exv10w1



 





Exhibit 10.1




GAS PURCHASE AGREEMENT




          This Agreement is made and entered into as of November 21, 2007, by and between WTG Benedum
Joint Venture (as “Buyer”) and Approach Oil & Gas Inc. and Approach Operating, LLC (as “Seller”).



          WHEREAS, Seller owns or controls natural gas produced from the properties outlined in yellow
on Exhibit “A” attached hereto and made a part hereof (the “Area of Interest”); and



          WHEREAS, for any section of land in the Area of Interest that is partially outlined in yellow,
the entirety of such section shall be considered to be part of the Area of Interest for purposes of
this Agreement; and



          WHEREAS, Seller desires to sell and Buyer desires to purchase natural gas produced from
present and future wells located in the Area of Interest; and



          WHEREAS, Buyer agrees to install or has in place certain facilities (“Facilities”) to effect
receipt and purchase of natural gas production owned or marketed by Seller as a source of supply
for Buyer’s facilities, and for other purposes.



          NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, Buyer
and Seller hereby agree as follows:




	1.	 	Commitment. Buyer agrees to accept and purchase, and Seller agrees to deliver and
sell and hereby dedicates to the performance of this Agreement all natural gas produced from
the present and future well(s) located on the acreage described or depicted in the Area of
Interest on Exhibit “A”, attached hereto and made a part hereof, which Seller owns, controls,
or represents with respect to any and all interests, now or hereafter acquired (“Dedicated
Gas”). Title to the gas shall pass at the Receipt Point(s) from Seller and shall vest in
Buyer without regard to the purpose for which said gas may thereafter be used by Buyer.
Seller reserves the following rights with respect to all of said natural gas and said well(s)
and the lease(s) covering said well(s).






(a) to operate said well(s) and  lease(s)  free from any control by Buyer and in such manner
as Seller, in Seller’s sole discretion, may deem advisable, including without limitation the
right to determine the maximum efficient rate of flow for any well(s), the right to drill new
well(s), to repair and rework old well(s), and to abandon any well or terminate or surrender
any  lease(s) when it no longer is deemed by Seller to be capable of producing gas in paying
quantities under normal methods of operation.




(b) to pool or unitize Seller’s lease(s) with other lease(s).




(c) to use gas produced from said well(s) and lease(s) for developing and operating said
lease(s) and for fulfilling obligations to the lessors in Seller’s lease(s) or for delivery in
kind to lessors as required under said lease(s); provided, that gas so used is to be taken
upstream from any of Buyer’s facilities.




(d)  to retain oil and liquid hydrocarbons separated from the gas, prior to delivery to Buyer
at the Receipt Point(s), by the use of conventional mechanical gas/liquid separators.




	2.	 	Facilities. Buyer shall own, operate, and maintain all pipeline and other
facilities located downstream from the Receipt Point defined herein, including Buyer’s
Measuring Station. Seller shall own, operate, and maintain all equipment and other property
located upstream from the Receipt Point defined herein. Except in the event of (a)
termination or cancellation by Buyer (which termination or cancellation is not caused by the
default of Seller), or (b) force majeure as set forth in Section 5 of Exhibit “C” hereto, if
Seller fails to deliver one million four hundred and sixty thousand (1,460,000) Mcf to Buyer
hereunder prior to February 1, 2010 or if Seller should cancel or terminate this Agreement on
any earlier date (unless such cancellation or termination is caused by the default of Buyer),
then Seller shall pay to Buyer within thirty days of any such date an amount computed in
accordance with the following formula:




 









 












	 	 	$932,000.00 X (1,460,000 Mcf minus Actual Mcf Volume Delivered to Buyer Hereunder Prior to
February 1, 2010)
                                                                                     1,460,000 Mcf






	3.	 	Pressure. Seller’s gas shall be delivered at pressures sufficient to overcome the
pressure maintained from time to time on Buyer’s Facilities at the Receipt Point(s) defined
hereinbelow. The pressure at the Receipt Point shall be derived solely from the data provided
by Buyer, provided that such pressure shall not exceed 1,100 psig.






	4.	 	Primary Term. This Agreement shall become effective on the date first written above
and shall continue in effect for a Primary Term of five (5) years from the first day of the
month following the date of first delivery hereunder. Thereafter, this Agreement shall
continue in effect on a year-to-year basis; however, either party shall have the right to
terminate this Agreement at the expiration of the Primary Term or any anniversary date
thereafter by giving to the other party at least 90 days prior written notice.






	5.	 	Pricing and Financial Terms. The consideration and terms of payment for Seller’s gas
and all of its components received by Buyer at each Receipt Point hereunder shall be as set
forth in Exhibits “B” and “B-1” of this Agreement.






