Document:

exhibit1029llex10k201912

                                             EXECUTION VERSION                                                                                                                                                  CRUDE OIL GATHERING AGREEMENT                                                          May 21, 2018                                   SALT CREEK MIDSTREAM, LLC                                              “Gatherer”                                                 And                                         LILIS ENERGY, INC.                                              “Shipper” 

 

                             TABLE OF CONTENTS                                                                                                                     Page   ARTICLE I CERTAIN DEFINITIONS ........................................................................................ 1   ARTICLE II TERM ....................................................................................................................... 8          2.1    Term .................................................................................................................. 8   ARTICLE III DEDICATION ........................................................................................................ 9          3.1    Dedication ......................................................................................................... 9          3.2    Subsequently Acquired Interests ........................................................................9          3.3    New Dedications and Commitments............................................................... 10          3.4    Releases and Exclusions from the Dedication; Reservations ..........................10          3.5    Covenant Running with the Land ................................................................... 12          3.6    Memorandum of Agreement ........................................................................... 12   ARTICLE IV  COMMENCEMENT DATE AND CONSTRUCTION OF FACILITIES ........... 12          4.1    Commencement Date ...................................................................................... 13          4.2    Construction of Commencement Date Facilities .............................................13          4.3    Construction of Receipt Point(s); Drilling Plans .............................................13          4.4    License and Right-of-Use ............................................................................... 16          4.5    Construction Delay ..........................................................................................16          4.6    Connecting Pipelines....................................................................................... 17   ARTICLE V  DELIVERY TO CONNECTING PIPELINES ...................................................... 17   ARTICLE VI GATHERER OBLIGATIONS ............................................................................. 18          6.1    Provision of Services .......................................................................................18          6.2    Gatherer’s Prorationing Obligations; Priority Service .....................................18  ARTICLE VII  NOMINATIONS AND OTHER TERMS ........................................................... 18          7.1    Nominations .....................................................................................................18          7.2    Unused Capacity ............................................................................................. 18          7.3    Tariff ............................................................................................................... 19          7.4    Linefill ............................................................................................................. 19          7.5    Off-Spec Crude Oil ......................................................................................... 19          7.6    Loss Allowance ................................................................................................20          7.7    Commingling; Quality Bank ........................................................................... 20          7.8    Possession and Control; Liability ....................................................................20   ARTICLE VIII FEES .................................................................................................................. 21          8.1    Tariff Filings and Rates................................................................................... 21          8.2    Governmental Modifications ...........................................................................21          8.3    Fee Escalation ................................................................................................. 21   ARTICLE IX  WARRANTY OF TITLE ..................................................................................... 22                                          i 

 

        9.1    Title Warranty ................................................................................................. 22          9.2    Proceeds of Production ....................................................................................22          9.3    Indemnification ............................................................................................... 22          9.4    Title to Shipper Crude Oil ............................................................................... 22   ARTICLE X  WAIVER OF CERTAIN DAMAGES ................................................................... 22   ARTICLE XI  FORCE MAJEURE .............................................................................................. 23          11.1   Suspension of Obligations ...............................................................................23          11.2   Definition of Force Majeure ........................................................................... 23          11.3   Interruption of Operations. ............................................................................... 24   ARTICLE XII DISPUTE RESOLUTION ................................................................................... 24          12.1   Resolution of Disputes ..................................................................................... 24          12.2   Dispute Notice ................................................................................................ 24          12.3   Direct Negotiation ........................................................................................... 24          12.4   Jurisdiction and Venue; Jury Waiver .............................................................. 24          12.5   Costs and Expenses ..........................................................................................25          12.6   Confidentiality of Dispute Resolution .............................................................25  ARTICLE XIII  DUTY TO SUPPORT ........................................................................................ 26          13.1   Arm's Length Negotiations ............................................................................. 26          13.2   Shipper Support ...............................................................................................26          13.3   No Tariff Rate Revision Proceedings ............................................................. 26          13.4   Third Party Proceedings .................................................................................. 26          13.5   Modification of Agreement ............................................................................. 27   ARTICLE XIV  COMMON CARRIER AND COMPLIANCE WITH APPLICABLE LAWS . 27          14.1   Common Carrier Pipeline ............................................................................... 27          14.2   Compliance with Laws ................................................................................... 27   ARTICLE XV  TAXES ................................................................................................................ 27   ARTICLE XVI  ASSIGNMENT .................................................................................................. 28   ARTICLE XVII  OFFER .............................................................................................................. 29          17.1   Effect of Unsigned Copy ................................................................................ 29          17.2   Irrevocable Offer by Shipper .......................................................................... 29   ARTICLE XVIII  NOTICES AND STATEMENTS ................................................................... 29          18.1   Notice .............................................................................................................. 29          18.2   Change of Address ...........................................................................................31   ARTICLE XIX  DEFAULTS AND REMEDIES ........................................................................ 31          19.1   Shipper Default ............................................................................................... 31          19.2   Remedies on Shipper Default ..........................................................................31          19.3   Gatherer Default .............................................................................................. 32          19.4   Remedies on Gatherer Default .........................................................................32          19.5   Excused Performance ...................................................................................... 33                                          ii 

 

       19.6   Adequate Assurances ...................................................................................... 33         19.7   Audit ............................................................................................................... 33  ARTICLE XX  MISCELLANEOUS ............................................................................................ 33         20.1   Entire Agreement; Amendments. ..................................................................... 33         20.2   Governing Law ............................................................................................... 33         20.3   No Drafting Presumption ................................................................................ 34         20.4   Waiver ............................................................................................................. 34         20.5   No Third Party Beneficiaries .......................................................................... 34         20.6   No Partnership .................................................................................................34         20.7   Confidentiality ................................................................................................ 34         20.8   Headings ......................................................................................................... 35         20.9   Rules of Construction ......................................................................................35         20.10  Survival ............................................................................................................36         20.11  Severability ..................................................................................................... 36         20.12  Further Assurances ...........................................................................................36         20.13  Liquidated Damages ....................................................................................... 36         20.14  Counterpart Execution .................................................................................... 36               Exhibits  Exhibit A  Dedicated Area  Exhibit B  Initial Receipt Points; Initial Delivery Points; MDQ; Rates  Exhibit C  Form of Memorandum of Agreement  Exhibit D  Commencement Date Facilities  Exhibit E  Form of New Receipt Point Notification  Exhibit F  Pro Forma Tariff  Exhibit G  Prior Dedications                                          iii 

 

                     CRUDE OIL GATHERING AGREEMENT                                   This Crude Oil Gathering Agreement (this “Agreement”) is made and entered into   effective as of this 21st day of May, 2018 (the “Effective Date”), by and between Salt Creek   Midstream, LLC, a Delaware limited liability company (“Gatherer”), and Lilis Energy, Inc., a  Nevada corporation (“Shipper”). Shipper and Gatherer may be referred to individually as  “Party,” or collectively as the “Parties.”                                                WITNESSETH:                      WHEREAS, Shipper is the owner and operator of certain interests in land, Wells and   leases with the right to produce Crude Oil therefrom and is or will be the operator of certain   producing properties located in Loving and Winkler Counties, Texas and Lea County, New   Mexico; and                      WHEREAS, Shipper has title to or the right to gather Shipper Crude Oil; and                      WHEREAS, Shipper desires that Gatherer, in accordance with the terms set forth in this   Agreement, (i) design, engineer and construct the Gathering System to enable Gatherer to   provide gathering services for Shipper Crude Oil, and (ii) gather Shipper Crude Oil on the   Gathering System; and                      WHEREAS, Gatherer desires to (i) construct, own and operate the Gathering System,   and (ii) gather Shipper Crude Oil on the Gathering System, all in accordance with the terms set   forth in this Agreement; and                      WHEREAS, Gatherer and Shipper are not Affiliates and are entering into this   Agreement as independent parties.                      NOW THEREFORE, in consideration of the mutual promises, covenants and   agreements herein contained, the Parties hereby covenant and agree as follows:                                                 ARTICLE I                              CERTAIN DEFINITIONS                      Unless otherwise required by the content, the terms defined in this ARTICLE I shall   have, for all purposes of this Agreement, the respective meanings set forth in this ARTICLE I:                      “Actual Shipments” shall mean, for any period of time, the volumes of Shipper Crude   Oil that Shipper delivers to Gatherer hereunder at the Receipt Points and that are ultimately   delivered by Gatherer to Shipper hereunder at the Delivery Points.                      “ADV” shall mean, for any period of calculation, the average Daily volume of Shipper   Crude Oil accepted into all Receipt Point(s) hereunder during such period, which will be   calculated by dividing (A) the sum of (i) the aggregate volume of all Shipper Crude Oil accepted   into the Gathering System hereunder during such period, plus (ii) the sum, for each Day in such   period, of the volume of Shipper Crude Oil, up to the MDQ in effect on each such Day during                

 

 such period, that Shipper was ready, willing and able to deliver on such Day but which Gatherer   was unable or failed to accept on such Day as required under this Agreement during such period,   by (B) the number of Days in such period.                      “Affiliate” shall mean any Person that directly or indirectly through one or more   intermediaries, controls or is controlled by or is under common control with another Person. The   term “control” (including its derivatives and similar terms) shall mean possessing the power to   direct or cause the direction of the management and policies of a Person, whether through   ownership, by contract, or otherwise. Any Person shall be deemed to be an Affiliate of any   specified Person if such Person owns fifty percent (50%) or more of the voting securities of the   specified Person, or if the specified Person owns fifty percent (50%) or more of the voting   securities of such Person, or if fifty percent (50%) or more of the voting securities of the   specified Person and such Person are under common control.                      “Agreement” shall have the meaning given to such term in the preamble of this   Agreement.                      “API” shall mean the American Petroleum Institute.                      “Applicable Law” shall mean all applicable laws, statutes, directives, codes, ordinances,   rules, regulations, municipal by-laws, judicial, arbitral, administrative, ministerial, departmental   or regulatory judgments, orders, decisions, rulings or awards, consent orders, consent decrees   and policies of any Governmental Authority.                      “Barrel” or “bbl” shall mean forty-two (42) gallons of 231 cubic inches per gallon at 60  degrees Fahrenheit (60° F) and equilibrium vapor pressure of the liquid.                      “BLM” shall mean the Bureau of Land Management and any lawful successor agency  thereto.                      “BPD” shall mean Barrels per Day.                      “Business Day” shall mean any calendar day other than Saturdays and Sundays that   commercial banks in Houston, Texas are open for business.                      “Central Clock Time” shall mean the then prevailing time in the Central Time Zone of   the United States of America.                      “Claims” shall mean any and all claims, demands and causes of action of any kind and all   losses, damages, liabilities, fines, penalties, costs and expenses of whatever nature (including   court costs and reasonable attorneys’ fees).                      “COGA” shall mean a Crude Oil Gathering Agreement executed by a Priority Shipper   with Gatherer with respect to the Gathering System pursuant to the Open Season.                      “Commencement Date” shall have the meaning given to such term in Section 4.1 of this   Agreement.                                           2 

 

       “Commencement Date Facilities” shall mean those facilities specifically described on   Exhibit D, including without, limitation, the Initial Receipt Point(s), the Initial Delivery Point(s).   Gatherer’s Wink Terminal, and the Crude Oil pipeline and equipment and facilities located at   and downstream of the Initial Receipt Points necessary to commence Services with respect to the   receipt, gathering, handling and delivery of Crude Oil as contemplated by this Agreement;   provided, however, truck racks and truck injection facilities are specifically excluded from the   Commencement Date Facilities.                      “Committed Volume” shall mean (i) with respect to a Priority Shipper that has committed   to deliver a specified volume of Crude Oil to the Gathering System pursuant to such Priority   Shipper’s COGA, such specified volume (expressed in BPD), and (ii) with respect to a Priority   Shipper that has not committed to deliver a specified volume of Crude Oil, but has made an   acreage dedication pursuant to such Priority Shipper’s COGA, a volume of Crude Oil (expressed   in BPD) equal to such Priority Shipper’s Maximum Daily Quantity.                      “Connecting Pipelines” shall mean all downstream pipeline systems now and hereafter  connected to the Gathering System at the Delivery Point(s), which, as of the Effective Date, are  contemplated to be (i) the Plains All-American, LP Pipeline or other pipeline with direct, long-  haul transportation to the Midland, Texas area, and (ii) the EPIC Crude Oil Pipeline or other  pipeline with direct, long-haul transportation to the Corpus Christi, Texas area, provided that, as  of the Effective Date, the EPIC Crude Oil Pipeline is not expected to be in service until the  second half of 2019.                      “Contract Year” shall mean a period commencing at 7:00 a.m., Central Clock Time, on   the Commencement Date and ending at 7:00 a.m., Central Clock Time on the same day and   calendar month of the following calendar year and thereafter for succeeding periods of twelve   (12) consecutive Months each.                      “Crude Oil” shall have the meaning given to such term in the Tariff.                      “Day” or “Daily” shall mean a  period  of  twenty-four  (24)  hours,  commencing  at   7:00 a.m., Central Clock Time, on a calendar day and ending at 7:00 a.m., Central Clock Time,  on the next succeeding calendar day.                      “Dedicated Area” shall mean the area depicted and described in Exhibit A attached   hereto.           “Dedication” shall have the meaning given to such term in Section 3.1 of this Agreement.          “Delay Period” shall have the meaning given to such term in Section 4.5(b) of this   Agreement.                      “Delivery Point(s)” shall mean the furthest downstream flange of Gatherer’s facilities on   the Gathering System where Gatherer redelivers Crude Oil in accordance with the Services to   Shipper or for Shipper’s account, and includes, collectively, (i) the Initial Delivery Points, (ii)   any additional points of interconnection specified by Shipper and added to the Gathering System   pursuant to Section 4.6, and (iii) any other points of interconnection between the Gathering                                           3 

 

 System and any Connecting Pipeline as mutually agreed upon by the Parties at which Gatherer   will redeliver Shipper Crude Oil for the account of Shipper.                      “Dispute” shall mean any controversy or claim, whether based on contract, tort, statute or   other legal or equitable theory (including, but not limited to, any claim of fraud,   misrepresentation or fraudulent inducement or any question of validity or effect of this   Agreement including this clause) arising out of or related to this Agreement (including any   amendments or extension), or breach or termination thereof.                      “Dispute Notice” shall have the meaning given to such term in Section 12.2 of this   Agreement.                      “Effective Date” shall have the meaning given to such term in the preamble to this   Agreement.                      “Energy Costs” shall mean the total actual, out-of-pocket cost of purchased electricity or  fuel (without mark-up), including actual transmission costs, loss and other costs associated with  providing such electricity services to equipment associated with the Receipt Point(s), including,  without limitation, Gatherer’s LACT(s); provided, however, “Energy Costs” shall not include  any costs or expenses related to Gatherer’s installation or construction of any utility lines,  measurement equipment or other infrastructure necessary to provide electricity or fuel.                      “Extended Term” shall have the meaning given to such term in Section 2.1 of this   Agreement.                      “FERC” shall mean the United States Federal Energy Regulatory Commission and any   lawful successor agency thereto.                      “Force Majeure” shall have the meaning given to such term in Section 11.2 of this   Agreement.          “Gatherer” shall have the meaning given to such term in the preamble of this Agreement.          “Gatherer Default” shall have the meaning given to such term in Section 19.3 of this   Agreement.                      “Gatherer Default Notice” shall have the meaning given to such term in Section 19.4 of   this Agreement.                      “Gatherer Indemnified Party” means Gatherer and its Affiliates, and all of its and their   respective equityholders, partners, members, directors, officers, managers, employees, agents   and representatives.                      “Gatherer’s Wink Terminal” means that certain Crude Oil terminal facility located in   Wink, Texas, being more particularly described on Exhibit D.                      “Gathering System” means the Crude Oil gathering system, Receipt Point(s), Delivery   Point(s), LACTs, Gatherer’s Wink Terminal, any Service related facilities, including, pipelines,                                          4 

 

 controls, pumps, pig receiving facilities, tanks, meters and measurement facilities, treating (if    any treating is performed hereunder) and other conditioning facilities, meters and measurement   facilities, storage and handling facilities, truck racks and truck injection facilities, vapor recovery   units, rights of way, fee parcels, surface rights, and permits, and all appurtenant facilities,   constructed or to be constructed and owned and operated by Gatherer to provide Services to   Shipper or other shippers.                      “Governmental Authority” shall mean (i) the United States of America, (ii) any state,   county, parish, municipality or other governmental subdivision within the United States of   America, and (iii) any court or any governmental department, commission, board, bureau,   agency or other instrumentality of the United States of America or of any state, county,   municipality or other governmental subdivision within the United States of America.                      “Impaired Party” shall have the meaning given to such term in Section 19.6 of this   Agreement.                      “Initial Delivery Points” shall mean the Delivery Points identified on Exhibit B attached   hereto.          “Initial Receipt Points” shall mean the Receipt Points identified on Exhibit B attached   hereto.          “Insecure Party” shall have the meaning given to such term in Section 19.6 of this   Agreement.                      “Interests” shall mean any right, title, or interest in lands, Wells, or leases with the right   to produce oil and/or gas therefrom whether arising from fee ownership, working interest   ownership, mineral ownership, leasehold ownership, or arising from any pooling, unitization or   communitization of any of the foregoing rights.                      “LACT” shall mean a lease automatic custody transfer unit whereby custody of Shipper   Crude Oil will transfer from one Party to the other Party or its designee, as applicable, that is   installed and operated in accordance with the latest revision of API Manual of Petroleum   Measurement Standards, Chapter 6.1.                      “Losses” shall mean any actual loss, cost, expense, liability, damage, demand, suit,   sanction, claim, judgment, lien, fine or penalty, including attorneys’ fees, asserted by a third   party not Affiliated with the Party incurring such, and which are incurred by the applicable   indemnified Persons on account of injuries (including death) to any person or damage to or   destruction of any property, sustained or alleged to have been sustained in connection with or   arising out of the matters for which the indemnifying party has indemnified the applicable  indemnified Persons.                      “Maximum Daily Quantity” shall mean the maximum volume of Crude Oil (expressed in   BPD) a Priority Shipper, including Shipper, is allowed to deliver to the Gathering System   pursuant to such Priority Shipper’s COGA.                                           5 

 

       “Memorandum” shall have the meaning given to such term in Section 3.6 of this   Agreement.                      “Month” shall mean a period of time beginning at 7:00 a.m., Central Clock Time on the   first day of the calendar month and ending at 7:00 a.m., Central Clock Time on the first day of   the next succeeding calendar month.                      “New Receipt Point Notification” shall have the meaning given to  such  term  in   Section 4.3(b) of this Agreement.                      “Nomination” (including “Nominates” and the syntactical variants thereof) shall mean   the written or electronic communication from Shipper to Gatherer, pursuant to and in accordance   with the Tariff, requesting that Gatherer transport for Shipper in a given Month a stated volume   of Crude Oil from a specified Receipt Point to the applicable Delivery Point pursuant to this   Agreement.                      “Notification Date” shall have the meaning given to such term in Section 4.3(b) of this   Agreement.                      “Off-Spec Crude Oil” shall have the meaning given to such term in Section 7.5 of this   Agreement.                      “Open Season” shall mean the open season initiated and conducted by Gatherer to   determine interest by Priority Shippers in the Gathering System.          “Parties” shall have the meaning given to such term in the preamble of this Agreement.          “Party” shall have the meaning given to such term in the preamble of this Agreement.          “Person” shall mean any individual, firm, corporation, trust, partnership, limited liability   company, association, joint venture, other business enterprise or Governmental Authority.                      “Primary Term” shall have the meaning given to such term in Section 2.1 of this   Agreement.                      “Prior Dedications” shall mean, as of the applicable date of determination, any and all   existing agreements or arrangements (including any joint operating agreements, pooling   agreements, unitization or communitization agreements) or rights of any third Persons that are   binding on the applicable Person or on the applicable Interest within the Dedicated Area or any   Crude Oil produced therefrom that would require or necessitate (i) Shipper Crude Oil to be   gathered on any gathering system or similar system other than the Gathering System (including   deliveries of Shipper Crude Oil as necessary to satisfy any minimum volume or similar   commitment), or (ii) Shipper Crude Oil to be trucked by a third party from the Dedicated Area.                      “Priority Rate” shall have the meaning given to such term in the Tariff.                      “Priority Service” shall have the meaning given to such term in Section 6.2 of this   Agreement.                                          6 

 

       “Priority Shipper” shall mean Shipper and any other Shipper whose COGA provides for   a term of at least ten (10) years and either (i) a commitment to deliver a specified volume of   Crude Oil on the Gathering System of at least 2,000 BPD, or (ii) with respect to a Priority   Shipper that has not committed to deliver a specified volume of Crude Oil, but has made an   acreage dedication pursuant to such Priority Shipper’s COGA, a dedication of Interests covering   at least 2,000 net acres of lands located in Winkler County, Texas, Loving County, Texas and/or   Lea County, New Mexico.                      “Project Deadline” shall have the meaning given to such term in Section 4.5(a) of this   Agreement.                      “Receipt Point” shall mean, a point where the custody and control of Shipper Crude Oil   transfers from Shipper to Gatherer located at the inlet flange of Gatherer’s LACT through which   such Shipper Crude Oil flows into the Gathering System.                      “Services” shall mean receipt, gathering and transportation on the Gathering System of   Crude Oil for Shipper’s account from the Receipt Point(s) and delivery to the Delivery Point(s)   specified in Shipper’s Nomination, together with all other services to be provided by Gatherer as   contemplated in this Agreement.          “Shipper” shall have the meaning given to such term in the preamble of this Agreement.          “Shipper Crude Oil” shall have the meaning given to such term in Section 3.1 of this   Agreement.                      “Shipper Default” shall have the meaning given to such term in Section 19.1 of this   Agreement.                      “Shipper Default Notice” shall have the meaning given to such term in Section 19.2 of   this Agreement.                      “Shipper Indemnified Party” means Shipper and its Affiliates, and all of its and their   respective equityholders, partners, members, directors, officers, managers, employees, agents   and representatives.                      “Shipper’s Maximum Daily Quantity” or “MDQ” shall mean, with respect to any   Contract Year, the volume of Crude Oil (expressed in BPD) set forth for such Contract Year in   the table captioned “MDQ” in Exhibit B attached hereto, for which Shipper shall receive Priority   Service as set forth in Section 6.2 hereof. With respect to any Contract Year beginning on or   after the fourth (4th) anniversary of the Commencement Date, Gatherer shall have the option, by   delivering written notice to Shipper on or before the date that is thirty (30) Days prior to the start   of any such Contract Year, to reduce Shipper’s Maximum Daily Quantity for such Contract Year   to an amount equal to the lesser of (x) the MDQ that was in effect at the end of the immediately   preceding Contract Year or (y) 110% of the ADV of Shipper Crude Oil delivered or available for   delivery hereunder by Shipper to Gatherer during the immediately preceding twelve (12) Month  period. Conversely, beginning on or after the fourth (4th) anniversary of the Commencement  Date, Shipper shall have the option, by delivering written notice to Gatherer on or before the date  that is thirty (30) Days prior to the start of any such Contract Year, to request an increase in                                          7 

 

