Document:

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                                                                EXHIBIT 10.22(i)

                     NATURAL GAS PURCHASE AND SALE AGREEMENT

                                 DATED EFFECTIVE
                                 JANUARY 1, 1999

                                     BETWEEN

                         UNION PACIFIC RESOURCES COMPANY

                                       AND

                            UNION PACIFIC FUELS, INC.

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
<S>      <C>               <C>                                                                                 <C>
I.    DEFINITIONS.................................................................................................1
         1.1 .....................................................................................................1

II.   COMMITMENT OF GAS AND OBLIGATION TO PURCHASE................................................................5
         2.1      Committed Gas...................................................................................5
         2.2      Excluded Gas....................................................................................5
                           2.2.1    Farmout Acreage...............................................................6
                           2.2.2    Pre-Effective Date Commitments................................................6
                           2.2.3    Operational Reservations......................................................6
                           2.2.4    Curtailed or Shut-In Gas......................................................7
                           2.2.5    Facility Gas..................................................................8
                           2.2.6    New Source of Supply Gas......................................................8
                           2.2.7    Lien Gas......................................................................8
         2.3      First-of-the-Month Availability Report..........................................................9
                           2.3.1    Revised Availability Report..................................................10
                           2.3.2    Estimates of Additional Quantities of Committed Gas..........................10
                           2.3.3    UPFUELS Information..........................................................10
                           2.3.4    Production Information.......................................................10

III.  TRANSPORTATION AND PENALTIES...............................................................................11
         3.1      Upstream Gathering and Transportation Agreements...............................................11
         3.2      Transporter's Tariff...........................................................................11
         3.3      Imbalances Generally...........................................................................11
                           3.3.1    Liability for Imbalance Charges..............................................12
         3.4      Operational Flow Orders........................................................................12
         3.5      Operational Balancing Agreements...............................................................13

IV.   QUANTITY, DELIVERY & PURCHASE OF COMMITTED GAS.............................................................13
         4.1      Purchase and Sale Obligation...................................................................13
                  4.1.1    UPR's Delivery Obligation.............................................................13
                  4.1.2    UPFUELS' Take Obligation..............................................................13
         4.2      Certain Defaults Related to the Delivery and Taking of Committed Gas...........................13
                  4.2.1    UPR Over-Delivery Default.............................................................13
                  4.2.2    UPR Under-Delivery Default............................................................14
                  4.2.3    Material UPR Delivery Default.........................................................14
                  4.2.4    UPFUELS Take Default..................................................................15
                  4.2.5    Material UPFUELS Take Default.........................................................15
                  4.2.6    Exclusive Consequences of UPR Delivery Defaults and UPFUELS Take Defaults.............15
         4.3      Provision Regarding Output Contract Laws.......................................................16
</TABLE>

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<TABLE>
<S>      <C>               <C>                                                                                 <C>
V.    TITLE AND RESPONSIBILITY...................................................................................16
         5.1      UPR Responsibility.............................................................................16
         5.2      UPFUELS Responsibility.........................................................................17

VI.   QUALITY, MEASUREMENT AND TESTS.............................................................................17
         6.1      Quality Specifications.........................................................................17
         6.2      Volume and Heating Value.......................................................................18
         6.3      Test Data and Charts...........................................................................18

VII.  PRICE......................................................................................................18
         7.1      Price for Committed Gas Generally..............................................................18
         7.2      Split Connect Price............................................................................19
         7.3      Locked Price Option............................................................................19
                           7.3.1    Request for a Locked Price...................................................20
                           7.3.2    Procedures...................................................................20
                           7.3.3    Locked Quantities............................................................20
                           7.3.4    Irrevocability...............................................................21
                           7.3.5    Availability of Committed Gas................................................21
                           7.3.6    Cessation of Futures Trading.................................................21
                           7.3.7    Applicability of Other Provisions of this Agreement to Committed Gas Sold
                           Under a Locked Price..................................................................21
                           7.3.8    Liquidation of Hedge Positions...............................................21
         7.4      Replacement of Indexes; Redetermination of Indexes, Split Connect Indexes and Index Price
                  Adjustments....................................................................................22
         7.5      Provisions Relating to Pricing Exhibit; Procedures for Change of Exhibit.......................22

VIII. ACCOUNTING, BILLING AND PAYMENT............................................................................23
         8.1      Statements.....................................................................................23
         8.2      Payment........................................................................................23
         8.3      Disputed Payments..............................................................................23
         8.4      Overdue Payments...............................................................................24
         8.5      Two Year Limit on Adjustments..................................................................24
         8.6      Audit..........................................................................................24
         8.7      Letter of Credit; Credit Enhancement...........................................................25

IX.   DISCLAIMER AND WARRANTY....................................................................................26
         9.1      Warranty.......................................................................................26
         9.2      Disclaimer.....................................................................................26

X.    FORCE MAJEURE..............................................................................................26
         10.1     Suspension of Obligations......................................................................26
         10.2     Force Majeure Defined..........................................................................26
         10.3     Exclusions.....................................................................................27
</TABLE>

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<TABLE>
<S>      <C>               <C>                                                                                 <C>
         10.4     Labor Disputes.................................................................................27
         10.5 ...................................................................................................27

XI.   TERM, DEFAULT AND REMEDIES.................................................................................27
         11.1     Term...........................................................................................27
         11.2     Defaults.......................................................................................28
         11.3     Consequences of Defaults.......................................................................29
         11.4     Setoff Rights..................................................................................30

XII.  DISPUTE RESOLUTION PROCEDURES..............................................................................30
         12.1     General Dispute Resolution Provisions..........................................................30
         12.2     Special Provisions Applicable to Price Disputes................................................33
         12.3     Special Provisions Applicable to Disputes for Less Than One Million Dollars....................34

XIII. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY UPR;CHANGES OF CONTROL.......................................34
         13.1     Non-Assignability..............................................................................34
         13.2     Transfer of Interest...........................................................................34
         13.3     Change of Control..............................................................................35

XIV.  MISCELLANEOUS..............................................................................................36
         14.1     No Continuing Waiver...........................................................................36
         14.2     Government Regulation..........................................................................36
         14.3     Exclusion of Consequential Damages.............................................................36
         14.4     Notices........................................................................................36
         14.5     Choice of Law..................................................................................38
         14.6     Integration....................................................................................38
         14.7     Confidentiality................................................................................38
         14.8     Taxes..........................................................................................39
         14.9     Construction of Agreement......................................................................39
         14.10    Representations and Warranties of UPR..........................................................40
         14.11    Representations and Warranties of UPFUELS......................................................41
         14.12    No Third Party Beneficiaries...................................................................41
         14.13    Further Assurances.............................................................................41
         14.14    Exhibits.......................................................................................41
</TABLE>

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EXHIBITS
         Exhibit A         Delivery Points, Indexes and Index Price Adjustments
         Exhibit B         Form of Availability Report
         Exhibit C         Pre-Effective Date Commitments
         Exhibit D         Price Lock Confirmation

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                     NATURAL GAS PURCHASE AND SALE AGREEMENT

         This Natural Gas Purchase and Sale Agreement is made and entered into
this 20th day of November, 1998, but effective as of the 1st day of January,
1999 ("Effective Date"), between UNION PACIFIC RESOURCES COMPANY, a Delaware
corporation (referred to herein as "UPR"), and UNION PACIFIC FUELS, INC., a
Delaware corporation ("UPFUELS"), both UPR and UPFUELS sometimes referred to
collectively as "Parties" or individually as a "Party."

                                 R E C I T A L S

         UPR is the owner and producer of Natural Gas and desires to sell
Natural Gas to UPFUELS, and UPFUELS is a marketer of Natural Gas, provides
products and services associated with the production, transportation and
marketing of Natural Gas, and desires to purchase Natural Gas from UPR.

         NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, UPR and UPFUELS agree as follows:

                                 I. DEFINITIONS

         1.1 General. The following terms shall have the meanings set forth
below. Other terms are defined elsewhere in this Agreement.

         "Affiliate" shall mean any Person Controlling, Controlled by, or under
common Control with another Person, whether directly or through one or more
intermediaries. For purposes of this Agreement field-wide and individual well
units created pursuant to 52 O.S. Section 287.8 (and like statutes in
jurisdictions other than Oklahoma) shall not be deemed Affiliates of UPFUELS or
UPR.

         "Agreement" shall mean the provisions of this document as it may be
amended from time to time.

         "Availability Report" shall have the meaning set forth in Section 2.3.

         "Btu" (British Thermal Unit) shall mean the amount of heat energy
required to raise the temperature of one pound of water from fifty-nine degrees
Fahrenheit (59(0)F) to sixty degrees Fahrenheit (60(0)F), as determined on a dry
basis.

         "Business Day" shall mean a day on which commercial banks are open for
business in Fort Worth, Texas.

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         "Committed Gas" shall have the meaning set forth in Section 2.1.

         "Contract Price" shall mean the First-of-the-Month Index Price, the
Daily Index Price, the Split Connect Price, or the Locked Price, as applicable.

         "Control," "Controlling," "Controlled" or terms of similar import shall
mean with respect to a corporation or limited liability company, the right to
exercise, directly or indirectly, more than fifty (50%) percent of the voting
rights attributable to the controlled corporation or limited liability company,
and, with respect to any other Person, the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
the controlled entity.

         "Daily Index" shall mean, with respect to a particular Delivery
Point(s), that published daily Index which has been determined by mutual
agreement (or, if there is no published Index for the relevant Delivery
Point(s), then such other Indexes as may be selected by mutual agreement) to
best represent the spot market price for Gas at such Delivery Point(s) for a
particular Day.

         "Daily Index Price" shall have the meaning set forth in Section 7.1.

         "Day" shall mean that period of 24 consecutive hours beginning and
ending at 9:00 a.m. Central Clock Time, or such other time as may be specified
in the Tariff of a Transporter.

         "Default" shall mean a UPFUELS Default or a UPR Default, as applicable.

         "Delivery Point(s)" shall mean the point(s) at which the title to Gas
delivered under this Agreement passes from UPR to UPFUELS. The Delivery Point(s)
of Committed Gas as of the Effective Date are listed on Exhibit A of this
Agreement.

         "Effective Date" shall have the meaning given such term in the preamble
to this Agreement.

         "Excluded Gas" shall have the meaning set forth in Section 2.2.

         "FERC" means the Federal Energy Regulatory Commission or any successor
government authority.

         "First-of-the-Month Price" shall have the meaning set forth in Section
7.1.

         "Gas" or "Natural Gas" means the effluent vapor stream in its natural
state produced from wells, including all hydrocarbon and nonhydrocarbon
constituents, and including, without limitation, casinghead Gas produced with
crude oil, and residue Gas resulting from the processing of Gas well Gas or
casinghead Gas.

         "Imbalance Charges" shall mean any imbalance charges (including but not
limited to imbalance penalties, penalties or other charges assessed for
violating OFOs and cash-out costs) assessed against UPFUELS or UPR by a
Transporter due to under-deliveries or over-deliveries of Gas.

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<PAGE>   8

         "Index(es)" shall mean, with respect to a particular Delivery Point(s),
that published index which has been determined by mutual agreement (or, if there
is no published index for the relevant Delivery Point(s), then such other
indexes as may be selected by mutual agreement) to best represent the 30-Day
spot market price for Gas at the Delivery Point(s). The initial Indexes
applicable to each Delivery Point are set forth on Exhibit A.

         "Index Price" shall mean the First-of-the-Month Price, the Daily Index
Price or the Split Connect Price, as applicable, after any applicable Index
Price Adjustments, as set forth on Exhibit A.

         "Index Price Adjustments" shall mean, with respect to an Index Price
for any Delivery Point(s), adjustments necessary to reflect transportation of
Gas to the relevant Delivery Point(s). The initial Index Price Adjustments
applicable to each of the Delivery Points as of the Effective Date are listed on
Exhibit A.

         "Locked Price" shall have the meaning set forth in Section 7.3.

         "MMBtu" means one million (1,000,000) Btu.

         "Material UPFUELS Take Default" shall have the meaning set forth in
Section 4.2.5

         "Material UPR Delivery Default" shall have the meaning set forth in
Section 4.2.3.

         "Month" means the period commencing at 9:00 a.m. Central Clock Time on
the first Day of a calendar month and ending at 9:00 a.m. Central Clock Time on
the first Day of the immediately following calendar month.

         "New Source of Supply Gas" shall mean any Gas Owned or Controlled by
UPR other than Committed Gas.

         "OFO" shall have the meaning set forth in Section 3.4.

         "Owned or Controlled" shall have the meaning set forth in Section 2.1.

         "Party" and "Parties" shall have the meanings given such terms in the
preamble to this Agreement.

         "Person" shall mean any individual or entity, including, without
limitation, any corporation, limited liability company, partnership (whether
general or limited), joint venture, association, joint stock company, trust,
business trust, cooperative, unincorporated organization, government (including,
without limitation, any board, agency, political subdivision or other body
thereof) or entities similar to any of the foregoing that are organized under
the laws of foreign jurisdictions.

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         "Pre-Effective Date Commitment" shall mean, for quantities of Gas
produced under normal operating conditions in excess of 200 Mcf per Day at any
Delivery Point (i) any contracts existing on the Effective Date with third
Persons who are not Affiliates of UPR for the sale of Gas Owned or Controlled by
UPR or its Affiliates, including, without limitation, such contracts listed on
Exhibit C to be provided within 30 Days after execution and (ii) any joint
operating agreement, unit operating agreement or similar agreement to which UPR
is a party, and pursuant to which Gas Owned or Controlled by UPR is being sold
on the Effective Date.

         "Reference Rate" shall mean the lesser of (i) two percent (2%) above
the per annum rate of interest announced from time to time as the "prime rate"
for commercial loans by Chase Manhattan Bank of New York (or its successor), as
such "prime rate" may change from time to time, or (ii) the maximum applicable
nonusurious rate of interest.

         "Split Connect Committed Gas" shall have the meaning set forth in
Section 7.2(a).

         "Split Connect Index" shall have the meaning set forth in Section
7.2(a).

         "Split Connect Price" shall have the meaning set forth in Section
7.2(a).

         "Tariff" means (i) the tariff of a Transporter, as such tariff is filed
and in effect from time to time with the FERC or any other state or Federal
governmental authority, or (ii) if a Transporter does not have such a tariff on
file with the FERC or any other state or Federal governmental authority, such
Transporter's operating policies and procedures, as they may be in effect from
time to time.

         "Taxes" shall mean any and all ad valorem, property, occupation,
severance, production, extraction, first use, conservation, Btu or energy,
gathering, transport, pipeline, utility, gross receipts, gas or oil revenue, gas
or oil import, privilege, sales, use, consumption, excise, lease, transaction,
environmental, and other taxes, governmental charges, duties, licenses, fees,
permits, and assessments.

         "Transporter" shall mean an interstate or intrastate pipeline,
including, without limitation, a gathering pipeline, that transports Gas.

         "UPFUELS Default" shall have the meaning set forth in Section 11.2(a).

         "UPR Default" shall have the meaning set forth in Section 11.2(b).

                II. COMMITMENT OF GAS AND OBLIGATION TO PURCHASE

         2.1 COMMITTED GAS. During the term of this Agreement, and subject to
any limitations herein set forth, UPR agrees to sell to UPFUELS and UPFUELS
agrees to purchase from UPR under the terms of this Agreement all deliverable
Committed Gas, as defined in the third sentence of this Section 2.1. Subject to
the terms and conditions of this Agreement, UPR's obligation to sell all
deliverable Committed Gas, and UPFUELS' obligation to purchase all Committed Gas
made available

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by UPR, are firm obligations. Committed Gas is defined as all Gas Owned or
Controlled by UPR (including, without limitation, UPR's Affiliates) in the
United States on the Effective Date, or Owned or Controlled thereafter during
the term of this Agreement, from the Delivery Point(s) in existence on the
Effective Date as set forth on Exhibit A, including, without limitation, Gas
produced from state or federal waters on the Outer Continental Shelf and Gas
which is committed to a gathering or processing agreement with UPFUELS on the
Effective Date, but excluding (i) Gas Owned or Controlled by UPR in Alaska and
Hawaii and (ii) Excluded Gas, as defined in Section 2.2. Committed Gas includes,
without limitation, (x) Gas Owned or Controlled by UPR and produced from wells
in existence on the Effective Date, (y) Gas Owned or Controlled by UPR from
wells acquired, drilled or recompleted subsequent to the Effective Date which
are produced at the Delivery Point(s) set forth on Exhibit A and (z) make-up Gas
accruing to, and capable of being delivered by, UPR after the Effective Date as
a result of production or pipeline imbalances regardless of whether the
imbalances occurred before or after the Effective Date. The phrase "Owned or
Controlled" as used in this Agreement, shall mean produced or producible Gas
that is either: (i) owned by UPR as and when it is produced at the wellhead
(including, without limitation, residue Gas), (ii) purchased by UPR and resold
by UPR to UPFUELS (such Gas being called "Third-Party Gas"), but only if such
Third-Party Gas is (a) being gathered and commingled with Gas Owned or
Controlled by UPR (within the meaning of clauses (i) or (iii) of this Section
2.1) and all such Gas is subsequently gathered, processed or otherwise treated
in connection with the marketing of such Gas, or (b) residue Gas, which has been
commingled with and processed together with Gas Owned or Controlled by UPR
(within the meaning of clauses (i) or (iii) of this Section 2.1), or (iii) Gas
for which UPR has the written authority of the third party owner(s) thereof to
act as such owner(s)' representative, agent, or attorney-in-fact in marketing
such Gas (including, without limitation, under a joint operating agreement
pursuant to which UPR is the operator), but only for the duration of such
authorization.

         2.2 EXCLUDED GAS. Excluded Gas is defined as (a) New Source of Supply
Gas; (b) Gas produced from or allocable to acreage farmed out by UPR to a third
Person who is not an Affiliate of UPR, and that is not committed to any
gathering or processing contract with UPFUELS, as more particularly set forth in
Section 2.2.1; (c) Gas that is committed to a Pre-Effective Date Commitment; (d)
Gas required to fulfill UPR's obligations under (i) the royalty provisions of
its oil, Gas and mineral leases, (ii) other provisions of its oil, Gas and
mineral leases, and (iii) agreements customarily found in the oil and Gas
exploration industry to which UPR is a party, including obligations pursuant to
calls on production, rights of first refusal, reversionary rights to convert
retained overriding royalties into working interests and similar rights in favor
of third Persons of the sort customarily found in joint operating agreements,
unit operating agreements, agreements for easements, farmins or similar
drill-to-earn agreements, or other agreements typically entered into in
connection with Gas exploration and production activities that affect UPR's oil,
Gas and mineral leases or the wells situated thereon from time to time; (e) Gas
subject to the operational reservations set forth in Section 2.2.3, (f) Gas
curtailed or shut-in pursuant to Section 2.2.4; (g) Gas that UPR may require, in
its sole discretion, to use in any facility owned by UPR or an Affiliate, or in
which UPR or an Affiliate owns an interest, as more particularly set forth in
Section 2.2.5; (h) New Source of Supply Gas, as more particularly set forth in
Section 2.2.6, (i) Lien Gas and Gas affected by other transactions described in
Section 2.2.7 and (j) such other Gas as UPR and UPFUELS may mutually agree in
writing.

                                       5
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                  2.2.1 FARMOUT ACREAGE. During the term of this Agreement, UPR
shall be entitled to farm out to any third Person any acreage covered by an oil,
Gas and mineral lease or mineral fee interest held by UPR. If there is
production from acreage subject to a farmout, Gas produced from such acreage
shall be Committed Gas, but only if such acreage is also committed to a
gathering or processing agreement with UPFUELS on the date of such farmout.
Except as specifically provided in the immediately preceding sentence, Gas
produced from farmout acreage shall not be Committed Gas under this Agreement.

