Exhibit 10.3

* THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION
(THE “COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS.
ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND
HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED
BY “[REDACTED]”.

GAS GATHERING, COMPRESSION AND PROCESSING AGREEMENT

This Gas Gathering, Compression and Processing Agreement (“Agreement”) is made
and entered into this 21 st day of December, 2009, by and between Keystone
Midstream Services, LLC, a Delaware limited liability company (“Keystone”) and
R.E. Gas Development, LLC, a Delaware limited liability company (“Rex”) with Rex
Energy Corporation, a Delaware corporation (“Guarantor” for the limited purpose
specifically set forth in Article 18). Keystone and Rex may be referred to
individually as a “Party,” or collectively as the “Parties.”

RECITALS:

A. Rex owns or controls Gas produced from oil and gas leasehold rights or other
oil and gas interests and rights held by Rex within the Dedication Area as
defined herein, and Rex desires to develop such for the production of oil and/or
gas.

B. Upon the development of Rex’s interests for the production of gas, Rex will
require certain gas gathering, compression and processing services.

C. Keystone is willing to provide the gas gathering, compression and processing
facilities needed for the development of Rex’s oil and gas interests within the
Dedication Area.

D. The Parties desire to enter into this Agreement for Keystone to provide gas
gathering, compression and processing services to Rex for Rex’s Gas, as defined
herein, produced within the Dedication Area, all on the terms set forth herein.

In consideration of the mutual covenants and agreements contained herein, Rex
and Keystone agree as follows:

ARTICLE 1: DEFINITIONS

Accounting Period. The period commencing at 9:00 a.m., Central Clock Time, on
the first day of a calendar month and ending at 9:00 a.m., Central Clock Time,
on the first day of the next succeeding month.

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Affiliate. Any (a) Person directly or indirectly controlling, controlled by, or
under common control with such Person, (b) Person owning or controlling fifty
percent (50%) or more of the outstanding voting interests of such Person,
(c) officer, director, manager, or general partner of such Person, or (d) Person
who is an officer, director, manager, general partner, trustee, or holder of
fifty percent (50%) or more of the voting interests of any Person described in
clauses (a) through (c) of this sentence. For purposes of this definition, the
term “control,” “controls,” “controlling,” “controlled by,” or “under common
control with” means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

Btu. A British Thermal Unit, which is the quantity of heat required to raise the
temperature of one (1) pound avoirdupois of pure water from fifty-eight and five
tenths degrees Fahrenheit (58.5°F) to fifty-nine and five tenths degrees
Fahrenheit (59.5°F) at a pressure of fourteen and six hundred ninety-six
thousandths pounds per square inch absolute (14.696 psia).

Business Day. Any day other than Saturday, Sunday or a legal holiday in the
State of Pennsylvania.

Dedication Area. All acreage in the area shown on Exhibit A, attached hereto.

Entity. Any general partnership (including a limited liability partnership),
limited partnership (including a limited liability limited partnership), limited
liability company, corporation, joint venture, trust, business trust,
cooperative, association, foreign trust, or foreign business organization.

Facilities. The Gathering System together with the Processing Plant.

Fuel. All Gathering System Fuel and Plant Fuel measured and utilized as fuel in
the Facilities.

Gas. All hydrocarbon and non-hydrocarbon substances produced from gas and/or oil
wells in a gaseous state at the relevant Receipt Point(s).

Gathering System. Gas gathering facilities, from the Receipt Point(s) to the
inlet of the Processing Plant, including any needed compression, as expanded
from time to time.

Gathering System Fuel. All Gas measured and utilized as fuel for the Gathering
System.

GPM. The number of gallons of Plant Products per 1,000 cubic feet of Gas.

Gross Heating Value. The number of Btu’s produced by the combustion, on a dry
basis and at a constant pressure, of the amount of the Gas which would occupy a
volume of one Cubic Foot at a temperature of 60°F and at a pressure of 14.73
psia, with air of the same temperature and pressure as the Gas, when the
products of combustion are cooled to the initial temperature of the Gas and air,
and when the water formed by combustion is condensed to the liquid state.
Hydrogen sulfide shall be deemed to have no heating value.

 

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Indemnifying Party and Indemnified Parties. As defined in Article 13, below.

In-Service Date. The date upon which the Processing Plant has been constructed,
commissioned, and is ready to process Gas, and has been connected to the
Gathering System and to the Redelivery Point(s).

Interest(s). Any right, title, or interest of any nature in and to oil and gas
leases and mineral fee interests together with any pooling, unitization or
communitization of any of the foregoing rights.

Losses. Any actual loss, cost, expense, liability, damage, demand, suit,
sanction, claim, judgment, lien, fine or penalty asserted by a third party
(unaffiliated with Indemnified Party) incurring such, and which are asserted
against the applicable Indemnified Party on account of injuries (including
death) to any person or damage to or destruction of any property, sustained or
alleged to have been sustained in connection with or arising out of the matters
for which the Indemnifying Party has indemnified the applicable Indemnified
Party.

Mcf. 1,000 cubic feet of Gas, measured at Standard Base Conditions.

MMBtu. 1,000,000 Btu’s.

MMcf. 1,000,000 cubic feet of Gas, measured at Standard Base Conditions.

Person. Any individual or Entity, and the heirs, executors, administrators,
legal representatives, successors, and assigns of such “Person” where the
context so permits.

Plant Fuel. All Gas measured and utilized as fuel in the Processing Plant.

Plant Products. Ethane, propane, iso-butane, normal butane, iso-pentane, normal
pentane, hexanes plus, and any other liquid hydrocarbon product except for a
liquefied methane product, or any mixtures thereof, and any incidental methane
included in any Plant Products, which are separated, extracted, recovered or
condensed, and saved, from Gas processed in the Processing Plant.

Priority Capacity Rights. Subject to the provisions of this Agreement, the
rights to use certain specified capacity of the Processing Plant, superior to
the rights of other parties that do not hold Priority Capacity Rights, and which
rights provide that in the event that available capacity is curtailed or
reduced, or insufficient for the needs of all parties desiring to utilize the
capacity, that the gas available from all parties other than the holder(s) of
the Priority Capacity Rights will be curtailed or interrupted prior to any
curtailments of the holder(s) of the Priority Capacity Rights. Rex’s Priority
Capacity Rights are as provided in Article 6.

 

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Processing Plant. That certain skid-mounted cryogenic gas processing plant
commonly referred to as “Sarsen” to be initially installed and constructed on
the site located adjacent to the existing Rex Energy refrigeration plant site in
Butler County, Pennsylvania. Processing Plant facilities include, to the extent
installed: cryogenic, refrigeration and chilling equipment, absorption vessels,
product separation and fractionation vessels, product storage vessels,
associated condensing, heating, compressing, pumping, conveying, dehydration and
other equipment and instrumentation; any inlet compression required to boost the
Gas to processing pressure; any recompression required by Processing Plant
operations; any refrigeration compression required by Processing Plant
operations; all structures associated with those facilities; and including all
easements, rights-of-way, and other property rights pertaining to the
construction and operation of those facilities, wherever those facilities,
structures, easements, rights-of-way, leases, and other property rights are
located.