 Shipper’s Maximum Daily Quantity for such Contract Year to an amount equal to 120% of the   ADV of Shipper Crude Oil delivered or available for delivery hereunder by Shipper to Gatherer   during the immediately preceding twelve (12) Month period, and if, in the sole determination of   Gatherer, consistent with Gatherer’s obligations under Section 6.2 hereunder and to the extent   permitted by Applicable Law, Gatherer has adequate capacity eligible for Priority Service in the   Gathering System and related facilities to provide Priority Service with respect to such requested   amount, then such requested increase shall become effective.                      “Shipper’s Permitted Liens” shall mean (i) any liens, security interests or other   encumbrances benefiting one or more lenders to Shipper as part of a financing provided by such   lenders to Shipper for which such lenders have not taken actions to foreclose on such liens; and   (ii) normal and customary liens under financing agreements, operating agreements, unitization   agreements, pooling orders, drilling contracts and similar agreements for upstream operators and   mechanic's and materialman's liens, tax liens or mineral liens related to claims or obligations that   are not delinquent or that are being contested in good faith and by appropriate proceedings.                      “Shipper’s Priority Rate” shall have the meaning given to such term in Section 8.1(a) of   this Agreement.                      “Shipper’s Uncommitted Rate” shall have  the  meaning  given  to  such  term  in    Section 8.1(b) of this Agreement.                      “Target RP In-Service Date” shall have the meaning given to such term in Section 4.3(b)   of this Agreement.                      “Tariff” shall mean Gatherer’s rate, rules and regulations tariff for the Gathering System   on file and in effect with the FERC or other Governmental Authority, as such tariff may be   amended or supplemented by Gatherer from time to time, a pro forma copy of which, materially   in the form expected to be filed by Gatherer with the FERC, is attached hereto as Exhibit F.                      “Tariff Rate Revision Proceeding” shall have the meaning given to such term  in   Section 13.3 of this Agreement.                      “Taxes” shall mean any or all current or future taxes, fees, levies, charges, assessments   and/or other impositions levied, charged, imposed, assessed or collected by any Governmental   Authority having jurisdiction.                      “Term” shall have the meaning given to such term in Section 2.1 of this Agreement.          “Uncommitted Rate” shall have the meaning given to such term in the Tariff.          “Well” shall mean a well for the production of gas and/or liquid hydrocarbons, including   Crude Oil, which is operated by Shipper or its Affiliates.                                                 ARTICLE II                                       TERM                                           8 

 

      2.1  Term.  The term of this Agreement shall commence on the Effective Date, and   unless sooner terminated as provided herein, shall remain in full force and effect through the  twelfth (12th) anniversary of the Effective Date (the “Primary Term”); provided, however, this  Agreement shall continue beyond the expiration of the Primary Term for additional terms of one  year each (each an “Extended Term,” and, the Primary Term as may be extended by one or more  Extended Terms, the “Term”) unless this Agreement is terminated by either Party as of the end  of the Primary Term or the then-current Extended Term, as applicable, by providing not less than  sixty (60) Days written notice of termination prior to the end of the Primary Term or such  Extended Term to the other Party.                                                ARTICLE III                                  DEDICATION                     3.1   Dedication. Subject to the other terms and conditions hereof, Shipper hereby (i)  dedicates for Services with respect to Shipper Crude Oil under this Agreement to Gatherer all  Interests now owned or hereafter acquired by Shipper and/or its Affiliates and their respective  successors and assigns that cover lands located within the Dedicated Area, and (ii) dedicates for  Services under this Agreement and shall deliver, or cause to be delivered, hereunder to Gatherer,  at the Receipt Points, the following (the “Dedication,” and the Crude Oil that is the subject of the  Dedication being herein referred to as “Shipper Crude Oil”):                           (a)   all Crude Oil produced and saved on or after the Commencement Date for  the remainder of the Term from those Wells for which Shipper and/or any of its Affiliates is the  operator now or hereafter located within the Dedicated Area or on lands pooled or unitized  therewith, to the extent such Crude Oil is attributable to the Interests within the Dedicated Area  now owned or hereafter acquired by Shipper and/or its Affiliates and their respective successors  and assigns; and                           (b)   with respect to those Wells for which Shipper and/or any of its Affiliates   is the operator, Crude Oil produced on or after the Commencement Date for the remainder of the  Term from such Wells which is attributable to the Interests in such Wells owned by other  working interest owners and royalty owners which is not taken “in-kind” by such working  interest owners and royalty owners and for which Shipper and/or its Affiliates has the right or  obligation to deliver such Crude Oil and only for the period that Shipper and/or its Affiliates has  such right or obligation.               For the avoidance of doubt, Shipper shall not be required to deliver Crude Oil from any well  operated by an operator other than Shipper or its Affiliates, including any well where Shipper  would be required to install split stream connection facilities or similar facilities to take such  Crude Oil in kind, and such Crude Oil shall not be Shipper Crude Oil subject to the Dedication  hereunder.                     3.2   Subsequently Acquired Interests. In the event that after the date hereof Shipper  and/or any of its Affiliates acquire Interests within the Dedicated Area, then the Shipper Crude  Oil produced and saved from such Interests shall automatically be included within the  Dedication; provided, however, if any of the Shipper Crude Oil produced from such Interests is  subject to a Prior Dedication, then such Shipper Crude Oil shall be excluded from the                                          9 

 

 Dedication, to the extent and only to the extent of such Prior Dedication, until such Prior   Dedication expires or terminates. In the event that any such Prior Dedication expires or   terminates, then the Shipper Crude Oil subject to such Prior Dedication shall, to the extent not   already subject to the Dedication, automatically be included within the Dedication and subject to   this Agreement without any further actions by the Parties.                      3.3   New Dedications and Commitments. Shipper represents and warrants to Gatherer   that, as of the Effective Date, except as set forth on Exhibit G attached hereto, none of the   Interests owned by Shipper and/or its Affiliates within the Dedicated Area are subject to a Prior   Dedication. With respect to any such Interests which are subject to a Prior Dedication, Shipper   shall have the right to comply with such Prior Dedication and the Shipper Crude Oil produced   from such Interests shall be excluded from the Dedication, to the extent and only to the extent of   such Prior Dedication, until such Prior Dedication expires or terminates. In the event that any   such Prior Dedication expires or terminates, then the Shipper Crude Oil subject to such Prior   Dedication shall, to the extent not already subject to the Dedication, automatically be included   within the Dedication and subject to this Agreement without any further actions by the Parties.   Commencing on the Effective Date of this Agreement, Shipper shall not, as to the Interests   owned by Shipper and/or its Affiliates within the Dedicated Area as of the Effective Date, enter   into any dedication or commitment for Crude Oil gathering or transportation services burdening   such Interests if the term of such dedication or commitment extends beyond the Commencement   Date; provided, however, Shipper may enter into such dedication and commitment (i) for periods   beyond the Commencement Date, to the extent that Shipper reasonably anticipates that   Commencement Date Facilities will not be completed and placed in-service on or before the  anticipated Commencement Date set forth in Section 4.5, but not for a period in excess of six (6)   Months past the anticipated Commencement Date, and (ii) during periods when Shipper is   released from Dedication pursuant to the terms and conditions of this Agreement.                      3.4   Releases and Exclusions from the Dedication; Reservations. Notwithstanding   Section 3.1 hereof,                            (a)   if, at any time during the Term, Gatherer suspends, curtails, is unable or   fails to receive all volumes of Shipper Crude Oil hereunder, for more than twenty-four (24)   consecutive hours for any reason, including an event of Force Majeure, the affected Well(s)   (including the volumes of Crude Oil associated therewith) delivering to the affected Receipt   Point(s) where all such volumes of Shipper Crude Oil are not received shall automatically be   temporarily released from this Agreement; provided, however, during such suspension,   curtailment, or interruption event, Gatherer shall have the right, but shall have no obligation, to   (or to cause its designee to) truck all or a portion of the Shipper Crude Oil delivered hereunder,   and by doing so, such Shipper Crude Oil trucked by Gatherer or its designee shall be considered   received hereunder and not temporarily released hereunder. If Gatherer elects the option to truck   Barrels of Shipper Crude Oil as provided in the immediately preceding sentence, (i) Shipper’s   Priority Rate will apply to all such Barrels, and (ii) Gatherer shall redeliver such Shipper Crude   Oil to Gatherer’s Wink Terminal via the Gathering System (if available) or to one or more   alternative markets, purchasers, pipelines, processor or transporters designated by Producer in   close proximity thereto (if Gatherer’s Wink Terminal is not available). Shipper may, at its sole   option, store or deliver all or any portion of the Shipper Crude Oil temporarily released   hereunder to Gatherer’s Wink Terminal via the Gathering System (if available) or an alternative                                          10 

 

market, purchaser, pipeline, processor or transporter (if Gatherer’s Wink Terminal is not  available); provided, however, to the extent that Gatherer does not elect its trucking option under  this Section 3.4(a) and the temporary release is not attributable to a Force Majeure or an  interruption of operations described in Section 11.3, Gatherer shall reimburse Producer for  Producer’s out of pocket costs incurred during such release period on a per Barrel basis to truck  Shipper Crude Oil to Gatherer’s Wink Terminal via the Gathering System (if available) or such  alternative markets, purchasers, pipelines, or transporters (if Gatherer’s Wink Terminal is not  available), less the Shipper’s Priority Rate per Barrel. This temporary release shall cease, and  Shipper shall resume deliveries of such temporarily released Shipper Crude Oil, as soon as  Shipper, exercising commercially reasonable efforts, can terminate all alternative gathering  and/or marketing arrangements without penalty, but in no event later than the first Day of the  Month commencing after the passage of ninety (90) Days after Gatherer has provided Shipper  written notice that Gatherer is ready, willing and able to resume receiving the affected volumes  of Shipper Crude Oil.                          (b)    If Gatherer suspends, curtails, is unable or fails to receive all volumes of  Shipper Crude Oil (i) for any reason other than an event of Force Majeure, for one hundred  twenty (120) consecutive Days or one hundred twenty (120) or more cumulative Days during  any consecutive one hundred eighty (180) Day period following the Commencement Date, or  (ii) as a result of an event of Force Majeure, for two hundred seventy (270) consecutive Days or  two hundred seventy (270) Days or more cumulative Days during any consecutive three  hundred sixty-five (365) Day period following the Commencement Date, then Shipper shall  have the right, immediately following such period, to request and receive a permanent release  from Gatherer of the affected Well(s) and Interest(s) delivering to the affected Receipt Point(s)  where all such volumes of Shipper Crude Oil are not received (including the volumes of Crude  Oil associated therewith).                           (c)   Shipper Crude Oil may be released from the Dedication in accordance  with Sections 4.3(c) and (e) hereof.                           (d)  Shipper reserves the following rights respecting Shipper Crude Oil:                                 (i)   to operate the Well(s) and Interests in its sole discretion, including,              without limitation, the right, but never the obligation, to drill new Well(s), to              repair and rework old Well(s), renew or extend, in whole or in part, any oil and              gas lease covering any of lands within the Dedicated Area, and to cease              production from or abandon any Well or surrender any such oil and gas lease, in              whole or in part, in Shipper’s discretion;                                 (ii)  to deliver or furnish to Shipper’s and its Affiliates’ lessors and              holders of other existing burdens on production such Shipper Crude Oil as is              required to satisfy the terms of the applicable oil and gas leases and other              applicable instrument creating the burdens;                                 (iii) to pool, communitize, or unitize the lands covered by the Interests              of Shipper and its Affiliates’, including with lands not covered by such Interests;              provided that Shipper’s and/or its Affiliates’ share of Crude Oil produced from                                          11 

 

             such pooled, communitized, or unitized interests shall be dedicated and               committed to this Agreement to the extent that such Crude Oil would constitute               Shipper Crude Oil hereunder;                                  (iv)  to construct, install, maintain, own and operate any treating and/or               conditioning facilities upstream of the Gathering System as reasonably necessary               to (i) comply with any environmental, legal, or Interest requirements, or (ii) meet               the quality specifications of the Gathering System set forth in this Agreement               and/or the quality specification of any Connecting Pipeline;                                  (v)   to deliver or furnish to Shipper’s and its Affiliates’ non-operators               or other Persons all Crude Oil that such non-operators or Persons elect to               separately take in-kind and market; and                                  (vi)  to retain any and all Crude Oil that is not Shipper Crude Oil               dedicated and committed to this Agreement, including, without limitation, Crude               Oil produced prior to the Commencement Date or released hereunder, and to               transport by truck and/or sell or otherwise dispose of such Crude Oil.                            (e)   In the event of a release from the Dedication hereunder, at the request of   Shipper, the Parties shall execute a release reasonably acceptable to Shipper (which, in the case   of a permanent release, shall be in recordable form) reflecting the release of any Receipt Point(s),   Well(s), Interest(s) and Shipper Crude Oil released from Dedication hereunder.                      3.5   Covenant Running with the Land. So long as this Agreement is in effect, this   Agreement shall (i) be a covenant running with the Interests now owned or hereafter acquired by   Shipper and/or its Affiliates within the Dedicated Area (including, without limitation, all Wells   operated by Shipper or its Affiliates) and (ii) be binding on and enforceable by Gatherer and its   successors and assigns against Shipper, its Affiliates and their respective successors and assigns.   Notwithstanding this Section 3.5, to the extent all or a portion of such Interests within the   Dedicated Area are sold to a non-Affiliated Person, such acquiring Person shall only be required   to dedicate for delivery hereunder that Crude Oil that is produced from such Interests within the   Dedicated Area acquired by such non-Affiliated Person from Shipper. The acquiring Person    shall not be required to dedicate Crude Oil produced from Interests already held by or acquired   after such date by such acquiring Person. Notwithstanding the foregoing, with prior written   notice to Gatherer, Shipper and its Affiliates shall each be permitted to convey, sell, assign, or   otherwise transfer its interest in the Interests that are not connected to or in the process of being   connected to the Gathering System free of the Dedication hereunder in an “acreage swap” or   exchange transaction in which such undeveloped Interests within the Dedicated Area are   exchanged for other properties or Interests of approximately equal net acreage and projected   production located in the Dedicated Area that are not subject to a Prior Dedication and would   become subject to the Dedication hereunder. Gatherer and Shipper shall prepare, execute,   acknowledge, deliver, and record any such instruments and other documents reasonably   necessary to effectuate such release and memorialize such acquired Interests subject to the  Dedication.                                           12 

 

      3.6   Memorandum of Agreement. Contemporaneously with the execution of this  Agreement, the Parties shall execute, acknowledge, deliver and record a “short form”  memorandum of this Agreement in the form of Exhibit C attached hereto (the “Memorandum”).                                                ARTICLE IV          COMMENCEMENT DATE AND CONSTRUCTION OF FACILITIES                     4.1   Commencement Date. The “Commencement Date” under this Agreement shall   be the first Day of the Month following the date Gatherer notifies Shipper that (i) Gatherer has  obtained all required operating permits and/or approvals of regulatory authorities, and (ii) all of  the Commencement Date Facilities are ready to be placed in-service and operational to the extent  necessary to commence the full performance of the Services as contemplated by this Agreement  from the Receipt Point(s) to the Connecting Pipeline(s) (subject to Shipper’s obligation to  provide its pro rata share of line fill hereunder). Gatherer shall, subject to Force Majeure, use  commercially reasonable efforts to achieve the Commencement Date within one hundred eighty  (180) Days after the Effective Date; provided, however, the Parties acknowledge and agree that  there are a number of contingencies that may affect the actual Commencement Date, and,  accordingly, except for the rights and remedies set out in Section 4.5, neither Party shall have  any right or remedy against the other Party if the actual Commencement Date is earlier or later  than the anticipated Commencement Date.                     4.2   Construction of Commencement Date Facilities. Except for new facilities  provided by Gatherer pursuant to Section 4.3 hereof, Shipper shall, at its sole cost and expense,  install, own, operate and maintain all facilities and equipment upstream of the Receipt Points,  including on-lease tank batteries. Without limitation of the foregoing, Shipper shall arrange for  the supply of, and pay all Energy Costs associated with supplying of, continuous electrical power  service as required to operate all equipment, including Gatherer’s equipment, at all Receipt  Points to the extent Shipper has power available. If Shipper does not have power available at a  Receipt Point, Gatherer will use its commercially reasonable efforts to make power available for  its operations and Shipper will reimburse Gatherer for all Energy Costs. Shipper shall not bear  any responsibility for any Energy Costs attributable to the Gathering System downstream of the  Receipt Point(s). Gatherer shall, at its sole cost and expense, design, engineer, modify, construct  and equip, maintain and operate or caused to be designed, engineered, modified, constructed and  equipped, maintained and operated, the Gathering System, including the Commencement Date  Facilities and any facilities constructed by Gatherer pursuant to Section 4.3 hereof to connect  new Receipt Point(s), as necessary to perform the Services and all its obligations under this  Agreement as a reasonably prudent operator and in accordance with the Tariff. Gatherer may  design and shall expand, and may add or remove components of the Gathering System, as it  determines to be best, provided that such operations are consistent with Gatherer’s obligations  hereunder. Except through the payment of the rates specified in Article VIII or as otherwise  expressly provided in this Agreement, Shipper shall have no responsibility for the cost of the  Gathering System or any facilities constructed or to be constructed by Gatherer. The Receipt  Point(s), including the Initial Receipt Point(s), installed by Gatherer hereunder, at its sole cost  and expense, will contain a LACT and transfer pumps with the capacity at each such Receipt  Point to measure and pump at least 5,000 BPD of Shipper Crude Oil. Gatherer’s LACTs shall  include pipeline sample pots with capabilities to record quantity, API gravity, sediment and  water and sulfur content.                                         13 

 

       4.3  Construction of Receipt Point(s); Drilling Plans.                            (a)   In order to assist Gatherer in planning for future facilities which Gatherer   may install under this Agreement following the Effective Date, every six (6) Months during the   Term, Shipper shall provide to Gatherer copies of its current drilling plan(s) with respect to the   Dedicated Area. Shipper shall provide Gatherer with an update to its drilling plan(s) promptly   following any material change to a plan previously provided to Gatherer. Each drilling plan and   any associated updates provided to Gatherer by Shipper of the drilling plan(s) shall include (i)   the name and location of any new potential Receipt Point, (ii) Shipper’s estimate of the spud   date, completion date and date of first production with respect to each new Well(s) associated   with such new potential Receipt Point, and (iii) Shipper’s good faith estimate of the average   daily volume from such new potential Receipt Point.                            (b)   If, at any time after the Effective Date, Shipper desires that a new Receipt   Point for any Well(s) located within the Dedicated Area (other than Wells delivering Crude Oil to   the Initial Receipt Points identified in Exhibit B) be connected to the Gathering System, Shipper   shall provide written notice to Gatherer for new Receipt Points associated with Shipper Crude   Oil setting forth the expected date of first flow to Gatherer (the “Notification Date”), location   and volume profile for such Receipt Point in the form attached hereto as Exhibit E (a “New   Receipt Point Notification”). Following Gatherer’s receipt of a New Receipt Point Notification,   Gatherer shall promptly commence and diligently conduct all reasonable operations at Gatherer’s   sole cost and expense necessary to extend the existing Gathering System to each such new   Receipt Point described in such New Receipt Point Notification that Shipper desires to be   connected to the Gathering System by the later of (i)(A) for a new Receipt Point that is within   two (2) miles of the existing Gathering System and does not require BLM approval to be   connected to the Gathering System, one hundred twenty (120) Days after Gatherer’s receipt of   the applicable New Receipt Point Notification, or (B) for a new Receipt Point that is either more   than two (2) miles from the existing Gathering System and/or requires BLM approval to be   connected to the Gathering System, one hundred eighty (180) Days after Gatherer’s receipt of the  applicable New Receipt Point Notification, and (ii) the Notification Date (each such date, a  “Target RP In-Service Date”); provided, however, with respect to Receipt Point(s) that are  identified in New Receipt Point Notification(s) delivered by Shipper to Gatherer between the  Effective Date and the Commencement Date, the Target RP In-Service Date with respect to such  Receipt Point(s) shall be the later of the (i) Target RP In-Service Date (as defined above) or (ii)  within sixty (60) Days after the Commencement Date.                            (c)   If Gatherer fails or is unable to connect any such additional Receipt Point   by the applicable Target RP In-Service Date for any reason, then the Shipper Crude Oil   associated with such Receipt Point and the affected Well(s) and Interest(s) to which such Shipper   Crude Oil is attributable shall be temporarily released from the Dedication until such time as   such Receipt Point is connected, provided that, during such period, Gatherer shall have the right,   but shall have no obligation, to (or to cause its designee to) truck all or a portion of the Shipper   Crude Oil associated with such Receipt Point prior to the completion of such connection to   Gatherer’s Wink Terminal via the Gathering System (if available) or to one or more alternative   markets, purchasers, pipelines, processor or transporters designated by Producer in close   proximity thereto (if Gatherer’s Wink Terminal is not available), and by doing so, such Shipper   Crude Oil trucked by Gatherer or its designee shall be considered received hereunder and not                                          14 

 

temporarily released hereunder. If Gatherer elects the option to truck Barrels of Shipper Crude  Oil as provided in the immediately preceding sentence, (w) Shipper’s Priority Rate will apply to  all such Barrels, and (x) Gatherer shall redeliver such Shipper Crude Oil to Gatherer’s Wink  Terminal via the Gathering System (if available) or to one or more alternative markets,  purchasers, pipelines, processor or transporters designated by Producer in close proximity thereto  (if Gatherer’s Wink Terminal is not available). Shipper may, at its sole option, store or deliver   all or any portion of the Shipper Crude Oil temporarily released hereunder to Gatherer’s Wink  Terminal via the Gathering System (if available) or an alternative market, purchaser, pipeline,  processor or transporter (if Gatherer’s Wink Terminal is not available); provided, however, to the  extent that Gatherer does not elect its trucking option under this Section 4.3(c) and the temporary  release is not attributable to a Force Majeure, Gatherer shall reimburse Producer for Producer’s  out of pocket costs incurred during such release period on a per Barrel basis to truck Shipper  Crude Oil to Gatherer’s Wink Terminal via the Gathering System (if available) or such  alternative markets, purchasers, pipelines, or transporters (if Gatherer’s Wink Terminal is not  available), less the Shipper’s Priority Rate per Barrel.                           (d)   In addition to Gatherer’s obligations set forth in Section 4.3(c) above, if  Gatherer fails or is unable to connect any such additional Receipt Point by the date that is thirty  (30) Days beyond the applicable Target RP In-Service Date for any reason other than Force  Majeure, then, for each Day of unexcused delay until Gatherer connects such additional Receipt  Point beyond the Target RP In-Service Date, Gatherer shall temporarily reduce Shipper’s   Priority Rate to $0.375 per Barrel and Shipper’s Uncommitted Rate to $0.370 per Barrel for  Shipper Crude Oil delivered to such additional Receipt Point for only a period of time equal to  the amount of Days from the deadline set forth in the first sentence of this Section 4.3(d) until   the date such additional Receipt Point is connected; provided, however, on the first Day after the  expiration of such period of time, Shipper’s Priority Rate and Shipper’s Uncommitted Rate will  be increased to such rates, respectively, set out in Article VIII and Exhibit B. By means of  example, if Gatherer connects a requested Receipt Point fifty (50) Days after the Target In-  Service Date for such additional Receipt Point, and such delay is not due to an event of Force  Majeure, then the reduction in Shipper’s Priority Rate and Shipper’s Uncommitted Rate  described in the preceding sentence would apply to Shipper Crude Oil received at such additional  Receipt Point for the first twenty (20) Days after such additional Receipt Point is connected.                           (e)   Notwithstanding anything in this Section 4.3 to the contrary, if Gatherer  fails or is unable to connect any such additional Receipt Point by the date that is (i) one hundred  eighty (180) Days beyond the applicable Target RP In-Service Date for any reason other than  Force Majeure or (ii) two hundred seventy (270) Days beyond the applicable Target RP In-  Service Date due to Force Majeure, then Shipper shall have the right, immediately following  such period, to request and receive a permanent release from Gatherer of the affected Interest(s)  and Well(s) delivering to such additional Receipt Point (including the volumes of Crude Oil  associated therewith). Shipper acknowledges that the rights and remedies set forth in this   Section 4.3 shall be its sole and exclusive remedies in the event of Gatherer’s failure to timely  connect a requested additional Receipt Point.                           (f)   In the event that Gatherer completes an interconnection requested by  Shipper and paid for by Gatherer for any new Receipt Point, and after one hundred eighty (180)  Days following the date of completion of any such Receipt Point, Shipper has not used the                                         15 

