Exhibit 10.2

Execution Version

GAS GATHERING AGREEMENT

AZURE ETG, LLC

AS GATHERER

AND

TGG PIPELINE, LTD

AS SHIPPER

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GAS GATHERING CONTRACT

BETWEEN AZURE ETG, LLC AS GATHERER

AND TGG PIPELINE, LTD AS SELLER

INDEX

 

ARTICLE

       PAGE  

I

  GENERAL TERMS AND CONDITIONS      1   

II

  QUANTITY      1   

III

  FEES; FUEL AND ELECTRICITY      1   

IV

  POINTS OF RECEIPT AND DELIVERY      2   

V

  TERM      2   

VI

  NOTICES      2   

VII

  SIGNATURE PAGE      4   

SECTION

       PAGE  

EXHIBIT A GENERAL TERMS AND CONDITIONS

     A-1   

I

  DEFINITIONS      A-1   

II

  QUANTITIES AND SERVICES PROVIDED      A-3   

III

  MEASUREMENT EQUIPMENT AND TESTING      A-6   

IV

  MEASUREMENT SPECIFICATIONS      A-8   

V

  QUALITY      A-10   

VI

  NOMINATIONS      A-11   

VII

  DELIVERY PRESSURE      A-12   

VIII

  TAXES AND FEE REIMBURSEMENT      A-12   

IX

  BILLING AND PAYMENTS      A-12   

X

  FINANCIAL RESPONSIBILITY; DEFAULT      A-13   

XI

  RESPONSIBILITY; INDEMNITIES      A-14   

XII

  WARRANTY; TRANSFER OF TITLE      A-15   

XIII

  FORCE MAJEURE      A-15   

XIV

  LIMITATION OF LIABILITY      A-16   

XV

  ASSIGNMENT      A-16   

XVI

  LAWS AND REGULATIONS      A-16   

XVII

  CONFIDENTIALITY      A-18   

XVIII

  MISCELLANEIOUS      A-18   

EXHIBIT B

     B-1   

EXHIBIT C

     C-1   

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GAS GATHERING AGREEMENT

THIS GAS GATHERING AGREEMENT (“Agreement”) is made and entered into this 6th day
of August, 2015, by and between AZURE ETG, LLC hereinafter referred to as
“Gatherer,” and TGG PIPELINE, LTD hereinafter referred to as “Shipper.” Gatherer
and Shipper are sometimes referred to singularly as a “Party” and collectively
as the “Parties.”

WITNESSETH:

WHEREAS, Shipper desires to contract with Gatherer to receive, gather and
redeliver Gas which Shipper owns or controls; and

WHEREAS, Gatherer owns and operates a natural gas gathering system in the area
in which Shipper’s lands, leases and/or wells are located and desires to gather
the natural gas which Shipper has available to gather;

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

ARTICLE I – GENERAL TERMS AND CONDITIONS

 

1.1 The GENERAL TERMS AND CONDITIONS attached hereto as Exhibit A are
incorporated herein as if set forth in full. In the event of any conflict
between the terms and conditions contained in this Agreement and the terms and
conditions contained in Exhibit A, then this Agreement shall prevail.
Capitalized terms used shall have the meanings ascribed to such terms in
Exhibit A.

ARTICLE II – QUANTITY

 

2.1 Subject to the terms of this Agreement, Shipper shall deliver to Gatherer at
the Point(s) of Receipt and Gatherer shall receive all such Gas and redeliver,
or cause to be redelivered, Equivalent Quantities at the Point(s) of Delivery.
Gatherer will provide gathering services to Shipper for quantities of Gas on a
Priority Basis. Shipper has no obligation to deliver any minimum quantities of
Gas hereunder, subject to the other provisions of this Agreement (including the
obligation to make deficiency payments with respect to Commitment Volumes);
provided, however, Shipper shall be obligated to deliver quantities of Gas
nominated and confirmed in accordance with the provisions of this Agreement.

ARTICLE III – FEES; FUEL AND ELECTRICITY

 

3.1 Gathering Fees. Shipper shall pay to Gatherer monthly each of the fees and
other amounts, as applicable, set forth on Exhibit C attached hereto for the
gathering and other services provided under this Agreement.

 

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3.2 System Fuel, Lost and Unaccounted for Gas. Gatherer may retain from the
volumes of Gas delivered hereunder, at no cost to Gatherer, a volume of Gas (in
Mcf) equal to a ratable allocation of all fuel and lost and unaccounted for Gas
(“FL&U”) associated with the operation, maintenance and repair of the Gathering
System, including, without limitation, compression, dehydration, treating and
liquids handling. To the extent that Gatherer uses electric compression, the
costs of operating such compression shall be allocated ratably amongst all
shippers utilizing such compression. As used herein, any amounts that are
“allocated ratably” shall be allocated to Shipper based on deliveries hereunder
at the Points of Receipt as a percentage of total deliveries at all Points of
Receipt on the Gathering System over the applicable billing period, unless a
different allocation is determined by Gathering to be more equitable.

 

3.3 Invoicing. All fees, costs and other amounts referenced in this Agreement
shall be invoiced by Gatherer and be due and payable by Shipper in accordance
with Section IX of Exhibit A attached hereto.

ARTICLE IV – POINTS OF RECEIPT AND DELIVERY

 

4.1 Each “Point of Receipt” (or “Receipt Point”) for Gas delivered by Shipper to
Gatherer shall be at the inlet flange of the measurement facilities installed by
Gatherer to receive Gas at each Receipt Point set forth on Exhibit B attached
hereto and at each additional Receipt Point added to Exhibit B by written
agreement of Shipper and Gatherer. Pipeline connections and related facilities
to connect each Receipt Point will be at Shipper’s sole cost.

 

4.2 Each “Point of Delivery” (or “Delivery Point”) for Gas delivered by Gatherer
to or for the account of Shipper shall be at the inlet flange of the measurement
facilities of each Delivery Point that is set forth on Exhibit B and at each
Delivery Point added to Exhibit B by written agreement of Shipper and Gatherer.
Notwithstanding the foregoing, Gatherer may, at its sole discretion, add a
Delivery Point to Exhibit B at any time. Shipper shall be obligated to make all
arrangements with the pipelines interconnecting with the Gathering System at the
Delivery Point(s) to receive Gas delivered by Gatherer to or for the account of
Shipper at such Delivery Point(s).

ARTICLE V – TERM

 

5.1 This Agreement shall be effective as of the date set forth at the outset of
this Agreement, and, unless terminated earlier in accordance with any express
provision of this Agreement, shall remain in full force and effect until
July 31, 2020 and, unless terminated by either Party upon written notice to the
other at least ninety (90) Days prior to the end of the primary term or any
anniversary thereafter, continuing from year to year thereafter.

ARTICLE VI – NOTICES

 

6.1 Any notice, request, demand, statement, invoice or bill provided for in this
Agreement, or any notice which a Party may desire to give to the other, shall be
in writing and shall be deemed as duly made when delivered personally, or three
(3) Business Days following deposit in the United States mail, certified mail,
return receipt requested, or one (1) Business Day following delivery to a
recognized overnight courier service, or upon transmittal by facsimile (with
answerback confirmation), in each such case postage or charges prepaid and
addressed to the addresses set forth below.

 

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GATHERER:

 

Notices & Correspondence:

Azure ETG, LLC

Attn: Contract Administration

12377 Merit Drive Suite 300

Dallas, Texas 75251

Phone: 214-736-1499

Fax: 972-387-3885

  

Accounting Matters:

Azure ETG, LLC

Attn: Gas Accounting

12377 Merit Drive Suite 300

Dallas, Texas 75251

Phone: 214-736-1499

Fax: 972-387-3885

SHIPPER:

 

Notices & Correspondence:

TGG Pipeline Ltd

Attn: Contract Administration

12377 Merit Drive Suite 300

Dallas, Texas 75251

Phone: 214-736-1499

Fax: 972-387-3885

  

Accounting Matters:

TGG Pipeline Ltd

Attn: Gas Accounting

12377 Merit Drive Suite 300

Dallas, Texas 75251

Phone: 214-736-1499

Fax: 972-387-3885

Either Party may change one or more of its addresses or accounts by giving
written notice to the other Party in any manner provided above.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized officers on the date first hereinabove written.

 

Azure ETG, LLC By:  

/s/ I. J. “Chip” Berthelot, II

  Name: I. J. “Chip” Berthelot, II   Title: President TGG Pipeline, Ltd By:  

/s/ I. J. “Chip” Berthelot, II

  Name: I. J. “Chip” Berthelot, II   Title: President

 

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EXHIBIT A

GENERAL TERMS AND CONDITIONS

Section I - Definitions

Unless another definition is expressly stated or the context requires otherwise,
the following terms, when used in the Agreement to which this Exhibit A is
attached and all exhibits and attachments thereto, are intended to and shall
have the following meanings:

 

(a) “Affiliate” means any Person that directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
another Person. The term “control” (including its derivatives and similar terms)
means possessing the power to direct or cause the direction of the management
and policies of a Person, whether through ownership, by contract, or otherwise.
Any Person shall be deemed to be an Affiliate of any specified Person if such
Person owns fifty percent (50%) or more of the voting securities of the
specified Person, if the specified Person owns fifty percent (50%) or more of
the voting securities of such Person, or if fifty percent (50%) or more of the
voting securities of the specified Person and such Person are under common
control.