	6.	 	Profitability. In the event the gathering and/or processing of Seller’s gas becomes
unprofitable (as demonstrated by the books and records of Buyer) due to compliance with rules,
regulations or orders of any local, state or federal governmental authority, or a material
change in the volume and/or content of said natural gas, Buyer may terminate the Agreement in
its entirety following ninety (90) days prior written notice. In no event shall Buyer
exercise this provision before February 1, 2010. In the event that Buyer should terminate
this Agreement pursuant to this Section 6, then Buyer will transport Seller’s gas for a
mutually agreeable fee throughout the remainder of the term of this Agreement (as if this
Agreement had not been cancelled or terminated), provided, however, such fee shall not exceed
twenty-five cents ($0.25) per MMBtu.






	7.	 	Buyer’s Reservations. The receipt and delivery of gas by Buyer shall comply with the
General Terms and Conditions attached hereto as Exhibit “C” and made a part hereof. The
performance of Buyer under this Agreement is further subject to laws and regulations, either
State or Federal, and shall comply with all valid present and future orders, rules, and
regulations of duly constituted authorities having jurisdiction. With regards to the quality
specifications contained therein, if any gas hereunder does not meet said specifications, then
Seller shall promptly bring the gas into compliance prior to its delivery to Buyer at the
Receipt Point(s). Acceptance of non-conforming gas shall not constitute any waiver of
Buyer’s rights to accept or reject all or part of any gas under this Agreement not meeting the
quality specifications.






	8.	 	Modifications. Modifications to this Agreement will only be allowed through express
written agreement executed by authorized officers or representatives of both Buyer and Seller.






	9.	 	Taxes and Royalties. Seller shall bear all production, severance, excise, and
similar taxes imposed or levied by the state or any other governmental agency on the gas and
all of its components until they are produced, sold, or delivered hereunder, as applicable.
The price payable shall be inclusive of all such taxes, and Seller shall remit such taxes to
the proper governmental agency. Buyer shall bear all taxes that may be imposed on Buyer at
and after title and possession of the gas and all of its components delivered hereunder passes
to Buyer. Furthermore, Seller shall be responsible for all royalties, bonus payments,
production payments, and the like accruing from the production and sale of gas and all of its
components hereunder.






	10.	 	Indemnification. EACH PARTY AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS
THE OTHER PARTY, ITS AFFILIATES, SUBSIDIARIES, AND THEIR RESPECTIVE DIRECTORS, STOCKHOLDERS,
OFFICERS, EMPLOYEES, SUCCESSORS, TRANSFEREES AND ASSIGNS (THE “INDEMNIFIED PARTIES”) AGAINST
ANY AND ALL CLAIMS, SUITS, LIABILITIES, COST, AND EXPENSE ON ACCOUNT OF INJURY OR DEATH OF
PERSONS, DAMAGE TO PROPERTY, OR ENVIRONMENTAL DEGRADATION, WITHOUT LIMIT, RESULTING FROM,
ARISING FROM, OR GROWING OUT OF THE INDEMNIFYING PARTIES’ INSTALLATION, OPERATION, AND
MAINTENANCE OF THE FACILITIES, APPURTENANCES, OR PROPERTY; OR NEGLIGENT ACTS 




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	 	 	OR OMISSIONS OF
THE INDEMNIFYING PARTY IN THE POSSESSION AND HANDLING OF GAS OR CONDENSATE WHICH OCCUR WHILE
SAME IS IN THE POSSESSION AND CONTROL OF THE INDEMNIFYING PARTY, REGARDLESS OF THE CAUSE OR
CAUSES THEREOF, OR BREACH OF THIS AGREEMENT; PROVIDED, THAT IN NO EVENT WILL A PARTY BE LIABLE TO THE OTHER PARTY FOR
PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES OR LOSSES. HOWEVER, NEITHER PARTY TO THIS AGREEMENT
SHALL BE INDEMNIFIED FOR ITS OWN WILLFUL MISCONDUCT. THE ABOVE INDEMNITY OBLIGATIONS SHALL
SURVIVE THE COMPLETION OF THE TERMINATION OF THIS AGREEMENT.






	11.	 	Execution and Assignment. This Agreement shall not become a binding contract between
the parties unless and until it has been executed by duly authorized officers or
representatives of both Seller and Buyer. Upon full execution, this Agreement shall be
binding upon the parties hereto and their representatives, heirs, successors, and assigns.
Either party may assign all, but not part, of its rights under this Agreement only with the
prior written consent of the other party, such consent not to be unreasonably withheld. The
assigning party shall furnish the other party with a copy of the fully executed instrument(s)
effecting such assignment, and any change in ownership shall not become effective or binding
upon such other party until it receives said document(s), and (ii) the assigning party shall
continue to be liable for all of its obligations under this Agreement that occur during or are
related to that period of time prior to the receipt by the other party of all instrument(s)
effecting such assignment.
	 
