exv10w6



 







EXHIBIT 10.6



SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT

FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY

FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED

AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).




Gas Sales and Purchase Agreement

MC Panhandle, Inc., Seller and MidCon Gas Services Corp., Buyer




TABLE OF CONTENTS




	 	 	 	 	 	 	 
	I.

	 	DEFINITIONS
	 	 	2	 
	 
	 	 	 	 	 	 
	II.

	 	COMMITMENT AND DEDICATION
	 	 	3	 
	 
	 	 	 	 	 	 
	III.

	 	TERM
	 	 	4	 
	 
	 	 	 	 	 	 
	IV.

	 	PRICE
	 	 	5	 
	 
	 	 	 	 	 	 
	V.

	 	DELIVERIES
	 	 	6	 
	 
	 	 	 	 	 	 
	VI.

	 	MEASUREMENT AND TESTING	 	 	6	 
	 
	 	 	 	 	 	 
	VII.

	 	WARRANTY OF TITLE
	 	 	8	 
	 
	 	 	 	 	 	 
	VIII.

	 	SCHEDULING AND NOMINATIONS
	 	 	8	 
	 
	 	 	 	 	 	 
	IX.

	 	QUALITY AND PROCESSING
	 	 	8	 
	 
	 	 	 	 	 	 
	X.

	 	BILLING AND PAYMENT
	 	 	9	 
	 
	 	 	 	 	 	 
	XI.

	 	FORCE MAJEURE
	 	 	11	 
	 
	 	 	 	 	 	 
	XII.

	 	NOTICES
	 	 	11	 
	 
	 	 	 	 	 	 
	XIII.

	 	OPTION TO LEASE
	 	 	12	 
	 
	 	 	 	 	 	 
	XIV.

	 	MISCELLANEOUS
	 	 	13	 






Page 1









 






GAS SALES AND PURCHASE AGREEMENT




     This agreement is entered into effective this 1st day of July, 1997, by and between MC
Panhandle, Inc., a Delaware corporation, hereinafter referred to as “Seller”, and MidCon Gas
Services Corp., hereinafter referred to as “Buyer.”



     WITNESSETH:



     WHEREAS, Seller has the right to sell and dispose of certain gas produced from properties
more particularly described herein and desires to sell same; and



     WHEREAS, Buyer desires to purchase and receive said gas under the terms set forth herein.



     Now, therefore, in consideration of the mutual covenants herein contained, Seller and Buyer
do hereby agree as follows:



I. DEFINITIONS




     Unless specifically set forth to the contrary, the following terms shall have the meanings
ascribed to them herein:




	 	1.1.	 	British Thermal Unit (“Btu”). The term “British thermal unit” shall mean the
amount of heat required to raise the temperature of one pound of water from fifty-nine
degrees Fahrenheit (59°F) to sixty degrees Fahrenheit (60°F).
	 
	 	1.2.	 	Business Day. The term “Business Day” shall mean from 8:00 a.m. to 5:00
p.m.. Central Standard Time on any weekday excluding holidays.
	 
	 	1.3.	 	Buyer’s Processing Plant. The term “Buyer’s Processing Plant” shall mean
the Stinnett Processing Plant currently owned by MidCon Gas Products Corp., located
in the NW/4 of Section 1, T.T. RR Survey, in Moore County, Texas, any reconfiguration
or replacement thereof, and any other functionally similar facility which Buyer may
designate from time to time during the term hereof.
	 
	 	1.4.	 	Day. The term “Day” shall mean a period of twenty-four (24) consecutive hours
beginning and ending at 9:00 A.M. Local Clock Time. The reference date for any Day
shall be the date of the beginning of such Day.




Page 2









 












	 	1.5.	 	Delivery Point. The term “Delivery Point(s)” shall mean the point(s) at
which Seller delivers Gas to the Buyer, or to Buyer’s designee for Buyer’s account,
which shall be the outlet flange of Seller’s EFM located at or near the well(s).
	 
	 	1.6.	 	EFM. The term “EFM” shall mean electronic flow measurement and control
equipment.
	 
	 	1.7.	 	Fuel. The term “fuel” shall mean the volume of Gas used for fuel by the
Gathering Facilities and Seller’s Facilities located downstream of the Delivery
Point(s), as stipulated in paragraph 4.2 hereof.
	 
	 	1.8.	 	Gas. The term “Gas” shall mean natural gas, or any mixture of hydrocarbons or
of hydrocarbons and non-combustible gases, including helium, in a gaseous state, the
quantity of which shall be determined on an MMBtu basis.
	 
	 	1.9.	 	Gathering Facility(ies). The term “Gathering Facility(ies)” shall mean any and
all equipment used by Gatherer to gather Gas under this Agreement or any other
gathering agreement including, but not limited to, pipe, meters, and field booster
compression equipment and wet gas compression equipment located at Buyer’s Processing
Plant.
	 
	 	1.10.	 	Gatherer. The term “Gatherer” shall mean Buyer or Buyer’s designee who
delivers gas from the Point(s) of Delivery to the inlet of Buyer’s Processing Plant.
	 
	 	1.11.	 	Index. The term “Index” shall mean the first
of the month index price for (**).
	 
	 	1.12.	 	Interest Rate. The term “Interest Rate” shall mean the lesser of (i) two
percent (2%) over the per annum rate of interest announced from time to time by
Citibank, N.A., as its “prime” rate for commercial loans, effective for such date as
established from time to time by such bank or (ii) the highest rate permitted by
applicable law.
	 
	 	1.13.	 	Mcf. The term “Mcf” shall mean 1,000 cubic feet of Gas measured at 14.73
psia and sixty degrees Fahrenheit (60°F).
	 
	 	1.14.	 	MMBtu. The term “MMBtu” shall mean 1,000,000 Btu.






	II.	 	COMMITMENT AND DEDICATION




Page 3









 












	 	2.1.	 	Seller’s Dedication. Seller dedicates for sale to Buyer herein all
of its interest in the Gas now or hereafter produced from the area set forth and
described on Exhibit “A” attached hereto and made a part hereof from all
producing formations from the surface to the base of the (**)
as found in the existing (**) producing horizons (“Dedicated
Formations”).
	 
	 	2.2.	 	Seller’s Reservations. Seller reserves the right to deepen, rework, plug
or perform any other work on the gas, wells or property dedicated to Buyer herein
at its sole discretion.
	 
	 	2.3.	 	New Wells — Dedicated Formations. For gas from new wells drilled by Seller on
the dedicated acreage which is produced from the Dedicated Formations, Seller shall
construct the facilities necessary to connect Seller’s well(s) to a mutually agreeable
interconnection point on Gatherer’s existing gathering system. Following the
installation of such facilities, Seller shall submit to Buyer an invoice identifying the
costs incurred by Seller in constructing those facilities downstream of Seller’s
production equipment (which equipment includes wellhead compression, if any). Buyer,
within thirty (30) days of receipt of Seller’s invoice, shall reimburse Seller for
twenty-five percent (25%) of the costs identified on such invoice.
	 
	 	2.4	 	New Wells — Other Formations. For gas from new or recompleted wells which
is produced from other than the Dedicated Formations, Seller shall be permitted to
solicit third-party offers to purchase such production. Upon receipt of any such
third-party offers, Buyer shall have the right to purchase such production on the
same terms and conditions as those offered to Seller by such third party.
	 
	 	2.5.	 	Buyer’s Commitment. Buyer shall take and purchase all gas tendered by
Seller at the Point(s) of Delivery.






	III.	 	TERM






	 	3.1	 	The term of this Agreement shall be from the effective date hereof until
(**) (“Primary Term”), and (**) thereafter. This contract may
be terminated by either party at the end of the Primary Term or any anniversary date
thereafter upon (**) prior written notice.
	 
	 	3.2	 	This Agreement supersedes that certain Gas Sales and Purchase Agreement between
the parties dated December 1, 1996 as of the effective date hereof.




Page 4









 












	IV.	 	PRICE AND GATHERING CHARGES






	 	4.1.	 	Base Price. The price payable by Buyer to Seller for all gas delivered at the
Point(s) of Delivery shall be the (**), as adjusted pursuant to the Gathering
Charge set forth in paragraph 4.2, below.
	 
	 	4.2	 	Gathering Charge.  (**)







	 	4.3	 	Redetermination of Gathering Charge.  (**)





Page 5









 

















	 	 	 
	 	4.4.	 	Curtailment or Restrained Capacity.  (**)






	V.	 	DELIVERIES AND PRESSURES






	 	5.1.	 	Title, Possession and Risk of Loss. As between Buyer and Seller, title,
possession and control of the gas sold and purchased hereunder shall pass from Buyer to
Seller at the Point(s) of Delivery. Prior to delivery, Seller shall be liable for any
damages resulting from Seller’s possession of same, except for damages resulting from
the gross negligence or willful misconduct of Buyer. Subsequent to delivery, Buyer
shall be liable for all damages resulting from Buyer’s ownership and control of same,
except for those damages resulting from the gross negligence or willful misconduct of
Seller.
	 
	 	5.2.	 	Pressure Requirements. Buyer shall use its best efforts to maintain operating
pressures prevailing at the Delivery Point(s) at (**). Buyer and Seller
each agree that each will act as a prudent operator of their respective facilities in
endeavoring to maintain such operating pressures to accommodate reasonable development
of Seller’s reserves.