 

(b) “Btu” means the amount of heat required to raise the temperature of one
(1) avoirdupois pound of pure water from fifty-eight and one-half degrees
Fahrenheit (58.5°F) to fifty-nine and one-half degrees Fahrenheit (59.5°F) at a
constant pressure of fourteen and sixty-five hundredths pounds per square inch
absolute (14.65 psia).

 

(c) “Claims” means any and all actions, claims, costs (including without
limitation, costs of investigation, litigation, and court costs), damages,
demands, fines, interest, judgments, liabilities (INCLUDING STRICT LIABILITY),
losses, penalties, proceedings, suits (including appeal), and expenses
(including, without limitation, reasonable attorneys’ fees).

 

(d) “Cubic Foot” means a volume of Gas occupying a space of one (1) cubic foot
at a temperature of sixty degrees Fahrenheit (60°F) and at a pressure of
fourteen and sixty-five hundredths pounds per square inch absolute (14.65 psia).

 

(e) “Day” means a period of time beginning at 9:00 a.m., Central time, on one
calendar day and ending at 9:00 a.m., Central time, on the following calendar
day; provided, however, that “Business Day” means any Day that is a Monday,
Tuesday, Wednesday, Thursday or Friday, except when such Day is a Federal
Reserve Bank holiday.

 

(f) “Equivalent Quantities” means that quantity of Gas (in MMBTUs) that is
thermally equivalent to the quantity of Gas (in MMBTUs) received by Gatherer
from Shipper at the Receipt Point(s) on any one Day less those volumes of
Shipper’s Gas that are retained as fuel under Section VII of this Exhibit A
and/or FL&U under Article 3.2 of this Agreement, as such volumes are determined
by Gatherer in good faith and allocated ratably or prorata, as applicable.

 

(g) “Gas” means natural gas or any mixture of hydrocarbon gases or of
hydrocarbon gases and non-combustible gases including all elements and compounds
contained therein as produced from oil and gas wells.

 

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(h) “Gatherer Indemnified Parties” means Gatherer, its successors and permitted
assigns, and each of their respective Affiliates, and each of their and their
respective Affiliates, shareholders, members, partners, officers, directors,
employees, and agents.

 

(i) “Gathering System” means Gatherer’s Gas gathering pipeline facilities, and
related compression, dehydration, treating and other facilities, acquired or
constructed by Gatherer, that are utilized in conjunction with receiving,
gathering and redelivering Gas from points of interconnect delivering Gas into
Gatherer’s Gas gathering facilities to points of interconnect delivering Gas out
of Gatherer’s gathering facilities.

 

(j) “Gross Heating Value” means the number of Btu produced by the complete
combustion, at constant pressure, of the amount of Gas which would occupy a
volume of one (1) Cubic Foot at a temperature of 60°F when saturated with water
vapor and at a pressure equivalent to fourteen and sixty-five hundredths pounds
per square inch absolute (14.65 psia), under standard gravitational force, 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. The Gross Heating
Value so determined shall be corrected from the conditions of testing to that of
the actual condition of the Gas received, expressed in Btu per Cubic Foot and
reported at a pressure base of fourteen and sixty-five hundredths pounds per
square inch absolute (14.65 psia). Correction for water vapor content greater
than seven (7) pounds per million cubic feet shall be made in accordance with
the most current version of GPA 2172, as revised.

 

(k) “Interest(s)” means any right, title or interest in lands and any right to
produce oil and/or Gas therefrom whether arising from fee ownership, working
interest ownership, mineral ownership, leasehold ownership, or arising from any
pooling, unitization or communitization of any of the foregoing rights, without
limitation as to depths or formations.

 

(l) “Interruptible Basis,” “Interruptible Service,” “Interruptible” and similar
terms used herein mean the lowest level of service offered by Gatherer on the
Gathering System, which Gatherer may interrupt at any time for any reason.

 

(m) “Mcf” means one thousand (1,000) Cubic Feet.

 

(r) “MMbtu” means one million (1,000,000) Btu.

 

(s) “Month” means the period beginning at 9:00 a.m., Central time, on the first
Day of a calendar month and ending at 9:00 a.m., Central time, on the first Day
of the succeeding calendar month.

 

(t) “Nominated Quantity” means the quantity of Gas (in MMBtu) nominated by
Shipper pursuant to the provisions of Section VI of this Exhibit A.

 

(v) “Person” means any individual, firm, corporation, trust, partnership,
limited liability company, association, joint venture, other business enterprise
or governmental authority.

 

(w) “Primary Firm Basis,” “Primary Firm Service,” “Primary Firm” and similar
terms used herein mean the highest priority of firm service offered by Gatherer
on the Gathering System.

 

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(x) “Priority Basis,” “Priority Service,” “Priority” and similar terms used
herein mean the level of firm service offered by Gatherer on the Gathering
System which is lower than Primary Firm Service but is higher than Interruptible
Service.

 

(y) “Taxes” means all taxes, assessments, allowances, charges or costs imposed
by any law, rule, regulation or other government authority or paid or incurred
by Gatherer in response to, or to comply with, any law, rule or regulation or
other government authority, including, without limitation, to comply with any
emissions limitations (which costs include the costs of any allowances that are
required to be purchased by or on behalf of Gatherer to comply with such
emissions limitations).

Section II - Quantities and Services Provided

 

(a) Subject to all of the provisions hereof, Gatherer shall accept at the
Receipt Point(s) a daily quantity of Gas up to the Nominated Quantity for such
Receipt Point(s), provided, however, that Gatherer shall not be obligated to
accept any Gas on a Priority Basis at any Receipt Point unless there is capacity
available after providing Primary Firm Service to all shippers (including
Gatherer) who have contracted (in the case of other shippers) or reserved (in
the case of Gatherer) Primary Firm Service at such Receipt Point, and then
Gatherer shall provide Priority Service to Shipper hereunder at such Receipt
Point on a prorata basis (as determined in good faith by Gatherer) with all
other shippers who have contracted for Priority Service at such Receipt Point.
In addition, subject to all provisions of this Agreement, Gatherer shall not be
obligated to deliver any Gas on a Priority Basis at any Delivery Point unless
there is capacity available after providing Primary Firm Service to all shippers
(including Gatherer) who have contracted (in the case of other shippers) or
reserved (in the case of Gatherer) Primary Firm Service at such Delivery Point,
and then Gatherer shall provide Priority Service to Shipper hereunder at such
Delivery Point, on a prorata basis (as determined in good faith by Gatherer)
with all other shippers who have contracted for Priority Service at such
Delivery Point. Gatherer shall not be obligated to receive Gas from Shipper at
any time in excess of Receipt Point capacity or Gathering System capacity.

 

(b) Subject to all other provisions of this Agreement, Gatherer shall, as nearly
as practicable each Day, deliver for Shipper’s account Equivalent Quantities of
Gas at the Delivery Point(s). All quantities received hereunder at the Receipt
Points and all deliveries of Equivalent Quantities hereunder at the Delivery
Point(s) shall be balanced on a Btu basis, and all such quantities referred to
herein shall be adjusted for the Gross Heating Value thereof.

 

(c)

The intent of the Parties to this Agreement is that Gas be received and
delivered hereunder at the same rate, and Shipper shall not, in any manner,
utilize Gatherer’s pipeline system for storage, drafting, banking, or peaking
purposes. If on any Day(s) Shipper delivers a quantity of Gas at the Receipt
Point(s) (less applicable fuel and FL&U) in excess of the quantity of Gas being
concurrently delivered by Gatherer at the Delivery Point(s) to or for the
account of Shipper hereunder, Gatherer shall have the right to reduce and/or
discontinue its receipts of Gas from Shipper until such time as arrangements
have been made by Shipper with Gatherer to balance such excess. If on any Day(s)
Shipper delivers a quantity of Gas at the Receipt Point(s) (less applicable fuel
and FL&U) less than the quantity of Gas being concurrently delivered by Gatherer
at the Delivery Point(s) to or for the account of Shipper hereunder, Gatherer
shall have the right to reduce and/or discontinue deliveries of Gas to Shipper’s
downstream purchaser or transporter until arrangements have been made by Shipper
to balance such under delivery. It is recognized that an exact daily balancing
of receipts

 

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(less applicable fuel and FL&U) and deliveries may not be possible due to the
inability of the Parties to control precisely such receipts and deliveries.
However, Gatherer, to the extent practicable, will deliver each Day at the
Delivery Points an Equivalent Quantity to the quantity received by Gatherer that
Day at the Receipt Points. Gatherer shall have no liability for any scheduling,
imbalance or other penalties which may be imposed at or downstream of the
Point(s) of Delivery, and Shipper shall defend; shall release, discharge, and
relinquish; and shall indemnify, protect and hold harmless the Gatherer
Indemnified Parties from and against any Claims relating to or arising from such
scheduling, imbalance or other penalties, including penalties associated with
pipeline Operational Flow Orders or similar directives. In the event quantities
of Gas are scheduled for delivery hereunder at more than one Delivery Point
during any Month, then imbalances occurring between Shipper and Gatherer on the
Gathering System applicable to each Delivery Point shall be determined based on
scheduled and actual deliveries at such Delivery Point. Gatherer shall include
in the monthly statement under Section IX(a) any cash out and penalty amounts
which may be owed in accordance with the foregoing as a result of any such
imbalances which may occur and the method used to calculate such imbalances.