	 	 	Notwithstanding anything to the contrary in this Agreement, Seller may, without Buyer’s consent,
assign this Agreement to any Affiliate or Successor (as such terms are defined below). For
purposes of this Agreement, the following terms shall have the following meanings:
	 
	 	 	“Affiliate” means any corporation or other business entity that controls, is controlled by or is
under common control with Seller. For purposes of the preceding sentence, “control” means
either (i) ownership or voting control, directly or indirectly, of 50% or more of the voting
stock, partnership interests or other beneficial ownership interests of the entity in question
or (ii) the power to direct the management and policies of such entity.
	 
	 	 	“Successor” means any one of the following: (i) an entity resulting from a merger,
consolidation, reorganization or recapitalization of or with Seller or (ii) a purchaser (or
other transferee) of all or substantially all of Seller’s assets and all or substantially all of
such Seller’s liabilities (including the liabilities of Seller hereunder).
	 
	 	 	Notwithstanding any such transfer, Seller shall remain liable for all of Seller’s obligations
under this Agreement prior to such transfer.






	12.	 	Notices. Written notification as provided for in this Agreement shall be deemed
given when delivered: (a) by U.S. mail or other nationally recognized commercial carrier of
mail, postage prepaid, to the following addresses, (b) by hand delivery to the following
addresses, or (c) by facsimile transmission, electronically confirmed to the number below:





	 	 	 	 	 	 	 	 	 	 	 
	 	 	Approach Oil & Gas Inc.	 	 	 	WTG Benedum Joint Venture
	 	 	Approach Operating, LLC	 	 	 	4000 N. Big Spring Ste. 114
	 	 	One Ridgmar Centre	 	 	 	Midland, TX 79705
	 	 	6500 W. Freeway, Suite 800	 	 	 	 	 	 
	 	 	Fort Worth, Texas 76116	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Attn:
	 	Mr. Bob Howell
	 	 	 	Attn:
	 	Contract Administration
	 

	 	Tel:
	 	817-989-9000
	 	 	 	Tel:
	 	(432) 620-6105
	 

	 	Fax:
	 	817-989-9001
	 	 	 	Fax:
	 	(432) 570-4246







	13.	 	General Terms and Conditions. The General Terms and Conditions attached hereto as
Exhibit “C” are hereby made a part of this Agreement.




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	14.	 	Termination of Prior Agreements. Upon execution by both parties of this Agreement,
and except as otherwise agreed by the parties hereto in writing, all previous contracts and
agreements between the
parties pertaining to the purchase and sale of Seller’s gas from the Area of Interest shall
terminate and be displaced and superseded hereby, except for any audit and/or payment
obligations under any such agreements..






	15.	 	Statements and Payment. On or before the 20th day of the month following
the month of production, Buyer shall render to Seller a statement reflecting the actual
volumes and supporting detail for the payment that will be rendered to Seller on or before the
last day of the month following the month of production. If a payment is not rendered within
ten (10) days of the date due, interest shall accrue from the due date until the date of
payment at a rate equal to the lower of (i) the then-effective prime rate of interest
published under “Money Rates” by the Wall Street Journal, plus two percent per annum; or (ii)
the maximum applicable lawful interest rate.





     IN WITNESS WHEREOF, the undersigned authorized officers or representatives of Buyer Joint
Venture and Seller have executed this Agreement by signature below.



	 	 	 	 	 	 	 	 	 
	“Seller”	 	 	 	“Seller”
	 
	 	 	 	 	 	 	 	 
	Approach Oil & Gas Inc.	 	 	 	Approach Operating, LLC
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert B. Howell
	 	 	 	By:
	 	/s/ Robert B. Howell
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	“Buyer”	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	WTG BENEDUM JOINT VENTURE, a Texas Joint	 	 	 	 	 	 
	 

	 	Venture by Benedum Gas
Partners,
L.P., its Managing
Venturer, and Upton
Gas GP, Inc., 

its General
Partner	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ J. L. Davis	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	J. L. Davis	 	 	 	 	 	 
	 

	 	President	 	 	 	 	 	 






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STATE OF Texas



COUNTY OF Tarrant




     BEFORE ME, the undersigned authority, a notary public in and for the State of Texas
, Robert B. Howell, personally appeared and is known to me to be the person whose name
is subscribed to the foregoing instrument, and acknowledged to me that he/she is the proper
authority and having the proper capacity to execute the foregoing instrument and has executed the
same for the purposes and consideration therein expressed.


GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 21st day of November, 2007.




Print of Stamp Notary’s Name

and Date Commission Expires:




	 	 	 	 	 
	 	 	 
	 	                                                /s/ Pam M. Wilson
 	 
	 	Notary Public in and for the State of Texas 	 
	 	 	 
	 



STATE OF TEXAS




COUNTY OF MIDLAND





     BEFORE ME, the undersigned authority, a notary public in and for the State of Texas, J. L.
Davis, an officer of , WTG BENEDUM JOINT VENTURE, a Texas Joint Venture by Benedum Gas Partners,
L.P., its Managing Venturer, and Upton Gas GP, Inc., its General Partner Inc., personally appeared
and is known to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration therein expressed,
in the capacity therein stated.



