through which Produced Water is gathered, collected, transported, processed, treated, recycled, or disposed of from any Interests.

Well. A well for the production of Hydrocarbons in which Producer or a Rice Entity owns an interest that is located on the Service Area Properties or for which Services are otherwise required to be performed in accordance with this Agreement.

Well Pad. The surface installation on which one or more Wells are located.

ARTICLE 2

PRODUCER COMMITMENTS

Section 2.1 Producer Commitments . Subject to the terms and conditions of this Agreement, Producer covenants and commits (a) to exclusively use, and to cause each Rice Entity to exclusively use, Fresh Water made available by Service Provider under this Agreement, together with Produced Water from Producer’s Wells (including Produced Water collected by Service Provider and trucked to the Well Pad, where applicable), in its hydraulic fracturing

 

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operations for all Wells operated by Producer or such Rice Entity in the Service Area and (b) to exclusively utilize Service Provider for the performance of the Produced Water Services for all Attributable Produced Water, as and when produced.

Section 2.2 Producer Take Points . Producer agrees to use all reasonable efforts to (a) maintain the right to take Fresh Water from each Take Point (whether now existing or hereafter acquired) for use in its operations and (b) afford Service Provider the right to take Fresh Water from Take Points from which Producer has the right to take Fresh Water for use in its operations for the purpose of making such Fresh Water available to Producer under this Agreement and, subject to the provisions of Section 7.3 , to provide Fresh Water to third party customers.

Section 2.3 Covenant Running with the Land . The covenants and commitments made by Producer under this Article 2 are covenants running with the land. For the avoidance of doubt and in addition to that which is provided in Section 17.4, in the event Producer sells, transfers, conveys, assigns, grants, or otherwise disposes of any or all of its Interests in the Service Area, then any such sale, transfer, conveyance, assignment, grant, or other disposition shall be expressly subject to this Agreement and any instrument of conveyance shall so state. Notwithstanding the foregoing, Producer shall be permitted to sell, transfer, convey, assign, grant, or otherwise dispose of Service Area Properties free of the covenant and commitment made under this Article 2 in a sale or other disposition in which a number of net acres of Service Area Properties that, when added to the total of net acres of Service Area Properties theretofore and, where applicable, simultaneously disposed of free of the commitment made by Producer under this Article 2, does not exceed the aggregate number of net acres of Service Area Properties acquired by Producer after the Effective Date, including in a transaction in which Service Area Properties are exchanged for other properties located in the Service Area that would be subject to commitment made by Producer under this Article 2.

ARTICLE 3

SERVICES; WATER FACILITIES EXPANSION AND CONNECTION OF DELIVERY POINTS

Section 3.1 Service Provider Service Commitment . Subject to and in accordance with the terms and conditions of this Agreement, Service Provider commits to providing the following services (collectively, the “ Services ”) to Producer:

(a) construct and expand the Fresh Water System to connect to the Fresh Water System each Well in the Service Area that (i) is included in the Initial Development Plan, or (ii) is within two miles of the Fresh Water System (the “ Two Mile Perimeter ”) as it exists as of the date of the Connection Notice for such Well, subject in each case to the procedures set forth in Section 3.6 (such Wells, and such other Wells that become Required Connection Wells in accordance with Section 3.6 , “ Required Connection Wells ”);

(b) Subject to Section 2.2 , take, or cause to be taken, at each Take Point on each Day, Water in a quantity at least equal to the volume of Water required to be taken in the Fresh Water System in order to perform the Fresh Water Services;

 

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(c) make available or cause to be made available, by underground or surface water lines and through the use of Impoundment Facilities if applicable, at the interconnection between the Fresh Water System and the High-Rate Transfer Facilities at each Well Pad during the periods nominated by Producer in accordance with Section 9.1 during which hydraulic fracturing operations are to be carried out at such Well Pad, Fresh Water at sufficient rates of flow so that Frac Water can be made available at the Frac Water Delivery Points during such period at the required rates of flow;

(d) during the periods nominated by Producer in accordance with Section 9.1 during which hydraulic fracturing operations are to be carried out at such Well Pad, (i) transfer Fresh Water from the Fresh Water System, (ii) if so instructed by Producer, mix such Fresh Water with Produced Water in the proportion instructed by Producer, and (iii) transfer such Fresh Water or mixed Fresh Water and Produced Water, as Frac Water, through the High-Rate Transfer Facilities to the Frac Water Delivery Point at such Well Pad (the “ High-Rate Transfer Services ”);

(e) receive, or cause to be received, into its (or its subcontractors’) trucks, or otherwise collect, all Attributable Produced Water from the Produced Water Receipt Points and deliver, or cause to be delivered, such Produced Water (i) to a Well Pad in order to mix with Fresh Water in accordance with Producer’s instructions, or (ii) to a Designated Receiving Facility (the “ Transportation Services ”); and

(f) cause Produced Water collected from the Produced Water Receipt Points (other than Produced Water delivered to a Well Pad to be mixed with Fresh Water in accordance with Producer’s instructions) to be treated, recycled, released, sold for re-use, or otherwise disposed of through Designated Receiving Facilities.

Section 3.2 Priority of Fresh Water Services . Subject to the terms and conditions of this Agreement, Fresh Water Services requiring deliveries of Fresh Water to the interconnection with the High-Rate Transfer Facilities at no more than one Well on any trunkline at any time at rates of flow at or below the Minimum Flow Rate shall be provided on a Firm Service basis. All Fresh Water Services requiring deliveries to the interconnection with the High-Rate Transfer Facilities at more than one Well on any trunkline at any time or in excess of the Minimum Flow Rate shall be provided on an Interruptible Service basis.

Section 3.3 Rights to Take Fresh Water at the Take Points . Subject to Section 2.2 , Service Provider is responsible for obtaining all necessary rights, including all Governmental Approvals, to take Fresh Water from the Take Points in sufficient volumes to make available Frac Water at the Frac Water Delivery Points at the required rates of flow. Producer will provide all information to Service Provider that is required for Service Provider to acquire, and will use commercially reasonable efforts to assist Service Provider in acquiring, such rights.

Section 3.4 Right of Producer to Supplement Fresh Water Supplies .

(a) If the capacity and/or the volume of water in the Fresh Water System is insufficient for water to be made available at the flow rates desired by Producer at one or more Frac Water Delivery Points, Producer may, at its option and subject to the fees in Section

 

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6.1(a)(ii) , provide supplemental Fresh Water by truck to the Service Provider at the applicable Impoundment Facility or Fresh Water or Produced Water to Service Provider’s facilities at the applicable Well Pad so that the desired flow rates can be achieved.

(b) Notwithstanding Section 14.1(a)(ii) , Service Provider shall not have any liability whatsoever for its inability to make water available at the flow rates desired by Producer.

Section 3.5 Development Plan; Fresh Water Facilities Plan; Exchange and Review of Information .

(a) The Initial Development Plan describes Producer’s planned development and drilling activities relating to the Service Area Properties through December 31, 2017 (such plan, as updated as hereinafter provided, the “ Development Plan ”). Following the Effective Date, on or before the last Day of each Month, Producer shall provide Service Provider an updated Development Plan describing the planned development and drilling activities relating to the Service Area Properties for the 24-Month period commencing on the date of such updated Development Plan. Each Development Plan will include (i) information as to the Wells that Producer expects will be drilled during such period (each such Well reflected in a Development Plan, a “ Planned Well ”), which may be by reference to Well Pads and the number of Wells to be drilled at such Well Pads, information as to the Well Pads expected to be constructed during such period and the approximate locations thereof, and the earliest date on which one or more Planned Wells at each such Well Pad are expected to be hydraulically fractured, and (ii) good faith and reasonable forecasts of the periods of time during which Fresh Water will be required at each Well Pad for the purpose of hydraulic fracturing operations for all Planned Wells on such Well Pad and the volumes of Fresh Water and the rates of flow that will be required for hydraulic fracturing operations on such Well Pad during the 24-Month period following the date of such Development Plan. Producer shall make its representatives available to discuss the Development Plan from time to time with Service Provider and its representatives, in order to facilitate advance planning for expansion or improvement of the Fresh Water System and/or the planning of the Fresh Water Services and to address other matters relating to the construction and installation of additions to the Fresh Water System. Producer may provide updated or amended Development Plans to Service Provider at any time and shall provide its then-current Development Plan to Service Provider from time to time on or prior to the fifth (5 th ) Business Day after Service Provider’s request therefor.

(b) Service Provider has provided to Producer a Fresh Water System plan describing and/or depicting the Fresh Water System, including all Take Points, pipelines, Impoundment Facilities, rights of way for surface Fresh Water lines, and all pumping stations and other major physical facilities, together with their locations, sizes and other physical specifications, operating parameters, capacities, and other relevant specifications, and together with a schedule for completing the construction and installation of the planned portions thereof, in each case as currently in existence, under construction, or planned, together with information about the High Rate Transfer Facilities, including the number and capacity of ASTs and high rate transfer pumps, that will be utilized to perform the High-Rate Transfer Services at each Well Pad (such plan, as updated as hereinafter provided, the “ Fresh Water Facilities Plan ”). Based on the Development Plans and such other information about the expected development of the Service

 

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Area Properties as shall be provided to Service Provider by or on behalf of Producer, Service Provider shall periodically update the Fresh Water Facilities Plan. Without limiting the generality of the foregoing, Service Provider shall ensure that the Fresh Water Facilities Plan reflects all Required Connection Wells included in each Monthly Development Plan not later than 30 Days after such Development Plan is delivered to Service Provider. Service Provider shall make the Fresh Water Facilities Plan available for inspection by Producer and its representatives from time to time and shall make representatives of Service Provider available to discuss the Fresh Water Facilities Plan from time to time with Producer and its representatives. Service Provider shall provide Producer updates not less frequently than Monthly on the progress of work on all facilities necessary to connect the Fresh Water System to the Well Pads on which the Required Connection Wells are or are to be located as set forth in the then-current Fresh Water Facilities Plan.

(c) The Parties recognize that the plans for the development of the Service Area Properties set forth in each Development Plan, as well as all information provided by Producer to Service Provider regarding its intentions with respect to the development of the Service Area Properties, are subject to change and revision at any time at the discretion of Producer, and that such changes may impact the timing, configuration, and scope of the planned activities of Service Provider. The exchange of such information and any changes thereto shall not give rise to any rights or liabilities as between the Parties except as expressly set forth in this Agreement, and Service Provider shall determine at its own risk the time at which it begins to work on and incur costs in connection with projects to expand the Fresh Water System and its other facilities and capacities, including the acquisition of rights of way, equipment, and materials. Without limiting the generality of the foregoing, Producer has no obligation to Service Provider under this Agreement to develop or produce any Hydrocarbons from the Service Area Properties or to pursue or complete any drilling or development on the Service Area Properties, whether or not envisioned in the Development Plan.

Section 3.6 Expansion of Fresh Water System; Connection of Well Pads .

(a) The Service Provider shall design and develop the Fresh Water System at least to the capacity of the Minimum Flow Rate for the purpose of providing Fresh Water Services as and when needed for hydraulic fracturing operations on the Required Connection Wells, and Service Provider shall be obligated, at its sole cost and expense, subject to the provisions of this Agreement, to plan, procure, construct, install, own, and operate the Fresh Water System so as to timely extend the Fresh Water System to all Wells Pads on which Required Connection Wells are located and timely deliver such quantities of Fresh Water to the Wells Pads so as to permit Service Provider to commence providing the full scope of Services with respect to all the Required Connection Wells in accordance with this Section 3.6 ; provided , that the foregoing shall not preclude Service Provider from also designing and developing the Fresh Water System to provide services to third parties.

(b) Producer shall from time to time give notice, in the form of Exhibit A hereto (or in such form as the Parties shall otherwise agree from time to time), to Service Provider of each Planned Well that Producer intends to drill and complete in the Service Area (a “ Connection Notice ”). Each Connection Notice shall set forth the target commencement date for starting the hydraulic fracturing of such Well (the “ Target Commencement Date ”).

 

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(c) On or before the 30th Day after delivery of a Connection Notice for a Planned Well, Service Provider shall, by notice to Producer, (i) (A) acknowledge that the Planned Well covered by such Connection Notice is a Required Connection Well and provide anticipated aggregate Take Point flow rate availability or (B) acknowledge that such Planned Well is not a Required Connection Well but nonetheless commit to extend the Fresh Water System to the Well Pad on which such Planned Well is or will be located and, in each case, make Fresh Water available for such Planned Well for the Delivery Fee defined in Section 6.1(a) , and provide anticipated aggregate Take Point flow rate availability, or (ii) state that it has determined that such Planned Well is not a Required Connection Well or that, whereas such Planned Well is within the Two Mile Perimeter and/or was included in the Initial Development Plan, making Fresh Water available for such Planned Well is not commercially economical, as solely determined by Service Provider, and in either case state the Delivery Fee that it would charge for extending the Fresh Water System to the Well Pad on which such Planned Well is located and making Fresh Water available for such Planned Well. The Parties acknowledge and agree that Service Provider does not control the availability of Fresh Water at each Take Point and Service Provider’s written notice in response to each Connection Notice shall be subject to change due to fluctuations of Fresh Water availability at any Take Point. Service Provider shall use commercially reasonable efforts to minimize such fluctuations at any Take Point and shall promptly provide written notice to Producer of any material change in anticipated aggregate Take Point flow rate based on Service Provider’s prior notice to Producer.

(d) If Service Provider delivers the notice referred to in Section 3.6(c)(i)(A) with respect to a Connection Notice for a Planned Well, such Planned Well shall be deemed a Required Connection Well. If Service Provider delivers the notice referred to in Section 3.6(c)(i)(B) with respect to a Connection Notice for a Planned Well, Producer may, by notice to Service Provider, accept Service Provider’s proposed Delivery Fee, in which case such Planned Well shall be deemed a Required Connection Well from and after the date of Producer’s notice, and the Delivery Fee proposed in Service Provider’s notice shall be charged for Fresh Water made available at the Frac Water Delivery Point at the Well Pad on which such Planned Well is located.

(e) If Service Provider delivers the notice referred to in Section 3.6(c)(ii) with respect to a Connection Notice for a Planned Well, and if Producer desires to have the Fresh Water System extended to the Well Pad on which such Planned Well is located but does not agree to the proposed Delivery Fee stated in such notice, the Parties shall negotiate in good faith for a period not to exceed 30 Days from the date of such notice and use reasonable efforts to reach agreement on a Delivery Fee that would be applicable to Fresh Water made available for such Planned Well. If the Parties agree in writing on such Delivery Fee, such Planned Well shall be deemed a Required Connection Well from and after the date of such agreement, and the Delivery Fee agreed by the Parties shall be charged for Fresh Water made available at the Frac Water Delivery Point at the Well Pad on which such Planned Well is located. If the Parties do not reach agreement within such 30-day period, Producer may, at its option by notice to Service Provider, (i) withdraw the Connection Notice with respect to such Planned Well, in which case Producer may source Fresh Water for hydraulic fracturing operations on such Planned Well from such source as Producer may determine, or (ii) agree to pay the incremental costs incurred by Service Provider to extend the Fresh Water System to the Well Pad on which such Planned Well is located above the costs that would be incurred by Service Provider to extend the Fresh Water

 

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System to such Well Pad if it were located at the point on the Two Mile Perimeter, as of the date of the Connection Notice for such Planned Well, that is nearest such Well Pad, in which case such Planned Well shall become a Required Connection Well from and after the date of Producer’s notice, and the Delivery Fee defined in Section 6.1(a) shall apply to Fresh Water made available for such Planned Well.

(f) Service Provider shall cause the necessary facilities to be constructed to extend the Fresh Water System to the Well Pad on which each Required Connection Well is located and to make Fresh Water available for such Required Connection Well. Such facilities shall be available to make Fresh Water available to such Required Connection Well as soon as reasonably practicable following the Connection Notice with respect to such Well and in any event on or before the later to occur of (1) the Target Commencement Date with respect to such Well, (2) the date that is 365 Days after the Connection Notice for such Well, and (3) the date on which such Well is ready for hydraulic fracturing (the later of such dates, with respect to such Well, the “ Completion Deadline ”). Service Provider shall provide Producer notice promptly upon Service Provider’s becoming aware of any reason to believe that it may not be able to complete the extension of the Fresh Water System to the Well Pad on which a Required Connection Well is located by the Target Commencement Date therefor or to otherwise complete all facilities necessary to make Fresh Water available for such Well by the Target Commencement Date therefor. If and to the extent Service Provider is delayed in completing and making available such facilities by a Force Majeure event or any action of Producer that is inconsistent with the cooperation requirements of Section 3.9 , then the Completion Deadline for such connection shall be extended for a period of time equal to that during which Service Provider’s completion and making available of such facilities was delayed by such events or actions. If such facilities are not completed and made available by the Completion Deadline, as Producer’s sole and exclusive remedies for such delay,

(i) Producer may, until such time as the Fresh Water System is extended to such Well Pad and Fresh Water can be made available from the Fresh Water System to such Well, source Fresh Water for hydraulic fracturing operations at such Well from such source as it may determine; and

(ii) Producer shall have the right to complete the procurement, construction and/or installation of any rights or facilities necessary to extend the Fresh Water System to such Well Pad and/or to permit Fresh Water from the Fresh Water System to be made available at the Frac Water Delivery Point at such Well Pad, in which case Service Provider shall pay to Producer an amount equal to 115% of all reasonable actual and verifiable costs and expenses incurred by Producer in so procuring, constructing, and/or installing such rights and facilities, and Producer shall convey all such rights and facilities to Service Provider and such rights and facilities shall thereafter be part of the Fresh Water System.

The remedies set forth in clauses (i) and (ii) above shall be applicable to Wells with Completion Deadlines that are on or after December 22, 2015.

(g) Producer has previously delivered a Connection Notice to Service Provider with respect to the Required Connection Wells set forth on Exhibit C . Such Connection Notice shall be deemed to have been given for each such Required Connection Well 365 Days prior to the Target Commencement Date specified for such Well in such notice.

 

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Section 3.7 Installation and Operation of High-Rate Transfer Facilities .

(a) Service Provider shall be obligated, directly or through subcontractors, to engineer, procure, transport to the Well Pad or other applicable site, and erect or install on the Well Pad or on such site on or prior to the Completion Deadline all necessary High-Rate Transfer Facilities to enable Fresh Water to be transferred from the Fresh Water System, such Fresh Water to be mixed with Produced Water in accordance with Producer’s instructions, and to transfer Frac Water through the High-Rate Transfer Facilities to the Frac Water Delivery Points. Service Provider shall ensure that all such High-Rate Transfer Facilities remain on the Well Pad or on such site and be available to perform the High-Rate Transfer Services at all times during which Producer has notified Service Provider in accordance with Section 9.1 that hydraulic fracturing operations will be carried out on such Well Pad until such time as Producer has advised Service Provider that all hydraulic fracturing operations have been completed on all Planned Wells at such Well Pad. Service Provider shall have the right to remove and re-install or re-erect such High Rate Transfer Facilities from time to time as long as no delay or disruption in Producer’s hydraulic fracturing operations results therefrom.

(b) Producer shall provide sufficient space on the Well Pad for all necessary High-Rate Transfer Facilities other than ASTs to be located on such Well Pad. Producer shall use commercially reasonable efforts to provide sufficient space on the Well Pad, or if sufficient space on such Well Pad is not available, on the nearest reasonably available site, in any event, within one mile of the Well Pad, for the erection and installation of all ASTs required by Service Provider for the performance of the High-Rate Transfer Services on such Well Pad, together with rights of access to such site from a public road and easements or rights of way over which Service Provider may run hoses and temporary Fresh Water lines to the Well Pad. If Producer, through the use of commercially reasonable efforts, has been unable, by the date that is at least 180 days prior to the Target Commencement Date for such Well Pad, to obtain such a site and such rights of access and easements, Producer shall promptly notify Service Provider, and Service Provider shall be responsible for obtaining such site and the related access rights and easements.

(c) Service Provider shall be responsible for the operation, maintenance, repair, and removal of all High-Rate Transfer Facilities, including the operation of the applicable ASTs, ensuring that such ASTs and other High-Rate Transfer Facilities are operating properly and that the Fresh Water is transferred from such ASTs at proper flow rates (such that such ASTs do not overflow), and necessary coordination with Producer’s and its hydraulic fracturing contractors’ personnel.

(d) If Service Provider fails to perform its obligations to timely engineer, procure, transport, erect, and install the High-Rate Transfer Facilities by the Completion Date or fails to ensure that such High-Rate Transfer Facilities remain on the Well Pad or other applicable site in each case in accordance with Section 3.7(a) or fails to perform the High-Rate Transfer Services in connection with the hydraulic fracturing of Wells on a Well Pad in accordance with Section 3.1(d) , then, as Producer’s sole and exclusive remedy for such failure, Producer shall

 

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have the right to complete the engineering, procurement, transportation, erection and/or installation (including through one or more subcontractors) of replacement facilities and/or to carry out such activities itself (including through one or more subcontractors), in which case Service Provider shall pay, within 30 days after presentment of an invoice therefor, to Producer an amount equal to 115% of all reasonable, actual and verifiable out of pocket costs and expenses incurred by Producer in so engineering, procuring, transporting, erecting, and installing such facilities and carrying out such activities, and upon receipt of payment by Producer therefor, Producer shall convey all such rights (including rights under third party contracts) and facilities owned or under the control of Producer to Service Provider (and shall use commercially reasonable efforts to obtain any applicable consents triggered by such assignment).

Section 3.8 Right of Way and Access . Service Provider is responsible for the acquisition of rights of way, crossing permits, licenses, use agreements, access agreements, leases, fee parcels, and other rights in land necessary to construct, own, and operate the Fresh Water System, and all such rights in land shall be solely for use by Service Provider and shall not be shared with Producer, except as otherwise agreed by Service Provider; provided, however, that if Producer’s rights to take Fresh Water from any Take Point (or any other surface use or other agreements of Producer) also provide Producer the right to use any lands for the purpose of installing facilities to take Fresh Water, Producer shall use commercially reasonable efforts to make such rights available to Service Provider; and provided, further, that Producer agrees to grant and/or to cause each Rice Entity to grant, without warranty of title, either express or implied, to the extent that it has the right to do so without the incurrence of material expense, an easement and right of way upon all lands covered by the Service Area Properties, for the purpose of installing, using, maintaining, servicing, inspecting, repairing, operating, replacing, disconnecting, and removing all or any portion of the Fresh Water System, including all pipelines, meters, and other equipment necessary for the performance of this Agreement; provided, further, that the exercise of these rights by Service Provider shall not unreasonably interfere with Producer’s or such Rice Entity’s lease operations or with the rights of owners in fee, and will be subject to Producer’s safety and other reasonable access requirements applicable to Producer’s personnel. Neither Producer nor such Rice Entity shall have a duty to maintain the underlying agreements (such as leases, easements, and surface use agreements) that such grant of easement or right of way to Service Provider is based upon, and such grants of easement or right of way will terminate if Producer or such Rice Entity, as applicable, loses its rights to the property, regardless of the reason for such loss of rights. Notwithstanding the foregoing, (i) Producer will assist Service Provider to secure replacements for such terminated grants of easement or right of way, in a manner consistent with the cooperation requirements of Section 3.9 , (ii) to the extent that Producer agrees that Service Provider’s Measurement Facilities may be located on Producer’s Well Pad sites, Producer shall be responsible for obtaining any necessary rights to locate such Measurement Facilities on such Well Pad sites, and (iii) Producer shall use reasonable efforts to involve Service Provider in Producer’s negotiations with the owners of lands covered by the Service Area Properties so that Producer’s surface use agreements and Service Provider’s rights of way with respect to such lands can be concurrently negotiated and obtained.

Section 3.9 Cooperation . Because of the interrelated nature of the actions of the Parties required to obtain the necessary Governmental Approvals from the appropriate Governmental Authorities and the necessary consents, rights of way and other authorizations

 

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from other Persons necessary to drill and complete each Planned Well and construct the required extensions of the Fresh Water System to each Well Pad, the Parties agree to work together in good faith to obtain such Governmental Approvals, authorizations, consents and rights of way as expeditiously as reasonably practicable, all as provided herein. The Parties further agree to cooperate with each other and to communicate regularly regarding their efforts to obtain such Governmental Approvals, authorizations, consents and rights of way.

ARTICLE 4

CERTAIN PROVISIONS REGARDING PRODUCED WATER SERVICES

Section 4.1 Access to Produced Water Receipt Points . Producer shall be responsible for ensuring that Service Provider and its subcontractors have safe road access to all Produced Water Receipt Points from public roadways suitable for travel by highway trucking equipment. As between Producer and Service Provider, Producer shall be responsible for all maintenance of and damage to (and all payments in respect thereof) all access roads from public roadways to the Produced Water Receipt Points.

Section 4.2 Dispatch Procedures .

(a) Service Provider shall install, regularly inspect, maintain, and operate, at Service Provider’s cost, in Producer’s Produced Water tanks located at or in the vicinity of each Well Pad, water-level sensors connected to a remote monitoring system capable of making available to Service Provider on an hourly or more frequent basis data regarding the level of Produced Water in each such tank. Producer hereby grants Service Provider the right, and agrees to provide access for, Service Provider to install, regularly inspect, maintain and operate such sensors. Service Provider shall be responsible for the timely dispatch of trucks to all Wells at which such sensors and monitoring systems are installed and operating properly to collect Produced Water from the tanks at such Wells. In the event that Service Provider is notified or otherwise has knowledge of any outage of or malfunction in any such sensors at any such tanks or any outage of or malfunction in such monitoring system, Service Provider shall use reasonable efforts to timely dispatch trucks to collect Produced Water based on historical flow rates or on information provided by Producer but shall not otherwise be liable for any failure to timely dispatch trucks to any affected tank during any period of any such outage or malfunction.

Section 4.3 Designated Receiving Facilities .

(a) Service Provider shall treat, recycle, release, sell for re-use, or otherwise dispose of, or shall cause an Affiliate or subcontractor of Service Provider to treat, recycle, release, sell for re-use, or otherwise dispose of, all Produced Water collected by Service Producer at the Produced Water Receipt Points in the Service Area through facilities, including Service Provider’s or its Affiliates’ own facilities, that have been designated by Service Provider and approved by Producer (each such facility, a “ Designated Receiving Facility ”). If Producer approves a facility as a Designated Receiving Facility, it shall have the right, at any time upon notice to Service Provider, to withdraw such approval, and such facility shall cease to be a Designated Receiving Facility effective upon the 60 th Day after such notice; provided, however, that Producer shall reimburse Service Provider for all costs reasonably incurred by Service Provider in order to utilize such facility as a Designated Receiving Facility and shall indemnify Service Provider and its Affiliates for any contractual liability incurred by Service Provider to a third party as a result of its not being able to utilize such facility as a Designated Receiving Facility.

 

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(b) Producer shall have the right, at its sole cost and expense, to visit and observe operations at each Designated Receiving Facility operated by Service Provider, in each case during normal business hours, on reasonable notice, and subject to such reasonable safety procedures as shall be reasonably required by Service Provider. Such visits and observations shall be carried out in a manner that does not unreasonably interfere with operations at such Designated Receiving Facility. Service Provider shall use reasonable efforts to afford Producer the opportunity to visit and observe operations at each Designated Receiving Facility operated by a Service Provider subcontractor and shall at the request of Producer perform such visits and observations and use reasonable efforts to include a representative of Producer among its representatives on any such visit.

