EX-10.6






Exhibit 10.6




CONTINGENT VALUE AGREEMENT




THIS CONTINGENT VALUE AGREEMENT (this “Agreement”) is made and entered into as of August 16,
2005, by and among, Capital C Energy, LP, a Delaware limited partnership (the “General Partner”),
Capital C Energy Partners, L.P., a Delaware limited partnership (the “Limited Partner”, and
together with the General Partner, “Sellers”), and the entities named on the signature page hereof
as Buyers (“Buyers”) and Belden & Blake Corporation, an Ohio corporation (“Asset Company”).



RECITALS:




WHEREAS, contemporaneously with the execution and delivery of this Agreement, the General
Partner and the Limited Partner are selling and conveying all of the limited partnership interests
(the “Partnership Interests”) in Capital C Energy Operations, LP (the “Partnership”) pursuant to a
Partnership Interests Purchase Agreement dated as of July 5, 2005 by and among Sellers and Buyers
(as amended, the “Purchase Agreement”); and



WHEREAS, the Partnership’s sole assets are issued and outstanding shares of common stock, no
par value (the “Shares”), of Asset Company; and



WHEREAS, as a further inducement to Sellers to sell the Partnership Interests to Buyers, and
to satisfy Buyers’ interest in purchasing the Partnership Interests, Sellers, Buyers and the Asset
Company desire to enter into this Agreement to provide Sellers with additional consideration upon
the occurrence of certain future events, the value of which, if paid, shall be treated as
additional Purchase Price under the Purchase Agreement; and



WHEREAS, capitalized terms used but not otherwise defined herein shall have the meaning given
such terms in the Purchase Agreement;



NOW, THEREFORE, in consideration of the premises, the respective representations, warranties,
covenants and agreements contained herein, and other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties hereto agree as follows:



Section 1. Conditions for Payment of Additional Consideration. In the event, and each
time, that all of the following events occur, Buyers shall cause Asset Company to pay promptly to
Sellers, among Sellers in the same proportion that the original Purchase Price is allocated, the
Additional Consideration as set forth in Section 2 hereof:



(a) during a period commencing on the Closing Date and ending on, but including, the second
anniversary of the Closing Date (the “Contingent Event Period”), Buyers, the Asset Company or its
subsidiaries, or any of their affiliates (a “Transferor”), directly or indirectly sells,
contributes, or otherwise transfers any Covered Assets (an “MLP Transfer”) to a Covered MLP; and



(b) as a consequence of an MLP Transfer, Transferor, Realizes (as defined in Section 3
hereof) a Value Enhancement Gain (as defined in Section 3 hereof) during the Contingent
Event Period; and



(c) either (i) 90% of the consideration received for an MLP Transfer is cash or securities or
(ii) Transferor has at the time of the MLP Transfer an existing equity interest in the Covered MLP
that is the subject of the MLP Transfer and as a result of such MLP Transfer, the Transferor’s
equity interest is enhanced.



Section 2. Payment of Additional Consideration.



(a) Upon each satisfaction of the conditions in Section 1, Buyers shall, or cause the
Asset Company to, promptly pay to Sellers as additional Purchase Price under the Purchase
Agreement, an amount equal to: (i) 20% of any Value Enhancement Gain incurred or deemed incurred
during the first year of the Contingent Event Period by the Transferor and (ii) 10% of any Value
Enhancement Gain incurred or deemed incurred during the second year of the Contingent Event Period
by the Transferor (the “Additional Consideration”).