                  2.2.2 PRE-EFFECTIVE DATE COMMITMENTS. UPR agrees to exercise
reasonable efforts to terminate any Pre-Effective Date Commitment at the
earliest opportunity in accordance with the terms and conditions of such
Commitment if, in the reasonable judgment of UPR, such termination will not
result in adverse economic consequences to UPR.

                  2.2.3 OPERATIONAL RESERVATIONS. UPR reserves to itself, its
successors, assigns and Affiliates the following rights (together with
quantities of Gas sufficient to satisfy such rights):

                  (a) To operate UPR's leaseholds, lands and/or interests
therein, free from any control by UPFUELS, in such manner as UPR deems advisable
for the development and operation of UPR's leases (or on any unit, including,
without limitation, field-wide units), including the right (but never the
obligation) to transport Gas from one of UPR's leases to another in accordance
with Section 2.2.3(f), to drill new wells, enhance production, to repair and
rework UPR's wells, to renew and extend (in whole or in part) any lease, to
abandon any well or surrender any lease (in whole or in part) for any reason, to
abandon, modify, extend or dispose of any production facilities owned or
installed (in whole or in part) by UPR, to treat Gas, to use Gas as compressor
fuel, for ethane injection and recovery operations to generate power in
connection with leasehold operations, to lift oil by repressuring, recycling or
pressure maintenance operations and to otherwise operate such leases and fields
free from any control by UPFUELS;

                  (b) To remove from the Committed Gas all liquids, liquid
hydrocarbons, oil and/or condensate and any other non-methane constituents, both
by lease separation and/or, prior to delivery into a main transmission line, by
processing plant. It is specifically understood and agreed that such processing
rights may be exercised either before or, if the Transporter allows, after
delivery of the Committed Gas to UPFUELS at the Delivery Point(s). In addition,
if any Delivery Point is located on an offshore platform, UPR may inject
condensate into the Committed Gas stream delivered hereunder for transportation
and redelivery to UPR at a separation facility located onshore if (i) the
Transporter agrees that UPR may do so and (ii) UPR bears all charges of the
Transporter attributable to the injection, transportation and redelivery of such
condensate. The liquids, liquid hydrocarbons, oil and/or condensate removed (or
the propanes, butanes, motor fuel or other products obtained) therefrom
(collectively, "Removed Products") shall not be deemed Committed Gas, nor shall
such Removed Products otherwise be subject to this Agreement and, when UPR is
exercising its right to process the Committed Gas, title to the liquefiable
hydrocarbons and other Removed Products shall remain at all times in UPR. In
addition, by not later than ninety (90) Days after the Effective Date, UPR and
UPFUELS will establish reasonable accounting and billing procedures so that (i)
UPFUELS will pay only for the quantities of residue Committed Gas remaining
after processing and

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(ii) all charges of Transporter will be equitably allocated between UPFUELS and
UPR, with UPR paying all costs attributable to the exercise of its processing
rights and UPFUELS paying all costs attributable to the Committed Gas purchased
by it. Where UPR elects to process Gas, UPR shall use commercially reasonable
efforts to reserve the right to take residue Gas in kind; and residue Gas taken
in kind shall be deemed Committed Gas subject to this Agreement, with the
Delivery Point(s) for same being at the tailgate of the processing plant;

                  (c) To produce Gas without waste and in accordance with
prudent oil and Gas filed practices, it being understood and agreed that UPR
shall not be required to produce any well at a rate in excess of the rate fixed
by law or regulation or in excess of the rate of flow which UPR determines, in
its discretion, exercised in good faith as a prudent operator, should be
produced from such well;

                  (d) To pool or unitize UPR's leases with other leases of UPR
or others located in the field in which UPR's wells are located (it being
understood that the Gas attributable or allocated to UPR's interest in the pool
or unit so created will remain Committed Gas unless otherwise provided in this
Agreement);

                  (e) To deliver Gas required to be delivered to third Persons
under the common law governing relationships between cotenants, or under Gas
balancing agreements or similar arrangements affecting any of UPR's wells or
oil, Gas and mineral leases.

                  (f) To use Gas in connection with the operation of a well in
which UPR has an interest located on a lease other than the lease producing such
Gas, and requiring gathering or transportation downstream of the applicable
Delivery Point, it being understood and agreed that such Gas will not constitute
Committed Gas but will appear in the Availability Report as a separate category.

                  2.2.4 CURTAILED OR SHUT-IN GAS.

                  (a) UPR, in its sole discretion, may curtail or shut in Gas
that would otherwise be Committed Gas due to prices that, in UPR's sole opinion,
are unacceptable. UPR shall give UPFUELS notice of any curtailment or shut-in of
Committed Gas pursuant to this Section 2.2.4 before delivery of the Availability
Report pursuant to Section 2.3. Each notice delivered under this Section 2.2.4
shall be in writing and shall identify the quantities of Gas that UPR intends to
curtail or shut in, the Delivery Point(s) affected, and the expected duration of
such curtailment or shut-in period. UPR shall not, however, shut in or curtail
any quantities of Committed Gas hereunder during any Month in which such
quantities have been included in the Availability Report. UPR shall notify
UPFUELS at least two (2) Business Days prior to any applicable deadline in
Transporter(s)' Tariffs for nominations (or nomination changes) of UPR's intent
to resume sales of Committed Gas for which UPR had previously given UPFUELS
notice of UPR's intention to shut in or curtail deliveries pursuant to this
Section 2.2.4.

                                       7
<PAGE>   13

                  (b) In addition to the rights reserved by UPR pursuant to
Section 2.2.4(a), UPR may, at any time, without penalty, curtail or shut in Gas
due to operational circumstances that require such actions in accordance with
prudent oil and gas field practices, notwithstanding the fact that such
quantities were included in the Availability Report; provided, however, if such
operational circumstance was known to UPR and UPR did not use commercially
reasonable efforts to notify UPFUELS of such, then the volume of Gas curtailed
or shut in shall be used in the applicable calculation to determine whether or
not a UPR Under-Delivery Default has occurred. UPR shall identify all foreseen,
forecast or known operational circumstances that may result in operational
variances in the Availability Report(s) where possible and as soon as reasonably
practicable if such information becomes available after the delivery of the
Availability Report(s). It is understood that such notice may be oral if
required by circumstances, to be promptly followed by written confirmation. UPR
shall notify UPFUELS as provided in Section 2.2.4(a) of UPR's intent to resume
sales of previously curtailed or shut-in Committed Gas.

                  2.2.5 FACILITY GAS. UPR retains the right to use Gas which it
Owns or Controls for use in any facility, including but not limited to, use in
chemical, manufacturing or mining facilities (a) owned, directly or indirectly,
by UPR or any of its Affiliates, or (b) if such facilities are owned by a
corporation, limited liability company, general partnership or joint venture,
facilities in which UPR or any of its Affiliates owns an interest. Gas used by
UPR or its Affiliates pursuant to this Section 2.2.5. shall not constitute
Committed Gas but will appear in an Availability Report as a separate category.

                  2.2.6 NEW SOURCE OF SUPPLY GAS. New Source of Supply Gas shall
not constitute Committed Gas hereunder.

                  2.2.7 LIEN GAS.

                  (a) GENERALLY. Notwithstanding anything stated herein to the
contrary, UPR shall in no way be prohibited or precluded from assigning or
granting a security interest, lien or other encumbrance (collectively, referred
to as "Liens") to secure the repayment of obligations that UPR owes to
commercial banks, insurance companies or other financial or trade creditors
(collectively, "Lenders") on any of the properties owned by UPR from which
Committed Gas is produced.

                  (b) CERTAIN RIGHTS. UPR shall use commercially reasonable
efforts to obtain from its Lenders an agreement that their Liens shall be
subordinate or otherwise subject to UPFUELS' rights and obligations under this
Agreement. If UPR notifies UPFUELS in writing that UPR has been unsuccessful in
obtaining such an agreement from its Lenders, UPFUELS hereby agrees to
subordinate its rights and interests hereunder and shall execute and deliver to
such Lenders such instruments or agreements in form and substance reasonably
satisfactory to Lenders and UPFUELS, as may be necessary to evidence UPFUELS'
subordination of its rights and interests in such Committed Gas. The Committed
Gas in which UPFUELS' rights are so subordinated shall be herein referred to as
"Lien Gas." Notwithstanding anything stated herein to the contrary, Lien Gas
shall remain Committed Gas hereunder so long as Lenders permit such Committed
Gas to be sold to UPFUELS, notwithstanding any provisions in the documents
creating or evidencing the Liens that

                                       8
<PAGE>   14

assign or purport to assign the Committed Gas to Lenders; but such Lien Gas
shall be released from the terms of this Agreement if Lenders foreclose their
Lien, or exercise any other remedy under the documents creating the Lien that
would result in the transfer of the title and the benefits of ownership of the
Lien Gas to such Lenders. UPR shall use commercially reasonable efforts in
cooperating with UPFUELS to (i) subject such Lien Gas to the terms of this
Agreement as Committed Gas hereunder, or (ii) continue sales of Lien Gas under
this Agreement, or under another contract with terms and conditions
substantially the same as those of this Agreement.

                  (c) OTHER TRANSACTIONS. It is specifically understood and
agreed that UPR may enter into financing transactions involving Committed Gas
with a third Person other than those pursuant to which a Lien is created,
including, without limitation, transactions such as prepayments, conveyances of
production payments, or conveyances of overriding royalty interests, so long as
the Gas burdened by such transaction shall continue to be sold to UPFUELS as
Committed Gas under the terms and conditions of this Agreement.

         2.3 FIRST-OF-THE-MONTH AVAILABILITY REPORT. In each Month during the
term of this Agreement, UPR shall submit to UPFUELS an Availability Report (the
"Availability Report") setting forth UPR's best estimate of the quantity of
Committed Gas that UPR will deliver to UPFUELS from each Delivery Point during
the following Month. The Parties agree that the Availability Report will include
an estimate of any plant fuel and shrinkage volumes that reflect the volume loss
from the wellhead to the plant tailgate for Committed Gas that is processed.
UPFUELS will provide UPR with a written Monthly report on plant fuel and
shrinkage volumes (or, if applicable, shrinkage factor) for the preceding Month
by not later than two (2) Business Days before the date the First-of-the-Month
Availability Report is due under this Section 2.3 for the following Month. A
form of the Availability Report is attached hereto as Exhibit B. If the quantity
of Committed Gas available for delivery from a Source of Supply is expressed as
a single Monthly quantity, and unless the Availability Report states otherwise,
it shall be presumed that such quantity will be delivered at as constant a daily
rate of flow as is commercially reasonable throughout the Month. Except as
provided below in this Section 2.3, the Availability Report shall be delivered
to UPFUELS no later than the eighth (8th) Business Day before the relevant
Transporter's First-of-the-Month nomination deadline for the Month of delivery
of Committed Gas, and it shall identify the estimated quantity of Committed Gas
that will be delivered at each Delivery Point on each Day of the Month. The
Parties will endeavor to develop the systems required to implement the
electronic delivery of the Availability Report, provided UPR and UPFUELS are in
agreement in respect to the expenditure of funds required to develop the
systems. UPR and UPFUELS will each have Gas control personnel accessible
twenty-four hours a Day, seven Days a week.

                  2.3.1 REVISED AVAILABILITY REPORT. The Parties shall confer at
either Party's initiative during each Month to reforecast the quantities of
Committed Gas scheduled to be delivered or purchased pursuant to the
First-of-the-Month Availability Report. Without limiting the generality of the
foregoing, UPR shall promptly notify UPFUELS of any changes in the quantities of
Committed Gas scheduled to be delivered or taken pursuant to the
First-of-the-Month Availability Report, as well as any condition or event that
is reasonably likely to change such quantities estimated to be delivered in such
Report. Such changes shall be deemed timely delivered for purposes of
determining liability

                                       9
<PAGE>   15

for Imbalance Charges pursuant to this Agreement if delivered to UPFUELS by not
later than 9:00 a.m. on the Business Day before revised nominations are due to
be delivered by UPFUELS to the first downstream Transporters pursuant to such
Transporters' respective Tariffs.

                  2.3.2 ESTIMATES OF ADDITIONAL QUANTITIES OF COMMITTED GAS.
Without limiting the generality of Section 2.3.1, the Parties recognize that
additional quantities of Committed Gas not included in the Availability Report
may become available for delivery to UPFUELS at various times after the first
Day of an applicable Month. At least two (2) Business Days before the Day that
UPR wishes to begin deliveries of such additional quantities of Committed Gas,
UPR shall provide UPFUELS with a written notice setting forth (i) the Delivery
Points at which UPR wishes to make such deliveries and (ii) the additional
monthly quantities that UPR estimates will be delivered to each such Delivery
Point during the Month. The Contract Price for the additional monthly quantities
shall be determined in accordance with Article VII, and UPFUELS shall purchase
such additional monthly quantities in accordance with Section 4.1.2.

                  2.3.3 UPFUELS INFORMATION. Where UPR is a Delivery Point
operator and Committed Gas flows through that Point, and upon UPR's request,
UPFUELS will exercise reasonable efforts to provide UPR with information
required by UPR in its role as Delivery Point operator, including, without
limitation, UPFUELS' downstream transportation contract number, the identity of
the downstream shipper, whether UPFUELS purchases Gas flowing through such
Delivery Point from other suppliers, and, if so, the quantity of Gas purchased
from each such supplier. The Parties acknowledge that the purpose of this
Section 2.3.3 is not to require UPFUELS to furnish information that UPR would
otherwise be able to collect on its own, but rather to obligate UPFUELS to use
reasonable efforts to furnish information not readily accessible to UPR.

                  2.3.4 PRODUCTION INFORMATION. Both Parties shall use
commercially reasonable efforts to notify the other Party of any take or
delivery deficiencies. The Parties recognize that each may have access to
certain information necessary to confirm gas flows and agree to share such
information on a commercially reasonable basis. With respect to non-operated UPR
properties, subject to the concurrence of the operator of such property, UPR
shall instruct the operator to send duplicate copies of production notices to
UPFUELS. With respect to such non-operated UPR properties, for purposes of
Section 4.2.4, a UPFUELS Take Default shall be deemed to occur upon the receipt
of such notice from either UPR or its operator. UPFUELS shall have until the
conclusion of the Day to which such notice applies or the conclusion of the Day
such notice is received, whichever is later, to remedy such UPFUELS Take
Default. If UPFUELS does not remedy the UPFUELS Take Default by the end of such
Day then the penalties set forth in Section 4.2.4 shall apply. With respect to
properties where UPFUELS is a shipper on a Transporter or receives Gas from a
facility operated by UPFUELS or an Affiliate of UPFUELS, a UPFUELS Take Default
will be deemed to have occurred upon the receipt of oral, written or electronic
notice from a Transporter or the Affiliate of the failure of any Gas flows and
shall notify UPR of such UPFUELS Take Default. If Gas is produced into a
Delivery Point(s) where UPFUELS has an OBA or similar agreement in place, then
no UPFUELS Take Default shall be deemed to have occurred so long as UPFUELS pays
UPR for all Gas delivered pursuant to this Agreement at such Delivery Point.

                                       10
<PAGE>   16

                        III. TRANSPORTATION AND PENALTIES

         3.1 UPSTREAM GATHERING AND TRANSPORTATION AGREEMENTS. UPR shall be
responsible for arranging, nominating and paying for, all upstream
transportation and gathering services (and associated charges) necessary for UPR
to deliver Committed Gas to the Delivery Point(s). In respect of any upstream
gathering or transportation service agreement(s) managed by Union Pacific Fuels,
Inc. before the Effective Date (the "G&T Agreements"), UPR shall have the
option, exercisable at any time during the term of this Agreement upon delivery
of written notice to UPFUELS sixty (60) days prior to the Effective Date, to
shift responsibility for the management and operation of such service agreements
to UPFUELS as of the Effective Date (or effective as of a later date if UPR does
not exercise its option on or before the Effective Date), without payment of
further consideration to UPFUELS. If UPR exercises the option reserved in the
preceding sentence, the Parties agree to execute and deliver any agreements
(such agreements to contain terms and conditions consistent with this Agreement
that are customarily found in like agreements between natural gas industry
participants) that such Parties reasonably deem necessary to implement the
shifting of such responsibility to UPFUELS pursuant to UPR's exercise of such
option. Management and operation of such G&T Agreements will include, without
limitation, nominations, scheduling, confirmations and the payment of invoices,
subject to reimbursement by UPR. Actual and reasonable transportation costs paid
by UPFUELS to an upstream gatherer or transporter on UPR's behalf will be netted
against amounts UPFUELS is obligated to pay UPR for Committed Gas delivered
under this Agreement.

         3.2 TRANSPORTER'S TARIFF. The Tariff of the Transporter immediately
downstream of the Delivery Point shall define and set forth the manner in which
the Committed Gas purchased and sold under this Agreement is measured and
transported. UPR and UPFUELS recognize that the receipt and delivery into
Transporter's pipeline facilities of Committed Gas purchased and sold under this
Agreement shall be subject to the relevant Transporter's Tariff. UPR shall
designate on the relevant Availability Report the Transporter's Tariff that will
apply to Split Connect Committed Gas; provided, however, that the Transporter so
designated must have been selected by UPR in its designation of a Split Connect
Index pursuant to Section 7.2(a).

         3.3 IMBALANCES GENERALLY. The Parties recognize that imbalances may
occur on Transporters. Accordingly, UPFUELS and UPR agree to make every
reasonable effort to promptly eliminate or minimize such imbalances. UPFUELS
shall have primary responsibility for eliminating or minimizing imbalances
downstream of the Delivery Point(s), it being understood, however, that UPR
shall cooperate with UPFUELS' efforts in all reasonable respects. For purposes
of this Agreement, (a) an imbalance resulting from an under-delivery is defined
as an instance whether the Monthly quantity of Committed Gas delivered to a
given Delivery Point is less than the Monthly quantity of Committed Gas
designated for delivery at that Delivery Point in UPR's Availability Report, as
modified throughout the Month by timely revisions of the Availability Report in
accordance with Sections 2.3.1 and 2.3.2 above and (b) an over-delivery is
defined as an instance where the Monthly quantity of Committed Gas delivered to
a given Delivery Point is greater than the Monthly quantity of Committed Gas
designated for delivery at that Delivery Point in UPR's Availability Report, as
modified throughout the Month by timely revisions of the Availability Report in
accordance with Sections 2.3.1. and 2.3.2. If the applicable Transporter
requires balancing on a Daily basis, the definitions of under-delivery and
over-delivery shall be modified to reflect Daily

                                       11
<PAGE>   17

balancing as opposed to Monthly balancing. Over-deliveries by UPR into a
Transporter at one Delivery Point will be netted against under-deliveries into
that Transporter by UPR at a different Delivery Point to the extent permitted
under that Transporter's Tariff, provided that such Delivery Point(s) have the
same index publication and pipeline location. Under-deliveries by UPR on one
Transporter will not be netted against over-deliveries by UPR to a different
Transporter absent the Parties' mutual consent, and under-deliveries or
over-deliveries by UPR will not be netted against over-deliveries or
under-deliveries by other UPFUELS suppliers of Gas.

                  3.3.1 LIABILITY FOR IMBALANCE CHARGES. Imbalance Charges
(including, but not limited to, any cash-out costs) under this Agreement will be
assessed on a Transporter-by-Transporter basis using the applicable terms of the
relevant Transporter's Tariff and any OBA (as defined in Section 3.5) applicable
and as if UPR were the shipper and UPFUELS were the Transporter, and without
regard to whether the relevant Transporter has actually assessed such Imbalance
Charges against UPR or UPFUELS. In instances of Split Connect Committed Gas, the
Tariff of the Transporter downstream of the Delivery Point as selected by UPR on
Exhibit A and associated with the Index selected by UPR in the
First-of-the-Month Availability Report shall be used for purposes of this
Section 3.3.1. If an imbalance occurs during any Month, the cause of any
Imbalance Charge due hereunder shall be determined. If it is determined that the
Imbalance Charge was imposed as a result of acts or omissions by UPR, then UPR
shall pay such Imbalance Charge and/or indemnify UPFUELS against any such
Imbalance Charge.

