Exhibit 10.1

Execution Version

Crude Oil Connection and Dedication Agreement

THIS Crude Oil Connection and Dedication Agreement (this “Agreement”) is entered
into this 27th day of April, 2017 (the “Effective Date”), between Caprock
Permian Crude LLC, a Texas limited liability company (“Carrier”), and Resolute
Natural Resources Southwest, LLC, a Delaware limited liability company
(“Producer”).  Carrier and Producer are each a “Party” and collectively are the
“Parties.”

RECITALS

WHEREAS, Producer owns an interest in certain oil and gas leases, wells, and/or
lands within the area described in Exhibit “A” attached hereto and by reference
made a part hereof (the “Dedication Area”), and may acquire additional interests
in oil and gas leases, wells, and/or lands within the Dedication Area during the
Term of this Agreement; and

WHEREAS, Producer desires to have Carrier receive, gather and redeliver the
Committed Crude Oil (as defined herein) and Carrier desires to receive the
Committed Crude Oil at the Receipt Points and redeliver such Committed Crude Oil
at the Delivery Points (as such terms are defined herein), utilizing the
facilities constructed, owned and operated by Carrier, upon the terms and
conditions set forth in this Agreement.

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

ARTICLE I
DEFINITIONS

1.1Affiliate means with respect to any Person, any other Person controlling,
controlled by or under common control with that first Person.  As used in this
definition, the term “control” shall mean (a) with respect to any Person having
voting shares or the equivalent and elected directors, managers or Persons
performing similar functions, the ownership of or power to vote, directly or
indirectly, shares or the equivalent representing more than 50% of the power to
vote in the election of directors, managers or Persons performing similar
functions, and (b) ownership of more than 50% of the equity or equivalent
interest in any Person; provided however, in no event shall any Caprock Excluded
Entity be deemed to constitute an “Affiliate” of Carrier.

1.2Agreement has the meaning given such term in the preamble of this Agreement.

1.3Barrel means 42 U.S. gallons.

 

 

 

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1.4Caprock Excluded Entity means Energy Spectrum Partners VII LP or any direct
or indirect Affiliate or affiliated investment funds or portfolio companies of
Energy Spectrum Partners VII LP or any affiliated investment funds or Persons
advised or managed by Energy Spectrum Partners VII LP or any direct or indirect
Affiliate (other than Caprock Midstream Holdings LLC or any direct or indirect
subsidiary thereof).

1.5Carrier has the meaning given such term in the preamble of this Agreement.

1.6Carrier Tariff has the meaning given such term in Section 2.2(c).

1.7Carrier’s Central Oil Storage Facility means Carrier’s central oil gathering
and storage facility located in Reeves County, Texas proposed to be constructed
and placed in service commencing on or about May 2017 and completed on or about
July 2017.

1.8Carrier’s Facilities has the meaning given such term in Section 3.1(a).

1.9Central Production Facilities means the common point to which Producer will
gather, in its Full Well Stream state, production from one or more Wells for the
purpose of (i) separating the oil, gas and produced water and (ii) facilitating
deliveries to Carrier of Committed Crude Oil hereunder.

1.10Condensate, Drip Liquids, Skim Oil and Natural Gas Liquids are those
hydrocarbon liquids that occur as the result of natural gas compression and
pipeline pigging and temperature changes (drip) and oil skimming.

1.11Confidential Information has the meaning given such term in Section 16.10 of
this Agreement.

1.12Crude Oil means a mixture of hydrocarbons as it occurs naturally and that
exists in a liquid phase at the surface and remains in such liquid phase at
normal atmospheric pressure and temperature after passing through surface
separating facilities.  For the avoidance of doubt, condensate, drip liquids,
and natural gas liquids such as y-grade are not Crude Oil for the purposes of
this Agreement.

1.13Curtailment has the meaning set forth in Section 2.3.

1.14Day or Daily means a period of twenty-four (24) consecutive hours, beginning
and ending at 9:00 a.m. Central Time; provided, that on the Day on which
Daylight Savings Time becomes effective, the period will be twenty-three (23)
consecutive hours; and on the Day on which Standard Time becomes effective, the
period will be twenty-five (25) consecutive hours.

1.15Dedication Area has the meaning given such term in the Recitals of this
Agreement.

1.16Deductions has the meaning given such term in Section 7.6 of this Agreement.

1.17Delivery Point has the meaning given such term in Section 3.1(d)

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1.18Designated Producer means a third party or parties that Producer may
contract with from time to time to purchase its Crude Oil and assume the
contractual rights of this Crude Oil Connection and Dedication Agreement to
transport Crude Oil on Carrier’s Facilities, as Producer’s agent as provided in
Section 2.6 of this Agreement

1.19Fees has the meaning given such term in Section 7.1 of this Agreement.

1.20Full Well Stream means the combined production from a Well, generally
including natural gas, Crude Oil, condensate, and produced water.

1.21Insulating Flange has the meaning given such term in Section 4.1(c) of this
Agreement.

1.22Joint Tariff has the meaning given such term in Section 7.1 of this
Agreement.

1.23LACT has the meaning given such term in Section 3.1(a).

1.24Lease(s) means any oil and/or gas lease, mineral interest (including fee
mineral interests), working interest, net profit interest, royalty or overriding
royalty interest, fee right, mineral servitude, license, concession or other
rights covering oil, gas and related hydrocarbons or an undivided interest
therein or portion thereof, now owned or hereafter acquired therein by Producer
or any of its Affiliates in and under the Dedication Area, along with rights to
drill for, produce and dispose of oil, gas and liquid hydrocarbons or other
substances, in and under the Dedication Area.  “Lease” does not include any
non-operated mineral or working interests in wells or leases of Producer.

1.25Line Fill means the amount of Crude Oil required to fill Carrier’s
Facilities, such that Carrier’s Facilities attain an adequate operating pressure
for continuous operation for the receipt and delivery of the Committed Crude
Oil.

1.26Month means the period beginning at 9:00 a.m. Central Time on the first Day
of each calendar Month and ending at 9:00 a.m. Central Time on the first Day of
the next succeeding calendar Month.

1.27Primary Term has the meaning given such term in Section 11.1 of this
Agreement.

1.28Producer has the meaning given such term in the preamble of this Agreement.

1.29Producer’s Facilities has the meaning given such term in Section 3.1(b).

1.30Psia means pounds per square inch absolute.

1.31Psig means pounds per square inch gauge.

1.32Receipt Point(s) has the meaning given such term in Section 3.1(c).

1.33Requested Confidential Information has the meaning given such term in
Section 4.1(d) of this Agreement.

1.34Tariff has the meaning given such term in Section 6.1 of this Agreement.

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1.35Term has the meaning given such term in Section 11.1 of this Agreement.

1.36TRRC has the meaning given such term in Section 6.1 of this Agreement.

1.37Well(s) means any oil, gas or other hydrocarbon well that is now completed
or may be hereafter completed on the Leases or lands pooled therewith.  

1.38Year or year means a period of three hundred sixty-five (365) consecutive
Days; provided, that any year that contains a date of February 29 will consist
of three hundred sixty-six (366) consecutive Days.

ARTICLE II
DEDICATION AND RELEASE

2.1Producer’s Dedication and Delivery Commitment.

(a)Subject to the terms and conditions of this Agreement, and only for the
duration of the Term hereof, Producer hereby:

(i)grants, conveys, assigns, commits and dedicates to Carrier the exclusive
right, during the Term, to gather and transport from the Receipt Points to the
Delivery Point(s), with the exception of the Excluded Crude Oil, (A) all of
Producer’s (and its Affiliates’) share of Crude Oil (i) in place, and yet to be
produced, in and under the Dedication Area from or attributable to the Leases
and Wells, and (ii) produced from the Leases and Wells, excluding any Crude Oil
produced from a Well operated by a third party for which Producer (or its
Affiliate) has not elected to take “in-kind” (subject to such exclusions,
“Producer’s Crude Oil”), and (B) all Crude Oil produced from any Well operated
by Producer (or its Affiliate) that is owned by third party working interest
owners, royalty owners and overriding royalty owners that is not taken “in-kind”
by such third party owners, and for which Producer has the right and/or
obligation to market such Crude Oil, but only for so long as such third party
owners do not elect to take such Crude Oil “in-kind” and Producer has the right
and/or obligation to market such Crude Oil (subject to such limitations and
exclusions, “Other Owner’s Crude Oil”) (Producer’s Crude Oil and Other Owner’s
Crude Oil are collectively, “Committed Crude Oil”); and  

(ii)grants, conveys and assigns to Carrier a restrictive covenant in, to and
burdening the Leases and Wells, that neither Producer nor any of its Affiliates
shall produce, gather and deliver any Committed Crude Oil or Excluded Crude Oil
except in accordance with the terms of this Agreement or as otherwise provided
hereunder.  

(b)As used herein, “Excluded Crude Oil” means (i) Crude Oil in, under and/or
produced from any Leases or Wells acquired after the date of this Agreement that
are subject to prior dedication (but only for the minimum duration of that
dedication) (ii) any Crude Oil from Producer’s existing vertical wells in the
Dedication Area, and (iii) any Crude Oil produced that is subject to Temporary
Release or Permanent Release.

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(c)Producer shall cause those of its Affiliates that own an interest in the
Leases and/or Wells and are not parties to this Agreement to execute a joinder
to this Agreement under which they agree to be bound to its terms including the
obligation to execute a memorandum of this Agreement to be filed in the real
property records of the applicable county or counties.  Producer shall not
assign, delegate or otherwise transfer operatorship of any Well to a third party
who is not an Affiliate for the purpose of avoiding terms of this
Agreement.  Except as otherwise allowed under this Agreement, Producer will
deliver each Day to Carrier at the Receipt Point(s) all Committed Crude Oil
produced from the Leases and Wells.  

(d)The Parties agree that they intend for this Agreement and the dedications,
commitments, conveyances and restrictive covenants of Producer described in this
Section 2.1 (i) to constitute real property interests of Carrier and covenants
attaching, touching, and concerning, and running with the land and the Leases,
and (ii) in the event of a bankruptcy of Producer, not to be deemed to be an
executory contract or subject to rejection by Producer, it being acknowledged
and agreed that such dedications, commitments, conveyances and restrictive
covenants of Producer constitute an absolute and present assignment and transfer
which vests real property interests in Carrier and creates privity of estate
between Producer and its Affiliates with respect to their respective interests
in the Leases, Wells and other real property interests, and Carrier with respect
to such vested real property interests.