	VI.	 	MEASUREMENT AND TESTING






	 	6.1.	 	EFM as Custody Transfer Point. It is agreed between the parties that
where EFM is currently operating or installed by Seller, that EFM will be the




Page 6









 






	 	 	 	custody transfer point. New measurement facilities installed by Seller shall be EFM and
shall meet current AGA standards. In order to minimize pulsation problems, the design and
layout of new or relocated measurement facilities shall be approved by Buyer prior to
installation. Seller will provide and transfer to Buyer within 48 hours of collection, gas
measurement data via electronic transfer for all wells connected to Buyer’s Gathering
Facilities. Additionally, Seller and Buyer agree that Seller shall be responsible for the
performance of primary measurement. Seller shall provide buyer remote electronic access to
EFM and compressor alarm polling computers for the purpose of downloading volume and alarm
data. It is understood that electronic flow data, rather than charts, will be provided for
audit purposes.






	 	6.2.	 	Gas Sampling. Every six (6) months Seller or Seller’s designee shall collect spot gas samples
and perform or have performed analysis, on such samples, for Seller’s well(s) connected to
Gatherer’s Gathering Facilities. Seller or Seller’s Designee shall be responsible for data
input of analysis information into Seller’s measurement facilities within seven (7) days from
the date of analysis. Additionally Seller shall be responsible for providing the collection
and analysis service within 72 hours from initial deliveries from all new Delivery Points on
Gatherer’s Facilities. Seller will provide a hard (paper) copy record of all analysis to Buyer
and Gatherer in a timely fashion. Buyer shall have the right to witness and Seller shall give
Buyer sufficient notice to allow Buyer to witness all gas sampling conducted by Seller. Seller
shall provide sufficient notice of such sampling to Buyer.
	 
	 	6.3.	 	Location of EFM with respect to Wellhead Compressors. Subsequent to the effective date
hereof, any new installation or relocation of either EFM facilities or wellhead compression
units that results in the EFM being located upstream of the wellhead compression unit will
require adjustment to the fuel charge specified in paragraph 4.2(i).




Page 7









 












	VII.	 	WARRANTY OF TITLE






	 	7.1.	 	Title. Seller warrants that Seller at the time of Delivery of Gas to Gatherer
will have good title to all such Gas pursuant to contractual arrangements entered into
prior to commencement of Service, and that it will deliver, or cause to be delivered,
such Gas free from all liens, encumbrances and claims whatsoever. Seller will
indemnify Buyer and save it harmless from
all suits, actions, debts, liabilities, accounts, damages, costs, losses, and
expenses (including attorneys’ fees and court costs) arising out of the adverse
claim of any person or persons claiming ownership of any interest in the Gas or for
any taxes, licenses, royalties, fees or charges which are applicable prior to the
time of delivery of such Gas to Buyer.






	VIII.	 	SCHEDULING AND NOMINATIONS






	 	8.1.	 	Subject to Buyer’s obligation to take and purchase all volumes made available
for sale by Seller hereunder, Seller recognizes Buyer’s interest in maintaining as
constant a rate of flow as is reasonably possible. Seller shall provide Buyer with
such advance notice as is reasonably possible of any material changes in volumes
tendered (or to be tendered) to Buyer under this Agreement and will cooperate in
providing Buyer whatever information is required by Buyer to accommodate Buyer’s
obligations to nominate gas for gathering service with Gatherer.






	IX.	 	QUALITY AND PROCESSING






	 	9.1.	 	Quality. The Gas delivered and sold to Buyer hereunder shall be in its natural
state and will meet the quality specifications of Gatherer from time to time. The
current specifications of Gatherer are identified in Exhibit “B” attached hereto and
made a part hereof. Notwithstanding the foregoing, Buyer also agrees to accept Gas
tendered by Seller which does not meet Gatherer’s quality specification for water,
nitrogen, and maximum Btu content until such time as Buyer or Gatherer determine that
acceptance poses operational problems for Buyer or the Gatherer.
	 
	 	9.2.	 	Processing. Seller grants to Buyer the right to process all Gas produced
from the Dedicated Formations during the term hereof. Except for the operation of
traditional non-refrigerated wellhead mechanical separation




Page 8









 






	 	 	 	equipment of the type generally in use in the industry, Seller shall not
operate or allow to be operated any equipment to extract any liquefiable
hydrocarbons from the Gas delivered hereunder prior to the Delivery Point(s).






	X.	 	BILLING AND PAYMENT






	 	10.1.	 	Invoicing. Seller shall submit to Buyer a statement and billing for the
actual volumes (in MMBtus adjusted for actual delivery conditions) delivered at the
Delivery Point(s) during the preceding month. Buyer shall, within the later of (**)
of the receipt of such billing or the (**) day of the month, render
to Seller, wire transfer payment of the amount billed by Buyer, less applicable Fuel
charges incurred by Buyer, for the preceding month. Payment shall be made to the
payment address provided in Article 11 of this Agreement.
	 
	 	10.2.	 	Disputed Billings. If Buyer, in good faith, disputes any part of any
statement, Buyer shall pay the portion of such statement conceded to be correct. If
the disputed billing is determined to be correct, it shall be paid within ten (10)
business days of such determination, along with interest calculated at the Interest
Rate from the original due date until the date paid.
If an error is discovered in any billing, such error shall be adjusted within
thirty (30) days of the determination thereof, provided that claims therefor shall
have been made within two (2) years from the date of such billing.
	 
	 	10.3.	 	Late Payments. Should Buyer fail to pay part or all of the amount of any
billing for gas delivered hereunder, Seller may impose interest calculated at the
Interest Rate, from the due date until date of payment. If such failure to pay
continues, Seller, in addition to any other remedy it may have and subject to the
provisions of paragraph 10.2, above, may suspend deliveries hereunder upon thirty (30)
day written notification to Buyer and may be released from the terms of this Agreement.
	 
	 	10.4.	 	Audit. Each party has the right, as its sole expense and during normal
working hours, to examine the records of the other party as necessary to verify the
accuracy of any statement, charge or computation made pursuant to the provisions of
this Agreement. If any such examination reveals any inaccuracy in any statement, the
necessary adjustments to such statement and the payments thereof will be promptly made;
provided that no adjustment for any statement or payment will be made after the lapse
of two (2) years from the rendition thereof; and provided further that this provision




Page 9









 






	 	 	 	of this Agreement will survive any termination of the Agreement for a period of two
(2) years from the date of such termination for the purpose of such statement and payment
adjustments.






	 	10.5.	 	Credit Worthiness. Seller shall not be required to perform or to continue deliveries if
Buyer is or has become insolvent or who, at Seller’s request, fails within a reasonable period
to demonstrate credit worthiness; provided, however, Buyer may continue to receive deliveries
if Buyer prepays for such service or furnishes good and sufficient security, as determined by
Seller in its reasonable discretion, in an amount equal to the cost of estimated gas
deliveries under this Agreement for a two (2) month period. For purposes herein, the
insolvency of Buyer shall be evidenced by the filing by Buyer, or any parent entity thereof,
of a voluntary petition in bankruptcy or the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Buyer bankrupt or insolvent, or approving as
properly filed, a petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Buyer under the Federal Bankruptcy Act or any other applicable federal or
state law, or appointing a receiver, liquidator, assignee, trustee, or sequestrator (or other
similar official) of the Buyer or of any substantial part of its property, or the ordering of
the winding-up or liquidation of its affairs, with said order or decree continuing unstayed
and in effect for a period of sixty (60) consecutive days.




Page 10









 












	XI.	 	FORCE MAJEURE






	 	11.1.	 	In the event either Seller or Buyer is rendered unable, by an event of force
majeure, to carry out wholly or in part its obligations under the provisions hereunder
except payment obligations hereunder, it is agreed that if such Party gives written
notification and full particulars of such event of force majeure to the other Party as
soon as practicable after the occurrence of the cause relied on, then the obligations
of the Party affected by such event of force majeure, other than the obligation to
make payments then due or becoming due hereunder, shall be suspended from the
inception and throughout the continuance of any such inability so caused, but for no
longer period, and such event of force majeure shall, so far as practicable, be
remedied with all reasonable dispatch. The term “force majeure” as employed herein
shall mean any cause of any kind not reasonably within the control of the party
claiming suspension and which by the exercise of due diligence such party could not
have prevented or is unable to overcome.






	XII.	 	NOTICES






	 	12.1.	 	Any notice, statement, or bill provided for in this Agreement shall be in
writing and shall be considered as having been given if delivered personally, by
facsimile, or if mailed by United States mail, postage prepaid, to the following
addresses, or any changed address if provided by the other Party:






	 	 	   To Buyer:





	 	 	 	 	 
	 

	 	(I) Invoices for Gas:
	 	MidCon Gas Services Corp.
	 

	 	 	 	P.O. Box 283
	 

	 	 	 	Houston, TX 77001-0283
	 

	 	 	 	Attention: Gas Purchase Accounting
	 

	 	 	 	Facsimile: (713) 963-3087
	 
	 	 	 	 
	 

	 	(II) Notices:
	 	MidCon Gas Services Corp.
	 

