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Exhibit 10.22
The Company has redacted certain confidential information in this agreement in reliance upon its confidential treatment request that it has filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. In this agreement, we indicate each redaction by use of asterisk *.
 
GAS PURCHASE AGREEMENT
 
DATED AS OF JUNE 1, 2006
 
between
 
WILLIAMS PRODUCTION RMT COMPANY
 
and
 
RILEY NATURAL GAS COMPANY
 
and
 
PETROLEUM DEVELOPMENT CORPORATION
 
  

 
 

 
 

 

 

 
GAS PURCHASE AGREEMENT
 
 
Table of Contents
 
 
	
				
	SECTION
	TITLE
	PAGE
	 

	 
	 
	 

	1
	COMMITMENTS/PERFORMANCE OBLIGATIONS
	1
	 

	 
	 
	 

	2
	SERVICE OPTIONS
	5
	 

	 
	 
	 

	3
	STATEMENTS AND PAYMENT
	5
	 

	 
	 
	 

	4
	TITLE
	7
	 

	 
	 
	 

	5
	TERM AND TERMINATION
	7
	 

	 
	 
	 

	6
	EXHIBITS
	10
	 

	 
	 
	 

	7
	ENTIRE AGREEMENT, CONSTRUCTION
	11
	 

 
 
	
		
	EXHIBITS
	TITLE

	 
	 

	A.
	STANDARD TERMS AND CONDITIONS

	B.
	INTENTIONALLY OMITTED

	C.
	RECEIPT POINT(S)

	D.
	DELIVERY POINT(S)

	E.
	SERVICE AND FEE DESCRIPTION

	F.
	GAS VOLUMES COMMITTED

	G.
	TWO YEAR MONTHLY MDQ SCHEDULE

 

 

 

 

 
GAS PURCHASE AGREEMENT 
PAGE 1 

 
 
THIS GAS PURCHASE AGREEMENT ("Agreement") is made and entered into as of June 1, 2006 by and between WILLIAMS PRODUCTION RMT COMPANY ("Buyer") and RILEY NATURAL GAS COMPANY ("Riley") and PETROLEUM DEVELOPMENT CORPORATION ("PDC," and together with Riley, collectively, "Seller," and Seller, together with Buyer, the "Parties," and individually, a "Party")
 
RECITALS
 
 
A.       Seller owns or controls a supply of Gas that it desires Buyer to purchase.
 
B.        Buyer is willing to purchase such Gas from Seller pursuant to the terms set forth herein.
 
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the Parties agree as follows:
 
 
AGREEMENT
 
 
	
		
	1. 
	COMMITMENTS / PERFORMANCE OBLIGATIONS

 
	
		
	1.1
	Seller's Commitment. Seller commits to Buyer to sell and deliver to Buyer, on a Firm basis, Seller's present and future right, title, and interest in the Gas Volumes Committed to this Agreement and outlined on Exhibit F, that Seller delivers to the Receipt Point(s) from the Area of Interest ("Seller's Gas"), subject to the terms of this Agreement.

 
	
		
	1.2
	Buyer's Commitment. Buyer commits to Seller to buy and receive from Seller at the Receipt Point(s), on a Firm basis, Seller's Gas, subject to the terms of this Agreement, including, without limitation, Section 1.3.

 
	
		
	1.3
	Quantity.

 
	
			
	 
	1.3.1
	Each Day, Seller agrees to sell and deliver, and Buyer agrees to receive and purchase, Seller's MDQ, subject to the terms of this Agreement   If Seller delivers more than Seller's MDQ to Buyer at the Receipt Point(s) on any Day, Buyer shall take and purchase up to 105% of Seller's MDQ for such Day, but shall not be obligated to take or purchase more than 105% of Seller's MDQ for such Day and shall take and/or purchase any such excess amounts above 105% in its sole and absolute discretion.

 
	
			
	 
	1.3.1.1
	Seller's MDQ may be reduced proportionately with other Shippers on the Gathering System with Guaranteed Capacity pursuant to Section B.4 of Exhibit A to this Agreement.

 
	
			
	 
	1.3.2
	Should either Party become aware that actual deliveries of Seller's Gas at the Receipt Point(s) shall be greater than 105% of Seller's MDQ, such Party shall promptly notify the other Party thereof.

 

 

 

 

GAS PURCHASE AGREEMENT
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	1.3.3
	Seller commits to deliver and sell Seller's Annual Volume to Buyer at the Receipt Point(s). Notwithstanding the foregoing provision:

 
	
			
	 
	1.3.3.1 
	if Seller sells and delivers less than [ * ]% of Seller's Annual Volume to Buyer for any given Contract Year (a "Shortfall"), and such Shortfall is not due to or arising from the circumstances addressed in Sections B.3, B.4 and/or B.7 of Exhibit A to this Agreement, Seller agrees to pay to Buyer, within ten (10) Business Days of Seller's receipt of Buyer's statement therefore, the Shortfall Fee for such Contract Year; and

 
	
			
	 
	1.3.3.2 
	if Seller delivers more than Seller's Annual Volume to Buyer at the Receipt Point(s) ("Excess Volumes"), such Excess Volumes shall be included in the calculation of Seller's Annual Volume for the immediately following Contract Year,

 
	
			
	 
	1.3.4
	Upon written notice to Buyer given on or before July 1 of any calendar year but no earlier than March 1 of such calendar year, Seller may request an increase to Seller's Annual Volume for any given Contract Year, provided that any such revision shall not be effective any earlier than twenty-four (24) months after Buyer's receipt of such request. Within thirty (30) Days of Buyer's receipt of such request, Buyer and Seller shall negotiate in good faith to adjust Seller's MDQ for such Contract Years to accommodate such projected increase to Seller's Annual Volume for such Contract Years, and shall revise Exhibit F accordingly.

 
	
		
	1.4
	Buyer's Processing Service. Seller's Gas at the Receipt Point(s) may have a hydrocarbon dew point that exceeds the most restrictive quality specification for hydrocarbon dew point required from time to time by the Interconnecting Pipeline(s). Buyer shall Process Seller's Gas to reduce its hydrocarbon dew point to a maximum of 20°F at any pressure between 100 psia and 1,480 psia at the Delivery Point(s). The fee for such Processing is incorporated into the Gathering and Processing Fee, If the most restrictive quality specification for hydrocarbon dew point of the interconnecting Pipeline(s) should ever be reduced below a maximum of 20°F at any pressure between 100 psia and 1,480 psia, then the Parties shall within thirty (30) Days of written notice thereof from Buyer, renegotiate, subject to Section 1.9 of this Agreement, the Gathering and Processing Fee. If the Parties are unable to renegotiate the Gathering and Processing Fee, then Buyer may refuse to accept further deliveries of Seller's Gas affected thereby or Buyer may, at its option, upon thirty (30) Days' prior written notice to Seller, release such affected Gas from the provisions of this Agreement, Buyer's right to renegotiate the Gathering and Processing Fee or, upon the failure of such renegotiation, to refuse to accept further deliveries of Seller's Gas affected thereby or release such affected Gas from the provisions hereof, shall apply to each successive reduction of the most restrictive quality specification for hydrocarbon dew point of the Interconnecting Pipeline(s) that is below a maximum of 20°F at any pressure between 100 psia and 1,480 psia.

	
		
	1.5
	Buyer's Dehydrating Service.  Seller's Gas at the Receipt Point(s) may have a water vapor content that exceeds the most restrictive quality specification for water vapor content required from time to time by the Interconnecting Pipeline(s), Buyer shall Dehydrate Seller's Gas to reduce its water vapor content to five (5) pounds per MMcf at the Delivery Point(s). The fee for such Dehydrating is incorporated into the Gathering and Processing Fee, If the most restrictive quality specification for water vapor content of the Interconnecting Pipeline(s) should ever be reduced below five (5) pounds per MMcf, then the Parties shall within thirty (30) Days of written notice thereof from Buyer, renegotiate, subject to Section 1.9 of this Agreement, the Gathering and Processing Fee, If the Parties are unable to renegotiate the Gathering and Processing Fee, then Buyer may refuse to accept further deliveries of Seller's Gas affected thereby or Buyer may at its option, upon thirty (30) Days' prior written notice to Seller, release such affected Gas from the provisions of this Agreement   Buyer's right to renegotiate the Gathering and Processing Fee or, upon the failure of such renegotiation, to refuse to accept further deliveries of Seller's Gas affected thereby or release such affected Gas from the provisions hereof, shall apply to each successive reduction of the most restrictive quality specification for water vapor content of the Interconnecting Pipeline(s) that is below five (5) pounds per MMcf.

 

 

 

 
 
GAS PURCHASE AGREEMENT
PAGE 3 

 
 
	
		
	1.6
	Buyer's Treating Service.  Seller's Gas at the Receipt Point(s) may have a C02 content that exceeds the most restrictive quality specification for C02 content required from time to time by the Interconnecting Pipeline(s). Buyer shall Treat Seller's Gas to reduce its C02 content to no more than two percent (2.00%) by volume at the Delivery Point(s), provided the CO2 content of Seller's Gas does not exceed four percent (4.00%) by volume at the Receipt Point(s)  The fee for such Treating is incorporated into the Gathering and Processing Fee. In no event, however, is Buyer obligated to accept deliveries of Seller's Gas at a given Receipt Point if the CO2 content of Seller's Gas at that Receipt Point exceeds four percent (4.00%) by volume, If the weighted arithmetic average quality specification for C02 content of the Interconnecting Pipeline(s) should ever be reduced below two and thirty-one hundredths percent (2.31%) per Mcf, then the Parties shall within thirty (30) Days of written notice thereof from Buyer, renegotiate, subject to Section 1 9 of this Agreement, the Gathering and Processing Fee. If the Parties are unable to renegotiate the Gathering and Processing Fee, then Buyer may refuse to accept further deliveries of Seller's Gas affected thereby or Buyer may at its option, upon thirty (30) Days' prior written notice to Seller, release such affected Gas from the provisions of this Agreement. Buyer's right to renegotiate the Gathering and Processing Fee or, upon the failure of such renegotiation, to refuse to accept further deliveries of Seller's Gas affected thereby or release such affected Gas from the provisions hereof, shall apply to each successive reduction of the most restrictive quality specification for CO2 content of the Interconnecting Pipeline(s) that is below two and thirty-one hundredths percent (2.31%)  per Mcf

 
	
		
	1.7
	Fee for Low Volumes. In the event the volume of Seller's Gas delivered to a Receipt Point operated by Buyer falls below 1,000 MMBtu per Accounting Period (each, a "Low Volume"), the Low Delivery Fee as set forth in Exhibit E shall be payable from Seller to Buyer for each affected Receipt Point, in addition to the Gathering and Processing Fee payable with respect to Seller's Gas delivered thereto. No Low Delivery Fee shall be due and payable from Seller to Buyer if a Low Volume was due to or arising from the circumstances addressed in Sections B.3, B.4 and/or B.7 of Exhibit A to this Agreement

 
	
		
	1.8
	FL&U.   Buyer shall retain FL&U attributable to Seller's Gas quantities received at the Receipt Point(s). The initial FL&U of [ * ] percent ([ * ]%) for Low Pressure Receipt Point(s) and [ * ]  percent ([ * ]%) for High Pressure Receipt Point(s) shall be effective for the initial Contract Year. The applicable FL&U percentage shall be included in the calculation of Seller's Annual! Volume for the purposes of determining Seller's compliance with its delivery to Buyer of Seller's Annual Volume. Buyer shall recalculate the FL&U at the beginning of each Contract Year and shall notify Seller of the revised applicable percentage. The Parties agree that the Lost and Unaccounted for Gas portion of the FL&U shall not exceed [ * ]  percent ([ * ]%) during the term of this Agreement.

 

 

 

 
 
GAS PURCHASE AGREEMENT
PAGE 4

 
 
	
		
	1.9
	Renegotiation of Fees. If any fee payable by Seller to Buyer hereunder requires renegotiation in accordance with the terms of this Agreement because of changes in Interconnecting Pipeline(s) specifications, Buyer will increase any such fee in an amount not to exceed any applicable increases in its operating costs due directly to such change in Interconnecting Pipeline(s) specifications, with a guaranteed after-income-tax rate of return on Buyer's additional capital costs of [ * ] percent ([ * ]%) over a five-year period (assuming a thirty-seven percent (37%) income tax rate).

 
	
		
	1.10
	Price for Seller's Gas, Deductions. As total and complete consideration for the purchase of Seller's Gas and the processing rights and Plant Products attributable to Seller's Gas, Buyer shall pay Seller for each Accounting Period an amount equal to Seller's Allocable MMBtu for such Accounting Period multiplied by a price equal to the CIG, Rocky Mountains as posted in Plaits Inside FERC's Gas Market Report published monthly which is an estimate for the Weighted Average Sale Price for such Accounting Period, This amount, in accordance with Section 3.4, shall be reduced by (a) all relevant fees due from Seller to Buyer listed on Exhibit E to this Agreement and Incurred by Seller in such Accounting Period, and (b) all other amounts due Buyer pursuant to this Agreement. All fee and fuel deducts applicable hereunder shall be calculated on a dry basis and then applied to the Seller's gross MMBtus of Gas received at the Receipt Point(s). The amount paid to Seller for such Account Period will be adjusted in the next Accounting Period using the actual Weighted Average Sales Price once that price has been calculated.

 
	
		
	1.11
	Seller's Right to Convert to Gathering and Processing. Seller has, at its sole discretion, the option to convert this Agreement to a Guaranteed Gathering and Processing Agreement (the "Conversion Option"). Should Seller elect to exercise the Conversion Option, the effective date of any Guaranteed Gathering and Processing Agreement entered into by the Parties in accordance with this Section shall be no later than twelve (12) months from the date of Buyer's receipt of Seller's written notice and exercise of the Conversion Option. This Agreement shall terminate on the effective date of such Guaranteed Gathering and Processing Agreement. Buyer shall provide to Seller a form of Guaranteed Gathering and Processing Agreement, which shall contain the same fees set forth on Exhibit E to this Agreement (adjusted as set forth in this Agreement) and capacity allocation as outlined in B.4 of the attached Standard Terms and Conditions, for acceptance and execution. It is the intent of the parties that the Guaranteed Gathering and Processing Agreement will be in substantially the same form as this Agreement, excluding provisions regarding purchase of gas by Buyer.

 
	
		
	1.12
	Delivery of Seller's Gas, Seller shall have the sole responsibility for delivering Seller's Gas to the Receipt Point(s).

 
	
		
	1.13
	Forward Contract. The Parties agree that this Agreement is a "forward contract" and a "master netting agreement" as such terms are defined in the United States Bankruptcy Code, and that each Party is a "forward contract merchant" as such term is defined in the United States Bankruptcy Code.

 
	
		
	1.14
	Joint and Several Obligations. All obligations of Seller hereunder are the joint and several obligations of PDC and Riley.

 

 

 

 
 
GAS PURCHASE AGREEMENT 
PAGE 5 

 
 
	
		
	2. 
	SERVICE OPTIONS

 
	
		
	2.1
	Connection of Additional Wells to Existing Receipt Point(s). Before commencement of deliveries of Gas from wells connected after the Effective Date, Seller will give Buyer thirty (30) Days' written notice, prior to commencing Gas deliveries from such wells, of the name of the well, the location of the well, the volumes of Gas from such well anticipated to be delivered to Buyer and the manner and point of connection of such well to a Receipt Point or to gathering fines upstream of such Receipt Point.

 
	
		
	2.2
	Addition of Receipt Point(s). In addition to the Receipt Point(s) listed in Exhibit C on the Effective Date, Seller may request that new Receipt Points be added to Exhibit C for the delivery of Seller's Gas. Buyer shall construct, or cause to be constructed, at Buyer's sole cost, the facilities necessary to create the first new Receipt Point. Buyer shall construct, or cause to be constructed, the facilities necessary for the second new Receipt Point, provided that Seller shall reimburse Buyer for all costs associated with the construction of such second Receipt Point. For each additional Receipt Point thereafter requested by Seller, Buyer and Seller shall alternate between them the payment obligation for the cost of construction of the necessary facilities for each such Receipt Point. Buyer shall maintain records of such payment obligations, and such records shall be prima facie evidence of the amount owed by a Party pursuant to this Section (absent manifest error). Seller and Buyer acknowledge and agree that the addition of Receipt Point(s) pursuant to this Section 2.2 shall not create an obligation on the part of Buyer to accept, or a right on the part of Seller to require, any increase in Seller's Annual Volume or Seller's MDQ under this Agreement; any such increase may occur only in accordance with the terms of Section 1.3.4.

 
	
		
	3. 
	STATEMENTS AND PAYMENT

 
	
		
	3.1
	Report by Seller. Where CTM is not being performed by Buyer, no later than the fifth (5th) Business Day after the end of each Accounting Period, Seller's Operator shall deliver to Buyer a report of the Day(s) of Seller's Gas production, the applicable Accounting Period and year in which such production is to be recognized, Mcf pressure base, Btu pressure base, Daily Mcf, Daily Btu, Daily MMBtu and quality of Seller's Gas, all for such Accounting Period, Such report shall be transmitted to Buyer electronically in a data file format designated by Buyer, Buyer may request from Seller an additional monthly electronic audit file with all of the hourly, Daily, configuration and event/alarm data for such Accounting Period, which Seller shall provide to Buyer within twenty (20) Business Days of Buyer's request therefore.

 
 
	
		
	3.2
	Statements by Buyer.

 
	
			
	 
	(a) 
	On or before thirty (30) Days following the end of each Accounting Period(provided Buyer has received Seller's report under Section 3.1 above as required in such Section), Buyer shall send Seller electronically and/or via U.S. mail a statement setting forth the following:

 

 

 

 
 
GAS PURCHASE AGREEMENT 
PAGE 6

 
 
	
			
	 
	3.2.a.1 
	The number of MMBtu of Seller's Gas received by Buyer at the Receipt Point(s) during such Accounting Period;

	
			
	 
	3.2.a.2
	The number of MMBtu of Seller's Gas retained by Buyer as FL&U during such Accounting Period;

	
			
	 
	3.2.a.3
	The CIG, Rocky Mountains price as published monthly in Piatt's inside FERC's Gas Market Report for such Accounting Period;

	
			
	 
	3.2.a.4 
	The Weighted Average Sales Price for the previous Accounting Period;

	
			
	 
	3.2.a.5
	Prior Accounting Period adjustment for the price and amount paid to Seller and

	
			
	 
	3.2.a.6 
	The fees and any other amounts due and payable by Seller to Buyer for services rendered by Buyer during such Accounting Period.

	
			
	 
	(b)
	On or before the forty-five (45) Day following the end of each Contract Year, Buyer shall send Seller electronically and/or via U.S. mail, a statement setting forth the calculation of Seller's Annual Volume, and, if applicable, the Shortfall Fee due for such period.