         3.4 OPERATIONAL FLOW ORDERS. UPR and UPFUELS recognize that Transporter
at the Delivery Point(s) may be authorized to issue Operational Flow Orders
("OFOs"), or the equivalent, under Transporter's Tariff. UPR and UPFUELS also
recognize that such Transporter may issue an OFO that obligates UPR or UPFUELS
to take action that may be contrary to the terms of this Agreement, including,
without limitation, the delivery and taking of Gas in quantities contrary to
those set forth in Availability Reports and prior nominations. UPR and UPFUELS
agree to use commercially reasonable efforts to prevent the issuance of such an
OFO. If an OFO is issued, UPR and UPFUELS agree that compliance with any duly
authorized OFO will not constitute a violation of this Agreement, provided that:
(i) the Party receiving an OFO notifies the other Party as soon as possible and
(ii) the Parties use commercially reasonable efforts to minimize the operational
and economic consequences of compliance with the OFO by all means at their
disposal. If an OFO can be construed as calling for the shutting-in of UPR
production, the Parties will cooperate to take steps alternative to such a
shut-in. Neither Party shall be excused from its performance obligations under
this Agreement as a result of any OFO being issued by a pipeline which is not a
Transporter at the Delivery Point or if the OFO issued by the Delivery Point
Transporter only requires curtailment of interruptible transportation service
while other higher priority services continue to flow. In addition, nothing in
this Section 3.4 shall be construed as requiring either Party to bear adverse
economic consequences under an OFO unless such adverse economic consequences are
the direct result of any act or omission by such Party.

         3.5 OPERATIONAL BALANCING AGREEMENTS. The Parties shall use
commercially reasonable efforts to maintain an operational balancing agreement
(an "OBA"), at each point of delivery into a transporting pipeline or at such
other points the Parties deem advisable. In respect to any point at

                                       12
<PAGE>   18

which an OBA is not in effect, upon UPR's request, UPFUELS will assume the
responsibility for negotiating and implementing an OBA on terms and conditions
acceptable to UPR and UPFUELS.

               IV. QUANTITY, DELIVERY & PURCHASE OF COMMITTED GAS

         4.1 PURCHASE AND SALE OBLIGATION.

                  4.1.1 UPR'S DELIVERY OBLIGATION. Commencing on the Effective
Date and continuing through the term hereof, UPR agrees to sell and deliver, or
cause to be sold and delivered (excepting an event of Force Majeure or any other
reason excusing the performance of UPR's obligation to sell and deliver
Committed Gas hereunder, and subject in all respects to the provisions of
Section 4.2.6) to UPFUELS at the Delivery Point(s) one hundred percent (100%) of
deliverable Committed Gas, including, without limitation, (i) one hundred
percent (100%) of the quantities of Gas delivered in accordance with UPR's
Availability Report as set forth in Section 2.3 and adjusted in accordance with
Section 2.3.1, and (ii) one hundred percent (100%) of additional Committed Gas
as set forth in Section 2.3.2. It is specifically understood and agreed that UPR
shall have no obligation to deliver quantities of Committed Gas for which UPR
has given notice of its intention to curtail or shut-in pursuant to Section
2.2.4.

                  4.1.2 UPFUELS' TAKE OBLIGATION. Commencing on the Effective
Date and continuing through the term hereof, UPFUELS agrees to take and purchase
(excepting an event of Force Majeure or any other reason excusing the
performance of UPFUELS' obligation to purchase and take Committed Gas hereunder,
and subject in all respects to the provisions of Section 4.2.6) from UPR at the
Delivery Point(s) one hundred percent (100%) of deliverable Committed Gas,
including, without limitation (i) one hundred percent (100%) of Committed Gas
delivered in accordance with UPR's Availability Report as set forth in Section
2.3 and adjusted in accordance with Section 2.3.1, (ii) one hundred percent
(100%) of additional Committed Gas as set forth in Section 2.3.2. It is
specifically understood and agreed that UPFUELS shall have no obligation to take
quantities of Committed Gas for which UPR has given notice of its intention to
curtail or shut-in pursuant to Section 2.2.4.

         4.2 CERTAIN DEFAULTS RELATED TO THE DELIVERY AND TAKING OF COMMITTED
GAS.

                  4.2.1 UPR OVER-DELIVERY DEFAULT. If, for any Day during any
Month, UPR delivers quantities of Committed Gas (including, without limitation,
additional quantities of Committed Gas delivered pursuant to Section 2.3.1 or
2.3.2) at all Delivery Point(s) on a Transporter that share a common Contract
Price under this Agreement and such aggregate deliveries exceed 105% of the
quantity of Committed Gas designated for delivery at such Delivery Point(s) in
the initial Availability Report for such Month (such excess Committed Gas being
herein called the "Excess Quantities", and the delivery of such Excess
Quantities being herein called a "UPR Over-Delivery Default"), then, as the sole
and exclusive remedy for such UPR Over-Delivery Default, UPFUELS shall pay an
amount equal to the product of (i) such Excess Quantities and (ii) the price
determined pursuant to the Daily Index, after any applicable Index Price
Adjustments.

                                       13
<PAGE>   19

                  4.2.2 UPR UNDER-DELIVERY DEFAULT. If, for any Day during any
Month, UPR fails for any reason (other than Force Majeure or any other reason
excusing performance of UPR's obligation to deliver Committed Gas hereunder) to
deliver ninety-five percent (95%) of the quantities set forth in UPR's
First-of-the-Month Availability Report delivered pursuant to Section 2.3 at all
Delivery Point(s) on a Transporter that share a common Contract Price under this
Agreement (such quantities being referred to herein as the "Minimum Quantities,"
and such failure to deliver such Minimum Quantities being herein defined as a
"UPR Under-Delivery Default"), then, as the sole and exclusive remedy for such
UPR Under-Delivery Default, UPR shall pay UPFUELS, in accordance with the
provisions of Article VIII, an amount equal to the product of (x) the positive
difference, if any, between (A) the Daily Index Price applicable to the relevant
Delivery Point(s) on the Day of such UPR Under-Delivery Default and (B) the
Contract Price that UPFUELS would have paid for the quantities of Committed Gas
not delivered by UPR at such Delivery Point(s) on such Day and (y) the
difference between the Minimum Quantities and the quantities actually delivered
by UPR at such Delivery Point(s) on such Day. Notwithstanding the foregoing
provisions of this Section 4.2.2, the Parties acknowledge that no payment may be
due from UPR in respect of a UPR Under-Delivery Default if the Daily Index Price
is the applicable Contract Price. If a UPR Under-Delivery Default occurs solely
as the result of UPR's sale of Committed Gas to third Persons for reasons not
excused by this Agreement, then, in addition to any applicable remedy set forth
above for such Under-Delivery Default, UPR shall pay UPFUELS, in accordance with
Article VIII, an amount equal to the product of (A) twenty percent (20%) of the
Contract Price applicable to the relevant Delivery Point(s) on the Day of such
Default and (B) the difference between the Minimum Quantities and the quantities
actually delivered by UPR at such Delivery Point on such Day. UPR's payment
hereunder shall not be recoupable. Nothing herein shall be construed as
relieving UPR from Imbalance Charges for which it is liable under Section 3.3.1.

                  4.2.3 MATERIAL UPR DELIVERY DEFAULT. "Material UPR Delivery
Default" shall mean UPR's failure for any reason (including but not limited to
selling Committed Gas to third Persons, but excepting Force Majeure or any other
reason excusing performance of UPR's obligation to deliver Committed Gas
hereunder) to deliver (i) ninety percent (90%) of deliverable Committed Gas, as
set forth in UPR's Availability Report, adjusted in accordance with Sections
2.3.1 and 2.3.2, during any calendar year or (ii) ninety percent (90%) of
deliverable Committed Gas, as set forth in UPR's Availability Report, adjusted
in accordance with Sections 2.3.1 and 2.3.2, during any calendar quarter. In the
event of a Material UPR Delivery Default, UPR shall pay UPFUELS an amount equal
to the product of (x) 120% of the Contract Price that would have applied to the
Committed Gas that UPR failed to deliver and (y) the quantity of Committed Gas
that UPR failed to deliver during the applicable calendar year or calendar
quarter.

                  4.2.4 UPFUELS TAKE DEFAULT. A "UPFUELS Take Default" shall
occur if, during any Month, UPFUELS fails for any reason (other than Force
Majeure or any other reason excusing performance of UPFUELS' obligation to take
Committed Gas hereunder) to take one hundred percent (100%) of deliverable
Committed Gas required to be taken in accordance with Section 4.1.2, in which
event (i) such untaken Committed Gas shall be released to UPR for the remainder
of such Month, with UPR to use commercially reasonable efforts to market such
Gas, and (ii) as the sole and exclusive remedy for such UPFUELS Take Default,
UPFUELS shall pay UPR, in accordance with

                                       14
<PAGE>   20

the provisions of Article VIII, an amount equal to: (a) the Contract Price
applicable to the relevant Delivery Point(s) on the Day of such UPFUELS Take
Default times the quantity of Committed Gas UPR is not able to market despite
commercially reasonable efforts to do so, and (b) for the quantities UPR is able
to market, UPFUELS shall pay UPR, an amount equal to the product of (A) the
higher of (1) the Daily Index Price applicable to the relevant Delivery Point(s)
on the Day of such UPFUELS Take Default times twenty percent (20%) or (2) 120%
of the positive difference, if any, between (x) the Contract Price less (y) the
Daily Index Price applicable to the relevant Delivery Point(s) on the Day of
such UPFUELS Take Default, and (B) the quantity of Committed Gas that UPFUELS
failed to take at such Delivery Point(s) on such Day. UPFUELS' payment hereunder
shall not be recoupable. Nothing herein shall be construed as relieving UPFUELS
for Imbalance Charges for which it is liable under Section 3.3.1.

                  4.2.5 MATERIAL UPFUELS TAKE DEFAULT. UPR may, in its
discretion, terminate this Agreement if a Material UPFUELS Take Default occurs
and UPR gives UPFUELS written notice of UPR's intention to terminate this
Agreement within sixty (60) Days after the last Day of the calendar year or
calendar quarter, as applicable, in which a Material UPFUELS Take Default
occurs, such termination to be effective on the last Day of the Month following
the Month in which such termination notice is delivered to UPFUELS. UPR's right
to terminate this Agreement for a Material UPFUELS Take Default shall be waived
if UPR fails to deliver to UPFUELS the notice described in the preceding
sentence of this Section within the 60-Day period set forth therein. After the
occurrence of a Material UPFUELS Take Default, UPR's sole and exclusive remedies
shall be (i) the recovery of any accrued and unpaid amounts due from UPFUELS
under Section 4.2.4 through the date of such Material UPFUELS Take Default, plus
interest accrued thereon in accordance with Section 8.4, and (ii) termination of
this Agreement pursuant to this Section. "Material UPFUELS Take Default" shall
mean UPFUELS' failure for any reason (other than Force Majeure or any other
reason excusing performance of UPFUELS' obligation to take Committed Gas
hereunder) to take (i) ninety percent (90%) of deliverable Committed Gas as set
forth in UPR's Availability Report, as adjusted in accordance with Sections
2.3.1 and 2.3.2, during any calendar year or (ii) ninety percent (90%) of
deliverable Committed Gas as set forth in UPR's Availability Report, as adjusted
in accordance with Sections 2.3.1 and 2.3.2, during any calendar quarter.

                  4.2.6 EXCLUSIVE CONSEQUENCES OF UPR DELIVERY DEFAULTS AND
UPFUELS TAKE DEFAULTS. The sole consequences of (i) a UPR Over-Delivery Default
are set forth in Section 4.2.1, (ii) a UPR Under-Delivery Default are set forth
in Section 4.2.2 and (iii) a Material UPR Delivery Default are set forth in
Section 4.2.3; provided, however, that if UPR shall fail to make any payment
required under any of such Sections when due, such failure shall constitute a
UPR Payment Default as provided in Section 11.2(b). The sole consequences of a
UPFUELS Take Default under this Agreement are set forth in Section 4.2.4
provided, however, that if UPFUELS shall fail to make any payment required
thereunder when due, such failure shall constitute a UPFUELS Payment Default as
provided in Section 11.2(a). The sole consequences of a Material UPFUELS Take
Default under this Agreement are set forth in Section 4.2.5. TO THE EXTENT THAT
DAMAGES IN RESPECT OF DEFAULTS ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE AND AGREE
THAT ACTUAL DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OTHERWISE
OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED

                                       15
<PAGE>   21

DAMAGES PROVIDED FOR HEREIN CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR
LOSS RESULTING FROM SUCH A DEFAULT. ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN
EQUITY RELATING TO A UPR OVER-DELIVERY DEFAULT, A UPR UNDER-DELIVERY DEFAULT, A
MATERIAL UPR DELIVERY DEFAULT, A UPFUELS TAKE DEFAULT AND A MATERIAL UPFUELS
TAKE DEFAULT ARE WAIVED, RELEASED AND RELINQUISHED IN RESPECT OF SUCH DEFAULTS.
THE PARTIES ACKNOWLEDGE THAT THE CONSEQUENCES OF THE DEFAULTS DESCRIBED IN THIS
ARTICLE IV ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND THAT THE CONSEQUENCES
SET FORTH HEREIN RESPECTING SUCH EVENTS CONSTITUTE A REASONABLE APPROXIMATION OF
THE HARM OR LOSS THAT WOULD BE SUFFERED BY EITHER PARTY AS A RESULT OF SUCH A
DEFAULT BY THE OTHER PARTY.

         4.3 PROVISION REGARDING OUTPUT CONTRACT LAWS. The Parties acknowledge
that deliveries of Committed Gas hereunder may increase or decrease
significantly from Month to Month as a consequence of the routine conduct of the
Parties' operations and a variety of factors affecting the market for Gas
generally. Accordingly, the Parties agree that (a) the obligations of UPR (i) to
sell and deliver Committed Gas and (ii) of UPFUELS to purchase and receive
Committed Gas, and (b) the methods used by UPFUELS and UPR pursuant to Section
2.3 to estimate the quantities of Committed Gas to be sold by UPFUELS and
purchased by UPR from Month to Month hereunder, are all commercially reasonable
means, arrived at by both Parties, acting in good faith, to minimize the
severity of such increases and decreases in deliveries, consistent with the
commercial realities of producing and marketing the Committed Gas and the
realities of Gas markets generally. The Parties agree that Section 2.306 of the
Texas Business and Commerce Code, or any provision of any law with similar
provisions (collectively, "Output Contract Laws"), is inapplicable to this
Agreement and the transactions hereby contemplated. To the extent that any
Output Contract Laws are held to apply to this Agreement and the transactions
hereby contemplated, the Parties hereby WAIVE, RELEASE AND RELINQUISH any
defenses to the enforcement of this Agreement arising from such Output Contract
Laws, and any claims that may be asserted by either Party arising from such
Output Contract Laws.

                           V. TITLE AND RESPONSIBILITY

         5.1 UPR RESPONSIBILITY. Title to Committed Gas delivered by UPR to
UPFUELS shall pass to UPFUELS at the Delivery Points. All charges, royalties,
lease burdens, expenses, fees, claims, damages, demands, injuries and other
costs or losses incurred in or attributable to production and transfer,
transportation (except as otherwise agreed by the Parties), and handling of
Committed Gas delivered in accordance with this Agreement prior to delivery to
UPFUELS at the Delivery Point(s) shall be the exclusive responsibility of UPR,
as between the Parties, and UPR shall indemnify, defend, and hold harmless
UPFUELS from all such charges, royalties, lease burdens, expenses, fees, claims,
damages, demands, injuries, and other costs or losses.

         5.2 UPFUELS RESPONSIBILITY. All charges, expenses, fees, claims,
damages, demands, injuries and other costs or losses incurred in or attributable
to the purchase and transfer, transportation, and handling of the Committed Gas
delivered in accordance with this Agreement at

                                       16
<PAGE>   22

and after delivery of Committed Gas at the Delivery Point(s) shall be the
exclusive responsibility of UPFUELS, as between the Parties, and UPFUELS shall
indemnify, defend, and hold harmless UPR from all such charges, expenses, fees,
claims, damages, demands, injuries, and other costs or losses.

                       VI. QUALITY, MEASUREMENT AND TESTS

         6.1 QUALITY SPECIFICATIONS. UPFUELS agrees to purchase Committed Gas
delivered by UPR to the Delivery Point(s) meeting the quality and pressure
specifications set forth in the Tariff of the Transporter immediately downstream
of the Delivery Point(s). If Committed Gas delivered by UPR to the Delivery
Point(s) is rejected by such Transporter for failure to meet its quality
specifications (such Committed Gas being herein sometimes called "Nonconforming
Gas"), UPFUELS shall be relieved of the obligation to purchase such Committed
Gas. If such Transporter accepts Nonconforming Gas tendered by UPR for UPFUELS'
account at the Delivery Point(s), UPR shall be deemed to have complied with the
quality specifications of this Agreement. UPR may bring such Nonconforming Gas
into conformity with the requirements of this Section 6.1 and, if such efforts
are successful, such Nonconforming Gas shall once again be Committed Gas and
subject in all respects to the terms and conditions of this Agreement. If it
would be uneconomical for UPR to bring such Nonconforming Gas into conformity
with the requirements of this Section 6.1, however, UPR shall notify UPFUELS in
writing of that fact (providing in such notice UPR's reasons for such conclusion
and the facts in support thereof), whereupon UPFUELS may, in its discretion (a)
accept such Nonconforming Gas for delivery at a price mutually acceptable to UPR
and UPFUELS, (b) have such Gas brought into conformity with Section 6.1 at its
sole cost and expense or (c) release such Nonconforming Gas from this Agreement.
Where UPFUELS may ship or redeliver Committed Gas to more than one Transporter,
UPFUELS will, if available, select a Transporter under whose standards such
Committed Gas would not be Nonconforming Gas. Without limiting the generality of
the foregoing provisions, it is expressly agreed and understood that either
Party may, but neither shall be obligated to, install and operate facilities
(including but not limited to compression facilities) to bring Committed Gas
into conformity with Transporter specifications. Any such facilities shall be
installed, operated and maintained at the sole cost, risk and expense of the
Party which elected to install such facilities, and either Party may discontinue
the operation of such facilities if, in the sole judgment of the Party
installing same, such operation is uneconomical. If neither Party elects to
install or continue the operation of such facilities, Nonconforming Gas shall be
released from the terms of this Agreement within thirty (30) Days of either
Party's written request for such a release. THE PROVISIONS OF THIS SECTION 6.1
SET FORTH THE SOLE REMEDIES FOR THE DELIVERY OR NON-ACCEPTANCE, AS APPLICABLE,
OF NONCONFORMING GAS, AND ALL OTHER REMEDIES ARE SPECIFICALLY WAIVED, RELEASED
AND RELINQUISHED BY THE PARTIES.

         6.2 VOLUME AND HEATING VALUE. UPFUELS and UPR agree that the volume and
heating value of Committed Gas sold and delivered under this Agreement will be
measured at or near the Delivery Point(s) by the relevant Transporter, using
equipment owned or controlled by, and measuring procedures employed by, such
Transporter. The measurements made by such Transporter shall be accepted by
UPFUELS and UPR (subject to adjustment if prior measurements are determined to

                                       17
<PAGE>   23

be inaccurate or incomplete), so long as the measuring equipment and procedures
used conform to Transporter's Tariffs and to generally recognized industry
standards. In addition, either Party may, at its sole expense and subject to
Transporter's approval, install check meters.

         6.3 TEST DATA AND CHARTS. UPR and UPFUELS shall preserve all original
test data, charts and other similar records in a Party's possession for a period
of at least three years.

