Exhibit 10.5
Specific terms in this exhibit have been redacted, as marked with three
asterisks (***), because confidential treatment for those terms has been
requested. The redacted material has been separately filed with the Securities
and Exchange Commission.
GAS GATHERING AGREEMENT
BY AND BETWEEN
PIÑON GATHERING COMPANY, LLC
AND
SANDRIDGE EXPLORATION AND PRODUCTION, LLC
DATED
JUNE 30, 2009

 

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TABLE OF CONTENTS

              Page
Article 1 DEFINITIONS
    1  
 
       
Article 2 DEDICATION AND SERVICES
    14  
 
       
Section 2.1 Dedication
    14  
Section 2.2 Shipper’s Right To Deliver Other Gas
    15  
Section 2.3 Covenant Running with the Land
    15  
Section 2.4 Services
    15  
Section 2.5 Operation and Maintenance of Gathering System
    15  
Section 2.6 Priority of Services; Curtailment
    16  
Section 2.7 Third Party Gas
    16  
Section 2.8 Release of Dedicated Gas
    16  
Section 2.9 Maintenance of System Capacity
    18  
Section 2.10 Memorandum of Agreement
    18  
Section 2.11 No Breach
    18  
 
       
Article 3 MONTHLY SHORTFALL PAYMENTS
    18  
 
       
Section 3.1 Deliveries in Excess of the Base Volume
    18  
Section 3.2 Deliveries Less Than the Base Volume
    18  
Section 3.3 Force Majeure Volumes
    19  
Section 3.4 Monthly Shortfall Payments Offset Against Future Fees
    19  
Section 3.5 Example of Operation of Monthly Excess Bank
    19  
Section 3.6 Adjustment to Account for Released Gas
    19  
 
       
Article 4 WELL CONNECTIONS AND EXPANSIONS
    20  
 
       
Section 4.1 Well Connection and Timing
    20  
Section 4.2 System Expansions
    20  
Section 4.3 Gatherer’s Purchase of Expansions
    21  
 
       
Article 5 TERM
    21  
 
       
Section 5.1 Term
    21  
Section 5.2 Obligations Upon Termination
    21  
 
       
Article 6 SERVICE FEES AND FL&U
    21  
 
       
Section 6.1 Gathering Fee
    21  
Section 6.2 Commodity Fee
    22  
Section 6.3 Adjustment to Base Fee and Commodity Fee after Trigger Event
    22  
Section 6.4 Condensate
    22  
Section 6.5 Modifications to Determination of Operations Fee
    23  
Section 6.6 Operating Expense Budget Process
    23  
 
       
Article 7 ALLOCATIONS
    24  
 
       
Section 7.1 Fuel, Lost and Unaccounted for Gas Allocation Procedures
    24  
Section 7.2 Modifications to Allocation Procedures
    24  
 
       
Article 8 SHIPPER COMMITMENTS AND RIGHTS
    25  
 
       
Section 8.1 Conveyance of Rights to Gatherer
    25  
Section 8.2 Shipper Compression
    25  
Section 8.3 Gas for Lease Operations
    25  
Section 8.4 Pooling or Units
    26  
Section 8.5 Operational Control of Shipper’s Wells
    26  
Section 8.6 Access to Facilities
    26  
Section 8.7 Line Pack
    26  
Section 8.8 Cholla Gathering Agreement
    26  
 
       
Article 9 MAINTENANCE AND MARKETING OF CONDENSATE
    26  

 

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TABLE OF CONTENTS

              Page
Section 9.1 Maintenance
    26  
Section 9.2 Marketing of Condensate
    26  
 
       
Article 10 RECEIPT POINTS, DELIVERY POINTS, AND PRESSURES
    27  
 
       
Section 10.1 Receipt Points
    27  
Section 10.2 Delivery Points
    27  
Section 10.3 Uniform Deliveries
    27  
Section 10.4 Pressure at Receipt Points
    27  
Section 10.5 Pressure at Delivery Points
    28  
Section 10.6 Arrangements Prior to Receipt and After Redelivery
    28  
 
       
Article 11 NOMINATION AND BALANCING PROCEDURES
    29  
 
       
Section 11.1 Notice of Available Capacity
    29  
Section 11.2 Nomination Procedures
    29  
Section 11.3 Gas Balancing
    30  
Section 11.4 Imbalances
    30  
Section 11.5 Maintenance
    31  
Section 11.6 Unscheduled Capacity Allocations
    32  
Section 11.7 Modifications to Nomination and Balancing Procedures
    32  
 
       
Article 12 GAS QUALITY
    32  
 
       
Section 12.1 Receipt Point Gas Quality Specifications
    32  
Section 12.2 Non-Conforming Gas
    32  
Section 12.3 Off-Specification Receipts
    33  
Section 12.4 Reimbursement and Shipper Indemnity
    33  
Section 12.5 Delivery Point Gas Quality Specifications
    33  
Section 12.6 Gatherer Indemnity
    33  
 
       
Article 13 MEASUREMENT EQUIPMENT AND PROCEDURES
    33  
 
       
Section 13.1 Equipment and Specifications
    33  
Section 13.2 Gas Meter Standards
    33  
Section 13.3 Notice of Measurement Equipment Inspection and Calibration
    34  
Section 13.4 Measurement Accuracy Verification
    34  
Section 13.5 Special Tests
    35  
Section 13.6 Metered Flow Rates in Error
    35  
Section 13.7 Record Retention
    35  
Section 13.8 Correction Factors for Volume Measurement
    35  
Section 13.9 Exception to Gas Measurement Basis
    36  
Section 13.10 Gas Sampling
    36  
Section 13.11 Modifications to Measurement Procedures
    37  
Section 13.12 Measurement Disputes
    37  
 
       
Article 14 NOTICES
    37  
 
       
Article 15 PAYMENTS
    38  
 
       
Section 15.1 Payments and Invoices
    38  
Section 15.2 Audit Rights
    38  
Section 15.3 Right to Suspend on Failure to Pay
    39  
Section 15.4 Creditworthiness
    39  
Section 15.5 Payment Disputes
    39  
Section 15.6 Interest on Late Payments
    40  
 
       
Article 16 FORCE MAJEURE
    40  
 
       
Section 16.1 Suspension of Obligations
    40  
Section 16.2 Definition of Force Majeure
    40  

 

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TABLE OF CONTENTS

              Page
Section 16.3 Non-Gatherer Force Majeure Events
    41  
 
       
Article 17 INDEMNIFICATION
    41  
 
       
Section 17.1 Gatherer
    41  
Section 17.2 Shipper
    42  
 
       
Article 18 CUSTODY AND TITLE
    42  
 
       
Section 18.1 Shipper Custody
    42  
Section 18.2 Gatherer Custody
    42  
Section 18.3 Shipper Warranty
    42  
Section 18.4 Title
    43  
Section 18.5 Carbon Dioxide
    43  
 
       
Article 19 ROYALTY AND TAXES
    43  
 
       
Section 19.1 Proceeds of Production
    43  
Section 19.2 Production Taxes
    43  
Section 19.3 Indemnification
    43  
 
       
Article 20 DISPUTE RESOLUTION
    43  
 
       
Section 20.1 Negotiation
    43  
Section 20.2 Jurisdiction and Venue
    44  
Section 20.3 Jury Waiver
    44  
Section 20.4 Costs and Expenses
    44  
 
       
Article 21 MISCELLANEOUS
    44  
 
       
Section 21.1 Rights
    44  
Section 21.2 Applicable Laws
    44  
Section 21.3 Governing Law
    44  
Section 21.4 Assignments
    45  
Section 21.5 Set-off
    46  
Section 21.6 Published Indices
    46  
Section 21.7 Exhibits
    46  
Section 21.8 Entire Agreement, Amendments
    47  
Section 21.9 Waivers
    47  
Section 21.10 Limitation of Liability
    47  
Section 21.11 Headings
    48  
Section 21.12 Rights and Remedies
    48  
Section 21.13 No Partnership
    48  
Section 21.14 Rules of Construction
    48  
Section 21.15 No Third Party Beneficiaries
    48  
Section 21.16 Further Assurances
    48  
Section 21.17 No Inducements
    48  
Section 21.18 Counterpart Execution
    48  

 

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TABLE OF EXHIBITS
EXHIBITS
Exhibit A — Map of Dedicated Area
Exhibit B — Dedicated Area Description
Exhibit C — Base Volumes
Exhibit D — Wellhead Meters
Exhibit E — Delivery Points
Exhibit F — Sub-Systems
Exhibit G — Trigger Event Example
Exhibit H — Gas Quality Specifications
Exhibit I — Monthly Average Receipt Point Pressure Example
Exhibit J — Gathering System
Exhibit K — Monthly Excess Bank Example
Exhibit L — Memorandum of Gas Gathering Agreement

 

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GAS GATHERING AGREEMENT
     This Gas Gathering Agreement (as amended, restated or otherwise modified
from time to time, the “Agreement”) is made and entered into this 30th day of
June, 2009 (the “Effective Date”), by and between SANDRIDGE EXPLORATION AND
PRODUCTION, LLC, a Delaware limited liability company (together with its
Affiliates, successors and their respective Affiliates, “Shipper”), and PIÑON
GATHERING COMPANY, LLC, a Delaware limited liability company (together with its
successors and permitted assigns, “Gatherer”). Shipper and Gatherer may be
referred to herein individually as “Party,” or collectively as the “Parties.”
RECITALS
     A. Gatherer owns and operates the Gathering System (as defined in Article 1
below).
     B. Shipper owns or controls Shipper’s Gas (as defined in Article 1 below)
produced from wells connected to, or that in the future may be connected to, the
Gathering System.
     C. Subject to the terms and conditions of this Agreement, Shipper desires,
and has the capability, to deliver to Gatherer, and Gatherer desires to receive
from Shipper, Shipper’s Gas, at the Receipt Points for Gathering on the
Gathering System.
     D. In accordance with the terms and conditions of this Agreement, Gatherer
will provide the Services with respect to Shipper’s Gas delivered to Gatherer
hereunder.
     NOW THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
     Capitalized terms used in this Agreement shall have the following meanings:
     1.1 Accounting Arbitrator. The first of the following firms (or successor
thereof) that has not been engaged by either of the Parties at any time during
the one (1) year period immediately prior to the time of selection: Ernst &
Young, KPMG, Deloitte, PricewaterhouseCoopers, Grant Thornton. If all of such
firms (or their successors) have been engaged by either one or both of the
Parties during such one (1) year period, then the Parties shall in good faith
mutually agree on one of such firms (or their successors) or another accounting
firm which has not been engaged by either of the Parties during such one
(1) year period to serve as the Accounting Arbitrator.
     1.2 Adjusted Force Majeure Volumes. As defined in Section 3.3 of this
Agreement.
     1.3 Affiliate. With respect to any Person, any other Person that, directly
or indirectly, controls, is controlled by, or is under common control with, such
specified Person through one or more intermediaries or otherwise. For the
purposes of this definition, “control” means, where used with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the

 

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ownership of Voting Securities or interests, by contract or otherwise, and the
terms “controlling” and “controlled” have correlative meanings.
     1.4 Agreement. As defined in the preamble of this Agreement.
     1.5 Alternate Delivery Points. Those points of delivery not identified as
Delivery Points on Exhibit E, but which are agreed to by the Parties from time
to time to act as Delivery Points hereunder.
     1.6 Base Fee. Subject to adjustment in accordance with Section 6.3, with
respect to any Month, the sum of (i) *** and (ii) ***.
     1.7 Base Volume. With respect to any Month during the Term, the Volume of
Gas set forth in Exhibit C applicable to such Month, prorated for any partial
Month and as adjusted pursuant to Section 3.3; provided, that if at any time
Dedicated Gas is permanently released from the Dedicated Area pursuant to the
terms hereof, the Volumes of Gas set forth in Exhibit C shall be reduced in
accordance with Section 3.6.
     1.8 Base Volume Monthly Gas Receipt. With respect to any Month, the total
actual Volume of Gas received into the Gathering System during such Month that,
without duplication, is (i) produced from a well located on lands within the
Dedicated Area or on lands pooled or unitized therewith, (ii) produced from a
well operated by Shipper and located on lands outside of the Dedicated Area or
lands pooled or unitized therewith, or (iii) Shipper’s Gas.
     1.9 Btu or British Thermal Unit. The amount of heat required to raise the
temperature of one (1) pound of water from fifty-nine degrees Fahrenheit (59ºF)
to sixty degrees Fahrenheit (60ºF) at a constant pressure of fourteen and
sixty-five hundredths (14.65) psia.
     1.10 Business Day. Any calendar day, other than a Saturday or Sunday, on
which commercial banks in Dallas, Texas are open for business.
     1.11 Calendar Quarter or Quarterly. The quarterly periods of (i) January
1st through March 31st, (ii) April 1st through June 30th, (iii) July 1st through
September 30th, and (iv) October 1st through December 31st.
     1.12 Calendar Year. The time period from January 1st through December 31st
of the same calendar year.
     1.13 Central Clock Time. Central Standard time throughout the year, as
adjusted for Central Daylight time.
     1.14 Century Plant. The CO2 gas treating and delivery plant under
construction and owned by OXY USA, Inc. located in Section 68, Block 101, T.C.
RR Company Survey, Pecos County, Texas.
     1.15 Cholla Gathering Agreement. That certain Gas Gathering Agreement dated
June 30, 2009, between Cholla Pipeline, L.P. and SandRidge Exploration and
Production, LLC relating to Gas being shipped on the Cholla gathering system.

2

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     1.16 Claim. Any lawsuit, claim, proceeding, investigation, review, audit or
other cause of action of any kind.
     1.17 Commodity Fee. As defined in Section 6.2 of this Agreement.
     1.18 Company Conveyance. That certain Assignment of Membership Interests
dated as of June 30, 2009, between SandRidge Midstream, Inc. and TCW Pecos
Midstream, LLC, together with all amendments, modifications or waivers thereto.
     1.19 Condensate. Hydrocarbons that have condensed from Gas downstream of a
Receipt Point and are collected as a liquid in the Gathering System.
     1.20 Condensate Purchase Price. As defined in Section 6.4 of this
Agreement.
     1.21 Confidentiality and Disclosure Agreement. That certain Confidentiality
and Disclosure Agreement dated as of June 30, 2009, between SandRidge Energy,
Inc., TCW Asset Management Company, and Piñon Gathering Company, LLC, together
with all amendments, modifications or waivers thereto.
     1.22 CPI Index. The Consumer Price Index — All Urban Consumers (Series ID
CUUR0000SA0), Not Seasonally Adjusted, U.S. city average, All items (Base Period
1982-84=100), as published by the United States Department of Labor, Bureau of
Labor Statistics.
     1.23 Cubic Foot of Gas. The volume of Gas occupying one (1) cubic foot of
space when such Gas is at a base pressure of fourteen and sixty-five hundredths
(14.65) psia and at a base temperature of sixty degrees Fahrenheit (60ºF).
Whenever the conditions of pressure and temperature differ from the foregoing
standard, conversion from the foregoing standard conditions shall be made in
accordance with the Ideal Gas Laws.
     1.24 Day or Daily. A period of time commencing at 6:00 A.M., Central Clock
Time, on a calendar day and ending at 6:00 A.M., Central Clock Time, on the next
succeeding calendar day.
     1.25 Dedicated Area. The lands identified on the map attached hereto as
Exhibit A and more particularly described on Exhibit B.
     1.26 Dedicated Gas. As defined in Section 2.1 of this Agreement.
     1.27 Dedication. As defined in Section 2.1 of this Agreement.
     1.28 Dehydration. The removal of water in its vapor phase from Gas, such
that the Gas contains seven (7) pounds of water or less per MMcf.
     1.29 Delivery Point Gas. As defined in Section 2.4(c) of this Agreement.
     1.30 Delivery Point Gas Quality Specifications. As set forth in Exhibit H
attached hereto.

3

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     1.31 Delivery Points. The points of delivery identified in Exhibit E
attached hereto and the Alternate Delivery Points.
     1.32 Effective Date. As defined in the preamble of this Agreement.
     1.33 Expansion Period. As defined in Section 4.2 of this Agreement.
     1.34 Expansions. As defined in Section 4.2 of this Agreement.
     1.35 Field Fuel. With respect to each Month and each Sub-System, the
measured Quantity of Gas actually used and consumed in the operation of such
Sub-System during such Month, including, but not limited to, compressor fuel,
Dehydration fuel, and instrument Gas; provided, however, (i) if Other Shippers
use Shipper Compression, then the Gas used and consumed in the operation of
Shipper Compression shall also be included in Field Fuel for the applicable
Sub-System, and (ii) for each Month following the first anniversary of the end
of the Month in which the Expansion Period ends, Field Fuel for each Sub-System
shall be limited to no more than one hundred ten percent (110%) of the average
Monthly Field Fuel measured for such Sub-System during the twelve (12) Months
immediately following the Month in which the Expansion Period ends.
     1.36 Firm Basis. The provision of Services hereunder, which may only be
interrupted or curtailed by Gatherer as a result of a Force Majeure event or
Maintenance.
     1.37 Force Majeure. As defined in Section 16.2 of this Agreement.
     1.38 Force Majeure Volumes. With respect to any Month, the Volumes of Gas
that Shipper is not able to deliver into the Gathering System during such Month
due to Force Majeure.
     1.39 Fuel, Lost and Unaccounted for Gas or FL&U. With respect to each Month
and each of the Sweet Gas Gathering System and the Sour Gas Gathering System,
the Thermal Content of Gas necessarily flared or vented on such system during
such Month, Field Fuel for such system for such Month, and Gas that otherwise
cannot be sufficiently accounted for in such system for such Month.
     1.40 G&A Expenses. All (i) costs, fees and expenses incurred by Gatherer in
connection with any management, administration, marketing and other services
necessary or advisable to run Gatherer’s business of owning and operating the
Gathering System, including, without limitation, any fees of attorneys,
consultants, Tax or financial accountants, auditors, experts or advisors, and
(ii) other general or administrative expenses of Gatherer, to the extent, and
only to the extent, that each of the foregoing is (x) not duplicative of any
costs, fees or expenses included in the definition of Operating Expenses,
(y) reasonably incurred in accordance with this Agreement, and (z) reasonably
allocated to the Gathering System.
     1.41 GAAP. Generally accepted accounting principles, consistently applied.
     1.42 Gallon. One (1) U.S. gallon.