Section 4.4 Non-Conforming Produced Water . If the Produced Water quality at any Produced Water Receipt Point does not conform to the Produced Water Quality Standards, then Service Provider will have the right to immediately discontinue taking Produced Water at such Produced Water Receipt Point so long as the Produced Water at such Produced Water Receipt Point continues to be non-conforming. In the event that Service Provider takes receipt of non-conforming Produced Water at any Produced Water Receipt Point, Producer agrees to be responsible for, and to defend, indemnify, release, and hold Service Provider and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees harmless from and against, all claims and losses of whatever kind and nature resulting from such non-conforming Produced Water, including claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party. “ Produced Water Quality Standards ” means, with respect to any Produced Water, that such Produced Water is free from any contamination or any substances that would result in such Produced Water not meeting any requirements imposed by Applicable Law for transportation by truck or any quality standards of a Designated Receiving Facility.

Section 4.5 Transportation Services Equipment . Service Provider shall provide, or cause to be provided, all equipment necessary to perform the Transportation Services. The equipment shall (a) be suitable for the performance of the Transportation Services, (b) comply with the specifications for equipment used for services equivalent to the Transportation Services as required by Applicable Law, including the regulations of the USDOT, and (c) be maintained in a good, safe, and serviceable condition. Service Provider shall only use subcontractors to perform the Transportation Services that maintain a USDOT safety rating of “Satisfactory”.

Section 4.6 Contract Carrier Status . Producer and Service Provider intend to rely on their respective rights and remedies under this Agreement and, if it would otherwise be applicable, expressly waive any and all rights and remedies under Part B, Subtitle IV of Title 49 of the United States Code that may be waived as provided in 49 USC § 14101(b)(1). Producer and Service Provider intend that the contractual arrangement documented by this Agreement be that of a contract motor carrier and for the terms and conditions of this Agreement to take precedence over any terms and conditions which might apply to a shipper and common carrier. Any use of form bills of lading, or other freight documents referring to “common carriers” and/or “tariffs”, shall not alter the contract relationship created hereunder between the Parties.

 

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ARTICLE 5

TERM

Section 5.1 Term . This Agreement, unless terminated earlier by mutual agreement of the Parties, shall continue in effect until December 22, 2029, and from Month to Month thereafter (with the initial term of this Agreement deemed extended for each of any such additional Month) until such time as this Agreement is terminated, by notice from either Party to the other Party, effective on the last day of the Month specified in such notice, which notice shall be given not less than 30 days before the effective date of such termination.

ARTICLE 6

FEES AND CONSIDERATION

Section 6.1 Fees .

(a) Subject to the other provisions of this Agreement, Producer shall pay Service Provider each Month in accordance with the terms of this Agreement, for all Services provided by Service Provider during such Month, an amount equal to the sum of the following:

(i) the aggregate volume of Fresh Water stated in Gallons delivered by Service Provider to the Frac Water Delivery Points, as measured at the Fresh Water Measurement Points, during such Month multiplied by the tiered fee set forth below (as may be otherwise agreed in accordance with Section 3.6(a) or increased or decreased in accordance with Section 6.1(c) , the “ Delivery Fee ”):

 

For volumes up to and including the first 8,250,000 Gallons per Well

   $ 0.07 per Gallon   

For Volumes above 8,250,000 Gallons up to and including 13,250,000 Gallons per Well

   $ 0.03 per Gallon   

For volumes above 13,250,000 Gallons per Well

   $ 0.01 per Gallon   

Volumes of supplemental Fresh Water delivered by Producer to Service Provider at an Impoundment Facility or supplemental Fresh Water delivered by Producer to Service Provider at the Well Pad during such Month as contemplated in Section 3.4 shall not be subject to the Delivery Fee and shall not be included in the volumes of Fresh Water delivered to a Frac Water Delivery Point and used in hydraulic fracturing operations for purposes of determining the appropriate Delivery Fee tier.

(ii) an amount equal to $0.01 per Gallon of supplemental Fresh Water delivered by Producer to Service Provider at an Impoundment Facility or Service Provider’s facilities at the applicable Well Pad during such Month as contemplated in Section 3.4 (the “ Supplemental Water Fee ”); and

 

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(iii) an amount equal to the sum of (A) all third party out-of-pocket costs actually incurred by Service Provider in performing the Produced Water Services (“ Reimbursable Produced Water Services Costs ”), plus (B) 2% of the amount of such costs.

(b) If the Minimum Aggregate Fresh Water Volume for any calendar quarter exceeds the actual aggregate volume of Fresh Water measured at the Fresh Water Measurement Points during such calendar quarter (such excess, the “ Aggregate Shortfall Volume ”), then (1) the Aggregate Shortfall Volume for such calendar quarter shall be allocated to each Well having a Well Shortfall Volume for such calendar quarter pro rata based on the volumes of Fresh Water measured at the applicable Fresh Water Measurement Point and Produced Water measured at the applicable Produced Water Delivery Point and, in each case, delivered to each such Well as Frac Water and (2) the aggregate Delivery Fee payable for such calendar quarter shall be recalculated, treating the Aggregate Shortfall Volume as allocated to each such Well for purposes of such recalculation as Fresh Water subject to the Delivery Fee. For an example calculation, see Exhibit E. The excess of the amount of the Delivery Fee for such calendar quarter as so recalculated over the amount of the Delivery Fee otherwise payable for such calendar quarter shall be included in Service Provider’s invoice for the last Month of such calendar quarter and shall be paid by Producer to Service Provider. The following terms used in this Section 6.1(b) have the following meanings:

(i) “ Minimum Aggregate Fresh Water Volume ” for any calendar quarter means 70% of the sum of (i) the aggregate volumes of Fresh Water measured at the Fresh Water Measurement Points during such calendar quarter plus (ii) the aggregate volumes of Produced Water measured at the Produced Water Measurement Points during such calendar quarter.

(ii) “ Minimum Fresh Water Volume ” means, with respect to any Well and any calendar quarter, 70% of the sum of (i) the volumes of Fresh Water measured at the applicable Fresh Water Measurement Point during such calendar quarter and delivered as Frac Water to such Well plus (ii) the aggregate volumes of Produced Water measured at the applicable Produced Water Measurement Point and delivered as Frac Water to such Well during such calendar quarter.

(iii) “ Well Shortfall Volume ” means with respect to any calendar quarter the excess of the Minimum Fresh Water Volume for such Well over the actual volume of Fresh Water measured at the applicable Fresh Water Measurement Point and delivered as Frac Water to such Well.

(c) The Delivery Fee and the Supplemental Water Fee shall be adjusted up on an annual basis in proportion to the percentage change, from the preceding year, in the All Items Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average, 1982-84 = 100, as published by the United States Department of Labor, Bureau of Labor Statistics (“ CPI ”). Such adjustment shall be made effective upon the first Day of each Contract Year commencing

 

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in the Contract Year beginning in 2016, and shall reflect the percentage change in the CPI as it existed for June of the preceding Contract Year from the CPI for the second immediately preceding June; provided, however , that the Delivery Fee and the Supplemental Water Fee shall never be less than the initial fees stated in Section 6.1(a) and such fees shall not be increased by more than 4% in any given Contract Year.

(d) Service Provider shall have the right to pass through to Producer and its other customers, on a pro rata basis based on aggregate Monthly Fresh Water deliveries through the relevant facilities, any heating costs incurred by Service Provider to prevent pipeline freezing.

ARTICLE 7

CERTAIN RIGHTS AND OBLIGATIONS OF PARTIES

Section 7.1 Operational Control of Service Provider’s Facilities . Subject to the terms and conditions of this Agreement, Service Provider shall design, construct, own, operate, and maintain the Water Facilities at its sole cost and risk. Service Provider shall be entitled to full and complete operational control of its facilities and shall be entitled to operate and reconfigure its facilities in a manner consistent with its obligations under this Agreement.

Section 7.2 Maintenance . Service Provider shall be entitled, without liability, to interrupt its performance hereunder to perform necessary or desirable inspections, maintenance, testing, alterations, modifications, expansions, connections, repairs or replacements to its facilities as Service Provider deems necessary (“ Maintenance ”), with reasonable notice provided to Producer, except in cases of emergency where such notice is impracticable or in cases where the operations of Producer will not be affected. Before the beginning of each calendar year, Service Provider shall provide Producer in writing with a projected schedule of the Maintenance to be performed during the year and the anticipated date of such Maintenance. On or before the 10 th Day before the end of each Month, Service Provider shall provide Producer with its projected maintenance schedule for the following Month.

Section 7.3 Third Party Services; Capacity Allocations on the Fresh Water Facilities .

(a) Subject to this Section 7.3 and the other provisions of this Agreement, Service Provider has the right to contract with other Persons to provide services utilizing the Fresh Water Facilities on an Interruptible Service basis.

(b) To the extent that the Firm Service volumes of Fresh Water that Service Provider has agreed to make available on a particular System Segment, including the volumes that Service Provider is obligated to make available at the Frac Water Delivery Points on such System Segment pursuant to Section 3.1 , for any reason (including Maintenance, Force Majeure, or any foreseen or unforeseen reduction in capacity) exceed the capacity of such System Segment to make Fresh Water available or the availability of Fresh Water at the Take Points, then Service Provider shall first completely curtail all Interruptible Service volumes on such System Segment for Producer and other 3 rd party producer volumes at Service Provider’s discretion and second, if required, interrupt or curtail Firm Service volumes of Fresh Water on such System Segment made available to all Firm Service customers of Service Provider pro rata.

 

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(c) Except as otherwise provided in this Section 7.3 , Service Provider shall be free to use any Fresh Water present or available in the Fresh Water Facilities to satisfy its obligations to Producer and any third party and shall not be obligated to ensure that Fresh Water taken from any Take Point is utilized only to perform Services for Producer; provided, however, that Service Provider shall comply with any restrictions on the use of any Fresh Water taken from any of Producer’s Take Point and made available to any third party, and ensure that such third party also so complies, to the extent that Producer has informed Service Provider of such restrictions.

Section 7.4 Water Treatment Asset . If, to the extent permitted in accordance with Section 5.9 of the Purchase and Sale Agreement dated as of November 4, 2015 (the “PSA”), between Rice Energy and the Partnership, Producer or any of its Affiliates controlled by Rice Energy constructs or acquires and retains ownership of a Water Treatment Asset (as defined in the PSA), the Parties agree to negotiate in good faith and use reasonable efforts to agree on modifications to the applicable portions of this Agreement relating to Produced Water treated at such Water Treatment Asset and then utilized by Producer as Frac Water.

ARTICLE 8

DELIVERY RATES

Section 8.1 Delivery Rates . The Fresh Water System, including the Impoundment Facilities, will be designed to permit Fresh Water to be made available at the points on interconnection with the High-Rate Transfer Facilities at a minimum flow rate of 60 Barrels per minute, assuming that Fresh Water will be made available for hydraulic fracturing operations on only one Well per trunkline at any given time (the “ Minimum Flow Rate ”).

Section 8.2 Producer Facilities . Producer, at its own expense, directly or through subcontractors, shall construct, equip, maintain, and operate all facilities necessary to receive Frac Water at the Frac Water Delivery Points at the required rates of flow.

ARTICLE 9

NOMINATION

Section 9.1 Fresh Water Delivery Nominations . Producer shall regularly communicate to Service Provider the dates on which Producer plans to carry out hydraulic fracturing operations on each Well Pad and shall by notice to Service Provider not less than five Business Days in advance specify the dates on which Service Provider is to commence deliveries of Fresh Water at the Frac Water Delivery Points at such Well Pad.

Section 9.2 Changes in Fresh Water Delivery Rates . If Producer desires that Service Provider make Frac Water available on any Day at the Frac Water Delivery Point on any Well Pad at flow rates greater than or less than the Frac Water delivery rate specified for such Well Pad in the Connection Notice for such Well Pad, Producer may, on not less than 5 Business Days’ notice to Service Provider, increase or decrease the Frac Water delivery rate for such Well Pad.

 

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ARTICLE 10

MEASUREMENT EQUIPMENT AND PROCEDURES

Section 10.1 Equipment . Service Provider shall install, own, operate, and maintain Measurement Facilities to measure the volumes of Fresh Water made available on each Day at each Fresh Water Measurement Point and the volumes of Produced Water delivered by truck on each Day at each Produced Water Measurement Point for mixing with Fresh Water in the High-Rate Transfer Facilities. Producer shall have the right to install check Measurement Facilities at each Measurement Point. The changing and integration of the charts (if utilized for measurement purposes hereunder) and calibrating and adjusting of Service Provider’s Measurement Facilities at each Measurement Point shall be performed by Service Provider.

Section 10.2 Notice of Measurement Facilities Inspection and Calibration . Each Party shall give reasonable notice to the other Party in order that the other Party may, at its option, have representatives present to observe any reading, inspecting, testing, calibrating or adjusting of Measurement Facilities or other facilities or equipment used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement (including Producer’s or its hydraulic fracturing contractor’s equipment collecting data regarding Fresh Water volumes delivered hereunder). The official electronic data from such Measurement Facilities or other facilities or equipment shall remain the property of the owner thereof, but copies of such records shall, upon request, be submitted, together with calculations and flow computer configurations therefrom, to the requesting Party for inspection and verification.

Section 10.3 Measurement Accuracy Verification .

(a) Each Party shall verify the accuracy of all Measurement Facilities or other equipment or facilities used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement owned by such Party no less frequently than twice per year, unless a special test is requested pursuant to Section 10.4 .

(b) If, during any test of such Measuring Facilities, an adjustment or calibration error is found which results in an incremental adjustment to the calculated flow rate through each meter run in excess of two percent (2%) of the adjusted flow rate (whether positive or negative and using the adjusted flow rate as the percent error equation denominator), then any previous recordings of such equipment shall be corrected to zero error for any period during which the error existed (and which is either known definitely or agreed to by the Parties) and the total flow for the period redetermined in accordance with the provisions of Section 10.5 . If the period of error condition cannot be determined or agreed upon between the Parties, such correction shall be made over a period extending over the last one half of the time elapsed since the date of the prior test revealing the two percent (2%) error.

(c) If, during any test of any Measurement Facilities, an adjustment or calibration error is found which results in an incremental adjustment to the calculated hourly flow rate which does not exceed two percent (2%) of the adjusted flow rate, all prior recordings and electronic flow computer data shall be considered to be accurate for volume determination purpose.

 

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Section 10.4 Special Tests . In the event a Party desires a special test (a test not scheduled by a Party under the provisions of Section 10.3 ) of any Measurement Facilities used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement, seventy-two (72) hours advance notice shall be given to the other Party and both Parties shall cooperate to secure a prompt test of the accuracy of such equipment. If the Measurement Facilities tested are found to be within the range of accuracy set forth in Section 10.3(b) , then the Party that requested the test shall pay the costs of such special test including any labor and transportation costs pertaining thereto. If the Measurement Facilities tested are found to be outside the range of accuracy set forth in Section 10.3(b) , then the Party that owns such Measurement Facilities shall pay such costs and perform the corrections according to Section 10.5 .

Section 10.5 Metered Flow Rates in Error . If, for any reason, any Measurement Facilities used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement are (i) out of adjustment, (ii) out of service, or (iii) out of repair and the total calculated flow rate through each meter run is found to be in error in excess of two percent (2%) of the adjusted flow rate as described in Section 10.3 , the total volumes of Fresh Water or Produced Water, as applicable, made available shall be determined in accordance with the first of the following methods which is feasible:

(a) By using the registration of any mutually agreeable check metering facility, if installed and accurately registering (subject to testing as provided for in Section 10.3 );

(b) Where multiple meter runs exist in series, by calculation using the registration of such meter run equipment; provided that they are measuring Fresh Water or Produced Water, as applicable, in common with the faulty metering equipment, are not controlled by separate regulators, and are accurately registering;

(c) By correcting the error by re-reading of the official data, or by straightforward application of a correcting factor to the volumes recorded for the period (if the net percentage of error is ascertainable by calibration, tests or mathematical calculation); or

(d) By estimating the volumes, based upon volumes made available during periods of similar conditions when the meter was registering accurately.

Section 10.6 Record Retention . The Party owning the Measurement Facilities shall retain and preserve all test data, flow metering data, and similar records for any calendar year for a period of at least twenty-four (24) Months following the end of such calendar year unless Applicable Law requires a longer time period or the Party has received written notification of a dispute involving such records, in which case records shall be retained until the related issue is resolved.

 

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ARTICLE 11

NOTICES

Section 11.1 Notices . Unless otherwise provided herein, any notice, request, invoice, statement, or demand which either Party desires to serve upon the other regarding this Agreement shall be made in writing and shall be considered as delivered (i) when hand delivered, or (ii) when delivery is confirmed by pre-paid delivery service (such as FedEx, UPS, DHL or a similar delivery service), or (iii) if mailed by United States certified mail, postage prepaid, three (3) Business Days after mailing, or (iv) if sent by facsimile transmission, when receipt is confirmed by the equipment of the transmitting Party, or (v) when sent via email; provided, if sent by email after normal business hours or if receipt of a facsimile transmission is confirmed after normal business hours, receipt shall be deemed to be the next Business Day. Notwithstanding the foregoing, if a Party desires to serve upon the other a notice of default under this Agreement, or if Producer desires to serve upon Service Provider a Connection Notice, the delivery of such notice shall be considered effective under this Section 11.1 only if delivered by any method set forth in items (i) through (iv) above. Any notice shall be given to the other Party at the following address, or to such other address as either Party shall designate by written notice to the other:

 

Producer:    RICE DRILLING B LLC
   400 Woodcliff Drive
   Canonsburg, PA 15317
   Attn: Jide Famuagun
   Phone: 724-825-2600
   Email: Jide.Famuagun@RiceEnergy.com
With copy to:    For gas control, nominations & balancing:
   Attn: Greg Nichols
   Phone: 724-531-4920
   Email: Greg.Nichols@RiceEnergy.com
   For accounting, financial, and legal:
   Attn: Kate Romano
   Phone: 724-338-2129
   Email: Kate.Romano@RiceEnergy.com
   All notices related to non-routine business matters, including all notices related to legal claims and other legal proceedings, shall also be sent to the following:
   Attn: Will Jordan
   Phone: 832-708-3432
   Email: Will.Jordan@RiceEnergy.com
Service Provider:    RICE WATER SERVICES (PA) LLC
   400 Woodcliff Drive
   Canonsburg, PA 15317
   Attn: Mark Griffin
   Phone: 412-616-8871
   Email: Mark.Griffin@RiceEnergy.com

 

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With copy to:    For gas control, nominations & balancing:
   Attn: Greg Nichols
   Phone: 724-531-4920
   Email: Greg.Nichols@RiceEnergy.com
   For accounting, financial, and legal:
   Attn: Kate Romano
   Phone: 724-338-2129
   Email: Kate.Romano@RiceEnergy.com
   All notices related to non-routine business matters, including all notices related to legal claims and other legal proceedings, shall also be sent to the following:
   Attn: Will Jordan
   Phone: 832-708-3432
   Email: Will.Jordan@RiceEnergy.com

ARTICLE 12

PAYMENTS

Section 12.1 Invoices . Not later than the tenth (10th) Day following the end of each Month, Service Provider shall provide Producer with a detailed statement setting forth the volumes of Fresh Water made available during such Month at the Frac Water Delivery Points and the Delivery Fee with respect to such Month, the volumes of supplemental Fresh Water delivered to the Impoundment Facilities by Producer as contemplated by Section 3.4 and the aggregate Supplemental Water Fee, the Reimbursable Produced Water Services Costs, and the net amount due to Service Provider, together with measurement summaries and all relevant supporting documentation, to the extent available on such tenth (10 th ) Day (with Service Provider being obligated to deliver any such supporting documentation that is not available on such tenth (10 th ) Day as soon as it becomes available). Producer shall make payment to Service Provider by the last Business Day of the Month in which such invoice is received. Such payment shall be made by wire transfer pursuant to wire transfer instructions delivered by Service Provider to Producer in writing from time to time. If any overcharge or undercharge in any form whatsoever shall at any time be found and the invoice therefor has been paid, Service Provider shall refund any amount of overcharge, and Producer shall pay any amount of undercharge, within thirty (30) Days after final determination thereof, provided, however, that no retroactive adjustment will be made beyond a period of twenty-four (24) Months from the date of a statement hereunder.

Section 12.2 Right to Suspend on Failure to Pay . If any undisputed amount due hereunder remains unpaid for sixty (60) Days after the due date, Service Provider shall have the right to suspend or discontinue Services hereunder until any such past due amount is paid.

 

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Section 12.3 Audit Rights . Either Party, on not less than thirty (30) Days prior written notice to the other Party, shall have the right at its expense, at reasonable times during normal business hours, but in no event more than twice in any period of twelve (12) consecutive Months, to audit the books and records of the other Party to the extent necessary to verify the accuracy of any statement, allocation, measurement, computation, charge, payment made under, or obligation or right pursuant to this Agreement. The scope of any audit shall be limited to transactions affecting Fresh Water volumes hereunder and shall be limited to the twenty-four (24) Month period immediately prior to the Month in which the notice requesting an audit was given. All statements, allocations, measurements, computations, charges, or payments made in any period prior to the twenty-four (24) Month period immediately prior to the Month in which the audit is requested shall be conclusively deemed true and correct and shall be final for all purposes.

Section 12.4 Payment Disputes . In the event of any dispute with respect to any payment hereunder, Producer shall make timely payment of all undisputed amounts, and Service Provider and Producer will use good faith efforts to resolve the disputed amounts within sixty (60) Days following the original due date. Any amounts subsequently resolved shall be due and payable within ten (10) Days of such resolution.

Section 12.5 Interest on Late Payments . In the event that Producer shall fail to make timely payment of any sums, except those contested in good faith or those in a good faith dispute, when due under this Agreement, interest will accrue at an annual rate equal to ten percent (10%) from the date payment is due until the date payment is made.

Section 12.6 Excused Performance . Service Provider will not be required to perform or continue to perform Services, and Producer shall not be obligated to obtain Fresh Water under this Agreement, in the event:

(a) the other Party has voluntarily filed for bankruptcy protection under any chapter of the United States Bankruptcy Code;

(b) the other Party is the subject of an involuntary petition of bankruptcy under any chapter of the United States Bankruptcy Code, and such involuntary petition has not been settled or otherwise dismissed within ninety (90) Days of such filing; or

(c) the other Party otherwise becomes insolvent, whether by an inability to meet its debts as they come due in the ordinary course of business or because its liabilities exceed its assets on a balance sheet test; and/or however such insolvency may otherwise be evidenced.

ARTICLE 13

FORCE MAJEURE

Section 13.1 Suspension of Obligations . In the event a Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than the obligation to make payments then or thereafter due hereunder, and such Party promptly gives notice and reasonably full particulars of such Force Majeure in writing to the other Party promptly after the occurrence of the cause relied on, then the obligations of the Party giving such notice, so far as and to the extent that they are affected by such Force Majeure, shall be

 

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suspended during the continuance of any inability so caused, but for no longer period, and such cause shall so far as reasonably possible be remedied with all reasonable dispatch by the Party claiming Force Majeure.

Section 13.2 Definition of Force Majeure . The term “ Force Majeure ” as used in this Agreement shall mean any cause or causes not reasonably within the control of the Party claiming relief and which, by the exercise of reasonable diligence, such Party is unable to prevent or overcome, including acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, acts of terror, sabotage, wars, blockades, military action, insurrections, riots, epidemics, landslides, subsidence, lightning, earthquakes, fires, storms or storm warnings, crevasses, floods, washouts, civil disturbances, explosions, breakage or accident to wells, machinery, equipment or lines of pipe, the necessity for testing or making repairs or alterations to wells, machinery, equipment or lines of pipe, freezing of wells, equipment or lines of pipe, inability of any Party hereto to obtain, after the exercise of reasonable diligence, necessary materials, supplies, or Governmental Approvals, any action or restraint by any Governmental Authority (so long as the Party claiming relief has not applied for or assisted in the application for, and has opposed where and to the extent reasonable, such action or restraint, and as long as such action or restraint is not the result of a failure by the claiming Party to comply with any Applicable Law).

Section 13.3 Settlement of Strikes and Lockouts . It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the Party affected thereby, and that 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 sole discretion of the Party having the difficulty.

Section 13.4 Payments for Fresh Water Made Available . Notwithstanding the foregoing, it is specifically understood and agreed by the Parties that an event of Force Majeure will in no way affect or terminate Producer’s obligation to make payment for Services performed.

ARTICLE 14

INDEMNIFICATION

Section 14.1 Service Provider . Subject to the terms of this Agreement, including Section 17.8 ,

(a) Service Provider shall release, indemnify, defend, and hold harmless Producer and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Service Provider, but only to the extent that liability for such claims and losses is not otherwise allocated pursuant to the indemnification provisions of Section 4.3(a) , Section 4.4 , Section 14.1(b) , Section 14.2(b) , or Article 15 , and (ii) subject to Section 3.4(b) , any breach of this Agreement by Service Provider.

 

27


(b) Service Provider shall release, indemnify, defend, and hold harmless Producer and its joint interest owners and Producer’s contractors and subcontractors of any tier and its and their Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees (collectively, the “ Producer Group ”) from and against all claims and losses for bodily injury to or death of any individual in the Service Provider Group or damage to or loss of the property of any Person in the Service Provider Group in each case arising while such individual or property is on a Well Pad or any property of the Producer adjacent to a Well Pad in connection with the performance by Service Provider of the High-Rate Transfer Services or other services at such Well Pad, including in each case claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding in each case claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party.

Section 14.2 Producer . Subject to the terms of this Agreement, including Section 17.8 ,

(a) Producer shall release, indemnify, defend, and hold harmless Service Provider and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Producer, but only to the extent that liability for such claims and losses is not otherwise allocated pursuant to the indemnification provisions of Section 4.3(a) , Section 4.4 , Section 14.1(b) , Section 14.2(b) , or Article 15 , and (ii) any breach of this Agreement by Producer.

(b) Producer shall release, indemnify, defend, and hold harmless Service Provider and its contractors and subcontractors of any tier and its and their Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees (collectively, the “ Service Provider Group ”) from and against all claims and losses for bodily injury to or death of any individual in the Producer Group or damage to or loss of the property of any Person in the Producer Group in each case arising while such individual or property is on a Well Pad or any property of the Producer adjacent to a Well Pad in connection with the operations of Producer at such Well Pad, including in each case claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding in each case claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party.