	
		
	3.3
	Payment by Buyer. On or before thirty (30) Days following each Accounting Period, Buyer shall pay to Seller an amount due Seller as set forth in the statement delivered by Buyer pursuant to Section 3.2(a) of this Agreement, by automated clearing house (ACH) transfer of immediate available funds to [ * ]. If the thirtieth (30th) Day is not a Business Day, then payment shall be made on the Business Day immediately following. Seller shall have the right to dispute the amounts set forth in any statement as specified in Section F.1 of Exhibit A to this Agreement.

 
	
		
	3.4
	Party's Right to Offset.

	
			
	 
	(a)
	Buyer shall have the right to offset any amounts due Buyer (including amounts for which Seller has indemnified Buyer hereunder) from amounts due to Seller under this Agreement  Any such offset, including the balance remaining after such offset, shall be reflected in Buyer's statement described in Section 3 2(a). The remaining balance due to Seller shall be paid in accordance with Section 3.3.

 
	
			
	 
	(b)
	To the extent that any amounts payable by Seller to Buyer exceed the amounts due to Seller from Buyer hereunder, Seller shall have the right to offset any amounts due to Seller (including amounts for which Buyer has indemnified Seller hereunder) from amounts due to Buyer under this Agreement  Any such offset, including the balance remaining after such offset, shall be reflected in a statement, in detail reasonably acceptable to Buyer, prepared by Seller and delivered with any remaining balance due to Buyer, to Buyer's address specified in Section 3.5,

 
	
		
	3.5
	Notice. Any notice called for in this Agreement shall be in writing and shall be considered as having been given if delivered personally, by U.S. mail, by fax, or by express courier, postage prepaid, by either Party to the other at the addresses given below. A notice received from either of Riley or PDC shall be effective as notice from Seller hereunder, and Buyer shall be entitled to act on any such notice as notice from Seller. Routine communications, including monthly statements, shall be considered as duly delivered when mailed by regular U.S. mail. Unless changed upon written notice by a Party, the addresses for notices to the Parties are as follows:

 

 

 

 
 
GAS PURCHASE AGREEMENT
PAGE 7 

 
 
Notices and Statements to Buyer:
 
WILLIAMS PRODUCTION RMT COMPANY
One Williams Center
Tulsa, OK 74172
Attn:       Director, Gas Management- Mail Drop 26-4
Telephone:        (918) 573-3885
Facsimile:           (918) 573-1324
 
 
Notices and Statements to Seller:
 
PETROLEUM DEVELOPMENT CORPORATION
103 East Main Street 
Bridgeport, West Virginia   26330
 
 
	
		
	4
	TITLE

 
	
		
	4.1
	Passage of Title, Unless otherwise specifically agreed in writing by the Parties, title to Seller's Gas shall pass from Seller to Buyer at the Receipt Point(s)

 
	
		
	4.2
	Seller's Warranty of Title. Seller warrants that ft (a) has (i) the authority to make the commitment set forth in Section 1.1 of this Agreement, and (ii) good and marketable title to ail Gas delivered to Buyer at the Receipt Point(s), and (b) will have the right to convey, and will transfer good and merchantable title to, all of Seller's Gas sold hereunder and delivered by it to Buyer, free and clear of all liens, encumbrances and claims.

 
5.      TERM AND TERMINATION
 
	
		
	5.1
	Effective Date. This Agreement shall become effective upon June 1, 2006 (the "Effective Date"), and continue from and after the Effective Date through the end of the last Contract Year for the period of volume commitment outlined on Exhibit F

 
	
		
	5.2
	Termination Events. Notwithstanding the foregoing Section 5.1:

 
	
			
	 
	5.2.1
	in the event a Regulatory Event occurs that:

 
	
			
	 
	5.2.1.1.
	renders Buyer unable to continue to perform under this Agreement, Buyer shall be entitled to terminate this Agreement upon thirty (30) Days' prior notice to Seller, such notice to contain a reasonably detailed description of such Regulatory Event and the cause for Buyer's inability to perform; or

 

 
 

 

 

GAS PURCHASE AGREEMENT
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	5.2.1.2. 
	 is the sole cause of making a Party's continued performance uneconomic (the "Affected Party"), the Affected Party shall notify the other Party (the "Unaffected Party") of such event, and the Parties shall have forty-five (45) Days from the Unaffected Party's receipt of such notice to negotiate, in good faith, provisions that restore the economic benefit to the Affected Party, consistent with the intent originally reflected in this Agreement. If the Parties are unable to do so within such forty-five (45) Day period, then either Party may thereafter terminate this Agreement by giving the other Party written notice of termination with an effective date no earlier than thirty (30) Days from the date of such notice of termination; or

 
	
			
	 
	5.2.2.
	 in the event that a Party (the "Insolvent Party") files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors, or has such petition filed or proceeding commenced against it, or otherwise becomes bankrupt or insolvent (however evidenced), or has a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed to it or with respect to substantially alt of its assets (a "Bankruptcy Event"), then the other Party (the "Solvent Party") shall have the right, at its sole election, to immediately withhold and/or suspend performance under this Agreement and/or to terminate and liquidate this Agreement in the manner provided in Section 5.4 of this Agreement and as permitted by Sections 362(b)(6), 362(b)(27), 556 and 561 of the United States Bankruptcy Code, in addition to any and all other remedies available to the Solvent Party hereunder, under applicable law or in equity.

 
	
			
	 
	5.2.3.
	  For the avoidance of doubt, (a) a Bankruptcy Event occurring with respect to PDC shall not create any rights of termination and/or liquidation for Riley, (b) a Bankruptcy Event occurring with respect to Riley shall not create any rights of termination and/or liquidation for PDC hereunder, and (c) a Bankruptcy Event occurring with respect to either of PDC or Riley shall create rights of termination and/or liquidation for Buyer hereunder.

 
	
		
	5.3
	Additional Termination Rights.In addition to the termination rights contained in Section 5.2, the Parties, as applicable, have rights to terminate this Agreement pursuant to the terms of Sections 1.11 and 9 of this Agreement, and Sections J. 1 and J .3 of Exhibit A hereto

 
	
		
	5.4 
	Termination and Liquidation Upona Bankruptcy Event.

 
	
			
	 
	5 4.1. 
	If a Bankruptcy Event has occurred and is continuing, the Solvent Party shall have the right to terminate this Agreement by giving written notice to the Insolvent Party, with the date of the Insolvent Party's receipt of such notice being the early termination date for the liquidation and termination of this Agreement pursuant to this Section (the "Early Termination Date")   On the Early Termination Date, this Agreement shall terminate,

 
	
			
	 
	5 4.2.
	As of the Early Termination Date, the Solvent Party shall determine, in good faith and in a commercially reasonable manner, the amount owed by each Party with respect to all of Seller's Gas delivered and sold, and received and purchased, between the Parties under this Agreement on and before the Early Termination Date, and all other applicable charges relating to such Seller's Gas, for which payment has not yet been made by the Parties.

 

 
 

 

 

 
GAS PURCHASE AGREEMENT
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	5.4.3. 
	The Solvent Party shall liquidate and accelerate the remaining obligations under this Agreement in the following manner:

 
	
			
	 
	5.4.3.1.
	If the Solvent Party is Seller, Seller shall have a liquidated claim against Buyer in the amount $[ * ] per MMBtu of Gas to be gathered and purchased for a period of two years following the Early Termination Date, as specified on Exhibit F in satisfaction of Buyer's remaining obligations under this Agreement; and

 
	
			
	 
	5.4.3.2.
	If the Solvent Party is Buyer, Buyer shall have a liquidated claim against Seller in the amount $[ * ] per MMBtu of Gas remaining to be delivered as specified on Exhibit F in satisfaction of Seller's remaining obligations under this Agreement,

 
	
			
	 
	5.4.4.
	The Solvent Party shall net or aggregate, as appropriate, any and all amounts owing between the Parties under this Section so that all such amounts are netted or aggregated to a single liquidated amount payable by one Party to the other (the "Net Settlement Amount"). At its sole option, the Solvent Party may setoff (a) any Net Settlement Amount payable to the Insolvent Party against any amounts payable by the Insolvent Party to the Solvent Party and/or its affiliates under any other agreement or arrangement between the Insolvent Party and the Solvent Party and/or its affiliates arising from or related to this Agreement, or (b) any Net Settlement Amount payable to the insolvent Party against any amounts payable by the Solvent Party or its affiliates to the Insolvent Party or its affiliates under any other agreement or arrangement between the Insolvent Party and its affiliates and the Solvent Party and its affiliates arising from or related to this Agreement. The Solvent Party will give the Insolvent Party notice of any set-off effected under this Section, provided that failure to give such notice shall not affect the validity of the set-off.

 
	
			
	 
	5.4.5. 
	The rights provided by this Section are in addition to and not in limitation of any other right or remedy (including any right to set-off, counterclaim, claim or otherwise withhold payment) to which a Party may be entitled (whether by operation of law, contract or otherwise).

 
	
			
	 
	5.4.6. 
	If any obligation that is to be included in any netting, aggregation or setoff pursuant to this Section is unascertained, the Solvent Party may, in good faith, estimate that obligation and net, aggregate or setoff, as applicable, in respect of the estimate, subject to the Solvent Party's accounting to the Insolvent Party when the obligation is ascertained, Any amount not then due that is included in any netting, aggregation or setoff pursuant to this Section shall be discounted to net present value in a commercially reasonable manner determined by the Solvent Party,

 
	
			
	 
	5 4.7.
	 As soon as practicable after the Early Termination Date, the Solvent Party shall notify the Insolvent Party of the Net Settlement Amount, and whether the Net Settlement Amount is due to or from the Solvent Party. The notice shall include a written statement explaining in reasonable detail the calculation of the Net Settlement Amount   The Net Settlement Amount shall be paid by the Party owing such amount by the close of business on the tenth (10th) Business Day following the Insolvent Party's receipt of such notice, which date shall not be earlier than the Early Termination Date. Interest on any unpaid portion of the Net Settlement Amount shall accrue from such tenth (10th) Business Day until the date of payment at a rate equal to the then-effective prime rate of interest published under the "Money Rates" column of The Wall Street Journal (or if there is more than one such rate, the average of such rates) plus two percent (2.0%) per annum

 

 

 

 

 
GAS PURCHASE AGREEMENT
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	5.4.8.
	The Insolvent Party may dispute the calculation of the Net Settlement Amount by providing the Solvent Party with written notice of the dispute setting forth the insolvent Party's calculation, within seven (7) Days of its receipt of the Solvent Party's calculation. The Parties will use the dispute resolution process set forth in Article I of Exhibit A to this Agreement to resolve the dispute

 
	
			
	 
	5 4.9.
	The Solvent Party's remedies under this Section 5.4 are the sole and exclusive remedies of the Solvent Party with respect to the declaration of any Early Termination Date, Each Party reserves to itself all other rights, setoffs, claims, counterclaims and other defenses to which it is or may be entitled arising from this Agreement.

	
		
	5.5
	Release. Promptly after any termination of this Agreement, Buyer agrees to record, as applicable, any document reasonably required by Seller to effect the release of the Memorandum of this Agreement that Buyer may have recorded pursuant to Section 8 hereof

	
		
	6
	EXHIBITS

 
This Agreement incorporates and is subject to the following Exhibits:
 
	
			
	 
	Exhibit A:
	Standard Terms and Conditions

	
			
	 
	Exhibit B:
	Intentionally Omitted

	
			
	 
	Exhibit C:
	Receipt Point(s)

	
			
	 
	Exhibit D:
	Delivery Point(s)

	
			
	 
	Exhibit E: 
	Service and Fee Description

	
			
	 
	Exhibit F: 
	Gas Volumes Committed

	
			
	 
	Exhibit G:
	Two Year Monthly MDQ Schedule

 
In the event of a conflict between the terms of the Agreement (without reference to the Exhibits) and the terms of the Exhibits, the terms of the Agreement (without reference to the Exhibits) shall control.
 
	
		
	7
	ENTIRE AGREEMENT, CONSTRUCTION

 
This Agreement, together with its Exhibits, contains the entire agreement of the Parties with respect to the matters addressed herein and supersedes all prior and contemporaneous agreements, representations and understandings of the Parties with respect to such matters. The Parties represent and acknowledge that in executing this Agreement they do not rely on and have not relied on any representation or statement, oral or written, which is not set forth in this Agreement. This Agreement shall be considered for all purposes as prepared through the joint efforts of the Parties, and the Parties agree that it shall not be construed against one Party or the other as a result of the manner in which this Agreement was actually negotiated, prepared, drafted or executed
 

 

 

 

 
GAS PURCHASE AGREEMENT 
PAGE 11 

 
 
IN WITNESS WHEREOF, the Parties hereto have executed two duplicate original copies of this Agreement.
 
 
	
					
	WILLIAMS PRODUCTION RMT COMPANY
	 
	RILEY NATURAL GAS COMPANY

	 
	 
	 
	 
	 

	By:
	/s/ Ralph A. Hill
	 
	By:
	/s/ Thomas E. Riley

	Name:
	 
	 
	Name:
	Thomas E. Riley

	Title:
	President
	 
	Title:
	President

	 
	 
	 
	 
	 

	 
	 
	 
	PETROLEUM DEVELOPMENT CORPORATION

	 
	 
	 
	 
	 

	 
	 
	 
	By:
	/s/ Eric R Stearns

	 
	 
	 
	Name:
	Eric R Stearns

	 
	 
	 
	Title:
	Exec VP

 

 

 

 
 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-2

	 
	 

 
 
EXHIBIT A
TO THE GAS PURCHASE AGREEMENT
DATED AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
PETROLEUM DEVELOPMENT CORPORATION
 
 
STANDARD TERMS AND CONDITIONS
 
A.  DEFINITIONS
 
In addition to the terms defined in the text of this Agreement, the following terms shall have the meanings indicated:
 
A.1      Accounting Period shall mean a calendar month commencing on the first Day of that calendar month and ending on the last Day of that calendar month.
 
A.2      Bankruptcy Event shall have the meaning given such term in Section 5.2.2 of this Agreement.
 
A.3      British Thermal Unit or Btu shall mean the measurement unit for the amount of heat required to raise the temperature of one (1) pound of water, at 60 degrees Fahrenheit, one (1) degree Fahrenheit.
 
A.4      Business Day shall mean a Day on which Buyer is open for business, and a Business Day shall open at 8:00 am and close at 5:00 pm CST.
 
A.5      CST shall mean Central Standard Time.
 
A.6      Confirmed Receipt Nomination shall mean a Receipt Nomination that is adjusted by Gatherer when historical production or current data from Gatherer's Telemetering Facilities suggest that such Receipt Nomination is inaccurate.
 
A.7      Contract Year shall mean each consecutive twelve month period as detailed on the attached Exhibit F beginning with the Effective Date hereof or, if the Effective Date is not the first Day of a month, then with the first Day of the month following the Effective Date.
 
A.8      CTM shall mean custody transfer measurement at the Receipt Point(s).
 
A.9      Cubic Foot shall mean the volume of Gas occupying one cubic foot of space when such Gas is at a base temperature of sixty degrees Fahrenheit (60° F) and a base pressure of 14.73 Psia and shall be calculated in accordance with ANSI/API 2530 where the factors for Fpwl and Fhgt shall each be equal to one (1).
 
A.10   Day or Daily shall mean twenty-four (24) consecutive hours beginning at 9:00 am CST or as otherwise designated by Buyer.
 
A.11   Dehydrate or Dehydrating shall mean the removal of water vapor from Gas.
 

 
 

 

 

	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-3

	 
	 

 
 
A.12   Delivery Point(s) shall mean those point(s) of delivery of Seller's Gas to Interconnecting Pipeline(s) as shown on Exhibit D to this Agreement, together with such other Delivery Point{s) as may be added by Buyer to such Exhibit D and notified to Seller from time to time.
 
A.13   Early Termination Date shall have the meaning given such term in Section 5.4.1 of this Agreement.
 
A.14   Effective Date shall have the meaning given such term in Section 5.1 of this Agreement.
 
A.15   Excess Volumes shall have the meaning given such term in Section 1.3.3.2 of this Agreement.
 
A.16   Field shall mean any point on the Gathering System upstream of a Plant.
 
A.17   Firm shall mean that either Party may interrupt its performance under this Agreement without liability only to the extent that such performance is prevented by reasons of Force Majeure.
 
A.18   FL&U shall mean Gathering Fuel, Plant Fuel, and Lost and Unaccounted for Gas volumes.
 
A.19   Force Majeure shall have the meaning given such term in Section B.3 of Exhibit A to this Agreement.
 
A.20  Gas shall mean any mixture of gaseous hydrocarbons or hydrocarbons and other gases, in a gaseous state, consisting primarily of methane.
 
A.21   Gathering and Processing Fee shall mean, collectively, the Gathering and Processing Fees payable from Seller to Buyer for Buyer's services performed under this Agreement and more specifically set forth on Exhibit £ to this Agreement.
 
A.22   Gathering Fuel shall mean that volume of Seller's Gas, expressed as a percentage of the Receipt Point Gas quantities, used or consumed as fuel in the operation of field compression on the Gathering System.
 
A.23   Gather, Gathered or Gathering shall mean the receipt of Gas at the Receipt Point(s).
 
A.24   Gatherer shall mean Buyer's gatherer of Gas, Bargath Inc., or such other entity as Buyer shall select from time to time to Gather Gas on behalf of Buyer under this Agreement.
 
A.25   Gathering System shall mean those facilities used by Buyer to Gather Seller's Gas and provide any other service described in Section 1 in the Field.
 
A.26   Gross Heating Value shall mean the total Btu content for a Cubic Foot of Gas on a dry basis as determined by calculation from a compositional analysis using physical properties of gases at fourteen and seventy-three hundredths (14.73) psia and sixty degrees Fahrenheit (60°F), as prescribed by industry standards.
 
A.27  Guaranteed Capacity shall mean that Gatherer has guaranteed to a Shipper to have the capacity available to Gather such Shipper's Gas in its Gathering System except during times of capacity allocation pursuant to Section B.4 of Exhibit A to this Agreement.
 

 

 

 
 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-4

	 
	 

 
 
A.28   High Pressure Receipt Point shall mean any Receipt Point above three hundred and fifty (350) psig.
 
A.29   Insolvent Party shall have the meaning given such term in Section 5.2.2 of this Agreement.
 
A.30   Interconnecting Pipeline(s) shall mean any pipeline connected immediately downstream of the Delivery Point(s).
 
A.31   Lost and Unaccounted for Gas shall mean that volume of Seller's Gas, expressed as a percentage of the Receipt Point Gas quantities, that is lost or unaccounted for, which may include, but is not limited to, Gas flared or vented by Buyer or Gatherer.
 