4

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     1.43 Gas. Any mixture of hydrocarbons or of hydrocarbons and
non-combustible gases produced from wells.
     1.44 Gatherer. As defined in the preamble of this Agreement.
     1.45 Gatherer Controlled Event. As defined in Section 2.8(c) of this
Agreement.
     1.46 Gatherer Force Majeure Event. As defined in Section 2.8(b) of this
Agreement.
     1.47 Gatherer Indemnified Parties. Gatherer, its successors and permitted
assigns, and their respective Affiliates, shareholders, members, partners,
officers, directors, employees, and agents.
     1.48 Gathering or Gather. The receipt of Gas by Gatherer at the Receipt
Points for transportation, compression and/or Dehydration, and the delivery of
Delivery Point Gas to the Delivery Points.
     1.49 Gathering Fees. As defined in Section 6.1 of this Agreement.
     1.50 Gathering System. The “Gathering System” as defined in the Membership
Interest Purchase Agreement, as such gathering system is more particularly
described in Exhibit J attached hereto, together with the facilities acquired by
Gatherer in each Subsequent Acquisition, including all additions and alterations
made to any of the foregoing by Gatherer from time to time.
     1.51 Governmental Authority. Any federal, state, municipal, local or
similar governmental authority, regulatory or administrative agency, court or
arbitral body with jurisdiction over the Parties, this Agreement, any of the
transactions contemplated hereby or the facilities utilized under this
Agreement.
     1.52 Gross Heating Value. The number of Btus produced by the complete
combustion in air, at a constant pressure, of one Cubic Foot of Gas when the
products of combustion are cooled to the initial temperature of the Gas and air
and all water formed by combustion is condensed to the liquid state. The
resultant number of Btus determined above shall be adjusted to reflect the
actual water content of the Gas at the Delivery Points except that Gas
containing seven (7) pounds of water or less per MMcf shall be considered dry
for purposes of this adjustment.
     1.53 Guaranty Agreements. Collectively, that certain (a) Guaranty Agreement
dated as of June 30, 2009, by SandRidge Energy, Inc. in favor of TCW Pecos
Midstream, LLC, (b) Guaranty Agreement dated as of June 30, 2009, by SandRidge
Energy, Inc. in favor of Gatherer, (c) Guaranty Agreement dated as of June 30,
2009, by SandRidge Exploration and Production, LLC in favor of Gatherer, and
(d) Guaranty Agreement dated as of June 30, 2009, by SandRidge Midstream, Inc.
in favor of Gatherer, in each case, together with all amendments, modifications
or waivers thereto.

5

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     1.54 High-Pressure Sour Sub-System. That portion of the Gathering System
that typically operates at pressures at or above seven hundred fifty (750) psig,
and delivers Gas to a treating and/or processing plant for removal of carbon
dioxide and other contaminants.
     1.55 High-Pressure Sweet Sub-System. That portion of the Gathering System
that typically operates at pressures at or above seven hundred fifty (750) psig,
and delivers such Gas to third-party pipelines.
     1.56 Ideal Gas Laws. The thermodynamic laws applying to perfect gases.
     1.57 Imbalance Cash-Out Price. For each Month, (i) the average of the daily
“Midpoint” prices for that Month as reported in the Platt’s Gas Daily table
entitled “Daily price survey ($/MMBtu)” under the heading “Permian Basin Area”
in the row labeled “Waha,” minus (ii) the price per MMBtu to transport Gas from
the applicable Delivery Point to Waha.
     1.58 Imbalance Gas. As defined in Section 11.4(a) of this Agreement.
     1.59 Initial Excess Pressure Period. As defined in Section 10.4(c) of this
Agreement.
     1.60 Initial Force Majeure Period. As defined in Section 2.8(b) of this
Agreement.
     1.61 Initial Purchase Price. The Purchase Price as defined in and paid by
Gatherer pursuant to the Membership Interest Purchase Agreement.
     1.62 Initial Service Interruption Period. As defined in Section 2.8(c) of
this Agreement.
     1.63 Intercompany Conveyance. That certain Assignment, Bill of Sale and
Conveyance dated as of June 30, 2009, between SandRidge Midstream, Inc. and
Piñon Gathering Company, LLC, together with all amendments, modifications or
waivers thereto.
     1.64 Interests. Any right, title, or interest in lands and the right to
produce oil and/or Gas therefrom, whether arising from fee ownership, working
interest ownership, mineral ownership, leasehold ownership, farmout or other
contractual arrangement or arising from any pooling, unitization, or
communitization of any of the foregoing rights.
     1.65 L&U Percentage. With respect to each Month and each of the Sweet Gas
Gathering System and the Sour Gas Gathering System, the percentage obtained by
dividing (i) the sum of the Quantity of Gas necessarily flared or vented during
such Month plus the Quantity of Gas that cannot be sufficiently accounted for in
such system during such Month into (ii) the total Quantity of Gas received into
such system during such Month.
     1.66 Line Pack. A Volume and Quantity of Gas equal to the Volume and
Quantity of Gas in the Gathering System as of the Effective Date and from time
to time thereafter.
     1.67 LLC Agreement. That certain Amended and Restated Limited Liability
Company Agreement of Piñon Gathering Company, LLC, together with all amendments,
modifications or waivers thereto.

6

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     1.68 Loss. Any loss, cost, expense, liability, damage, sanction, judgment,
lien, fine, or penalty, including attorney’s fees, incurred, suffered or paid
by, or resulting to, the applicable indemnified Persons on account of
(i) injuries (including death) to any Person or damage to or destruction of any
property, sustained or alleged to have been sustained in connection with or
arising out of the matters for which the indemnifying Party has indemnified the
applicable indemnified Persons, (ii) any failure of any representation or
warranty made by Shipper in this Agreement to be true and correct when made, or
(iii) the breach of any covenant or agreement made or to be performed by the
indemnifying Party pursuant to this Agreement.
     1.69 Lost and Unaccounted for Gas. With respect to each Month and each of
the Sweet Gas Gathering System and the Sour Gas Gathering System, FL&U less
Field Fuel; provided, however, for each Month, Lost and Unaccounted for Gas
shall be limited to the product of (i) the Quantity of Gas received into such
system during such Month and (ii) the lesser of (a) one and one-half percent
(1.5%) or (b) two hundred percent (200%) of the average L&U Percentage for such
system for the twelve (12) Months immediately preceding such Month.
     1.70 Low-Pressure Sour Sub-System. That portion of the Gathering System
that typically operates at pressures below two hundred fifty (250) psig, and
delivers Gas to a treating and/or processing plant for removal of carbon dioxide
and other contaminants.
     1.71 Low-Pressure Sweet Sub-System. That portion of the Gathering System
that typically operates at pressures below two hundred fifty (250) psig, and
delivers Gas to third-party pipelines.
     1.72 Maintenance. As defined in Section 9.1 of this Agreement.
     1.73 Material Error. As defined in Section 13.4 of this Agreement.
     1.74 Mcf. One thousand (1,000) Cubic Feet of Gas.
     1.75 Measurement Dispute. As defined in Section 13.12 of this Agreement.
     1.76 Measurement Expert. As defined in Section 13.12 of this Agreement.
     1.77 Measurement Meter. Any meter used to determine the Volume and Quantity
of Shipper’s Gas delivered into the Gathering System hereunder at the Receipt
Points, which meters shall be Shipper’s wellhead meters.
     1.78 Membership Interest Purchase Agreement. That certain Membership
Interest Purchase Agreement dated as of June 30, 2009, by and between SandRidge
Midstream, Inc. and TCW Pecos Midstream, LLC, together with all amendments,
modifications or waivers thereto.
     1.79 Memorandum. As defined in Section 2.10 of this Agreement.
     1.80 Mid-Pressure Sour Sub-System. That portion of the Gathering System
that typically operates at pressures at or above two hundred fifty (250) psig
and below seven hundred fifty (750) psig, and delivers Gas to a treating and/or
processing plant for removal of carbon dioxide and other contaminants.

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     1.81 Mid-Pressure Sweet Sub-System. That portion of the Gathering System
that typically operates at pressures at or above two hundred fifty (250) psig
and below seven hundred fifty (750) psig, and delivers such Gas to third-party
pipelines.
     1.82 MMBtu. One million (1,000,000) Btus.
     1.83 MMcf. One million (1,000,000) Cubic Feet of Gas.
     1.84 MMcf/D. One million (1,000,000) Cubic Feet of Gas per Day.
     1.85 Month or Monthly. A period commencing at 6:00 A.M., Central Clock
Time, on the first day of a calendar month and extending until 6:00 A.M.,
Central Clock Time, on the first day of the next succeeding calendar month.
     1.86 Monthly Average Receipt Point Pressure. With respect to each
Sub-System, each Month, the Volume-weighted average pressure (in psig) measured
at the downstream static pressure tap of each Measurement Meter at or near each
Receipt Point delivering into such Sub-System, which shall be calculated by
multiplying (i) the total Daily Volume for each Day during such Month at each
such point by (ii) the average pressure (in psig) for such Day at such point;
summing the resulting products for all such Days and points; and then dividing
the resulting sum by the sum of such Daily Volumes, and rounding the quotient to
the nearest whole number; provided, however, if Shipper Compression is installed
on such Sub-System, the point at which pressure shall be measured shall be
downstream of the discharge of such Shipper Compression, and the individual
Receipt Points upstream of such Shipper Compression shall not be included. In
the calculation of Monthly Average Receipt Point Pressure, Gatherer may exclude
any Day when any of the following conditions occur: (i) Force Majeure,
(ii) Maintenance, not to exceed one hundred (100) hours per Calendar Year, or
(iii) when Shipper’s Gas on such Sub-System exceeds the Sub-System Capacity for
such Sub-System, not to exceed five (5) Days in any Month and not to exceed
thirty (30) Days in any Calendar Year. In order for any Day to qualify for
exclusion because of Force Majeure or Maintenance, Gatherer must give Shipper
written notice within three (3) Business Days after the occurrence of such
event. Gatherer shall provide Shipper with the calculation of the Monthly
Average Receipt Point Pressure for each Sub-System within thirty (30) Days
following the end of each Month. An example calculation of the Monthly Average
Receipt Point Pressure is set forth in Exhibit I attached hereto.
     1.87 Monthly Excess Bank. As defined in Section 3.1 of this Agreement.
     1.88 Monthly Excess Volumes. As defined in Section 3.1 of this Agreement.
     1.89 Monthly Gas Receipt. With respect to any Month, the actual Volume of
Gas delivered by Shipper to Gatherer at the Receipt Points during such Month
pursuant to this Agreement, as measured at the Measurement Meters, less and
except any Gas brought into the Gathering System solely for Field Fuel or that
is recirculated in the Gathering System.
     1.90 Monthly Shortfall. As defined in Section 3.2 of this Agreement.
     1.91 Monthly Shortfall Offset Amount. As defined in Section 3.2(b) of this
Agreement.

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     1.92 Monthly Shortfall Payment. As defined in Section 3.2 of this
Agreement.
     1.93 Monthly Waha Index Price. The first of the month “Index” price for Gas
published in Platt’s Inside FERC’s Gas Market Report in the table entitled
“Market Center Spot Gas Prices” under the heading “West Texas” in the row
entitled “Waha” for the applicable Month.
     1.94 Negative Shipper Monthly Imbalance Quantity. With respect to any
Month, the amount, if any, by which (i) the Quantity of Delivery Point Gas
delivered by Gatherer for Shipper’s account at the Delivery Points during such
Month exceeds (ii) the Quantity of the Monthly Gas Receipt for such Month, less
the Quantity Reductions.
     1.95 Net Condensate Proceeds. With respect to each Month and each
Sub-System, the gross proceeds received by Gatherer (in U.S. Dollars) for the
sale of Condensate collected on such Sub-System during such Month, net of
transportation, storage, and/or similar charges or costs incurred by Gatherer in
connection with the sale of such Condensate.
     1.96 Non-Dedicated Area Connected Wells. As defined in Section 2.1(c) of
this Agreement.
     1.97 Non-Gatherer Force Majeure Event. Any Force Majeure event that does
not constitute a Gatherer Force Majeure event.
     1.98 O&M Agreement. That certain Operations and Maintenance Agreement dated
as of the Effective Date, by and between SandRidge Midstream, Inc. and Gatherer,
as amended, restated or otherwise modified from time to time, wherein Gatherer
has appointed SandRidge Midstream, Inc. to operate the Gathering System on
behalf of Gatherer.
     1.99 Off-Specification Receipts. As defined in Section 12.2 of this
Agreement.
     1.100 Operated Gas. Shipper’s Gas and any other Gas produced from wells
operated by Shipper and delivered to the Gathering System.
     1.101 Operating Expenses. With respect to each Sub-System, each Month,
without duplication, the sum of, in each case as reasonably allocated to the
Gathering System and as further reasonably allocated to such Sub-System and not
to exceed cost and expense that would be incurred by a reasonably prudent
operator of unregulated natural gas gathering pipelines, ***.
     1.102 Operations Fee. Subject to Section 10.4, with respect to each
Sub-System, each Month, the quotient of (i) the Operating Expenses for such
Sub-System for such Month, divided by (ii) the greater of (x) total Volume of
Gas delivered into such Sub-System during such Month or (y) one (1) Mcf.
     1.103 Other Shipper. Any Person other than Shipper for whom Gatherer
provides gathering, compression, Dehydration, and/or measurement services on the
Gathering System.
     1.104 Parties. As defined in the preamble of this Agreement.

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     1.105 Party. As defined in the preamble of this Agreement.
     1.106 Person. An individual, a corporation, a partnership, a limited
partnership, a limited liability company, an association, a joint venture, a
trust, an unincorporated organization, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
     1.107 Positive Shipper Monthly Imbalance Quantity. With respect to any
Month, the amount, if any, by which (i) the Quantity of the Monthly Gas Receipt
for such Month, less the Quantity Reductions, exceeds (ii) the Quantity of
Delivery Point Gas delivered by Gatherer for Shipper’s account at the Delivery
Points during such Month.
     1.108 Prior Dedications. (i) As to the Interests owned by Shipper within
the Dedicated Area as of the Effective Date, all dedications or commitments for
gathering services burdening such Interests as of the Effective Date, (ii) as to
any Interests acquired by Shipper within the Dedicated Area after the Effective
Date, any dedication or commitment for gathering services burdening such
Interests which is existing as of the time of any such acquisition, and (iii) as
to any Interests acquired by any successor of Shipper within the Dedicated Area,
all dedications or commitments for gathering services burdening such Interests,
which are existing as of the time of any such acquisition or that are placed on
such Interests prior to any such successor becoming a successor of Shipper;
provided that such dedication or commitment was not incurred in anticipation of
such acquisition.
     1.109 Production Taxes. All gross production, severance, conservation, and
similar or other Taxes now existing or in the future imposed and measured by or
based upon production, together with all Taxes on the right or privilege of
ownership of Shipper’s Gas, or upon the Services.
     1.110 Proposed Operating Expense Budget. As defined in Section 6.6(b) of
this Agreement.
     1.111 psia. Pressure expressed in pounds per square inch absolute.
     1.112 psig. Pressure expressed in pounds per square inch gauge.
     1.113 Quantity. Gas as measured on an MMBtu basis.
     1.114 Quantity Reductions. With respect to each Month, the total Quantity
of (i) Shipper’s Gas measured at the Measurement Meters and used by Shipper
pursuant to Section 8.3 during such Month, (ii) Shipper’s Pro Rata Share of
Field Fuel for such Month, (iii) Shipper’s Pro Rata Share of Lost and
Unaccounted for Gas for such Month and (iv) the Thermal Content of Shipper’s Pro
Rata Share of Condensate for such Month.
     1.115 Receipt Point Gas Quality Specifications. As set forth on Exhibit H
attached hereto.
     1.116 Receipt Points. The points of interconnection between the Gathering
System and other facilities where Gas is delivered into the Gathering System,
including, without limitation,

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the points identified on Exhibit D. Exhibit D shall be amended by the Parties
from time to time to reflect the addition of new Receipt Points.
     1.117 Released Gas. Gas that would have been Dedicated Gas hereunder but
was permanently released from the Dedication and this Agreement pursuant to the
terms hereof.
     1.118 Scheduled Nomination. As defined in Section 11.2(b) of this
Agreement.
     1.119 Services. As defined in Section 2.4 of this Agreement.
     1.120 Shipper. As defined in the preamble of this Agreement.
     1.121 Shipper Compression. Collectively, any facilities installed by
Shipper under Section 8.2.
     1.122 Shipper Indemnified Parties. Shipper, its permitted assigns, and
their respective Affiliates, shareholders, members, partners, officers,
directors, employees, and agents.
     1.123 Shipper Volume Forecast. As defined in Section 6.6(a) of this
Agreement.
     1.124 Shipper’s Gas. All Gas now or hereafter owned or controlled by
Shipper and delivered to the Gathering System pursuant to the terms of this
Agreement.
     1.125 Shipper’s Pro Rata Share. With respect to a Sub-System, the Sweet Gas
Gathering System or the Sour Gas Gathering System, each Month, a percentage,
expressed in decimal form, calculated by dividing (i) the total Quantity of that
portion of the Monthly Gas Receipt delivered into such Sub-System, the Sweet Gas
Gathering System or the Sour Gas Gathering System, as the case may be, during
such Month, by (ii) the total Quantity of Gas received into such Sub-System, the
Sweet Gas Gathering System or the Sour Gas Gathering System, as the case may be,
during such Month; provided, however, with respect to allocation of Field Fuel
on the Low-Pressure Sour Sub-System, the Mid-Pressure Sour Sub-System, the
High-Pressure Sour Sub-System or the Sour Gas Gathering System, such percentage
shall be calculated by dividing (i) the total Volume of that portion of the
Monthly Gas Receipt delivered into the Low-Pressure Sour Sub-System, the
Mid-Pressure Sour Sub-System, the High-Pressure Sour Sub-System or the Sour Gas
Gathering System, as the case may be, during such Month, by (ii) the total
Volume of Gas received into the Low-Pressure Sour Sub-System, the Mid-Pressure
Sour Sub-System, the High-Pressure Sour Sub-System or the Sour Gas Gathering
System, as the case may be, during such Month.
     1.126 Similarly Situated Shipper. Any Other Shipper that is similarly
situated to Shipper, as determined by applying the criteria set forth in
Rule 2.1(b)(16) of Chapter 2 of Part 1 of Title 16 of the Texas Administrative
Code or any successor or replacement rule.
     1.127 Sour Gas Gathering System. That portion of the Gathering System
comprised of the Low-Pressure Sour Sub-System, the Mid-Pressure Sour Sub-System,
and the High-Pressure Sour Sub-System.
     1.128 Subsequent Acquisition. As defined in Section 4.3 of this Agreement.