	 	 	 	P.O. Box 283
	 

	 	 	 	Houston, TX 77001-0283
	 

	 	 	 	Phone: (713) 963-3700
	 

	 	 	 	Facsimile: (713) 963-5611






Page 11









 






To Seller:




	 	 	 	 	 
	 

	 	Notices:
	 	MC Panhandle
	 

	 	 	 	c/o OXY USA Inc.
	 

	 	 	 	P.O. Box 300
	 

	 	 	 	Tulsa, OK 74102
	 

	 	 	 	Phone: (918) 561-_____
	 
	 	 	 	 
	 

	 	Payments:
	 	MC Panhandle
	 

	 	 	 	c/o OXY USA Inc.
	 

	 	 	 	P.O. Box 300
	 

	 	 	 	Tulsa, OK 74102
	 
	 	 	 	 
	 

	 	Wire Transfers:
	 	[to be provided]






     The above-referenced addresses may be modified at any time by either party by providing at
least 30 days prior written notice to the other either via facsimile or first class mail.




	XIII.	 	OPTION TO LEASE






	 	13.1.	 	Option to Lease Gathering System. Seller shall have the option, exercisable on
or before December 31, 1998, to lease a portion of Buyer’s gathering system by
executing a Lease and License agreement in the form attached as Exhibit “D”. Such
portion shall consist of the lines, drips, meters and field booster compressors up to
the inlet of Buyer’s four wet gathering trunklines as more fully described in said
Exhibit. The said lease will be effective January 1, 2000 and terminate concurrently
with the sale of the gas hereunder. Should the requisite regulatory approvals set
forth in 13.2 not be obtained prior to January 1, 2000, then such lease shall be
effective the first day of the month following thirty (30) days after the receipt of
such authorization.






	 	13.2	 	Option Subject to Regulatory Approval; Contract Revisions. The option to
lease set forth herein is subject to receipt by Natural Gas Pipeline Company of
America receiving the requisite authorization to spindown the Gathering Facilities.
Notwithstanding the provisions of 4.3(i), the parties recognize that should Seller
exercise its option to lease such facilities, then certain contract modifications
including, but not limited to gathering charges, fuel, pressures, measurement and
testing shall be renegotiated by the parties in good faith to be effective with the
effective date of the lease.




Page 12









 






	 	13.3.	 	Buyer to Provide Information. Buyer shall provide Seller, on a timely
basis, all relevant information requested by Seller needed to evaluate whether to
exercise its option herein. Such information shall include, but not be limited to,
permits, licenses, rights-of-way, leases, easements and servitudes related to the
Gathering Facilities.






	XIV.	 	MISCELLANEOUS






	 	14.1	 	Laws, Orders and Regulations. This Agreement and the respective rights and
obligations of the Parties hereto is subject to all present and future valid laws,
orders, rules and regulations of any legislative body, or duly constituted authority
now or hereafter having jurisdiction and shall be varied and amended to comply with or
conform to any valid rule, regulation, order, or direction of any board, tribunal, or
administrative agency which affects any of the provisions of this Agreement.
	 
	 	14.2	 	Authority to Execute. The Parties represent and warrant that each party has the
requisite power and authority to execute, deliver and perform this Agreement.
Execution, delivery and performance of this Agreement by the Parties hereto and the
consummation of the transactions contemplated hereby have been duly authorized by all
requisite corporate action.
	 
	 	14.3.	 	Entire Agreement. This Agreement constitutes the entire agreement between
the Parties and no other representations, memoranda, agreements or other matter, oral
or written, prior to the date hereof, shall vary, alter or aid in the interpretation
of the provisions hereof.
	 
	 	14.4.	 	No Third-Party Beneficiary. There is no third party beneficiary to this
Agreement, and the provisions of this Agreement shall not impart rights enforceable by
any person, firm or organization not a Party or not bound as a Party, or not a
successor or assignee of a Party bound to this Agreement.
	 
	 	14.5.	 	Amendments in Writing. All modifications, amendments or changes to this
Agreement, whether made simultaneously with or after the execution of this Agreement,
shall be in writing, and executed with the same formality as this Agreement.
	 
	 	14.6.	 	Waiver of Default. No waiver by either Party hereto of any one or more
defaults by the other in the performance of any of the provisions of this Agreement
shall operate or be construed as a waiver of any subsequent default or defaults
whether of a like or a different character.




Page 13









 





	 	14.7.	 	Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, ENFORCED
AND PERFORMED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
	 
	 	14.8.	 	Headings. The headings used for the Articles herein are for convenience and reference
purposes only and shall in no way affect the meaning or interpretation of the provisions
of this Agreement.
	 
	 	14.9.	 	Taxes. The Contract Price is inclusive of all royalties, production taxes, severance
taxes, ad valorem taxes, or other sums now or hereafter levied on the production of the
gas prior to its delivery to Buyer at the Delivery Point(s). All such taxes and
royalties shall be borne and paid exclusively by Seller.
	 
	 	14.10.	 	Special Damages Waiver. THE PARTIES WAIVE ALL PUNITIVE, SPECIAL, EXEMPLARY OR
CONSEQUENTIAL DAMAGES FOR ANY BREACH OF THIS CONTRACT.




AGREED TO AND ACCEPTED this 6th day of November, 1997.




	 	 	 	 	 	 	 
	MidCon Gas Services Corp.	 	MC Panhandle, Inc.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Steven M. Salato
	 	By:
	 	/s/ 
	 

	 	 
	 	 	 	 
	Title: Senior Vice President	 	Title: Attorney-In-Fact





Natural Gas Pipeline Company of America is executing this Agreement solely for the purposes
of Article XIII hereof.




Natural Gas Pipeline Company of America




	 	 	 	 	 
	By:
	 	/s/ C. E. DOULRAVA	 	 
	 

	 	 

	 	 
	Title: SVP	 	 






Page 14









 






	 	EXHIBIT “A”	 




(**)




 









 








EXHIBIT C




MONTHLY STATEMENT EXAMPLE




	 	 	 	 	 	 	 






(**) 









 






EXHIBIT “D”




Lease and License Agreement




     This Lease and License Agreement (“Agreement”) is made and entered into effective
January 1, 2000, between Natural Gas Pipeline Company of America, a Delaware corporation (“Lessor”)
and MC Panhandle, Inc., a Delaware corporation (“Lessee”).



     This Agreement sets forth, among other things, the terms and conditions upon which (i) Lessor
demises and leases, subleases and licenses to Lessee and Lessee takes from Lessor certain pipeline
facilities and related interests of Lessor and (ii) Lessor assigns to Lessee and Lessee assumes
certain contractual rights and obligations.



     In consideration of the mutual agreements contained herein, intending to be legally bound
hereby, the parties hereto agree as follows:



ARTICLE I




DEFINITIONS




     Definitions. For purposes of this Agreement, including the schedules and exhibits
attached hereto, the terms defined in this Article I have the following meanings assigned:




	(a)	 	“Additions” means all Improvements not constituting Extensions, including, but not limited
to equipment, machinery, pipeline, compressor stations, expansions of the system, loop lines,
or related facilities and materials, that serve to improve the operation of the Leased Assets
as they exist on the Commencement Date.
	 
	(b)	 	“Agreement” means this Lease and License Agreement, as




 









 






	 	 	amended from time to time.






	(c)	 	“Base Rent” means, for each twelve-month period during the Term, seven hundred thousand
dollars ($700,000).
	 
	(d)	 	“Commencement Date” means January 1, 2000.
	 
	(e)	 	“Contracts” means the gas Purchase and Sales Agreements described on Schedule 2 hereto.
	 
	(f)	 	“Default” has the meaning assigned to such term in Section 17.1.
	 
	(g)	 	“Easements” means the easements, rights of way, benefits, servitudes, and leases described
with more particularity on Schedule 1 hereto.
	 
	(h)	 	“Extensions” means Improvements that consist of natural gas pipelines that are extensions
from, or connections to the Pipeline Assets, including interconnects or gathering systems,
constructed after the Commencement Date.
	 
	(i)	 	“Improvements” means Additions and Extensions as defined herein.
	 
	(j)	 	“Term” has the meaning assigned to such term in Article IV.
	 
	(k)	 	“Leased Assets” means the Real Property and Pipeline.
	 
	(1)	 	“Leased Inventory” means the materials and supplies more particularly described on
Schedule 1.
	 
	(m)	 	“Licensed Assets” means the Easements and the Permits.
	 
	(n)	 	“Permits” means the permits and licenses described with more particularity on Schedule 1
hereto.
	 
	(o)	 	“Pipeline” means the approximate 368-mile gathering system in Carson, Gray,
Hutchinson, and Moore Counties, Texas, all




 - 2 -









 












	 	 	as more particularly described and shown in Exhibit “A”.
	 
	(p)	 	“Pipeline Assets” means the Leased Assets and the Licensed Assets in place as of the
Commencement Date.
	 
	(q)	 	“Real Property” means the fee property and surface
leases and easements described with more particularity on Schedule 1 hereto.
	 
	(r)	 	“Rent” means, collectively, Base Rent and Taxes payable by Lessee pursuant to Article V.
	 