Receipt Point. The point(s) of delivery from Rex’s wells or other sources of gas
supply into the Gathering System.

Receipt Point Thermal Content. The Thermal Content of the Gas delivered by or on
behalf of Rex at a Receipt Point.

Redelivery Point. Each point at which Residue Gas is redelivered by Keystone to
Dominion, or any other third party transporter, for the account of Rex.

Residue Gas. That portion of the Gas delivered for the account of Rex at the
Redelivery Point that remains after processing and Fuel deductions.

Rex’s Gas. All Gas that is attributable to Interests now owned or hereafter
acquired by Rex within any portion of the Dedication Area, or is attributable to
third parties that is produced from a well that is operated by Rex located
within the Dedication Area and from which well Rex has the right to control,
market or deliver the Gas for processing.

Standard Base Conditions. A pressure of fourteen and seventy three hundredths
pounds per square inch absolute (14.73 psia) at a temperature of sixty degrees
Fahrenheit (60°F).

Taxes. All gross production, severance, conservation, ad valorem and similar or
other taxes measured by or based upon production, together with all taxes on the
right or privilege of ownership of the Gas, or upon the handling, transmission,
compression, processing, treating, conditioning, distribution, sale, delivery or
redelivery of the Gas, including all of the foregoing now existing or in the
future imposed or promulgated.

Thermal Content. For Gas, the product of the measured volume in Mcf’s multiplied
by the Gross Heating Value per Mcf, adjusted to the same pressure base and
expressed in MMBtus; and for a liquid, the product of the measured volume in
gallons multiplied by the gross heating value per gallon.

 

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ARTICLE 2: TERM

2.1 This Agreement shall remain in full force and effect for a “Primary Term”
commencing on the date of execution and continuing for a period of ten
(10) years following the In-Service Date, and shall continue thereafter year to
year, until terminated by either Party upon at least twelve (12) months prior
written notice to the other Party in advance of the expiration of the Primary
Term, or during any extension thereof.

ARTICLE 3: PRODUCER COMMITMENTS

3.1 Rex hereby commits and agrees to deliver or cause to be delivered at the
Receipt Points all of Rex’s Gas produced from wells in the Dedication Area;
provided, however, that Rex reserves the right to withhold from delivery any Gas
(i) that Rex is required to deliver to its lessor(s) under the terms of any
leases included within the Dedication Area; or (ii) that Rex reasonably requires
for oil and gas producing operations within the Dedication Area; provided,
however, if prior to January 1, 2011, the Plant is not in service and capable of
processing a minimum of 20 MMcf per day, then all of Rex’s Gas produced from
wells in the Dedication Area shall be released from its commitment to Keystone
hereunder, and Rex shall have no further obligation to deliver Gas to Keystone
pursuant to the terms of this Agreement. In the event of a material delay (i) in
the acquisition of the Plant Site or the Alternate Site (as such terms are
defined in that certain Contribution Agreement by and among Rex, Keystone, and
Stonehenge Energy Resources, L.P.), (ii) in obtaining any requisite permits from
governmental authorities for the construction or operation of the Processing
Plant, or (iii) due to an event of Force Majeure, the Parties will agree upon a
reasonable extension of the date set forth in the previous sentence.

3.2 The provisions of Section 3.1, above, shall be covenants running with the
land, and Rex shall ensure that any conveyance, assignment, sale or other
transfer of all or a portion of the Interests owned by Rex covered by this
Agreement shall be subject thereto. Rex shall require any purchaser, assignee or
other transferee of any portion of those Interests to ratify this Agreement and
to expressly assume and agree to the terms hereof, to the extent of the portion
of those Interests acquired from Rex by that party, in a manner consistent with
the provisions of Article 16.

3.3 Any separation equipment installed by or on behalf of Rex to separate liquid
hydrocarbons and free water from the Gas prior to delivery at the Receipt Points
shall be only conventional mechanical type gas-liquid field separators commonly
used in the industry. Except for the foregoing and the conditions set forth in
Section 3.1 hereof, Rex shall not process, or cause or permit another party to
process, the Gas for recovery of liquid or liquefiable hydrocarbons or other
products prior to delivery to Keystone.

ARTICLE 4: KEYSTONE’S COMMITMENTS

4.1 Commencing on the In-Service Date, Keystone shall receive all of Rex’s Gas
delivered at the Receipt Points, gather that Gas to the Processing Plant,
compress the Gas for processing, and process the Gas for recovery of Plant
Products (not including liquefied methane) and redeliver Rex’s Residue Gas at a
pressure sufficient to enter the Redelivery Point(s).

 

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4.2 Keystone shall own all the appurtenances, additions, extensions,
improvements, or expansions of or to the Facilities that are constructed by
Keystone, which additions shall become a part of the Facilities and shall be
subject to this Agreement.

4.3 Subject to the terms hereof, Keystone will install, own and operate
extensions of the Gathering System as necessary to connect wells producing Rex’s
Gas within the Dedication Area. At such time that Rex requests a well to be
connected, Rex will furnish Keystone with information regarding the location of
the well and all test results for the well. If Keystone determines that the
connection of that well will not be economic under the terms of this Agreement,
Keystone shall propose terms on which such connection would be economic. If the
parties are unable to agree on such terms, then Rex may, at its option, install,
own and operate the necessary facilities to connect the well to the Gathering
System and deliver the Gas from such well to Keystone hereunder, and Rex shall
not be charged and shall have no obligation to pay any gathering or other
transportation fees for Gas being transported through such facilities installed,
owned and operated by Rex.

4.4 Keystone shall ensure that Rex’s Gas with Priority Capacity Rights that is
delivered to the Processing Plant is given priority to the available capacity of
the Processing Plant in accordance with such Priority Capacity Rights.

4.5 It is understood and agreed that either Party hereto may, without liability
to the other Party, interrupt the operations of its facilities for the purpose
of making necessary alterations, maintenance or repairs thereto or to comply
with applicable regulatory requirements. Keystone will exercise due diligence to
schedule routine repair and maintenance so as to minimize disruption of service
hereunder, and except in situations reasonably perceived by Keystone to be
emergencies, shall use commercially reasonable efforts to provide at least
fourteen (14) days prior notice to Rex of such scheduled routine repair and
maintenance. It is further understood and agreed that Rex shall, at all times,
have the right to regulate the rate of production from any well as Rex
determines, in its sole discretion, necessary to optimize reservoir
characteristics, maximize long-term production, or otherwise improve the
economic performance of such well.

ARTICLE 5: RECEIPT POINT AND CONDITIONS

5.1 Rex shall deliver or shall cause to be delivered Gas to Keystone at the
Receipt Points.

5.2 Under normal operating conditions, Rex shall deliver or shall cause to be
delivered Gas hereunder to the Receipt Points at a pressure not greater than 600
psig and not less than 100 psig, or such lower pressure as exists in the
Gathering System at the Receipt Points. Notwithstanding anything to the contrary
herein, Rex shall have no obligation to compress Gas prior to delivery of such
Gas at the Receipt Points.