(b) If 90% or more of the consideration paid to Transferor in the MLP Transfer is cash, the
Additional Consideration shall be paid to Sellers in cash by wire transfer of immediately available
funds to an account specified by Sellers. Subject to paragraph 2(c), if less than 90% of the
consideration received by Transferor in the MLP Transfer is cash, a portion of the Additional
Consideration shall be paid to Sellers in cash by wire transfer of immediately available funds in
an amount equal to the Additional Consideration multiplied by a fraction, the numerator of which is
the amount of cash and the fair market value of any other consideration which is not securities
received by Transferor as consideration (for all assets transferred, including those that do not
constitute Covered Assets) in the MLP Transfer (including any increase in value of any existing
equity interests of Transferor owned in the Covered MLP resulting from the MLP Transfer), and the
denominator of which the value of all consideration received by Transferor in the MLP Transfer
(including any increase in value of any existing equity interests of Transferor owned in the
Covered MLP resulting from the MLP Transfer). The balance of the Additional Consideration will be
paid, at Transferor’s election, in cash or by transfer of securities received by the Transferor in
the MLP Transfer having a fair market value equal to the amount of Additional Consideration not
paid in cash; provided that if such securities are issued in a Covered MLP and are of a class, or
convertible or exchangeable into a class, that is, or are reasonably expected to be, listed on a
national securities, or traded on the NASDAQ National Market (or similar replacement thereof) and
the issuing Covered MLP, (i) Sellers and their assigns shall be granted or assigned registration
rights with respect to such securities (or the underlying class of securities if convertible or
exchangeable into such a publicly traded class) for the registration under the Securities Act of
1933, as amended, of the resale of such securities by Sellers or their assigns; (ii) such
registration rights shall not be materially less favorable than registration rights received by
Transferor in connection with such MLP Transfer; (iii) unless registration rights granted to
Transferor provide for earlier registration, the registration of Sellers’ securities shall not be
required prior to such time as the Covered MLP is eligible for short-form registration on Form S-3
or similar form; and (iv) such registration rights shall terminate if such securities are available
to be resold by Sellers or their assigns pursuant to an exemption from such registration under
Securities and Exchange Commission Rule 144(k) or similar rule.



(c) Notwithstanding the provisions of paragraph 2(b), if the entire Additional Consideration
is not paid Buyers or the Asset Company in cash, Buyers or the Asset Company will pay an amount of
the Additional Consideration in cash at least equal to the lesser of the following: (i) the federal
income tax payable by Sellers with respect to receipt of the non-cash portion of the Additional
Consideration calculated at the highest marginal federal income tax rate applicable to Sellers at
the time of payment and (ii) $5 million.



Section 3. Value Enhancement Gain. For purposes of this Agreement:



(a) a “Covered Asset” is any of the following assets owned by the Asset Company or a
Subsidiary on the Closing Date of the Purchase Agreement: an oil and gas property, and any
pipeline, gathering system or other equipment relating to the production, processing or
transportation of oil and gas;



(b) a “Value Enhancement Gain” with respect to any MLP Transfer, shall mean the value, if
positive, of the Realized Value of the Covered Assets transferred in the MLP Transfer minus the
Adjusted Carrying Value of such Covered Assets immediately prior to such MLP Transfer;



(c) the “Realized Value” shall mean the amount of cash or fair market value of other property
received by Transferors for the Covered Assets at the time of such MLP Transfer, provided that if
the property received by Transferors in the MLP Transfer constitutes units of equity interests in
the MLP, the Realized Value shall be determined by reference to the trading price of such units on
the date of the MLP Transfer, or if the MLP is not yet publicly traded, the initial public offering
price of such units, in each case with an appropriate discount for any legal or contractual
restriction on transfer or any subordination or other contractual differences between the equity
interests received by Transferor and the publicly traded units;



(d) a Transferor shall “Realize” a Value Enhancement Gain on the later of (i) the date of the
MLP Transfer and (ii) the date the equity interests in the Covered MLP are first sold in an initial
public offering;



(e) “Adjusted Carrying Value” shall mean the Transferor’s book value of the transferred
Covered Assets as set forth in the most recently completed quarterly statements immediately prior
to such MLP Transfer using generally accepted accounting principles, which book value shall include
“push down” purchase accounting adjustments made in a manner consistent with SEC accounting rules
(except that goodwill, if any is so recorded, shall be reallocated among the Covered Assets in
proportion to their adjusted fair values) to record the fair value of assets and liabilities of the
Asset Company and its subsidiaries resulting from the transactions consummated pursuant to the
Purchase Agreement (but not as a result of the receipt of Additional Consideration under this
Agreement), plus to the extent not included in such book value, the amount of any capital costs
incurred with respect to such Covered Assets after the Closing Date under the Purchase Agreement;
and



(f) in the event an MLP Transfer also involves a transfer and assumption of liabilities, the
determinations of Value Enhancement Gain, Realized Value and Adjusted Carrying Value shall be
adjusted to take the fair value of such transferred liabilities into account using analogous
valuation methods; and



(g) A “Controlled MLP” shall mean either (i) a “publicly traded partnership” within the
meaning of Section 7704(b) of the Internal Revenue Code of 1986, as amended or (ii) a publicly
traded royalty trust if (1) the entity is, or at any time during the Contingent Event Period was,
an affiliate of Buyers or (2) during the Contingent Event Period, at or prior to the subject
transfer, the Transferor or any of this affiliates acted as a sponsor or grantor of, or made
founding or initial contributions to, such entity.