	(s)	 	“Taxes” means all federal, state and local government taxes, assessments and charges of any
kind or nature, whether general, special, ordinary or extraordinary, payable with respect to
the Pipeline Assets, and all related improvements thereto or thereon and all machinery,
equipment, fixtures and other facilities, including personal property, as may now or hereafter
exist in or on the Pipeline Assets, including, without limitation, real estate and transit
district taxes and assessments, impact fees, ad valorem taxes, personal property taxes, all
taxes, assessments and charges in lieu of, substituted for, or in addition to, any or all of
the foregoing taxes, assessments and charges, but excluding any federal, state or local
government income or franchise taxes.
	 
	(t)	 	“Term” as it is defined in Article IV.
	 
	(u)	 	“Transfer” has the meaning assigned to such term in Section 16.1.




 - 3 -









 











ARTICLE II




CONDITION AND OPERATION AND MAINTENANCE OF PIPELINE ASSETS




     2.1 Normal Operation and Maintenance. Subject to Section 2.2 below, Lessee shall be
responsible for operation and maintenance of the Pipeline Assets throughout the Term.



     2.2 Extraordinary Repair or Replacement. Upon Lessor’s receipt of written notice from
Lessee of the necessity for an extraordinary repair or replacement project (with an estimated total
cost equal to or greater than $200,000) on the Pipeline Assets by July 1, 2000, the parties will
enter into good faith negotiations and within 45 days of such notice reach a cost-sharing
agreement on the project. In the event investigation discloses that the identified problem is
attributable to pre-Commencement Date operations of the Pipeline Assets, then Lessor shall bear
all of the financial responsibility for the project. In the event investigation discloses that the
identified problem is attributable exclusively to post-Commencement Date operations, then Lessee
shall bear all of the financial responsibility for the project. In the event responsibility for
the identified problem cannot be readily ascertained or it is determined that both parties share
some responsibility for the identified problem, then the parties shall share financial
responsibility equally for the project.



     2.3 Election Not to Make Extraordinary Repair or Replacement. Notwithstanding
Section 2.2, in the event Lessor is exclusively or partly responsible for an extraordinary repair



 - 4 -









 




or replacement project, and Lessor determines that the costs associated with the project
represent an uneconomic activity as it pertains to this Agreement, Lessor may elect, upon written
notice to Lessee received by Lessee no later than forty-five (45) days after Lessor’s receipt of
Lessee’s notification under Section 2.2, to refuse to contribute to the project. In the event of
such an election by Lessor, Lessee may elect to terminate the Agreement in its entirety if, within
sixty (60) days of Lessor’s election to refuse to contribute to the project, Lessee gives written
notice to Lessor.




ARTICLE III




DEMISE




     Lessor hereby leases the Leased Assets to Lessee and, to the extent permitted under the
terms of the Easements and Permits, hereby licenses Lessee to utilize the Licensed Assets upon the
terms, covenants and conditions set forth in this Agreement and in the Licensed Assets. Lessee
covenants as a material part of the consideration for this Agreement to keep and perform each and
all of the terms, covenants and conditions by it to be kept and performed pursuant to this
Agreement.



ARTICLE IV




TERM




     Subject to the terms, covenants and conditions in this Agreement, the Term of the
lease and license of the Pipeline



 - 5 -









 




Assets by Lessee pursuant to this Agreement shall commence at 12:01 a.m. C.S.T. on the
Commencement Date and end at 12:01 a.m. C.D.T. on July 1, 2012 (the “Term”).




ARTICLE V




RENT




     5.1 Lessee shall pay to Lessor by wire transfer according to the written instructions of
Lessor or to such other person or entity or at such other place as Lessor may from time to time
direct in writing, all amounts due Lessor from Lessee hereunder, including, without limitation,
Base Rent. For the duration of the Term and except as specifically provided in this Agreement,
Base Rent and Taxes shall be paid without abatement, deduction or setoff of any kind.



     5.2
Base Rent for each twelve (12) month period shall be payable in advance in equal
semi-annual installments, on or before each June 30 and December 31st for the six-month period
commencing the next day, with the first semi-annual payment due January 1, 2000.



     5.3 In addition to Base Rent, Lessee shall pay directly to the appropriate governmental entity
all Taxes assessed relating to the Pipeline Assets for periods which occur in whole or in part
during the Term. As to any Taxes assessed for periods which do not occur entirely within the Term,
Lessee shall pay to Lessor a pro rata share of such Taxes determined by multiplying the total
amount of Taxes assessed for such period by a fraction the numerator of which is the number of days
of the Term included in




 - 6 -









 






the period to which the assessment applies and the denominator of which is the total number of
days in the period to which the assessment applies. Lessor shall provide to Lessee written
statements of all Taxes assessed, promptly following receipt thereof by Lessor. Lessee shall
provide Lessor with receipts and other sufficient proof of the payment of such Taxes payable
hereunder within fourteen (14) days of the date such Taxes are due or the thirtieth day following
Lessee’s receipt of Lessor’s invoice for such Taxes. Lessee’s obligation to pay the Taxes which
accrue during the Term shall survive the expiration or termination of this Agreement. At Lessee’s
sole expense and with the cooperation of Lessor, Lessee shall have the right to contest or protest
the valuations of property and tax assessments by taxing entities and all other such matters
affecting ad valorem or other tax assessments against the Pipeline Assets.




ARTICLE VI



USE
OF PIPELINE ASSETS



     6.1 Lessee shall use and occupy the Pipeline Assets solely for the receipt, delivery,
transportation and exchange of natural gas, or any other activity traditionally associated with
natural gas gathering and for the repair, operation and maintenance of the Pipeline Assets in
furtherance of the foregoing, and for no other use or purpose. Lessee may enter into contracts
pursuant to which Lessee receives, delivers, transports or exchanges for the account of third
persons natural gas in and through the Pipeline Assets provided that, to the extent the term of any



 - 7 -









 




purchase or sales contract extends beyond the Term, Lessor may elect to assume any such contract.
In the event Lessor elects not to assume any such purchase or sales contract, then Lessor agrees to
provide transportation, on market responsive terms and conditions, to Lessee for all volumes of gas
associated with such non-assumed contract(s) provided that Lessor shall have no obligation to
increase the system capacity or install compression to provide such transportation service. With
respect to transportation contracts entered into by Lessee during the Term, the effectiveness of
any of such contracts shall not extend beyond the Term, but may be coextensive therewith.




     6.2 Lessee shall be responsible for operating, maintaining and preserving the Pipeline Assets
during the Term (including without limitation making all payments under and complying with all
terms and conditions of the Permits and Easements) and shall conduct all such operations and
maintenance in full compliance with all applicable laws, ordinances, rules and regulations of
governmental authorities and all terms and conditions of the Easements and the Permits. Lessee
shall use and operate the Pipeline as a gathering system and shall not use or operate the Pipeline
in a manner that would subject the Pipeline or Lessor to regulation by the Federal Energy
Regulatory Commission as an interstate pipeline or a natural gas company under the Natural Gas Act
of 1938, respectively.



     6.3 Subject to its compliance with the other provisions of this Agreement, Lessee shall have sole
and exclusive control over



 - 8 -









 




the day to day operation and maintenance of the Pipeline Assets, including, without limitation, the
duty to perform all dispatching, measurement, leak detection, surveys, cathodic protection,
monitoring, inspections, right-of-way maintenance, line locates, pigging, routine repair,
supervision of personnel, and safety monitoring. In addition, Lessee shall have the right to
remove, relocate or redeploy pipe, meter equipment, or other associated pipeline facilities for use
on the Pipeline Assets. Subject to Section 2.2, all expenses of operation and maintenance shall be
borne by Lessee. Lessee shall maintain the Pipeline Assets in good working order, making such
repairs to the Pipeline Assets as may be appropriate to receive, transport, exchange and deliver
natural gas. Upon termination of this Agreement the Pipeline Assets shall be returned to Lessor in
substantially the same condition as on the Commencement Date, normal wear and tear excepted. Lessee
shall retain ownership and be permitted to remove any Additions it has made to the Pipeline Assets
in accordance with Section 7.1, provided any such removal shall not impair the operating
capabilities of the Pipeline Assets as measured by its capabilities on the Commencement Date.
Lessee’s permitted removal of Additions shall be completed within ninety (90) days of contract
termination, otherwise the Addition shall, at Lessor’s option, become Lessor’s property.




ARTICLE VII



ADDITIONS



     7.1 Before commencement of any Addition having an



 - 9 -









 




estimated cost in excess of $100,000 in or to the Pipeline Assets, Lessee shall furnish to Lessor a
description of the intended project and such other documentation as Lessor shall reasonably
request. All such Additions shall be completed (i) in compliance with all applicable laws,
ordinances, rules and regulations of governmental bodies, and with the terms and provisions of the
Permits and Easements and (ii) in a good and workmanlike manner and with the use of good grades of
materials. Lessee agrees to hold Lessor, its agents, officers, servants and employees forever
harmless against all claims, liabilities, losses and expenses (including reasonable attorney fees)
of every kind, nature and description which may arise out of or in any way be connected with any
such Additions. Lessee shall pay the cost of all such Additions and the cost of altering the
Pipeline Assets occasioned by any such Additions. All Additions shall be the property of Lessee.
Upon completion of any Addition, Lessor shall have the right to audit Lessee’s records to verify
compliance with this Article VII, including allowing the inspection of the as-built plans,
contractors’ affidavits, full and final waivers of lien, and receipted bills covering all labor and
materials expended and used in connection with such Additions.