                                   VII. PRICE

         7.1 PRICE FOR COMMITTED GAS GENERALLY. Except as otherwise specifically
provided in this Article VII, UPFUELS shall pay UPR the Index Prices which , at
UPR's election, shall be either the First-of-the-Month Price or the Daily Index
Price for Committed Gas delivered at each Delivery Point. The
"First-of-the-Month Price" of Committed Gas at a given Delivery Point shall be
the price reported in the first issue of the designated commercial publication
of the relevant Index that is published in the Month of delivery of Committed
Gas at the relevant Delivery Point(s), such price to be shown in the applicable
table, heading and entry, after any Index Price Adjustments. The "Daily Index
Price" of Committed Gas at a given Delivery Point shall mean the price reported
in the issue of the designated commercial publication of the relevant Daily
Index published for the relevant Day that is applicable to the Delivery Point(s)
where Committed Gas is delivered hereunder, after any Index Price Adjustment.
UPR shall make its election between the First-of-the-Month Price and the Daily
Index Price for each Month in the First-of-the-Month Availability Report for
such Month delivered pursuant to Section 2.3. If UPR fails to make an election
between the First-of-the-Month Price and the Daily Index Price in the
Availability Report for any Delivery Point(s) for any Month, the
First-of-the-Month Price shall apply to the Committed Gas delivered at such
Delivery Point(s) for that Month, except as otherwise specifically provided
elsewhere in this Article VII. If multiple Indexes are applicable to a Delivery
Point for which UPR has failed to make an election under this Section 7.1, the
Index previously selected by UPR shall apply to the Committed Gas delivered at
such Delivery Point for that Month, except as otherwise specifically provided
elsewhere in this Article VII. Although the Parties will strive to reduce to
writing agreements replacing an existing Index with a new Index, the Parties
recognize that market conditions may require prompt action. Consequently, oral
agreements replacing an existing Index with a new Index will be effective until
reduced to writing. Subject in all respects to Section 7.4, the Parties agree to
exercise commercially reasonable efforts to reduce such oral agreements to
writing within thirty (30) Days after the date of the initial request for a
replacement Index. The First-of-the-Month Price shall be calculated each Month
during the term of this Agreement and, if selected by UPR for a particular Month
as to any Delivery Point, shall remain in effect during the entire Month unless
the Parties agree in writing to change the First-of-the-Month Price during the
course of the Month.

         7.2 SPLIT CONNECT PRICE.

                  (a) GENERALLY. If Committed Gas is capable of being delivered
into Delivery Points located on more than one pipeline system ("Split Connect
Committed Gas"), UPR shall select up to three Indexes (any or all of which shall
be listed on Exhibit A for each relevant Delivery Point to use for the
First-of-the-Month Price or Daily Index Price, as applicable, and the
corresponding

                                       18
<PAGE>   24

Index Price Adjustments applicable to such Split Connect Committed Gas (such
Indexes being herein called the "Split Connect Indexes"). "Split Connect Price"
shall mean the arithmetical average of the prices determined by the applicable
Split Connect Indexes. Each Split Connect Index selected by UPR must correspond
to a separate pipeline system into which the Split Connect Committed Gas is
capable of being delivered, and such selection will remain in effect for a
period of no less than five full Months or seven full Months, as the case may
be, with the five-Month period to run each year from November 1 through March 31
and the seven-Month period from April 1 through October 31. UPR shall make its
selection of Split Connect Indexes and Index Price Adjustments by choosing in
the First-of-the-Month Availability Report pursuant to Section 2.3 either (x)
all of the First-of-the-Month Split Connect Indexes and Index Price Adjustments
or (y) all of the Daily Split Connect Indexes and Index Price Adjustments set
forth in Exhibit A with respect to any Delivery Point at which Split Connect
Committed Gas is to be delivered. If UPR fails to make an election between the
First-of-the-Month Split Connect Indexes and related Index Price Adjustments and
the Daily Split Connect Indexes and Index Price Adjustments in any such
Availability Report, the First-of-the-Month Indexes and related Index Price
Adjustments shall apply to the Committed Gas delivered at such Delivery Point(s)
for that Month, except as otherwise specifically provided elsewhere in this
Article VII.

                  (b) CAPACITY CONSTRAINTS. The Parties acknowledge that, from
time to time, constraints on available Transporter capacity on a Monthly basis
for firm markets in certain pipeline systems may limit the quantities of Split
Connect Committed Gas that may be delivered into such systems, which in turn
would affect the Split Connect Price payable to UPR hereunder. The existence of
such capacity constraints shall be determined on the basis that capacity
constraints actually exist, announced pipeline constraints or curtailments and
by the success of UPFUELS' efforts to nominate Committed Gas for delivery into
the applicable pipeline. If UPFUELS notifies UPR at least one (1) Business Day
before the beginning of the Month that a capacity constraint exists on a
specified pipeline system, then the Split Connect Price applicable to such
capacity-constrained Split Connect Committed Gas that Transporter shall be
determined by the Parties. If the Parties cannot agree that the capacity
constraints exist, or cannot agree on the Split Connect Price within thirty (30)
Days after UPFUELS' notification to UPR of the existence of a capacity
constraint, then the disagreement shall be resolved in accordance with the
dispute resolution procedures set forth in Article XII.

         7.3 LOCKED PRICE OPTION. In lieu of an Index Price provided for
pursuant to Sections 7.1 or 7.2, UPR may request that a fixed price (the "Locked
Price") be substituted for the Index Price for a period as short as one Month or
as long as twelve Months. The Index Price Adjustments used to calculate the
Contract Price under Sections 7.1 or 7.2 shall not be affected by the
substitution of a Locked Price. The Parties acknowledge that a Locked Price will
be based on New York Mercantile Exchange (or other exchange selected by UPFUELS)
posting for the Natural Gas futures contract applicable to the Month(s) selected
by UPR and prevailing at the time of UPR's request for a Locked Price plus a
differential adjustment required to equate the posted price with the market
price of Committed Gas delivered at the applicable Delivery Point.

                  7.3.1 REQUEST FOR A LOCKED PRICE. UPR may request a quote of a
Locked Price by telephone on any Business Day, between the hours of 8:30 a.m.
and 2:00 p.m., local Fort Worth,

                                       19
<PAGE>   25

Texas time, up to and including the second Business Day prior to the beginning
of a Month to which the Locked Price shall apply. UPR's request shall identify
the Delivery Point(s) subject to the request for a Locked Price, the Month(s)
for which UPR requests a Locked Price and the quantity of Committed Gas
estimated to be delivered from the applicable Delivery Point(s) that will be
subject to the Locked Price. UPR and UPFUELS acknowledge and agree that all
telephone conversations between the Parties relating to a Locked Price may be
recorded by UPFUELS or UPR, or both, for purposes of establishing the terms and
conditions associated with a Locked Price. UPR and UPFUELS also agree that the
taped conversation may be used to establish the terms and conditions associated
with a Locked Price if the Parties are unable to agree on such terms and
conditions subsequent to the conversation in question.

                  7.3.2 PROCEDURES. As soon as possible after UPR's telephonic
request, but in any event by no later than the end of the Business Day following
UPR's request, UPFUELS' Authorized Trader (as designated pursuant to Section
14.4) shall determine if it is able to offer a Locked Price and, if it is able,
the Locked Price (expressed in MMBtus) it is willing to offer, and shall notify
UPR's Authorized Trader (as designated pursuant to Section 14.4) of such Price.
UPFUELS' notice shall be addressed to UPR's Authorized Trader, and shall
separately state the differential, if any, applicable to the Locked Price. If
UPR accepts the Locked Price, including any adjustments thereto required to
reflect the market value at the Delivery Point(s) of the Committed Gas sold
pursuant to the Locked Price, then UPFUELS shall forward to UPR's Authorized
Trader a "Price Lock Confirmation," in substantially the form attached hereto as
Exhibit D, specifying the terms to which the Parties have agreed. Such Price
Lock Confirmation shall be forwarded to UPR's Authorized Trader as soon as
possible following UPR's acceptance of the Locked Price. The terms set forth in
the Price Lock Confirmation shall be binding upon the Parties unless UPR's
Authorized Trader notifies UPFUELS' Authorized Trader in writing that UPR
disputes one or more of the terms set forth in said Price Lock Confirmation
within two (2) Business Days of UPR's Authorized Trader's receipt of the Price
Lock Confirmation.

                  7.3.3 LOCKED QUANTITIES. UPR may request that all, or any
portion of, the Committed Gas available for delivery from one or more Delivery
Point(s) during the Month(s) designated by UPR be subject to a Locked Price
determined under this Section 7.3, provided that UPR's request shall designate a
specific quantity of Committed Gas. UPFUELS shall be entitled to decline to
offer a Locked Price on such quantities at its sole discretion. If a Locked
Price has been established for a portion of the quantities of Committed Gas
available for delivery from one or more Delivery Point(s) for a given period,
UPR shall be entitled to make one or more additional requests for a Locked Price
on all or any additional quantities of the remaining Committed Gas available for
delivery from such Delivery Point(s) during the designated period.

                  7.3.4 IRREVOCABILITY. Unless UPR and UPFUELS agree otherwise
in writing, a Locked Price shall remain effective for the entire period
designated in the Price Lock Confirmation and shall not be increased or
decreased.

                  7.3.5 AVAILABILITY OF COMMITTED GAS. UPR shall not be entitled
to curtail production and delivery, and UPFUELS shall not be entitled to curtail
takes, of Committed Gas

                                       20
<PAGE>   26

subject to a Locked Price pursuant to this Section 7.3 for any reason including,
without limitation, force majeure. If UPR and UPFUELS establish a Locked Price
for less than one hundred percent (100%) of the Committed Gas available for
delivery from one or more Delivery Point(s) or establish more than one Locked
Price for Committed Gas available for delivery from one or more Delivery
Point(s), the first Committed Gas delivered on each Day and during the
applicable Month shall be deemed to be subject to the first Locked Price
established, followed by quantities of Committed Gas subject to additional
Locked Prices in the order established, followed by quantities of Committed Gas
not subject to a Locked Price.

                  7.3.6 CESSATION OF FUTURES TRADING. If Natural Gas futures
contracts cease to be traded on the New York Mercantile Exchange or on any other
mercantile exchange acceptable to UPFUELS in its sole discretion, then after
such cessation UPFUELS shall be relieved of any and all obligation to
established Locked Prices hereunder, upon providing UPR with written notice that
such cessation has occurred, and that UPFUELS no longer wishes to provide UPR
with a Locked Price hereunder.

                  7.3.7 APPLICABILITY OF OTHER PROVISIONS OF THIS AGREEMENT TO
COMMITTED GAS SOLD UNDER A LOCKED PRICE. Except as specifically provided in the
Price Lock Confirmation, the terms of this Agreement shall continue to apply to
Committed Gas sold pursuant to a Locked Price, except that UPR's obligation to
deliver Committed Gas subject to a Locked Price shall be a Monthly obligation
and not a Daily obligation. Accordingly, for purposes of this Agreement, UPR
shall have complied with its obligation to deliver quantities of Committed Gas
subject to a Locked Price if it delivers such quantities at the applicable
Delivery Point(s) during the course of the Month, without regard to variations
in quantities delivered on any particular Day. However, nothing herein shall
relieve UPR from Imbalance Charges for which it is liable under Section 3.3.1.

                  7.3.8 LIQUIDATION OF HEDGE POSITIONS. The Parties acknowledge
that a hedge position is a financial transaction which requires liquidation if
physical delivery or receipt of the Locked Price Gas is interrupted for any
reason (including without limitation Force Majeure). Such interruption may
require liquidation of the entire position, which may not be partially
liquidated to accommodate only the duration, or anticipated duration, of the
interruption. In the event any hedge position is undertaken by UPFUELS in
reliance upon an agreed Locked Price, and delivery of the Locked Price Gas is
interrupted for any reason, including without limitation Force Majeure, then UPR
shall be liable to UPFUELS for any actual, direct loss incurred by UPFUELS in
liquidating such hedge position in a commercially reasonable manner. A loss is
incurred when all costs of undertaking the position exceed the net liquidation
proceeds. In the event such liquidation yields a profit (i.e. net liquidation
proceeds exceed all costs of undertaking the position), then UPR shall be paid
or credited with such profit. UPFUELS in the exercise of its sole discretion,
shall determine: (i) whether the anticipated or estimated duration of the
interruption justifies liquidation of the entire hedge position, and (ii)
whether the affected hedge position may be feasibly or economically liquidated
in part only. The decision of UPFUELS with regard to such matters shall be
controlling.

         7.4 REPLACEMENT OF INDEXES; REDETERMINATION OF INDEXES, SPLIT CONNECT
INDEXES AND INDEX PRICE ADJUSTMENTS. If, during the term of this Agreement, (i)
an Index used to determine

                                       21
<PAGE>   27

the Index Price for any Delivery Point ceases to be available, (ii) either Party
believes that another Index more accurately reflects existing market conditions
with respect to any Delivery Point(s) than the Index currently being used with
respect to such Delivery Point(s), or (iii) either Party believes that the Index
Price Adjustments with respect to any Index Price for any Delivery Point(s) no
longer accurately reflects all differentials reasonably necessary to adjust the
Index Price for Gas to accurately reflect the market price for Gas of like
quantities and quality at such Delivery Point(s), then either Party may request
the other to reconsider the currently-applicable Index or Index Price
Adjustment. If the Parties cannot agree on a replacement Index or an appropriate
change to the Index Price Adjustment in question within thirty (30) Days after
such request, then the dispute resolution provisions of Article XII shall apply.
The Parties shall review the appropriateness of, and make selection of or
request changes to, all Index(es), Split Connect Indexes, and Index Price
Adjustments prior to February 15 and September 15 of each year, and shall not
request any change in Index pursuant to clause (ii) or in Index Price Adjustment
pursuant to clause (iii) more than once in each applicable five or seven-Month
period. Any disputes regarding Indexes or Index Price Adjustments remaining
unresolved by the following April or November, as applicable, shall be
consolidated and submitted to the dispute resolution procedures set forth in
Article XII.

         7.5 PROVISIONS RELATING TO PRICING EXHIBIT; PROCEDURES FOR CHANGE OF
EXHIBIT. The attached Exhibit A accurately sets forth the Parties agreement
regarding the Indexes, Split Connect Indexes, Index Price Adjustments and
Delivery Points applicable to Committed Gas as of the Effective Date, and such
Indexes, Index Price Adjustments and Delivery Points shall not change for a
period of sixty (60) Days after the Effective Date except for (i) the deletion
of Delivery Points no longer needed for the delivery of Committed Gas, (ii) the
replacement of any Index that ceases to be available during such period, (iii)
changes in an Index Price Adjustment, or (iv) changes or amendments to
Transporter Tariffs or agreements with Transporters that affect actual costs of
transportation including, without limitation, changes in fuel retention
percentages insofar as such costs are a part of an Index Price Adjustment.
Either Party may propose a change in Exhibit A after the end of such 60-Day
period, subject to the limitations of Section 7.4, by giving the other Party no
less than thirty (30) Days' written notice before the first Day of the Month
such change is proposed to be effective (the "Price Effective Date"). If the
other Party agrees in writing to such change, the change shall be effective on
the Price Effective Date. If the other Party does not agree in writing to the
proposed change by the tenth (10th) Day prior to the proposed Price Effective
Date, then the proposed change shall not be effective, and either Party may seek
to resolve the dispute pursuant to Article XII.

                      VIII. ACCOUNTING, BILLING AND PAYMENT

         8.1 STATEMENTS. UPFUELS shall provide UPR with a written and
electronically transmitted statement by not later than the 15th Day of the Month
for Committed Gas delivered during the preceding Month. Such statement shall set
forth (a) the quantities of Committed Gas received at each Delivery Point(s),
(b) the Contract Price applicable to such Committed Gas (indicating, where
appropriate, the applicability of the First-of-the-Month Price, the Daily Index
Price, the Split Connect Price or the Locked Price), as provided herein, at each
of such Delivery Point(s), (c) any amount (i) due UPR in respect of any UPFUELS
Take Defaults under Sections 4.2.4 or 4.2.5

                                       22
<PAGE>   28

(including reasonably satisfactory evidence of such amounts), or (ii) due
UPFUELS in respect of any UPR Delivery Defaults under Sections 4.2.1, 4.2.2 or
4.2.3 (including reasonably satisfactory evidence of such amounts) and (d) any
amounts (i) due UPR in respect of an Imbalance Charge for which UPFUELS is
responsible (including reasonably satisfactory evidence of such amounts) or (ii)
due UPFUELS in respect of Imbalance Charge for which UPFUELS is responsible
(including reasonably satisfactory evidence of such amounts), together with an
invoice for payment based thereon less any amounts due UPFUELS pursuant to
clauses (c) and (d) above. If actual quantities delivered at each of such
Delivery Point(s) are not available by the 15th Day of the Month, UPFUELS may
furnish statements and invoices based on UPR's Availability Report pursuant to
Sections 2.3, 2.3.1 and 2.3.2 which statements and invoices shall be adjusted to
reflect actual deliveries as soon as practicable after such actual deliveries
become known. Within five (5) Business Days of the request of either Party, the
other Party shall provide, to the extent it has a legal right of access thereto
and/or such statement is then available, a copy of the Transporter's allocation
or imbalance statement applicable to the Committed Gas for the requested period.
UPR will cooperate with UPFUELS in helping UPFUELS obtain all information
necessary or desirable to prepare UPFUELS' statements and invoice in accordance
with this Section 8.1.

         8.2 PAYMENT. By no later than the 25th Day of the Month following the
Month in which Committed Gas was delivered, UPFUELS shall pay UPR, by wire
transfer of immediately available funds into an account designated by UPR, all
amounts due under this Agreement for Committed Gas delivered during the previous
Month. If the Day on which payment is due hereunder does not fall on a Business
Day, then UPFUELS' payment shall be due on the preceding Business Day.

         8.3 DISPUTED PAYMENTS. Should a statement be disputed by a Party in
good faith, the disputing Party will pay any undisputed amount and will notify
the other Party in writing of the disputed amount and the basis for the dispute.
Payment of the undisputed portion of a statement will not be deemed a waiver of
the paying Party's right to recoup any overpayment, and acceptance of such
payment will not be deemed a waiver of the accepting Party's right to recover
any underpayment. The Party that rendered the disputed statement will promptly
investigate the dispute and will submit a corrected statement, if necessary,
within thirty (30) Days after receiving notice of the dispute. If the Parties
cannot agree on the disputed amount within such 30-Day period, then either Party
may institute dispute resolution procedures in accordance with Article XII. If
upon resolution of the dispute (whether by agreement or otherwise), a Party is
determined to have underpaid the amount actually due, the Party will remit the
amount due, plus interest thereon from the date such amount should have been
paid until such amount has been received by the underpaid Party, calculated at
the rate stated in Section 8.4 herein. If upon resolution of the dispute
(whether by agreement or otherwise), a Party is determined to have overpaid the
amount actually due, the Party to whom such overpayment was made will refund the
excess paid, plus interest thereon from the date such amount was received by the
overpaid Party until such amount has been received by the underpaid Party,
calculated at the rate stated in Section 8.4 herein.

         8.4 OVERDUE PAYMENTS. Subject in all respects to Section 8.3, if either
Party fails to pay the amount due the other Party when due hereunder as set
forth in Section 8.2, then interest on any such unpaid and overdue amount shall
accrue until paid at the Reference Rate.

                                       23
<PAGE>   29

         8.5 TWO YEAR LIMIT ON ADJUSTMENTS. Any statement, charge or payment
under this Agreement will be deemed final unless disputed in accordance with
Section 8.3 within 24 Months from the final Business Day of the calendar year in
which such statement, charge or payment was made or rendered, except for any
adjustments to such statement, charge or payment due to volume adjustments of
Committed Gas delivered at the Delivery Point(s) and other adjustments caused by
Transporters' statements affecting payments for Committed Gas or Imbalance
Charges, in which event any dispute regarding such adjustments must be made
within 24 months of the final Business Day of the calendar year in which notice
of such adjustment was received. Any payment with respect to a retroactive
adjustment shall include an amount equal to interest on all amounts past due
from the date of the initial payment at the rate set forth in Section 8.4 above.