A.32   Low Pressure Receipt Point shall mean any Receipt Point at or below three hundred and fifty (350) psig.
 
A.33   Maximum Daily Quantities shall mean, with respect to a Shipper, the maximum daily quantity of Gas for which Gatherer has committed to provide service to such Shipper.
 
A.34   MMBtu shall mean one million (1,000,000) British Thermal Units.
 
A.35  Mcf shall mean one thousand (1,000) Cubic Feet of Gas and shall be the unit of volume typically utilized under this Agreement.
 
A.35   MMcf shall mean one million (1,000,000) Cubic Feet of Gas.
 
A.37   New Taxes shall mean any and all governmental charges, licenses, fees, permits and assessments, or increases of any thereof (excluding taxes described in Section H of Exhibit A to this Agreement and taxes based on the net income or net worth of any Party) that are imposed on a Party or the transactions contemplated under this Agreement that (a) were not in effect on the Effective Date of this Agreement or (b) were not imposed on a Party or the transactions contemplated under this Agreement on the Effective Date of this Agreement.
 
A38    Non-Guaranteed Capacity shall mean that Gatherer has not guaranteed to a Shipper to have the capacity available to Gather such Shipper's Gas in its Gathering System.
 
A.39   Plant shall mean any of those facilities used by Buyer to Process Gas and provide any other service described in Section 1 other than in the Field.
 
A.,40   Plant Fuel shall mean the number of MMBtu of Gas or other hydrocarbons used or consumed in the operation of the Plant including, but not limited to, fuel, flared and vented Gas and such Gas as may be lost and unaccounted for despite the prudent operation of the Plant.
 
A.41   Plant Products shall mean those liquid hydrocarbons obtained by Processing.
 
A.42   Process, Processed or Processing shall mean the liquefaction and removal of hydrocarbons from Gas at the Plant.
 
A.43   Receipt Nomination shall mean a notification, submitted in writing or via Gatherer's nomination and scheduling system, of the number of MMBtus of Gas that a Shipper will deliver to the Gathering System.
 

 
 

 

 

	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-5

	 
	 

 
 
A.44   Receipt Point MMBtu shall mean the number of MMBtu of Gas measured at the Receipt Point(s).
 
A.45   Receipt Point(s) shall mean the upstream flange(s) of the Gathering System at the point(s) of receipt shown on Exhibit C to this Agreement, as the same may be modified in accordance with Section 2.2 of this Agreement.
 
A.46   Regulatory Event shall mean any government action or potential action, such as necessity for compliance with any court order, FERC order, FERC agreement, FERC settlement agreement, law, statute, ordinance, regulation or policy having the effect of law, promulgated by a governmental authority having jurisdiction, including the imposition of New Taxes.
 
A.47   Seller's Allocable MMBtu shall be an amount, for each Accounting Period, equal to the Receipt Point MMBtu for such Accounting Period received by Buyer from Seller less applicable FL&U for such Accounting Period.
 
A.48   Seller's Annual Volume shall mean, for any Contract Year, the amount of Seller's Gas as shown on Exhibit F to this Agreement, (as the same may be modified in accordance with Section 1.3.4 of this Agreement or Section B7 of Exhibit A to this Agreement) to be delivered by Seller to the Receipt Point(s) and purchased by Buyer during such Contract Year.
 
A.49   Seller's Gas shall have the meaning given such term in Section 1.1 of this Agreement.
 
A.50   Seller's-MDQ shall mean, for any Contract Year or part thereof shown on Exhibit F to this Agreement, the maximum Daily quantity of Seller's Gas as shown on such Exhibit F (as the same may be modified in accordance with Section 1.3.4 of this Agreement or Section B.7 of Exhibit A to this Agreement) to be delivered by Seller to the Receipt Point(s) and purchased by Buyer each Day during such Contract Year or part thereof, as applicable, not to exceed Seller's Annual Volume for such Contract Year.
 
A.51   Seller's Operator shall mean the operator of the facilities upstream of a given Receipt Point Seller's Operator, however, may also operate CTM equipment located downstream of a given Receipt Point as provided in Section D of Exhibit A to this Agreement. Seller's Operator may be either Seller or a third party acting on Seller's behalf and notified to Buyer. When Seller's Operator is a third party acting on Seller's behalf, it shall be Seller's responsibility to cause such third party to comply with those terms of this Agreement which refer to Seller's Operator.
 
A.52   Shipper shall mean any party that delivers Gas into the Gathering System.
 
A.53   Shortfall Fee for any Contract Year, if applicable under Section 1.3.3.1 of this Agreement ("SF"), shall mean the amount calculated in accordance with the following formula:
 
	
		
	SF = 
	(GPF + TF + TS) x (([*] x AV) - (AD + EV)), where

	 
	 

	GPF = 
	the then -applicable Gathering and Processing Fee

	 
	 

	TF = 
	the then -applicable Excess CO2 Treating Fee, provided that “TF” will equal [*][*] if the weighted average CO2 content of Seller's Gas from all Receipt Point(s) for the Contract Year for which SF is being calculated is less than or equal to three percent (3%).

	 
	 

	TS = 
	Firm transport fee equal to [*] $[*] per MMBtu

 

 

 

 

 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-6

 
	
		
	AV = 
	Seller's Annual Volume for such Contract Year

	AD = 
	actual deliveries of Seller's Gas at the Receipt Point(s) taken by Buyer for such Contract Year

	EV = 
	any Excess Volumes delivered by Seller in the Contract Year immediately preceding the Contract Year for which SF is being calculated

 
A.54   Telemetering Facilities shall mean electronic monitoring facilities, including, but not limited to, electronic flow measurement facilities, remote terminal units and all other end devices and transmitters used to calculate pressure, temperature, differential pressure, flow and valve position.
 
A.55   Treat, Treating or Treatment shall mean the removal, reduction or dilution of C02 in Gas.
 
A.56   Weighted Average Sales Price shall mean, for any specified period, the weighted average sales price that Buyer [*] Gas produced from the Piceance Basin to [*] markets through its affiliate, Williams Power Company, Inc., its successors or assigns (the "Marketing Affiliate"), for such period, less the weighted average [*] costs (including, but not limited to, demand, commodity and fuel fees ) incurred by Buyer or the Marketing Affiliate for the transport of such Gas from the Delivery Point(s) to the point of sale to such [*] markets during such period. In the event that Buyer makes sales directly to [*] markets or the Marketing Affiliate purchases Buyers gas directly, then such amounts will be included in the calculation of the Weighted Average Sales Price.
	
		
	B. 
	OPERATING PROVISIONS

 
B.1     Operational Control   Buyer shall be entitled to complete operational control of its facilities and shall operate its facilities in a manner that, in Buyer's sole opinion, is consistent with its obligations under this Agreement, However, this Section B 1 shall not be interpreted to relieve Buyer of its obligations under this Agreement.
 
B.2     Maintenance, Gatherer shall, without liability, be entitled to perform such maintenance, testing, alteration, modification, repair or replacement of the Gathering System and/or Plant, or any part thereof, as would be done by a prudent operator, even if it requires the allocation of capacity pursuant to Section B 4 of Exhibit A to this Agreement, Buyer shall provide or caused to be provided to Seller, thirty (30) Days' advance written notice of scheduled maintenance to be performed on the Gathering System and/or Plant.
 
B.3     Force Majeure   Neither Buyer nor Seller shall be liable in damages to the other for its inability to perform under this Agreement due to an event of Force Majeure As used herein, the term "Force Majeure" shall mean any act, omission, or circumstance occasioned by or in consequence of any acts of God, acts of terrorism, blockades, insurrections, riots, epidemics, flood, washouts, landslides, mudslides, earthquakes, storms, threat of hurricanes and tropical storms that result in the evacuation of the affected area, extreme hot, cold, or freezing weather, lightning, restraint of rulers and peoples, civil disturbances, war, explosions, fires, mechanical failure, structural failure, breakage of or accident to, or the unavailability of supply of, machinery, equipment, lines of pipe, platform or wells, the inability or failure of downstream or upstream pipelines to deliver or receive, the inability or failure of downstream third-party markets to receive, the order of any court or governmental authority having jurisdiction, any change in any applicable regulation materially affecting the operation of the facilities or any other cause of a similar nature, whether of the kind herein enumerated or otherwise, and including, without limitation, any Regulatory Event, not reasonably within the control of the Party claiming suspension and that, by the exercise of due diligence, such Party is or should have been unable to prevent or overcome. Failure to prevent or settle any strike or strikes shall not be considered a matter within the control of the Party claiming suspension  With regard to the installation of new facilities or modifications to existing facilities, delay or inability to obtain any necessary permits or rights-of-way from a regulatory agency or landowner after an application or request by Buyer shall be deemed to be a Force Majeure event, provided Buyer has given reasonable notice of any planned suspension of service to Seller. Force Majeure shall not relieve either Party of liability in the event of its concurring negligence and shall only relieve the non-performing Party from liability for failure to perform under this Agreement for so long as such Party is making reasonable efforts to remedy the situation. Force Majeure shall not relieve either Party of its obligation to pay money due under this Agreement.
 

 

 

 

 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-7

	 
	 

 
 
B.4      Allocation of Capacity, Notwithstanding any other term of this Agreement if for any Day, Gatherer notifies Buyer that the capacity of its Gathering System and/or Plant is constrained. Buyer shall cause Gatherer, without liability to either Gatherer or Buyer, to allocate the available capacity as follows:
	
			
	 
	(a)
	Capacity shall first be allocated pro rata to all Shippers with Guaranteed Capacity based upon the lower of their respective (i) Maximum Daily Quantities, (ii) Receipt Nominations or (iii) Confirmed Receipt Nominations; and

	
			
	 
	(b)
	Any remaining capacity shall be allocated pro rata to all Shippers with Non-Guaranteed Capacity based upon the lower of their respective (i) Maximum Daily Quantities, (ii) Receipt Nominations or (iii) Confirmed Receipt Nominations

 
However, if Gatherer can identify the location of the constraint, then Buyer shall cause Gatherer, without liability to either Gatherer or Buyer, to impose such allocation only upon those Shippers whose Gas is affected, and only at such location. That capacity will then be allocated pro rata based on the previous 24 hour physical flow through the location that is constrained. From time to time, Seller may request from Buyer or Gatherer information regarding daily volumes of Gas received or to be received by the Gathering System to determine available capacity and capacity allocation on the Gathering System,
 
B.5       Access, Easements and Rights-of-Way  Seller shall provide Buyer and/or Gatherer such access to its facilities as is necessary and convenient for Buyer and/or Gatherer to perform the obligations of Buyer under this Agreement  Seller grants to Buyer and/or Gatherer, upon the execution of a mutually agreeable form, the use of ail easements and rights-of-way held by Seller, to the extent that Seller has the right to do so, that are necessary and convenient for Buyer and/or Gatherer to perform Buyer's obligations under this Agreement and for Gatherer to Gather Seller's Gas. Buyer shall cause Gatherer to fulfill ail obligations of any kind whatsoever for such use as required under any lease or agreement that pertains to such grant as outlined above utilized by Gatherer. Such use and grant of rights shall include, but not be limited to, those rights under Seller's oil and Gas lease(s) to construct, operate, and maintain pipelines and appurtenant facilities for the purpose of Gathering Gas from the Area of Interest, Any grant to or use by Buyer or Gatherer as contemplated above shall be for the express and limited purpose of gathering Seller's gas from the Receipt Points or otherwise allowing Buyer to meeting its obligations under this Agreement. Any other use shall be prohibited unless approved in writing by Seller and appropriate surface owner.
 
B.6      Seller's Delivery Pressure. Seller shall deliver Seller's Gas to the Receipt Point(s) at pressure(s) sufficient to cause if to enter Gatherer's facilities; however, such pressure(s) shall not exceed the Maximum Allowable Operating Pressure of Gatherer's facilities ("MAOP"). The MAOP for a given facility may be revised from time to time by Gatherer in its sole discretion, such revision to be notified to Seller by Buyer promptly thereafter Any such MAOP revisions shall be applied uniformly and not discriminately against Seller  Except as otherwise expressly provided in Section B.7 of Exhibit A to this Agreement, neither Buyer nor Gatherer is obligated to modify the pressure(s) in its facilities in order to cause the entry of Seller's Gas into its facilities   Seller shall equip its compression equipment, if any, with:
 

 

 

 
 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-8

	 
	 

 
	
			
	 
	(a)
	over pressurization protection devices in accordance with ANSI B31.8 to prevent delivery pressure in excess of the MAOP;

	
			
	 
	(b)
	Gas cooling to prevent delivery temperatures in excess of 120°F into Buyer's or Gatherer's facilities; and

	
			
	 
	(c)
	Pulsation dampening equipment, as necessary, to minimize pulsation induced measurement errors to less than two percent (2%) peak-to-peak square root error

 
B.7     Receipt Point Pressure Maintenance  Buyer shall cause Gatherer to use reasonable efforts to maintain an average monthly operating pressure of three hundred and fifty (350) psig or less (the "Target Pressure") at the Low Pressure Receipt Point(s) into the Gathering System. Should the average monthly pressure at any Low Pressure Receipt Point exceed the Target Pressure for three (3) consecutive months for any Low Pressure Receipt Point, then, beginning with the fourth month in which such average monthly pressure exceeds the Target Pressure, Buyer shall reduce the Gathering and Processing Fee by [ * ] ($[ * ]) per MMBtu. Buyer shall have nine (9) months in which to install, or cause Gatherer to install, equipment necessary to reduce the pressure at such Low Pressure Receipt Point to the Target Pressure. If Buyer or Gatherer has not reduced the pressure at such Low Pressure Receipt Point after such nine (9) month period to the Target Pressure, then Seller may, at its option, upon thirty (30) Days' prior written notice to Buyer, release only the affected Low Pressure Receipt Point and Seller's Gas delivered thereto from the provisions of this Agreement   In the event of any such release, during such thirty (30) Day period, Buyer and Seller shall negotiate in good faith to reduce Seller's MDQ and Seller's Annual Volume by an amount equal to the Gas that was projected to have been delivered to the affected Low Pressure Receipt Point, and shall revise Exhibit F accordingly.
 
C.       GAS QUALITY
 
	
		
	C.1 
	Gas Quality at Receipt Point(s),Seller's Gas at the Receipt Point(s) shall be commercially free of oxygen, hydrocarbons in their liquid state, water in its liquid state, crude oil, brine, air, dust, gums, gum-forming constituents, bacteria and other objectionable liquids and solids,

	
			
	 
	(a) 
	       with not more than;

	
			
	 
	(1)
	one quarter (1/4) grain of H2S per one hundred (100) Cubic Feet;

	
			
	 
	(2)
	five (5) grains of total sulfur per one hundred (100) Cubic Feet;

	
			
	 
	(3)
	one (1) grain of mercaptan per one hundred (100) Cubic Feet;

	
			
	 
	(4)
	two (2) mole percent of carbon dioxide;

	
			
	 
	(5)
	three (3) mole percent of nitrogen;

	
			
	 
	(6)
	five (5) mole percent of combined carbon dioxide, nitrogen and oxygen; and

	
			
	 
	(b) 
	meeting the following additional quality specifications:

	
			
	 
	(1) 
	not exceeding 120°F in temperature at the Receipt Point(s);

 

 
 

 

 

	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-9

	 
	 

 
	
			
	 
	(2)
	having a total heating value of at least 1,000 Btu per Cubic Foot; and

	
			
	 
	(3)
	not exceeding seven (7) pounds of water vapor per MMcf.

 
In addition to the foregoing, unless otherwise expressly provided in Section 1 of this Agreement, Seller's Gas shall conform to the most restrictive quality specifications required from time to time by the Interconnecting Pipeline(s). If at any time Seller's Gas at the Receipt Point(s) fails to conform to such quality specifications, Buyer shall give Seller written notice of the deficiency and Seller shall immediately remedy the deficiency. If Seller fails to immediately remedy the deficiency, Buyer may refuse to accept further deliveries of Seller's Gas or exercise such other remedies as are provided in Section 1 of this Agreement, Any such refusal by Buyer to accept Seller's Gas pursuant to this Section C.1 shall in no way release Seller from its obligations under this Agreement or reduce Seller's commitment to sell and deliver to Buyer the quantities of Seller's Gas specified in this Agreement.
 
	
		
	C.2
	Removal of Liquefiable Hydrocarbons in the Field. Seller's Gas shall not be Processed for removal of liquefiable hydrocarbons prior to its receipt by Buyer at the Receipt Point(s) other than by the use of conventional mechanical liquid-Gas separators operated at or above ambient temperatures. Seller shall own and be responsible for any liquid hydrocarbons removed by this method from Seller's Gas.

 
	
		
	C.3
	Water Disposal. Buyer shall dehydrate Seller's Gas. If Buyer's method of disposal of Seller's water is ever disallowed for any reason or is deemed to be uneconomic by Buyer, then Buyer shall notify Seller and Seller shall promptly make alternate arrangements to dispose of Seller's water at Seller's sole cost and expense, and Seller shall reimburse Buyer for any costs incurred by Buyer in delivering Seller's water. Seller shall release, indemnify and defend Buyer from and against any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from personal injury, death, property damage, environmental damage, pollution, or contamination relating to the disposal of Seller's water by either evaporation or any alternate arrangement(s) selected by Seller. This Section C.3 by itself does not obligate Buyer to Dehydrate Seller's Gas

 
	
		
	C.4
	C02 Disposal. To the extent that Buyer removes C02 from Seller's Gas, Buyer shall dispose of Seller's CO2 by venting. If venting Seller's C02 is ever disallowed for any reason or is deemed to be uneconomic by Buyer, Buyer shall notify Seller and Seller shall promptly make alternate arrangements to dispose of Seller's CO2 at Seller's sole cost and expense, and shall reimburse Buyer for any costs incurred by Buyer in delivering Seller's C02. Seller shall release, indemnify and defend Buyer from and against any and ail damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from personal injury, death, property damage, environmental damage, pollution, or contamination relating to the disposal of Seller's C02 by either venting or any alternate arrangement(s) selected by Seller   This Section C.4 by itself does not obligate Buyer to Treat Seller's Gas

 
	
		
	C.5
	Gross Heating Value and Component Analysis. The component analysis and Gross Heating Value of the Gas shall be determined and calculated at least once each year by whomever is operating the CTM equipment, The component analysis and Gross Heating Value of the Gas shall be based on any of the following at the choice of the operator of the CTM equipment: spot samples, continuous samples, or on-line analysis  The component analysis of the Gas shall be performed by Gas chromatography in accordance with GPA 2261 or any pertinent revision(s) thereto or replacement(s) thereof. If the component percentages fall outside the limits of GPA 2261, then the operator of the CTM equipment shall make a reasonable judgment as to the accuracy of the component analysis. If neither Party objects in writing to the results within sixty (60) Days after their delivery, such results shall become conclusive. If either Party objects in writing to the results within sixty (60) Days after their delivery, then: in the case of spot samples, a re-sampling, redetermination and recalculation shall be performed by a third party acceptable to both Parties and such third party's results shall be used; and in the case of continuous samples or on-line analysis, the analyzer shall be tested for accuracy according to GPA 2261 and, if warranted, a recalculation of the components shall be made by a means acceptable to the Parties. The cost of any re-sampling, retesting, redetermination and/or recalculation shall be borne by the objecting Party.

