Document:

exv10w8

 

Exhibit 10.8

Base Contract for Sale and Purchase of Natural Gas-EOG

This Base Contract is entered into as of the fallowing date: October 9, 2003. The parties to this
Base Contract are the following;

	 	 	 	 	 
	WPS Energy Services, Inc.

	 	and
	 	Enervest Operating L.L.C. / CGAS Exploration, Inc.
	1088 Springhurst Drive, Green Bay, WI 54304

	 	 	 	300 Capital Street, Suite 700, Charleston, WV 25301
	Duns Number: 84-173-9824

	 	 	 	Duns Number: 00-477-3552
	U.S. Federal Tax ID Number: 39-1802356

	 	 	 	U.S. Federal Tax ID Number: 31-4367248

	 	 	 	 	 	 	 
	Notices:
	 	 	 	 	 	 
	WPS Energy Services, Inc. dba FSG Energy Services, Inc.	 	 	 	 
	Attn: Judy Fitz

	 	 	 	Attn: Ken Mariani	 	 
	Phone: (614) 846-7888 x 225

	 	Fax: (614) 846-7833
	 	Phone: 304-343-5505
	 	Fax: 304-343-5525
	Cc: Contract Administration
	 	 	 	 	 	 
	Fax: (920) 617-6182
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Confirmations:
	 	 	 	 	 	 
	WPS Energy Services, Inc. dba FSG Energy Services, Inc.	 	 	 	 
	Attn: Judy Fitz
	 	 	 	 	 	 
	Phone:
(614) 846-7888 x 225

	 	Fax: (614) 846-7833	 	 	 	 
	Cc: Contract Administration

	 	 	 	Attn: Ken Mariani	 	 
	Phone: (920) 617-6067

	 	Fax: (920) 617-6070
	 	Phone: 304-343-5505
	 	Fax: 304-343-5525
	 
	 	 	 	 	 	 
	Invoices and Payments:
	 	 	 	 	 	 
	WPS Energy Services, Inc.
	 	 	 	 	 	 
	Attn: Credit Manager

	 	 	 	Attn: Ken Mariani	 	 
	1088 Springhurst Drive,
Green Bay, WI 54304	 	 	 	 
	Phone: (920) 617-6019 Fax: (920) 617-6070	 	Phone: 304-343-5505	 	Fax: 304-343-5525

	 	 	 	 	 	 	 
	Wire Transfer or ACH Numbers (if applicable):	 	 	 	 
	BANK: U.S. Bank	 	BANK: Bank One of Columbus
	ABA: 075000022	 	   ABA: 044000037
	ACCT: 121740451	 	   ACCT: 98-1877904
	Other Details: ___________________	 	   Other
Details: ______________

This Base Contract incorporates by reference for all purposes the General Terms and Conditions for
Sale and Purchase of Natural Gas published by the North American Energy Standards Board. The
parties hereby agree to the following provisions offered in said General Terms and Conditions. In
the event the parties fail to check a box, the specified default provision shall apply. Select
only one box from each section:

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	Section 1.2

	 	X
	 	Oral (default)
	 	 	Section 7.2
	 	X  15th Day of after receipt of Natural Gas	 
	 	Transaction

	 	o
	 	Written
	 	 	Payment Date
	 	Payment Statement	 
	 	Procedure

	 	 	 	 	 	 	 	 	o _____ Day of Month following Month of	 
	 	 

	 	 	 	 	 	 	 	 	delivery	 
	 	 	 	 	 	 
	 	Section 2.5

	 	X 
	 	2 Business Days after receipt (default)
	 	 	Section 7.2
	 	o Wire transfer (default)	 
	 	Confirm

	 	o
	 	      Business Days after receipt
	 	 	Method of
	 	o Automated Clearinghouse Credit (ACH)	 
	 	Deadline

	 	 	 	 	 	 	Payment
	 	X  Check	 
	 	 	 	 	 	 
	 	Section 2.6

	 	o
	 	Seller (default)
	 	 	Section 7.7
	 	X  Netting applies (default)	 
	 	Confirming

	 	o
	 	Buyer
	 	 	Netting
	 	o Netting does not apply	 
	 	Party

	 	X 
	 	WPS Energy Services, Inc.	 	 	 	 	 	 
	 	 	 	 	 	 
	 	Section 3.2

	 	o
	 	Cover Standard (default)
	 	 	Section 10.3.1
	 	X  Early Termination Damages
Apply (default)	 
	 	Performance

	 	X 
	 	Spot Price Standard
	 	 	Early Termination
	 	o Early Termination Damages Do Not Apply	 
	 	Obligation

	 	 	 	 	 	 	Damages	 	 	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	Section 10.3.2
	 	X  Other Agreement Setoffs Apply (default)	 
	 	Note: The following Spot Price Publication applies to both	 	 	Other Agreement	 	o Other Agreement Setoffs Do Not Apply	 
	 	of the
immediately preceding.	 	 	Setoffs	 	 	 
	 	 	 	 	 	 
	 	Section 2.26	 	X  Index price listed in Inside FERC’s
Gas	 	 	Section 14.5	 	 	 
	 	Spot Price	 	Market Report. for deliveries by
Dominion Publication Transmission Inc. to
Appalachia, in the table ‘Prices of spot
gas delivered to pipeline’, for the second
month after the delivery month multiplied
by the BTU factor as it may be amended by
DEOG from time to time. (Until amended,
BTU factor is 1.106) o	 	 	Choice Of Law	 	Ohlo	 
	 	 	 	 	 	 
	 	Section 6	 	X     Buyer Pays At and After Delivery Point	 	 	Section 14.10	 	X  Confidentiality applies (default)	 
	 	Taxes

	 	(default)
	 	 	Confidentiality
	 	o Confidentiality does not apply	 
	 	 	 	 	 	 

			
	Copyright © 2002 North
American Energy Standards Board, Inc.
	 	NAESB Standard 6.3.1
	All Rights Reserved
	 	April 19, 2002

 

                      o    Seller Pays Before and At Delivery Point

X Special Provisions Number of sheets attached:

X Addendum(s):                      “The attached Addendum is incorporated into this bass contract”                    

IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate.

	 	 	 	 	 	 	 	 	 
	WPS ENERGY SERVICES, INC.	 	 	 	ENERVEST OPERATING LL.C. / CGAS EXPLORATION, Inc.
	 
	 	 	 	 	 	 	 	 
	BY:

	 	/s/ Darrell Bragg
	 	 	 	By:
	 	Keneth Mariaw
	 

	 	 
	 	 	 	 	 	 
	Name: Darrell Bragg	 	 	 	Name: Keneth Mariaw
	Title: VICE PRESIDENT	 	 	 	Title: Exe Up-Explorator

General Terms and Conditions

Base Contract for Sale and Purchase of Natural Gas

SECTION 1. PURPOSE AND PROCEDURES

1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions
of Gas on a Firm or
interruptible basis. “Buyer” refers to the party receiving Gas and “Seller” refers to the party
delivering Gas. The entire agreement between the parties shall be the Contract as defined in
Section 2.7

			
	The parties have selected either the “Oral Transaction Procedure” or the “Written Transaction
Procedure” as indicated on the Base Contract.
	 
	 	 
	Oral Transaction Procedure:
	 
	 	 
	1.2. The parties will use the following Transaction Confirmation procedure. Any Gas purchase and
sale transaction may be effectuated in an EDI transmission or telephone conversation with the
offer and acceptance constituting the agreement of the parties. The parties shall be legally bound
from the time they so agree to transaction terms and may each rely thereon. Any such transaction
shall be considered a “writing” and to have been “signed”. Notwithstanding the foregoing sentence,
the parties agree that Confirming Party shall, and the other party may, confirm a telephonic
transaction by sending the other party a Transaction Confirmation by facsimile, EDI or mutually
agreeable electronic means within three Business Days of a transaction covered by this Section 1,2
(Oral Transaction Procedure) provided that the failure to send Transaction Confirmation shall
not invalidate the oral agreement of the parties. Confirming Party adopts its confirming
letterhead, or the like, as its signature on any Transaction Confirmation as the identification
and authentication of Confirming Party, If the Transaction Confirmation contains any provisions
other than those relating to the commercial terms of the transaction (i.e., price, quantity,
performance obligation, delivery point, period of delivery and/or transportation conditions),
which modify or supplement the Base Contract or General Terms and Conditions of this Contract
(e.g., arbitration or additional representations and warranties), such provisions shall not be
deemed to be accepted pursuant to Section 1.3 but must be expressly agreed to by both parties;
provided that the foregoing shall not invalidate any transaction agreed to by the parties,
	 
	 	 
	Written Transaction Procedure:
	 
	 	 
	1.2. The parties will use the following Transaction Confirmation procedure. Should the parties come
to an agreement regarding a Gas purchase and sales transaction for a particular Delivery Period,
the Confirming Party shall, and the other party may, record that agreement on a Transaction
Confirmation and communicate such Transaction Confirmation by facsimile, EDI or mutually agreeable
electronic means, to the other party by the close of the Business Day fallowing the date of
agreement, The parties acknowledge that their agreement will not be binding until the exchange of
nonconflicting Transaction Confirmations or the passage of the Confirm Deadline without objection
from the receiving party, as provided in Section 1.3.

1.3. If a sending party’s Transaction Confirmation is materially different from the receiving
party’s understanding of the agreement referred to in Section 1.2, such receiving party shall
notify the sending party via facsimile, EDI or mutually agreeable electronic means by the Confirm
Deadline, unless such receiving party has previously sent a Transaction Confirmation to the sending
party. The failure of the receiving party to so notify the sending party in writing by the Confirm
Deadline constitutes the receiving party’s agreement to the terms of the transaction described in
the sending party’s Transaction Confirmation. If there are any material differences between timely
sent Transaction Confirmations governing the same transaction, then neither Transaction
Confirmation shall be binding until or unless such differences are resolved including the use of
any evidence that clearly resolves the differences in the Transaction Confirmations. In the event
of a conflict among the terms of (i) a binding Transaction Confirmation pursuant to Section 1.2,
(ii) the oral agreement of the parties which may be evidenced by a recorded conversation, where the
parties have selected the Oral Transaction Procedure of the Base Contract, (iii) the Base Contract,
and (iv) these General Terms and Conditions, the terms of the documents shall govern in the
priority listed in this sentence.

1.4. The parties agree that each party may electronically record all telephone conversations with
respect to this Contract between their respective employees, without any special or further notice
to the other party. Each party shall obtain any necessary consent of its agents and employees to
such recording. Where the parties have selected the Oral Transaction Procedure in Section 1.2 of
the Base Contract, the parties agree not to contest the validity or enforceability of telephonic
recordings entered into in accordance with the requirements of this Base Contract. However, nothing
herein shall be construed as a waiver of any objection to the admissibility of such evidence.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board

All Rights Reserved
	 	NAESB Standards 6.3.1

April 19, 2002

 

 

SECTION 2. DEFINITIONS

The terms set forth below shall have the meaning ascribed to them below. Other terms are also
defined elsewhere in the Contract and shall have the meanings ascribed to them herein.

2.1.     “Alternative Damages” shall mean such damages, expressed in dollars or dollars per MMBtu, as
the parties shall agree upon in the Transaction Confirmation, in the event either Seller or Buyer
fails to perform a Film obligation to deliver Gas in the case of Seller or to receive Gas in the
case of Buyer.

2.2.     “Base Contract” shall mean a contract executed by the parties that incorporates these General
Terms and Conditions by reference; that specifies the agreed selections of provisions contained
herein; and that sets forth other information required herein and any Special Provisions and
addendum(s) as identified on page one.

2.3.      “British thermal unit” or “Btu” shall mean the International BTU, which is also called the Btu
(IT).

2.4.      “Business Day” shall mean any day except Saturday, Sunday or Federal Reserve Bank holidays.

2.5.      “Confirm Deadline” shall mean 5:00 p.m. in the receiving party’s time zone on the second
Business Day following the Day a Transaction Confirmation is received or, If applicable, on the
Business Day agreed to by the parties in the Base Contract; provided, if the Transaction
Confirmation is time stamped after 5:00 p.m. in the receiving party’s time zone, it shall be deemed
received at the opening of the next Business Day.

2.6.      “Confirming Party” shall mean the party designated in the Base Contract to prepare and
forward Transaction Confirmations to the other party.

2.7.      “Contract” shall mean the legally-binding relationship established by (i) the Base Contract,
(ii) any and all binding Transaction Confirmations and (iii) where the parties have selected the
Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the
parties have entered into through and EDI transmission or by telephone, but that have not been
confirmed in a binding Transaction Confirmation.

2.8.      “Contract Price” shall mean the amount expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties in a transaction.

2.9.      “Contract Quantity” shall mean the quantity of Gas to be delivered and taken as agreed to by the
parties in a transaction.

2.10.      “Cover Standard”, as referred to in Section 3.2, shall mean that if there is an unexcused
failure to take or deliver any quantity of Gas pursuant to this Contract, then the performing party
shall use commercially reasonable efforts to (i) if Buyer is the performing party, obtain Gas, (or
an alternate fuel if elected by Buyer and replacement Gas is not available), or (ii) if Seller is
the performing party, sell Gas, in either case, at a price reasonable for the delivery or
production area, as applicable, consistent with: the amount of notice provided by the nonperforming
party; the immediacy of the Buyer’s Gas consumption needs or Seller’s Gas sales requirements, as
applicable; the quantities involved; and the anticipated length of failure by the nonperforming
party.

2.11.      “Credit Support Obligation(s)” shall mean any obligation(s) to provide or establish credit
support for, or on behalf of, a party to this Contract such as an irrevocable standby letter of
credit, a margin agreement, a prepayment, a security interest in an asset, a performance bond,
guarantee, or other good and sufficient security of continuing nature.

2.12.      “Day” shall mean a period of 24 consecutive hours, coextensive with a “day” as defined by the
Receiving Transporter in a particular transaction.

2.13.      “Delivery Period” shall be the period during which deliveries are to be made as agreed to by
the parties in a transaction.

2.14.      “Delivery Point(s)” shall mean such point(s) as are agreed to by the parties in a
transaction.

2.15.      “EDI” shall mean an electronic data interchange pursuant to an agreement entered into by the
parties, specifically relating to the communication of Transaction Confirmations under this
Contract.

2.16.      “EFP” shall mean the purchase, sale or exchange of natural Gas as the “physical” side of an
exchange for physical transaction involving gas futures contracts. EFP shall incorporate the
meaning and remedies of “Firm”, provided that a party’s excuse for nonperformance of its
obligations to deliver or receive Gas will be governed by the rules of the relevant futures
exchange regulated under the Commodity Exchange Act.

2.17.      “Firm” shall mean that either party may interrupt its performance without liability only to
the extent that such performance is prevented for reasons of Force Majeure; provided, however, that
during Force Majeure interruptions, the party invoking Force Majeure may be responsible for any
Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is
made to the Transporter and until the change in deliveries and/or receipts is confirmed by the
Transporter.

2.18.      “Gas” shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous state
consisting primarily of methane.

2.19.      “Imbalance Charges” shall mean any fees, penalties, costs or charges (in cash or in kind)
assessed by a Transporter for failure to satisfy the Transporter’s balance and/or nomination
requirements.

2.20.      “Interruptible” shall mean that either party may interrupt its performance at any time for any
reason, whether or not caused by an event of Force Majeure, with no liability, except such
interrupting party may be responsible for any
Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is
made to the Transporter and until the change in deliveries and/or receipts is confirmed by
Transporter.

2.21.     “MMBtu” shall mean one million British thermal units, which is equivalent to one dekatherm.

					
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.	 	NAESB Standard 6.3.1
	All Rights Reserved
	 	 
	 	April 19, 2002

Page 3 of 13

 

2.22. “Month” shall mean the period beginning on the first Day of the calendar month and ending
immediately prior to the commencement of the first Day of the next calendar month.

2.23. “Payment Date” shall mean a date, as indicated on the Base Contract, on or before which
payment is due Seller for Gas received by Buyer in the previous Month.

2.24. “Receiving Transporter” shall mean the Transporter receiving Gas at a Delivery Point, or
absent such receiving Transporter,the Transporter delivering Gas at a Delivery Point.

2.25. “Scheduled Gas” shall mean the quantity of Gas confirmed by Transporter(s) for movement,
transportation or management.