All Imbalances shall be cashed out on a Monthly basis.

1) The Cash Out Index Price is NGPL TX OK Gas Daily average.

The Imbalance Percent set forth in the table below will be determined by
comparing the actual deliveries and the scheduled gas on any Delivery Point at
the Delivery Point(s) and will be applied in the Month that the Imbalance
accumulated. The Cash Out Index Price will be adjusted to reflect a premium for
the quantity of Gas owed to Gatherer or to reflect a discount for the quantity
of Gas owed to Shipper, based on the Imbalance Percent as set forth in the table
below with the resulting product being the Cash Out Price.

 

Imbalance Percent

   Premium/Discount Percent  

    0% - < 5%

     0 % 

> 5% - < 10%

     10 % 

> 10% - < 15%

     20 % 

> 15% - < 20%

     30 % 

> 20%

     40 % 

Using the table above, payments are to be made for any Imbalances in a Month as
follows:

 

  i) Gatherer will pay Shipper an amount that is the product of the Positive
Imbalance each Month, if any, and the Cash Out Index Price as reduced by the
Discount Percent corresponding to Shipper’s Imbalance Percent; and

 

  ii) Shipper will pay Gatherer an amount that is the product of the Negative
Imbalance each Month, if any, and the Cash Out Index Price as inflated by the
Premium Percent corresponding to the Shipper’s Imbalance Percent.

 

(d) Shipper shall make, or cause to be made, all necessary arrangements with
other pipelines or third parties at or upstream of the Receipt Point(s) and at
or downstream of the Delivery Point(s) in order to facilitate Gatherer’s receipt
and delivery of Gas. Such arrangements must be coordinated with Gatherer’s Gas
Control Department and must be acceptable to Gatherer in its sole good faith
discretion during the term of this Agreement.

 

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(e) Although Shipper shall retain title to Gas delivered to Gatherer at the
Receipt Point(s) hereunder, it is understood and agreed that such Gas received
by Gatherer shall constitute part of the supply of Gas from all sources in
Gatherer’s Gathering System, and as such Gatherer shall, subject to its
obligation to deliver an Equivalent Quantity as provided in Paragraph (c) of
this Section II, have the absolute and unqualified right to commingle such Gas,
to deliver molecules different from those received and to handle the molecules
received in any manner, retaining in Gatherer all right, title and interest to
any components, hydrocarbon or otherwise, obtained by virtue of liquids
accumulating in Gatherer’s Gathering System.

 

(f) Gatherer shall be entitled to full and complete operational control of its
facilities and shall be entitled to schedule deliveries and to operate and
reconfigure its facilities in a manner which, in Gatherer’s reasonable business
judgment, is consistent with its obligations under this Agreement. Gatherer
shall not be obligated to modify existing facilities or to install new
facilities in order to either receive or deliver Gas or increase its capacity
for service hereunder, unless otherwise mutually agreed in writing between the
Parties. Gatherer shall be entitled, without liability, to interrupt its
performance hereunder to perform necessary or desirable inspections,
maintenance, testing, alterations, modifications, expansions, connections,
repairs or replacements to its facilities as Gatherer deems necessary
(“Maintenance”), with reasonable notice provided to Shipper, except in cases of
emergency where such notice is impracticable or in cases where the operations of
Shipper will not be affected.

 

(g) Gatherer will use reasonable efforts to provide timely notification to
Shipper by telephone, with subsequent e-mail notification, of the potential size
and duration of any unscheduled capacity disruption. If Shipper does not adjust
its nomination within two (2) hours, Gatherer may adjust Shipper’s nomination
and/or not confirm the nominations requested by Shipper in the next nomination
cycle. Gatherer also may request that Shipper shut in wells to match production
with nominations. In the event that Shipper does not adjust its nomination as
reasonably directed by Gatherer, and such failure to adjust nominations could
materially impact operations on the Gathering System, Gatherer may curtail or
shut in Gas for a reasonable period of time. Gatherer shall not be liable for
Claims caused by any curtailment imposed by Gatherer.

 

(h)

In the event of any capacity constraints on the Gathering System due to events
of force majeure (as defined in Section XIII (b)), Maintenance or operational
considerations, Gatherer shall have the right to interrupt or curtail receipts
or deliveries of Gas hereunder. Gatherer shall allocate the physical capacity
available at the Receipt Points or Delivery Points, as applicable, among all
firm shippers on a pro rata basis based on each shipper’s scheduled firm volumes
(i.e. Primary Firm or Priority) at the applicable location (not to exceed each
such shipper’s firm contracted capacity (i.e. Primary Firm or Priority) at such
location) as a percentage of the total scheduled firm volumes (i.e. Primary Firm
or Priority) at the applicable location (not to exceed the total firm contracted
capacity (i.e. Primary Firm or Priority) at such location). In this regard,
Primary Firm Service shall have priority over Priority Service and Priority
Service shall have priority over Interruptible Service. As such, only if there
is capacity available at a specific location after allocation of all Primary
Firm Service at such location, will there be any allocation of Priority Service
at such location. For the avoidance of doubt, if a shipper which has contracted
for Primary Firm Service, or Priority Service, at a given location has scheduled
less than its full contracted capacity of Primary Firm Service, or Priority
Service, at such location when an interruption or curtailment of service at such
location occurs, such shipper shall

 

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have the right to increase its scheduled Primary Firm Service, or Priority
Service, at such location up to its full contracted capacity of Primary Firm
Service, or Priority Service, at such location in determining the prorata share
of capacity to be allocated to such firm shipper at such location during such
interruption or curtailment in accordance with the above.

 

(i) If Gatherer is unable to receive Gas hereunder at the Receipt Points or
deliver Gas hereunder at the Delivery Points with respect to all or any volume
of Gas (subject to any restrictions herein) that Shipper is ready, willing, and
able to deliver or receive, or cause to be delivered or received, as applicable,
in accordance with the terms of this Agreement, and there exists no uncured
breach of this Agreement on the part of Shipper, then (i) Shipper, at its
option, may elect to temporarily release the volume of Gas hereunder for which
Gatherer is unable to provide gathering services from this Agreement by
delivering written notice thereof to Gatherer, and (ii) immediately upon
delivering such notice and thereafter during such period of time, Shipper shall
have the right to deliver such volume of Gas to alternative facilities for the
provision of services. Upon the resumption of Gatherer’s ability to receive and
deliver Gas hereunder and after written notice thereof by Gatherer to Shipper,
such temporary release shall end and Shipper shall resume the delivery of all
Gas to Gatherer no later than sixty (60) Days from the receipt of Gatherer’s
notice of Gatherers ability to resume receipt of Shipper’s Gas; provided,
however, if the reason for Gatherer’s inability to receive or deliver Gas
hereunder was due to force majeure (as defined in Section XIII (b)) or
Maintenance, Shipper shall immediately resume the delivery of all Gas to
Gatherer hereunder.

 

(j) In order to insure that the Gathering System is kept relatively free of
obstructions that could impede free flow of Gas, Gatherer may collect, remove,
and dispose of any water, liquids or solids, whether or not hydrocarbons are
included, which could accumulate in the Gathering System. Gatherer shall be
responsible for disposal of the water, liquids and solids so collected, shall
own them, and shall not assess any additional charge for such disposal or make
reimbursement to Shipper for the disposed fluids or any shrink associated
therewith.

 

(k) If during any Month, Shipper delivers less than three thousand (3,000) Mcf
of Gas at any Point of Receipt, then Shipper shall pay Gatherer a minimum volume
fee for such Point of Receipt for such Month equal to five hundred dollars
($500). Such minimum volume fee shall be adjusted per paragraph 7 of Exhibit C.

 

(l) Gatherer agrees to treat for the removal of CO2 and hydrogen sulfide and
dehydrate all Gas delivered by Shipper hereunder at the Receipt Point(s) such
that the Gas delivered by Gatherer at the Delivery Point(s) to or for the
account of Shipper hereunder shall not have a water vapor content in excess of
seven (7) pounds of water vapor per one million (1,000,000) Cubic Feet of Gas
and shall meet the CO2 and hydrogen sulfide quality requirements of the
downstream pipeline(s) receiving such Gas at such Delivery Point(s). No Gas
delivered hereunder by Shipper shall be treated for the removal of CO2 prior to
such delivery. Shipper shall be charged a fee as provided in Exhibit C for any
such treating and dehydration services, and Shipper shall provide its share of
fuel applicable to such treating service, as set forth in Exhibit C.