 

 additional Receipt Point for any reason other than Force Majeure, then Shipper shall reimburse   any and all reasonable and documented out-of-pocket costs, expenses or fees incurred by  Gatherer related to the connection of such Receipt Point to the Gathering System (but excluding  trunklines, terminals or other facilities located downstream of the lateral gathering lines  constructed to connect such Receipt Point); provided that (i) Shipper shall not be required to  reimburse such costs, expenses or fees in the event Gatherer is otherwise utilizing the installed  pipelines and related equipment in a manner that is not reasonably expected to result in lost  profits or additional costs beyond the amounts anticipated for connecting the applicable  additional Receipt Point to the Gathering System, (ii) Gatherer shall prepare and deliver to  Shipper an itemized invoice of such costs, fees and expenses, which total amount shall be  reimbursed by Shipper in equal Monthly installments over a five (5) year period, with the first   such installment due within thirty (30) Days of receipt of Gatherer’s invoice, and (iii) in the   event Shipper reimburses Gatherer for all or a portion of such costs, fees and expenses and,   subsequently, such additional Receipt Point is later used by Shipper to deliver Shipper Crude   hereunder, then Shipper shall receive a credit, equal to the total or partial amount of such costs,   fees and expenses so reimbursed by Shipper, towards the payment of the amounts that would be   due from Shipper to Gatherer hereunder for the delivery of such Shipper Crude Oil at such new   Receipt Point.                       4.4  License and Right-of-Use. Gatherer is responsible, at its sole cost and expense,     for the acquisition and maintenance of easements, rights-of-way, fee lands and surface use    and/or surface access agreements necessary to construct, own and operate the Gathering    System. Notwithstanding the foregoing, upon Gatherer’s written request, to the extent that    Shipper is legally and contractually entitled to do so without the incurrence of cost or expense,    Shipper shall grant to Gatherer for purposes of constructing, owning, operating, repairing,    replacing and maintaining any portion of the Gathering System, a non-exclusive license and    right-of-use (including, without limitation, such license or right-of-use encompassed in    Shipper’s or its Affiliates’ oil and gas leases or other agreements with third parties) over,    across and under Shipper’s or its Affiliates, Interests as are reasonably necessary for such    purposes. Shipper shall have no obligation to execute any easements, rights-of-way, and/or    other conveyances of real property in connection with the foregoing license and right-of-use.    All facilities and other equipment acquired, placed, or installed by Gatherer for the purposes of    this Agreement pursuant to the provisions of this Section 4.4, will remain the property of    Gatherer. In the event Shipper identifies any issue with such Gatherer’s facilities on Shipper’s    or its Affiliates’ Interests, Shipper will notify Gatherer of such issue and Gatherer and Shipper    will work collaboratively to remedy the same. Gatherer shall be responsible for and release,    defend, indemnify, and hold the Shipper Indemnified Parties harmless from and against any    and all Claims and Losses, arising from or relating to Gatherer’s use of, or operations on, any    such non-exclusive license and right-of-use granted by Shipper, except to the extent such    Claims or Losses are caused by or attributable to the negligence, gross negligence or willful    misconduct of any of the Shipper Indemnified Parties. Shipper shall be responsible for and    release, defend, indemnify, and hold the Gatherer Indemnified Parties harmless from and    against any and all Claims and Losses, arising from or relating to Shipper’s use of, or    operations on, any fee lands, easements, right-of-way, or similar surface access rights owned or    maintained by Gatherer, except to the extent such Claims or Losses are caused by or    attributable to the negligence, gross negligence or willful misconduct of any of the Gatherer    Indemnified Parties.                                          16 

 

      4.5  Construction Delay.                           (a)   If the Commencement Date does not occur within two hundred ten (210)  Days after the Effective Date (“Project Deadline”), then Gatherer shall reimburse Shipper for  Shipper’s out of pocket costs on a per Barrel basis minus $0.75 per Barrel to truck Shipper Crude  Oil from the Dedicated Area to Gatherer’s Wink Terminal via the Gathering System (if  available) or to one or more alternative markets, purchasers, pipelines, processor or transporters  designated by Producer in close proximity thereto (if Gatherer’s Wink Terminal is not available)  after the Project Deadline that if not for the delay in the Commencement Date such Shipper  Crude Oil would have been gathered and transported on the Gathering System. Gatherer’s  payment obligation under this Section 4.5 hereunder shall continue until the earlier of the  Commencement Date or the termination of this Agreement. However, Gatherer shall have the  right, but shall have no obligation, to (or cause its designee to) truck all or a portion of such  Shipper Crude Oil as contemplated above and Shipper shall pay Gatherer Shipper’s Priority Rate  with respect to such trucking services. In the event that Gatherer’s Wink Terminal is not  complete during such period described above, Shipper Crude Oil may be trucked to an to one or  more alternative markets, purchasers, pipelines, processor or transporters designated by Producer  in close proximity thereto. Notwithstanding anything herein to the contrary, if the Project  Deadline is delayed due to a properly noticed event of Force Majeure, then the Project Deadline  shall be extended for each Day of any such delay.                           (b)   In addition to Gatherer’s obligations set forth in Section 4.5(a) above, if  the Commencement Date does not occur by the Project Deadline, then upon the Commencement  Date, Gatherer shall temporarily reduce Shipper’s Priority Rate to $0.375 per Barrel and  Shipper’s Uncommitted Rate to $0.370 per Barrel for only a period of time equal to the amount  of Days from the Project Deadline until the Commencement Date (“Delay Period”); provided,  however, on the first Day after the expiration of the period of time after the Commencement   Date equal to the Delay Period, Shipper’s Priority Rate and Shipper’s Uncommitted Rate will be  increased to such rates, respectively, set out in Article VIII and Exhibit B. By way of example, if  the Delay Period is equal to thirty (30) Days, then Shipper’s Priority Rate and Shipper’s  Uncommitted Rate will be $0.375 per Barrel and $0.370 per Barrel, respectively, for only the  first 30 Days after the Commencement Date and on the 31st Day after the Commencement  Period, Shipper’s Priority Rate and Shipper’s Uncommitted Rate shall be as set out in Article  VIII and Exhibit B. Notwithstanding anything herein to the contrary, if the Project Deadline is  delayed due to a properly noticed event of Force Majeure, then the Project Deadline shall be  extended for each Day of any such delay.                           (c)    If Gatherer fails to cause the Commencement Date to occur on or before  the four hundred eightieth (480th) Day after the Effective Date for any reason, due to Force  Majeure or otherwise, then Shipper, at Shipper’s option, shall be entitled to terminate this  Agreement in its entirety. Shipper’s right to terminate pursuant to this Section 4.5(c) shall expire  when the Commencement Date occurs.                     4.6   Connecting Pipelines. Gatherer shall install two (2) initial interconnections with  Connecting Pipelines: (i) at the Initial Delivery Point as of the Commencement Date, and (ii) at  one additional Delivery Point with the EPIC Crude Oil Pipeline or other pipeline with direct,  long-haul transportation to the Corpus Christi, Texas area, which Gatherer shall use                                         17 

 

 commercially reasonable efforts to install on or before December 31, 2019, subject to any delay   in the in service date for the EPIC Crude Oil Pipeline. In addition to such two (2) initial   interconnections, Shipper has the right to propose that Gatherer, at Gatherer’s sole cost and   expense, construct up to two additional interconnections with Connecting Pipelines, provided   that such additional interconnections are within five (5) miles of the Gathering System. In the   event Shipper reasonably requests additional interconnections with Connecting Pipelines in   excess of such two additional interconnections described in the immediately preceding sentence,   if Shipper agrees to pay Gatherer pursuant to a mutually agreeable facilities reimbursement   agreement an amount equal to all of the actual reasonable, direct and out-of-pocket costs  associated with such additional facilities, as determined by Gatherer, then Gatherer shall be  obligated to construct the proposed interconnection(s).                                                 ARTICLE V                      DELIVERY TO CONNECTING PIPELINES                      Gatherer shall deliver Shipper Crude Oil in accordance with the Services to Shipper or   for Shipper’s account at the Delivery Point(s) pursuant to the Tariff.                                                 ARTICLE VI                            GATHERER OBLIGATIONS          6.1   Provision of Services. Subject to the terms and conditions of this Agreement,   Gatherer shall, commencing on the Commencement Date and continuing through the remainder   of the Term of this Agreement, provide Services for Shipper Crude Oil in accordance with this   Agreement, including the Tariff, which is incorporated herein by reference and constitutes part    of this Agreement, expressly including provisions in the Tariff relating to the charges and rules   and regulations applicable to Shipper as a Party to this Agreement. Other than Gatherer’s   working tanks required in the process of transporting Crude Oil, the Services do not include any   terminaling, tankage or storage.                      6.2   Gatherer’s Prorationing Obligations; Priority Service. As set forth in the Tariff,   notwithstanding any other provisions of this Agreement, to the extent permitted by Applicable   Law, the terms of the Tariff shall provide generally that, subject to Gatherer’s rights and   remedies under Article XIX hereof, Defaults and Remedies, a tender of Shipper Crude Oil by   Shipper for transport on the Gathering System not exceeding Shipper’s Maximum Daily   Quantity and paying the Priority Rate for levels of applicable service on the Gathering System   (“Priority Service”), shall be entitled to the highest level of service on the Gathering System and   not be subject to prorationing to accommodate nominations of uncommitted volumes for   transport on the Gathering System or nominations of volumes for transport on the Gathering   System by shippers who do not elect to pay (or are not eligible thereunder) the Priority Rate for   such nominations. The allocation of the operational capacity of the Gathering System at any   given time among Priority Shippers and other Shippers is set forth in the Tariff. Notwithstanding   anything herein to the contrary, consistent with the Tariff, Gatherer agrees that, during the Term   of this Agreement, it will not enter into contracts with other Priority Shippers which, when taken   in the aggregate, along with Gatherer’s obligations to provide Priority Service to Shipper   hereunder, would obligate Gatherer to provide Priority Service on the Gathering System that  would exceed ninety percent (90%) of the capacity of the Gathering System. Gatherer agrees                                          18 

 

 that during the Term of this Agreement, Gatherer shall note create a higher level than Priority   Service.                                                ARTICLE VII                        NOMINATIONS AND OTHER TERMS                      7.1   Nominations. Commencing on the Commencement Date and  continuing   thereafter during the Term, Shipper agrees to tender (or cause to be tendered) at the Receipt   Points, Shipper Crude Oil to Gatherer for gathering and transportation on the Gathering System   as set forth on Exhibit B, in accordance with the nomination and tender procedures set forth in   the Tariff. Shipper expressly acknowledges and affirms that Gatherer is relying on Shipper’s   Dedication, together with the volume commitments and dedications from other Priority Shippers   executing COGAs, in order to establish the economic justification for the Gathering System.                      7.2   Unused Capacity. Shipper agrees, to the extent Shipper does not nominate or   tender up to Shipper’s Maximum Daily Quantity on the Gathering System in any Month,   Gatherer shall be free to utilize such unused capacity on the Gathering System for the provision   of gathering and transportation services to other shippers, but only to the extent and duration of   Shipper’s under-utilization of its capacity, without impacting the payment obligations of Shipper   or any other obligations of Shipper, including, but not limited to Shipper’s obligations pursuant   to Article III or otherwise crediting or paying Shipper in any manner. Nothing in this Section 7.2   shall operate to reduce or otherwise alter Shipper’s Maximum Daily Quantity.                      7.3   Tariff. Shipper’s nominations and tenders of Crude Oil for shipment, and   Gatherer’s scheduling, acceptance, gathering, transporting, measuring and delivering of Crude   Oil, shall, at all times, be subject to, and implemented in accordance with the Tariff. Shipper  shall comply with the Tariff at all times. The Tariff is subject to amendment by Gatherer in  accordance with Section 14.1 and Section 20.1.                       7.4  Linefill. Shipper shall provide (a) its share of linefill sufficient for the operation    of the Gathering System utilized by Shipper as required by the Tariff and (b) at least thirty (30)   Days prior to the Commencement Date (to the extent that the Commencement Date Facilities can   receive such linefill at such time), its proportionate share of linefill for the Gathering System to   be utilized by Shipper, as reasonably determined by Gatherer and specified in a written notice   given by Gatherer to Shipper at least thirty (30) Days prior to the Commencement  Date.   Gatherer shall not be required to provide the Services hereunder until Shipper provides its pro   rata portion of linefill.                      7.5   Off-Spec Crude Oil. The Tariff sets out that Gatherer reserves the right to reject   all tenders of Crude Oil and refuse transportation if Gatherer determines that Shipper has   delivered Crude Oil that does not conform to the Tariff’s specifications (as defined in the Tariff,   “Off-Spec Crude Oil”), all of which shall be determined by Gatherer in its reasonable discretion.   The Tariff also sets out under what conditions Gatherer may accept Off-Spec Crude Oil and  commingle the same with the common stream. In addition to the provisions in the Tariff,   Shipper and Gatherer may agree that (i) Gatherer will install and operate treatment facilities at  Receipt Point(s), for a mutually agreeable treating fee (which treating fee would be in lieu of  Shipper’s reimbursement of the actual costs and expenses incurred by Gatherer to treat, handle,                                           19 

 

 or otherwise dispose of such Off-Spec Crude Oil, as authorized in the Tariff), or (ii) Shipper or   its designee will install and operate treatment facilities upstream of the Receipt Point(s),   provided that such Party that is to install (or cause to be installed) such facilities shall use   commercially reasonable efforts to install (or cause to be installed) such facilities in a timely   manner. If Shipper and Gatherer agree that either Gatherer or Shipper shall install and operate   such treating facilities pursuant to the immediately preceding sentence, then Off-Spec Crude Oil   shall be temporarily released from this Agreement (free of any obligation to pay Gatherer the   Priority Rate or the Uncommitted Rate, as applicable), and Shipper may deliver such Off-Spec   Crude Oil to a third party, from the time such Crude Oil is determined to be Off-Spec Crude Oil   until such time as Gatherer is able to accept such Off-Spec Crude following the installation of   such treating facilities, provided, that Gatherer shall have the right, but shall have no obligation,   to (or cause its designee to) truck all or a portion of such Off-Spec Crude Oil to Gatherer’s Wink   Terminal via the Gathering System, and by doing so, such Off-Spec Crude Oil trucked by   Gatherer or its designee shall be considered received hereunder and accepted under the Tariff,   and not temporarily released hereunder. If Gatherer elects the option to truck Barrels of Off-   Spec Crude Oil as provided in the immediately preceding sentence, (i) Shipper’s Priority Rate   will apply to all such Barrels, and (ii) Gatherer shall redeliver such Off-Spec Crude Oil to   Gatherer’s Wink Terminal via the Gathering System. Notwithstanding the foregoing, if Shipper   and Gatherer do not agree (x) upon the terms under which Gatherer will install and operate   treatment facilities, or (y) that Shipper or its designee shall install and operate treatment facilities   upstream of the Receipt Point(s), within thirty (30) Days of the date of Gatherer’s initial proposal   to Shipper regarding the same, then, subject to Gatherer’s right to truck Off-Spec Crude Oil as   set forth in the previous two sentences of this Section 7.5, Off-Spec Crude Oil shall be   temporarily released from this Agreement from the time such Crude Oil is determined to be Off-   Spec Crude Oil; provided, however, after the expiration of such thirty (30) Day period until the   date that Shipper and Gatherer agree that either Gatherer or Shipper shall install and operate   treating facilities as provided in this Section 7.5, Shipper may continue to deliver such Off-Spec   Crude Oil to a third party, but shall pay Gatherer the Priority Rate or the Uncommitted Rate, as   applicable, for such volumes of Off-Spec Crude Oil as if such volumes were delivered to  Gatherer hereunder. For the avoidance of doubt, Shipper shall not be entitled to a release of Off-   Spec Crude Oil except as provided in this Section 7.5.                      7.6   Loss Allowance. Pursuant to the Tariff, Gatherer shall deduct the actual losses of   Shipper Crude Oil on a pro rata basis to cover losses inherent in the transportation of Shipper’s   Crude Oil on the Gathering System, provided that such loss allowance shall not exceed (i) two-   tenths of one percent (0.20%) of the volumes of Shipper Crude Oil received into the Gathering   System, with respect to Shipper Crude Oil having an API Gravity of 49.9 degrees or less, or (ii)   four-tenths of one percent (0.40%) of the volumes of Crude Oil received in the Gathering   System, with respect to Shipper Crude Oil having an API Gravity of 49.9 degrees to 60 degrees   (Gatherer will not accept for transportation Crude Oil with API Gravity above 60 degrees). The   volumes delivered to Shipper or its designee from Gatherer’s facilities shall be net of such   deduction.                      7.7   Commingling; Quality Bank. Pursuant to the Tariff, Gatherer shall be entitled to   commingle Shipper Crude Oil with other Crude Oil delivered to the Gathering System from   other shippers, and to transport Crude Oil in a common stream to the Delivery Point(s), provided   that Gatherer shall not knowingly accept any shipper’s delivery of Off-Spec Crude Oil if                                          20 

 

Gatherer determines that the quality of such Off-Spec Crude Oil, when commingled as a  common stream, would not meet the quality specifications in the Tariff. Gatherer shall not be  liable to Shipper for changes in gravity or quality of Shipper’s Crude Oil which may occur from  commingling or intermixing Shipper Crude Oil with other Crude Oil in the same common stream  while in transit, except to the extent that such commingling or intermixing would render  Shipper’s Crude Oil to be Off-Spec Crude Oil or undeliverable as a result of Off-Spec Crude Oil  received from other shippers. Shipper acknowledges that Shipper Crude Oil may be commingled  with other Crude Oil that Gatherer has purchased from and/or gathered for others; therefore, the  Crude Oil delivered at the Delivery Point(s) may not contain the same molecules as those  received by Gatherer at the Receipt Point(s). In the event that Crude Oil delivered from the  common stream to one or more Priority Shippers on the Gathering System consistently has an  API Gravity greater than ten degrees API than the Crude Oil delivered by such Priority Shipper  to Gatherer into the Gathering System, and (ii) a majority of Priority Shippers (at least two out   of three) request a quality bank agreement to address such differences in gravity, then Gatherer  and all Priority Shippers shall negotiate in good faith in an effort to enter into such an agreement,  and to the extent entered into, all Shippers on the Gathering System shall be subject thereto and  settled thereunder.                     7.8   Possession and Control; Liability. As between Shipper and Gatherer, (i) Shipper   is deemed in control and possession of Shipper Crude Oil delivered for Services hereunder until  Shipper delivers, or causes to be delivered, such Shipper Crude Oil at the Receipt Point(s) and  after Gatherer re-delivers, or causes to be re-delivered, such Shipper Crude Oil at the Delivery  Point(s), and (ii) Gatherer is deemed in control and possession of Shipper Crude Oil delivered for  Services hereunder from and after the time Shipper delivers, or causes to be delivered, such  Shipper Crude Oil at the Receipt Point(s) until Gatherer re-delivers, or causes to be re-delivered,  such Shipper Crude Oil at the Delivery Point(s).                                               ARTICLE VIII                                      FEES                     8.1   Tariff Filings and Rates. Shipper shall pay rates for all volume of Crude Oil  transported by Shipper on the Gathering System in accordance with the Tariff, which shall, to the  extent permitted by Applicable Law, provide for the following:                           (a)   Rate for Volumes up to Shipper’s Maximum Daily Quantity. For Actual  Shipments on the Gathering System each Day during a Month up to Shipper’s Maximum Daily  Quantity, Shipper shall pay to Gatherer a per Barrel Tariff rate (“Shipper’s Priority Rate”) equal  to the applicable base priority rate corresponding to Shipper’s average Daily Actual Shipments  during such Month, which shall be, as of the Commencement Date, the applicable base priority  rate set forth in Exhibit B attached hereto, and which shall be increased by Gatherer annually,  effective each January 1st after the Commencement Date, as provided in Section 8.3 hereof.                           (b)   Rate for Volumes in Excess of Shipper’s Maximum Daily Quantity. For  Actual Shipments on the Gathering System each Day during a Month in excess of Shipper’s  Maximum Daily Quantity, Shipper shall pay to Gatherer a per Barrel Tariff rate (“Shipper’s  Uncommitted Rate”) equal to the applicable base uncommitted rate corresponding to Shipper’s  average Daily Actual Shipments during such Month on the Gathering System, which shall be, as                                         21 

 

 of the Commencement Date, the applicable base uncommitted rate set forth in Exhibit B attached   hereto, and which shall be increased by Gatherer annually, effective each January 1st after the   Commencement Date, as provided in Section 8.3 hereof.                      8.2   Governmental Modifications. Notwithstanding anything herein to the contrary,   the Parties acknowledge that the Tariff rates payable for all Services are subject to the approval   of and modification by the FERC or any other Governmental Authority having jurisdiction,   subject in all respects to the terms and provisions and limitations of Article XIII.                      8.3   Fee Escalation. Effective as of 9:00 a.m., Central Clock Time, on the  first   January 1st that occurs two years after the Commencement Date, and each January 1st occurring   thereafter, Shipper’s Priority Rates and Shipper’s Uncommitted Rates shall be adjusted upwards   or downwards following FERC’s indexing adjustment, as set out in 18 C.F.R. § 342.3, including   future amendments or modifications thereof, provided, however, that such indexing adjustment   shall not result in an increase or decrease in the Shipper’s Priority Rate and/or Shipper’s   Uncommitted Rate that exceeds two percent (2%) or a decrease in the Shipper’s Priority Rate   and/or Shipper’s Uncommitted Rate that would result in a rate less than the rates set out in   Exhibit B. In the event that Gatherer is unable to make a tariff filing pursuant to 18 C.F.R. §   342.4(c) to adjust Shipper’s Uncommitted Rates, then Gatherer will make a tariff filing to adjust   Shipper’s Uncommitted Rates effective as of the subsequent July 1 pursuant to 18 C.F.R. §   342.3. However, if the FERC indexing adjustment is eliminated, the Parties agree to increase or   decrease Shipper’s Priority Rates and Shipper’s Uncommitted Rates to reflect any positive   changes or negative changes in the Producer Price Index for Finished Goods, on a year-over-year  basis, subject to the above-noted increase and decrease limitations.                                                 ARTICLE IX                               WARRANTY OF TITLE                       9.1  Title Warranty. Shipper represents and warrants to Gatherer that Shipper has title    to and/or the right to transport all Shipper Crude Oil delivered hereunder, and that, other than    Shipper’s Permitted Liens, said Shipper Crude Oil is free from liens, claims, encumbrances and    adverse claims, including liens to secure payment of production taxes, severance taxes, and    other taxes. SHIPPER SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD    HARMLESS THE GATHERER INDEMNIFIED PARTIES FROM AND AGAINST ALL    CLAIMS OF ANY AND ALL PERSONS RELATING TO OWNERSHIP OF  SAID    SHIPPER CRUDE OIL OR TO ROYALTIES, OVERRIDING ROYALTIES, TAXES,    LICENSE FEES, OR CHARGES THEREON. Gatherer shall not allow any liens, claims,    encumbrances or adverse claims arising by, through or under Gatherer to attach to Shipper    Crude Oil while in the possession and control of Gatherer, and GATHERER SHALL    RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS THE SHIPPER    INDEMNIFIED PARTIES FROM AND AGAINST ALL CLAIMS OF ANY AND ALL    PERSONS RELATING TO ANY SUCH LIENS, CLAIMS, ENCUMBRANCES OR    ADVERSE CLAIMS.                      9.2   Proceeds of Production. Shipper agrees to make payment of all royalties,   overriding royalties, production payments, and all other payments for interests attributable to                                           22 