2.26. “Spot Price” as referred to in Section 3.2 shall mean the price listed in the publication
indicated on the Base Contract, under the listing applicable to the geographic location closest in
proximity to the Delivery Point(s) for the relevant Day; provided, if
there is no single price
published for such location for such Day, but there is published a range of prices, then the Spot
Price shall be the average of such high and low prices. If no price or range of prices is published
for such Day, then the Spot Price shall be the average of the following: (i) the price (determined
as stated above) for the first Day for which a price or range of prices is published that next
precedes the relevant Day; and (ii) the price (determined as stated above) for the first Day for
which a price or range of prices is published that next follows the relevant Day.

2.27. “Transaction Confirmation” shall mean a document, similar to the form of Exhibit A, setting
forth the terms of a transaction formed pursuant to Section 1 for a particular Delivery Period.

2.28. “Termination Option” shall mean the option of either party to terminate a transaction in the
event that the other party fails to perform a Firm obligation to deliver Gas in the case of Seller
or to receive Gas in the case of Buyer for a designated number of days during a period as
specified on the applicable Transaction Confirmation.

2.29. “Transporter(s)” shall mean all Gas gathering or pipeline companies, or local distribution
companies, acting in the capacity of a transporter, transporting Gas for Seller or Buyer upstream
or downstream, respectively, of the Delivery Point pursuant to a particular transaction.

SECTION 3. PERFORMANCE OBLIGATION

3.1. Seller agrees to sell and deliver, and Buyer agrees to receive and purchase, the Contract
Quantity for a particular transaction in accordance with the terms of the Contract. Sales and
purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction.

The parties have selected either the “Cover Standard” or the “Spot Price Standard” as indicated on
the Base Contract.

Cover Standard:

3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to
deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller
on any Day(s), payment by Seller to Buyer in an amount equal to the positive difference, if any,
between the purchase price paid by Buyer utilizing the Cover Standard and the Contract Price,
adjusted for commercially reasonable differences in transportation costs to or from the Delivery
Point(s), multiplied by the difference between the Contract Quantity and the quantity actually
delivered by Seller for such Day(s); or (ii) in the event of a breach by Buyer on any
Day(s),payment by Buyer to Seller in the amount equal to the positive difference, if any, between
the Contract Price and the price received by Seller utilizing the Cover Standard for the resale of
such Gas, adjusted for commercially reasonable differences in
transportation costs to or from the
Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity
actually taken by Buyer for such Day(s); or (iii) in the event that Buyer has used commercially
reasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to sell
the Gas to a third party, and no such replacement or sale is
available, then the sole and exclusive
remedy of the performing party shall be any unfavorable difference between the Contract Price and
the Spot Price, adjusted for such transportation to the applicable Delivery Point, multiplied by
the difference between the Contract Quantity and the quantity actually delivered by Seller and
received by Buyer for such Day(s). Imbalance Charges shall not be recovered under this Section
3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in
Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after
presentation of the performing party’s invoice, which shall set
forth the basis upon which such
amount was calculated.

Spot
Price Standard:

3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to
deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on
any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Contract
Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s),
multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the
Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in
an, amount equal to the difference between the Contract Quantity and
the actual quantity delivered
by Seller and received by Buyer for such Day(s). multiplied by the positive difference, if any,
obtained by subtracting the applicable Spot Price from the Contract Price. Imbalance Charges shall
not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance
Charges, if any, as provided in Section 4.3. The amount of such
unfavorable difference shall be
payable five Business Days after presentation of the performing party’s invoice, which shall set
forth the basis upon which such amount was calculated.

3.3. Notwithstanding Section 3.2., the parties may agree to Alternative Damages in a Transaction
Confirmation executed in writing by both parties.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

Page 4 of 13

 

 

3.4. In addition to Sections 3.2 and 3.3, the parties may provide for a Termination Option
in a Transaction Confirmation executed in writing by both parties. The Transaction Confirmation
containing the Termination Option will designate the length of nonperformance triggering the
Termination Option and the procedures for exercise thereof, how
damages for nonperformance will be
compensated, and how liquidation costs will be calculated.

SECTION 4. TRANSPORTATION, NOMINATIONS, AND IMBALANCES

4.1. Seller shall have the sole responsibility for transporting the Gas to the Delivery
Point(s), Buyer shall have the sole responsibility for transporting the Gas from the Delivery
Point(s),

4.2. The parties shall coordinate their nomination activities, giving sufficient time to meet the
deadlines of the affected Transporter(s), Each party shall give the other party timely prior Notice,
sufficient to meet the requirements of all Transporter(s) involved in the transaction, of
the quantities of Gas to be delivered and purchased each Day. Should either party become aware that
actual deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas, such party
shall promptly notify the other party.

4.3. The parties shall use commercially reasonable efforts to avoid imposition of any Imbalance
Charges, if Buyer or Seller receives an invoice from a Transporter that includes Imbalance Charges,
the parties shall determine the validity as well as the cause of such
Imbalance Charges. If the
Imbalance Charges were incurred as a result of Buyer’s receipt of quantities of Gas greater than or
less than the Scheduled Gas,then Buyer shall pay for such imbalance Charges or reimburse Seller for
such Imbalance Charges paid by Seller. If the Imbalance Charges were incurred as a result of
Seller’s delivery of quantities of Gas greater than or less than the Scheduled Gas, then Seller
shall pay for such imbalance Charges or reimburse Buyer for such Imbalance Charges paid by Buyer.

SECTION 5. QUALITY AND MEASUREMENT

All Gas delivered by Seller shall meet the pressure, quality and heat content requirements
of the Receiving Transporter. The unit of quantity measurement far purposes of this Contract shall
be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the
established procedures of the Receiving Transporter.

SECTION 6. TAXES

The parties have selected either “Buyer Pays At and After Delivery Point” or “Seller Pays
Before and At Delivery Point” as indicated on the Base Contract.

Buyer Pays At and After Delivery Point:

Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges
Imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery
Point(s), Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at
the Delivery Point(s) and all Taxes after the Delivery Point(s). If a party is required to remit or
pay Taxes that are the other party’s responsibility here under, the party responsible for such Taxes
shall promptly reimburse the other party for such Taxes. Any party
entitled to an exemption from any
such Taxes or charges shall furnish the other party any necessary documentation thereof.

Sailer Pays Before and At Delivery Point:

Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges
imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery
Point(s) and all Taxes at the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on
or with respect to the Gas after the Delivery Point(s). If a party is required to remit or pay
Taxes that are the other party’s responsibility here under, the party responsible for such. Taxes
shall promptly reimburse the other party for such Taxes. Any party
entitled to an exemption from
any such Taxes or charges shall furnish the other party any necessary documentation thereof.

SECTION 7. BILLING, PAYMENT, AND AUDIT

7.1. Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for
any other applicable charges, providing supporting documentation acceptable in industry practice to
support the amount charged, If the actual quantity delivered is not
known by the billing date,
billing will be prepared based on the quantity of Scheduled Gas. The Invoiced quantity will then be
adjusted to the actual quantity on the following Month’s billing or as soon thereafter as actual
delivery information is available.

7.2. Buyer shall remit the amount due under Section 7.1 in the manner specified in the Base
Contract, in immediately available funds, on or before the later of the Payment Date or 10 Days
after receipt of the invoice by Buyer; provided that if the Payment Date is not a Business
Day, payment is due on the next Business Day following that date. In the event any payments are due
Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2.

7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may
submit an invoice to the nonperforming party for an accelerated payment setting forth the basis upon
which the invoiced amount was calculated. Payment from the nonperforming party will be due five
Business Days after receipt of invoice,

7.4. If the invoiced party, in good faith, disputes the amount of any such invoice or any part
thereof, such invoiced party will pay such amount as it concedes to be correct; provided, however,
if the invoiced party disputes the amount due, it must provide
supporting documentation acceptable
in industry practice to support the amount paid or disputed. In the event the parties are unable to
resolve such dispute, either party may pursue any remedy available at law or in equity to enforce
its rights pursuant to this Section,

7.5. If the invoiced party falls to remit the full amount payable when due, interest on the unpaid
portion shall accrue from the date due until the date of payment at a rate equal to the lower of (i)
the then-effective prime rate of interest published under “Money
Rates” by The Wall Street Journal,
plus two percent per annum; or (ii) the maximum applicable lawful interest rate.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

Page 5 of 13

 

 

7.6. A party shall have the right, at its own expense, upon reasonable Notice and at reasonable
times, to examine and audit and to obtain copies of the relevant portion of the books, records, and
telephone recordings of the other party only to the extent reasonably
necessary to verify the
accuracy of any statement, charge, payment, or computation made under the Contract This right to
examine, audit, and to obtain copies shall not be available with respect to proprietary information
not directly relevant to transactions under this Contract. All invoices and billings shall
be conclusively presumed final and accurate and all associated claims for under- or overpayments
shall be deemed waived unless such invoices or billings are objected to in writing, with adequate
explanation and/or documentation, within two years after the Month of Gas delivery. All
retroactive adjustments under Section 7 shall be paid in full by the party owing payment within 30
Days of Notice and substantiation of such inaccuracy,

7.7. Unless the parties have elected on the Base Contract not to make this Section 7.7 applicable
to this Contract, the parties shall net all undisputed amounts due and owing, and/or past due,
arising under the Contract such that the party owing the greater
amount shall make a single payment
of the net amount to the other party in accordance with
Section 7; provided that no payment
required to be made pursuant to the terms of any Credit Support Obligation or pursuant to Section
7.3 shall be subject to netting under this Section. If the parties have executed a separate netting
agreement, the terms and conditions therein shall prevail to the extent inconsistent herewith.

SECTION 8. TITLE, WARRANTY, AND INDEMNITY

8.1. Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the
Delivery Point(s). Seller shall have responsibility for and assume any liability with respect to the
Gas prior to its delivery to Buyer at the specified Delivery
Point(s). Buyer shall have
responsibility for and any liability with respect to said Gas after its delivery to Buyer at the
Delivery Point(s).

8.2.
Seller warrants that it will have the right to convey and will transfer good and merchantable
title to all Gas sold hereunder and delivered by it to Buyer, free and clear of all liens,
encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND
IN SECTION 14.8, ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE, ARE DISCLAIMED.

8.3. Seller agrees to indemnify Buyer and save it harmless from all losses, liabilities or claims
including reasonable attorneys’ fees and costs of court (“Claims”), from any and all persons,
arising from or out of claims of title, personal injury or property
damage from said Gas or other
charges thereon which attach before title passes to Buyer. Buyer agrees to indemnify Seller and
save it harmless from all Claims, from any and all persons, arising from or out of claims regarding
payment, personal injury or property damage from said Gas or other charges thereon which attach
after title passes to Buyer

8.4. Notwithstanding the other provisions of this Section 8, as between Seller and Buyer, Seller
will be liable for all Claims to the extent that such arise from the failure of Gas delivered by
Seller to meet the quality requirements of Section 5.

SECTION 9. NOTICES

9.1. All Transaction Confirmations, invoices, payments and other communications made pursuant
to the Base Contract (“Notices”)shall be made to the addresses specified in writing by the
respective parties from time to time.

9.2. All Notices required hereunder may be sent by facsimile or mutually acceptable electronic
means, a nationally recognized overnight courier service, first class mail or hand delivered.

9.3.
Notice shall be given when received on a Business Day by the addressee. In the absence of
proof of the actual receipt date,the following presumptions will
apply. Notices sent by facsimile
shall be deemed to have been received upon the sending party’s receipt of its facsimile machine’s
confirmation of successful transmission. If the day on which such facsimile is received is not
a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have
been received on the next following Business Day. Notice by overnight mail or courier shall be
deemed to have been received or the next Business Day after it was
sent or such earlier time as is
confirmed by the receiving party. Notice via first class mail shall be considered delivered five
Business Days after mailing.

SECTION 10. FINANCIAL RESPONSIBILITY

10.1. If either party (“X”) has reasonable grounds or insecurity regarding the performance of
any obligation under this Contract (whether or not then due) by the other party (“Y”) (including,
without limitation, the occurrence of a material change in the creditworthiness of Y), X may demand
Adequate Assurance of Performance. “Adequate Assurance of
Performance” shall mean sufficient
security in the form, amount and for the term reasonably acceptable to X, including, but not
limited to, a standby irrevocable letter, of credit, a prepayment, a security interest in an asset
or a performance bond or guaranty (including the issuer of any such
security).

10.2. In the event (each an “Event of Default”) either party (the “Defaulting Party”) or its
guarantor shall: (i) make an assignment or any general arrangement for the benefit of creditors;
(ii) file a petition or otherwise commence, authorize, or
acquiesce in the commencement of a
proceeding or case under any bankruptcy or similar law for the protection of creditors or have such
petition filed or proceeding commenced against it; (iii) otherwise become bankrupt or insolvent
(however evidenced); (iv) be unable to pay its debts as they fall due; (v) have a receiver,
provisional liquidator, conservator, custodian, trustee or other similar official appointed with
respect to it or substantially all of its assets; (vi) fail to perform any obligation to the other
party with respect to any Credit Support Obligations relating to the Contract; (vii) fail to give
Adequate Assurance of Performance under Section 10.1 within 48
hours but at least one Business Day
of a written request by the other party; or (viii) not have paid any amount due the other party
hereunder on or before the second Business Day following written Notice that such payment is due;
then the other party (the “Non-Defaulting Party”) shall
have the right, at its sole election, to
immediately withhold and/or suspend deliveries or payments upon Notice and/or to terminate and
liquidate

			
	 	 	 
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All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

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the transactions under the Contract, in the manner provided in Section 10.3. in addition to
any and all other remedies available hereunder.

10.3. If an Event of Default has occurred and is continuing, the Non-Defaulting Party shall have
the right, by Notice to the Defaulting Party, to designate a Day, no earlier than the Day such
Notice is given and no later than 20 Days after such Notice is given, as an early termination date
(the “Early Termination Date”) for the liquidation and termination pursuant to Section 10.3.1 of
all transactions under the Contract, each a “Terminated Transaction”. On the Early Termination
Date, all transactions will terminate, other than those transactions, if any, that may not be
liquidated and terminated, under applicable law or that are, in the reasonable opinion of the Non-
Defaulting Party, commercially impracticable to liquidate and terminate (“Excluded Transactions”),
which Excluded Transactions must be liquidated and terminated as soon thereafter as is reasonably
practicable, and upon termination shall be a Terminated Transaction and be valued consistent with
Section 10.3.1 below. With respect to each Excluded Transaction, its actual termination date shall
be the Early Termination Dale for purposes of Section 10.3.1.

The parties have selected either “Early Termination Damages Apply” or “Early Termination Damages
Do Not Apply” as indicated on the Base Contract.

Early Termination Damages Apply:

     10.3.1. As of the Early Termination Date, the Non-Defaulting Party shall determine, in good
faith and in a commercially reasonable manner, (i) the amount owed (whether or not then due) by
each party with respect to all Gas delivered and received between the parties under Terminated
Transactions and Excluded Transactions on and before the Early Termination Date and all other
applicable charges relating to such deliveries and receipts (including without limitation any
amounts owed under Section 3.2), for which payment has not yet been made by the party that owes
such payment under this Contract and (ii) the Market Value, as defined below, of each Terminated
Transaction. The Non-Defaulting Party shall (x) liquidate and accelerate each Terminated
Transaction at its Market Value, so that each amount equal to the difference between such Market
Value and the Contract Value, as defined below, of such Terminated Transaction(s) shall be due to
the Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and
to the Seller if the opposite is the case; and (y) where appropriate, discount each amount then
due under clause (x) above to present value in a commercially reasonable manner as of the Early
Termination Date (to take account of the period between the date of liquidation and the date on
which such amount would have otherwise been due pursuant to the relevant Terminated Transactions).