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     1.129 Subsequent Acquisition Purchase Price. As defined in Section 4.3 of
this Agreement.
     1.130 Sub-System. The integrated portions of the Gathering System described
on Exhibit F attached hereto.
     1.131 Sub-System Capacity. Individually for each Sub-System, the Mcf per
Day Volume shown on Exhibit F attached hereto, as such capacity may be increased
from time to time as a result of any Subsequent Acquisitions.
     1.132 Sub-System Turnover Average Receipt Point Pressure. With respect to
each Sub-System, one hundred and five percent (105%) of the average of the
Monthly Average Receipt Point Pressure for the lesser of (x) twelve (12) Months,
but excluding the three (3) highest pressure Months and the three (3) lowest
pressure Months, or (y) if the last capital project occurred less than twelve
(12) months prior to the calculation date, the number of Months since the last
capital project (including, without limitation, Expansions) was performed that
reduced the pressure on such Sub-System, in each case, immediately preceding the
Month following the one (1) year anniversary of the end of the Expansion Period.
     1.133 Surface Use Agreement. That certain Amended Surface Use and Damages
Agreement dated September 21, 2007, between Longfellow Ranch Partners, LP and
SandRidge Energy, Inc. covering lands in Pecos, Terrell, and Brewster Counties,
Texas.
     1.134 Sweet Gas Gathering System. That portion of the Gathering System
comprised of the Low-Pressure Sweet Sub-System, the Mid-Pressure Sweet
Sub-System, and the High Pressure Sweet Sub-System.
     1.135 System Capacity. The Gathering System throughput capacity as it
exists on the Effective Date, as increased from time to time as a result of any
Subsequent Acquisitions.
     1.136 Tax or Taxes. Any (i) federal, state, provincial, county, local or
foreign taxes, charges, fees, levies or other assessments, including all sales
and use, goods and services, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipt, value added, capital
stock, production, business and occupation, disability, employment, payroll,
license, estimated, stamp, custom duties, severance, unemployment, social
security, Medicare, alternative minimum or withholding taxes or charges imposed
by any Governmental Authority, and including any interest and penalties (civil
or criminal) on or additions to any such taxes, but expressly excluding any
income tax or tax based on income, such as, without limitation, the franchise
tax set forth in V.T.C.A. Tax Code Section 171.0001 et. seq., as the same may be
amended or recodified from time to time, and (ii) liability for items in (i) of
any other Person by contract, operation of Law (including Treasury
Regulation 1.1502-6) or otherwise.
     1.137 Term. As defined in Article 5 of this Agreement.
     1.138 Termination Event. As defined in the Intercompany Conveyance.
     1.139 Thermal Content. With respect to Gas, the product of (i) a volume of
Gas and (ii) the Gross Heating Value of such Gas, adjusted to a same pressure
base of fourteen and sixty-

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five hundredths (14.65) psia, expressed in MMBtus; and with respect to
Condensate, the product of (i) a volume of Condensate and the (ii) Gross Heating
Value of such Condensate, expressed in MMBtus.
     1.140 Thermally Equivalent. An equal number of MMBtus.
     1.141 Third Party Gas. Gas other than Shipper’s Gas.
     1.142 Third Party Receipt Point Gas Quality Specifications. The Receipt
Point Gas Quality Specifications for Third Party Gas set forth on Exhibit H
attached hereto.
     1.143 Third Party Shipper. Enterprise Products Operating, LLC, to the
extent it delivers Third Party Shipper Gas.
     1.144 Third Party Shipper Gas. Gas delivered to the Gathering System by
Third Party Shipper pursuant to that certain Gathering Agreement dated June 26,
2009, between Enterprise Products Operating, LLC, as shipper, and SandRidge
Midstream, Inc.
     1.145 Transaction Documents. Collectively, this Agreement, the O&M
Agreement, the Membership Interest Purchase Agreement, the Intercompany
Conveyance, the Company Conveyance, the Guaranty Agreements, the Confidentiality
and Disclosure Agreement, and the LLC Agreement.
     1.146 Trigger Event. The date on which the stream of cash flows consisting
of the Base Fee, the Commodity Fee, the Monthly Shortfall Payments, and all
amounts (or the value of non-cash consideration) paid by third parties for
services on the Gathering System with respect to Operated Gas (exclusive of
amounts attributable to the reimbursement of Gatherer for Operating Expenses),
when discounted back to the Effective Date from each date of receipt by Gatherer
of such amounts, first results in an internal rate of return to Gatherer, as
calculated in accordance with Microsoft’s Excel’s internal rate of return
function, of *** on the sum of (i) ***, (ii) ***, and (iii) ***. An example of
how the Trigger Event is to be calculated is included in Exhibit G.
     1.147 Volume. Gas as measured on an Mcf basis.
     1.148 Voting Securities. As it relates to a Person, securities of any class
of such Person entitling the holders thereof to vote in the election of, or to
appoint, members of the board of directors or other similar governing body of
the Person; provided that if such Person is a limited partnership, Voting
Securities of such Person shall be the general partner interest in such Person.
     1.149 Year. A period of three hundred sixty-five (365) consecutive Days;
provided, however, any year that contains the date of February 29 shall consist
of three hundred sixty-six (366) consecutive Days.

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ARTICLE 2
DEDICATION AND SERVICES
     Section 2.1 Dedication. Shipper hereby dedicates for Gathering under this
Agreement and, subject to the other terms and conditions hereof, shall deliver,
or cause to be delivered, hereunder to Gatherer at the Receipt Points, the
following (the “Dedication,” and the Gas that is the subject of the Dedication
being herein referred to as the “Dedicated Gas”):
     (a) all Gas produced and saved from wells now or hereafter located within
the Dedicated Area or on lands pooled or unitized therewith, to the extent such
Gas is attributable to Interests within the Dedicated Area now owned or
hereafter acquired by Shipper and not delivered or used as permitted pursuant to
Section 8.3;
     (b) with respect to wells now or hereafter located within the Dedicated
Area or on lands pooled or unitized therewith for which Shipper is the operator,
Gas produced from such wells which is attributable to Interests in such wells
owned by other working interest owners and royalty owners which is not (i) taken
“in-kind” by such working interest owners and royalty owners or (ii) delivered
or used as permitted pursuant to Section 8.3, and for which Shipper has the
right or obligation to gather such Gas, but only for the period that Shipper has
such right or obligation;
     (c) all Gas produced and saved from wells that are located outside of the
Dedicated Area but are connected to the Gathering System as of the Effective
Date (“Non-Dedicated Area Connected Wells”), to the extent such Gas is
attributable to Interests now owned or hereafter acquired by Shipper and not
delivered or used as permitted pursuant to Section 8.3; and
     (d) with respect to Non-Dedicated Area Connected Wells for which Shipper is
the operator, Gas produced from such Non-Dedicated Area Connected Wells which is
attributable to Interests in such Non-Dedicated Area Connected Wells owned by
other working interest owners and royalty owners which is not (i) taken
“in-kind” by such working interest owners and royalty owners or (ii) delivered
or used as permitted pursuant to Section 8.3, and for which Shipper has the
right or obligation to gather such Gas, but only for the period that Shipper has
such right or obligation;
provided, however, with respect to Dedicated Gas that is subject to a Prior
Dedication, such Gas shall not be subject to the Dedication during the existence
of such Prior Dedication. In the event that any such Prior Dedication expires or
terminates, then the Gas subject to such Prior Dedication shall automatically be
included within the Dedication and subject to this Agreement without any further
actions by Shipper. In the event that at any time in the future Shipper has the
right or ability to terminate any such Prior Dedication, then Shipper shall
terminate such Prior Dedication, and upon such termination, the Gas subject to
such Prior Dedication shall automatically be included within the Dedication and
subject to this Agreement without any further actions by the Parties. Nothing
herein shall obligate Shipper to terminate any Prior Dedication to the extent
that such termination would require Shipper to file suit, bring any arbitral or
mediation proceeding, incur any cost, or pay any termination fee or penalty.
Shipper (but excluding any successors and assigns) represents to Gatherer, that,
as of the Effective Date,

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Shipper (but excluding any successors and assigns) is not subject to any Prior
Dedications, other than the Cholla Gathering Agreement and the agreement between
Shipper and Third Party Shipper transferring the Third Party Shipper Gas to
Third Party Shipper.
     Section 2.2 Shipper’s Right To Deliver Other Gas. Subject to the other
terms and conditions hereof, Shipper shall have the continuing right to deliver
Gas (other than Dedicated Gas) to Gatherer at the Receipt Points, and Gatherer
shall provide Services for such Gas on the Gathering System.
     Section 2.3 Covenant Running with the Land. This Agreement shall (i) be a
covenant running with (x) the Gathering System, (y) the Interests now owned or
hereafter acquired by Shipper and its assigns within the Dedicated Area and
(z) the Non-Dedicated Area Connected Wells, (ii) be binding on and enforceable
by Gatherer against Shipper and its assigns, and (iii) be binding on and
enforceable by Shipper against Gatherer. In the event Shipper sells, transfers,
conveys, assigns, grants or otherwise disposes of all or any Interests in the
Dedicated Area or the Non-Dedicated Area Connected Wells, then any such sale,
transfer, conveyance, assignment or other disposition shall be expressly subject
to this Agreement and state such in any instrument of conveyance. In the event
Gatherer sells, transfers, conveys, assigns, grants or otherwise disposes of all
or any interest in the Gathering System, then any such sale, transfer,
conveyance, assignment or other disposition shall be expressly subject to this
Agreement and state such in any instrument of conveyance.
     Section 2.4 Services. Subject to the terms and conditions of this
Agreement, Gatherer agrees, during each Month of the Term, to provide the
following services, each on a Firm Basis, (collectively, the “Services”):
     (a) receive, or cause to be received, from Shipper, Shipper’s Gas at the
Receipt Points;
     (b) gather, Dehydrate, and compress Gas received from Shipper hereunder;
and
     (c) deliver, or cause to be delivered, to Shipper, and Shipper shall
accept, or cause to be accepted, at the Delivery Points, each Month, a Volume
and Quantity of Gas that is equal to the Volume of, and Thermally Equivalent to
the Quantity of, the Monthly Gas Receipt for such Month, less the Quantity
Reductions for such Month (such Gas delivered to Shipper hereunder at the
Delivery Points being herein referred to as the “Delivery Point Gas”).
     Section 2.5 Operation and Maintenance of Gathering System. Gatherer shall
(i) be entitled to complete operational control of the Gathering System,
(ii) operate and maintain the Gathering System in accordance in all material
respects with all applicable laws, rules and regulations, as a prudent operator
in accordance with good practices in the unregulated natural gas gathering
industry and in a cost efficient and effective manner for Shipper, including,
without limitation, (x) minimizing recycle volumes and other practices that
would result in excessive Field Fuel, (y) using electric compression or Gas
compression where appropriate and (z) using owned or leased compression
facilities where appropriate, and (iii) operate and

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maintain the Sweet Gas Gathering System and the Sour Gas Gathering System as
separate systems and shall not commingle the Gas streams between such systems,
without Shipper’s prior written consent; provided that Gatherer shall have the
unqualified right to commingle Shipper’s Gas with other Gas within each such
system; provided that such other Gas meets the Third Party Receipt Point Gas
Quality Specifications.
     Section 2.6 Priority of Services; Curtailment. Gatherer agrees not to
provide services for Third Party Gas on the Gathering System on a basis that has
a priority higher than Shipper is entitled to under this Agreement. If for any
reason (including, without limitation, Force Majeure, Maintenance, or
constraints at the Delivery Points) Gatherer needs to curtail receipt, gathering
or delivery of Gas on the Gathering System, the following procedures shall be
followed:
     (a) First, Gas deliveries from all Persons other than Shipper and Similarly
Situated Shippers shall be curtailed prior to any curtailment or interruption of
Shipper’s Gas or Gas from Similarly Situated Shippers; and
     (b) Second, if additional curtailments are required beyond Section 2.6(a)
above, Gatherer shall curtail Shipper’s Gas and Gas from Similarly Situated
Shippers, and allocate the capacity of the Gathering System, at the affected
point on a pro rata basis based upon Shipper’s and other Similarly Situated
Shippers’ last confirmed nominations through the affected point prior to the
event causing the curtailment.
Notwithstanding anything to the contrary herein contained, to the extent Gas
deliveries from Persons other than Shipper or Similarly Situated Shippers causes
or would reasonably be expected to cause a reduction in the production of any of
Shipper’s Gas or Similarly Situated Shippers’ Gas, Gatherer shall curtail
receipts of Gas deliveries from such Persons into the Gathering System.
     Section 2.7 Third Party Gas. Gatherer agrees that Third Party Gas delivered
into the Gathering System shall meet the Third Party Receipt Point Gas Quality
Specifications; provided, however, Shipper may, at its option, agree to allow
Gatherer to accept Third Party Gas that does not meet the Third Party Receipt
Point Gas Quality Specifications on an interruptible basis; provided, however,
any incremental FL&U and costs incurred by Shipper as a result of such
non-conforming Third Party Gas shall be borne by Gatherer and reimbursed to
Shipper.
     Section 2.8 Release of Dedicated Gas.
     (a) Temporary Release. If (i) Gatherer is unable to provide Services with
respect to all or any Volume of the Dedicated Gas that Shipper is ready,
willing, and able to deliver, or cause to be delivered, in accordance with the
terms of this Agreement, and (ii) no event has occurred or condition exists that
constitutes a material breach or violation of, or a failure to comply with, this
Agreement or the O&M Agreement on the part of Shipper which remains uncured,
then (y) Shipper, at its option, may elect to temporarily release the Volume of
Dedicated Gas for which Gatherer is unable to provide Services from this
Agreement by delivering written notice thereof to Gatherer, and (z)

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during such period of time, Shipper shall have the right to deliver such volume
of Dedicated Gas to alternative facilities for the provision of services. Upon
the resumption of Gatherer’s ability to provide Services, Gatherer shall provide
written notice thereof to Shipper, such temporary release shall end and Shipper
shall resume the delivery of all Dedicated Gas to Gatherer no later than the
first Day of the second Month immediately following Gatherer’s ability to
provide Services. Nothing herein shall relieve Gatherer of any liability for
failure to provide Services pursuant to, and in accordance with, the terms of
this Agreement.
     (b) Permanent Release on Account of Force Majeure. If (i) Gatherer because
of Force Majeure is unable to provide Services, for (A) a period of one hundred
eighty (180) Days or more during any Year or (B) a continuous period of ninety
(90) Days or more, at any Receipt Point (the “Initial Force Majeure Period”),
for all or any Volume of Dedicated Gas that Shipper is ready, willing, and able
to deliver to such Receipt Point in accordance with the terms of this Agreement,
and (ii) no event has occurred or condition exists that constitutes a material
breach or violation of, or a failure to comply with, this Agreement or the O&M
Agreement on the part of Shipper which remains uncured, then (y) Shipper, at its
option, may elect to permanently release the Dedicated Gas produced from the
wells delivering to such Receipt Point from the Dedication and this Agreement by
delivering written notice thereof to Gatherer, and (z) if Shipper exercises such
option, Shipper and Gatherer shall acknowledge in writing the wells and
Dedicated Gas that have been released from the Dedication and this Agreement.
Notwithstanding anything herein to the contrary, no Dedicated Gas shall be
released pursuant to this paragraph (b) prior to the occurrence of the Trigger
Event, unless (i) the applicable Force Majeure event is a condition or
circumstance that may be remedied by Gatherer (a “Gatherer Force Majeure Event”)
and (ii) at any time after the end of the Initial Force Majeure Period, Gatherer
is not using commercially reasonable efforts to remedy the situation with all
reasonable dispatch; provided, however, that with respect to any Gatherer Force
Majeure Event, if after an additional ninety (90) Days after the end of the
Initial Force Majeure Period, Gatherer has failed to remedy such Gatherer Force
Majeure Event, then Shipper, at its option, may elect to permanently release the
Dedicated Gas produced from the wells delivering to such Receipt Point as
provided above.
     (c) Permanent Release for Other Reasons. If (i) Gatherer, for any reason
other than Force Majeure, is unable to provide Services, for (A) a period of one
hundred eighty (180) Days or more during any Year or (B) a continuous period of
ninety (90) Days or more, at any Receipt Point (the “Initial Service
Interruption Period”), at any Receipt Point, for all or any Volume of Dedicated
Gas that Shipper is ready, willing, and able to deliver to such Receipt Point in
accordance with the terms of this Agreement, and (ii) no event has occurred or
condition exists that constitutes a material breach or violation of, or a
failure to comply with, this Agreement or the O&M Agreement on the part of
Shipper which remains uncured, then (y) Shipper, at its option, may elect to
permanently release the Dedicated Gas produced from the wells delivering to such
Receipt Point from the Dedication and this Agreement by delivering written
notice thereof to Gatherer, and (z) if Shipper exercises such option, Shipper
and Gatherer shall acknowledge in writing the wells and Dedicated Gas that have
been released from the

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Dedication and this Agreement. Notwithstanding anything herein to the contrary,
no Dedicated Gas shall be released pursuant to this paragraph (c) prior to the
occurrence of the Trigger Event, unless (i) the applicable condition or
circumstance can be remedied by Gatherer (a “Gatherer Controlled Event”) and
(ii) at any time after the end of the Initial Service Interruption Period,
Gatherer is not using commercially reasonable efforts to remedy the situation
with all reasonable dispatch; provided, however, that with respect to any
Gatherer Controlled Event, if after an additional ninety (90) Days after the end
of the Initial Service Interruption Period, Gatherer has failed to remedy the
Gatherer Controlled Event, then Shipper, at its option, may elect to permanently
release the Dedicated Gas produced from the wells delivering to such Receipt
Point as provided above. Nothing herein shall relieve Gatherer of any liability
for failure to provide Services pursuant to, and in accordance with, the terms
of this Agreement.
     Section 2.9 Maintenance of System Capacity. After expiration of the
Expansion Period, Gatherer shall maintain the System Capacity and each
Sub-System Capacity and shall not take, without Shipper’s prior written consent,
any action that could cause the System Capacity or any Sub-System Capacity to be
reduced or Shipper’s ability to deliver Gas to any Receipt Point to be reduced,
including, without limitation, the removal of owned or leased compression
facilities on the Gathering System or the implementation of pipeline
modifications.
     Section 2.10 Memorandum of Agreement. Contemporaneously with the execution
of this Agreement, the Parties shall execute, acknowledge, deliver and record a
“short form” memorandum of this Agreement in the form of Exhibit L attached
hereto (the “Memorandum”) which shall be placed of record in the counties in
which the Dedicated Area is located.
     Section 2.11 No Breach. No violation of any of the terms or conditions of
this Agreement or failure to provide Services hereunder shall be deemed a breach
of this Agreement by Gatherer if and to the extent such violation or failure
results, directly or indirectly, from a breach of the O&M Agreement by Shipper.
ARTICLE 3
MONTHLY SHORTFALL PAYMENTS
     Section 3.1 Deliveries in Excess of the Base Volume. If, during any Month
up to and including the Month in which the Trigger Event occurs, (i) the Base
Volume Monthly Gas Receipt for such Month is greater than (ii) the Base Volume
for such Month (the volume difference being “Monthly Excess Volumes”), Shipper
shall add such Monthly Excess Volumes to a notional account (the “Monthly Excess
Bank”). The balance in the Monthly Excess Bank shall be (x) reduced each Month
by the Monthly Shortfall Offset Amount (hereinafter defined), if any, and
(y) increased as provided in Section 3.6(b).
     Section 3.2 Deliveries Less Than the Base Volume. If, during any Month up
to and including the Month in which the Trigger Event occurs, (i) the Base
Volume Monthly Gas Receipt for such Month is less than (ii) the Base Volume for
such Month, as reduced by the Volume of Gas that Shipper is ready, willing, and
able to deliver during such Month pursuant to and in accordance with the terms
of this Agreement but is not received by Gatherer due to

