Exhibit 10.3

 

 

 

COMPRESSION SERVICES AGREEMENT

 

among

 

HILAND PARTNERS, LP

 

and

 

CONTINENTAL RESOURCES, INC.

 

Effective as of

 

January 28, 2005

 

 

 

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

ARTICLE II INDEPENDENCE OF THE PARTIES

 

ARTICLE III REPRESENTATIONS OF THE PARTIES

 

ARTICLE IV RESPONSIBILITIES OF THE PARTIES

 

ARTICLE V OPERATING FEE

 

ARTICLE VI BILLING AND PAYMENT

 

ARTICLE VII FORCE MAJEURE

 

ARTICLE VIII INDEMNITY AND INSURANCE

 

ARTICLE IX TERM

 

ARTICLE X DEFAULT

 

ARTICLE XI ASSIGNMENT

 

ARTICLE XII ADDRESS

 

ARTICLE XIII NON-WAIVER

 

ARTICLE XIV MERGER

 

ARTICLE XV GOVERNING LAW, VENUE

 

ARTICLE XVI MUTUAL DRAFTSMANSHIP

 

ARTICLE XVII MISCELLANEOUS

 

 

 

 

 

Exhibits

 

“A”—Delivery Points

 

“B”—Operating Fee

 

“C”—Insurance

 

 

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COMPRESSION SERVICES AGREEMENT

 

THIS COMPRESSION SERVICES AGREEMENT (“Agreement”), effective as of January 28,
2005 (the “Effective Date”), by and between Hiland Partners, LP (“Hiland”) and
Continental Resources, Inc. (“Continental”). Hiland and Continental are
sometimes referred to herein individually as a “Party” or collectively as the
“Parties.”

 

RECITALS:

 

A.                                   Continental desires to have Hiland provide
compression services with respect to air and water for use in its secondary
recovery operations located in Bowman and Slope Counties in North Dakota and in
Fallon County, Montana (the “Services”).

 

B.                                     Hiland agrees to provide compression
services with respect to air and water and Continental agrees to accept such
compression services with respect to air and water subject to the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Hiland and Continental agree as follows:

 

ARTICLE I

DEFINITIONS

 

“Adjusted Guarantee Percentage” shall have the meaning given to such term in
Section 4.3(c)(iii).

 

“Adjusted Performance Guarantee” shall have the meaning given to such term in
Section 4.3(c)(ii).

 

“Agreement” shall have the meaning given to such term in the introduction.

 

“Assets” shall have the meaning given to such term in Section 9.2.

 

“Business Day” shall mean any day on which the banks in Houston, Texas are open.

 

“Cedar Air” shall mean the compressed air delivered from the Cedar Hills Air
Injection facility listed on Exhibit A.

 

“Cedar Water” shall mean the pressurized water delivered from the Cedar Hills
Water Injection facility listed on Exhibit A.

 

“Commodity” shall mean each of the Cedar Air, Cedar Water, and HC Air.

 

“Continental” shall mean Continental Resources Inc.

 

“Continental Permit” shall mean air permit number No. O97008 for the Horse Creek
Compressor Station.

 

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“day” as used herein shall mean a period of 24 consecutive hours, beginning at
7:00 a.m. Central Standard or Daylight time, as the case may be.

 

“Delivery Point” shall mean each of the points specified on Exhibit A attached
hereto.

 

“Dispute” shall have the meaning given to such term in Section 17.5.

 

“Due Date” shall have the meaning given to such term in Section 6.1.

 

“Entity” shall mean a corporation, limited liability company, partnership
(including a general partnership, joint venture, limited partnership, limited
liability partnership, or partnership association), trust (including a business
trust), estate, Government Authority, or any other entity.

 

“Effective Date” shall have the meaning given to such term in the introduction.

 

“Force Majeure” shall have the meaning given to such term in Section 7.2.