For purposes of this Section 10.3.1. “Contract Value” means the amount of Gas remaining to be
delivered or purchased under a transaction multiplied by the Contract Price, and “Market Value”
rneans the amount of Gas remaining to be delivered or purchased under a transaction multiplied by
the market price for a similar transaction at the Delivery Point determined by the Non-Defaulting
Party in a commercially reasonable manner. To ascertain the Market Value, the Non-Defaulting Party
may consider, among other valuations, any or all of the settlement prices of NYMEX Gas futures
contracts, quotations from leading dealers in energy swap contracts or physical gas trading
markets, similar sales or purchases and any other bona fide third-party offers, all adjusted for
the length of the term and differences in transportation costs. A party shall not be required to
enter into a replacement transaction(s) in order to determine the Market Value. Any extension(s)
of the term of a transaction to which parties are not bound as of the Early Termination Date
(including but not limited to “evergreen provisions”) shall not be considered in determining
Contract Values and Market Values, For the avoidance of doubt, any option pursuant to which one
party has the right to extend the term of a transaction shall be considered in determining
Contract Values and Market Values, The rate of interest used in calculating net present value
shall be determined by the Non-Defaulting Party in a commercially reasonable manner.

Early Termination Damages Do Not Apply:

     10.3.1. As of the Early Termination Date, the Non-Defaulting Party shall determine, in good
faith and in a commercially reasonable manner, the amount owed (whether or not then due) by each
party with respect to all Gas delivered and received between the parties under Terminated
Transactions and Excluded Transactions on and before the Early Termination Date and all other
applicable charges relating to such deliveries and receipts (including without limitation any
amounts owed under Section 3.2), for which payment has not yet been made by the party that owes
such payment under this Contract.

The parties have selected either “Other Agreement Setoffs Apply” or “Other Agreement Setoffs Do Not
Apply” as indicated
on the Base Contract.

Other Agreement Setoffs Apply:

     10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts
owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated
to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”). At
its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party may
setoff (i) any Net Settlement Amount owed to the Non-Defaulting Party against any margin or other
collateral held by it in connection with any Credit Support Obligation relating to the Contract; or
(ii) any Net Settlement Amount payable to the Defaulting Party against any amount(s) payable by
the Defaulting Party to the Non-Defaulting Party under any other agreement or arrangement between
the parties.

Other Agreement Setoffs Do Not Apply:

     10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts
owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated
to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”). At
its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party may
setoff any Net Settlement Amount owed to the Non-Defaulting Party against any margin or other
collateral held by it in connection with any Credit Support Obligation relating to the Contract.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board

All Rights Reserved
	 	NAESB Standards 6.3.1

April 19, 2002

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     10.3.3. If any obligation that is to be included in any netting, aggregation or setoff
pursuant to Section 10.3.2 is unascertained, the Non-Defaulting party may in good faith estimate
that obligation and net, aggregate or setoff, as applicable, in respect of the estimate, subject to
the Non-Defaulting Party accounting to the Defaulting Party when the obligation is ascertained. Any
amount not then due which is included in any netting, aggregation or setoff pursuant to Section
10.3.2 shall be discounted to net present value in a commercially reasonable manner determined by
the Non-Defaulting Party.

10.4. As soon as practicable after a liquidation. Notice shall be given by the Non-Defaulting Party
to the Defaulting Party of the Net Settlement Amount, and whether the Net Settlement Amount is due
to or due from the Non-Defaulting Party, The Notice shall include a written statement explaining in
reasonable detail the calculation of such amount, provided that failure to give such Notice shall
not affect the validity or enforceability of the liquidation or give rise to any claim by the
Defaulting Party against the Non-Defaulting Party. The Net Settlement Amount shall be paid by the
close of business on the second Business Day following such Notice, which date shall not be earlier
than the Early Termination Date. Interest on any unpaid portion of the Net Settlement Amount shall
accrue from the date due until the date of payment at a rate equal to the lower of (i) the
then-effective prime rate of interest published under “Money Rates” by The Wall Street Journal,
plus two percent per annum; or (ii) the maximum applicable lawful interest rate.

10.5. The parties agree that the transactions hereunder constitute a “forward contract” within the
meaning of the United States Bankruptcy Code and that Buyer and Seller are each “forward contract
merchants” within the meaning of the United States Bankruptcy Code.

10.6. The Non-Defaulting Party’s remedies under this Section 10 are the sole and exclusive remedies
of the Non-Defaulting Party with respect to the occurrence of any Early Termination Date. Each
party reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or
may be entitled to arising from the Contract.

10.7. With respect to this Section 10, if the parties have executed a separate netting agreement
with close-out netting provisions, the terms and conditions therein shall prevail to the extent
inconsistent herewith.

SECTION 11. FORCE MAJEURE

11.1.
Except with regard to a party’s obligation to make payment(s) due under Section 7, Section
10.4, and Imbalance Charges under Section 4, neither party shall be liable to the other for failure
to perform a Firm obligation, to the extent such failure was caused by Force Majeure. The term
“Force Majeure” as employed herein means any cause not reasonably within the control of the party
claiming suspension, as further defined in Section 11.2.

11.2. Force Majeure shall include, but not be limited to, the following: (i) physical events such
as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as
hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage
or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather
related events affecting an entire geographic region, such as low temperatures which cause freezing
or failure of wells or lines of pipe; (iii) interruption and/or curtailment of Firm transportation
and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial
disturbances, riots, sabotage, insurrections or wars; and
(v) governmental actions such as
necessity for compliance with any court order, law, statute, ordinance, regulation, or policy
having the effect of law promulgated by a governmental authority having jurisdiction. Seller and
Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve
the event or occurrence once it has occurred in order to resume performance.

11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to the
extent performance is affected by any or all of the following circumstances: (i) the curtailment of
interruptible or secondary Firm transportation unless primary, in-path, Firm transportation is also
curtailed; (ii) the party claiming excuse failed to remedy the condition and to resume the
performance of such covenants or obligations with reasonable dispatch; or (iii) economic hardship,
to include, without limitation, Seller’s ability to sell Gas at a higher or more advantageous price
than the Contract Price, Buyer’s ability to purchase Gas at a lower or more advantageous price than
the Contract Price, or a regulatory agency disallowing, in whole or in part, the pass through of
costs resulting from this Agreement; (iv) the loss of Buyer’s market(s) or Buyer’s inability to use
or resell Gas purchased hereunder, except, in either case, as
provided in Section 11.2. or (v) the
loss or failure of Seller’s gas supply or depletion of reserves, except, in either case, as
provided in Section 11.2. The party claiming Force Majeure shall not be excused from its
responsibility for Imbalance Charges.

11.4. Notwithstanding anything to the contrary herein, the parties agree that the settlement of
strikes, lockouts or other industrial disturbances shall be within the sole discretion of the party
experiencing such disturbance.

11.5. The party whose performance is prevented by Force Majeure must provide Notice to the other
party. Initial Notice may be given orally; however, written Notice with reasonably full
particulars of the event or occurrence is required as soon as reasonably possible. Upon providing
written Notice of Force Majeure to the other party, the affected party will be relieved of its
obligation, from the onset of the Force Majeure event, to make or accept delivery of Gas. as
applicable, to the extent and for the duration of Force Majeure, and neither party shall be deemed
to have failed in such obligations to the other during such occurrence or event.

11.6. Notwithstanding Sections 11.2 and 11.3, the parties may agree to alternative Force Majeure
provisions in a Transaction Confirmation executed in writing by both parties.

SECTION 12. TERM

This Contract may be terminated on 30 Day’s written Notice, but shall remain in effect until
the expiration of the latest Delivery Period of any transaction(s). The rights of either party
pursuant to Section 7.6 and Section 10, the obligations to make payment hereunder, and the
obligation of either party to indemnify the other, pursuant hereto shall survive the termination
of the Base Contract or any transaction.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

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SECTION 13. LIMITATIONS

FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED,
SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY’S
LIABILITY HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR
DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN OR IN A TRANSACTION, A PARTY’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY.
SUCH DIRECT ACTUAL DAMAGES SHALL SE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR
DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE
LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR
OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION
OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND
THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO INCLUDING THE
NEGLIGENCE OF ANY PARTY. WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR
PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN
ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.

SECTION 14. MISCELLANEOUS

14.1. This Contract shall be binding upon and inure to the benefit of the successors, assigns,
personal representatives, and heirs of the respective parties hereto, and the covenants,
conditions, rights and obligations of this Contract shall run for the full term of this Contract.
No assignment of this
Contract, in whole or in part, will be made without the prior written consent of the non-assigning
party (and shall not relieve the assigning party from liability hereunder), which consent will not
be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge,
encumber, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with
any financing or other financial arrangements, or (ii) transfer its interest to any parent or
affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon
any such assignment, transfer and assumption, the transferor shall remain principally liable for
and shall not be relieved of or discharged from any obligations hereunder.

14.2. If any provision in this Contract is determined to be invalid, void or unenforceable by any
court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any
other provision, agreement or covenant of this Contract.

14.3. No waiver of any breach of this Contract shall be held to be a waiver of any other or
subsequent breach.

14.4. This Contract sets forth all understandings between the parties respecting each transaction
subject hereto, and any prior contracts, understandings and representations, whether oral or
written, relating to such transactions are merged into and superseded by this Contract and any
effective transaction(s). This Contract may be amended only by a writing executed by both parties.

14.5. The interpretation and performance of this Contract shall be governed by the laws of the
jurisdiction as indicated on the Base Contract, excluding, however, any conflict of laws rule which
would apply the law of another jurisdiction.

14.6. This Contract and all provisions herein will be subject to all applicable and valid
statutes, rules, orders and regulations of any governmental authority having jurisdiction
over the parties, their facilities, or Gas supply, this Contract or transaction or any
provisions thereof,

14.7. There is no third party beneficiary to this Contract.

14.8. Each party to this Contract represents and warrants that it has full and complete authority
to enter into and perform this Contract. Each person who executes this Contract on behalf of either
party represents and warrants that it has full and complete authority to do so and that such party
will be bound thereby.

14.9. The headings and subheadings contained in this Contract are used solely for convenience and
do not constitute a part of this Contract between the parties and
shall not be used to construe or interpret the provisions of this Contract.

14.10.
Unless the parties have elected on the Base Contract not to make this Section 14.10
applicable to this Contract, neither party shall disclose directly or indirectly without the prior
written consent of the other party the terms of any transaction to a third party (other than the
employees, lenders, royalty owners, counsel, accountants and other agents of the party, or
prospective purchasers of all or substantially all of a party’s assets or of any rights under this
Contract, provided such persons shall have agreed to keep such terms confidential) except (i) in
order to comply with any applicable law, order, regulation, or exchange rule, (ii) to the extent
necessary for the enforcement of this Contract, (iii) to the extent necessary to implement any
transaction, or (iv) to the extent such information is delivered to such third party for the sole
purpose of calculating a published index. Each party shall notify the other party of any proceeding
of which it is aware which may result in disclosure of the terms of any transaction (other than as
permitted hereunder) and use reasonable efforts to prevent or limit the disclosure. The existence
of this Contract is not subject to this confidentiality obligation. Subject to Section 13, the
parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief
in connection with this confidentiality obligation. The terms of any transaction hereunder shall
be kept confidential by the parties hereto for one year from the expiration of the transaction.

In the event that disclosure is required by a governmental body or applicable law, the party
subject to such requirement may disclose the material terms of this Contract to the extent so
required, but shall promptly notify the other party, prior to disclosure, and shall cooperate
(consistent with the disclosing party’s legal obligations) with the other party’s efforts to
obtain protective orders or similar restraints with respect to such disclosure at the expense of
the other party.

14.11. The
parties may agree to dispute resolution procedures in Special Provisions attached to
the Base Contract or in a Transaction Confirmation executed in writing by both parties.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

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DISCLAIMER; The purposes of this Contract are to facilitate trade, avoid misunderstandings
and make more definite the terms of contracts of purchase and sale of natural gas. Further, NAESB
does not mandate the use of this Contract by any party. NAESB
DISCLAIMS AND EXCLUDES, AND ANY USER
OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO NAESB’S DISCLAIMER OF, ANY AND ALL WARRANTIES,
CONDITIONS OR REPRESENTATIONS EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT
OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE,
NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER
OR NOT NAESB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY
SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY
COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB
BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
ARISING OUT OF ANY USE OF THIS CONTRACT.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

Page 10 of 13

 

 

ADDENDUM TO THE

Base Contract for Sale and Purchase of Natural Gas (NAESB)

Between ENERVEST / CGAS EXPLORATION, INC. and

WPS Energy Services, Inc.

dated

October 9, 2003

The above-referenced Base Contract for Sale and Purchase of Natural Gas (the “Base
Contract”) between Enervest / CGAS Exploration, Inc. and WPS Energy Services, Inc. is hereby
amended and revised as follows, effective as of the date of the Base Contract:

	 	1.	 	Section 2.8 is deleted and replaced with the following; “Contract Price” shall
mean the amount expressed in U.S. Dollars per MMBtu, or U.S. Dollars per MCF, to be paid
by Buyer to Seller for the purchase of Gas as agreed to by the parties in a
transaction.
	 
	 	2.	 	Section 3.5. Add the following as a new Section 3.5 to the Base Contract: 3.5
Notwithstanding, and in addition to, the remedies provided pursuant to Section 3.2, if
Seller or Buyer breaches a Firm obligation to deliver or receive Gas, and such breach is
not excused under Section 11 (Force Majeure] or by the other party’s failure to perform,
then an Event of Default shall be deemed to have occurred with respect to the
breaching party and, upon three (3) Business Days’ prior Notice, and for so long as the
breaching party fails to perform, the non-breaching party shall have the right to
suspend its performance under any or all transactions and/or to terminate and liquidate
the transactions under the Contract, in the manner provided in Section 10.3.
	 
	 	3.	 	Section 7.1. Delete Section 7.1 and replace with the following: On or about the
1st day of the second month following delivery, Buyer shall receive from Transporter via
facsimile, U.S. mail or electronic communication, Natural Gas Payment Statement(s)
showing the volumes of gas Seller delivered to the Delivery Points.
	 
	 	4.	 	Section 7.2. Delete Section 7.2 and replace with the following: Buyer shall
remit amounts due for the volumes delivered, in immediately available funds, on or
before the tenth (10th) day after receipt of the Natural Gas Payment Statement(s);
provided that if the fifteenth day after receipt of the Pipeline Transporter
statement(s) is not a Business Day, payment is due on the next Business Day following
that date. In the event any payments are due Buyer hereunder, payment to Buyer shall
be made in accordance with this Section 7.2.
	 
	 	5.	 	Section 7.4. Delete Section 7.4 and replace with the following: If either party,
in good faith, disputes the amount paid or invoiced, the disputing party shall pay the
amount it concedes to be correct; provided, however, the disputing party must provide
supporting documentation acceptable in industry practice to support the amount unpaid or
disputed. In the event the parties are unable to resolve such dispute, either party may
pursue any remedy available at law or in equity to enforce its rights.
	 
	 	6.	 	Section 7.5 In the first line, replace the words “the invoiced” with “either”.
	 
	 	7.	 	Section 10.1. In the fourth line, insert the words “and from an issuer” between
“term” and “reasonably”. Delete “(including the issuer of any such security)” from the
last sentence.
	 
	 	8.	 	Section 10.3.1 [Early Termination Damages Apply]. Insert the following at the
beginning of line 11 of the second paragraph, immediately before the words “shall be
considered”: “, if the exercise of that option would be economically reasonable for the
party holding the option,”, In the last line of the second paragraph, replace the words
“determined by the Non-Defaulting Party in a commercially reasonable manner” with “the
then-effective prime rate of interest published under “Money Rates” by The Wall Street
Journal”.

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

Page 11 of 13

 

 

	 	9.	 	Section 10.3.2 [Other Agreement Setoffs Apply]. In line 4, insert “any
Adequate Assurance of Performance held by it or” after the word “against”.
	 
	 	10.	 	Section 10.3.3. In the last sentence, replace the words “in a
commercially reasonable manner determined by the Non-Defaulting Party”
with “using as a discount rate the then-effective prime rate of interest
published under “Money Rates” by The Wall Street Journal”.
	 