Section III - Measurement Equipment and Testing

 

(a) The custody transfer points for volumes on the Gathering System will be
defined as the inlet flange of Gatherer’s measurement facility at the Receipt
Point(s) and the inlet flange of the measurement facility at the Delivery
Point(s), or as mutually agreed otherwise in writing.

 

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(b) Gatherer, or its designee, shall maintain and operate at its own expense the
measuring station(s) at the Receipt Point(s) and the Delivery Point(s) through
which the quantity of Gas gathered hereunder shall be measured. Shipper may
install, maintain and operate, at its own expense, at the Receipt Point(s) such
check measuring equipment as desired; provided, that such equipment shall be
installed so as not to interfere with the operation of Gatherer’s or its
designee’s measuring equipment.

 

(c) The measuring equipment at the Receipt Point(s) shall be constructed,
installed and operated in accordance with the following depending on the type of
meters used:

 

  (i) Orifice Meters - in accordance with ANSI/API 14.3.2 (American Gas
Association Report No. 3), Orifice Metering of Natural Gas and Other Hydrocarbon
Fluids, Fourth Edition, dated April 2000, and any subsequent amendments,
revisions or modifications thereof and shall include the use of flange
connections. Should Gas pulsation problems occur upstream of the Receipt
Point(s) or downstream of the Delivery Point(s), Shipper, or its designee, shall
take whatever steps are necessary to mitigate such pulsation.

 

  (ii) Turbine Meters - in accordance with the American Gas Association
Measurement Committee Report No. 7 (American Gas Association Report No. 7),
First Revision, dated November 1984, and any subsequent amendments, revisions or
modifications thereof.

 

  (iii) Electronic Transducers and Flow Computers (solar and otherwise) - in
accordance with the applicable American Gas Association standards, including but
not limited to American Gas Association Measurement Committee Report Nos. 3, 5
and 7 and any subsequent amendments, revisions, or modifications thereof.

 

  (iv) Ultrasonic Meters – in accordance with the American Gas Association
Measurement Committee Report No. 9 (American Gas Association Report No. 9),
dated June 1998, and any subsequent amendments, revisions or modifications
thereof.

Notwithstanding anything contained in this Paragraph (c) to the contrary,
Gatherer or its designee shall not be required to replace or make any
alterations to its measuring equipment as a result of any subsequent amendments,
revisions or modifications of the American Gas Association Reports cited in
Subparagraphs (i) through (v) of this Paragraph (c).

 

(d) Gatherer shall give reasonable notice to Shipper in order that Shipper may
have a representative present to observe any cleaning, changing, repairing,
inspecting, testing, calibrating, or adjusting of the measuring equipment at the
Receipt Point(s). The official charts and records from such measuring equipment
shall remain the property of Gatherer or its designee. Upon request, Gatherer or
its designee will submit such charts and records, together with calculations
therefrom, to Shipper for inspection and verification, subject to return to
Gatherer or its designee within thirty (30) Days after receipt thereof.

 

(e)

The accuracy of all measuring equipment at the Receipt Points shall be verified
by Gatherer or its designee at reasonable intervals and, if requested, in the
presence of a representative of Shipper. Gatherer or its designee shall verify
the accuracy of such equipment once every three (3) Months (or once annually for
meters with volumes less than five hundred (500) Mcf per Day) unless Shipper
requests a special test as described below; provided, however, that when daily
deliveries of Gas at any Point of Receipt average ten thousand (10,000) Mcf per
Day or greater during any Month, the accuracy of such measuring equipment shall
be verified once every Month. If, upon any test, such measuring equipment is
found to be inaccurate by two percent (2%) or less, previous readings of such
equipment will be considered correct in computing the deliveries of Gas by
Shipper hereunder, but such equipment shall immediately be adjusted to record
accurately. If, upon any test, such

 

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  measuring equipment is found to be inaccurate by more than two percent (2%) of
the average flow rate since the last test, then any previous recordings of such
equipment shall be corrected to zero (0) error for any period which is known
definitely to have been subject to such error or is otherwise agreed upon,
utilizing the procedure set forth in Paragraph (f) of this Section III. If such
period is not known or agreed upon, such correction shall be made for a period
covering one-half ( 1⁄2) of the time elapsed since the date of the latest test,
but not to exceed sixteen (16) Days when the equipment is tested every Month and
not to exceed forty-five (45) Days when the equipment is tested every three
(3) Months. In the event Shipper desires a special test of any measuring
equipment at the Receipt Points, at least seventy-two (72) hours advance notice
shall be given to Gatherer by Shipper, and both Parties shall cooperate to
secure a prompt test of the accuracy of such equipment. If the measuring
equipment so tested is found to be inaccurate by two percent (2%) or less,
Gatherer shall have the right to bill Shipper for the costs incurred due to such
special test, including any labor and transportation costs and Shipper shall pay
such costs promptly upon receipt of invoice therefor.

 

(f) If, for any reason, any measurement equipment at the Receipt Point(s) is out
of adjustment, out of service, or out of repair or a correction of the metered
flow rate is required under Paragraph (e) of this Section III, the total
quantity of Gas delivered shall be re-determined in accordance with the first of
the following methods which is feasible:

 

  (i) By using the registration of any check meter(s), if installed and
accurately registering (subject to testing as described in this Section III); or

 

  (ii) Where parallel multiple meter runs exist, by calculation using the
registration of such parallel meter runs; provided that they are measuring Gas
from upstream headers in common with the faulty metering equipment, are not
controlled by separate regulators, and are accurately registering; or

 

  (iii) By correcting the error by rereading of the official charts, or by
straightforward application of a correcting factor to the quantities recorded
for the period (if the net percentage of error is ascertainable by calibration,
tests or mathematical calculation); or

 

  (iv) By estimating the quantity, based upon deliveries made during periods of
similar conditions when the meter was registering accurately.

 

(g) Gatherer or its designee shall retain and preserve for a period of at least
2 years all Receipt Point test data, charts and other similar records.

 

(h) If Shipper’s flow volumes are outside of the accurate range of measurement
of Gatherer’s installed meter, Shipper shall be responsible for costs incurred
by Gatherer to install a meter that is accurate for the range of volumes that
Shipper is actually flowing. Gatherer shall provide Shipper with no less than
thirty (30) Days’ notice of such new meter installation as well as the estimated
costs associated therewith.

Section IV - Measurement Specifications

The measurements of the quantity and quality of all Gas delivered at the Receipt
Point(s) shall be conducted in accordance with the following:

 

(a) The unit of volume for measurement shall be one (1) Cubic Foot. Such
measured volumes shall be multiplied by their Gross Heating Value per Cubic Foot
and divided by one million (1,000,000) to determine MMBtu delivered hereunder.

 

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(b) The temperature of the Gas shall be determined by Gatherer or its designee
by a recording thermometer installed so that it may record the temperature of
the Gas flowing through the meters, or such other means of recording temperature
as may be mutually agreed upon by the Parties. The average of the record to the
nearest one degree Fahrenheit (1°F), obtained while Gas is being delivered,
shall be the applicable flowing Gas temperature for the period under
consideration.

 

(c) The specific gravity of the Gas shall be determined by Gatherer or its
designee by a recording gravitometer or chromatographic device installed and
located at a suitable point to record representative specific gravity of the Gas
being metered or, at Gatherer’s or its designee’s option, by spot samples or
continuous sampling using standard type gravity methods. If a recording
gravitometer or chromatographic device is used, the gravity to the nearest
one-thousandth (0.001) obtained while Gas is being delivered shall be the
specific gravity of the Gas used for the recording period. If the spot sample or
continuous sampling method is used, the gravity to the nearest one thousandth
(0.001) shall be determined once a Month from a Gas analysis. The result should
be applied during such Month for the determination of Gas volumes delivered
hereunder at the Receipt Points.

 

(d) Adjustments to measured Gas volumes for the effects of supercompressibility
shall be made in accordance with accepted American Gas Association standards.
Gatherer or its designee shall obtain appropriate carbon dioxide and nitrogen
mole fraction values for the Gas delivered as may be required to compute such
adjustments in accordance with standard testing procedures. At Gatherer’s or its
designee’s option, equations for the calculation of supercompressibility may be
taken from either the American Gas Association Manual for the Determination of
Supercompressibility Factors for Natural Gas, dated December, 1962 (also known
as the “NX-19 Manual”) or American Gas Association Report No. 8, dated December
1985, Compressibility and Supercompressibility for Natural Gas and Other
Hydrocarbon Gases, latest revision.

 

(e) For purposes of measurement and meter calibration, the atmospheric pressure
for each of the Receipt Point(s) shall be assumed to be the pressure value
determined by Gatherer, or its designee, for the county elevation in which such
point is located pursuant to generally accepted industry practices irrespective
of the actual atmospheric pressure at such point(s) from time to time. For the
purposes herein, such atmospheric pressure will be assumed to be fourteen and
seventy-three hundredths pounds per square inch absolute (14.73 psia).

