Last Updated: May 1, 2024
This Master Environmental Credit Agreement (“MECSA”) serves as the framework agreement for the purchase of Contract Credits 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 MECSA (a “Confirmation”) executed by the supplier identified in the applicable Confirmation (“Supplier”). This MECSA, any exhibits, any Confirmation and any other incorporated terms or policies (collectively, the “Agreement”) comprise the entire understanding between Supplier and Watershed regarding Watershed’s purchase of Contract Credits described in the applicable Confirmation.
WHEREAS, Watershed wishes to purchase 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, Supplier 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. The parties may transact certain Environmental Credits by agreeing to a Confirmation describing the Environmental Credits and details relevant to their purchase. Upon acceptance by Watershed in its sole discretion, each Confirmation shall be incorporated into and become a part of this Agreement.
1.2 Agreement for Sale. Supplier agrees to sell to Watershed, and Watershed 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 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 Supplier, 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 the Facility receives tradable Environmental Attributes based on the greenhouse gas reduction benefits or other emission offsets attributed to the Facility’s fuel usage, Supplier shall provide Watershed with sufficient Environmental Attributes to ensure that there are zero net emissions associated with the production of electricity 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 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.)
2. DELIVERY; TITLE
2.1 Delivery. On or before each Delivery Date specified in the applicable Confirmation, Supplier shall deliver the Contract Credits to Watershed in accordance with the delivery requirements and operating rules of the applicable Registry (each, a “Delivery”).
2.2 Transfer or Retirement. At Watershed’s election (as indicated in the applicable Confirmation), Supplier will effect Delivery by: (a) retiring (or, as applicable, cancelling) the Environmental Credits in the name of or for the benefit of Watershed or any customer nominated by Watershed; or (b) transferring the Environmental Credits to Watershed’s registry account or other registry account nominated in the applicable Confirmation per the rules of the applicable Registry.
2.3 Notification. Supplier shall provide notice of Delivery to Watershed by promptly transmitting documentation evidencing the retirement or transfer of the Contract Credits.
2.4 Title. Upon Delivery (i.e., transfer or retirement), all right, title, and interest in the applicable Contract Credits shall pass free and clear from encumbrances from Supplier to Watershed or its nominee.
2.5 Delivery Type. Supplier shall Deliver the Contract Credits according to the delivery obligation specified in the applicable Confirmation:
(a) Firm Delivery. If the Confirmation specifies a “Firm” delivery obligation, Supplier shall deliver the Contract Credits on the Delivery Date, without excuse other than Force Majeure. Unless otherwise specified in a Confirmation, the default delivery obligation thereunder shall be Firm.
(b) Unit Contingent Delivery. If the Confirmation specifies a “Unit Contingent” delivery obligation, then the actual quantity delivered may vary from the quantity specified in the Confirmation due to the performance of the Project.
(c) Project Contingent Delivery. If the Confirmation specifies a “Project Contingent” delivery obligation, then Supplier’s obligation to deliver Contract Credits shall be excused to the extent that the Project is not able to generate Environmental Credits in the period specified in the Confirmation due to an unavoidable delay or failure in constructing or obtaining necessary approvals to construct or modify and operate the new or modified Project, or due to another reason(s) specified in the Confirmation.
3. PAYMENT
3.1 Invoice. Unless otherwise specified in a Confirmation, Supplier shall provide an invoice for the amount due together with its notification of Delivery of the Contract Credits.
3.2 Payment. Watershed shall pay the purchase price stated in the Confirmation (the “Contract Price”) for Contract Credits actually delivered pursuant to the payment terms herein and as specified in the applicable Confirmation.
3.3 Late Payments. Without limiting any other rights herein, unpaid invoices are subject to a finance charge of 1.0% per month on any outstanding balance, or the maximum interest permitted by law, whichever is lower.
3.4 Disputes. To the extent Watershed disputes in good faith any part of an invoice, Watershed will 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 Supplier 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. Supplier shall be responsible for payment of all fees, charges, levies and costs associated with the validation, verification, issuance, and delivery, holding, retirement or transfer of Contract Credits, except if Watershed elects in a Confirmation to handle retirement of Contact Credits on behalf of its customers, then Watershed shall pay any retirement and, if applicable, transfer fees charged by the applicable Registry.
