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Exhibit 10.1
 
FORM OF DRILLING AND OPERATING AGREEMENT
 
 
DRILLING AND OPERATING AGREEMENT
 
This Agreement is entered into by and between PDC 2004-C Limited Partnership,
hereinafter designated and referred to as the "Partnership", and Petroleum
Development Corporation, hereinafter referred to and designated as "PDC".
 
Whereas, the parties to this agreement desire to enter into an agreement to
explore and develop certain Prospects for the production of oil and gas as
hereinafter provided,
 
It is agreed as follows:
 
ARTICLE I
 
DEFINITIONS
 
As used in this agreement, the following words and terms shall be defined as
follows:
 
A.           The term "oil and gas" shall mean oil, gas, casinghead gas, gas
condensate, and all other liquid or gaseous hydrocarbons and other marketable
substances produced therewith, unless an intent to limit the inclusiveness of
this term is specifically stated.
 
B.           The term "Prospect" shall mean a spacing unit established according
to state regulatory guidelines and industry practice on which the Partnership
proposes to drill a well. Generally, the spacing unit for Colorado wells will
encompass approximately 32 acres for wells drilled in the Wattenberg Field and
approximately 20 acres for wells drilled in the Grand Valley Field.
 
C.           "Royalty" shall mean a payment from gross revenues made to the
owner of the oil and gas mineral rights of a Prospect.
 
D.           "Overriding royalty" shall mean a payment from gross revenues to a
party other than the owner of oil and gas mineral rights of a Prospect.
 
E.           "Proportionate Working Interest" shall mean an interest in a well
or Prospect of less than 100% which bears that same percentage of costs of
development and production as it receives in production revenues after deducting
for royalty and overriding royalties.
 
F.           "Non-operators" shall mean all parties holding a proportionate
working interest in a Prospect, including the Additional General Partners and
the Limited Partners, but excluding PDC if it is also serving as Operator.
 
ARTICLE II
 
EXHIBITS
 
The following exhibits are incorporated in and made a part of this agreement:

 
 

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A.
Exhibit "A", Prospects.

 
1.           Identification of each Prospect to be drilled.
2.           Target formation.
3.           The Partnership fractional interest therein.
 
 
B.
Exhibit "B", Insurance.

 
 
C.
Exhibit "C", Additional Prospects.

 
1.           Identification of additional Prospects added or substituted after
the original date of this agreement, and if substituted, identification of the
Prospect which is replaced.
 
2.           Target formation.
 
3.           The Partnership fractional interest therein.
 
4.           Approval by the Partnership and PDC.
 
ARTICLE III
 
OPERATOR
 
 
A.
Designation and Responsibilities of Operator:

 
PDC shall be the Operator of the Prospects, and shall conduct and direct and
have full control of all operations on the Prospects as permitted and required
by, and within the limits of this agreement. It shall conduct all such
operations in a good workmanlike manner, but it shall have no liability as
Operator to the Partnership for losses sustained or liabilities incurred, except
such as may result from negligence or misconduct. The Managing General Partner
may subcontract with another operator or operators to perform some of all of die
duties of the operator, on Terms and conditions substantially the same as those
discussed herein. The Managing General Partner will supervise operations by
other non-affiliated drilling contractors and subcontractors.

 
B.
Resignation or Removal of Operator and Selection of Successor:

 
1.           Resignation or Removal of Operator: PDC may resign as Operator at
any time by giving written notice thereof to the Partnership. If PDC terminates
its legal existence, no longer owns an interest in the Prospects, has filed a
petition under the Federal bankruptcy laws or any state insolvency law or a
receiver, fiscal agent, or similar officer has been appointed by a court for the
business or property of PDC, or is otherwise no longer capable of serving as
Operator, PDC shall be deemed to have resigned without any action by the
Partnership, except the selection of a successor. PDC may be removed by the
affirmative vote of Non-Operators owning a majority working interest in each
Prospect after excluding the voting interest of Operator. Such resignation or
removal shall not become effective until 7:00 o'clock A.M., Eastern time, on the
first day of calendar month following the expiration of ninety (90) days after
the giving of notice of resignation of PDC or action by the Non-Operators to
remove PDC as Operator, unless a successor Operator has been selected and
assumes the duties of PDC at an earlier date. PDC, after effective date of
resignation or removal, shall be bound by the terms hereof as a Non-Operator. A
change of a corporate name or structure of PDC or transfer of PDC's interest to
any single subsidiary, parent or successor corporation shall not be the basis
for removal of PDC as Operator.
 