(e)Any interest hereafter acquired by Producer (or its Affiliate) in any Lease
or Well shall automatically be dedicated, committed and conveyed to Carrier
immediately upon acquisition by Producer or its Affiliates; provided, however,
that if such acquired interests are subject to a prior dedication, such
interests shall only become dedicated under this Agreement upon expiration of
the prior dedication. Notwithstanding anything in this Section 2.1(e) to the
contrary, in the event that Producer (or its Affiliate) sells or assigns all or
any portion of its interests in the Leases or Wells to a third party, then such
Leases or Wells shall remain subject to the terms of this Agreement and burdened
by the dedication hereunder; provided, however, any interest of such successor
or assign in the Dedication Area that was previously owned or is  acquired after
the date of such acquisition shall not be subject to this Agreement absent the
written election of such successor or assign.

(f)Subject to Section 2.1(g) below, any transfer of any of the Leases or Wells
shall be subject to Carrier’s rights under this Agreement.  As to any Leases or
Wells that are hereafter acquired that are not then subject to a prior
dedication, such Leases or Wells shall automatically be dedicated, committed and
conveyed to Carrier immediately upon acquisition by Producer or its
Affiliates.  Notwithstanding anything in this Section 2.1(f) to the contrary, in
the event that Producer or its Affiliates sells or assigns all or any portion of
its interests in the Leases or Wells to a third party, then such Leases or Wells
shall remain subject to the terms of this Agreement and burdened by the
dedication hereunder; provided, however, absent the written election of such
successors or assigns, the Leases or Wells hereunder shall not include and be
Permanently Released as to any Leases, Wells or Gas owned or acquired by such
successors or assigns on or after the date of such acquisition, sale and
assignment that are not already included in the Leases or Wells covered hereby.

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(g)If Producer or its Affiliates enter into any acreage trade or similar
agreement during the Term of this Agreement whereby Producer and its Affiliates’
interests in the Dedication Area are conveyed to a third party, but Producer and
its Affiliates receive substantially equivalent interests in the Dedication Area
from such third party that (i) are not subject to a prior dedication, (ii) will
allow Carrier to realize substantially the same economic results as contemplated
by this Agreement, the interests so conveyed to the third party shall be
Permanently Released from this Agreement.

2.2Carrier’s Dedication and Commitment; Redelivery Obligation.

(a)Subject to the terms and conditions of this Agreement and the right of
Carrier to provide gathering services to third parties in accordance with the
terms of this Agreement, and only for the duration of the Term hereof, Carrier
hereby grants, conveys, assigns, commits and dedicates to Producer the
non-exclusive right to receive and gather on Carrier’s Facilities and redeliver
to Producer or Producer’s designee all of the Committed Crude Oil from the
Leases and Wells.   Except as otherwise allowed under this Agreement, Carrier
will receive each Day at the Receipt Point(s) all Committed Crude Oil delivered
by Producer and re-deliver equivalent quantities and qualities (or compensate
Producer for any difference in delivered quality according to Carrier’s Tariff
or the Joint Tariff) at the Delivery Point(s), less the Deduction. Any transfer
of Carrier’s Facilities, or any portion thereof shall be subject to Producer’s
rights under this Agreement.

(b)The Parties agree that they intend for this Agreement and the dedications,
commitments, conveyances and restrictive covenants of Carrier described in this
Section 2.2 (i) to constitute real property interests of Producer and covenants
attaching, touching, and concerning, and running with the land and Carrier’s
Facilities, and benefits running with all of Leases now owned or hereafter
acquired within the Dedication Area, and (ii) in the event of a bankruptcy of
Carrier, not to be deemed to be an executory contract or subject to rejection by
Carrier.  

(c)Carrier is obligated to accept and gather all of the Committed Crude Oil
delivered by Producer at the Receipt Points and to re-deliver equivalent
quantities and qualities at the Delivery Point(s), less the Deduction.  Carrier
agrees that: (i) Producer will have status as an “Anchor Firm Shipper” and all
of the Committed Crude Oil produced and delivered by Producer to Carrier will
have “Anchor Firm Capacity Rights” during the Term under Carrier’s tariff filed
with the Texas Railroad Commission (materially in the form attached to this
Agreement as Exhibit G, the “Carrier Tariff”) which status is the highest
priority of service on Carrier’s Facilities; (ii) Carrier will only offer or
agree to provide gathering service on Carrier’s Facilities to third parties at a
service priority level less that Producer’s service level unless such third
parties qualify as Anchor Firm Shippers under the Carrier Tariff; (iii) Carrier
will never interrupt or curtail gathering and redelivery services on Carrier’s
Facilities under this Agreement to Producer unless and until all gathering and
redelivery services to other parties with lower priority under the terms of the
Carrier Tariff have been totally interrupted; and (iv) unless required by
applicable law, rules or regulation, including applicable Texas Railroad
Commission rules and regulations, Carrier will not amend the Carrier Tariff in
any manner that could adversely affect Producer or Producer’s priority without
Producer’s prior written consent which may be withheld in Producer’s sole
discretion.  Producer acknowledges that transportation services for Producer’s
Crude Oil on the Plains Facilities may be interrupted or curtailed in accordance
with the Plains tariff then in effect with the Texas Railroad Commission.

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(d)With respect to Crude Oil production from Producer’s existing vertical wells
as of the Effective Date, should Producer choose to deliver Crude Oil from its
undedicated vertical wells to Carrier’s Central Oil Storage Facility by truck,
Carrier is obligated to accept such vertical well Crude Oil for delivery by
trucks at Carrier’s Central Oil Storage Facility to blend such vertical well
Crude Oil with other Crude Oil and to re-deliver equivalent quantities of such
vertical well Crude Oil at the Delivery Point(s), less the Deduction as set
forth in Section 7.3.  If Producer chooses to deliver such Crude Oil, Carrier
agrees that the receipt, blending and delivery of Producer’s vertical well Crude
Oil will have Anchor Firm Capacity Rights within Carrier’s Central Oil Storage
Facility during the Term of this Agreement.

2.3Curtailment; Release.  

(a)At any time when Carrier interrupts, curtails or otherwise fails or is unable
to accept deliveries of all or part of the Committed Crude Oil on Carrier’s
System (in each case, a “Curtailment”), up to the Peak Maximum Daily Quantity
(“Peak MDQ”) as set forth in Exhibit “B” at a Receipt Point for any reason other
than Force Majeure (including the failure to complete any facilities that
Carrier is required to provide in accordance with this Agreement), Carrier
shall, at its sole cost and expense, as soon as is practicable, use commercially
reasonable efforts on Carrier’s System to cure the event or condition causing
the Curtailment.

(b)At any time Carrier is unable to receive all or part of the Committed Crude
Oil up to the Initial MDQ or Peak MDQ, as appropriate, at a Receipt Point or at
Carrier’s Central Oil Storage Facility for any reason other than Force Majeure
(including the failure to complete any facilities that Carrier is required to
provide in accordance with this Agreement), the portion of the Committed Crude
Oil which is being curtailed upstream of the affected Receipt Point will be, and
is hereby, temporarily released from this Agreement (a “Temporary Release”), and
Producer shall be free to transport such Committed Crude Oil under other
arrangements including trucking arranged and paid for by Producer (collectively,
“Alternative Curtailment Arrangements”).  At Producer’s option, any portion of
the Committed Crude Oil which is being curtailed upstream of the affected
Receipt Point may be delivered to Carrier’s Central Oil Storage Facility for
delivery to the PPLP Z285 Station.  For the duration of such Curtailment,
Carrier shall not charge a Gathering Fee and shall reimburse Producer for all
reasonable, out-of-pocket costs and expenses incurred by Producer in excess of
the Joint Tariff Fee then in effect with respect to such Alternative Curtailment
Arrangement.  

(c)In the event of a Curtailment involving the PPLP Z285 Station, then Carrier
shall take all necessary and reasonable steps to accommodate truck loading
arranged by Producer with the highest level of service priority of the maximum
volume possible of Producer’s Committed Crude Oil volumes at Carrier’s Central
Oil Storage Facility and Carrier shall bear no costs or expense due to a
Curtailment involving the PPLP Z285 Station.  For the duration of such
Curtailment, Carrier shall not charge a Joint Tariff Fee on such curtailed
volumes but shall be entitled to charge only a Gathering Fee and a Truck Loading
Fee with respect to all such volumes.

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(d)Upon the end of the Force Majeure event or Carrier’s cure of the events
causing the Curtailment, Producer will promptly commence the delivery of the
temporarily released Committed Crude Oil, in any event no later than the end of
the Month that is thirty (30) Days after receipt by Producer of Carrier’s
written notification that the Curtailment has been cured and that Carrier is
able to commence the gathering of such Committed Crude Oil.  If Carrier
experiences Curtailment at any Receipt Point for any reason other than Force
Majeure or the fault of Producer, for a period exceeding (i) sixty (60)
consecutive Days, or (ii) one hundred and twenty (120) Days in any thirty-six
(36) Month period, then at Producer’s option, in its sole discretion and upon
written notice to Carrier, all Committed Crude Oil shall be, and is hereby,
permanently released from this Agreement (a “Permanent Release or Permanently
Released”). Carrier agrees to execute and deliver to Producer an instrument
evidencing such Permanent Release, which Producer may record in the county
records of the county or counties where the affected Leases and Wells are
located.  Except to the extent of Force Majeure, the provisions of this Section
2.3(a) shall apply notwithstanding any other provision of this Agreement to the
contrary.

(e)Beginning on the third (3rd) anniversary of the Effective Date, Producer and
Carrier agree to revise the Peak MDQ for each Receipt Point each year to reflect
an updated peak production projection as determined and agreed upon by the
Parties from actual Crude Oil volumes delivered at each Receipt Point and any
additional planned development in the area.

2.4Reservations of Producer. Producer reserves the following rights under this
Agreement:

(a)to pool or unitize the Leases with other leases in the same field, provided
that all Crude Oil produced from any pooled unit so formed shall be deemed
Committed Crude Oil subject to this Agreement;

(b)to own, retain, and have the sole right to the proceeds from any sale of all
gaseous hydrocarbons separated from the Crude Oil prior to the delivery to
Carrier by the use of conventional mechanical gas or oil field separators and
ambient air coolers; and

(c)subject to Carrier’s rights under this Agreement, to operate and develop the
Leases and Wells free of any control by Carrier and in such a manner as
Producer, in its sole discretion, may deem advisable, including without
limitation, the right (i) to enter into farmouts of any Lease, to sell, assign,
convey or otherwise transfer, any Lease or Well subject to this Agreement, (ii)
to repair, rework, or recomplete any Well, and to temporarily abandon,
permanently abandon or shut-in any Well, or surrender any Lease, (iii) to
determine the maximum efficient rate of flow for any Well (including the right
to curtail production due to low market demand for Crude Oil), and (iv) to
determine whether or not to drill additional Wells or to deepen, repair, rework
or recomplete any Well.