GIVEN UNDER MY HAND AND SEAL OF OFFICE,
this the 26th day
 of November, 2007.



Print of Stamp Notary’s Name

and Date Commission Expires:




	 	 	 	 	 
	 	 	 
	 	/s/ Dana Johnson
 	 
	 	Notary Public in and for the State of Texas 	 
	 	 	 
	 





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EXHIBIT “A”




     This Exhibit “A” is for all purposes attached to and made a part of that certain Agreement
dated November 21, 2007, by and between WTG Benedum Joint Venture (“Buyer”) and Approach Oil & Gas
Inc. and Approach Operating, LLC (“Seller”) covering the properties described below.








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EXHIBIT “B”

RESIDUE AND PLANT PRODUCT PRICING CALCULATIONS




     This Exhibit “B” is for all purposes attached to and made a part of that certain Agreement
dated November 21, 2007, by and between WTG Benedum Joint Venture (“Buyer”) and Approach Oil & Gas
Inc. and Approach Operating, LLC (“Seller”). Said price and consideration payable to Seller
hereunder shall be based on and determined from a percentage of the value of Plant Products and
Surplus Residue Gas attributable to Seller’s gas hereunder as defined below:




	1.	 	Settlement Percentage of the Value of Plant Product Due Seller: Eighty-eight Percent (88%)
	 
	2.	 	Settlement Percentage of the Value of Surplus Residue Gas Due Seller: Eighty-eight Percent
(88%)
	 
	3.	 	Field Fuel & Loss Allowance: 6.0% of the volume delivered at the Receipt Point hereunder by
Seller
	 
	4.	 	Component Plant Product Recovery Rates:





	 	 	 	 	 
	Ethane
	 	 	75	%
	Propane
	 	 	85	%
	Iso-Butane
	 	 	97	%
	Normal Butane
	 	 	97	%
	Pentanes and Heavier
	 	 	97	%







	5.	 	Plant Fuel & Loss Allowance: 1.82% of the volume delivered at the Receipt Point hereunder by
Seller.
	 
	6.	 	Plant Product Price: The Plant Product Price for each component product shall be the average
component price per gallon published during the month in which deliveries are made hereunder
by the “Oil Price Information Service” or “OPIS” publication for Mt. Belvieu, (“Purity Ethane”
for ethane and “Non-TET” for propane and heavier hydrocarbons), less a “T&F Fee” of $0.058 per
gallon for product transportation, fractionation, handling, and marketing charges. Said T&F
Fee shall be adjusted simultaneously and proportionately to reflect actual transportation and
fractionation fee changes incurred after October 31, 2007 by Buyer for gas purchased from
Seller. Should the above mentioned OPIS publication or the referenced prices no longer be
available, a mutually acceptable replacement listing component prices at Mt. Belvieu shall be
used.
	 
	7.	 	Monthly Index Price: The Monthly Index Price shall mean the index price posted for “West
Texas WAHA” on or about the first of each production month by McGraw-Hill’s “Inside
F.E.R.C.’s-Gas Market Report” publication under the table entitled “Delivered Spot-Gas
Prices” less $0.08. A mutually agreeable successor index shall be used in the event that the
above referenced index is no longer published or available.
	 
	8.	 	Plant Product MMBtu Conversion Factors (Gallons to MMBtu Volumes): The factors to be used to
convert the component gallons of plant products attributable to Seller’s gas hereunder shall
be as follows:





	 	 	 	 	 
	Ethane
	 	 	0.066320	 
	Propane
	 	 	0.091523	 
	Iso-Butane
	 	 	0.099692	 
	Normal Butane
	 	 	0.103732	 
	Pentanes and Heavier
	 	 	0.119000	 







	9.	 	Monthly Settlement Computatin Method: The monthly compensation due Seller for gas purchased
by Buyer hereunder shall be made in accordance with the illustration attached hereto as Exhbit
“B-1”






10. Notwithstanding anything to the contrary herein, effective the first day of the month following
the date on which Seller delivers one million four hundred and sixty thousand (1,460,000) Mcf to
Buyer hereunder, the payment percentages referenced above in 1. and 2. of this Exhibit “B” shall be
increased to ninety percent (90%) for the duration of this Agreement.



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EXHIBIT “B-1”

FINANCIAL TERMS FOR PRICING CALCULATIONS




     This Exhibit “B-1” is for all purposes attached to and made a part of that certain Agreement
dated November 21, 2007, by and between WTG Benedum Joint Venture (“Buyer”) and Approach Oil & Gas
Inc. and Approach Operating, LLC (“Seller”). As full consideration for Seller’s gas and all
components thereof purchased by Buyer hereunder, Buyer shall pay to Seller a value computed in
accordance with the method used in the following illustration:









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Exhibit “C”




     This Exhibit “C” is for all purposes attached to and made a part of that certain Agreement
dated November 21, 2007, by and between WTG Benedum Joint Venture (“Buyer”) and Approach Oil & Gas
Inc. and Approach Operating, LLC (“Seller”).