 

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ARTICLE 6: GAS PROCESSING

6.1 Following the execution of this Agreement, and subject to the other
provisions of this Agreement, Keystone shall design, engineer, procure,
construct, install and operate the Processing Plant.

6.2 Rex will have Priority Capacity Rights as to 20 MMcf per day of processing
capacity at the Processing Plant during the initial 12-month period following
the In-Service Date, and 40 MMcf per day of processing capacity at the
Processing Plant thereafter, or at such time that the Processing Plant has
capacity to process 40 MMcf per day, whichever is later.

6.3 Keystone will deliver to the Redelivery Point(s), all Residue Gas allocable
to Rex, and Keystone shall make all arrangements, on a timely basis, for the
further transportation, marketing and disposition of such Residue Gas.

ARTICLE 7: GAS QUALITY

7.1 As measured at each Receipt Point, Gas delivered by Rex shall be of a
quality that, after processing in the Processing Plant as it then currently
exists, meets the quality specifications of pipelines receiving Gas at the
Redelivery Point(s), as in effect from time to time, other than for water vapor
content and hydrocarbon dew point; provided that the water content of Gas
delivered by Rex to the Receipt Points shall not include free water. The
receiving pipeline’s existing specifications are set forth on Exhibit B,
attached hereto.

7.2 The Parties acknowledge that if the quality standards of the pipelines
receiving Gas at the Redelivery Point(s) change, the Parties will consider
whether such change is material to this Agreement and, if material, will
cooperate with each other to address such change in an manner that preserves the
business and economic objectives of this Agreement.

7.3 If Gas tendered by Rex should fail to meet any one or more of the above
specifications from time to time, then:

a. Keystone may take receipt of the non-conforming Gas, and that receipt shall
not be construed as a waiver or change of standards for future Gas volumes; or

b. Keystone may, at its sole discretion, cease receiving the non-conforming Gas
from Rex, and shall notify Rex that it will cease receiving the non-conforming
Gas. If Keystone refuses to accept such non-conforming Gas from Rex, the Parties
shall negotiate with respect to the services and facilities necessary to remedy
the non-conforming gas and the fees for Keystone to provide such services and
facilities. If the Parties are unable to agree on such facilities, services and
fees within 30 days and if Keystone refuses to accept non-conforming Gas from
Rex, then all (but only that) Gas that Keystone refuses to accept for processing
shall be released from this Agreement, and the Parties shall have no further
obligations to each other with respect to such non-conforming Gas.

 

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c. If the Gas as delivered contains contaminants not in conformance with the
specifications as described in Section 7.1, then Rex shall be responsible for,
and shall reimburse Keystone for, all actual expenses, damages and costs
resulting from Keystone’s receipt of such non-conforming Gas prior to the time
Keystone becomes aware of such non-conforming Gas. Keystone shall be responsible
for all actual expenses, damages and costs resulting from all non-conforming Gas
accepted by Keystone after Keystone becomes aware of such non-comforming Gas.

7.4 As long as Gas delivered by Rex at each Receipt Point meets the foregoing
specifications, or if it does not meet the foregoing specifications but Keystone
nevertheless continues to receive such Gas after becoming aware of the
non-conforming Gas, the Residue Gas redelivered by Keystone at the Redelivery
Point(s) shall meet the quality specifications of the pipelines receiving Gas at
the Redelivery Point(s).

ARTICLE 8: MEASUREMENT EQUIPMENT AND PROCEDURES

8.1. All Gas measurements required hereunder shall be made with equipment of
standard make to be furnished, installed, operated, and maintained by Keystone
in accordance with the recommendations contained in ANSI/API 2530 as then
published. Rex, or others having Rex’s consent, may, at its option and expense,
install and operate check measuring equipment Upstream of the measuring
equipment to check the measuring equipment, provided the installation of the
check measuring equipment in no way interferes with the operation of the
measuring equipment.

8.2 All Gas volume measurements shall be based on an assumed atmospheric
pressure of 14.4 psia, regardless of actual atmospheric pressure at which the
Gas is measured. The factors used in computing Gas volumes from orifice meter
measurements shall be the latest factors published by the AGA. These factors
shall include:

a. Basic orifice factor.

b. Pressure base factor based on a pressure base of 14.73 psia.

c. Temperature base factor based on a temperature base of 60°F.

d. Flowing temperature factor, based on the flowing temperature as measured by
an industry accepted recording device, if, at Keystone’s option, a recording
device has been installed, otherwise the temperature shall be assumed to be
60°F.

 

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e. Super compressibility factor, obtained from the latest AGA Manual for the
Determination of Super Compressibility Factors for Natural Gas (AGA 8).

f. Specific gravity factor, based on the specific gravity of the Gas as
determined under the provisions set forth below.

8.3 Keystone shall test the accuracy of its measuring equipment at least once
every calendar quarter. Additional test(s) shall be promptly performed upon
notification by either Party to the other. If any additional test requested by
Rex indicates that no inaccuracy of more than 2% exists, at a recording rate
corresponding to the average rate of flow for the period since the last
preceding test, then Rex shall reimburse Keystone for all its direct costs in
connection with that additional test within 15 days following receipt of a
detailed invoice and supporting documentation setting forth those costs.

8.4 If, upon test, any measuring equipment is found to be in error by an amount
not exceeding 2%, at a recording rate corresponding to the average rate of flow
for the period since the last preceding test, previous recordings of that
equipment shall be considered correct in computing deliveries hereunder. If the
measuring equipment shall be found to be in error by an amount exceeding 2%, at
a recording rate corresponding to the average rate of flow for the period since
the last preceding test, then any preceding recordings of that equipment since
the last preceding test shall be corrected to zero error for any period which is
known definitely or agreed upon. If the period is not known definitely or agreed
upon, the correction shall be for a period extending back one-half of the time
elapsed since the last test. In the event a correction is required for previous
deliveries, the volumes delivered shall be calculated by the first of the
following methods which is feasible: (i) by using the registration of any check
meter or meters if installed and accurately registering; or (ii) by correcting
the error if the percentage of error is ascertainable by calibration, test, or
mathematical calculations; or (iii) by estimating the quantity of delivery by
deliveries during periods of similar conditions when the meter was registering
accurately.

8.5 The composition and Gross Heating Value of any Gas stream required to be
measured shall be determined by Keystone at least once each calendar quarter, or
more often if deemed necessary by Keystone, by spot samples, or by using a
proportionate to flow sampler located at the point where the measurement
equipment is located, by chromatographic analysis, or by some other method
mutually acceptable to the Parties. Should Rex request more frequent
determinations, the cost of those determinations will be paid by Rex.

8.6 Each Party, at its sole risk and liability, shall have access at all
reasonable hours to all facilities which are related to Gas measurement and
sampling. Each Party, at its sole risk and liability, shall have the right to be
present for any installing, reading, cleaning, changing, repairing, testing,
calibrating and/or adjusting of either Party’s measuring equipment. The Parties
shall cooperate in obtaining and providing telemetry and similar equipment and
systems to provide measurement information to the Parties.