Section 4. Reports, Records and Inspection. Buyers agrees to deliver to each of Sellers
(i) within 45 days of after the end of the calendar quarter in which the closing of the purchase
pursuant to the Purchase Agreement occurs, a closing date balance sheet prepared in accordance with
the principles set forth in Section 3(d) hereof, together with detailed schedules on a property by
property basis of the adjustments made to reflect the fair value of assets and liabilities and (ii)
prompt notice of the occurrence of any MLP Transfer or the Realization of a Value Enhancement Gain
by any Transferor, together with reasonable detail. Each of the Sellers shall have the right to
inspect during normal business hours all relevant records of Buyers or the Asset Company related to
any MLP Transfer or the calculation of any possible Value Enhancement Gain.Section 5.
Notices. All notices, requests, consents, directions and other instruments and
communications required or permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered (a) in person, (b) by courier, (c) by overnight
delivery service with proof of delivery, (d) by prepaid registered or certified first-class mail,
return receipt requested, in each such case addressed to the respective party at the address set
forth below, or (e) if sent by facsimile or other similar form of communication (with receipt
confirmed) to the respective party at the facsimile number set forth below:




	 	 	 	If to Sellers, to:






	 	 	 	Riverstone Holdings, LLC






	 	712	 	Fifth Avenue, 51st Floor






	 	 	 	New York, New York 10019






	 	 	 	Attention: Pierre Lapeyre






	 	 	 	Facsimile: (212) 993-0077






	 	 	 	Confirm: (212) 993-0076






	 	 	 	and to:






	 	 	 	Capital C Energy, LP






	 	 	 	c/o Legend Natural Gas II, LP






	 	16420	 	Park Ten Place, Suite 520






	 	 	 	Houston, Texas 77084






	 	 	 	Attention: Michael Becci






	 	 	 	Facsimile: (281) 675-8301






	 	 	 	Confirm: (281) 675-8311






	 	 	 	and to:






	 	 	 	Capital C Energy Partners, L.P.






	 	910	 	Travis Street, Suite 1930






	 	 	 	Houston, Texas 77002






	 	 	 	Attention: David M. Carmichael






	 	 	 	Facsimile:      






	 	 	 	Confirm: (713) 655-0366






	 	 	 	with a copy to:






	 	 	 	Andrews Kurth LLP






	 	600	 	Travis, Suite 4200






	 	 	 	Houston, Texas 77002






	 	 	 	Facsimile: (713) 220-4285






	 	 	 	Confirm: (713) 220-4200






	 	 	 	and to:






	 	 	 	Vinson & Elkins L.L.P.






	 	2300	 	First City Tower






	 	1001	 	Fannin Street






	 	 	 	Houston, Texas 77002-6760






	 	 	 	Attention: Robin S. Fredrickson






	 	 	 	Facsimile: (713) 615-5850






	 	 	 	Confirm: (713) 758-2450






	 	 	 	If to Buyers or to the Asset Company, to:






	 	 	 	c/o EnerVest Management Partners, Ltd.






	 	1001	 	Fannin Street, Suite 800






	 	 	 	Houston, Texas 77002






	 	 	 	Attention: John Walker






	 	 	 	Facsimile: (713) 659-3556






	 	 	 	Confirm: (713) 659-3500






	 	 	 	With a copy to:






	 	 	 	Haynes & Boone, L.L.P.






	 	1221	 	McKinney Street, Suite 2100






	 	 	 	Houston, Texas 77010






	 	 	 	Attention: Guy Young






	 	 	 	Facsimile: (713) 236-5699






	 	 	 	Confirm: (713) 547-2081





or to such other address or facsimile number and to the attention of such other Person as either
party may designate by written notice. Any notice mailed shall be deemed to have been given and
received on the third Business Day following the day of mailing.



Section 6. Assignment and Successors. Except as specifically contemplated by this
Agreement, no party hereto shall assign this Agreement or any part hereof without the prior written
consent of the other party. This Agreement shall inure to the benefit of, be binding upon and be
enforceable by the parties hereto and their respective successors and permitted assigns.
Notwithstanding the foregoing, each Seller (and any subsequent assignee of such Seller’s rights)
shall have the right to assign its or their rights under this under this Agreement, including the
right to receive Additional Consideration, to one or more assignees upon written notice to Buyers,
provided that the rights under Section 4 of each original Seller (and any subsequent assignee of
such rights) under this Agreement may only be assigned to a single assignee.