     7.2 Without limitation of the provisions of Section 7.1, Lessee agrees not to suffer or permit any
lien of any mechanic or materialman to be placed or filed against the Pipeline Assets. In case any
such lien shall be filed, Lessee shall immediately



 - 10 -









 




satisfy and release such lien of record. If Lessee shall fail to have such lien immediately
satisfied and released of record, Lessor may, on behalf of Lessee, without being responsible for
making any investigation as to the validity of such lien and without limiting or affecting any
other remedies Lessor may have, pay the same and Lessee shall pay Lessor on demand the amount so
paid by Lessor.




ARTICLE VIII



CONDITION OF PIPELINE ASSETS



     Subject to the terms and conditions of this Agreement, Lessee shall, at its own expense, keep the
Pipeline Assets safe and in good repair and condition and shall expeditiously notify Lessor of all
damage to the Pipeline Assets or other events reportable to any state or federal regulatory
authority, and shall pay all costs of repair of all such damage. If Lessee does not promptly and
adequately make such repairs or replacements, Lessor may, at its sole option, make such repairs and
replacements and Lessee shall pay Lessor the cost thereof on demand.



ARTICLE IX



SURRENDER



     At the termination of this Agreement by lapse of time or otherwise, Lessee shall surrender
possession of the Pipeline Assets to Lessor and return the Pipeline Assets to Lessor in
substantially the same condition as when Lessee originally took



 - 11 -









 




possession, normal wear and tear excepted.




ARTICLE X



DAMAGE OR DESTRUCTION AND MAJOR REGULATORY CHANGE



     10.1(a) Damage or Destruction. If, during the Term, part or all the Pipeline Assets are damaged
or destroyed to such an extent that the Pipeline Assets are rendered substantially unavailable for
use for the purposes specified in Section 6.1, either party may, by written
notice to the other given within thirty (30) days after such damage or destruction, terminate this
Agreement. Such termination shall become effective as of the date of such damage or destruction.



            (b) In the event of damage or destruction within the meaning of Section 10.1 (a) and neither party
has elected to terminate this Agreement pursuant to that Section, then Lessor, subject to the terms
and conditions of this Agreement, shall undertake restoration and repair of the Pipeline Assets to
their pre-damage condition with reasonable promptness. If Lessor fails to commence such
restoration or repair within ninety (90) days after the damage or destruction or fails to
diligently complete the restoration or repair of the Pipeline Assets thereafter, then Lessee may,
by giving written notice thereof to Lessor, either terminate this Agreement (prior to the
substantial completion of the restoration or repair) or undertake such repairs itself. Termination
of the Agreement pursuant to this paragraph 10.1(b) shall be effective as of the fifth (5th) day
after receipt of said notice by Lessor. If Lessee undertakes the restoration or




 - 12 -









 







repair, in no event shall Lessor possess the right to terminate the Agreement under this Section
10.1.




          (c) In the event of damage or destruction within the meaning of Section 10.1 (a), Lessee’s
liability for Base Rent and Taxes shall abate from date of the casualty until the Pipeline Assets
are ready for use and reasonably accessible to Lessee.




          (d) Notwithstanding anything to the contrary in this Section 10.1, Lessee shall not have the right
to terminate this Agreement and its liability for Rent and Taxes shall in no event abate if such
casualty was caused by Lessee, its contractors, subcontractors, employees, or agents.




     10.2 Limitations on Lessor’s Obligations to Restore or Repair. If Lessor repairs or restores the
Pipeline Assets as provided in Section 10.1 above, Lessor shall not be required to repair or
restore any Additions or Extensions to the Pipeline Assets previously made by or on behalf of
Lessee or any trade fixtures, furnishings, equipment or personal property belonging to or installed
by Lessee.



     10.3 Major Regulatory or Legal Change. If during the Term of the Agreement, a major regulatory or
legal change effectively renders the Pipeline Assets substantially unavailable for use for the
purposes specified in Section 6.1, either party may terminate this Agreement upon 30 days prior
written notice.



     10.4 Proration of Rent and Taxes. In the event of termination of the Agreement pursuant to this
Article X, Base Rent and Taxes shall be prorated on a per diem basis and paid



 - 13 -









 




only to the date of the damage or destruction or the effective date of the major regulatory or
legal change, whichever is applicable.




ARTICLE XI



EMINENT DOMAIN



     11.1 In the event that the whole or a substantial part of
the Pipeline Assets shall be condemned or taken in any manner for
any public or quasi-public use (or sold under threat of such
taking), this Agreement shall terminate as of the date
possession is taken.



     11.2 If less than a substantial part of the Pipeline Assets
shall be so condemned or taken (or sold under threat thereof) and
after such taking the Pipeline Assets can be used for the same
purposes as prior thereto, the Term shall cease only as to the
part so taken as of the date possession shall be taken by such
authority, and Lessee shall pay full Rent up to that date (with
appropriate refund by Lessor of such Rent attributable to the
part so taken as may have been paid in advance for any period
subsequent to the date possession is taken) and thereafter Rent
shall be equitably adjusted to reflect the reduction in the
Pipeline Assets by reason of such taking.



     11.3 Subject to Section 11.2, Lessor shall be entitled to
receive the entire award, including the damages for the property
taken and damages to the remainder, with respect to any
condemnation proceedings affecting the Pipeline Assets, except
that Lessee shall be entitled to the portion of the award or



 - 14 -









 




damages allocable to the Additions and Extensions.




ARTICLE XII



INDEMNIFICATION



     12.1 To the extent not expressly prohibited by law, Lessee
agrees to hold harmless and indemnify Lessor, and any of Lessor’s
agents, officers, servants and employees against claims and
liabilities, including reasonable attorneys’ fees, for injuries
to all persons and damage to or theft or misappropriation or loss
of property occurring in or about the Pipeline Assets arising
from Lessee’s occupancy of the Pipeline Assets or the conduct of
its business or from activity, work, or things done, permitted or
suffered by Lessee in or about the Pipeline Assets, or from any
breach or default on the part of Lessee, its affiliates,
employees, agents, contractors and subcontractors in the
performance of any covenant or agreement on the part of Lessee to
be performed pursuant to the terms of this Agreement or due to
any other act or omission of Lessee, its agents or employees. In
the event any action or proceeding is brought against Lessor, or
its officers, servants or employees by reason of any such claims,
then, upon notice from Lessor, Lessee covenants to defend such
action or proceeding at Lessee’s expense by counsel reasonably
satisfactory to Lessor.



     12.2 To the extent not expressly prohibited by law, Lessor
agrees to hold harmless and indemnify Lessee, and any of Lessee’s
agents, officers, servants and employees against claims and
liabilities, including reasonable attorneys’ fees, for injuries



 - 15 -









 




to all persons and damage to or theft or misappropriation or loss of property occurring in or about
the Pipeline Assets arising from the conduct of its business or from activity, work, or things
done, permitted or suffered by Lessor, its affiliates, employees, agents, contractors and
subcontractors in or about the Pipeline Assets prior to the Commencement Date, or from any breach
or default on the part of Lessor in the performance of any covenant or agreement on the part of
Lessor to be performed pursuant to the terms of this Agreement or due to any other act or omission
of Lessor, its agents or employees. In the event any action or proceeding is brought against
Lessee, or its officers, servants or employees by reason of any such claims, then, upon notice from
Lessee, Lessor covenants to defend such action or proceeding at Lessor’s expense by counsel
reasonably satisfactory to Lessee.




     12.3 Environmental Indemnifications. Lessee agrees to hold harmless and indemnify Lessor, and any
of Lessor’s agents, officers, servants and employees for claims of damage, degradation or other
harm to the environment, natural resources, wildlife, habitat, other ecologically sensitive area,
or persons, arising by virtue of a spill, release, discharge, venting or other disposal that occurs
after the Commencement Date and as a result of Lessee’s operation of the Pipeline Assets.
Likewise, Lessor agrees to hold harmless and indemnify Lessee, and any of Lessee’s agents,
officers, servants and employees for claims of damage, degradation or other harm to environment,
natural



 - 16 -









 




resources, wildlife, habitat, other ecologically sensitive areas, or persons, arising by virtue of
a spill, release, discharge, venting or other disposal that occurs or originates prior to the
Commencement Date and as a result of Lessor or its affiliate’s operation of the Pipeline Assets.
The indemnifications granted hereunder shall include all claims and liabilities, including
reasonable attorney and consultant fees and costs, associated with the relevant claim of damage,
degradation, or other harm.




ARTICLE XIII



INSURANCE; WAIVER OF SUBROGATION



     13.1 Upon execution of this Agreement, Lessee shall furnish evidence in a form satisfactory to
Lessor of the following insurance coverage:



          (a) Comprehensive General Liability: Five million
dollars $5,000,000.00 combined single limit (including broad from
property damage, blanket contractual liability, products and
completed operations, and owners and contractors protective
insurance with “x”, “c” and “u” exclusions deleted) for bodily
injury, death and property damage, including Lessor, its
directors, officers, agents and employees as additional insureds.




          (b) Automobile: Five million dollars ($5,000,000.00)
combined single limit for bodily injury, death and property
damage, including Lessor, its directors, officers, agents and
employees as additional insureds.




          (c) Worker’s Compensation and Employer’s Liability:
Workers’ compensation, statutory levels; employer’s liability,





 - 17 -









 







$500,000.00 per occurrence including a waiver of subrogation in favor of Lessor.