 

 
 

 

 

	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-10

	 
	 

 
	
		
	C.6 
	Correction of Gross Heating Value for Water Vapor, The Gross Heating Value of the Gas shall be corrected for water vapor content in accordance with GPA 181 and 2172. Gas having a water vapor content of greater than seven (7} pounds per MMcf at CTM shall be considered fully saturated. Gas having a water vapor content of less than or equal to seven (7) pounds per MMcf at CTM shall be considered dry.

 
	
		
	C.7
	Computation Factors. The specific gravity of the Gas shall be calculated by the operator of the CTM equipment and shall be adjusted for the difference between the specific gravity in the ideal state and in the real state in accordance with ANSI/API 2530. The deviation of the Gas from Boyle's law shall also be calculated by the operator of the CTM equipment and shall be determined in accordance with AGA Transmission Measurement Committee Report No 8, Both the specific gravity of the Gas and the deviation of the Gas from Boyle's law shall be based on the component analysis obtained pursuant to Section C.5.

 
	
		
	D. 
	VOLUME

 
	
		
	D.1 
	Determination of Temperature for Volume Calculation. The temperature of the Gas shall be determined by a temperature recording device installed by the operator of the CTM equipment in accordance with ANSI/API 2530 and other industry standards. If the temperature of the Gas is recorded by chart, the arithmetic average of the temperatures recorded during periods of Gas flow shall be used in calculating the Mcf.

 
	
		
	D.2
	Correction of Volume Due to Calculation Error. An error in volume calculation for a given Receipt Point shall be corrected for such period as the error is determined to have existed, not to exceed one (1) year. In no event, however, shall Buyer be obligated to correct an error in volume calculation for a given Receipt Point unless it resulted in an error of greater than 100 MMBtu per Accounting Period at the Receipt Point during the correction period, Such correction shall only be processed by Buyer prospectively with the current Accounting Period's business

 
	
		
	D.3
	Custody Transfer Measurement, CTM for any Receipt Point in existence as of the Effective Date shall be performed by whomever is providing CTM at that Receipt Point as of the Effective Date. However, if Buyer installs CTM equipment at any Receipt Point after the Effective Date, then CTM at that Receipt Point shall be performed by Buyer. Except as otherwise provided in this Section D, all CTM and CTM equipment shall comply with ANSI/API 2530. Meter charts may be rotated as determined by Buyer, Buyer may install and operate electronic flow measurement equipment to perform CTM, in which case it shall be installed and operated in accordance with the applicable methods and standards that have been approved by the American Petroleum institute or successor entity. When alternate methods and standards are permitted for low volume wells by any applicable regulatory agency with jurisdiction, then such alternate methods and standards shall apply to CTM and CTM equipment serving such low volume wells.

 
	
		
	D.4 
	Notice of CTM Equipment Tests.Tests of the CTM equipment shall be performed by the operator of the CTM equipment at least once each calendar year. Where Buyer is operating the CTM Equipment, Buyer shall give Seller's Operator forty-eight (48) hours' notice of the time and location of any tests of the CTM equipment so that Seller's Operator may be present. Where Seller's Operator is operating the CTM Equipment, Seller's Operator shall give Buyer forty-eight (48) hours' notice of the time and location of any tests of the CTM equipment so that Buyer may be present   if the Party not operating the CTM equipment is unsatisfied with the test, it shall notify the operator of the CTM equipment to perform a retest. The cost of retesting shall be paid by the Party requesting the retest unless the retest shows a difference between the registration of the CTM equipment and test instrument of greater than two percent (2%) and 100 MMBtu, in which case the cost of retesting shall be paid by the Party who did not request the retest. Any CTM equipment found to be measuring inaccurately shall be promptly restored to accuracy by the operator of the CTM equipment.

 

 
 

 

 

	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-11

	 
	 

 
 
	
		
	D.5 
	Check Meter. Either Party may install and operate a check meter at its own expense to check the CTM equipment. Except as provided in Section D.6 or D.7, the readings of the CTM equipment shall govern. The check meter shall be installed so as not to interfere with the operation of the CTM equipment, Pulsation filters may be required if unacceptable square root error or gauge line error shift occurs as a result of the check meter, If a disagreement arises regarding the source of pulsation, a third party consultant shall be selected by the Parties to determine the source of the pulsation. The Party responsible for the source of the pulsation shall pay all the consulting fees and costs associated with identifying and eliminating the source of the pulsation, Seller will use the alternate taps on the meter run for check measurement   If alternate taps do not provide a viable option, Seller will seek a variance from any applicable regulatory entities and Buyer to use Buyer's meter taps.

 
	
		
	D.6
	Correction of CTM Equipment Inaccuracies. If any test conducted pursuant to Section D.4 reveals an inaccuracy of greater than two percent (2%) and 100 MMBtu in the registration of the CTM equipment, the volume of Gas measured by such CTM equipment shall be corrected for such period as the inaccuracy is confirmed to have existed, not to exceed one (1) year, or, if not confirmable, then for such period as the Parties can agree upon, not to exceed one (1) year   If the correction period is not confirmable and cannot be agreed upon, then the correction period shall extend back one-half (1/2) of the time elapsed since the CTM equipment was last calibrated, not to exceed one (1) year, The volume of Gas actually received per Day through the CTM equipment shall be determined on the basis of the best data available using the first of the following methods which is feasible:

	
			
	 
	(a)
	by using the registration of the other Party's check meter if registering accurately; or

	
			
	 
	(b)
	by calibration, test, or mathematical calculation if the percentage of inaccuracy is ascertainable with reasonable certainty; or

	
			
	 
	(c)
	by estimating the volume of Gas received by comparison to receipts during prior Accounting Periods under similar conditions when the CTM equipment was registering accurately.

 
In no event, however, shall Buyer be obligated to correct any volume measurement inaccuracy for given CTM Equipment unless it resulted in an inaccuracy of greater than two percent (2%) and 100 MMBtu per Accounting Period at the affected Receipt Point during the correction period. Such correction shall only be processed by Buyer prospectively with the current Accounting Period's business,
 
	
		
	D.7 
	Measurement During Periods of CTM Equipment Failure. Upon the occurrence of any event of Force Majeure that prevents Buyer from obtaining or recovering actual measurement data from the CTM Equipment, Buyer shall have the right to estimate the volume of Gas received by comparison to receipts during the prior Accounting Period under similar conditions until such time as Buyer is again able to obtain accurate data from the CTM Equipment, but in no event for a period longer than ninety (90) days. Any estimated volumes relied upon under such circumstances shall be considered actual volumes for such period of time.

 

 
 

 

 

 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-12

	 
	 

 
E.                       SCHEDULING
	
		
	E.1
	Receipt Scheduling. Four (4) Business Days prior to the beginning of each Accounting Period and two (2) Business Days prior to any change thereof during an Accounting Period, Seller's Operator, as directed by Buyer, shall submit electronically or in writing as may be required by Gatherer, the number of MMBtu of Gas that Seller's Operator will make available at each Receipt Point.

 
	
		
	F.
	DISPUTED STATEMENTS, AUDIT

	
		
	F.1
	Statement(s) Disputed by Seller. in the event that Seller disputes any statement prepared by Buyer pursuant to Section 3 2 of this Agreement, Seller shall provide written notice of the dispute to Buyer within one (1) year from the date of such statement. Notwithstanding such dispute, Buyer shall nonetheless pay the portion of any such statement that Seller concedes to be correct without prejudice to Seller's right to dispute the remaining portion of such statement. If any statement is not disputed by Seller, if at all, within one (1) year from the date of such statement, such statement shall be conclusively deemed to be correct. This one (1) year period for disputing statements does not extend the dispute period for any matter whose dispute period is less than one (1) year, as expressly provided in this Agreement, even if it otherwise impacts any such statement. Within sixty (60) Days after timely disputing a statement, Seller shall assemble all available documentation demonstrating the basis for the dispute and furnish it to Buyer   Failure of Seller to fully comply with each of the terms of this Section F.1 for disputing a statement shall constitute a waiver of Seller's right to dispute such statement.

 
	
		
	F.2
	Audit. The Parties shall each preserve all records relating to the performance of this Agreement for a period of at least two (2) years, or such longer periods as shall be required by law, regulation, rule or order. A Party shall have the right, at its own expense, upon reasonable written notice to and during the normal business hours of the other Party, to examine, audit and obtain copies of the relevant portion of the books, records and telephone recordings of the other Party, but only to the extent reasonably necessary to verify the accuracy of any statement, charge, payment or computation made under this Agreement  The right to examine, audit and obtain copies of the records of the other Party shall not apply to proprietary information of a Party not directly relevant to the transactions under this Agreement

 
	
		
	G.
	LIABILITY, INDEMNIFICATION AND WARRANTY

 
	
		
	G.1
	Seller's Liability and Indemnification. Seller shall be in control and possession of Seller's Gas until delivered to Buyer at the Receipt Point(s) and shall be fully responsible and liable for any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from personal injury, death, property damage, environmental damage, pollution, or contamination relating to Seller's Gas while in Seller's control and possession, and Seller agrees to release, indemnify and defend Buyer with respect thereto. Seller further agrees to release, indemnify and defend Buyer from and against any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from personal injury, death, property damage, environmental damage, pollution, or contamination relating to Seller's ownership and/or operation of the facilities delivering Gas to the Receipt Point(s) and/or Seller's performance or nonperformance of its obligations under this Agreement.

 
	
		
	G.2
	Buyer's Liability and Indemnification. Buyer shall be in control and possession of Seller's Gas from the time delivered to Buyer at the Receipt Point(s), and shall be fully responsible and liable for any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from personal injury, death, property damage, environmental damage, pollution or contamination relating to Seller's Gas white in Buyer's control and possession, and Buyer agrees to release, indemnify and defend Seller with respect thereto. Buyer further agrees to release, indemnify and defend Seller from and against any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from personal injury, death, property damage, environmental damage, pollution or contamination relating to Buyer's ownership, operation, use or direction, as applicable, of the Gathering System and Plant, and/or Buyer's performance or nonperformance of its obligations under this Agreement.

 

 

 

 
 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-13

	 
	 

 
	
		
	G.3 
	Warranty of Title. Seller warrants that at the time of delivery of Seller's Gas at the Receipt Point(s), it will have title to such Gas, free and clear of all liens, encumbrances, and claims whatsoever, and that it will, at the time of such delivery, have the right to deliver such Gas. Seller shall release, indemnify and defend Buyer against any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from Seller's breach of the foregoing warranty and Seller's warranties contained in Section 4.2 of this Agreement.

	
		
	G.4
	Limitations, Notwithstanding any language in this Agreement to the contrary, neither Party shall be released, indemnified or defended with respect to its own negligence or willful misconduct   No language in this Agreement is intended to provide indemnification greater than that which is permitted by applicable law. If any limitations upon indemnification are imposed by applicable law, then such limitations are hereby incorporated by reference and made a part of this Agreement. Except as necessary to provide the indemnifications contemplated in this Agreement against third party claim(s), neither Party shall be liable to the other for any incidental, consequential or punitive damages.

 
	
		
	H. 
	ROYALTIES, TAXES, FEES AND OTHER CHARGES

 
	
		
	H.1
	Royalties. Seller shall be responsible and liable for ail payments due to royalty owners, overriding royalty owners or any other persons whomsoever claiming any right to payment on account of the production, gathering, dehydration, treating and/or marketing of Seller's Gas, and agrees to make all such payments prior to the delinquency thereof   Buyer shall have no responsibility or liability for such payments, and Seller shall release, indemnify and defend Buyer against any and ail damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, relating to any such payments,

 
	
		
	H.2
	   Taxes, Fees and Other Charges. Seller shall be responsible and liable for the payment of ail taxes, fees and other charges (including penalties and interest thereon) now or hereafter levied or assessed by any municipal, county, state, federal or tribal government relating to Seller's Gas or Buyer's or Gatherer's services under or with respect to this Agreement. If Buyer is required to pay any such taxes, fees or other charges (or penalties or interest thereon), Seller shall immediately reimburse Buyer therefore.

 
	
		
	H.3
	Limitation on Tax Responsibility. Neither Party shall be responsible or liable for the taxes now or hereafter levied or assessed by any municipal, county, state, federal or tribal government upon the income, operations or facilities of the other.

 
	
		
	I.
	ALTERNATIVE DISPUTE RESOLUTION

 
Any dispute arising out of or relating to this Agreement shall be resolved in accordance with the procedures specified in this Article i, which shall be the sole and exclusive procedures for the resolution of any such disputes   The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between senior executives of the Parties who have authority to settle the controversy. Any Party may give the other Party written notice of any dispute not resolved in the normal course of business. Within fifteen (15) Days after delivery of the notice, the receiving Party shall submit to the other a written response. The notice and the response shall include (a) a statement of each Party's position and a summary of arguments supporting that position, and (b) the name and title of the senior executive who will represent that Party and of any other person who will accompany such executive. Within thirty (30) Days after delivery of the disputing Party's notice, the designated senior executives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one Party to the other will be honored. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.
 

 

 

 
 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-14

 
If the dispute has not been resolved by negotiation of the designated senior executives of the Parties within sixty (60) Days of the receiving Party's receipt of the disputing Party's notice, or if the Parties failed to meet within thirty (30) Days of the receiving Party's receipt of the disputing Party's notice, the Parties shall endeavor to settle the dispute by mediation under the then-current CPR Institute for Dispute Resolution mediation procedure in effect on the date of this Agreement. Unless otherwise agreed, the Parties will select a mediator from the CPR Panels of Distinguished Neutrals. Notwithstanding the provisions of this clause, either Party may seek from any court having jurisdiction hereof any interim, provisional or injunctive relief that may be necessary to protect its rights or property or maintain the status quo before, during or after the pendency of the mediation proceeding. The institution and maintenance of any judicial action or proceeding for any such interim, provisional or injunctive relief shall not constitute a waiver of the right or obligation of either Party to submit the dispute to negotiation and mediation as described above, including any claims or disputes arising from the exercise of such interim, provisional or injunctive relief. If the dispute has not been resolved by mediation as provided herein within ninety (90) Days of the initiation of the above procedures, either Party may initiate litigation upon thirty (30) Days' written notice to the other Party; provided, however, that if one Party has requested the other to participate in any of the above non-binding procedures and the other has failed to participate, the requesting Party may initiate litigation before expiration of the above period. The prevailing Party in the resolution of any dispute hereunder shall be entitled to have its costs and expenses incurred in the prosecution of such dispute (including, without limitation, reasonable attorneys' fees and expenses) reimbursed by the other Party promptly after the resolution thereof
 
	
		
	J. 
	MISCELLANEOUS

 
	
		
	J.1 
	New Requirements of Interconnecting Pipeline(s).Buyer may from time to time become subject to new requirements imposed by the Interconnecting Pipeline(s)   Buyer shall provide written notice to Seller of any such new requirements. Thereafter, Seller shall promptly comply with such new requirements or Buyer may suspend or terminate this Agreement. If Buyer has not suspended or terminated this Agreement in accordance with the foregoing clause of this Section J.1, Seller shall release, indemnify, and defend Buyer from any claims, costs or expenses incurred by Buyer resulting from Seller's failure to comply with such new requirements.

 
	
		
	J.2
	Governing Law/Venue. This Agreement shall be interpreted, construed, and governed by the laws of the State of Colorado, without regard to conflicts of law principles thereof.  Venue shall be the State or Federal Courts in Colorado.

 
	
		
	J.3
	Severability. Should any part of this Agreement be found to be unenforceable or be required to be modified bya court or governmental authority, then only that part of this Agreement shall be affected or so modified, The remainder of this Agreement shall remain in force and unmodified. If the absence or modification of the affected part of this Agreement substantially deprives Party of the economic benefit of this Agreement or substantially impacts a Party's economic benefit hereunder, the Parties shall negotiate reasonable and enforceable provisions to restore the economic benefit to the Party so deprived or impacted consistent with the intent originally reflected in this Agreement. If the Parties are unable to do so, then either Party may terminate this Agreement by giving the other Party written notice of termination no later than sixty (60) Days after any provision of this Agreement was determined to be unenforceable or modified by a court or governmental authority.

 

 
 

 

 

 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-15

	 
	 

 
 
	
		
	J.4 
	Waiver. A waiver by either Party of any one or more defaults by the other Party shall not operate as a waiver of any future default(s), whether of a like or different character.

 
	
		
	J.5 
	Confidentiality. The Parties and their respective officers, directors, employees, agents and representatives shall keep the terms of this Agreement confidential for the term hereof. However, either Party may disclose the terms of this Agreement to the following persons or entities in the following circumstances:

 
	
			
	 
	(a)
	To financial institutions requiring such disclosure as a condition precedent to making or renewing a loan or independent certified public accountants for purposes of obtaining a financial audit; provided, however, that such financial institutions or accountants have agreed in writing to keep the terms of this Agreement confidential;

 
	
			
	 
	(b)
	To courts or other governmental authorities, including persons or entities to whom disclosure is required by such courts or other governmental authorities, if such disclosure is required by law, regulation, rule or order; provided, however, that the Party making such disclosure shall use its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the terms of this Agreement;

 
	
			
	 
	(c)
	To any purchaser, or any potential purchaser, of ail or any portion of the Gathering System and to any of such purchaser's agents, attorneys, lenders or their representatives, provided however that all such parties or persons shall first have agreed in writing to maintain the confidentiality of the terms and provisions of this Agreement; and

 
	
			
	 
	(d)
	To any purchaser, or potential purchaser, of all or any portion of Seller's interest in the wells, leasehold estates or other rights to produce Gas dedicated hereto and to any of such purchaser's agents, attorneys, lenders or their representatives, provided however that all such parties or persons shall first have agreed in writing to maintain the confidentiality of the terms and provisions of this Agreement.