 

“Governmental Authority” shall mean a federal, state, local, or foreign
governmental authority; a state, province, commonwealth, territory, or district
thereof; a county or parish; a city, town, township, village, or other
municipality; a district, ward, or other subdivision of any of the foregoing;
any executive, legislative, or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council, or other administrative body of any of the foregoing; any
court or other judicial body; and any officer, official, or other representative
of any of the foregoing.

 

“Guarantee Percentage” shall have the meaning given to such term in Section
4.3(a).

 

“HC Air” shall mean the compressed air delivered from the Horse Creek Compressor
Station listed on Exhibit A.

 

“Hadley Compressor Station” shall mean that certain compressor station owned by
Hiland in Bowman County, North Dakota.

 

“Hiland” shall mean Hiland Partners, LP.

 

“Indemnified Party” shall have the meaning given to such term in Section 8.2.

 

“Indemnifying Party” shall have the meaning given to such term in Section 8.2.

 

“LD Cap” shall have the meaning given to such term in Section 4.3(f).

 

“Liquidated Damages” shall have the meaning given to such term in Section
4.3(c).

 

“Monthly Delivery Notice” shall have the meaning given to such term in Section
4.1(b).

 

“Operating Fee” shall mean individually each of the monthly fees set forth for a
Commodity on Exhibit B.

 

“Party” or “Parties” shall have the meanings given to such terms in the
introduction.

 

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“Performance Guarantee” and “Performance Guarantees” shall have the meaning
given to such terms in Section 4.3(a).

 

“Person” shall mean a natural person or an Entity.

 

“Prime Rate” shall have the meaning given to such term in Section 6.2.

 

“Proceeding” shall mean a judicial, administrative, or arbitral proceeding
(including a lawsuit or an investigation by a Government Authority), commencing
with the institution of such proceeding through the issuance, service, or
delivery of the applicable claim or other applicable event.

 

“Services” shall have the meaning given to such term in Recital A.

 

ARTICLE II

INDEPENDENCE OF THE PARTIES

 

Hiland shall be an independent contractor and not an agent of Continental,
except to the limited extent and for those limited purposes specifically set
forth herein. Nothing in this Agreement or the arrangement for which it is
written shall constitute or create a joint venture, partnership, or any other
similar agreement between Hiland and Continental, nor shall it be deemed to
limit the Parties to perform similar activities with third parties even while
this Agreement is in full force and effect.

 

ARTICLE III

REPRESENTATIONS OF THE PARTIES

 

3.1                                 In order to induce Hiland to enter into this
Agreement, Continental represents and warrants to Hiland that, as of the
Effective Date:

 

(a)                                  Continental is a corporation duly formed,
validly existing and in good standing under the laws of the State of Oklahoma.
Continental has the power to own its property and to execute, deliver and
perform this Agreement and to carry on its business as it is currently being
conducted.

 

(b)                                 The execution, delivery and performance by
Continental of this Agreement have been duly authorized by all necessary action
of Continental. This Agreement is the legal, valid and binding obligation of
Continental, duly enforceable against Continental in accordance with its terms
(subject, however, to the effects of bankruptcy, insolvency, reorganization,
moratorium, and similar laws from time to time in effect relating to the rights
and remedies of creditors as well as to general principles of equity).

 

(c)                                  The execution, delivery and performance by
Continental of this Agreement do not and will not result in a violation of,
conflict with or default under (i) the terms of Continental’s organizational,
formation or governing documents; (ii) any applicable law; or (iii) any
contract, agreement, or other obligation or restriction to which Continental may
be bound; nor, to the best of Continental’s knowledge after due inquiry,

 

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does there exist any condition that, upon the passage of time, the giving of
notice or both, would cause any such violation, conflict or default.

 

(d)                                 Except for the transfer of the Continental
Permit to Hiland, no approval, consent, waiver, order or authorization of, or
registration, qualification, declaration, or filing with, or notice to, any
Governmental Authority or other third party is required on the part of
Continental in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby.

 

(e)                                  There are no Proceedings pending or, to the
best of Continental’s knowledge after due inquiry, threatened against
Continental that would adversely affect its ability to execute, deliver and
perform this Agreement.