GENERAL TERMS AND CONDITIONS





	1.	 	Definitions. Except in those certain instances where the context states another
meaning, the following terms, when used in these General Terms and Conditions or in the
Agreement into which these General Terms and Conditions are incorporated, shall have the
following meanings:






	 	A.	 	The terms “gas” and “natural gas” shall mean natural gas as produced in its
natural state, whether or not stored or processed prior to receipt or delivery, and
that meets the respective quality standards for receipt and delivery contained in
Article 2 below.
	 
	 	B.	 	The term “Btu” shall mean British thermal unit and, where appropriate, shall
mean the plural thereof. A British thermal unit is the amount of heat required to
raise the temperature of one (1) pound of water one (1) degree Fahrenheit at a starting
point of sixty (60) degrees Fahrenheit. The term “MMBtu” shall mean one million
(1,000,000) Btu.
	 
	 	C.	 	The term “thermal content” shall mean the aggregate number of Btu contained in
that volume, when applied to any volume of gas.
	 
	 	D.	 	The term “psig” shall mean pounds per square inch gauge. The term “psia” shall
mean pounds per square inch absolute.
	 
	 	E.	 	The term “cubic foot” shall mean the amount of gas required to fill a cubic
foot of space at a base pressure of 14.65 psia and at a base temperature of 60 degrees
Fahrenheit. The term “MCF/D” shall mean one thousand (1,000) cubic feet of gas per
day.
	 
	 	F.	 	The term “heating value” shall mean, when applied to a cubic foot of gas, the
number of Btu produced by the combustion, at a constant pressure, of the amount of gas
which would occupy a volume of one (1) cubic foot at a temperature of sixty (60)
degrees Fahrenheit if saturated with water vapor and at a constant pressure of fourteen
and sixty-five hundredths pounds per square inch absolute (14.65 psia) and under
standard gravitational force (acceleration 980.655 centimeters per second2),
with air of the same temperature and pressure as the gas, when the products of
combustion are cooled to the initial temperature of the gas and air and when the water
formed by combustion is condensed to the liquid state; provided, however, if the gas as
received and/or delivered contains seven (7) pounds of water vapor or less per one
million (1,000,000) cubic feet, such gas shall be assumed to be dry.
	 
	 	G.	 	The term “day” shall mean a period of time beginning at 9:00 a.m. local time
and ending 9:00 a.m. local time the following day.
	 
	 	H.	 	The term “month” shall mean a period of time beginning at 9:00 a.m. local time
on the first (1st) day of a calendar month and extending to 9:00 a.m. local time on the
first (1st) day of the following calendar month.
	 
	 	I.	 	The terms “Receipt Point”, “receipt”, “receive”, or “received” shall refer to
Buyer taking physical possession of gas from Seller or Seller’s designee from
Seller-owned or Seller’s designee-owned facilities located in the vicinity of Section
8, Block AB, GC&SF RR Co Survey, Crockett County, Texas.
	 
	 	J.	 	The terms “Delivery Point”, “delivery”, “deliver”, or “delivered” shall refer
to the physical transfer of possession of gas from Buyer to any downstream pipeline.




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	 	K.	 	The term “GPM” shall mean the sum of equivalent liquid gallons of contained
ethane, propane, butane and natural gasoline (pentanes plus heavier hydrocarbons
components) per Mcf as measured by chromatograph analysis.
	 
	 	L.	 	The term “Plant” shall mean the equipment, gathering system and/or processing
facilities constructed for the purpose of removing liquefiable hydrocarbons from
natural gas streams and to which Buyer has the right to deliver Seller’s gas for
processing.
	 
	 	M.	 	The term “Plant Products” or “NGLs” shall mean the natural gas liquids,
including ethane, propane, butane and natural gasoline and mixtures thereof which may
be extracted from the Receipt Point gas stream by Buyer in the liquid extraction
process at the Plant as contemplated in Exhibits “B” and “B-1” hereto.
	 
	 	N.	 	The term “Residue Gas” or “Residue” shall mean the natural gas remaining after
liquefiable hydrocarbons are extracted by Buyer at the Plant and the term
“Surplus Residue Gas” shall mean that portion of the Residue Gas remaining after Field
Fuel and Loss Allowance and Plant Fuel and Loss Allowance as contemplated in Exhibits
“B” and “B-1” hereto.
	 
	 	O.	 	The term “Plant Product Conversion Factor” as used in the calculations in
Exhibit “B-1” hereto shall mean the conversion factor, by component, under the volume
heading “Btu/gal. fuel as ideal gas” as published in the Gas Processors Association
Publication Standard 2145, as amended from time to time.






	2.	 	Quality






	 	2.1	 	Gas delivered by Seller under this Agreement shall meet the minimum quality
specifications below:






	 	A.	 	No free water or liquid is to be delivered to Buyer hereunder and
the gas shall not contain more than seven (7) pounds of water vapor per million
cubic feet of gas.
	 