Section 7. Entire Agreement; Amendment. This Agreement and the Purchase Agreement and its
exhibits and schedules constitute the entire agreement and understanding between the parties
relating to the subject matter hereof and thereof and supersede all prior representations,
endorsements, premises, agreements, memoranda communications, negotiations, discussions,
understandings and arrangements, whether oral, written or inferred, between the parties relating to
the subject matter hereof. This Agreement (or any provision hereof) may not be modified, amended,
rescinded, canceled, altered or supplemented, in whole or in part, except upon the execution and
delivery of a written instrument executed by a duly authorized representative of Buyers and each
Seller.



Section 8. Governing Law. This Agreement shall be governed by, construed and interpreted
in accordance with the internal laws of the State of Texas, without regard to choice of law rules.



Section 9. Waiver. The waiver of any breach of any term or condition of this Agreement
shall not be deemed to constitute the waiver of any other breach of the same or any other term or
condition.



Section 10. Severability. Any provision hereof that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.



Section 11. No Third Party Beneficiaries. Nothing in this Agreement shall entitle any
Person other than Buyers and Sellers to any claims, remedy or right of any kind. No party shall
have any direct liability or obligation to any Person who is not a party to be this Agreement or be
liable to any such Person for any election or non-election or any act or failure to act under or in
regard to any term of this Agreement.



Section 12. Arbitration. Any controversy, dispute, or claim arising out of, in connection
with, or in relation to, the interpretation, performance or breach of this Agreement, including,
without limitation, the validity, scope, and enforceability of this Section 12, will be
solely and finally settled by binding arbitration, without right of appeal. Arbitration will be
conducted before a single arbitrator in Houston, Texas by and in accordance with the then existing
rules for commercial arbitration of the American Arbitration Association, or any successor
organization and in accordance with the Federal Arbitration Act, 9 U.S.C. § 1 et. seq. Judgment
upon any award rendered by the arbitrator may be entered by the state or federal Court having
jurisdiction thereof. Any of the parties may demand arbitration by written notice to the other and
to the American Arbitration Association (“Demand for Arbitration”). Any Demand for Arbitration
pursuant to this Section 12 shall be made within one hundred eighty (180) days from the
date that the dispute upon which the demand is based arose or the other parties shall have the
option to have such dispute adjudicated in a federal court of competent jurisdiction in Texas. The
parties intend that this agreement to arbitrate be valid, enforceable and irrevocable.



Section 13. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.



Section 14. Headings. The headings of the Sections of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or otherwise modify any of the terms
or provisions hereof or affect in any way the meaning or interpretation of this Agreement.



Section 15. Negotiated Transaction. The provisions of this Agreement were negotiated by
the parties hereto, and this Agreement shall be deemed to have been drafted by all of the parties
hereto.



Section 16. Several Liability. Notwithstanding anything in this Agreement to the contrary,
each Seller’s obligations hereunder are (a) limited to those liabilities specifically related to
such Seller’s covenants and agreements and (b) several, not joint and several. No Seller hereunder
shall be deemed to have made any representations or warranties or provided any indemnities with
respect to any Partnership Interests not owned by it.



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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
above written.




SELLERS:




GENERAL PARTNER:




CAPITAL C ENERGY, LP



	 	 	 
	By:

	 	Capital C Energy, LLC,

its general partner







By: /s/ Gregory A. Beard

Gregory A. Beard

Executive Vice President





LIMITED PARTNER:




CAPITAL C ENERGY PARTNERS, L.P.



	 	 	 
	By:

	 	Capital C Energy Holdings, LLC,

its general partner







By: /s/ David M. Carmichael




	 	 	 	David M. Carmichael






Chairman




MICHAEL BECCI




/s/ Michael Becci




	 	 	 	JAMES A. WINNE III






/s/ James A. Winne III




	 	 	 	BUYERS:






ENERVEST BB, L.P.




	 	 	 	By:
EnerVest BB GP, LLC, its General Partner






By: EnerVest Management Partners, Ltd., its Sole
Member




By: EnerVest Management GP, L.C., its General
Partner




By: /s/ James M. Vanderhider

James M. Vanderhider, Executive Vice

President and Chief Financial Officer





ENERVEST BB GP, LLC




By: EnerVest Management Partners, Ltd., its Sole
Member




	 	 	 	By:
EnerVest Management GP, L.C., its General
Partner






By: /s/ James M. Vanderhider

James M. Vanderhider, Executive Vice

President and Chief Financial Officer





ASSET COMPANY:




BELDEN & BLAKE CORPORATION




By: /s/ Michael Becci

Michel Becci, President and Chief

Operating Officer





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