 

3.2                                 In order to induce Continental to enter into
this Agreement, Hiland represents and warrants to Continental that, as of the
Effective Date:

 

(a)                                  Hiland is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware. Hiland has the power to own its property and to execute, deliver and
perform this Agreement and to carry on its business as it is currently being
conducted.

 

(b)                                 The execution, delivery and performance by
Hiland of this Agreement have been duly authorized by all necessary action of
Hiland. This Agreement is the legal, valid and binding obligation of Hiland,
duly enforceable against Hiland in accordance with its terms (subject, however,
to the effects of bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect relating to the rights and remedies of
creditors as well as to general principles of equity).

 

(c)                                  The execution, delivery and performance by
Hiland of this Agreement do not and will not result in a violation of, conflict
with or default under (i) the terms of Hiland’s organizational, formation or
governing documents; (ii) any applicable law; or (iii) any contract, agreement,
or other obligation or restriction to which Hiland may be bound; nor, to the
best of Hiland’s knowledge after due inquiry, does there exist any condition
that, upon the passage of time, the giving of notice or both, would cause any
such violation, conflict or default.

 

(d)                                 Except for the transfer of the Continental
Permit to Hiland, no approval, consent, waiver, order or authorization of, or
registration, qualification, declaration, or filing with, or notice to, any
Governmental Authority or other third party is required on the part of Hiland in
connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby.

 

(e)                                  There are no Proceedings pending or, to the
best of Hiland’s knowledge after due inquiry, threatened against Hiland that
would adversely affect its ability to execute, deliver and perform this
Agreement.

 

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ARTICLE IV

RESPONSIBILITIES OF THE PARTIES

 

4.1                                 (a) Hiland agrees to provide the Services in
a manner that results in the delivery to Continental at the Delivery Points, on
a monthly basis, of the quantities of Cedar Air, Cedar Water, and HC Air
requested by Continental for each Commodity set forth in the Monthly Delivery
Notice. This monthly quantity at any one site will not exceed the maximum output
from all equipment located at any one site, as determined from the original
design.

 

(b)                                 Continental will nominate the volumes of
Cedar Air, Cedar Water, and HC Air that it will request at the Delivery Points
for any calendar month on or before the 25th (23rd in the month of February) day
of the preceding calendar month in an email to a designated Hiland
representative (the “Monthly Delivery Notice”).

 

4.2                                 (a) Continental agrees to provide, at no
cost to Hiland, all fuel, whether gas or electric, and water, in the quantities
necessary for Hiland to provide the Services required to deliver each of the
Commodities as set forth in Section 4.1 above.

 

(b)                                 Hiland agrees to obtain written consent from
the then designated Continental manager before starting up more than 4 of the 6
compressors at the Hadley Compressor Station. Should Hiland fail to obtain such
consent, Hiland agrees to pay the actual excess demand and usage charges for
electricity incurred by Continental related to such start-up and operations.

 

4.3                                 (a) Subject to: (i) Article VII below; (ii)
the provision of fuel (including, but not limited to, consent as necessary to
start-up additional compressors at the Hadley Compressor Station), and water by
Continental as required in Section 4.2 above; Hiland guarantees the provision of
Services adequate to produce 96.5% (the “Guarantee Percentage”) of the
quantities of Cedar Air, Cedar Water, and HC Air set forth in each Monthly
Delivery Notice for such calendar month (for each Commodity, the “Performance
Guarantee,” and collectively the “Performance Guarantees”) as determined in
accordance with Section 4.3(c) below.

 

(b)                                 Hiland will use its best efforts to inform
Continental 30 days in advance of the dates when it expects its equipment to be
down for scheduled maintenance.