	 	B.	 	The gas shall be free of objectionable or deleterious substances
and other potentially harmful matter and shall be commercially free from dust or
other solids, gum, gum-forming constituents, chemicals or hazardous substances
other than hydrocarbon gases.
	 
	 	C.	 	The gas shall not contain any oxygen.
	 
	 	D.	 	The gas shall not contain more than one-fourth (1/4) grain of
hydrogen sulphide per one hundred (100) cubic feet.
	 
	 	E.	 	The gas shall not contain more than five (5) grains of total
sulphur (including the sulphur in any hydrogen sulphide and mercaptans) per one
hundred (100) cubic feet.
	 
	 	F.	 	The gas shall not contain mercaptans in excess of five (5) parts
per million by volume.
	 
	 	G.	 	The gas shall not have a carbon dioxide content in excess of two
(2) percent by volume.
	 
	 	H.	 	The gas shall not contain more than four (4) percent inert gases
by volume; provided, however, that Buyer may, on a commercially reasonable
efforts basis accept gas having a nitrogen content in excess of (3) three
percent if such does not adversely affect Buyer.
	 
	 	I.	 	The gas shall have a total heating value per cubic foot of not
less than eleven hundred (1100) Btu.
	 
	 	J.	 	The gas shall be received at a temperature not in excess of one
hundred (120) degrees Fahrenheit.




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	 	K.	 	The gas shall not be processed prior to receipt by Buyer except
through conventional separators and other conventional field devices.






	 	2.2	 	If, at any time, gas tendered for receipt shall fail to conform to any of the
quality specifications set forth above, Buyer may, at its option, refuse to accept
receipt of such gas without incurring any liability to Seller.
	 
	 	2.3	 	Gas tendered to Buyer at the Receipt Point(s) must meet or exceed the quality
specifications in Paragraph 2.1 above or such higher standards as may be required at
the Delivery Point(s).






	3.	 	Measurement and Tests. The measurement of gas at the Receipt Point(s) shall be
in accordance with the following provisions:






	 	3.1	 	For all of the purposes of this Agreement, a cubic foot of gas shall be that
quantity as defined in Section 1(E) of these General Terms and Conditions. For
measurement purposes, the atmospheric pressure shall be the greater of (a) thirteen and
two-tenths (13.2) pounds per square inch absolute or (b) the actual atmospheric
pressure at which the gas is measured. The volumes of gas received and delivered
hereunder shall be computed in accordance with methods prescribed in the Gas
Measurement Committee Report No. 3 of the American Gas Association as reprinted and
revised September 1992, together with all subsequent revisions, supplements and
appendices to said Report.
	 
	 	3.2	 	A representative sample of the gas from each delivery point hereunder shall be
taken Buyer for use in settlement computations, quality conformance, or other purpose
contemplated by this Agreement. Buyer shall capture samples of Seller’s gas hereunder
on either a spot basis, by means continuous sampling device, or by other mutually
acceptable method for analysis by chromatography analysis or other instrument or
equipment generally accepted in the industry. Spot samples of Seller’s gas hereunder
shall be obtained by Buyer (i) at least monthly for delivery points where the volume of
Seller’s gas averages one thousand (1,000) Mcf or more per day, (ii) at least quarterly
for delivery points where the volume of Seller’s gas averages five hundred (500) Mcf or
more per day, (iii) at least semi-annually for delivery points where the volume of
Seller’s gas averages more than one hundred (100) but less than five hundred (500) Mcf
or more per day or (iv) at least annually for delivery points where the volume of
Seller’s gas averages less than one (100) Mcf per day. Such samples shall be analyzed
at no cost to Seller. The component analyses of each routine set of samples shall
become effective commencing with the first of the month following the month in which
samples were taken. Buyer will notify Seller reasonably in advance of the time of any
sampling so that Seller may conveniently have its representative present to witness the
sampling procedure.
	 
	 	3.3	 	The gas shall be measured with orifice meters using flange taps and whose
computations of volume are made in accordance with provisions of Gas Measurement
Committee Report No. 3 of the American Gas Association (1985 edition).
	 
	 	3.4	 	The flowing temperature of gas shall be determined by means of a recording
thermometer, and the arithmetical average of hourly temperatures recorded while gas is
flowing during each day shall be used in computing the volume of gas received and
delivered during the day.
	 
	 	3.5	 	If, at any time during the term hereof, a new method or technique is developed
with respect to gas measurement or determination of factors used in such gas
measurement, such new method or technique may be substituted for the gas measurement
set forth herein upon notice by Buyer to Seller.
	 
	 	3.6	 	Buyer may, at its sole option, install computers, transducers, and other
associated sensing devices to accomplish the accurate measurement of gas received
and/or delivered.