2.5Reservations of Carrier. Carrier reserves the following rights under this
Agreement:

(a)to commingle the Committed Crude Oil with other Crude Oil in Carrier’s
Facilities, provided, however, that (i) Carrier shall deliver equivalent
qualities and quantities (or compensate Producer for any difference in delivered
quality according to Carrier’s Tariff or the Joint Tariff) of Crude Oil, less
the Deduction, to the Delivery Point(s), and (ii) Carrier’s actions with respect
to commingling do not in any way decrease the value of Producer’s Crude Oil; and

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(b)to cease taking deliveries of Crude Oil in the event Carrier determines, in
its reasonable opinion and based upon industry standards, that due to operations
of Producer, its agents, representatives, or contractors, a dangerous or unsafe
condition exists.  Carrier shall provide notice to Producer of any such
cessation, which may continue until such condition is remedied to Carrier’s
reasonable satisfaction.

2.6Designated Producer.  Producer shall have the right to contract with a third
party to purchase its Crude Oil at any Receipt Point or all Receipt Points. In
the event Producer, in its sole discretion, elects to sell all of the Committed
Crude Oil, or all of the Committed Crude Oil delivered to certain Receipt
Points, to a third party upstream of the Receipt Points (or such Receipt Points,
if applicable), then Producer shall provide Carrier written notice that such
third party will be the Designated Producer under this Agreement and shall
describe the term of such arrangement. Upon such written notification providing
the name, address, telephone number and email address for the appropriate
contact of such Designated Producer, Carrier shall provide such Designated
Producer, subject to acceptable credit in Carrier’s reasonable judgment, all
rights to ship the Committed Crude Oil under this Agreement.  If Carrier
approves the Designated Producer, Carrier agrees to look solely to the
Designated Producer for the payment of the Joint Tariff Fee set forth in Section
7.1 (and as escalated in accordance with Section 7.2), the Deduction defined in
Section 7.6 and the provision of line fill as set forth in Section 8.1.  All
other fees shall remain for the account of Producer.  Notwithstanding anything
to the contrary herein, any shipping history attributable to volumes of
Committed Crude Oil shipped by the Designated Producer under the Joint Tariff
will inure to the benefit of the Designated Producer and not to the
Producer.  Carrier shall grant Producer a Temporary Release as to any Committed
Crude Oil sold to a Designated Producer, provided that such Designated Producer
confirms in writing that it will deliver all purchased Committed Crude Oil to
the Receipt Points during the term of such sale and purchase of such Committed
Crude Oil.  Following the expiration of any such third party arrangement,
Producer shall again resume its responsibility for the performance the
obligations of “Producer” under this Agreement.

2.7Condensate, Drip Liquids, Skim Oil and Natural Gas Liquids.  Following the
execution of this Agreement, Carrier and Producer shall negotiate in good faith
and use their commercially reasonable efforts to agree on an amendment of this
Agreement to accommodate the blending of Condensate, Drip Liquids, Skim Oil and
Natural Gas Liquids.  The objectives of the parties in this regard are (i) for
Carrier to study and engineer the facilities modifications that would be
required and for the parties to jointly agree on any amendments to the terms of
this Agreement (including any modification to fee structure that would enable
Carrier to achieve a reasonable rate of return on its additional investment)
that would be necessary to accommodate such blending such that the project would
be complete by December 31, 2017 and (ii) initially continue existing
arrangements with respect to collection and sales of Condensate, Drip Liquids,
Skim Oil and Natural Gas Liquids, subsequently accomplish the blending of such
products at Carrier’s Central Oil Storage Facility and finally accomplish the
blending of such products at the Receipt Points or at new receipt points using
Carrier’s pipeline infrastructure.

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ARTICLE III
CARRIER’S AND PRODUCER’S FACILITIES

3.1Initial Facilities.  Immediately following the execution of this Agreement,
the Parties will undertake the steps necessary to design, construct, install and
place into service their respective facilities necessary to perform under this
Agreement, as follows:

(a)Carrier Facilities.

(i) Carrier shall design, construct, install, place into service, and maintain,
at its sole cost and expense, all crude oil gathering pipelines, crude oil
transmission pipelines, ancillary facilities and equipment including all Lease
Automatic Custody Transfer (“LACT”) units (which shall consist of two separate
LACTs at all new locations to accommodate both truck loading and pipeline
injection of Crude Oil). Carrier shall own the truck loading LACTs at new
locations through the term and at the conclusion of this agreement, however
Producer or its Designated Producer shall be responsible for maintaining and
proving the truck LACTs and Carrier provides Producer or its Designated Producer
permission to operate the truck LACTs during events of Curtailment subject to
Article 2.3 of this Agreement.  

(ii)Carrier’s Central Oil Storage Facility shall initially include a Crude Oil
storage tank with a nominal capacity of 20,000 Barrels.  Carrier shall endeavor
to have the Central Oil Storage Facility in service by August 1, 2017; however,
in no instance shall the in-service date be later than September 15,
2017.  Beginning on January 1, 2018 and an annual basis thereafter, Producer
shall provide to Carrier a good faith projection of the anticipated production
of Crude Oil for the upcoming 12 month period.  In the event that the
anticipated average daily production of Crude Oil for the period is more than
0.5 times the aggregate volume capacity of the storage tanks then installed at
Carrier’s Central Oil Storage Facility, then Carrier shall reasonably promptly
begin construction of incremental tank(s) and shall use commercially reasonable
efforts to place such additional tankage into service within 180 days of the
notice from Producer such that Carrier will provide storage for approximately 2
times the average daily volume of Crude Oil at any time, up to a maximum of
40,000 barrels of capacity.  The costs of construction and placement into
service of all Crude Oil storage tanks and other facilities at Carrier’s Central
Oil Storage Facility (up to 40,000 barrels of capacity) shall be borne by
Carrier and there shall be no adjustment to the fees payable under this
Agreement for such additional tankage.  The aggregate volume capacity of the
tankage referred to above included in Carrier’s Central Oil Storage Facility
shall refer to the tankage that is available for Producer’s Crude Oil production
and as to which Producer shall have the highest service priority level.

(iii)  Producer shall have the right thereafter to require Carrier to install
additional tankage at Carrier’s Central Oil Facility based upon reasonably
anticipated future production as well as system reliability and curtailment
history.  Any such incremental tankage beyond 40,000 barrels shall be at the
cost of Producer.  In the event that Producer requires additional tankage, then
the parties shall negotiate in good faith for an amendment to this Agreement to
reimburse for the incremental operating expense associated with the additional
tankage.

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(iv) Carrier Facilities shall include measurement facilities, and Supervisory
Control and Data Acquisition (“SCADA”) systems necessary to receive up to 110%
of the Initial MDQ (“IMDQ”) from each Receipt Point up to a total daily volume
not to exceed 110% of the IMDQ for the Production Area containing all Receipt
Points as set forth in Exhibit “B” with provisions for expansion to receive 100%
of the Peak MDQ of Committed Crude Oil at all Receipt Points as set forth on
Exhibit “B”  and deliver such volumes of Committed Crude Oil less the Deduction
to Plains All American Pipeline (“PPLP”) at PPLP’s Z285 Station in Reeves
County, Texas (the “PPLP Z285 Station”).  Carrier shall also design, construct,
install, place into service, and maintain, at its sole cost and expense, truck
loading and unloading facilities, tanks and mixing equipment at Carrier’s
Central Oil Storage Facility.  These facilities will have the ability to load
Crude Oil onto trucks in the event of a downstream Curtailment, receive and
measure Crude Oil in the event of an upstream Curtailment and subject to the
terms of Section 2.2(d), receive and measure, Producer’s Vertical Well Crude Oil
as delivered by Producer’s trucks for blending with other Crude Oil such that
the blended composition of such products and other Crude Oil complies with the
quality specifications of the downstream pipelines.  Carrier’s Automated Custody
Transfer (“ACT”) unit at its Central Oil Storage Facility truck receipt station
shall be the point of measurement for Carrier’s receipt of Producer’s Vertical
Well Crude Oil.  Carrier’s Facilities shall comply with Plains Measurement
Specifications for connection to PAAPLP DOC NO: PAALP-OPS-MEASUREMENT, Rev 1,
5/1/15 and “Specification as to Quality Received” in Plains Pipeline,
L.P.  Tariff O.C.C. No. 3.11.0 “Containing Rules and Regulations Governing the
Intrastate Transportation of Crude Petroleum” October 1, 2015” as well as the
Plains Pipeline LACT/ACT Policy dated February 2009.

(b)Producer Facilities. Producer shall design, construct, install, place into
service, and maintain, at its sole cost and expense, all flow-lines, tank(s),
and other ancillary equipment  located upstream of Carrier’s LACT unit at each
Receipt Point that are necessary to transport the Committed Crude Oil from the
Wells and deliver the same into Carrier’s Facilities.  Producer shall design,
construct, install, place into service, and maintain, at its sole cost and
expense, all flow-lines, tank(s), and other ancillary equipment required to
receive quantities of Non-Conforming Crude Oil as redelivered back to Producer
from Carrier’s LACT unit at each Receipt Point.  Producer shall provide level
instrumentation on all tanks supplying Crude Oil to each of Carrier’s Receipt
Point LACT units and provide Carrier access to electronic signals from such
level instrumentation required for Carrier to efficiently operate Carrier’s
Facilities.  Design and operation of Producer’s Receipt Point storage tank that
supplies Crude Oil directly to Carrier’s LACT unit shall be in accordance with
Measurement Specifications for Connection to PAALP (Doc. No.
PAALP-OPS-MEASUREMENT, Rev. No. 1, 5/1/15) with a minimum four inch (4”) sized
pipe with a block valve extending from the tank through the tank battery
containment wall for Carrier to connect its LACT unit. For Receipt Point(s)
delivering four thousand (4,000) Barrels per Day or less, as averaged over a
Month, Producer shall provide, at a minimum, two (2) 400 Barrel oil storage
tanks (800 Barrels total) and one reject oil tank, sized by Producer as adequate
for the service, at each Receipt Point lease battery where Carrier’s LACT unit
is to be located. For Receipt Point(s) delivering greater than four thousand
(4,000) Barrels per Day, as averaged over a Month, Producer shall provide, at a
minimum, two (2) 500 Barrel oil storage tanks (1000 Barrels total) and one
reject oil tank, sized by Producer as adequate for the service, at each Receipt
Point lease battery where Carrier’s LACT unit is to be located.  Producer may