         8.6 AUDIT. Each Party shall keep and maintain true and correct books,
records, files and accounts of all information reasonably related to the
transactions contemplated by this Agreement, including all measurement records,
all information used to determine prices and calculate invoices, all invoices,
statements and payment records (collectively, the "Records"). Each Party shall
have the right, upon reasonable written notice to the other Party of not less
than ten (10) Business Days, to audit the Records of the other Party at any time
during reasonable business hours during the term of this Agreement and for a
period of 24 Months after the Month of such Agreement's termination, to the
extent necessary to determine compliance by the other Party with the terms of
this Agreement, but such audit rights shall be limited to auditing such Records
for the then current and three (3) preceding calendar years. Notwithstanding the
foregoing, if a governmental body asserts a claim, or conducts an audit, against
a Party arising from the purchase or sale of Committed Gas and that Party
determines in its reasonable judgment that its response to such claim requires
or would benefit from an audit of the Records of the other Party, such audit may
be conducted during the term of this Agreement and for a period ending on the
fifth anniversary of the event or payment forming the basis of such governmental
claim. In order to accommodate such governmental audits, UPR and UPFUELS will
maintain the appropriate Records for a period of not less than five (5) years.
Each Party shall also have access to the Records of the other Party for purposes
of responding to claims, or requests for audits, asserted by a non-governmental
third Person and arising from the purchase or sale of Committed Gas.

                                       24
<PAGE>   30

         8.7 LETTER OF CREDIT; CREDIT ENHANCEMENT.

                  (a) INITIAL LETTER OF CREDIT REQUIREMENT. Subject to Section
8.7(d), on or before the Effective Date, UPFUELS' Affiliate, Duke Energy Trading
and Marketing, L.L.C. ("DETM") shall have executed and delivered, at its sole
cost and expense, one or more irrevocable standby letters of credit (the "Letter
of Credit," whether one or more), issued by one or more commercial banks
satisfactory to UPR, in an aggregate amount equal to the Initial Amount
(hereinafter defined), and otherwise in form, term and substance satisfactory to
UPR. The Initial Amount shall equal the product of (i) the average Daily
quantities of Committed Gas designated for delivery by UPR in the initial
Availability Report delivered to UPFUELS in accordance with Section 2.3 of this
Agreement, (ii) the Contract Price estimated in good faith by UPR to be payable
in respect of Committed Gas designated for delivery by UPR pursuant to clause
(i) and (iii) sixty-five (65) Days. DETM's delivery of the Letter of Credit
shall be a condition precedent to the performance of UPR's obligations
hereunder.

                  (b) ADJUSTMENT OF INITIAL AMOUNT. Except as otherwise provided
in this Section 8.7(b), the Initial Amount shall not be subject to adjustment
until April 1999, when UPR shall review the Initial Amount and all other terms
of the Letter of Credit to determine whether such Initial Amount or such other
terms should be adjusted in view of all commercial factors relevant to the
assurance of UPFUELS' performance of its obligations under this Agreement,
including but not limited to (i) DETM's creditworthiness, (ii) the general level
of prices for Gas and other energy commodities and (iii) the condition of the
domestic and international economy. UPR shall thereafter review the amount and
other terms of the Letter of Credit not less frequently than each subsequent
October and April during the term of this Agreement. Nothing in this Section
8.7(b) shall be construed to limit UPR's right to review the amount of the
Letter of Credit on a more frequent basis, however, or to require such
additional credit enhancement as UPR deems necessary to provide adequate
assurances of UPFUELS' obligations hereunder. Notwithstanding the foregoing, the
Parties agree that no adjustment shall result in a Letter of Credit with an
obligation greater than the product of (x) the quantities of Committed Gas
estimated in good faith to be delivered by UPR over a period of sixty-five (65)
Days, (y) the Contract Price estimated in good faith by UPR to be payable in
respect of such Committed Gas over such period and (z) sixty-five (65) Days.

                  (c) MAINTENANCE OF LETTER OF CREDIT. DETM shall maintain the
Letter of Credit at all times during the term of this Agreement, and shall give
UPR not less than sixty (60) Days' written notice by registered mail prior to
the expiration of any Letter of Credit. DETM's failure to maintain the Letter of
Credit in the amounts and on the terms required hereunder, or to provide UPR
with any other credit enhancement required hereunder, shall be a DETM Credit
Default, and shall entitle UPR to exercise the remedies set forth in Article XI,
including but not limited to suspension of performance hereunder and the
termination of this Agreement.

                  (d) Notwithstanding the foregoing provisions of this Section
8.7, UPR shall not require DETM to maintain a Letter of Credit as long as DETM
maintains a credit rating of no lower than BBB by Standard and Poors or Baa2 by
Moody's.

                                       25
<PAGE>   31

                           IX. DISCLAIMER AND WARRANTY

         9.1 WARRANTY. UPR warrants title to, or the right to sell, all Gas
delivered to UPFUELS under this Agreement. UPR also warrants that all such Gas
shall be free from all liens, encumbrances and adverse claims, other than (i)
Liens as permitted under Section 2.2.7, and (ii) liens mandated by Section 9-319
of the Texas Business and Commerce Code and the statutes, if any, in other
jurisdictions with like lien provisions of mandatory application.

         9.2 DISCLAIMER. EXCEPT AS MADE IN SECTION 9.1 (REGARDING UPR'S TITLE),
UPR MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH
RESPECT TO COMMITTED GAS SOLD HEREUNDER, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

                                X. FORCE MAJEURE

         10.1 SUSPENSION OF OBLIGATIONS. If either UPR or UPFUELS is rendered
unable, by reason of an event of Force Majeure, to perform, wholly or in part,
any obligation or commitment set forth in this Agreement, except for the payment
of monies owed, then upon that Party's giving notice (the initial notice may be
oral notice followed by written notice within five (5) Business Days of such
oral notice) and full particulars of the event of Force Majeure, then the
obligations of both Parties under this Agreement shall be suspended, except for
the payment of amounts owed under this Agreement, to the extent and for the
period of such Force Majeure event.

         10.2 FORCE MAJEURE DEFINED. The term "Force Majeure" means an event
that (i) was not within the control of the Party claiming its occurrence; and
(ii) could not have been prevented or avoided by such Party through the exercise
of due diligence. Events of Force Majeure include, without limitation by
enumeration: acts of nature; lightning, hurricanes or storms, hurricane or storm
warnings which in UPR's judgment require and result in the precautionary
shut-down or evacuation of production facilities; earthquakes, epidemics, fires,
floods, landslides, washouts, freezing of wells or lines of pipe used to supply
Committed Gas under this Agreement and other similar severe natural calamities;
events of force majeure affecting processing or fractionation plants at which
Committed Gas is being processed, if such events prevent the delivery of such
Committed Gas to the Delivery Point(s) provided for in this Agreement; acts of
public enemy; wars; blockades; insurrections; riots; civil disturbances and
arrests; strikes, lockouts or other industrial disturbances; explosions,
breakage, accidents to wells, equipment, facilities or lines of pipe used to
enable UPR to deliver or UPFUELS to receive Committed Gas under this Agreement;
the inability or refusal of any Transporter of Gas to receive, transport or
deliver Gas sold or purchased hereunder (but only if (x) such inability or
refusal results from an event that is interrupting such Transporter's service to
its firm customers and (y) no available alternative for the transportation of
the affected Committed Gas exists); imposition by a regulatory agency, court or
other governmental authority having jurisdiction, of binding laws, conditions,
limitations, orders, rules or regulations that prevent or prohibit either Party
from performing its obligations hereunder, provided such governmental action has
been resisted in good faith by all reasonable legal means; or any other cause of
a similar type whether of the kind herein

                                       26
<PAGE>   32

enumerated or otherwise, not within the control of the Party claiming suspension
and which by the exercise of due diligence such Party is unable to overcome.
Force Majeure shall also include the inability to acquire, or delays in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
any servitudes, right-of-way grants, permits or licenses required to be obtained
to enable a Party hereto to fulfill its obligations hereunder.

         10.3 EXCLUSIONS. Force Majeure does not include loss of markets, a
change in market prices for Gas or the interruption of interruptible
transportation service.

         10.4 LABOR DISPUTES. The settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty and the above
requirement of the use of diligence in restoring normal operating conditions
shall not require the settlement of strikes or lockouts by acceding to the terms
of the opposing Person(s) when such course is inadvisable in the discretion of
the Party having the difficulty.

         10.5 MARKETING OF FORCE MAJEURE GAS. If UPFUELS is unable to take
Committed Gas from any Delivery Point(s) due to the occurrence of Force Majeure,
UPR, acting in a commercially reasonable manner, may market and sell such
Committed Gas from the affected Delivery Point(s) to any third parties free from
this Agreement and without any obligation to UPFUELS during the continuance of
the Force Majeure. As soon as the Force Majeure that rendered UPFUELS unable to
take Committed Gas is remedied or terminated, UPR's obligation to thereafter
commence selling the Committed Gas to UPFUELS shall commence following the
expiration of any agreement between UPR and third parties for the purchase of
Committed Gas that UPFUELS was unable to take and that UPR subsequently marketed
and sold to such parties as permitted by this Section 10.5. It is specifically
understood and agreed that any such agreement between UPR and third parties
shall terminate no later than the last Day of the Month in which the Force
Majeure event occurred; provided, however, if the Force Majeure event has not
been remedied two (2) Business Days prior to the end of such Month, or the force
majeure event is not scheduled (two Business Days prior to the end of such
Month) to be remedied by the first Business Day of the next succeeding Month,
UPR may contract with third parties to sell such Gas in the next succeeding
Month. UPR shall use commercially reasonable efforts to terminate any such
agreement within a shorter period so that the Committed Gas being sold
thereunder will be available for sales to UPFUELS once UPR receives notice from
UPFUELS pursuant to this Section 10.5 that such Force Majeure has been remedied
or terminated.

                                       27
<PAGE>   33

                         XI. TERM, DEFAULT AND REMEDIES

         11.1 TERM.

                  (a) GENERAL. This Agreement shall remain in full force and
effect until the first to occur of: (i) the fifth (5th) anniversary of the
Effective Date (it being understood that, subject to the other terms and
conditions of this Agreement, this Agreement shall be automatically extended
from year to year after such fifth anniversary, unless terminated by either
Party upon written notice delivered to the other Party at least 180 Days prior
to the last Day of the then-effective term); (ii) termination of this Agreement
by UPR for a Material UPFUELS Take Default pursuant to Section 4.2.5; (iii)
termination of this Agreement for other Defaults enumerated in Section 11.3(a),
or (iv) upon the occurrence of a Change of Control with respect to either Party,
as provided in Section 13.3.

                  (b) SURVIVAL OF OBLIGATIONS. Termination of this Agreement
shall in no way relieve any Party from any obligations or liabilities accrued
hereunder as of the date of termination, and any imbalances in receipts or
deliveries shall be corrected to zero within sixty (60) Days after such date. In
addition, all indemnity obligations of the Parties shall survive the termination
of this Agreement for the maximum period prescribed by applicable law.

         11.2 DEFAULTS.

                  (a) UPFUELS DEFAULT DEFINED. Each of the following shall be
deemed a "UPFUELS Default": (i) UPFUELS' failure to pay or cause to be paid any
undisputed amount owing under this Agreement when due (including, without
limitation, payments due from UPFUELS in respect of a UPFUELS Take Default or
UPFUELS Material Take Default and any interest accrued on any amounts payable
hereunder in accordance with Section 8.4) for a period of three (3) Business
Days after the due date (a "UPFUELS Payment Default"); (ii) a Material UPFUELS
Take Default (as defined in Section 4.2.5); (iii) the occurrence of one or more
of the following events with respect to UPFUELS: (A) the entry of a decree or
order for relief against UPFUELS by a court of competent jurisdiction in any
involuntary case brought against UPFUELS under any bankruptcy insolvency or
other similar law (collectively, "Debtor Relief Laws") generally affecting the
rights of creditors and relief of debtors now or hereafter in effect, (B) the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar agent under applicable Debtor Relief Laws for
UPFUELS or for any substantial part of its assets or property, (C) the ordering
of the winding up or liquidation of the UPFUELS' affairs, (D) the filing of a
petition in any such involuntary bankruptcy case, which petition remains
undismissed for a period of 180 Days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy law) (E) the commencement by
UPFUELS of a voluntary case under any applicable Debtor Relief Law now or
hereafter in effect, (F) the consent by UPFUELS to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar agent under any applicable Debtor Relief Laws for
UPFUELS or for any substantial part of its assets or property, or (G) the making
by UPFUELS of any general assignment for the benefit of

                                       28
<PAGE>   34

its creditors (the events referred to in clauses (A) through (G) being
collectively referred to as a "UPFUELS Bankruptcy Default"); (iv) the failure of
DETM to maintain the Letter of Credit, or any other credit enhancement, required
under Section 8.7 (a " DETM Credit Default"); (v) the inaccuracy, in any
material respect, of any representation or warranty made by UPFUELS in Section
14.11 (a "UPFUELS Representation Default"); or (vi) UPFUELS' failure to perform
any covenant or other obligation in this Agreement (other than those specified
in clauses (i) through (v) of this Section 11.2(a)), and if such failure is
susceptible of cure before UPR suffers any costs or losses as a result thereof,
such failure is not remedied within thirty (30) Days of UPFUELS' receipt of a
written notice describing the particulars of such failure in reasonable detail
(such failure being herein called a "UPFUELS Covenant Default").

                  (b) UPR DEFAULT DEFINED. Each of the following shall be deemed
a "UPR Default": (i) UPR's failure to pay or cause to be paid any undisputed
amount owing under this Agreement when due (including, without limitation,
payments due from UPR in respect of a UPR Delivery Default; and any interest
accrued thereon in accordance with Section 8.4) for a period of sixty (60) Days
after the due date (a "UPR Payment Default"); (ii) a UPR Over-Delivery Default
(as defined in Section 4.2.1), a UPR Under-Delivery Default (as defined in
Section 4.2.2) or a Material UPR Delivery Default (as defined in Section
4.2.3.), (iii) the occurrence of one or more of the following events with
respect to UPR: (A) the entry of a decree or order for relief against UPR by a
court of competent jurisdiction in any involuntary case brought against UPR
under any Debtor Relief Laws generally affecting the rights of creditors and
relief of debtors now or hereafter in effect, (B) the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar agent
under applicable Debtor Relief Laws for UPR or for any substantial part of its
assets or property, (C) the ordering of the winding up or liquidation of UPR's
affairs, (D) the filing of a petition in any such involuntary bankruptcy case,
which petition remains undismissed for a period of 180 Days or which is not
dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code
(or any corresponding provision of any future United States bankruptcy law) (E)
the commencement by UPR of a voluntary case under any applicable Debtor Relief
Law now or hereafter in effect, (F) the consent by UPR to the entry of an order
for relief in an involuntary case under any such law or to the appointment of or
the taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable Debtor
Relief Laws for UPR or for any substantial part of its assets or property, or
(G) the making by UPR of any general assignment for the benefit of its creditors
(the events referred to in clauses (A) through (G) being collectively referred
to as a "UPR Bankruptcy Default"); (iv) the inaccuracy, in any material respect,
of any representation or warranty made by UPR in Section 14.10 (a "UPR
Representation Default"); or (v) UPR's failure to perform any covenant or other
obligation in this Agreement (other than those specified in clauses (i) through
(iv) of this Section 11.2(b)), and if such failure is susceptible of cure before
UPFUELS suffers any costs or losses as a result thereof, such failure is not
remedied within thirty (30) Days of UPR's receipt of a written notice describing
the particulars of such failure in reasonable detail (such failure being herein
called a "UPR Covenant Default").

                                       29
<PAGE>   35
         11.3 CONSEQUENCES OF DEFAULTS.

                  (a) GENERAL. Except as explicitly provided in this Agreement,
and subject in all respects to the other terms and conditions hereof (including,
without limitation, Section 4.2.6), the Party not in Default (herein referred to
as an "Unaffected Party") may take such actions as it may be permitted to take
under applicable law in consequence of a Default of the other Party (herein
sometimes called the "Defaulting Party"), including, without limitation, the
exercise of setoff rights under Section 11.4, the right to suspend further
performance under this Agreement and, in the case of UPR, the right to sell all
or any part of the Committed Gas to third Persons; provided, however, that the
right to terminate this Agreement shall only be applicable (A) upon occurrence
of a UPFUELS Bankruptcy Default or a UPR Bankruptcy Default (whereupon this
Agreement shall terminate automatically and immediately), (B) upon occurrence of
a UPFUELS Payment Default (whereupon this Agreement shall immediately terminate,
at UPR's election, if UPR had previously given at least ten (10) Days' prior
written notice to UPFUELS of UPR's intent to terminate this Agreement), (C) upon
occurrence of a Material UPFUELS Take Default, as provided in Section 4.2.5 or
(D) upon occurrence of a UPFUELS Credit Default under Section 8.8, if UPR had
previously given at least ten (10) Days' prior written notice to UPFUELS of
UPR's intent to terminate this Agreement.

                  (b) MITIGATION OF DAMAGES. An Unaffected Party shall use
commercially reasonable efforts to mitigate costs or losses as a result of a
Default, including, without limitation, exercising commercially reasonable
efforts to find alternative markets for Committed Gas or alternative supplies of
Gas, as applicable. Similarly, a Defaulting Party shall exercise commercially
reasonable efforts to minimize the harm suffered by an Unaffected Party in
consequence of such Default, including providing the Unaffected Party with
prompt notice of such Default so as to facilitate cover for Committed Gas not
delivered or the resale of Committed Gas not taken hereunder.

                  (c) REMEDIES CUMULATIVE. Unless explicitly indicated to the
contrary in this Agreement, the remedies contemplated in this Section 11.3
(including, without limitation, termination of this Agreement) are cumulative
of, and may be exercised without prejudice to, any other remedies, whether at
law or in equity to which an Unaffected Party may be entitled under this
Agreement for any Default.

         11.4 SETOFF RIGHTS. Except as specifically set forth in Sections 8.1
and 14.8, all payments under this Agreement will be made without setoff or
counterclaim; provided, however, that upon a Defaulting Party's failure to make
payment of undisputed amounts on the due date, the Unaffected Party may, at its
option and in its discretion, setoff against any amounts owed to the Defaulting
Party under this Agreement or otherwise. The obligations of the Unaffected Party
to the Defaulting Party shall be deemed satisfied and discharged to the extent
of any such setoff. The Unaffected Party will give the Defaulting Party notice
of any setoff made under this Section 11.4 as soon as practicable after the
setoff is made, but failure to give such notice shall not affect the validity of
the setoff.

                                       30
<PAGE>   36
                       XII. DISPUTE RESOLUTION PROCEDURES

         12.1 GENERAL DISPUTE RESOLUTION PROVISIONS.

                  (a) EXECUTIVE MEDIATION. In the event of any dispute,
controversy or claim, whether based in contract, tort or otherwise, arising out
of or related to this Agreement or the scope, breach, termination, performance,
interpretation, construction, application, enforcement, or validity of this
Agreement (a "Dispute"), the Parties to this Agreement shall promptly seek to
resolve such Dispute by negotiations pursuant to this Section 12.1(a) between
senior executives of the Parties who have authority to settle the Dispute and
who have not been directly involved in the transactions giving rise to such
Dispute. When a Party believes there is a Dispute under this Agreement, that
Party will give the other Party written notice of the Dispute. Within thirty
(30) Days after receipt of such notice, the receiving Party shall submit to the
other a written response. Both the notice and response shall include (i) a
statement of the Party's position and a summary of the evidence and arguments
supporting its position, and (ii) the name, title, fax number and telephone
number of the executive who will represent that Party. If a Dispute involves a
claim arising out of the actions of any Person not a signatory to this
Agreement, the receiving Party shall have such additional time as necessary, not
to exceed an additional sixty (60) Days, to investigate the Dispute before
submitting a written response. The executives shall meet at a mutually
acceptable time and place not later than fifteen (15) Days after the date of the
response and thereafter as often as they reasonably deem necessary to exchange
relevant information and to attempt to resolve the Dispute. If one of the
executives proposes to be accompanied by an attorney at any meeting, the other
executive shall be given at least five (5) Business Days' notice of such
intention and may also be accompanied by an attorney. All negotiations and
communications pursuant to this Section 12.1(a) shall be treated and maintained
by the Parties as confidential information and shall be treated as compromise
and settlement negotiations for the purposes of the Federal Rules of Evidence
and state rules of evidence.