 
Under no circumstances shall the terms of this Agreement be disclosed to any other third party, including any newspaper, magazine or other publication, without the prior written consent of the other Party,
 
	
		
	J.6 
	Transfer. Any transfer, whether voluntary or involuntary, of all or any part of Seller's right, title, or interest in the Gas committed to Buyer under this Agreement shall not impair its commitment to Buyer. Seller shall notify in writing any potential transferee that such Gas remains committed to Buyer pursuant to this Agreement, and Seller shall ensure that such Gas when produced is delivered to Buyer during the term of and in accordance with this Agreement, Any such transfer shall not impair Buyer's rights under this Agreement as against Seller. Seller shall notify Buyer of any such transfer within ten (10) Business Days of the effective date thereof Failure of Seller to so notify Buyer shall not impair Buyer's rights under this Agreement.

 
Any transfer, whether voluntary or involuntary, of all or any part of  Buyer's or Gatherer's right, title, or interest in the Agreement or Gatherer's facilities shall not impair the duties and obligations of Buyer or its transferee to Seller under the Agreement and shall be subject to this Agreement  Any such transfer shall not impair Seller's rights under this Agreement as against Buyer, Buyer shall notify Seller of any such transfer within ten (10) Business Days of the effective date thereof. Failure of Buyer to so notify Seller shall not impair Seller's rights under this Agreement.

 
 

 

 

	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-16

	 
	 

 
	
		
	J.7 
	No Third Party Beneficiaries. It is the intent of the Parties that no person or entity besides Buyer, Seller and their respective successors and permitted assigns shall be entitled to enforce any provision of this Agreement and that the covenants and obligations set forth in this Agreement are solely for the benefit of Buyer, Seller and their respective successors and permitted assigns.

 
	
		
	J.8  
	Amendment. Except as expressly provided otherwise in this Agreement no amendment of this Agreement shall be binding unless in writing and signed by the Parties.

 
	
		
	J.9
	Counterparts, This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, and such counterparts together shall constitute one instrument

 
	
		
	J.10
	Further Assurances. Each Party shall promptly execute, deliver, file or record such agreements, instruments, certificates and other documents and take such actions as may reasonably requested by the other Party or as may otherwise be necessary or proper to carry out the terms and provisions of this Agreement and to consummate the transactions contemplated hereby.

 
	
		
	J.11
	Telephone Recordings. The Parties agree that each Party may electronically record all telephone conversations with respect to this Agreement between their respective employees, upon notice to the other Party. Each Party shall obtain any necessary consent of its agents and employees to such recording,

 
	
		
	K.
	REPRESENTATIONS AND WARRANTIES

	
		
	K.1 
	Representations and Warranties of the Parties. Each Party represents and warrants to and in favor of the other Party, that:

 
	
			
	 
	(a)
	it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; and is duly qualified, authorized to do business and in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary;

 
	
			
	 
	(b)
	it has all requisite power and authority to own or hold under lease or easement and operate the property it purports to own or hold under lease or easement and to carry on its business as now being conducted and as proposed to be conducted under this Agreement;

 
	
			
	 
	(c)
	it has the requisite power and authority to execute, deliver and perform its obligations under this Agreement;

 
	
			
	 
	(d)
	it has duly authorized, executed and delivered this Agreement, and neither its execution and delivery hereof nor its consummation of the transactions contemplated hereby nor its compliance with the terms hereof or performance of its obligations hereunder (i) does or will contravene any of its organizational documents or, in any material respect, any law, statute or other legal requirement applicable to or binding upon it or its properties; (ii) does or will contravene or result in any material breach of or constitute any material default under any agreement or instrument to which it is a party or by which it or any of its properties may be bound or affected; or (iii) does or will require the consent or approval of any person or entity that has not already been obtained;

 

 

 

 

 
 
	
		
	STANDARD TERMS AND CONDITIONS
	PAGE A-17

	 
	 

 
 
	
			
	 
	(e)
	this Agreement is its legal, valid and binding obligation, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law);

	
			
	 
	(f)
	there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or, to its knowledge, threatened against or affecting it or contesting or affecting its execution, delivery or performance, or the validity or enforceability, of this Agreement; and

	
			
	 
	(g)
	it will be able to deliver and sell, or receive and buy, as applicable, Seller's Gas in the quantities and for the prices specified in this Agreement.

 
Each Party (the "Warranting Party") shall release, indemnify and defend the other Party against any and all damages, claims, actions, expenses, penalties and liabilities, including attorney's fees, arising from the Warranting Party's breach of any of the foregoing warranties, or any other representations or warranties made by the Warranting Party under this Agreement.
 

 
 

 

 

 
EXHIBIT B
TO THE GAS PURCHASE AGREEMENT
DATED AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
  PETROLEUM DEVELOPMENT CORPORATION 
 
 
INTENTIONALLY OMITTED
 

 

 

 
 
EXHIBIT C
TO THE GAS PURCHASE AGREEMENT
DATED AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
PETROLEUM DEVELOPMENT CORPORATION
 
 
RECEIPT POlNT(S)
	
						
	Meter Number
	Receipt Point Name
	Point Type
	Location
	County
	State

	RTU 1224
	PDC Starkey 1
	Low Pressure
	 
	Garfield
	CO

	RTU1501
	PDC Starkey 2
	Low Pressure
	 
	 
	 

	RTU 1508
	PDC Starkey 3
	Low Pressure
	 
	 
	 

	RTU 0414
	PDC Nolte
	Low Pressure
	 
	 
	 

	RTU 1263
	PDC Chevron
	Low Pressure
	 
	 
	 

	RTU 1504
	PDC Redpoint
	Low Pressure
	 
	 
	 

	RTU 11509
	PDC Logan
	Low Pressure
	 
	 
	 

	RTU
	PDC Garden Gulch
	High Pressure
	 
	 
	 

 

 

 

 

 
EXHIBIT D
TO THE GAS PURCHASE AGREEMENT
DATED AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
PETROLEUM DEVELOPMENT CORPORATION
 
 
DELIVERY POINT(S)
 
	
					
	Delivery Point(s)
	Location
	EBB Nom Loc.
	County
	State

	Colorado Interstate Gas Company (Parachute)
	Sec. 8-T2S-R96W
	PCH
	Rio Blanco
	CO

	Colorado Interstate Gas Company (Roan Cliffs)
	Sec. 2-T7S-R96W
	RCL
	Garfield
	CO

	Questar Pipeline Company
	Sec 18-T6S-R93W
	MAP 106
	Garfield
	CO

	TransColorado Gas Transmission Co (Raccoon Hollow)
	Sec 28-T8S-R97W
	Pin 40412
	Mesa
	CO

	TransColorado Gas Transmission Co (Greasewood)
	Sec 5-T2S-R96W
	Pin 36101
	Rio Blanco
	CO

 

 

 

 
 
EXHIBIT E
TO THE GAS PURCHASE AGREEMENT
DATED AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
PETROLEUM DEVELOPMENT CORPORATION
 
 
SERVICE AND FEE DESCRIPTION
 
	
						
	Gathering and Processing Fee a/
	Gathering and Processing Fee a/
	FL&U
(Low pressure receipt points)
	FL&U
(High pressure receip points)
	Low Delivery Fee
	Excess C02 Treating Fee a/

	 
	 
	 
	 
	 
	 

	$[ * ] per MMBtu Received at Low Pressure
Receipt Point
	$[ * ] per MMBtu Received at a High Pressure Receipt Point
	Actual usage
(Initially [ * ]%)
	Actual usage
(Initially [ * ]%)
	$[ * ] per Accounting
Period per Receipt Point
	$[ * ] per Mcf for each 1 00% Greater than 3.00%

(
 
	
			
	 a/
	 
	Annually, at the beginning of each Contract Year, Buyer shall adjust the Gathering and Processing Fee and the Excess C02 Treating Fee by a percentage equal to the annual average percentage change, from the preceding Contract Year, in the cumulative implicit Gross Domestic Product price deflator ("GDPDEF") computed and published by the U.S. Department of Commerce.

 

 

 

 
 
EXHIBIT F
TO THE GAS PURCHASE AGREEMENT
DATES AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
PETROLEUM DEVELOPMENT CORPORATION
 
GAS VOLUMES COMMITTED
 
	
				
	Contract Year
	Seller's Annual Volume
(In MMBtu)
	Seller's MDQ
(In MMBtu)

	1
	June 1, 2006-August 31, 2006
	1,978,000
	21,500

	1
	September 1, 2006-May 31, 2007
	15,578,760
	57,065

	2
	June 1, 2007
	22,890,878
	63,585

	3
	June 1, 2008
	32,393,817
	88,750

	4
	June 1, 2009
	35,164,648
	96,342

	5
	June 1, 2010
	35,415,768
	97,030

	6
	June 1, 2011
	36,204,441
	99,190

	7
	June 1, 2012
	36,588,969
	100,244

	8
	June 1, 2013 - May 31, 2014
	31,880,469
	87,344

	9
	June 1, 2014
	25,068,839
	68,682

	10
	June 1, 2015
	19,328,393
	52,955

	11
	June 1, 2016
	14,757,224
	40,431

	12
	June 1, 2017
	11,877,191
	32,540

	13
	June 1, 2018
	9,750,519
	26,714

	14
	June 1, 2020
	7,695,618
	20,920

	15
	June 1, 2021
	5,771,836
	15,813

 

 

 

 
 
EXHIBIT G
TO THE GAS PURCHASE AGREEMENT
DATES AS OF JUNE 1, 2006
Between
WILLIAMS PRODUCTION RMT COMPANY
and
RILEY NATURAL GAS COMPANY
and
PETROLEUM DEVELOPMENT CORPORATION
 
TWO YEAR MONTHLY MDQ SCHEDULE
 
	
			
	Month
	MDQ Mcf
	MDQ MMBtu

	June 2006
	20,000
	21,500

	July 2006
	20,000
	21,500

	August 2006
	20,000
	21,500

	September 2006
	52,900
	56,868

	October 2006
	55,280
	59,426

	November 2006
	56,850
	61,114

	December 2006
	54,290
	58,362

	January 2007
	52,040
	55,943

	February 2007
	50,040
	53,793

	March 2007
	51,250
	55,094

	April 2007
	52,000
	55,900

	May 2007
	52,890
	56,857

	June 2007
	59,460
	63,920

	July 2007
	59,430
	63,887

	August 2007
	63,910
	68,703

	September 2007
	64,090
	68,897

	October 2007
	64,550
	69,391

	November 2007
	66,230
	71,197

	December 2007
	63,650
	68,424

	January 2008
	61,330
	65,930

	February 2008
	59,200
	63,640

	March 2008
	57,260
	61,555

	April 2008
	61,300
	65,898

	May 2008
	59,240
	63,683WebFilings | EDGAR view

 

 

 
Exhibit 10.23
 
The Company has redacted certain confidential information in this agreement in reliance upon its confidential treatment request that it has filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. In this agreement, we indicate each redaction by use of an asterisk *.
 
 
 
GAS PURCHASE AND PROCESSING AGREEMENT
 
BETWEEN
 
DUKE ENERGY FIELD SERVICES, INC., A COLORADO CORPORATION
 
AND
 
UNITED STATES EXPLORATION, INC, A COLORADO CORPORATION
 
AND
 
PETROLEUM DEVELOPMENT CORPORATION, A NEVADA CORPORATION
 
 
("DEDICATED ACREAGE")
 
  
  

 

 

 
INDEX
 
	
					
	I
	REPRESENTATIONS OF SELLERS
	2
	 

	 
	 
	 
	 

	II
	COMMITMENT OF SELLERS' GAS
	2
	 

	 
	 
	 
	 

	III
	CONSTRUCTION OF PIPELINE GATHERING SYSTEM
	2
	 

	 
	 
	 
	 

	IV
	QUANTITY
	2
	 

	 
	 
	 
	 

	V
	GENERAL TERMS AND CONDITIONS
	3
	 

	 
	 
	 
	 

	VI
	PRICE
	3
	 

	 
	 
	 
	 

	VII
	NOTICES
	3
	 

	 
	 
	 
	 

	VIII
	TERM
	4
	 

	 
	 
	 
	 

	IX
	MISCELLANEOUS
	4
	 

	 
	 
	 
	 

	 
	EXHIBIT A - THE LEASES
	Page 1 A
	 

	 
	 
	 
	 

	 
	EXHIBIT B - APPENDIX - GENERAL TERMS AND CONDITIONS
	 

	 
	 
	 

	 
	1
	DEFINITIONS
	Page 1 E
	 

	 
	2
	POINT(S) OF DELIVERY, PRESSURE AND OWNERSHIP
	Page 2 B
	 

	 
	3
	RESERVATIONS OF SELLER
	Page 3 B
	 

	 
	4
	QUANTITY RESTRICTIONS
	Page 3 B
	 

	 
	5
	SELLER'S WARRANTIES
	Page 4 B
	 

	 
	6
	EASEMENTS
	Page 4 B
	 

	 
	7
	SHRINKAGE
	Page 4 B
	 

	 
	8
	GAS MEASUREMENT AND QUALITY
	Page 4 B
	 

	 
	9
	ALLOCATION OF RESIDUE GAS & PLANT PRODUCTS REVENUES
	Page 6 B
	 

	 
	10
	PRICING INFORMATION & REFUNDS
	Page 7 B
	 

	 
	11
	TAXES
	Page 7 B
	 

	 
	12
	PAYMENT
	Page 7 B
	 

	 
	13
	SELLER'S REPRESENTATIVE
	Page 8 B
	 

	 
	14
	REGULATORY BODIES
	Page 9 B
	 

	 
	15
	FORCE MAJEURE
	Page 9 B
	 

	 
	16
	DEFAULTS
	Page 10 B
	 

	 
	17
	UNECONOMIC WELL CONNECTIONS
	Page 10 B
	 

	 
	18
	UNECONOMIC OPERATION OF GAS PLANTS
	Page 10 B
	 

	 
	19
	LITIGATION - ATTORNEYS' FEES
	Page 11 B
	 

	 
	20
	DAMAGES
	Page 11 B
	 

	 
	21
	GENERAL
	Page 11 B
	 

(REVISED 10/11/99)
 
  
  

 

 

 
  
 
GPA 018 R (TLL,S/D)
 
GAS PURCHASE AND PROCESSING AGREEMENT
 
 
THIS GAS PURCHASE AND PROCESSING AGREEMENT, entered into as of the last date acknowledged below, (herein, as the same may be amended from time to time, called this "Agreement") by and between DUKE ENERGY FIELD SERVICES, INC., a Colorado corporation, with offices at 370 Seventeenth Street, Suite 900, Denver, Colorado 80202, hereinafter referred to as "Buyer/Processor", and UNITED STATES EXPLORATION, INC, a Colorado corporation, whose address is 1560 Broadway, Suite 1900, Denver, Colorado 80202, and PETROLEUM DEVELOPMENT CORPORATION, a Nevada corporation, whose address is 103 E. Main St., Bridgeport, WV 26330, hereinafter referred to collectively as "Sellers".
 
R E C I T A L S
 
 
	
		
	1
	Buyer/Processor owns, operates and maintains a natural gas gathering system, compression facilities and natural gas processing facilities, and Buyer/Processor's designee owns, operates and maintains certain natural gas liquids fractionation facilities (the "Fractionator"), all such facilities in the aggregate hereinafter referred to as the "Facilities", which Facilities are located in Weld, Larimer, Morgan, Adams and Boulder; Counties, Colorado, to enable Buyer/Processor to purchase and accept delivery of Sellers' natural gas (including natural gasoline and other liquefiable hydrocarbons), produced and saved from the oil and gas leases, lands and formations committed hereunder, at the Point(s) of Delivery defined herein.

 
	
		
	2
	Sellers own and hold, or have an interest or interests in certain oil and gas leases, wells and/or- lands described in Exhibit "A" attached hereto and made a part hereof, said oil and gas leases, wells and/or lands and formations thereunder hereinafter sometimes being referred to as the "Leases".

 
	
		
	3
	Sellers desires to sell to Buyer/Processor all of the Gas owned or controlled by Sellers which is produced and saved from the Leases covered hereunder; as well- as to contract with Buyer/Processor to process all such Gas upon the terms and for the consideration herein expressed.

 
	
		
	4
	Buyer/Processor desires to purchase, gather and process Sellers' Gas, as defined herein, utilizing the Facilities constructed, owned and operated by Buyer/Processor upon the terms and for the consideration herein expressed.

 
 
(DEDICATED ACREAGE)
 
  
  

 
  

 

 

 
	
		
	5
	Buyer/Processor has entered into, and may enter into additional, third-party Residue Gas Sales Agreements pursuant to which Buyer/Processor shall utilize its best efforts to sell the Residue Gas resulting from the processing of Sellers' Gas (as defined herein).

 
FOR GOOD AND VALUABLE CONSIDERATION, the Parties hereto agree as follows:
 
ARTICLE I
REPRESENTATIONS OF SELLERS
 
	
		
	1.1
	Sellers represent and warrant to Buyer/Processor, its successors and assigns, that Sellers own an interest in, or have the right to market Sellers' portion of the Gas produced and saved from the Leases ("Sellers' Gas") and that Sellers intend to construct, or cause to be constructed, the facilities necessary, if any, to enable Sellers to sell and deliver to Buyer/Processor for sale at the Point(s) of Delivery, as hereinafter set forth, all of Sellers' Gas in accordance with the terms and provisions of this Agreement.

 
ARTICLE II
COMMITMENT OF SELLERS' GAS
 
	
		
	2.1
	Subject to the terms and conditions contained herein, Sellers hereby commit to the performance of this Agreement all of Sellers' Gas produced and saved from the Leases, and to insure the faithful performance of the provisions of this Agreement, Sellers covenant to sell and deliver' the same to Buyer/Processor' at the Point(s) of Delivery without other disposition except as herein otherwise provided.

 
ARTICLE III
CONSTRUCTION OF PIPELINE GATHERING SYSTEM
 
	
		
	3.1
	Subject to the terms and conditions contained herein, Buyer/Processor agrees to construct or has already constructed sufficient miles of pipeline gathering system to connect all of the wells drilled and produced, or to be drilled and produced, on the Leases by Sellers ("Sellers Wells") at the Point(s) of Delivery.

 
ARTICLE IV
QUANTITY
 
	
		
	4 1
	Subject to the terms and conditions contained herein, Sellers shall deliver and sell to Buyer/Processor, and Buyer/Processor shall receive and purchase Sellers' Gas on a best efforts basis.

 
	
		
	4.2
	Sellers acknowledge and understand that Buyer/Processor will receive and purchase Sellers' Gas utilizing the Facilities which also receive, transmit and process Gas delivered to Buyer/Processor by other parties.

 
  
2

 

 

 

  
 
ARTICLE V
GENERAL TERMS AND CONDITIONS
 
	
		
	5.1
	The General Terms and Conditions set forth in the Appendix attached hereto as Exhibit "B" (the "Appendix") are the general terms and conditions applicable to this Agreement, which Appendix is by reference hereby incorporated into and made an integral part of this Agreement.