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Gatherer’s failure to receive Shipper’s Gas in material breach of the terms of
this Agreement (such amount by which (i) above is less than (ii) above, being
the “Monthly Shortfall”), then Shipper shall pay to Gatherer an amount (the
“Monthly Shortfall Payment”) equal to the product of the following:
          (a) the Base Fee applicable to such Month; and
          (b) the Monthly Shortfall minus the lesser of (1) the balance in the
Monthly Excess Bank as of the beginning of such Month or (2) the Monthly
Shortfall (such lesser amount being the “Monthly Shortfall Offset Amount”).
     Section 3.3 Force Majeure Volumes. During any Month in which there are
Force Majeure Volumes, the Volume of Gas set forth in Exhibit C for such Month
shall be reduced by such Force Majeure Volumes, and such Force Majeure Volumes
shall be deducted from the balance in the Monthly Excess Bank. If there are
Force Majeure Volumes remaining after such deduction (“Adjusted Force Majeure
Volumes”), the Volume of Gas set forth in Exhibit C for each subsequent Month
during which there are no Force Majeure Volumes shall equal the greater of
(A) one hundred ten percent (110%) of such Volume and (B) the total Base Volume
Monthly Gas Receipt for such Month until such time as the Base Fee has been paid
with respect to Volumes in excess of the Volumes set forth in Exhibit C equal to
the Adjusted Force Majeure Volumes. Notwithstanding anything herein to the
contrary, the Volume of Gas set forth in Exhibit C shall not be reduced for a
period longer than six (6) Months after the first Month in which there are Force
Majeure Volumes unless such Force Majeure Volumes are due to a Gatherer Force
Majeure Event.
     Section 3.4 Monthly Shortfall Payments Offset Against Future Fees. The
Monthly Shortfall Payments shall be used to offset any Base Fees due hereunder
with respect to any Monthly Excess Volumes in any subsequent Month; provided,
however, in such event, the balance in the Monthly Excess Bank shall be reduced
by the Monthly Excess Volumes for which Base Fees due thereon were offset by
such Monthly Shortfall Payments.
     Section 3.5 Example of Operation of Monthly Excess Bank. An example of the
operation of the Monthly Excess Bank, including the calculation of Monthly
Excess Volumes, Monthly Shortfalls, Monthly Shortfall Payments and Monthly
Shortfall Offset Amounts is set forth on Exhibit K attached hereto.
     Section 3.6 Adjustment to Account for Released Gas.
          (a) If at any time Dedicated Gas is permanently released from the
Dedication and this Agreement pursuant to the terms hereof, Gatherer and Shipper
shall negotiate in good faith a mutually agreeable reduction in the Base Volumes
in order to account for the Released Gas. In the event that the Parties cannot
agree on such reduction in the Base Volumes within thirty (30) days after the
date on which such permanent release becomes effective, then the Accounting
Arbitrator shall settle the dispute. In settling the dispute, the Accounting
Arbitrator (a) shall determine the Volumes of Released Gas and the likely
production curve based upon the then proved producing reserves of the wells
delivering to the applicable Receipt Point and such Volumes shall be deducted
from the Base Volumes and (b) shall be permitted to engage

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technical consultants, including independent engineering firms, as necessary.
Within ten (10) days after the selection of the Accounting Arbitrator, each of
the Parties shall summarize and submit its position with regard to the dispute
to the Accounting Arbitrator. Within ten (10) Business Days after receiving the
Parties’ respective submissions, the Accounting Arbitrator shall render a
decision with respect to the dispute. Any decision rendered by the Accounting
Arbitrator pursuant hereto shall be final, conclusive and binding on the Parties
and will be enforceable against the Parties in any court of competent
jurisdiction. The costs of the Accounting Arbitrator shall be borne one-half by
Shipper and one-half by Gatherer.
          (b) Additions to Monthly Excess Bank. If (i) there are deductions to
the Monthly Excess Bank for Force Majeure Volumes pursuant to this Article, and
(ii) the wells and/or Receipt Points attributable to such Force Majeure Volumes
are thereafter permanently released from the Dedication and this Agreement
pursuant to the terms hereof, then such Force Majeure Volumes shall be added
back to the Monthly Excess Bank.
ARTICLE 4
WELL CONNECTIONS AND EXPANSIONS
     Section 4.1 Well Connection and Timing. Subject to the provisions of
Section 4.2, Shipper shall (i) connect any well that is drilled within the
Dedicated Area or on lands pooled or unitized therewith that will produce
Dedicated Gas to the Gathering System, (ii) have the option, at Shipper’s sole
election, to connect any well drilled outside the Dedicated Area and lands
pooled or unitized therewith to the Gathering System, and (iii) pay all
connection costs associated therewith, including, but not limited to, costs for
well tie lines, taps into the Gathering System, measurement facilities,
right-of-way acquisition, and all requisite permits and licenses. With respect
to any well that Shipper desires to connect to the Gathering System, Shipper
shall provide written notice thereof to Gatherer, which notice shall include the
well name, Shipper’s working interest in such well, a well location survey plat,
the legal location of such well, the actual spud date or the estimated spud date
if not yet spud, the completion date or the estimated completion date if not yet
completed, Shipper’s best estimate of the well’s deliverability, the approximate
location on the Gathering System where Shipper desires to connect such well and
the estimated date on which Shipper anticipates that it will make such
connection.
     Section 4.2 System Expansions. Shipper shall expand the Gathering System by
installing and/or acquiring such facilities as are reasonably necessary to
handle the delivery of Dedicated Gas to the Gathering System, which facilities
may include, without limitation, the installation of compression on the
Gathering System and/or the looping of Gathering System pipelines (the real and
personal property rights included with each such expansion are referred to
herein as “Expansions”). Shipper shall construct sufficient Expansions within
five (5) Years following the Effective Date (the “Expansion Period”), such that
the Gathering System will have a total throughput capacity sufficient to Gather
the Base Volumes during each of the applicable periods. All such Expansions
shall be owned and operated by Shipper unless and until such time as such
Expansions are acquired by Gatherer pursuant to a Subsequent Acquisition, in
which case and at which time, such Expansions shall be owned by Gatherer and
such Expansions will become a part of the Gathering System. Gatherer shall
reasonably cooperate with Shipper in connection with Shipper’s installation of
Expansions, which

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cooperation shall include, without limitation, the granting by Gatherer to
Shipper of easements and other real property rights as reasonably required by
Shipper in connection with the installation of any such Expansions.
     Section 4.3 Gatherer’s Purchase of Expansions. For thirty (30) Days
following each of the first, second, and third anniversaries of the Effective
Date, Shipper shall have the right to offer to Gatherer, and, if offered,
Gatherer shall have the right, for a period of sixty (60) Days after receipt of
such offer, to acquire the Expansions constructed during the one Year period
immediately preceding such anniversary date for a purchase price equal to the
greater of (i) the fair market value of such Expansions constructed during such
one Year period or (ii) the actual costs and expenses incurred by for such
Expansions constructed during such one Year period (each such consummated
purchase is referred to herein as a “Subsequent Acquisition” and the
corresponding purchase price is referred to herein as the “Subsequent
Acquisition Purchase Price”).
ARTICLE 5
TERM
     Section 5.1 Term. This Agreement shall become effective on the Effective
Date and shall continue in full force and effect until the earlier of (A) twenty
(20) years after the Effective Date or (B) the later of (i) one year after the
wells located on lands within the Dedicated Area or on land pooled or unitized
therewith in which Shipper owns an Interest cease to be capable of production of
hydrocarbons in paying quantities or (ii) one year after the Non-Dedicated Area
Wells cease to be capable of production of hydrocarbons in paying quantities
(the “Term”).
     Section 5.2 Obligations Upon Termination. Upon termination of this
Agreement, the Parties shall reasonably cooperate with each other in
(i) disconnecting their respective facilities from each other’s facilities and
(ii) to the extent that one Party has facilities located on the other Party’s
property, allowing such Party to remove its facilities from such other Party’s
property.
ARTICLE 6
SERVICE FEES AND FL&U
     Section 6.1 Gathering Fee. Shipper shall pay Gatherer, each Month, subject
to adjustment in accordance with Section 6.3, the following fees for the
Services (collectively, the “Gathering Fees”):
     (a) Operations Fee. With respect to each Sub-System each Month, Shipper
shall pay Gatherer a fee equal to the product of (i) the greater of (A) the
Volume of the Monthly Gas Receipt delivered into such Sub-System during such
Month and (B) one (1) Mcf, and (ii) the Operations Fee applicable to such
Sub-System for such Month.
     (b) Base Fee. Shipper shall pay to Gatherer, each Month, a fee equal to the
product of (i) the Monthly Gas Receipt for such Month and (ii) the Base Fee
applicable to such Month.

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     Section 6.2 Commodity Fee. Shipper shall pay Gatherer, each Month, subject
to adjustment in accordance with Section 6.3, the following variable fee (the
“Commodity Fee”) for each Mcf of the total Monthly Gas Receipts for such Month:
     (a) $*** per Mcf if the Monthly Waha Index Price for such Month is less
than $***;
     (b) $*** per Mcf if the Monthly Waha Index Price for such Month is equal to
or greater than $***, but less than $***;
     (c) $*** per Mcf if the Monthly Waha Index Price for such Month is equal to
or greater than $***, but less than $***;
     (d) $*** per Mcf if the Monthly Waha Index Price for such Month is equal to
or greater than $***, but less than $***;
     (e) $***per Mcf if the Monthly Waha Index Price for such Month is equal to
or greater than $***, but less than $***; and
     (f) $0*** per Mcf if the Monthly Waha Index Price for such Month is equal
to or greater than $***.
     Section 6.3 Adjustment to Base Fee and Commodity Fee after Trigger Event.
After the occurrence of the Trigger Event, each of the Base Fee and the
Commodity Fee shall each be reduced to an amount equal to the product of (A) the
applicable fee and (B) a percentage, expressed in decimal form, equal to the sum
of (i) *** and (ii) an amount equal to the product of (x) *** and (y) the total
of all Subsequent Acquisition Purchase Prices paid hereunder prior to the
Trigger Event. For example, if the Initial Purchase Price is $200,000,000 and
Gatherer purchased three (3) Subsequent Acquisitions, each with a Subsequent
Acquisition Purchase Price of $100,000,000, then the Base Fee at such time would
be $***. Upon the occurrence of the Trigger Event, the Base Fee would be
adjusted to $*** and each of the per Mcf Commodity Fee figures would be adjusted
by multiplying each such figure by ***.
     Section 6.4 Condensate. Gatherer shall pay Shipper, each Month, for the
value of Shipper’s Pro Rata Share of Condensate retained by Gatherer, an amount
equal to the sum of the Condensate Purchase Price for each Sub-System during
such Month. The term “Condensate Purchase Price” as used herein means, with
respect to each Sub-System, each Month, an amount equal to Shipper’s Pro Rata
Share of the Net Condensate Proceeds for such Sub-System for such Month.
Gatherer shall retain and own all such Condensate and, subject to the payment
obligation described above, shall retain any and all revenues from the sale
thereof. Title to Shipper’s Pro Rata Share of Condensate shall pass from Shipper
to Gatherer upon the delivery of Shipper’s Gas at the Receipt Points. In the
event that the methodology used to allocate Condensate becomes inequitable in
any respect, including, without limitation, due to any Other Shipper having Gas
that has a liquids content significantly different than Shipper’s Gas, such
methodology shall be modified from time to time in order to remove any such
inequities; provided, however, such methodology shall be consistently applied to
Shipper and all Other Shippers utilizing the Gathering System.

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     Section 6.5 Modifications to Determination of Operations Fee. In the event
that the allocation of Operating Expenses to the Gathering System, to the
various Sub-Systems and to Shipper and the Other Shippers becomes inequitable in
any respect, including, without limitation, due to a Person being burdened by a
lesser or greater portion of certain Operating Expenses than such Person should
reasonably share because of the benefit derived by such Person from such
Operating Expenses, the applicable provisions hereof shall be modified from time
to time in order to remove any such inequities; provided, however, such
modifications shall be consistently applied to Shipper and all Other Shippers
utilizing the Gathering System.
     Section 6.6 Operating Expense Budget Process.
     (a) Shipper’s Production Estimate. No later than (i) March 1st of each
Calendar Year, Shipper shall provide to Gatherer a forecast of the Volumes of
Shipper’s Gas (by Sub-System) that Shipper in good faith estimates that it will
deliver into the Gathering System during the third (3rd) and fourth (4th)
Calendar Quarters of such Calendar Year and (ii) September 1st of each Calendar
Year, Shipper shall provide to Gatherer a forecast of the Volumes of Shipper’s
Gas (by Sub-System) that Shipper in good faith estimates that it will deliver
into the Gathering System during the first (1st) and second (2nd) Calendar
Quarters of the following Calendar Year (each, a “Shipper Volume Forecast”).
     (b) Gathering System Throughput and Operating Expense Budget. No later than
(A) April 1st of each Calendar Year with respect to the third (3rd) and fourth
(4th) Calendar Quarters of such Calendar Year and (B) October 1st of each
Calendar Year with respect to the first (1st) and second (2nd) Calendar Quarters
of the following Calendar Year, Gatherer shall provide to Shipper, a forecast of
Gatherer’s good faith estimate of (i) the total Gas throughput for each
Sub-System during the applicable period, such estimate to based on the Shipper
Volume Forecast and Gatherer’s good faith estimate of the Volumes that Other
Shippers will deliver into each Sub-System during such period, (ii) the total
Operating Expenses to be incurred for each Sub-System during such period, such
estimate to be based on the prior period’s budgeted Operating Expenses and
actual Operating Expenses, as reasonably adjusted for anticipated operating
conditions during such period, and (iii) the Operations Fee per Mcf for each
Sub-System for such period, which estimate of the Operations Fee shall be
determined by dividing (x) the estimate of the Operating Expenses to be incurred
for each Sub-System during such period by (y) the estimate of the total Gas
throughput in Mcf for such Sub-System for such period (collectively, the
“Proposed Operating Expense Budget”).
     (c) Review of Proposed Operating Expense Budget. On or before (A) May 1st
of each Calendar Year with respect to the third (3rd) and fourth (4th) Calendar
Quarters of such Calendar Year and (B) November 1st of each Calendar Year with
respect to the first (1st) and second (2nd) Calendar Quarters of the following
Calendar, Gatherer shall meet with Shipper to review the Proposed Operating
Expense Budget and seek Shipper’s input with respect thereto; provided, however,
any such review and input by Shipper shall not be construed as (i) Shipper’s
approval of any cost or expense contained in the Proposed Operating Expense
Budget or (ii) any cost or expense incurred in connection with the

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Proposed Operating Expense Budget being deemed to have been incurred in
accordance with the terms and conditions of this Agreement.
     (d) Accounting Arbitrator. If, at any time within twenty-four (24) Months
after the Month in which any Operations Fee was paid by Shipper hereunder,
Shipper believes that any cost or expense charged by Gatherer as an Operating
Expense and included in the determination of such Operations Fee was not
incurred in accordance with the terms and conditions of this Agreement,
including, without limitation, Section 2.5, Shipper shall have the right to
submit the issue to the Accounting Arbitrator for resolution. Any decision
rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive
and binding on the Parties and will be enforceable against the Parties in any
court of competent jurisdiction. If the Accounting Arbitrator decides that any
such cost or expense was not incurred in accordance with the terms and
conditions of this Agreement, including, without limitation, Section 2.5, then,
within thirty (30) days after the determination thereof by the Accounting
Arbitrator, Gatherer shall refund to Shipper any such costs and expenses paid by
Shipper to Gatherer hereunder. The costs of the Accounting Arbitrator shall be
borne one-half by Shipper and one-half by Gatherer. The Parties’ respective
rights and obligations under this Section 6.6 shall be in addition to and not
limited by Section 15.2 hereof.
ARTICLE 7
ALLOCATIONS
     Section 7.1 Fuel, Lost and Unaccounted for Gas Allocation Procedures.
Shipper shall bear Shipper’s Pro Rata Share of FL&U in accordance with the
following:
     (a) Field Fuel Allocation for Sub-Systems. That portion of the Monthly Gas
Receipt delivered into each Sub-System shall be allocated, each Month, Shipper’s
Pro Rata Share of Field Fuel for the applicable Sub-System for such Month;
provided that Shipper shall provide one hundred percent (100%) of the Field Fuel
consumed in the operation of any Shipper Compression unless Other Shippers also
utilize Shipper Compression.
     (b) Lost and Unaccounted for Gas Allocation for Sweet Gas Gathering System.
That portion of the Monthly Gas Receipt delivered into the Sweet Gas Gathering
System shall be allocated, each Month, Shipper’s Pro Rata Share of Lost and
Unaccounted for Gas calculated for the Sweet Gas Gathering System for such
Month.
     (c) Lost and Unaccounted for Gas Allocation for Sour Gas Gathering System.
That portion of the Monthly Gas Receipt delivered into the Sour Gas Gathering
System shall be allocated, each Month, Shipper’s Pro Rata Share of Lost and
Unaccounted for Gas calculated for the Sour Gas Gathering System for such Month.
     Section 7.2 Modifications to Allocation Procedures. In the event that the
allocation procedures herein shall cease to be reflective of actual operations
or become inequitable in any respect, such allocation procedures shall be
modified, including, without limitation, the determination of Shipper’s Pro Rata
Share, from time to time in order to reflect actual

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operations and to remove any such inequities; provided, however, such allocation
procedures shall be consistently applied to Shipper and all Other Shippers
utilizing the Gathering System.
ARTICLE 8
SHIPPER COMMITMENTS AND RIGHTS
     Section 8.1 Conveyance of Rights to Gatherer. Subject to Shipper’s
obligations under the Prior Dedications and the other terms and conditions of
this Agreement, Shipper hereby grants, sells, transfers, conveys, and assigns to
Gatherer (i) the exclusive right to provide Services for the Dedicated Gas,
(ii) all right, title, interest and/or ownership in all Condensate recovered
from Shipper’s Gas, and (iii) the right to consume Shipper’s Gas as Field Fuel
in connection with the provision of the Services hereunder.
     Section 8.2 Shipper Compression.
     (a) Shipper shall have the right, at its own expense, to install
compression facilities and plunger lifts upstream of the Receipt Points. Any
such facilities installed by Shipper shall be installed, operated, and
maintained in a manner that does not adversely affect (i) Gatherer’s
dehydration, measurement, gathering or other facilities, (ii) the operation of
the Gathering System, or (iii) any contractual obligations of Gatherer.
     (b) If, from time to time, Shipper desires to have lower pressures on all
or any portion of a Sub-System, Gatherer and Shipper shall negotiate in good
faith for Gatherer to install compression to lower pressures. If Gatherer and
Shipper are unable to agree upon terms under which Gatherer would install such
compression, then Gatherer shall allow Shipper to install, own and operate such
compression facilities on the Gathering System as reasonably determined by
Shipper.
     (c) Shipper shall provide the Field Fuel consumed in the operation of any
Shipper Compression, unless Other Shippers also utilize Shipper Compression.
     (d) If Shipper installs Shipper Compression, Shipper shall indemnify,
defend, and hold harmless the Gatherer Indemnified Parties from and against all
Claims and Losses arising out of, or resulting from, the installation,
operation, maintenance, or removal of such Shipper Compression, unless such
claims were the result of negligence, gross negligence or willful misconduct of
any of the Gatherer Indemnified Parties.
     Section 8.3 Gas for Lease Operations. Shipper shall have the right to
utilize Dedicated Gas and other Gas from the Gathering System as may be required
to be delivered to lessors under the terms of any leases or as required for
Shipper’s operations within the Dedicated Area or lands pooled or unitized
therewith, as determined by Shipper in its sole discretion. In connection
therewith, Gatherer shall provide Shipper, at Shipper’s sole cost and expense,
such taps on the Gathering System as may be reasonably required by Shipper for
such purposes. Shipper shall estimate the Volume and Quantity of such Gas so
used and report such estimate to Gatherer on or before the fifth (5th) Day of
the Month following the Month of such usage.