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	 	3.7	 	It is recognized that all facilities necessary to measure gas at Receipt Point
(s) have been or will be installed and in operation as of the date of first delivery of
gas to Buyer hereunder. Unless otherwise agreed, Buyer shall install, maintain, and
operate all facilities and equipment for the accurate measurement of the gas received,
processed, transported, and delivered hereunder. Seller shall have access to the
measuring equipment at all reasonable times, including Level 1 electronic data
retrieval, but readings, calibrations, and adjustments thereof, and changing of charts,
if applicable, shall be done by Buyer unless otherwise agreed.
	 
	 	3.8	 	Seller shall have the right, at its option, to install, maintain, and operate
such check measuring equipment at the Receipt Point(s) as it may desire. Each party
shall have the right of access, at all reasonable times when gas is being received or
delivered, to the measuring equipment installed by the other party. The calibrating
and adjusting of Buyer’s measuring equipment and changing of meter charts on Buyer’s
meters shall be done only by Buyer, and the calibrating and adjusting of Seller’s
measuring equipment and changing of meter charts on its check meters shall be performed
only by Seller. Buyer, upon request by Seller, or Seller, upon request by Buyer, shall
mail or deliver to the other all meter charts and/or records used in measurement of gas
received and delivered hereunder during any specified period for which charts and/or
records are required to be retained as hereinafter provided, but such charts and/or
records shall be mailed or returned to Buyer or Seller, as the case may be, within
thirty (30) days after their receipt.
	 
	 	3.9	 	Each party shall have the right to be present at the time of any installation,
testing, cleaning, changing, repairing, inspection, calibration, or adjusting of
measuring equipment of another party used in measurement of gas received and delivered
hereunder. Each party shall notify the other, with at least a 24 hour notice, to
witness any such activity.
	 
	 	3.10	 	The accuracy of the measuring equipment at each Receipt Point shall be verified at
intervals not exceeding 180 days and at such other times as may be requested by Seller
or Buyer; and if any such verification shall be requested by Seller or Buyer and the
measuring equipment is found to be not more than two percent (2%) inaccurate, the
expense of such verification shall be borne by the party requesting verification.
	 
	 	3.11	 	If, upon test, the measuring equipment at any Receipt Point is found to be not
more than two percent (2%) inaccurate or amounts to less than 100 MCF, previous
readings of such equipment after the last preceding test shall be considered correct,
but the equipment shall be adjusted to record accurately. If, at the Receipt Point, on
any test, the measuring equipment is found to be inaccurate by an amount exceeding two
percent (2%) and amounts to more than 100 MCF, or if at any time the measuring
equipment should be out of service or not registering, gas received or delivered
through the period during which the measuring equipment was registering inaccurately or
was out of service or not registering shall be estimated and agreed upon by use of the
first of the following methods which may be applicable:






	 	A.	 	By using the registration of any check measuring equipment installed by
either party if registering accurately; or
	 
	 	B.	 	By computing the error if the percentage of error is ascertainable by
calibration, test, or mathematical calculation; or
	 
	 	C.	 	By estimating the quantity received or delivered and/or its thermal
content by reference to actual receipts or deliveries during preceding periods
under similar conditions when the measuring equipment was registering
accurately. If the period during which the measuring equipment at the Receipt
Point had been registering inaccurately or had been out of service or not
registering is not definitely known or agreed upon, correction shall be made for
the last half of the time elapsed since the measuring equipment was previously
tested and found to be registering within two




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	 	 	 	percent (2%) of accurate or was adjusted to register accurately. All
corrections made as above provided shall be made to zero error.






	 	3.12	 	The charts and/or records from the measuring equipment shall remain the
property of the party owning the measuring equipment and shall be kept on file for a
period of not less than two (2) years.






	4.	 	Governmental Rules, Regulations and Authorizations






	 	4.1	 	This Agreement is subject to all valid orders, laws, rules, and regulations of
duly constituted governmental authorities having jurisdiction or control over the
parties, their facilities or gas supplies, this Agreement, or any provisions hereof. If
at any time during term of this Agreement such governmental authority shall take or
threaten to take any action, directly or indirectly, whereby the receipt, sale, purchase
or delivery of gas as contemplated hereunder shall be proscribed or possibly subjected
to terms, conditions, restraints, or regulations, including without limitation by
enumeration, rate or price controls or ceilings that, in the reasonable judgment of the
party affected, would make performance unprofitable (as demonstrated by the books and
records of the affected party) to that party, such party may, upon ninety (90) days
written notice, cancel and terminate this Agreement without further liability hereunder
except for payment for services or products provided hereunder prior to such
cancellation and termination.
	 
	 	4.2	 	The parties agree to timely file and prosecute all applications, statements, and
notices with any governmental regulatory authority having appropriate and applicable
jurisdiction.