ARTICLE 15

CUSTODY AND TITLE

Section 15.1 Custody of Fresh Water . As among the Parties, Producer shall be in custody, control and possession of Fresh Water after such Fresh Water is made available as or as part of the Frac Water at the Frac Water Delivery Points and shall be in custody, control, and possession of Fresh Water that it delivers to the Impoundment Facilities as contemplated in Section 3.4 until such Fresh Water is delivered to the Impoundment Facilities. As among the Parties, Service Provider shall be in custody, control and possession of all Fresh Water in the Fresh Water Facilities at all other times. Subject to Section 4.4 , Section 14.1(b) , and Section 14.2(b) , the Party having custody and control of Fresh Water under the terms of this Agreement shall be responsible for, and shall defend, indemnify, release and hold the other Party and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees harmless from and against, all claims and losses of whatever kind and nature for anything that

 

28


may happen or arise with respect to such Fresh Water when such Fresh Water is in its custody and control, including losses resulting from any negligent acts or omissions of any indemnified party, but excluding any losses to the extent caused by or arising out of the negligence, gross negligence, or willful misconduct of the indemnified party.

Section 15.2 Custody of Produced Water . As among the Parties, Producer shall be in custody, control and possession of Produced Water until such Produced Water is received by Service Provider or its subcontractors at the Produced Water Receipt Points and shall be in custody, control, and possession of Produced Water after such Produced Water is made available as part of the Frac Water at the Frac Water Delivery Points. As among the Parties, Service Provider shall be in custody, control and possession of all Produced Water from and after its receipt by Service Provider or its subcontractors at the Produced Water Receipt Points, except for Produced Water made available as part of the Frac Water at the Frac Water Delivery Points. Subject to Section 4.4 , Section 14.1(b) , and Section 14.2(b) , the Party having custody and control of Produced Water under the terms of this Agreement shall be responsible for, and shall defend, indemnify, release and hold the other Party and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees harmless from and against, all claims and losses of whatever kind and nature for anything that may happen or arise with respect to such Produced Water when such Produced Water is in its custody and control, including claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party.

Section 15.3 Title to Produced Water . Service Provider shall take title to all Produced Water received by Service Provider or its subcontractors at the Produced Water Receipt Points, other than Produced Water that is to be delivered to Producer’s Produced Water tanks at a Well Pad in accordance with Producer’s instructions, title to which shall be retained by Producer. Producer shall ensure that such Produced Water is free of all liens arising by, through, or under Producer, other than liens arising by operation of law.

ARTICLE 16

PAYMENTS FOR FRESH WATER; TAXES

Section 16.1 Payments for Fresh Water; Taxes . To the extent that any Person is entitled to any payment in respect of Fresh Water taken from any Take Point, including any taxes, Service Provider shall pay or cause to be paid and agrees to hold Producer harmless as to the payment of all such payments or taxes. Service Provider shall pay or cause to be paid all taxes, charges and assessments of every kind and character required by statute or by order of Governmental Authorities with respect to the Fresh Water Facilities. Neither Party shall be responsible nor liable for any taxes or other statutory charges levied or assessed against the facilities of the other Party, including ad valorem tax (however assessed), used for the purpose of carrying out the provisions of this Agreement or against the net worth or capital stock of such Party. Notwithstanding the foregoing, to the extent that such payments or taxes relate to Fresh Water that is made available to a third party pursuant to Section 7.3(c) , Service Provider shall look only to such third party, and not to Producer, for payment or reimbursement of such payments and taxes to the extent relating to the Fresh Water made available to such third party, and shall use reasonable efforts to ensure that Fresh Water not subject to such payments and taxes is made available to Producer in preference to third parties.

 

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ARTICLE 17

MISCELLANEOUS

Section 17.1 Rights . The failure of either Party to exercise any right granted hereunder shall not impair nor be deemed a waiver of that Party’s privilege of exercising that right at any subsequent time or times.

Section 17.2 Applicable Laws . This Agreement is subject to all valid present and future laws, regulations, rules and orders of Governmental Authorities now or hereafter having jurisdiction over the Parties, this Agreement, or the services performed or the facilities utilized under this Agreement. To the extent that the performance of the Services by Service Provider shall at any point in time become prohibited or restricted by Applicable Laws or the provisions of any Governmental Approval, Service Provider shall be relieved from its obligations to perform such Services.

Section 17.3 Governing Law; Jurisdiction .

(a) This Agreement shall be governed by, construed, and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to choice of law principles.

(b) The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in the City and County of Washington, Pennsylvania, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.

Section 17.4 Successors and Assigns .

(a) This Agreement shall extend to and inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns.

(b) To the extent any Affiliate of Producer acquires any Interests in the Service Area or any water facilities, Producer shall cause such Affiliate to comply with the obligations of Producer under Article 2 of this Agreement with respect to its Interests and to enter into an agreement with Service Provider substantially the same as this Agreement.

(c) Except as set forth in Section 17.4(d) and Section 17.4(e) , neither Party shall have the right to assign its respective rights and obligations in whole or in part under this Agreement without the prior written consent of the other Party, and any assignment or attempted assignment made otherwise than in accordance with this Section 17.4 shall be null and void ab initio .

 

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(d) Service Provider may perform all services under this Agreement itself using its own water facilities and/or perform any or all such services through third parties, in which case references herein to the relevant Water Facilities shall be deemed to be references to such facilities of the relevant third party.

(e) Notwithstanding the foregoing clause (d):

(i) Service Provider shall have the right to assign its rights under this Agreement, in whole or in part, as applicable, without the consent of Producer if such assignment is made to any Person to which the Water Facilities or any part thereof has been or will be transferred that assumes in writing all of Service Provider’s obligations hereunder (if applicable, to the extent that part of the Water Facilities being transferred to such Person) and is (A) an Affiliate of Service Provider or (B) a Person to which the Water Facilities has been or will be transferred who (1) hires (or retains, as applicable) operating personnel who are then operating the Water Facilities (or has similarly experienced operating personnel itself), (2) has operated for at least two (2) years prior to such assignment systems similar to the Water Facilities, or (3) contracts for the operation of the Water Facilities with another Person that satisfies either of the foregoing conditions (1) or (2) in this clause (B), provided in the case of an assignment pursuant to this clause (B), the assignee has creditworthiness as reasonably determined by Producer that is equal to the higher of Service Provider’s creditworthiness as of the Effective Date and Service Provider’s creditworthiness as of the date of the assignment.

(ii) Service Provider shall have the right to grant a security interest in this Agreement to a lender or other debt provider (or trustee or agent on behalf of such lender) of Service Provider.

(iii) Producer shall have the right to assign its rights under this Agreement, in whole or in part, as applicable, without the consent of Service Provider, to any Person to which it sells, assigns, or otherwise transfers all or any portion of the Service Area Properties and who (A) who assumes in writing all of Producer’s obligations hereunder (if applicable, to the extent of the Service Area Properties being transferred to such Person) and (B) whose creditworthiness is equal to or greater than the greater of Producer’s credit rating as of the Effective Date and Producer’s creditworthiness as of the date of the assignment.

(f) Upon an assignment by Service Provider in accordance with Section 17.4(e)(i)(B) Service Provider shall be released from its obligations under this Agreement to the extent of such assignment. Upon an assignment by Producer in accordance with Section 17.4(e)(iii) , (i) Producer shall be released from its obligations under this Agreement to the extent of such assignment and (ii) except in the case of an assignment to an Affiliate, Guarantor’s obligations under the Guaranty will terminate as to such obligations to the extent of such assignment.

Section 17.5 Severability . If any provision of this Agreement is determined to be void or unenforceable, in whole or in part, then (i) such provision shall be deemed inoperative to the extent it is deemed void or unenforceable, (ii) the Parties agree to enter into such amendments to

 

31


this Agreement in order to give effect, to the greatest extent legally possible, to the provision that is determined to be void or unenforceable and (iii) the other provisions of this Agreement in all other respects shall remain in full force and effect and binding and enforceable to the maximum extent permitted by Applicable Law; provided, however, that in the event that a material term under this Agreement is so modified, the Parties will, timely and in good faith, negotiate to revise and amend this Agreement in a manner which preserves, as closely as possible, each Party’s business and economic objectives as expressed by the Agreement prior to such modification.

Section 17.6 Confidentiality .

(a) Confidentiality . Except as otherwise provided in this Section 17.6 , each Party agrees that it shall maintain all terms and conditions of this Agreement, and all information disclosed to it by the other Party or obtained by it in the performance of this Agreement and relating to the other Party’s business (including Development Plans, Fresh Water Facilities Plans, and all data relating to the production of Producer) (collectively, “ Confidential Information ”) in strictest confidence, and that it shall not cause or permit disclosure of this Agreement or its existence or any provisions contained herein without the express written consent of the other Party.

(b) Permitted Disclosures . Notwithstanding Section 17.6(a) disclosures of any Confidential Information may be made by either Party (i) to the extent necessary for such Party to enforce its rights hereunder against the other Party; (ii) to the extent to which a Party is required to disclose all or part of this Agreement by a statute or by the order or rule of a Governmental Authority exercising jurisdiction over the subject matter hereof, by order, by regulations, or by other compulsory process (including deposition, subpoena, interrogatory, or request for production of documents); (iii) to the extent required by the applicable regulations of a securities or commodities exchange; (iv) to a third person in connection with a proposed sale or other transfer of a Party’s interest in this Agreement, provided such third person agrees in writing to be bound by the terms of this Section 17.6 ; (v) to its own directors, officers, employees, agents and representatives; (vi) to an Affiliate; (vii) to financial advisors, attorneys, and banks, provided that such Persons are subject to a confidentiality undertaking consistent with this Section 17.6(b) , or (viii) except for information disclosed pursuant to Article 3 of this Agreement, to a royalty, overriding royalty, net profits or similar owner burdening production from the Service Area Properties, provided such royalty, overriding royalty, net profits or similar owner, agrees in writing to be bound by the terms of this Section 17.6 .

(c) Notification . If either Party is or becomes aware of a fact, obligation, or circumstance that has resulted or may result in a disclosure of any of the terms and conditions of this Agreement authorized by Section 17.6(b)(ii) or (iii) , it shall so notify in writing the other Party promptly and shall provide documentation or an explanation of such disclosure as soon as it is available.

(d) Party Responsibility . Each Party shall be deemed solely responsible and liable for the actions of its directors, officers, employees, agents, representatives and Affiliates for maintaining the confidentiality commitments of this Section 17.6 .

 

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(e) Public Announcements . The Parties agree that prior to making any public announcement or statement with respect to this Agreement or the transaction represented herein permitted under this Section 17.6 , the Party desiring to make such public announcement or statement shall provide the other Party with a copy of the proposed announcement or statement prior to the intended release date of such announcement. The other Party shall thereafter consult with the Party desiring to make the release, and the Parties shall exercise their reasonable best efforts to (i) agree upon the text of a joint public announcement or statement to be made by both such Parties or (ii) in the case of a statement to be made solely by one Party, obtain approval of the other Party to the text of a public announcement or statement. Nothing contained in this Section 17.6 shall be construed to require either Party to obtain approval of the other Party to disclose information with respect to this Agreement or the transaction represented herein to any Governmental Authority to the extent required by Applicable Law or necessary to comply with disclosure requirements of the Securities and Exchange Commission, New York Stock Exchange, or any other regulated stock exchange.

(f) Survival . The provisions of this Section 17.6 shall survive any expiration or termination of this Agreement; provided that other than with respect to information disclosed pursuant to Article 3 , as to which such provisions shall survive indefinitely, such provisions shall survive only a period of one (1) year.

Section 17.7 Entire Agreement, Amendments and Waiver . This Agreement, including all exhibits hereto, integrates the entire understanding between the Parties with respect to the subject matter covered and supersedes all prior understandings, drafts, discussions, or statements, whether oral or in writing, expressed or implied, dealing with the same subject matter. This Agreement amends and restates in its entirety and supersedes the Original Agreement. This Agreement may not be amended or modified in any manner except by a written document signed by the Parties that expressly amends this Agreement. No waiver by either Party of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless expressly provided. No waiver shall be effective unless made in writing and signed by the Party to be charged with such waiver.

Section 17.8 Limitation of Liability . NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE BREACH THEREOF OR UNDER ANY OTHER THEORY OF LIABILITY, WHETHER TORT, NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT, WARRANTY, INDEMNITY OR OTHERWISE, INCLUDING LOSS OF USE, INCREASED COST OF OPERATIONS, LOSS OF PROFIT OR REVENUE, OR BUSINESS INTERRUPTIONS; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION SHALL NOT APPLY TO ANY DAMAGE CLAIM ASSERTED BY OR AWARDED TO A THIRD PARTY FOR WHICH A PARTY WOULD OTHERWISE BE LIABLE UNDER ANY INDEMNIFICATION PROVISION SET FORTH HEREIN.

 

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Section 17.9 Headings . The headings and captions in this Agreement have been inserted for convenience of reference only and shall not define or limit any of the terms and provisions hereof.

Section 17.10 Rights and Remedies . Except as otherwise provided in this Agreement, each Party reserves to itself all rights, counterclaims, other remedies and defenses that such Party is or may be entitled to arising from or out of this Agreement or as otherwise provided by Applicable Law.

Section 17.11 No Partnership . Nothing contained in this Agreement shall be construed to create an association, trust, partnership, or joint venture or impose a trust, fiduciary or partnership duty, obligation or liability on or with regard to either Party.

Section 17.12 Rules of Construction . In construing this Agreement, the following principles shall be followed:

(a) no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Agreement;

(b) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(c) the word “includes” and its syntactical variants mean “includes, but is not limited to,” “includes without limitation” and corresponding syntactical variant expressions;

(d) the plural shall be deemed to include the singular and vice versa, as applicable; and

(e) references to Section shall be references to Sections of this Agreement.

Section 17.13 No Third Party Beneficiaries . This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns, and shall not inure to the benefit of any other Person whomsoever or whatsoever, it being the intention of the Parties that no third Person shall be deemed a third party beneficiary of this Agreement.

Section 17.14 Further Assurances . Each Party shall take such acts and execute and deliver such documents as may be reasonably required to effectuate the purposes of this Agreement.

Section 17.15 Counterpart Execution . This Agreement may be executed in any number of counterparts, each of which shall be considered an original, and all of which shall be considered one and the same instrument.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first set forth above.

 

RICE DRILLING B LLC
 
By:  

/s/ Daniel J. Rice IV

 

Daniel J. Rice IV

Chief Executive Officer

RICE WATER SERVICES (PA) LLC
 
By:  

/s/ Rob Wingo

  Rob Wingo
  Senior Vice President, Chief Operating Officer

Water Services Agreement

Signature Page


EXHIBIT A

FORM OF CONNECTION NOTICE

Rice Water Services (PA) LLC

400 Woodcliff Drive

Canonsburg, PA 15317

 

  Re: Amended and Restated Water Services Agreement dated December __, 2015, between Rice Drilling B LLC and Rice Water Services (PA) LLC (the “ Water Services Agreement ”)

Ladies and Gentlemen:

This is a Connection Notice for purposes of the Water Services Agreement. Capitalized terms used but not defined in this Connection Notice have the meanings given such terms in the Water Services Agreement.

Service Provider is hereby notified that Producer is planning to drill, complete, and hydraulically fracture the Planned Wells at the Well Pads by the Target Commencement Dates, in each case as set forth below and will require Frac Water to be delivered to the Frac Water Delivery Points at such Well Pads at the rates of flow stated below for the number of days after the Target Commencement Date as set forth below:

 

Planned Well

 

Well Pad

 

Target Commencement Date

   Rates of Flow and
Number of Days
      

 

Very truly yours,
 
RICE DRILLING B LLC
 
By:  

 

Name:  

 

Title:  

 

 

 

Exhibit A – Page 1


EXHIBIT C

INITIAL REQUIRED CONNECTION WELLS

(as of 11/1/2015)

 

Pad Name

   # of
Wells
on Pad
     Target
Commencement
Date
 

Wiggin Out South

     5         11/1/2015   

Rumpelstiltskin South

     4         12/30/2015   

Iron Man North

     4         5/2/2016   

Fowler North

     5         6/8/2016   

Brova South

     4         10/11/2016   

Shotski South

     4         5/30/2017   

 

Exhibit C


EXHIBIT D

RICE GUARANTY

This Parent Guaranty (this “ Agreement ”) dated as of November 4, 2015 is made by Rice Energy Inc., a Delaware corporation (the “ Guarantor ”), in favor of each of Rice Water Services (OH) LLC, a Delaware limited liability company (“ Rice OH ”), and Rice Water Services (PA) LLC, a Delaware limited liability company (“ Rice PA ” and, together with Rice OH, each a “ Beneficiary ” and together the “ Beneficiaries ”), as set forth below. The Guarantor and the Beneficiaries are sometimes referred to together herein as the “ Parties ” and each individually as a “ Party .”

INTRODUCTION

WHEREAS, this Agreement is being executed and delivered in connection with that certain (i) Amended & Restated Water Services Agreement, by and between Rice Drilling D LLC, a Delaware limited liability company (“ Drilling D ”), and Rice OH, dated as of November 4, 2015 (the “ Rice OH Agreement ”); and (ii) Amended & Restated Water Services Agreement, by and between Rice Drilling B LLC, a Delaware limited liability company (“ Drilling B ”), and Rice PA, dated as of November 4, 2015 (the “ Rice PA Agreement ” and, together with the Rice OH Agreement, the “ Water Services Agreements ” and each a “ Water Services Agreement ”);

WHEREAS, as of the date hereof, each of Drilling B and Drilling D is a subsidiary of the Guarantor, and the Guarantor acknowledges that (a) it will substantially benefit from the Water Services Agreements and (b) this Agreement is necessary or convenient to the conduct, promotion or attainment of the business of each of Drilling B and Drilling D;

WHEREAS, (i) to induce Rice OH to enter into the Rice OH Agreement, Rice OH desires that the Guarantor guarantee the performance of Drilling D under the Rice OH Agreement and (ii) to induce Rice PA to enter into the Rice PA Agreement, Rice PA desires that the Guarantor guarantee the performance of Drilling B under the Rice PA Agreement, each upon the terms and conditions set forth herein; and

WHEREAS, the Guarantor desires to guarantee the performance of (i) Drilling D under the Rice OH Agreement and (ii) Drilling B under the Rice PA Agreement, each upon the terms and conditions set forth herein.

AGREEMENT

For and in consideration of the premises and mutual covenants herein contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the Guarantor hereby stipulates and agrees as follows:

1. The Guaranty .

(a) Subject to the last sentence of Section 1(c) , the Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Rice OH the full and timely performance and discharge (including the payment of money) by Drilling D of all

 

Exhibit D – Page 1


obligations and liabilities of Drilling D now existing or hereafter arising under the Rice OH Agreement (the “ Drilling D Guaranteed Obligations ”) and hereby agrees that if Drilling D shall fail to (i) pay any amount when and as the same shall be due and payable by Drilling D to or for the benefit of Rice OH or any subsidiary thereof or (ii) timely perform and discharge in full any other obligation or liability in accordance with the terms of the Rice OH Agreement, the Guarantor shall forthwith pay to or for the benefit of Rice OH or any subsidiary thereof, as applicable, such amount or perform and discharge, or cause to be performed and discharged, any such obligation or liability, as the case may be, as such payment or performance and discharge is required to be made or done by Drilling D pursuant to the terms thereof.

(b) Subject to the last sentence of Section 1(c) , the Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Rice PA the full and timely performance and discharge (including the payment of money) by Drilling B of all obligations and liabilities of Drilling B now existing or hereafter arising under the Rice PA Agreement (the “ Drilling B Guaranteed Obligations ” and, together with the Drilling D Guaranteed Obligations, the “ Guaranteed Obligations ”) and hereby agrees that if Drilling B shall fail to (i) pay any amount when and as the same shall be due and payable by Drilling B to or for the benefit of Rice PA or any subsidiary thereof or (ii) timely perform and discharge in full any other obligation or liability in accordance with the terms of the Rice PA Agreement, the Guarantor shall forthwith pay to or for the benefit of Rice PA or any subsidiary thereof, as applicable, such amount or perform and discharge, or cause to be performed and discharged, any such obligation or liability, as the case may be, as such payment or performance and discharge is required to be made or done by Drilling B pursuant to the terms thereof.

(c) Except to the extent otherwise expressly provided herein, each of the guarantees set forth in Sections (1)(a) and (1)(b)  is an absolute, present and continuing guarantee of payment and of performance of obligations and not of collectibility and is in no way conditional or contingent upon any attempt to collect from Drilling B or Drilling D, as applicable, or upon any other action, occurrence or circumstance whatsoever. It shall not be necessary for any Beneficiary in order to enforce such payment or performance by the Guarantor, first to institute suit or exhaust its remedies against Drilling B or Drilling D, as applicable, the Guarantor or any other person or entity liable with respect to any Guaranteed Obligations.

(d) Notwithstanding any provision of this Agreement to the contrary, as to any Guaranteed Obligation which the Guarantor is called upon to pay, perform, or discharge, Guarantor reserves to itself the right to assert any and all claims, counterclaims, defenses, setoffs and other rights to the same extent that Drilling D or Drilling B, as applicable, could assert any such claim, counterclaim, defense, setoff or other right against the applicable Beneficiary with respect to such Guaranteed Obligation, except for those arising out of any of the events described in Section 2(d) hereof.

2. Obligations Absolute . The obligations of the Guarantor with respect to each Beneficiary hereunder shall be absolute, continuing and unconditional and shall not be released, discharged or in any way affected by any of the following:

 

 

Exhibit D – Page 2


(a) any amendment to, modification of, or supplement to the applicable Water Services Agreement or any assignment or transfer of any rights or obligations thereunder;

(b) any extension of the time for the payment of all or any portion of any sums payable under the applicable Water Services Agreement or the extension of time for the performance of any obligations under, arising out of or in connection with the applicable Water Services Agreement;

(c) any failure, omission, delay or lack of diligence on the part of the applicable Beneficiary or any other person or entity to enforce, assert or exercise, or any waiver of, any right, privilege, power or remedy conferred on such Beneficiary or any other person or entity by the applicable Water Services Agreement, or any action on the part of such Beneficiary or such other person or entity granting indulgence or extension of any kind;

(d) any bankruptcy, insolvency, readjustment, composition, liquidation, dissolution or similar proceeding or any other defense that may arise in connection with any such proceeding with respect to Drilling B, Drilling D, the Guarantor or any other person or entity;

(e) any change in the corporate, limited liability company or partnership structure, existence or ownership of Drilling B (as applicable), Drilling D (as applicable), the Guarantor (as applicable), Rice OH (as applicable) or Rice PA (as applicable), or any sale, lease or transfer of any or all of the assets of Drilling B (as applicable), Drilling D (as applicable), the Guarantor (as applicable), Rice OH (as applicable) or Rice PA (as applicable) to any person or entity;

(f) any failure on the part of, as applicable, Drilling B or Drilling D for any reason to comply with or perform any of the terms of any other agreement with the Guarantor;

(g) any law, regulation or order hereafter in effect in any jurisdiction affecting any of the rights under or terms of the applicable Water Services Agreement; or

(h) any other circumstance that might otherwise constitute a legal or equitable discharge of the Guarantor.

3. Waiver . With respect to each Beneficiary, the Guarantor unconditionally waives, to the fullest extent permitted by law: (a) notice of acceptance hereof, of any action taken or omitted in reliance hereon, of demand, and of any defaults by, as applicable, Drilling B or Drilling D in the payment or performance of the applicable Guaranteed Obligations, and of any of the matters referred to in Section 2 ; (b) all notices that may otherwise be required by statute, rule of law or otherwise to preserve any of the rights of such Beneficiary against the Guarantor, including presentment to or demand for payment from Drilling B (as applicable), Drilling D (as applicable) or the Guarantor, or notice to, as applicable, Drilling B or Drilling D of claims with a court in the event of the bankruptcy of, as applicable, Drilling B or Drilling D; (c) any right to the enforcement, assertion or exercise by such Beneficiary of any right, power or remedy conferred in this Agreement or the applicable Water Services Agreement; (d) any requirement of

 

Exhibit D – Page 3


diligence on the part of such Beneficiary; and (e) any other act or omission (including any delay by such Beneficiary or any other person or entity in the taking of any action) that might in any manner or to any extent vary the risk of the Guarantor or that might otherwise operate as a discharge of the Guarantor.

4. Reinstatement of Guaranty . This Agreement shall continue to be effective, or be reinstated, as the case may be, if and to the extent at any time any payment, in whole or in part, made by any of Drilling B, Drilling D or the Guarantor to any Beneficiary in respect of any Guaranteed Obligation is rescinded or must otherwise be restored or returned by such Beneficiary upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of such entity, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to any such entity or any substantial part of its property, or otherwise, all as though such payments had not been made and, to the extent permitted by applicable law, in such event, the Guarantor shall pay such Beneficiary an amount equal to the payment that has been rescinded or returned. No Beneficiary shall be required to litigate or otherwise dispute its obligation to make such repayments if it in good faith believes that such obligation exists.

5. Subrogation . The Guarantor hereby agrees not to assert or enforce any right of contribution, reimbursement, indemnity, subrogation or any other right to payment from Drilling B or Drilling D as a result of the Guarantor’s performance of its obligations pursuant to this Agreement or any other claim Guarantor may have against either Drilling B or Drilling D until all Guaranteed Obligations are performed or paid in full.

6. Representations . The Guarantor represents, as of the date hereof, as follows:

(a) the Guarantor has received, or will receive, direct or indirect benefit from the making of this Agreement and the Guaranteed Obligations;

(b) the Guarantor is familiar with, and has independently reviewed, the books and records regarding the financial condition of both Drilling B and Drilling D and is familiar with the value of any and all collateral intended to be created as security for the payment of the Guaranteed Obligations, but the Guarantor is not relying on such financial condition, the collateral or the agreement of any other party to become a surety as an inducement to enter into this Agreement;

(c) except to the extent contained in the Water Services Agreements, neither Beneficiary nor any other party has made any representation, warranty or statement to the Guarantor in order to induce the Guarantor to execute this Agreement;

(d) as of the date hereof, and after giving effect to this Agreement and the contingent obligation evidenced hereby, the Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities;

 

Exhibit D – Page 4


(e) neither execution and delivery of this Agreement nor the consummation of the transactions herein contemplated, nor compliance with the terms and provisions hereof, will contravene any provision of applicable law, statute, rule or regulation or any judgment, decree, franchise, order or permit applicable to the Guarantor or will conflict or be inconsistent with, or will result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, security interest, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which the Guarantor is a party or by which the Guarantor may be bound; and

(f) there are no unsatisfied judgments against the Guarantor and no actions, suits or proceedings pending or threatened against or affecting the Guarantor before any court or before any governmental or administrative body or agency that might result in any materially adverse change in the operations, business, property or assets or in the condition (financial or otherwise) of the Guarantor.

7. Notices . Any notice, demand or communication required or permitted under this Agreement shall be in writing and delivered personally, by reputable overnight delivery service or other courier or by certified mail, postage prepaid, return receipt requested, and shall be deemed to have been duly given (a) as of the date of delivery if delivered personally or by overnight delivery service or other courier or (b) on the date receipt is acknowledged if delivered by certified mail, addressed as follows; provided that a notice of a change of address shall be effective only upon receipt thereof:

If to Rice OH, to:

Rice Water Services (OH), LLC

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: General Counsel

If to Rice PA, to:

Rice Water Services (PA), LLC

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: General Counsel

If to the Guarantor, to:

Rice Energy Inc.