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provide additional tanks at its own discretion, but shall not be required to
provide more capacity than this at any location, and shall not be required to
provide one day’s storage capacity at each of its batteries.  Recognizing that
delivery rates from adjacent Receipt Points lease batteries may vary widely,
Producer may install storage tanks that can be piped, with appropriate isolation
block and bleed valves, to service more than one Receipt Point lease battery to
comply with minimum storage requirements described above. At any Receipt Point
lease battery where Producer, as of the Effective Date, owns and operates a
truck loading LACT unit (Producer’s LACT) as referenced in Exhibit G, at
Carrier’s option, Producer shall leave Producer’s LACT in place such that
Producer or Producer’s Designated Producer may continue truck transport of Crude
Oil from the Receipt Point lease battery as needed during temporary outages of
Carrier’s Facilities.  Producer shall continue to maintain and prove the
Producer’s LACTs throughout the term of this agreement and shall retain
ownership of the Producer’s LACTs upon the termination of this
agreement.  Producer, at Producer’s cost (subject to reimbursement as described
below), shall provide a connection point at each of Producer’s Central
Production Facilities for Carrier to obtain 480V three phase electrical power
from Producer’s existing Central Production Facility’s electrical infrastructure
for operation of Carrier’s Receipt Point LACT units. Carrier shall install and
be responsible for all costs of electrical facilities required downstream of the
connection point provided by Producer. Carrier shall reimburse Producer for its
costs to install any power drop/transformers and panels and to upgrade the
Central Production Facility’s electrical infrastructure if required to supply
Carrier’s electrical power needs.  All electrical power consumed by Carrier to
operate its LACT units at the Receipt Points shall be provided by Producer at a
no cost to Carrier.  Producer shall not be responsible for providing electrical
infrastructure or power supply to Carrier’s Central Oil Storage
Facility.  Collectively, the facilities of Producer described in this subsection
(c) shall be referred to as “Producer’s Facilities”.

(c)Receipt Points.  The “Receipt Point(s)” shall be the outlet flange of
Producer’s Crude Oil delivery pipe located at the outside of the tank battery
containment wall at the Receipt Points located as set forth on Exhibit “B”,
unless otherwise mutually agreed by the Parties.

(d)Delivery Point(s).  During the initial 5 year period of Carrier’s connection
agreement with Plains Pipeline, L.P., the term of which is ten years following
the Effective Date, the “Delivery Point(s)” shall be located at the Plains
Pipeline, L.P.’s Midland tank farm as further set forth on Exhibit “C” attached
hereto and made a part hereof.  Following the expiration of the initial 5 year
period following the Effective Date, Carrier’s agreement with Plains Pipeline,
the Delivery Point(s) shall be the same Delivery Point or at such other point of
delivery as mutually agreed to by the Parties.  In the event the Parties agree
to an additional or different delivery point, the Parties shall amend the Fee
due for the Crude Oil delivered at such new delivery point as the result of any
required change to the Joint Tariff.

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3.2Subsequent Facilities.  Notwithstanding anything herein to the contrary,
Producer may request additional Receipt Points be designated at a Central
Production Facility (each an “Additional Receipt Point”).  Producer shall
provide Carrier written notice for the connection of any Additional Receipt
Point(s) to Carrier’s Facilities (“Connection Notice”).  The Connection Notice
shall include the required in-service date, the anticipated initial production
rate, and the anticipated maximum production rate over the immediate following
twelve (12) months. Upon receiving a Connection Notice, Carrier shall expand its
facilities as necessary to receive Committed Crude Oil at the Additional Receipt
Point(s) and deliver it to the Delivery Point(s) (“Subsequent Facilities”);
provided, however, that Producer agrees to reimburse Carrier for 50% of its
actual third party costs at the completion of construction within 30 days of
invoice (with reasonable supporting documentation).

(i)Measurement.  Carrier shall install industry standard LACT units with
electronic flow measurement (“EFM”) at all Additional Receipt Points, in
accordance with ARTICLE IV of this Agreement.

(ii)SCADA.  Carrier shall install SCADA systems at all Additional Receipt
Points.  

Subject to Force Majeure, should Carrier fail to complete the installation of
the Subsequent Facilities by the later of (i) ninety (90) Days following the
receipt of the Connection Notice or (ii) the required in-service date as stated
in the Connection Notice, Carrier’s inability to accept receipt of Producer’s
Crude Oil at such Subsequent Facility shall be deemed a Curtailment and handled
in accordance with Section 2.3 of this Agreement.

3.3Quarterly Meetings.  The Parties shall meet in person no less than four (4)
times each year for the purpose of joint development planning.  At such
meetings, Producer shall present items to include, but not necessarily limited
to, drilling plans and Crude Oil volume forecasts relating to the Dedication
Area.  Carrier shall present items to include, but not necessarily limited to,
planned system maintenance and system growth plans relating to the Dedication
Area.

3.4Standards of Performance.  Carrier, at its sole cost and expense, shall
secure and maintain all permits, approvals, bonds, easements, and grants
necessary for it to construct, place into service, own and operate Carrier’s
Facilities, including any Subsequent Facilities, and to provide the services
contemplated hereunder. Carrier shall comply with all laws and governmental
rules, orders and regulations and shall file all reports and obtain all permits,
licenses and other authorizations required for the construction, ownership and
operation of Carrier’s Facilities in accordance with all applicable laws, rules,
regulations, orders and other requirements applicable thereto, at Carrier’s sole
cost and expense.  Carrier shall perform all services under this Agreement in a
good and workmanlike manner in accordance with good oil and gas field practices
and all laws, rules, regulations, permits and orders applicable thereto, and
shall construct, place into service, own, operate, maintain and repair Carrier’s
Facilities in accordance with good industry standards.

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ARTICLE IV
FACILITY DESIGN STANDARDS AND OPERATIONS

4.1Facility Standards. Carrier’s Facilities shall be designed, constructed and
installed in accordance with both current and generally accepted industry
practices applied to Crude Oil pipelines.  The design, construction,
installation and maintenance of all facilities shall provide for and be in
compliance with the following:

(a)Carrier shall design, operate and maintain its LACT and ACT units in
accordance with Plains Pipeline, LP’s Measurement Specifications for Connection
to PAALP (DOC NO PAALP-OPS-Measurement, Rev. 1, dated 5/15/2015 (“Measurement
Specifications”).  Producer shall furnish Carrier a generic drawing of its
battery and related facilities design for each Central Production Facility
Receipt Point.

(b)Carrier’s Facilities at each Receipt Point shall be capable of accepting
volumes at each Receipt Point equivalent to 110% of the Initial Maximum Daily
Quantity with provisions for expansion to the Peak Maximum Daily Quantity as
listed in Exhibit “B”. Producer’s Facilities at each Central Production Facility
shall be capable of delivering volumes of Crude Oil to each Delivery Point
equivalent to 110% of the Initial Maximum Daily Quantity with provisions for
expansion to the Peak Maximum Daily Quantity, as listed in Exhibit “B”, at
sufficient suction pressure for efficient operation of Carrier’s LACT unit
pump.  Carrier shall locate LACT units outside Producer’s lease battery, but
close enough to tanks to maintain proper pump suction pressure for operation.

(c)Producer’s Facilities at each Central Production Facility shall be
electrically isolated from Carrier’s Facilities by an insulating flange kit
(“Insulating Flange”) to be installed by Carrier at Producer’s Crude Oil outlet
flange of each lease tank battery and at Producer’s inlet flange of Carrier’s
connection of the Non-Conforming Crude Oil return line of each LACT unit, both
located at the outside of the lease tank battery containment wall in compliance
with the Measurement Specifications.

(d)Upon reasonable request, each Party will provide or make available flow data
and data on valve status, pressure and temperature to the other Party at no
charge.  Each Party acknowledges and agrees that (i) all such data and
information generated or received in connection with this subsection
(collectively, “Requested Confidential Information”) is proprietary and
confidential business information that is owned by each respective Party or its
subsidiaries, Affiliates, members, or partners, and (ii) neither Party nor any
of its subsidiaries, Affiliates, members, partners or any employees thereof
shall disclose or distribute any such Requested Confidential Information to any
person or entity without the prior written consent of the non-disclosing Party,
except where such disclosure is mandated by applicable law, rule, regulation or
any court order or directive.  

(e)Carrier shall be granted a limited, personal, non-exclusive right to access
Producer’s Crude Oil tanks, tank level instrumentation, pipeline and valves on
an as-needed basis at each Central Production Facility and along the easement
upon which the applicable portion of the connection to related facilities are
located.  Such right of access is strictly limited to the construction,
installation, commissioning, maintenance, operation, testing, witnessing and

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removal of the facilities related to this Agreement.  Carrier will be solely
responsible for any damages caused or sustained as a result of Carrier’s
exercise of such access and will indemnify, defend and hold Producer, its
Affiliates and each of their respective owners, directors, managers, officers,
employees and agents (“Producer Indemnified Parties”) harmless for any such
damage pursuant to Section 12.2 of this Agreement.

4.2Agreement for Grant and Assignment of Easements to Carrier. To the extent
that Producer or any of its Affiliates now or hereafter owns any real property
rights covering, or located within, the Dedication Area, whether derived from a
Lease, easement, right-of-way, surface use agreement, permit, governmental
agency order, regulation, statute, or otherwise, and to the extent Producer
and/or its Affiliates have the right to do so, Producer hereby GRANTS, ASSIGNS
and CONVEYS to Carrier (and Producer covenants and agrees that it shall cause
its Affiliates to grant, assign and convey to Carrier), in each case, without
warranty of title or other representation of any kind, either express or
implied, a non-exclusive easement in the Leases and such other real property
interests (but only for so long as the lands on which such easement is granted
and assigned relate to real property rights that are not released from this
Agreement as provided herein, and in no case, after the Term hereof), for the
limited purposes of the performance of Carrier’s obligations under this
Agreement with respect to the gathering and transportation of Committed Crude
Oil and the reasonable exercise of Carrier’s rights under this Agreement, which
shall include the installing, inspecting, repairing, operating, replacing,
and/or removing of pipes, meters, lines, and other equipment used or useful in
the performance of this Agreement with respect to the gathering and
transportation of Committed Crude Oil.  Any property of Carrier placed in, upon
or under any of the lands burdened by such easement shall remain the property of
Carrier.  Carrier agrees to, and shall release, indemnify, defend and hold the
Producer Indemnified Parties harmless from and against any and all suits,
actions, causes of action, claims and demands arising from or out of any adverse
claims made by any Person for any loss, liability, damage, including death and
damage to property, cost or expense (including fees and expenses of counsel,
accountants, consultants and experts), in each case to the extent related to,
caused by or arising out of Carrier’s ownership and use of the rights
transferred under this Section 4.2, except to the extent such claim or damage
results from the gross negligence or willful misconduct of Producer, its
employees, agents or representatives. Notwithstanding anything herein to the
contrary, Carrier covenants that at all times during the Term of this Agreement,
that it shall keep the Leases, Wells, real property interests, surface rights,
easements, rights-of-way, surface use agreements, permits and similar interests
owned by Producer and relating to the Dedicated Area free and clear of all
liens, encumbrances, and adverse claims of any kind, arising by, through or
under Carrier, but not otherwise, save and except the burdens and encumbrances
set forth in ARTICLE II and this Section 4.2.