	 	11.	 	Section 10.8. Add the following as a new Section 10.8 to the Base Contract:

	 	10.8	 	     a. Events that may give a party (the “Requesting Party”) “reasonable
grounds for insecurity regarding the performance of any obligation under the
Contract” by the other party (the “Posting Party”) for purposes of Section 10.1
include, but are not limited to, the following:

The Requesting Party has knowledge that the Posting Party (or its guarantor,
if applicable) is defaulting under other material contracts or transactions
(including, but not limited to, contracts or transactions with third parties);

The Posting Party has exceeded any credit or trading limit set out
in a Transaction Confirmation or other agreement between the Posting Party and
the Requesting Party;

The Posting Party or its guarantor has a corporate or debt rating
which is (a) rated as investment grade at the time the Posting Party enters
into a transaction hereunder and that rating falls below investment grade
according to at least one nationally-recognized rating agency, or (b) rated
below investment grade at the time the Posting Party enters into a transaction
hereunder and that rating is downgraded further by at least one
nationally-recognized rating agency;

Other material adverse change(s) in the Posting Party’s financial condition occur;

Substantial change(s) in market prices occur that may, either alone or in the
aggregate, materially and adversely impact the Posting Party’s ability to
perform under the Contract or any transaction hereunder; and

Any Adequate Assurance of Performance previously posted by the
Posting Party is due to expire within twenty (20) calendar days.

	 	b.	 	On any Business Day, the Posting Party may, if it in good faith and reasonably
believes it should be entitled to reduce the amount of Adequate Assurance of
Performance previously provided by it to the Requesting Party, request that such
Adequate Assurance of Performance be reduced or returned by the Requesting Party.
In such an event, if and to the extent the Requesting Party’s reasonable grounds
for insecurity regarding the performance by the Posting Party of any obligation
under this Contract have been mitigated or eliminated, the Requesting Party shall
reduce or return an appropriate amount of such Adequate Assurance of Performance
within five (5) Business Days after receipt of the Posting Party’s request.

	 	 	 	 	 	 	 	 	 	 	 
	UNDERSTOOD AND AGREED:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	WPS Energy Services, Inc.	 	 	 	Enervest / CGAS Exploration, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Darrell Bragg
	 	 	 	By:	 	/s/ Keneth Mariaw	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	Darrell Bragg
	 	 	 	Name:	 	Keneth Mariaw	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Title:

	 	Vice President
	 	 	 	Title:	 	Exec VP - Exploration	 	 
	 

	 	 	 	 	 	 	 	 	 	 

			
	 	 	 
	Copyright © 2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

Page 12 of 13

 

 

EXHIBIT C

TRANSACTION CONFIRMATION

FOR IMMEDIATE DELIVERY

	 	 	 	 	 
	

	 	 	 	Date: September 29, 2005

This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated
October 9, 2003. The terms of this Transaction Confirmation are binding unless disputed in writing
within 2 Business Days of receipt unless otherwise specified in the Base Contract.

	 	 	 
	SELLER:

	 	BUYER:
	Enervest Operating L.L.C.

	 	WPS Energy Services, Inc.
	1064 Old Route 33

	 	6737 North High Street, Ste 314
	Weston, WV 26452-7722

	 	Worthington, OH 43215
	Attn: Ken Mariani

	 	Attn: Darrell Bragg
	Phone: 304-517-1102     Cell: 304-545-4096

	 	Phone: 614-844-4307
	Fax: 304-517-1107

	 	Fax: 614-844-4305
	 
	 	 
	Contact: Kim George

	 	Contact: Judy Fitz
	Phone: 304-517-1102     Fax 304-517-1107

	 	Phone: 614-844-4320
    Fax: 614-844-4305

Contract Price: Index plus Basis less Fees per MCF*.

Index shall mean a price equal to the Henry Hub natural gas futures contract at expiration
for the delivery month as traded on and
published by the New York Mercantile Exchange, per MCF*.

Basis shall be priced equal to $1.02 per MCF*

Fees shall mean the gathering, enhancement, and other charges billed directly to Buyer for
payment on behalf of Seller.

Delivery Period: Begin: November 2005             End: March 2007

Performance Obligation and Contract Quantity: (Select One)

	 	 	 	 	 
	Firm (Fixed Quantity):

	 	Firm (Variable Quantity):
	 	Interruptible:
	                     MMBtus/day

	 	                     MMBtus/day Minimum
	 	þ
All Volumes in MCF/Mo.
	   o EFP

	 	                     MMBtus/day Maximum
	 	      BEST EFFORTS
	 

	 	subject to Section 4.2. at election of	 	 
	 

	 	o Buyer or o Seller	 	 

Delivery
Point(s): Dominion East Ohio Meter Numbers: See attached list

Special Provisions:

 

			
	*	 	The Contract Price Is per recalculated MCF based on the BTU enhancement program established by DEOG
(currently a 1.115
BTU factor). In the event that DEOG modifies the BTU factor, the MCF recalculation will be adjusted
to account for that modification.

	 	 	 	 	 	 	 	 	 	 	 
	Seller:

	 	Keneth Mariaw
	 	 	 	Buyer:
	 	Darrell Bragg	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Keneth Mariaw
 

	 	 	 	By:
	 	/s/ Darrell Bragg
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	VP
	 	 	 	Title:
	 	VICE PRESIDENT	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	10/6/05
	 	 	 	Date:
	 	10/17/05	 	 

			
	 	 	 
	Copyright
©
2002 North American Energy Standards Board, Inc.

All Rights Reserved
	 	NAESB Standard 6.3.1

April 19, 2002

Page 1 of 1

 

 

Enervest

Existing and New Meters to WPS, 11/05

NEW show Measured (unadjusted) Volumes

	 	 	 	 	 
	MeterNumber	 	Average
	5024
	 	 	286	 
	5138
	 	 	310	 
	5905
	 	 	443	 
	6255
	 	 	755	 
	A204
	 	 	423	 
	A256
	 	 	757	 
	A269
	 	 	736	 
	A713
	 	 	243	 
	A735
	 	 	669	 
	A744
	 	 	374	 
	B177
	 	 	368	 
	B135
	 	 	 	 
	B253
	 	 	349	 
	B271
	 	 	258	 
	C104
	 	 	 	 
	C105
	 	 	 	 
	C155
	 	 	 	 
	C159
	 	 	281	 
	C233
	 	 	265	 
	C360
	 	 	 	 
	C361
	 	 	 	 
	C375
	 	 	 	 
	C377
	 	 	 	 
	C510
	 	 	279	 
	C717
	 	 	 	 
	C780
	 	 	464	 
	C816
	 	 	458	 
	C868
	 	 	306	 
	D086
	 	 	 	 
	D145
	 	 	 	 
	D179
	 	 	292	 
	D489
	 	 	666	 
	D519
	 	 	338	 
	D686
	 	 	377	 
	E351
	 	 	 	 
	E418
	 	 	534	 
	E450
	 	 	 	 
	E471
	 	 	 	 
	E503
	 	 	 	 
	E505
	 	 	 	 
	E628
	 	 	 	 
	E648
	 	 	1028	 
	E669
	 	 	 	 
	E670
	 	 	 	 
	E680
	 	 	 	 
	E773
	 	 	 	 
	E774
	 	 	 	 
	E784
	 	 	 	 
	E800
	 	 	633	 
	E827
	 	 	1062	 
	E834
	 	 	 	 
	E912
	 	 	 	 
	E996
	 	 	 	 
	E998
	 	 	 	 
	F001
	 	 	 	 
	F006
	 	 	 	 
	F008
	 	 	559	 
	F017
	 	 	364	 
	F041
	 	 	 	 
	F056
	 	 	 	 
	F105
	 	 	 	 
	F144
	 	 	 	 
	F162
	 	 	 	 
	F165
	 	 	 	 
	F202
	 	 	 	 
	F227
	 	 	 	 
	F255
	 	 	 	 
	F260
	 	 	 	 
	F285
	 	 	307	 
	G074
	 	 	 	 
	G080
	 	 	357	 
	G087
	 	 	385	 
	G264
	 	 	 	 
	G265
	 	 	 	 
	G357
	 	 	381	 
	G465
	 	 	290	 
	G694
	 	 	337	 
	G695
	 	 	580	 
	G709
	 	 	641	 
	G739
	 	 	481	 
	G756
	 	 	489	 
	G784
	 	 	323	 
	G812
	 	 	359	 
	H015
	 	 	 	 
	H096
	 	 	416	 
	H194
	 	 	 	 
	H195
	 	 	494	 
	H389
	 	 	531	 
	H524
	 	 	 	 
	H544
	 	 	 	 
	H644
	 	 	 	 
	H645
	 	 	 	 
	H731
	 	 	380	 
	J089
	 	 	312	 
	J190
	 	 	 	 
	J220
	 	 	755	 
	J304
	 	 	 	 
	J316
	 	 	 	 
	J356
	 	 	368	 
	J398
	 	 	259	 
	J435
	 	 	 	 
	J457
	 	 	 	 
	J638
	 	 	 	 
	J653
	 	 	479	 
	J882
	 	 	 	 
	K486
	 	 	 	 
	K525
	 	 	858	 
	K547
	 	 	340	 
	K713
	 	 	 	 
	K931
	 	 	941	 
	R164
	 	 	 	 
	R178
	 	 	 	 
	 
	 	 	 	 
	Total New
	 	 	24942	 
	 
	 	 	 	 
	Historical to WPS
	 	 	68151	 
	 
	 	 	 	 
	 

	 	 	 
	Tolal
	 	 	93093exv10w9

 

Exhibit
10.9

BASE CONTRACT FOR THE

SALE AND PURCHASE OF NATURAL GAS

This Base Contract is entered into as of the following date: July 1, 2001, 9:00 a.m.

The parties to this Base Contract are the following:

	 	 	 	 	 	 	 	 	 
	EnerVest Monroe Marketing, Ltd.	 	and	 	Cargas Operating Company
	P. O. Box 219, Fairbanks, LA 71240	 	 	 	P. O. Box 2807, Monroe, LA 71207-2807
	Duns #

	 	 	 	 	 	Duns #	 	 
	 

	 	 
	 	 	 	 	 	 
	Contract # EVM 01 - 01	 	 	 	Contract # EVM 01 - 01
	Attn: Mr. Jimmy Pardue	 	 	 	Attn: Mr. Barringer K. Primos
	Phone: 318) 665-4506 Fax: 318) 665-4612	 	 	 	Phone: 318) 322-1661 Fax: 3l8) 340-9204
	Federal Tax ID Number:	 	 	 	Federal Tax ID Number: 72-1326885
	 
	 	 	 	 	 	 	 	 
	Invoices and Payments:	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	Same as above	 	 	 	Same as above
	Wire Transfer or ACH Nos. (if applicable)	 	 	 	Wire Transfer or ACH Nos. (if applicable)
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 

This Base Contract incorporates by reference for all purposes the General Terms and Conditions
for Short-Term Sale and Purchase of Natural Gas published by the Gas Industry Standards Board.
The parties hereby agree to the following provisions offered in said General Terms and
Conditions (select only one from each box, but see “Note” relating to Section 2.24.):

	 	 	 	 	 	 	 
	Section 1.2

	 	o Oral
	 	Section 6.
	 	o Buyer Pays At and After Delivery Point
	Transaction

	 	þ Written
	 	Taxes
	 	þ Seller Pays Before and At Delivery Point
	Procedure
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.4

	 	þ 2 Business Days after receipt
	 	Section 7.2
	 	28th day of Month following Month of delivery.
	Confirm Deadline

	 	(default)
	 	Payment	 	 
	 

	 	o Business Days after receipt
	 	Date	 	 
	 
	 	 	 	 	 	 
	Section 2.5

	 	o Seller
	 	Section 7.2
	 	o Wire Transfer (WT)
	Confirming Party

	 	þ Buyer
	 	Method of
	 	o Automated Clearinghouse (ACH)
	 

	 	o

	 	Payment
	 	þ Check
	 
	 	 	 	 	 	 
	Section 3.2

	 	o Cover Standard
	 	Section 13.5	 	 
	Performance Obl.	 	þ Spot Price Standard	 	CHOICE OF LAW: Louisiana
	 
	 	 	 	 	 	 
	Section 2.24 — Contract Price: The pride for
week gas delivered under this Base Contract
shall be equal to the bid “Delivered to
Pipeline” average of the Natural Gas Week
Louisiana Gulf Coast Onshore Index and North
Louisiana Index, for the Month of actual
deliveries less $0.10, on an MMBtu
basis.	 	 	 	 

þ Special Provisions: This Base Contract is subject to all of the terms and conditions
set forth in the “Gas Transportation Agreement,” dated effective July 1, 2001, between EnerVest
Monroe Gathering, Ltd. and Seller, including but not limited to the provisions requiring Buyer to
bear its proportionate share of all fuel, losses and shrinkage, to meet certain Quality
Specifications and to pay a transportation fee.

IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate.

	 	 	 	 	 	 	 
	EnerVest Monroe Marketing, Ltd.	 	Cargas Operating Company
	 
	 	 	 	 	 	 
	By

	 	/s/ Mark A. Houser
	 	By
	 	/s/ Barringer K. Primos
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title

	 	 Vice President
	 	Title
	 	President

DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid
misunderstandings and make more definite the terms of contracts of purchase and sale of
natural gas. This Contract is intended for Interruptible transactions or Firm transactions of
one month or less and may not be suitable for Firm transactions of longer than one month.
Further, GISB does not mandate the use of this Contract by any party. GISB DISCLAIMS AND
EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO GISB’S DISCLAIMER OF, ANY
AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH
RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR
CONDITIONS OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY
PARTICULAR PURPOSE (WHETHER OR NOT GISB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS
OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON
OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO
AGREES THAT UNDER NO CIRCUMSTANCES WILL GISB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT.

			
	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.
	 	GISB Standard 6.3.1

 

GENERAL TERMS AND CONDITIONS

BASE CONTRACT FOR THE

SALE AND PURCHASE OF NATURAL GAS

SECTION 1. PURPOSE AND PROCEDURES

1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of
Gas on a Firm or Interruptible basis. “Buyer” refers to the party receiving Gas and “Seller” refers
to the party delivering Gas.

The parties have selected either the “Oral” version or the “Written” version of transaction
procedures as indicated on the Base Contract.

Oral Transaction Procedure:

1.2 The parties will use the following Transaction Confirmation procedure. Any Gas purchase and
sale transaction may be effectuated in an EDI transmission or telephone conversation with the offer
and acceptance constituting the agreement of the parties. The parties shall be legally bound from
the time they so agree to transaction terms and may each rely thereon. Any such transaction shall
be considered a “writing ” and to have been “signed”. Notwithstanding the foregoing sentence, the
parties agree that Confirming Party shall, and the other party may, confirm a telephonic transaction
by sending the other party a Transaction Confirmation by facsimile, EDI or mutually agreeable
electronic means. Confirming party adopts its confirming letterhead, or the like, as its signature
on any Transaction Confirmation as the identification and authentication of Confirming Party.

Written Transaction Procedure:

1.2 The parties will use the following Transaction Confirmation procedure. Should the parties come
to an agreement regarding a Gas purchase and sale transaction for a particular Delivery Period, the Confirming Party
shall, and the other party may, record that agreement on a Transaction Confirmation and communicate
such Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means, to the
other party by the close of the Business Day following the date of agreement. The parties acknowledge that
their agreement will not be binding until the exchange of non-conflicting Transaction Confirmation
or the passage of the Confirm Deadline without objection from the receiving party, as provided in
Section 1.3.

1.3. If a
sending party’s Transaction Confirmation is materially different from the receiving party’s
understanding of the agreement referred to in Section 1.2. such receiving party shall notify the
sending party via facsimile by the Confirm Deadline, unless such receiving party has previously
sent a Transaction Confirmation to the sending party. The failure of the receiving party to so notify the
sending party in writing by the Confirm Deadline constitutes the receiving party’s agreement to the
terms of the transaction described in the sending party’s Transaction Confirmation. If there are
any material differences between timely sent Transaction Confirmations governing the same
transaction, then neither Transaction Confirmation shall be binding until or unless such
differences are resolved including the use of any evidence that clearly resolves the differences in
the Transaction
Confirmation. The entire agreement between the parties shall be those provisions contained in both the
Base Contract and any effective Transaction Confirmation. In the event of a conflict among the
terms of (i) a Transaction Confirmation, (ii) the Base Contract, and (iii) these General and
Conditions, the terms of the documents shall govern in the priority listed in this sentence.

SECTION 2 DEFINITIONS

2.1. “Base Contract” shall mean a contract executed by the parties that incorporates these General
Terms and Conditions by reference; that specifies the agreed selections of provisions
contained herein; and that sets forth other information required herein.

2.2. “British thermal unit” or “Btu” shall have the meaning ascribed to it by the Receiving
Transporter.