 

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ARTICLE 9: ALLOCATIONS

9.1 All allocations required for determining payments or fees due under this
Agreement shall be conducted in accordance with the following provisions, and
shall be based upon the measurements taken and quantities determined for the
applicable Accounting Period. The following definitions shall be applicable:

a. Processed Thermal Content means the Receipt Point Thermal Content
attributable to a particular Receipt Point LESS the Gathering System Fuel
Thermal Content, the Gathering System Flare Gas Thermal Content, and the
Condensate Thermal Content allocated to that particular Receipt Point.

b. Receipt Point Processed Volume means the volume of Gas at the Receipt Point
LESS the volume of Gathering System Fuel, the volume of Gathering System Flare
Gas, and Condensate, expressed in Gas volume, all allocated to that particular
Receipt Point.

c. Theoretical Total Mcf of a Plant Product or of Condensate, in any stream of
Gas, means the product of the measured volume in dry Mcf’s multiplied by the mol
percent of that Plant Product in the stream of Gas as determined from the
chromatographic analysis provided under this Agreement, or, as applicable, of
the Condensate. For the purposes of determining the mol percent of natural
gasoline or Condensate, only the pentane and heavier hydrocarbon components will
be considered.

d. Plant Products Thermal Content or Condensate Thermal Content attributable to
each Receipt Point, or Condensate Recovery Point, as applicable, shall be
determined by the summation of the products of the volumes of each Plant Product
sold, allocated to each Receipt Point, or the volume of Condensate sold
allocated to the Condensate Recovery Point, as applicable, expressed in gallons,
multiplied by the gross heating value per gallon of each Plant Product, or
Condensate, as applicable, using the Gross Heating Values per gallon published
in the Standard Table of Physical Constants of Paraffin Hydrocarbons in GPA
Publication 2145-95, “Fuel as Ideal Gas,” as the same might be revised.

e. Drip means liquids, including water and liquid hydrocarbons, whether or not
of commercial value, which are separated from Rex’s Gas in the Gathering System
as a result of standard Gathering System operations, including the compression
of gas and pigging of pipelines. Drip will be handled, recovered and disposed of
by Keystone, at its expense, and Keystone will be entitled to retain all drip
and the proceeds thereof without accounting to Rex for such.

 

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f. Theoretical Residue Gas Thermal Content means the Processed Thermal Content
attributable to a particular Receipt Point LESS the Processing Plant Fuel
Thermal Content, the Processing Plant Flare Gas Thermal Content, and the Plant
Products Thermal Content attributable to that Receipt Point.

g. Upstream means, with respect to any particular point, the direction from
which Gas is received at that point, and includes all Receipt Points and
portions of the Facilities located in the direction from which Gas flows to the
particular point.

h. Fuel Point or Flare Point means a point on the Gathering System where
Gathering System Fuel is consumed or Gathering System Flare Gas is released.

i. Condensate Recovery Point means a point on the Facilities where Condensate is
recovered and permanently removed from the Facilities.

j. Redelivery Point Gas Thermal Content means the Thermal Content of all Gas
available at the Redelivery Point.

k. Theoretical Residue Gas Thermal Content means the Receipt Point Gas Thermal
Content adjusted for water vapor, LESS Plant Product Thermal Content and LESS
the Gathering System Flare Gas Thermal Content, Gathering System Fuel Thermal
Content, Processing Plant Flare Gas Thermal Content and Processing Plant Fuel
Thermal Content allocated to that Receipt Point. Upon the prior written consent
of Rex, the components included in this calculation may be modified by Keystone
to maintain equitable allocations on its Facilities.

9.2. Gathering System Fuel Thermal Content and Gathering System Flare Gas
Thermal Content shall be allocated to each Receipt Point Upstream of the
applicable Fuel Point or Flare Point by multiplying the Gathering System Fuel
and/or Flare Gas Thermal Content at the applicable Fuel Point or Flare Point by
a fraction, the numerator of which is the Receipt Point Thermal Content
attributable to each Receipt Point Upstream of the applicable Fuel Point or
Flare Point, and the denominator of which is the Receipt Point Thermal Content
attributable to all Receipt Points Upstream of the applicable Fuel Point or
Flare Point.

9.3 Condensate, excluding Drip, shall be allocated to each Receipt Point
Upstream of the applicable Condensate Recovery Point by multiplying the total
volume, expressed in gallons, of Condensate saved and sold from that Condensate
Recovery Point by a fraction, the numerator of which shall be the Theoretical
Total Mcf of Condensate contained in the volume of Gas at each Receipt Point
Upstream of the Condensate Recovery Point, and the denominator of which shall be
the Theoretical Total Mcf of Condensate contained in the volume of all Gas at
each receipt point Upstream of that Condensate Recovery Point.

9.4 Processing Plant Fuel Thermal Content and the Processing Plant Flare Gas
Thermal Content shall be allocated to each Receipt Point by multiplying the sum
of the Processing Plant Fuel Thermal Content and the Processing Plant Flare Gas
Thermal Content by a fraction, the numerator of which is the Processed Thermal
Content attributable to each Receipt Point, and the denominator of which is the
Processed Thermal Content attributable to all Receipt Points.

 

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9.5 Each Plant Product shall be allocated to each Receipt Point by multiplying
the total volume, expressed in gallons, of each Plant Product saved and sold by
a fraction, the numerator of which shall be the Theoretical Total Mcf of that
Plant Product contained in the Processed Volume attributable to each Receipt
Point, and the denominator of which shall be the Theoretical Total Mcf of that
Plant Product contained in the Processed Volume attributable to all Receipt
Points.

9.6 Residue Gas Thermal Content shall be allocated to each Receipt Point each
Accounting Period by multiplying the sum of the total actual Residue Gas Thermal
Content at the Plant tailgate from all Gas delivered to the Facilities by a
fraction, the numerator of which is the Theoretical Residue Gas Thermal Content
attributable to that Receipt Point and the denominator of which is the
Theoretical Residue Gas Thermal Content attributable to all receipt points,
including Producer’s and others’.

9.7 It is anticipated that compression and compression cooling, not including
the propane condenser, in the Processing Plant shall be engine-driven, fueled by
Gas. Upon the mutual agreement of the Parties, which agreement will not be
unreasonably withheld or delayed, Keystone may replace some engines with
electrical motors. Costs for electric power consumed by the electrical motors,
together with all other electric power consumed by the Facilities, will be
allocated to all Gas delivered to the Facilities, and the portion allocated to
Rex shall be deducted from Rex’s compensation under this Agreement. The
allocation shall be made to each Receipt Point by multiplying the total electric
power cost for the Accounting Period by a fraction, the numerator of which is
the Receipt Point volume (in Mcf) attributable to such Receipt Point and the
denominator of which is the Receipt Point volume (in Mcf) attributable to all
Receipt Points delivering Gas to the Facilities during the Accounting Period.