	5.	 	Force Majeure. Either party shall not be liable for the breach of any express or
implied obligation under this Agreement, except for the payment of money due and owing, to the
extent such breach is the result of any cause beyond the reasonable control of such party,
including, but not limited to, (i) any action by a governmental entity, (ii) storms, floods,
earthquakes, acts of terrorism or insurrection, and other acts of God, (iii) sabotage, (iv)
war, riot, strike, (v) explosions, breakage or accident to machinery or lines of pipe,
freezing of wells or pipelines, (vi) the making of repairs or alterations to pipelines or
facilities, or (vii) the inability to secure rights-of-way, leases and/or easements at prices
deemed reasonable and necessary in the performing party’s reasonable judgment. The parties’
time for performance of any obligation hereunder (except for payment of amounts due and owing
to Buyer or Seller hereunder) shall be tolled during any period of force majeure hereunder,
provided however, the tolling period shall not extend past the term of the Agreement, except
by mutual agreement.






	6.	 	Audit Rights. All parties hereto shall have the right at any and all
reasonable times to examine the books and records of the other party to the extent necessary
to verify the accuracy of any statement, charge, computation, or demand made under
or pursuant to this Agreement. Any statement or charge shall be final as to both parties
hereto unless questioned within two (2) years of the rendering thereof to the other party.






	7	 	Creditworthiness






	 	7.1	 	Seller shall not be required to commence or continue gas sales under the terms
of the Agreement to Buyer, if Buyer:






	 	A.	 	Fails to make any payment when due and fails to cure such failure
within ten (10) days of such due date; or
	 
	 	B.	 	Fails to demonstrate creditworthiness when reasonably requested
by Seller. Seller shall use all means available, including but not limited to
previous payment experience and prudent credit analysis, to determine credit
worthiness.






	 	7.2.	 	If either party has reasonable grounds for insecurity regarding performance of
any obligation under this Agreement by the other party, such first party may demand
adequate assurance 




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	 	 	 	of performance from such other party in the form and amount
reasonably acceptable to the demanding party. Such assurance may include, but not be limited to, a standby
irrevocable letter of credit, a prepayment, a security interest in an asset or
performance bond or guaranty. In the event (each an Event of Default) either party
or its guarantor shall: (i) make an assignment or any general arrangement for the
benefit of creditors; (ii) file a petition or otherwise commence, authorize, or
acquiesce in the commencement of a proceeding or case under any bankruptcy or similar
law for the protection of creditors or have such petition filed or proceeding
commenced against it; (iii) otherwise become bankrupt or insolvent; (iv) be unable to
pay its debts as they fall due; (v) have a receiver, provisional liquidator,
conservator, custodian, trustee, or other similar official appointed with respect to
it or substantially all of its assets; (vi) fail to perform any obligation to the
other party with respect to any credit support obligations relating to this
Agreement; (vii) fail to give adequate assurance of performance under this Section 7
within 48 hours but at least one day of a written request of the other party; or
(viii) not have paid any amount due the other party hereunder on or before the second
day following written notice that such payment is due; then the other party shall
have the right, at its sole election, to immediately withhold and/or suspend
deliveries or receipts of gas upon notice. If an Event of Default has occurred and
is continuing, the non-defaulting party shall have the right, by notice to the
defaulting party, to designate a day, no earlier than the day such notice is given
and no later than 20 days after such notice is given to terminate this Agreement.






	8.	 	Transfer and Warranty of Title. As between the parties hereto, Seller shall be in
control and in possession of the gas prior to such gas being received hereunder by Buyer at
the Receipt Point(s) and shall be responsible for any damages, losses, or injuries caused
thereby; and upon Buyer’s physical receipt of such gas at the Receipt Point(s), Buyer shall
thereafter be deemed to be in exclusive control and possession of such gas, and responsible
for any injuries, losses, or damages caused thereby; provided, however, neither party shall be
indemnified for damages, losses, or injuries caused by its own omissions or negligent acts.
Each party hereby warrants to the other that at the time of receipt of delivery of gas
hereunder, it will have the right to receive or deliver, as the case may be, such gas, and
that such gas shall be free and clear of all liens and adverse claims; and each party agrees,
with respect to the gas received or delivered by it, to indemnify the other party against all
suits, actions, debts, accounts, damages, costs (including attorney fees), losses, and
expenses arising from or out of any adverse claim of any and all persons to or against said
gas while that party has responsibility for the gas; PROVIDED, THAT IN NO EVENT WILL A PARTY
BE LIABLE TO THE OTHER PARTY FOR PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES OR LOSSES.






	9.	 	Confidentiality. Buyer and Seller agree to keep the content and nature of this
Agreement, and any other material or information provided during the negotiation of this
Agreement, strictly confidential and to not disclose the nature or contents to any third party
without prior written consent from the other party to this Agreement, which consent will not
be unreasonably withheld; provided, however that either party may make any public disclosure
it believes in good faith is required by applicable law or any listing or trading agreement
concerning its publicly traded securities, in which case the disclosing party agrees to use
reasonable efforts to advise the other party prior to making such disclosure.






	10.	 	Descriptive Headings. The descriptive headings of the provisions of this Agreement,
including these General Terms and Conditions, are formulated and used for convenience only and
shall not be deemed to affect the meaning or construction of any such provision.






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