2.           Selection of Successor Operator: Upon the resignation or removal of
PDC, a successor Operator shall be selected by the parties. The successor
Operator shall be selected by the affirmative vote of parties owning a majority
working interest in each Prospect; provided, however, if an Operator which has
been removed fails to vote or votes only to succeed itself, the successor
Operator shall be selected by the affirmative vote of parties owning a majority
interest after excluding the voting interest of the Operator that was removed.

 
C.
Employees:

 
The number of employees used by PDC in conducting operations hereunder, their
selection, and the hours of labor and the compensation for services performed
shall be determined by PDC.

 
 

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ARTICLE IV
 
DRILLING PROSPECTS
 
 
A.
Prospects:

 
Exhibit "A" lists Prospects initially to be acquired by the Partnership, and its
proportionate working interest in each Prospect. Most wells to be drilled by the
Partnerships will be offsets to producing wells. Therefore, it is unlikely that
a well drilled on a Prospect will prove up any additional acreage outside the
Prospect. If a Partnership well does prove up additional acreage, PDC will
assign the Partnership a proportionate interest in such spacing units.
 
 
B.
Cost:

 
The Partnership shall reimburse PDC for its proportionate share of the lesser
of:
 
1.            The fair market value of the Prospect, or
 
 
2.
The "Cost" of acquisition of the Prospect including: (a) the price paid by PDC
for such property; (b) title examination, abstracting, brokers commissions,
filing fees, recording costs, transfer taxes, and other charges incurred in
connection with the acquisition of the property; (c) bonuses, rentals and ad
valorem taxes paid by PDC with respect to the Prospect to the date of its
transfer to the Partnership, interest on funds used to acquire or maintain such
property, and such portion of PDC's expenses for geological, drafting,
accounting, legal and other like services allocated to the Prospect in
accordance with generally accepted accounting principles, not including for
expenses incurred in the prior drilling of wells, and provided such expenses
shall have been incurred not more than 36 months prior to the purchase by the
program.

 
C.
Substitution:

 
As drilling progresses other, more desirable Prospects may become may become
less desirable as a result of additional information not available as of the
date of this agreement. For any undrilled Prospect, the Partnership may request
that PDC substitute another Prospect, in which case the entire acquisition cost
paid for the Prospect or a substitute thereof will be applied against the cost
of the substituted Prospect, and against other costs of this contract if and to
the extent the cost of the substitute Prospect is less than the cost of the
original Prospect it replaces. An amendment to this agreement in the form of
Exhibit "C" shall be used for the addition or substitution of a Prospect.
 
 
D.
Title Examination and Opinion:

 
Title examination shall be made by outside attorneys on the drillsite of any
proposed well prior to commencement of drilling operations. The opinion will
include ownership of the working interest, mineral, royalty, overriding royalty,
and production payments under the applicable leases. A copy of the opinion will
be furnished to the Partnership.
 
PDC shall take such steps as are necessary in its best judgment to render title
to the leases assigned to the Partnership acceptable for the purposes of the
Partnership. No operation shall be commenced on leases acquired by the
Partnership unless the Partnership Manager is satisfied that necessary title
requirements have been satisfied by PDC and that the undertaking of such
operation would be in the interest of the Partnership. PDC shall be free,
however, to use their own best judgment in waiving title requirements and shall
not be liable to the Partnership, or Participants for any mistakes of judgment;
nor shall PDC be deemed to be making any warranties or representations, express
or implied, as to the validity or merchantability of the title to any lease
assigned to the Partnership or the extent of the interest covered thereby.

 
 

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ARTICLE V

 
INTEREST IN COSTS AND PRODUCTION

 
A.
Royalties and Overriding Royalties:

 
The Partnership interest in production from drilling Prospects will be subject
to the payment to non-affiliated parties of royalties and overriding royalties ,
provided the weighted average of all royalties for all Partnership Prospects
drilled shall not exceed 25% gross revenues. No such royalty or overriding
royalty will be paid to PDC or its affiliates.