4.3Agreement for Grant and Assignment of Easements to Producer. To the extent
that Carrier or any of its Affiliates now or hereafter owns any real property
rights covering, or located within, the Dedication Area, whether derived from a
fee interest, lease, easement, right-of-way, surface use agreement, permit,
governmental agency order, regulation, statute, or otherwise, and to the extent
Carrier and/or its Affiliates have the right to do so, Carrier hereby GRANTS,
ASSIGNS and CONVEYS to Producer (and Carrier covenants and agrees that it shall
cause its Affiliates to grant, assign and convey to Producer), in each case,
without warranty of title or other representation of any kind, either express or
implied, a non-exclusive easement in such real property interests (but only for
so long as the lands on which such easement is granted and

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assigned relate to real property rights that are not released from this
Agreement as provided herein, and in no case, after the Term hereof), for the
limited purposes of the performance of Producer’s obligations under this
Agreement and the reasonable exercise of Producer’s rights under this Agreement,
which shall include the installing, inspecting, repairing, operating, replacing,
and/or removing of pipes, meters, lines, and other equipment used or useful in
the performance of this Agreement.  Any property of Producer placed in, upon or
under any of the lands burdened by such easement shall remain the property of
Producer.  Producer agrees to, and shall release, indemnify, defend and hold
Carrier, its Affiliates and each of their respective owners, directors,
managers, officers, employees and agents (“Carrier Indemnified Parties”)
harmless from and against any and all suits, actions, causes of action, claims
and demands arising from or out of any adverse claims made by any Person for any
loss, liability, damage, including death and damage to property, cost or expense
(including fees and expenses of counsel, accountants, consultants and experts),
in each case to the extent related to, caused by or arising out of Producer’s
ownership and use of the rights transferred under this Section 4.3, except to
the extent such claim or damage results from the gross negligence or willful
misconduct of Carrier, its employees, agents or representatives. Notwithstanding
anything herein to the contrary, Producer covenants that at all times during the
Term of this Agreement, that it shall keep the real property interests, surface
rights, easements, rights-of-way, surface use agreements, permits and similar
interests owned by Carrier and relating to the Dedicated Area free and clear of
all liens, encumbrances, and adverse claims of any kind, arising by, through or
under Producer, but not otherwise, save and except the burdens and encumbrances
set forth in ARTICLE II and this Section 4.3.

4.4Emergency Shut-In. Either Party shall have the right to shut-in a Receipt
Point at any time a Party reasonably deems it appropriate to do so in order to
protect persons or property or the common stream or to prevent or reduce an
environmental risk.  The Party shutting-in a Receipt point shall use reasonable
efforts to give the other Party at least 24-hour advance written notice of a
shutdown, except in the case of an emergency when either Party may shut down
immediately.  In no event shall the Party shutting-in the Receipt Point be
liable to the other Party for any cost or damage incurred as a result of any
such shut-in that was based on a Party’s reasonable determination.  The affected
Receipt Point shall be reactivated as soon as any risks to persons, property, or
the environment are remedied.

ARTICLE V
MEASUREMENT AND CRUDE OIL QUALITY

5.1LACT Unit.  Measurement of all Crude Oil quantities at each Receipt Point
shall be made via Carrier’s LACT units, which will be maintained and operated by
Carrier and Carrier shall utilize applicable standards specified in Plains
Pipeline, L.P.’s measurement policies, or to the extent that Plains Pipeline
L.P.’s measurement policies do not address an issue, then the latest edition of
the Manual of Petroleum Measurement Standards ("MPMS") as published by the API
shall apply.  Producer’s LACTs and truck LACTs shall be maintained and operated
by Producer.  Sampling and calibration of Carrier’s LACT Units will be performed
in accordance with the following schedule and criteria:

(a)Sampling will be performed monthly at all Receipt Points.

(b)Sampling will be performed monthly at all Delivery Points.

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(c)Calibration of all Receipt Point meters will be performed monthly.

(d)Calibration of all Delivery Point meters will be performed monthly.

(e)Carrier shall use reasonable efforts to provide no less than seven (7) Days
advance notice to Producer of all meter-proving activities and shall permit
Producer, or Producer’s representative, to witness such meter proving
activities.

(f)Producer or its Designated Producer shall use reasonable efforts to provide
no less than seven (7) Days advance notice to Carrier of all truck LACT or
Producer LACT meter-proving and shall permit Carrier or its representative to
witness such meter proving activities.

5.2Measurement Data. Carrier shall provide Producer, at no cost to Producer, a
port to receive all measurement data generated at each individual Receipt Point
and Delivery Point and Carrier will utilize this data to manage the nomination,
allocation and billing procedures related to Carrier’s services provided
hereunder. In addition, all data collected in Carrier’s SCADA system shall be
made available to Producer in electronic form on a continuous, real-time basis.

(a)Carrier will provide direct electronic access to communications port(s) on
Carrier’s EFMs to obtain real time and audit trail data (thirty-five (35) Day
hourly average measurement data, alarms, and events).

(b)If Producer is unable to obtain historical measurement data from any meter,
Carrier will provide such data in electronic format.

(c)Carrier and Producer will mutually agree upon a reporting method for volumes
of vertical well Crude Oil.

(d)Carrier shall install a SCADA system to collect and monitor Central Battery
LACT and tank level data.  All data collected will be made available to Producer
via direct electronic access.

5.3Quality Specifications.  The Committed Crude Oil delivered at the Receipt
Points, considered in the aggregate, shall meet the quality specifications, as
well as the other terms, rules and regulations of the applicable Plains
Pipeline, L.P. tariff for the Z285, Texas delivery point, as amended and
effective at the time of delivery to Carrier.  The Crude Oil at any individual
lease battery shall meet the Reid Vapor Pressure, API Gravity, and all other
specifications as listed in Item No. 20 “Specification As To Quality Received”
in the document Plains Pipeline, L.P.  Tariff O.C.C. No. 3.11.0 “Containing
Rules and Regulations Governing the Intrastate Transportation of Crude
Petroleum” dated October 1, 2015.

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ARTICLE VI
TARIFFS

6.1Tariff. Producer acknowledges that Carrier is required to maintain on file
with the Texas Railroad Commission (“TRRC”) generally applicable tariffs that
establish rates, rules and regulations applicable to the transportation service
that Carrier provides through Carrier’s Facilities (the “Tariffs”). The Parties
agree that the Tariffs, as they may be supplemented or superseded from time to
time, govern the transportation service to be provided hereunder and shall
establish the rights, duties, liabilities and obligations of the Parties with
respect to the receipt, movement, and delivery of crude oil.

6.2FERC Regulation. 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.  It is the intent of the
Parties that Carrier provide to Producer the services set forth in this
Agreement on a negotiated contract basis only and the Parties hereby agree that,
in the event that (i) Carrier’s facilities, or any part thereof, become subject
to regulation by the Federal Energy Regulatory Commission, or any successor
agency thereto (“FERC”), or any other governmental body or agency of the rates,
terms and conditions for the services set forth in this Agreement, (ii) Carrier
becomes obligated by FERC or any other governmental body or agency to provide
gathering services on a common carrier, nondiscriminatory basis as a result of
Carrier’s execution, performance or continued performance of this Agreement or
(iii) FERC or any other governmental body or agency seeks to modify any term or
conditions of this Agreement, then: (a) to the maximum extent permitted by law,
it is the intent of the Parties that the rates and terms and conditions
established by the FERC or governmental body or agency having jurisdiction shall
not alter the terms and conditions set forth in this Agreement, and the Parties
agree to vigorously defend and support in good faith the enforceability of the
terms and conditions of this Agreement; (b) in the event that FERC or the
governmental body or agency having jurisdiction modifies the terms and
conditions set forth in this Agreement, the Parties hereby agree to enter into
such amendments to this Agreement and or enter into a separate arrangement in
order to give effect, to the greatest extent possible, to the terms and
conditions set forth herein; and (c) in the event that the Parties are not
successful in accomplishing the objectives set forth in (a) or (b) above such
that the Parties are in substantially the same economic position as they were
prior to any such regulation, then either Party may terminate this Agreement
effective one (1) Day prior to the effective date of such governmental action by
providing prompt, written notice to the other Party.

ARTICLE VII
FEES AND DEDUCTIONS

7.1Joint Tariff Fee.  During the first five (5) years following the Effective
Date of this Agreement, Carrier shall charge, or cause to be charged, Producer
or Designated Producer, as applicable, a Joint Tariff Fee equal to two dollars
and twenty-five cents ($2.25) for each barrel of Committed Crude Oil delivered
into Carrier’s System at the Receipt Point(s).  In the event PPLP fails, for any
reason, to honor the Joint Tariff, then Producer and Carrier agree to work
together in an attempt to (i) cause PPLP to honor the Joint Tariff or (ii) find
other mutually agreeable connections with pipelines downstream of Carrier’s
Facilities at which point only Carrier’s Gathering Fee would, as adjusted, would
then be in effect.

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7.2Joint Tariff Fee Adjustments.   Beginning in 2017, the Joint Tariff Fee shall
be adjusted annually, on July 1st, by the methodology set out in Section 342.3
of the FERC’s regulations (18 C.F.R. § 342.3).  The Fees may increase and
decrease, however, in no event shall the Gathering Fee be less than two dollars
and twenty-five cents ($2.25).

7.3Gathering Fee.  Beginning the sixth (6th) year following the Effective Date
of this Agreement, and continuing for the remaining term of this Agreement, and
at any point when the Joint Tariff is not in effect under the terms of this
Agreement, Carrier shall charge Producer or Designated Producer, as applicable,
a Gathering Fee equal to an adjusted seventy-seven and one half cents ($0.775)
for each barrel of Committed Crude Oil delivered into Carrier’s System at the
Receipt Point(s).  The Gathering Fee shall be adjusted each year beginning in
2017 as set forth in Section 7.4 below (for example: assuming that the FERC
Index provided for a 2% upward adjustment each year during the first 5 years of
this Agreement, then the effective Gathering Fee beginning in the sixth year of
this Agreement would be $0.856 per barrel) for transportation services from the
CPFs to Carrier’s interconnect facilities with PPLP at PPLP’s Z285 Station
located in Reeves County, Texas.