 

Shipper Crude Oil delivered hereunder due to any Person under any leases or other documents in  accordance with the terms thereof.                     9.3   Indemnification. Shipper agrees to indemnify and hold the Gatherer Indemnified  Parties harmless from any and all Claims and Losses incurred in connection with, or in any  manner whatsoever relating to (i) any breach of the representations and warranties made by  Shipper pursuant to Section 9.1 above, and (ii) payment of Taxes, royalties, overriding royalties,  production payments, and all other payments for interests attributable to Shipper Crude Oil  delivered hereunder.                     9.4   Title to Shipper Crude Oil. Title to Shipper Crude Oil delivered or caused to be  delivered by Shipper to Gatherer hereunder at the Receipt Point(s) shall remain with Shipper and  shall not pass to nor vest in Gatherer at any point under this Agreement.                                                ARTICLE X                        WAIVER OF CERTAIN DAMAGES                     NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS  AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER  PARTY OR ITS AFFILIATES, ANY SUCCESSORS IN INTEREST OR ANY  BENEFICIARY OR ASSIGNEE OF THIS AGREEMENT FOR ANY  CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES,  INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS OR REVENUES THAT  CONSTITUTE SUCH DAMAGES, THAT ARISE OUT OF OR RELATE TO THIS  AGREEMENT OR ANY BREACH HEREOF; PROVIDED, HOWEVER, THE  FOREGOING SHALL NOT BE CONSTRUED AS LIMITING AN OBLIGATION OF A  PARTY HEREUNDER TO INDEMNIFY, DEFEND AND HOLD HARMLESS PERSONS  ENTITLED TO INDEMNIFICATION HEREUNDER AGAINST CLAIMS ASSERTED  BY UNAFFILIATED THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD  PARTY CLAIMS FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR  EXEMPLARY DAMAGES.                                                ARTICLE XI                                FORCE MAJEURE         11.1  Suspension of Obligations. If either Party is unable to perform any obligations   due to an event of Force Majeure, such failure shall not be a default under this Agreement,  insofar as such obligations are affected by such event of Force Majeure, for the duration of such  event of Force Majeure, and any additional period when Gatherer remains unable to perform  such obligations as a result of such event of Force Majeure. The Party incurring the Force  Majeure event will make reasonable attempts to remedy such event (it being agreed, without  limitation, that the terms of settlement of any strike, lockout, or other industrial disturbance will  be wholly in the discretion of such Party). The Party incurring the Force Majeure event will  promptly notify the other Party in writing of any event of Force Majeure affecting the ability to  perform its obligations and will provide a nonbinding, written estimate of the anticipated  duration of such Force Majeure event. Notwithstanding the foregoing, the existence of an event                                          23 

 

 of Force Majeure will not relieve either Party’s obligations hereunder to the extent any action or   inaction is not the result of Force Majeure.                      11.2  Definition of Force Majeure. The term “Force Majeure” shall mean any cause or   causes not reasonably within the control of the Party claiming suspension and which, by the  exercise of reasonable diligence, such Party is unable to prevent or overcome, including acts of  God, acts of Governmental Authorities, compliance with rules, regulations or orders of any  Governmental Authority, strikes, lockouts or other industrial disturbances, acts of the public  enemy, acts of terrorism, wars, blockades, insurrections, riots, epidemics, landslides, lightning,  earthquakes, fires, extreme cold, storms, hurricanes, floods, or other adverse weather conditions,  washouts, arrests and restraint of rulers and people, civil disturbances, explosions, breakage or  accident to machinery, equipment or pipelines, freezing of wells, pipelines or equipment,  requisitions, directives, diversions, embargoes, priorities or expropriations of government or  Governmental Authorities, legal or de facto, whether purporting to act under some constitution,  decree, law or otherwise, failure of pipelines or other gatherers to gather or furnish facilities for  transportation, failures, disruptions, or breakdowns of machinery or of facilities for production,  manufacture, transportation, distribution, processing or consumption (including, but not by way   of limitation, the Gathering System), allocation or curtailment by third parties of downstream   capacity, inability to secure or delays in securing permits from Governmental Authorities,   transportation embargoes or failures or delays in transportation or poor road conditions, partial or   entire failure of Crude Oil supply and downstream pipeline market constraints. “Force    Majeure” shall expressly exclude (i) delays in permitting that are not extraordinary or unusual   for the Dedicated Area and the development of the Permian Basin and other relevant basins, or   (ii) any matters within the reasonable control of Gatherer (such as easement, right-of-way, fee   land and surface right acquisition, the availability of labor, materials and supplies, and other   similar matters).                      11.3  Interruption of Operations. Pursuant to the Tariff, Gatherer may, without liability   to Shipper (but subject to and without limitation of Shipper’s release rights pursuant to the terms   and conditions of Section 3.4), interrupt the operations of its facilities for the purpose of   performing inspections, pigging, maintenance, testing, alterations, modifications, expansions,   connections, repairs or replacements, but such interruption shall be for only such time as may be   reasonable. Gatherer shall give Shipper at least thirty (30) Days’ advance written notice, except   in case of emergency, of its intention to interrupt operations and of the estimated time thereof.                                                ARTICLE XII                              DISPUTE RESOLUTION                      12.1  Resolution of Disputes. Any Dispute shall be resolved pursuant to the   provisions of this ARTICLE XII, which shall be the sole and exclusive procedures for the   resolution of any such Dispute. While the procedures in this ARTICLE XII are pending, each   Party shall continue to perform its existing obligations under the Agreement to the extent those   obligations are not the subject of the Dispute.                      12.2  Dispute Notice. Prior to submitting any Dispute for resolution by a court, a Party   shall provide written notice (a “Dispute Notice”) to the other of the occurrence of such dispute.   The Dispute Notice shall contain (i) a concise statement describing the Dispute, including a                                          24 

 

 description of its nature, circumstances and cause, (ii) an explanation of the basis and   justification for the Dispute, including reference to any pertinent provision(s) of the Agreement,   (iii) if applicable, the estimated dollar amount of the Dispute and how that estimate was   determined, (iv) the claiming Party's desired resolution, and (v) any other information the   claiming Party deems relevant.                      12.3  Direct Negotiation. Commencing within thirty (30) Days after the Dispute Notice   is received and concluding fifteen (15) Business Days thereafter, the authorized representatives   of the Parties with decision-making authority shall meet in person in Houston, Texas (or in a   place mutually agreed upon by the Parties to the Dispute) in an attempt to resolve the Dispute   raised in the Dispute Notice. If the Parties are unable to resolve the Dispute for  any reason   within such fifteen (15) Business Day period, then either Party shall be entitled to pursue any   remedies available at law or in equity; or as otherwise provided in this Agreement; provided,   however, this ARTICLE XII shall not limit a Party’s right to initiate litigation prior to the   expiration of the time periods set forth in this Section 12.3 if application of such limitations   would prevent a Party from filing a lawsuit or claim within the applicable period for filing   lawsuits (e.g. statutes of limitation, prescription, etc.).                      12.4  Jurisdiction and Venue; Jury Waiver . The Parties hereby irrevocably consent to   the exclusive jurisdiction of the state or federal courts located in Houston, Harris County, Texas   and irrevocably and unconditionally waive, to the fullest extent they may legally and effectively   do so, any objection which they may now or hereafter have to the laying of venue of any suit,   action or proceeding arising out of or relating to this Agreement or the transactions contemplated   hereby in any federal or state court located in Houston, Harris County, Texas. EACH PARTY   HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A  TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR  RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.          12.5  Costs and Expenses. The prevailing Party in any litigation pertaining to any   Dispute hereunder shall be entitled to recover its reasonable costs, expenses and attorney’s fees   in connection with such litigation.                      12.6 Confidentiality of Dispute Resolution.                                           25 

 

             (a)   The Parties agree that any Dispute and any negotiations among the Parties   in relation to any Dispute shall be subject to the confidentiality provisions of this Agreement.   The Parties further agree that any information, documents or materials produced for the purposes   of, or used in, negotiations of any Dispute shall be subject to the confidentiality provisions of this   Agreement. The Parties further agree that upon the request of the providing Party, any   information, documents or materials produced by such Party for the purpose of negotiations of   any Dispute shall be destroyed or returned to the providing Party within thirty (30) Days of the   resolution of such Dispute or the issuance of a final decision with respect to such Dispute;   provided, however, any confidential information (i) found in drafts, notes, studies and other   documents prepared by or for the receiving Party or its representatives, or (ii) found in electronic   format as part of receiving Party’s off-site or on-site data storage/archival process system, will be  held by the receiving Party or destroyed at the receiving Party’s option.                            (b)   Without limiting the foregoing, the Parties agree that disclosure of   confidential information to third parties may only be made if:                                  (i)   necessary to enforce any of the provisions of this Agreement,               including without limitation, any court judgment;                                  (ii)  such third party is an auditor, advisor, insurer, expert witness or               Affiliate of the disclosing party and has a legitimate need to know such               confidential information;                                  (iii) the disclosing Party is under a legal or regulatory obligation to               make such disclosure, but such disclosure shall be limited to the extent of such               legal obligation; or                                  (iv)  the non-disclosing Party provides prior written consent to the               disclosing Party to disclose such information.                            (c)   The Parties agree to submit to the jurisdiction of a court of competent   jurisdiction located in Houston, Harris County, Texas for the purpose of any proceedings to   enforce this Section 12.6 and, except as permitted under this Section 12.6(b), the receiving Party   shall prevent any information, documents or materials belonging to a disclosing Party from being   disclosed to third parties.                                                ARTICLE XIII                                DUTY TO SUPPORT                      13.1  Arm's Length Negotiations. Each of the Parties acknowledges and agrees that this   Agreement is the result of good faith, arm's length negotiations which have resulted in an  agreement that is fair and equitable to Gatherer and Shipper.                      13.2  Shipper Support. Shipper hereby agrees to any tariff rate filings for the Gathering   System which are made in accordance with this Agreement. Shipper agrees (i) not to challenge,   nor to encourage or recommend to any other Person that it challenge, or voluntarily assist in any   way any other Person in challenging, in any forum, any or all of the tariff rates for the Gathering   System and (ii) not to protest or file a complaint, nor encourage or recommend to any other                                          26 

 

 Person that it protest or file a complaint, or voluntarily assist in any way any other Person in   protesting or filing a complaint, with respect to any or all of the tariff rates for the Gathering   System in each case so long as the tariff rates are in accordance with, or not inconsistent with,   the terms of this Agreement. Furthermore, Shipper hereby agrees at its own cost, upon written   request by Gatherer provided at least ten (10) Days prior to the deadline for such action: (a) to   support Gatherer's applications for necessary certificates, approvals, authorizations and permits   of the FERC and Texas and New Mexico regulating bodies, if any, in relation to the Gathering   System; (b) to support the tariff rates calculated in accordance with the terms of this Agreement,   and not take any action directly or indirectly that could be interpreted as evidence of Shipper's   lack of support for such Tariff rates; and (c) to support the pro forma Tariff materially in the   form attached as Exhibit F, in any and all regulatory proceedings relating thereto and not take   any action or inaction that could be interpreted as evidence of Shipper's lack of support therefor;   provided that nothing in the foregoing shall obligate Shipper to support future changes to the   Tariff rates that are inconsistent with this Agreement, or prevent Shipper from opposing any  position taken by Gatherer before FERC and/or Texas and/or New Mexico regulating bodies that  is inconsistent with this Agreement.                      13.3  No Tariff Rate Revision Proceedings. Each of the Parties further acknowledges   that the setting of Tariff rates for the Gathering System is subject to the approval of, and   potential modification by, the FERC, from time to time, and each of the Parties hereby agrees not   to, directly or indirectly, commence or support any application, motion or other proceeding (a   "Tariff Rate Revision Proceeding") before the FERC for the purpose of requesting the FERC to   set tariff rates applicable to the Gathering System which are inconsistent with this Agreement.                      13.4  Third Party Proceedings. In the event of any Tariff Rate Revision Proceeding   being commenced by a third party or by the FERC itself, and in the event of any other   proceedings pursuant to which the Tariff rates for the Gathering System may be reviewed by the   FERC or other Governmental Authority having jurisdiction, Shipper agrees to support or defend   the setting of Tariff rates applicable to the Gathering System that are consistent with this   Agreement. In the event of any other proceedings challenging any of the terms of this    Agreement being commenced by a third party or by the FERC itself, Shipper agrees to provide   all reasonable support and cooperation in defending such terms or otherwise resolving the   complaint or other challenge (which may include, without limitation, modifying the terms of this   Agreement that are the subject of the challenge) as shall be requested by Gatherer.                       13.5 Modification of Agreement. Notwithstanding anything to the contrary set forth   herein, it is the intent of the Parties that Gatherer provide the Services to Shipper on a negotiated-   contract basis pursuant to the terms and conditions of this Agreement and the Tariff, and the   Parties hereby agree that, in the event that FERC or any other Governmental Authority seeks to   modify any rates under, or terms or conditions of, this Agreement that would have a greater than   de minimis detrimental economic or operational impact on either Party, then:                           (a)    to the maximum extent permitted by Applicable Law, it is the intent of the   Parties that the rates and terms and conditions established by FERC or such Governmental   Authority having jurisdiction will not alter the rates or terms and conditions set forth in this   Agreement, and the Parties shall vigorously defend and support in good faith the enforceability   of the rates and terms and conditions of this Agreement; and                                          27 

 

           (b)    if FERC or such Governmental Authority modifies the rates or terms and  conditions set forth in this Agreement, then the Parties hereby agree to negotiate in good faith to  enter into such amendments to this Agreement and or enter into a separate arrangement in order  to give effect, to the greatest extent permitted by law, to the rates and other provisions of this  Agreement; provided, however, if Gatherer and Shipper cannot arrive at such agreement  following such negotiations, either Party may terminate this Agreement by delivering written  notice thereof to the other Party, with such termination to be effective ninety (90) Days after the  delivery of such notice.                                               ARTICLE XIV        COMMON CARRIER AND COMPLIANCE WITH APPLICABLE LAWS                     14.1  Common Carrier Pipeline. The Gathering System will be operated as a common  carrier pipeline, and Shipper's rights hereunder shall be subject to all laws related to and  governing the operation of common carrier pipelines, including, without limitation, laws and  regulations that prevent discrimination in favor of any given shipper or the provision of service  for consideration other than the rate set forth in a published tariff. The Tariff shall apply to the  Services provided hereunder, and if there is a conflict between a provision of this Agreement and  the Tariff, the terms and conditions of the Tariff shall control and govern. Gatherer reserves the  right to modify or amend the Tariff, in its sole discretion, as it deems necessary in a manner  consistent with this Agreement and subject to the terms and conditions of Article XIII.                     14.2  Compliance with Laws. Both Parties shall, in carrying out the terms and  provisions of this Agreement, abide by all present and future laws of any Governmental  Authorities.                                               ARTICLE XV                                     TAXES         Gatherer shall not be responsible for or pay, and Shipper hereby agrees to pay and  indemnify, defend and hold harmless the Gatherer Indemnified Parties for, any and all Taxes,  import duties, license fees or other governmental charges, if any, levied on (i) Shipper Crude Oil  tendered under this Agreement, including property Taxes on such Crude Oil in the Gathering  System, (ii) the gathering of Shipper Crude Oil, (iii) Tariff rates, surcharges, or any other  payment, fee, charge or amount provided for in this Agreement or (iv) the provision of Services  hereunder; provided, however, that Shipper shall not be liable hereunder for (x) Taxes (including  ad valorem taxes) assessed against Gatherer based on Gatherer’s income, revenues, gross  receipts, net worth or ownership of the Gathering System, and (y) state franchise, license and  similar Taxes required for the maintenance of Gatherer’s corporate existence. In the event  Gatherer is required to pay any Tax for Shipper, Shipper shall reimburse Gatherer for the same  per invoice provided by Gatherer. The payment, indemnity, defense and hold harmless  obligations set forth in this ARTICLE XV shall survive the termination of this Agreement.                                               ARTICLE XVI                                  ASSIGNMENT                                          28 

 

       This Agreement shall extend to and inure to the benefit of and be binding upon the   Parties, and their respective successors and permitted assigns, including any assigns of Shipper’s   Interests covered by the Dedication and of any interest of Gatherer in the Gathering System;   provided, however, (i) neither Party may assign this Agreement without the prior written consent   of the non-assigning Party, such consent not to be unreasonably withheld, conditioned or  delayed, (ii) any transfer by Shipper of any of its Interests in the Dedicated Area and any transfer  by Gatherer of any of its interest in the Gathering System or this Agreement shall be expressly  made subject to the terms and conditions of this Agreement and (iii) if requested by the non-   assigning Party, the assigning Party shall not transfer or assign this Agreement or its Interests in   the Dedicated Area or Gathering System, as applicable, without first requiring the transferee to   execute and deliver to the non-assigning Party an agreement expressly assuming the assigning   Party’s obligations under this Agreement and including such other items that need to be   addressed in connection with any such transfer or assignment or as may be reasonably requested   by the non-assigning Party. Assignment by either Party in compliance with the foregoing   requirements shall not relieve such Party of any liabilities, obligations or duties accruing   hereunder before the date of such assignment, but shall relieve such Party of any liabilities,   obligations or duties accruing hereunder after the date of such assignment. Notwithstanding the   foregoing:                            (a)   Shipper may assign its rights and obligations under this Agreement to any   Person to whom Shipper assigns or transfers an interest in any of the Interest(s) or Well(s),   insofar and only insofar as, this Agreement relates to such Interest(s) or Well(s), without the   consent of Gatherer; provided that (i) such Person is at least as creditworthy as Shipper is as of   the Effective Date and at the time of such assignment, (ii) such Person assumes in writing the   obligations of Shipper under this Agreement insofar as it relates to such Interest(s) or Well(s),   and (ii) if such transfer or assignment is to a Person that is not an Affiliate of Shipper, Shipper   shall be released from its obligations under this Agreement with respect to such Interest(s) or   Well(s) so assigned or transferred, except for its obligations arising prior to the date of   assignment. For the avoidance of doubt, (i) no assignee or transferee of Shipper shall assume the   Dedication of this Agreement in its entirety, but shall only be subject to, and assume, such   Dedication insofar and only insofar as the Interest(s) or Well(s) assigned or transferred to such   assignee or transferee and (ii) Gatherer shall not be required to install supplemental meters or   other facilities at existing Receipt Points, or undertake additional obligations or incur additional   expenses as a result of such assignment (provided the Parties shall reasonably cooperate to   establish a procedure for the allocation of Crude Oil delivered at existing Receipt Points between   Shipper and such transferee or assignee, if applicable); and                            (b)   either Party may assign (or grant a lien or security interest in) this   Agreement to any Person as security in connection with arranging financing for such Party or   any Affiliate of such Party or upon enforcement of any such lien or security (and each Party   agrees to execute all consents, estoppels, waivers and other documents and instruments   reasonable requested by any such Person).                      Any assignment made in violation of this ARTICLE XVI shall be void ab initio.                                               ARTICLE XVII                                      OFFER                                          29 

 

      17.1  Effect of Unsigned Copy. The submission of an unsigned copy of this Agreement  to Shipper shall not constitute an offer.                     17.2  Irrevocable Offer by Shipper. Shipper acknowledges that, upon closing of the  Open Season, Gatherer will undertake significant work and incur significant expense in  connection with the Gathering System. Further, Gatherer may be required to allocate capacity  among potential Priority Shippers; provided, however, such allocation shall not limit or  otherwise alter Shipper’s MDQ as set forth in this Agreement. In consideration of the foregoing  and other good and valuable consideration, the receipt and sufficiency of which are hereby  acknowledged by Shipper, Shipper agrees that the submission of a signed copy of this  Agreement by Shipper to Gatherer shall constitute an offer by Shipper that shall be irrevocable.                                              ARTICLE XVIII                           NOTICES AND STATEMENTS                     18.1  Notice. Any notice, statement, payment, claim or other communication required  or permitted hereunder shall be in writing and shall be sent by: (i) facsimile transmission; (ii)  email, (iii) delivered by hand; (iv) sent by United States mail with all postage fully prepaid; or  (v) by courier with charges paid in accordance with the customary arrangements established by  such courier, in each of the foregoing cases addressed to the Party at the following addresses:                    Gatherer:        NOTICES AND CORRESPONDENCE:                                     Salt Creek Midstream, LLC                        200329 State Highway 249                        Floor 4                        Houston, TX 77070                        Attn: Paul Williams                        Email: paul.williams@armenergy.com                                                  With a copy to:                                     Salt Creek Midstream, LLC                        20329 State Highway 249                        Floor 4                        Houston, TX 77070                        Attn: Contract Administration                        Email: contracts@armenergy.com                                                  ACCOUNTING MATTERS:                                          30 

 

                 Salt Creek Midstream, LLC                   200329 State Highway 249                   Floor 4                   Houston, TX 77070                   Attn: Bryan Fullmer                   Email: bryan.fullmer@armenergy.com                                             PAYMENTS                                Bank Name:                    ABA No.:                    Account No.:                             Shipper:         NOTICES AND CORRESPONDENCE:                                Lilis Energy, Inc.                   300 E. Sonterra Blvd, Suite 1220                   San Antonio, TX 78258                   Attention: Accounting and Operations                   Telephone: 210-999-5400                   Facsimile 210-999-5401                    With a copy to:                    RDP Producer Services, LLC                   10300n Town Park, Suite SE1000                   Houston, TX 77072                   Attn: David Lipp                   Fax: 281-849-8911                   Email: dlipp@republicpartnersllc.com                    ACCOUNTING MATTERS:                    Lilis Energy, Inc.                   300 E. Sonterra Blvd, Suite 1220                   San Antonio, TX 78258                   Attention: Patrick Tumer                   Telephone: 817-502-1635                   Facsimile: 210-999-5401                   Email: AP@Lilisenergy.com                                PAYMENTS                                Bank Name:                                      31 