ARTICLE 10: FEES AND CONSIDERATION

10.1 As full consideration for the Gas delivered hereunder, Keystone shall pay
and/or deliver to Rex the following, which payment and delivery shall entitle
Keystone to retain for its own account and benefit all portions of Rex’s Gas not
redelivered hereunder, including Plant Products, together with all components
thereof which are recovered in the Facilities. Except as provided in
Section 10.2 below, Keystone shall have the exclusive right to market all Plant
Products and Residue Gas allocable to Rex:

a. A sum equal to [REDACTED]* of the “Net Sales Price” per gallon, as defined
below, for each gallon of individual Plant Products allocated to Rex.

b. The “Net Sales Price” per gallon of each individual Plant Product allocated
to Rex’s Gas shall be the weighted average of the net price per gallon received
by Keystone for the total volume of each individual Plant Product sold at the
Facilities during the relevant Accounting Period. There shall be deducted from
the actual gross sales price of such Plant Products the cost of transportation
and tank car rentals, marketing fees and other actual out-of-pocket expenses

 

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incurred by Keystone from third parties who are not Affiliates of Keystone prior
to sale of Plant Products and Taxes (excluding income taxes) as incurred to
determine a net price (FOB the Processing Plant) for such sale. If any of the
Plant Products are stored offsite from the Processing Plant, then such Plant
Products will be deemed to have been produced on the day such Plant Products are
moved to offsite storage and will be deemed to have been sold from such offsite
storage on a first-in, first-out basis. The Net Sales Price shall be paid to Rex
at such time as such Plant Products are sold from offsite storage, based on the
Net Sales Price in effect at that time.

c. The Residue Gas Value.

d. As used herein “Residue Gas Value” means an amount of money equal to
[REDACTED]* of the Residue Gas Thermal Content allocated to Rex’s Gas,
multiplied by the WASP Price, as hereinafter defined.

e. As used herein “WASP Price”, for Residue Gas, means the net weighted average
sales price received by Keystone for the sale of Residue Gas from the Facilities
during the Accounting Period in which Rex’s Gas was produced, expressed in
dollars per MMBtu. The “WASP Price” shall be net of any costs and expenses
incurred by Keystone from third parties who are not Affiliates of Keystone in
the selling and marketing of the Residue Gas, including, but not limited to,
Taxes (excluding ad valorem and income taxes), compression, gathering and
transportation fees to determine the WASP Price (FOB the Processing Plant).

f. If in any Accounting Period, the volume of Gas delivered to Keystone by Rex
at the Receipt Points is less than an amount equal to the product of the then
applicable Priority Capacity Rights multiplied by the number of “Operational
Days” in the Accounting Period (“Monthly Demand Volume”), then, in addition to
any other amounts due hereunder, Rex will pay Keystone an amount equal to the
difference between the Monthly Demand Volume and the actual deliveries during
the Accounting Period, multiplied by [REDACTED]* per Mcf (“Demand Fee”). As used
herein, “Operational Days” means Days during which the Processing Plant was in
operation with available capacity at least equal to all the Priority Capacity
Rights of Rex.

g. In addition to all other compensation due Keystone hereunder, Rex shall pay
Keystone a Gathering Fee, initially equal to [REDACTED]* per Mcf of Rex’s Gas as
measured at the Receipt Points.

 

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10.2 Rex shall have the right to take all or a portion of Residue Gas and/or
Plant Products, attributable to Rex’s Gas, in kind, subject to the following
requirements:

a. Rex must provide Keystone with at least six (6) months prior written notice
of its election to take Residue Gas and/or Plant Products in kind, provided that
if Keystone has, before it receives Rex’s notice, entered into any contractual
arrangements for the sale of any of the Residue Gas or Plant Products for a term
that ends after the end of the six (6) month notice period (“Prior Sales
Arrangement”), then Rex’s right to take such Residue Gas and Plant Products in
kind shall not begin until the end of such Prior Sales Arrangement with respect
to the applicable Residue Gas and/or Plant Products, but in no event longer than
12 months following Rex’s notice to take in kind. Such notice shall identify the
types and volumes of Plant Products to be taken in kind, and shall identify the
effective date of such election, provided that the effective date shall be the
first day of a calendar month. Once the election is made and becomes effective,
such election shall remain in effect, and Rex shall be required to continue to
take such portion of the Residue Gas and/or Plant Products in kind, continuously
for at least 12 months.

b. Upon the election of Rex to take Plant Products in kind, Rex will make
arrangements for the sale, transportation or other disposition of the Plant
Products in a manner that does not require Keystone to provide storage for those
Plant Products beyond two days after the day on which the Plant Products were
produced. For Plant Products produced on any day (“Non-Take Day”) that Rex fails
to make arrangements for the sale, transportation or other disposition of such
Plant Products within two days after such Plant Products are produced, Keystone
shall have the option (exercisable by giving notice and remitting payment to
Rex) to purchase such Plant Products from Rex; provided that if such option is
not exercised within 5 business days after the Non-Take Day Rex may thereafter
take delivery of any of such Plant Products as to which such option has not been
exercised. The purchase price for those Plant Products shall be the lowest Net
Sales Price received for each respective Plant Product by Keystone on the
Non-Take Day; provided, if no sales were made by Keystone on the Non-Take Day,
then the purchase price will be the lowest Net Sales Price received for each
respective Plant Product by Keystone on the day prior to and the day after the
Non-Take Day.

 

10.3 [REDACTED]*.

ARTICLE 11: PAYMENTS

11.1 Keystone shall provide Rex with a statement explaining fully how all
consideration due (including deductions) under the terms of this Agreement was
determined not later than the last day of the Accounting Period following the
Accounting Period for which the consideration is due.

11.2 Keystone shall deduct fees owed by Rex under this Agreement from amounts
otherwise due Rex for Plant Products and Residue Gas, and the net amount
remaining will be paid no later than the last day of the Accounting Period
following the Accounting Period during which the Gas was delivered hereunder.
During any Accounting Period, if no amounts are otherwise due Rex hereunder,
then Rex shall pay Keystone within thirty (30) days of receipt of the statement
setting forth such amount.

 

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11.3 Either Party, on 30 days prior written notice, shall have the right at its
expense, at reasonable times during business hours, to audit the books and
records of the other Party to the extent necessary to verify the accuracy of any
statement, allocation, measurement, computation, charge, or payment made under
or pursuant to this Agreement. The scope of any audit shall be limited to the 24
month period immediately prior to the month in which notice is given (“Audit
Period”). However, no audit may include any time period for which a prior audit
hereunder was conducted, and no audit may occur more frequently than once each
12 months. All statements, allocations, measurements, computations, charges, or
payments made in any period prior to the Audit Period shall be conclusively
deemed true and correct and shall be final for all purposes. To the extent that
the foregoing varies from any applicable statute of limitations, the Parties
expressly waive all such other applicable statutes of limitations. The Parties
acknowledge and agree that, in connection with any audit hereunder, Keystone
shall not be required to disclose to Rex the names of other Keystone customers
but shall disclose to Rex the settlement terms for those customers to enable Rex
to determine whether Keystone has complied with its agreement under
Section 10.3.