 
ARTICLE VI
PRICE
 
	
		
	6.1
	Effective the date of first deliveries of Sellers' Gas under this Agreement, Sellers shall receive a price for all of Sellers' Gas purchased hereunder which price shall be calculated as follows, pursuant to Section 9 of the Appendix:

 
	
			
	 
	A.
	[ * ] percent ([ * ]%) of the Residue Gas Revenues attributable to each of Sellers' Wells; plus

 
	
			
	 
	B.
	[ * ] percent ([ * ]%) of the Plant Products Revenue attributable to each of Sellers' Wells

 
	
		
	6.2
	Sellers shall be responsible for distribution of revenues to owners of interest in the Gas purchased by Buyer/Processor hereunder, as further described in the Payment section of the Appendix.

 
ARTICLE VII
NOTICES
 
	
		
	7.1
	All notices and communications required or permitted under this Agreement shall be in writing and any communication or delivery hereunder shall be deemed to have been duly made when delivered personally or three (3) business days following deposit in the United States mails, certified mail, return receipt requested, or one (1) business day following delivery to recognized overnight courier- service, or upon transmittal by facsimile, in each such case postage or charges prepaid and addressed as follows:

 
 
	
			
	TO:
	SELLERS' REPRESENTATIVE:
	 

	 
	 
	 

	 
	United States Exploration, Inc
	Petroleum Development Corporation

	 
	1560 Broadway, Suite 1900
	103 East Main Street

	 
	Denver, Colorado 80202
	P.O.  Box 26

	 
	 
	Bridgeport, WV 26330

 
	
				
	 
	ATTN:
	Connie L Nordberg
	Thomas E. Riley

	 
	 
	(303) 863-3505
	Vice President

	 
	 
	(303) 863-1932-FAX
	(304) 842-3597

	 
	 
	 
	(304) 842-8936- FAX

 
  
3

 

 

 
  
 
TO:         BUYER/PROCESSOR:
 
Duke Energy Field Services, Inc
370 - 17th Street, Suite 900
Post Office Box 5493
Denver, Colorado 80217
 
	
			
	 
	ATTN:
	Vice President - Gas Supply

(303) 595-3331
(303) 595-0480 - FAX
 
 
ARTICLE VIII
TERM
 
	
		
	8.1
	This Agreement shall be effective as of October 1, 1999 and shall continue and remain in full force and effect for the economic life of the Facilities.

 
ARTICLE IX
MISCELLANEOUS
 
9.1           Respecting certain rights of the Parties hereto:
 
	
			
	 
	A.
	This Agreement shall be binding upon and inure to the benefit of the Parties hereto, their successors, assigns, heirs, administrators and/or executors and shall constitute a real right and covenant running with the lands and leasehold-interests covered hereby. Either Party may assign his or its right, title, and interest in, to and under this Agreement, including, without limitation, any and all renewals, extensions, amendments, and/or supplements hereto; provided, however; that no such assignment shall in any way operate to enlarge, alter, or change any right or obligation of the other Party or Parties hereto.  No assignment shall be effective or binding until a copy of same has been furnished to the other Party.

 
	
			
	 
	B.
	Further, this Agreement, including, without limitation, any and all renewals, extensions, amendments and/or supplements hereto shall be binding upon any purchaser of Buyer/Processor's Facilities and upon any purchaser of Sellers' Leases, or any part thereof or interest therein which are subject to this Agreement. It is agreed that no sale of Sellers' Leases, or any part thereof or interest therein, or of all or substantially all of Buyer/Processor's Facilities, shall be made unless the purchaser thereof shall assume and agree to be bound by this Agreement insofar as the same shall affect and relate to the Leases, Facilities or interests so sold or conveyed. It is further agreed, however; that nothing herein contained shall in any way prevent either Party hereto from pledging or mortgaging all or any part of such Party's Leases or Facilities as security under any mortgage, deed of trust, or other similar lien, or from pledging this Agreement or any benefits accruing hereunder to the Party making the pledge, without the assumption of obligations hereunder by the mortgagee, pledgee or other grantee under such an instrument.

 
  
4

 

 

 

  
 
	
			
	 
	C.
	Nothing in this Agreement, expressed or implied, confers any rights or remedies on any person or entity not a party hereto other than successors and assigns, or heirs, administrators or executors of the Parties hereto.

 
	
		
	9.2
	Sellers expressly do not by the terms of this Agreement, sell, transfer or assign unto Buyer/Processor any title or interest whatsoever in the Leases or any pipe, meters, lines or other equipment of any nature owned or used by Sellers in the operation of Sellers' Wells and the Leases.

 
	
		
	9.3
	This Agreement constitutes the entire agreement and understanding between the Parties hereto and supersedes and renders null and void and of no further force and effect any prior understandings, negotiations or agreements between the Parties relating to the subject matter hereof, and all amendments and letter agreements in any way relating thereto. No provision of this Agreement may be changed, modified, waived or discharged orally, and no change, modification, waiver or amendment of any provision will be effective except by written instrument to be executed and approved by the Parties hereto.

 
	
		
	9.4
	THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 
 
THE PARTIES HERETO have executed this Agreement as of the day and year first above written.
 
 
	
						
	 
	 
	BUYER/PROCESSOR:
	 

	(SEAL)
	 
	 
	 

	ATTEST:
	 
	DUKE ENERGY FIELD SERVICES, INC
	 

	 
	 
	A COLORADO CORPORATION
	 

	 
	 
	 
	 

	By:
	/s/ WILLIAM B. MATHEWS
	 
	BY:
	/s/ KEVIN L. WILLIAMS
	 

	 
	WILLIAM B. MATHEWS,
	 
	 
	KEVIN L. WILLIAMS,
	 

	 
	ASSISTANT SECRETARY
	 
	 
	VICE PRESIDENT
	 

 
  
5

 
  
 

 

 

	
						
	 
	 
	 
	 
	SELLERS:

	 
	 
	 
	 
	 
	 

	(SEAL)
	 
	 
	 
	 

	ATTEST:
	 
	 
	UNITED STATES EXPLORATION, INC.

	 
	 
	 
	 
	A COLORADO CORPORATION

	 
	 
	 
	 
	 
	 

	BY:
	/s/ Shirley R. Kovar
	 
	BY:
	/s/ Bruce D. Benson
	 

	 
	Shirley R. Kovar
	 
	 
	Bruce D. Benson
	 

	 
	Assistant Secretary
	 
	 
	President
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	SELLER'S TAX ID NO. 84-1120323

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	(SEAL)
	 
	 
	 
	 

	ATTEST:
	 
	 
	PETROLEUM DEVELOPMENT CORPORATION

	 
	 
	 
	 
	A NEVADA CORPORATION

	 
	 
	 
	 
	 
	 

	BY:
	/s/ Dale G Rettinger
	 
	BY:
	/s/ Thomas E. Riley
	 

	 
	Assistant Secretary
	 
	 
	Vice President
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	SELLER'S TAX ID NO. 95-2636730

 
	
		
	STATE OF COLORADO
	)

	 
	) ss

	CITY & COUNTY OF DENVER
	)

 
Before me, Elaine D. Hegler, a Notary Public in and for said County and State, on this 28th day of October, 1999, personally appeared KEVIN L. WILLIAMS and WILLIAM B. MATHEWS, known to me to be the Vice President and Assistant Secretary, respectively, of Duke Energy Field Services, Inc, a Colorado corporation, on behalf of said corporation and acknowledged to me that they executed this Agreement for the considerations and purposes therein set forth.
 
Given under my hand and seal of office this 28th day of October, 1999.
 
 
	
				
	MY COMMISSION EXPIRES:
	 
	/s/ Elaine D. Hegler
	 

	 
	 
	NOTARY PUBLIC
	 

	11/17/2002
	 
	 
	 

 
  
6

 

 

 

  
 
 
	
		
	STATE OF Colorado
	)

	 
	) ss

	COUNTY OF Denver
	)

 
Before me, CONSTANCE L. NORDBERG, a Notary Public in and for said County and State, on this 15 day of October, 1999, personally appeared BRUCE D. BENSON, and SHIRLEY R. KOVAR, known to me to be the PRESIDENT and ASSISTANT SECRETARY respectively, of United States Exploration, Inc., a Colorado corporation, on behalf of said corporation and acknowledged to me that they executed this Agreement for the considerations and purposes therein set forth.
 
Given under my hand and seal of office this 15 day of October 1999.
 
 
	
			
	MY COMMISSION EXPIRES:
	 
	/s/ Constance L. Nordberg

	 
	 
	NOTARY PUBLIC

	May 5, 2002
	 
	 

	 
	 
	CONSTANCE L. NORDBERG

	 
	 
	NOTARY PUBLIC

	 
	 
	STATE OF COLORADO

	 
	 
	My Commission Expires May 5, 2002

 
	
		
	STATE OF West Virginia
	)

	 
	) ss

	COUNTY OF HARRISON
	)

 
Before me, Misty L. Finch, a Notary Public in and for said County and State, on this 20th day of October, 1999, personally appeared Dale G. Rettinger and Thomas E. Riley known to me to be the Asst. Secretary and Vice President, respectively, of Petroleum Development Corporation, a Nevada corporation, on behalf of said corporation and acknowledged to me that they executed this Agreement for the considerations and purposes therein set forth.
 
Given under my hand and seal of this 20th day of October, 1999
 
	
			
	MY COMMISSION EXPIRES:
	 
	/s/ Misty L. Finch

	 
	 
	NOTARY PUBLIC

	October 16, 2001
	 
	 

 

 
 
  
7

 
  
 

 

 

	
															
	EXHIBIT “A”

	LEASE SCHEDULE

	ESSOR
	 
	LESSEE
	 
	DESCRIPTON
	 
	LEASE DATE/TERM
	 
	RECORDED BOOK PAGE
	 
	COUNTY
	 
	GROSS ACRES
	 
	NET ACRES

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Union Pacific Resources Company
	 
	United States Exploration, Inc.
	 
	T4N-R67W Sec. 13; NENE Weld Co., CO Insofar and only Insofar as the Lease covers the Codell formation and further limited to the wellbore of the Bernhardt 13A well located in the NENE of section 13, T4N-R67W
	 
	To be determined
*
	 
	To be determined
*
	 
	Weld
	 
	40
	 
	40

 
	
			
	 
	*
	To be earned under that certain Exploration Agreement dated effective 6/1/98, as amended, by and between Union Pacific Resources Company and United States Exploration, Inc.

 
  
  

 

 

 
 
(ROGGEN)
 
EXHIBIT B
 
APPENDIX
TO
GAS PURCHASE AND PROCESSING AGREEMENT
GENERAL TERMS AND CONDITIONS
 
	
		
	1
	DEFINITIONS

 
A.          For the purposes of the Gas Purchase and Processing Agreement {the "Agreement") to which this Appendix is attached, unless the context of the Agreement requires otherwise, the following terms and expressions used therein and in this Appendix shall be defined as follows:
 
	
			
	 
	1)
	"Accounting Period", except the initial "Accounting Period", shall mean a period of one calendar month, commencing at 8:00 a.m. local time on the first day of each month, and ending at 8:00 a.m. local time on the first day of the succeeding calendar month. The initial “Accounting Period" shall commence at 8:00 a.m. local time on the date of initial deliveries of Gas hereunder, continuing for a period of consecutive calendar days until 8:00 a.m. local time on the first day of the succeeding calendar month.

	
			
	 
	2)
	"Btu" (British Thermal Unit) shall mean the amount of heat required to raise the temperature of one (1) avoirdupois pound of pure water from fifty-eight and five-tenths degrees (58.5°) to fifty-nine and five-tenths degrees (59.5°) Fahrenheit under standard conditions.

	
			
	 
	3)
	"Buyer/Processor's Gathering System" shall mean the pipelines (including field compression) and appurtenances constructed by Buyer/Processor for the purpose of accepting delivery and transmitting Seller's Gas from the Point(s) of Delivery to the Gas Plants.

	
			
	 
	4)
	"Cubic foot of Gas" shall mean the amount of Gas required to fill a cubic foot of space when the Gas is at a base pressure of 14.65 Psia and at a base temperature of 60° F.

	
			
	 
	5)
	"Day" shall mean the 24-hour period beginning and ending at 8:00 a.m. Local Time.

	
			
	 
	6)
	"Facilities" shall have meaning ascribed by the first Recital of the Agreement.

	
			
	 
	7)
	"Fractionator" shall have the meaning ascribed by the first Recital of the Agreement.

	
			
	 
	8)
	"Gas" shall mean the effluent vapor stream including ail of the constituents thereof, entrained liquids as produced from a well, whether a gas well or an oil well, and delivered into the Facilities by Seller and other producers at their respective Point(s) of Delivery.

	
			
	 
	9)
	"Gas Plant” shall mean Buyer/Processor's Roggen natural gas processing plant (excluding fractionation facilities) located in the SW1/4 of Section 24, Township 2 North, Range 63 West, Weld County, Colorado, as well as those processing facilities which may be added or deleted (including the Roggen plant) by Buyer/Processor in its sole discretion from time to time for the efficient operation of any of the Facilities.  Buyer/Processor, in its sole discretion from time to time for the efficient administration of the Facilities, may perform allocations under this Agreement on a single processing facility basis or on a pooled basis among any or all of the processing facilities constituting the Gas Plant.

	
			
	 
	10)
	"MMBtu" shall mean one million (1,000,000) Btu's.

{Revised 10/11/99}
 
  
  

 

 

 
  
 
	
			
	 
	11)
	"Market Price" shall be defined as the weighted average commodity price per MM Btu received by Buyer/Processor for the amounts of Residue Gas (excluding any storage amounts) sold to uncommitted Residue Gas markets via the pipeline facilities of Public Service Company of Colorado or Colorado Interstate Gas Company at the best price then obtainable in Buyer/Processor's sole judgment and discretion, less any applicable transportation, handling and storage fees Incurred and paid by Buyer/Processor in association therewith. As used above, "uncommitted Residue Gas markets" shall mean those markets not committed to specific Gas Purchase and Processing or similar Agreements and/or sellers.

	
			
	 
	12)
	"Month" shall mean the period beginning at 8:00 a.m. local time on the first day of a calendar month and ending at 8:00 a.m. local time on the first day of the next succeeding calendar month.

	
			
	 
	13)
	"Party" or "Parties" shall mean one or both, respectively, of the signatories to this Agreement.

	
			
	 
	14)
	"Plant Products” shall mean all liquefiable hydrocarbons including without limitation ethane, propane, butane, and natural gasoline, individually or as a mixture, as determined by the latest GPA Publication 2145 extracted and saved at the Gas Plants from all of the Gas delivered to and processed by Buyer/Processor, whether or not fractionated into individual components at the Fractionator. Plant Products shall not be deemed to include liquids or drip (condensed hydrocarbons) which have collected in and are removed from Buyer/Processor's Gathering System upstream of the inlets to the Gas Plant.

	
			
	 
	15)
	"Points of Delivery" shall have the meaning ascribed to it by Section 2 of this Appendix.

	
			
	 
	16)
	"Psia" shall mean pounds per square inch absolute.

	
			
	 
	17)
	"Psig" shall mean pounds per square inch gauge.

	
			
	 
	18)
	"Residue Gas" shall mean that portion of all Gas, as measured at the tailgate of the Gas Plant, remaining after the extraction therefrom of Plant Products, Gas Plant and field fuel requirements, and Gas Plant and field losses or uses of Gas at the Gas Plant.

	
			
	 
	19)
	"Seller's Gas Reserves” shall mean the total quantity of Seller's Gas attributable to Seller's present or future interest in, and/or which Seller has the right to market from the Leases.

	
			
	 
	20)
	"Shrinkage" shall mean the thermal reduction in the Gas which results from Facilities fuel gas consumption and the extraction of Plant Products.

	
		
	2
	POINT(S) OF DELIVERY, PRESSURE AND OWNERSHIP

 
A.           The Point(s) of Delivery of all Gas delivered under the Agreement shall be at the inlet of Buyer/Processor's metering facilities located at Seller's lease separation facilities or at such other Point(s) of Delivery as may be mutually agreed upon in writing by the Parties from time to time, and title to said Gas (including such hydrocarbons from the Gas that have not been or cannot be recovered through the use of conventional mechanical wellhead gas-oil separators) shall pass from Seller to Buyer/Processor at said Point(s) of Delivery with respect to all amounts of Seller's Gas sold to Buyer/Processor hereunder.
 
B.           Seller, at its own expense, shall equip, maintain and operate all facilities to deliver Seller's Gas to Buyer/Processor at the Point(s) of Delivery, including, but not limited to, installation and maintenance of Seller's gathering facilities and mechanical separation equipment.
 
C.           Buyer/Processor shall construct, maintain, own and operate all necessary facilities to accept Seller's Gas from Seller at the Point(s) of Delivery.  Buyer/Processor shall keep Buyer/Processor's Gathering System and Facilities reasonably clear of obstruction and in consideration thereof shall own all vapors, liquids or drip collected and removed from same.
 
  
2 B

 

 

 
 
D.           Seller will deliver Gas at the Point(s) of Delivery at a pressure sufficient to enter Buyer/Processor's Gathering System, which Buyer/Processor agrees to maintain at an average maximum working pressure during each Accounting Period of one hundred fifty (150) Psig. However, in the event Seller determines that such working pressure excessively limits the production of Seller's Wells, Seller shall provide written notice thereof to Buyer/Processor. Upon receipt of such notice, Buyer/Process or, as soon as practicable, shall present to Seller a written proposal pursuant to which Buyer/Processor shall construct, own and operate such field compression facilities as may be necessary to reduce such pressure to a mutually acceptable level and shall disclose the charges to be assessed Seller therefore together with a schedule of payment. Once such proposal has been accepted by Seller in writing, Buyer/Processor shall utilize its best efforts to construct or cause to be constructed and placed in operation the required field compression facilities within ninety (90) days of receipt of such written acceptance.
 
E.           As between the Parties, Seder shall be in possession and control of the Gas deliverable under the Agreement and responsible for any injury or damage caused thereby until the same shall have been delivered to Buyer/Processor, after which delivery Buyer/Processor shall be deemed to be in exclusive possession and control thereof and responsible for any injury or damage caused thereby.
 
	
		
	3
	RESERVATIONS OF SELLER

 
A.           Seller, as a reasonable and prudent operator, hereby expressly reserves the following rights with respect to Seller's Gas Reserves and the Leases subject hereto:
 
	
			
	 
	1)
	The right to use the Gas produced from the Leases prior to delivery to Buyer/Processor for the following purposes:

	
			
	 
	a)
	For fuel in the development and operation of the Leases from which the Gas is produced;

	
			
	 
	b)
	For delivery to the lessors of the Leases of the Gas if such lessors are entitled to use or take such Gas in kind under the terms of the Leases;

	
			
	 
	c)
	For fuel in the operation of the facilities which Seller may install in order to deliver Gas hereunder in accordance with the terms hereof.