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: General Counsel

8. Rules of Construction . The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of

 

Exhibit D – Page 5


the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law will be deemed to refer to such statute or law, as amended, and also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Any reference to a Party will also include such Party’s permitted successors and assigns. The words “including,” “includes,” and “include” will be deemed to be followed by the phrase “without limitation.” All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, will include all other genders; the singular will include the plural, and vice versa; and the term “shall” means “will,” and vice versa. The terms “herein,” “hereby,” “hereunder,” “hereof,” “hereinafter,” and other equivalent words refer to this Agreement in its entirety and not solely to the particular portion of the Agreement in which such word is used.

9. Severability . In the event of a direct conflict between the provisions of this Agreement and any mandatory provision of applicable laws, the applicable provision of applicable law will control. If any provision of this Agreement, or the application thereof to any person or circumstance, is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances will not be affected thereby and that provision will be enforced to the greatest extent permitted by applicable laws. The Parties agree to negotiate in good faith to replace any such invalid provision with a valid provision having similar effect.

10. Entire Agreement; Amendment . This Agreement is intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Parties in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such subject matter, whether verbal or written. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Guarantor, Rice OH or Rice PA from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Parties, in the case of an amendment, supplement or modification, and by the Party granting the waiver or consent in the case of a waiver or consent, and (ii) only in the specific instance and for the specific purpose for which made or given.

11. Term of Agreement . This Agreement and all guarantees, covenants and agreements of the Guarantor contained herein shall continue in full force and effect and shall not be discharged until all of the Guaranteed Obligations shall have terminated or expired, or shall be indefeasibly paid or otherwise performed and discharged in full.

12. Governing law; Jurisdiction .

(a) This Agreement shall be governed by, construed, and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to choice of law principles.

(b) The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions

 

Exhibit D – Page 6


contemplated hereby shall be in any state or federal court in the City and County of Washington, Pennsylvania, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.

13. Attorneys’ Fees . In the event of any litigation or other proceedings to enforce this Agreement, the prevailing Party shall be entitled to recover all reasonable attorneys’ fees and expenses incurred in connection therewith.

14. Counterparts . This Agreement may be executed in multiple counterparts, each of which, when executed, will be deemed an original, and all of which will constitute but one and the same instrument.

15. Headings . The headings herein are included for convenience of reference only and shall be ignored in the construction and interpretation of this Agreement.

[signature page follows]

 

Exhibit D – Page 7


IN WITNESS WHEREOF, the Guarantor has executed this Agreement as of the date first set forth above.

 

GUARANTOR:
 
RICE ENERGY INC.
 
By:  

 

  Name:
  Title:

 

AGREED TO AND ACKNOWLEDGED BY:
 
RICE WATER SERVICES (OH) LLC
 
By:  

 

  Name:
  Title:
 
RICE WATER SERVICES (PA) LLC
 
By:  

 

  Name:
  Title:

 

Exhibit D – Page 8


EXHIBIT E

EXAMPLE CALCULATION

ECONOMIC MECHANISM FOR EXCESSIVE PRODUCED

WATER

Produced Water Threshold              30.0%

 

                                        Pennsylvania                                            
    Volume Water (MM Gallons)           Fresh
Water
          Tier 1                 Tier 2                 Tier 3              
    Fresh     Produced     Total     %
Fresh
    Allocation     Volume,
MM
    Fee/gal     $ Fee     Volume,
MM
    Fee/gal     $ Fee     Volume,
MM
    Fee/gal     $ Fee     Total
Fee
 

PA Wells

              8.25      $ 0.07          5.00      $ 0.03          $ 0.01       

Example Well 1

    9.3        2.7        12.0        77.8     —          —            —          —            —          —            —          —     

Example Well 2

    8.0        2.7        10.6        75.0     —          —            —          —            —          —            —          —     

Example Well 3

    10.6        1.3        12.0        88.9     —          —            —          —            —          —            —          —     

Example Well 4

    6.7        1.3        8.0        83.3     —          —            —          —            —          —            —          —     

Example Well 5

    7.0        6.7        13.7        51.3     0.97        0.97          67,919        —            —          —            —          67,919   

Example Well 6

    6.0        5.3        11.3        53.0     0.80        0.80          56,325        —            —          —            —          56,325   

Example Well 7

    6.7        5.3        12.0        55.6     0.85        0.85          59,583        —            —          —            —          59,583   

Example Well 8

    9.3        5.3        14.6        63.6     1.04        —            —          1.04          31,210        —            —          31,210   

Example Well 9

    10.6        6.7        17.3        61.5     1.23        —            —          1.23          36,885        —            —          36,885   

Example Well 10

    13.0        9.0        22.0        59.1     1.56        —            —          0.25          7,500        1.31          13,132        20,632   

Example Well 11

    18.0        11.0        29.0        62.1     2.06        —            —          —            —          2.06          20,606        20,606   

Total

    105.2        57.3        162.5        64.8     8.52        2.63        $ 183,827        2.52        $ 75,595        3.37        $ 33,739      $ 293,161   

Minimum Aggregate Fresh Water Volume (MM Gallons)

    113.7                               

Freshwater Allocation

    8.52        <—— allocated to wells with more than 30% produced water               

Tiered Water Fee Structure

 

     Pennsylvania        

Freshwater, MM gal

  

Tier 1

     8.25     

Tier 2

     5.00     

$/Gallon

    

Tier 1

   $ 0.07     

Tier 2

   $ 0.03     

Tier 3

   $ 0.01     
  

 

 

   

SINGLE WELL EXAMPLE

    

Lateral, Ft

     7,000     

gal/ft

     1,970     

Total

     13.79     

% Produced

     20  

Tier 1

    

Fresh

     8.25     

Produced

     2.06     

Total

     10.31     

Tier 2

    

Fresh

     5.00     

Produced

     1.25     

Total

     6.25     

Freshwater, MM gal

    

Tier 1

     8.25        59.8

Tier 2

     2.78        20.2

Tier 3

     —          —     

Produced Water, MM gal

    

Tier 1

     2.06     

Tier 2

     0.70     

Tier 3

     —       

Total

     13.79     

Water Revenue

    

Tier 1

   $ 578        87.4

Tier 2

   $ 83        12.6

Tier 3

     —          —     

Total

   $ 661     

 

Exhibit E

Exhibit 10.3

Execution Version

AMENDED AND RESTATED WATER SERVICES AGREEMENT

BY AND BETWEEN

RICE DRILLING D LLC

AND

RICE WATER SERVICES (OH) LLC

DATED AS OF

November 4, 2015


TABLE OF CONTENTS

 

ARTICLE 1     

DEFINITIONS

     2   
ARTICLE 2     

PRODUCER COMMITMENTS

     8   
 

Section 2.1

    

Producer Commitments

     8   
 

Section 2.2

    

Producer Take Points

     8   
 

Section 2.3

    

Covenant Running with the Land

     8   
ARTICLE 3     

SERVICES; WATER FACILITIES EXPANSION AND CONNECTION OF DELIVERY POINTS

     8   
 

Section 3.1

    

Service Provider Service Commitment

     8   
 

Section 3.2

    

Priority of Fresh Water Services

     9   
 

Section 3.3

    

Rights to Take Fresh Water at the Take Points

     9   
 

Section 3.4

    

Right of Producer to Supplement Fresh Water Supplies

     10   
 

Section 3.5

    

Development Plan; Fresh Water Facilities Plan; Exchange and Review of Information

     10   
 

Section 3.6

    

Expansion of Fresh Water System; Connection of Well Pads

     11   
 

Section 3.7

    

Installation and Operation of High-Rate Transfer Facilities

     14   
 

Section 3.8

    

Right of Way and Access

     15   
 

Section 3.9

    

Cooperation

     16   

ARTICLE 4

    

CERTAIN PROVISIONS REGARDING PRODUCED WATER SERVICES

     16   
 

Section 4.1

    

Access to Produced Water Receipt Points

     16   
 

Section 4.2

    

Dispatch Procedures

     16   
 

Section 4.3

    

Designated Receiving Facilities

     16   
 

Section 4.4

    

Non-Conforming Produced Water

     17   
 

Section 4.5

    

Transportation Services Equipment

     17   
 

Section 4.6

    

Contract Carrier Status

     18   

ARTICLE 5

    

TERM

     18   
 

Section 5.1

    

Term

     18   

ARTICLE 6

    

FEES AND CONSIDERATION

     18   
 

Section 6.1

    

Fees

     18   

ARTICLE 7

    

CERTAIN RIGHTS AND OBLIGATIONS OF PARTIES

     20   
 

Section 7.1

    

Operational Control of Service Provider’s Facilities

     20   
 

Section 7.2

    

Maintenance

     20   
 

Section 7.3

    

Third Party Services; Capacity Allocations on the Fresh Water Facilities

     20   
 

Section 7.4

    

Water Treatment Asset

     21   

ARTICLE 8

    

DELIVERY RATES

     21   
 

Section 8.1

    

Delivery Rates

     21   
 

Section 8.2

    

Producer Facilities

     21   

 

i


ARTICLE 9     

NOMINATION

     21   
 

Section 9.1

    

Fresh Water Delivery Nominations

     21   
 

Section 9.2

    

Changes in Fresh Water Delivery Rates

     21   

ARTICLE 10

    

MEASUREMENT EQUIPMENT AND PROCEDURES

     22   
 

Section 10.1

    

Equipment

     22   
 

Section 10.2

    

Notice of Measurement Facilities Inspection and Calibration

     22   
 

Section 10.3

    

Measurement Accuracy Verification

     22   
 

Section 10.4

    

Special Tests

     23   
 

Section 10.5

    

Metered Flow Rates in Error

     23   
 

Section 10.6

    

Record Retention

     23   

ARTICLE 11

    

NOTICES

     24   
 

Section 11.1

    

Notices

     24   

ARTICLE 12

    

PAYMENTS

     25   
 

Section 12.1

    

Invoices

     25   
 

Section 12.2

    

Right to Suspend on Failure to Pay

     26   
 

Section 12.3

    

Audit Rights

     26   
 

Section 12.4

    

Payment Disputes

     26   
 

Section 12.5

    

Interest on Late Payments

     26   
 

Section 12.6

    

Excused Performance

     26   

ARTICLE 13

    

FORCE MAJEURE

     27   
 

Section 13.1

    

Suspension of Obligations

     27   
 

Section 13.2

    

Definition of Force Majeure

     27   
 

Section 13.3

    

Settlement of Strikes and Lockouts

     27   
 

Section 13.4

    

Payments for Fresh Water Made Available

     27   

ARTICLE 14

    

INDEMNIFICATION

     28   
 

Section 14.1

    

Service Provider

     28   
 

Section 14.2

    

Producer

     28   

ARTICLE 15

    

CUSTODY AND TITLE

     29   
 

Section 15.1

    

Custody of Fresh Water

     29   
 

Section 15.2

    

Custody of Produced Water

     29   
 

Section 15.3

    

Title to Produced Water

     29   

ARTICLE 16

    

PAYMENTS FOR FRESH WATER; TAXES

     30   
 

Section 16.1

    

Payments for Fresh Water; Taxes

     30   

ARTICLE 17

    

MISCELLANEOUS

     30   
 

Section 17.1

    

Rights

     30   
 

Section 17.2

    

Applicable Laws

     30   
 

Section 17.3

    

Governing Law; Jurisdiction

     30   
 

Section 17.4

    

Successors and Assigns

     31   
 

Section 17.5

    

Severability

     32   
 

Section 17.6

    

Confidentiality

     32   

 

ii


  Section 17.7     

Entire Agreement, Amendments and Waiver

     33   
  Section 17.8     

Limitation of Liability

     34   
  Section 17.9     

Headings

     34   
  Section 17.10     

Rights and Remedies

     34   
  Section 17.11     

No Partnership

     34   
  Section 17.12     

Rules of Construction

     34   
  Section 17.13     

No Third Party Beneficiaries

     35   
  Section 17.14     

Further Assurances

     35   
  Section 17.15     

Counterpart Execution

     35   

 

Exhibit A      Form of Connection Notice
Exhibit B      Initial Development Plan
Exhibit C      Initial Required Connection Wells
Exhibit D      Rice Guaranty
Exhibit E      Exclusion from Service Area
Exhibit F      Example Minimum Fresh Water Calculation

 

iii


AMENDED AND RESTATED WATER SERVICES AGREEMENT

This Amended and Restated Water Services Agreement (this “ Agreement ”), dated as of November 4, 2015 (the “ Effective Date ”), is by and between RICE DRILLING D LLC , a Delaware limited liability company (“ Producer ”), and RICE WATER SERVICES (OH) LLC , a Delaware limited liability company (“ Service Provider ”). Producer and Service Provider may be referred to herein individually as a “ Party ” or collectively as the “ Parties .”

RECITALS

A. Producer owns Interests and intends to drill and complete Wells for the production of Hydrocarbons in the Service Area.

B. Producer requires supplies of Fresh Water in its areas of operation for hydraulic fracturing operations and other purposes and has the right to take Fresh Water from various rivers and other Fresh Water sources to use for such purposes in its operations in the Service Area and may from time to time have rights to take Fresh Water from other sources for such operations and operations in other areas.

C. Service Provider owns and operates the Fresh Water System, which is being used to take Fresh Water from Take Points and to make available such Fresh Water to Producer in its areas of operation in the Service Area. Service Provider anticipates the expansion of the Fresh Water System to make available Fresh Water to additional locations in the Service Area. Service Provider also anticipates obtaining additional rights to take Fresh Water from rivers and other Fresh Water sources to make available to Producer and its other customers via the Fresh Water System.

D. Producer and Service Provider have entered into that certain Water Services Agreement dated December 22, 2014 (the “ Original Agreement ”), pursuant to which Producer contracted with Service Provider to provide certain Services utilizing the Fresh Water System in the Service Area, and Service Provider agreed to provide such Services to Producer, in each case in accordance with the terms and conditions of the Original Agreement.

E. Producer and Service Provider now desire to expand the scope of the Services covered by the Original Agreement to include additional Fresh Water and Produced Water handling services. Accordingly, the Parties are entering into this Agreement, which shall amend and restate the Original Agreement in its entirety.

 

1


NOW THEREFORE, in consideration of the premises and mutual covenants set forth in this Agreement, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used, but not otherwise defined, in this Agreement shall have the respective meanings given to such terms set forth below:

Affiliate . Any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with another Person. Affiliated shall have the correlative meaning. The term “control” (including its derivatives and similar terms) shall mean possessing the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise. Any Person shall be deemed to control any specified Person if such Person owns fifty percent (50%) or more of the voting securities of the specified Person, or if the specified Person owns fifty percent (50%) or more of the voting securities of such Person, or if fifty percent (50%) or more of the voting securities of the specified Person and such Person are under common control. Notwithstanding the foregoing, for purposes of this Agreement neither Service Provider, Rice Midstream Management, LLC, a Delaware limited liability company (the “ General Partner ”), the Partnership, nor any of their subsidiaries shall be Affiliates of Producer, and neither Producer nor any of its subsidiaries (other than Service Provider, the General Partner, the Partnership and their subsidiaries) shall be Affiliates of Service Provider.

Aggregate Shortfall Volume . As defined in Section 6.1(b) .

Agreement . As defined in the preamble hereof.

Applicable Law . Any applicable law, statute, regulation, rule, code, administrative order or enforcement action (whether national, local, municipal, territorial, provincial, or federal) of any Governmental Authority, including any Environmental Law, to the extent they apply to the Services or the Parties.

AST . An above-ground storage tank.

Attributable Produced Water . Produced Water produced from a Well operated by Producer or a Rice Entity located on the Service Area Properties and attributable to either (i) Producer’s or such Rice Entity’s interest in such Well or (ii) the interest of non-operating parties in such Well, to the extent that Producer or such Rice Entity (as operator) has the right to dispose of, and is responsible for the disposition of, such Produced Water.

Barrel . Forty-two Gallons.

Business Day . Any calendar Day on which commercial banks in New York City are open for business.

Completion Deadline . As defined in Section 3.6(f) .

Confidential Information . As defined in Section 17.6(a) .

Connection Notice . As defined in Section 3.6(b) .

Contract Year . Each of (i) the period from December 22, 2014, through December 31, 2015, and (ii) each calendar year thereafter.

CPI . As defined in Section 6.1(c) .

 

2


Day . A period commencing at 10:00 a.m., Eastern Standard Time, on a calendar day and ending immediately prior to 10:00 a.m., Eastern Standard Time, on the next succeeding calendar day. Daily shall have the correlative meaning.

Delivery Fee . As defined in Section 6.1(a)(i) .

Designated Receiving Facility . As defined in Section 4.3(a) .

Development Plan . As defined in Section 3.5(a) .

Effective Date . As defined in the preamble of this Agreement.

Environmental Laws . Any and all Applicable Laws concerning or relating to public health and safety, worker/occupational health and safety, and the prevention of pollution or protection of the environment, including those relating to, or imposing liability or standards of conduct concerning, the presence, use, manufacturing, refining, production, generation, handling, transportation, treatment, recycling, transfer, storage, disposal, distribution, importing, labeling, testing, processing, discharge, release, threatened release, control, cleanup or other action or failure to act involving Hazardous Materials, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, noise, or radiation.

Firm Service . Services that are accorded the highest priority on the Fresh Water System with respect to capacity allocations, interruptions, or curtailments, specifically including the Fresh Water Services provided to Producer hereunder. Firm Services will be the last curtailed on the relevant part of the Fresh Water System in the event of an interruption or curtailment, and all Firm Services will be treated equally in the event an allocation is necessary.

Force Majeure . As defined in Section 13.2 .

Frac Water . Fresh Water or, when applicable, Fresh Water mixed with Produced Water in accordance with Producer’s instructions as contemplated in Section 3.1(d) .

Frac Water Delivery Point . The water inlet flange of the mixing tanks or the hydration unit being utilized by Producer and its other contractors in hydraulic fracturing operations on a Well Pad.

Fresh Water . Raw fresh water. For the avoidance of doubt, “ Fresh Water ” does not include recycled flowback water or Produced Water.

Fresh Water Facilities . Collectively, the Fresh Water System and the High-Rate Transfer Facilities, including any additional System Segments constructed after the date hereof, as such Fresh Water Facilities are expanded after the date hereof.

Fresh Water Measurement Point . The inlet to Service Provider’s Measurement Facilities located at the inlet to the High-Rate Transfer Facilities located at or in the vicinity of each Well Pad where Fresh Water is measured as or before it goes into the High-Rate Transfer Facilities.

 

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Fresh Water Services . Those Services that are described in Section 3.1(a) through Section 3.1(d) .

Fresh Water System . The Fresh Water facilities owned by Service Provider as of the date hereof upstream of the interconnection with the High-Rate Transfer Facilities, together with any additional System Segments constructed after the date hereof, as such Fresh Water facilities are expanded after the date hereof, including, in each case, to the extent now in existence or constructed or installed in the future, all underground Fresh Water pipelines, Impoundment Facilities, pumping stations, Take Point Facilities, Measurement Facilities, rights of way (whether for underground or surface use), fee parcels, surface rights, and permits, and all appurtenant facilities.

Fresh Water Facilities Plan . As defined in Section 3.5(b) .

Gallon . One U.S. gallon, which is equal to 231 cubic inches.

Gas . Any mixture of gaseous hydrocarbons, consisting essentially of methane and heavier hydrocarbons and inert and noncombustible gases, that is extracted from beneath the surface of the earth.

Governmental Approval . Any permit, license, consent, clearance, certificate, approval, authorization or similar document or authority which any Applicable Law or Governmental Authority requires either Party to hold or obtain in order for the Services to be performed, including any that are required to take Fresh Water from the Take Points.

Governmental Authority . Any federal, state, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.

Guarantor . Rice Energy.

Hazardous Materials . (a) Any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum or petroleum product or byproduct, (d) any polychlorinated biphenyl, (e) any asbestos or asbestos-containing materials, and (f) any substance, pollutant, contaminant, material, or waste, or combination thereof, whether solid, liquid, or gaseous in nature, subject to regulation, investigation, control, or remediation under any Environmental Law.

High-Rate Transfer Facilities . Facilities of Service Provider and its subcontractors located at or in the vicinity of a Well Pad used to perform High-Rate Transfer Services at such Well Pad, including, as applicable, ASTs, high-rate transfer pumps, facilities and equipment for mixing Fresh Water with Produced Water, associated hoses and lines, and all related equipment and facilities used to transfer Fresh Water from the Fresh Water System, mix such Fresh Water with Produced Water when applicable, and transfer Frac Water to the Frac Water Delivery Points at the required rates of flow.

 

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High-Rate Transfer Services . As defined in Section 3.1(d) .

Hydrocarbons . Gas and/or Liquid Hydrocarbons.

Impoundment Facility . Each impoundment or retention area or other similar facility that is part of the Fresh Water System and is used to temporarily store Fresh Water upstream of the High-Rate Transfer Facilities prior to its being made available at a Frac Water Delivery Point.

Initial Development Plan . The Development Plan previously provided by Producer to Service Provider and identified as the initial Development Plan and attached as Exhibit B .

Interests . Oil and gas leasehold interests and oil and gas mineral fee interests, including working interests, overriding royalty interests, net profits interests, carried interests, and similar rights and interests.

Interruptible Service . Service that is accorded the lowest priority on the Fresh Water System with respect to capacity allocations, interruptions, or curtailments. Interruptible Service will be the first curtailed on the Fresh Water System in the event of an interruption or curtailment.

Liquid Hydrocarbons . Oil, condensate, natural gasoline and all the liquid hydrocarbon production from wells, or a blend of such.

Maintenance . As defined in Section 7.2 .

Measurement Facilities . Any facility or equipment used to measure the volume of Fresh Water or Produced Water, which may include meter tubes, isolation valves, tank strappings, recording devices, communication equipment, buildings and barriers.

Measurement Points . Each Fresh Water Measurement Point and Produced Water Measurement Point.

Minimum Flow Rate . As defined in Section 8.1 .

Month . A period commencing at 10:00 a.m., Eastern Standard Time, on the first Day of a calendar month and extending until 10:00 a.m., Eastern Standard Time, on the first Day of the next succeeding calendar month. Monthly shall have the correlative meaning.

Original Agreement . As defined in the recitals of this Agreement.

Parties . As defined in the preamble of this Agreement.

Partnership . Rice Midstream Partners L.P., a Delaware limited partnership.

Party . As defined in the preamble of this Agreement.

Person . An individual, a corporation, a partnership, a limited partnership, a limited liability company, an association, a joint venture, a trust, an unincorporated organization, or any other entity or organization, including a Governmental Authority.

 

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Planned Well . As defined in Section 3.5(a) .

Produced Water . Water produced from Wells alongside Hydrocarbons (whether or not treated at a water treatment facility), including water separated from Hydrocarbons at the wellhead upstream of a Produced Water Receipt Point located at a Well Pad through conventional mechanical separation equipment and held in tanks owned by Producer at the Well Pad, including flowback water, drilling fluids, and other fluid wastes produced from such Wells, and including in each case all materials (including Hydrocarbons) contained in such water.

Produced Water Measurement Point . The inlet to Service Provider’s Measurement Facilities at the truck unloading facility located at or in the vicinity of each Well Pad where Produced Water that is to be mixed with Fresh Water in accordance with Producer’s instructions is measured as or before it goes into the High-Rate Transfer Facilities.

Produced Water Quality Standards . As defined in Section 4.4 .

Produced Water Receipt Point . The outlet flange of the Producer’s Produced Water tankage located at or nearby or assigned to a Well, downstream of the Producer’s separation equipment.

Produced Water Services . Those Services described in Section 3.1(e) and Section 3.1(f) .

Producer . As defined in the preamble of this Agreement.

Producer Group . As defined in Section 14.1(b) .

Reimbursable Produced Water Services Costs . As defined in Section 6.1(a)(iii) .

Required Connection Wells . As defined in Section 3.1(a) .

Rice Energy . Rice Energy, Inc., a Delaware corporation.

Rice Entity . Means Rice Energy, Inc., a Delaware corporation, and each Affiliate of Producer that is a direct or indirect subsidiary of Rice Energy Inc.

Rice Guaranty . The Guaranty dated as of the Effective Date made by Guarantor in favor of Service Provider in the form of Exhibit D .

Service Area . Belmont County, Ohio, but excluding the area shaded in the map in Exhibit E , which is the Belmont County portion of the area of mutual interest for Rice Midstream Holding LLC’s proposed midstream joint venture with Gulfport Energy Corporation; provided that if Rice Midstream Holdings LLC has not entered into definitive written agreements with Gulfport Energy Corporation regarding the proposed midstream joint venture by June 30, 2016, the shaded area will on such date become a part of the Service Area.

Service Area Properties . All Interests now owned or hereafter acquired by Producer or any Rice Entity and located wholly or partly within the Service Area or pooled, unitized or communitized with Interests located wholly or partly within the Service Area; provided that

 

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Service Area Properties shall not include any Interests that are unitized or pooled with the properties of third parties that are not Service Area Properties if neither Producer nor a Rice Entity is the operator of such unit.

Services . As defined in Section 3.1 .

Service Provider . As defined in the preamble of this Agreement.

Service Provider Group . As defined in Section 14.2(b) .

Supplemental Water Fee . As defined in Section 6.1(a)(ii) .

System Segment . A physically separate segment of the Fresh Water System that connects one or more Take Points to one or more Impoundment Facilities, together with any underground Fresh Water lines downstream of such Impoundment Facilities and any rights of way downstream of such Impoundment Facilities for surface Fresh Water lines, including all underground Fresh Water pipelines, Impoundment Facilities, pumping stations, Take Point Facilities, Measurement Facilities, rights of way, fee parcels, surface rights, and permits, and all appurtenant facilities.

Take Point . Those points from which, in accordance with agreements with the holders of water rights and/or Applicable Laws and required Governmental Approvals, Producer or Service Provider has procured the right for Service Provider to take Fresh Water to make available to Producer for use in accordance with this Agreement.

Take Point Facilities . All facilities located at any Take Point that are necessary for Service Provider to take Fresh Water from the Fresh Water source at such Take Point.

Target Commencement Date . As defined in Section 3.6(b) .

Transportation Services . As defined in Section 3.1(e) .

Two Mile Perimeter . As defined in Section 3.1(a) .

USDOT . The United States Department of Transportation.

Water Facilities . The Fresh Water Facilities and any facilities owned by Service Provider through which Produced Water is gathered, collected, transported, processed, treated, recycled, or disposed of from any Interests.

Well . A well for the production of Hydrocarbons in which Producer or a Rice Entity owns an interest that is located on the Service Area Properties or for which Services are otherwise required to be performed in accordance with this Agreement.

Well Pad . The surface installation on which one or more Wells are located.

 

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ARTICLE 2

PRODUCER COMMITMENTS

Section 2.1 Producer Commitments . Subject to the terms and conditions of this Agreement, Producer covenants and commits (a) to exclusively use, and to cause each Rice Entity to exclusively use, Fresh Water made available by Service Provider under this Agreement, together with Produced Water from Producer’s Wells (including Produced Water collected by Service Provider and trucked to the Well Pad, where applicable), in its hydraulic fracturing operations for all Wells operated by Producer or such Rice Entity in the Service Area and (b) to exclusively utilize Service Provider for the performance of the Produced Water Services for all Attributable Produced Water, as and when produced.