ARTICLE 12: FORCE MAJEURE

12.1 In the event a Party is rendered unable, wholly or in part, by Force
Majeure (as hereinafter defined), to carry out its obligations under this
Agreement, other than the obligation to make any payments due hereunder, the
obligations of that Party, so far as they are affected by Force Majeure, shall
be suspended from the inception and during the continuance of the inability, and
the cause of the Force Majeure, as far as possible, shall be remedied with
reasonable diligence. The Party affected by Force Majeure shall provide the
other Party with written notice of the Force Majeure event, with reasonably full
detail of the Force Majeure within a reasonable time after the affected Party
learns of the occurrence of the Force Majeure event. The settlement of strikes,
lockouts, and other labor difficulty shall be entirely within the discretion of
the Party having the difficulty, and nothing herein shall require the settlement
of strikes, lockouts, or other labor difficulty. As used herein, “Force Majeure”
shall mean any cause or condition not within the control of the Party claiming
suspension and which, by the exercise of commercially reasonable diligence, such
Party is unable to prevent or overcome, and, without limiting the generality of
the foregoing, specifically includes major equipment failures, inabilities or
delays in obtaining requisite permits, consents and authorizations, and delays
occasioned by governmental actions. Notwithstanding anything to the contrary
herein, in the event any Party claims suspension of its obligations under this
Agreement due to an event of Force Majeure for more than 180 days during any
365-day period, then the Party not claiming such event of Force Majeure shall be
entitled to terminate this Agreement upon 10 days written notice to the Party
claiming such event of Force Majeure.

 

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ARTICLE 13: LIABILITY AND INDEMNIFICATION

13.1 As among the Parties hereto, Rex and any of its designees shall be in
custody, control and possession of the Gas hereunder, including any portion
thereof which accumulates as liquids, until that Gas is delivered to the Receipt
Points, and after any portion of the Gas is redelivered to or for the account of
Rex at a Redelivery Point. Rex shall only be in custody, control and possession
of Plant Products upon delivery from Keystone to or for the account of Rex
pursuant to Section 10.2.

13.2 As among the Parties hereto, Keystone and any of its designees shall be in
custody, control and possession of the Gas hereunder, including any portion
thereof which accumulates as liquids, when that Gas is delivered at the Receipt
Points and until the Gas is redelivered to or for the account of Rex at a
Redelivery Point. Keystone shall also be in custody, control and possession of
Plant Products until they are redelivered to or for the account of Rex as
provided herein.

13.3 Each Party (“Indemnifying Party”) hereby covenants and agrees with the
other Party, and its Affiliates, and each of their directors, officers and
employees (“Indemnified Parties”), that except to the extent caused by the
Indemnified Parties’ gross negligence or willful conduct, the Indemnifying Party
shall protect, defend, indemnify and hold harmless the Indemnified Parties from,
against and in respect of any and all Losses incurred by the Indemnified Parties
to the extent those Losses (i) arise from claims brought by any of the
Indemnifying Party’s employees, its contractors or subcontractors, or their
employees for Losses due to bodily injury, death, or damage to property or
(ii) are not covered by clause (i) and arise from or are related to: (a) the
Indemnifying Party’s facilities and the ownership or operation thereof; or
(b) the Indemnifying Party’s possession and control of the Gas and Plant
Products.

ARTICLE 14: TITLE

14.1 Rex represents and warrants that it owns, or has the right to commit, all
Gas committed under this Agreement and to deliver that Gas to the Receipt Points
for the purposes of this Agreement, free and clear of all liens, encumbrances
and adverse claims. If the title to Gas delivered by Rex hereunder is disputed
or is involved in any legal action, Keystone shall have the right to withhold
payment (without interest), or cease receiving the Gas, to the extent of the
interest disputed or involved in legal action, during the pendency of the action
or until title is freed from the dispute, or until Rex furnishes, or causes to
be furnished, indemnification to save Keystone harmless from all claims arising
out of the dispute or action, with surety reasonably acceptable to Keystone. Rex
hereby indemnifies Keystone against and holds Keystone harmless from any and all
Losses arising out of or related to any breach of the foregoing representation
and warranty.

14.2 Title to all Gas shall remain in Rex until such time as the Gas is sold.
Title to the Plant Products, other than the Plant Products taken in kind by Rex
pursuant to this Agreement, shall remain in Rex until such time as the Plant
Products are sold. Title to the Plant Products taken in kind by Rex shall remain
in Rex until such Plant Products are sold or are purchased by Keystone under the
provisions of Section 10.1(b).

 

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ARTICLE 15: ROYALTY AND TAXES

15.1 Rex shall have the sole and exclusive obligation and liability for the
payment of all persons due any proceeds derived from the Gas delivered under
this Agreement, including royalties, overriding royalties, and similar
interests, in accordance with the provisions of the leases or agreements
creating those rights to proceeds. In no event will Keystone have any obligation
to those persons due any of those proceeds of production attributable to the Gas
under this Agreement.

15.2 Rex shall pay and be responsible for all Taxes levied against or with
respect to Rex’s Gas delivered or services provided to Rex under this Agreement,
except for any Keystone local, state or federal income taxes associated with
payments by Rex in cash or in kind to Keystone for such services and except for
any ad valorem taxes assessed with respect to the Facilities and all Taxes
levied against or with respect to the 8% share of Gas and Plant Products
allocated to Rex that Keystone retains for its own account and benefit as
provided in Section 10.1. to the extent that such Gas and Plant Products or the
proceeds thereof are subject to such Taxes. Keystone shall under no
circumstances become liable for those Taxes for which Rex is responsible, unless
designated to remit those Taxes on behalf of Rex by any duly constituted
jurisdictional agency having authority to impose such obligations on Keystone,
in which event the amount of those Taxes remitted on Rex’s behalf shall (a) be
reimbursed by Rex upon receipt of invoice, with corresponding documentation from
Keystone setting forth such payments, or (b) deducted from amounts otherwise due
Rex under this Agreement.

15.3 Rex hereby agrees to defend and indemnify and hold Keystone harmless from
and against any and all Losses arising from the payments made by Rex in
accordance with Sections 15.1 and 15.2, above, including, without limitation,
Losses arising from claims for the nonpayment, mispayment, or wrongful
calculation of those payments.

 

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ARTICLE 16: ASSIGNMENTS

16.1 This Agreement shall extend to and be binding upon the parties hereto,
their successors, and assigns. Subject to the provisions below, this Agreement
and the rights, duties or obligations of the parties hereunder may be assigned
or conveyed in whole; provided, however, that except as set forth in the
following sentence, neither Party shall assign or transfer this Agreement and
any rights, duties or obligations hereunder, without the prior written consent
of the other Party, which consent shall not be unreasonably withheld. Either
Party may make such an assignment or transfer to an Affiliate without seeking
the prior written consent of the other Party. A reasonable basis for withholding
consent may include (i) the financial condition of the assignee raising
reasonable concern relating to its ability to perform under this Agreement, or
(ii) concerns regarding the administration of this Agreement among multiple
assignees of Rex unless the assignees appoint an agent to represent them in
connection with this Agreement in a manner reasonably satisfactory to the other
Party. All assignments and conveyances of either the wells and leaseholds that
are covered by this Agreement or the Facilities shall be subject to this
Agreement, including the foregoing provisions of this Article 16. No assignment
shall relieve the assignor of any of its duties or liabilities hereunder which
arose prior to such assignment, but the assignee shall assume all duties and
obligations of the assignor arising from and after such assignment and the
assignor shall be relieved of such duties and obligations arising from and after
such assignment. No transfer of, or succession to, the interest of any Party
hereto, either in whole or partially, shall affect or bind the other Party until
the first day of the month following the month in which the other Party shall
have received written notification thereof.