7.4Truck Loading Fee.  Carrier shall charge a Truck Loading Fee of twelve cents
($0.12) for each barrel loaded or unloaded from Carrier’s Central Oil Storage
Facility onto trucks.

7.5Gathering Fee Adjustments.   Beginning in 2017, the Gathering Fee shall be
adjusted annually, on July 1st, by the methodology set out in Section 342.3 of
the FERC’s regulations (18 C.F.R. § 342.3; referred herein to as the “FERC
Index”).  The Fees may increase and decrease, however, in no event shall the
Gathering Fee be less than seventy-seven and one half cents ($0.775).

7.6Deductions.  A total deduction of two tenths of one percent (0.2%) will be
made to cover evaporation, interface losses and other normal losses during all
transportation, storage and blending of Committed Crude Oil and Vertical Well
Crude Oil that complies with the quality specifications of the downstream
pipelines from the Receipt Point(s) and the Central Storage Facility truck
receipt point to the Delivery Point(s) (hereinafter referred to as the
“Deduction”).

ARTICLE VIII
LINE FILL

8.1Producer, or the Designated Producer, shall provide Producer’s proportionate
share of the necessary quantity of Crude Oil to establish initial Line Fill for
Carrier’s facilities.  Such Line Fill quantity shall be credited to Producer’s
account and redelivered at the conclusion of this Agreement unless mutually
extended by the Parties.  Carrier shall not assess any Fee for Line Fill until
Carrier redelivers such Line Fill at the conclusion of services hereunder to the
Delivery Point(s).

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ARTICLE IX
STATEMENTS, BILLINGS AND PAYMENTS

9.1Statements.  On or before the twenty-fifth (25th) Day of each Month, Carrier
shall deliver to Producer a statement or invoice for the Crude Oil delivered
during the preceding Month showing the quantity of Crude Oil delivered and the
associated Fees and Deduction and any other information reasonably requested by
Producer.  If the actual quantity delivered is not available, the statement will
be prepared based upon estimates.  Carrier shall make appropriate adjustments to
reflect the actual quantity delivered on the following Month’s statement or as
soon thereafter as actual delivery information for the Month during which
estimates have been made is available.

9.2Payment Method.  Producer shall pay by wire transfer, check or ACH transfer
to the account or remittance address set forth herein or according to the
instructions set forth in the applicable statement or invoice, the full amount
payable according to such statement no later than the thirtieth (30th) Day of
the Month following the Month of delivery of the Crude Oil.

9.3Taxes.  Producer shall pay all severance, production, processing, excise or
similar taxes imposed or levied by the state or any other governmental entity on
the Crude Oil gathered hereunder, if any, and Producer shall remit such tax to
the applicable governmental entity.  Producer further agrees to reimburse
Carrier upon invoice for the full amount of any taxes or charges levied,
assessed or fixed by any municipal or governmental authority against Carrier or
its business in connection with or attributable to the volumes, value or gross
receipts from the movement of the Crude Oil received from Producer hereunder or
against such Crude Oil itself or the act, right or privilege of ownership,
production, severance, handling, transmission, compression, treating,
distribution, sale, delivery or redelivery of such Crude Oil, whether such tax
or charge is based upon the volume, value or gross receipts from the gathering
of such Crude Oil or upon some other basis.

9.4Delinquent Payments. If Producer is delinquent in any undisputed payments
hereunder, Carrier may, upon thirty (30) Days written notice, suspend service
under this Agreement until all outstanding amounts are paid in full. Carrier
shall have no liability to Producer for any such suspension of service under
this Section 9.4.  

9.5Examination of Books and Records.  Each Party hereto, or its representative,
has the right at all reasonable times to examine the books and records of the
other Party, in the offices of the other Party during its normal business hours,
to the extent necessary to verify the accuracy of any statement, charge,
computation or demand made hereunder.  Statements shall be final as to both
Parties unless questioned within two (2) years after the payment due date
thereof, except in the case of fraud or willful misconduct.  If Producer
contracts with a Designated Producer, then, in addition to Producer, the
Designated Producer shall have the rights set forth in this paragraph.

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ARTICLE X
PRORATIONING

10.1Carrier shall maintain a prorationing policy in accordance with the current
policy contained in Carrier’s TRRC Tariff, including any supplements thereto or
reissues thereof.  Upon Producer’s request, Carrier shall provide Producer with
a copy of such current policy.

ARTICLE XI
TERM

11.1Subject to the remaining provisions hereof, this Agreement shall continue in
effect until July 31, 2031 (“Primary Term”) unless earlier terminated pursuant
to the provisions hereof. Following the Primary Term, this Agreement shall
continue in effect on a year to year basis thereafter unless terminated by
either Party providing at least ninety (90) days’ written notice prior to the
expiration of the Primary Term or any subsequent year thereafter, unless earlier
terminated pursuant to the provisions hereof.  The period of time during which
this Agreement in in force and effect is referred to herein as the “Term”.

ARTICLE XII
WARRANTIES AND INDEMNIFICATION

12.1Warranty of Title.  Producer warrants that it will at the time of delivery
of Crude Oil to Carrier under this Agreement have good title to or contractual
right to deliver such Crude Oil and that such Crude Oil will be free and clear
of all liens, encumbrances, and adverse claims of any kind that have been
asserted prior to the time of delivery.  If any claim is made on the title of
the Committed Crude Oil, Carrier has the right to suspend receipt or deliveries
of Committed Crude Oil but only to the extent to which title is in issue and
only until such issue is finally resolved to the reasonable satisfaction of
Carrier.

12.2Indemnification by Producer.  PRODUCER COVENANTS THAT IT WILL RELEASE,
DEFEND, INDEMNIFY AND SAVE THE CARRIER INDEMNIFIED PARTIES HARMLESS FROM AND
AGAINST ANY AND ALL SUITS, ACTIONS, CAUSES OF ACTION, CLAIMS, AND DEMANDS
ARISING FROM OR OUT OF ANY ADVERSE CLAIMS MADE BY ANY THIRD PARTY OR BY PRODUCER
FOR ANY LOSS, DAMAGE, COST OR EXPENSE RELATING TO, CAUSED BY, OR ARISING OUT
OF:  (i) PRODUCER’S OPERATION OF THE PRODUCER FACILITIES, (ii) THE OWNERSHIP OF
OR ANY INTEREST IN THE CRUDE OIL TENDERED FOR SERVICES CONTEMPLATED HEREUNDER,
(iii) THE QUALITY (OR LACK THEREOF) OF THE COMMITTED CRUDE OIL DELIVERED
HEREUNDER, (iv) THE BREACH BY PRODUCER OF ANY REPRESENTATION OR WARRANTY MADE BY
PRODUCER HEREUNDER, AND (v) THE LOSS OF OR DAMAGE TO COMMITTED CRUDE OIL
DELIVERED HEREUNDER FOR REASONS OTHER THAN THE WILLFUL MISCONDUCT OR NEGLIGENCE
OF CARRIER BEFORE CARRIER’S RECEIPT OF SUCH COMMITTED CRUDE OIL AND AFTER
CARRIER’S DELIVERY OF SUCH COMMITTED CRUDE OIL TO PRODUCER OR ITS DESIGNEE.

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12.3Indemnification by Carrier.  CARRIER COVENANTS THAT IT WILL RELEASE, DEFEND,
INDEMNIFY, AND SAVE THE PRODUCER INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST
ANY AND ALL SUITS, ACTIONS, CAUSES OF ACTION, CLAIMS, AND DEMANDS ARISING FROM
OR OUT OF ANY ADVERSE CLAIMS MADE BY ANY THIRD PARTY OR BY CARRIER FOR ANY LOSS,
DAMAGE, COST, OR EXPENSE RELATING TO, CAUSED BY, OR ARISING OUT OF (i) CARRIER’S
OPERATION OF CARRIER’S FACILITIES, (ii) THE BREACH BY CARRIER OF ANY
REPRESENTATION OR WARRANTY MADE BY CARRIER HEREUNDER, AND (iii) THE LOSS OF OR
DAMAGE TO THE COMMITTED CRUDE OIL DELIVERED HEREUNDER FOR REASONS OTHER THAN THE
WILLFUL MISCONDUCT OR NEGLIGENCE OF PRODUCER AFTER CARRIER’S RECEIPT OF SUCH
COMMITTED CRUDE OIL AND BEFORE CARRIER’S DELIVERY OF SUCH COMMITTED CRUDE OIL TO
PRODUCER OR ITS DESIGNEE.

12.4Limitation of Liability.  FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS
REMEDY OR MEASURE OF DAMAGES IS PROVIDED IN THIS AGREEMENT, THE LIABILITY OF THE
BREACHING PARTY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER
DAMAGES OR REMEDIES ARE HEREBY WAIVED.  IF NO REMEDY OR MEASURE OF DAMAGES IS
EXPRESSLY PROVIDED IN THIS AGREEMENT, THE LIABILITY OF THE BREACHING PARTY SHALL
BE LIMITED TO DIRECT DAMAGES ONLY (INCLUDING COURT COSTS AND REASONABLE
ATTORNEYS’ FEES) AND ALL OTHER DAMAGES AND REMEDIES ARE WAIVED. In no event WILL
EITHER PARTY BE liable to THE OTHER PARTY for EXEMPLARY OR PUNITIVE DAMAGES OR
any special, indirect, incidental, or consequential damages of any character,
including without limitation, loss of use, lost profits or revenues, cost of
capital, cancellation of permits, unabsorbed transportation or storage charges,
termination of contracts (OTHER THAN THIS AGREEMENT), tort or contract claims
(other than contract claims arising out of an agreement between CARRIER and
Producer), OR lost production, irrespective of whether claims for such damages
are based upon contract, warranty, negligence, strict liability or otherwise.

ARTICLE XIII
POSSESSION AND CONTROL

13.1Producer shall be deemed to be in control and in possession of the Crude Oil
prior to such Crude Oil being received by Carrier at the Receipt Points and
shall be responsible for any damages, losses or injuries to such Crude Oil until
the same shall have been received by Carrier, except for injuries and damages
which have been occasioned solely and proximately by the willful misconduct or
negligence of Carrier or its designee.  Carrier shall be in control and in
possession of the Crude Oil subsequent to such Crude Oil being received by
Carrier and shall be responsible for any damages or injuries to such Crude Oil
until the same shall have been redelivered by Carrier pursuant to this
Agreement, except for injuries and damages that have been occasioned solely and
proximately by the willful misconduct or negligence of Producer or its designee.

