May 1, 2024
This Master Environmental Credit Agreement (“MECA”) serves as the framework agreement for the purchase of Environmental Credits presented by Watershed Technology, Inc., a Delaware corporation with offices located at 360 9th Street, San Francisco, CA 94103 USA (“Watershed”), and governs any confirmation referencing this MECA (a “Confirmation”) executed by the buyer identified in the applicable Confirmation (“Buyer”). This MECA, any exhibits, any Confirmation and any other incorporated terms or policies (collectively, the “Agreement”) comprise the entire understanding between Buyer and Watershed regarding Buyer’s purchase of Environmental Credits described in the applicable Confirmation.
WHEREAS, Buyer has retained Watershed to assemble on its behalf a portfolio (the “Environmental Portfolio”) of environmental instruments such as energy attribute certificates, greenhouse gas reductions, carbon removal credits, carbon avoidance credits, sustainable aviation fuel certificates, or other social or environmental credits (each an “Environmental Credit”);
WHEREAS, Buyer wishes to purchase for its Environmental Portfolio, and Watershed wishes to sell, Environmental Credits together with corresponding environmental, social or sustainability attributes, in the form, type, quantity, vintage and price specified in a Confirmation;
NOW THEREFORE, in consideration of the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to the following terms and conditions.
Capitalized terms not defined herein shall have the meaning in the applicable Confirmation.
1. PURCHASE AND SALE
1.1 Confirmations. Watershed may propose certain Environmental Credits for inclusion in Buyer’s Environmental Portfolio by presenting Buyer with a Confirmation describing the Environmental Credits and details relevant to their purchase. Upon acceptance by Buyer, each Confirmation shall be incorporated into and become a part of this Agreement.
1.2 Agreement to Purchase. Watershed agrees to sell to Buyer, and Buyer agrees to purchase, the Environmental Credits specified in each accepted Confirmation (the “Contract Credits”) at the price and on the terms specified herein and in the applicable Confirmation.
1.3 Attributes. Unless otherwise specified in an applicable Confirmation, the Contract Credits shall include the following environmental attributes for each Contract Credit type (the “Environmental Attributes”):
(a) Carbon Credits. Environmental Attributes with respect to carbon credits means all greenhouse gas reductions or removals and, subject to Section 1.3(d) (Sustainable Development Goals) below, associated social, sustainable development or environmental attributes associated with the carbon credits under the Applicable Standard (as specified in the applicable Confirmation).
(b) SAFc. Environmental Attributes with respect to sustainable aviation fuel certificates (“SAFc”) means the decoupled sustainability characteristics of one metric ton of neat sustainable aviation fuel (“SAF”), including the life cycle carbon dioxide equivalent (CO2e) emissions reductions as compared to conventional jet fuel, and tracked using a book-and-claim system under the Applicable Standard specified in the Confirmation. SAF is renewable or waste-derived drop-in aviation fuel that meets the specifications and sustainability criteria of the Applicable Standard. SAFc (i) convey the right to report Scope 3 end-user greenhouse gas reductions but not Scope 1 greenhouse gas reductions, which are retained by other actors in the supply chain according to the rules of the Applicable Standard; (ii) do not include title to any Renewable Identification Numbers (RINs), Low Carbon Fuel Standard (LCFS) credits, or other environmental credits; (iii) cannot be used as part of a renewable energy certificate program or as any other regulated carbon emission compliance instrument; and (iv) are not part of any renewable portfolio standard or any other local, state, provincial, federal, national or supranational law, rule, regulation or other governance regime relating to renewable energy. SAFc are correlated to an amount of greenhouse gas reductions based on a calculation of carbon intensity as determined under the Applicable Standard, and carbon intensity may be adjusted on an ex post basis.