2.3. “Business Day” shall mean any day except Saturday, Sunday or Federal Reserve Bank holidays.

2.4. “Confirm Deadline” shall mean 5:00 p.m. in receiving party’s time zone on the second Business
Day following the Day a Transaction Confirmation is received, or if applicable,
on the Business Day agreed to by the parties in the Base Contract; provided, if the
Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party’s time Zone,
it shall be deemed received at the opening of the next Business Day.

2.5. “Confirming party” shall mean the party designated in the Base Contract to prepare and
forward Transaction Confirmations to the other party.

2.6. “Contract shall mean the legally binding relationship established by (i) the Base
Contract, (ii) the provisions contained in any effective Transaction Confirmation and (iii) the
Gas Transportation Agreement.

2.7. “Contract Price” shall mean the amount expressed in U.S. Dollars per MMBtu, as evidenced by
the Contract Price on the Transaction Confirmation.

2.8. “Contract Quantity” shall mean the quantity of Gas to be delivered and taken as set forth in
the Transaction Confirmation.

2.9. “Cover Standard”, if applicable, shall mean that if there is an unexcused failure to take or
deliver any quantity of Gas pursuant to this Contract, then the non-defaulting party shall use commercially reasonable efforts to obtain Gas or alternate
fuels, or sell Gas, at a price reasonable for the delivery or production area, as applicable,
consistent with: the amount of notice provided by the defaulting party; the immediacy of the
Buyer’s Gas consumption needs or Seller’s Gas sales requirements, as applicable; the
quantities involved; and the anticipated length of failure by the defaulting party.

			
	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.
	 	GISB Standard 6.3.1

 

 

2.10. “Day shall mean a period of 24 consecutive hours, coextensive with a “day” as defined by the
Receiving Transporter in a particular transaction.

2.11. “Delivery period” shall be the period during which deliveries are to be made as set forth in
the Transaction Confirmation.

2.12. “Delivery point(s)” shall mean such points(s) as are mutually agreed upon between Seller and
Buyer as set forth in the Transaction Confirmation.

2.13. “EDI” shall mean an electronic data interchange pursuant to an agreement entered into by the
parties, specifically relating to the communication of Transaction Confirmations under this
Contract.

2.14. “EFP” shall mean the purchase, sale or exchange of natural Gas as the “physical” side of an
exchange for physical transaction involving gas futures contracts. EFP shall incorporate the
meaning and remedies of “Firm”.

2.15. “Firm” shall mean that either party may interrupt its performance without liability only to
the extent that such performance is prevented for reasons of Force Majeure; provided, however,
that during Force Majeure interruptions, the party invoking Force Majeure may be responsible
for any Imbalance Charges as set forth in Section 4.3. related to its interruption after the
nomination is made to the Transporter and until the change in deliveries and /or receipts is
confirmed by the Transporter.

2.16. “Gas” shall mean any mixture of hydrocarbons and non-combustible gases in a gaseous state
consisting primarily of methane.

2.17. “Imbalance Charges” shall mean any fees, penalties, costs or charges (in cash or in kind)
assessed by a Transporter for failure to satisfy the Transporter’s balance and/or nomination
requirements.

2.18. “Interruptible” shall mean that either party may interrupt its performance at any time for
any reason, whether or not caused by an event of Force Majeure, with no liability, except such
interrupting party may be responsible for any Imbalance Charges as set forth in Section 4.3.
related to its interruption after the nomination is made to the Transporter and until the
change in deliveries and/or receipts is confirmed by Transporter.

2.19. “MMBtu” shall mean one million British thermal units which is equivalent to one dekatherm.

2.20. “Month” shall mean the period beginning on the first Day of the calendar month and ending
immediately prior to the commencement of the first Day of the next calendar month For the
purpose of measuring and paying for production, a Month may cover the period of time shown on
the chart. For example, if charts are pulled on the 29th of the month, a Month for
production shall mean from the 29th of that month to the 29th of the
next month.

2.21. “Payment Date” shall mean a date, selected by Buyer under the Gas Transportation Agreement
and Sections 7.1 or 7.2 below, on which payment is due to be mailed to Seller for Gas received
by Buyer in the previous Month.

2.22. “Receiving Transporter” shall mean the Transporter receiving Gas at a Delivery Point, or
absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point.

2.23. “Scheduled Gas” shall mean the quantity of Gas confirmed by Transporter(s) for movement,
transportation or management, as further set forth in Paragraph 3.2 and Paragraph A4.b. of
Exhibit B to the Gas Transportation Agreement.

2.24. “Spot Price” as referred in Section 3.2 shall mean the price listed in the publication
specified by the parties in the Base Contract, under the listing applicable to the geographic
location closest in proximity to the Delivery Point(s) for the relevant Month; provided, if
there is no single price published for such location for such Month, but there is published a
range of prices, then the Spot Price shall be the average of such high and low prices. If no
price or range of prices is published for
such Month, then the Spot Price shall be the average of the following: (i) the price
(determined as stated above) for the first Month for which a price or range of prices is
published that next precedes the relevant Month; and (ii) the price (determined as stated
above) for the first Month for which a price or range of prices is published than next follows
the relevant Month.

2.25. “Transaction Confirmation” shall mean the document, substantially in the form of Exhibit A,
setting forth the terms of a purchase and sale transaction formed pursuant to Section 1 for a
particular Delivery Period.

2.26. “Transporter(s)” shall mean all Gas gathering of pipeline companies, or local distribution
companies, acting in the capacity of a transporter, transporting Gas for Seller or Buyer
upstream or downstream, respectively, of the Delivery Point pursuant to a particular
Transaction Confirmation.

2.27. “Transportation Agreement” or “Gas Transportation Agreement” shall mean the Gas
Transportation Agreement between Seller and EnerVest Monroe Gathering, Ltd., dated effective
July 1, 2001, governing the terms for transportation of all gas purchased under this Contract.
All of the terms, conditions and provisions of the “Gas Transportation Agreement” are
incorporated in this Contract, just as if fully written herein. In the event of a conflict
between the Base Contract, the Transaction Confirmation and the Gas Transportation Agreement,
the terms of the Gas Transportation Agreement will control.

SECTION 3 PERFORMANCE OBLIGATION

3.1. Seller agrees to sell and deliver, and Buyer agrees to receive and purchase, the Contract
Quantity for a particular transaction in accordance with the terms of the Contract. Sales and
purchases will be on a Firm or Interruptible basis, as specified in the Transaction
Confirmation.

The parties have selected the “Cover Standard” version or the “Spot Price Standard” version as
indicated on the Base Contract.

	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.	 	GISB Standard 6.3.1

 

 

Cover Standard:

3.2 In addition to any liability for Imbalance Charges, which shall not be recovered twice by
the following remedy, the exclusive and sole remedy of the parties in the event of a breach of a
Firm obligation shall be recovery of the following: (i) in the event of a breach by Seller on any
Day(s), payment by Seller to Buyer in an amount equal to the positive difference, if any, between
the purchase price paid by Buyer utilizing the Cover Standard for replacement Gas or alternative
fuels and the Contract Price, adjusted for commercially reasonable differences in transportation
costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity
and the quantity actually delivered by Seller for such Day(s); or (ii) in the event of a breach by
Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the positive difference, if
any, between the Contract Price and the price received by Seller utilizing the Cover Standard for
the resale of such Gas, adjusted for commercially reasonable differences in transportation costs to
or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the
quantity actually taken by Buyer for such Day(s); or (iii) in the event that Buyer has used
commercially reasonable efforts to replace the Gas or Seller has used commercially reasonable
efforts to sell the Gas to a third party, and no such replacement or sale is available, then the
exclusive and sole remedy of the non-breaching party shall be any unfavorable difference between
the Contract Price and the Spot Price, adjusted for such transportation to the applicable Delivery
Point multiplied by the difference between the Contract Quantity and the quantity actually
delivered by Seller and received by Buyer for such Day(s).

Spot Price Standard: (Interruptible Basis)

3.2 In addition to any liability for Imbalance Charges, which shall not be recovered
twice by the following remedy, the exclusive and sole remedy of the parties in the event of a
breach of a Firm obligation shall be recovery of the following: (i) in the event of a breach by
Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the
Contract Quantity and the actual quantity delivered by Seller and received by Buyer for Day(s),
multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the
Spot Price; (ii) in the event of a breach by Buyer on any Day(s), payment Buyer to Seller in an
amount equal to the difference between the Contract Quantity and the actual quantity delivered by
Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any,
obtained by subtracting the applicable Spot Price from the Contract Price.

3.3.
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, IN NO EVENT WILL EITHER PARTY
BE LIABLE UNDER THIS CONTRACT WHETHER IN CONTRACT, IN TORT (INCLUDING NEGLIGENCE
AND STRICT LIABILITY), OR OTHERWISE, FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL. OR
PUNITIVE DAMAGES.

SECTION 4. TRANSPORTATION, NOMINATIONS AND IMBALANCES

4.1. Seller shall have the sole responsibility for transporting the Gas to the Delivery Point(s)
and for delivering such Gas at a pressure sufficient to effect such delivery but not to exceed
the maximum operating pressure of the Receiving Transporter. Buyer shall have the sole
responsibility for transporting the Gas from the Delivery Point(s).

4.2. The parties shall
coordinate their nomination activities, giving sufficient time to
meet the deadlines of the affected Transporter(s). Each party shall give the other party timely prior notice, sufficient to meet the
requirements of all Transporter(s) involved in the transaction, of the quantities of Gas to be
delivered and purchased each Day Should either party become aware that actual deliveries at the
Delivery Point(s) are greater or lesser than the Scheduled Gas, such party shall promptly notify
the other party.

4.3. The parties shall use commercially reasonable efforts to avoid imposition avoid imposition of
any Imbalance Charges. If Buyer or Seller receives an invoice from a Transporter that includes
Imbalance Charges, the parties shall determine the validity as well as the cause of such Imbalance
Charges. If the Imbalance Charges were incurred as a result of Buyer’s actions or inactions (which
shall include, but shall not be limited to, Buyer’s failure to accept quantities of Gas equal to
the Gas), then Buyer shall pay for such Imbalance Charges, or reimburse Seller for such Imbalance
Charges paid by Seller to the Transporter. If the Imbalance Charges were incurred as a result of
Seller’s actions or inactions (Which shall include, but shall not be limited to, Seller’s failure
to deliver quantities of Gas equal to the Scheduled Gas, then Seller shall pay for such Imbalance Charges, or
reimburse Buyer for such Imbalance Charges paid by Buyer to the Transporter.

SECTION 5. QUALITY AND MEASUREMENT

All Gas delivered by Seller shall meet the quality and heat content requirements of the
Receiving Transporter, and the Quality Specifications set forth in
the Gas Transportation Agreement. The unit of quantity measurement
for purposes of this Contract shall be one MMBtu wet. Measurement
of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving
Transporter.

SECTION 6. TAXES

The parties have selected either the “Buyer Pays At and After Delivery Point” version or the
“Seller Pays Before and At Delivery Point” version as
indicated on the Base Contract.

Buyer Pays At and After Delivery Point:

Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges
imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery
Point(s). Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at the
Delivery Point(s) and all Taxes after the Delivery Point(s). If a party is required to remit or
pay Taxes that are the other party’s

 
	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.	 	GISB Standard 6.3.1

 

 

responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the
other party for such Taxes. Any party entitled to an exemption from any such Taxes or charges shall
furnish the other party any necessary documentation thereof.

Seller Pays Before and At Delivery Point:

Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges
imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery
Point(s) and all Taxes at the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on
or with respect to the Gas after the Delivery Point(s). If a party is
required to remit or pay
Taxes which are the other party’s responsibility hereunder, the party responsible for such Taxes
shall promptly reimburse the other party for such Taxes. Any party entitled to an exemption from
any such Taxes or charges shall furnish the other party any necessary documentation thereof.

SECTION 7. BILLING, PAYMENT AND AUDIT

7.1. Buyer shall pay Seller for gas by the 28th day of the Month following the Month of
delivery, by payment of a net check, which represents the amount due Seller after deducting all
Transportation Fees and other costs as further set forth in Paragraph 3.1 of the Gas Transportation
Agreement. The net check will be accompanies by a statement showing the amount of Gas delivered and
re-delivered in the preceding Month
and for any other applicable charges, providing supporting documentation acceptable in industry
practice to support the amount charged. If the actual quantity delivered is not known due to the
failure to timely deliver charts as provided in the Gas Transportation Agreement, billing will be
prepared based on the quantity of Scheduled Gas.

7.2. If Buyer does not elect to send a net check for the purchased gas, less transportation fees
and other costs, as set forth in Section 7.1 above, Buyer shall remit the amount due in the manner
specified in the Base Contract, in immediately available funds, on or before the later of the
Payment Date; provided that if the Payment Date is not a Business
Day, payment is due on the next
Business Day following that date. If Buyer fails to remit the full amount payable by it when due,
interest on the unpaid portion shall accrue at a rate equal to the
lower of (i) the
 then-effective
prime rate of interest published under “Money Rates” by The Wall Street Journal, plus two percent
per annum from the date due until the date of payment; or
(ii) the maximum applicable lawful
interest rate. If Buyer, in good faith, disputes the amount of any
such statement or any part thereof, Buyer will pay to Seller such amount as it concedes to be
correct; provided, however, if Buyer disputes the amount due, Buyer must provide supporting
documentation acceptable in industry practice to support the amount
paid or disputed. In any event,
Buyer shall have the right to suspend payment, without interest, for any Gas received to which
Seller’s title is disputed, until such disputed are resolved to the satisfaction of Buyer.

7.3. In the event any payments are due Buyer hereunder, payment to Buyer shall be made in
accordance with Sections 7.1 and 7.2. above.

7.4. A party shall have the right, at its own expense, upon reasonable notice and at
reasonable times, to examine the books and records of the other party only to the extent
reasonably necessary to verify the accuracy of any statement, charge, payment, or computation
made under the Contract. This examination right shall not be
available with respect to proprietary information not directly relevant to transactions under
this Contract. All invoices and billings shall be conclusively presumed final and accurate unless
objected to in writing, with adequate explanation and/or documentation, within two years after the
Month of Gas delivery. All retroactive adjustments under Section 7. shall be paid in full by the
party owing payment within 30 days of notice and substantiation of such inaccuracy.

SECTION 8. TITLE, WARRANTY AND INDEMNITY

8.1.
Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at
the Delivery Point(s). Seller shall have responsibility for and assume any liability with respect
to the Gas prior to its delivery to Buyer at the specified Delivery
Point(s). Buyer shall have responsibility for and assume any liability with
respect to said Gas after its delivery to Buyer at the Delivery Point(s).

8.2. Seller warrants that it will have the right to convey and will transfer good and merchantable
title to all Gas sold hereunder and delivered by it to Buyer, free and clear of all liens,
encumbrances, and claims.

8.3. Seller agrees to indemnify Buyer and save it harmless from all losses, liabilities or
claims including attorneys’ fees and costs of court (“Claims”), from any and all persons, arising
from or out of claims of title, personal injury or property damage from said Gas or
other charges thereon which attach before title passes to Buyer. Buyer agrees to indemnify Seller
and save it harmless from all Claims, from any and all persons, arising from or out of claims
regarding payment, personal injury property damage from said Gas or other charges thereon which
attach after title passes to Buyer.

8.4. Notwithstanding the other provisions of this Section 8., as between Seller and Buyer,
Seller will be liable for all Claims to the extent that such arise from the failure of Gas
delivered by Seller to meet the quality requirements of Section 5.

SECTION 9. NOTICES

9.1. All Transaction Confirmations, invoices, payments and other communications made
pursuant to the Base Contract (“Notices”) shall be made to the addresses specified in writing by
the respective parties
from time to time.

9.2. All Notices required hereunder may be sent by facsimile or mutually acceptable
electronic means, a nationally recognized overnight courier service, first class mail or hand
delivered.

9.3. Notice shall be given when received on a Business Day by the addressee. In the
absence of proof of the actual receipt date, the following presumptions will apply. Notices sent by
facsimile shall be deemed to have been received upon the sending party’s receipt of its facsimile
machine’s confirmation of successful transmission, if the day on which such facsimile is received
is not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed
to have been received on the next following Business Day. Notice by overnight

			
	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.