 

                       Account Name:                          Account Number:                          ABA:                Such notices, statements, payments, claims or other communications shall be deemed received as  follows: (i) if delivered personally, upon delivery; (ii) if sent by United States mail, whether by  express mail, registered mail, certified mail or regular mail, the Day receipt is refused or is  confirmed orally or in writing by the receiving Party; (iii) if sent by a courier service, upon  delivery; or (iv) if sent by facsimile or email, upon completion of the transmission thereof,  except that if such transmission is on any Day other than a Business Day, or on or after 4:00  p.m., Central Clock Time, such notice shall be deemed to be received on the next Business Day.                      18.2  Change of Address and Payment Instructions. Notices of change of address or   payment instructions of either of the Parties shall be given in writing to the other Party in the   manner aforesaid and shall be observed in the giving of all future notices, statements, payments,   claims or other communications required or permitted to be given hereunder.                                                ARTICLE XIX                            DEFAULTS AND REMEDIES                      19.1  Shipper Default. The following events shall be a “Shipper Default”: the   occurrence and continuation of (i) a breach or default by Shipper of any of its payment   obligations under this Agreement or the Tariff, or (ii) a material breach or default by Shipper of   any of its obligations under this Agreement or the Tariff, unless such breach or default, or   material breach or default, as applicable, occurs as a result of a breach or default by Gatherer of   its obligations under this Agreement or the Tariff.                      19.2  Remedies on Shipper Default. Upon the occurrence of a Shipper Default,   Gatherer may provide written notice to Shipper, describing the Shipper Default in reasonable   detail and requiring Shipper to cure the Shipper Default (the “Shipper Default Notice”). If (a) a   Shipper Default comprising Shipper’s failure to make any payment due hereunder has not been   cured within ten (10) Business Days following receipt by Shipper of a Shipper Default Notice, or   (b) a Shipper Default comprising Shipper’s failure to comply with any obligation under this   Agreement or the Tariff, other than a payment obligation, has not been cured within thirty (30)   Days after receipt by Shipper of a Shipper Default Notice, or, if such failure is not reasonably   capable of being cured within a thirty (30) Day period, but Shipper expeditiously commences to   cure the same following its receipt of a Shipper Default Notice and diligently proceeds with such   cure, within such longer period of time as shall be reasonably necessary to cure such failure, then   in any such case, Gatherer may, by written notice to Shipper:                           (a)    inform Shipper of its intention to terminate this Agreement if such Shipper   Default is not cured within a further thirty (30) Day period, and if any such Shipper Default has   not been cured within such further period of thirty (30) Days, Gatherer may, by written notice to   Shipper, terminate this Agreement, any such termination to be effective upon receipt of such   termination notice by Shipper; and/or                                           32 

 

            (b)    temporarily suspend Shipper's right to be treated as a Priority Shipper for   purposes of the prorationing rule of the Tariff until such default is cured.                      The rights and remedies under this Section 19.2 shall be in addition to all of Gatherer's   other rights and remedies under this Agreement or which Gatherer may otherwise have at law, in   equity or by statute or regulation, and the exercise of one or more rights or remedies shall not   prejudice or impair the concurrent or subsequent exercise by Gatherer of other rights or   remedies.                      19.3  Gatherer Default. Subject to Section 11.1 hereof, the following events shall be a   “Gatherer Default”: the occurrence and continuation of (i) a breach or default by Gatherer of   any of its payment obligations under this Agreement or the Tariff, or (ii) a material breach or   default by Gatherer of any of its obligations under this Agreement, unless such breach or default,   or material breach or default, as applicable, occurs as a result of a breach or default by Shipper of   its obligations under this Agreement or the Tariff.                      19.4  Remedies on Gatherer Default. Upon the occurrence of a Gatherer Default,   Shipper may provide written notice to Gatherer, describing the Gatherer Default in reasonable  detail and requiring Gatherer to cure the Gatherer Default (the “Gatherer Default Notice”). If   (a) a Gatherer Default comprising Gatherer's failure to make any payment due hereunder has not   been cured within ten (10) Business Days following receipt by Gatherer of a Gatherer Default   Notice, or (b) a Gatherer Default comprising Gatherer's failure to comply with any obligation   under this Agreement or the Tariff, other than a payment obligation, has not been cured within   thirty (30) Days after receipt by Gatherer of a Gatherer Default Notice, or, if such failure is not   reasonably capable of being cured within a thirty (30) Day period, but Gatherer expeditiously   commences to cure the same following its receipt of a Gatherer Default Notice and diligently   proceeds with such cure, within such longer period of time as shall be reasonably necessary to   cure such failure, then in any such case, Shipper may, by written notice to Gatherer, inform   Gatherer of its intention to terminate this Agreement if such Gatherer Default is not cured within   a further thirty (30) Day period, and if any such Gatherer Default has not been cured within such   further period of thirty (30) Days, Shipper may, by written notice to Gatherer, terminate this   Agreement, any such termination to be effective upon receipt of such termination notice by   Gatherer. The rights and remedies under this Section 19.4 shall be in addition to all of Shipper’s   other rights and remedies under this Agreement or the Tariff or which Shipper may otherwise   have at law, in equity or by statute or regulation, and the exercise of one or more rights or   remedies shall not prejudice or impair the concurrent or subsequent exercise by Shipper of other   rights or remedies.                      19.5  Excused Performance. Either Party shall be entitled to suspend performance   hereunder in the event:                            (a)   the other Party has voluntarily filed for bankruptcy protection under any   chapter of the United States Bankruptcy Code;                            (b)   the other Party is the subject of an involuntary petition of bankruptcy   under any chapter of the United States Bankruptcy Code, and such involuntary petition has not   been settled or otherwise dismissed within ninety (90) Days of such filing; or                                           33 

 

            (c)   the other Party otherwise becomes insolvent, whether by an inability to  meet its debts as they come due in the ordinary course of business or because its liabilities  exceed its assets on a balance sheet test; and/or however such insolvency may otherwise be  evidenced.                      19.6 Adequate Assurances. When reasonable grounds for insecurity of payment or   performance arise with respect to a Party (the “Impaired Party”), including, without limitation,   as a result of the occurrence of a material change in the creditworthiness of the Impaired Party   or the Impaired Party’s failure to timely pay any amounts due hereunder other than amounts   subject to a good-faith dispute, the other Party (the “Insecure Party”) may demand adequate   assurance of performance, and in the absence of the provision of such assurance from the   Impaired Party within three (3) Business Days of request, suspend further performance and/or   exercise its rights under this Article XIX, including the right to terminate this Agreement.   Adequate assurance shall mean security in the form, amount and for the term reasonably   specified by the Insecure Party, including, but not limited to, a standby irrevocable letter of   credit issued by a financial institution reasonably acceptable to the Insecure Party, a   prepayment or a guarantee by an entity deemed creditworthy at the sole discretion of the   Insecure Party, advance cash payment or other satisfactory security reasonably acceptable to   the Insecure Party.                      19.7 Audit. Either Party, upon notice in writing to the other Party, may during normal   business hours audit the accounts and records relating to any invoice under this Agreement and   the Tariff within the twenty four (24) Month period following the end of the calendar year in   which an invoice was rendered; provided, however, that the auditing Party must make a claim   in writing upon the other Party for all discrepancies disclosed by said audit within said twenty   four (24) Months. Any audit shall be conducted by the auditing Party or its representative at    the auditing Party’s expense. Any invoices or settlement statements shall be final as to all   Parties unless questioned within said twenty four (24) Months.                                               ARTICLE XX                                MISCELLANEOUS                     20.1  Entire Agreement; Amendments. This Agreement and the Exhibits hereto  constitute the entire agreement and understanding between the Parties with respect to the subject  matter hereof and thereof, supersede all prior agreements and understandings with respect  thereto, and may be amended, restated or supplemented only by written agreement of the Parties.  Notwithstanding the foregoing, the Tariff is subject to amendment by Gatherer from time to time  subject to Applicable Law (and subject to the limitations of Section 14.1 and Article XIII).                     20.2  Governing Law. This Agreement shall be governed and construed in accordance  with the laws of the state of Texas without giving effect to the conflict of law rules thereof.                     20.3  No Drafting Presumption. No presumption will operate in favor of or against any  Party as a result of any responsibility that any Party may have had for drafting this Agreement.  Shipper and Gatherer acknowledge and mutually agree that this Agreement and all contents  herein were jointly prepared by the Parties.                                          34 

 

      20.4  Waiver. No waiver of any term, provision or condition of this Agreement shall be  effective unless in writing signed by the Parties, and no such waiver shall be deemed to be or  construed as a further or continuing waiver of any such term, provision or condition or as a  waiver of any other term, provision or condition of the Agreement, unless specifically so stated  in such written waiver.                     20.5  No Third Party Beneficiaries. Except for Persons indemnified hereunder, this  Agreement is not for the benefit of any third party and nothing herein, expressed or implied,  confers any right or remedy upon any Person not a party hereto.                     20.6  No Partnership. It is not the intention of the Parties to create, nor is there created  hereby, a partnership, trust, joint venture or association. The status of each Party hereunder is  solely that of an independent contractor.                     20.7 Confidentiality.                           (a)   Except with respect to the Memorandum and as otherwise set forth herein,  each Party agrees that it shall maintain all terms and conditions of this Agreement in strictest  confidence, and that it shall not cause or permit disclosure of this Agreement or any provisions  contained herein without the express written consent of the other Party.                           (b)   Permitted Disclosures. Notwithstanding Section 20.7(a) of this  Agreement, disclosures of any terms and provisions of this Agreement otherwise prohibited may  be made by either Party (i) to the extent necessary for such Party to enforce its rights hereunder  against the other Party; (ii) to the extent to which a Party is required to disclose all or part of this  Agreement by a statute or by the order or rule of a court, agency, or other governmental body  exercising jurisdiction over the subject matter hereof, by order, by regulations, or by other  compulsory process (including, but not limited to, deposition, subpoena, interrogatory, or request  for production of documents); (iii) to the extent required by the applicable regulations of a  securities or commodities exchange; (iv) to a third Person in connection with a proposed sale or  other transfer of a Party’s interest in this Agreement, provided such third Person agrees in  writing to be bound by the terms of this Section 20.7; (v) to its own directors, officers,  employees, agents and representatives; (vi) to an Affiliate; or (vii) to a co-working interest owner  or royalty owner of Shipper Crude Oil delivered hereunder, provided such co-working interest  owner or royalty owner agrees in writing to be bound by the terms of this Section 20.7.                           (c)   Notification. If either Party is or becomes aware of a fact, obligation, or  circumstance that has resulted or may result in a disclosure of any of the terms and conditions of  this Agreement authorized by Section 20.7(b) (ii), (iii) or (iv) above, it shall so notify in writing  the other Party promptly and shall provide documentation or an explanation of such disclosure as  soon as it is available.                           (d)   Party Responsibility. Each Party shall be deemed solely responsible and  liable for the actions of its directors, officers, employees, agents, representatives and Affiliates  for maintaining the confidentiality commitments of this Section 20.7.                           (e)   Public Announcements. The Parties agree that prior to making any public  announcement or statement with respect to this Agreement or the transaction represented herein,                                         35 

 

the Party desiring to make such public announcement or statement shall provide the other Party  with a copy of the proposed announcement or statement prior to the intended release date of such  announcement. The other Party shall thereafter consult with the Party desiring to make the  release, and the Parties shall exercise their reasonable best efforts to (i) agree upon the text of a  joint public announcement or statement to be made by both such Parties or (ii) in the case of a  statement to be made solely by one Party, obtain approval of the other Party to the text of a  public announcement or statement. Nothing contained in this Section 20.7 shall be construed to  require either Party to obtain approval of the other Party to disclose information with respect to  this Agreement or the transaction represented herein to any Governmental Authority to the extent  required by Applicable Law or necessary to comply with disclosure requirements of the  Securities and Exchange Commission, New York Stock Exchange, or any other regulated stock  exchange.                     20.8  Headings. The headings and captions in this Agreement have been inserted for  convenience of reference only and shall not define or limit any of the terms and provisions  hereof.                     20.9 Rules of Construction. In construing this Agreement, the following principles  shall be followed:                           (a)  examples shall not be construed to limit, expressly or by implication, the  matter they illustrate;                           (b)  the word “includes” and its syntactical variants mean “includes, but is not  limited to” and corresponding syntactical variant expressions;                           (c)  the plural shall be deemed to include the singular and vice versa, as  applicable;                           (d)  all references in this Agreement to an “Article,” “Section,” “subsection,”  or “Exhibit” shall be to an Article, Section, subsection, or Exhibit of this Agreement, unless the  context requires otherwise;                           (e)   unless the context otherwise requires, the words “this Agreement,”  “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this  Agreement as a whole and not to a particular Article, Section, subsection, clause or other  subdivision hereof; and                           (f)   each Exhibit to this Agreement is attached hereto and incorporated herein  as a part of this Agreement, but if there is any conflict or inconsistency between the main body   of this Agreement and any Exhibit, the provisions of the main body of this Agreement shall  prevail, except as to any conflicts with the Tariff.                     20.10 Survival. Notwithstanding the termination of this Agreement for any reason, (a)  ARTICLES VIII, IX, X, XII, XIII, XV, XVIII, XIX and XX shall survive the termination of this  Agreement; and (b) each Party to this Agreement will be liable for all of its accrued obligations  hereunder up to and including the date on which the termination becomes effective.                                          36 

 

      20.11 Severability. If any provision of this Agreement shall be held to be invalid, illegal  or unenforceable, (i) the validity, legality and/or enforceability of the remaining provisions shall  not, in any way, be affected or impaired thereby and (ii) in lieu of such invalid, illegal or  unenforceable provision, there shall be automatically added to this Agreement a provision as  similar to such invalid, illegal or unenforceable provision as may be possible and be legal, valid  and enforceable.                     20.12 Further Assurances. Each Party shall take such acts and execute and deliver such  documents as may be reasonably required to effectuate the purposes of this Agreement.                     20.13 Liquidated Damages. The circumstances of this Agreement are such that a Party  will be exposed to substantial injury if the other Party does not timely perform under this  Agreement, and the injuries that may occur to such Party could take a variety of forms. Where  this Agreement imposes on a Party an obligation to pay to the other Party certain monetary sums,  or provide other value to the other Party, as a result of certain non-performance or delayed  performance under this Agreement, such sums or other value are intended to serve as liquidated  damages for certain of the injuries to such other Party. The Parties stipulate and agree that  (a) the injury that would be caused to a Party as a result of the other Party’s non-performance or  delayed performance would be difficult to estimate accurately, (b) the sums or other value to be  provided to such Party under this Agreement in such circumstances are intended to serve as a  liquidated damages and not as a penalty, and (c) such sums or other value represent the Parties’  reasonable estimate at this time of the probable damages that would be suffered by a Party in the  various scenarios addressed in this Agreement.                     20.14 Counterpart Execution. This Agreement may be executed in any number of  counterparts, each of which shall be considered an original, and all of which shall be considered  one and the same instrument. Neither Party shall be bound until both Parties have executed a  counterpart. Facsimile or other electronic copies of signatures shall constitute original signatures  for all purposes of this Agreement and any enforcement hereof.                                           [Signature page follows]                                          37 

 

      IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as  of the Effective Date.                                                GATHERER                                                SALT CREEK MIDSTREAM, LLC                                                        By: /s/ Michael S. Christopher                                              Name: Michael Christopher                                        Title: Chief Financial Officer                                                        SHIPPER                                                LILIS ENERGY, INC.                                                        By: /s/ Joseph C. Daches                                                    Name: Joseph C. Daches                                         Title: CFO                                                                                                                                                                                                                                                                                   38                                        

 

                                                        EXHIBIT A                                                   DEDICATED AREA                                                                 TEXAS AND NEW MEXICO                                                                                                      Legal Description          County  Sec. 1, Blk. 75            Winkler  Sec. 1, Blk. C-24          Winkler  Sec. 10, Blk. 74           Winkler  Sec. 10, Blk. C-23         Winkler  Sec. 11, Blk. 74           Winkler  Sec. 11, Blk. C-23         Winkler  Sec. 12, Blk 74            Winkler  Sec. 12, Blk. C-23         Winkler  Sec. 13, Blk. 74           Winkler  Sec. 13, Blk. C-23         Winkler  Sec. 14, Blk. 74           Winkler  Sec. 14, Blk. C-23         Winkler  Sec. 15, Blk. 27           Winkler  Sec. 15, Blk. C-17          Reeves  Sec. 15, Blk. C-23         Winkler  Sec. 16, Blk. C-23         Winkler  Sec. 17, Blk. C-23         Winkler  Sec. 17, T26S R36E           Lea  Sec. 18, Blk. C-23         Winkler  Sec. 18, T25S R36E           Lea  Sec. 18, T26S R36E           Lea  Sec. 19, Blk. C-23         Winkler  Sec. 19, Blk. C-25          Loving  Sec. 19, T25S R36E           Lea  Sec. 19, T26S R36E           Lea  Sec. 2, Blk. C-24       Winkler/Loving  Sec. 20, Blk. C-23         Winkler  Sec. 20, T26S R36E           Lea  Sec. 21, Blk. C-23         Winkler  Sec. 21, T26S R35E           Lea  Sec. 22, Blk. 74           Winkler  Sec. 22, Blk. C-23         Winkler  Sec. 23, Blk. 74           Winkler  Sec. 23, Blk. C-17          Reeves  Sec. 23, Blk. C-23         Winkler  Sec. 24, Blk. 74           Winkler  Sec. 24, Blk. C-23         Winkler  Sec. 25, Blk. 74           Winkler  Sec. 25, Blk. C-23         Winkler  Sec. 26, Blk. 74           Winkler  Sec. 26, Blk. C-23         Winkler  Sec. 27, Blk. 74           Winkler  Sec. 27, Blk. C-23         Winkler  Sec. 27, T26S R36E           Lea  Sec. 29, Blk. 74           Winkler  Sec. 29, T25S R36E           Lea  Sec. 3, Blk. C-24       Winkler/Loving                      

 

Sec. 30, Blk. 74           Winkler  Sec. 30, T25S R36E           Lea  Sec. 31, Blk. 74           Winkler  Sec. 32, Blk. 74           Winkler  Sec. 33, Blk. 74           Winkler  Sec. 4, Blk. C-24       Winkler/Loving  Sec. 5, Blk. 74            Winkler  Sec. 6, Blk. 27         Winkler/Loving  Sec. 6, Blk. 74            Winkler  Sec. 6, T26S R36E            Lea  Sec. 7, Blk 74             Winkler  Sec. 7, Blk. C-23          Winkler  Sec. 7, T26S R36E            Lea  Sec. 8, Blk. 74            Winkler  Sec. 8, Blk. C-23          Winkler  Sec. 9, Blk. 74            Winkler  Sec. 9, Blk. C-23          Winkler                     The above-described Dedicated Area is depicted in the attached plat.                      

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2 E                                                                                                                                                                                                                                                                                                                                                    2 E                                                                  2 E                                                                                             2 2E                                                                 2 E                                                                  2 E                                                                 2 E                                                                                                                                                                                       2 E  2 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           2                            2 E                                                                                                                                                                                                                                                                                                                                                                                                                      2 E                                                                 2 2E                                                                 2 E                                                                  2 E                                                                 2 E                                                                   2 E                                                                2 E                                              2 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    D E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             2                                                                                                                                                      A E                                         Y                                      Y                                                                             D                                      D                                                                             D                                      D                                                                             E 2 E                                  E                                   2 E                                                                  2                2E                                                  2     E                                                              2 E                                                                 2 E                                                                 2 E                                                                  2 E                                              2 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            22                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    2 2E                                                     2 E                                                                 2 E                                                                  2 E                                                                 2 E                                                                  2 E                                              2 E  2 E 2 E                                                                                 M                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        C22                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            C2                                                                                                                                                                                               C                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         C2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          C2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     2                                                                                                                                                                                                                                                                                                                                                                                                                                                                       2                                                                                                                                                                                                                                             C2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           2        A V N G                                                                                                                                                                                                                                                                                                                                                                         2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        2                                                                                                                                2                                                2                                                                    2                                                                   2      2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                \ LILIS_ACREAGE.mxdLilis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            \                                                                                                                                                                                                         2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           LILIS                                                                                                           2                                                                  C2                                                                                                                                                                                                                                                                                                                                                                      C2                                                                           2                                                                                                                                                                                                                                                                                                                      \ Energy  Companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     2                                                 E E N E                                                                                                                                                                                                                                                                                                                                                                  2                                                        E      E     N      E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                \ SALT_CREEK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Projects                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           \                                                                       2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         \ GIS                                                                                                                                               C2                                                                                                                                                                                                                                                         ‘                                                                                                                                                                                                                         Miles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Document  Path:  M:                                                                                                                                      

 

                                  EXHIBIT B   INITIAL RECEIPT POINTS; INITIAL DELIVERY POINTS; MDQ; RATES               Shipper’s MDQ of 35,000 BPD  Priority Rate of $0.75 per Barrel  Uncommitted Rate of $0.74 per Barrel                Other Charges:                Notwithstanding anything to the contrary in the Tariff, Shipper shall not be subject to or   obligated to pay any truck loading or unloading charges for any Crude Oil shipments   trucked hereunder, regardless of whether trucked by Shipper or Gatherer, that are   delivered to truck injection points on the Gathering System that are owned or controlled by   Gatherer.                Notwithstanding anything to the contrary in the Tariff, Shipper shall not be subject to or   obligated to pay any tax, fee or other charges levied against Gatherer in connection with   such Crude Oil by any Governmental Authority for the purpose of creating a fund for the   prevention, containment, clean up, and/or removal of spills and/or the reimbursement of   Persons sustaining a loss therefrom or any program where Gatherer is acting as a   collecting agent.                Initial Receipt Point(s):                Those Receipt Point(s) depicted on Exhibit D.                Initial Delivery Points(s):                   Meter Number     Points of Delivery Name County, State      Lat/Long   TBD                Plains All-American, LP Winkler County, TX    TBD                      Pipeline or other pipeline                      with direct, long-haul                      transportation to the                      Midland, Texas area                

 