 

(c)                                  In the event that Hiland is not able to
meet the Performance Guarantee for any particular Commodity in any month, Hiland
shall credit or pay to Continental an amount determined as follows:

 

(i)                                     Within 15 days after the end of each
calendar month, the Continental Baker District Area Supervisor (or designee) and
the Hiland designee will perform a performance review of each Hiland location
that produces a Commodity;

 

(ii)                                  If, as a result of the performance review,
it is determined that the quantity of a Commodity produced at such location for
the preceding month was equal to or greater than the Performance Guarantee for
such Commodity for such month less quantities attributable to the times during
such month Hiland was

 

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unable to deliver such Commodity due to an event set forth in 4.3(a)(i), (ii)
above (the “Adjusted Performance Guarantee”), no further calculation will be
made and no Liquidated Damages will be assessed for such Commodity;

 

(iii)                               If the quantity for a Commodity determined
in accordance with Section 4.3(c)(ii) above is less than the Adjusted
Performance Guarantee, and the run-time data for the particular Hiland location
which was used to produce such Commodity is equal to or greater than the
Guarantee Percentage as adjusted for the percentage of time during such month
Hiland was unable to deliver such Commodity due to an event set forth in
4.3(a)(i), or (ii) above (the “Adjusted Guarantee Percentage”), no further
calculation will be made and no Liquidated Damages will be assessed for such
Commodity;

 

(iv)                              If the quantity for a Commodity determined in
accordance with Section 4.3(c)(ii) above is less than the Adjusted Performance
Guarantee, and the run-time data for the particular Hiland location which was
used to produce such Commodity is less than the Adjusted Guarantee Percentage,
Hiland will credit or pay (as set forth in Section 4.3(d) below) an amount
determined by (I) subtracting from 1 the amount determined by dividing the
actual percentage of such Commodity delivered during such month by the Adjusted
Performance Guarantee for such Commodity for such month and (II) multiplying
such number times the Operating Fee for such Commodity, as liquidated damages
(the “Liquidated Damages”).

 

(d)                                 The Liquidated Damages, if any, shall be
determined within 30 days after the end of the calendar month in which such
occurred and credited on the next invoice from Continental to Hiland after their
determination, or paid to Continental within 15 days after such determination at
the address set forth in Section 12.1.

 

(e)                                  The sums payable by Hiland to Continental
as Liquidated Damages have been calculated as representing the anticipated loss
to Continental as a result of any failure to achieve the Performance Guarantees
and, except as provided in Section 10.2, shall be Continental’s sole and
exclusive remedy for Hiland’s failure to meet the Performance Guarantees. The
Parties agree (i) that Continental’s damages arising out of such performance
failure are impossible to calculate with precision and (ii) that the terms and
amount set forth above for Liquidation Damages are reasonable.

 

(f)                                    Notwithstanding anything else in this
Agreement to the contrary, Hiland shall not be obligated to pay Liquidated
Damages in any Contract Year in excess of the aggregate of the Operating Fees
for each Commodity for such Contract Year (the “LD Cap”).

 

ARTICLE V

OPERATING FEE

 

In consideration for Hiland making available the necessary equipment and labor
to perform the Services, and for the actual provision of the Services in the
manner and on the terms

 

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set forth in this Agreement, Continental shall pay to Hiland the Operating Fees
per month set forth on Exhibit B in accordance with the terms set forth in
Article VI.

 

ARTICLE VI

BILLING AND PAYMENT

 

6.1                                 Hiland will invoice Continental for the
Operating Fees less a credit for Liquidated Damages, if any, at the address
provided in Section 12.1 on or before the 5th of each month for Services
performed in the preceding month, and Continental agrees to make payment to
Hiland by wire transfer to the account set forth in Section 12.1 or by other
means to be received by Hiland within 15 days of the date of receipt of Hiland’s
invoice (the “Due Date”). When the Due Date falls on a day that is not a
Business Day, Continental shall cause such payment to be actually received by
Hiland on or before the next Business Day after such date. In the event Hiland’s
invoice is disputed, Continental shall pay the undisputed amounts on or before
the Due Date and give Hiland written notification setting forth the disputed
amounts and the basis therefor by the Due Date. Hiland and Continental shall use
reasonable diligence to resolve any disputed amounts. Any disputed amounts which
become undisputed and due to one Party shall be subject to interest from the
other Party as described in Section 6.2 below from the original Due Date for
such amounts.