Section 2.2 Producer Take Points . Producer agrees to use all reasonable efforts to (a) maintain the right to take Fresh Water from each Take Point (whether now existing or hereafter acquired) for use in its operations and (b) afford Service Provider the right to take Fresh Water from Take Points from which Producer has the right to take Fresh Water for use in its operations for the purpose of making such Fresh Water available to Producer under this Agreement and, subject to the provisions of Section 7.3 , to provide Fresh Water to third party customers.

Section 2.3 Covenant Running with the Land . The covenants and commitments made by Producer under this Article 2 are covenants running with the land. For the avoidance of doubt and in addition to that which is provided in Section 17.4, in the event Producer sells, transfers, conveys, assigns, grants, or otherwise disposes of any or all of its Interests in the Service Area, then any such sale, transfer, conveyance, assignment, grant, or other disposition shall be expressly subject to this Agreement and any instrument of conveyance shall so state. Notwithstanding the foregoing, Producer shall be permitted to sell, transfer, convey, assign, grant, or otherwise dispose of Service Area Properties free of the covenant and commitment made under this Article 2 in a sale or other disposition in which a number of net acres of Service Area Properties that, when added to the total of net acres of Service Area Properties theretofore and, where applicable, simultaneously disposed of free of the commitment made by Producer under this Article 2, does not exceed the aggregate number of net acres of Service Area Properties acquired by Producer after the Effective Date, including in a transaction in which Service Area Properties are exchanged for other properties located in the Service Area that would be subject to commitment made by Producer under this Article 2.

ARTICLE 3

SERVICES; WATER FACILITIES EXPANSION AND CONNECTION OF DELIVERY POINTS

Section 3.1 Service Provider Service Commitment . Subject to and in accordance with the terms and conditions of this Agreement, Service Provider commits to providing the following services (collectively, the “ Services ”) to Producer:

(a) construct and expand the Fresh Water System to connect to the Fresh Water System each Well in the Service Area that (i) is included in the Initial Development Plan, or (ii) is within two miles of the Fresh Water System (the “ Two Mile Perimeter ”) as it exists as of the date of the Connection Notice for such Well, subject in each case to the procedures set forth in Section 3.6 (such Wells, and such other Wells that become Required Connection Wells in accordance with Section 3.6 , “ Required Connection Wells ”);

 

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(b) Subject to Section 2.2 , take, or cause to be taken, at each Take Point on each Day, Water in a quantity at least equal to the volume of Water required to be taken in the Fresh Water System in order to perform the Fresh Water Services;

(c) make available or cause to be made available, by underground or surface water lines and through the use of Impoundment Facilities if applicable, at the interconnection between the Fresh Water System and the High-Rate Transfer Facilities at each Well Pad during the periods nominated by Producer in accordance with Section 9.1 during which hydraulic fracturing operations are to be carried out at such Well Pad, Fresh Water at sufficient rates of flow so that Frac Water can be made available at the Frac Water Delivery Points during such period at the required rates of flow;

(d) during the periods nominated by Producer in accordance with Section 9.1 during which hydraulic fracturing operations are to be carried out at such Well Pad, (i) transfer Fresh Water from the Fresh Water System, (ii) if so instructed by Producer, mix such Fresh Water with Produced Water in the proportion instructed by Producer, and (iii) transfer such Fresh Water or mixed Fresh Water and Produced Water, as Frac Water, through the High-Rate Transfer Facilities to the Frac Water Delivery Point at such Well Pad (the “ High-Rate Transfer Services ”);

(e) receive, or cause to be received, into its (or its subcontractors’) trucks, or otherwise collect, all Attributable Produced Water from the Produced Water Receipt Points and deliver, or cause to be delivered, such Produced Water (i) to a Well Pad in order to mix with Fresh Water in accordance with Producer’s instructions, or (ii) to a Designated Receiving Facility (the “ Transportation Services ”); and

(f) cause Produced Water collected from the Produced Water Receipt Points (other than Produced Water delivered to a Well Pad to be mixed with Fresh Water in accordance with Producer’s instructions) to be treated, recycled, released, sold for re-use, or otherwise disposed of through Designated Receiving Facilities.

Section 3.2 Priority of Fresh Water Services . Subject to the terms and conditions of this Agreement, Fresh Water Services requiring deliveries of Fresh Water to the interconnection with the High-Rate Transfer Facilities at no more than one Well on any trunkline at any time at rates of flow at or below the Minimum Flow Rate shall be provided on a Firm Service basis. All Fresh Water Services requiring deliveries to the interconnection with the High-Rate Transfer Facilities at more than one Well on any trunkline at any time or in excess of the Minimum Flow Rate shall be provided on an Interruptible Service basis.

Section 3.3 Rights to Take Fresh Water at the Take Points . Subject to Section 2.2 , Service Provider is responsible for obtaining all necessary rights, including all Governmental Approvals, to take Fresh Water from the Take Points in sufficient volumes to make available Frac Water at the Frac Water Delivery Points at the required rates of flow. Producer will provide all information to Service Provider that is required for Service Provider to acquire, and will use commercially reasonable efforts to assist Service Provider in acquiring, such rights.

 

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Section 3.4 Right of Producer to Supplement Fresh Water Supplies .

(a) If the capacity and/or the volume of water in the Fresh Water System is insufficient for water to be made available at the flow rates desired by Producer at one or more Frac Water Delivery Points, Producer may, at its option and subject to the fees in Section 6.1(a)(ii) , provide supplemental Fresh Water by truck to the Service Provider at the applicable Impoundment Facility or Fresh Water or Produced Water to Service Provider’s facilities at the applicable Well Pad so that the desired flow rates can be achieved.

(b) Notwithstanding Section 14.1(a)(ii) , Service Provider shall not have any liability whatsoever for its inability to make water available at the flow rates desired by Producer.

Section 3.5 Development Plan; Fresh Water Facilities Plan; Exchange and Review of Information .

(a) The Initial Development Plan describes Producer’s planned development and drilling activities relating to the Service Area Properties through December 31, 2017 (such plan, as updated as hereinafter provided, the “ Development Plan ”). Following the Effective Date, on or before the last Day of each Month, Producer shall provide Service Provider an updated Development Plan describing the planned development and drilling activities relating to the Service Area Properties for the 24-Month period commencing on the date of such updated Development Plan. Each Development Plan will include (i) information as to the Wells that Producer expects will be drilled during such period (each such Well reflected in a Development Plan, a “ Planned Well ”), which may be by reference to Well Pads and the number of Wells to be drilled at such Well Pads, information as to the Well Pads expected to be constructed during such period and the approximate locations thereof, and the earliest date on which one or more Planned Wells at each such Well Pad are expected to be hydraulically fractured, and (ii) good faith and reasonable forecasts of the periods of time during which Fresh Water will be required at each Well Pad for the purpose of hydraulic fracturing operations for all Planned Wells on such Well Pad and the volumes of Fresh Water and the rates of flow that will be required for hydraulic fracturing operations on such Well Pad during the 24-Month period following the date of such Development Plan. Producer shall make its representatives available to discuss the Development Plan from time to time with Service Provider and its representatives, in order to facilitate advance planning for expansion or improvement of the Fresh Water System and/or the planning of the Fresh Water Services and to address other matters relating to the construction and installation of additions to the Fresh Water System. Producer may provide updated or amended Development Plans to Service Provider at any time and shall provide its then-current Development Plan to Service Provider from time to time on or prior to the fifth (5 th ) Business Day after Service Provider’s request therefor.

(b) Service Provider has provided to Producer a Fresh Water System plan describing and/or depicting the Fresh Water System, including all Take Points, pipelines, Impoundment Facilities, rights of way for surface Fresh Water lines, and all pumping stations

 

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and other major physical facilities, together with their locations, sizes and other physical specifications, operating parameters, capacities, and other relevant specifications, and together with a schedule for completing the construction and installation of the planned portions thereof, in each case as currently in existence, under construction, or planned, together with information about the High Rate Transfer Facilities, including the number and capacity of ASTs and high rate transfer pumps, that will be utilized to perform the High-Rate Transfer Services at each Well Pad (such plan, as updated as hereinafter provided, the “ Fresh Water Facilities Plan ”). Based on the Development Plans and such other information about the expected development of the Service Area Properties as shall be provided to Service Provider by or on behalf of Producer, Service Provider shall periodically update the Fresh Water Facilities Plan. Without limiting the generality of the foregoing, Service Provider shall ensure that the Fresh Water Facilities Plan reflects all Required Connection Wells included in each Monthly Development Plan not later than 30 Days after such Development Plan is delivered to Service Provider. Service Provider shall make the Fresh Water Facilities Plan available for inspection by Producer and its representatives from time to time and shall make representatives of Service Provider available to discuss the Fresh Water Facilities Plan from time to time with Producer and its representatives. Service Provider shall provide Producer updates not less frequently than Monthly on the progress of work on all facilities necessary to connect the Fresh Water System to the Well Pads on which the Required Connection Wells are or are to be located as set forth in the then-current Fresh Water Facilities Plan.

(c) The Parties recognize that the plans for the development of the Service Area Properties set forth in each Development Plan, as well as all information provided by Producer to Service Provider regarding its intentions with respect to the development of the Service Area Properties, are subject to change and revision at any time at the discretion of Producer, and that such changes may impact the timing, configuration, and scope of the planned activities of Service Provider. The exchange of such information and any changes thereto shall not give rise to any rights or liabilities as between the Parties except as expressly set forth in this Agreement, and Service Provider shall determine at its own risk the time at which it begins to work on and incur costs in connection with projects to expand the Fresh Water System and its other facilities and capacities, including the acquisition of rights of way, equipment, and materials. Without limiting the generality of the foregoing, Producer has no obligation to Service Provider under this Agreement to develop or produce any Hydrocarbons from the Service Area Properties or to pursue or complete any drilling or development on the Service Area Properties, whether or not envisioned in the Development Plan.

Section 3.6 Expansion of Fresh Water System; Connection of Well Pads .

(a) The Service Provider shall design and develop the Fresh Water System at least to the capacity of the Minimum Flow Rate for the purpose of providing Fresh Water Services as and when needed for hydraulic fracturing operations on the Required Connection Wells, and Service Provider shall be obligated, at its sole cost and expense, subject to the provisions of this Agreement, to plan, procure, construct, install, own, and operate the Fresh Water System so as to timely extend the Fresh Water System to all Wells Pads on which Required Connection Wells are located and timely deliver such quantities of Fresh Water to the Wells Pads so as to permit Service Provider to commence providing the full scope of Services with respect to all the Required Connection Wells in accordance with this Section 3.6 ; provided , that the foregoing shall not preclude Service Provider from also designing and developing the Fresh Water System to provide services to third parties.

 

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(b) Producer shall from time to time give notice, in the form of Exhibit A hereto (or in such form as the Parties shall otherwise agree from time to time), to Service Provider of each Planned Well that Producer intends to drill and complete in the Service Area (a “ Connection Notice ”). Each Connection Notice shall set forth the target commencement date for starting the hydraulic fracturing of such Well (the “ Target Commencement Date ”).

(c) On or before the 30th Day after delivery of a Connection Notice for a Planned Well, Service Provider shall, by notice to Producer, (i) (A) acknowledge that the Planned Well covered by such Connection Notice is a Required Connection Well and provide anticipated aggregate Take Point flow rate availability or (B) acknowledge that such Planned Well is not a Required Connection Well but nonetheless commit to extend the Fresh Water System to the Well Pad on which such Planned Well is or will be located and, in each case, make Fresh Water available for such Planned Well for the Delivery Fee defined in Section 6.1(a) , and provide anticipated aggregate Take Point flow rate availability, or (ii) state that it has determined that such Planned Well is not a Required Connection Well or that, whereas such Planned Well is within the Two Mile Perimeter and/or was included in the Initial Development Plan, making Fresh Water available for such Planned Well is not commercially economical, as solely determined by Service Provider, and in either case state the Delivery Fee that it would charge for extending the Fresh Water System to the Well Pad on which such Planned Well is located and making Fresh Water available for such Planned Well. The Parties acknowledge and agree that Service Provider does not control the availability of Fresh Water at each Take Point and Service Provider’s written notice in response to each Connection Notice shall be subject to change due to fluctuations of Fresh Water availability at any Take Point. Service Provider shall use commercially reasonable efforts to minimize such fluctuations at any Take Point and shall promptly provide written notice to Producer of any material change in anticipated aggregate Take Point flow rate based on Service Provider’s prior notice to Producer.

(d) If Service Provider delivers the notice referred to in Section 3.6(c)(i)(A) with respect to a Connection Notice for a Planned Well, such Planned Well shall be deemed a Required Connection Well. If Service Provider delivers the notice referred to in Section 3.6(c)(i)(B) with respect to a Connection Notice for a Planned Well, Producer may, by notice to Service Provider, accept Service Provider’s proposed Delivery Fee, in which case such Planned Well shall be deemed a Required Connection Well from and after the date of Producer’s notice, and the Delivery Fee proposed in Service Provider’s notice shall be charged for Fresh Water made available at the Frac Water Delivery Point at the Well Pad on which such Planned Well is located.

(e) If Service Provider delivers the notice referred to in Section 3.6(c)(ii) with respect to a Connection Notice for a Planned Well, and if Producer desires to have the Fresh Water System extended to the Well Pad on which such Planned Well is located but does not agree to the proposed Delivery Fee stated in such notice, the Parties shall negotiate in good faith for a period not to exceed 30 Days from the date of such notice and use reasonable efforts to reach agreement on a Delivery Fee that would be applicable to Fresh Water made available for such Planned Well. If the Parties agree in writing on such Delivery Fee, such Planned Well shall

 

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be deemed a Required Connection Well from and after the date of such agreement, and the Delivery Fee agreed by the Parties shall be charged for Fresh Water made available at the Frac Water Delivery Point at the Well Pad on which such Planned Well is located. If the Parties do not reach agreement within such 30-day period, Producer may, at its option by notice to Service Provider, (i) withdraw the Connection Notice with respect to such Planned Well, in which case Producer may source Fresh Water for hydraulic fracturing operations on such Planned Well from such source as Producer may determine, or (ii) agree to pay the incremental costs incurred by Service Provider to extend the Fresh Water System to the Well Pad on which such Planned Well is located above the costs that would be incurred by Service Provider to extend the Fresh Water System to such Well Pad if it were located at the point on the Two Mile Perimeter, as of the date of the Connection Notice for such Planned Well, that is nearest such Well Pad, in which case such Planned Well shall become a Required Connection Well from and after the date of Producer’s notice, and the Delivery Fee defined in Section 6.1(a) shall apply to Fresh Water made available for such Planned Well.

(f) Service Provider shall cause the necessary facilities to be constructed to extend the Fresh Water System to the Well Pad on which each Required Connection Well is located and to make Fresh Water available for such Required Connection Well. Such facilities shall be available to make Fresh Water available to such Required Connection Well as soon as reasonably practicable following the Connection Notice with respect to such Well and in any event on or before the later to occur of (1) the Target Commencement Date with respect to such Well, (2) the date that is 365 Days after the Connection Notice for such Well, and (3) the date on which such Well is ready for hydraulic fracturing (the later of such dates, with respect to such Well, the “ Completion Deadline ”). Service Provider shall provide Producer notice promptly upon Service Provider’s becoming aware of any reason to believe that it may not be able to complete the extension of the Fresh Water System to the Well Pad on which a Required Connection Well is located by the Target Commencement Date therefor or to otherwise complete all facilities necessary to make Fresh Water available for such Well by the Target Commencement Date therefor. If and to the extent Service Provider is delayed in completing and making available such facilities by a Force Majeure event or any action of Producer that is inconsistent with the cooperation requirements of Section 3.9 , then the Completion Deadline for such connection shall be extended for a period of time equal to that during which Service Provider’s completion and making available of such facilities was delayed by such events or actions. If such facilities are not completed and made available by the Completion Deadline, as Producer’s sole and exclusive remedies for such delay,

(i) Producer may, until such time as the Fresh Water System is extended to such Well Pad and Fresh Water can be made available from the Fresh Water System to such Well, source Fresh Water for hydraulic fracturing operations at such Well from such source as it may determine; and

(ii) Producer shall have the right to complete the procurement, construction and/or installation of any rights or facilities necessary to extend the Fresh Water System to such Well Pad and/or to permit Fresh Water from the Fresh Water System to be made available at the Frac Water Delivery Point at such Well Pad, in which case Service Provider shall pay to Producer an amount equal to 115% of all reasonable actual and verifiable costs and expenses incurred by Producer in so procuring,

 

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constructing, and/or installing such rights and facilities, and Producer shall convey all such rights and facilities to Service Provider and such rights and facilities shall thereafter be part of the Fresh Water System.

The remedies set forth in clauses (i) and (ii) above shall be applicable to Wells with Completion Deadlines that are on or after December 22, 2015.

(g) Producer has previously delivered a Connection Notice to Service Provider with respect to the Required Connection Wells set forth on Exhibit C . Such Connection Notice shall be deemed to have been given for each such Required Connection Well 365 Days prior to the Target Commencement Date specified for such Well in such notice.

Section 3.7 Installation and Operation of High-Rate Transfer Facilities .

(a) Service Provider shall be obligated, directly or through subcontractors, to engineer, procure, transport to the Well Pad or other applicable site, and erect or install on the Well Pad or on such site on or prior to the Completion Deadline all necessary High-Rate Transfer Facilities to enable Fresh Water to be transferred from the Fresh Water System, such Fresh Water to be mixed with Produced Water in accordance with Producer’s instructions, and to transfer Frac Water through the High-Rate Transfer Facilities to the Frac Water Delivery Points. Service Provider shall ensure that all such High-Rate Transfer Facilities remain on the Well Pad or on such site and be available to perform the High-Rate Transfer Services at all times during which Producer has notified Service Provider in accordance with Section 9.1 that hydraulic fracturing operations will be carried out on such Well Pad until such time as Producer has advised Service Provider that all hydraulic fracturing operations have been completed on all Planned Wells at such Well Pad. Service Provider shall have the right to remove and re-install or re-erect such High Rate Transfer Facilities from time to time as long as no delay or disruption in Producer’s hydraulic fracturing operations results therefrom.

(b) Producer shall provide sufficient space on the Well Pad for all necessary High-Rate Transfer Facilities other than ASTs to be located on such Well Pad. Producer shall use commercially reasonable efforts to provide sufficient space on the Well Pad, or if sufficient space on such Well Pad is not available, on the nearest reasonably available site, in any event, within one mile of the Well Pad, for the erection and installation of all ASTs required by Service Provider for the performance of the High-Rate Transfer Services on such Well Pad, together with rights of access to such site from a public road and easements or rights of way over which Service Provider may run hoses and temporary Fresh Water lines to the Well Pad. If Producer, through the use of commercially reasonable efforts, has been unable, by the date that is at least 180 days prior to the Target Commencement Date for such Well Pad, to obtain such a site and such rights of access and easements, Producer shall promptly notify Service Provider, and Service Provider shall be responsible for obtaining such site and the related access rights and easements.

(c) Service Provider shall be responsible for the operation, maintenance, repair, and removal of all High-Rate Transfer Facilities, including the operation of the applicable ASTs, ensuring that such ASTs and other High-Rate Transfer Facilities are operating properly and that the Fresh Water is transferred from such ASTs at proper flow rates (such that such ASTs do not overflow), and necessary coordination with Producer’s and its hydraulic fracturing contractors’ personnel.

 

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(d) If Service Provider fails to perform its obligations to timely engineer, procure, transport, erect, and install the High-Rate Transfer Facilities by the Completion Date or fails to ensure that such High-Rate Transfer Facilities remain on the Well Pad or other applicable site in each case in accordance with Section 3.7(a) or fails to perform the High-Rate Transfer Services in connection with the hydraulic fracturing of Wells on a Well Pad in accordance with Section 3.1(d) , then, as Producer’s sole and exclusive remedy for such failure, Producer shall have the right to complete the engineering, procurement, transportation, erection and/or installation (including through one or more subcontractors) of replacement facilities and/or to carry out such activities itself (including through one or more subcontractors), in which case Service Provider shall pay, within 30 days after presentment of an invoice therefor, to Producer an amount equal to 115% of all reasonable, actual and verifiable out of pocket costs and expenses incurred by Producer in so engineering, procuring, transporting, erecting, and installing such facilities and carrying out such activities, and upon receipt of payment by Producer therefor, Producer shall convey all such rights (including rights under third party contracts) and facilities owned or under the control of Producer to Service Provider (and shall use commercially reasonable efforts to obtain any applicable consents triggered by such assignment).

Section 3.8 Right of Way and Access . Service Provider is responsible for the acquisition of rights of way, crossing permits, licenses, use agreements, access agreements, leases, fee parcels, and other rights in land necessary to construct, own, and operate the Fresh Water System, and all such rights in land shall be solely for use by Service Provider and shall not be shared with Producer, except as otherwise agreed by Service Provider; provided that Producer agrees to grant and/or to cause each Rice Entity to grant, without warranty of title, either express or implied, to the extent that it has the right to do so without the incurrence of material expense, an easement and right of way upon all lands covered by the Service Area Properties, for the purpose of installing, using, maintaining, servicing, inspecting, repairing, operating, replacing, disconnecting, and removing all or any portion of the Fresh Water System, including all pipelines, meters, and other equipment necessary for the performance of this Agreement; provided, further, that the exercise of these rights by Service Provider shall not unreasonably interfere with Producer’s or such Rice Entity’s lease operations or with the rights of owners in fee, and will be subject to Producer’s safety and other reasonable access requirements applicable to Producer’s personnel. Neither Producer nor such Rice Entity shall have a duty to maintain the underlying agreements (such as leases, easements, and surface use agreements) that such grant of easement or right of way to Service Provider is based upon, and such grants of easement or right of way will terminate if Producer or such Rice Entity, as applicable, loses its rights to the property, regardless of the reason for such loss of rights. Notwithstanding the foregoing, (i) Producer will assist Service Provider to secure replacements for such terminated grants of easement or right of way, in a manner consistent with the cooperation requirements of Section 3.9 , (ii) to the extent that Producer agrees that Service Provider’s Measurement Facilities may be located on Producer’s Well Pad sites, Producer shall be responsible for obtaining any necessary rights to locate such Measurement Facilities on such Well Pad sites, and (iii) Producer shall use reasonable efforts to involve Service Provider in Producer’s negotiations with the owners of lands covered by the Service Area Properties so that Producer’s surface use agreements and Service Provider’s rights of way with respect to such lands can be concurrently negotiated and obtained.

 

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Section 3.9 Cooperation . Because of the interrelated nature of the actions of the Parties required to obtain the necessary Governmental Approvals from the appropriate Governmental Authorities and the necessary consents, rights of way and other authorizations from other Persons necessary to drill and complete each Planned Well and construct the required extensions of the Fresh Water System to each Well Pad, the Parties agree to work together in good faith to obtain such Governmental Approvals, authorizations, consents and rights of way as expeditiously as reasonably practicable, all as provided herein. The Parties further agree to cooperate with each other and to communicate regularly regarding their efforts to obtain such Governmental Approvals, authorizations, consents and rights of way.

ARTICLE 4

CERTAIN PROVISIONS REGARDING PRODUCED WATER SERVICES

Section 4.1 Access to Produced Water Receipt Points . Producer shall be responsible for ensuring that Service Provider and its subcontractors have safe road access to all Produced Water Receipt Points from public roadways suitable for travel by highway trucking equipment. As between Producer and Service Provider, Producer shall be responsible for all maintenance of and damage to (and all payments in respect thereof) all access roads from public roadways to the Produced Water Receipt Points.

Section 4.2 Dispatch Procedures .

(a) Service Provider shall install, regularly inspect, maintain, and operate, at Service Provider’s cost, in Producer’s Produced Water tanks located at or in the vicinity of each Well Pad, water-level sensors connected to a remote monitoring system capable of making available to Service Provider on an hourly or more frequent basis data regarding the level of Produced Water in each such tank. Producer hereby grants Service Provider the right, and agrees to provide access for, Service Provider to install, regularly inspect, maintain and operate such sensors. Service Provider shall be responsible for the timely dispatch of trucks to all Wells at which such sensors and monitoring systems are installed and operating properly to collect Produced Water from the tanks at such Wells. In the event that Service Provider is notified or otherwise has knowledge of any outage of or malfunction in any such sensors at any such tanks or any outage of or malfunction in such monitoring system, Service Provider shall use reasonable efforts to timely dispatch trucks to collect Produced Water based on historical flow rates or on information provided by Producer but shall not otherwise be liable for any failure to timely dispatch trucks to any affected tank during any period of any such outage or malfunction.

Section 4.3 Designated Receiving Facilities .

(a) Service Provider shall treat, recycle, release, sell for re-use, or otherwise dispose of, or shall cause an Affiliate or subcontractor of Service Provider to treat, recycle, release, sell for re-use, or otherwise dispose of, all Produced Water collected by Service Producer at the Produced Water Receipt Points in the Service Area through facilities, including Service Provider’s or its Affiliates’ own facilities, that have been designated by Service Provider

 

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and approved by Producer (each such facility, a “ Designated Receiving Facility ”). If Producer approves a facility as a Designated Receiving Facility, it shall have the right, at any time upon notice to Service Provider, to withdraw such approval, and such facility shall cease to be a Designated Receiving Facility effective upon the 60 th Day after such notice; provided, however, that Producer shall reimburse Service Provider for all costs reasonably incurred by Service Provider in order to utilize such facility as a Designated Receiving Facility and shall indemnify Service Provider and its Affiliates for any contractual liability incurred by Service Provider to a third party as a result of its not being able to utilize such facility as a Designated Receiving Facility.

(b) Producer shall have the right, at its sole cost and expense, to visit and observe operations at each Designated Receiving Facility operated by Service Provider, in each case during normal business hours, on reasonable notice, and subject to such reasonable safety procedures as shall be reasonably required by Service Provider. Such visits and observations shall be carried out in a manner that does not unreasonably interfere with operations at such Designated Receiving Facility. Service Provider shall use reasonable efforts to afford Producer the opportunity to visit and observe operations at each Designated Receiving Facility operated by a Service Provider subcontractor and shall at the request of Producer perform such visits and observations and use reasonable efforts to include a representative of Producer among its representatives on any such visit.

Section 4.4 Non-Conforming Produced Water . If the Produced Water quality at any Produced Water Receipt Point does not conform to the Produced Water Quality Standards, then Service Provider will have the right to immediately discontinue taking Produced Water at such Produced Water Receipt Point so long as the Produced Water at such Produced Water Receipt Point continues to be non-conforming. In the event that Service Provider takes receipt of non-conforming Produced Water at any Produced Water Receipt Point, Producer agrees to be responsible for, and to defend, indemnify, release, and hold Service Provider and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees harmless from and against, all claims and losses of whatever kind and nature resulting from such non-conforming Produced Water, including claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party. “ Produced Water Quality Standards ” means, with respect to any Produced Water, that such Produced Water is free from any contamination or any substances that would result in such Produced Water not meeting any requirements imposed by Applicable Law for transportation by truck or any quality standards of a Designated Receiving Facility.