All rights reserved.
	 	GISB Standard 6.3.1

Ratified January 7, 2000

 

 

mail or courier shall be deemed to have been received on the next Business Day after it was
sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall
be considered delivered two Business Days after mailing.

SECTION 10. FINANCIAL RESPONSIBILITY

10.1. When reasonable grounds for insecurity of payment or title to the Gas arise, either party may
demand adequate assurance of performance. Adequate assurance shall mean sufficient security in the
form and for the term reasonably specified by the party demanding assurance, including, but not
limited to, a standby irrevocable letter of credit, a prepayment, a security interest in an asset
acceptable to the demanding party or a performance bond or guarantee by a creditworthy entity. In
the event either party shall (i) make an assignment or any general arrangement for the benefit of
creditors; (ii) default in the payment or other obligation to the other party, and fail to cure the
default within 10 Days after notice of default; (iii) file a petition or otherwise commence,
authorize, or acquiesce in the commencement of a proceeding or cause under any bankruptcy or
similar law for the protection of creditors or have such petition filed or proceeding commenced
against it; (iv) otherwise become bankrupt or insolvent (however evidenced); or (v) be unable to
pay its debts as they fall due because of insolvency or legal impediment; then the other party
shall have the right to either withhold and/or suspend deliveries or payment, or terminate the
Contract if the default is not cured/within 10 days after notice, in addition to any and all other
remedies available hereunder.

10.2. Each party reserves to itself all rights, set-offs, counterclaims, and other defenses which
it is or may be entitled to arising from the Contract.

SECTION 11. FORCE MAJEURE

11.1. Except with regard to a party’s obligation to make payment due under Section 7, and
Imbalance Charges under Section 4, neither party shall be liable to the other for failure to
perform a Firm obligation, to the extent such failure was caused by Force Majeure. The term “Force
Majeure” as employed herein means any cause not reasonably within the control of the party claiming
suspension, as further defined in Section 11.2.

11.2. Force Majeure shall include but not be limited to the following: (i) physical events
such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as
hurricanes, which result in evacuation of the affected area, floods, washouts, explosions,
breakage or accident or necessity of repairs to machinery of equipment or lines of pipe; (ii)
weather related events affecting an entire geographic region, such as low temperatures which cause
freezing or failure of wells or lines of pipe; (iii) interruption of firm transportation and/or
storage
by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances,
riots, sabotage, insurrections or wars; (v) failure of gathering or transmission pipelines; (vi)
the failure of Buyer’s gas purchaser to take any or all delivered gas; and (vii) governmental
actions such as necessity for compliance with any court order, law, statute, ordinance, or
regulation promulgated by a governmental authority having jurisdiction. Seller and Buyer shall
make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or
occurrence once it has occurred in order to resume performance.

11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to
the extent performance or non-performance is caused by (i) the breach of any covenants or
obligations, due in accordance with this Contract, after such time when the breach could be
remedied with reasonable dispatch; or (ii) economic hardship. The party claiming Force Majeure
shall not be excused from its responsibility for Imbalance Charges.

11.4. Notwithstanding anything to the contrary herein, the parties agree that the settlement
of strikes, lockouts or other industrial disturbances shall be entirely within the sole discretion
of the party experiencing such disturbance.

11.5. The party whose performance is prevented by Force Majeure must provide notice to the
other party. Initial notice may be given orally; however, written notification with reasonably full
particulars of the event or occurrence is required as soon as reasonably possible. Upon providing
written notification of Force Majeure to the other party, the affected party will be relieved of its obligation to
make or accept delivery of Gas as applicable to the extent and for the duration of Force Majeure,
and neither party shall be deemed to have failed in such obligations
to the other during such occurrence or event.

SECTION 12. TERM

This Contract is for an initial term of three (3) years, and thereafter may be terminated on 30
days’ written notice, which termination shall be effective on the 1st Day of the Month
after the 30 Day written notice is received by the other party or until the expiration of the
latest Delivery Period of any Transaction Confirmation(s). After the end of the 3 year term, the
failure of either party to provide a Transaction Conformation will not result in cancellation, and
this Contract shall continue from Month to Month until such 30 day written notice is given, as
provided above. Buyer shall also have the right to cancel this Contract by giving 30 Day prior
notices, in the event that it becomes uneconomic to purchase gas under the terms of this Contract,
as determined in Buyer’s sole opinion. The rights of either party pursuant to Section 7.4, the
obligations to make payment hereunder and the obligation of either party to indemnify the other,
pursuant hereto shall survive the termination of the Base Contract, any Transaction Confirmation
and the Gas Transportation Agreement.

SECTION 13. MISCELLANEOUS

13.1. This Contract shall be binding upon and inure to the benefit of the successors, assigns,
personal representatives, and heirs of the respective parties hereto, and the covenants,
conditions, rights and obligations of this Contract shall run for the full term of this Contract. No
assignment of this Contract by Seller, in whole or in part, will be made without the prior written
consent of Buyer, which consent will not be

	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.	 	GISB Standard 6.3.1

 

 

unreasonably withheld or delayed; provided, Seller may transfer its interest to any parent or
affiliate by assignment, merger or otherwise without the prior approval of the other party, if the
security of Buyer is not jeopardized, in Buyer’s opinion. Upon any transfer and assumption, the
transferor shall not be relieved of or discharged from any obligations hereunder.

13.2. If any provision in this Contract is determined to be invalid, void or unenforceable by any
court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any
other provision, agreement or covenant of this Contract.

13.3. No waiver of any breach of this Contract shall be held to be a waiver of any other or
subsequent breach.

13.4. This Contract sets forth all understandings between the parties respecting each
transaction subject hereto, and any prior contracts, understandings and representations, whether
oral or written, relating to such transactions are merged into and superseded by this Contract and
any effective Transaction Confirmation(s). This Contract may be amended only by a writing executed
by both parties. The parties expressly terminate, in full, the prior Chart Integration Agreement
between Seller and Midcoast Marketing, Inc., which are believed to be dated June 1,
1997.

13.5. The interpretation and performance of this Contract shall be governed by the laws of
the state specified by the parties in the Base Contract, excluding, however, any conflict of laws
rule, which would apply the law of another jurisdiction.

13.6. This Contract and all provisions herein will be subject to all applicable and valid
statutes, rules, orders and regulations of any Federal, State, or local governmental authority
having jurisdiction over the parties, their facilities, or Gas supply, this Contract or Transaction
Confirmation or any provisions thereof.

13.7. There is no third party beneficiary to this Contract.

13.8. Each party to this Contract represents and warrants that it has full and complete
authority to enter into and this Contract. Each person who executes this Contract on behalf of
either party represents and warrants that it has full and complete authority to do so and that
such party will be bound thereby.

	 	 	 
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.	 	GISB Standard 6.3.1

 

 

EXHIBIT A

TRANSACTION CONFIRMATION

FOR IMMEDIATE DELIVERY

EnerVest Monroe Marketing, Ltd.

P.O. Box 219

Fairbanks, La 71240

 

Date: July 1, 2001

Transaction Confirmation # : EVM 01-01

 

This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated
effective at 9:00 am, July 1, 2001. The terms of this Transaction Confirmation are binding unless
disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base
Contract.

	 	 	 	 	 	 	 
	SELLER:

	 	Cargas Operating Company
	 	BUYER:
	 	EnerVest Monroe Marketing, Ltd.
	 

	 	P. O. Box 2807
	 	 	 	P.O. Box 219
	 

	 	Monroe, LA 71207-2807
	 	 	 	Fairbanks, La 71240
	 
	 

	 	Attn: Mr. Barringer K. Primos
	 	 	 	Attn: Jimmy Pardue
	 
	 

	 	Phone: 318.322.1661
	 	 	 	Phone: 318.665.4506
	 

	 	Fax: 318.340.9204
	 	 	 	Fax: 318.665.4612

Base Contract No: EVM 01 - 01

Gas Transportation Agreement # EVM 01 - 01, between Seller

and EnerVest Monroe Gathering, Ltd.

Contract
Price: The price for gas Delivered by Seller to the Delivery Point(s) shall be equal to
the bid week “Delivered to Pipeline” average of the Natural Gas Week, Louisiana Gulf Coast Onshore
Index and North Louisiana Index, for the Month of actual deliveries, less $0.10, on an MMBtu basis.

	 	 	 
	Delivery Period: Begin: 9:00 a.m. July 1, 2001

	 	End: 9:00 a.m, July
1, 2004, and Month
to Month
thereafter, unless
30 day notice is
given in accordance
with Section 12 of
the Contract. See
Section 12 for the
“Term” of this
Contract.

Performance Obligation and Contract Quantity: Interruptible, as further provided in the
Gas Transportation Agreement, concerning the Performance and Quality Obligations, among other
things.

	 	 	 	 	 
	Firm (Fixed Quantity):

	 	Firm (Variable Quantity):
	 	þ Interruptible:
	                    MMBtus/day

	 	                    MMBtus/day Minimum
	 	Up to available pipeline excess capacity
	 
	 	 	 	 
	     o EFP

	 	                    MMBtus/day Maximum

Subject to Section 4.2 at election of	 	 
	 

	 	o Buyer or o Seller	 	 

Delivery
Point(s): See Paragraph “B.1” of “Exhibit B” attached to the Gas Transportation
Agreement between Seller and EnerVest Monroe Gathering, Ltd., dated effective July 1, 2001.

Special Conditions: The purchase of any gas is subject to and governed by the terms and conditions
set forth in the Gas Transportation Agreement between Seller and EnerVest Monroe Gathering, Ltd.,
dated effective July 1, 2001.

	 	 	 	 	 	 	 	 	 	 
	Seller:

	 	Cargas Operating Company
	 	 	 	Buyer:
	 	EnerVest Monroe Marketing, Ltd.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Barringer K. Primos
	 	 	 	By:
	 	/s/ Mark A. Houser
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	President
	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 	 	 
	Date:

	 	June 21, 2001
	 	 	 	Date:
	 	June 22, 2001
	 

			
	Copyright © 1996-2001 Gas Industry Standards Board, Inc.	 	GISB Standard 6.3.1

 

 

GAS TRANSPORTATION AGREEMENT

EMV 01-01

     This GAS TRANSPORTATION AGREEMENT, including the attached Exhibits (herein collectively called
the “Agreement”), is made effective as of July 1, 2001 (the “Effective Date”), between EnerVest
Monroe Gathering, Ltd.., a Texas Limited Partnership, whose address is P. O. Box 219, Fairbanks, LA
71240 (“Transporter”) and Cargas Operating Company, whose address is P. O. Box 2807, Monroe, LA
71207-2807 (“Seller”).

ARTICLE I

DELIVERY OF GAS, QUALITY SPEC’S AND RE-DELIVERY

1.1
Delivery Points & Quality Spec.’s: Seller desires to dedicate natural gas which
it owns or controls from various wells in Monroe Field, for transportation through the pipeline
system owned by Transporter (or companies with whom Transporter is affiliated, including but not
limited to EnerVest Monroe Pipeline, Ltd.), for re-delivery to EnerVest Monroe Marketing, Ltd.,
Seller’s natural gas purchaser. Seller hereby agrees that:

	(a)	 	All gas produced from any wells behind the Meters listed on Exhibit A (herein called
“Dedicated Gas”), is dedicated to Transporter for transportation under this Agreement, as described
below;
	 
	(b)	 	All Dedicated Gas will be delivered to Transporter at the “Delivery Points” listed on Exhibit
A, in accordance with the terms set forth on Exhibit B, particularly Paragraph “A.1”, and
	 
	(c)	 	All Dedicated Gas must meet or exceed the Quality Specifications set forth on Exhibit C.

1.2 Re-Delivery. Transporter will transport all Dedicated Gas that meets its Quality
Specifications to the Re-Delivery Points listed in Section “B” of Exhibit B, during times when
Transporter has excess capacity available in its pipelines, in accordance with the terms and
conditions of this Agreement. Seller understands that Transporter will redeliver gas in a
commingled stream to any one or more of the Re-Delivery Points chosen by Transporter or EnerVest
Monroe Marketing, Ltd., and that Seller will be liable for its proportionate share of all
shrinkage, losses and fuel used in operations for the entire pipeline system.

ARTICLE II

DEDICATION, TRANSPORTATION AND MINIMUMS

2.1 Dedication: Subject to the Terms and Conditions set forth on Exhibit D,
Seller hereby commits and dedicates to Transporter, and Transporter agrees to gather and transport,
all natural gas and associated hydrocarbons produced from the wells behind the Meters listed on
Exhibit A (herein called “Dedicated Gas”). The term Dedicated Gas shall include all interests that
Seller owns, hereafter acquires or controls in the wells, from time to time, including gas under
contract with third parties giving Seller the right to market such third parties’ gas produced from
the wells. Transporter shall have the exclusive right to transport such Dedicated Gas for the term
of this Agreement, and any extension thereof.

2.2 Additional Gas or Wells. If Seller obtains any right, title, or interest
(whether by purchase, farm-in, assignment, marketing contract or otherwise), in any additional gas
produced from wells behind the Meters listed on Exhibit A, or in other wells in Monroe Field,
Seller shall immediately give Transporter notice of the additional interest. Within ten (10)
working days after Transporter receives Seller’s notice, it shall give Seller notice of its
election to either accept or decline transportation of the additional gas under the terms of this
Agreement, for the remaining
term of this Agreement, including any extensions. Failure of Transporter to give notice within 10
days after receipt of notice from Seller shall be deemed an election to transport the additional
gas. If Seller fails to give notice or if additional gas is transported without Transporter’s
knowledge, Transporter shall nevertheless have the right to charge a transportation rate for any
gas transported, even though the additional gas or wells are not specifically made subject to this
Agreement.

2.3 Transportation Service . Transporter shall use reasonable efforts to accept,
at the Delivery Points, the volume of Dedicated Gas (and additional gas which Transporter elects to
take) that is owned or controlled by Seller. Transporter shall redeliver and transfer custody of an
equivalent volume of natural gas, less fuel, losses and shrinkage, to EnerVest Monroe Marketing,
Ltd., on Seller’s behalf, at one or more of the Re-delivery Points. This transportation service is
based on availability of capacity, and is therefore on an interruptible basis. Notwithstanding

1

 

anything to the contrary, Transporter shall not be obligated to accept delivery of or transport
volumes of gas in excess of the capacity of its pipeline system, or during times of maintenance or
repair, and shall have no liability for failure or refusal to accept such gas. Seller shall bear
its proportionate share of all fuel, shrinkage and line losses (including but not limited to losses
resulting from failure, breakage or damage to the pipeline or equipment) that occurs from the
Delivery Points to the Re-Delivery Points. The Transportation Fee shall be calculated based upon
the volume of gas, or other substance, received by Transporter at the Delivery Points. However,
only the volume of gas that is re-delivered out of the pipeline system, and purchased by a third
party purchaser, shall be allocated back to the parties that delivered gas into the pipeline
system, based upon that parties respective share of the total gas delivered into the pipeline
system at all Delivery Points (including other Delivery Points not listed in this Agreement).

2.4 Available Capacity. Transportation services will be provided only if
Transporter has sufficient capacity available after transporting all gas and associated
hydrocarbons owned by Transporter, or a related company, partnership or other entity. Seller must
also comply with any Nomination Procedures of its gas purchaser or any other party. Transportation
may be curtailed at any time, without advance notice, due to equipment failure, inability or
refusal of the interconnected transmission pipeline(s) to take delivery of all or part of the gas,
lack of available excess capacity on the pipeline system, failure of Seller to properly Nominate
any volumes, or as a result of the failure of Seller to comply with the terms of this Agreement.
In the event that there is not sufficient capacity available for all gas dedicated to the pipeline
system, Transporter, in its sole determination, may elect to curtail all or any portion of the gas
committed under this Agreement. Seller acknowledges and understands that production owned or
controlled by EnerVest Monroe Partners, LP, EnerVest Monroe Limited Partnership or any related
company, partnership or entity, shall have a higher priority of transportation services. Seller
acknowledges that Transporter has not made any warranties or representations whatsoever
concerning the availability of excess capacity in the pipeline system or the ability to
consistently transport Seller’s gas.