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     Section 8.4 Pooling or Units. Shipper may form, dissolve, and/or
participate in pooling agreements or units encompassing all or any portions of
the Dedicated Area, as determined by Shipper in its sole discretion.
     Section 8.5 Operational Control of Shipper’s Wells. Shipper reserves the
right to operate its leases and wells in any manner that it desires, free of any
control by Gatherer, as determined by Shipper in its sole discretion, including
without limitation, (i) shutting-in, cleaning out, reworking, modifying,
deepening, or abandoning any such wells, (ii) using any efficient, modern, or
improved method for the production of its wells and (iii) surrendering,
releasing, or terminating its leases or Interests at any time; provided that
before any well is taken out of service for any reason, Shipper shall first
shut-off the well’s connection to the Receipt Point.
     Section 8.6 Access to Facilities. Subject to Shipper’s safety rules,
regulations and procedures, (i) Shipper shall provide Gatherer such access to
Shipper’s facilities as necessary and convenient to perform Gatherer’s
obligations under this Agreement and (ii) insofar as it has the right to do so,
Shipper grants Gatherer the use of all easements and rights-of-way held by
Shipper that are necessary and convenient for Gatherer to perform its
obligations under this Agreement. Shipper shall be responsible for maintaining
such rights of access, easements and rights-of-way at its sole cost and expense.
     Section 8.7 Line Pack. The Parties acknowledge and agree that Line Pack
shall be owned as provided for in the Intercompany Conveyance.
     Section 8.8 Cholla Gathering Agreement. Shipper shall not (a) cancel or
terminate the Cholla Gathering Agreement (or consent or accept any cancellation
or termination thereof) prior to June 30, 2029 or (b) enter into or permit any
material modification of, or waive any material right or obligation of any
Person under, the Cholla Gathering Agreement.
ARTICLE 9
MAINTENANCE AND MARKETING OF CONDENSATE
     Section 9.1 Maintenance. Gatherer shall be entitled to interrupt its
performance hereunder to perform necessary or desirable inspections, pigging,
maintenance, testing, alterations, modifications, expansions, connections,
repairs, or replacements to the Gathering System (“Maintenance”), with notice as
provided herein to Shipper, except in cases of emergency where such notice is
impracticable or in cases where the operations of Shipper will not be affected.
Before the beginning of each Calendar Year, Gatherer shall provide Shipper in
writing with an estimated schedule of the Maintenance to be performed during the
Calendar Year and the anticipated dates of such Maintenance. In performing
Maintenance, Gatherer shall coordinate its activities with Shipper and perform
such Maintenance is such a manner so as to minimize downtime, shutting-in of
Shipper’s production and interference with Shipper’s operations.
     Section 9.2 Marketing of Condensate. Gatherer shall market Condensate to a
Person not Affiliated with Gatherer, upon terms which, in Gatherer’s good faith
judgment, are reasonable terms in light of market conditions existing at that
time.

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ARTICLE 10
RECEIPT POINTS, DELIVERY POINTS, AND PRESSURES
     Section 10.1 Receipt Points. Shipper shall deliver Shipper’s Gas to
Gatherer hereunder at the Receipt Points.
     Section 10.2 Delivery Points. Gatherer shall deliver Delivery Point Gas
hereunder to the Delivery Points as nominated by Shipper pursuant to this
Agreement.
     Section 10.3 Uniform Deliveries. Shipper shall deliver Shipper’s Gas at the
Receipt Points and Gatherer will receive and redeliver Delivery Point Gas to the
Delivery Points as nearly as practicable at uniform hourly and daily rates of
flow.
     Section 10.4 Pressure at Receipt Points. Shipper shall cause Shipper’s Gas
to be delivered to the Receipt Points at a pressure sufficient to enter the
Gathering System, but shall not be delivered at pressures in excess of the
maximum allowable operating pressure at the Receipt Points, as such pressure may
exist from time to time; provided, however, the following shall apply:
     (a) Required Pressure. From and after the one (1) year anniversary of the
end of the Expansion Period, Gatherer shall be responsible, at its sole cost and
expense, to maintain pressures on each Sub-System (other than the High-Pressure
Sweet Sub-System and the High Pressure Sour Sub-System) at or below the
Sub-System Turnover Average Receipt Point Pressure applicable to such
Sub-System.
     (b) Operations Fee Reduction. If the Monthly Average Receipt Point Pressure
exceeds the applicable Sub-System Turnover Average Receipt Point Pressure for
any Sub-System (other than the High-Pressure Sweet Sub-System and the High
Pressure Sour Sub-System) during any Month after the one (1) year anniversary of
the end of the Expansion Period, then for each Receipt Point on such Sub-System
that exceeds the Sub-System Turnover Average Receipt Point Pressure for the
Sub-System to which such Receipt Point is connected, the Operations Fees for
such Month applicable to such Receipt Point shall be reduced by an amount equal
to the product of (i) such Operations Fee and (ii) two percent (2%) for each one
percent (1%) that such Monthly Average Receipt Point Pressure exceeds the
applicable the Sub-System Turnover Average Receipt Point Pressure. For example,
if during the applicable Month, the applicable Operations Fee is $0.10 per Mcf
and the applicable the Sub-System Turnover Average Receipt Point Pressure is one
hundred (100) psig, but during such Month, the Monthly Average Receipt Point
Pressure was one hundred ten (110) psig, then the Operations Fee would be
reduced to $0.08 per Mcf. Nothing herein shall relieve Gatherer of any liability
for failure to provide Services pursuant to, and in accordance with, the terms
of this Agreement. Notwithstanding anything contained in this Section 10.4(b),
there will be no reduction in the Operations Fee for any Receipt Point that is
first established or re-connected to the Gathering System after the one (1) year
anniversary of the end of the Expansion Period, which has, during the first
thirty (30) days of production, a weighted average pressure above the Sub-System
Turnover Average Receipt Point Pressure for the Sub-System to which such Receipt
Point is connected.

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     (c) Release. If (i) after the one (1) year anniversary of the end of the
Expansion Period, the Monthly Average Receipt Point Pressure for any Sub-System
(other than the High-Pressure Sweet Sub-System and the High Pressure Sour
Sub-System) is greater than the applicable Sub-System Turnover Average Receipt
Point Pressure for (A) a period of one hundred twenty (120) Days or more during
any Year or (B) a continuous period of sixty (60) Days or more (the “Initial
Excess Pressure Period”), and (ii) no event has occurred or condition exists
that constitutes a material breach or violation of, or a failure to comply with,
this Agreement or the O&M Agreement on the part of Shipper which remains
uncured, then (y) Shipper, at its option, may elect to permanently release the
Dedicated Gas produced from wells delivering to each Receipt Point on such
Sub-System that exceeds the Sub-System Turnover Average Receipt Point Pressure
for the Sub-System to which such Receipt Point is connected by delivering
written notice thereof to Gatherer, and (z) if Shipper exercises such option,
Shipper and Gatherer shall acknowledge in writing the wells and Dedicated Gas
that have been released from the Dedication and this Agreement. Notwithstanding
anything herein to the contrary, no Dedicated Gas shall be released pursuant to
this paragraph (c) prior to the occurrence of the Trigger Event, unless, at any
time after the end of the Initial Excess Pressure Period, Gatherer is not using
commercially reasonable efforts to remedy the situation with all reasonable
dispatch; provided, however, if after an additional ninety (90) Days after the
Initial Excess Pressure Period, Gatherer has failed to remedy such situation,
then Shipper, at its option, may elect to permanently release the Dedicated Gas
produced from the wells delivering to such Sub-System or such Receipt Point as
provided above. Nothing herein shall relieve Gatherer of any liability for
failure to provide Services pursuant to, and in accordance with, the terms of
this Agreement.
     (d) Excessive Shipper Volumes. If (i) Gatherer is unable to comply with the
obligations set forth in Section 10.4(a) due solely to deliveries or attempted
deliveries of Shipper’s Gas and (ii) no event has occurred or condition exists
that constitutes a material breach or violation of, or a failure to comply with,
this Agreement or the O&M Agreement on the part of Gatherer which remains
uncured, then Gatherer shall be relieved of its obligations under this
Section 10.4 with respect to such Day.
     Section 10.5 Pressure at Delivery Points. Gatherer shall deliver Delivery
Point Gas to the Delivery Points at a pressure sufficient to enter the receiving
facilities at each such Delivery Point but shall not deliver the Delivery Point
Gas at pressures in excess of the maximum allowable operating pressure of the
receiving facilities at the Delivery Point, as such pressure may exist from time
to time. The minimum pressures for each Delivery Point are specified in
Exhibit E attached hereto.
     Section 10.6 Arrangements Prior to Receipt and After Redelivery. It shall
be Shipper’s obligation to make any required arrangements with other parties for
delivery of Shipper’s Gas into the Gathering System at the Receipt Points and
following redelivery at the Delivery Points.

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ARTICLE 11
NOMINATION AND BALANCING PROCEDURES
     Section 11.1 Notice of Available Capacity. On or before the 20th day of
each Month, Gatherer shall provide written notice to Shipper of Gatherer’s good
faith estimate of any capacity allocations or curtailments, if any, that, based
on then currently available information, Gatherer anticipates will be required
or necessary during the next succeeding Month. In the event that the 20th day of
the Month is a weekend or holiday, such notice will be provided on the last
Business Day preceding the 20th day of such Month.
     Section 11.2 Nomination Procedures. Pursuant to the terms of this
Agreement, the nomination procedures detailed in this Section will be utilized
by the Parties with respect to the Services provided hereunder. All nominations
must be made by Shipper or Shipper’s designee. For the purposes of this
Article 11, Shipper’s Gas shall include Third Party Shipper Gas.
     (a) Shipper and Similarly Situated Shippers shall have priority service
over all Other Shippers and Shipper’s and Similarly Situated Shippers’
nominations to the Delivery Points shall be placed in advance of all Other
Shippers. To the extent a Delivery Point does not have capacity for the
cumulative volumes from Shipper and Other Shippers’ nominations, Gatherer will
advise each Other Shipper to reduce its nominations to ensure that Shipper’s Gas
and Similarly Situated Shippers’ Gas receive priority service.
     (b) Shipper’s nominations hereunder shall be accepted and scheduled for
delivery by Gatherer to the extent (i) Shipper’s Gas (including any Imbalance
Gas) hereunder is sufficient to support such nominations, (ii) available
capacity exists to provide Services with respect to such Gas (which capacity
shall be allocated to Shipper in accordance with Section 2.6), and (iii) the
party receiving Gas at each Delivery Point accepts Shipper’s nominations. Upon
being scheduled for delivery, Gatherer’s dispatcher shall thereupon advise
Shipper in writing, via fax, e-mail, or web-based nomination process of the
quantity scheduled for Services hereunder (a “Scheduled Nomination”) and the
reason for any failure to schedule any of Shipper’s Gas nominated by Shipper.
     (c) Each nomination shall be made in conformance with the North American
Energy Standards Board nominations timeline, which may change from time to time.
     (d) Shipper shall provide to Gatherer’s dispatcher in writing, via fax,
e-mail, or web-based nomination process the actual daily nominations of the
quantities to be delivered hereunder by Gatherer for Shipper’s account at each
Delivery Point in accordance with Gatherer’s requirements. Such nominations
shall include the information requested by Gatherer, and Gatherer shall maintain
a record of such nominations.
     (e) Gatherer shall have the right to refuse receipt of volumes of Shipper’s
Gas from Shipper to the extent they exceed Scheduled Nominations provided that
Gatherer gives Shipper notice of such refusal. In that regard, Gatherer may
require that Shipper cease or curtail deliveries of Shipper’s Gas to match
production with Scheduled

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Nominations; provided, however, that to the extent available capacity exists,
Gatherer shall accept any increase in Shipper’s Scheduled Nominations made by
Shipper or its designee to match the delivered Volumes to receive such Gas so
that Shipper does not have to cease or curtail deliveries.
     (f) Gatherer shall accept any revisions to a prior Scheduled Nomination
which result in an increase in volume of Gas Shipper desires to deliver to the
Delivery Point that is supported by corresponding increases in physical volume
available at the Receipt Point.
     Section 11.3 Gas Balancing. It shall be Gatherer’s responsibility to
maintain balance on the Gathering System with Shipper and all Other Shippers.
Gatherer and Shipper shall resolve an over-delivery or under-delivery of
Shipper’s Gas each Month in accordance with this Article 11 on an MMBtu basis.
     Section 11.4 Imbalances.
     (a) Imbalance Gas. Shipper intends for the Quantity of Gas actually
delivered at each Delivery Point to equal the Scheduled Nominations for each
such Delivery Point and will use reasonable efforts to nominate Gas in such
manner. Shipper will use its best efforts to base Scheduled Nominations on the
forecasted quantity of Shipper’s Gas less any deductions provided for herein.
Any difference between the actual physical flow of Gas at the Delivery Points
and the Scheduled Nominations shall be deemed “Imbalance Gas” at such Delivery
Point. In that regard, Gatherer shall provide Shipper (i) a Daily balancing
statement and (ii) a Monthly balancing statement by the tenth (10th) Day of each
Month of the difference, if any, between the Quantity of Gas nominated by
Shipper at each Delivery Point during the immediately preceding Month and the
Quantity of Shipper’s Gas allocated at each Delivery Point during such Month.
Such difference, positive or negative, shall be deemed the Imbalance Gas with
positive amounts being the Quantity of Gas due Shipper and negative amounts
being the Quantity due Gatherer. The Imbalance Gas shall be eliminated over time
through the nomination and delivery process by Shipper nominating less Gas than
is actually delivered if the Imbalance Gas account is negative and by Shipper
nominating more Gas than is actually delivered if the Imbalance Gas account is
positive.
     (b) Imbalance Accounts. Gatherer shall (i) enter into agreements containing
similar balancing provisions to those contained herein with all Other Shippers
and (ii) maintain similar imbalance Gas accounts with, and shall provide similar
balancing statements to, all Other Shippers at each Delivery Point on an MMBtu
basis. Gatherer shall diligently coordinate with Shipper to resolve any
imbalances each Month under the premise that Shipper and Similarly Situated
Shippers have priority service and any Shipper imbalances will not be greater
from a percentage standpoint than any Other Shipper imbalances. In that regard,
Gatherer shall require Other Shippers to adjust their nominations throughout the
Month so as to minimize imbalances and to achieve balance on the Gathering
System. Either Party shall have the option to exercise a cash-out for any
Positive Shipper Monthly Imbalance Quantity or Negative Shipper Monthly
Imbalance Quantity pursuant to Section 11.4(c) below.

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     (c) Cash-Out of Shipper Monthly Imbalances. If either Party elects to
cash-out pursuant to Section 11.3(b), for each MMBtu of Positive Shipper Monthly
Imbalance Quantity or Negative Shipper Monthly Imbalance Quantity, as the case
may be, calculated at the end of each Month that falls within each range set
forth below, Shipper shall pay to Gatherer, or Gatherer shall pay to Shipper, as
applicable, the product of (i) the Cash-Out Value Percentage attributable to
such Gas, as set forth below, multiplied by (ii) the Imbalance Cash-Out Price
for such Month. Such amounts shall be included on and paid in accordance with
Gatherer’s next ensuing Monthly invoice.

          Monthly Imbalance Percentage     ([Positive or Negative Shipper
Monthly     Imbalance Quantity] Divided by [the     Quantity of the Monthly Gas
Receipt for     such Month less Quantity Reductions for     such Month])  
Cash-out Value Percentage
less than 5%
    100 %
5% up to 10%
    105 %
greater than 10%
    110 %

For example, if the Quantity of the Monthly Gas Receipt for such Month less the
Quantity Reductions equaled one hundred (100) MMBtu, the Negative Shipper
Monthly Imbalance Quantity for such Month was twelve (12) MMBtu, and the
Imbalance Cash-Out Price for such Month was $5.00, then Gatherer would pay to
Shipper $5.00 for the first five (5) MMBtu, $5.25 for the next five (5) MMBtu,
and $5.50 for the remaining two (2) MMBtu.
     (d) Imbalance Penalties. If either Party incurs any costs or fees
(including, without limitation, transportation costs, charges or penalties) from
Persons receiving Gas at the Delivery Points as a result of the other Party’s
actions or negligence in maintaining balance on the Gathering System, such other
Party shall reimburse the first Party for such costs and fees. The Party
requesting such reimbursement shall provide the other Party with all the
documentation and statements justifying the claim for its review and to contest
should it not agree with the requesting Party.
     Section 11.5 Maintenance.
     (a) Monthly Maintenance schedules shall be sent via email to Shipper by the
20th day of each Month setting forth the Maintenance that is to be performed
during the next Month; provided, however, in the event the 20th day of the Month
is a weekend or holiday, monthly Maintenance schedules will be provided no later
than the last Business Day preceding the 20th day of the Month.
     (b) Maintenance schedules will include by compressor station a description
of each Maintenance project at the compressor stations and an estimate of
capacity curtailment and duration for each project.