 

6.2                                 If Continental fails to make timely payment
of all undisputed amounts so billed, simple interest on the unpaid portion of
the invoice shall accrue at the lower of the Prime Rate plus 2% or the maximum
lawful rate. For the purpose of this article, the term “Prime Rate” shall mean
the rate charged by JPMorgan Chase Bank to their most credit worthy customers
for each month in which such payment is outstanding.

 

ARTICLE VII

FORCE MAJEURE

 

7.1                                 In the event that any Party hereto is
rendered unable, wholly or in part, by Force Majeure to carry out its
obligations under this Agreement, other than the obligation to make payment of
amounts due hereunder, the obligations of such Party, so far as they are
affected by the Force Majeure, shall be suspended during the continuance of the
Force Majeure. The Party impacted by a Force Majeure shall, upon such occurrence
of a Force Majeure, (a) give verbal notice to the other Party followed by
written notice within a reasonable period of time of the particulars of the
Force Majeure and (b) take commercially reasonable steps to remedy the Force
Majeure.

 

7.2                                 The term “Force Majeure” means any event
outside the control of the affected Party that cannot, despite the exercise of
commercially reasonable precautions, remediation and mitigation efforts, be
prevented, avoided or removed and that prevents the total or partial performance
of the obligations of the affected Party under this Agreement. The following
events, the list of which is not exhaustive, shall be considered to be cases of
Force Majeure to the extent they present the characteristics described above:
(a) lightning, earthquake, hurricane, storm, cyclone, typhoon, tsunami, peril of
the sea, wind, drought, abnormal weather condition, or other similar natural
calamities or acts of God; (b) fire, explosion, chemical contamination, or
vandalism; (c) epidemic or plague; (d) act of war (declared or undeclared),
invasion, armed

 

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conflict or act of foreign enemy, blockade, economic sanction or embargo,
revolution, sabotage, riot, insurrection, civil unrest or disturbance, military
or guerilla action, banditry, terrorist activity or a threat of terrorist
activity, or tribal, religious or sectarian unrest; (e) radioactive
contamination; (f) strikes, lockouts and work stoppages; (g) damage to or
failure of equipment; and (h) other acts or omissions of Governmental
Authorities.

 

ARTICLE VIII

INDEMNITY AND INSURANCE

 

8.1                                 AS BETWEEN CONTINENTAL AND HILAND, HILAND
SHALL BE DEEMED TO BE IN CONTROL AND POSSESSION OF THE COMPRESSED AIR AND
PRESSURIZED WATER UNTIL SUCH TIME AS SAID PRODUCTS ARE DELIVERED TO THE DELIVERY
POINTS AND AFTER SUCH TIME CONTINENTAL SHALL BE DEEMED TO BE IN CONTROL AND
POSSESSION OF THE COMPRESSED AIR AND PRESSURIZED WATER.

 

8.2                                 EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS
4.3, 8.3, 8.4 AND 8.5 BELOW, EACH PARTY (THE “INDEMNIFYING PARTY”) SHALL DEFEND,
INDEMNIFY AND HOLD HARMLESS THE OTHER PARTY (THE “INDEMNIFIED PARTY”) FROM AND
AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES, INJURIES, LIABILITIES, CLAIMS,
DEMANDS, AND PENALTIES (INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS’
FEES AND EXPENSES) SUSTAINED OR INCURRED BY THE INDEMNIFIED PARTY TO THE EXTENT
(a) RESULTING FROM THE NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF
THE INDEMNIFYING PARTY OR (b) RELATING TO THE COMPRESSED AIR AND PRESSURIZED
WATER DURING THE PERIOD THAT THE INDEMNIFYING PARTY HAS CONTROL AND POSSESSION
OF SUCH IN ACCORDANCE WITH SECTION 8.1.