 
B.
Proportionate Working Interest:

 
The Partnership may acquire 100% of the working interest in a Prospect or a
proportionate interest of less than 100%. In the event the Partnership acquires
a proportionate interest, the respective obligations and benefits acquired by
the Partnership will be proportionately the same as the working interest
acquired. PDC and its affiliates may not retain any overrides or other burdens
on the interest conveyed to the Partnership. The Partnership will pay a
proportionate share of the total of lease, development, and operating costs, and
will be entitled to receive a proportionate share of production subject only to
royalties and overriding royalties discussed in Article V, A.

 
C.
Joint Venture Activities:

 
PDC may retain an interest or convey interests in undrilled Prospects to other
Joint Venturers, retaining for its own account a profit or promotional interest
on the interest conveyed. PDC shall require any party acquiring such an interest
to acquire a proportionate working interest and to assume and bear alone all
obligation associated with such an interest, and to bear alone and hold the
Partnership and other Joint Venturers harmless from all costs, claims, and
burdens associated with the interest acquired. At the discretion of the Managing
General Partner, the Partnership may enter into joint ventures which allow a
functional allocation of tangible, intangible and lease costs, where each joint
venturer is responsible for its overhead costs, provided the Partnerships
interest in the revenues and income of such a joint venture is proportional to
its contribution to the total cost of such venture.

 
D.
Adjustments:

 
Payment of any bill shall not prejudice the right of Partnership to protest or
question die correctness thereof: provided, however, all bills and statements
rendered to Partnership by PDC during any calendar year shall conclusively be
presumed to be true and correct after a twenty-four (24) month period unless the
Partnership takes written exception thereto and makes claim on PDC for
adjustment. No adjustment favorable to PDC shall be made unless it is made
within the same prescribed period. The provisions of this paragraph shall not
prevent adjustments resulting from a physical inventory of controllable
material.

 
E.
Audits:

 
The Partnership, upon notice in writing to PDC and all other Non-Operators,
shall have the right to audit PDC's accounts and records relating to the
Partnership wells for any calendar year within the twenty-four (24) month period
following the end of such calendar year; provided, however the making of an
audit shall not extend the time for the taking of written exception to and the
adjustments of account. Where mere are two or more Non-Operators, the
Non-Operators shall make every reasonable effort to conduct a joint audit in a
manner which will result in a minimum of inconvenience to PDC. PDC shall bear no
portion of the Non-Operators audit cost incurred under this paragraph unless
agreed to by PDC. The audits shall not be conducted more than once each year
without prior approval of PDC, except upon the resignation or removal of PDC as
operator, and shall be made at the expense of those Non-Operators requesting
such audit.
 
PDC shall reply in writing to an audit report within 75 days after receipt of
such report.

 
 

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ARTICLE VI
 
DRILLING AND DEVELOPMENT

 
A.
Agreement To Drill and Complete:

 
PDC shall commence drilling of a well or wells on each Prospect within 180 days
of the date of the initial formation of the Partnerships, but in no case later
than March 30, 2005 and shall continue drilling thereafter with due diligence to
the Target formation unless a condition which renders further drilling
impractical is encountered at a lesser depth, or unless the Partnership agrees
to complete or abandon the well at a lesser depth.
 
PDC shall make reasonable tests of all formations encountered during drilling
which give indication of containing economic quantities of oil and/or gas. If
such tests indicate the presence of economic quantities of oil and/or gas, PDC
shall complete the well and install such surface and well equipment, garnering
pipelines, heaters, separators, etc., as are necessary and normal in the area in
which the Prospect is located. If it is determined that the well is not likely
to produce oil and/or gas in commercial quantities PDC shall plug and abandon
the well in accordance with applicable regulations.
 
 
B.
Cost of Drilling and Completion:

 
The Partnership shall bear its proportionate share of the cost of drilling and
completing or drilling and abandoning each Partnership well, where the Managing
General Partner serves as operator as follows:
 
 
1.
The Cost of the Prospect, as defined; and

 
 
2.
For intangible well Costs:

 
 
a.
For each well completed and placed in production, an amount equal to the depth
of the well in feet at its deepest penetration as recorded by the drilling
contractor multiplied by the "intangible drilling and completion cost" in the
following table, plus the actual extra completion cost of zones completed in
excess of the cost of the first zone and actual additional costs incurred in the
event that an intermediate or third string of surface casing is run, rig
mobilization and tracking costs, the additional cost for directional drilling
and drill stem testing, sidetracking, fishing of drilling tools; or

 
 
b.
For each well which the partnership elects not to complete, an amount equal to
the "intangible dry hole cost" in the following table, plus the additional costs
incurred in the event that an intermediate or third string of surface casing is
run, rig mobilization and trucking costs, the additional cost for directional
drilling and drill stem testing, sidetracking, fishing of drilling tools; and

 
 
3.
The tangible Costs of drilling and completing tire Partnership wells and of
gathering pipelines necessary to connect the well to the nearest appropriate
sales point or delivery point.