                                  EXHIBIT C                    FORM OF MEMORANDUM OF AGREEMENT                          MEMORANDUM OF AGREEMENT          THIS MEMORANDUM OF CRUDE OIL GATHERING AGREEMENT (this   “Memorandum”) is made and entered into as of May [ ], 2018 (the “Effective Date”), by and   between Salt Creek Midstream, LLC, a Delaware limited liability company (“Gatherer”), and  Lilis Energy, Inc., a Nevada corporation (“Shipper”). Shipper and Gatherer may be referred to  individually as “Party,” or collectively as the “Parties.”                                                 RECITALS:                      WHEREAS, Shipper and Gatherer have entered into that certain Crude Oil Gathering   Agreement dated as of the Effective Date (the “Agreement”), pursuant to which Gatherer will (i)   design, engineer and construct the Gathering System to enable Gatherer to provide gathering   services for Shipper Crude Oil, and (ii) gather Shipper Crude Oil on the Gathering System, as   more particularly described below and in the Agreement;                      WHEREAS, any capitalized term used but not defined in this Memorandum shall have   the meaning given to such term in the Agreement; and                      WHEREAS, the Parties desire to file this Memorandum of record in the official public   records of Loving and Winkler Counties, Texas and Lea County, New Mexico to give notice of   the existence of the Agreement and the dedication of Shipper Crude Oil and certain other   provisions contained therein.                      FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency   whereof are hereby acknowledged, the Parties hereby agree as follows:                1.    Notice. Notice is hereby given of the existence of the Agreement and certain provisions   contained therein, which are summarized in Sections 2 – 4 below.                2.    Term: The term of the Agreement shall commence on the Effective Date, and unless   sooner terminated as provided herein, shall remain in full force and effect through the twelfth   (12th) anniversary of the Effective Date (the “Primary Term”); provided, however, the   Agreement shall continue beyond the expiration of the Primary Term for additional terms of one   year each (each an “Extended Term,” and, the Primary Term as may be extended by one or more   Extended Terms, the “Term”) unless the Agreement is terminated by either Party as of the end of   the Primary Term or the then-current Extended Term, as applicable, by providing not less than   sixty (60) Days written notice of termination prior to the end of the Primary Term or such   Extended Term to the other Party.                3.    Dedication. Subject to the terms and conditions of the Agreement and certain exclusions   from dedication described in the Agreement, Subject to the other terms and conditions thereof,   Shipper hereby (i) dedicates for Services with respect to Shipper Crude Oil under the Agreement   to Gatherer all Interests now owned or hereafter acquired by Shipper and/or its Affiliates and                                          2 

 

 their respective successors and assigns that cover lands located within the Dedicated Area, and   (ii) dedicates for Services under the Agreement and shall deliver, or cause to be delivered, under   the Agreement to Gatherer, at the Receipt Points, the following (the “Dedication,” and the Crude   Oil that is the subject of the Dedication being therein referred to as “Shipper Crude Oil”):                            (a)   all Crude Oil produced and saved on or after the Commencement Date for   the remainder of the Term from those Wells for which Shipper and/or any of its Affiliates is the   operator now or hereafter located within the Dedicated Area (a description of which is attached   to Schedule 1) or on lands pooled or unitized therewith, to the extent such Crude Oil is   attributable to the Interests within the Dedicated Area now owned or hereafter acquired by   Shipper and/or its Affiliates and their respective successors and assigns; and                            (b)   with respect to those Wells for which Shipper and/or any of its Affiliates    is the operator, Crude Oil produced on or after the Commencement Date for the remainder of the   Term from such Wells which is attributable to the Interests in such Wells owned by other   working interest owners and royalty owners which is not taken “in-kind” by such working   interest owners and royalty owners and for which Shipper and/or its Affiliates has the right or   obligation to deliver such Crude Oil and only for the period that Shipper and/or its Affiliates has   such right or obligation.                For the avoidance of doubt, Shipper shall not be required to deliver Crude Oil from any well   operated by an operator other than Shipper or its Affiliates, including any well where Shipper   would be required to install split stream connection facilities or similar facilities to take such   Crude Oil in kind, and such Crude Oil shall not be Shipper Crude Oil subject to the Dedication   under the Agreement.                4.    Covenant Running with the Land. So long as the Agreement is in effect, the Agreement   shall (i) be a covenant running with the Interests now owned or hereafter acquired by Shipper   and/or its Affiliates within the Dedicated Area (including, without limitation, all Wells operated   by Shipper or its Affiliates) and (ii) be binding on and enforceable by Gatherer and its successors   and assigns against Shipper, its Affiliates and their respective successors and assigns.   Notwithstanding anything in the Agreement to the contrary, to the extent all or a portion of such   Interests within the Dedicated Area are sold to a non-Affiliated Person, such acquiring Person   shall only be required to dedicate for delivery under the Agreement that Crude Oil that is   produced from such Interests within the Dedicated Area acquired by such non-Affiliated Person   from Shipper. The acquiring Person shall not be required to dedicate Crude Oil produced from   Interests already held by or acquired after such date by such acquiring Person. Notwithstanding   the foregoing, with prior written notice to Gatherer, Shipper and its Affiliates shall each be   permitted to convey, sell, assign, or otherwise transfer its interest in the Interests that are not   connected to or in the process of being connected to the Gathering System free of the Dedication   under the Agreement in an “acreage swap” or exchange transaction in which such undeveloped   Interests within the Dedicated Area are exchanged for other properties or Interests of   approximately equal net acreage and projected production located in the Dedicated Area that are   not subject to a Prior Dedication and would become subject to the Dedication. Gatherer and   Shipper shall prepare, execute, acknowledge, deliver, and record any such instruments and other   documents reasonably necessary to effectuate such release and memorialize such acquired  Interests subject to the Dedication.                                          3 

 

5.    No Amendment to Agreement. This Memorandum is executed and recorded solely for   the purpose of giving notice and shall not amend nor modify the Agreement in any way. To the  extent of a conflict between any provisions of this Memorandum and any provisions of the  Agreement, the provisions of the Agreement shall govern and control.               6.    Miscellaneous. This Memorandum may be executed in multiple counterparts, each of  which, when executed, will be deemed an original, and all of which will constitute but one and  the same instrument.                                    Remainder of page intentionally left blank:                               Signature page follows                                          4 

 

DULY AUTHORIZED REPRESENTATIVES of the Parties have executed this Memorandum  on the dates of their respective acknowledgments below, effective for all purposes as of the  Effective Date.                                         GATHERER                                                      SALT CREEK MIDSTREAM, LLC                                                                   By:                                                                             Name:                                                                           Title:                                                                                                    SHIPPER                                                      LILIS ENERGY, INC.                                                                   By:                                                                             Name:                                                                           Title:                                                                           5 

 

                              Acknowledgements                            STATE OF [         ]                     §                                            §  COUNTY OF [          ]                   §                This  instrument  was  acknowledged  before me on  day of            , 20 , by                   ,               of Salt Creek Midstream, LLC, a Delaware limited  liability company, on behalf of such limited liability company.                                                                             Notary Public in and for [   ]                                                                                          Printed or Typed Name of Notary                                          STATE OF [         ]                     §                                            §  COUNTY OF [          ]                   §                This  instrument  was  acknowledged  before me on  day of            , 20 , by                   ,               of Lilis Energy, Inc., a Nevada corporation, on behalf  of such corporation.                                                                             Notary Public in and for [   ]                                                                                          Printed or Typed Name of Notary                                          6 

 

                  Schedule 1  DEDICATED AREA                

 

                          EXHIBIT D  COMMENCEMENT DATE FACILITIES                           [ATTACHED]                

 

                                                                                                                                                                                                                                                                                                                                                                               6                                  6   6       5        4                  2          1         6         5          4                  2          1        6           5        4                    2         1        6         5          4                    2        1           6       5        4                                                         1                               15                                   1                             9        1                                                                                                                                                                                                                                                                                        24                   22        21                               14                                  2                                                                                                                                                                                                                                                                             25                A25 2                                  12      1                                                                    7 8                         5    7       8        9        1         11        12         7         8          9        1         11        12        7           8        9         1         11        12        7         8          9         1         11        12                                                                                                                               4                                                                  1                                                                                                                                                                                                                                                       7       8        9                                                       11                                5                                        12                                                                                                                                                                                                                                                                                                          Pri e Hog BWZ                                                                                                       11                                      16                                                                                                                                                                                                                                                                             5         4                   2          1                             6                               1                                  17                     2   18     17        16        15        14        1          18        17        16        15        14        1         18         17        16        15        14        1         18        17         16        15        14        1         1                                                                                    22                                  9                                       18                                                                                                                                                                                                                                                     8       17      16    5tate Com 1H                                         2                                  8                              14        1                                                                                                                                                                                                                                                                                                              6         7         8         9         1                                  7                                                                      11        21                                                                                                                                                                                                                                                                                                                                                1                                      15                             19      2                                                                                                                                                                                                                                                                                                                                        25N         D      R     E     W      156                                                   19 2             21        22        2         24         19        2         21         22       2         24        19         2         21        22        2         24        19        2         21        22         2         24        1                                                                          ●      Wi  dhogN      D  BWXR E W                5                      255                                                       255                                                          255                                                          255                                       9       2       21                         .                                24   A54                            17                                        24                          28                                                                                                                                                                                                                                                      255                                                                            5tate Com 1H                                                    2                       34E                                                       35E                                                          36E                                                          37E                                                               15        14                   12        11     ●                             18                              22                                     29                                                                                                                                                                                                                                                      38E                                      A15 5                                          26                                 21                                                 29        28        27        26        25                   29        28        27        26        25                   29        28        27        26        25                  29        28         27        26        25                                                                                                                                                                      25                                                                                                                                                                                                                                                             29       28                                                            27                                A41                                                                                                                                                                                                                                                                                                                                                                                                  28                                       16                                26                                                                                                                                                                                                                                                                             16        17        18         19        2                                     A2 22                             27                              1        2                                                                                                                                                                                                                                                                                                                                                  1                                 28                                                                                                                                                                                                                                                                                                                                                                                                                    6                         4   1 2                        4        5          6         1         2                    4        5          6        1          2                    4        5          6        1         2                     4        5         6           1       2                                                                                                            29                                                        1  2                                                                                                                                                                                                                                                                                                                                       29                                                              7          5                                                                                                                                                                                                                                                                             25        24        2          22        21    A 54                          1  4                                  4                                       5                                                                                                                                                                                                                                                                                                                                                    1                                                                          6               9   6       5       4                    2        1           6        5         4                    2        1       L  6 E  5              4                    2        1         6         5         4                     2        1             6        5        4                                                                    2                                 2                                     7                                                                                                                                                                                                                                                                                                                                                                                             1                                         8                    45 T2                                                                                                                                                                                                                                                                               5         4                    2         1                                                                        9                                         8                                                                                                                                                                                                                                                                                                                                                       7                              4                                           7    7 8              9        1         11        12         7         8          9        1         11        12        7           8        9         1         11        12        7         8          9         1         11        12          7       8        9                                                                      6                               41                                       48                                                                                                                                                                                                                                                                                                                                   5                                42                                       47                             5                                                                                                                                                                                                                                                                              6         7         8         9         1                                   8                                        46                                                                                                                                                                                                                                                                                                                                                                                                                         45                                         6                                                                                                                                                                                                                                                                                                                                                9                                                                       1   18     17        16        15        14        1          18        17        16        15        14        1         18         17        16        15        14        1         18        17        16         15        14        1         1 8       17      16                                                                1                                       44                                                                                                                                                                                                                                                                                                                                                                                             4                                     4                                          2                             8                                                                                                                                                                                                                                                    265 38E                 15        14      A51 6       12         11                                    15                                                                  45   T1                        265                                                     265 35E                                                 265 36E                                                           265 37E                                                                                                                                                                             4                               9        7                                                                                                                                                                                                                                                                                                                                                A57                                                                                                                                                                                                                                                        9       2                                                                                   14        A 57                   16                                                          1         2                                       24         19        2         21        22        2         24        19         2         21        22        2                                                                                                  21                                                         1       1                               17                                         8                              19               2134E 22            2                                                                             ●  .                                                  24        19        2         21         22        2         24        1                         16        17        18        19         2                                       18                             46          7                                     7                                                                                                                                                                                                                                                                                                                                                                                               6                                        18                                                                                                                                                                                                                                                                29                                                                            2      19                                                                         14 6                                                                                                                                                                                                                                                                       28                                                                                                           5                                  11                     2          29       28        27        26        25                   29        28        27        26        25                   29        28        27        26        25                  29        28         27        26        25                                                                                      21                                          26                                                     45 TI                                                                                                                                                                                                                                                                               25        24        2         22         21                                         25                                       12                               19                                                                                                                                                                                                                                                                                                                                                                                                1                                                                                                                                                                                                                                                     1       2                                                                                         24                              14                                        21    1       2                  4       5           6         1         2                    4        5          6        1           2                   4        5          6        1         2                     4         5        6                                                                                                   2                                                                         2                                                                                                                                                                                                                                                                                                                                     22                                       15                                                                                                                                                                                                                                                                         9                                                 2757                                      1                                       19                                                                                              25                               5                              2         19                         7                                                                       6                    8                               8                 A57                                                                              18                                       28                   2          19                     6                               14                              27                              1        12                      6                                                                                                                                                                   2    1         11                            7                               15                               4                              18                                                               1                                        7                                7                A 57                                                                              17                                        22                                                                                                                                                                                                                                                                             6                              29      28                                                          16                                        2                                  18                                                                                                                                        8                                                                5                      5                                                                     4                            7                                  46    46                                                                      24                              6                               21                              11                               4                      C22                                                                      9                                                                                                           24                            2                          21                                5                                                                                                                                                                       4                                                                                                7                                                                                                          9                                                                                        1                               26 C2                           14                               5                                                                  4                                                                                                  88                                      25                                     12         1                                                               16                                                                                                                                                                                                           1                               2            Gri    5                                               26         T1                 2                                                   17        8                     2                                7                                        17                               9                                        1                                                                                                                                .22                                                                                                                                            11                               1                                6                                 27                                                                                                                                                                                          .                                    1                             2                                                                                                                                   8                                                                                                      4                          22                                                                                                                                                                                                          2                              12                              24                      C           2H                              8                                        1    1                                                       4                              12                              25                               15                                                                                                77                            2                  Gri                                             267                  9                     16        9                     22        17 C24                           2                                                                                                                                       1                                                                19                                                                 29                                        4                                            C25                                                                                                                                                                                                     4                             22                               2                                  1                                                                        5                                                                                                                                 .                16                               4                                                               1                                                                                         11                                       28                                                                                                                                    .                                                                             18                                                                                                                                         8                                                                                                                                                               21                                                             .                                   15                                        6                                                                                                                       .                                                                                                                                                                                            1H                  .Lion                                                                7                                                                                                                                                                                                                                                                   R                                                                                                                                                                                                                                                                                                                            .                                                                                                                                                                        5                                                                                         R                                                                                                                         .                                                                              17                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             14                              2                                                               11                    .                                   .                                                                              15                     2    R                           4                          .     1                                                                                                         42                                                                                                                                                                                                                                                                                                                                                                                                  8                                                                                                                                                                                               16                                                            G                                                                                                                                                                                                                                                         16                     19      G                       5                               9                                  1                                                                        41     24               8                                                                                                                                                                                                                                       G                                                                                                                         16                                                     1                                                                                   2                                                                                                                         E                                                                                    18                                                                    6                                                                                                       E                                                                           12                                                                                                                                                                                                                                                                                                                                                                                                                                                    15                             19                                             E        1                              8                                                                  17                                       4                                                                                                                                                                                                                                                                                                                                                  3H              12                           15                              21                                9 .               24                      7                                                                                                     N                                                                                                                                                9                                                                                                                                                                                                                                                              N                                                                                                                                                                                                                                                                   L 2                                                  Lion                                                                                                                                                          .                                                                                                   N                                    7                                                                 18                                                                                                                                            8                               14                              2                                                      L                                                              11                                                                                                         1                                  24                                                                                                                                                                                                        18                      L                                                                 2                               1                                                                                                                                                                                                                                                                                       .                                                                                                                                I                                                                                                                            76                                                                                                                   1                                                                                                                                     I                                                                                                                                                                                                                                                                                                                                                                                               .9                                    1                               21                                                          I                                                                                          1                                          26                                                                                                                                                                                                                                  17                                               7                                                                                                                                                                                                                                                               6                                                        11                               19                                                                                                                                                                        K                                                     12                               19                                                                          2                                                                                                                                                                                                                                                                   K                                                                                                                       25   6 25                                                                                                                                                                                                                                                             K                                                                           Hippo                                                                                                                                                        12                               22                                                                  V                                                                                                                                                                                                                                                                                V                1                                            1H              1                                                                                                                                                                                                         6                                                                                                                                                                                                                                                14                               2                                                                                                                                                                              V                                             Tiger1                                                               24                                                                                                                                                                                         11                                                                                                                                                                                          2                                                                                                             2                                                                  2                               5                                                  N                                                                                                                                              1                                                                                                                                                                                                                                               4                  N  9                     15       14                                     25                              1                                                                                                                                                                                              N                                                      19                                221       2                                                                5                                                                                                                                                                                                                                                            O                                                 2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   O                                                                                                                                                                                                                                                                                1                                24                              4                                                            I                                                                                                                                    2                                                                                                                                                                                                                                                                                               O                                                                                                                                                                                                                                                                  I              11                                                                                                                                         46 T1S           6                                                           12                                                                                                                                                                        5                      8       I    6                     6                                                                                                                                                                                                                                                                                                                                                             18                                                                                                                                                                                      18                                                                                            4                                                              25    74                                                         1                                L                                                                                   21                                                                                                                                                                                                                                                              L                                                                   .                                                   1                                        4                  14                              1                   WF                                                                                                                                                                                      L                                                                   .                                                                                               46                                                                                 5                               17                                                                                               2                                               W     12              Kudu            17                                                                                                           6                                                                                                                                                 26                                2                                                               7               W                                        1H                                                                                                                                                                26                                                                                                                                                                                                                          W                                                                                                      2     7                         5                                        6                               16                               27                              1                                                               6                     1                               16                   .                                2H                                     .G. Hi5                                            7                                                              7                                                                                                                                                                                                                      2                              .          22                 .     4                                       74                               TIS       8                                                                                              15                              19                                                                4                              12                                     Kudu                  1H                       2                            .                                     8                                        9                     15                                8                             14                              2                               29                                                                                             142                    19                                                                                                                    1H                                                                                                                                                                                      5                              11                                                                                    24                                                                 7                                        7              24                            9                             1                                21                              28                                                                                                                                                                                       .                                    4                            12                                                                                                         6                              1                               15                     18     2H                       25                              29.                                6                                        8                            11    48                                                   11                                       22                              6                               1                                9                                                    17                                  .                                                              5                         16                                                             2                               5                                2                                                                        1                                                     21  .                            28   Hippo                                                             9          7     .G. Hi  1                  2                              1                                                                                                                                         8                              14                                                     22                              27                               1                               1                  .                     12                                                                75            24                              4                                                                7                                                                                    2                                26                               2                               11                                        11                           1                                                                     25                                                              4                               12                                        15                             16                          .                  Wo  e .                                                                                                  .           1                                                                                                                                                                                              16                               24                    24                                               .                     1H                        12                                        1.  1                                                                17                              26                               2                               5                                                                                                                                                                                                                                                               16                               E C1    T 4                 22                                                                                                                                       11                               17                             2                                                     29                               4                                1                        4   15                                          1                                                   27                               1                               6                                1                                                                                                                    28                   7nit 1            .                                                                                                                              1                          C26           2                                                                                                                                       18                               22                                           W       I   N     K     L     E     R     5     .                         9                                                                        14                                                                                                                                    1                               9                                                                                                                      W I        N K          L E R                                                                            14   12                        18                                                                                                                                        1                               21                                  25                27                               1                               8                               1                                         15                      46 TIS        7                                                              29                               2                               8                                                                                                                                                                              Bi on                                                                            17                    21                                                                                                                                        14                              2                               26                     26                               2                               7                               11                                                                               16          25                                        28                                                              7                               15                                                     26                                                                                                                                                                       18                                        18                                                                                     4                              12                                                                        19                              27                                                                                     6    1H                        12                              19                                        17             29                  19          1                                                                                             16                              24                              28                              6                                                                                                                                                               16                                  2    1                   2                                         5                                                              17                              2                               29                                                               4                              1                               1                                                                                                                                     6                               1       11                                      27                                                                                      5                                                                                                                       18                              22                                                               4                                                                                                                                                                        24                                      21               26                                                              9                                                                                                                                                                        5                               9                               14        6                                                                                              19                                       L O V I N G                                                            1                               21                             25                                                                7                                                                                                        2                               2    24                               2                               8                               14                             2                                                                                                                                          8                              15                              19                              22                                        2                                                             7                              15                              19                     27                26                               2                              8                                7                               11                             18                                                                        21                            22                  4                               12                                                                                                      27                               1                                9                               6                              12                              17                                                                       25     T2                                                                          16                              24                              28                              6                                                                                                                                                                         21                                                                       24                                                                                                                                                                                                                4                               48                              1                                16                                                                      26                                               25     5                           11                               17                              2                              29                              5                                                                                                                                                                         22                             27                  4                     2                             1                                                                                                                                                                         41                             47                              14                              2                               2                                                                         22                                                                                          18                               22                                                              4                              42                                                                                                                                                                      248                               2                     9                               1                              21                                                                                                                                        46                              15        5                     19                              24                               1                                                                        4            8                            14                                                                        25                                                               7                              45                               8                              18                                                                                                        1                                                                                                                     2                               26                                                                                                                                                                                                       25                                2     6                                                           19                     28                                                  2                             8                                44                              9                               17                                                                                                                                                5                 8                       16        15                     24                                       27                               1                             9                                                                 4                             16                               22        21                     4                                       29                              2         1                                                                                        28                              6                               4                              48                               41                              7                                                                                                        1 4                                                                       7              17                  29         2                                                                                                                                                      4                                                                                  2                                5                               9                                                                       6                                  22                                         29                      4       5                               41                              47                              42                              6                              5                                                                                                         4                              1               7   18                21                                                                                                       42                              46                                                                                                  24                                     1                              8                              5                                                           25                                                                                                                                                                        5                              25                               2                               7                                                                       9                              14                 2                                                                                                         7                              45                               1                                4                              26                                                                                                       11                             8                                 2                                                             26                               2                                8                              44                                                                                                                                                                        6                       12                                9 7                                         15        48    19                           27                                                                9                             4                                          2                                                              27                               4                              1                              1                                                                        11                      I ITIAL RECEIPT P I   T                          1                                                                                                                                2                                                                                                                                      1                               6              ●              28                              6                              4                                                                                                                                         28                               5                               9                              14                             2                                        12                                                                                                                             48                               4                              12                              29                                                                                                                                                                       1                                     17                     29                             5                               41                              47                                                                                                                                        1                               8                                                               19                                                                                                          46                               6         5                              11                                                               2                               7                              11    12                                                               14                                       16 8                                           4                              42                                                                                              1                                                                                                                                                                        18                             15                                       18                     WI K TER M I   AL                                                                                                                                                                    1                                                               6                               12                                                                                                    17                          24             ■B                                                  7                              45                               1                               9                               1                               4                                                                                                        17                             21                              16                                                                                                                                                                                                                                                                 12                                                                                                                                                                                \ LILIS_Crude_Well_2.mxdLilis                                                                                                                                                                                                                                                                                      2                                                                                                                                                           \                        2                             8                               44                               2                               8                               14                                                                                                       1                               16                              22                             1                                       25     4        1                                                                                                                                                                         ■B                             5                               11                                                              2                                                                              4                                                                7                               15                                                                                                                                                                       2                                11                                   19                                        SALT CREEK MIDSTREAMC 929     PIPELI E                                                                           WINK                                                                   6                               1                               15         4                                                   24                                                                     2                          4                                   4                               48                                                              12                              16                              24                                                              1                                       1 9 11                                                                                                                                   4                                                                                                                              9                                                              18                         41                               47                               5                              11                              17                               2                                                                                                                                        25                               1                                                                   5                42                             46                               6                                                                                                                                         8                              14                              17                              21                                                                        9        21                  1        14    C627                                                                                                          1                              18                                                                                                                                                                                                       5                               12                                                       \ Energy  Companies                     LISIS            45                              1                                                                                                   21 22                                 7                              15                              16                                                                                                                                      2                                                                                                                                        1                              21                                                                                                                                       22                              51                              29  6 2                                                                                                  9                                                                                               25                            16     12                         24                             2                                7                              44                               2                               8                       2 14                                    2                              26                              17                                                                                                                                         2                               8                                   6             7      4                                                               7                                                                                                                                                                        2                               24                               71                             49                              1                                           5                                                                                                                  15                                19                              27                              18                                                            25                               9                                                                                                                               \ SALT_CREEK     61                                   4                                                                                                                                                                                                       22                                                                                               52                                                                     4                                                                          11                              16                              24                              28                                                                                                                                                                                                   28                                 5                              1                               17                                                                                                        6                              21                                                                                                                                A                                                                                                                                                                                                                                                                                                          91                              69                                                                                                       Projects                        6                                                                                                                                                                                                                                                                                                                                                                                 7                1                15    \            5                                          9   19                         18                                                                                                                                                                                                                                                                                                                8                              12                                                                                                                                                                                                                                                                                                                                                                    \ GIS           1                2                                                                                                                                                          4                              19                             27                               11                             89                               5                                                                        7                              1                                        21                             25                                                                                                                                                                                                                                        27                                     7      51            49                                                                             2                                                                                                          7                              28                                              F               92                              68                                                                                               16                                                          14                              19                                       26                               2                              8                                                                                                9                                                                         4                               6        1                                           5                                            ‘                       27                                1                              9                                         29                              1                                                             7                                47                               15                 8                 1              48            42                   15                                              Miles                                                                                                           48                                                                                                                                                                                                               9    2                                    16                             19      2                               28                               6                                4                                                                      5                                12                              88                         54                                   26   5                                41                                                                 29                              5                                                                                                7        51                             29                               9                               67                               5                               5                                Document  Path:  M:      47            4                                         18                                                             4                               42       41                      46 47                           71                              49        2                              8                      87 74                                    46                              16                                    11           