 

(f) The Gross Heating Value of the Gas delivered at the Receipt Point(s) shall
be determined by Gatherer or its designee at least once each calendar quarter by
means of a method of general use in the Gas industry. Provided, however, that
when daily deliveries of Gas at any Point of Receipt average ten thousand
(10,000) Mcf or greater during any Month, the Gross Heating Value of the Gas
delivered at such Point of Receipt shall be taken Monthly at a suitable point on
the facilities to be representative of the Gas being metered.

 

(g) Other tests to determine water content, sulfur, and other impurities in the
Gas shall be conducted whenever requested by either Party and shall be conducted
in accordance with standard industry testing procedures. The Party requested to
perform such test(s) shall bear the cost of such test(s) only in the event the
Gas tested is determined not to be within the quality specification set forth
below. If the Gas is within such quality specification, the requesting Party
shall bear the cost of such test(s). Notwithstanding the foregoing, if the
initial test performed by the requested Party indicates the Gas tested is within
the quality specifications set forth below, and the requesting Party requests a
retest of such Gas and such retest determines such Gas is not within such
quality specifications, then the requesting Party shall not bear the cost(s) of
such retest.

 

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(h) If at any time during the term hereof a new method or technique is developed
with respect to Gas measurement or the determination of the factors used in such
Gas measurement, then such new method or technique may be substituted by
Gatherer for the method set forth in this Section IV when such methods or
techniques are in accordance with the currently accepted standards of the
American Gas Association.

Section V - Quality

 

(a) Subject to Gatherer’s obligation to treat (for the removal of CO2) and
dehydrate the Gas as provided in Section II(p) of this Exhibit A, all Gas
delivered at the Receipt Point(s) hereunder shall conform to the following
specifications:

 

  (i) Water Vapor: The Gas shall not have a water vapor content in excess of
seven (7) pounds of water vapor per one million (1,000,000) Cubic Feet of Gas.

 

  (ii) Hydrogen Sulfide: The Gas shall not contain more than one and one quarter
(1.25) grain of hydrogen sulfide per one hundred (100) Cubic Feet of Gas.

 

  (iii) Total Sulfur: The Gas shall not contain more than six (6) grains of
total sulfur per one hundred (100) Cubic Feet of Gas.

 

  (iv) Temperature: The Gas shall not have a temperature less than forty degrees
Fahrenheit (40°F) or more than one hundred twenty degrees Fahrenheit (120°F).

 

  (v) Oxygen: The Gas shall contain no oxygen.

 

  (vi) Nitrogen: The Gas shall not contain more than two percent (2%) by volume
of nitrogen.

 

  (vii) Carbon Dioxide: The Gas shall not contain more than two percent (2%) by
volume of carbon dioxide.

 

  (viii) Nonhydrocarbons: Notwithstanding the foregoing provisions of this
Paragraph (a) to the contrary, the Gas shall not contain more than four percent
(4%) by volume of total nonhydrocarbons. Nonhydrocarbons shall include, but not
be limited to, hydrogen sulfide, sulfur, carbon dioxide, oxygen and nitrogen.

 

  (ix) The Gas shall not contain any carbon monoxide, halogens or unsaturated
hydrocarbons, and no more than four hundred (400) ppm of hydrogen.

 

  (x) Objectionable Liquids and Solids and Dilution: The Gas shall be free of
objectionable liquids and solids, shall not contain any hydrocarbons which might
condense to free liquids in the pipeline under normal pipeline conditions and
shall be commercially free from dust, gums, gum-forming constituents, and other
liquids or solid matter or any other substance which might interfere with the
merchantability of the Gas, or cause injury to or interference with proper
operation of the lines, meters, regulators, or other equipment downstream
through which it flows.

 

A-10

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  (xi) Gross Heating Value: The Gas shall not have a Gross Heating Value less
than nine hundred fifty (950) Btu per Cubic Foot of Gas or more than one
thousand fifty (1,050) Btu per Cubic Foot of Gas.

 

  (xii) Hydrocarbon Dewpoint: The Gas shall conform to the most stringent
hydrocarbon dewpoint specifications published by any of the downstream pipelines
that are interconnected to the Gathering System at any time.

 

(b) In the event any Gas delivered to any Receipt Point hereunder fails to meet
the more stringent of (i) any of the quality specifications stated in this
Section V or (ii) any of the most stringent quality specifications published by
any of the downstream pipelines that are interconnected to the Gathering System
at any time (“Non-Conforming Gas”), Gatherer shall have the right, in addition
to other rights it may have, at its option at any time and from time to time to
refuse to accept such Non-Conforming Gas for so long as Shipper is unable to
deliver Gas conforming to such specifications; provided, however, Gatherer shall
not have the right to reject Non-Conforming Gas under this sentence to the
extent the non-conformance is caused by water vapor and/or carbon dioxide.
Gatherer, in its sole discretion, may accept Non-Conforming Gas; however, such
acceptance shall not be deemed a waiver of Gatherer’s right to refuse to accept
Non-Conforming Gas at a subsequent time. In addition, should Shipper deliver
Non-Conforming Gas, Shipper shall be responsible for (i) any fees or other
amounts charged by Gatherer’s downstream transporter or its designee and/or
(ii) any costs incurred by Gatherer in order to avoid such fees or other amounts
for such Non-Conforming Gas for as long as such condition exists or such fees or
other amounts are charged.

 

(c) Shipper shall defend; shall release, discharge, and relinquish; and shall
indemnify, protect and hold harmless, the Gatherer Indemnified Parties from and
against all Claims arising out of, or related to, the delivery of Non-Conforming
Gas. The duty to indemnify under this Section V shall continue in full force and
effect, notwithstanding the expiration or early termination of this Agreement,
with respect to any Claims based on facts or conditions that occurred prior to
such expiration or termination.

Section VI - Nominations

For each Month during the term of this Agreement, Shipper shall provide
Gatherer, by no later than 8:30 a.m., Central time, on the earlier of the fifth
(5th) Business Day immediately preceding the first Day of the next Month or one
(1) Business Day prior to the nomination deadline for the next Month for the
downstream pipeline(s) receiving gas at the Delivery Point(s), a nomination
indicating the estimated volume of Gas for each Receipt Point(s) and Delivery
Point(s) and any other information relevant to the gathering and other service
provided hereunder, provided, however, that (i) nominations at the Delivery
Point(s) are subject to confirmation by the downstream pipelines at such
Delivery Points and (ii) Gatherer reserves the right, from time to time and upon
reasonable notice to Shipper, to revise its nominations procedures. Shipper may
revise its nomination for Gas gathered upon not less than 24 hours’ notice to
Gatherer (subject to confirmation by downstream pipeline(s) at the Delivery
Points, as applicable). Nominations and any revisions thereto shall be made to
Gatherer’s Gas Control Department by email, facsimile or other electronic means,
as directed by Gatherer from time to time.

 

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Section VII - Delivery Pressure

Shipper shall deliver Gas at the Receipt Point(s) hereunder at a pressure(s)
sufficient to enter the Gathering System at each such point not to exceed the
maximum allowable operating pressure of the Gathering System. Gatherer shall
deliver Gas at the Delivery Point(s) hereunder at the pressure(s) existing in
the Gathering System at each such point. If any downstream pipeline changes its
normal operating pressure, or Gathering System conditions are such that it
requires Gatherer to install additional compression in order to effect delivery
of Gas into such pipeline, Gatherer may install compression between any
applicable Receipt Point and the applicable Delivery Point sufficient to cause
Shipper’s Gas to enter such downstream pipeline from the Gathering System, and
Shipper shall be charged a Compression Fee related thereto as set forth on
Exhibit C attached hereto, and Shipper shall provide its share of fuel in kind
to operate such compression as set forth in Exhibit C.

Section VIII - Taxes and Fee Reimbursement

Shipper shall reimburse Gatherer for any Taxes arising from or attributable to
the gathering and/or other services provided by Gatherer hereunder, the receipt
or delivery of Gas hereunder, and/or the operation of the Gathering System,
excluding Taxes calculated or paid on Gatherer’s net income and excluding real
property taxes. Any Taxes arising from or relating to the operation of the
Gathering System shall be allocated to Shipper based on deliveries by Shipper
hereunder as a percent of total deliveries by all entities delivering on the
Gathering System.

Section IX - Billing and Payments

 

(a) Each Month, Gatherer shall render to Shipper a statement setting forth the
amount owed for the services provided hereunder during the preceding Month, and
any other applicable charges hereunder including Volumetric Commitment fees set
forth in Exhibit C. If the actual quantities of Gas received and delivered
hereunder are not known at the time of billing, Gatherer will prepare its
statement based on the quantities nominated. The invoiced quantities will then
be adjusted to the actual quantities on the following Month’s statement or as
soon thereafter as actual receipt and delivery information is available. Shipper
shall pay to Gatherer, by wire transfer of immediately available funds, all
amounts set forth in Gatherer’s statement by the later of the twenty-fifth
(25th) Day of the Month following the Month in which the services which are the
subject of the statement were provided or ten (10) Business Days after the date
of receipt of such statement by Shipper.