	
			
	 
	2)
	The right to pool or unitize the Leases (or-any portion thereof) with other lands and leases so long as such action does not reduce Seller's Gas Reserves. In the event of any such pooling or unitization, the Agreement will cover Seller's interest in the pool or unit and the Gas attributable thereto to the extent that such interest is derived from Seller's Gas Reserves.

 
B.           Seller shall provide to Buyer/Processor all necessary information whereby Buyer/Processor can make the proper allocation herein called for or required by Buyer/Processor's normai and customary accounting practices or required by Buyer/Processor's normal and customary contract administration practices, when different vintages of Gas are being delivered through a single Point of Delivery.
 
C.           Seller shall operate the Leases free of any control by Buyer/Processor, including without limitation the right to make farmouts of any lease subject to this Agreement, and to abandon any well and surrender any lease when Seller deems the same no longer capable of producing Gas in commercial quantities under normal methods of operation. Seller shall not be required to produce any well or wells in any manner which in its sole judgment and discretion would not constitute good operating practice, nor shall Seller be obligated to drill additional wells or to deepen, repair or rework any existing wells.
 
	
		
	4
	QUANTITY RESTRICTIONS

 
A.           Buyer/Processor's obligation to receive Seller's Gas under the Agreement is subject to the limitations and conditions set forth below:
	
			
	 
	1)
	If Buyer/Processor is unable to receive and purchase the total amounts of Seller's Gas tendered to Buyer/Processor from Seller's Wails due to market restrictions or capacity restrictions on the Facilities, Buyer/Processor shall receive and purchase only that portion of Seller's Gas available for delivery to the Gas Plant which is ratable on a thermal basis with the heating value of all Gas available for delivery to the Gas Plant, excluding gas being transported by Buyer/Processor, based upon the most recent Accounting Period of production during which no delivery restrictions wars imposed and/or no events of force majeure were in effect, after all required-purchase and/or dedicated capacity Gas has been received and purchased.

 
3 B

 

 

 
  
 
	
			
	 
	2) 
	The terms of any third-party Residue Gas sales agreements then in force.

 
	
		
	5
	SELLER'S WARRANTIES

 
A.           Seller hereby warrants title to the Gas sold and delivered hereunder and the right of Seller to sell the same; and Seller warrants that all such Gas is owned by Seller, or that Seller has the right to market said Gas free from ad liens and adverse claims, including liens to secure payments of production taxes, severance taxes, and other taxes. Seller agrees to defend (with counsel reasonably acceptable to Buyer/Processor), indemnify Buyer/Processor and save it harmless from all suits, actions, debts, accounts, damages, costs, losses and expenses arising from or out of adverse claims, whether meritorious or not, of any and all persons, firms, or corporations to said Gas or to royalties, overriding royalties, taxes, license fees, or charges thereon, resulting from actions of, by, through or under Seller, including, without limitation, nonpayment or incorrect payment of proceeds of production. Buyer/Processor shall be entitled to recover all attorneys' fees incurred as a result of its Involvement in any action or claim described herein. Buyer/Processor, at any time thereafter, when it shall appear to Buyer/Processor by reason of receipt of written notice of claim or dispute that the ownership or title to all or part of the Leases, or the Gas produced therefrom, may be in a party or parties other than Seller, or upon learning of any other claims, liens, taxes, royalties, fees, expenses or other adverse claims, may suspend payments hereunder and retain as security for the performance of Seller's obligations with respect thereto, the entire purchase price of the Gas until Buyer/Processor has been satisfied as to the amount of such claim or ownership claimed, and thereafter up to the amount of such ownership interest or claim until it has been finally determined and satisfied or until Seller shall have furnished a bond to Buyer/Processor in an amount and with sureties satisfactory to Buyer/Processor, conditioned upon the protection of Buyer/Processor with respect to such ownership or claim.
 
	
		
	6
	EASEMENTS

 
A.           To the extent that it may contractually or lawfully do so under its leasehold interest without impairing its own similar right. Seller hereby assigns and transfers to Buyer/Processor any easement across the Seller's Leases, and across any adjoining lands in which Seller may have an interest, for the purposes of installing, using, inspecting, repairing, operating, replacing, and/or removing Buyer/Processor's pipe, meters, lines, and other equipment used or useful in the performance of the Agreement, It is intended that any property of Buyer/Processor placed in or upon any of such land shall remain the personal property of Buyer/Processor, subject to removal by it upon the expiration or termination of the Agreement for any reason.  Buyer/Processor shall have a reasonable time after the expiration or termination of the Agreement to remove same. Buyer/Processor shall defend (with counsel reasonably acceptable to Seller), indemnify and hold Seller harmless of and from any and all claims and damages for all injuries to persons, including death, or damage to property arising out of or incident to Buyer/Processor's use of the easement hereunder transferred, only in the event said claim or damage shall be the result of negligence legally imputable to Buyer/Processor, its employees, agents, and representatives.
 
	
		
	7
	SHRINKAGE

 
A.           Buyer/Processor agrees to use ordinary care in transporting Seller's Gas from the Point(s) of Delivery to the Gas Plant, and after processing Seller's Gas, delivering the resultant Residue Gas to its purchaser at the tailgate of the Gas Plant.  However, the Parties understand and agree that certain losses in the Gas will occur and shall be shared by and among Seller and other third parties whose gas is transported to the Gas Plant, in the proportion that each party delivers gas into Buyer/Processor's Gathering System at their respective Point(s) of Delivery.
 
	
		
	8
	GAS MEASUREMENT AND QUALITY

 
A.           Buyer/Processor shall furnish and install a suitable orifice meter at the Point(s) of Delivery of the Gas covered hereby.  Each meter installed by Buyer/Processor shall be a meter acceptable in the industry and each mater shall be installed and operated in accordance with the requirements of applicable provisions in ANSI/API 2530, “Orifice Metering of Natural Gas” (American Gas Association Gas Measurement Committee Report No. 3) of the Natural Gas Department of the American Gas Association, as amended from time to time, or by any other method commonly used in the industry and mutually acceptable to the Parties, Any meter installed hereunder shall be open to inspection by Seller at ail reasonable times. The charts and records pertaining to measurement hereunder shall be kept on file by Buyer/Processor for a period of two (2) years for the mutual use of the Parties.  In the event any question arises as to the accuracy of the measurement, the meter or meters shall be tested upon the demand of either Party. The expense of any such special test shall be borne by the Party demanding same if the meter registration is found to be correct, and by Buyer/Processor if found to be incorrect.
 
  
4 B

 

 

 
  
 
B.           Seller may, at its option and sole expense, install, maintain and operate check meters and other equipment to check Buyer/Processor's meters; provided, however, that such check meters and other equipment shall be installed by Seller so as not to interfere with the operation of any of the Facilities.. Buyer/Processor and Seller shall have access to each other's measuring equipment at all times during business hours, but the reading, calibrating and adjustment thereof and the changing of charts shall be done only by the employees or agents of Buyer/Processor and Seller, respectively, as to meters or check meters so installed hereunder.
 
C.           At least semi-annually Buyer/Processor shall calibrate all meters installed hereunder and make adjustments as necessary. Should Seller so desire, Buyer/Processor shall give notice to Seller of the time of such calibrations sufficiently in advance of holding same in order that Seller may have its representative present. With respect to any test made hereunder, a registration within two percent (2%) of correct shall be considered correct. However, the meter or meters, when found to be incorrect, shall be adjusted to one hundred percent (100%) accuracy as soon as possible. Settlement for any period during which the meter registration deviates by more than two percent (2%) of correct shall be corrected at the rate of inaccuracy for any period of inaccuracy which is definitely known or agreed upon; but in case the period is not definitely known or agreed upon, then either for a period of fifteen (15) days prior to the date of said test, or for a period calculated from the beginning of the Accounting Period in which the test was conducted, whichever is longer. The rate of the inaccuracy shall be estimated and agreed upon by the Parties hereto on the basis of the best available data, using the first of the following methods which is feasible:
 
	
			
	 
	1)
	By using the registration of any check meter or meters if installed and accurately registering; or, in the absence thereof,

 
	
			
	 
	2)
	By calibration, test, or mathematical calculation; or

 
	
			
	 
	3)
	By estimation based on comparison of the quantity of deliveries with deliveries during preceding periods under similar conditions when the meter was registering accurately.

 
D.           All fundamental constants, observations, records and procedures involved in the determination and/or verification of the quantity and other characteristics of Gas measured hereunder, unless otherwise specified herein, shall be In accordance with the applicable provisions in ANSI/API 2530, "Orifice Metering of Natural Gas" (American Gas Association Gas Measurement Committee Report No. 3) of the Natural Gas Department of the American Gas Association, as amended from time to time, or by any other method commonly used in the industry and mutually acceptable to the Parties.  The average local atmospheric pressure shall be assumed to be 12.3 Psia. The temperature of Gas flowing through each meter shall be determined by a recording thermometer, installed by Buyer/Processor at its sole cost and expense to properly record the temperature of the flowing Gas, and the arithmetical average of the temperature recorded while the Gas is flowing during each meter chart interval shall be used in correcting amounts delivered hereunder to a temperature base of sixty degrees Fahrenheit (60°F) and to a pressure base of 14.65 pounds Psia.
 
E.           Seller agrees that all Gas delivered to Buyer/Processor under the Agreement shall:
 
	
			
	 
	1)
	Contain not more than one-fourth (1⁄4) grain of hydrogen sulfide per one hundred (100) cubic feet of Gas, or more than five (5) grains of total sulfur per one hundred (100) cubic feet of Gas;

 
	
			
	 
	2)
	Contain not more than two percent (2%) by volume of carbon dioxide, nor more than three percent (3%) by volume of nitrogen, nor more than two-tenths percent (0.2%) by volume of oxygen;

 
	
			
	 
	3)
	Not have a maximum temperature greater than one hundred twenty degrees Fahrenheit (120°F), or a minimum temperature less than forty degrees Fahrenheit (40°F); and

 
	
			
	 
	4)
	Be commercially free of all objectionable dust or other solid or liquid or gaseous matters which might interfere with its merchantability or cause injury to or interference with proper operations of any of the Facilities through which the Gas flows.

 
  
5 B

 

 

 
  
F.           Buyer/Processor may test Seller's Gas delivered hereunder for adherence to the specifications above set forth, such testing to be in accordance with generally accepted industry standards and procedures. If the Gas so delivered by Seller does not meet the specifications set forth above. Buyer/Processor, at its option, may refuse to accept delivery of said Gas into its Facilities, or may accept such Gas, provided that measured volumes of such Gas shall be reduced by the amount by which the total volume of inert components exceed five percent (5%) as set forth above. If Seller shall deliver Gas to Buyer/Processor which exceeds the maximum pressure specifications or fails to meet the quality specifications for any given Delivery Point, Seller shall be responsible for any damages caused to Buyer/Processor's Facilities and any other damages as a result of Seller's delivery of such nonconforming Gas.
 
G.           At least annually, Buyer/Processor shall take samples from each of Seller's Wells at the Delivery Points and have such samples analyzed by chromatograph analysis to determine the liquids content by component and the heating value of such Gas. Buyer/Processor shall have the right to take and analyze a spot Gas sample prior to the regularly scheduled sampling. Additionally, upon Seller's written request to Buyer/Processor and at Seller's sole cost, risk and expense, Buyer/Processor shall take and analyze Gas samples more frequently, All Gas samples taken hereunder shall be taken at such times that are reasonably mutually agreeable so that the sample will be representative of the Gas produced, shall be analyzed using the most current Gas Processor's Association Publications and Seller shall be permitted to be present for such sampling and permitted to take a split sample.  Heating values determined by calculation from compositional analysis according to GPA Standard 2172-84 (or latest revision) shall be converted to values that reflect the actual condition of the Gas on delivery as adjusted for pressure, water content, and compressibility unless otherwise prescribed by statute. Gas produced and not dehydrated at point of measurement shall be considered to be saturated with water at measurement temperature and pressure unless determined otherwise. For the purpose of making Btu calculations, Gas which contains seven (7) pounds of water or more per Mcf shall constitute wet gas and Gas which contains less than seven (7) pounds of water per Mcf shall constitute dry gas. Any chromatograph analysis taken hereunder shall be effective for Gas delivered commencing on the first day of the next succeeding month and shall not be effective retroactively unless otherwise mutually agreed by the Parties.
 
	
		
	9
	ALLOCATION OF RESIDUE GAS AND PI ANT PRODUCTS REVENUES

 
A.           For the purpose of determining the Residue Gas MMBtu's attributable to Producer's Gas, Gatherer/Processor shall calculate a fraction, the numerator being the Theoretical Residue MMBtu's of Gas attributable to each of Producer's Wells and the denominator being the total Theoretical Residue MMBtu's of all Gas received and processed-by Gatherer/Processor, This fraction shall be multiplied by the total Residue Gas MMBtu's available at the tailgate of the Gas Plant to determine the Residue Gas attributable to each of Producer's Wells.. Residue Gas attributable to each of Producer's Wells shall be allocated to Gatherer/Processor and Producer pursuant to the Gathering and Processing Fees provisions contained herein.. For the purpose of making Btu calculations, Gas which contains seven (7) pounds of water or more per Mcf shall constitute wet gas and Gas which contains less than seven (7) pounds of water per Mcf shall constitute dry gas. Any chromatograph analysis taken hereunder shall be effective for Gas delivered commending on the first day of the next succeeding month and shall not be effective retroactively unless otherwise agreed by the Parties.
 
B.           Theoretical Residue MMBtu's attributable to each of Producer's Wells shall be determined by calculating the MMBtu's measured at each of Producer's Wells and deducting the Shrinkage MMBtu's attributable to each of Producer's Wells Shrinkage MMBtu's shall be the sum of the MMBtu's determined by multiplying the allocated gallons of each of Plant Product attributable to each of Producer's Wells by the following conversion factors:
 
	
					
	 
	Plant Product
	 
	Conversion Factor (Btu/Gallon)
	 

	 
	C2
	 
	65,869
	 

	 
	C3
	 
	90,830
	 

	 
	C4
	 
	98,917
	 

	 
	NC4
	 
	102,913
	 

	 
	IC5
	 
	108,913
	 

	 
	NC5
	 
	110,084
	 

	 
	C6+
	 
	117,040
	 

 
C.           Plant Products Revenue attributable to each of Producer's Wells shall be calculated by multiplying the percentage of each Plant Product allocable to each of Producer's Wells by the total apportioned fractionated and non-fractionated Plant Products Sales Revenue received by Gatherer/Processor for the total of each Plant Product marketed by Gatherer/Processor or it designee during the applicable Accounting Period {FOB the Gas Plant and/or the Fractionator, as applicable), less transportation and fractionation fees with respect to fractionated volumes (currently [ * ] ($[ * ]) per gallon), subject to adjustment by Gatherer/Processor or its designee, as determined at the inlet to the Fractionator. Division of revenues from tile Plant Products shall be determined in accordance with the Gathering and Processing Fees provisions contained herein.
  
6 B

 

 

D.           For purposes of determining the percentage of each plant Product allocable to each of Producer's Wells, Gatherer/Processor shall multiply the volume in MCF's of Gas attributable to each of Producer's Wells by the GPM (Gallons Per MCF) for each Plant Product contained in the well stream. Said GPM shall be determined by an Initial chromatograph analysis taken on spot Gas samples from each of Producer's Wells subject to the measurement provisions of the Existing Agreements, The calculated value will be the Theoretical Plant Product Content for each Plant Product of Producer's Gas. Said Theoretical Plant Product Content for each Plant Product shall be divided by the Total Theoretical Plant Product Content for each Plant Product of all gas received by Gatherer/Processor to determine the percentage of Plant Product for each Plant Product attributable to each of Producer's Wells.
 
E.           Gatherer/Processor or its designee, in its sole discretion, shall determine whether or not to fractionate ail or any portion of the Plant Products based upon then current market conditions, and will market one hundred percent (100%) of the Plant Products, both fractionated and unfractionated, upon terms which, in Gatherer/Processor's or its Designee's sole judgement, are commercially reasonable. Upon request, Gatherer/Processor will furnish Producer on a monthly basis with reports containing volumes sold and prices applicable thereto. Upon execution of Gatherer/Processor's confidentiality agreement. Producer shall have the right at reasonable times during normal business hours to review the books and records of Gatherer/Processor pertaining to the sale of Plant Products, allocation of Residue Gas and revenues received therefrom.
	
		
	10
	PRICING INFORMATION AND REFUNDS

 
A.           Seder agrees that it will supply data and information at Buyer/Processor's reasonable request, and otherwise cooperate with Buyer/Processor in any regulatory proceeding wherein the price or other provisions set forth herein may be the subject of review.
 
B.           Should Buyer/Processor make payment to Seller based on the price for any category of Gas subject to any governmental agency or judicial review of such determination, and if it is subsequently determined that the Gas for which payment was made was not eligible for the price upon which payment was based, or if the price to be paid hereunder for such Gas is determined to be in excess of the maximum lawful price permitted by applicable NGPA price categories, or if for any reason Buyer/Processor is not permitted to receive or retain such prices in its resale rates, then the rate thereafter to be paid shall be accordingly reduced and Seller will refund to Buyer/Processor any previous excess payments together with interest at the rate prescribed in 18 C.F.R. Sec. 273.302 or subsequent regulation.
 
C.    The Parties acknowledge that Buyer/Processor has not reviewed the terms of Seller's Leases pertaining to Seller's Gas and that, to the extent it is responsible for doing so, Buyer/Processor shall account and make payment to royalty, overriding royalty, and other interest owners and to taxing authorities based on the price paid by Buyer/Processor for Seller's Gas as set forth in the Agreement, and that so long as Buyer/Processor makes payment as aforesaid, Buyer/Processor shall not be responsible for any other deficiency or overpayment.
	
		
	11
	TAXES

 
A.           Seller agrees to pay, or cause to be paid, when due, the taxes lawfully levied on Seller's Gas prior to its delivery to Buyer/Processor, as wall as its proportionate share of taxes, if any, levied upon the Plant Products to be marketed by Buyer/Processor hereunder and not paid by the purchaser.
	