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     (c) No later than forty-eight (48) hours prior to the beginning of the Day
of each Maintenance project, a volume curtailment allocation will be sent to
Shipper if capacity allocations are determined to be necessary by Gatherer.
     Section 11.6 Unscheduled Capacity Allocations.
     (a) Gatherer shall 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 make
necessary adjustments to its nominations within four (4) hours, Gatherer may
adjust Shipper’s nominations and/or not confirm additional nominations requested
by Shipper.
     (b) Gatherer also may request that Shipper curtail production to match
production with nominations of Shipper’s Gas. In such event, if Shipper does not
adjust its nomination as reasonably directed by Gatherer, and such failure to
adjust nominations materially impacts operations on the Gathering System,
Gatherer may curtail or shut in Gas for a reasonable period of time to match
Shipper’s production with Shipper’s nominations. Gatherer shall not be liable
for Losses caused by any such curtailment under this Section 11.6(b) unless such
curtailment is due to the negligence of Gatherer.
     Section 11.7 Modifications to Nomination and Balancing Procedures. In the
event that the nomination and balancing procedures herein shall cease to be
reflective of actual operations or become inequitable in any respect, such
nomination and balancing procedures shall be modified from time to time in order
to reflect actual operations and to remove any such inequities; provided,
however, such nomination and balancing procedures shall be consistently applied
to Shipper and all Other Shippers utilizing the Gathering System.
ARTICLE 12
GAS QUALITY
     Section 12.1 Receipt Point Gas Quality Specifications. Shipper’s Gas
delivered to the Receipt Points shall meet the applicable Receipt Point Gas
Quality Specifications.
     Section 12.2 Non-Conforming Gas. If at any time Gatherer becomes aware that
Shipper’s Gas at the Receipt Points fails to conform to the applicable Receipt
Point Gas Quality Specifications (“Off-Specification Receipts”), then
(i) Gatherer shall give Shipper written notice of the deficiency and Shipper
shall take steps to remedy the deficiency and (ii) Gatherer may take any
combination of the following actions:
     (a) take receipt of the non-conforming Shipper’s Gas and that receipt shall
not be construed as a waiver or change of standards for future volumes; or
     (b) after providing notice as provided above in this Section 12.2,
immediately cease receiving the non-conforming Shipper’s Gas by shutting in the
sources of such non-conforming Shipper’s Gas or by other appropriate means and
shall notify Shipper that Gatherer has ceased, or will cease, receiving the
non-conforming Shipper’s Gas.

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Notwithstanding anything to the contrary herein, the fact that Dedicated Gas may
not meet the Receipt Point Gas Specifications shall not operate to release such
Dedicated Gas from the Dedication.
     Section 12.3 Off-Specification Receipts. Notwithstanding Section 12.2,
Gatherer shall accept Off-Specification Receipts; provided that Gatherer shall
have the right to cease receiving such Off-Specification Receipts if Gatherer
determines in good faith that the blended Gas stream in the applicable
Sub-System would not meet the Delivery Point Gas Quality Specifications or the
receiving party at the Delivery Point would not agree to accept such
Off-Specification Receipts.
     Section 12.4 Reimbursement and Shipper Indemnity. Any damages caused by
Off-Specification Receipts from Shipper to the Gathering System or the Gas
therein shall be remedied by Shipper through a reimbursement of the costs
incurred by Gatherer to mitigate or remedy the damages. In addition, Shipper
agrees to defend, indemnify, and hold harmless Gatherer from and against all
Claims and Losses arising out of, resulting from, or caused by Shipper
delivering Gas to Gatherer at the Receipt Points that does not conform to the
applicable Receipt Point Gas Quality Specifications.
     Section 12.5 Delivery Point Gas Quality Specifications. The Delivery Point
Gas delivered by Gatherer to Shipper at the Delivery Points shall meet the
Delivery Point Gas Quality Specifications, except to the extent that the
delivery of non-conforming Gas is caused by the receipt of Off-Specification
Receipts from Shipper at the Receipt Points.
     Section 12.6 Gatherer Indemnity. Gatherer agrees to defend, indemnify, and
hold harmless Shipper from and against all Claims and Losses arising out of,
resulting from, or caused by Gatherer delivering Gas to Shipper at the Delivery
Points that does not conform to the applicable Delivery Point Gas Quality
Specifications, except to the extent that the delivery of such non-conforming
Gas is caused by the receipt of Off-Specification Receipts from Shipper at the
Receipt Points.
ARTICLE 13
MEASUREMENT EQUIPMENT AND PROCEDURES
     Section 13.1 Equipment and Specifications. For measurement purposes under
this Agreement, Shipper’s Gas delivered into the Gathering System shall be
measured at the Measurement Meters and the Delivery Point Gas shall be measured
at the meters at the Delivery Points. Measurement and appurtenant facilities
shall be installed, operated, and maintained by the measuring party in accurate
working order and condition to measure Gas at all applicable measurement points
in accordance with the provisions hereof.
     Section 13.2 Gas Meter Standards. Orifice meters installed in such
measuring stations shall be constructed and operated in accordance with ANSI/API
2530 API 14.3, AGA Report No. 3, Orifice Metering of Natural Gas and Other
Related Hydrocarbon Fluids, as it is now and from time to time may be revised,
amended, or supplemented and shall include the use of flange connections and,
where necessary, straightening vanes, flow conditioners and/or pulsation
dampening equipment. Ultrasonic meters installed in such measuring stations
shall be

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constructed and operated in accordance with AGA Report No. 9, Measurement of Gas
by Ultrasonic Meters, First Edition, and any subsequent modification and
amendment thereof generally accepted within the Gas industry. Electronic flow
computers shall be used and the Gas shall have its volume, mass, and/or heat
content computed in accordance with the applicable AGA standards including, but
not limited to, AGA Report Nos. 3, 5, 6, 7, 8 and API 21.1 “Flow Measurement
Using Electronic Metering Systems” and any subsequent modifications and
amendments thereof generally accepted within the Gas industry. When Gas
chromatographs are used they shall be installed, operated, maintained, and
verified according to industry standards (GPA 2261, GPA 2145, GPA 2172, and GPA
2177).
     Section 13.3 Notice of Measurement Equipment Inspection and Calibration.
Each Party shall give reasonable notice to the other Party in order that the
other Party may, at its option, have representatives present to observe any
reading, inspecting, testing, calibrating, or adjusting of measuring equipment
used in measuring or checking the measurement of receipts or deliveries of Gas
under this Agreement. The official electronic data from such measuring equipment
shall remain the property of the measuring equipment owner, but copies of such
records shall, upon written request, be submitted, together with calculations
and flow computer configurations therefrom, to the requesting Party for
inspection and verification.
     Section 13.4 Measurement Accuracy Verification. Each Party shall verify the
accuracy of all transmitters, flow computers, and other equipment used in the
measurement of the Gas hereunder at intervals not to exceed one hundred eighty
(180) Days and cause such equipment to be adjusted or calibrated as necessary.
Testing frequency will be based upon each well or station’s flow rate (Mcf/Day).
Any flow rate greater than or equal to 5,000 Mcf/Day shall be tested monthly.
Any flow rate that is greater than or equal to 1,000 Mcf/Day, but less than
5,000 Mcf/Day, shall be tested semi-annually. Neither Party shall be required to
cause adjustment or calibration of such equipment more frequently than once
every Month, unless a special test is requested pursuant to Section 13.5 of this
Agreement. If, upon test, (i) no adjustment or calibration error is found that
results in an incremental adjustment to the calculated flow rate through each
meter run in excess of one percent (1%) of the adjusted flow rate (whether
positive or negative and using the adjusted flow rate as the percent error
equation denominator) or (ii) any quantity error is not greater than two hundred
fifty (250) Mcf per Month, then any previous recordings of such equipment shall
be considered accurate in computing deliveries but such equipment shall be
adjusted or calibrated at once. If, during any test of the measuring equipment,
an adjustment or calibration error is found that results in (i) an incremental
adjustment to the calculated flow rate through each meter run in excess of one
percent (1%) of the adjusted flow rate (whether positive or negative and using
the adjusted flow rate as the percent error equation denominator) and (ii) a
quantity error greater than two hundred fifty (250) Mcf per Month (“Material
Error”), then any previous recordings of such equipment shall be corrected to
zero error for any period during which the error existed (and which is either
known definitely or agreed to by the Parties) and the total flow for such period
shall be determined in accordance with the provisions of Section 13.6 of this
Agreement. If the period of error condition cannot be determined or agreed upon
between the Parties, such correction shall be for a period extending over the
last one half (1/2) of the time elapsed since the date of the last test.

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     Section 13.5 Special Tests. In the event a Party desires a special test (a
test not scheduled by a Party under the provisions of Section 13.4 of this
Agreement) of any measuring equipment, seventy-two (72) hours advance notice
shall be given to the other Party and, after providing such notice, such test
shall be promptly performed. If no Material Error is found, the Party requesting
the test shall pay the costs of such special test including any labor and
transportation costs pertaining thereto. If a Material Error is determined to
exist, the Party responsible for such measurement shall pay such costs and
perform any corrections required under Section 13.4 of this Agreement.
     Section 13.6 Metered Flow Rates in Error. If, for any reason, any
measurement equipment is (i) out of adjustment, (ii) out of service, or
(iii) out of repair, and, in each case, a Material Error exists as a result
thereof, the total quantity of Gas delivered shall be determined in accordance
with the first of the following methods which is feasible:
     (a) by using the registration of any mutually agreeable check metering
facility, if installed and accurately registering (subject to testing as
provided for in Section 13.4 of this Agreement);
     (b) where multiple meter runs exist in series, by calculation using the
registration of such meter run equipment; provided that they are measuring Gas
from upstream and downstream headers in common with the faulty metering
equipment, are not controlled by separate regulators, and are accurately
registering;
     (c) by estimating the quantity, based upon deliveries made during periods
of similar conditions when the meter was registering accurately.
     Section 13.7 Record Retention. The Party owning the measurement equipment
shall retain and preserve all test data, charts, and similar records for any
calendar year for a period of at least sixty (60) Months following the end of
such calendar year unless applicable law or regulation requires a longer time
period or the Party has received written notification of a dispute involving
such records, in which case records shall be retained until the related issue is
resolved.
     Section 13.8 Correction Factors for Volume Measurement. The computations of
the volumes of Gas measured shall be made as follows:
     (a) The hourly orifice coefficient for each meter shall be calculated at
the base pressure of fourteen and sixty-five hundredths (14.65) psia and the
base temperature of sixty (60) degrees Fahrenheit. All Gas volume measurements
shall be based on an local atmospheric pressure assumed to be thirteen and
two-tenths (13.2) psia.
     (b) The flowing temperature of the Gas shall be continuously measured. In
the case of electronic metering, such temperature measurement shall be used as
continuous input to the flow computer for calculation of Gas volume, mass and/or
energy content in accordance with the applicable AGA or API 21.1 standards
including, but not limited to, AGA Report Nos. 3, 5, 6, 7 and 8 and any
subsequent modification and amendments thereof generally accepted within the Gas
industry.

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     (c) Measurements of inside diameters of pipe runs and orifices shall be
obtained by means of a micrometer to the nearest one-thousandth of an inch, and
such measurements shall be used in computations of coefficients.
     (d) In determining the volume of Gas, when electronic transducers and flow
computers are used, the Gas shall have its volume, mass and/or energy content
continuously integrated in accordance with the applicable AGA standards
including, but not limited to, AGA report Nos. 3, 5, 6, 7 and 8 and any
subsequent modification and amendments thereof generally accepted within the Gas
industry.
     (e) In calculating the volume of Gas, deviation from Boyle’s Law at the
pressure, specific gravity, and temperature for each measurement shall be
determined by use of AGA Report No. 8, Compressibility Factors for Natural Gas
and Other Related Hydrocarbon Gases, published by the AGA in conjunction with
Gas Measurement Committee Report No. 3 and amendments thereto generally accepted
within the Gas industry.
     (f) Whenever the conditions of pressure and temperature differ from the
standards described herein, conversion of the volume from these conditions to
the standard conditions shall be made in accordance with the Ideal Gas Laws,
corrected for deviation by the methods set forth in the AGA Gas Measurement
Committee Report No. 3, as said report may be amended from time to time.
     Section 13.9 Exception to Gas Measurement Basis. If at any time the basis
of measurement set out in this Agreement should conflict with rules,
regulations, or orders of any state or federal regulatory body having
jurisdiction, then the basis of measurement provided for in such rules,
regulations, or orders shall govern measurements hereunder.
     Section 13.10 Gas Sampling. The frequency of sampling will be at the same
interval as the calibration for all meters. New wells or wells that have been
changed due to a work over or other well bore alteration that could alter the
Gas composition shall be sampled monthly until the analyses demonstrate
reasonable consistency. After such time said meters will then be sampled at the
stated calibration frequency.
     (a) The C6+ composition, specific gravity and Gross Heating Value of Gas
will be determined by the measuring party taking a sample at the same frequency
as the meter calibration test. The sample will be acquired through a spot,
composite, or on-line Gas chromatograph. The analytical results shall be applied
at the beginning of the Month the sample is taken until a subsequent
representative sample is applied.
     (b) The specific gravity of Gas at all applicable measurement points shall
be determined by a Gas chromatographic component analysis to the nearest one
thousandth (0.001) of the samples of the Gas taken for test purposes as provided
above, or by such other method as shall be mutually agreed upon.
     (c) The Gross Heating Value shall be measured by Gas chromatographic
analysis component analysis of the samples of the Gas taken for test purposes as
provided above, or by such other method as shall be mutually agreed upon.

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     Section 13.11 Modifications to Measurement Procedures. In the event that
the measurement procedures herein shall cease to be reflective of actual
operations or become inequitable in any respect, such measurement procedures
shall be modified from time to time in order to reflect actual operations and to
remove any such inequities; provided, however, such measurement procedures shall
be consistently applied to Shipper and all Other Shippers utilizing the
Gathering System.
     Section 13.12 Measurement Disputes. Any dispute, controversy, or claim
arising out of or in connection with this Article 13 (a “Measurement Dispute”),
which the Parties are unable to resolve shall be referred to and determined by a
mutually agreeable measurement expert (the “Measurement Expert”), as the sole
and exclusive remedy of the Parties as to the Measurement Dispute. Prior to
retention of a Measurement Expert, the Parties will collectively approach and
negotiate fees with such Measurement Expert. Before any material information
pertaining to the Measurement Dispute is presented to the Measurement Expert,
the Measurement Expert must agree in writing to maintain the confidentiality of
all information provided to the Measurement Expert by either Party. All Party
communications with the Measurement Expert prior to and after retention,
including explanations of the dispute, data submissions, and data reviews, must
be attended by representatives of the other Party or its designees. The decision
of the Measurement Expert shall be final and binding upon the Parties.
ARTICLE 14
NOTICES
     Except as specifically provided otherwise herein, any notice, claim, or
other communication provided for in this Agreement or any notice that either
Party may desire to give to the other shall be in writing and shall be: (i) sent
by facsimile transmission; (ii) delivered by hand; (iii) sent by United States
mail with all postage fully prepaid; or (iv) delivered by courier with charges
paid in accordance with the customary arrangements established by such courier,
in each of the foregoing cases addressed to the Party at the following
addresses:

         
 
  Gatherer:   Piñon Gathering Company, LLC
 
      c/o TCW Asset Management Company
 
      333 Clay Street, Suite 4150
 
      Houston, Texas 77002
 
      Attention: Clay Taylor
 
      Fax Number: 713.615.7460
 
       
 
  with a copy to:   TCW Asset Management Company
 
      865 South Figueroa Street, Suite 1800
 
      Los Angeles, California 90017
 
      Attention: R. Blair Thomas
 
      Fax Number: 213.244.0604
 
       
 
  Shipper:   SandRidge Exploration and Production, LLC
 
      123 Robert S. Kerr Avenue
 
      Oklahoma City, Oklahoma 73102-6406
 
      Attention: Midstream — Manager of Administration
 
      Fax Number: 405.429.5990

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or at such other address as either Party may at any time designate by giving
written notice to the other Party. Such notices, invoices, allocation
statements, claims, or other communications shall be deemed received as follows:
(i) if delivered personally, upon delivery; (ii) if sent by United States mail,
whether by express mail, registered mail, certified mail or regular mail, the
notice shall be deemed to have been received on the day receipt is refused or is
confirmed orally or in writing by the receiving Party; (iii) if sent by a
courier service, upon delivery; or (iv) if sent by facsimile, the Business Day
following the day on which it was transmitted and confirmed by transmission
report or such earlier time as confirmed orally or in writing by the receiving
Party.
ARTICLE 15
PAYMENTS
     Section 15.1 Payments and Invoices. Not later than the fifteenth (15th) day
of the Month immediately following the Month for which the consideration is due,
Shipper shall pay to Gatherer the Gathering Fees and the Commodity Fee for the
Base Volumes for the Month for which the consideration is due. Gatherer shall
provide Shipper with a detailed statement and supporting documentation for the
net amount of all consideration due (including deductions) under the terms of
this Agreement (including amounts due or deductions for monthly imbalances
pursuant to Section 11.3), not later than the last day of the Month immediately
following the Month for which the consideration is due. In the event Shipper
disputes any portion of the net amount set out in Gatherer’s statement, Shipper
shall provide Gatherer with a detailed accounting of the disputed amounts and
its basis for the dispute and shall make payment to Gatherer of the net amount
due and not in dispute within fifteen (15) days after receipt of Gatherer’s
statement. Such payment shall be made by wire transfer pursuant to wire transfer
instructions delivered by Gatherer to Shipper in writing from time to time;
provided that upon the request of Gatherer, Shipper shall make payment of the
Operations Fee directly to Operator. Any amounts owing by Gatherer to Shipper
shall be deducted from amounts otherwise due Gatherer in the next ensuing
Monthly invoice. Notwithstanding anything herein to the contrary, any
indemnification payments required to be made by a Party hereunder shall be made
to the indemnified Party upon receipt by the indemnifying Party of written
demand therefor from the indemnified Party.
     Section 15.2 Audit Rights. Each Party, on not less than thirty (30) Days’
prior written notice to the other Party, shall have the right at its expense, at
reasonable times during normal business hours, to audit the books and records of
the other Party to the extent necessary to verify the accuracy of any statement,
allocation, measurement, computation, charge, or payment made under or pursuant
to this Agreement. The scope of any audit shall be limited to transactions
affecting the Gas delivered or Services provided hereunder and shall be limited
to the twenty-four (24) month period immediately prior to the Month in which the
notice requesting an audit was given. However, no audit may include any time
period for which a prior audit hereunder was conducted, and no audit may occur
more frequently than once each twelve (12) Months. All statements, allocations,
measurements, computations, charges, or payments made hereunder shall be
conclusively deemed true and correct and shall be final for all purposes, unless
a specific written claim detailing the amounts in question is made on or before
the end of the twenty-fourth (24th) Month after the Month in which such
statement,