                  (b) INITIATION OF ARBITRATION. If the Dispute has not been
resolved within sixty (60) Days after the date of the response given pursuant to
Section 12.1(a) (or such additional time, if any, that the Parties mutually
agree in writing), or if the Party receiving a notice of Dispute denies the
applicability of the provisions of Section 12.1(a) or otherwise refuses to
participate under the provisions of Section 12.1(a), either Party may initiate
binding arbitration pursuant to the provisions of Section 12.1(c) below.

                  (c) ARBITRATION PROCEDURES. All Disputes not resolved by
agreement of the Parties shall be submitted to binding arbitration in accordance
with the following provisions of this paragraph. This arbitration agreement is
expressly made pursuant to and shall be governed by the Federal Arbitration Act,
9 U.S.C. section 1, et seq. (The "Arbitration Act"). It is further expressly
agreed that upon request of either Party a judgment shall be entered by any
court of competent jurisdiction upon any award made pursuant to an arbitration
hereunder. All Disputes shall be resolved by arbitration in accordance with the
American Arbitration Association's Commercial Arbitration Rules, as amended and
effective as of November 1, 1993 (the "Rules"), except as mutually agreed to the
contrary by the Parties, and except as specified below.

                           (i) EXPEDITED PROCEDURES. Regardless of the amount in
         dispute, the Expedited Procedures of the Rules shall not be utilized
         without the agreement of both Parties. However, the arbitrator shall
         hear and determine preliminary motions with respect to any issues of
         law asserted by a party to be dispositive of any claim, in whole or in
         part, in the

                                       31
<PAGE>   37

         manner of a court hearing and acting upon a motion to dismiss for
         failure to state a claim or for summary judgment.

                           (ii) LOCATION. In the absence of agreement by both
         Parties to another locale, the arbitration shall be held in Fort Worth,
         Texas. In no event will the American Arbitration Association or JAMS
         Endispute, Inc. ("JAMS") have the power to decide the locale of the
         arbitration.

                           (iii) SELECTION OF ARBITRATOR. Arbitration shall be
         initiated by formal written notice from either Party to the other Party
         describing in reasonable detail the Dispute and naming three persons
         that the Party giving such notice (the "Initiating Party") will accept
         as an arbitrator to resolve the matter. Within ten (10) Days of receipt
         of said notice, the Party receiving the notice (the "Receiving Party")
         shall either agree to one of the three proposed arbitrators, or the
         Parties will confer and attempt to agree upon another person to
         arbitrate the Dispute. If these steps do not result in the selection of
         an arbitrator, then either the Initiating Party or the Receiving Party
         may request that JAMS provide to both the Initiating Party and the
         Receiving Party, in writing, a panel of seven names from JAMS' panel of
         commercial arbitrators. All members of the panel submitted by JAMS
         shall be United States nationals who are attorneys licensed to practice
         in the highest court of one or more states of the United States of
         America or the District of Columbia who have at least fifteen years of
         experience as a practicing attorney primarily involving the oil and gas
         industry or who are judges or former judges with at least fifteen years
         experience as a judge, and JAMS shall be requested to cause the panel
         to state the qualifications of each member of the panel satisfying
         these requirements. Within five (5) Days of receipt of this panel, the
         Initiating Party shall strike three names from the panel and forward it
         to the Receiving Party. The Receiving Party shall then strike three
         additional names from the panel and forward the remaining name to JAMS
         (with a copy to the Initiating Party) within five (5) Days of receipt
         of the stricken panel. The name forwarded to JAMS shall be the neutral
         arbitrator appointed to hear the Dispute. Either the Initiating Party
         or Receiving Party may object to an entire panel and request that JAMS
         provide a new panel by giving written notice of the request and the
         reason therefor to JAMS and the other party within three (3) Days after
         receipt of such panel. Such notice may be given by telecopy, by
         delivery in hand, or by depositing same in the United States Postal
         Service, properly addressed and stamped, as certified mail, but only
         one such request may be made regardless of which Party initiates the
         request. In no event may JAMS appoint an arbitrator.

                           (iv) ARBITRATOR'S DECISION FINAL. The decision of the
         arbitrator, which shall be rendered within thirty (30) Days after the
         conclusion of the hearings conducted pursuant to this Section 12.1,
         shall be final and binding on both Parties; provided that the
         arbitrator shall not have the authority or power to award punitive or
         exemplary damages, and each of the Parties expressly waives and
         relinquishes any right to recover or receive punitive or exemplary
         damages in connection with any Dispute. Any decision of the arbitrator,
         whether preliminary or final, shall be in a writing signed by the
         arbitrator and shall contain the findings of fact and conclusions of
         law upon which the decision is based.

                                       32
<PAGE>   38

                           (v) SELECTION OF NEW ARBITRATOR. If for any reason,
         the selected arbitrator is unable to perform his or her duties, JAMS
         may, on proof satisfactory to it or based on the agreement of the
         Initiating Party and Receiving Party, declare the position vacant. In
         the event of such a vacancy, the provisions of Section 12.1(c)(iii)
         shall be followed to select a new arbitrator.

                           (vi) HEARINGS. The arbitrator shall set the date and
         time of each hearing hereunder. The first hearing shall take place
         within twenty-five (25) Days following the arbitrator's appointment,
         and the arbitration proceeding shall be concluded not later than ten
         (10) Days after the date of the first hearing. JAMS shall give ten (10)
         Days' notice to the Initiating Party and Receiving Party of the first
         hearing unless otherwise agreed.

                           (vii) STENOGRAPHIC RECORD. Either the Initiating
         Party or the Receiving Party may request a stenographic record be made
         of all hearings hereunder. The cost of such stenographic record shall
         be shared equally by the Initiating Party and the Receiving Party.

                           (viii) PRIVACY. The arbitrator will ensure the
         privacy of the hearings hereunder to the maximum extent allowed by law.
         Both the Initiating Party and the Receiving Party shall be entitled to
         attend all hearings. At the request of either the Initiating Party or
         the Receiving Party, all persons who are not executives of a Party
         shall be excluded from the hearings, except for the attorneys for the
         Initiating Party and Receiving Party, the stenographer (if any), and
         persons who are witnesses when actually called to testify. Unless
         otherwise agreed by the Parties, and except as reasonably required to
         enforce or implement or exercise any right of appeal provided by law
         from the decision of the arbitrator, the decision of the arbitrator and
         the evidence and arguments presented to the arbitrator (to the extent
         not otherwise generally known or regularly disseminated) shall be
         maintained in confidence by the Parties.

                           (ix) FEES AND EXPENSES. The Initiating Party and
         Receiving Party shall share equally the arbitrator's fees and expenses
         and any charges of JAMS. Otherwise, except for the cost of the
         stenographic record, each of the Initiating Party and the Receiving
         Party shall bear their own costs.

         (d) ALTERNATE SELECTOR OF PANEL. If JAMS ceases to function or is
otherwise unable or unavailable to provide a panel from which the Parties can
select an arbitrator pursuant to Section 12.1(c), the Parties will utilize the
Center for Public Resources (New York, New York) to obtain a panel for such
purpose; and in such circumstance all references to JAMS in Section 12.1(c)
shall be deemed to refer to the Center for Public Resources.

         12.2 SPECIAL PROVISIONS APPLICABLE TO PRICE DISPUTES. The provisions of
this Section 12.2 shall apply to disputes relating to the determination of the
Contract Price, including, without limitation, issues relating to the choice of
an applicable Index, Index Price or the determination of Index Price Adjustments
(all such disputes being hereinafter called "Price Disputes").

                                       33
<PAGE>   39

The arbitrator shall be selected in accordance with Section 12.1. Each Party
shall submit its proposed outcome to the arbitrator within ten (10) Business
Days after the arbitrator's selection. Within forty-five (45) Days after his
selection and appointment, the arbitrator shall select and adopt either UPR's
proposal or UPFUELS' proposal, without modification or compromise. The
arbitrator shall make his decision as follows: (i) in any Price Dispute over an
Index, the arbitrator shall decide which of the proposed Indexes presented to
the arbitrator best represents the 30-Day spot market price for Gas of like
quantities and quality at the applicable Delivery Point(s), (ii) in any Price
Dispute over Index Price Adjustments, the arbitrator shall decide which proposed
Index Price Adjustment presented to the arbitrator best represents the
differentials reasonably necessary to adjust the Index Price for Gas to
accurately reflect the 30-Day spot market price for Gas of like quantities and
quality at the Delivery Point(s) in question, and (iii) in all other Price
Disputes, the arbitrator shall consider the terms and conditions of this
Agreement and the requirements of applicable Texas law, including, without
limitation, the Texas version of the Uniform Commercial Code in effect at the
period relevant to the Price Dispute under consideration. The applicable
Contract Price during the arbitration shall be the Contract Price being paid on
the day before the Price Effective Date. Upon the conclusion of the arbitration,
such Contract Price, if it has changed as a result of the arbitrator's decision,
shall be adjusted retroactive to the Price Effective Date. Unless explicitly
provided otherwise in this Section 12.2, the other provisions of this Article
XII shall be applicable to all Price Disputes.

         12.3 SPECIAL PROVISIONS APPLICABLE TO DISPUTES FOR LESS THAN ONE
MILLION DOLLARS. The provisions of this Section 12.3 shall apply to disputes,
which are not Price Disputes, relating to matters with a value of less than one
million dollars ($1,000,000) (all such disputes being hereinafter called
"Special Disputes"). The arbitrator shall be selected, and fees and expenses
paid, in accordance with Section 12.1. Each Party shall submit its proposed
outcome to the arbitrator within ten (10) Business Days after the arbitrator's
selection. Within forty-five (45) Days after his selection and appointment, the
arbitrator shall select and adopt either UPR's proposal or UPFUELS' proposal,
without modification or compromise. The arbitrator shall consider the terms and
conditions of this Agreement and the requirements of applicable Texas law,
including, without limitation, the Texas version of the Uniform Commercial Code
in effect at the period relevant to the Special Dispute under consideration.

            XIII. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY UPR;
                               CHANGES OF CONTROL

         13.1 NON-ASSIGNABILITY. Except as provided in Section 13.2 below,
neither this Agreement nor any obligation of a Party under this Agreement are
assignable without the prior written consent of the other Party, which consent
may be withheld in its sole discretion for any reason, except to Affiliates, in
which case the assigning Party shall remain liable for its obligations
hereunder.

         13.2 TRANSFER OF INTEREST. UPR shall have the right to convey interest
in oil and gas leases from which Committed Gas is being produced, together with
all associated real and personal property and fixtures (such interests being
herein referred to as the "UPR Interests") to a Person who is not an Affiliate
without the consent of UPFUELS. At UPR's option, the affected UPR Interests
shall

                                       34
<PAGE>   40

either remain subject to this Agreement, and Gas produced from such UPR
Interests shall remain Committed Gas for all purposes under this Agreement, or
shall remain Committed Gas pursuant to a separate agreement executed by UPFUELS
and UPR's successor in interest and containing terms and conditions
substantially identical to this Agreement. If UPR elects to convey UPR Interests
subject to this Agreement, the documents evidencing the conveyance of such UPR
Interests shall specifically identify this Agreement and obligate UPR's
successor in interest to ratify and adopt this Agreement insofar as it applies
to the UPR Interests acquired by UPR's successor in interest. If UPR elects to
require its successor in interest to execute an agreement substantially
identical to this Agreement, such agreement shall be executed contemporaneously
with the documents evidencing the conveyance of such UPR Interests.
Notwithstanding the foregoing, UPR shall have the right to convey UPR Interests
to a Person who is not an Affiliate free and clear of this Agreement if such UPR
Interests, when combined with any other UPR Interests contemporaneously conveyed
to such Person, produced an average of 200 MMBtu per Day, or less, over the six
Month period ending ninety (90) Days prior to the effective date of the
conveyance of the relevant UPR Interests.

         13.3 CHANGE OF CONTROL. A Party affected by a Change of Control shall
give the other Party written notice thereof not later than fifteen (15) Days
after the occurrence of such Change of Control. If a Change of Control occurs
with respect to either Party during the term of this Agreement, the other Party
shall have the right to terminate this Agreement by providing the Party affected
by such Change of Control with written notice as provided herein. Such other
Party shall provide the affected Party with written notice of termination of
this Agreement not later than thirty (30) Days after receipt of the affected
Party's notice hereunder, and termination of this Agreement pursuant to this
Section 13.3 shall be effective on the first Day of the Month following the
Month in which the Party affected by the Change of Control receives terminating
Party's notice; provided, however, that if the affected Party fails to timely
give written notice of the Change of Control, the other Party may give written
notice of termination of this Agreement at any time following its discovery or
knowledge of such Change of Control. "Change of Control" shall mean:

                  (a) with respect solely to, a Party or its Affiliates, any
person or "group" (as determined for purposes of Rule 13d-5 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934 or under any
successor rule or regulation, being herein referred to as the "Regulation")
shall have acquired "beneficial ownership" (as determined for purposes of such
Regulation) of a Party's or its Affiliate's securities (i) representing 25% or
more of the combined voting power of such Party's or Party's Affiliates
then-outstanding securities or (ii) having voting power sufficient to elect a
majority of the board of directors or other similar governing body of such Party
or its Affiliates;

                  (b) any statutory merger, consolidation or exchange of such
Party's, or its Affiliate's shares or interests (other than a merger,
consolidation or share exchange with an Affiliate of such Party) in which either
(i) such Party, or its Affiliates, will not be the surviving Person; or (ii)
such Party, or its Affiliates will be the surviving Person and any outstanding
shares of its common stock or member interests, as the case may be, will be
converted into shares, member interests or other ownership interests of any
other Person (other than an Affiliate of such Party); or

                                       35
<PAGE>   41

                  (c) a Party's shareholders, or a Party's Affiliate (i) approve
any plan or proposal for the disposition or other transfer of all or
substantially all the assets of such Party, whether by means of a merger,
reorganization, liquidation or dissolution or otherwise; or (ii) with respect
solely to UPR, UPFUELS, or Affiliates of either UPR or UPFUELS, dispose of, or
become obligated to dispose of, 25% or more of the outstanding capital stock or
interests of such Party or Party's Affiliate by tender offer or otherwise.

                  (d) Notwithstanding the foregoing Sections 13.3(a), (b), or
(c), no Change of Control shall be deemed to have occurred with respect to
UPFUELS as long as UPFUELS' ultimate parent, Duke Energy Corporation ("Duke")
has directly or indirectly, control, and more than fifty percent (50%) of the
combined voting power of UPFUELS or voting power sufficient to elect a majority
of the governing body of UPFUELS, and Duke or Mobil Oil Corporation,
individually or in any combination, have, directly or indirectly, control, and
more than fifty percent (50%) of the combined voting power of member interests
of UPFUELS' affiliate, Duke Energy Trading and Marketing, L.L.C. ("DETM") or
voting power sufficient to elect a majority of the management committee or other
governing body of DETM.

                  (e) It is specifically understood and agreed that a Party may
not avoid the application of this Section 13.3 directly, or by any indirect
means, whether by use of one or more Affiliates, agents or designees, by
contract or otherwise.

                               XIV. MISCELLANEOUS

         14.1 NO CONTINUING WAIVER. The waiver by either Party of any breach of
any of the provisions of this Agreement shall not constitute a continuing waiver
of other breaches of the same or other provisions of this Agreement.

         14.2 GOVERNMENT REGULATION. This Agreement is subject to all present
and future valid and applicable laws, orders, rules and regulations of any
regulatory body of the federal government or any state, county or local
governmental body having jurisdiction.

         14.3 EXCLUSION OF CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER FOR ANY PUNITIVE, SPECIAL, CONSEQUENTIAL, OR INDIRECT
DAMAGES, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS.

         14.4 NOTICES. Unless otherwise explicitly provided herein, all notices
provided for in this Agreement shall be in writing and shall be (i) delivered in
person or by messenger, (ii) mailed by Federal Express or similar private
courier service, (iii) sent by United States certified mail (return receipt
requested), postage prepaid, (iv) by facsimile, telex or telecopier, or (v) by
any other commercially reasonable means, to the addresses of the Parties set
forth below or to such other addresses as either Party may designate in writing
to the other Party. All notices given hereunder shall be effective on the date
of actual receipt at the appropriate address. Notice given pursuant to clause
(iv) shall be effective (A) upon actual receipt if received during recipient's
normal business

                                       36
<PAGE>   42

hours, or (B) at the beginning of the next Business Day after receipt if
received after the recipient's normal business hours.

         UPR: NOTICES AND CORRESPONDENCE:

                           Union Pacific Resources Company
                           P. O. Box 7, MS 4100
                           Fort Worth, Texas 76101-0007
                           Attention: _________________
                           Telephone: (817) 877-7543
                           Fax: (817) 877-7522

                           INVOICES AND STATEMENTS:

                           Union Pacific Resources Company
                           P. O. Box ________
                           Fort Worth, Texas 76____
                           Attention: _____________
                           Telephone: (817) ___-_____
                           Fax: (817) ___-____

                           UPR AUTHORIZED TRADERS:
                           [names, addresses, telephone and fax numbers;
                           consider including E-Mail]

         UPFUELS: NOTICES AND CORRESPONDENCE:

                           UPFUELS
                           P. O. Box 901027
                           Fort Worth, Texas 76101
                           Attention: Marketing Department
                           Telephone: (817) 255-6000
                           Fax: (___) ___-_____

                           INVOICES AND STATEMENTS:

                           UPFUELS
                           P. O. Box 901027
                           Fort Worth, Texas 76101
                           Attention: Marketing Department
                           Telephone: (817) 255-6000
                           Fax: (___) ___-_____

                                       37
<PAGE>   43

                           UPFUELS AUTHORIZED TRADERS:
                           [names, addresses, telephone and fax numbers;
                           consider including E-Mail]

         14.5 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION. THE VENUE OF ANY PROCEEDING TO COMPEL ARBITRATION SHALL BE IN THE
UNITED STATES FEDERAL COURT FOR THE NORTHERN DISTRICT OF TEXAS - FORT WORTH
DIVISION.

         14.6 INTEGRATION. This Agreement sets forth all understandings of
UPFUELS and UPR with respect to the purchase and sale of Committed Gas. All
other agreements, oral or written, concerning such purchase and sale are merged
into and superseded by this Agreement. No waiver of rights hereunder, or
modification or amendment hereof shall be effective unless in writing and signed
by both Parties.

         14.7 CONFIDENTIALITY.

                  (a) PARTIES' OBLIGATIONS. The terms of this Agreement,
including, but not limited to, the Contract Price and information exchanged or
disclosed by the Parties pursuant to the dispute resolution procedures of
Article XII and all other information exchanged by the Parties hereunder, will
be kept confidential by the Parties unless (i) such information becomes known to
the public at large without breach of this Agreement, (ii) a Party is obligated
to disclose such information to a Transporter or other third Person for the
purpose of effectuating the sale and transportation of Gas pursuant to this
Agreement, (iii) a Party is obligated to disclose such information to meet
applicable securities or commodity exchange requirements, (iv) a Party is
obligated to disclose such information to meet regulatory filing requirements,
(v) a Party is obligated to disclose such information to comply with mandatory
document production requirements under federal or state Rules of Civil
Procedure, a subpoena or other order of judicial or administrative tribunal,
(vi) as agreed in writing by the non-disclosing Party, or (vii) a Party is
obligated to disclose such information to comply with a request made by a Lender
or an investment bank underwriting an offering of securities by a Party.