(c) RECs/EACs. Environmental Attributes with respect to renewable energy certificates (“RECs”) or energy attribute certificates (“EACs”) (e.g., I-RECs (International Renewable Energy Credits), GOs (Guarantees of Origin) or similar product) means those aspects, claims, characteristics and benefits associated with the generation of a quantity of energy by the applicable facility (the “Facility”) and, in the absence of any withholding of any part thereof by Watershed, all of them, including any and all the environmental, power source, and emission characteristics, credits, allowances, emissions reductions, offsets, and benefits, howsoever entitled, attributable to the generation of energy from the Facility and its displacement of generation from non-renewable energy resources, and including any avoided emission of pollutants to the air, soil or water such as carbon monoxide (CO) and other pollutants, any avoided emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), fluorocarbons, and other greenhouse gases (GHGs), but not including (i) emissions reduction credits encumbered or used by the Facility for compliance with local, state, or federal operating and/or air quality permits, unless those credits are required for the certificate to be listed on the applicable registry; (ii) production tax credits and investment tax credits associated with the Facility; (iii) any energy, capacity, reliability or other power attributes from the Facility; (iv) any liabilities, including adverse wildlife or environmental impacts; or (v) unless the parties have expressly agreed otherwise in a Confirmation, tradable emission allowances or other entitlements to produce emissions issued by a governmental authority and allocated to the Facility on a basis other than actual generation of avoided emissions associated with the generation of energy by the Facility. If the Facility is a biomass, biogas, or other facility for which Watershed receives tradable Environmental Attributes based on the greenhouse gas reduction benefits or other emission offsets attributed to the Facility’s fuel usage, Watershed shall provide Buyer with sufficient Environmental Attributes to ensure that there are zero net emissions associated with the production of energy from the Facility for the EACs in an applicable Confirmation. Any Green-e® REC product: (x) must be Green-e certified and meet the environmental and consumer-protection standards set forth by the non-profit Center for Resource Solutions (www.green-e.org); and (y) does not contain electricity. Each Green-e REC represents the environmental benefits of 1 megawatt hour (MWh) of renewable energy that can be paired with electricity. (For more information, see www.green-e.org/rec.)
(d) Sustainable Development Goals. For avoidance of doubt, unless specified in a Confirmation, Environmental Attributes include only those attributes of Sustainable Development Goals (SDG) (https://sdgs.un.org/goals) inherent in the applicable Contract Credits under the Applicable Standard, and do not include any SDG attribute documentation, certification, verifications or approvals that must be separately verified, issued, labelled or ‘stapled’ to the Contract Credits.
1.4 Buyer Requirements. Prior to entering into a Confirmation, Buyer must inform Watershed of any Buyer sourcing requirements (e.g., a particular geography or specific EAC type) for possible inclusion in the Confirmation which Watershed shall make reasonable efforts to procure. Watershed will not be responsible for any Buyer sourcing requirements not listed in the applicable Confirmation. SAFc purchases under the Sustainable Aviation Buyers Alliance network are subject to the additional terms of the SABA Annex, available at https://watershed.com/saba-annex.
1.5 Substitution. If the Environmental Credits specified in an applicable Confirmation cannot be procured, Watershed may substitute the same quantity of Environmental Credits of comparable project type, vintage, and attributes (as may be more specifically detailed in the applicable Confirmation).
2. DELIVERY; TITLE
2.1 Delivery. On or before each Delivery Date specified in the applicable Confirmation, Watershed shall make commercially reasonable efforts to deliver the Contract Credits to Buyer in accordance with the delivery requirements and operating rules of the applicable Registry (each, a “Delivery”). For the avoidance of doubt, Delivery Dates are an estimate and not a firm obligation.
2.2 Holding; Retirement. At Buyer’s election (as indicated in the applicable Confirmation), Watershed will effect a Delivery by: (a) holding the Environmental Credits in the Buyer’s Environmental Portfolio for the benefit of Buyer; or (b) retiring (or, as applicable, cancelling) the Environmental Credits in the name of or for the benefit of Buyer per the rules of the applicable Registry.
2.3 Notification. Upon request, Watershed shall provide notice of Delivery to Buyer by transmitting documentation evidencing the holding or retirement of the Contract Credits.
2.4 Title. Upon Delivery (i.e., hold or retirement) and payment by Buyer, all right, title, and interest in the applicable Contract Credits shall pass free and clear from encumbrances from Watershed to Buyer.