 

8.3                                 CONTINENTAL SHALL DEFEND, INDEMNIFY, AND
HOLD HARMLESS HILAND FROM AND AGAINST ALL LOSSES, COSTS, DAMAGES, INJURIES,
LIABILITIES, CLAIMS, DEMANDS, AND PENALTIES (INCLUDING, BUT NOT LIMITED TO,
REASONABLE ATTORNEYS’ FEES AND EXPENSES) SUSTAINED OR INCURRED BY HILAND
RELATING TO THE MANAGEMENT, MAINTENANCE, REPAIR, AND OPERATION OF EQUIPMENT FOR
THE PROVISION OF SERVICES (INCLUDING, BUT NOT LIMITED TO, FAILURE TO OBTAIN AND
COMPLY WITH ALL NECESSARY PERMITS) BY CONTINENTAL OR ANY OTHER PERSON FOR
CONTINENTAL PRIOR TO THE EFFECTIVE DATE.

 

8.4                                 EACH INDEMNIFYING PARTY SHALL DEFEND,
INDEMNIFY, AND HOLD HARMLESS THE INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL
LOSSES, COSTS, DAMAGES, INJURIES, LIABILITIES, CLAIMS, DEMANDS, AND PENALTIES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS’ FEES AND EXPENSES) FOR
DAMAGE TO OR LOSS OF THE INDEMNIFYING PARTY’S PROPERTY, EXCEPT TO THE EXTENT
CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.

 

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8.5                                 IN NO EVENT, WHETHER AS A RESULT OF BREACH
OF CONTRACT, TORT LIABILITY (INCLUDING NEGLIGENCE AND GROSS NEGLIGENCE), STRICT
LIABILITY, OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR SPECIAL,
PUNITIVE, INCIDENTAL, INDIRECT, EXEMPLARY, OR CONSEQUENTIAL DAMAGES OF ANY
NATURE WHATSOEVER, INCLUDING LOSS OF PROFITS. THE PARTIES ALSO INTEND AND AGREE
THAT THE PROVISIONS OF THIS AGREEMENT WITH RESPECT TO INDEMNITIES AND
LIMITATIONS SHALL CONTINUE IN FULL FORCE AND EFFECT NOTWITHSTANDING THE
TERMINATION, SUSPENSION, CANCELLATION, OR EXPIRATION OF THIS AGREEMENT. THE
PROVISIONS OF THIS SECTION 8.5 SHALL NOT PRECLUDE THE RECOVERY, WHERE
APPLICABLE, OF LIQUIDATED DAMAGES.

 

8.6                                 IT IS THE PARTIES’ INTENT THAT, EXCEPT AS
PROVIDED IN SECTION 8.2, THE INDEMNITY OBLIGATIONS IN THIS ARTICLE VIII ARE
WITHOUT REGARD TO THE CAUSES OF THE INDEMNIFIED CLAIMS, INCLUDING THE NEGLIGENCE
(BUT WITH REGARD TO SECTION 8.4, NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)
OF THE INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, OR CONCURRENT,
OR ACTIVE OR PASSIVE OR THE STRICT LIABILITY OF THE INDEMNIFIED PARTY.

 

8.7                                 During the term of this Agreement and any
extension, Hiland shall maintain the insurances set forth on Exhibit C.

 

ARTICLE IX

TERM

 

The term of this Agreement shall be for a period of four years commencing on the
Effective Date and ending at midnight Central time on the day prior to the
fourth anniversary of the Effective Date and thereafter this Agreement shall
automatically renew for additional one month terms unless terminated by either
Party by the giving of notice to the other Party of such termination no less
than 15 days prior to the end of the then current term.

 

ARTICLE X

DEFAULT

 

10.1                           If Continental shall fail to pay Hiland any
amounts due under this Agreement within 10 days after notice from Hiland of such
failure, Hiland, in addition to any other rights and remedies it may have, shall
have the right to terminate this Agreement.

 

10.2                           If Hiland fails to provide any Services, for 20
consecutive days, and such failure is not the result of force majeure or of
Continental’s failure to provide the fuel and water as set forth in Section 4.2,
Continental may, upon 10 days notice to Hiland, terminate this Agreement.