     13.2 Coverage required by 13.1 (a) through (c) shall be
evidenced by certificates of insurance from companies
satisfactory to Lessor, delivered to Lessor upon Lessee’s
execution of this Agreement, and thereafter from time to time at
Lessor’s request, showing the requisite liability limits and
containing a clause obligating the insurer to provide Lessor with
thirty (30) days notice of cancellation or material change in
coverage. The coverage afforded additional insureds, pursuant to
this Article XIII, shall be primary insurance with respect to any
insurance that is applicable to the additional insureds. If the
additional insureds have other insurance that it is applicable to
the loss, such other insurance shall be on an excess basis.
Lessee shall promptly report in writing to Lessor all accidents,
claims, suits or threats of litigation arising out of, or in
connection with, the performance of this Agreement.



     13.3 Any policies of insurance required to be maintained by
Lessee under the terms of this Agreement shall contain waiver of
subrogation clauses in form and content satisfactory to Lessor.



ARTICLE XIV



LESSOR’S RIGHT OF ACCESS


     Lessor and its representatives shall have the right, upon 24 hours notice, (i) to inspect the
Pipeline Assets at all reasonable times and (ii) to inspect at all reasonable times all records of
Lessee relating to the operation, maintenance and





 - 18 -









 







repair of the Pipeline Assets.




ARTICLE XV



CONTRACTS



     Purchase and Sales Agreements. Lessee agrees to transport for Lessor volumes of gas delivered to
the Pipeline from those contracts described on Schedule 2. Lessee shall deliver at no cost to
Lessor equivalent MMBtu to the outlet of the Pipeline facilities or other mutually acceptable point
as may be agreed upon. Should volumes delivered from these contracts materially increase from the
volumes existing on the Commencement Date then Lessee and Lessor shall endeavor in good faith to
mutually agree to reasonable compensation to Lessee for such increased transport volumes.



ARTICLE XVI



TRANSFER OF LESSEE’S INTEREST



     16.1 Lessee shall not sell, assign, encumber, mortgage or transfer this Agreement or any interest
herein or in the Pipeline Assets or any part thereof, or allow any transfer thereof or any lien
upon any of such interest of Lessee by operation of law or otherwise to any person or entity other
than an affiliate or subsidiary of Lessee (collectively, a “Transfer”), without the prior written
consent of Lessor, which, Lessor may withhold in the exercise of its absolute discretion. Any
Transfer which is not in compliance with the provisions of this Article XVI shall, at the option of
Lessor, be void and of no force or effect.



 - 19 -









 





     16.2 If Lessee shall Transfer the Pipeline Assets or any
part thereof, Lessee shall be responsible for all actions and
neglect of the transferee and its officers, partners, employees,
agents, guests and invitees. Nothing in this Section 16.2 shall
be construed to relieve Lessee from the obligation to obtain
Lessor’s prior written consent to any proposed Transfer.



     16.3 The consent by Lessor to any Transfer shall not be
construed as a waiver or release of Lessee from liability for the performance of all covenants and obligations to be performed by
Lessee under this Agreement, and Lessee shall remain liable
therefor, nor shall the collection or acceptance of Rent from any
assignee, subtenant or occupant constitute a waiver or release of
Lessee from any of its obligations or liabilities under this
Agreement. Any consent given pursuant to this Article XVI shall
not be construed as relieving Lessee from the obligation of
obtaining Lessor’s prior written consent to any subsequent
Transfer.



     16.4 Neither this Agreement nor any interest therein nor
any estate created thereby shall pass by operation of law or
otherwise to any trustee, custodian or receiver in bankruptcy of
Lessee or any assignee for the assignment of the benefit of
creditors of Lessee.



 - 20 -









 





ARTICLE XVII



DEFAULT: RIGHTS AND REMEDIES



     17.1 The occurrence of any one or more of the following matters constitutes a default by Lessee
under this Agreement unless cured, or agreed upon arrangements for cure are made, as specified
below (“Default”):



     (a) Failure by Lessee to pay, within five (5) days after
the due date, any Rent or any other amounts due and payable by
Lessee under this Agreement;



     (b) Failure by Lessee to cure forthwith, within 30 days of
notice thereof from Lessor, any hazardous condition that Lessee
has created in violation of law or of this Agreement;



     (c) Failure to cure within 30 days of notice of a failure
of Lessee to observe or perform any covenant, agreement,
condition or provision of this Agreement;



     (d) The levy upon execution or the attachment by legal
process of the leasehold interest of Lessee, or the filing or
creation of a lien in respect of such leasehold interest which
has not been cured within 30 days of notice;



     (e) Lessee becoming insolvent or bankrupt or admitting in
writing its inability to pay its debts as they mature, making an
assignment for the benefit of creditors, or applying for or
consenting to the appointment of a trustee or receiver for itself
or for all or a part of its property;



     (f) Proceedings for the appointment of a trustee, custodian
or receiver of Lessee or for all or a part of Lessee’s property



 - 21 -









 




being filed against Lessee and not being dismissed within thirty (30) days; or




     (g) Proceedings in bankruptcy, or other proceedings for relief under any law for the relief of
debtors, being instituted by or against Lessee, and, if instituted against Lessee, being allowed
against Lessee or being consented to by Lessee or not being dismissed within sixty (60) days
thereof.



     17.2 If a Default occurs then Lessor shall have the
following rights and remedies, which shall be distinct, separate
and cumulative, and which may be exercised by Lessor concurrently
or consecutively in any combination:



     (a) Lessor may terminate this Agreement by giving to Lessee
written notice of the Lessor’s intention to do so, in which event
the Term shall end, and all rights, title and interest of Lessee
hereunder shall expire, on the date stated in such notice; and



     (b) Lessor may enforce the provisions of this Agreement and
may enforce and protect the rights of Lessor hereunder by a suit
or suits in equity or at law for the specific performance of any
covenant or agreement contained herein, including injunctive
relief and recovery of all payments due and damages from Lessee.



     17.3 If Lessor exercises the remedy provided for in
subparagraph (a) of Section 17.2, Lessee shall surrender
possession and vacate the Pipeline Assets immediately and deliver
possession thereof to Lessor, and Lessor may then, or at any time
thereafter, re-enter and take complete and peaceful possession of
the Pipeline Assets, with or without process of law, full and



 - 22 -









 




complete license to do so being granted to Lessor, without relinquishing Lessor’s right to Base
Rent or any other right given to Lessor hereunder.




     17.4 Lessee shall pay all costs, charges and expenses,
including court costs and reasonable attorneys’ fees incurred by
Lessor or its beneficiaries in enforcing Lessee’s obligations
under this Agreement or, in the exercise by Lessor of any of its
remedies in the event of a Default.



     17.5 Notwithstanding any provision of applicable law
governing the sale or leasing of goods, the defaults, rights and
remedies of each of the parties hereto shall be limited to those
specified in this Agreement.



ARTICLE XVIII



HOLDING OVER



     If Lessee retains possession of the Pipeline Assets or any part thereof after the termination of
the Agreement by lapse of time or otherwise, Lessee shall, at the option of
Lessor, become a tenant from month to month and shall pay Lessor monthly rent, at one-sixth of the
Base Rent plus the applicable Taxes last in effect, computed on a per month basis, for each month
or part thereof (without reduction for any such partial month) that Lessee thus remains in such
possession. As a month to month tenant, Lessee shall be subject to all the terms, conditions,
covenants and agreements hereunder. Nothing herein contained shall preclude Lessor from
terminating such month to month tenancy. The provisions of this Article XVIII do not exclude



 - 23 -









 




Lessor’s right of re-entry or any other right hereunder.




ARTICLE XIX



NOTICES AND DEMANDS



     All notices, demands, approvals, consents, requests for approval or consent or other writings in
this Agreement provided to be given, made or sent by either party hereto to the other (“Notice”)
shall be in writing and shall be deemed to have been fully given, made or sent when made by
personal service or deposited in the United States mail certified or registered and postage prepaid
and properly addressed as follows:



	 	 	 	 	 
	 

	 	To Lessor:
	 	Natural Gas Pipeline
	 

	 	 	 	     Company of America
	 

	 	 	 	701 E. 22nd Street
	 

	 	 	 	Lombard, Illinois 60148
	 

	 	 	 	Attn: Sr. Vice President
	 

	 	 	 	          Transmission
	 

	 	 	 	Facsimile No.: (708) 691-3829
	 
	 	 	 	 
	 

	 	To Lessee:
	 	MC Panhandle, Inc.
	 

	 	 	 	c/o Oxy USA Inc.
	 

	 	 	 	P. O. Box 300
	 

	 	 	 	Tulsa, Oklahoma 74102
	 

	 	 	 	Facsimile No.: (918) 561-3561





The address to which any Notice should be given, made or sent to either party may be changed by
written notice given by such party as above provided.




ARTICLE XX



CONSTRUCTION OF AGREEMENT



     20.1 (a) The language in all parts of this Agreement shall in all cases be construed as a whole
according to its fair



 - 24 -









 




meaning and neither strictly for nor against either Lessor or Lessee.




          (b) Article headings in this Agreement are for
convenience only and are not to be construed as part of this
Agreement or in any way defining, limiting, amplifying,
construing, or describing the provisions hereof.