Section 4.5 Transportation Services Equipment . Service Provider shall provide, or cause to be provided, all equipment necessary to perform the Transportation Services. The equipment shall (a) be suitable for the performance of the Transportation Services, (b) comply with the specifications for equipment used for services equivalent to the Transportation Services as required by Applicable Law, including the regulations of the USDOT, and (c) be maintained in a good, safe, and serviceable condition. Service Provider shall only use subcontractors to perform the Transportation Services that maintain a USDOT safety rating of “Satisfactory”.

 

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Section 4.6 Contract Carrier Status . Producer and Service Provider intend to rely on their respective rights and remedies under this Agreement and, if it would otherwise be applicable, expressly waive any and all rights and remedies under Part B, Subtitle IV of Title 49 of the United States Code that may be waived as provided in 49 USC § 14101(b)(1). Producer and Service Provider intend that the contractual arrangement documented by this Agreement be that of a contract motor carrier and for the terms and conditions of this Agreement to take precedence over any terms and conditions which might apply to a shipper and common carrier. Any use of form bills of lading, or other freight documents referring to “common carriers” and/or “tariffs”, shall not alter the contract relationship created hereunder between the Parties.

ARTICLE 5

TERM

Section 5.1 Term . This Agreement, unless terminated earlier by mutual agreement of the Parties, shall continue in effect until December 22, 2029, and from Month to Month thereafter (with the initial term of this Agreement deemed extended for each of any such additional Month) until such time as this Agreement is terminated, by notice from either Party to the other Party, effective on the last day of the Month specified in such notice, which notice shall be given not less than 30 days before the effective date of such termination.

ARTICLE 6

FEES AND CONSIDERATION

Section 6.1 Fees .

(a) Subject to the other provisions of this Agreement, Producer shall pay Service Provider each Month in accordance with the terms of this Agreement, for all Services provided by Service Provider during such Month, an amount equal to the sum of the following:

(i) the aggregate volume of Fresh Water stated in Gallons delivered by Service Provider to the Frac Water Delivery Points, as measured at the Fresh Water Measurement Points, during such Month multiplied by the tiered fee set forth below (as may be otherwise agreed in accordance with Section 3.6(a) or increased or decreased in accordance with Section 6.1(c) , the “ Delivery Fee ”):

 

For volumes up to and including the first 12,500,000 Gallons per Well

   $ 0.08 per Gallon   

For Volumes above 12,500,000 Gallons up to and including 20,000,000 Gallons per Well

   $ 0.04 per Gallon   

For volumes above 20,000,000 Gallons per Well

   $ 0.02 per Gallon   

Volumes of supplemental Fresh Water delivered by Producer to Service Provider at an Impoundment Facility or supplemental Fresh Water delivered by Producer to Service Provider at the Well Pad during such Month as contemplated in Section 3.4 shall not be

 

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subject to the Delivery Fee and shall not be included in the volumes of Fresh Water delivered to a Frac Water Delivery Point and used in hydraulic fracturing operations for purposes of determining the appropriate Delivery Fee tier.

(ii) an amount equal to $0.01 per Gallon of supplemental Fresh Water delivered by Producer to Service Provider at an Impoundment Facility or Service Provider’s facilities at the applicable Well Pad during such Month as contemplated in Section 3.4 (the “ Supplemental Water Fee ”); and

(iii) an amount equal to the sum of (A) all third party out-of-pocket costs actually incurred by Service Provider in performing the Produced Water Services (“ Reimbursable Produced Water Services Costs ”), plus (B) 2% of the amount of such costs.

(b) If the Minimum Aggregate Fresh Water Volume for any calendar quarter exceeds the actual aggregate volume of Fresh Water measured at the Fresh Water Measurement Points during such calendar quarter (such excess, the “ Aggregate Shortfall Volume ”), then (1) the Aggregate Shortfall Volume for such calendar quarter shall be allocated to each Well having a Well Shortfall Volume for such calendar quarter pro rata based on the volumes of Fresh Water measured at the applicable Fresh Water Measurement Point and Produced Water measured at the applicable Produced Water Delivery Point and, in each case, delivered to each such Well as Frac Water and (2) the aggregate Delivery Fee payable for such calendar quarter shall be recalculated, treating the Aggregate Shortfall Volume as allocated to each such Well for purposes of such recalculation as Fresh Water subject to the Delivery Fee. For an example calculation, see Exhibit F. The excess of the amount of the Delivery Fee for such calendar quarter as so recalculated over the amount of the Delivery Fee otherwise payable for such calendar quarter shall be included in Service Provider’s invoice for the last Month of such calendar quarter and shall be paid by Producer to Service Provider. The following terms used in this Section 6.1(b) have the following meanings:

(i) “ Minimum Aggregate Fresh Water Volume ” for any calendar quarter means 70% of the sum of (i) the aggregate volumes of Fresh Water measured at the Fresh Water Measurement Points during such calendar quarter plus (ii) the aggregate volumes of Produced Water measured at the Produced Water Measurement Points during such calendar quarter.

(ii) “ Minimum Fresh Water Volume ” means, with respect to any Well and any calendar quarter, 70% of the sum of (i) the volumes of Fresh Water measured at the applicable Fresh Water Measurement Point during such calendar quarter and delivered as Frac Water to such Well plus (ii) the aggregate volumes of Produced Water measured at the applicable Produced Water Measurement Point and delivered as Frac Water to such Well during such calendar quarter.

(iii) “ Well Shortfall Volume ” means with respect to any calendar quarter the excess of the Minimum Fresh Water Volume for such Well over the actual volume of Fresh Water measured at the applicable Fresh Water Measurement Point and delivered as Frac Water to such Well.

 

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(c) The Delivery Fee and the Supplemental Water Fee shall be adjusted up on an annual basis in proportion to the percentage change, from the preceding year, in the All Items Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average, 1982-84 = 100, as published by the United States Department of Labor, Bureau of Labor Statistics (“ CPI ”). Such adjustment shall be made effective upon the first Day of each Contract Year commencing in the Contract Year beginning in 2016, and shall reflect the percentage change in the CPI as it existed for June of the preceding Contract Year from the CPI for the second immediately preceding June; provided , however , that the Delivery Fee and the Supplemental Water Fee shall never be less than the initial fees stated in Section 6.1(a) and such fees shall not be increased by more than 4% in any given Contract Year.

(d) Service Provider shall have the right to pass through to Producer and its other customers, on a pro rata basis based on aggregate Monthly Fresh Water deliveries through the relevant facilities, any heating costs incurred by Service Provider to prevent pipeline freezing.

ARTICLE 7

CERTAIN RIGHTS AND OBLIGATIONS OF PARTIES

Section 7.1 Operational Control of Service Provider’s Facilities . Subject to the terms and conditions of this Agreement, Service Provider shall design, construct, own, operate, and maintain the Water Facilities at its sole cost and risk. Service Provider shall be entitled to full and complete operational control of its facilities and shall be entitled to operate and reconfigure its facilities in a manner consistent with its obligations under this Agreement.

Section 7.2 Maintenance . Service Provider shall be entitled, without liability, to interrupt its performance hereunder to perform necessary or desirable inspections, maintenance, testing, alterations, modifications, expansions, connections, repairs or replacements to its facilities as Service Provider deems necessary (“ Maintenance ”), with reasonable notice provided to Producer, except in cases of emergency where such notice is impracticable or in cases where the operations of Producer will not be affected. Before the beginning of each calendar year, Service Provider shall provide Producer in writing with a projected schedule of the Maintenance to be performed during the year and the anticipated date of such Maintenance. On or before the 10 th Day before the end of each Month, Service Provider shall provide Producer with its projected maintenance schedule for the following Month.

Section 7.3 Third Party Services; Capacity Allocations on the Fresh Water Facilities .

(a) Subject to this Section 7.3 and the other provisions of this Agreement, Service Provider has the right to contract with other Persons to provide services utilizing the Fresh Water Facilities on an Interruptible Service basis.

(b) To the extent that the Firm Service volumes of Fresh Water that Service Provider has agreed to make available on a particular System Segment, including the volumes that Service Provider is obligated to make available at the Frac Water Delivery Points on such System Segment pursuant to Section 3.1 , for any reason (including Maintenance, Force Majeure, or any foreseen or unforeseen reduction in capacity) exceed the capacity of such System

 

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Segment to make Fresh Water available or the availability of Fresh Water at the Take Points, then Service Provider shall first completely curtail all Interruptible Service volumes on such System Segment for Producer and other 3 rd party producer volumes at Service Provider’s discretion and second, if required, interrupt or curtail Firm Service volumes of Fresh Water on such System Segment made available to all Firm Service customers of Service Provider pro rata.

(c) Except as otherwise provided in this Section 7.3 , Service Provider shall be free to use any Fresh Water present or available in the Fresh Water Facilities to satisfy its obligations to Producer and any third party and shall not be obligated to ensure that Fresh Water taken from any Take Point is utilized only to perform Services for Producer; provided, however, that Service Provider shall comply with any restrictions on the use of any Fresh Water taken from any of Producer’s Take Point and made available to any third party, and ensure that such third party also so complies, to the extent that Producer has informed Service Provider of such restrictions.

Section 7.4 Water Treatment Asset . If, to the extent permitted in accordance with Section 5.9 of the Purchase and Sale Agreement dated as of November 4, 2015 (the “PSA”), between Rice Energy and the Partnership, Producer or any of its Affiliates controlled by Rice Energy constructs or acquires and retains ownership of a Water Treatment Asset (as defined in the PSA), the Parties agree to negotiate in good faith and use reasonable efforts to agree on modifications to the applicable portions of this Agreement relating to Produced Water treated at such Water Treatment Asset and then utilized by Producer as Frac Water.

ARTICLE 8

DELIVERY RATES

Section 8.1 Delivery Rates . The Fresh Water System, including the Impoundment Facilities, will be designed to permit Fresh Water to be made available at the points on interconnection with the High-Rate Transfer Facilities at a minimum flow rate of 60 Barrels per minute, assuming that Fresh Water will be made available for hydraulic fracturing operations on only one Well per trunkline at any given time (the “ Minimum Flow Rate ”).

Section 8.2 Producer Facilities . Producer, at its own expense, directly or through subcontractors, shall construct, equip, maintain, and operate all facilities necessary to receive Frac Water at the Frac Water Delivery Points at the required rates of flow.

ARTICLE 9

NOMINATION

Section 9.1 Fresh Water Delivery Nominations . Producer shall regularly communicate to Service Provider the dates on which Producer plans to carry out hydraulic fracturing operations on each Well Pad and shall by notice to Service Provider not less than five Business Days in advance specify the dates on which Service Provider is to commence deliveries of Fresh Water at the Frac Water Delivery Points at such Well Pad.

Section 9.2 Changes in Fresh Water Delivery Rates . If Producer desires that Service Provider make Frac Water available on any Day at the Frac Water Delivery Point on any Well Pad at flow rates greater than or less than the Frac Water delivery rate specified for such Well

 

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Pad in the Connection Notice for such Well Pad, Producer may, on not less than 5 Business Days’ notice to Service Provider, increase or decrease the Frac Water delivery rate for such Well Pad.

ARTICLE 10

MEASUREMENT EQUIPMENT AND PROCEDURES

Section 10.1 Equipment . Service Provider shall install, own, operate, and maintain Measurement Facilities to measure the volumes of Fresh Water made available on each Day at each Fresh Water Measurement Point and the volumes of Produced Water delivered by truck on each Day at each Produced Water Measurement Point for mixing with Fresh Water in the High-Rate Transfer Facilities. Producer shall have the right to install check Measurement Facilities at each Measurement Point. The changing and integration of the charts (if utilized for measurement purposes hereunder) and calibrating and adjusting of Service Provider’s Measurement Facilities at each Measurement Point shall be performed by Service Provider.

Section 10.2 Notice of Measurement Facilities Inspection and Calibration . Each Party shall give reasonable notice to the other Party in order that the other Party may, at its option, have representatives present to observe any reading, inspecting, testing, calibrating or adjusting of Measurement Facilities or other facilities or equipment used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement (including Producer’s or its hydraulic fracturing contractor’s equipment collecting data regarding Fresh Water volumes delivered hereunder). The official electronic data from such Measurement Facilities or other facilities or equipment shall remain the property of the owner thereof, but copies of such records shall, upon request, be submitted, together with calculations and flow computer configurations therefrom, to the requesting Party for inspection and verification.

Section 10.3 Measurement Accuracy Verification .

(a) Each Party shall verify the accuracy of all Measurement Facilities or other equipment or facilities used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement owned by such Party no less frequently than twice per year, unless a special test is requested pursuant to Section 10.4 .

(b) If, during any test of such Measuring Facilities, an adjustment or calibration error is found which results in an incremental adjustment to the calculated flow rate through each meter run in excess of two percent (2%) of the adjusted flow rate (whether positive or negative and using the adjusted flow rate as the percent error equation denominator), then any previous recordings of such equipment shall be corrected to zero error for any period during which the error existed (and which is either known definitely or agreed to by the Parties) and the total flow for the period redetermined in accordance with the provisions of Section 10.5 . If the period of error condition cannot be determined or agreed upon between the Parties, such correction shall be made over a period extending over the last one half of the time elapsed since the date of the prior test revealing the two percent (2%) error.

(c) If, during any test of any Measurement Facilities, an adjustment or calibration error is found which results in an incremental adjustment to the calculated hourly

 

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flow rate which does not exceed two percent (2%) of the adjusted flow rate, all prior recordings and electronic flow computer data shall be considered to be accurate for volume determination purpose.

Section 10.4 Special Tests . In the event a Party desires a special test (a test not scheduled by a Party under the provisions of Section 10.3 ) of any Measurement Facilities used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement, seventy-two (72) hours advance notice shall be given to the other Party and both Parties shall cooperate to secure a prompt test of the accuracy of such equipment. If the Measurement Facilities tested are found to be within the range of accuracy set forth in Section 10.3(b) , then the Party that requested the test shall pay the costs of such special test including any labor and transportation costs pertaining thereto. If the Measurement Facilities tested are found to be outside the range of accuracy set forth in Section 10.3(b) , then the Party that owns such Measurement Facilities shall pay such costs and perform the corrections according to Section 10.5 .

Section 10.5 Metered Flow Rates in Error . If, for any reason, any Measurement Facilities used in measuring or checking the measurement of volumes of Fresh Water or Produced Water under this Agreement are (i) out of adjustment, (ii) out of service, or (iii) out of repair and the total calculated flow rate through each meter run is found to be in error in excess of two percent (2%) of the adjusted flow rate as described in Section 10.3 , the total volumes of Fresh Water or Produced Water, as applicable, made available shall be determined in accordance with the first of the following methods which is feasible:

(a) By using the registration of any mutually agreeable check metering facility, if installed and accurately registering (subject to testing as provided for in Section 10.3 );

(b) Where multiple meter runs exist in series, by calculation using the registration of such meter run equipment; provided that they are measuring Fresh Water or Produced Water, as applicable, in common with the faulty metering equipment, are not controlled by separate regulators, and are accurately registering;

(c) By correcting the error by re-reading of the official data, or by straightforward application of a correcting factor to the volumes recorded for the period (if the net percentage of error is ascertainable by calibration, tests or mathematical calculation); or

(d) By estimating the volumes, based upon volumes made available during periods of similar conditions when the meter was registering accurately.

Section 10.6 Record Retention . The Party owning the Measurement Facilities shall retain and preserve all test data, flow metering data, and similar records for any calendar year for a period of at least twenty-four (24) Months following the end of such calendar year unless Applicable Law requires a longer time period or the Party has received written notification of a dispute involving such records, in which case records shall be retained until the related issue is resolved.

 

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ARTICLE 11

NOTICES

Section 11.1 Notices . Unless otherwise provided herein, any notice, request, invoice, statement, or demand which either Party desires to serve upon the other regarding this Agreement shall be made in writing and shall be considered as delivered (i) when hand delivered, or (ii) when delivery is confirmed by pre-paid delivery service (such as FedEx, UPS, DHL or a similar delivery service), or (iii) if mailed by United States certified mail, postage prepaid, three (3) Business Days after mailing, or (iv) if sent by facsimile transmission, when receipt is confirmed by the equipment of the transmitting Party, or (v) when sent via email; provided, if sent by email after normal business hours or if receipt of a facsimile transmission is confirmed after normal business hours, receipt shall be deemed to be the next Business Day. Notwithstanding the foregoing, if a Party desires to serve upon the other a notice of default under this Agreement, or if Producer desires to serve upon Service Provider a Connection Notice, the delivery of such notice shall be considered effective under this Section 11.1 only if delivered by any method set forth in items (i) through (iv) above. Any notice shall be given to the other Party at the following address, or to such other address as either Party shall designate by written notice to the other:

 

Producer:    RICE DRILLING D LLC
   400 Woodcliff Drive
   Canonsburg, PA 15317
   Attn: Jide Famuagun
   Phone: 724-825-2600
   Email: Jide.Famuagun@RiceEnergy.com
With copy to:    For gas control, nominations & balancing:
   Attn: Greg Nichols
   Phone: 724-531-4920
   Email: Greg.Nichols@RiceEnergy.com
   For accounting, financial, and legal:
   Attn: Kate Romano
   Phone: 724-338-2129
   Email: Kate.Romano@RiceEnergy.com

 

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   All notices related to non-routine business matters, including all notices related to legal claims and other legal proceedings, shall also be sent to the following:
   Attn: Will Jordan
   Phone: 832-708-3432
   Email: Will.Jordan@RiceEnergy.com
Service Provider:    RICE WATER SERVICES (OH) LLC
   400 Woodcliff Drive
   Canonsburg, PA 15317
   Attn: Mark Griffin
   Phone: 412-616-8871
   Email: Mark.Griffin@RiceEnergy.com
With copy to:    For gas control, nominations & balancing:
   Attn: Greg Nichols
   Phone: 724-531-4920
   Email: Greg.Nichols@RiceEnergy.com
   For accounting, financial, and legal:
   Attn: Kate Romano
   Phone: 724-338-2129
   Email: Kate.Romano@RiceEnergy.com
   All notices related to non-routine business matters, including all notices related to legal claims and other legal proceedings, shall also be sent to the following:
   Attn: Will Jordan
   Phone: 832-708-3432
   Email: Will.Jordan@RiceEnergy.com

ARTICLE 12

PAYMENTS

Section 12.1 Invoices . Not later than the tenth (10th) Day following the end of each Month, Service Provider shall provide Producer with a detailed statement setting forth the volumes of Fresh Water made available during such Month at the Frac Water Delivery Points and the Delivery Fee with respect to such Month, the volumes of supplemental Fresh Water delivered to the Impoundment Facilities by Producer as contemplated by Section 3.4 and the aggregate Supplemental Water Fee, the Reimbursable Produced Water Services Costs, and the net amount due to Service Provider, together with measurement summaries and all relevant

 

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supporting documentation, to the extent available on such tenth (10 th ) Day (with Service Provider being obligated to deliver any such supporting documentation that is not available on such tenth (10 th ) Day as soon as it becomes available). Producer shall make payment to Service Provider by the last Business Day of the Month in which such invoice is received. Such payment shall be made by wire transfer pursuant to wire transfer instructions delivered by Service Provider to Producer in writing from time to time. If any overcharge or undercharge in any form whatsoever shall at any time be found and the invoice therefor has been paid, Service Provider shall refund any amount of overcharge, and Producer shall pay any amount of undercharge, within thirty (30) Days after final determination thereof, provided, however, that no retroactive adjustment will be made beyond a period of twenty-four (24) Months from the date of a statement hereunder.

Section 12.2 Right to Suspend on Failure to Pay . If any undisputed amount due hereunder remains unpaid for sixty (60) Days after the due date, Service Provider shall have the right to suspend or discontinue Services hereunder until any such past due amount is paid.

Section 12.3 Audit Rights . Either Party, on not less than thirty (30) Days prior written notice to the other Party, shall have the right at its expense, at reasonable times during normal business hours, but in no event more than twice in any period of twelve (12) consecutive Months, to audit the books and records of the other Party to the extent necessary to verify the accuracy of any statement, allocation, measurement, computation, charge, payment made under, or obligation or right pursuant to this Agreement. The scope of any audit shall be limited to transactions affecting Fresh Water volumes hereunder and shall be limited to the twenty-four (24) Month period immediately prior to the Month in which the notice requesting an audit was given. All statements, allocations, measurements, computations, charges, or payments made in any period prior to the twenty-four (24) Month period immediately prior to the Month in which the audit is requested shall be conclusively deemed true and correct and shall be final for all purposes.

Section 12.4 Payment Disputes . In the event of any dispute with respect to any payment hereunder, Producer shall make timely payment of all undisputed amounts, and Service Provider and Producer will use good faith efforts to resolve the disputed amounts within sixty (60) Days following the original due date. Any amounts subsequently resolved shall be due and payable within ten (10) Days of such resolution.

Section 12.5 Interest on Late Payments . In the event that Producer shall fail to make timely payment of any sums, except those contested in good faith or those in a good faith dispute, when due under this Agreement, interest will accrue at an annual rate equal to ten percent (10%) from the date payment is due until the date payment is made.

Section 12.6 Excused Performance . Service Provider will not be required to perform or continue to perform Services, and Producer shall not be obligated to obtain Fresh Water under this Agreement, in the event:

(a) the other Party has voluntarily filed for bankruptcy protection under any chapter of the United States Bankruptcy Code;

 

26


(b) the other Party is the subject of an involuntary petition of bankruptcy under any chapter of the United States Bankruptcy Code, and such involuntary petition has not been settled or otherwise dismissed within ninety (90) Days of such filing; or

(c) the other Party otherwise becomes insolvent, whether by an inability to meet its debts as they come due in the ordinary course of business or because its liabilities exceed its assets on a balance sheet test; and/or however such insolvency may otherwise be evidenced.

ARTICLE 13

FORCE MAJEURE

Section 13.1 Suspension of Obligations . In the event a Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than the obligation to make payments then or thereafter due hereunder, and such Party promptly gives notice and reasonably full particulars of such Force Majeure in writing to the other Party promptly after the occurrence of the cause relied on, then the obligations of the Party giving such notice, so far as and to the extent that 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 so far as reasonably possible be remedied with all reasonable dispatch by the Party claiming Force Majeure.

Section 13.2 Definition of Force Majeure . The term “ Force Majeure ” as used in this Agreement shall mean any cause or causes not reasonably within the control of the Party claiming relief and which, by the exercise of reasonable diligence, such Party is unable to prevent or overcome, including acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, acts of terror, sabotage, wars, blockades, military action, insurrections, riots, epidemics, landslides, subsidence, lightning, earthquakes, fires, storms or storm warnings, crevasses, floods, washouts, civil disturbances, explosions, breakage or accident to wells, machinery, equipment or lines of pipe, the necessity for testing or making repairs or alterations to wells, machinery, equipment or lines of pipe, freezing of wells, equipment or lines of pipe, inability of any Party hereto to obtain, after the exercise of reasonable diligence, necessary materials, supplies, or Governmental Approvals, any action or restraint by any Governmental Authority (so long as the Party claiming relief has not applied for or assisted in the application for, and has opposed where and to the extent reasonable, such action or restraint, and as long as such action or restraint is not the result of a failure by the claiming Party to comply with any Applicable Law).

Section 13.3 Settlement of Strikes and Lockouts . It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the Party affected thereby, and that 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 sole discretion of the Party having the difficulty.

Section 13.4 Payments for Fresh Water Made Available . Notwithstanding the foregoing, it is specifically understood and agreed by the Parties that an event of Force Majeure will in no way affect or terminate Producer’s obligation to make payment for Services performed.

 

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ARTICLE 14

INDEMNIFICATION

Section 14.1 Service Provider . Subject to the terms of this Agreement, including Section 17.8 ,

(a) Service Provider shall release, indemnify, defend, and hold harmless Producer and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Service Provider, but only to the extent that liability for such claims and losses is not otherwise allocated pursuant to the indemnification provisions of Section 4.3(a) , Section 4.4 , Section 14.1(b) , Section 14.2(b) , or Article 15 , and (ii) subject to Section 3.4(b) , any breach of this Agreement by Service Provider.

(b) Service Provider shall release, indemnify, defend, and hold harmless Producer and its joint interest owners and Producer’s contractors and subcontractors of any tier and its and their Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees (collectively, the “ Producer Group ”) from and against all claims and losses for bodily injury to or death of any individual in the Service Provider Group or damage to or loss of the property of any Person in the Service Provider Group in each case arising while such individual or property is on a Well Pad or any property of the Producer adjacent to a Well Pad in connection with the performance by Service Provider of the High-Rate Transfer Services or other services at such Well Pad, including in each case claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding in each case claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party.

Section 14.2 Producer . Subject to the terms of this Agreement, including Section 17.8 ,

(a) Producer shall release, indemnify, defend, and hold harmless Service Provider and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Producer, but only to the extent that liability for such claims and losses is not otherwise allocated pursuant to the indemnification provisions of Section 4.3(a) , Section 4.4 , Section 14.1(b) , Section 14.2(b) , or Article 15 , and (ii) any breach of this Agreement by Producer.

(b) Producer shall release, indemnify, defend, and hold harmless Service Provider and its contractors and subcontractors of any tier and its and their Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees (collectively, the “ Service Provider Group ”) from and against all claims and losses for bodily injury to or death of any individual in the Producer Group or damage to or loss of the property of any Person in the Producer Group in each case arising while such individual or property is on a Well Pad or any property of the Producer adjacent to a Well Pad in connection with the operations of Producer at such Well Pad, including in each case claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding in each case claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party.

 

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ARTICLE 15

CUSTODY AND TITLE

Section 15.1 Custody of Fresh Water . As among the Parties, Producer shall be in custody, control and possession of Fresh Water after such Fresh Water is made available as or as part of the Frac Water at the Frac Water Delivery Points and shall be in custody, control, and possession of Fresh Water that it delivers to the Impoundment Facilities as contemplated in Section 3.4 until such Fresh Water is delivered to the Impoundment Facilities. As among the Parties, Service Provider shall be in custody, control and possession of all Fresh Water in the Fresh Water Facilities at all other times. Subject to Section 4.4 , Section 14.1(b) , and Section 14.2(b) , the Party having custody and control of Fresh Water under the terms of this Agreement shall be responsible for, and shall defend, indemnify, release and hold the other Party and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees harmless from and against, all claims and losses of whatever kind and nature for anything that may happen or arise with respect to such Fresh Water when such Fresh Water is in its custody and control, including losses resulting from any negligent acts or omissions of any indemnified party, but excluding any losses to the extent caused by or arising out of the negligence, gross negligence, or willful misconduct of the indemnified party.