ARTICLE 17: MISCELLANEOUS

17.1 The failure of any Party hereto to exercise any right granted hereunder
shall not impair nor be deemed a waiver of that Party’s privilege of exercising
that right at any subsequent time or times.

17.2 This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State of Pennsylvania without regard to choice of law
principles. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

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17.3 Dispute Resolution.

a. Dispute. Any controversy, claim, deadlock or dispute between the Parties
arising out of, relating to or in connection with this Agreement (a “Dispute”),
and that is not otherwise settled by agreement between the Parties, shall be
exclusively and finally resolved pursuant to the provisions and procedures set
forth in this Section 17.3. Without limiting the generality of the first
sentence of this Section, the following shall be considered Disputes for this
purpose: (a) all questions relating to the interpretation or breach of this
Agreement, (b) all questions relating to any representations, negotiations and
other proceedings leading to the execution of this Agreement and (c) all
questions regarding the application of this Section 17.3 and the arbitration
provisions contained herein. Notwithstanding the foregoing provisions of this
Section 17.3, any legal action for a preliminary injunction or other prejudgment
relief will be resolved by the arbitrator appointed in accordance with
Section 17.3; provided, that, at any time before the arbitrator has been
appointed, any Party may seek a preliminary injunctive or other prejudgment
relief from a Pennsylvania court of competent jurisdiction to the extent
necessary to preserve the status quo or to preserve such Party’s ability to
obtain meaningful relief pending the outcome of the arbitration proceeding under
this Section 17.3. Any Party may bring an action in a Pennsylvania court of
competent jurisdiction to compel arbitration of any Dispute after the procedure
under Section 17.3(b) is exhausted; provided, that to the fullest extent
permitted by law, each Party hereby waives and relinquishes any right to compel
the resolution of any substantive issues regarding a Dispute in any court of
competent jurisdiction, or to request any other relief from a court of competent
jurisdiction except as specifically set forth in this Section 17.3.

b. Executive Mediation. In the event of any Dispute, upon written request of any
Party, such Dispute shall immediately be referred to one representative of the
executive management designated by each Party in respect of such Dispute who is
authorized to settle such Dispute. Such representatives shall promptly meet in a
good faith effort to resolve such Dispute. If the representatives designated by
the relevant Dispute Parties pursuant to this Section 17.3(b) do not resolve
such Dispute within ten (10) days after such written request, such Dispute shall
be exclusively and finally resolved by binding arbitration in accordance with
the provisions and procedures set forth in Section 17.3(c).

c. Arbitration. The arbitration shall be administered by the American
Arbitration Association, or a successor organization (the “AAA”), under its
Commercial Arbitration Rules. The arbitration shall be conducted by a single
arbitrator chosen under the AAA’s Commercial Arbitration Rule and such
arbitrator shall have at least ten (10) years experience practicing in the oil
and gas industry.

(i) The site of arbitration shall be Pittsburgh, Pennsylvania, unless otherwise
agreed by the Parties.

 

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(ii) The Parties shall diligently and expeditiously proceed with arbitration.
The arbitrator shall be instructed to render a written decision within
forty-five (45) days after the conclusion of the hearing or the filing of such
briefs as may be authorized by the arbitrator, subject to any reasonable delay
due to unforeseen circumstances. Except to the extent the Parties’ remedies may
be limited by the terms of this Agreement, the arbitrator shall be empowered to
award any remedy available under the laws of the State of Pennsylvania including
monetary damages and specific performance. The arbitrator shall not have the
power to amend or add to this Agreement. The award of the arbitrator shall be in
writing with reasons for such award and signed by the arbitrator. Any award
rendered shall be final and binding. Judgment rendered by the arbitrator may be
entered in any court having jurisdiction thereof

(iii) The Parties hereto hereby waive any rights to appeal or to review of such
award by any court or tribunal. The Parties further undertake to carry out
without delay the provisions of any arbitral award or decision, and each agrees
that any such award or decision may be enforced by any competent tribunal.

(iv) The costs of such arbitration shall be determined by and allocated between
the Parties by the arbitrator in its award. This Section 17.3(c) constitutes an
independent contract to arbitrate all disputes between the Parties, including
disputes regarding contract formation and whether a Party is entitled to
quasi-contractual or quantum meruit recovery from another Party. Unless
otherwise agreed in writing, the Parties shall continue to perform their
respective obligations hereunder during any arbitration proceeding by the
Parties in accordance with this Section 17.3(c).

17.4 The Parties agree that (a) Keystone shall keep confidential all information
provided by Rex to Keystone pertaining to Rex’s exploration and development
plans, production forecasts, acreage positions and other non-public information
of Rex, and (b) the Parties shall keep the terms of this Agreement confidential
and not disclose the same to any other persons, firms or entities without prior
written consent (of Rex in the case of (a) or the other Party in the case of
(b)); provided, the foregoing shall not apply to disclosures compelled by law or
court order; or to disclosures to a Party’s Affiliates or such Party’s or its
Affiliates’ employees, directors, officers, partners, prospective partners or
financing sources, financial advisors, consultants, attorneys, banks, or
institutional investors provided those persons, firms or entities likewise agree
to keep this Agreement confidential.

17.5 Any change, modification or alteration of this Agreement shall be in
writing, signed by the Parties; and, no course of dealing between the Parties
shall be construed to alter the terms of this Agreement.

 

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17.6 All exhibits and appendices to this Agreement are hereby incorporated into
and made part of this Agreement for all purposes. This Agreement, including all
exhibits and appendices, contains the entire agreement between the Parties with
respect to the subject matter hereof, and there are no oral or other promises,
agreements, warranties, obligations, assurances, or conditions precedent,
affecting it.

17.7 The terms and provisions of this Agreement are for the sole benefit of
Keystone and Rex, and no third party is intended to benefit herefrom other than
the Indemnified Parties.

17.8 NO BREACH OF THIS AGREEMENT OR CLAIM FOR LOSSES UNDER ANY INDEMNITY
OBLIGATION CONTAINED IN THIS AGREEMENT SHALL CAUSE ANY PARTY TO BE LIABLE FOR,
NOR SHALL LOSSES INCLUDE, ANY DAMAGES OTHER THAN ACTUAL AND DIRECT DAMAGES, AND
EACH PARTY EXPRESSLY WAIVES ANY RIGHT TO CLAIM ANY OTHER DAMAGES, INCLUDING,
WITHOUT LIMITATION, CONSEQUENTIAL, SPECIAL, INDIRECT, PUNITIVE OR EXEMPLARY
DAMAGES.