                  (b) HANDLING OF REQUEST FOR DISCLOSURE. If either Party
believes that it may be required to disclose information concerning this
Agreement that is to be kept confidential pursuant to Section 14.7(a) (iii) -
(vi), the disclosing Party will notify the other Party in writing as soon as
practicable in advance of disclosure, specifying the nature of the request and
the information to be disclosed. To the extent permitted under statutes, rules,
regulations or contractual provisions applicable to the disclosure request, the
Party required to make disclosure will assert any available privilege permitting
non-disclosure of the information that is to be kept confidential hereunder, or
request confidential treatment of the disclosed information, including exemption
from public disclosure under applicable "open records" and "freedom of
information" statutes. The Party disclosing information required to be kept
confidential under Section 14.7 shall use commercially

                                       38
<PAGE>   44

reasonable efforts to obtain from the Person to whom disclosure of such
information is made an agreement, to be signed by such Person and any employee,
agent, officer, director or independent contractor of such Person to whom
disclosure shall be made, such agreement to have terms and conditions
substantially the same as those set forth in this Section 14.7.

                  (c) RESPONSIBILITY FOR CONFIDENTIALITY. Each Party will be
deemed solely responsible and liable for the actions of its employees,
independent contractors, officers, and agents for maintaining the
confidentiality commitments of this Article, but will be required in that regard
only to exercise such care in maintaining the confidentiality of this Agreement
as it normally exercises in preserving the confidentiality of its other
commercially sensitive documents.

         14.8 TAXES.

                  (a) UPR RESPONSIBILITY. The Contract Price to be paid by
UPFUELS to UPR for Committed Gas purchased and sold hereunder is inclusive of
the reimbursement of one hundred percent (100%) of all state severance Tax
reimbursement, as well as all other production, severance, ad valorem, and/or
similar Taxes levied on or applicable to the Committed Gas at or prior to the
Delivery Point(s). UPR shall be liable for all Taxes applicable to the Committed
Gas upstream of the Delivery Point(s), and shall pay, cause to be paid, or
reimburse UPFUELS if UPFUELS has paid, such Taxes. If UPFUELS is required to pay
such Taxes, UPFUELS shall describe such Taxes in reasonable detail on the
statement provided to UPR pursuant to Section 8.1, and shall be entitled to
deduct the amount of such Taxes from amounts paid to UPR thereunder. UPR shall
indemnify, defend and hold harmless UPFUELS from all claims, damages, demands
and other costs or losses in respect of Taxes for which UPR is liable. If
UPFUELS is required by law to collect any such Taxes and UPR claims an exemption
from such Taxes, UPR shall, upon UPFUELS' request, furnish UPFUELS with a copy
of UPR's exemption certificate, or other reasonably satisfactory evidence of
UPR's exemption.

                  (b) UPFUELS RESPONSIBILITY. The Contract Price does not
include Taxes applicable to the Committed Gas at and after delivery of the
Committed Gas at the Delivery Point(s). UPFUELS shall be liable for all Taxes
applicable to the Committed Gas at and downstream of the Delivery Point(s), and
shall pay, cause to be paid, or reimburse UPR if UPR has paid, such Taxes. If
UPR is required to pay such Taxes, UPR shall provide UPFUELS with an invoice
describing such Taxes in reasonable detail, and shall be reimbursed therefor
within ten (10) Business Days of the date of such invoice, or may deduct the
amount of such Taxes from amounts payable to UPFUELS under this Agreement.
UPFUELS shall indemnify, defend and hold harmless UPR from all claims, damages,
demands and other costs or losses in respect of Taxes for which UPFUELS is
liable. If UPR is required by law to collect any such Taxes and UPFUELS claims
an exemption from such Taxes, UPFUELS shall, upon UPR's request, furnish UPR
with a copy of UPFUELS' exemption certificate, or other reasonably satisfactory
evidence of UPFUELS' exemption.

         14.9 CONSTRUCTION OF AGREEMENT.

                  (a) GENERAL PRINCIPLES. In construing this Agreement, the
following principles shall be followed:

                                       39
<PAGE>   45

                           (1) no consideration shall be given to the fact or
presumption that one Party had a greater or lesser hand in drafting this
Agreement;

                           (2) examples shall not be construed to limit,
expressly or by implication, the matter they illustrate;

                           (3) the words "includes," "including" and their
respective syntactical variants mean "includes, but is not limited to" and
corresponding syntactical variant expressions;

                           (4) the plural shall be deemed to include the
singular and vice versa, as applicable;

                           (5) the term "Party" shall refer to all Affiliates of
such Party unless the context specifically indicates to the contrary; and

                           (6) each exhibit, attachment, and schedule to this
Agreement is a part of this Agreement, but if there is any conflict or
inconsistency between the main body of this Agreement and any exhibit,
attachment, or schedule, the provisions of the main body of this Agreement shall
prevail.

                  (b) SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under the present or future laws
effective during the term of this Agreement, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement, and (iii) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision, there will be added
automatically as a part of this Agreement a provision agreeable to both Parties
which is as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and may be legal, valid and enforceable.

                  (c) RELATIONSHIP OF PARTIES. This Agreement does not create a
partnership, joint venture, or relationship of trust or agency between the
Parties.

         14.10 REPRESENTATIONS AND WARRANTIES OF UPR. UPR hereby represents and
warrants to UPFUELS that on and as of the date hereof:

                  (a) It is duly formed and validly existing and, to the extent
it is a corporation, in good standing under the laws of the state or
jurisdiction of formation, with all requisite corporate power and authority to
carry on the business in which it is engaged and to perform its obligations
under this Agreement;

                  (b) The execution and delivery of this Agreement have been
duly authorized and approved by all requisite corporate action;

                                       40
<PAGE>   46

                  (c) It has all the requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder;

                  (d) The execution and delivery of this Agreement do not, and
consummation of the transactions contemplated herein will not, violate (i) any
of the material provisions of its articles of incorporation, bylaws or other
organizational documents, (ii) any material agreement pursuant to which it or
its properties are bound or (iii) to its knowledge, any material applicable
laws; and

                  (e) This Agreement is valid, binding, and enforceable against
it in accordance with its terms, subject to bankruptcy, moratorium, insolvency
and other laws generally affecting creditor's rights and general principles of
equity (whether applied in a proceeding in a court of law or equity).

         14.11 REPRESENTATIONS AND WARRANTIES OF UPFUELS. UPFUELS hereby
represents and warrants to UPR that on and as of the date hereof:

                  (a) It is duly formed and validly existing and in good
standing under the laws of the state or jurisdiction of formation, with all
requisite corporate power and authority to carry on the business in which it is
engaged and to perform its obligations under this Agreement;

                  (b) The execution and delivery of this Agreement have been
duly authorized and approved by all requisite corporate action;

                  (c) It has all the requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder;

                  (d) The execution and delivery of this Agreement do not, and
consummation of the transactions contemplated herein will not, breach or violate
(i) any of the material provisions of its articles of incorporation, bylaws or
other organizational documents, (ii) any material agreement pursuant to which it
or its properties are bound or (iii) to its knowledge, any material applicable
laws; and

                  (e) This Agreement is valid, binding, and enforceable against
it in accordance with its terms, subject to bankruptcy, moratorium, insolvency
and other laws generally affecting creditor's rights and general principles of
equity (whether applied in a proceeding in a court of law or equity).

         14.12 NO THIRD PARTY BENEFICIARIES. Any agreement herein contained,
express or implied, shall be only for the benefit of the Parties and their
respective successors and permitted assigns, and such agreements or assumptions
shall not inure to the benefit of any other Person whatsoever, it being the
intention of the Parties that no Person shall be deemed a third-party
beneficiary of this Agreement.

         14.13 FURTHER ASSURANCES. Each Party shall take such acts and execute
and deliver such documents in form and substance reasonably satisfactory to each
of them, in order to effectuate the purposes of this Agreement.

                                       41
<PAGE>   47

         14.14 EXHIBITS. The Parties expect that the Exhibits to this Agreement
will be agreed upon and completed prior to the Effective Date and the Parties
agree that the absence of a completed Exhibit at the time this Agreement is
executed by the Parties shall not affect the enforceability of this Agreement at
any time. In the event an Exhibit is not completed at the time this Agreement is
executed, a pro forma Exhibit shall be attached setting forth the form and
content of the Exhibit to be completed.

         IN WITNESS WHEREOF, this Agreement is executed on the 20th day of
November, 1998, but effective as of the Effective Date.

UNION PACIFIC RESOURCES COMPANY         UNION PACIFIC FUELS, INC.

By:                                     By:
   ----------------------------            ---------------------------
Name:  V. Richard Eales                 Name:  D.W. Niemic
     --------------------------              -------------------------
Title: Executive Vice President         Title: President
      -------------------------               ------------------------

                                       42<PAGE>   1
           CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this
               document have been omitted and are marked with the
           notation, "*Confidential Treatment Requested." A complete
        copy has been filed with the Securities and Exchange Commission.

                                                                   EXHIBIT 10.21

                               LICENSE AGREEMENT

THIS AGREEMENT is made and entered into this 30th day of June, 1997, by and
between:

     ALLOS THERAPEUTICS, INC., 7000 North Broadway, Suite 310, Denver, Colorado
80221 (hereinafter referred to as the "LICENSEE"), and

     VIRGINIA COMMONWEALTH UNIVERSITY INTELLECTUAL PROPERTY FOUNDATION,
Virginia Commonwealth University-Medical College of Virginia Campus, Sanger
Hall, Richmond, Virginia 23298 (hereinafter referred to as the "LICENSOR").

     WHEREAS, LICENSOR is the owner of all right, title, and interest in and to
intellectual property made by employees and students of Virginia Commonwealth
University or made using the facilities of Virginia Commonwealth University,
and will be an owner of any and all intellectual property made under the
Sponsored Research Agreement between Virginia Commonwealth University and
LICENSEE, and any and all of its attachments, attached hereto as Exhibit A;

     WHEREAS LICENSEE is desirous of acquiring from LICENSOR certain rights set
forth below in and to the intellectual property made by employees and students
of Virginia Commonwealth University under the Sponsored Research Agreement
between Virginia Commonwealth University and LICENSEE;

     NOW, THEREFORE, in consideration of the promises and the covenants set
forth herein, LICENSOR and LICENSEE agree as follows:

1. DEFINITIONS

     The following definitions shall apply in the interpretation of this
Agreement.

1.1 "Affiliate" of any company means any corporation which, directly or
indirectly, controls or is controlled by, or is under direct or indirect common
control with, such company; and for the purposes of this definition "control"
(including "control by" and "under common control with") as used with respect to
any corporation or company, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such corporation or company, through the ownership of more than 50% of the
voting shares.

1.2 "Calendar Quarter" means the three-month period ending March 31, June 30,
September 30, or December 31 in any year.

                                       1
<PAGE>   2

1.3 "Technology" shall mean all intellectual property including copyrights,
patents and patent applications, both foreign and domestic, as well as
continuations, continuations-in-part, divisionals, reexaminations, reissues and
extensions thereof, owned or to be owned by LICENSOR which pertain to
discoveries and inventions or other developments made during and under the
Sponsored Research Agreement between Virginia Commonwealth University and
LICENSEE, and any improvements to intellectual property developed during and
under the Sponsored Research Agreement which occur within two years after the
termination of any Research Project set forth in the Sponsored Research
Agreement. Technology does not include any intellectual property which is made
outside the scope of the Sponsored Research Agreement.

1.4 "Licensed Technology" shall mean all Technology for which LICENSEE has
executed its option to acquire a license and for which the license has not been
terminated.

1.5 "Licensed Product" shall mean any product or part thereof which embodies in
whole or in part the Licensed Technology.

1.6 "Net Sales" for purposes of computing the royalty payment contemplated under
the provisions below, means either LICENSEE's or its sub-licensees [*] for
Licensed Product after [*].

1.7 "Net Revenues" shall mean all [*] derived by LICENSEE from the Licensed
Technology, other than [*], including but not limited to [*].

1.8 "Effective Date" shall mean the date of the Agreement set forth above.

1.9 "Licensed Territory" shall mean world wide.

2. OPTION

2.1 LICENSOR hereby grants to LICENSEE an exclusive Option to acquire a license
to any and all parts of the Technology. The Option period on any part of the
Technology will be for six (6) months from the date it is disclosed to LICENSEE.

2.2 The Option will be deemed exercised by the LICENSEE when LICENSEE notifies
the LICENSOR in writing that it wishes to exercise its Option on a particular
portion of the Technology, and when the LICENSEE authorizes the filing of
patent applications and/or copyrights on that portion of the Technology. All
Technology for which LICENSEE exercises its Option, and for which rights are
not earlier terminated, will be considered Licensed Technology.

2.3 The LICENSEE shall retain no rights in or options on Technology which
LICENSEE does not exercise its Option.

*CONFIDENTIAL TREATMENT
        REQUESTED

                                       2

<PAGE>   3
3.   LICENSE

3.1  If LICENSEE exercises its Option under Section 2.2 of this Agreement,
LICENSOR to the extent not prohibited by law or other patents, and subject to
any rights of the U.S. Government under 37 C.F.R. 401, grants LICENSEE and
exclusive license to make, have made, use, lease, sell, import, and export
LICENSED PRODUCT in the LICENSED TERRITORY.

3.2  If LICENSEE exercises its Option under Section 2.2 of this Agreement,
LICENSOR hereby grants LICENSEE the exclusive right to sublicense Licensed
Technology to third parties and Affiliates subject to the terms and conditions
of this Agreement. LICENSEE will attach and incorporate by reference the
provisions of this Agreement pertaining to payment obligations, patent
applications, warranties, reporting requirements, and confidentiality, to any
sub-license agreements entered into by LICENSEE.

3.3  LICENSEE will provide LICENSOR with copies of appropriate sections of all
sub-license agreements evidencing a third party or Affiliate sublicensee's
commitment to be bound by the terms and conditions of this Agreement and with
sections pertaining to Net Revenues within one month of their being executed by
the LICENSEE with the third party or Affiliate sublicensee.

3.4  In order to establish a period of exclusivity for LICENSEE once LICENSEE
exercises its Option under Section 2.2 of this Agreement, LICENSOR hereby
agrees that it shall not grant any other license to make, have made, use,
lease, sell, export or import, or sub-license Licensed Product during the
period of time commencing with the Effective Date of this Agreement and
terminating with the last to occur of:

     a.   the expiration of the last to expire patent on the Licensed
          Technology; or

     b.   January 1, 2017.

3.5  Nothing in this Agreement shall be construed to confer rights upon
LICENSEE by implication, estoppel, or otherwise to any technology or
intellectual property other than the Licensed Technology.

3.6  This License shall be subject to a royalty-free right of LICENSOR and the
inventors or authors of any Licensed Technology to make, have made, or use the
Licensed Technology and Licensed Products for educational, research and
scientific study and not for commercial purposes.

4.   DILIGENCE AND PATENT PROSECUTION

4.1  LICENSEE shall use reasonable efforts to bring one or more Licensed
Products to market through vigorous and diligent efforts and to continue
active, commercially reasonable marketing efforts for one or more Licensed
Products.

4.2  LICENSEE, at its sole expense, shall apply for, seek issuance
or registration of, and maintain patents and copyrights during the term of this
Agreement on the Licensed Technology for subject

                                       3
<PAGE>   4
matter protectable by patent or copyright using counsel which is mutually
acceptable to both LICENSEE and LICENSOR.  The management of the various tasks
and procedures involved shall be the primary responsibility of LICENSEE.
LICENSOR, at the sole expense of LICENSEE, shall assist LICENSEE in all such
tasks and procedures.

4.3  All patents, patent applications, and copyrights on the Licensed Technology
shall be assigned to LICENSOR, and LICENSOR's interest therein shall be recorded
in the U.S. Patent and Trademark Office, U.S. Copyright Office, and
corresponding foreign patent and copyright offices at the sole expense of
LICENSEE.

4.4  LICENSEE shall provide LICENSOR with copies of all papers received from and
to be filed in the U.S. Patent and Trademark Office, U.S. Copyright Office, and
corresponding foreign patent and copyright offices.

4.5  LICENSEE shall be entitled, in its discretion, to abandon any application
or granted patent or copyright if it considers that the ongoing costs of the
same are not justified, provided that LICENSEE notifies LICENSOR prior to such
abandonment and allows LICENSOR reasonable opportunity to avoid such
abandonment.  In no event shall such reasonable opportunity be less than one (1)
month prior to abandonment.  If LICENSEE chooses to abandon an application or
granted patent or copyright under this provision and LICENSOR, at its sole
expense, continues pursuing the application, granted patent or copyright,
LICENSEE shall retain no right to exclusively use or exclusively exploit the
technology claimed in a granted patent or copyright on the technology which
LICENSOR later obtains in the country, territory or jurisdiction which granted
the patent or copyright.

5.   PAYMENT PROVISIONS AND REPORTING OBLIGATIONS

5.1  LICENSEE shall satisfy all requirements of the Sponsored Research Agreement
attached hereto as Exhibit A.

5.2  LICENSEE shall pay all fees and costs relating to filing, prosecution, and
maintenance of patents and copyrights on the Licensed Technology.

5.3  LICENSEE, in its discretion and using counsel mutually acceptable to
LICENSEE and LICENSOR, can assert patent or copyright rights under the Licensed
Technology against third parties.  Any recovery from lawsuits asserting such
patent and copyright rights shall be first used to satisfy the legal expenses
and costs of such lawsuits, and then be split equally between LICENSEE and
LICENSOR.

5.4  LICENSEE shall pay all fees and costs, including reasonable attorney's fees
of the LICENSOR, in connection with any lawsuit involving defense of the
validity of patents and copyrights on the Licensed Technology, and infringement
of patents and copyrights on the Licensed Technology by a third party.  LICENSOR
agrees to cooperate with LICENSEE in all such lawsuits; however, in no event
will LICENSOR be required to bring or defend such lawsuits

                                       4
<PAGE>   5
for the benefit of LICENSEE, and in no event will the failure of LICENSOR to
bring or defend such lawsuits relieve LICENSEE of royalty obligations set forth
below in this Agreement.

5.5 LICENSEE shall pay LICENSOR royalties of [*] Net Revenues and [*] of Net
Sales of Licensed Product derived by Licensee under this Agreement.

5.6 LICENSEE, within sixty (60) days after each calendar quarter of each year,
shall deliver to LICENSOR true and accurate reports, pertaining to [*]

5.7) [*]

5.8) LICENSEE shall keep full, true and accurate books of account containing
all particulars that may be necessary for the purpose of showing the amounts
payable to LICENSOR hereunder. Said books of account shall be kept at
LICENSEE'S principle place of business. [*]

5.9) [*]

* CONFIDENTIAL TREATMENT
        REQUESTED

                                       5
<PAGE>   6

6. TERMINATION

6.1 The provisions of this Agreement, having come into force on the Effective
Date, shall, unless terminated earlier for any reason, continue in force in
accordance with their respective terms (if any) and otherwise without limit of
time.

6.2 LICENSEE may terminate this Agreement at any time by giving LICENSOR ninety
(90) days written notice. In the event of termination of this Agreement by
LICENSEE, LICENSEE shall have no further rights under this Agreement; however,
LICENSEE will have remain obligated for any royalties due or other expenses
incurred up until the date of termination.

6.3 LICENSOR may terminate this Agreement if LICENSEE

     a. fails to pay on the due date any sum due under Section 5 of this
        Agreement;

     b. fails to provide reports on the due date specified under Section 5 of
        this Agreement; or

     c. fails to provide funding as specified in the Sponsored Research
        Agreement attached as Exhibit A,

provided that LICENSOR provides LICENSEE with written notice of any of the
above, and that LICENSEE is allowed ninety (90) days to cure after receiving
the written notice from LICENSOR.