 

(b) Should Shipper fail to pay the amount of any statement rendered by Gatherer
hereunder when such amount is due, interest thereon shall accrue from, but
excluding, the due date to and including, the date payment thereof is actually
made at the lesser of (i) the “Prime Rate”, plus three percent (3%), computed on
an annualized basis and compounded Monthly, and (ii) the maximum rate of
interest permitted by applicable law. “Prime Rate” shall be defined as the prime
rate on corporate loans at large U.S. money center commercial banks as set forth
in the Wall Street Journal “Money Rates” table under the Heading “Prime Rate”,
or any successor thereto, on the first date of publication for the calendar
month in which payment is due. Gatherer shall render a late payment charge
invoice and Shipper shall make payment therefor within ten (10) Days of the date
of such invoice. Subject to Section IX(c) below, if Gatherer provides written
notice to Shipper of Shipper’s failure to pay an amount due hereunder and
Shipper fails to pay within five (5) Business Days of the date of such notice,
Gatherer may suspend gathering and other services hereunder to Shipper.

 

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(c) If any statement is disputed by Shipper, Shipper shall pay the undisputed
amounts when due and shall, within ten (10) Days from the date of Shipper’s
receipt of Gatherer’s statement, give Gatherer written notification setting
forth the disputed amount and the basis therefor. Shipper and Gatherer shall use
reasonable diligence to resolve disputed amounts within thirty (30) Days
following written notification. If the undisputed amount is not paid when due,
the undisputed amount shall be subject to late payment charges as described in
Section IX(b) above. Any disputed amount which later is determined to be due to
Gatherer, shall be subject to late payment charges as described in Section IX(b)
above from the original due date.

 

(d) Subject to execution of the audited Party’s standard form confidentiality
agreement, each Party has the right, at its sole expense and during normal
working hours and after providing written notice at least twenty (20) Days prior
to the audit, to examine the records of the other Party to the extent reasonably
necessary to verify the accuracy of any statement, charge or computation made
pursuant to this Agreement. Upon receipt of a written notice of audit, the
audited Party, and the Party requesting such audit, shall not destroy any
records applicable to such audit and the applicable period being audited until
such audit is complete and any issues raised by such audit have been finally
settled or resolved.

 

(e) Subsequent to any statement having been paid, if any overcharge or
undercharge in any form whatsoever shall be found, Gatherer shall refund the
amount of any overcharge received by Gatherer, and Shipper shall pay the amount
of any undercharge due Gatherer, within thirty (30) Days after final
determination thereof; provided, however, no retroactive adjustments will be
made for any overcharge or undercharge beyond a period of twenty-four
(24) Months from the date of the statement. The provisions of this Paragraph
(e) shall survive the termination of this Agreement.

 

(f) No adjustments, retroactive or prospective, shall be made to volumes for
prior periods, whether the result of volume allocation errors or any other
reason other than meter calibration error, that involve changes that would be
less than one hundred (100) MMBtu per Month.

Section X - Financial Responsibility; Default

 

(a)

Financial Responsibility. If Gatherer determines at any time, in its sole good
faith judgment, that the credit worthiness or financial responsibility of
Shipper is impaired or is unsatisfactory or if Shipper fails to provide the
information required under Section X(b), then Gatherer may, upon written notice
to Shipper: (1) require Shipper to pay for the gathering of Gas hereunder in
cash in advance of Gatherer’s gathering services thereof, (2) retain 10% of
Shipper’s Gas as further provided in this Section X(a), or (3) request other
security satisfactory to Gatherer before further gathering or other services are
provided. If Gatherer elects to retain 10% of Shipper’s Gas as provided in the
previous sentence, then: (A) Shipper hereby transfers and conveys to Gatherer
that Gas, free of charge and free of any liens, encumbrances and Claims of any
nature, (B) Gatherer will settle with Shipper for each Day in which it retains
Gas on the basis of the Midpoint price for the Carthage Hub as published by
“Platts Gas Daily” subtracting from such amount all fees and charges due to
Gatherer under this Agreement and all transport, treating and other fees that
are related to a sale of that Gas, and (C) if Gatherer owes a net amount to
Shipper, Gatherer will pay that amount within ten Days after the date of the
statement rendered in accordance with Section IX(a) of this Exhibit A. If
Shipper (i) makes an assignment or any general arrangement for the benefit of
creditors, (ii) files a petition or otherwise commences, authorizes, or
acquiesces in the commencement of a proceeding or cause under any bankruptcy or
similar law for the protection of creditors or has such petition filed or
proceeding commenced against it, (iii) otherwise becomes bankrupt or insolvent
(however

 

A-13

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  evidenced), (iv) is unable to pay its debts as they fall due, or (v) fails to
give adequate security for or assurance of its ability to perform its
obligations under this Agreement within forty-eight (48) hours of a reasonable
request by Gatherer, then Gatherer shall have the right to either suspend
services hereunder, or terminate this Agreement, without prior notice and
without prejudice to any and all claims for damages or other rights or remedies
available under this Agreement or pursuant to law, and without liability of any
kind or character to Shipper.

 

(b) Shipper will furnish, or cause to be furnished, to Gatherer, upon Gatherer’s
written request: (A) within one hundred twenty (120) Days after the close of
each fiscal year, (i) the audited consolidated balance sheets of Shipper and its
consolidated subsidiaries as at the end of such year, and (ii) the audited
consolidated statements of income, equity and cash flow of Shipper and its
consolidated subsidiaries for such year setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, which
report shall be to the effect that such statements have been prepared in
accordance with generally accepted accounting practices in the United States;
and (B) within ninety (90) Days after the close of each fiscal quarter (except
the last quarter of each fiscal year) of Shipper, (i) the unaudited consolidated
balance sheets of Shipper and its consolidated subsidiaries as at the end of
such quarter, and (ii) the unaudited consolidated statements of income, equity
and cash flow of Shipper and its consolidated subsidiaries for such quarter,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and in each case prepared in accordance with generally
accepted accounting principles excluding footnotes. Notwithstanding the
foregoing, for so long as Shipper is a publicly traded company and the
information specified in the preceding sentence, or information substantially
the same as such information, is filed with the U.S. Securities and Exchange
Commission and publicly available to Gatherer, then Shipper shall not be
required to comply with the requirements of the preceding sentence.

 

(c) If this Agreement is terminated in any manner provided herein, Shipper’s
execution of this Agreement shall be deemed a consent by Shipper to the
disconnection of Gatherer’s facilities under Statewide Rule 73 of the
Conservation Rules and Regulations of the Railroad Commission of Texas, if and
to the extent such rule is ever interpreted to govern transaction(s) of the type
evidenced hereby.

Section XI – Responsibility; Indemnities

 

(a) Shipper shall be deemed to be in exclusive control and possession of the Gas
until such Gas is received by Gatherer at the Receipt Point(s) and after such
Gas has been delivered at the Delivery Point(s). Gatherer shall be deemed to be
in exclusive control and possession of the Gas after receipt of the Gas at the
Receipt Point(s) and until such Gas has been delivered to Shipper or its
designee at the Delivery Point(s). As between the Parties, the Party deemed to
be in exclusive control and possession of the Gas hereunder shall be responsible
for anything that may be done, happen or arise with respect to such Gas;
provided, however, Gatherer shall not be responsible for anything that may
happen due to the nature of or caused by Non-Conforming Gas delivered by Shipper
hereunder.

 

(b) Except as specifically set forth elsewhere in this Agreement, each Party
(i) assumes full responsibility and liability arising from the installation,
ownership and operation of its pipelines and facilities and (ii) shall hold
harmless the other Party from all Claims for death, personal injury or damage to
property that such Party incurs on account of such installation, ownership and
operation. However, a Party shall not be liable to the other Party for, or hold
harmless the other Party from, any such Claims arising out of acts or omissions
of third parties when such acts or omissions are not reasonably within the first
Party’s control.

 

A-14

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Section XII – Warranty; Transfer of Title

 

(a) Shipper represents and warrants to Gatherer that upon delivery of Gas to
Gatherer, Shipper will have good title and the good right to deliver such Gas
and that such Gas shall be free and clear of all liens, encumbrances and adverse
claims. Shipper shall indemnify, defend and hold harmless Gatherer from and
against all suits, actions, debts, accounts, damages, costs (including
attorneys’ fees), losses and expenses arising out of or in connection with any
adverse claims of any and all Persons regarding said Gas.

 

(b) Shipper hereby transfers and conveys to Gatherer, free of charge and free of
any liens, encumbrances and Claims of any nature, all Gas that Gatherer is
entitled to retain in accordance with this Agreement as fuel, FL&U or otherwise.