17.9 This Agreement shall be subject to all applicable federal, state, and local
laws, rules, regulations, and orders affecting either Rex or Keystone and that
pertain to the Facilities or the operation thereof. In the event any one or more
of the provisions of this Agreement shall be found to be violative of any
applicable order, rule, or regulation of any regulatory body having
jurisdiction, or of any valid law of the United States or any state or other
governmental entity having jurisdiction, such provision or provisions shall be
deemed to be modified to the extent necessary to comply with such order, rule,
regulation, or law; provided, however, that in the event that a material term
under this Agreement is so modified, the Parties will, timely and in good faith,
revise and amend this Agreement in a manner which preserves, as closely as
possible, each Party’s business and economic objectives as expressed by the
Agreement prior to such modification.

17.10 Unless otherwise provided herein, any notice, request or demand which
either Party desires to serve upon the other regarding this Agreement shall be
made in writing and shall be considered as delivered when hand delivered, or
when delivery is confirmed by pre-paid delivery service (such as FedEx, UPS, DHL
or a similar delivery service), or when sent via email, or, if mailed by United
States certified mail, postage prepaid, three (3) days after mailing, or, if
sent by facsimile transmission, when receipt is confirmed by the equipment of
the transmitting Party; provided, if sent by email after normal business hours
or if receipt of a facsimile transmission is confirmed after normal business
hours, receipt shall be deemed to be the next Business Day. Such notice shall be
given to the other Party at the following address, or to such other address as
either Party shall designate by written notice to the other:

If to Rex:

R.E. GAS DEVELOPMENT, LLC

476 Rolling Ridge Drive, Suite 300

State College, PA 16801

Attention: Timothy Beattie

Phone: (814) 278-7267

Fax: (814) 278-7286

 

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If to Keystone:

KEYSTONE MIDSTREAM SERVICES, LLC

10355 Westmoor Drive, Suite 250

Westminster, CO 80021-2579

Attention: Michael Brinkmeyer

Phone: (303) 991-1480

Fax: (303) 451-7394

17.11 This Agreement may be executed in any number of counterparts, each of
which shall be considered an original, and all of which shall be considered one
instrument. This Agreement shall not become effective unless and until executed
by all Parties.

ARTICLE 18: REX GUARANTY

18.1 Payment Guaranty. Guarantor unconditionally, absolutely, continually and
irrevocably guarantees, as principal and not as surety, to Keystone the punctual
and complete payment in full when due of all amounts due from Rex under the
Agreement (collectively, the “Rex Payment Obligations”). Guarantor agrees that
Keystone shall be entitled to enforce directly against the Guarantor any of the
Rex Payment Obligations.

18.2 Guaranty Absolute. Guarantor hereby guarantees that the Rex Payment
Obligations will be paid strictly in accordance with the terms of the Agreement.
The obligations of the Guarantor under this Agreement constitute a present and
continuing guaranty of payment, and not of collection or collectability. The
liability of the Guarantor under this Agreement shall be absolute,
unconditional, present, continuing and irrevocable irrespective of:

a. any assignment or other transfer of the Agreement or any of the rights
thereunder of Keystone;

b. any amendment, waiver, renewal, extension or release of or any consent to or
departure from or other action or inaction related to the Agreement;

c. any acceptance by Keystone of partial payment or performance from Rex;

d. any bankruptcy, insolvency, reorganization, arrangement, composition,
adjustment, dissolution, liquidation or other like proceeding relating to
Keystone or any action taken with respect to the Agreement by any trustee or
receiver, or by any court, in any such proceeding;

 

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e. any absence of any notice to, or knowledge of, the Guarantor, of the
existence or occurrence of any of the matters or events set forth in the
foregoing subsections (a) through (d); or

f. any other circumstance which might otherwise constitute a defense available
to, or a discharge of, a guarantor.

18.3 Waiver. The Guarantor hereby waives promptness, diligence, presentments,
protests and notice of acceptance and any other notice relating to any of the
Rex Payment Obligations and any requirement for Keystone to protect, secure,
perfect or insure any security interest or lien or any property subject thereto
or exhaust any right or take any action against Rex, any other entity or any
collateral.

18.4 Continuing Guaranty. This Article 18 is a continuing guaranty and shall
(i) remain in full force and effect until the first to occur of the indefeasible
payment in full of all of the Rex Payment Obligations, (ii) be binding upon the
Guarantor and each of its respective successors and assigns and (iii) inure to
the benefit of and be enforceable by Keystone and its respective successors,
transferees and assigns.

 

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

 

R.E. GAS DEVELOPMENT, LLC     KEYSTONE MIDSTREAM SERVICES, LLC By:   /s/
Benjamin W. Hulburt     By:   /s/ Charles Wilkinson Name:   Benjamin W. Hulburt
    Name:   Charles Wilkinson Title:   President and Chief Executive Officer    
Title:   President of Stonehenge Energy Resources, L.P., Stonehenge is Manager
of Keystone Midstream Services, LLC

ACKNOWLEDGED AND AGREED

EXCLUSIVELY FOR THE PURPOSES OF

ARTICLE 18 HEREOF:

    REX ENERGY CORPORATION     By:   /s/ Benjamin W. Hulburt       Name:  
Benjamin W. Hulburt       Title:   President and Chief Executive Officer      

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LIST OF EXHIBITS

 

EXHIBIT A    DEDICATION AREA EXHIBIT B    DOMINION TRANSMISSION SPECIFICATIONS

--------------------------------------------------------------------------------

EXHIBIT A

DEDICATION AREA

[REDACTED]*

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EXHIBIT B

DOMINION TRANSMISSION SPECIFICATIONS

Quality Specifications of the downstream pipeline receiving Residue Gas from
Keystone:

A. Hydrogen Sulfide and Total Sulfur: The gas shall contain not more than one
quarter (1/4) grain of hydrogen sulfide per one hundred cubic feet and not more
than twenty grains total sulfur or sulfur compounds per one hundred cubic feet.

B. Carbon Dioxide and Nitrogen: The gas shall contain not more than three
percent by volume of carbon dioxide, not more than four percent by volume of
nitrogen, and shall contain not more than five percent by volume of combined
non-hydrocarbon gases including, but not limited to, carbon dioxide, nitrogen
and oxygen.

C. Oxygen: The gas shall not contain in excess of two-tenths of one percent by
volume of oxygen, and the parties agree to exercise every reasonable effort to
keep the gas completely free of oxygen.

D. Dust, Gums, etc.: The gas shall be free of objectionable odors, dust, gum,
dirt, impurities and other solid or liquid or hazardous matter which might
interfere with its merchantability or cause injury to or interfere with proper
operation of the Facilities, lines, regulators, meters or other appliances
through which it flows.

E. Bacteria: The gas and any associated liquids shall not contain any active
bacteria or bacterial agent capable of contributing to or causing operational
problems. Bacteria or bacterial agents include, but are not limited to, sulfate
reducing bacteria (SRB) and acid producing bacteria (APB). If evidence of
bacteria is discovered, Rex shall, upon Keystone’s request, test for bacteria or
bacterial agents. Such tests shall be conducted on samples taken from the meter
run or other appurtenant piping using American Petroleum Institute (API) test
method API-RP38 or any other test method acceptance to Keystone which is
currently available or may become available at any time during the term.