 
To the extent that a Partnership acquires less than 100% of a Prospect, its
Drilling and Completion Costs of that Prospect will proportionately decrease.
 
 
 

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Footage Based Rate

Location
 
Target Formation
 
Approximate Well Depth
 
Intangible Drilling and Completion Cost*
 
Intangible Dry Hole Cost*
                 
Wattenberg Field Colorado
 
Cretaceous Codell
 
6,500 - 7,800'
 
$57 per foot
 
$19 per foot
                 
Wattenberg Field Colorado
 
Cretaceous J Sandstone
 
7,000 - 8,000'
 
$68 per foot
 
$22 per foot
                 
Piceance Basin Colorado
 
Cretaceous Mesaverde
 
7,000-10,000'
 
$135 per foot
 
$76 per foot
                 
Sand Wash Basin Colorado
 
Cretaceous Territory Sands
 
8,000- 12,000'
 
$135 per foot
 
$76 per foot

 
* The depth used for determination well charges will be the deepest penetration
by the drilling bit.
 
In the event the foregoing rates exceed competitive rates available from other
non-affiliated persons in the area engaged in the business of rendering or
providing comparable services or equipment, the foregoing rates will adjust to
an amount equal to that competitive rate.
 
 
C.
Completion By Less Than All Parties:

 
In the event not all Participants in a well wish to participate in a completion
attempt, the parties desiring to do so may pay all costs of the completion
attempt including the cost of necessary well equipment and a gathering pipeline,
and such parties shall receive all income and pay all operating costs from the
well until they have received an amount equal to 300% of the completion and
connection costs, after which time the non-consenting parties shall have the
right to receive their original interest in further revenues and expenses.

 
D.
Prepayment:

 
The Partnership agrees to pay PDC the Prospect cost for each planned well prior
to the spud date. The Partnership shall pay drilling and completion costs of the
Operator as incurred. Notwithstanding die foregoing, PDC may require full
prepayment by December 31,2004 in order to assure the Partnership of the rates
quoted in Article VI, B, to arrange for the drilling equipment for the wells
through subcontractors and to provide PDC with working capital for the drilling
of the wells.

 
E.
Refunds:

 
In no event shall PDC be obligated to refund any moneys paid to it by the
Partnership under this Agreement. In the event any amounts paid under Article
VI, D exceed costs due under Article VI, B, such excess shall be credited to the
Partnership and shall be expended for additional drilling.

 
 

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ARTICLE VII
 
PRODUCTION AND SUBSEQUENT OPERATIONS
 
 
A.
Commencement of Production:

 
For purposes of this agreement, production will commence:
 
 
1.
In the case of gas wells when gas is first delivered from the well through a
pipeline or other delivery system to a purchaser;

 
 
2.
In the case of oil wells when the well has produced 100 barrels; or

 
 
3.
In the case of combination wells when either of criteria have been satisfied.

 
A well will be deemed to be "in production" in any month thereafter in which oil
or gas are produced in commercial quantities.
 
 
B.
Production Operations:

 
PDC shall provide all necessary labor, vehicles, supervision, management,
accounting, and overhead services for normal production operations, and lease
accounting, and shall be entitled to deduct from Partnership revenues a monthly
well-lending fee of $325 per Wattenberg Field well and $600 per Piceance Basin
well and Sand Wash Basin well and a monthly Partnership Administration charge of
S75 per well. If the Partnership has producing wells in areas different from
those above, the operator will charge a monthly Partnership Administration fee
of $75 per well plus a competitive industry rate for operations and field
supervision. Nonroutine operations will be billed to the Partnership at their
proportionate cost. Any nonroutine operation with an estimated cost exceeding
$2,000 will be authorized for expenditure ("AFE" or "AFE'd") and submitted to
the Non-Operators for approval. Approval of a majority of the working interest
owners will be required to authorize such operations. If the Partnership
authorized such operations PDC shall have the right to deduct payment for the
cost from Partnership revenues.
 