Section 15.2 Custody of Produced Water . As among the Parties, Producer shall be in custody, control and possession of Produced Water until such Produced Water is received by Service Provider or its subcontractors at the Produced Water Receipt Points and shall be in custody, control, and possession of Produced Water after such Produced Water is made available as part of the Frac Water at the Frac Water Delivery Points. As among the Parties, Service Provider shall be in custody, control and possession of all Produced Water from and after its receipt by Service Provider or its subcontractors at the Produced Water Receipt Points, except for Produced Water made available as part of the Frac Water at the Frac Water Delivery Points. Subject to Section 4.4 , Section 14.1(b) , and Section 14.2(b) , the Party having custody and control of Produced Water under the terms of this Agreement shall be responsible for, and shall defend, indemnify, release and hold the other Party and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees harmless from and against, all claims and losses of whatever kind and nature for anything that may happen or arise with respect to such Produced Water when such Produced Water is in its custody and control, including claims and losses resulting from any negligent acts or omissions of any indemnified party, but excluding claims and losses to the extent caused by or arising out of the gross negligence or willful misconduct of the indemnified party.

Section 15.3 Title to Produced Water . Service Provider shall take title to all Produced Water received by Service Provider or its subcontractors at the Produced Water Receipt Points, other than Produced Water that is to be delivered to Producer’s Produced Water tanks at a Well Pad in accordance with Producer’s instructions, title to which shall be retained by Producer. Producer shall ensure that such Produced Water is free of all liens arising by, through, or under Producer, other than liens arising by operation of law.

 

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ARTICLE 16

PAYMENTS FOR FRESH WATER; TAXES

Section 16.1 Payments for Fresh Water; Taxes . To the extent that any Person is entitled to any payment in respect of Fresh Water taken from any Take Point, including any taxes, Service Provider shall pay or cause to be paid and agrees to hold Producer harmless as to the payment of all such payments or taxes. Service Provider shall pay or cause to be paid all taxes, charges and assessments of every kind and character required by statute or by order of Governmental Authorities with respect to the Fresh Water Facilities. Neither Party shall be responsible nor liable for any taxes or other statutory charges levied or assessed against the facilities of the other Party, including ad valorem tax (however assessed), used for the purpose of carrying out the provisions of this Agreement or against the net worth or capital stock of such Party. Notwithstanding the foregoing, to the extent that such payments or taxes relate to Fresh Water that is made available to a third party pursuant to Section 7.3(c) , Service Provider shall look only to such third party, and not to Producer, for payment or reimbursement of such payments and taxes to the extent relating to the Fresh Water made available to such third party, and shall use reasonable efforts to ensure that Fresh Water not subject to such payments and taxes is made available to Producer in preference to third parties.

ARTICLE 17

MISCELLANEOUS

Section 17.1 Rights . The failure of either Party to exercise any right granted hereunder shall not impair nor be deemed a waiver of that Party’s privilege of exercising that right at any subsequent time or times.

Section 17.2 Applicable Laws . This Agreement is subject to all valid present and future laws, regulations, rules and orders of Governmental Authorities now or hereafter having jurisdiction over the Parties, this Agreement, or the services performed or the facilities utilized under this Agreement. To the extent that the performance of the Services by Service Provider shall at any point in time become prohibited or restricted by Applicable Laws or the provisions of any Governmental Approval, Service Provider shall be relieved from its obligations to perform such Services.

Section 17.3 Governing Law; Jurisdiction .

(a) This Agreement shall be governed by, construed, and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to choice of law principles.

(b) The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in the City and County of Washington, Pennsylvania, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.

 

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Section 17.4 Successors and Assigns .

(a) This Agreement shall extend to and inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns.

(b) To the extent any Affiliate of Producer acquires any Interests in the Service Area or any water facilities, Producer shall cause such Affiliate to comply with the obligations of Producer under Article 2 of this Agreement with respect to its Interests and to enter into an agreement with Service Provider substantially the same as this Agreement.

(c) Except as set forth in Section 17.4(d) and Section 17.4(e) , neither Party shall have the right to assign its respective rights and obligations in whole or in part under this Agreement without the prior written consent of the other Party, and any assignment or attempted assignment made otherwise than in accordance with this Section 17.4 shall be null and void ab initio .

(d) Service Provider may perform all services under this Agreement itself using its own water facilities and/or perform any or all such services through third parties, in which case references herein to the relevant Water Facilities shall be deemed to be references to such facilities of the relevant third party.

(e) Notwithstanding the foregoing clause (d):

(i) Service Provider shall have the right to assign its rights under this Agreement, in whole or in part, as applicable, without the consent of Producer if such assignment is made to any Person to which the Water Facilities or any part thereof has been or will be transferred that assumes in writing all of Service Provider’s obligations hereunder (if applicable, to the extent that part of the Water Facilities being transferred to such Person) and is (A) an Affiliate of Service Provider or (B) a Person to which the Water Facilities has been or will be transferred who (1) hires (or retains, as applicable) operating personnel who are then operating the Water Facilities (or has similarly experienced operating personnel itself), (2) has operated for at least two (2) years prior to such assignment systems similar to the Water Facilities, or (3) contracts for the operation of the Water Facilities with another Person that satisfies either of the foregoing conditions (1) or (2) in this clause (B), provided in the case of an assignment pursuant to this clause (B), the assignee has creditworthiness as reasonably determined by Producer that is equal to the higher of Service Provider’s creditworthiness as of the Effective Date and Service Provider’s creditworthiness as of the date of the assignment.

(ii) Service Provider shall have the right to grant a security interest in this Agreement to a lender or other debt provider (or trustee or agent on behalf of such lender) of Service Provider.

(iii) Producer shall have the right to assign its rights under this Agreement, in whole or in part, as applicable, without the consent of Service Provider, to

 

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any Person to which it sells, assigns, or otherwise transfers all or any portion of the Service Area Properties and who (A) who assumes in writing all of Producer’s obligations hereunder (if applicable, to the extent of the Service Area Properties being transferred to such Person) and (B) whose creditworthiness is equal to or greater than the greater of Producer’s credit rating as of the Effective Date and Producer’s creditworthiness as of the date of the assignment.

(f) Upon an assignment by Service Provider in accordance with Section 17.4(e)(i)(B) Service Provider shall be released from its obligations under this Agreement to the extent of such assignment. Upon an assignment by Producer in accordance with Section 17.4(e)(iii) , (i) Producer shall be released from its obligations under this Agreement to the extent of such assignment and (ii) except in the case of an assignment to an Affiliate, Guarantor’s obligations under the Guaranty will terminate as to such obligations to the extent of such assignment.

Section 17.5 Severability . If any provision of this Agreement is determined to be void or unenforceable, in whole or in part, then (i) such provision shall be deemed inoperative to the extent it is deemed void or unenforceable, (ii) the Parties agree to enter into such amendments to this Agreement in order to give effect, to the greatest extent legally possible, to the provision that is determined to be void or unenforceable and (iii) the other provisions of this Agreement in all other respects shall remain in full force and effect and binding and enforceable to the maximum extent permitted by Applicable Law; provided, however, that in the event that a material term under this Agreement is so modified, the Parties will, timely and in good faith, negotiate to revise and amend this Agreement in a manner which preserves, as closely as possible, each Party’s business and economic objectives as expressed by the Agreement prior to such modification.

Section 17.6 Confidentiality .

(a) Confidentiality . Except as otherwise provided in this Section 17.6 , each Party agrees that it shall maintain all terms and conditions of this Agreement, and all information disclosed to it by the other Party or obtained by it in the performance of this Agreement and relating to the other Party’s business (including Development Plans, Fresh Water Facilities Plans, and all data relating to the production of Producer) (collectively, “ Confidential Information ”) in strictest confidence, and that it shall not cause or permit disclosure of this Agreement or its existence or any provisions contained herein without the express written consent of the other Party.

(b) Permitted Disclosures . Notwithstanding Section 17.6(a) disclosures of any Confidential Information may be made by either Party (i) to the extent necessary for such Party to enforce its rights hereunder against the other Party; (ii) to the extent to which a Party is required to disclose all or part of this Agreement by a statute or by the order or rule of a Governmental Authority exercising jurisdiction over the subject matter hereof, by order, by regulations, or by other compulsory process (including deposition, subpoena, interrogatory, or request for production of documents); (iii) to the extent required by the applicable regulations of a securities or commodities exchange; (iv) to a third person in connection with a proposed sale or other transfer of a Party’s interest in this Agreement, provided such third person agrees in writing

 

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to be bound by the terms of this Section 17.6 ; (v) to its own directors, officers, employees, agents and representatives; (vi) to an Affiliate; (vii) to financial advisors, attorneys, and banks, provided that such Persons are subject to a confidentiality undertaking consistent with this Section 17.6(b) , or (viii) except for information disclosed pursuant to Article 3 of this Agreement, to a royalty, overriding royalty, net profits or similar owner burdening production from the Service Area Properties, provided such royalty, overriding royalty, net profits or similar owner, agrees in writing to be bound by the terms of this Section 17.6 .

(c) Notification . If either Party is or becomes aware of a fact, obligation, or circumstance that has resulted or may result in a disclosure of any of the terms and conditions of this Agreement authorized by Section 17.6(b)(ii) or (iii) , it shall so notify in writing the other Party promptly and shall provide documentation or an explanation of such disclosure as soon as it is available.

(d) Party Responsibility . Each Party shall be deemed solely responsible and liable for the actions of its directors, officers, employees, agents, representatives and Affiliates for maintaining the confidentiality commitments of this Section 17.6 .

(e) Public Announcements . The Parties agree that prior to making any public announcement or statement with respect to this Agreement or the transaction represented herein permitted under this Section 17.6 , the Party desiring to make such public announcement or statement shall provide the other Party with a copy of the proposed announcement or statement prior to the intended release date of such announcement. The other Party shall thereafter consult with the Party desiring to make the release, and the Parties shall exercise their reasonable best efforts to (i) agree upon the text of a joint public announcement or statement to be made by both such Parties or (ii) in the case of a statement to be made solely by one Party, obtain approval of the other Party to the text of a public announcement or statement. Nothing contained in this Section 17.6 shall be construed to require either Party to obtain approval of the other Party to disclose information with respect to this Agreement or the transaction represented herein to any Governmental Authority to the extent required by Applicable Law or necessary to comply with disclosure requirements of the Securities and Exchange Commission, New York Stock Exchange, or any other regulated stock exchange.

(f) Survival . The provisions of this Section 17.6 shall survive any expiration or termination of this Agreement; provided that other than with respect to information disclosed pursuant to Article 3 , as to which such provisions shall survive indefinitely, such provisions shall survive only a period of one (1) year.

Section 17.7 Entire Agreement, Amendments and Waiver . This Agreement, including all exhibits hereto, integrates the entire understanding between the Parties with respect to the subject matter covered and supersedes all prior understandings, drafts, discussions, or statements, whether oral or in writing, expressed or implied, dealing with the same subject matter. This Agreement amends and restates in its entirety and supersedes the Original Agreement. This Agreement may not be amended or modified in any manner except by a written document signed by the Parties that expressly amends this Agreement. No waiver by either Party of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless expressly provided. No waiver shall be effective unless made in writing and signed by the Party to be charged with such waiver.

 

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Section 17.8 Limitation of Liability . NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE BREACH THEREOF OR UNDER ANY OTHER THEORY OF LIABILITY, WHETHER TORT, NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT, WARRANTY, INDEMNITY OR OTHERWISE, INCLUDING LOSS OF USE, INCREASED COST OF OPERATIONS, LOSS OF PROFIT OR REVENUE, OR BUSINESS INTERRUPTIONS; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION SHALL NOT APPLY TO ANY DAMAGE CLAIM ASSERTED BY OR AWARDED TO A THIRD PARTY FOR WHICH A PARTY WOULD OTHERWISE BE LIABLE UNDER ANY INDEMNIFICATION PROVISION SET FORTH HEREIN.

Section 17.9 Headings . The headings and captions in this Agreement have been inserted for convenience of reference only and shall not define or limit any of the terms and provisions hereof.

Section 17.10 Rights and Remedies . Except as otherwise provided in this Agreement, each Party reserves to itself all rights, counterclaims, other remedies and defenses that such Party is or may be entitled to arising from or out of this Agreement or as otherwise provided by Applicable Law.

Section 17.11 No Partnership . Nothing contained in this Agreement shall be construed to create an association, trust, partnership, or joint venture or impose a trust, fiduciary or partnership duty, obligation or liability on or with regard to either Party.

Section 17.12 Rules of Construction . In construing this Agreement, the following principles shall be followed:

(a) no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Agreement;

(b) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(c) the word “includes” and its syntactical variants mean “includes, but is not limited to,” “includes without limitation” and corresponding syntactical variant expressions;

(d) the plural shall be deemed to include the singular and vice versa, as applicable; and

(e) references to Section shall be references to Sections of this Agreement.

 

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Section 17.13 No Third Party Beneficiaries . This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns, and shall not inure to the benefit of any other Person whomsoever or whatsoever, it being the intention of the Parties that no third Person shall be deemed a third party beneficiary of this Agreement.

Section 17.14 Further Assurances . Each Party shall take such acts and execute and deliver such documents as may be reasonably required to effectuate the purposes of this Agreement.

Section 17.15 Counterpart Execution . This Agreement may be executed in any number of counterparts, each of which shall be considered an original, and all of which shall be considered one and the same instrument.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first set forth above.

 

RICE DRILLING D LLC
By:  

/s/ Daniel J. Rice IV

  Daniel J. Rice IV
  Chief Executive Officer
RICE WATER SERVICES (OH) LLC
By:  

/s/ Rob Wingo

  Rob Wingo
  Senior Vice President, Chief Operating Officer

 

Water Services Agreement

Signature Page


EXHIBIT A

FORM OF CONNECTION NOTICE

Rice Water Services (OH) LLC

400 Woodcliff Drive

Canonsburg, PA 15317

 

  Re: Amended and Restated Water Services Agreement dated December     , 2015, between Rice Drilling D LLC and Rice Water Services (OH) LLC (the “ Water Services Agreement ”)

Ladies and Gentlemen:

This is a Connection Notice for purposes of the Water Services Agreement. Capitalized terms used but not defined in this Connection Notice have the meanings given such terms in the Water Services Agreement.

Service Provider is hereby notified that Producer is planning to drill, complete, and hydraulically fracture the Planned Wells at the Well Pads by the Target Commencement Dates, in each case as set forth below and will require Frac Water to be delivered to the Frac Water Delivery Points at such Well Pads at the rates of flow stated below for the number of days after the Target Commencement Date as set forth below:

 

Planned Well

 

Well Pad

 

Target Commencement

Date

 

Rates of Flow and

Number of Days

     

 

Very truly yours,
RICE DRILLING D LLC
By:  

 

Name:  

 

Title:  

 

 

Exhibit A – Page 1


EXHIBIT C

INITIAL REQUIRED CONNECTION WELLS

(as of 11/1/2015)

 

Pad Name

  

# of
Wells
on Pad

    

Target
Commencement
Date

 

Thunderstruck South

     4         1/31/2016   

Dragonsbreath North

     5         2/12/2016   

Madusa South

     2         3/30/2016   

Spitfire North

     2         7/9/2016   

Gold Digger South

     4         8/22/2017   

Son-Uva Digger South

     4         10/12/2017   

 

Exhibit C


EXHIBIT D

RICE GUARANTY

This Parent Guaranty (this “ Agreement ”) dated as of November 4, 2015 is made by Rice Energy Inc., a Delaware corporation (the “ Guarantor ”), in favor of each of Rice Water Services (OH) LLC, a Delaware limited liability company (“ Rice OH ”), and Rice Water Services (PA) LLC, a Delaware limited liability company (“ Rice PA ” and, together with Rice OH, each a “ Beneficiary ” and together the “ Beneficiaries ”), as set forth below. The Guarantor and the Beneficiaries are sometimes referred to together herein as the “ Parties ” and each individually as a “ Party .”

INTRODUCTION

WHEREAS, this Agreement is being executed and delivered in connection with that certain (i) Amended & Restated Water Services Agreement, by and between Rice Drilling D LLC, a Delaware limited liability company (“ Drilling D ”), and Rice OH, dated as of November 4, 2015 (the “ Rice OH Agreement ”); and (ii) Amended & Restated Water Services Agreement, by and between Rice Drilling B LLC, a Delaware limited liability company (“ Drilling B ”), and Rice PA, dated as of November 4, 2015 (the “ Rice PA Agreement ” and, together with the Rice OH Agreement, the “ Water Services Agreements ” and each a “ Water Services Agreement ”);

WHEREAS, as of the date hereof, each of Drilling B and Drilling D is a subsidiary of the Guarantor, and the Guarantor acknowledges that (a) it will substantially benefit from the Water Services Agreements and (b) this Agreement is necessary or convenient to the conduct, promotion or attainment of the business of each of Drilling B and Drilling D;

WHEREAS, (i) to induce Rice OH to enter into the Rice OH Agreement, Rice OH desires that the Guarantor guarantee the performance of Drilling D under the Rice OH Agreement and (ii) to induce Rice PA to enter into the Rice PA Agreement, Rice PA desires that the Guarantor guarantee the performance of Drilling B under the Rice PA Agreement, each upon the terms and conditions set forth herein; and

WHEREAS, the Guarantor desires to guarantee the performance of (i) Drilling D under the Rice OH Agreement and (ii) Drilling B under the Rice PA Agreement, each upon the terms and conditions set forth herein.

AGREEMENT

For and in consideration of the premises and mutual covenants herein contained and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the Guarantor hereby stipulates and agrees as follows:

1. The Guaranty .

(a) Subject to the last sentence of Section 1(c) , the Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Rice OH the full and timely performance and discharge (including the payment of money) by Drilling D of all

 

Exhibit D – Page 1


obligations and liabilities of Drilling D now existing or hereafter arising under the Rice OH Agreement (the “ Drilling D Guaranteed Obligations ”) and hereby agrees that if Drilling D shall fail to (i) pay any amount when and as the same shall be due and payable by Drilling D to or for the benefit of Rice OH or any subsidiary thereof or (ii) timely perform and discharge in full any other obligation or liability in accordance with the terms of the Rice OH Agreement, the Guarantor shall forthwith pay to or for the benefit of Rice OH or any subsidiary thereof, as applicable, such amount or perform and discharge, or cause to be performed and discharged, any such obligation or liability, as the case may be, as such payment or performance and discharge is required to be made or done by Drilling D pursuant to the terms thereof.

(b) Subject to the last sentence of Section 1(c) , the Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Rice PA the full and timely performance and discharge (including the payment of money) by Drilling B of all obligations and liabilities of Drilling B now existing or hereafter arising under the Rice PA Agreement (the “ Drilling B Guaranteed Obligations ” and, together with the Drilling D Guaranteed Obligations, the “ Guaranteed Obligations ”) and hereby agrees that if Drilling B shall fail to (i) pay any amount when and as the same shall be due and payable by Drilling B to or for the benefit of Rice PA or any subsidiary thereof or (ii) timely perform and discharge in full any other obligation or liability in accordance with the terms of the Rice PA Agreement, the Guarantor shall forthwith pay to or for the benefit of Rice PA or any subsidiary thereof, as applicable, such amount or perform and discharge, or cause to be performed and discharged, any such obligation or liability, as the case may be, as such payment or performance and discharge is required to be made or done by Drilling B pursuant to the terms thereof.

(c) Except to the extent otherwise expressly provided herein, each of the guarantees set forth in Sections (1)(a) and (1)(b)  is an absolute, present and continuing guarantee of payment and of performance of obligations and not of collectibility and is in no way conditional or contingent upon any attempt to collect from Drilling B or Drilling D, as applicable, or upon any other action, occurrence or circumstance whatsoever. It shall not be necessary for any Beneficiary in order to enforce such payment or performance by the Guarantor, first to institute suit or exhaust its remedies against Drilling B or Drilling D, as applicable, the Guarantor or any other person or entity liable with respect to any Guaranteed Obligations.

(d) Notwithstanding any provision of this Agreement to the contrary, as to any Guaranteed Obligation which the Guarantor is called upon to pay, perform, or discharge, Guarantor reserves to itself the right to assert any and all claims, counterclaims, defenses, setoffs and other rights to the same extent that Drilling D or Drilling B, as applicable, could assert any such claim, counterclaim, defense, setoff or other right against the applicable Beneficiary with respect to such Guaranteed Obligation, except for those arising out of any of the events described in Section 2(d) hereof.

2. Obligations Absolute . The obligations of the Guarantor with respect to each Beneficiary hereunder shall be absolute, continuing and unconditional and shall not be released, discharged or in any way affected by any of the following:

(a) any amendment to, modification of, or supplement to the applicable Water Services Agreement or any assignment or transfer of any rights or obligations thereunder;

 

Exhibit D – Page 2


(b) any extension of the time for the payment of all or any portion of any sums payable under the applicable Water Services Agreement or the extension of time for the performance of any obligations under, arising out of or in connection with the applicable Water Services Agreement;

(c) any failure, omission, delay or lack of diligence on the part of the applicable Beneficiary or any other person or entity to enforce, assert or exercise, or any waiver of, any right, privilege, power or remedy conferred on such Beneficiary or any other person or entity by the applicable Water Services Agreement, or any action on the part of such Beneficiary or such other person or entity granting indulgence or extension of any kind;

(d) any bankruptcy, insolvency, readjustment, composition, liquidation, dissolution or similar proceeding or any other defense that may arise in connection with any such proceeding with respect to Drilling B, Drilling D, the Guarantor or any other person or entity;

(e) any change in the corporate, limited liability company or partnership structure, existence or ownership of Drilling B (as applicable), Drilling D (as applicable), the Guarantor (as applicable), Rice OH (as applicable) or Rice PA (as applicable), or any sale, lease or transfer of any or all of the assets of Drilling B (as applicable), Drilling D (as applicable), the Guarantor (as applicable), Rice OH (as applicable) or Rice PA (as applicable) to any person or entity;

(f) any failure on the part of, as applicable, Drilling B or Drilling D for any reason to comply with or perform any of the terms of any other agreement with the Guarantor;

(g) any law, regulation or order hereafter in effect in any jurisdiction affecting any of the rights under or terms of the applicable Water Services Agreement; or

(h) any other circumstance that might otherwise constitute a legal or equitable discharge of the Guarantor.

3. Waiver . With respect to each Beneficiary, the Guarantor unconditionally waives, to the fullest extent permitted by law: (a) notice of acceptance hereof, of any action taken or omitted in reliance hereon, of demand, and of any defaults by, as applicable, Drilling B or Drilling D in the payment or performance of the applicable Guaranteed Obligations, and of any of the matters referred to in Section 2 ; (b) all notices that may otherwise be required by statute, rule of law or otherwise to preserve any of the rights of such Beneficiary against the Guarantor, including presentment to or demand for payment from Drilling B (as applicable), Drilling D (as applicable) or the Guarantor, or notice to, as applicable, Drilling B or Drilling D of claims with a court in the event of the bankruptcy of, as applicable, Drilling B or Drilling D; (c) any right to the enforcement, assertion or exercise by such Beneficiary of any right, power or remedy conferred in this Agreement or the applicable Water Services Agreement; (d) any requirement of

 

Exhibit D – Page 3


diligence on the part of such Beneficiary; and (e) any other act or omission (including any delay by such Beneficiary or any other person or entity in the taking of any action) that might in any manner or to any extent vary the risk of the Guarantor or that might otherwise operate as a discharge of the Guarantor.

4. Reinstatement of Guaranty . This Agreement shall continue to be effective, or be reinstated, as the case may be, if and to the extent at any time any payment, in whole or in part, made by any of Drilling B, Drilling D or the Guarantor to any Beneficiary in respect of any Guaranteed Obligation is rescinded or must otherwise be restored or returned by such Beneficiary upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of such entity, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to any such entity or any substantial part of its property, or otherwise, all as though such payments had not been made and, to the extent permitted by applicable law, in such event, the Guarantor shall pay such Beneficiary an amount equal to the payment that has been rescinded or returned. No Beneficiary shall be required to litigate or otherwise dispute its obligation to make such repayments if it in good faith believes that such obligation exists.

5. Subrogation . The Guarantor hereby agrees not to assert or enforce any right of contribution, reimbursement, indemnity, subrogation or any other right to payment from Drilling B or Drilling D as a result of the Guarantor’s performance of its obligations pursuant to this Agreement or any other claim Guarantor may have against either Drilling B or Drilling D until all Guaranteed Obligations are performed or paid in full.

6. Representations . The Guarantor represents, as of the date hereof, as follows:

(a) the Guarantor has received, or will receive, direct or indirect benefit from the making of this Agreement and the Guaranteed Obligations;

(b) the Guarantor is familiar with, and has independently reviewed, the books and records regarding the financial condition of both Drilling B and Drilling D and is familiar with the value of any and all collateral intended to be created as security for the payment of the Guaranteed Obligations, but the Guarantor is not relying on such financial condition, the collateral or the agreement of any other party to become a surety as an inducement to enter into this Agreement;

(c) except to the extent contained in the Water Services Agreements, neither Beneficiary nor any other party has made any representation, warranty or statement to the Guarantor in order to induce the Guarantor to execute this Agreement;

(d) as of the date hereof, and after giving effect to this Agreement and the contingent obligation evidenced hereby, the Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities;

(e) neither execution and delivery of this Agreement nor the consummation of the transactions herein contemplated, nor compliance with the terms and provisions

 

Exhibit D – Page 4


hereof, will contravene any provision of applicable law, statute, rule or regulation or any judgment, decree, franchise, order or permit applicable to the Guarantor or will conflict or be inconsistent with, or will result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, security interest, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which the Guarantor is a party or by which the Guarantor may be bound; and

(f) there are no unsatisfied judgments against the Guarantor and no actions, suits or proceedings pending or threatened against or affecting the Guarantor before any court or before any governmental or administrative body or agency that might result in any materially adverse change in the operations, business, property or assets or in the condition (financial or otherwise) of the Guarantor.

7. Notices . Any notice, demand or communication required or permitted under this Agreement shall be in writing and delivered personally, by reputable overnight delivery service or other courier or by certified mail, postage prepaid, return receipt requested, and shall be deemed to have been duly given (a) as of the date of delivery if delivered personally or by overnight delivery service or other courier or (b) on the date receipt is acknowledged if delivered by certified mail, addressed as follows; provided that a notice of a change of address shall be effective only upon receipt thereof:

If to Rice OH, to:

Rice Water Services (OH), LLC

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: General Counsel

If to Rice PA, to:

Rice Water Services (PA), LLC

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: General Counsel

If to the Guarantor, to:

Rice Energy Inc.

400 Woodcliff Drive

Canonsburg, Pennsylvania 15317

Attn: General Counsel

8. Rules of Construction . The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of

 

Exhibit D – Page 5


the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law will be deemed to refer to such statute or law, as amended, and also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Any reference to a Party will also include such Party’s permitted successors and assigns. The words “including,” “includes,” and “include” will be deemed to be followed by the phrase “without limitation.” All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, will include all other genders; the singular will include the plural, and vice versa; and the term “shall” means “will,” and vice versa. The terms “herein,” “hereby,” “hereunder,” “hereof,” “hereinafter,” and other equivalent words refer to this Agreement in its entirety and not solely to the particular portion of the Agreement in which such word is used.

9. Severability . In the event of a direct conflict between the provisions of this Agreement and any mandatory provision of applicable laws, the applicable provision of applicable law will control. If any provision of this Agreement, or the application thereof to any person or circumstance, is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances will not be affected thereby and that provision will be enforced to the greatest extent permitted by applicable laws. The Parties agree to negotiate in good faith to replace any such invalid provision with a valid provision having similar effect.