 

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ARTICLE XI

ASSIGNMENT

 

This Agreement shall extend to and be binding upon the Parties hereto, their
heirs, administrators, successors, and assigns. Neither Party shall be entitled
to assign in whole or in part any of its rights and obligations under this
Agreement without the prior written consent of the other party. Notwithstanding
such consent, no such transfer of the interest of one Party hereunder, wholly or
partially, shall affect or bind the other Party until it has been furnished, at
the address specified in Article XII below, with (a) a copy of the original
documentation of such transfer or succession and (b) an acknowledgement and
acceptance of the terms of this Agreement in a form reasonably acceptable to the
non-assigning Party by the assignee of such interest.

 

ARTICLE XII

ADDRESS

 

12.1                           All notices or other communications between the
Parties given under or in relation to this Agreement shall be delivered
physically or by facsimile to the respective parties at the following addresses
or facsimile numbers:

 

Continental Resources, Inc.

P.O. Box 1032

Enid, Oklahoma 73702

Attn: General Counsel

Phone: (580) 548-5137

Facsimile: (580) 242-4703

 

Hiland Partners, LP

P.O. Box 5122

Enid, Oklahoma 73702

Attn: Randy Moeder

Phone: (580) 234-0473

Facsimile: (580) 548-5188

 

12.2                           Any notice or other communication shall be
effective upon actual receipt if received during the recipient’s normal business
hours, or at the beginning of the next Business Day after receipt if not
received during the recipient’s normal business hours.

 

12.3                           Either Party may change its address for notice
purposes by written notice to that effect delivered to the other Party in
accordance with this Article.

 

ARTICLE XIII

NON-WAIVER

 

The failure of either Party at any time to exercise any right or to require
performance by the other Party of any provision hereof shall in no way affect
the right of such Party thereafter to enforce the same, nor shall the waiver by
either Party hereto of any breach of any provision

 

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hereof by the other Party be a waiver of any other breach of such provision, or
as a waiver of the provision itself.

 

ARTICLE XIV

MERGER

 

This Agreement terminates and supersedes any prior agreements pertaining to
equipment or services related to the compression of air or water between the
Parties hereto or their successors-in-interest effective as of the Effective
Date (each a “Prior Agreement”). This Agreement does not release or discharge
any obligation or debt pertaining to any Prior Agreement (including, but not
limited to, any equipment leases) which arose prior to the Effective Date.

 

ARTICLE XV

GOVERNING LAW, VENUE

 

15.1                           This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Oklahoma, except for
the conflicts of laws provisions thereof which would refer resolution of any
dispute to the laws of another jurisdiction.

 

15.2                           Each Party irrevocably and unconditionally
submits, for itself and its property to the nonexclusive jurisdiction of the
courts of the State of Oklahoma sitting in Garfield County, Enid, Oklahoma, and
of the United States District Court sitting in Western District of Oklahoma,
Oklahoma City, Oklahoma, in any action or proceeding arising out of or relating
to this Agreement or for recognition or enforcement of any judgment, and each
Party hereto irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such Oklahoma
State Court or, to the fullest extent permitted by applicable law, in such
Federal Court. Each Party agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

15.3                           Each Party irrevocably and unconditionally
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of venue of any action or proceeding
arising out of or related to this Agreement in any court referred to in Section
15.2 above. Each Party hereby irrevocably waives, to the fullest extent
permitted by applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

ARTICLE XVI

MUTUAL DRAFTSMANSHIP

 

This Agreement was prepared jointly by the Parties hereto, and not by either to
the exclusion of the other.

 

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ARTICLE XVII

MISCELLANEOUS

 

17.1                           Entire Agreement. This Agreement constitutes the
entire agreement between the Parties covering the subject matter hereof, and
there are no other agreements, modifications, conditions, or understanding,
written or oral, expressed or implied, pertaining to the subject matter hereof
which are not contained herein. Provided however, if there is any conflict
between a provision in the body of this Agreement and any Exhibit thereto, the
provisions contained in the body of this Agreement shall govern.

 

17.2                           Headings and Subheadings. The headings and
subheadings contained in this Agreement are used solely for convenience and do
not constitute a part of the Agreement between the Parties hereto nor should
they be used to aid in any manner in construing this Agreement.