2.5 Right to Commingle. Transporter shall be entitled to commingle all gas and
associated materials delivered into the pipeline system, including the commingling of Seller’s gas
with gas transported for Transporter, its related companies or others, and to transport the
commingled stream to the Re-delivery Points: Transporter shall have the right to make all
re-deliveries at the Btu value of the commingled stream at the Re-delivery Points.

2.6 Minimum Volume. The minimum volume of Dedicated Gas committed to
this Agreement and delivered by Seller, shall not be less than one million cubic feet per day
(1,000 Mcf/day). In the event that Seller, at any time, fails to deliver to the Delivery Points a
quantity of Dedicated Gas equaling at least 95% of its minimum volume (i.e., 950 Mcf/day),
averaged over any calendar month, Seller shall be in default, and Transporter may elect to
terminate this Agreement as follows:

If Seller does not increase the volume of Dedicated Gas delivered at the Delivery Points, to 95% of
the minimum volume of 1000 Mcf/day (i.e., 950 Mcf/day), averaged over the two calendar months that
occur after receipt of notice from Transporter or its agent, then Transporter may cancel this
Agreement by giving Seller thirty (30) day written notice termination.

In addition to the above, and any other termination provision, if over any consecutive twelve (12)
month period, the volume of gas delivered by Seller at the Delivery Points does not average one
million cubic feet per day (1,000 Mcf/day), Transporter shall have the right to terminate this
Agreement by the giving of a thirty (30) day termination notice.

2.7 “Grandfather” Provisions: Prior to the effective date of this
Agreement, various parties (referred to as “Aggregators”) were selling gas to Midcoast
Marketing, Inc. from properties described on Exhibit A to this Agreement. Transporter has agreed
to “grandfather”, and continue transportation for those Aggregators that were selling to Midcoast
Marketing, Inc., even though their volumes do not meet the minimum volume requirements of Paragraph
2.6 above. The “Aggregators” subject to this grandfather provision are United American Gas
Systems, Peerless Gathering, Inc., OFT Service Company (formerly Primos Production), Haddox
Petroleum Company, Inc., and Canyon Industries, Inc. Paragraph 2.6 notwithstanding, the above
described Aggregators will be required to deliver not less than 200 Mcf/day, averaged over any two
consecutive calendar months (called “the minimum-grandfathered volumes”). If any
Aggregator delivers less than the minimum-grandfathered volumes, Transporter will have the

2

 

right and option to cancel this Agreement as to that Aggregator by giving a thirty (30) day
termination notice. In addition to the above, and any other termination provision, if over any
consecutive twelve (12) month period, the volume of gas delivered by Seller at the Delivery Points
does not average two hundred cubic feet per day (200 Mcf/day), Transporter shall have the right to
terminate this Agreement by the giving of a thirty (30) day termination notice.

ARTICLE III

TRANSPORTATION FEE

3.1 Rate . Seller agrees to pay Transporter a transportation fee of seventy five cents
(75¢) for each Mcf of gas delivered to Seller’s purchaser (EnerVest Monroe Marketing, Ltd.) at the
Re-Delivery Points (“Transportation Fee”). Transporter shall have the right and option to obtain
payment of the Transportation Fee, and any other costs, by electing to (a) invoice Seller for all
fees and costs, or (b) collect the fees and costs by set off, Compensation, deduction or collection
from funds due to Seller from Transporter, related companies and/or third parties, whether or not
such fees or costs are directly related to or equally liquidated with the funds from which they are
deducted. It is anticipated that in the normal course of events, Transporter and the gas purchaser
(EnerVest Monroe Marketing, Ltd.), will send a net check to Seller by the 28th day of
each month. The net check will pay Seller an amount due for gas purchased by EnerVest Monroe
Marketing, Ltd.,
after deducting the Transportation Fee and other costs (including any set off or compensation
claims) from the purchase price for delivered gas. The net check to Seller will be accompanied by a
statement showing the volume of gas delivered into the system and the net volumes delivered to the
gas purchaser, and any other details for calculation of the net check paid to Seller. If
Transporter elects not to send a netted check that deducts the Transportation Fee and other costs,
then Transporter will mail or otherwise deliver invoices, or notice of amounts deducted, to Seller
by the 15th day of each month, and Seller shall deliver to Transporter full payment of
each monthly invoice by the last day of the month in which the invoice is received. In the event
Seller fails to make timely payment, and the failure continues for five (5) days after written
notice of default is given Seller, then Transporter may, at its option, suspend transportation
services or terminate this Agreement upon written notice to Seller. A Transportation Fee will not
be charged on volumes of gas lost through shrinkage, line losses or gas used for fuel. Seller may
not reduce or offset any amounts due Transporter against any amounts that Seller claims it
is owed under this Agreement or any other agreement, debt or claim. Transporter further agrees that
if the price received by Seller from EnerVest Monroe Marketing, Ltd., for the Dedicated Gas drops
to less than $2.50 / Mcf, for three (3) consecutive months, then Transporter will consider a
possible reduction in the Transportation Fee, if needed to keep the Dedicated Wells from being
uneconomical to produce or operate, but Transporter will not be obligated to reduce the
Transportation Fee if in its sole opinion the rate should continue at
75¢.

3.2 Chart Delivery Deadline. As further provided in Paragraph “A. 4.” of Exhibit
“B”, all meter charts pulled by Seller shall be delivered to Transporter no later than 3:30 p.m. on
the third calendar day of each month. If the third calendar day is a Saturday, Sunday or holiday,
then the charts shall be delivered by 9:00 a.m. on the next working day. Transporter shall charge a
fee of $0.74 per chart for integration. If the charts are not timely delivered by the deadline,
Transporter will have the right to take the action(s) specified in Paragraph “A.4” of Exhibit B.

3.3 Taxes and Other Charges. Seller shall pay all taxes, fees or charges, now or
subsequently levied or assessed by any Governmental authority (State, local or Federal), for
production, severance, gathering, transportation, handling, sales, delivery or use of gas, from the
wellhead to the Delivery Points. Transporter shall pay all taxes, fees, costs or expenses arising
from the transportation of the Dedicated Gas under this Agreement.

ARTICLE IV

TERM

4.1 Term . The initial term of this Agreement is for three (3) years, commencing on
the Effective Date. This Agreement will automatically be extended from month to month thereafter,
unless canceled by either party, by the giving of advance written notice of termination at least
thirty (30) days prior to the anniversary of the Effective Date.

     Signed on the date shown below, but effective for all purposes as of the Effective Date
shown in the first paragraph of this Agreement.

3

 

	 	 	 	 	 	 	 	 	 
	 	 	TRANSPORTER:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	ENERVEST MONROE GATHERING, LTD..	 	 
	Witnesses:
	 	 	 	 	 	 	 	 
	/s/ Cindy Mayza

	 	 	 	By:
	 	/s/ Mark A. Houser	 	 
	 

	 	 	 	 	 	 	 	 
	Cindy Mayza

	 	 	 	Name:
	 	Mark A. Houser	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	DATE SIGNED: June 22, 2001	 	 

					
	 	 	 	 	 
	 
	 	/s/ Lisa Renee Wilson

 

NOTARY PUBLIC
	 	 
	[SEAL]
	 	 
	 	 

	 	 	 	 	 	 	 	 	 
	 	 	SELLER:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	CARGAS OPERATING COMPANY	 	 
	Witnesses:
	 	 	 	 	 	 	 	 
	Maggie Lytle

	 	 	 	By:
	 	/s/ Barringer K. Primos	 	 
	 

	 	 	 	 	 	 	 	 
	[ILLEGIBLE]

	 	 	 	Name:
	 	Barringer K. Primos	 	 
	 

	 	 	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	DATE SIGNED: June  21, 2001	 	 

					
	 	 	 	 	 
	 
	 	/s/ Don S. Mears

 

NOTARY PUBLIC

[STAMP]
	 	 

4

 

Exhibit A

	 
	557700

	557744

	557746

	597758

	597991

	597992

	677780

	677781

	857820

	993002

	111001

	111002

	116001

	116002

	116003

	117003

	117005

	125001

	128002

	128003

	130001

	130002

	139002

	143001

	147006

	147008

	147012

	164001

	183002

	183003

	183005

	557813

	557814

	557825

	557836

	557853

	599001

	601001

	632004

	633001

	633002

	633003

	633004

	634005

	634006

	644001

	644003

	645002

	649001

	655002

	793001

	941003

	941009

	941010

	953001

	959001

	959002

	959003

	965002

	965003

	965006

	995004

	995008

	995009

5

 

EXHIBIT B

Delivery, Re-Delivery and Allocation

A. Delivery Points:

1. Delivery Points and Reporting: Seller shall deliver all Dedicated Gas into Transporter’s pipeline system at
the discharge side of the meters or points listed on Exhibit “A” (the “Delivery Points”). Seller
shall retain custody of, and liability for, all Dedicated Gas until it is delivered to Transporter
at the Delivery Points. Although custody of the gas shall pass to Transporter at the Delivery
Points, title to all Dedicated Gas delivered by Seller shall at all times remain in Seller, unless
lost or used in transmission operations. All Dedicated Gas shall be delivered by Seller at a
pressure sufficient (in Transporter’s opinion) for the gas to enter Transporter’s pipeline system,
at varying pressures that may exist from time to time. The delivery pressures shall never exceed
normal operating pressure of the pipeline system, as set from time to time by Transporter. Seller
shall install, at its cost, any pulsation dampeners or other facilities, required for delivery of
gas at steady pressures. Any compression or other facilities required to accomplish delivery into
the pipeline system at the Delivery Points, shall be installed at the cost, risk and expense of the
Seller, but must be approved in advance by Transporter to meet its specifications and pressure
requirements.

2. Standards: All fundamental constants, observations, records and procedures involved in
the determining
and/or verifying of the volume, quality and other characteristics of gas delivered and redelivered,
shall be in
accordance with the standards and methods prescribed in gas Measurement Committee Report No. 3,
dated April,
1955, of the American Gas Association as now and from time to time amended. The unit of volumes
for all
purposes of measurement shall be one (1) cubic foot of gas at a temperature of sixty (60) degrees
Fahrenheit and at
an absolute pressure of fifteen and twenty-five thousandths (15.025) pounds per square inch
absolute. The average
atmospheric pressure shall be assumed to be fourteen and seven tenths (14.7) pounds per square
inch. Whenever
conditions of temperature and pressure differ from such standard, conversion of the volume from
such conditions to
the standard conditions shall be made in accordance with the Ideal Gas Laws corrected for deviation
of the gas from
Boyle’s Law in accordance with the methods and formulas prescribed in the American Gas
Association’s manual for
the determination of supercompressibility factors for natural gas, as last amended and superseded.

3. Costs Associated with New Delivery Points: In the event that Seller desires to deliver
gas to Transporter at
a point other than the Delivery Points listed on Exhibit B (“New Delivery Points”), then Seller
shall deliver written
notice thereof to Transporter. Transporter, in its own judgement, may deny such New Delivery
Points. If
Transporter elects to accept any New Delivery Points, Transporter shall construct and install, when
practical, such
new facilities as are necessary to accept delivery of gas at the New Delivery Points (the “New
Facilities”). Seller
shall pay Transporter, in advance, for the estimated costs of the New Facilities, including but not
limited to all
material and construction costs, and shall pay any additional amounts exceeding the estimate within
five (5) business
days after Seller’s receipt of an invoice from Transporter. All New Facilities shall be owned by
Transporter, even
though Seller pays for the New Facilities.

4.
Meters. a). Testing: Seller has (or will) install, own, control and operate, at
each Delivery Point, a
measuring station equipped with meters and other necessary equipment, by which the volumes of
natural gas
received for transportation shall be accurately measured. Seller shall “zero” the meters each
month, to confirm that
zero (0) volume of gas registers when the meter is by-passed, and make a visible zero mark on the
chart. Seller shall,
at its expense, test all meters for accuracy at least twice each year, or quarterly if the meter
averages more than 1000
Mcf / day. Except as otherwise provided in this Agreement, the pulling, cleaning, repairing,
inspecting, testing,
calibrating, adjusting, zeroing and the changing of charts on these meters shall be performed by
Seller, in a reliable
and accurate manner acceptable to Transporter. Transporter shall have the right to be present at
any time, and will
have the right to set a confirmation meter or conduct any tests to confirm or refute any
information provided by
Seller or the accuracy of any measurements. Seller shall exercise reasonable care in the
maintenance and operation
of measuring equipment, so as to avoid any inaccuracy in excess of 1%, in the determination of the
volume of gas
received at the Delivery Points. Seller will give Transporter a minimum of three (3) working days
notice prior to any
changes to meter springs, plates, plate sizes, adjustments or other changes to any meters, and
Transporter shall have
the right to be present and witness any such changes or adjustments. Transporter shall have the
right to adjust or
disregard any charts or readings from meters that have been adjusted or changed without being given
such prior
notice and opportunity to witness.

b). Reporting and Integration: Seller will not report volumes of water, air or other
non-combustible substance as a volume of natural gas. Seller shall not read, integrate, calibrate,
etc., any of the meters for wells owned or operated by Transporter or related companies. All meter
charts pulled by Seller shall be delivered to Transporter no later than 3:30 p.m. on the third
calendar day of each month. If the third calendar day is a Saturday, Sunday or holiday, then the
charts shall be delivered by 9:00 a.m. on the next working day. Transporter shall read and
integrate (the process of converting meter readings to Mcf) all charts that are timely reported to
Transporter. Seller shall also provide, within 24 hours after receipt of a verbal (or fax) request
from Transporter, any information (including the original meter charts) that Transporter requests
to allow Transporter to calculate the produced gas volumes. In the event that Seller either fails
to timely (and accurately) provide charts for the Dedicated Wells to Transporter, then Transporter
shall have the right to use an estimated historical volume as production from the Dedicated Wells,
with an adjustment for average decline in those wells, which volumes shall be final and shall not
be changed even if the charts are subsequently provided for that month. If Seller is delinquent in
the delivery of charts for two consecutive months, no volumes of gas will be allocated to those
delinquent charts for that month and each month thereafter until the charts are timely delivered.
Transporter shall have the right, upon notice to Seller, to refuse to use chart volumes or other
information that it believes is inaccurate, unreliable or incorrect, provided that within 30 days
after notice to Seller, Transporter will attempt to either confirm or correct the questioned
volumes or other information. Seller shall have the right to audit the integration work done by
Transporter after the 15th of the month following production or seven (7) working days
after integration work is completed, which ever occurs last, provided they are requested within
the time allowed under this Agreement for audits. Seller will complete all use of the charts and
return them to Transporter within 30 days after receipt. Transporter will supply all chart labels
by the 25th day of the month

6

 

proceeding the month of production. Transporter will charge Seller seventy-four cents ($0.74) per
chart for integration services. Transporter will attempt to have all charts integrated and volumes
reported back to the Seller, or its gas purchaser, by the 15th day of the month in
which charts are timely received. In performing integration calculations, Transporter shall have
the right to use an average temperature in Monroe Field, as it varies from time to time, as
determined by averaging the readings from temperature recorders placed by Transporter in portions
of the field.

5. Confirmation and Auditing of Measurements: Transporter shall have the right to
inspect, check, calibrate
and take any other measures necessary to confirm that all meters function properly, have been
properly calibrated and are accurate measures of the volumes of gas being produced and delivered
to Transporter, including but not limited to meters owned or controlled by Seller or by any third
parties. Each party shall have the right to audit the records of the other party to confirm that
all meter readings were accurate. Transporter shall be entitled to install and operate at its own
expense at the wellhead, Delivery Point or other location of its choice, any check meters or
other equipment needed to check or verify the amount of gas produced from the Dedicated Wells or
delivered at the Delivery Points. In addition to other remedies available under this Agreement,
Transporter shall have the right, upon giving five (5) day written notice to Seller, to terminate
all or part of this Agreement, and cease taking gas from any Dedicated Wells, if Transporter
determines that Seller has willfully injected or allowed water, air or other foreign material to
be introduced into the gas stream, or taken any action to misrepresent or inaccurately measure,
calculate or report volumes of produced gas.