2.5 On-Selling. Unless otherwise permitted by Watershed in writing, Buyer shall not on-sell Contract Credits or Environmental Attributes to any third party.
3. PAYMENT
3.1 Invoice. Unless otherwise specified in a Confirmation, Buyer’s acceptance of a Confirmation (as evidenced by Buyer’s signature on the Confirmation) shall constitute an invoice for payment.
3.2 Payment. Buyer shall pay the purchase price stated in the Confirmation (the “Contract Price”) in accordance with the payment terms in the Confirmation, by electronic funds transfer in immediately available funds in U.S. Dollars (unless otherwise specified in the Confirmation), subject to any additional payment terms specified in the applicable Confirmation; provided that, Buyer shall be entitled to any refunds or other remedies agreed to in a Confirmation for Contract Credits not delivered as of the Delivery Date specified in the Confirmation, unless extended by mutual agreement of the parties.
3.3 Late Payments. Without limiting any other rights herein, unpaid invoices are subject to a finance charge of 1.5% per month on any outstanding balance, or the maximum interest permitted by law, whichever is lower.
3.4 Disputes. To the extent Buyer disputes in good faith any part of an invoice, Buyer shall pay the undisputed amount on the applicable due date. If any amount withheld under dispute is finally determined to have been due, such withheld amount shall be paid over to Buyer within thirty (30) business days of such determination, along with interest at the rate specified in Section 3.3 (Late Payments) from, and including, the original due date.
4. FEES, TAXES AND COSTS
4.1 Fees. Subject to Section 4.2 (Taxes), Buyer is responsible for payment of the Contract Price invoiced pursuant to a Confirmation, which shall be inclusive of all advisory fees, charges, levies and costs associated with the validation, verification, issuance, and Delivery of the Contract Credits.
4.2 Taxes. Buyer is responsible for all taxes, duties or other fees imposed, assessed or collected by or under the authority of any governmental body (“Taxes”) imposed on the Delivery of Contract Credits (except Taxes based on Watershed’s net income).
4.3 Costs. Each party will bear its own costs and expenses in connection with the preparation, negotiation and execution of this Agreement and each Confirmation.
5. TERM AND TERMINATION
5.1 Term. This MECA is effective on the date the Confirmation referencing this MECA is executed by both parties, and remains in effect until terminated as provided herein or by mutual agreement of the parties (the “Term”).
5.2 Termination. Either party may terminate this Agreement by thirty (30) days’ advance written notice; provided that, each party’s rights and obligations with respect to any Confirmation accepted, and rights and obligations accrued, prior to the effective date of such termination shall continue and survive termination.
6. REPRESENTATIONS AND WARRANTIES
6.1 Mutual Representations and Warranties. Each party represents and warrants that: (a) it is duly organized and validly existing under the laws of its governing jurisdiction and is qualified to conduct its business in that jurisdiction; (b) it has the power and authority to execute and deliver this Agreement and to perform its obligations under it, has undertaken all necessary due diligence, and has taken all necessary actions to authorize the entry into and the observance and performance of its obligations under this Agreement; (c) its entry into, execution, delivery, and observance and performance of its obligations under this Agreement do not violate or conflict with or require any consent or waiver under any of the terms or conditions in its governing documents or any material contract to which it is a party or by which any of its assets are bound or affected, or any applicable law; (d) this Agreement constitutes a legal, valid and binding obligation on it enforceable in accordance with its terms by an appropriate legal remedy; (e) all transactions hereunder constitute “forward contracts” within the meaning of Section 101(25) of the Bankruptcy Code and the remedies identified in this Agreement shall be “contractual rights” as provided for in 11 U.S.C. § 556, as these provisions may be amended from time to time; (f) it intends each Confirmation to be for physical delivery and settlement; and (g) it is in compliance with applicable anti-corruption and anti-terrorism laws.