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13.2Title to the Crude Oil shall remain with and shall vest in Producer or
Producer’s Designated Shipper; provided, however, that title to Crude Oil that
is retained as a Deduction in accordance with Section 7.3 herein, will transfer
to and shall vest in Carrier as it is retained.

ARTICLE XIV
FORCE MAJEURE

14.1Except as otherwise provided herein, if either Carrier or Producer is
rendered unable, wholly or in part, by Force Majeure, to perform or comply with
any obligation or condition of this Agreement, such obligation or condition will
be suspended during the continuance of the inability so caused and such Party
will be relieved of liability and will suffer no prejudice for failure to
perform the same during such period; provided, however, the obligation to make
payments then due hereunder will not be suspended and the cause for suspension
(other than strikes or lockouts) shall be remedied so far as possible with
reasonable dispatch. The Party suffering a condition of Force Majeure shall give
notice and reasonably full particulars to the other Party as soon as reasonably
possible upon the occurrence of such event.  Settlement of strikes and lockouts
are wholly within the discretion of the Party having the
difficulty.  Notwithstanding anything to the contrary in this Agreement, if a
condition of Force Majeure prevents either Party, wholly or in part, from
performing or complying with any obligation or condition of this Agreement for a
period of six (6) Months, then all Committed Crude Oil affected by the condition
of Force Majeure shall be Permanently Released from this Agreement. Carrier
hereby agrees to execute and deliver to Producer an instrument evidencing such
Permanent Release, which Producer may record in the county records of the county
or counties where the affected Leases and Wells are located.  The term “Force
Majeure” includes, without limitation, the following:  acts of God and the
public enemy; the elements or threats thereof; fire, accidents, or breakdowns;
strikes and any other industrial, civil, or public disturbance; loss of
electrical power supply; failure of pipelines upstream or downstream of
Carrier’s Facilities to install facilities or to take or transport Crude Oil;
accidents; inability to obtain rights-of-way, easements or property rights for
the construction or operation of any necessary facilities hereunder on a
commercially reasonable basis; any act or omission by parties not controlled by
the Party having the difficulty (and for which the Party having the difficulty
is not reasonably able to obtain substitute performance or to make alternative
arrangements); and any laws, order, rules, regulations, acts or restraints of
any government or governmental body or authority, civil or military; and any
other cause, whether of the kind herein enumerated or not, that is not
reasonably within the control of the Party affected (and for which the Party
having the difficulty is not reasonably able to obtain substitute performance or
to make alternative arrangements).  Notwithstanding the foregoing, general
changes in industry or economic conditions or changes resulting from a change in
commodity prices shall not constitute a condition of Force Majeure.

ARTICLE XV
NOTICES & PAYMENTS

16.1Except as otherwise provided, any notice provided or permitted to be given
under this Agreement (including any request for consent or approval, or response
thereto) shall be in writing, and may be served by personal delivery, by
electronic mail or by Federal Express or another reputable overnight courier
service, addressed to the Party to be notified.  If there is any dispute
regarding the actual receipt of notice, the Party giving such notice shall bear
the burden

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of providing reasonably satisfactory evidence of such delivery and receipt.  For
the purpose of the foregoing, automated electronic confirmation of receipt shall
be satisfactory evidence of receipt of electronic mail notice.  Notices shall be
deemed to have been given and received upon receipt at the addresses specified
below.  Each Party shall have the right, upon giving five (5) Days’ prior notice
to the other in the manner hereinabove provided, to change its address for
purposes of notice.

 

 

Carrier:

Notices:

 

 

 

 

 

Caprock Permian Crude LLC

 

 

5810 Wilson Road, Suite 100

 

 

Humble, Texas 77396

 

 

Attn: Contract Administration

 

 

Phone: (832) 914-1670

 

 

Fax: (832) 914-1672

 

 

 

 

 

Payments: Wire Transfer or ACH

 

 

Comerica Bank

 

 

Houston, TX

 

 

ABA# 111000753

 

 

Account # 1881792400

 

 

Account name: Caprock Midstream LLC

 

 

 

 

 

Payments: Check

 

 

Caprock Permian Crude LLC

 

 

5810 Wilson Road, Suite 100

 

 

Humble, Texas 77396

 

 

 

 

 

 

 

Producer:

Notices:

 

 

 

 

 

Resolute Natural Resources Southwest, LLC

 

 

1700 Lincoln Street, Suite 2800

 

 

Denver, CO 80203

 

 

Attn:  Michael Stefanoudakis

 

 

Phone:  303-534-4600

 

 

Fax:  303-623-3628

 

 

 

 

 

Payments:  Wire Transfer

 

 

 

 

 

US Bank

 

 

Denver, CO

 

 

ABA#:  102 000 021

 

 

Acct #:  1036 9023 3038

 

 

Acct Name:  Resolute Energy Corporation

 

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ARTICLE XVI
MISCELLANEOUS

16.1Regulatory Bodies.  This Agreement shall be subject to all valid applicable
federal, state and local laws, rules and regulations of any governmental body or
official having jurisdiction.  All Parties hereto shall be entitled to treat all
laws, orders, rules and regulations issued by any federal, state or local
regulatory body as valid and may act in accordance therewith until such time as
the same may be invalidated by final unappealable judgment in a court of
competent jurisdiction.

16.2Modification.  Any modification of terms or amendment of provisions of this
Agreement (including the documents, schedules, attachments, exhibits, annexes
and instruments referred to herein) shall become effective only by supplemental
written agreement between the Parties signed by an authorized representative of
each Party.

16.3Waiver.  No waiver of any of the provisions of this Agreement shall be
effective unless in writing signed by each Party hereto.  No waiver by either
Party of any default of the other Party under this Agreement shall operate as a
waiver of any future default, whether of a like or different character.

16.4Default.  Carrier shall not be required to receive Crude Oil or deliver
Crude Oil if Producer fails to comply with any or all material terms of this
Agreement.  Producer shall not be required to deliver Crude Oil to Carrier if
Carrier fails to comply with any or all material terms of this Agreement.  Prior
to suspending service under this Section 16.4, the non-breaching Party must
provide the other Party with at least thirty (30) Days written notice of its
intent to suspend service, except in cases of emergency or reasonably threatened
environmental, health, or safety concerns, in which case as much written notice
as the circumstances will allow must be given.  The defaulting Party will have
thirty (30) Days after its receipt of written notice in which to cure the
alleged default or to undertake the activities necessary to correct the default
if the same cannot be completed within the thirty (30) Day period; provided,
however, that such thirty (30) Day period shall not extend any of the time
periods in Section 2.3, Section 3.2 or Section 14.1.

16.5Governing Law.  This Agreement shall be governed and construed, interpreted
and enforced in accordance with the laws of the State of Texas, without regard
to conflict of law rules that would direct application of the laws of another
jurisdiction.  With respect to any suit, action or proceeding arising out of or
relating to this Agreement, each of the Parties hereby irrevocably and
unconditionally (a) submits, for itself and its property, to the exclusive
jurisdiction of any Texas state court sitting in Midland County, Texas, or the
United States District Court for the Western District of Texas and any appellate
court from any thereof, and agrees that all claims in respect of any such suit,
action or proceeding may be heard and determined only in such state court or, to
the extent permitted by law, in such federal court, (b) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding in
any such court, (c) waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such suit, action or
proceeding  in any such court, and (d) agrees that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.  Each Party

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knowingly, voluntarily, and intentionally waives its right to trial by jury in
any proceeding arising out of or relating to this Agreement, whether sounding in
contract, tort, or otherwise.

16.6Succession and Assignment.  This Agreement may not be assigned by either
Party, in whole or in part, without the prior written consent of the other
Party, such consent not to be unreasonably withheld; provided, however, that
either Party may assign this Agreement without the consent of the other Party to
any Affiliate of the assigning Party, or in connection with the sale or other
transfer of (i) any Leases or Wells by Producer, or (ii) Carrier’s Facilities by
Carrier, and provided, further, that any assignment of this Agreement shall
extend to and be binding on the Parties, their successors and assigns,
including, without limitation, any subsequent assignees of Producer’s interests
in the Leases and Wells and the Committed Crude Oil or any subsequent assignees
of Carrier’s Facilities. Without limiting the foregoing, Producer shall not
assign any of its interests in the Leases and Wells and the Committed Crude Oil
unless the assignee (or assignees) executes a joinder to this Agreement by which
such assignee (or assignees) expressly assumes the rights, obligations and
liabilities of the assignor under this Agreement and that no transfer or
succession to the interest of Producer hereunder, wholly or partially, shall
affect or bind Carrier until the first of the month following the date Carrier
has received a copy of the recorded transfer document or other proof
satisfactory to Carrier that the claimant is legally entitled to such interest.
Similarly without limiting the foregoing, Carrier shall not assign any of its
interests in Carrier’s Facilities unless the assignee (or assignees) executes a
joinder to this Agreement by which such assignee (or assignees) expressly
assumes the rights, obligations and liabilities of the assignor under this
Agreement and that no transfer or succession to the interest of Carrier
hereunder, wholly or partially, shall affect or bind Producer until the first of
the month following the date Producer has received a copy of the recorded
transfer document or other proof satisfactory to Producer that the claimant is
legally entitled to such interest.  Notwithstanding anything in this Section
16.6 to the contrary, this Agreement shall not be binding on any Leases and
Wells within the Dedication Area, or the Crude Oil produced therefrom, owned or
later acquired by any successor or assign of Producer not otherwise bound by the
terms of this Agreement, unless such successor or assign, on one hand, and
Carrier, on the other hand, in their respective sole discretion, execute and
deliver a joinder of this Agreement as to any such existing or after-acquired
Leases and Wells within the Dedication Area, and the Crude Oil produced
therefrom that were not otherwise subject to and burdened by the terms hereof
prior to the acquisition of such Leases, Wells and Crude Oil by such successor
or assign.  

16.7Disconnect.  If this Agreement terminates for any reason whatsoever, or if
Producer is granted a Permanent Release as to all or any portion of the
Committed Crude Oil, (i) Producer hereby consents to and agrees that Carrier may
disconnect Carrier’s Facilities from Producer’s Facilities at the affected
Receipt Point(s) and (ii) Carrier hereby consents to and agrees that Producer
may disconnect Producer’s Facilities from Carrier’s Facilities at the affected
Receipt Points.  “Disconnect” for the purposes of this paragraph means to remove
metering facilities, pipelines and any other interconnection facilities through
which such released Crude Oil was delivered under this Agreement.  This consent
and agreement by Producer in this paragraph applies to both Carrier and any
third party employed by Carrier to provide services hereunder, without
distinction, and is intended in all respects to satisfy the requirements of any
local, state or federal governmental agency having jurisdiction over such
matters.