B. Re-Delivery:

1. Re-Delivery Points: Transporter shall redeliver, to EnerVest Monroe Marketing, Ltd., or
other designated
gas purchaser, all volumes of Dedicated Gas that meets the Quality Specifications on Exhibit “C”,
less fuel, shrinkage and losses, at or near any of the following Re-Delivery Points (collectively
called the Re-Delivery Points):

	(a)	 	The interconnect of Transporter’s pipeline system at the Midcoast Gas Company DeSiard
Compressor Station
(at meter numbers 417849-01 and 417849-02),
	 
	(b)	 	The Interconnect of Transporter’s pipeline system, or pipelines owned by affiliated
companies, to the Koch
Sterlington Plant or related facilities, at meter number 401-01; or
	 
	(c)	 	Such other point of interconnection to be established by Transporter.

It is understood that Transporter has or will make arrangements with EnerVest Monroe Pipeline,
Ltd., to transport natural gas from the end of any gathering lines owned by Transporter, through
the transmission pipeline owned by EnerVest Monroe Pipeline, Ltd. (previously referred to as part
of the Non-Core transmission line), to the Re-Delivery Points on which its system has an
interconnect.

2. Commingled Stream: All gas shall be transported and redelivered in a commingled stream.
It is recognized
that differences will exist between the Btu value of gas delivered to Transporter at the Delivery
Points and the Btu value of gas redelivered by Transporter at the Re-delivery Points. Transporter
shall not be liable for the loss, or reduction of any value or price received as a result of
reduction in the Btu content of the gas, whether caused by the commingling Sellers Dedicated Gas
with other gas, or for any other reason.

C. Allocation of Re-Delivered Gas:

1. Allocation to Producers: The commingled stream of gas that is re-delivered to a
purchaser(s) at the Re-
Delivery Points, shall be allocated back to all producers or customers (including but not limited
to Transporter or
Seller) that deliver gas into the pipeline system. This allocation of re-delivered gas volumes
shall be divided based
on each party’s proportionate share of the total gas volumes delivered into the pipeline system.
The Sellers shall all
bear its proportionate share of gas that is lost, used as fuel or shrinkage that occurs during
Transportation or
compression. For example, assuming (a) Twelve (12) customers (including Seller and Transporter or
its affiliate)
are utilizing the pipeline system, (b) the meters timely submitted by the 12 customers show that
each delivered 2
Mmcf (totaling 24 Mmcf for all customers) into the pipeline system, and (c) the volume of gas
re-delivered out of
the pipeline to purchasers at all Re-Delivery Points equals 21 Mmcf, THEN each customer (including
Seller) in this
example shall be allocated l/12th of 21 Mmcf (i.e., 1.75Mmcf or 1750Mcf) of gas for that month.

2. No Foreign Materials: All volumes of water, air, foreign materials and gas delivered by
Seller that do not
meet the quality specifications required by this Agreement or the applicable gas purchaser, shall
be excluded from
the calculations of volumes used for allocation of gas to Seller. Seller shall not install any
mercury meters, whether
at the wellhead, master meter site, Delivery Points or Redelivery Points, provided that all mercury
meters now in
use, which are listed on Exhibit A, may continue to be used as long as permitted by law or
regulation.

D. Transporter’s Facilities:

1. The Gathering System: Transporter agrees to utilize its pipeline gathering systems and
facilities that are
currently in place from the Delivery Points to the Re-Delivery Points, which were previously
known as the “Core” pipeline and the unregulated portion of the “Non-Core” pipeline system, in
Monroe Field, Louisiana (collectively referred to herein as the “pipeline system”). Transporter
has also arranged for transportation rights under that portion of the “Non-Core” system which
constitutes a regulated Intrastate transmission pipeline (downstream of intake to field
compressors), owned by EnerVest Monroe Pipeline, Ltd., for the delivery, re-delivery or
transmission to the Re-delivery Points and for transmission of gas to alleviate bottlenecks or
other operational problems, where needed in the sole opinion of Transporter. To the extent
allowed by law and regulation, any charges to utilize the transportation rights on the Intrastate
pipeline of EnerVest Monroe Pipeline, Ltd. are included in the Transmission Fee and other charges
set forth in this Agreement. Transporter shall have no obligation to maintain a consistent
pressure in the pipeline system, and may change the vacuum on all or any portion of the pipeline
system at any times. Seller understands and agrees that Transporter will have the right to
schedule all maintenance and repair work to be performed as Transporter deems appropriate, and
that portions of the pipeline system affecting the Dedicated Wells

7

 

may be shut in during times for maintenance or repairs to the any portion of the pipeline
system, or the Intrastate Transmission pipeline. Transporter will have no liability of any nature
to Seller which may be incurred as a result of any maintenance or repair work, including but not
limited to lost revenues, increased costs, consequential damages or damage to any wells or
equipment.

8

 

EXHIBIT C

Quality Specifications

1. Quality. Any gas which Seller causes to be delivered to Transporter at the Delivery
Points
shall meet the following quality specifications: (a) Shall be of pipeline quality and commercially
free of dust, gums, gum-forming constituents, and any other objectionable solid and/or liquid
matter, (b) Shall not contain more than one percent (1%) by volume of oxygen, (c) Shall not contain
more than twenty (20) grains of total sulfur, nor more than (1) grain of hydrogen sulfide per one
hundred (100) cubic feet, (d) Shall not contain more than eight percent (8%) by volume of nitrogen,
and (e) Shall have a gross heating value of not less than nine hundred forty (940) Btu on a wet
basis per cubic foot. Temperature of the gas shall not exceed one hundred twenty (120) degrees
Fahrenheit nor be less than forty (40) degrees Fahrenheit. The unit of volume for the purpose of
determining total heating value shall be one (1) cubic foot of gas saturated with water vapor at a
temperature of sixty (60) degrees Fahrenheit and an absolute pressure equivalent to fifteen and
twenty-five thousandths (15.025) pounds per square inch absolute.

2. Failure to Meet Quality Specifications. If the gas fails to meet the quality
specifications
set forth above or the specifications of Seller’s gas purchaser, then Transporter may refuse to
take any such gas tendered, or shut in the particular wells that Transporter believes are producing
gas in violation of these quality specifications, until such gas is brought into conformity with
the quality specifications required by this Agreement.

3. Non-Waiver. Failure to enforce the quality specifications above or any waiver of such
specifications with respect to any delivery or redelivery of gas hereunder shall not constitute a
waiver of Transporter’s right to enforce the quality requirements of Paragraph 1 above with
respect to any other gas tendered for delivery to Transporter.

4. No Liquid Hydrocarbons. Seller shall not deliver oil, condensate or other
liquid hydrocarbons (including hydrocarbons in the gas stream that liquefy at the Delivery Points), at
the Delivery Points. Any oil, condensate or other liquid hydrocarbons captured, processed or
saved by Transporter from the gas stream shall belong to, and be owned by Transporter. Seller
shall have no right or claim in or to such liquid hydrocarbons or any proceeds from any sale.

9

 

EXHIBIT D

Terms and Conditions

1.
Force Majeure. In the event either party hereto is rendered unable, wholly or in
part, by reason of force majeure, to carry out its obligations under this Agreement, other than to make any payments or
accounting, then the obligations of the affected by such force majeure, shall be suspended during
the continuance of any inability so caused, but for no longer period, and such cause shall, so far
as possible, be remedied with reasonable dispatch. Seller shall give Transporter written notice of
any force majeure condition, as soon as possible after the occurrence, along with details of the
event, actions taken to remedy the condition and an expected time for the condition to cease. The
term “force majeure” as employed herein shall mean acts of God, acts of the public enemy, wars,
blockades, insurrections, strikes or differences with workmen, riots, storms, floods, high water,
washouts, arrests and restraints, civil disturbances, freezing of wells or lines of pipe,
embargoes, expropriations of government or governmental authorities, equipment repairs, maintenance
or failure of Transporter’s pipeline system, the inability of Transporter to acquire materials,
supplies, permits and permissions necessary to perform any work for maintenance or alteration of
the pipeline system, and the failure of a gas purchaser at the Re-Delivery Points to take delivery
of gas. It is understood and agreed that the settlement of any labor disputes shall be entirely
within the discretion of the party having the difficulty, and that the above requirement that any
force majeure shall be remedied with all reasonable dispatch shall not require the settlement of
strike or lockouts by acceding to the demands of the opposing party when such course is inadvisable
in the discretion of the party having the difficulty. It is expressly understood that during any
emergency situations (including but not limited to maintenance or repair), Transporter shall have
the right to curtail, reduce or cease taking any gas from Seller, all as to be determined in the
sole judgment of Transporter.

2. Responsibility for Claims. Seller shall be solely liable for, and shall indemnify,
defend and hold Transporter harmless from any claim for damages (including property losses or
injury to or death of any person) arising out of or in connection with the production of wells,
pulling of charts, reading meters, processing and movement of gas to the Delivery Points and for
all damages after the redelivery of gas. Transporter shall be solely liable for, and shall
indemnify, defend and hold Seller harmless from any damage, injury or death in connection with the
transportation of Seller’s Gas from the Delivery Points to the Re-delivery Points, except for
damages caused by the fault, negligence, misconduct or breach of this Agreement by Seller, its
employees, agents, designees or nominees. Seller agrees to carry liability and other insurance to
secure its obligations and responsibilities to satisfy any such claims, in amounts and with
reputable insurers that are acceptable to Transporter.

3. Access to Seller’s Premises. Transporter or its agent shall have the continuing right
of access to the premises of Seller and to all metering points for all gas transported hereunder,
and for all purposes necessary for the fulfillment and confirmation of information under this
Agreement.

4. Inspection of Records. Each party shall have the right at all reasonable times during
business hours to examine the records (including integration records), charts, meters, measuring
equipment and other pertinent data of the other party, and their contractors, to the extent
necessary to verify the accuracy of any statement, charge, computation or demand made under or
pursuant to any of the provisions of this Agreement. If any such examination shall reveal, or if
either party shall otherwise discover, any error or inaccuracy in its own or the other party’s
statements, payments, measurements, integration, calculations or determinations, then proper
adjustment and corrections thereof shall be made as promptly as practicable thereafter; provided
that no adjustment of any statement, billing or payment shall be made after the lapse of two (2)
years from the end of the calendar year to which such statement, billing or payment pertains.

5. No Assignment. This Agreement may not be conveyed or assigned, in whole or part, by the
Seller without the prior written consent of Transporter. Transporter shall have the right to
withhold its consent to an Assignment based on its sole determination of the stability, financial
condition and business reputation of the proposed Assignee. Any Assignment of this Agreement that
is approved, shall be made subject to the terms and conditions of this Agreement, and the Assignee
shall assume all liabilities and obligations of the signing party arising on and after the
effective date of any Assignment. No Assignment shall relieve a party of its obligation or
liabilities under this Agreement, unless the other parties expressly consent in writing to the
release.

6. Non-Waiver. No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy
consequent upon a breach thereof shall not constitute a waiver of any such breach or any other
terms, condition, provision, obligation, covenant, duty, agreement or condition.

7. Warranty of Title. Seller warrants for itself, its successors and assigns, that it
will have, at the time of delivery to Transporter, good title to or the right to the delivered gas,
free and clear of all liens, encumbrances and claim. Seller agrees to defend, indemnify and save
Transporter, its shareholders, officers, directors, agents and employees harmless from and against
any and all suits, actions, debts, accounts, damages, liabilities, losses, costs and expenses
(including, without limitation, court costs and attorneys’ fees) arising from or out of (a) any
adverse claims of any person, (b) any claims for royalties, overriding royalties, security
interests, license fees or other charges which are applicable to such delivery of gas and (c) any
and all taxes or assessments which may be levied and assessed upon such delivery of gas.

8. Adjustment of Billing Errors. If at any time it is established that Seller has
overpaid or underpaid Transporter, then within thirty (30) days after the final determination,
Transporter shall refund to Seller the amount of any such overpayment or Seller shall pay to
Transporter the amount of any such underpayment. If the parties are unable to agree on the
adjustment of any claimed error, any resort by either of the parties to legal procedure, either by
law, in equity or otherwise, shall be commenced within two (2) years after the end of the calendar
year in which the alleged overpayment or underpayment was made, or shall thereafter be forever
barred.

9.
Severability. In the event that any clause or provision in this Agreement shall, for
any reason, be deemed

10

 

 

illegal, invalid or unenforceable, the remaining provisions and clauses shall not
be affected, impaired or invalidated and shall remain in full force and effect.

10.
Time. All time limits provided for herein are of the essence of this Agreement.

11. No Consequential Damages. Neither party shall be liable to the other for any
indirect, incidental, consequential or punitive damages which may occur, in whole or in part, as a result of a party’s
performance or non-performance of any of the terms and conditions of this Agreement. Seller waives
any and all rights to damages resulting from the loss of any wells, gas or equipment, including
loss of profits.

12. Collection Costs. In addition to other legal and ethical remedies provided by law, it
is agreed that if either party does not comply with the terms, conditions or obligations of this
Agreement, or any Exhibit, and it should be necessary to institute litigation for collection or to
enforce any portion of this Agreement, the defaulting party shall be liable for all reasonable
collection and litigation cost, including but not limited to attorney fees, court cost and
interest.

13. 24 hour Contacts and Notice. For purposes of notice and emergency contacts, the
addresses of the parties, until changed by written notice, shall be as follows:

	 	 	 	 	 	 	 	 	 
	Transporter:

	 	EnerVest Monroe Pipeline, Ltd.

P.O. Box 219

Fairbanks, Louisiana 71240

Attn: Mr. Jimmy Pardue

Phone: (318) 665-4506

Fax:   (318) 665-4612

24 Hour Contact: (318) 665-4506
	 	 
	 	Seller:
	 	

Cargas Operating Company                     
P. O. Box 2807                               
Monroe, Louisiana 71207-2807                 
Attn: Mr. Barringer K. Primes                
Phone: (318) 322-1661                        
Fax:     (318) 340-9204                      
24 Hour Contact: (318) 366-8464

                                     Donald Womack

All emergency communications shall be made by phone or in person, followed by written
notification as soon as possible thereafter. Emergency situations shall be reported to the other
party at any time of the day or night, at the 24 Hour Contact phone number listed above. Any other
notices shall be made in writing, and may be given by U.S. Mail, Express Mail Services or by Fax.

14. Procedure for Activation of New Site. Seller shall notify Transporter of any new site,
meter or well(s) from which it desires to deliver gas into the pipeline system. Transporters shall
have the right to make a physical inspection of the site, meters, measurement facilities, wells,
pipeline and facilities, before deciding whether or not to accept such gas into the pipeline
system. Seller shall supply, at its cost, all meters and other measurement facilities, to the
specifications given by Transporter. Once Transporter decides to accept the new site, it shall
provide a tap at the Delivery Point into the pipeline system, and Seller will be notified when the
tap is ready for connection. Seller will then install all facilities necessary to connect to
Transporter’s tap, and notify Transporter that its facilities are ready for inspection. If all
facilities meet the specifications of Transporter, the necessary contract amendment will be
prepared by Transporter and signed by all parties. The tap will be turned on by Transporter, and
gas will be received into the pipeline system, only after all of the above procedures have been
complied with, to the satisfaction of Transporter. Under no circumstances shall Seller activate a
new site or institute the flow of gas into the pipeline facilities without the specific approval of
Transporter, after all facilities have passed inspection.

15. Procedure for Reactivation of Existing Site. If Seller desires to reactivate
production from a well or site that is already covered by this Agreement, but at any time hereafter
has no reported production for three (3) consecutive months, Transporter will be notified of the
desire to reactivate the delivery of gas from the well or site. Transporter will inspect all
facilities as soon as possible after notice is given, and if the facilities pass inspection,
Transporter will reactivate the flow of gas into its pipeline facilities, or give Seller
authorization to reactivate the flow of gas after all inspections are passed. Under no
circumstances shall Seller reactivate gas flow into the pipeline facilities without approval from
Transporter.

16. Prior Agreements Canceled. This Agreement, including all Exhibits, constitutes the
entire agreement between the parties for the transportation of gas and for chart integration
services. All prior agreements that relate to transportation of gas or chart integration, between
Seller and Transporter, or Seller and any third party (such as Mid Louisiana Marketing or Midcoast
Marketing), are hereby canceled in full and replaced by this Agreement. The prior agreements that
are canceled include, but are not limited to, the Chart Integration Services Agreement, dated June
1, 1997, between Seller and Mid Louisiana Marketing Company, and the Partial Assignment from
Midcoast Marketing, Inc. (assigning transportation rights under Gas Transportation Agreements,
dated January 1. 1996, that are now terminated).

11

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