6.2 Additional Seller Representations and Warranties. At each Delivery, Watershed represents and warrants that: (a) it has title to, or the right to hold and retire, the Contract Credits; (b) the Contract Credits delivered are free and clear of, and not subject to, any lien or encumbrance; (c) the underlying Environmental Attributes have not been sold or transferred to any other person; (d) it has not and shall not make any claim inconsistent with the Environmental Attributes or that would constitute double counting; (e) Contract Credits delivered will vest in Buyer and Buyer will (i) have the exclusive rights to make all claims as to the Contract Credits and Environmental Attributes according to the terms of the Applicable Standard; and (ii) have the right to report and register, as applicable, the exclusive ownership of the Contract Credits and Environmental Attributes with any registry, system, agency, authority, or other party, either voluntarily or in compliance with any present or future domestic, international, or foreign law, regulation, registry or program (according to their respective terms); and (f) the Contract Credits have been issuedin compliance with the applicable methodology (the “Protocol”), as determined by the Applicable Standard.
6.3. OTHER THAN AS PROVIDED HEREIN, WATERSHED MAKES NO OTHER, AND DISCLAIMS ALL OTHER, WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ANY CREDIT OR ATTRIBUTE, INCLUDING ANY EVENT OF INVALIDATION OR DISCONTINUATION OF A REGISTRY, ANY REPUTATIONAL RISK, ANY IMPLIED WARRANTY OF MERCHANTABILITY, AND/OR ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
7. INDEMNITY; LIMITATION OF LIABILITY
7.1 Indemnity. Each party shall defend, indemnify and hold harmless the other party, its officers, directors, employees and agents from and against any and all actions brought by a third party and all related losses, liabilities, damages, expenses and costs (including attorneys’ fees and court costs) arising from or relating to fraud, gross negligence or willful misconduct by the indemnifying party with respect to the Contract Credits.
7.2 Limitation of Liability. EXCEPT FOR A PARTY’S LIABILITY IN THE EVENT OF A CLAIM UNDER SECTION 7.1 (INDEMNITY), GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUD, (A) NEITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, PUNITIVE, SPECIAL, EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT; AND (B) EACH PARTY’S LIABILITY (OTHER THAN FOR COSTS OF ENFORCEMENT) UNDER THIS AGREEMENT SHALL NOT EXCEED THE AMOUNTS PAID, OR PAYABLE, HEREUNDER.
7.3 THE PROVISIONS OF THIS SECTION 7 SHALL APPLY REGARDLESS OF FAULT AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION OR EXPIRATION OF THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL LIMIT WATERSHED’S EXPECTATION OF PROFITS FROM THE SALE OF ANY CONTRACT CREDITS IN AN ACCEPTED CONFIRMATION.
8. CONFIDENTIALITY
8.1 Confidentiality. “Confidential Information” means any information disclosed under this Agreement that (a) if tangible, is clearly marked as “Confidential” or with a similar designation; (b) if intangible, is identified as “Confidential” by the disclosing party (“Discloser”) at the time of disclosure and confirmed in writing to the receiving party (“Recipient”) as being Confidential Information; or (c) from the relevant circumstances should reasonably be known by the Recipient to be confidential (e.g., pricing, personal data, etc.). Confidential Information does not include information that: (i) was available to the Recipient before disclosure of such information to the Recipient and free of any confidentiality obligation in favor of the Discloser and known to the Recipient at the time of disclosure; (ii) is made available to the Recipient from a third party not known by the Recipient at the time of such availability to be subject to a confidentiality obligation in favor of the Discloser; (iii) is made available to third parties by the Discloser without restriction on disclosing such information; (iv) is or becomes available to the public other than as a result of disclosure by the Recipient prohibited by this Agreement; or (v) is developed independently by or on behalf of the Recipient without reference to the Discloser’s Confidential Information. The Recipient must: (1) use Confidential Information only for the purposes of furthering the business relationship between the parties; (2) protect Confidential Information using the same degree of care it uses to protect its own confidential information of a like nature, but in no event less than a reasonable degree of care; and (3) not disclose Confidential Information to any third party except (i) its personnel, consultants, investors, potential investors, subcontractors, and professional advisors who have a need to know in order to carry out their obligations under this Agreement and who are bound by agreements limiting use of third-party confidential information; or (ii) as permitted pursuant to Section 8.2 (Registry; Claims) below. If the Recipient receives a court subpoena, request for production of documents, court order or requirement of a government agency to disclose any Confidential Information, the Recipient will give prompt written notice to the Discloser so that the request can be challenged or limited in scope by the Discloser.