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16.8Insurance.  During the Term, the Parties shall maintain insurance for the
coverages and amounts as set forth on Exhibit “D”, which policies of each Party
shall name the other Party as an additional insured thereunder, and otherwise
meet the requirements set forth on Exhibit “D”.

16.9Controlling Agreement.  This Agreement replaces and supersedes all prior
agreements regarding crude oil gathering between Carrier and its Affiliates, and
Producer and its Affiliates, relating to the Lease(s), Well(s) or Committed
Crude Oil, which prior Agreements are terminated effective as the effective date
of this Agreement.  Furthermore, to the extent of a conflict between this
Agreement and the Carrier Tariff, the terms of this Agreement shall control;
provided that if there is a conflict between this Agreement and applicable law
as it applies to the Carrier Tariff, then applicable law shall control.  The
provisions of Section 11.02(b) of the Purchase and Sale Agreement dated as of
July 7, 2016 between the Producer and Carrier’s affiliate are incorporated
herein by reference and the Parties agree that such provisions shall apply to
the terms of this Agreement.  Any breach by Carrier’s affiliate under the
Amended and Restated Earn-Out Agreement dated as of the date of this Agreement,
between the parties shall constitute a breach by Carrier under this Agreement,
for all purposes hereof.

16.10Confidentiality.  Throughout  the Term, each Party shall hold, and cause
their Affiliates and their respective officers, agents and representatives to
hold, in confidence any and all information, whether written or oral, concerning
the terms, conditions, and obligations of this Agreement, and any information
relating to geological, geophysical, land and engineering data, core samples,
maps, financial models, returns, references and interpretations furnished by
Producer to Carrier (collectively “Confidential Information”), except to the
extent that (a) the disclosing Party can show that such Confidential Information
(i) is or becomes part of the public domain by publication or otherwise, except
by breach of this Article XV.11 by such disclosing Party; or (ii) is lawfully
acquired by the disclosing Party, any of its Affiliates or their respective
officers, agents or representatives from and after the date of execution of this
Agreement from sources that are not prohibited from disclosing such information
by a legal, contractual, or fiduciary obligation, or (b) such disclosure is (i)
to the existing or prospective lenders, financing sources, or financial advisors
of Producer, or (ii) pursuant to a potential sale of all or any portion of the
Leases, Wells or Subsequent Wells by Producer, and in each case, any third party
to whom such Confidential Information is disclosed has agreed in writing to
maintain the confidentiality of such Confidential Information, or (c) the
disclosing Party or any of its respective Affiliates or their respective
representatives are required by any applicable legal requirement, securities
laws or stock exchange rules to disclose any such Confidential Information.  If
either Party or any of its respective Affiliates or their respective
representatives are compelled to disclose any such Confidential Information by
legal requirements, the disclosing Party shall promptly notify the other Party’s
representative in writing and shall disclose only that portion of such
Confidential Information which the disclosing Party is advised by its counsel is
legally required to be disclosed, provided that the disclosing Party shall use
its reasonable best efforts to obtain an appropriate protective order or other
reasonable assurance that confidential treatment will be accorded such
Confidential Information. Notwithstanding anything to the contrary herein, in no
event shall a Party who has received Confidential Information from the other
Party, or its respective Affiliates, use such Confidential Information for any
purpose other than the performance of such receiving Party’s rights and
obligations hereunder.

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16.11Captions.  The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Agreement.

 

16.12Severability.  The unenforceability or invalidity of any one or more
portions or provisions of this Agreement shall not affect the enforceability or
validity of the remaining portions or provisions of this Agreement.

16.13Expenses.  Except as otherwise expressly stated in this Agreement, each
party hereto shall be solely responsible for all expenses incurred by it in
connection with these transactions (including fees and expenses of its own
counsel, accountants and consultants).

16.14Non-Solicitation.  For the Term of this Agreement and for a period of two
(2) years after the termination of this Agreement, neither Producer, on the one
hand, nor Carrier, on the other hand, shall, and shall not permit any of their
respective Affiliates to, directly or indirectly, solicit, employ or otherwise
engage as an employee or independent contractor any person who is an employee or
independent contractor of Producer, Carrier, or their respective Affiliates, as
applicable, except pursuant to (a) a mutual agreement between the applicable
Parties or (b) a general solicitation which is not directed specifically to any
such employees or independent contractors.  The restriction set forth in this
Section 16.14 shall not apply to any employee or independent contractor of a
Party, or their respective Affiliates, as applicable, (i) who was terminated by
such Party or such Affiliate, or (ii) whose employment or engagement ended more
than twelve (12) months prior to the date of solicitation, employment or
engagement by a Party hereto.

16.15Third-Party Beneficiaries.  Except as expressly set forth in ARTICLE XII,
nothing in this Agreement is intended to create any third-party beneficiary
rights respecting any Person or to confer upon any Person, other than the
Parties hereto and their respective successors and permitted assigns, any
rights, remedies or obligations under or by reason of this Agreement, and the
Parties specifically negate any such intention. Notwithstanding the foregoing:
(a) the Parties reserve the right to amend, modify, terminate, supplement, or
waive any provision of this Agreement or this entire Agreement without the
consent or approval of any other Person (including any other indemnified party
pursuant to ARTICLE XII).

16.16Memorandum. The Parties shall execute, acknowledge, deliver, and record a
mutually agreeable “short form” memorandum of this Agreement in the form
attached as Exhibit ”E” (the “Memorandum of Crude Oil Gathering Agreement”)
which shall be placed of record in the counties comprising the Dedication Area.

16.17Further 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, including, without limitation, executing supplements to (i) this
Agreement to provide for the present dedication and commitment of any Leases
and/or Wells hereafter acquired in accordance with this Agreement, and (ii) the
Memorandum of Crude Oil Gathering Agreement to provide notice to third parties
of such dedication and commitment of such Leases and/or Wells hereafter
acquired.

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16.18Counterparts; Exhibits.  This Agreement may be executed in one or more
counterparts (delivery of which may be made electronically or by facsimile),
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.  All Exhibits attached hereto are hereby
made a part of this Agreement and incorporated herein by this reference.

16.19Right of First Offer.  For a period beginning on the Effective Date and
ending on July 31, 2019 (the “ROFO Period”), Carrier shall provide prompt
advance written notice (a “Sale Event Notice”) to Producer of its intent to
enter into a transaction constituting a Sale Event (as defined below), which
Sale Event Notice shall include, to the extent available, the nature of the
transaction, the assets to be included in such transaction, any written offer
received by Carrier from a potential purchaser, and the price and other terms
and conditions of such proposed transaction (if any).  For a period of thirty
(30) days after the Sale Event Notice, Producer may submit a bona fide
non-binding indication of interest (the “Producer Indication”) to acquire (i)
Carrier’s Facilities or the portion thereof that is the subject of the Sale
Event Notice (the “ROFO Assets”).  If Carrier determines in good faith that the
Producer Indication presents an acceptable basis for negotiating a definitive
agreement, the Parties shall negotiate in good faith for a period of not less
than sixty (60) days the terms of a definitive agreement.  If Carrier determines
in good faith that the Producer Indication does not present an acceptable basis
for negotiating a definitive agreement, Carrier shall be entitled for a period
of one hundred and eighty (180) days from the expiration of the thirty (30) day
offer period to enter into a definitive agreement and consummate a Sale Event
with a third party, provided that the purchase price paid by such third party
for the ROFO Assets shall be at least five percent (5%) higher than the price
set forth in the Producer Indication.  If Carrier does not conclude any such
Sale Event to a third party within such 180 day period, Carrier shall thereafter
be obligated to repeat the process described in this Section 16.19 before again
pursuing a Sale Event.  A “Sale Event” shall mean (i) the sale, disposition or
other transfer (either directly or indirectly, in a single transaction or series
of related transactions, or otherwise) to a third party of more than 50% of the
combined voting power of the outstanding equity of either Buyer, Caprock Permian
Crude LLC, Caprock Permian Holdings LLC, Caprock Midstream Holdings and/or
Caprock Parent, whether by means of a merger, consolidation or sale of equity
interests, or otherwise; (ii) the sale, disposition or other transfer (either
directly or indirectly, in a single transaction or series of related
transactions, or otherwise) of any material portion of the ROFO Assets, whether
by means of a merger, consolidation, sale of equity interests in excess of 50%
of the equity interest of either Buyer, Caprock Permian Crude LLC, Caprock
Permian Holdings LLC, Caprock Midstream Holdings and/or Caprock Parent, sale of
assets, or otherwise; or (iii) the transfer or disposition, whether voluntary or
involuntary, by operation of law, of a material part of the ROFO Assets as the
result of bankruptcy or similar process; provided, that a “Sale Event” shall not
include a transfer of equity interests or assets to an Affiliate of the
foregoing entities, so long as such transferee executes a joinder to this
Agreement agreeing to be bound by this Section 16.19; and provided, further, in
the event of a Sale Event as described in this clause (ii), Producer’ right of
first offer shall apply only to that portion of the ROFO Assets that Carrier
propose to sell, dispose of or otherwise transfer in such Sale Event, and the
remaining assets included in the ROFO Assets shall remain subject to the right
of first offer on the terms set forth herein.

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16.20Construction.

(a)The Parties hereto 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 shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.  If the date specified in this Agreement for giving any notice
or taking any action is not a business day (or if the period during which any
notices required to be given or any action taken expires on a date which is not
a business day), then the date for giving such notice or taking such action (and
the expiration date for such period during which notice is required to be given
or action taken) shall be the next day which is a business day.

(b)Unless the context requires otherwise: (i) the gender (or lack of gender) of
all words used in this Agreement includes the masculine and feminine; (ii)
references to Articles and Sections refer to Articles and Sections of this
Agreement; (iii) references to Attachments, Schedules or Exhibits refer to the
Attachments, Schedules and Exhibits attached to this Agreement; (iv) the word
“including” means “including, without limitation” and (v) references to $ or
dollars means the lawful currency of the United States of America.  

[Signature Page(s) to Follow]

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This Agreement is executed by the duly authorized representatives of the Parties
as of the date shown above.

CARRIER:

CAPROCK PERMIAN CRUDE LLC

 

RESOLUTE NATURAL RESOURCES SOUTHWEST, LLC

 

 

 

 

 

By:

/s/ Michael Forbau

 

By:

/s/ Richard F. Betz

 

Michael Forbau

 

 

Richard F. Betz

 

President & CEO

 

 

Chief Executive Officer