6.4  Either party may forthwith terminate this Agreement by written notice to
the other

     a. if the other commits any breach of its obligations under this
Agreement, other than in the cases specified in Section 6.3 of this Agreement,
and, if the breach is capable of remedy, has failed to remedy the same within a
period of ninety (90) days after receipt of written notice specifying the
nature of the breach and requiring it to be remedied; or

     b. if the other party makes any arrangement or composition with its
creditors, or goes into liquidation (except for the purposes of amalgamation or
reconstruction and in such manner that the company resulting therefrom
effectively agrees to be bound by or assume the obligations imposed on that
party under this Agreement); or

     c. if an encumbrance takes possession, or a receiver is appointed, of any
of the property or assets of the other party; or

     d. anything analogous to any of the foregoing under the law of any
jurisdiction occurs in relation to that other party; or

     e. if the other party ceases, or threatens to cease, to carry on business.

6.5 No relaxation, forbearance, delay or indulgence by either party in
enforcing any of the terms of this Agreement or the granting of time by either
party to the other shall prejudice, affect or restrict the rights and powers of
the former hereunder nor shall any waiver by either party of a breach of this
Agreement be considered as a waiver of any subsequent breach of the same or any
other provision hereof.

* CONFIDENTIAL TREATMENT
        REQUESTED

                                       6

<PAGE>   7
6.6 The rights to terminate this Agreement given by this clause shall not
prejudice any other right or remedy of either party in respect of the breach
concerned (if any) or any other breach.

7. MISCELLANEOUS

7.1 Nothing in this Agreement shall create, or be deemed to create, a
partnership, or the relationship of principal and agent, between the parties.

7.2 LICENSEE shall be entitled to assign this Agreement to any of its
Affiliates taking over substantially all the business of LICENSEE relating to
this Agreement or, with the consent of LICENSOR, which shall not be
unreasonably be withheld, to any other company taking over substantially all
the business of LICENSEE relating to this Agreement and all or a major part of
the voting shares in which are, or are to be floated on, a recognized exchange
or otherwise publicly owned.

7.3 Subject to Section 7.2 of this Agreement, the clauses are personal to the
parties and neither party may assign, mortgage, charge or license any of its
rights hereunder, nor may either party sub-contract or otherwise delegate any
of its obligations hereunder, except with the prior written consent of the
other party.

7.4 LICENSEE shall (i) to the extent reasonably practical, place in a
conspicuous location on all patented products made pursuant to this Agreement a
patent notice in accordance with 35 U.S.C. Section 282 consisting of the word
"Patent" or "Patents" and the number or numbers of the United States patent or
patents licensed hereunder, and (ii) comply in all respects with the laws of the
country of manufacture, and/or sale of the Technology with respect to marking
such products so as to ensure LICENSOR of full protection and rights under such
laws. LICENSEE shall include the provisions of this clause in all sub-licenses
with third parties and Affiliates.

7.5 LICENSEE shall at all times during the term of this Agreement and thereafter
indemnify, defend and hold LICENSOR, its trustees, directors, officers,
employees and affiliates harmless against all claims, proceedings, demands and
liabilities, including legal expenses and reasonable attorney's fees, arising
out of the death of or injury to any person or persons or out of any damages to
property resulting from the research, development, production, manufacture,
sale, modification, use, import or advertisement of LICENSED PRODUCT or arising
from any obligation of LICENSEE hereunder.

7.6 LICENSEE shall at all times during the term of this Agreement and
thereafter indemnify, defend, and hold LICENSOR, its trustees, directors,
officers, employees, and affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorney's fees, arising out of patent infringement action by a third
party.

7.7 LICENSEE shall obtain and carry in full force and effect commercial,
general liability insurance which shall protect LICENSEE and LICENSOR with
respect to events set forth above. Such insurance shall be written by a
reputable company authorized to due business in the

                                       7
<PAGE>   8

Commonwealth of Virginia, shall list LICENSOR as an additional named insured
thereunder, shall be endorsed to include product liability coverage and shall
require reasonable written notice to be given to LICENSOR prior to any
cancellation or material change thereof. The limits of such insurance shall not
be less than one million dollars ($1,000,000) per occurrence with an aggregate
of five million ($5,000,000) for personal injury or death, and one million
dollars ($1,000,000) per occurrence with aggregate of three million dollars
($3,000,000) for property damage. LICENSEE shall provide LICENSOR with
Certificates of Insurance evidencing same.

7.8 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR, ITS
TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES MAKE NO REPRESENTATIONS
AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
AND VALIDITY OF THE CLAIMS OF ANY PATENTS ON THE TECHNOLOGY ISSUED OR PENDING,
OR FREEDOM OF A PRODUCT THAT EMBODIES THE TECHNOLOGY FROM INFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF OTHERS, THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE. IN NO EVENT SHALL LICENSOR, ITS TRUSTEES,
DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES BE LIABLE FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO ECONOMIC DAMAGE
OR INJURY TO PROPERTY AND LOST PROFITS, WHETHER LICENSOR SHALL BE ADVISED, SHALL
HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE
FOREGOING.

7.9 For the purposes of this Agreement "Force Majeure" means any circumstances
beyond the reasonable control of either party including, without limitation, any
strike, lock-out, or other form of industrial action. If either party is
affected by Force Majeure, it shall forthwith notify the other party of the
nature and extent thereof. Neither party shall be deemed to be in breach of this
Agreement, or otherwise be liable to the other, by reason of any delay in
performance, or the nonperformance, of any of its obligations under this
Agreement, to the extent that such delay or nonperformance is due to any Force
Majeure of which it has notified the other party, and the time for performance
of that obligation shall be extended accordingly. If the Force Majeure in
question prevails for a continuous period in excess of six (6) months, the
parties shall enter into bona fide discussions with a view to alleviating its
effects, or to agreeing upon such alternative arrangements as may be fair and
reasonable.

7.10 LICENSEE shall not use the names or trademarks of LICENSOR, nor any
adaptation thereof, nor the names of any of its employees, in any advertising,
promotional or sales literature without prior written consent obtained from
LICENSOR, or said employee, in each case, except that the LICENSEE may state
that it is a licensee of LICENSOR with respect to the Technology.

7.11 All Notices shall be made in writing to the individuals noted below at the
addresses noted above, and shall be sent by certified mail, returned receipt
requested. If the individual to whom notices are to be given, or address where
notices are to be sent changes for any party, that party

*CONFIDENTIAL TREATMENT
       REQUESTED

                                       8
<PAGE>   9
shall promptly notify the other party accordingly.

7.12 LICENSEE recognizes the proprietary rights of LICENSOR in and to the
confidential nature of information provided to LICENSEE under the Sponsored
Research Agreement attached hereto as Exhibit A, and agrees to take every
necessary precaution to safe-guard and treat the information as confidential and
to take appropriate action by instruction, agreement or notice with LICENSEE's
directors, officers, agents and employees to protect the confidential and
proprietary nature of the Information. LICENSEE agrees that it will not make use
of, either directly or indirectly, any of the information which it receives from
LICENSOR, other than for the purpose for which the information is disclosed
except with the specific prior written authorization of LICENSOR. LICENSEE
agrees not to disclose, publish or otherwise reveal any of the information to
any other party, except with the specific prior written authorization of
LICENSOR. However, nothing contained in this provision of the Agreement shall be
construed, by implication or otherwise, to apply to information which:

     a) is or becomes part of the public domain through no fault of LICENSEE:

     b) was in the possession of LICENSEE, as evidenced by written records,
prior to the time of disclosure by LICENSOR;

     c) lawfully becomes known or available to the LICENSEE from third parties
who are not under a similar agreement directly and indirectly with LICENSOR
regarding disclosure; or

     d) LICENSEE is required by law to disclose.

7.13 This Agreement contains the entire and only agreement and understanding
between the parties and supersedes all preexisting agreements between them
respecting its subject matter. Any representation, promises, or condition in
connection with such subject matter which is not incorporated in this Agreement
shall not be binding on either party. No modification, renewal, extension,
waiver, and no termination of this Agreement or any of its provisions shall be
binding upon the party against whom enforcement of such modification, renewal,
extension, waiver or termination is sough, unless made in writing and signed on
behalf of such party by one of its duly authorized officers. As used herein, the
word "termination" includes any and all means of bringing an end prior to its
expiration by its own terms this Agreement, or any provisions thereof, whether
by release, discharge, abandonment or otherwise.

7.14 This Agreement shall be construed, governed, interpreted and applied in
accordance with the laws of the Commonwealth of Virginia, U.S.A, except that
questions affecting the construction and effect of any patent shall be
determined by the law of the country in which the patent was granted. Any legal
action or proceeding relating to this Agreement or any document or instrument
related hereto shall be brought only in the courts of the Commonwealth of
Virginia in Richmond, Virginia, and by its execution and delivery of this
Agreement, LICENSEE hereby accepts for itself and in respect to its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.

7.15 This Agreement may be executed in one or more counterparts and any party
hereto may execute any such counterparts each of which shall be deemed an
original and all of which, taken together, shall constitute but one and the
same document. It shall not be necessary in making

                                       9
<PAGE>   10
proof of this document or any counterpart hereof to produce or account for any
of the other counterparts.

7.16 The provisions of this Agreement are severable, and in the event that any
provisions of this Agreement shall be determined to be invalid or unenforceable
under any controlling body of the law, such invalidity and unenforceability
shall not in any way affect the validity or unenforceability of the remaining
provisions hereof. In the event the validity or unenforceability of any
provision of this Agreement is brought into question because of the decision
of a court of competent jurisdiction, LICENSOR, by written notice to LICENSEE
may revise the provision in question or may delete it entirely so as to comply
with the decision of said court.

7.17 The failure of either party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall not constitute a
waiver of that right or excuse a similar failure to perform any such term or
condition by the other party.

7.18 It is understood that LICENSOR is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended and the United States Department of Commerce Export
Administration Act of 1979). The transfer of such items may require a license
from the cognizant agency of the United States Government and/or written
assurances by LICENSEE that LICENSEE shall not export data or commodities to
certain foreign countries without prior approval of such agency. LICENSOR
neither represents that license shall not be required not that, if required, it
shall be issued.

7.19 All reports and documents to be forwarded to LICENSOR shall be in the
English Language.

7.20 All payments required under this Agreement shall be made in U.S. Dollars.
[*]

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate as first above written.

ALLOS THERAPEUTICS INC.                  VIRGINIA COMMONWEALTH
                                         UNIVERSITY INTELLECTUAL
                                         PROPERTY FOUNDATION

By: /s/ STEPHEN HOFFMAN
   -----------------------------         -----------------------------
Name: Stephen Hoffman                    James Farinholt
Title: President                         Acting Director of Technology Transfer
Date:  6/30/97                           Date:
     ---------------------------              ------------------------

                                       10
<PAGE>   11
<TABLE>
<CAPTION>
               VIRGINIA COMMONWEALTH UNIVERSITY                SPA#__________________________
              SPONSORED PROGRAMS INTERNAL APPROVAL             Copy Received ___ yes ___ no
(INSTRUCTIONS PROVIDED ON REVERSE SIDE; PLEASE PRINT OR TYPE)  Award Received ___ yes ___ no
                                                               SPA Reviewer _________________
                                                                   (for SPA purposes only)

I.       PRINCIPAL INVESTIGATOR

<S>                                                            <C>                                                  <C>
Principal Investigator(s)    Abraham           Donald           J.
                         ------------------------------------------------
                           Last Name         First name        M.I.     (Please provide complete name)

Office Phone Extension:   8-8483     Office Fax#:   8-7625     Box#: 980540      Department    Med Chem
                       -------------              -----------       --------                ---------------------------------
Contact Individual for Proposal Pickup & Phone:  Michelle            Fiscal Administrator:                     Dpt#
                                                -------------------                         -----------------        --------

II.      SPONSOR AND PROPOSAL INFORMATION

Name of Sponsor (Agency):    Allos Therapeutics, Inc.
                          ---------------------------------------------------------------------------------------------------
Proposal Identification Number:
                                 --------------------------------------------------------------------------------------------
Title:  Non-Heme Allosteric Proteins
       ----------------------------------------------------------------------------------------------------------------------
Type of Proposal:  Research(R) X  Clinical Trial(R)                 Training/Fellowship(T)       Other(O)
                              ---                   ---                                    ---           ---
Status of Proposal:     New(N) X  Non-competing Continuation(C)    Competing Continuation(R)    Supplement(S)    Revision
                              ---                              ---                          ---              ---          ---
                          Other:
                                ---------------------------------------------------------------------------------------------

*****************************************************************************************************************************
</TABLE>

<TABLE>
<S>                                                                                                             <C>     <C>
                                                                                                                  YES    NO
Will the project include use of human subjects?      CCHR Approval#  9410-4D     Date:  Feb. 97    Pending?       [X]    [ ]
                                                                    ----------         ---------            ---
Will the project include use of vertebrate animals? IACUC Approval#              Date:             Pending?       [ ]    [X]
                                                                    ----------         ---------            ---
Does the project involve research on infectious substances? (i.e. HIV, etc.)   Blood, Hb                          [X]    [ ]
                                                                             ----------------------------------
Does the research involve recombinant DNA/hazardous substances (subject to appropriate regulations)?              [ ]    [X]
Does the project involve rented off-campus facilities?  Location:  VBRP                                           [X]    [ ]
                                                                   --------------------------------------------
         If YES is rent included in budget?  yes     no  X
                                                 ---    ---
Does the proposal involve one or more other institutions or organizations?                                        [ ]    [X]
         If YES list participants:
                                   ----------------------------------------------------------------------------
Will program income be generated?   Estimated Amount $         Alternative:                                       [ ]    [X]
                                                      --------              ---------
Does any investigator have a significant financial interest in this project?                                      [ ]    [X]

20% What percent of your total effort will be devoted to the project?
---
20% What portion of your salary will be requested by the grant/contract?
---

*****************************************************************************************************************************
</TABLE>

<TABLE>
<CAPTION>
III.     BUDGET

Fill in Dates Below               Direct Costs            Indirect Costs*         Total Costs           Indirect Costs***
-------------------               ------------            ---------------         -----------
<S>                           <C>                     <C>                     <C>                    <C>
THIS BUDGET PERIOD:                                                                                           [ * ]
From:    To:                                                                                         -----------------------
7/1/97   6/30/98                     [ * ]                     [ * ]                 [ * ]
---------------------------   --------------------    --------------------    --------------------   Base:     MTDC       TDC
TOTAL PROJECT PERIOD:**                                                                                    ----     ------
From:    To:                                                                                         Type:    CR    FUC   TFC
7/1/97   6/30/98                     [ * ]                     [ * ]                 [ * ]                 ---  ---    ----
---------------------------   --------------------    --------------------    --------------------

*        IF NO INDIRECT COSTS ARE ALLOWED OR IF IDC ARE LIMITED BY SPONSORING AGENCY, ATTACH DOCUMENTATION
**       NOT APPLICABLE FOR NON-COMPETITIVE RENEWALS
***      IF A VOLUNTARY REDUCTION OF INDIRECT COSTS IS DESIRED, ATTACH THE REQUEST AND JUSTIFICATION AND OBTAIN THESE ENDORSEMENTS:
         CHAIRPERSON'S APPROVAL:           DEAN'S APPROVAL:          (INITIALS)
                                 ---------                 ----------

IV.      CERTIFYING SIGNATURES

We, the undersigned, do certify to the best of our knowledge and believe that 1) the designated facility will be released for the
effort indicated; 2) personnel costs are correctly estimated; 3) adequate and suitable space is/will be provided for completion
of the above noted project; 4) we comply with the Debarment Statement and the Conflict of Interests Statement as defined on the
reverse side of this document; and 5) this project is consistent with the educational and research objectives of the University.

Principal Investigator(s)/Project Director(s)  /s/ DONALD J. ABRAHAM                                             Date: April 30, 97
                                              -------------------------------------------------------------------      ------------
Department Chairperson(s)  /s/ DONALD J. ABRAHAM                                                                 Date: April 30, 97
                          ---------------------------------------------------------------------------------------      ------------
School Dean(s) or Designee(s)                                                                                    Date:
                              -----------------------------------------------------------------------------------      ------------
Authorized University Official                                                                                   Date:
                               ----------------------------------------------------------------------------------      ------------
</TABLE>

     NOTE: THIS FORM IS FOR INTERNAL USE ONLY: DO NOT FORWARD WITH PROPOSAL

    Sponsored Programs Administration o P.O. Box 980588 o Richmond, VA 23298
                        VCU OSDA (828-6722) Fax 828-2521

*CONFIDENTIAL TREATMENT
        REQUESTED
<PAGE>   12
              Principal Investigator/Program Director (Last, first, middle):
                               Abraham, Donald J.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                        FROM           THROUGH
DETAILED BUDGET FOR INITIAL BUDGET PERIOD
          DIRECT COSTS ONLY                             07/01/97       06/30/98
---------------------------------------------------------------------------------------------
PERSONNEL (Applicant organization only)                 DOLLAR AMOUNT REQUESTED (omit cents)
---------------------------------------          %      -------------------------------------
                                        TYPE   EFFORT   INST.
                    ROLE ON             APPT.    ON     BASE     SALARY     FRINGE
NAME                PROJECT           (months)  PROJ.  SALARY   REQUESTED  BENEFITS   TOTALS
----                -------           -------- ------  -------  ---------  --------  --------
<S>                 <C>               <C>      <C>     <C>      <C>        <C>       <C>
D. Abraham          Principal               12     20   [ * ]     [ * ]      [ * ]    [ * ]
                    Investigator
R. Danso Danquah    Post-doc                12     50   [ * ]     [ * ]      [ * ]    [ * ]
Mark Eaton          Research                12     50   [ * ]     [ * ]      [ * ]    [ * ]
                    Technician II
Martin Safo         Post-doc                12     50   [ * ]     [ * ]      [ * ]    [ * ]
T. Boyiri           Post-doc                12    100   [ * ]     [ * ]      [ * ]    [ * ]
C. Wang             Protein                 12    100   [ * ]     [ * ]      [ * ]    [ * ]
                    Chemist
Peter Galatin       Graduate                12    100   [ * ]     [ * ]      [ * ]    [ * ]
                    Student               ----   ----  -------   --------   -------  --------

                    SUBTOTALS-------------------------------->    [ * ]      [ * ]    [ * ]
                                                                 ========   =======  ========
---------------------------------------------------------------------------------------------
CONSULTANT COSTS
                                                                                 0.
                       None                                                      0.        0.
---------------------------------------------------------------------------------------------
EQUIPMENT (Itemize)

                                                                                           0.
---------------------------------------------------------------------------------------------
SUPPLIES (Itemize by category)
Chemicals, solvents, analysis, buffer, Reage   20,000.

                                                                                      20,000.
---------------------------------------------------------------------------------------------
TRAVEL

                                                                                 0.        0.
---------------------------------------------------------------------------------------------
PATIENT CARE COSTS                 INPATIENT      None                           0.        0.
                                   OUTPATIENT     None                           0.        0.
---------------------------------------------------------------------------------------------
ALTERATIONS AND RENOVATIONS (Itemize by category)
                                                  None                           0.        0.
---------------------------------------------------------------------------------------------
OTHER EXPENSES (Itemize by category)
Instrument repairs                                                             [ * ]
                                                                                 0.
                                                                                 0.
                                                                                 0.     [ * ]
---------------------------------------------------------------------------------------------
SUBTOTAL DIRECT COSTS FOR INITIAL BUDGET PERIOD                                $        [ * ]
186,516.
---------------------------------------------------------------------------------------------
CONSORTIUM/CONTRACTUAL COSTS  DIRECT COSTS                                                 0.
                              ---------------------------------------------------------------
                              INDIRECT COSTS                                               0.
                              ---------------------------------------------------------------
TOTAL DIRECT COSTS FOR INITIAL BUDGET PERIOD (Item 7a. Face Page) -----------> $        [ * ]
---------------------------------------------------------------------------------------------
</TABLE>
PHS 398 (Rev. 5/95)          (Form Page 4) Page  4

Number pages consecutively at the bottom throughout the application. Do not use
suffixes such as 3a, 3b,.

*CONFIDENTIAL TREATMENT
       REQUESTED

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