4.2 Taxes. The contract price shall be inclusive of VAT, GST or similar tax, which shall be for the account of Supplier. Supplier shall be responsible for any taxes, duties and levies imposed by any governmental authority or regulatory body in relation to the sale and purchase of Contract Credits (except for 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, including any broker’s fees and Registry account fees.
5. TERM AND TERMINATION
5.1 Term. This MECSA is effective on the date of the Confirmation referencing this MECSA 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 Supplier Representations and Warranties. Upon execution of each Confirmation and at each Delivery, Supplier represents and warrants that: (a) it has title to, and the right to transfer or retire, the Contract Credits, and will transfer to Watershed or its nominee good and marketable title to each Contract Credit and associated Environmental Attributes; (b) the Contract Credits and associated Environmental Attributes have not been sold to, transferred to, retired, or claimed by any other person; (c) the Contract Credits delivered are free and clear of, and not subject to, any lien or encumbrance; (d) neither it nor the project or Facility has, and shall not make, any claim inconsistent with the Environmental Attributes or that would constitute double counting; (e) the Contract Credits delivered will vest in Watershed or its nominee and Watershed or its nominee will (i) have the exclusive rights to make all claims as to the Contract Credits and associated Environmental Attributes; and (ii) have the right to report and register, as applicable, the exclusive ownership of the Contract Credits and associated 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); (f) the Contract Credits have been issued in compliance with the applicable methodology (the “Protocol”) and verified under the Applicable Standard; (g) energy generated with respect to RECs or EACs was not and will not be separately sold, marketed, or otherwise represented as renewable energy, clean energy, zero-emission energy, or in any similar manner; (h) each project or Facility has been registered with the Applicable Standard and Registry and is qualified in all respects to create Environmental Credits under the Applicable Standard; (i) each project or Facility and the owner and operator has obtained, and will maintain, all necessary regulatory approvals, meets all requirements of the Applicable Standard, and has complied with, and shall remain in compliance with, all applicable laws, including environmental health and safety regulations and anti-corruption and anti-terrorism laws; (j) all information provided to Watershed by Supplier pursuant to this Agreement is true and accurate in all material respects including but not limited to all information concerning project registration, validation, insurance and reporting; and (k) Supplier has no knowledge of any facts or circumstances that could materially adversely affect its ability to perform its obligations hereunder, including with respect to its creditworthiness, or the integrity or reputation of the project, Facility or Contract Credits. Nothing herein shall restrict Watershed from designating a nominee as a beneficiary or on-selling Contract Credits or Environmental Attributes to any third party, and Supplier’s representations and warranties shall be as if also made to such customer or third party.
6.3 OTHER THAN AS PROVIDED HEREIN, SUPPLIER MAKES NO OTHER, AND DISCLAIMS ALL OTHER, WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND 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, sublicensees,customersand 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, 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.
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 DESIGNATION OR SALE OF ANY CONTRACT CREDITS IN AN ACCEPTED CONFIRMATION.
8. CONFIDENTIALITY; NON-CIRCUMVENTION
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 (and, in the event of Watershed, its nominees) 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 related to the Contract Credits.
8.3 No Circumvention. Supplier, as the restricted party, shall not enter into any negotiations or transactions with any customer, client, nominee, or contact of Watershed disclosed (directly or indirectly), introduced or otherwise revealed to the restricted party in connection with or during the term of this Agreement for the purpose of raising investments for or developing projects and/or buying or selling Environmental Credits without the express prior written permission of Watershed; provided that, such restriction shall not apply to any person with which the restricted party was actively engaged prior to the disclosure, introduction, or revelation by Watershed such as can be clearly and convincingly documented by Supplier. In the case of breach of this provision, notwithstanding Section 7.2 (Limitation of Liability) above, Supplier shall be liable for all damages suffered by Watershed, whether direct or indirect, and Watershed shall be entitled to reasonable costs of enforcement, including attorneys’ and expert fees. This provision shall survive termination of this Agreement for a period of one (1) year.
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 event or circumstances was not reasonably anticipated as of the effective date of the applicable Confirmation and 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) a party’s inability economically to use or resell the Contract Credits; (c) a party’s ability to sell the Contract Credits to another person on superior terms; or (d) a party’s ability to purchase similar credits from another party on superior terms. If a Force Majeure continues for more than sixty (60) days, Watershed may terminate the affected Confirmation.
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 Supplier 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 Supplier, 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.