 
C.
Abandonment of Wells That Have Produced:

 
Any well which has been completed as a producer shall not be plugged and
abandoned without the consent of all Non-Operators. If all parties consent to
such abandonment, the well shall be plugged and abandoned in accordance with
applicable regulations and at the cost, risk of expense of all owners. If,
within (30) days after receipt of the notice of the proposed abandonment of any
well, all parties do not agree to the abandonment of such well, those wishing to
continue its operations from the interval(s) of the formation(s) then open to
production shall tender to each of die other parties its proportionate shale of
the value of the wells salvageable material and equipment, less the estimated
cost of salvaging and assign the non-abandoning parties, without warranty,
express or implied, as to title or as to quantity, or fitness for use of the
equipment and material, all of its interest in the well and related equipment,
together with its interest in leasehold estate as to, but only as to, the
interval or intervals of the formation or formations then open to production.
 
 
D.
Marketing of Production:

 
The Partnership shall have the right to take in kind and separately dispose of
its share of all oil and gas produced from the Prospects, excluding its
proportionate share of production required for lease operations and production
unavoidably lost. Initially the Partnership designates PDC as its agent to
market such production and authorizes PDC to enter into and bind the Partnership
in such agreements as it deems in the best interest of the Partnership for the
sale of such oil and/or gas. The Partnership may rescind the designation of PDC
as its agent with regard to all subsequent marketing agreements by written
notice at any time, but agrees to be bound by such agreements as may then be in
effect during their terms. The Partnership shall bear its proportionate share of
all marketing costs, if any. In the event PDC provides marketing services, its
charge shall be no greater than those charges made by unaffiliated marketers. If
pipelines which have been built by PDC are used in the delivery of natural gas
to market, PDC may charge a gathering fee not to exceed that which would be
charged by a nonaffiliated third parry for a similar service.
 
 
E.
Escalation in the Event of Rising Costs:

 
The production and accounting charges provided in Article VII, B, may be
adjusted annually beginning January 1, 2005, to an amount equal to the rates
from Article VII, B, multiplied by the ratio of the then current average weekly
earnings of Crude Petroleum and Gas Production workers to the average weekly
earnings of Crude Petroleum and Gas Production workers for 2004, as published by
the United States Department of Labor, Bureau of Labor Statistics, provided that
the charge may not exceed the rate which would be charged by other comparable
operators in the area of operations.

 
 

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ARTICLE VIII
 
LIABILITY OF PARTIES
 
 
A.
Liability of Parties:

 
If the Partnership participates in a well with third parties the liability of
the parties shall be several, not joint or collective. The Partnership shall be
responsible only for its obligations, and shall be liable only for its
proportionate share of the costs of developing and operating the Prospects. It
is not the intention of the parties to create, nor shall tins agreement be
construed as creating, a mining or other partnership or association, or to
render the parties liable as partners.
 
 
B.
Liens and Payment Defaults:

 
The Partnership grants to PDC a lien upon its oil and gas rights in the Contract
Area, and a security interest in its share of oil and/or gas when extracted and
its interest in all equipment, to secure payment of its share of expense,
together with interest thereon. To the extent that PDC has a security interest
under the Uniform Commercial Code of the state, PDC shall be entitled to
exercise the rights and remedies of a secured party under the Code. The bringing
of a suit and the obtaining of judgment by PDC for the secured indebtedness
shall not be deemed an election of remedies or otherwise affect the Hen rights
or security interest as security for the payment thereof. In addition, upon
default by the Partnership in the payment of its share of expense, PDC shall
have the right, without prejudice to other rights or remedies, to collect from
the purchaser the proceeds from the sale of the Partnership's share of oil
and/or gas until the amount owed by die Partnership, plus interest, has been
paid. Each purchaser shall be entitled to rely upon PDC's written statement
concerning the amount of any default. PDC grants a like lien and security
interest to the Partnership to secure payment of PDC's proportionate share of
expenses.
 
If any party fails or is unable to pay its share of expense within sixty (60)
days after rendition of a statement therefor by PDC, PDC shall pay the unpaid
amount in the proportion that the interest of each such parry bears to the
interest of all such parties.
 
 
C.
Payments and Accounting:

 
Except as herein otherwise specifically provided, PDC shall promptly pay and
discharge expenses incurred in the development and operation of the Contract
Area pursuant to this agreement. PDC shall keep an accurate record of the
account hereunder, showing expenses incurred and charges and credits made and
received.
 