          (c) Unless the context otherwise requires “or” is not
exclusive. Unless the context otherwise requires an accounting
term not otherwise defined has the meaning assigned to it in
accordance with accounting principles and practices that are
generally accepted in the United States of America and have been
consistently applied by either of the parties.




          (d) Time is of the essence of this Agreement and of
every term, covenant and condition hereof.




          (e) All of the covenants of Lessee and Lessor
hereunder shall be deemed and construed to be “conditions” as
well as “covenants” as though the words specifically expressing
or importing conditions were used in each separate instance.




          (f) Subject to Section 10.3, Lessor and Lessee agree
that in the event any term, covenant or condition herein
contained (other than with respect to the payment of Rent) is
held to be invalid or void by any court of competent
jurisdiction, the invalidity of any such term, covenant or
condition shall in no way affect any other term, covenant or
condition herein contained.




     20.2 Except as specifically provided in this Agreement or



 - 25 -









 







in the Exhibits and Schedules hereto for the Term of this Agreement, Lessor makes no warranties to
Lessee, express or implied, that the Pipeline Assets are of any particular nature or quality, or
have any particular capabilities or condition. LESSOR MAKES NO WARRANTY THAT THE PIPELINE ASSETS
ARE MERCHANTABLE OR THAT THEY WILL BE FIT FOR A PARTICULAR PURPOSE.




ARTICLE XXI



BROKERS



     Lessee represents and warrants to Lessor that Lessee has not engaged or dealt with, directly or
indirectly, any broker in connection with this Agreement, and agrees to indemnify and hold harmless
Lessor from and against any and all claims or demands, damages, liabilities and expenses of any
type or nature whatsoever arising by reason of the incorrectness or breach of the aforesaid
representation and warranty.



ARTICLE XXII



MISCELLANEOUS



     22.1 Subject to the provisions of Article XVI, all terms,
covenants and conditions of this Agreement shall be binding upon
and inure to the benefit of and shall apply to the respective
heirs, executors, administrators, successors, assigns and legal
representatives of Lessor and Lessee.



     22.2 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.



     22.3 Any amount due hereunder shall bear interest after



 - 26 -









 




default in the payment thereof at the annual rate of three percent (3%) above the corporate base
rate as announced by Chemical Bank from time to time, or if the use of the corporate base rate is
discontinued by Chemical Bank, such other rate as may thereafter be announced from time to time by
Chemical Bank or any other major bank in New York, New York selected by the non-defaulting party as
a measure of the cost to such bank’s borrowers of short-term commercial loans, until said past due
amount shall be paid by defaulting party to the non-defaulting party or, in the absence of any such
rate, 12% per year or, if less, the maximum rate of interest Lessor shall be permitted lawfully to
charge.




     22.4 No waiver of any provision of this Agreement shall be implied by any failure of Lessor or
Lessee to enforce any remedy on account of the violation of such provision, even if such violation
be continued or repeated subsequently, and no express waiver shall affect any provision other than
the one specified in such waiver and in that event only for the time and in the manner specifically
stated. Unless otherwise agreed to in writing, no receipt of monies by either party hereto from
the other after the termination of this Agreement will in any way alter the length of the Term or
Lessee’s right of possession hereunder or, after the giving of any notice, shall reinstate,
continue or extend the Term or affect any notice given hereunder prior to the receipt of such
monies.



 - 27 -









 





     22.5 If a party fails timely to perform any of its duties under this Agreement, the other party
shall have the right (but not the obligation), after the expiration of any grace period
specifically provided by this Agreement, to perform such duty on behalf and at the expense of the
defaulting party without further notice to that party, and all sums expended or expenses incurred
by the non-defaulting party in performing such duty shall be recoverable from the defaulting party.



     22.6 This Agreement is subject to all valid laws, rules and regulations of any duly constituted
governmental authority. Nothing contained herein shall be construed as a waiver of any right to
question or contest any such laws, rules or regulations.



     22.7 Lessor shall cooperate with Lessee to obtain any and
all governmental permits and authorizations required to be
obtained by Lessee, and to make any notices to governmental
authorities required to be made, in connection with the use and
operation of the Pipeline Assets by Lessee pursuant to this
Agreement, provided, however, any costs to obtain such permits
and authorizations or to provide such notices shall be borne by
Lessee.



     22.8 Accounting Adjustments and Imbalances. Retroactive
adjustments to payments and performance, and the settlement of
imbalances, that arise out of Lessor ownership and operation of
the Pipeline Assets or out of any accounting period ending prior
to January 1, 2000, shall be the responsibility of Lessor and
Lessor-shall indemnify and hold Lessee harmless for the same.



 - 28 -









 




Likewise, retroactive adjustments to payment and performance that arise out of Lessee’s operation
of the Pipeline Assets subsequent to January 1, 2000 and until such time, if any, that Lessor
resumes operation of the Pipeline Assets shall be the responsibility of Lessee and Lessee shall
indemnify and hold Lessor harmless for the same. To the extent cash balancing is not practicable,
imbalances may be settled through the physical transfer of gas on a fair and equitable basis as
agreed upon by the parties hereto.




     22.9 Gas Quality. Lessee agrees to operate the pipeline
according to the gas quality specifications set forth on Schedule
3. Lessor reserves the right to audit and inspect Lessee’s
compliance with this Section pursuant to Article XIV hereof.



     22.10 By the Commencement Date or as soon thereafter as
reasonable possible, Lessor shall provide Lessee with all records
in the possession of Lessor relating to the Pipeline Assets and
the Contracts as are reasonably requested by Lessee to exercise
its rights and perform its obligations under this Agreement.
Lessee will thereupon maintain and keep current all records
relating to the Pipeline Assets. Lessor shall have the right to
audit and inspect the records maintained by Lessee to ensure
Lessee’s compliance with this paragraph and the terms and
conditions of this Agreement. Should this Agreement terminate,
all records pertaining to the Pipeline Assets shall be returned
to Lessor by the termination date or as soon thereafter as is
reasonably possible.



 - 29 -









 





     22.11 The schedules and exhibits attached hereto are hereby
incorporated in this Agreement by reference.



     22.12 It is the specific intention of the parties hereto
that the provisions of this Agreement shall not impart rights
enforceable by any person, firm or organization not a party or
not a successor or assignee of a party to this Agreement and,
therefore, that there be no third party beneficiary to this
Agreement.



XXIII



MEMORANDUM



     Lessor and Lessee shall execute and deliver a short form or memorandum of this Agreement,
satisfactory in substance and form to Lessor, for recording in the proper office or offices in the
State of Texas.



XXIV



CONCURRENT AGREEMENT



     In the event Lessor and Lessee execute this Agreement, they also shall execute an amendment of that
certain Gas Sales and Purchase Agreement between them dated July 1, 1997, which amendment shall
provide that the Seller thereunder will be obligated to install EFM downstream of each field
booster unit at Seller’s sole cost and expense, but that the Buyer thereunder will own and operate
all such EFM.



 - 30 -









 





     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first
above written.



	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Lessee: MC PANHANDLE, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Lessor: NATURAL GAS PIPELINE	 	 
	 	 	 	 	 	 	               COMPANY OF AMERICA	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 






 - 31 -









 







SCHEDULE 1




EASEMENTS, PERMITS & REAL PROPERTY



Information regarding Easements, Permits, Real Property and Leased Inventory, if
any, will be provided prior to execution of this Agreement.




- 32 -









 





SCHEDULE 2




THIRD PARTY CONTRACTS IN PANHANDLE GATHERING SYSTEM




	 	 	 	 	 	 	 	 	 	 	 	 	 
	MAIN	 	 	 	PIN	 	 	 	 	CONTRACT	 	CONTRACT
	B/S	 	WELL NAME	 	NO.	 	 	PRODUCER	 	NO.	 	TYPE
	2	 	Comstock Master #1	 	 	7929	 	 	Comstock Resources	 	5368	 	Purchase
	2	 	Comstock Master #2	 	 	8182	 	 	Comstock Resources	 	5368	 	Purchase
	2	 	N. J. Jones / Comstock	 	 	8183	 	 	Comstock Resources	 	5368	 	Purchase
	8	 	Thompson Et Al	 	 	5069	 	 	Shamrock [ILLEGIBLE]	 	 	 	Transportation
	10	 	MEGG Garrett  #1 [ILLEGIBLE]	 	 	5070	 	 	MEGG, Inc	 	 	 	Transportation
	10	 	MEGG Kilgore	 	 	25158	 	 	MEGG, Inc	 	6482	 	Purchase
	10	 	Holtorf  #1	 	 	25438	 	 	Big Run Production	 	6682	 	Purchase
	41	 	R.A. Burnett  #1-B	 	 	1564	 	 	Char-Will Corp.	 	6029	 	Purchase
	44	 	McCoy #1	 	 	1565	 	 	Kimberlin & Miller	 	311	 	Purchase
	44	 	Brown #1	 	 	1584	 	 	Bryan Exploration	 	5667	 	Purchase
	44	 	MEGG Taylor  #1	 	 	25395	 	 	MEGG, Inc.	 	6550	 	Purchase
	46	 	MEGG McConnell	 	 	25246	 	 	Werner Oil	 	6554	 	Purchase
	47	 	S. B. Burnett  66-A	 	 	7852	 	 	Conoco	 	91-6918	 	Purchase
	47	 	S. B. Burnett  84-A	 	 	7854	 	 	Conoco	 	91-6918	 	Purchase
	47	 	S. B. Burnett  75-A	 	 	7853	 	 	Conoco	 	91-6918	 	Purchase
	51	 	E. B. Johnson A-102	 	 	751	 	 	Rio Petroleum, Inc.	 	91-6867	 	Purchase
	51	 	E. B. Johnson  A-101	 	 	750	 	 	Rio Petroleum, Inc.	 	91-6867	 	Purchase
	51	 	E. B. Johnson A-l-G	 	 	749	 	 	Rio Petroleum, Inc.	 	91-6867	 	Purchase