Section XIII - Force Majeure

 

(a) If either Party is rendered unable, wholly or in part, by force majeure to
carry out its obligations under this Agreement, except for the obligations to
make payments hereunder, it is agreed that, on such Party’s giving notice and
reasonably full particulars of such force majeure, orally as soon as practicable
and followed in writing or by electronic transmission, to the other Party within
a reasonable time after the occurrence of the force majeure relied upon, the
obligations of the Parties, so far as they are affected by such force majeure,
shall be suspended from the commencement and during the continuance of any
inability so caused. Upon the event of force majeure, the Parties shall
cooperate to the extent reasonable and use commercially reasonable efforts to
remedy such force majeure with all reasonable dispatch.

 

(b) The term “force majeure,” as employed herein, shall mean acts of God;
strikes, lockouts or other industrial disturbances; acts of the public enemy,
wars, blockades, insurrections, civil disturbances and riots, and epidemics;
landslides, lightning, earthquakes, fires, storms, hurricanes and threats of
hurricanes, floods and washouts; arrests, orders, requests, directives,
restraints and requirements of the government and governmental agencies, either
federal or state, civil and military; failure of transportation; explosions,
breakage or accident to machinery, equipment or lines of pipe; outages
(shutdowns) of equipment, machinery or lines of pipe for inspection, maintenance
or repair; freezing of wells or lines of pipe; and other causes of a similar
nature not reasonably within the control of the Party claiming suspension. Force
majeure shall likewise include (a) in those instances where either Party is
required to obtain servitudes, right-of-way grants, permits or licenses to
enable such Party to fulfill its obligations hereunder, the inability of such
Party to acquire, or the delays on the part of such Party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such servitudes,
right-of-way grants, permits or licenses; and (b) in those instances where
either Party is required to furnish materials and supplies for the purpose of
constructing or maintaining facilities or is required to secure permits or
permissions from any governmental agency to enable such Party to fulfill its
obligations hereunder, the inability of such Party to acquire or the delays on
the part of such Party in acquiring, at reasonable cost and after the exercise
of reasonable diligence, such materials and supplies, permits and permissions.

 

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(c) The term “force majeure” as applied to Shipper, specifically excludes the
following occurrences or events: the loss, interruption, or curtailment of
transportation on any pipeline interconnection with Gatherer necessary to make
or take delivery of Gas hereunder (unless due to a force majeure declared by the
receiving pipeline at the Delivery Point(s) to the extent it prevents such
pipeline from receiving Gas at such Delivery Point(s) from firm basis
customers); increases or decreases in Gas supply, allocation or reallocation of
production by well operators, pipelines, or other parties; loss of markets; loss
of supply; and failure of specific, individual wells or appurtenant facilities
in the absence of a force majeure event broadly affecting other wells in the
same geographic area. As applied to Shipper and Gatherer, price changes due to
market conditions or economics associated with the gathering and transportation
of Gas gathered hereunder shall not be considered events of “force majeure”.

Section XIV - Limitation of Liability

NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL
BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR
EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY RESULTING FROM OR ARISING OUT OF THIS
AGREEMENT OR THE BREACH THEREOF OR UNDER ANY OTHER THEORY OF LIABILITY, WHETHER
TORT, NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT, WARRANTY, INDEMNITY OR
OTHERWISE, INCLUDING LOSS OF USE, LOSS OF PRODUCTION, INCREASED COST OF
OPERATIONS, OR BUSINESS INTERRUPTIONS. IN FURTHERANCE OF THE FOREGOING, EACH
PARTY RELEASES THE OTHER PARTY AND WAIVES ANY RIGHT OF RECOVERY FOR SPECIAL,
INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY
REGARDLESS OF WHETHER ANY SUCH DAMAGES ARE CAUSED BY THE OTHER PARTY’S
NEGLIGENCE (AND REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE, JOINT,
CONCURRENT, ACTIVE, PASSIVE OR GROSS NEGLIGENCE), FAULT, OR LIABILITY WITHOUT
FAULT; PROVIDED, HOWEVER, THE FOREGOING SHALL NOT BE CONSTRUED AS LIMITING AN
OBLIGATION OF A PARTY HEREUNDER TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE OTHER
PARTY AGAINST CLAIMS ASSERTED BY UNAFFILIATED THIRD PARTIES, INCLUDING THIRD
PARTY CLAIMS FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY
DAMAGES.

Section XV - Assignment

This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and assigns. This Agreement shall not be transferred
or assigned by either Party without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, either Party may assign this Agreement without
the consent of the other Party: (i) to a purchaser of all or substantially all
of its assets, and (ii) to any Person as security in connection with arranging
financing for such Party or any Affiliate of such Party provided further that in
the event of any assignment under this Section XV, the assigning Party shall not
be released from its obligations hereunder without the prior written consent of
the other Party (such consent not to be unreasonably withheld or delayed).

Section XVI - Laws and Regulations

 

(a) This Agreement shall be governed by the laws of the State of Texas without
regard to the conflicts of law provisions contained therein. This Agreement is
subject to all valid existing and future laws, orders, rules, regulations or
proclamations of duly constituted governmental authorities having jurisdiction
or control over the Gatherer, the Gathering System or the subject matter hereof.

 

(b) Shipper shall not deliver any Gas at the Receipt Points, or otherwise take
any action, which could result in the Gathering System or Gatherer’s ownership
and operation thereof, not being exempt from regulation under the Natural Gas
Act pursuant to the gathering exemption under Section 1(b) of such Act. Shipper
shall indemnify, defend and hold harmless Gatherer from and against all Claims
arising out of or in connection with Shipper’s breach of this provision.

 

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(c) If any governmental authority shall take any action (including, without
limitation, issuance of a “policy statement”) (i) which is, with respect to or
as a result of this Agreement, designed to subject or otherwise subjects
Gatherer, its Affiliates, designees or any pipeline or related facilities of
either Gatherer, its Affiliates or its or their agents to any greater or
different regulation or jurisdiction than that existing on the date of this
Agreement or (ii) whereby the receipt, gathering and delivery of Gas as
contemplated hereunder or pursuant to other agreements shall be prohibited or
subject to terms, conditions, restraints or regulations, including rate or price
control, or ceilings or open access requirements which, in the sole judgment of
Gatherer, are unduly or overly burdensome, then, the Parties agree to, in good
faith, renegotiate this Agreement or enter into a superseding agreement. If the
Parties cannot renegotiate this agreement or enter into a superseding agreement,
upon written notice to Shipper, Gatherer may terminate this Agreement in whole
or in part effective one (1) Day prior to the effective date of such
governmental action without further obligation to Shipper. However, Shipper
shall make payment for services rendered (but shall have no obligation for any
remaining Commitment Volumes) and the Parties shall endeavor to correct any Gas
imbalance existing on the date of such termination. Notwithstanding the
foregoing, nothing contained herein shall preclude the Parties from
renegotiating this Agreement or entering into a superseding agreement if they so
choose.

 

(d) Gatherer shall file all necessary reports and/or notices required by law or
regulation to be filed by Gatherer, and Shipper shall provide Gatherer with any
necessary compliance information requested by Gatherer in connection with
preparing such reports.

 

(e) If a dispute between Shipper and Gatherer arises out of this Agreement,
either Party may initiate dispute resolution procedures by sending written
notice (the “Initial Notice”) to the other Party specifically stating the
complaining Party’s claim and requesting dispute resolution in accordance with
this Article. The Parties shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation between
executives who have authority to settle the controversy and who are at a higher
level of management than the persons with direct responsibility for
administration of this Agreement. Within twenty (20) Business Days after
delivery of the Initial Notice, the executives of both Parties shall meet at a
mutually acceptable time and place, and thereafter as often as they mutually
agree, to attempt to resolve the dispute. All negotiations pursuant to this
clause are confidential and shall be treated as compromise and settlement
negotiations for purposes of applicable rules of evidence.

 

(f) If the executives fail to meet or are unable to resolve the dispute within
thirty (30) Days after the Initial Notice from the Party initiating dispute
resolution procedures, or such longer period as mutually agreed to by the
Parties, then the Parties agree that any such dispute shall be adjudicated
exclusively in the federal and state courts located in Dallas, Dallas County,
Texas, and venue shall at all times be proper there.

 

(g) THE PARTIES HEREBY WAIVE A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING IN
ANY ACTION OR PROCEEDING BETWEEN THE PARTIES OR THEIR SUCCESSORS OR PERMITTED
ASSIGNS, ARISING UNDER OR RELATED TO THIS AGREEMENT, OR ANY OF ITS PROVISIONS.

 

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Section XVII - Confidentiality

The terms of this Agreement, including but not limited to the rates and/or fees
paid for gathering and other service, the identified transporting pipelines, the
volumes gathered and all other material terms of this Agreement shall be kept
confidential by the Parties and their respective Representatives (as defined
below), except to the extent that any information must be disclosed to a third
party for the purpose of effectuating gathering and other services pursuant to
this Agreement, or as required by regulation, law, subpoena or court order. If a
Party intends to disclose the terms of this Agreement to such a third party it
shall first cause such third party to enter into a confidentiality and non-use
agreement with respect to such information, unless such other party is a
government agency or court, in which case it shall use commercially reasonable
efforts to maintain the confidentiality of the information required to be
disclosed. For purposes of this Section XVII, “Representatives” means such
Party’s affiliates and its and their respective officers, directors, employees,
advisors, consultants, agents and actual or potential lenders, financing sources
and/or joint venture partners.