Regardless of which party has contributed the lease(s) and/or oil and gas
interest(s) hereto on which royalty is due and payable, PDC shall pay or deliver
or cause to be paid or delivered the royalty and overriding royalty payments due
under die terms associated with the acquisition of each Prospect, and shall
deduct such payments from the revenue of the Partnership.

 
D.
Taxes:

 
Unless Partnership elects to take production in kind, PDC shall pay or cause to
be paid all production, severance, excise, gathering and other taxes imposed
upon or with respect to the production or handling of such party's share of oil
and/or gas produced under the terms of this agreement, and shall be entitled to
reimbursement for such taxes from partnership revenue.
 
 
 

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E.
Insurance:

 
At all times while operations are conducted hereunder, PDC shall comply with the
workmen's compensation laws of the state of West Virginia. PDC shall also carry
or provide insurance as outlined in Exhibit "B", attached to and made a part
hereof. PDC shall require all contractors engaged in work on or for the Contract
Area to comply with the workmen's compensation law of the state where the
operations are being conducted and to maintain such other insurance as PDC may
require.
 
No additional charge will be made for such insurance during drilling and
completion operations. When wells have been placed in production PDC may bill
for the cost of providing such insurance, allocated among wells and operations
in accordance with generally accepted accounting principles.
 
ARTICLE IX

 
INTERNAL REVENUE CODE ELECTION
 
This agreement is not intended to create, and shall not be construed to create,
a relationship of partnership or an association for profit between or among the
parties hereto. Notwithstanding any provision herein that the rights and
liabilities hereunder are several and not joint or collective, or that this
agreement and operations hereunder shall not constitute a partnership, if, for
federal income tax purposes, this agreement and the operations hereunder are
regarded as a partnership, each party hereby affected elects to be excluded from
the application of all of the provisions of Subchapter "K", Chapter 1, Subtitle
"A", of the Internal Revenue Code of 1986, as amended (the "Code") as permitted
and authorized by Code Section 761 and the regulations promulgated thereunder.
PDC is authorized and directed to execute on behalf of the Partnership such
evidence of this election as may be required by the Secretary of the Treasury of
the United States or the Federal Internal Revenue Service, including
specifically, but not by way of limitation, all of the returns, statements, and
the data required by Regulations 1.761. Should there be any requirement that
each party hereby affected to give further evidence of this election, each such
party shall execute such documents and furnish such other evidence as may be
required by the Federal Internal Revenue Service or as may be necessary to
evidence this election. No such party shall give any notices or take any other
action inconsistent with the election made hereby. If any present or future
income tax laws of the state or states in which the Contract Area is located or
any future income tax laws of the United States contain provisions similar to
those in Subchapter "K", Chapter 1, Subtitle "A", of the Code, under which an
election similar to that provided by Section 761 of the Code is permitted, each
party hereby affected shall make such election as may be permitted or required
by such laws. In making the foregoing election, each such party states that the
income derived by such party from operations hereunder can be adequately
determined without the computation of partnership taxable income.
 
ARTICLE X

 
CLAIMS AND LAWSUITS
 
PDC may settle any single uninsured third party damage claim or suit arising
from operations hereunder if the expenditure does not exceed One Thousand
Dollars ($1,000.00) and if the payment is in complete settlement of such claim
or suit. If the amount required for settlement exceeds the above amount, the
Partnership shall assume and take over the further handling of its interest in
the claim suit, unless such authority is delegated to PDC. All costs and
expenses of handling, settling, or otherwise discharging such claim or suit
shall be at the joint expenses of the parties participating in the operation
from which the claim or suit arises. If a claim is made against any party or if
any party is sued on account of any matter arising from operations hereunder
over which such individual has no control because of the rights given Operator
by this agreement, such party shall immediately notify all other parties, and
the claim or suit shall be treated as any other claim or suit involving
operations hereunder all claims and suits involving title to any interest
subject to this Agreement shall be treated as a claim or suit against all
parties participating in the Prospect so affected.