 

                                     EXHIBIT E                    FORM OF NEW RECEIPT POINT NOTIFICATION                 NEW RECEIPT POINT NOTIFICATION            1. Operator Contact Name                                              2. Phone Numbers                                                      3. E-Mail                                                             4. Notification Date                                                  5. Receipt Point/New Well                                             6. County/Township/Range/Section :                                   7. Expected Date of First Flow/Delivery                               8. Projected  Volume (Barrels)                                        9. Receipt Point (location)       ’     ” -_         ’     ”   10. Surface site provided by Shipper0 or SCM   0                      11. Expected Crude Oil composition  Attach sample analysis          12. Sulfur Content Expected (Y / N) and quantity (Weight %)                       13. Basic Sediment and Water (% of Volume)                                         

 

          SUBMITTED BY SHIPPER:          LILIS ENERGY, INC.          By:                                      Name:                                    Title:                                   Date:                                                                                                    ACKNOWLEDGED BY GATHERER   SALT CREEK MIDSTREAM, LLC           By:                                      Name:                                    Title:                                   Date:                                             

 

               EXHIBIT F  PRO FORMA TARIFF              [ATTACHED]           

 

                                                                  [COGA – EXECUTION]             FERC ICA OIL TARIFF                                         F.E.R.C. No. 1.0.0                                            Salt Creek Midstream, LLC                                   LOCAL TARIFF                                          CONTAINING                             RULES, REGULATIONS AND RATES                GOVERNING THE GATHERING AND TRANSPORTATION                                        OF                                   CRUDE OIL                                    BY PIPELINE  Rules and regulations published herein apply only under tariffs making specific reference by  number to this tariff; such references will include subsequent reissues hereof.          Filed in accordance with 18 CFR 342.2(b) (Establishing initial rates).          Issued on [  ( )] days notice under authority of 18 CFR 341.14. This tariff publication is  conditionally accepted subject to refund pending a 30 day review period.                                                                                           The provisions published herein will, if effective, not result in an effect on the quality of the  human environment.                                                                                   ISSUE DATE:   [       ], 2018              EFFECTIVE DATE: [          ], 2018                                                                                           ISSUED BY:                                 COMPILED BY:  [name]                                     [name]  [title]                                    [title]  Salt Creek Midstream, LLC                  Salt Creek Midstream, LLC  [address]                                  [address]  [contact info]                             [contact info]                                           1 

 

                                                                  [COGA – EXECUTION]                                       TABLE OF CONTENTS          SECTION I RULES AND REGULATIONS ............................................................................. 3         1. DEFINITIONS ........................................................................................................................... 3         2. COMMODITY ........................................................................................................................... 6         3. QUALITY SPECIFICATIONS .................................................................................................. 6         4. VARIATIONS IN QUALITY AND GRAVITY ....................................................................... 9         5. MINIMUM TENDER ................................................................................................................ 9         6. NOMINATIONS REQUIRED ................................................................................................... 9         7. PRORATIONING PROCEDURES ......................................................................................... 10         8. MEASUREMENT .................................................................................................................... 12         9. RECEIPT FACILITIES ............................................................................................................ 12         10. STORAGE OF CRUDE OIL ................................................................................................. 13         11. DELIVERY FACILITIES ..................................................................................................... 13  12.       NOTICE OF ARRIVAL, DELIVERY AT DESTINATION .................................. 13         13. LINE FILL REQUIREMENTS ............................................................................................. 14         14. TITLE ..................................................................................................................................... 16         15. RATES APPLICABLE .......................................................................................................... 16  16.       RATES APPLICABLE FROM INTERMEDIATE POINTS .................................. 17         17. PAYMENT OF CHARGES ................................................................................................... 17         18. FINANCIAL ASSURANCES ............................................................................................... 18         19. CHARGE FOR FUND COMPENSATION .......................................................................... 19         20. LIABILITY OF SHIPPER ..................................................................................................... 19         21. LIABILITY OF GATHERER ................................................................................................ 19         22. CLAIMS, SUITS, AND TIME FOR FILING ....................................................................... 20         23. CONNECTIONS .................................................................................................................... 20         24. GATHERER DISCRETION .................................................................................................. 21         25. LOSS ALLOWANCE ............................................................................................................ 21         SECTION II RATES ................................................................................................................. 22                                                 1 

 

                                                                 [COGA – EXECUTION]                                                                                     SECTION I                           RULES AND REGULATIONS          1.   DEFINITIONS          “Affiliate” means any Person that directly or indirectly through one or more intermediaries,  controls or is controlled by or is under common control with another Person. The term “control”  (including its derivatives and similar terms) means possessing the power to direct or cause the  direction of the management and policies of a Person, whether through ownership, by contract,  or otherwise. Any Person shall be deemed to be an Affiliate of any specified Person if such  Person owns fifty percent (50%) or more of the voting securities of the specified Person, or if the  specified Person owns fifty percent (50%) or more of the voting securities of such Person, or if  fifty percent (50%) or more of the voting securities of the specified Person and such Person are  under common control.          “API” means the American Petroleum Institute.          “API Gravity” means gravity determined in accordance with the American Society for Testing  Materials Designation set out in Item 3(A).          “Applicable Law” means all applicable laws, statutes, directives, codes, ordinances, rules,  regulations, municipal by-laws, judicial, arbitral, administrative, ministerial, departmental or  regulatory judgments, orders, decisions, rulings or awards, consent orders, consent decrees and  policies of any Governmental Authority.          “ASTM” means the American Society for Testing Materials.          “Barrel” means forty-two (42) gallons of 231 cubic inches per gallon at 60 degrees Fahrenheit  (60° F) and equilibrium vapor pressure of the liquid.          “COGA” means a Crude Oil Gathering Agreement executed by a Priority Shipper with Gatherer  with respect to the Gathering System pursuant to the Open Season.          “Commencement Date” means the date that the Gathering System commenced initial service.          “Committed Volume” means (i) with respect to a Priority Shipper that has committed to deliver a  specified volume of Crude Oil to the Gathering System pursuant to such Priority Shipper’s  COGA or pay a deficiency payment, such specified volume (expressed in Barrels per day), and  (ii) with respect to a Priority Shipper that has not committed to deliver a specified volume of  Crude Oil, but has made an acreage dedication pursuant to such Priority Shipper’s COGA, a  volume of Crude Oil (expressed in Barrels per day) equal to such Priority Shipper’s Maximum  Daily Quantity.          “Consignee” means the Person to whom a Shipper has ordered the delivery of Crude Oil.   “Consignor” means the Person from whom a Shipper has ordered the receipt of Crude Oil.                                         2 

 

                                                                  [COGA – EXECUTION]           “Crude Oil” means liquid hydrocarbons that meet the Quality Specifications set forth in Item   3(A).           “Delivery Point” means the points of interconnection between the Gathering System and any   downstream pipeline as mutually agreed upon by the Parties at which Gatherer will redeliver   Shipper Crude Oil for the account of Shipper, as such points are specified in Section II of this   tariff.           “Encumbered Crude Oil” has the meaning set forth in Item 14(B).   “Excess Line Fill” has the meaning set forth in Item 13(B).   “Force Majeure” means any cause or causes not reasonably within the control of the Party  claiming suspension and which, by the exercise of reasonable diligence, such Party is unable to  prevent or overcome, including acts of God, acts of Governmental Authorities, compliance with  rules, regulations or orders of any Governmental Authority, strikes, lockouts or other industrial  disturbances, acts of the public enemy, acts of terrorism, wars, blockades, insurrections, riots,  epidemics, landslides, lightning, earthquakes, fires, extreme cold, storms, hurricanes, floods, or  other adverse weather conditions, washouts, arrests and restraint of rulers and people, civil  disturbances, explosions, breakage or accident to machinery, equipment or pipelines, freezing of  wells, pipelines or equipment, requisitions, directives, diversions, embargoes, priorities or  expropriations of government or Governmental Authorities, legal or de facto, whether purporting  to act under some constitution, decree, law or otherwise, failure of pipelines or other gatherers to  gather or furnish facilities for transportation, failures, disruptions, or breakdowns of machinery  or of facilities for production, manufacture, transportation, distribution, processing or  consumption (including, but not by way of limitation, the Gathering System), allocation or  curtailment by third parties of downstream capacity, inability to secure or delays in securing  permits from Governmental Authorities, transportation embargoes or failures or delays in  transportation or poor road conditions, partial or entire failure of Crude Oil supply and  downstream pipeline market constraints. “Force Majeure” shall expressly exclude (i) delays in  permitting that are not extraordinary or unusual for the dedicated area under a COGA and the  development of the Permian Basin and other relevant basins, or (ii) any matters within the  reasonable control of Gatherer (such as easement, right-of-way, fee land and surface right  acquisition, the availability of labor, materials and supplies, and other similar matters).           “Gatherer” means Salt Creek Midstream, LLC.           “Gathering System” means that portion of Gatherer’s pipeline system, including all   appurtenances thereto, related to the provision of gathering and transportation services provided   by Gatherer pursuant to this tariff.           “Governmental Authority” or “Governmental Authorities” means (i) the United States of   America, (ii) any state, county, parish, municipality or other governmental subdivision within the   United States of America, and (iii) any court or any governmental department, commission,   board, bureau, agency or other instrumentality of the United States of America or of any state,   county, municipality or other governmental subdivision within the United States of America.           “Guarantee” has the meaning set forth in Item 18(B).                                          3 

 

                                                                  [COGA – EXECUTION]           “Inaccuracy Period” has the meaning set forth in Item 8(D).    “Line Fill” has the meaning set forth in Item 13(A).    “Maximum Daily Quantity” shall mean the maximum volume of Crude Oil (expressed in Barrels   per day) a Priority Shipper is allowed to deliver to the Gathering System pursuant to such   Priority Shipper’s COGA.           “Monthly Committed Volume” means the product of (i) the Priority Shipper’s Committed   Volume and (ii) the number of days in the applicable month.           “Nomination” (including “Nominates” and the syntactical variants thereof) means the written or   electronic communication from Shipper to Gatherer, pursuant to and in accordance with this   tariff, requesting that Gatherer transport for Shipper in a given month a stated volume of Crude   Oil from a specified Receipt Point to the applicable Delivery Point in accordance with the terms   of this tariff.           “Non-Priority Capacity” means the System Capacity available for allocation to Uncommitted  Shippers each Proration Month following the allocation of System Capacity to Priority Shippers  under Item 7(C), which shall equal at least ten percent (10%) of the System Capacity, assuming  Gatherer receives sufficient Nominations from Uncommitted Shippers.           “Notification” has the meaning set forth in Item 13(C)(3).    “Off-Spec Crude Oil” has the meaning set forth in Item 3(E).    “Open Season” means that open season held by Gatherer to obtain volume commitments and/or   acreage dedications on the Gathering System, and any supplemental open season held by   Gatherer to obtain additional volume commitments and/or acreage dedications on the Gathering   System prior to the commencement of service on the Gathering System.           “Party” shall refer to either Shipper or Gatherer, individually, and “Parties” shall refer to   Gatherer and Shipper, collectively.           “Person” means any individual, corporation, limited liability company, partnership, trust or other   entity, or any Governmental Authority.           “Priority Rates” means the rates identified as “Priority Rates” in Section II of this tariff.           “Priority Service” means that a tender of Crude Oil by a Priority Shipper for transport on the   Gathering System not exceeding Shipper’s Maximum Daily Quantity and paying the Priority   Rate for levels of applicable service on the Gathering System, shall be entitled to the highest   level of service on the Gathering System and not be subject to prorationing to accommodate   nominations of uncommitted volumes for transport on the Gathering System or nominations of   volumes for transport on the Gathering System by Shippers who do not elect to pay (or are not   eligible thereunder) the Priority Rate for such nominations.           “Priority Shipper” means a Shipper with which Gatherer has executed a COGA for Priority   Service on the Gathering System pursuant to the open season(s) held by Gatherer and such                                          4 

 

                                                                  [COGA – EXECUTION]           COGA provides for a term of at least ten (10) years and either (i) a commitment to deliver a   specified volume of Crude Oil on the Gathering System of at least 2,000 Barrels per day, or (ii)   with respect to a Priority Shipper that has not committed to deliver a specified volume of Crude   Oil, but has made an acreage dedication pursuant to such Priority Shipper’s COGA, an acreage   dedication covering at least 2,000 net acres of lands located in Winkler County, Texas, Loving   County, Texas and/or Eddy and Lea Counties, New Mexico.           “Prime Rate” has the meaning set forth in Item 17(C).           “Proration Month” means the month for which capacity is to be allocated under Item 7.           “Qualified Institution” means the domestic office of a commercial bank or trust company that is   not an Affiliate of Shipper and that has assets of at least $10 billion and an investment-grade   credit rating as established by Standard and Poor’s and Moody’s.           “Quality Specifications” has the meaning set forth in Item 3(A).           “Receipt Point” means the receipt/inception point(s) where Crude Oil is received into the   Gathering System, as such points are specified in Section II of this tariff.           “Shipper” means a party that contracts with Gatherer for transportation of Crude Oil in   accordance with this tariff and any other applicable tariffs of Gatherer.           “Shipper’s Permitted Liens” means (i) any liens, security interests or other encumbrances   benefiting one or more lenders to Shipper as part of a financing provided by such lenders to   Shipper for which such lenders have not taken actions to foreclose on such liens; and (ii) normal   and customary liens under financing agreements, operating agreements, unitization agreements,   pooling orders, drilling contracts and similar agreements for upstream operators and mechanic's   and materialman's liens, tax liens or mineral liens related to claims or obligations that are not   delinquent or that are being contested in good faith and by appropriate proceedings.           “System Capacity” means the operational capacity of the Gathering System at any applicable   point in time.           “Tender” or “Tendered” means delivery by Shipper to Gatherer of a stated quantity of Crude Oil  for transportation from a specified Receipt Point to a specified Delivery Point on the Gathering  System in accordance with this tariff.           “Uncommitted Rates” means the rates identified as “Uncommitted Rates” in Section II of this   tariff.           “Uncommitted Shipper” means a Shipper that is not a Priority Shipper.           “Unremoved Crude Oil” means Crude Oil that Shipper fails to arrange for receipt of, or refuses   to receive, upon Gatherer’s delivery at the Nominated Delivery Point.                                           5 

 

                                                                       [COGA – EXECUTION]          2.   COMMODITY                Gatherer is engaged in the transportation on the Gathering System of Crude Oil meeting the        Quality Specifications set forth in Item 3 and will not accept any other commodity for        transportation under this tariff.          3.   QUALITY SPECIFICATIONS                      A.    The quality specifications for Crude Oil set forth below (“Quality                    Specifications”) shall apply to Shipper’s Tender. Shipper shall not deliver to                    Gatherer and Gatherer shall not be obligated to accept Crude Oil that, as                    determined by Gatherer, has on receipt qualities which are outside of the                    minimum and maximum ranges specified in the following table:                                                                                                       Quality            Units       Min      Max       Reference Test                                                                         Method                                                                                 API Gravity (60F)    deg. API         36       44     ASTM D287 AND                                                                    API MPMS                                                                    CHAPTER 9                                                                                 Sulfur Content       Weight %                 < 0.4   ASTM D4294                                                                                 Reid Vapor Pressure  PSIA                      9.5    ASTM D6377                                                                                 True Vapor Pressure  PSIA                     11.0    ASTM D6377                                                                                 Basic Sediment and   % of Volume             < 1.0%   API MPMS              Water                                                 CHAPTER 10.4                      B.    Gatherer shall have the right to change or modify the Quality Specifications                    provided in Item 3(A) in order to conform Gatherer’s Quality Specifications to                    those of downstream connecting facilities.                      C.    Shipper shall perform applicable tests to ensure that the Crude Oil it Tenders to                    Gatherer for transportation on the Gathering System conforms to the Quality                    Specifications. Gatherer may also require Shipper to furnish a certificate setting                    forth in detail the specifications of each shipment of Crude Oil offered for                    transportation hereunder, and Shipper shall be liable for any contamination or                    damage to other Crude Oil in Gatherer’s custody or to the Gathering System or                    other facilities caused by failure of the Crude Oil Tendered by Shipper to meet the                    specifications stated in Shipper’s certification.                      D.    Gatherer or its representative may test all Crude Oil Tendered for transportation                    on the Gathering System for compliance with the Quality Specifications. All such                    tests shall be performed by Gatherer, but Shipper, Consignor, or Consignee may                                               6 

 

                                                           [COGA – EXECUTION]                be present or represented at the testing provided such witnessing does not        unreasonably interfere with Gatherer’s operation of the Gathering System.        Gatherer shall provide reasonable advance notice of any such testing (other than        the continuous monitoring of the Gathering System) to Shipper. Quantities shall        be tested in accordance with applicable API/ASTM standards and pipeline        industry practice or such other tests as may be agreed upon by Gatherer and        Shipper. All tests performed by Gatherer shall be determinative unless Shipper,        Consignor, or Consignee submits to Gatherer, within sixty (60) days of the date of        the test, appropriate documentation contesting the test. In the event of variance        between Gatherer’s test results and Shipper’s test results or the specifications        contained in a certificate provided by Shipper pursuant to Item 3(C), Gatherer’        test results shall prevail (absent error demonstrated by Shipper or fraud).          E.    Gatherer reserves the right to reject all Tenders of Crude Oil and refuse        transportation if Gatherer determines that Shipper has delivered Crude Oil that (i)        does not conform to the Quality Specifications, (ii) is not merchantable, (iii) is not        readily acceptable for transportation through the Gathering System, (iv) would        otherwise adversely affect the Gathering System or other Crude Oil on the        Gathering System, (v) would make other Crude Oil on the Gathering System        undeliverable at the Delivery Point(s) and/or (vi) would expose any Person or        property (including the Gathering System) to an undue risk of harm or property        damage (“Off-Spec Crude Oil”), all of which shall be determined by Gatherer, in        Gatherer’s reasonable discretion.          F.    In the event Shipper Tenders Off-Spec Crude Oil to the Gathering System: (i)        Gatherer may accept such Shipper’s delivery if Gatherer determines, in its sole        discretion, that the quality of the Off-Spec Crude Oil, when commingled as a        common stream, will nonetheless meet the Quality Specifications; provided,        however, that Gatherer shall not knowingly accept Shipper's delivery of Off-Spec        Crude Oil (a) if Gatherer determines that the quality of Off-Spec Crude Oil when        commingled as a common stream, would not meet the Quality Specifications or        (b) if the common stream is not meeting the Quality Specifications; and (ii) if        Gatherer does not accept such Off-Spec Crude Oil as provided in (i) of this Item       3(F), Gatherer may exclude such Shipper with respect to such Off-Spec Crude Oil       from further entry into the Gathering System until such time as Shipper returns        the quality of its Off-Spec Crude Oil to a level satisfactory to Gatherer in       accordance with this tariff. Nothing contained in this tariff, any other tariff filing,       any pipeage contract or transportation services agreement or any other document,       nor any receipt by Gatherer of Off-Spec Crude Oil (either unknowingly, as a       temporary accommodation, or in its sole discretion), shall be construed to affect       the Gatherer’s right, at any time and from time to time, to reject Tenders of Off-        Spec Crude Oil and to refuse or suspend receipt of such Off-Spec Crude Oil until        it is established to such Gatherer’s reasonable satisfaction that subsequent        deliveries of Crude Oil will conform to the applicable Quality Specifications.        During any period when Gatherer is knowingly accepting Off-Spec Crude Oil,        Gatherer shall (x) regularly monitor the API Gravity of the Off-Spec Crude Oil at        all Receipt Points from which Off-Spec Crude Oil is knowingly accepted by                                   7 

 

                                                                 [COGA – EXECUTION]                      Gatherer, and (y) manage the cumulative volume of Off-Spec Crude Oil so              accepted to reduce the likelihood of the common stream failing to meet the              Quality Specifications.                G.    Gatherer may monitor, but is not responsible for monitoring, receipts or deliveries              for contaminants. Further, Gatherer reserves the right to dispose of any Off-Spec              Crude Oil (other than such Crude Oil accepted pursuant to Item 3(F)(i)) blocking              the Gathering System. Disposal thereof may be made in any reasonable manner,              including, but not limited to, commercial sales. Shipper shall be liable for and              shall defend, indemnify and hold Gatherer harmless from and against any and all              claims, actions, suits, losses, demands, costs and expenses (including attorney’s              fees and costs of repairing, inspecting, cleaning and decontaminating the              Gathering System or the facilities of third parties) of every kind, nature or              description to the extent caused by Off-Spec Crude Oil (other than such Crude Oil              accepted pursuant to Item 3(F)(i)) that Shipper has delivered into the Gathering              System.                H.    In addition to any other remedies available to Gatherer, if Crude Oil received by              Gatherer into the Gathering System does not meet the Quality Specifications              (other than such Crude Oil accepted pursuant to Item 3(F)(i)), Gatherer reserves              the right to charge the Shipper the actual costs and expenses incurred by Gatherer              to treat, handle, or otherwise dispose of all such Off-Spec Crude Oil so received;              provided, however, Shipper shall not be subject to any such costs and expenses to              the extent that the treatment of such Crude Oil and the costs related thereto are              addressed pursuant to a COGA. In the event that, based upon Gatherer’s own             testing, it is determined that Shippers are or have been delivering Crude Oil into             the Gathering System at the Receipt Point that does not meet the Quality              Specifications, then (i) Gatherer may add an off-spec penalty provision to this              tariff in order to discourage deliveries of Crude Oil to the Gathering System that              violate the Quality Specifications and (ii) for the avoidance of doubt, any Shipper              who has delivered Off-Spec Crude Oil that, when commingled as a common              stream, results in the common stream not meeting the Quality Specifications, shall              be liable for damages caused to other Shippers’ Crude Oil to the extent that such              Shipper’s delivery of Off-Spec Crude Oil results in other Shippers receiving              Crude Oil that does not meet the Quality Specifications (other than such Crude              Oil accepted pursuant to Item 3(F)(i)).                I.   As set forth in Item 3(G), Shipper shall not be liable for any claims or losses or              other damages caused by or resulting from Crude Oil accepted pursuant to Item              3(F)(i), and Gatherer hereby waives its claims against Shipper with respect to any              such claims or losses or other damages.          4.   VARIATIONS IN QUALITY AND GRAVITY                A.    Gatherer shall not be liable to Shipper for changes in gravity or quality of              Shipper’s Crude Oil which may occur from commingling or intermixing               Shipper’s Crude Oil with Crude Oil from other Shippers in the same common              stream while in transit except to the extent that such commingling or intermixing                                         8 