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allocation, measurement, computation, charge or payment was made; provided,
however, if any such statement, allocation, measurement, computation, charge or
payment is the subject of an audit requested within the time periods provided
herein, then the Party conducting such audit shall have ninety (90) Days after
the date on which such audit is requested to make such specific written claim
detailing the amounts in question. To the extent the foregoing varies from any
applicable statute of limitation, the Parties expressly waive all such statutes
of limitation.
     Section 15.3 Right to Suspend on Failure to Pay. If any undisputed amount
due hereunder remains unpaid for the longer of (i) twenty (20) days after the
due date, or (ii) ten (10) days after delivery of notice of non-payment,
Gatherer shall have the right to suspend or discontinue services hereunder until
any such past due amount is paid. Each Party agrees to pay all costs incurred by
the prevailing Party in connection with the collection of, or attempt to
collect, any amounts due hereunder, including, without limitation, reasonable
attorney’s fees and court costs.
     Section 15.4 Creditworthiness.
     (a) Gatherer shall not be required to commence or to continue Services
hereunder on behalf of Shipper if Shipper (i) is or has become insolvent or
(ii) at Gatherer’ request, fails, within a reasonable period of time of not less
than ten (10) days, to demonstrate creditworthiness as reasonably determined by
Gatherer. Notwithstanding the foregoing, Gatherer shall provide Services to
Shipper hereunder if Shipper (x) prepays for such Services or (y) furnishes good
and sufficient security, as determined by Gatherer in its reasonable discretion,
in an amount equal to the estimated cost of Services for a three (3) Month
period. Gatherer may reassess the creditworthiness of and performance by Shipper
from time to time.
     (b) The insolvency of Shipper shall be evidenced by the filing by Shipper
or its parent entity of a voluntary petition in bankruptcy or the entry of a
decree or order by a court having jurisdiction in the premises adjudging Shipper
or its parent entity as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of Shipper or its parent entity under the Federal Bankruptcy Act or any
other applicable federal or state law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of Shipper, its
parent entity or of any substantial part of their respective property, or the
ordering of the winding-up or liquidation of Shipper’s or its parent entity’s
affairs, with said order or decree continuing unstayed and in effect for a
period of sixty (60) consecutive days. Notwithstanding anything herein to the
contrary, if Shipper is or has become insolvent, Gatherer shall not suspend
service in a manner that is inconsistent with the Federal Bankruptcy Code.
     Section 15.5 Payment Disputes. In the event Shipper disputes any payment
hereunder, Shipper shall make timely payment of all undisputed amounts and
Shipper and Gatherer will use good-faith efforts to resolve the disputed amounts
within sixty (60) Days following the original due date. Any amounts subsequently
resolved shall be due and payable within ten (10) Days of such resolution.

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     Section 15.6 Interest on Late Payments. In the event Shipper shall fail to
make timely payment of any sums, except those in a good-faith dispute, when due
under this Agreement, interest will accrue at an annual rate equal to the lower
of the prime rate as published in the “Money Rates” section of The Wall Street
Journal plus two percent (2%) and the maximum lawful rate of interest from the
date payment is due until the date payment is made.
ARTICLE 16
FORCE MAJEURE
     Section 16.1 Suspension of Obligations. In the event a Party is rendered
unable, wholly or in part, by Force Majeure to carry out its obligations under
this Agreement, other than the obligation to indemnify and make payments then or
thereafter due hereunder, and such Party promptly gives notice and full
particulars of such Force Majeure in writing to the other Party promptly after
the occurrence of the cause relied on, then the obligations of the Party giving
such notice, so far as and to the extent they are affected by such Force
Majeure, shall be suspended during the continuance of any inability so caused,
but for no longer period, and such cause shall so far as possible be remedied
with all reasonable dispatch by the Party claiming Force Majeure. A Force
Majeure event affecting the performance by either Party shall not relieve it of
liability in the event of its negligence, where such negligence was a cause of
the Force Majeure event, or in the event of its failure to use commercially
reasonable efforts to remedy the situation and remove the cause with all
reasonable dispatch.
     Section 16.2 Definition of Force Majeure. The term “Force Majeure” as used
in this Agreement shall mean any cause or causes not reasonably within the
control of the Party claiming suspension and which, by the exercise of
reasonable diligence, such Party is unable to prevent or overcome, including,
without limitation, acts of God, acts, omissions to act, and/or delays in action
of federal, state, or local government or any agency thereof, strikes, lockouts,
work stoppages, or other industrial disturbances, acts of a public enemy,
sabotage, wars, blockades, insurrections, riots, acts of terror, epidemics,
landslides, lightning, earthquakes, fires, storms, storm warnings, floods,
washouts, extreme cold or freezing weather, arrests and restraints of
governments and people, civil or criminal disturbances, interruptions by
governmental or court orders, present and future valid orders of any regulatory
body having jurisdiction, explosions, mechanical failures, breakage, or accident
to equipment installations, machinery, compressors, or lines of pipe, and
associated repairs, freezing of wells or lines of pipe, partial or entire
failure of wells, pipes, facilities, or equipment, electric power unavailability
or shortages, failure of pipelines or carriers to transport, partial or entire
failure or refusal of operators of upstream or downstream pipelines or
facilities to receive Gas, governmental regulations, and inability to obtain or
timely obtain, or obtain at a reasonable cost, after exercise of reasonable
diligence, pipe, materials, equipment, rights-of-way, servitudes, governmental
approvals, or labor, including those necessary for the facilities provided for
in this Agreement. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the Party having the
difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of the opposing party when such
course is inadvisable in the sole discretion of the Party having the difficulty.

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     Section 16.3 Non-Gatherer Force Majeure Events. Notwithstanding anything
herein to the contrary, the following events shall constitute Non-Gatherer Force
Majeure Events:
     (a) the termination or failure of the Surface Use Agreement for any reason
other than an act or omission of Gatherer; and
     (b) any failure of the Century Plant or any other CO2 plant to accept
Shipper’s Gas for any reason other than the failure of Gatherer to perform its
obligations hereunder.
ARTICLE 17
INDEMNIFICATION
     Section 17.1 Gatherer. Subject to the terms of this Agreement, including,
without limitation, Section 21.10 of this Agreement, Gatherer shall indemnify,
defend, and hold harmless the Shipper Indemnified Parties from and against all
Claims and Losses arising out of or relating to (i) the operations conducted
hereunder or in connection herewith by Gatherer to the extent resulting from the
negligence, gross negligence, or willful misconduct of Gatherer, except to the
extent such Claims or Losses are attributable to the negligence, gross
negligence, or willful misconduct of any of the Shipper Indemnified Parties,
(ii) any breach of this Agreement by Gatherer, and (iii) a breach by Gatherer
under this Agreement that results in the non-performance by Gatherer of
substantially all of its obligations thereunder, including a rejection of this
Agreement under any bankruptcy case or similar proceeding under any applicable
federal, state or other law. To secure the obligation of Gatherer to pay under
and perform the indemnity provided in Section 17.1(iii) (the “Gatherer Secured
Obligations”), Gatherer (i) grants, bargains, sells, assigns, mortgages,
transfers, and conveys unto Richard Gognat, as trustee for the benefit of the
Shipper Indemnified Persons (the “Shipper Trustee”), the Assets (as defined in
the Gathering Agreement) and all proceeds, products, renewals, increases,
profits, substitutions, replacements, additions, amendments, appurtenances and
accessions of the Assets (the “Shipper Collateral”), to have and to hold the
Shipper Collateral unto the Shipper Trustee and his successors or substitutes in
this trust forever, and (ii) grants to Shipper, for the benefit of the Shipper
Indemnified Persons, a security interest in all of Gatherer’s right, title and
interest, now existing or hereafter arising, in the Shipper Collateral. Upon the
failure of Gatherer to timely pay or perform any Gatherer Secured Obligation,
the Shipper Trustee shall have the right and power to sell, as the Shipper
Trustee may elect, all or a portion of the Shipper Collateral at one or more
sales, as an entirety or in parcels, in accordance with Section 51.002 of the
Texas Property Code. Gatherer hereby designates as Gatherer’s address for the
purpose of notice the address set forth in Article 14. Any purchaser or
purchasers will be provided with a general warranty conveyance binding Gatherer
and Gatherer’s successors and assigns. Sale of part of the Shipper Collateral
will not exhaust the power of sale, and sales may be made from time to time
until all of the Shipper Collateral is sold or all of the obligations under the
indemnity provided in Section 17.1(iii) are paid in full. The Shipper Trustee
will have the authority to appoint an attorney-in-fact to act as trustee in
conducting the foreclosure sale and executing a deed to the purchaser or
purchasers. The Shipper Trustee may resign in writing addressed to Shipper or be
removed at any time with or without cause by an instrument in writing duly
executed by Shipper. In case of the death, resignation or removal of the Shipper
Trustee, a successor trustee may be appointed by Shipper

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by instrument of substitution complying with any applicable requirements of law,
and in the absence of any requirement, without formality other than an
appointment and designation in writing. The appointment and designation will
vest in the named successor trustee all the estate and title of the Shipper
Trustee in all of the Shipper Collateral and all of the rights, powers,
privileges, immunities and duties hereby conferred upon the Shipper Trustee. All
references herein to the Shipper Trustee will be deemed to refer to any
successor trustee from time to time acting hereunder. Notwithstanding anything
herein to the contrary, upon the occurrence of a Termination Event, the lien and
security interest described in this Section 17.1 shall be deemed to be released,
terminated and void without further action by either Party.
     Section 17.2 Shipper. Subject to the terms of this Agreement, including,
without limitation, Section 21.10 of this Agreement, Shipper shall indemnify,
defend, and hold harmless the Gatherer Indemnified Parties from and against all
Claims and Losses arising out of or relating to (i) the operations conducted
hereunder or in connection herewith by Shipper to the extent resulting from the
negligence, gross negligence, or willful misconduct of Shipper, except to the
extent such Claims or Losses are attributable to the negligence, gross
negligence, or willful misconduct of any of the Gatherer Indemnified Parties,
(ii) any breach of this Agreement by Shipper, and (iii) the provision of
Services in accordance with this Agreement if the provision of such Services is
not permitted under applicable law.
ARTICLE 18
CUSTODY AND TITLE
     Section 18.1 Shipper Custody. As among the Parties, Shipper and any of its
designees shall be in custody, control, and possession of (i) Shipper’s Gas
hereunder until Shipper’s Gas is delivered to the Receipt Points and (ii) the
Delivery Point Gas after it is delivered to Shipper at the Delivery Points.
     Section 18.2 Gatherer Custody. As among the Parties, Gatherer shall be in
custody, control, and possession of Shipper’s Gas delivered hereunder, including
any portion thereof which accumulates as liquids, after Shipper’s Gas is
delivered at the Receipt Points and until the Delivery Point Gas is delivered to
Shipper at the Delivery Points.
     Section 18.3 Shipper Warranty. Shipper represents and warrants that it
(i) has the right to dedicate all Dedicated Gas and (ii) owns, or has the right
to deliver, Shipper’s Gas to the Receipt Points for the purposes of this
Agreement, free and clear of all liens, encumbrances, and adverse claims. If the
title to Shipper’s Gas delivered hereunder is disputed or is involved in any
legal action, Gatherer shall have the right to withhold payment (without
interest), or cease receiving such Gas, to the extent of the interest disputed
or involved in legal action, during the pendency of the action or until title is
freed from the dispute or until Shipper furnishes, or causes to be furnished,
indemnification to save Gatherer harmless from all Losses arising out of the
dispute or action, with surety reasonably acceptable to Gatherer. Subject to
Section 21.10, Shipper agrees to indemnify and hold harmless the Gatherer
Indemnified Parties from and against all Claims or Losses suffered by the
Gatherer Indemnified Parties, where such Claims or Losses arise, directly or
indirectly, out of, or are related to, any breach of the foregoing
representation and warranty.

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     Section 18.4 Title. Title to Shipper’s Gas delivered under this Agreement,
including all constituents thereof, shall remain with and in Shipper or its
designee at all times; provided, however, (i) title to Condensate shall pass
from Shipper to Gatherer immediately downstream of the Receipt Points and
(ii) title to FL&U shall pass from Shipper to Gatherer immediately downstream of
the Receipt Points.
     Section 18.5 Carbon Dioxide. Shipper shall retain title to all CO2
contained in Shipper’s Gas tendered by Shipper under this Agreement.
ARTICLE 19
ROYALTY AND TAXES
     Section 19.1 Proceeds of Production. Shipper shall have the sole and
exclusive obligation and liability for the payment of all Persons due any
proceeds derived by Shipper from Shipper’s Gas (including all constituents and
products thereof) delivered under this Agreement, including, without limitation,
royalties, overriding royalties, and similar interests, in accordance with the
provisions of the leases or agreements creating those rights to such proceeds.
     Section 19.2 Production Taxes. Shipper shall pay and be responsible for all
Production Taxes levied against or with respect to Shipper’s Gas delivered or
Services provided under this Agreement. Gatherer shall not become liable for
such Production Taxes, unless designated to remit those Production Taxes on
behalf of Shipper by any duly constituted jurisdictional agency having authority
to impose such obligations on Gatherer, in which event the amount of such Taxes
remitted on Shipper’s behalf shall be (i) reimbursed by Shipper upon receipt of
invoice, with corresponding documentation from Gatherer setting forth such
payments, or (ii) deducted from amounts otherwise due Shipper under this
Agreement.
     Section 19.3 Indemnification. Shipper hereby agrees to defend and indemnify
and hold Gatherer harmless from and against any and all Claims and Losses,
arising from the payments made by Shipper in accordance with Section 19.1 and
Section 19.2, above, including, without limitation, Claims and Losses arising
from claims for the nonpayment, mispayment, or wrongful calculation of those
payments.
ARTICLE 20
DISPUTE RESOLUTION
     Section 20.1 Negotiation. Prior to submitting any dispute for resolution by
a court, a Party shall provide written notice to the other of the occurrence of
such dispute. If the Parties have failed to resolve the dispute within fifteen
(15) Business Days after such notice was given, the Parties shall seek to
resolve the dispute by negotiation between senior management personnel of each
Party. Such personnel shall endeavor to meet and attempt to amicably resolve the
dispute. If the Parties are unable to resolve the dispute for any reason within
thirty (30) Business Days after the original notice of dispute was given, then
either Party shall be entitled to pursue any remedies available at law or in
equity; provided, however, this Section 20.1 shall not limit a Party’s right to
initiate litigation prior to the expiration of the time periods set forth in
this Section 20.1 if application of such limitations would prevent a Party from
filing

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a lawsuit or claim within the applicable period for filing lawsuits (e.g.
statutes of limitation, prescription, etc.).
     Section 20.2 Jurisdiction and Venue.
     (a) Each Party agrees that the appropriate, exclusive and convenient forum
for any disputes between any of the Parties arising out of this Agreement or the
transactions contemplated hereby shall be in any state or federal court in
Houston or Dallas, Texas, and each of the Parties irrevocably submits to the
jurisdiction of such courts solely in respect of any legal proceeding arising
out of or related to this Agreement or the transactions contemplated hereby. The
Parties further agree that the Parties shall not bring suit with respect to any
disputes arising out of this Agreement or the transactions contemplated hereby
in any court or jurisdiction other than the above specified courts.
     (b) Each Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any court referred to in paragraph (a) above. Each of the Parties
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.
     Section 20.3 Jury Waiver. THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO
SO, THE RIGHT TO A JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     Section 20.4 Costs and Expenses. The prevailing Party in any litigation
pertaining to any dispute hereunder shall be entitled to recover its reasonable
costs, expenses, and attorney’s fees in connection with such litigation.
ARTICLE 21
MISCELLANEOUS
     Section 21.1 Rights. The failure of either Party to exercise any right
granted hereunder shall not impair nor be deemed a waiver of that Party’s
privilege of exercising that right at any subsequent time or times.
     Section 21.2 Applicable Laws. This Agreement is subject to all valid
present and future laws, regulations, rules, and orders of Governmental
Authorities now or hereafter having jurisdiction over the Parties, this
Agreement, or the Services performed or the facilities utilized under this
Agreement.
     Section 21.3 Governing Law. This Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of Texas, without regard
to choice of law principles that would require the application of the laws of
any other jurisdiction.

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     Section 21.4 Assignments.
     (a) Shipper shall not make any assignment of all or any part of this
Agreement or any of the rights or obligations hereunder unless there first shall
have been obtained the written consent thereto of Gatherer, which consent shall
not be unreasonably withheld, conditioned, or delayed. In connection with any
proposed assignment, Shipper shall deliver to Gatherer a written proposal
detailing (i) the manner in which Shipper proposes to allocate the Base Volumes
and any balance then existing in the Monthly Excess Bank between Shipper and the
prospective assignee and (ii) a proposed crediting mechanism for adding Monthly
Excess Volumes to the Monthly Excess Bank. In the event Gatherer consents to the
proposed assignment and the proposed allocation of the Base Volumes and any
balance then existing in the Monthly Excess Bank, (i) the Parties shall sign an
amendment to this Agreement that adjusts the Base Volumes and the balance of the
Monthly Excess Bank, and (ii) Gatherer and the permitted assignee shall enter
into a separate gathering agreement in a form substantially similar to this
Agreement (rather than having a portion of this Agreement assigned to such
permitted assignee) with the effective date of such gathering agreement being
the date of execution thereof. Any permitted assignee of Shipper that executes a
separate gathering agreement described in (ii) above shall not be subject to
this Agreement.
     (b) Prior to the occurrence of a Termination Event, Gatherer shall neither
(i) convey all or any part of the Gathering System nor assign all or any part of
this Agreement to any Person (or an Affiliate or relative of such Person) that
owns, or has a leasehold interest in, surface or minerals located within the
Dedicated Area as of the Effective Date, or (ii) enter into any other
transaction pursuant to which control over all or any part of the Gathering
System is transferred to any Person (or an Affiliate or relative of such Person)
that owns, or has a leasehold interest in, surface or minerals located within
the Dedicated Area as of the Effective Date.
     (c) Subject to the other subsections of this Section 21.4, this Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
the Parties, and shall be binding upon any purchaser of the Gathering System and
upon any purchaser of Shipper’s Interests in the Dedicated Area or of Shipper’s
Interests in the Non-Dedicated Area Connected Wells. Any assignment or sublease
by Shipper of any of Shipper’s Interests in the Dedicated Area, or of Shipper’s
Interests in the Non-Dedicated Area Connected Wells shall be completed in
accordance with the obligations set forth in this Section 21.4 and Section 2.3
of this Agreement. Any assignment or sublease by Gatherer of any of interest in
the Gathering System shall be completed in accordance with the obligations set
forth in Section 2.3 of this Agreement. Any attempted assignment of this
Agreement in violation of this Section 21.4 shall be null and void.
     (d) Gatherer shall maintain uniformity of interest across the entire
Gathering System such that any Person that owns an interest in the Gathering
System has a uniform interest across the entire Gathering System. In furtherance
thereof, any assignment by Gatherer of any interest in the Gathering System must
include a uniform undivided interest in the entire Gathering System.