Section XVIII - Miscellaneous

 

(a) The Parties stipulate and agree that this Agreement shall be deemed and
considered for all purposes as prepared through the joint effort of the Parties
and shall not be construed against one Party or the other as a result of the
preparation, submittal or other event of negotiation, drafting or execution
hereof.

 

(b) Shipper agrees to grant or assign, and to cause any of its Affiliates to
grant or assign, to Gatherer or its designee, insofar as Shipper or its
Affiliate(s) is able to convey such rights, the right of ingress and egress and
all necessary easements and rights-of-way to any leaseholds or premises of
Shipper for the construction of pipelines and/or facilities necessary or
convenient for the performance by Gatherer of the services to be provided
hereunder.

 

(c) This Agreement embodies the entire agreement and understanding between the
Parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter.

 

(d) This Agreement is for the sole benefit of the Parties and their permitted
successors and assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the Parties and such permitted
successor and assigns, any legal or equitable rights hereunder.

 

(e) Any term of this Agreement may be amended only with the written consent of
each Party. A Party’s observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by written consent of the other Party. No waivers of or
exceptions to any term, condition, or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition, or provision.

 

(f) This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may be executed by facsimile signatures.

 

(g) The headings of the sections, subsections, and paragraphs of this Agreement
have been added for convenience only and shall not be deemed to be a part of
this Agreement.

 

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(h) If any provision of this Agreement or the application thereof to any Person
or circumstance shall be held by a court of competent jurisdiction to be invalid
or unenforceable to any extent, (i) the remainder of this Agreement and the
application of such provisions to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law,
and (ii) the provision of this Agreement which is so held to be invalid or
unenforceable shall be modified so that it is valid and enforceable while
preserving to the maximum extent possible the substance of the original
agreement of the Parties.

[End of Exhibit A]

 

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EXHIBIT B

RECEIPT POINT(S) AND DELIVERY POINT(S)

RECEIPT POINTS:

 

Name

   Location    Meter Number

TBD

   San Augustine County, TX    TBD

DELIVERY POINTS:

Each Delivery Point listed below will be made available to Shipper:

 

Name

   Location    Meter Number

NGPL

   Nacogdoches County, TX    45310

Gulf South 30”

   Sabine County, TX    022688

Center Point 32”

   Panola County, TX    822320

Gulf South 42”

   Panola County, TX    022708 Acadian/Mansfield    De Soto Parish, LA   

 

 

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EXHIBIT C

FEES

 

1. Volumetric Charge. A fee of five cents ($0.05) per Mcf assessed on all Gas
(in Mcfs) received hereunder at the Receipt Point(s) during each Month.

 

2. Volumetric Commitment. Shipper agrees to deliver hereunder at the Receipt
Point(s) during each Month of three (3) consecutive Commitment Periods, a daily
volume of Gas equal to the Commitment Volume for such Commitment Period. If for
any reason (including force majeure) Shipper fails to deliver during any Month
of any Commitment Period the aggregate Commitment Volume for all days in such
Month, then Shipper shall pay to Gatherer an amount equal to (i) such aggregate
Commitment Volume less the volume of Gas actually delivered by Shipper hereunder
during such Month (the “Deficiency”) multiplied by (ii) $0.05 per Mcf. Shipper
shall pay such amount within twenty (20) Days of Shipper’s receipt of Gatherer’s
statement for such Deficiency. Shipper’s obligation to pay such amount is in
addition to all other amounts owed by Shipper under this Agreement. For the
avoidance of doubt, once Shipper has delivered a volume of Gas hereunder at the
Receipt Points during any Month of any Commitment Period equal to the Commitment
Volume applicable to such Month, then it shall have no obligation to deliver any
minimum volumes of Gas hereunder during the remainder of such Month; provided,
however, Shipper’s dedication obligations hereunder and its obligations under
Section II (k) shall continue to apply.

 

(b) Subject to item (c) below, the Commitment Volume for each Commitment Period
shall be as follows:

1st Commitment Period – August 1, 2015 through January 31, 2016 – 50,000 Mcf/day

2nd Commitment Period – February 1, 2016 through July 31, 2016 – 75,000 Mcf/day

3rd Commitment Period – August 1, 2016 through July 31, 2020 – 100,000 Mcf/day

 

(c) All volumes of Gas, if any, delivered by Shipper hereunder during the first
Commitment Period in excess of the Commitment Volume shall be credited against
Shipper’s Commitment Volume obligation for the second Commitment Period, and so
on through the third Commitment Period.

 

3. Commodity Charge. A fee of two and one half cents ($0.025) per Mcf assessed
on all Gas (in Mcfs) received hereunder from Shipper by Gatherer at the Receipt
Points during each Month.

 

4. Compression Fee. Where Gatherer installs compression pursuant to Section VII
of Exhibit A, Delivery Pressure, between the Receipt Point(s) and the Delivery
Point(s) to cause Gas to be delivered to downstream pipelines at the Delivery
Point(s), then:

 

  a)

if the Gas delivered hereunder in any Month moves through such compression, a
fee of seven cents ($0.07) per Mcf per theoretical stage of compression, shall
be assessed on all Gas (in Mcfs) received hereunder at the applicable Receipt
Point during each month. In addition, Shipper will bear its prorata share of
actual fuel, and will reimburse Gatherer its prorata share of all electrical
charges, associated with the operation of such compression. For purposes of this
Agreement, the theoretical stages of compression shall be determined as follows:
Each Month, Gatherer shall determine the average suction pressure and the
average discharge pressure of

 

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  each compressor station during its period of operation. Such average discharge
pressure in pounds per square inch gauge (psig) shall be divided by the average
suction pressure in psig, and then be divided by three and one-half
(3.5) compression ratios, with the resulting number being the number of
theoretical stages of compression for such compressor station for which Shipper
shall be charged. For example, if in a Month, the average suction pressure and
the average discharge pressure of a compressor station during its period of
operation are 300 psig and 1,050 psig, respectively, then the number of
theoretical stages of compression for such compressor station would be 1.0 (i.e.
1,050 ÷ 300, ÷ 3.5) and the fee for such compression for such Month would be
$0.08 per Mcf.

 

  b) In addition to the fees set forth in Section 2(a) of this Exhibit C,
Shipper will bear its prorata share of actual fuel consumed in such compression
and will reimburse Gatherer its prorata share of all electrical charges,
associated with the operation of such compression.

 

5. CO2 Treating Fee. A fee per Mcf assessed on all Gas (in Mcfs) received
hereunder at each Receipt Point(s) and actually treated by Gatherer during each
month determined, based upon the CO2 content of such Gas at such Receipt Point,
as follows:

 

  a) If the CO2 content of such Gas at such Receipt Point meets the requirements
of Section V, Quality, then no fee.

 

  b) If the CO2 content of such Gas at such Receipt Point does not meet the
requirements of Section V, Quality, then a fee equal to $0.045 per Mcf.

 

  c) In addition to the fees set forth in Section 3(a) and (b) of this Exhibit
C, Shipper will bear its prorata share of actual fuel for each one
(1) percentage (or portion thereof) of CO2 content that the Gas exceeds the CO2
Requirement) and will reimburse Gatherer its prorata share of all electrical
charges, associated with the operation of such treatment facilities (based on
volumes of Gas moving through such treatment facilities).

 

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6. Minimum Volume Fee. The Minimum Volume Fee shall apply as stated in Section
II—Quantities and Services Provided (k).

 

7. FL&U. Shipper will provide to Gatherer, in kind and at no cost to Gatherer,
Shipper’s share of fuel under Sections 2 and 3 of this Exhibit C, as well as
Shipper’s share of FL&U under Article 3.2 of the Agreement; provided, however,
any fuel utilized to operate compression and/or treating facilities that is the
subject of Sections 2 and 3 of this Exhibit C shall not be included in FL&U
under Article 3.2 of the Agreement. In this regard, Gatherer may from time to
time use historical fuel and/or FL&U information in establishing fuel retention
percentages under Sections 2 and 3 of this Exhibit C and FL&U retention
percentages under Article 3.2 of the Agreement, to be applied on a prospective
basis.

 

8. Escalation. All fees per Mcf set forth in Sections 1, 2, 3, 4 and 5 of this
Exhibit C shall be adjusted effective on each anniversary during the term of
this Agreement, commencing on August 1, 2015, to reflect increases, if any, in
the “PPI-OME” (as defined below) during the twelve (12) month period ending with
January preceding the date of the applicable adjustment. As used herein,
“PPI-OME” means the Producer Price Index for Oil Field and Gas Field Machinery
and Equipment (Commodity Code 11-91), unadjusted index, as published by the U.S.
Department of Labor Statistics, or if the publication of such index is
discontinued, such other index or indices reasonably selected by Gatherer which
reflects the range of economic factors represented by such index.

 

C-3