8.2 Registry; Claims. Notwithstanding the foregoing, each party may disclose the other party’s name and such information as may be required to complete documentation (e.g., a retirement certificate) required by the applicable Registry or to make environmental, sustainability and other claims within the intention of this Agreement.
9. FORCE MAJEURE. A party will be excused from the performance of its obligations under this Agreement (other than the obligation to make payments then due or becoming due with respect to performance prior to the Force Majeure) for the duration of the Force Majeure; provided that the affected party provides prompt written notice to the other party of the existence and anticipated duration of the Force Majeure. “Force Majeure” means an event or circumstance which materially adversely affects the ability of a party to perform its obligations under this Agreement, which is not within the reasonable control of, or the result of the negligence of, the claiming party, and which the claiming party is unable to overcome or avoid or cause to be avoided by the exercise of reasonable care, such as acts of God, fire, flood, earthquake, war, riots, pandemic, epidemic, or terrorism. Force Majeure may not be based on (a) the loss or failure of a party’s markets; (b) Buyer’s inability economically to use or resell the Contract Credits; (c) Watershed’s ability to sell the Contract Credits to another person on superior terms; or (d) Buyer’s ability to purchase similar credits from another party on superior terms. With respect to a party’s obligation to make payments, Force Majeure is limited to an event or act of a governmental authority that on any day disables the banking system through which such party makes such payments.
10. NOTICES. Any notice regarding termination of this Agreement for breach, indemnification, or other legal matter must be sent by electronic mail or overnight postal or courier service, if to Buyer at the billing address or email address set forth on the applicable Confirmation or the address in its account records with Watershed, and if to Watershed at legal@watershedclimate.com and the Watershed contact and contact information included in the Confirmation. Notices are deemed received as of the time posted or delivered (and in the case of electronic mail provided written confirmation of receipt is provided by the recipient), or if that time does not fall within a business day, as of the beginning of the first business day following the time posted or delivered. To count days for notice periods, the business day on which the notice is deemed received counts as the first day.
11. MISCELLANEOUS. No party may assign its rights or transfer its obligations under this Agreement without the prior written consent of the other party; provided that, Watershed may, upon written notice to Buyer, assign and/or novate its rights and obligations to an affiliate. Each party must, at its own expense, whenever reasonably requested by the other party, promptly undertake, or procure that others undertake, every action, including execution of documents, reasonably necessary or desirable to give full effect to this Agreement. Any Confirmations, schedules and exhibits attached hereto shall be incorporated into the Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any prior negotiations or dealings. This Agreement may not be amended except in writing signed by each of the parties. This Agreement shall be binding upon, and inure to the benefit of, each party and its successors and assigns. This Agreement does not create a partnership, joint venture or other undertaking between the parties nor create any agency or fiduciary relationship between them. If any part of this Agreement is for any reason declared or becomes unenforceable, the terms and provisions of this Agreement shall remain in full force and effect as if this Agreement had been executed without inclusion of such provision. This Agreement shall be interpreted as if drafted by both parties.
12. GOVERNING LAW; DISPUTES
12.1 Governing Law. This Agreement shall be governed by the laws of the State of California, USA, without regard to any choice of law or conflict of law principles which would compel the application of the law of any other forum.
12.2 Disputes. Any claim, controversy or dispute arising under or relating to this Agreement (including its enforceability or arbitrability) shall be settled by confidential binding arbitration under the auspices of the American Arbitration Association under its commercial arbitration rules by a single arbitrator seated in San Francisco, California. The language of the arbitration shall be English. The rules of evidence of federal courts shall be applied. The costs of arbitration (including reasonable attorneys’ and experts’ fees) shall be awarded to the substantially prevailing party. An arbitral award may be enforced by any court of competent jurisdiction. Each party irrevocably waives any right to immunity (including sovereign immunity) from arbitration or any legal proceedings to enforce this Agreement.