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     (e) Upon the assignment by Shipper of any interest in this Agreement, any
of Shipper’s Interests in the Dedicated Area or any of Shipper’s Interests in
the Non-Dedicated Area Connected Wells, Shipper (but not its assignee) shall be
released from liability hereunder for obligations, accruing hereunder after the
effective date of such assignment, with respect to the interests assigned,
except for the obligation to make Monthly Shortfall Payments hereunder. Upon the
assignment by Gatherer of all of its rights and obligations hereunder, Gatherer
(but not its assignee) shall be released from liability hereunder for
obligations accruing hereunder after the effective date of such assignment. Upon
the assignment by Gatherer of less than all of its rights and obligations
hereunder, Gatherer shall not be released from any liability hereunder.
       Section 21.5 Set-off.
     (a) All payments required to be made hereunder by Shipper shall be
(i) absolute and unconditional, (ii) calculated without reference to any
netting, set-off, counterclaim or other right which Shipper may have against
Gatherer, including, without limitation, any right to set-off against any
amounts owed by Gatherer under this Agreement or any other Transaction Document,
and (iii) made free and clear of and without any deduction for or on account of
any such netting, set-off or counterclaim.
     (b) Gatherer is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to net, set-off and apply any payments owing to
Gatherer against any and all of the obligations of Shipper under this Agreement
or any other Transaction Document. Gatherer agrees to promptly notify Shipper
after any such netting, set-off or application is made; provided that the
failure to give such notice shall not affect the validity of such netting,
set-off or application.
     Section 21.6 Published Indices. Unless expressly provided otherwise herein,
in the event any published price index referred to in this Agreement fails
(whether due to market disruption events or otherwise) or ceases to publish the
applicable prices, rates or other information referred to in this Agreement,
changes the heading or format under which such information is published, changes
the source of information which it publishes under such heading or format, or
ceases publication altogether, then (i) Gatherer and Shipper shall for thirty
(30) Days thereafter diligently attempt to designate a mutually acceptable
comparable alternative source for the same or equivalent information, whereupon
the Parties will thereafter use such designated alternative source, and (ii) if
no such mutually acceptable comparable alternative source is agreed upon within
such thirty (30) Days, Gatherer will designate a comparable and reasonable
alternative source for the same or equivalent information, whereupon the Parties
will thereafter use such designated alternative source.
     Section 21.7 Exhibits. The following Exhibits are attached to this
Agreement and are incorporated herein by this reference:
Exhibit A — Map of Dedicated Area
Exhibit B — Dedicated Area Description
Exhibit C — Base Volumes
Exhibit D — Wellhead Meters

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Exhibit E — Delivery Points
Exhibit F — Sub-Systems
Exhibit G — Trigger Event Example
Exhibit H — Gas Quality Specifications
Exhibit I — Monthly Average Receipt Point Pressure Example
Exhibit J — Gathering System
Exhibit K — Monthly Excess Bank Example
Exhibit L — Memorandum of Gas Gathering Agreement
     Section 21.8 Entire Agreement, Amendments. This Agreement, including,
without limitation, all exhibits hereto, and the other Transaction Documents
integrate the entire understanding between the Parties with respect to the
subject matter covered and supersede all prior understandings, drafts,
discussions, or statements, whether oral or in writing, expressed or implied,
dealing with the same subject matter. This Agreement may not be amended or
modified in any manner except by a written document signed by the Parties that
expressly amends this Agreement.
     Section 21.9 Waivers. No waiver by either Party of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless expressly provided. No waiver shall be effective unless
made in writing and signed by the Party to be charged with such waiver.
     Section 21.10 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,
WITHOUT LIMITATION, LOSS OF USE, INCREASED COST OF OPERATIONS, LOSS OF PROFIT OR
REVENUE, OR BUSINESS INTERRUPTIONS; PROVIDED, HOWEVER, FOR THE AVOIDANCE OF
DOUBT, LOST PRODUCTION, DELAYED PRODUCTION OF HYDROCARBONS AND LOST OPPORTUNITY
TO RECEIVE GATHERING FEES AND COMMODITY FEES THROUGHOUT THE TERM SHALL BE
CONSIDERED A DIRECT DAMAGE. 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, BUT NOT LIMITED TO,
THIRD-

47

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PARTY CLAIMS FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY
DAMAGES.
     Section 21.11 Headings. The headings and captions in this Agreement have
been inserted for convenience of reference only and shall not define or limit
any of the terms and provisions hereof.
     Section 21.12 Rights and Remedies. Except as otherwise provided in this
Agreement, each Party reserves to itself all rights, counterclaims, other
remedies, and defenses to which such Party is or may be entitled arising from or
out of this Agreement or as otherwise provided by law.
     Section 21.13 No Partnership. Nothing contained in this Agreement shall be
construed to create an association, trust, partnership, or joint venture or
impose a trust, fiduciary, or partnership duty, obligation, or liability on or
with regard to either Party.
     Section 21.14 Rules of Construction. In construing this Agreement, the
following principles shall be followed:
     (a) no consideration shall be given to the fact or presumption that one
Party had a greater or lesser hand in drafting this Agreement;
     (b) examples shall not be construed to limit, expressly or by implication,
the matter they illustrate;
     (c) the word “includes” and its syntactical variants mean “includes, but is
not limited to” and corresponding syntactical variant expressions; and
     (d) the plural shall be deemed to include the singular and vice versa, as
applicable.
     Section 21.15 No Third Party Beneficiaries. Except for parties indemnified
hereunder, this Agreement is for the sole benefit of the Parties and their
respective successors and permitted assigns, and shall not inure to the benefit
of any other Person whomsoever or whatsoever, it being the intention of the
Parties that no third Person shall be deemed a third-party beneficiary of this
Agreement.
     Section 21.16 Further Assurances. Each Party shall take such acts and
execute and deliver such documents as may be reasonably required to effectuate
the purposes of this Agreement.
     Section 21.17 No Inducements. No director, employee, or agent of any Party
shall give or receive any commission, fee, rebate, gift, or entertainment of
significant cost or value in connection with this Agreement.
     Section 21.18 Counterpart Execution. This Agreement may be executed in any
number of counterparts, each of which shall be considered an original, and all
of which shall be considered one and the same instrument.

48

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

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective on the date first set forth above.

            GATHERER:

PIÑON GATHERING COMPANY, LLC
      By:   TCW Asset Management Company, its Manager:             By:   /s/
Clayton R. Taylor         Clayton R. Taylor        Vice President             
By:   /s/ Kurt A. Talbot         Kurt A. Talbot        Managing Director       
SHIPPER:

SANDRIDGE EXPLORATION AND
PRODUCTION, LLC
      By:   /s/ Richard J. Gognat         Richard J. Gognat        Senior Vice
President     

49

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EXHIBIT A
DEDICATED AREA
(GRAPHIC) [d68483d6848301.gif]
EXHIBIT A — Page 1

 

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EXHIBIT B
DEDICATED AREA

                                          SECTION   BLK   SURVEY   RRD   COUNTY
  STATE   Approx. Acres   7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     29       138    
T&STL RR CO
    8     Pecos   Texas     627.07     33       138    
T&STL RR CO
    8     Pecos   Texas     660.31     12       108    
EL&RR RR CO
    8     Pecos   Texas     320.98     26       2    
TC RR CO
    8     Pecos   Texas     648.81     41       2    
TC RR CO
    8     Pecos   Texas     637.43     42       2    
TC RR CO
    8     Pecos   Texas     634.06     43       2    
TC RR CO
    8     Pecos   Texas     647.15     44       2    
TC RR CO
    8     Pecos   Texas     644.17     48       2    
TC RR CO
    8     Pecos   Texas     644.84     20       138    
T&STL RR CO
    8     Pecos   Texas     642.87     22       138    
T&STL RR CO
    8     Pecos   Texas     646.55     23       138    
T&STL RR CO
    8     Pecos   Texas     648.90     27       138    
T&STL RR CO
    8     Pecos   Texas     625.40     28       138    
T&STL RR CO
    8     Pecos   Texas     629.63     30       138    
T&STL RR CO
    8     Pecos   Texas     631.48     31       138    
T&STL RR CO
    8     Pecos   Texas     655.78     32       138    
T&STL RR CO
    8     Pecos   Texas     656.45     34       138    
T&STL RR CO
    8     Pecos   Texas     660.82     35       138    
T&STL RR CO
    8     Pecos   Texas     663.67     19       2    
TC RR CO
    8     Pecos   Texas     654.46     20       2    
TC RR CO
    8     Pecos   Texas     658.82     22       2    
TC RR CO
    8     Pecos   Texas     650.57     23       2    
TC RR CO
    8     Pecos   Texas     638.27     45       2    
TC RR CO
    8     Pecos   Texas     639.36     46       2    
TC RR CO
    8     Pecos   Texas     643.62     47       2    
TC RR CO
    8     Pecos   Texas     641.39     50       2    
TC RR CO
    8     Pecos   Texas     634.19     51       2    
TC RR CO
    8     Pecos   Texas     635.03     24       2    
TC RR CO
    8     Pecos   Texas     637.71     25       2    
TC RR CO
    8     Pecos   Texas     650.96     27       2    
TC RR CO
    8     Pecos   Texas     650.08     28       2    
TC RR CO
    8     Pecos   Texas     648.97     29       2    
TC RR CO
    8     Pecos   Texas     643.17     7       600    
JM HOLBROOK
    8     Pecos   Texas     1,172.48     6       600    
ELIJAH ROBERTS
    8     Pecos   Texas     1,179.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     5       600    
FRANCISCO PINA
    8     Pecos   Texas     1,184.01     19       138    
T&STL RR CO
    8     Pecos   Texas     644.55     71       2    
TC RR CO
    8     Pecos   Texas     640.77     1       159    
GH&SA RR CO
    8     Pecos   Texas     638.19     3       159    
GH&SA RR CO
    8     Pecos   Texas     640.26     4       159    
GH&SA RR CO
    8     Pecos   Texas     673.67     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     2       168    
MRS J P MULLINS
    8     Pecos   Texas     1,263.35     2       4    
H&TC RR CO
    8     Pecos   Texas     302.08     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     21       2    
TC RR CO
    8     Pecos   Texas     650.55     21       138    
T&STL RR CO
    8     Pecos   Texas     649.84  

EXHIBIT B - Page 1

 

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EXHIBIT B
DEDICATED AREA

                                          SECTION   BLK   SURVEY   RRD   COUNTY
  STATE   Approx. Acres   7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     25       138    
T&STL RR CO
    8     Pecos   Texas     627.96     4       110    
D&SE RR CO
    8     Pecos   Texas     300.93     11       108    
EL&RR RR CO
    8     Pecos   Texas     316.91     12       108    
EL&RR RR CO
    8     Pecos   Texas     320.98     8       110A    
BS&F
    8     Pecos   Texas     641.42     52       2    
TC RR CO
    8     Pecos   Texas     646.05     56       2    
TC RR CO
    8     Pecos   Texas     643.10     67       2    
TC RR CO
    8     Pecos   Texas     631.09     70       2    
TC RR CO
    8     Pecos   Texas     646.89     4       600    
J N SIMS
    8     Pecos   Texas     1,257.16     2       600    
JA DECKIE
    8     Pecos   Texas     1,214.05     2       600    
JA DECKIE
    8     Pecos   Texas     1,214.05     22       138    
T&STL RR CO
    8     Pecos   Texas     646.55     22       138    
T&STL RR CO
    8     Pecos   Texas     646.55     24       138    
T&STL RR CO
    8     Pecos   Texas     648.66     26       138    
T&STL RR CO
    8     Pecos   Texas     623.91     27       138    
T&STL RR CO
    8     Pecos   Texas     625.40     27       138    
T&STL RR CO
    8     Pecos   Texas     625.40     19       139    
T&STL RR CO
    8     Pecos   Texas     650.61     30       139    
T&STL RR CO
    8     Pecos   Texas     634.38     31       139    
T&STL RR CO
    8     Pecos   Texas     666.78     39       2    
TC RR CO
    8     Pecos   Texas     642.43     40       2    
TC RR CO
    8     Pecos   Texas     631.14     46       2    
TC RR CO
    8     Pecos   Texas     643.62     46       2    
TC RR CO
    8     Pecos   Texas     643.62     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     53       2    
TC RR CO
    8     Pecos   Texas     646.29     24       2    
TC RR CO
    8     Pecos   Texas     637.71     24       2    
TC RR CO
    8     Pecos   Texas     637.71     24       2    
TC RR CO
    8     Pecos   Texas     637.71     24       2    
TC RR CO
    8     Pecos   Texas     637.71     28       2    
TC RR CO
    8     Pecos   Texas     648.97  

EXHIBITS - Page 2

 

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

 

EXHIBIT B
DEDICATED AREA

                                          SECTION   BLK   SURVEY   RRD   COUNTY
  STATE   Approx. Acres   28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     6       600    
ELIJAH ROBERTS
    8     Pecos   Texas     1,179.18     6       600    
ELIJAH ROBERTS
    8     Pecos   Texas     1,179.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     1       182    
TC RR CO
    8     Pecos   Texas     603.11     36       138    
T&STL RR CO
    8     Pecos   Texas     664.64     36       138    
T&STL RR CO
    8     Pecos   Texas     664.64     54       2    
TC RR CO
    8     Pecos   Texas     637.41     55       2    
TC RR CO
    8     Pecos   Texas     632.55     57       2    
TC RR CO
    8     Pecos   Texas     638.58     65       2    
TC RR CO
    8     Pecos   Texas     635.79     66       2    
TC RR CO
    8     Pecos   Texas     644.73     68       2    
TC RR CO
    8     Pecos   Texas     642.36     69       2    
TC RR CO
    8     Pecos   Texas     648.55     71       2    
TC RR CO
    8     Pecos   Texas     640.77     71       2    
TC RR CO
    8     Pecos   Texas     640.77     1       159    
GH&SA RR CO
    8     Pecos   Texas     638.19     1       159    
GH&SA RR CO
    8     Pecos   Texas     638.19     3       159    
GH&SA RR CO
    8     Pecos   Texas     640.26     3       159    
GH&SA RR CO
    8     Pecos   Texas     640.26     4       159    
GH&SA RR CO
    8     Pecos   Texas     673.67     4       159    
GH&SA RR CO
    8     Pecos   Texas     673.67     4       159    
GH&SA RR CO
    8     Pecos   Texas     673.67     3       600    
H C KINGSTON
    8     Pecos   Texas     1,204.08     10       110A    
BS&F
    8     Pecos   Texas     652.51     7       110A    
BS&F
    8     Pecos   Texas     646.72     9       110A    
BS&F
    8     Pecos   Texas     638.47     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     1       4    
H&TC RR CO
    8     Pecos   Texas     300.79     1       4    
H&TC RR CO
    8     Pecos   Texas     300.79     2       4    
H&TC RR CO
    8     Pecos   Texas     302.08     2       4    
H&TC RR CO
    8     Pecos   Texas     302.08     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     5       4    
H&TC RR CO
    8     Pecos   Texas     317.38  

EXHIBIT B - Page 3

 

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EXHIBIT B
DEDICATED AREA

                                          SECTION   BLK   SURVEY   RRD   COUNTY
  STATE   Approx. Acres   5       4    
H&TC RR CO
    8     Pecos   Texas     317.38     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     2       108    
HANNAH DONAHUE ALIAS ALEXANDER
    8     Pecos   Texas     1,133.75     6       2    
H&TC RR CO
    8     Pecos   Texas     648.09     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     7       2    
H&TC RR CO
    8     Pecos   Texas     1,298.18     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     4       4    
H&TC RR CO
    8     Pecos   Texas     317.69     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     9       600    
MA CLAY
    8     Pecos   Texas     1,178.00     4       110    
D&SE RR CO
    8     Pecos   Texas     300.93     4       110    
D&SE RR CO
    8     Pecos   Texas     300.93     22       138    
T&STL RR CO
    8     Pecos   Texas     646.55     22       138    
T&STL RR CO
    8     Pecos   Texas     646.55     27       138    
T&STL RR CO
    8     Pecos   Texas     625.40     27       138    
T&STL RR CO
    8     Pecos   Texas     625.40     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     51       2    
TC RR CO
    8     Pecos   Texas     635.03     24       2    
TC RR CO
    8     Pecos   Texas     637.71     24       2    
TC RR CO
    8     Pecos   Texas     637.71     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97     28       2    
TC RR CO
    8     Pecos   Texas     648.97  

EXHIBIT B - Page 4

 

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EXHIBIT B
DEDICATED AREA

                                          SECTION   BLK   SURVEY   RRD   COUNTY
  STATE   Approx. Acres   29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     29       2    
TC RR CO
    8     Pecos   Texas     643.17     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     8       600    
SS STUBBLEFIELD
    8     Pecos   Texas     1,167.18     71       2    
TC RR CO
    8     Pecos   Texas     640.77     71       2    
TC RR CO
    8     Pecos   Texas     640.77     1       159    
GH&SA RR CO
    8     Pecos   Texas     638.19     1       159    
GH&SA RR CO
    8     Pecos   Texas     638.19     3       159    
GH&SA RR CO
    8     Pecos   Texas     640.26     3       159    
GH&SA RR CO
    8     Pecos   Texas     640.26     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     18       2    
H&TC RR CO
    8     Pecos   Texas     1,296.48     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     3       4    
H&TC RR CO
    8     Pecos   Texas     304.65     5       4    
H&TC RR CO
    8     Pecos   Texas     317.38     5       4    
H&TC RR CO
    8     Pecos   Texas     317.38     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50     6       4    
H&TC RR CO
    8     Pecos   Texas     316.50  

EXHIBIT B - Page 5

 

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EXHIBIT C

BASE VOLUMES
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EXHIBIT C — Page 1