THE
AGGREGATE HEDGE SETTLEMENT COSTS PAID BY GRANTOR WITH RESPECT TO SUCH PAYMENT
PERIOD AND (2) OVERPAYMENTS PURSUANT TO SECTION 3.4;
(XI)
GROSS PROCEEDS SHALL NOT INCLUDE ANY
AMOUNT TO WHICH GRANTOR IS ENTITLED BY VIRTUE OF A JUDGMENT OF A COURT OF
COMPETENT JURISDICTION RESOLVING A DISPUTE HEREUNDER BETWEEN GRANTEE AND GRANTOR
IN FAVOR OF GRANTOR, OR ANY AMOUNT PAID TO GRANTOR IN SETTLEMENT OF SUCH
DISPUTE; AND
(XII)
GROSS PROCEEDS SHALL NOT INCLUDE ANY
ADDITIONAL PROCEEDS FROM THE SALE OF MINERALS RELATED TO ANY SUBJECT WELL WITH
RESPECT TO WHICH GRANTOR ELECTS TO BE A PARTICIPATING PARTY (WHETHER PURSUANT TO
AN OPERATING AGREEMENT OR OTHER AGREEMENT OR ARRANGEMENT, INCLUDING WITHOUT
LIMITATION, NON-CONSENT RIGHTS AND OBLIGATIONS IMPOSED BY STATUTE OR REGULATORY
AGENCY) WITH RESPECT TO ANY OPERATION WITH RESPECT TO SUCH SUBJECT WELL WHERE
ANOTHER PARTY OR PARTIES HAVE ELECTED NOT TO PARTICIPATE IN SUCH OPERATION (OR
HAVE ELECTED TO ABANDON SUCH SUBJECT WELL) AND GRANTOR ELECTS TO PAY THE COSTS
OF SUCH NONPARTICIPATING OR ABANDONING PARTY AND AS A RESULT OF WHICH GRANTOR
BECOMES ENTITLED TO RECEIVE, EITHER TEMPORARILY (I.E., THROUGH A PERIOD OF
RECOUPMENT) OR PERMANENTLY ANY ADDITIONAL PROCEEDS FROM THE SALE OF MINERALS
RELATED TO SUCH SUBJECT WELL.
11
(B)
THE NET PROFITS ACCOUNT SHALL BE DEBITED WITH AN AMOUNT EQUAL TO
THE SUM OF THE FOLLOWING (EXCLUDING IN ALL EVENTS MANUFACTURING COSTS AND HEDGE
SETTLEMENT COSTS), TO THE EXTENT THAT THE SAME ARE PROPERLY ALLOCABLE TO THE
SUBJECT INTERESTS (AND ANY RELATED EQUIPMENT OR PROPERTY USED IN CONNECTION
THEREWITH) AND THE PRODUCTION AND (SUBJECT TO SECTION 4.5) MARKETING OF SUBJECT
MINERALS THEREFROM AND HAVE BEEN INCURRED OR ACCRUED (AS DESCRIBED BELOW) BY
GRANTOR FROM AND AFTER THE EFFECTIVE TIME AND ATTRIBUTABLE TO PERIODS ENDING ON
OR BEFORE THE TERMINATION DATE:
(I)
ALL DIRECT COSTS (INCLUDING CAPITAL
COSTS) PAID BY GRANTOR (A) FOR ALL DIRECT LABOR (INCLUDING FRINGE BENEFITS) AND
OTHER SERVICES NECESSARY FOR EXPLORING, DEVELOPING, OPERATING, PRODUCING,
REWORKING AND MAINTAINING THE SUBJECT INTERESTS, (B) FOR DEHYDRATION,
COMPRESSION, SEPARATION AND TRANSPORTATION OF THE SUBJECT MINERALS, AND (C) FOR
ALL MATERIALS PURCHASED FOR USE ON, OR IN CONNECTION WITH, ANY OF THE SUBJECT
INTERESTS (INCLUDING WITHOUT LIMITATION (1) ALL AMOUNTS CHARGED GRANTOR FOR
CONFORMANCE OF INVESTMENT IF THE SUBJECT INTERESTS OR ANY PART OR PARTS THEREOF
ARE HEREAFTER FROM TIME TO TIME UNITIZED OR IF ANY PARTICIPATING AREA IN A
FEDERAL DIVIDED-TYPE UNIT IS CHANGED, (2) THE COSTS OF ANY SEISMIC (INCLUDING
3-D SEISMIC SURVEYS), GEOLOGICAL OR GEOPHYSICAL OPERATIONS RELATING TO THE
SEARCH FOR SUBJECT MINERALS, (3) THE COSTS OF DRILLING, COMPLETING, TESTING,
EQUIPPING, PLUGGING BACK, REWORKING, RECOMPLETING AND PLUGGING AND ABANDONING
ANY WELL ON THE SUBJECT INTERESTS, WHETHER OR NOT SUCH WELL IS A PRODUCER OR IS
ABANDONED AS A DRY HOLE OR JUNKED, (4) THE COST OF CONSTRUCTING GATHERING
FACILITIES, TANKS AND OTHER PRODUCTION AND DELIVERY FACILITIES ON THE SUBJECT
INTERESTS, AND (5) THE COST OF SECONDARY RECOVERY, PRESSURE MAINTENANCE,
REPRESSURING, RECYCLING AND OTHER OPERATIONS CONDUCTED FOR THE PURPOSE OF
ENHANCING PRODUCTION); PROVIDED, HOWEVER,