 

17.3                           Rights Enforceable. The provisions of this
Agreement shall not impart rights enforceable by any person, entity, or
organization not a Party hereto or not a successor or assignee of a Party to
this Agreement.

 

17.4                           Amendments. All amendments and modifications to
this Agreement shall be in writing and shall be executed by duly authorized
representatives of both Parties.

 

17.5                           Disputes. If any dispute or difference shall
arise between the Parties out of or relating to this Agreement or a breach
hereof, including any dispute or difference arising in connection with the
existence or termination of this Agreement (each a “Dispute”), the Parties shall
attempt to resolve the same through referral to senior management of each Party.
In the event such Dispute is not resolved within 30 days after referral to the
senior management of each Party, the Parties may agree to mediation of the
Dispute in a mutually acceptable manner, including, but not limited to selection
of a third party mediator and establishment of the period of time for such
mediation. If the Dispute is not resolved by such mediation, either Party may
seek to resolve the Dispute in any lawful manner.

 

12

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IN WITNESS WHEREOF, this Agreement may be executed in any number of
counterparts, each of which shall be considered an original.

 

 

 

CONTINENTAL RESOURCES, INC.

 

 

 

 

 

By:

/s/ G. B. SMITH

 

 

 

G. B. Smith

 

 

Sr. Vice President Drilling and Production

 

 

 

 

 

HILAND PARTNERS, LP

 

 

 

By:

Hiland Partners, GP, LLC,

 

 

its general partner

 

 

 

 

 

By:

/s/ RANDY MOEDER

 

 

 

Randy Moeder

 

 

Chief Executive Officer and President

 

[Signature Page to the Compression Services Agreement]

 

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

 

EXHIBIT A
DELIVERY POINTS

 

 

 

Location

Cedar Hills Air Injection (“Cedar Air”)

 

The five-4” main discharge block valves immediately downstream of the
compressors, located inside the Hadley Compression Station Building

 

 

 

Cedar Hills Water Injection (“Cedar Water”)

 

The 8” “2500 series” flange located on the discharge line immediately downstream
of the pumps inside the Bradac Water Station Building

 

 

 

Horse Creek Compressor Station (“HC Air”)

 

The 4” high pressure valve located on the North side of the Horse Creek
Compression Station Building

 

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

 

EXHIBIT B
OPERATING FEE

 

Commodity

 

Fee per Month

 

Cedar Air — Cedar Hills North

 

$

293,162.36

 

Cedar Water — Cedar Hills North

 

$

45,376.43

 

HC Air — SMPHU

 

$

63,085.42

 

 

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EXHIBIT C
INSURANCE

 

Location

 

Occupancy

 

Description of
Property

 

Limit

 

Insured Value

 

 

 

 

 

 

 

 

 

 

 

Cedar Air—Cedar Hills North

 

 

 

 

 

 

 

$

13,820,500

 

 

 

Five Compressors—Ariel JGC/4 with Cooler

 

Compressor

 

$

5,453,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Five Compressors—Joy/Cooper TAE 100MR2

 

Compressor

 

$

4,487,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor Control Center

 

 

 

$

1,989,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

115 KV/7.2 KV Substation

 

Substation

 

$

1,891,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Cedar Water—Cedar Hills North

 

 

 

 

 

 

 

$

979,000

 

 

 

Compressor Building

 

Building

 

$

274,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Injection Pumps

 

Pumps

 

$

525,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water Injection Building

 

Building

 

$

180,000

 

 

 

 

 

 

 

 

 

 

 

 

 

HC Air—SMPHU

 

 

 

 

 

 

 

$

2,000,000

 

 

 

Superior Clean Burn II Model 16SGTB, 2650 HP

 

Compressor

 

$

950,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Superior Clean Burn II Model 16SGTB, 2650 HP

 

Compressor

 

$

950,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compressor Building

 

Building

 

$

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Compression Assets

 

 

 

 

 

$

16,799,500

 

 

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