10. Entire Agreement; Amendment . This Agreement is intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Parties in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such subject matter, whether verbal or written. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Guarantor, Rice OH or Rice PA from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Parties, in the case of an amendment, supplement or modification, and by the Party granting the waiver or consent in the case of a waiver or consent, and (ii) only in the specific instance and for the specific purpose for which made or given.

11. Term of Agreement . This Agreement and all guarantees, covenants and agreements of the Guarantor contained herein shall continue in full force and effect and shall not be discharged until all of the Guaranteed Obligations shall have terminated or expired, or shall be indefeasibly paid or otherwise performed and discharged in full.

12. Governing law; Jurisdiction .

(a) This Agreement shall be governed by, construed, and enforced in accordance with the laws of the Commonwealth of Pennsylvania without regard to choice of law principles.

(b) The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions

 

Exhibit D – Page 6


contemplated hereby shall be in any state or federal court in the City and County of Washington, Pennsylvania, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.

13. Attorneys’ Fees . In the event of any litigation or other proceedings to enforce this Agreement, the prevailing Party shall be entitled to recover all reasonable attorneys’ fees and expenses incurred in connection therewith.

14. Counterparts . This Agreement may be executed in multiple counterparts, each of which, when executed, will be deemed an original, and all of which will constitute but one and the same instrument.

15. Headings . The headings herein are included for convenience of reference only and shall be ignored in the construction and interpretation of this Agreement.

[signature page follows]

 

Exhibit D – Page 7


IN WITNESS WHEREOF, the Guarantor has executed this Agreement as of the date first set forth above.

 

GUARANTOR:
RICE ENERGY INC.
By:  

 

  Name:
  Title:

 

AGREED TO AND ACKNOWLEDGED BY:
RICE WATER SERVICES (OH) LLC
By:  

 

  Name:
  Title:
RICE WATER SERVICES (PA) LLC
By:  

 

  Name:
  Title:

 

Exhibit D – Page 8


EXHIBIT E

EXCLUSION FROM SERVICE AREA

 

LOGO

 

Exhibit E


EXHIBIT F

EXAMPLE CALCULATION

 

ECONOMIC MECHANISM FOR

EXCESSIVE PRODUCED WATER

Produced Water Threshold    30.0%

 

Ohio  
    Volume Water (MM Gallons)     %
Fresh
    Fresh
Water

Allocation
    Tier 1     Tier 2     Tier 3        
    Fresh     Produced     Total         Volume,
MM
    Fee/gal     $ Fee     Volume,
MM
    Fee/gal     $ Fee     Volume,
MM
    Fee/gal     $ Fee     Total Fee  

OH Wells

              12.50      $ 0.08          7.50      $ 0.04          $ 0.02       

Example Well 1

    9.3        2.7        12.0        77.8     —          —            —          —            —          —            —          —     

Example Well 2

    8.0        2.7        10.6        75.0     —          —            —          —            —          —            —          —     

Example Well 3

    10.6        1.3        12.0        88.9     —          —            —          —            —          —            —          —     

Example Well 4

    6.7        1.3        8.0        83.3     —          —            —          —            —          —            —          —     

Example Well 5

    7.0        6.7        13.7        51.3     0.97        0.97          77,622        —            —          —            —          77,622   

Example Well 6

    6.0        5.3        11.3        53.0     0.80        0.80          64,371        —            —          —            —          64,371   

Example Well 7

    6.7        5.3        12.0        55.6     0.85        0.85          68,095        —            —          —            —          68,095   

Example Well 8

    9.3        5.3        14.6        63.6     1.04        1.04          83,227        —            —          —            —          83,227   

Example Well 9

    10.6        6.7        17.3        61.5     1.23        1.23          98,359        —            —          —            —          98,359   

Example Well 10

    13.0        9.0        22.0        59.1     1.56        —            —          1.56          62,530        —            —          62,530   

Example Well 11

    18.0        11.0        29.0        62.1     2.06        —            —          2.00          80,000        0.06          1,213        81,213   

Total

    105.2        57.3        162.5        64.8     8.52        4.90        $ 391,674        3.56        $ 142,530        0.06        $ 1,213      $ 535,416   

Minimum Aggregate Fresh Water Volume (MM Gallons)

    113.7                               

Freshwater Allocation

    8.52        <---- allocated to wells with more than 30% produced water   

 

Tiered Water Fee Structure

            
     Ohio        

Freshwater, MM gal

    

Tier 1

     12.50     

Tier 2

     7.50     

$/Gallon

    

Tier 1

   $ 0.08     

Tier 2

   $ 0.04     

Tier 3

   $ 0.02     

SINGLE WELL EXAMPLE

    

Lateral, Ft

     8,000     

gal/ft

     2,350     

Total

     18.80     

% Produced

     20  

Tier 1

    

Fresh

     12.50     

Produced

     3.13     

Total

     15.63     

Tier 2

    

Fresh

     7.50     

Produced

     1.88     

Total

     9.38     

Freshwater, MM gal

    

Tier 1

     12.50        66.5

Tier 2

     2.54        13.5

Tier 3

     —          —     

Produced Water, MM gal

    

Tier 1

     3.13     

Tier 2

     0.64     

Tier 3

     —       

Total

     18.80     

Water Revenue

    

Tier 1

   $ 1,000        90.8

Tier 2

   $ 102        9.2

Tier 3

     —          —     

Total

   $ 1,102     

 

Exhibit F

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Rice Midstream Partners LP Reports Third Quarter 2015 Results

CANONSBURG, Pa. - November 5, 2015 /PRNewswire/ - Rice Midstream Partners LP (NYSE: RMP) (“RMP” or the “Partnership”) today reported third quarter 2015 financial and operational results. Highlights for the quarter include:

 

    Third quarter average daily throughput of 671 MDth/d, a 3% increase relative to second quarter 2015

 

    Adjusted EBITDA (1) of $15.6 million for the third quarter 2015

 

    Distributable cash flow (“DCF”) (1) of $13.9 million for the third quarter 2015

 

    DCF coverage ratio of 1.25x for the third quarter 2015

 

    Increased third quarter distribution to $0.1935 per common unit

 

    Subsequent to quarter end, closed successful acquisition of Rice Midstream Holdings’ water services business for $200 million plus a $25 million earn out upon achievement of certain increases in connected water sources

 

    Subsequent to quarter end, announced private placement of 13,409,961 RMP common units for $175 million of gross proceeds

Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, “We are excited to report another solid quarter for RMP, as throughput continues to increase as a result of our sponsor’s continued solid execution and third party development ahead of schedule. The water services transaction announced this morning marks our initial acquisition since our IPO, and we expect to continue delivering significant growth through organic development and accretive acquisitions.”

Third Quarter 2015 Results

Average daily throughput for the third quarter was 671 MDth/d, a 3% increase relative to second quarter 2015, with 17% attributable to third-party volumes. Operating revenues were $20.1 million, and operation and maintenance expenses totaled $1.7 million. We reported net income of $12.3 million, or $0.21 per limited partner unit. Adjusted EBITDA and DCF were $15.6 million and $13.9 million, respectively. Estimated maintenance capital expenditures totaled $1.1 million and interest expense was $0.6 million.

Year to Date Financial Results

For the nine month period ended September 30, 2015, average daily throughput was 629 MDth/d, with 15% attributable to third-party volumes. Operating revenues were $56 million, and operation and maintenance expenses were $4 million. We reported net income of $33.7 million, or $0.59 per limited partner unit. Adjusted EBITDA and DCF were $44.7 million and $39.9 million, respectively. Estimated maintenance capital expenditures totaled $3.4 million and interest expense was $1.4 million.

 

(1) Please see “Supplemental Non-GAAP Financial Measures” for a description of Adjusted EBITDA and DCF.

 

1


2015 Operational Results

 

     Average Daily Throughput (MDth/d)  
     Three Months Ended
September 30, 2015
    Nine Months Ended
September 30, 2015
 

Washington County System

     525        456   

Greene County System

     146        173   
  

 

 

   

 

 

 

Total

     671        629   
  

 

 

   

 

 

 

% Third-party

     17     15

Water Services Business Acquisition

On November 5, 2015, RMP announced that it has acquired the water services business of Rice Energy’s wholly-owned subsidiary, Rice Midstream Holdings LLC (“Midstream Holdings”), for $200 million at closing plus a $25 million earn out to be paid upon achievement of certain increases in connected water sources, less any associated capital expenditures, if any, if Rice obtains an additional 5 MMgal/d of connected water sources in Ohio by December 31, 2017. This acquisition includes Midstream Holdings’ Pennsylvania and Ohio fresh water distribution systems and related facilities, as well as a right to provide fresh water for well completion operations and to collect, recycle, or dispose of flowback and produced water for Rice in Washington and Greene Counties, Pennsylvania, and Belmont County, Ohio (the “Services Area”). In addition, RMP has been given the exclusive right to acquire and/or develop water treatment facilities in the Services Area.

RMP funded the $200 million purchase price through borrowings under its revolving credit facility. Upon completion of the Partnership’s private placement of common units described below, the $175 million of gross proceeds will be used to repay a portion of borrowings outstanding under RMP’s revolving credit facility. Pro forma for the acquisition and the consummation of the private placement of common units, and assuming no earn out payment, RMP’s liquidity position as of September 30, 2015, was $369 million, consisting of $350 million available under its revolving credit facility and $19 million of cash on hand.

In connection with the Partnership’s fresh water services business acquisition, RMP entered into amended and restated water services agreements with Rice. RMP has agreed to provide certain fluid handling services to Rice, including the right to provide fresh water for well completion operations in the Marcellus and Utica Shales and to collect, recycle or dispose of flowback and produced water for Rice within the Services Area. The initial term of the water services agreements is until December 22, 2029 and from month to month thereafter. Under the agreement, Rice will pay (i) a variable fee, based on volumes of water supplied, for freshwater deliveries by pipeline directly to the well site, subject to annual CPI adjustments and (ii) a produced water handling fee of actual out-of-pocket cost incurred, plus a 2% margin.

RMP Private Placement

On November 4, 2015, the Partnership priced a private placement of 13,409,961 common units for gross proceeds of $175 million. The closing of the private placement is expected to occur on November 10, 2015, subject to certain customary closing conditions.

The securities offered in the private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the

 

2


registration requirements of the Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities described above.

Quarterly Cash Distribution

On October 23, 2015, we declared a quarterly distribution of $0.1935 per unit for the third quarter 2015, an increase of $0.003 per unit relative to second quarter 2015. The distribution will be payable on November 12, 2015 to unitholders of record as of November 3, 2015.

As previously announced, based on continued solid operational results and strong DCF coverage, we expect to increase distributions by $0.003 per unit in the fourth quarter 2015 to $0.1965 per unit, which represents a 5% increase above our minimum quarterly distribution of $0.1875 per unit.

Conference Call

RMP will host a conference call on November 5, 2015 at 11:00 a.m. Eastern time (10:00 a.m. Central time) to discuss third quarter 2015 financial and operating results. To listen to a live audio webcast of the conference call, please visit RMP’s website at www.ricemidstream.com . A replay of the conference call will be available following the call for two weeks and can be accessed from www.ricemidstream.com .

Rice Energy will host a conference call on November 5, 2015 at 9:30 a.m. Eastern time (8:30 a.m. Central time) to discuss third quarter 2015 financial and operating results and we encourage RMP investors to listen-in. To listen to a live audio webcast of the conference call, please visit Rice Energy’s website at www.riceenergy.com. A replay of the conference call will be available for two weeks and can also be accessed from Rice’s homepage.

Please visit www.ricemidstream.com to view a presentation containing supplemental third quarter 2015 information.

About Rice Midstream Partners

Rice Midstream Partners LP is a fee-based, growth-oriented limited partnership formed by Rice Energy Inc. (NYSE: RICE) to own, operate, develop and acquire midstream assets in the Appalachian basin. RMP provides midstream services to Rice Energy and third-party companies through its natural gas gathering and compression assets in the rapidly developing dry gas core of the Marcellus Shale in southwestern Pennsylvania.

For more information, please visit www.ricemidstream.com.

Forward Looking Statements

This release includes forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than historical facts included in this release, that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as, forecasted gathering volumes, revenues, Adjusted EBITDA, distribution growth, and distributable cash flow, the timing of completion of midstream projects, future capital expenditures (including the amount and nature thereof), and concurrent private placement, business strategy and measures to

 

3


implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although we believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.

We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering and sale of natural gas and oil. These risks include, but are not limited to: commodity price volatility; the availability of capital on an economic basis; inflation; lack of availability of drilling and production equipment and services; environmental risks; drilling and other operating risks; legislative and regulatory changes adversely affecting the industry; transportation capacity constraints and interruptions; the uncertainty inherent in estimating natural gas reserves and in projecting future rates of production, cash flow and access to capital; and the timing of development expenditures. Furthermore, the acquisition of the water services business by the Partnership, the concurrent private placement by the Partnership and related transactions may not be completed as described or at all. Information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by us will be realized, or even if realized, that they will have the expected consequences to or effects on us, our business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Contact:

Julie Danvers, Director of Investor Relations

832-708-3437

Julie.Danvers@RiceMidstream.com

 

4


Rice Midstream Partners LP

Statements of Operations

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(in thousands, except per unit data)    2015     2014     2015     2014  

Affiliate gathering volumes (MDth/d)

     559        327        537        302   

Third-party gathering volumes (MDth/d)

     112        47        92        29   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total gathering volumes (MDth/d)

     671        374        629        331   

Operating revenues:

        

Affiliate (1)

   $ 15,578      $ 68      $ 44,745      $ 237   

Third-party

     4,564        1,552        11,294        2,842   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     20,142        1,620        56,039        3,079   

Operating expenses:

        

Operation and maintenance expense

     1,727        1,495        3,985        2,863   

General and administrative expense

     2,828        1,115        7,344        7,791   

Incentive unit expense (2)

     —          5,878        —          10,526   

Equity compensation expense (2)

     961        260        2,960        378   

Depreciation expense

     1,597        955        4,531        1,851   

Amortization of intangible assets

     407        408        1,223        748   

Other (income) expense

     (347     —          492        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     7,173        10,111        20,535        24,157   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     12,969        (8,491     35,504        (21,078

Other income

     2        —          6        —     

Interest expense (2)

     (557     (2,744     (1,408     (10,502

Amortization of deferred finance costs

     (144     —          (432     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and discontinued operations

     12,270        (11,235     33,670        (31,580

Income tax benefit

     —          2,119        —          8,531   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     12,270        (9,116     33,670        (23,049

Loss from discontinued operations, net of tax (3)

     —          (1,630     —          (3,036
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 12,270      $ (10,746   $ 33,670      $ (26,085
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average limited partner units (basic and diluted) (in millions)

        

Common units

     28.8          28.8     

Subordinated units

     28.8          28.8     

Net income attributable to RMP per limited partner unit (basic and diluted) (3)

        

Common units

   $ 0.21        $ 0.58     

Subordinated units

   $ 0.21        $ 0.59     

Subordinated units (basic and diluted)

   $ 0.21        $ 0.59     

Adjusted EBITDA (4)

   $ 15,589        N/M      $ 44,716        N/M   

Distributable cash flow (5)

   $ 13,912        N/M      $ 39,948        N/M   

Quarterly distribution per unit

   $ 0.1935        $ 0.5715     

Distribution declared:

        

Limited partner units - Public

   $ 5,563         

Limited partner units - RICE

     5,565         
  

 

 

       

Total distribution declared

   $ 11,128         

DCF coverage ratio

     1.25         

 

(1) Prior to our IPO, we did not charge a gathering fee to affiliates, including Rice Energy, other than a fee charged on a single receipt point pipeline in Greene County in which we own a 60% working interest.
(2) Prior to our IPO, we were allocated our proportionate share of incentive unit expense, equity compensation expense, and interest expenses initially recognized by Rice Energy. These non-cash charges are described in more detail in Note 9 to the consolidated financial statements in our 10-Q.
(3) Net income per limited partner unit is presented only for the period subsequent to our initial public offering.
(4) We define Adjusted EBITDA as net income (loss) before interest expense, depreciation expense, amortization expense, non-cash equity compensation expense, amortization of deferred financing costs and other non-recurring items. Please read Supplemental “Non-GAAP Financial Measures.”
(5) We define distributable cash flow as Adjusted EBITDA less interest expense, and estimated maintenance capital expenditures. Please read Supplemental “Non-GAAP Financial Measures.”

 

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Rice Midstream Partners LP

Supplemental Non-GAAP Financial Measures

(Unaudited)

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define Adjusted EBITDA as net income (loss) before interest expense, depreciation expense, amortization expense, non-cash stock compensation expense, amortization of deferred financing costs and other non-recurring items. Adjusted EBITDA is not a measure of net income as determined by GAAP.

Distributable cash flow is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define distributable cash flow as Adjusted EBITDA less cash interest expense, and estimated maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances and is not a presentation made in accordance with GAAP.

Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the financial performance of our assets, without regard to financing methods, capital structure or historical cost basis; our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing or capital structure; our ability to incur and service debt and fund capital expenditures; the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of Adjusted EBITDA and distributable cash flow will provide useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income and net cash provided by (used in) operating activities. Our non-GAAP financial measures of Adjusted EBITDA and distributable cash flow should not be considered as an alternative to GAAP net income or net cash provided by operating activities. Each of Adjusted EBITDA and distributable cash flow has important limitations as an analytical tool because it excludes some but not all items that affect net income and net cash provided by operating activities. You should not consider either Adjusted EBITDA or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

 

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(in thousands)    Three Months Ended
September 30, 2015
    Nine Months Ended
September 30, 2015
 

Adjusted EBITDA reconciliation to loss from continuing operations:

    

Net income

   $ 12,270      $ 33,670   

Interest expense

     557        1,408   

Depreciation expense

     1,597        4,531   

Amortization of intangible assets

     407        1,223   

Non-cash stock compensation expense

     961        2,960   

Amortization of deferred finance costs

     144        432   

Other (income) expense

     (347     492   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,589      $ 44,716   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,589      $ 44,716   

Interest expense

     (557     (1,408

Estimated maintenance capital expenditures

     (1,120     (3,360
  

 

 

   

 

 

 

Distributable cash flow

   $ 13,912      $ 39,948   
  

 

 

   

 

 

 

Reconciliation of Adjusted EBITDA to Cash used in operating activities:

    

Adjusted EBITDA

   $ 15,589      $ 44,716   

Interest expense

     (557     (1,408

Other income (expense)

     347        (492

Changes in operating assets and liabilities which provided cash

     17,092        (8,176
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 32,471      $ 34,640   
  

 

 

   

 

 

 

 

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Exhibit 99.2

 

LOGO

FOR IMMEDIATE RELEASE

Rice Midstream Partners Announces Acquisition of Water Services Business from Rice Energy, Pricing of Private Placement of Common Units and Updated Guidance

CANONSBURG, Pa. - November 5, 2015 /PRNewswire/ - Rice Midstream Partners LP (NYSE: RMP) (“RMP” or the “Partnership”) today announced that it has acquired the water services business of Rice Energy Inc.’s (NYSE: RICE) (“Rice”) wholly-owned subsidiary, Rice Midstream Holdings LLC (“Midstream Holdings”), for $200 million at closing plus a $25 million earn out to be paid upon achievement of certain increases in connected water sources. This acquisition includes Midstream Holdings’ Pennsylvania and Ohio fresh water distribution systems and related facilities, as well as a right to provide fresh water for well completion operations and to collect, recycle or dispose of flowback and produced water for Rice in Washington and Greene Counties, Pennsylvania, and Belmont County, Ohio (the “Services Area”). In addition, RMP has been given the exclusive right to acquire and/or develop water treatment facilities in the Services Area. Finally, RMP priced a private placement of 13,409,961 common units for gross proceeds of $175 million and announced increased 2015 guidance.

Acquisition Highlights:

 

    RMP has acquired Midstream Holdings’ water services business for $200 million, or approximately 5.0 – 5.7 times 2016 estimated water services EBITDA

 

    One-time $25 million earn out payment by RMP, less any associated capital expenditures, if any, if Rice obtains an additional 5 MMgal/d of connected water sources in Ohio by December 31, 2017

 

    Assets include Midstream Holdings’ Pennsylvania and Ohio fresh water distribution systems that provide access to 15.9 MMgal/d of fresh water from the Monongahela River, the Ohio River and other regional water sources in Pennsylvania and Ohio

 

    The fresh water distribution systems include 123 miles of water pipeline, 143 million gallons of water impoundment capacity, as well as related pumping stations, take point facilities and measurement facilities

 

    Increases 2015 EBITDA guidance range to $60 - $65 million and distributable cash flow guidance range to $52 - $57 million

 

    Acquisition is expected to be immediately accretive to RMP’s distributable cash flow per unit

 

    Increases anticipated DCF coverage ratio to 1.15x – 1.2x during 2015

Commenting on the results, Rob Wingo, Senior Vice President and Chief Operating Officer, said, “We are excited to announce our first drop down transaction with Rice, as the acquired assets complement our existing business. This allows us to provide water services coupled with gathering and compression services to Rice and other quality Appalachian producers. The agreements are 100% fee based with volumetric tiers that provide revenue and cash flow stability, making this business an excellent addition to the Partnership. The acquisition is immediately accretive to RMP and builds healthy distributable cash flow coverage in 2016 and beyond, above our target of 1.2 times, while growing distributions at our target of 20%.”

 

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RMP funded the purchase price through borrowings under its revolving credit facility. Upon completion of the Partnership’s private placement of common units described below, the $175 million of gross proceeds will be used to repay a portion of borrowings outstanding under RMP’s revolving credit facility. Pro forma for the acquisition and the consummation of the private placement of common units, and assuming no earn out payment, RMP’s liquidity position as of September 30, 2015 was $369 million, consisting of $350 million available under its revolving credit facility and $19 million of cash on hand.

In connection with the Partnership’s water services business acquisition, RMP entered into amended and restated water services agreements with Rice. RMP has agreed to provide certain fluid handling services to Rice, including the exclusive right to provide fresh water for well completions operations in the Marcellus and Utica Shales and to collect, recycle or dispose of flowback and produced water for Rice within the Services Area. The initial term of the water services agreements is until December 22, 2029 and from month to month thereafter. Under the agreement and according to the tiered structure below, Rice will pay (i) a variable fee, based on volumes of water supplied, for fresh water deliveries by pipeline directly to the well site, subject to annual CPI adjustments and (ii) a produced water handling fee of actual out-of-pocket cost incurred, plus a 2% margin.

 

Water Services Agreements Overview

 

Tiered Fresh Water Fee

   Pennsylvania      Ohio  

Volumes (MMGal/Well)

     

Tier I

     <8.25         <12.5   

Tier II

     8.25 – 13.25         12.5 – 20  

Thereafter

     >13.25         >20   

Fee ($/Gallon)

     

Tier I

   $ 0.07       $ 0.08   

Tier II

   $ 0.03       $ 0.04   

Thereafter

   $ 0.01       $ 0.02   
  

 

 

    

 

 

 

Expected Weighted Average Fee (1)

   $ 0.06       $ 0.07   
  

 

 

    

 

 

 

Produced Water Services Fee

     2% of cost         2% of cost   
  

 

 

    

 

 

 

 

(1) Assumes fee of $0.06 per gallon in Pennsylvania and 11,000,000 gallons of water per well that utilize the fresh water delivery system based on a 7,000’ lateral. Assumes fee of $0.07 per gallon in Ohio and 16,900,000 gallons of water per well that utilize the fresh water delivery system based on a 9,000’ lateral.

The conflicts committee of the board of directors of RMP’s general partner, comprised entirely of independent directors, recommended approval of the terms of the transaction, which were subsequently approved by the board of directors of RMP’s general partner and the board of directors of Rice.

Simmons & Company International served as exclusive financial advisor to the conflicts committee and provided a fairness opinion for the drop-down transaction. Akin Gump Strauss Hauer & Feld LLP served as legal counsel to the conflicts committee. Vinson & Elkins L.L.P. served as legal counsel to Rice Energy.

 

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RMP Private Placement

On November 4, 2015, the Partnership priced a private placement of 13,409,961 common units for gross proceeds of approximately $175 million. The closing of the private placement is expected to occur on November 10, 2015, subject to certain customary closing conditions.

The securities offered in the private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities described above.

2015 Financial Guidance Update

As a result of the acquisition, RMP is increasing 2015 Adjusted EBITDA guidance to a range of $60 – $65 million and distributable cash flow is expected to be $52 – $57 million. RMP is increasing estimated capital expenditure guidance to $200 million. The increase is attributable to $15 million of gathering-related growth capital expenditures for new and existing projects and $5 million associated with the water services business acquisition. The table below compares our prior guidance with our updated guidance:

 

2015 Capital Budget and Financial Guidance

     Prior
Guidance
Feb. 17, 2015
   Updated
Guidance
Nov. 5, 2015

Adjusted EBITDA ($MM)

   $55 - $60    $60 - $65

% Third Party EBITDA

   20%    20%

Distributable Cash Flow ($MM)

   $48 - $53    $52 - $57

Average DCF Coverage Ratio

   1.1x – 1.2x    1.15 – 1.2x

Capital Expenditures ($MM)

   $180    $200

For further details on this announcement, please visit www.ricemidstream.com to view a presentation containing supplemental information.

About Rice Midstream Partners

Rice Midstream Partners LP is a fee-based, growth-oriented limited partnership formed by Rice Energy Inc. (NYSE: RICE) to own, operate, develop and acquire midstream assets in the Appalachian basin. RMP provides midstream services to Rice Energy and third-party companies through its natural gas gathering and compression assets in the rapidly developing dry gas core of the Marcellus Shale in southwestern Pennsylvania.

For more information, please visit www.ricemidstream.com.

Forward Looking Statements

This release includes forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than historical facts

 

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included in this release, that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as, the private placement, projected gathering volumes, revenues, adjusted EBITDA, distribution growth, and distributable cash flow, the timing of completion of midstream projects, future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although we believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.

We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering and sale of natural gas and oil. These risks include, but are not limited to: commodity price volatility; inflation; lack of availability of drilling and production equipment and services; environmental risks; drilling and other operating risks; regulatory changes; the uncertainty inherent in estimating natural gas reserves and in projecting future rates of production, cash flow and access to capital; and the timing of development expenditures. Information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by us will be realized, or even if realized, that they will have the expected consequences to or effects on us, our business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Supplemental Non-GAAP Financial Measures

(Unaudited)

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define Adjusted EBITDA as net income (loss) before interest expense, income tax benefit, depreciation and amortization, stock compensation expense and incentive unit expense. Adjusted EBITDA is not a measure of net income as determined by GAAP.

Distributable cash flow is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define distributable cash flow as Adjusted EBITDA, plus interest income, less cash interest expense, estimated maintenance capital expenditures and income taxes. Distributable cash flow does not reflect changes in working capital balances and is not a presentation made in accordance with GAAP.

Contact:

Julie Danvers, Director of Investor Relations

832-708-3437

Julie.Danvers@RiceMidstream.com

 

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