- 33 -









 







SCHEDULE 3


TO LEASE AND LICENSE AGREEMENT


DATED JANUARY 1, 2000



GAS QUALITY



Gas shall be/contain:





	 	1.	 	Free of liquids.
	 
	 	2.	 	Free of dust, gum, etc.
	 
	 	3.	 	Not more than .25 grain/100 cf of Hydrogen Sulfide
(H2S).
	 
	 	4.	 	Not more than one quarter (.25) grains/100 cf of
mercaptans.
	 
	 	5.	 	Not more than twenty (20) grains/100 cf of total
sulfur.
	 
	 	6.	 	Not more than three (3) percent carbon dioxide (CO2).
	 
	 	7.	 	Not more than ten (10) parts per million oxygen (02).
	 
	 	8.	 	Not more than three (3) percent nitrogen (N).
	 
	 	9.	 	Heating value greater than 975 Btu per cubic foot.
	 
	 	10.	 	At a flowing gas temperature between 40° and 120° F.


	 
	 	11.	 	 Not more than 400 parts per million hydrogen.





     All gas qualities determined for gas measured at 14.73 psia, 60° F, on a dry basis.




- 34 -









 





     14.6.
Waiver of Default. No waiver by either Party hereto of any one or more
defaults by the other in the performance of any of the provisions of
this Agreement shall
operate or be construed as a waiver of any subsequent default or defaults whether of a
[ILLEGIBLE] or a different character.



     14.7. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAW OF
THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.



     14.8. Headings. The headings used for the Articles herein are for convenience and reference
purposes only and shall in no way affect the meaning or
interpretation of the provisions of this Agreement.



     14.9.
Taxes. The Contract Price is inclusive of all royalties, production
taxes, severance taxes, ad [ILLEGIBLE] taxes, or other sums
now or hereafter levied on the production of the
gas prior to its delivery to Buyer at the Delivery Point(s). All such taxes and royalties
shall be [ILLEGIBLE] and paid exclusively by Seller.



     14.10.
Special Damages Waiver. THE PARTIES WAIVE ALL PUNITIVE SPECIAL, EXEMPLARY OR
CONSEQUENTIAL DAMAGES FOR ANY BREACH OF THIS CONTRACT.



     AGREED
TO AND ACCEPTED, this 19th day of November, 1996



	 	 	 	 	 	 	 	 	 	 	 
	 	 	MidCon Gas Services Corp.	 	 	 	MC Panhandlen, Inc.
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Sharon M. Hillman
	 	 	 	By:
	 	/s/  
	 

	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	Vice President Energy Marketing
	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 	 	 	 	 





Page 11









 





AMENDMENT TO GAS SALES AND PURCHASE AGREEMENT




     THIS AMENDMENT is entered into effective March 1, 2000 (“Effective Date”),
between Chesapeake Energy Marketing, Inc., an Oklahoma corporation, as Seller, and ONEOK
Texas Field Services, L.P., a Texas limited partnership, as Buyer, as successors to the
original Seller and Buyer under that certain Gas Sales and Purchase Agreement dated effective
July 1, 1997 (“the 1997 Gas Contract”), between MC Panhandle, Inc., as Seller, and MidCon Gas
Services Corp., as Buyer.



     WHEREAS, this Amendment is entered into pursuant to that certain Settlement Agreement
executed contemporaneously herewith in settlement and compromise of the claims asserted in
Chesapeake Panhandle Limited Partnership, et al. v. Kinder Morgan,
Inc., et al., United
States District Court for the Western District of Oklahoma, Case No. CIV-00-0397-F (“the
Settlement Agreement”).



     WHEREAS, in furtherance of the Settlement Agreement, the parties desire to amend the
1997 Gas Contract to extend the term contained in Paragraph 3.1 thereof to a “life of lease”
contract, to stipulate that effective July 1, 2002 the Gathering Charge provided for in
Paragraph 4.3 of the 1997 Gas Contract shall be (**), to add an
arbitration provision, and that Article XIII shall be deleted from the 1997 Gas Contract
effective from inception. In all other respects the 1997 Gas Contract shall remain in full
force and effect as originally written.



     NOW THEREFORE, in consideration for the mutual covenants contained herein
and such other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:



     1. TERM. The language of Paragraph
3.1 of the 1997 Gas Contract is hereby
deleted in its entirety and replaced with
the following:




The term of this Agreement shall be for so long as the life of each lease
dedicated to this Agreement now or in the future.



     2. REDETERMINATION OF GATHERING CHARGE. The language of Paragraph 4.3(i) of the
1997 Gas Contract is hereby deleted in its entirety and replaced with the following:




The
Gathering Charge set forth in Paragraph 4.2 shall remain in effect until
June 30, 2002. Effective July 1, 2002 the Gathering Charge set forth in
Paragraph 4.2 shall be (**) as follows: (1) (**); (2) (**); and (3)
the variable charge component will be (**)



1









 






shall remain in effect for two (2) years from and after July 1, 2002, and
then from year-to-year thereafter unless redetermined pursuant to Paragraph 4.3(ii).



     3. ARBITRATION. The following provision shall
be, and is hereby, added as Paragraph 4.3(iv)
to the 1997 Gas Contract:




          “Any dispute arising out of or relating to the redetermination of the Gathering
Charge under Section 4.3 of this Agreement, including the breach, termination or
validity thereof, shall be finally resolved by arbitration in accordance with the
CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration (“CPR
Rules”) by three arbitrators, of whom each party shall appoint one. The arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment
upon the award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of the arbitration shall be selected by mutual
agreement of the parties, or if the parties cannot agree, then by the chair of the
tribunal as selected under CPR Rule 5. The parties elect the following options and
amend the CPR Rules in the following respects:




	 	1.	 	Notices. CPR Rule 2 is hereby supplemented as follows: All
notices required or permitted under the provisions hereof shall be in writing
and shall be given by delivery in person; registered mail, return receipt
requested; or by Federal Express or other similar courier service providing
evidence of delivery, addressed as follows:






	 	a.	 	If to Seller:
	 
	 	 	 	Mr. James C. Johnson

Mr. Henry J. Hood

Chesapeake Energy Marketing, Inc.

P. O. Box 18496

Oklahoma City, OK 73154-0496
	 
	 	 	 	Fax: (405) 879-9531

        (405) 879-9575
	 
	 	b.	 	If to Buyer:

	 
	 	 	 	ONEOK Field Services

P. O. Box 871

Tulsa, OK 74102-0871

	 
	 	 	 	Attn: Contract Administration

Fax: (918) 588-7499




2









 






	 	 	 	ONEOK Field Services

1600 ONEOK Plaza

100 West Fifth Street

Tulsa, OK 74103






	 	2.	 	Commencement of Arbitration. CPR Rule 3 is hereby supplemented
as follows: No party may commence arbitration sooner than sixty (60)
days after either party has given written notice of a request to
redetermine the Gathering Charge as provided for in Paragraph 4.2(ii).
	 
	 	3.	 	Applicable Laws(s) and Remedies. CPR Rule 10 is hereby
supplemented as follows: The substantive law to be applied in
connection with the arbitration, and any hearings, trials or proceedings
related thereto, shall be the law of the State of Texas.





     4. Option to Lease. The parties agree that
Article XIII, inclusive of Paragraphs
13.1, 13.2 and 13.3, and Exhibit “D”, Lease and
License Agreement, are hereby stricken
from the 1997 Gas Contract in its entirety,
effective as of July 1,1997.



     5. Ratification. This Amendment shall be binding upon and inure to the benefit
of the parties hereto, including but not limited to their officers, agents, employees,
representatives, heirs, assigns, predecessors and successors-in-interest. In all other
respects the 1997 Gas Contract is hereby confirmed, ratified and adopted as originally
written in every respect.



     EXECUTED THIS                      DAY OF APRIL 2002, BUT EFFECTIVE FOR ALL PURPOSES AS OF THE EFFECTIVE DATE,
EXCEPT AS OTHERWISE PROVIDED FOR HEREIN.



	 	 	 	 	 	 	 	 	 
	Chesapeake Energy Marketing, Inc.	 	 	 	ONEOK Texas Field/Services, L.P.
	 
	 	 	 	 	 	 	 	 
	By

	 	/s/ James C. Johnson
	 	 	 	By
	 	/s/ Greg Phillips
	 

	 	 
	 	 	 	 	 	 
	 

	 	James C. Johnson, President
	 	 	 	 	 	By and through its General Partner
	 

	 	 	 	 	 	 	 	  ONEOK Field Services Company
	 

	 	 	 	 	 	 	 	  Greg Phillips
	 

	 	 	 	 	 	Its	 	  Vice President







3