 
 

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ARTICLE XI

 
FORCE MAJEURE
 
If either parry is rendered unable, wholly or in part, by force majeure to carry
out its obligations under this agreement, other than the obligation to make
money payments, that party shall give to the other party prompt written notice
of the force majeure with reasonably full particulars concerning its; thereupon,
the obligations of the party giving the notice, so far as they are affected by
the force majeure, shall be suspended during, but no longer than, the
continuance of the force majeure. The affected party shall use all reasonable
diligence to remove the force majeure situation as quickly as practicable.
 
The requirement that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts, or other labor
difficulty by the party involved, contrary to its wishes; how all such
difficulties shall be handled shall be entirely within the discretion of the
party concerned.
 
The term "force majeure", as here employed, shall mean act of God, strike,
lockout, or other industrial disturbance act of the public enemy, war, blockade,
public riot, lightning, fire, storm, flood, explosion, governmental action,
governmental delay, restraint or inaction, unavailability of equipment or market
for oil and/or gas, and any other cause, whether of the kind specifically
enumerated above or otherwise, which is not reasonably within the control of the
party claiming suspension.
 
ARTICLE XII
 
NOTICES
 
AH notices required by this agreement shall be given in writing addressed to the
parties as follows:
 
 
1.
For the Partnership:

 
Petroleum Development Corporation, Managing General Partner
PDC 2004-C Limited Partnership
P.O. Box 26
Bridgeport, WV 26330

 
2.             For PDC:
 
Petroleum Development Corporation
P.O. Box 26
Bridgeport, WV 26330
 
Each party shall have the right to change its address at any time, by giving
written notice to all other parties.
 
ARTICLE XIII
 
TERM OF AGREEMENT
 
In the event a well drilled under any provision of this agreement, results in
production of oil and/or gas in paying quantities, this agreement shall continue
in force so long as any such well or wells produce, or are capable of
production, and for an additional period of 180 days from cessation of all
production; provided, however, if, prior to the expiration of such additional
period, one or more of the parties hereto are engaged in drilling, reworking,
deepening, plugging back, testing or attempting to complete a well or wells
hereunder, this agreement shall continue in force until such operations have
been completed and if production results therefrom, this agreement shall
continue in force as provided herein.
 
It is agreed, however, that the termination of this agreement shall not relieve
any party hereto from any liability which has accrued or attached prior to the
date of such termination.

 
 

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ARTICLE XIV

 
COMPLIANCE WITH LAWS AND REGULATIONS
 
 
A.
Laws, Regulations and Order:

 
This agreement shall be subject to the conservation laws of the state in which
the Prospects are located, to the valid rules, regulations, and orders of any
duly constituted regulatory body of said state; and to all other applicable
federal, state, and local laws, ordinances, rules, regulations, and orders.

 
B.
Governing Law:

 
This agreement and all matters pertaining hereto, including, but not limited to,
matters of performance, non-performance, breach, remedies, procedures, rights,
duties and interpretation or construction, shall be governed and determined by
the law of the state in which the Prospect is located.

 
C.
Regulatory Agencies:

 
Nothing herein contained shall grant, or be construed to grant, PDC the right or
authority to waive or release any rights, privileges, or obligations which
Partnership may have federal or state laws or under rules, regulations or orders
promulgated under such laws in reference to oil, gas and mineral operations,
including the location, operation, or production of wells, on tracts offsetting
or adjacent to (lie Contract Area.
 
With respect to operations hereunder, the Partnership agrees to release PDC from
any and all losses, damages, injuries, claims and causes of action arising out
of, incident to or resulting directly or indirectly from Operator's
interpretation or application of rules, rulings, regulations, or orders of the
Department of Energy or predecessor or successor agencies to the extent such
interpretation or application was made in good faith. The Partnership further
agrees to reimburse PDC for any amounts applicable to Partnerships share of
production that PDC may be required to refund, rebate or pay as a result of such
an incorrect interpretation or application.
 
ARTICLE XV

 
MISCELLANEOUS
 
This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and to their respective heirs, devisees, legal representative,
successors and assigns.
 
This instrument may be executed in any number of counterparts, each of which
shall be considered an original for all purposes.
 
IN WITNESS WHEREOF, this agreement shall be effective as of 11th day of August
 2004.
 

/s/ Darwin L. Stump
 
Darwin L. Stump
 
CFO and Treasurer
 
Petroleum Development Corporation
     
/s/ Steven R. Williams
 
Steven R. Williams, President
 
Petroleum Development Corporation,
 
Managing General Partner
 
PDC 2004-C Limited Partnership
 

 
 

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