		
	12
	PAYMENT

 
A.           After delivery of Seller's Gas has commenced, Buyer/Processor shall mail a statement to Seller indicating the quantity of Gas delivered to and the Plant Products and Residue Gas purchased by Buyer/Processor during the preceding Accounting Period, adjustments, if any, made by Buyer/Processor, and the amount due therefore. Where Buyer/Processor is responsible for distribution of revenues, it shall be the obligation of Buyer/Processor to cause proper settlement and accounting to be made and to make distribution of proceeds to all owners of interest in the proceeds from the sale of Gas delivered to Buyer/Processor hereunder, and in consideration therefore, Buyer/Processor shall charge a monthly accounting and settlement fee in the amount of  [ * ] Dollars ($[ * ]) per well per interest owner to whom Buyer/Processor distributes revenues, said fee to be deducted by Buyer/Processor pro rata from the amount due the working interest owners hereunder on a per-well basis, The monthly accounting and settlement fee shall be increased [ each July 1 ] by a percentage equal to the percentage change In the cumulative implicit GNP price deflator (January 1995 = 1.0) computed and published as an annual rate by the U.S. Department of Commerce (or, if not available, a comparable economic indicator), provided that such number shall never be a negative number. Where Seller is responsible for revenue distribution, Buyer/Processor shall remit the amount due for all Gas purchased to Seller, and it shall be the obligation of Seller to cause proper settlement and accounting to be made and to make distribution of proceeds to all owners of interest in the proceeds from the sale of Gas delivered to Buyer/Processor hereunder, Buyer/Processor shall mail the statement and payment either on or before the last day of each month (or on the next business day if such day is a weekend or holiday) for Gas purchased the preceding Accounting Period, provided, however, that until Buyer/Processor has received satisfactory evidence of title, it may suspend payments hereunder.  The Party responsible for distribution of revenues to owners of interest in the Gas hereby agrees to defend (with counsel reasonably acceptable to the other Party)), indemnify and hold the other harmless of and from any and all claims, demands, actions, causes of action, costs, damages and expenses related to, arising out of or in any way stemming from such obligation; provided, however, that notwithstanding anything contained herein or the Agreement to the contrary.  Seller shall defend (with counsel reasonably acceptable to Buyer/Processor), indemnify and hold Buyer/Processor of and from any and all claims, demands, actions, causes of action, costs, damages and expenses related to incorrect information provided to Buyer/Processor concerning ownership interests in the proceeds of production. Buyer/Processor, at its election, may deduct from its payment to Seller, sums, if any, due to Buyer/Processor under the terms of the Agreement or other transactions.
 

 

 

  
7 B

 

 

 
  
 
B.           Buyer/Processor shall have the right to deduct from payment to Seller a metering fee of $[ * ] per meter, per month for each meter that is less than 100 MMBtu during any month is delivered to Buyer/Processor.
 
C.           Upon execution of the other Party's Confidentiality Agreement, each Party to the Agreement shall have, at its expense, the right at all times to examine the books and records of the other Party, during normal working hours, to the extent necessary to verify the accuracy of any statement, charge, computation, or demand made under or pursuant to the Agreement. Each Party agrees to keep records and books of account in accordance with generally accepted accounting principles in the industry.  The Parties agree that the sole and exclusive remedy and measure of damages for any improper payments under this Agreement shall be the amount of underpayment or overpayment, as the case may be, during the two (2) year period immediately preceding the date on which a statement delivered hereunder was questioned in writing.
 
	
		
	13
	SELLER'S REPRESENTATIVE

 
A.           The party set forth in Article 7 of the Agreement, Notices, is designated as Seller's representative with respect to all matters under this Agreement, including but not limited to the following:
 
	
			
	 
	1)
	To give and receive all notices;

 
	
			
	 
	2)
	To make and witness any tests to be made of Seller's Gas and measuring equipment and adjustments to such equipment;

 
	
			
	 
	3)
	To deliver the quantities of Seller's Gas deliverable hereunder;

 
	
			
	 
	4)
	To obtain, execute and deliver to Buyer/Processor such division order title opinions and division orders as may be required by Buyer/Processor hereunder; and

 
	
			
	 
	5)
	To comply with the requirements, rules and regulations of any duly constituted authority having jurisdiction.

 
	
			
	 
	6)
	If Seller is responsible for distribution of revenues, to receive payment hereunder and to cause proper settlement and accounting to be made and make distribution of proceeds to all owners of interest in the proceeds from the sale of Gas delivered to Buyer/Processor hereunder.

 
B.           Buyer/Processor may act, and shall be fully protected in acting, in reliance upon any and all acts and things done and performed by or agreements made with respect to all matters dealt with herein by said Representative on behalf of Seller as fully and with the same effect as though Seller had done, performed, made or executed the same.
 
  
8 B

 

 

 
  
 
C.           Seller may change its Representative designated above, or designate a new Representative from time to time by delivery of written notice of change and designation of Representative to Buyer/Processor.  The Representative so designated shad have and may exercise all power and authority therein granted with like effect as though named as such Representative herein in the first instance.
 
14.           REGULATORY BODIES
 
A.           The Agreement is subject to all present and future valid laws and lawful orders of all regulatory bodies now or hereafter having jurisdiction of the Parties, or either of them; and should either of the Parties, by force of such law or regulation imposed at any time during the term of the Agreement, be ordered or required to do any act inconsistent with the provisions of the Agreement, the Agreement shall continue nevertheless and shall be deemed modified to conform with the requirements of such law or regulation for that period only during which the requirements of such law or regulation are applicable. Nothing in the Agreement or this Appendix shall prohibit either Party from obtaining or seeking to obtain modification or repeal of such law or regulation or restrict either Party's right to legally contest the validity of such law or regulation, and each Party reserves the right to file with such regulatory bodies any material necessary to implement the terms of the Agreement and this Appendix as they existed prior to the modification.
 
15           FORCE MAJEURE
 
A.           Except for Buyer/Processor's and Seller's respective obligations to make proper settlement, accounting and distribution of proceeds to all interest owners as provided above for Gas delivered to and purchased by Buyer/Processor under the Agreement, in the event either Buyer/Processor or Seller is rendered unable, by reason of an event of force majeure, to perform, wholly or in part, any obligation or commitment set forth in the Agreement, then upon such Party giving notice and full particulars (including all supporting documentation) of such event as soon as practicable after the occurrence thereof, the obligations of both Parties shall be suspended to the extent and for the period of such force majeure provided that the Party claiming an event of force majeure shall make all reasonable attempts to remedy the same with all reasonable dispatch.
 
B.           The term "force majeure", as used herein, shall mean acts of God, strikes, lockouts or industrial disputes or disturbances, civil disturbances, arrest and restraint of rulers or people, interruptions by government or court orders, necessity for compliance with any present and future valid orders of court, or any law, statute, ordinance or regulation promulgated by any governmental or regulatory authority having proper jurisdiction, acts of the public enemy, wars, riots, blockades, insurrections, including inability to secure materials by reason of allocations promulgated by authorized governmental agencies, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, inclement weather which necessitates extraordinary measures and expense to construct facilities and/or maintain operations, explosions, partial or entire failure of Gas supply, breakage or accident to machinery or lines of pipe, freezing of wells or pipelines, inability to obtain or delays in obtaining easements or rights-of-way, the shutting in of facilities for the making of repairs, alterations or maintenance to wells, pipelines or plants, or any other cause whether of the kind herein enumerated or otherwise, not reasonably within the control of the Party claiming "force majeure”.
 
C.           Neither Party shall be entitled to the benefit of the provisions of this Section under either or both of the following circumstances:
 
	
			
	 
	1)
	To the extent that the failure was caused by the Party claiming suspension having failed to remedy the condition by taking all reasonable acts, short of litigation, if such remedy requires litigation, and having failed to resume performance of such commitments or obligations with reasonable dispatch; or,

 
	
			
	 
	2)
	If the failure was caused by lack of funds, or with respect to the payment of any amount or amounts then due hereunder.

 
D.           Settlement of strikes and lockouts shall be entirely within the discretion of the Party affected, and the duty that any event of force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes and lockouts by acceding to the demands of the Parties directly or indirectly involved in such strikes or lockouts when such course is inadvisable in the discretion of the Party having such difficulty.
 
  
9 B

 

 

 
  
 
16.           DEFAULTS
 
A.           It is covenanted and agreed that if either Party shall fail to perform any of the covenants or obligations imposed upon it under and by virtue of the Agreement or this Appendix, in addition to its other rights and remedies, the other Party may terminate the Agreement by proceeding as follows:
 
	
			
	 
	1)
	The Party not In default shall cause a written notice to be served on the other Party in default, stating specifically the cause for terminating the Agreement, and declaring it to be the Intention of the Party giving notice to terminate the same; thereupon, the Party in default shall have thirty (30) days after the service of the aforesaid notice in which to remedy or remove the cause or causes stated in the notice for terminating the Agreement. If within said thirty (30) days the Party in default does so remove and remedy said cause or causes, or fully indemnifies the Party not in default for any and all consequences of such breach, then such notice shall be withdrawn and the Agreement shall continue in full force and effect.

 
	
			
	 
	2)
	In case the Party in default does not remedy and remove the cause or causes, or does not indemnify the Party giving the notice for any and all consequences of such breach, within said period of thirty (30) days, then the Agreement shall become null and void from and after the expiration of said period.

 
	
			
	 
	3)
	Any cancellation of the Agreement pursuant to the provisions of this Section shall be without prejudice to the obligation of Buyer/Processor to make proper settlement, accounting and distribution of proceeds to ad owners of interest in the proceeds received for Gas delivered to Buyer/Processor thereunder to the time of cancellation, and without waiver of any remedy to which the Party not in default may be entitled for violations of the Agreement.

 
B.           No waiver by either Seller or Buyer/Processor of any default of the other under this Agreement shall operate as a waiver of any future default, whether of like or different character or nature, nor shall any failure to exercise any right hereunder be considered as a waiver of such right in the future
 
17.           UNECONOMIC WELL CONNECTIONS
 
A.           In the event Seller desires Buyer/Processor to connect a well to Buyer/Processor's Gathering System which well, in Buyer/Processor's sole opinion, would not constitute an economic connection, Buyer/Processor shall be under no obligation to connect any such well, or to accept any Gas therefrom. Nevertheless, Buyer/Processor, upon Seller's request, may accept Gas from any such well if Seller shall acquire and assign without charge to Buyer/Processor a - measuring station site on Buyer/Processor's existing Gathering System at a mutually agreeable point, together with all necessary rights of ingress and egress thereto, and bear the cost of the construction, operation and maintenance of all facilities necessary to deliver Gas from such well into Buyer/Processor's Gathering System at said mutually agreeable point. Should Seller elect not to deliver Gas to Buyer/Processor from such well, Buyer/Processor shall release such well and the acreage attributable to the drilling and spacing unit thereof from the Agreement, but only as to the formation in which such well is then completed.
 
B.           In the event Gas volumes available for delivery from any of Seller's Wells hereunder become uneconomic to Buyer/Processor in the exercise of Buyer/Processor's reasonable judgment, Buyer/Processor agrees to release from dedication to this Agreement the affected Well(s) and the Leases to the extent of the drilling and spacing unit(s) corresponding to such WelI(s).
 
	
		
	18
	UNECONOMIC OPERATION OF GAS PLANT OR BUYER/PROCESSOR'S GATHERING SYSTEM

 
A.           If, in the opinion of Buyer/Processor, any of the Gas Plant or Buyer/Processor's Gathering System is or becomes uneconomic to operate due to its volume, quality, Plant Products content, governmental regulation or any other cause, Buyer/Processor may either modify or suspend operations thereof, in which case Buyer/Processor shall not be obligated to take delivery of, or may cease processing all or any portion of the Gas from Seller's Wells, so long as such condition exists. For the purposes hereof, "uneconomic operation" shall be defined as circumstances under which Buyer/Processor's share of net operating revenues (the sum of Buyer/Processor's percentage of revenues attributable to sales of Plant Products and Residue Gas) of any of the Gas Plant or Buyer/Processor's Gathering System is insufficient to offset actual operating costs thereof.
 
  
10 B

 
  

 

 

 
B.           During periods of uneconomic operation of any of the Gas Plant or Buyer/Processor's Gathering System and/or suspension of operation of portions thereof, Buyer/Processor, at the request of the Seller, shall place back in service and operate such suspended portions of the affected Gas Plant or Buyer/Processor's Gathering System as may be necessary to accept and process all or any portion of Seller's Gas'. In consideration thereof, Seller agrees to reimburse Buyer/Processor, in the same proportion as the ratio of the Gas volumes supplied by Seller bear to the total Gas volumes supplied to the affected Gas Plant or Buyer/Processor's Gathering System by other third-party sellers, for any losses (costs of operations of the affected Gas Plant or Buyer/Processor's Gathering System in excess of revenues attributable to operations of the affected Gas Plant or Buyer/Processor's Gathering System after deducting payments to all contributing producers for Gas delivered to and processed by the affected Gas Plant or Buyer/Processor's Gathering System) incurred by Buyer/Processor during such continued uneconomic operations. Buyer/Processor may, at its option, elect to sell the affected Gas Plant or Buyer/Processor's Gathering System rather than operate the same under the terms of this Section.
 
	
		
	19
	LITIGATION - ATTORNEYS' FEES

 
A.           In the event litigation arising out of the Agreement (excluding litigation or actions indemnified pursuant to Section 5, Seller's Warranties, or Sections 2.E or 21 A of this Appendix) should be initiated by any Party hereto, the prevailing Party, after the entry of a final non-appealable order, shall be entitled to recover from the other Party, as a part of said judgment, all court costs, fees and expenses of such litigation, including reasonable attorneys' fees.
 
	
		
	20
	DAMAGES

 
A.           Whether or not occasioned by a default or other breach of the Agreement, neither Party shall be liable to he other for special, exemplary, or consequential damages, except as to third-party claims, pursuant to the indemnification provisions of the Agreement or this Appendix.
 
	
		
	21
	GENERAL

 
A.           The Parties hereto assume full responsibility and liability for the maintenance and operation of their respective properties and agree to indemnify and save harmless the other Party from all liability and expense on account of any damages, claims or actions arising from any act or accident in connection with the installation, presence, maintenance or operation of the property or equipment of the indemnifying Party.
 
B.           Seller agrees that Buyer/Processor, its successors and assigns, shall have the right, but not the obligation, at any time to redeem for Seller, its successors and assigns, or other interest owners by payment of any taxes, deeds of trust, judgments or other liens on the Leases described in Exhibit "A" hereto, on Seller's Gas Reserves or the production therefrom, in the event of default of payment by Seller or other interest owners, and be subrogated to the rights of the holder or holders thereof Seller further agrees that any such redemption and payment by Buyer/Processor for the account of Seller or other interest owners shall be applied by way of a setoff against the purchase price which Buyer/Processor would otherwise pay to Seller or the other interest owners under Section 9 of the Appendix attached hereto, such set-off to continue until all payments by Buyer/Processor under this Agreement, plus interest, have been fully recouped by Buyer/Processor.
 
C.           Upon consent of Buyer/Processor, this Agreement may be ratified and adopted by any owner of an interest in the Leases subject hereto, or any leases with which the Leases subject hereto may be pooled or unitized, by execution and delivery to Buyer/Processor of a separate written instrument ratifying and adopting this Agreement insofar as said owner's interest in any such lands or leases is concerned, all the terms and provisions of this Agreement shall be binding upon such interest owner.  In addition, upon Buyer/Processor's request, Seller shall cause each interest owner in the Leases to execute and deliver to Buyer/Processor a ratification of this Agreement.
 
D.          Each Seller executing or ratifying the Agreement makes and enters into the Agreement severally and not jointly with other sellers, and they are not acting as partners, joint venturers, or otherwise jointly in this transaction, and nothing herein contained or provided shall operate to create, or be construed as creating, any such relationship, It is expressly provided that there shall never be any joint liability against the Parties designated herein as Seller and that no single party Seller shall be liable for the acts or omissions of any other single party Seller.
 
E.           In the event Seller desires to commit additional Gas produced and saved, or to be produced and saved, from oil and gas leases other than those dedicated hereunder and in which Seller owns and holds, or has an interest or interests, such oil and gas leases and the wells drilled and completed, or to be drilled and completed, thereon shall be covered by a separate Gas Purchase and Processing Agreement between Seller and Buyer/Processor.
 
  
11 B

 
  

 

 

 
F.           The Equal Employment Opportunity Clause required under Executive Order No. 11246, the affirmative action commitment for disabled veterans and veterans of the Vietnam Era, set forth in 41 CFR 60-250 4, the affirmative action clause for handicapped workers, set forth in CFR 650-741 4, and the related regulations of the Secretary of Labor, 41 CFR Chapter 60, are incorporated by reference in this Agreement. By accepting this Agreement, Seller certifies that it complies with the authorities cited above and that it does not maintain segregated facilities or permit its employees to perform services at locations where segregated facilities are maintained, as required by 41 CFR 60.1.8.
 
 
END OF GENERAL TERMS AND CONDITIONS
 
  
12 B

 

 

 
  
 
	
			
	
	 
	K N Gas Gathering, Inc. 
A Subsidiary of K N Energy Inc 
635 N 7th Ave. Brighton, CO 80601 
(303) 659-5922

 
 
September 17, 1999
 
 
Connie L. Nordberg
United States Exploration, Inc
1560 Broadway, Suite 1900
Denver, CO 80202
 
Ms. Nordberg,
 
KN Gas Gathering, Inc., hereby releases the following proposed well from our gathering contract dedication: Bernhardt 13-A, located at NE/4, Section 13 - T4N - R67W, in Weld County, Colorado
 
If you have any questions, please call me at 303-655-4341.
 
Sincerely,
 
 
/s/ Scott Emerson
Scott Emerson
General Manager
Wattenberg Operations
 
	
		
	Cc:
	Rick Williams

	 
	Billy Cantwell

	 
	Darrel Gentry

 

 
 

 

 

 
 
 

	
			
	Denver District Office
	 
	 

 
October 4, 1999
 
 
Ms. Connie Nordberg
United States Exploration, Inc
1560 Broadway
Suite 1900
Denver, Colorado S0202
 
	
		
	RE:
	Gas Purchase and Sale Agreement

	 
	Greater Wattenberg Area

	 
	Bernhardt #13 A T4N, R67W Section 13: NENE

	 
	Weld County, Colorado

 
 
Dear Connie:
 
I'm writing in response to your recent request for a Release of Dedication for the referenced well from our Gas Purchase and Sale Agreement, effective July 1, 1999.  Narco hereby agrees to release the referenced well from the dedication of acreage as contained in our Area of Mutual Interest (AMI) to enable UXP to connect said well to Duke's Gathering System.
 
All other terms and conditions remain in full force and effect.  This release applys only to the referenced well Should you have any questions, please let me know.
 
 
Sincerely,
 
/s/ Christopher J. Denison
Christopher J Denison
Gas Supply Representative
 
 
1700 Broadway  Suite 2000  Denver, Colorado 80290
Telephone: 303-861-9183

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