 

                                                                 [COGA – EXECUTION]                      would render Shipper’s Crude Oil to be Off-Spec Crude Oil or undeliverable as a             result of Off-Spec Crude Oil received from other Shippers. Gatherer is not             obligated to deliver to Shipper the identical Crude Oil Nominated and Tendered             by Shipper; Gatherer will deliver the grade of Crude Oil it is regularly             transporting as a common stream.                B.    Except as provided in Item 4(A), Gatherer shall have no responsibility in, or for,             any revaluation or settlements which may be deemed appropriate by Shippers             and/or Consignees because of mixing or commingling of Crude Oil shipments             between the receipt and delivery of such shipments by Gatherer within the same             common stream.                C.    Gatherer shall not be required to transport Crude Oil except with reasonable              diligence, considering the quality of the Crude Oil, the distance of transportation              and other material elements. Gatherer cannot commit to delivering Crude Oil to a              particular destination, at a particular time.          5.   MINIMUM TENDER          Gatherer may impose minimum Tender requirements to the extent reasonably necessary for the  efficient operation of the Gathering System.          6.   NOMINATIONS REQUIRED                A.    Crude Oil for shipment through the Gathering System will be received only on a              properly executed Nomination from Shipper identifying the month for which              transportation is desired, the Receipt Point at which the Crude Oil is to be              received by Gatherer, the Delivery Point of the shipment, Consignee (if any), and              the amount of Crude Oil to be transported. Gatherer may refuse to accept Crude              Oil for transportation unless satisfactory evidence is furnished that Shipper or              Consignor has made adequate provisions for prompt receipt of all volumes at the              Delivery Point.         B.    Any Shipper desiring to Nominate Crude Oil for transportation shall make such              Nomination to Gatherer in writing on or before the twentieth (20th) day of the              calendar month, before 12:00 a.m. Central Time, preceding the month during              which the transportation of Crude Oil under the Nomination is to begin; provided,              however, that if operating conditions permit, Gatherer, in its sole discretion, may              consider and accept Nominations submitted after the date specified above.                C.    Gatherer may refuse to accept Crude Oil for transportation under this tariff              (i) where Shipper, Consignor, or Consignee is (1) not in compliance with this              tariff or (2) in breach of a COGA, as applicable, or (ii) where Shipper, Consignor,              and/or Consignee is not in material compliance with all Applicable Law              regulating shipments of Crude Oil.                D.    All Crude Oil accepted for transportation will be transported at such time and in              such quantity as scheduled by Gatherer.                                         9 

 

                                                                 [COGA – EXECUTION]          7.   PRORATIONING PROCEDURES                A.    When System Capacity will be prorated. When Gatherer receives more              Nominations in a month for transportation of Crude Oil on the Gathering System              than Gatherer is able to transport, Gatherer shall allocate the System Capacity              under the provisions of this Item 7.                B.    Division of System Capacity between Shipper classes. System Capacity will be              allocated among Priority Shippers as a class and Uncommitted Shippers as a              class; any remaining System Capacity will be allocated in accordance with the              provisions of Item 7(E).                C.   Allocation to Priority Shippers.                      (1)   Except as provided in Item 7(C)(2), Gatherer shall allocate each Priority                    Shipper an amount of System Capacity equal to the lesser of the Priority                    Shipper’s Nomination for the Proration Month or its Monthly Committed                    Volume. If a Priority Shipper Nominates volumes in excess of its                     Monthly Committed Volume, then the excess incremental volumes shall                    be subject to prorationing under Item 7(E) below.                      (2)   If an event of Force Majeure or other operational issue causes System                    Capacity to be reduced for the Proration Month, the allocation of System                    Capacity to each Priority Shipper under this Item 7(C) shall be reduced by                   the same percentage as the reduction in System Capacity that is caused by                   the Force Majeure event or operational issue. If an event of  Force                   Majeure or other operational issue causes a service disruption on only a                   portion of the Gathering System or at a particular Receipt Point or                   Delivery Point, Gatherer shall continue to provide full operational service                   with respect to the unaffected portions of the Gathering System and to the                   unaffected Receipt Points and Delivery Points. Gatherer will reduce the                   allocations of System Capacity to each Priority Shipper affected by such                   Force Majeure event by the same percentage as the reduction in capacity                   of the affected portion of the Gathering System or the reduction in receipt                   or delivery capability of the affected Receipt Point or Delivery Point,                   respectively and as applicable. Pursuant to the terms of a Priority                   Shipper’s COGA, Gatherer may temporarily suspend such Shipper’s right                   to be treated as a Priority Shipper for purposes of this Item 7 during the                   occurrence of a default of the COGA by such Shipper.                D.   Allocation to Uncommitted Shippers.                      (1)   Following the allocation of System Capacity set forth in Item 7(C) above,                    Gatherer shall next allocate the Non-Priority Capacity on the Gathering                    System among all Uncommitted Shippers in the following manner:                            i.   Each Uncommitted Shipper shall be allocated an amount of                          System Capacity in the Proration Month that is equal to:                                         10 

 

                                                           [COGA – EXECUTION]                            a.    its Nomination, if the total volume Nominated by all                          Uncommitted Shippers is less than or equal to ten percent                          (10%) of System Capacity on the Gathering System; or                            b.    its pro rata share, in accordance with its Nomination, of ten                          percent (10%) of the System Capacity on the Gathering                          System, if the total volume Nominated by all Uncommitted                          Shippers is greater than ten percent (10%) of such System                          Capacity.          E.    Remaining System Capacity. Any remaining System Capacity not allocated       through the application of Items 7(C) or 7(D) shall be allocated first, pro rata,       among all Priority Shippers having remaining unmet Nominations according to       the level of each Priority Shipper’s Monthly Committed Volume. If allocation to       any Shipper pursuant to this Item 7(E) exceeds such Shipper’s remaining       Nomination or there remains unallocated System Capacity following this       additional allocation to Priority Shippers, then the excess volume will be allocated       among all other Shippers having unmet Nominations until the remaining System       Capacity is fully allocated or all of the remaining Nominations have been       fulfilled.          F.    Basis for Allocation; Notification. When prorationing of System Capacity is in       effect:                (1)  Gatherer shall allocate System Capacity on a monthly basis; and                (2)   Gatherer will use reasonable efforts to notify each Shipper of its allocation              not later than the first working day of the Proration Month.          G.    Reallocation of Unused Allocated System Capacity. If a Shipper does not use the        portion of System Capacity allocated to it under this Item 7 at the times and in the        amounts designated by Gatherer, Gatherer shall have the right to use Shipper’s        unused portion of System Capacity to fulfill the unmet Nominations of other        Shippers, but only to the extent and duration of Shipper’s under-utilization of its        capacity, without impacting the payment obligations of Shipper or any other        obligations of Shipper, or otherwise crediting or paying Shipper in any manner.        Nothing in this Item 7(G) shall operate to reduce or otherwise alter Shipper’s        Maximum Daily Quantity.          H.   Failure of Uncommitted Shipper to Use Allocated System Capacity.                (1)   Except as provided in Item 7(H)(2) below, an Uncommitted Shipper that              fails to use all of its allocated System Capacity during a Proration Month              shall have its allocation of System Capacity reduced in each subsequent              Proration Month until the total reductions equal the amount of the              deficiency. The amount of any such reduction shall be treated as unused              allocated System Capacity and shall be reallocated among other Shippers              in accordance with Item 7(G).                                   11 

 

                                                                 [COGA – EXECUTION]                      (2)   Reduction of an Uncommitted Shipper’s allocation for failure to use its                    allocated System Capacity during a Proration Month may be waived, in                    whole or in part, if Gatherer determines that Shipper’s failure to use all or                    some of its allocated System Capacity was due to a Force Majeure.                I.   Transfer of Allocated System Capacity; Use of Affiliates. Except as provided in              this Item 7(I), capacity allocated to a Shipper under this Item 7 may not be              assigned, conveyed, loaned, transferred to, or used in any manner by another              Shipper; provided, however, that a Shipper’s allocation of capacity may be              transferred as an incident of the bona fide sale of the Shipper’s business or to a             successor to the Shipper’s business by the operation of law, such as an executor or             trustee in bankruptcy.          8.   MEASUREMENT          Crude Oil delivered hereunder shall be measured by in accordance with Gatherer’s  [Measurement Policy], dated [      ], 2018.  A copy of the [Measurement Policy] is available   on Gatherer’s website at [      ].          9.     RECEIPT FACILITIES   Gatherer will receive Crude Oil from Shippers at the Receipt Points on the Gathering System.  Crude Oil will be received only from pipelines, tanks or other facilities that are provided by  Shipper or Consignor, or a connecting carrier. Gatherer will not accept  a Nomination unless   such facilities have been provided and conform to the operating requirements of Gatherer, in  Gatherer’s sole discretion.          10.  STORAGE OF CRUDE OIL          Gatherer does not provide storage for Crude Oil, except storage incidental to transportation on  the Gathering System. Gatherer has the right to coordinate with downstream connecting   facilities to ensure that Shipper has arranged for receipt of its Crude Oil at the Nominated  Delivery Point; by Nominating Crude Oil for transportation on the Gathering System, Shipper  agrees to permit such coordination.          11.  DELIVERY FACILITIES          Gatherer will accept Crude Oil for transportation only when Shipper or Consignee has provided  the necessary facilities for taking delivery of the shipment as it arrives at the Delivery Point.  Gatherer will not accept a Nomination unless such facilities have been provided and conform to  the operating requirements of Gatherer, in Gatherer’s reasonable discretion. The cost of such  facilities shall be provided at the sole cost of Shipper, except as otherwise provided for in a  COGA.          12.  NOTICE OF ARRIVAL, DELIVERY AT DESTINATION                A.    After a shipment of Crude Oil has had time to arrive at Shipper’s Nominated              Delivery Point and on twenty-four (24) hours’ notice to Shipper or Consignee,                                         12 

 

                                                                 [COGA – EXECUTION]                      Gatherer may begin delivery of such Crude Oil to Shipper or Consignee at              Gatherer’s current rate of pumping. Shipper shall timely remove its Crude Oil, or              cause such Crude Oil to be removed, from the Gathering System following              transportation to a Nominated Delivery Point. If Shipper or Consignee is unable               or refuses to receive said shipment, Gatherer will assess a demurrage charge of              1.25 cents ($0.0125) per Barrel for each day (or fractional part thereof)              commencing twenty-four (24) hours following Gatherer’s notification described              above and Shipper’s failure to promptly accept such Crude Oil. In addition to               such demurrage charge, Gatherer shall also have the right to curtail the amount of              Crude Oil it will accept from Shipper until such Unremoved Crude Oil is              removed.                B.    In addition to such demurrage charge, Gatherer also reserves the right if deemed              necessary to clear the Gathering System, provided that the notices set out in Item              12(A) have been given, to make whatever arrangements for disposition of the              Unremoved Crude Oil that are appropriate, which includes selling the Unremoved              Crude Oil at a private sale for the best price reasonably obtainable. Gatherer may              be a purchaser at such sale. The proceeds of any sale shall be applied in the              following order: (i) to the reasonable expenses of holding, preparing for sale,              selling, and transporting the Crude Oil, and to the extent allowed by Applicable              Law reasonable attorneys’ fees and legal expenses incurred by Gatherer; and (ii)              to the satisfaction of Shipper’s indebtedness including interest herein provided              from the date payment is due. The balance of the proceeds of the sale remaining,              if any, shall be paid to Shipper or, if there is a dispute or claim as to entitlement,              held for whoever may be lawfully entitled thereto. Gatherer will have a claim for              and against Shipper with respect to any deficiency arising from the debt due to              Gatherer from Shipper and the proceeds of any sale after reduction as set forth              above. Shipper shall indemnify Gatherer for all losses associated  with              Unremoved Crude Oil and Gatherer’s disposition of the Unremoved Crude Oil.              Gatherer shall have no liability to Shipper associated with Shipper’s Unremoved              Crude Oil or Gatherer’s disposition of Unremoved Crude Oil except as set forth              herein.          13.  LINE FILL REQUIREMENTS                A.    Gatherer shall require Shipper to supply, and Shipper shall supply, Crude Oil              constituting its proportionate share of Crude Oil for line fill necessary for              operation of the Gathering System (“Line Fill”). For purposes of clarity, a              Priority Shipper’s proportionate share of Line Fill shall be the percentage equal to              Priority Shipper’s Committed Volume divided by ninety percent (90%) of the              total System Capacity at such time.                B.    In the event a Shipper’s Line Fill balance drops below its proportionate share of              the volume of Crude Oil necessary for operation of the Gathering System,              Gatherer will notify Shipper of the amount of Line Fill that Shipper owes and              Shipper shall supply such Line Fill to Gatherer before Gatherer is obligated to              accept Shipper’s Nominations or Tenders or make deliveries or shipments on                                         13 

 

                                                           [COGA – EXECUTION]                behalf of Shipper. Any notice to Shipper of additional Line Fill requirements        under this Item 13(B) shall provide adequate time for Shipper to make the        required Nominations under Item 6. Subject to the provisions of Item 17, in the        event Shipper’s Line Fill balance is above its proportionate share of the volume of        Crude Oil necessary for Line Fill (“Excess Line Fill”), then Gatherer shall notify        Shipper of such Excess Line Fill amount and will return such Excess Line Fill to        Shipper upon written request by Shipper to Gatherer and following a reasonable        period of time to allow for administrative and operational requirements associated        with the withdrawal of such Excess Line Fill.          C.    Subject to the provisions of Item 17, Line Fill furnished by Shipper may be        withdrawn from the Gathering System under two circumstances (i) if Shipper        intends to discontinue shipments on the Gathering System for the foreseeable        future and/or, (ii) if Shipper is “no longer shipping” on the Gathering System, as        described in Item 13(C)(2) below. Line Fill furnished by a Shipper may be        withdrawn from the Gathering System only pursuant to the terms of this Item        13(C).                (1)   If Shipper intends to discontinue shipments on the Gathering System for              the foreseeable future, Shipper shall provide written notification to              Gatherer that it intends to discontinue shipments on the Gathering System.              Gatherer will then provide written notice to Shipper as provided for in              Item 13(C)(3).                (2)   A Shipper that makes no shipments on the Gathering System over a              continuous six (6)-month period shall be deemed to be “no longer             shipping.” When Gatherer identifies that a Shipper is “no longer             shipping,” Gatherer will provide written notice to Shipper that it is             considered to be “no longer shipping” on the Gathering System as              provided for in Item 13(C)(3).                (3)   Gatherer will issue written notice (the “Notification”) to Shipper that              according to the Gatherer’s books, Gatherer is holding a certain volume of              Crude Oil on its books in Shipper’s name. Shipper will be advised in such              letter that Shipper will have thirty (30) days effective with the date of the              Notification to provide written direction regarding the disposal of              Shipper’s Crude Oil. If at the end of this thirty (30)-day period, Gatherer              has received no written direction, Gatherer will assume title to the Crude              Oil being held on its books in Shipper’s name, free and clear of any and all              liens, claims or encumbrances, and Shipper expressly agrees and consents              to transfer title to Gatherer as set forth herein.                       (i)   If Gatherer has been contacted by Shipper within thirty (30) days                    of the Notification described in Item 13(C)(3), Gatherer will grant                    Shipper an additional thirty (30) days without charge to facilitate                    the disposal of Shipper’s inventory Crude Oil. If at the end of this                    60-day period, Shipper has not disposed of this Crude Oil,                                   14 

 

                                                                 [COGA – EXECUTION]                                  Gatherer retains the right to charge a liquidated damage fee of                          $0.10 per Barrel, per month, retroactive to the date of the                          Notification, plus any other fees as allowed in accordance with this                          tariff; such fees will be required to be paid before the Crude Oil                          will be released. In addition, if Shipper has not disposed of such                          Crude Oil within sixty (60) days from the date of Notification,                          Gatherer will assume title to such Crude Oil free and clear of any                          and all liens, claims or encumbrances, and Shipper expressly                          agrees and consents to transfer title to Gatherer as set forth herein.                          If Shipper provides a written request to Gatherer after title  to                          Crude Oil has been assumed by Gatherer but before Gatherer has                          otherwise disposed of Crude Oil, Gatherer agrees to transfer title                          back to Shipper for a fee of $5.00 per Barrel. Such fees will be                          required to be paid before the Crude Oil will be released. Upon                          transfer of title back to Shipper, Shipper will then be responsible                          for disposing of Crude Oil within thirty (30) days therefrom.                          Failure of Shipper to dispose of said Crude Oil within thirty (30)                          days of the transfer of title back to Shipper will result in title being                          vested back in Gatherer without recourse.                      (4)   Gatherer’s return of Line Fill is contingent upon Shipper’s inventory                    balances and all outstanding amounts due having been reconciled between                    Shipper and Gatherer and Shipper having paid in full any amounts owed to                    Gatherer following such reconciliation. Gatherer shall have a reasonable                    period of time to complete administrative and operational requirements                    incident to Shipper’s withdrawal of Line Fill.                      (5)   Subpart (C) of this Item 13 shall not apply to a Priority Shipper during the                    term of such Priority Shipper’s COGA. However, following the                     expiration of a Priority Shipper’s COGA, such Priority Shipper’s Line Fill                    shall be returned to Priority Shipper pursuant to the provisions set forth in                    subpart (C) of this Item 13.          14.  TITLE                A.    Gatherer may require of Shipper satisfactory evidence of its perfected and              unencumbered title (other than Shipper’s Permitted Liens) of any Crude Oil              Tendered for shipment on the Gathering System. Gatherer shall have the right to              reject any Crude Oil, when Tendered for transportation, that constitutes              Encumbered Crude Oil (as defined below).                B.    At the time of Nomination, Shipper shall inform Gatherer if any Crude Oil              Nominated and/or to be Tendered to Gatherer for transportation (i) may be              involved in litigation, (ii) may be subject to a title dispute, or (iii) may be              encumbered by a lien or charge of any kind at the time of delivery of such Crude              Oil to Gatherer at a Receipt Point (other than any Shipper’s Permitted Liens and              the lien created hereunder in favor of Gatherer) (“Encumbered Crude Oil”). In             the event Gatherer receives such Shipper notice of Encumbered Crude Oil or                                         15 

 

                                                                  [COGA – EXECUTION]                       otherwise learns that Shipper has or will Nominate or Tender Encumbered Crude               Oil, Gatherer, in its reasonable discretion, may require Shipper to provide one or               more of the following: (i) satisfactory evidence of its perfected  and               unencumbered title, (ii) satisfactory indemnity bond to protect Gatherer against               any and all loss, (iii) pre-payment of transportation charges, or (iv) subordination               agreement from the applicable lienholder. Gatherer also has the right to refuse                any shipment of Encumbered Crude Oil.                 C.    By Nominating Crude Oil, Shipper warrants and guarantees that Shipper has good               title (or right to ship or control) thereto and agrees to hold Gatherer harmless for               any and all loss, cost, liability, damage and/or expense resulting from failure of               title (or right to ship or control) thereto; provided that acceptance for               transportation shall not be deemed a representation by Gatherer as to title (or right               to ship or control). Shipper shall not cause or permit any lien, security interest or               other form of burden to be filed or created with respect to Crude Oil in Gatherer’s               possession, except for any Shipper’s Permitted Liens and the lien created               hereunder in favor of Gatherer.           15.  RATES APPLICABLE           Crude Oil accepted for transportation shall be subject to the rates and charges in effect on the   date of receipt by Gatherer that are applicable to Shipper’s shipments, irrespective of the date of   the Nomination. The applicable rates are set forth in Section II herein. Transportation and all   other lawful charges shall be collected on the basis of the quantities of Crude Oil delivered to   Delivery Points, and said quantities will be determined in the manner provided in Item 8.           The terms of a COGA shall govern the rights of a Priority Shipper and Gatherer with respect to   the payment or nonpayment of any deficiency payments and/or other charges set forth in a   COGA.  In the event Gatherer refuses to accept Barrels of Crude Oil Tendered by a Priority   Shipper for transportation under this tariff or a COGA because such Shipper has been (i) in   violation of this tariff, or (ii) in material breach of a COGA at the time the Barrels are Tendered   to Gatherer, then no reduction shall be made to a deficiency payment if, as a result of such   refusal, such Priority Shipper fails to ship its Monthly Committed Volume for such month.           16.  RATES APPLICABLE FROM INTERMEDIATE POINTS   Shipments accepted for transportation from or to any point on the Gathering System not named  in this tariff, but which is intermediate to a point where rates are published, will be assessed the  rate in effect from or to the next more distant point published in this tariff. Continuous use of  intermediate point rate application under this Item 16 for more than thirty (30) days requires  establishment of a rate for the transportation service.           17.  PAYMENT OF CHARGES          A.    Gatherer will invoice Shipper for transportation rates, fees, and charges, and any               other amounts accruing on Crude Oil transported by Gatherer within twenty (20)               days of the end of each month. Gatherer shall calculate and assess any payments                                           16 

 

                                                           [COGA – EXECUTION]                Shipper owes to Gatherer under a COGA, including but not limited to any        deficiency payments, in accordance with the provisions of the COGA.          B.    All payments are due by the later of (i) the twenty-fifth (25th) day of the month in        which the invoice is received or (ii) fifteen (15) days from the date of Shipper’s        receipt of the invoice. Invoices falling due on a weekend or holiday need not be        paid until the following regular workday and no interest shall accrue under Item        17(C) until after such regular workday. If Shipper, in good faith, disputes the        amount of any such invoice or any part thereof, Shipper shall pay such amount as        it concedes to be correct. If Shipper disputes the amount due, it must provide        supporting documentation to support the amount disputed within ten (10) days of        the date of Shipper’s receipt of such invoice.          C.    If any undisputed charge remains unpaid after the due date, then interest shall        accrue at a per annum rate of interest equal to the lower of (i) the Prime Rate plus        five percent (5%) or (ii) the maximum legal rate. “Prime Rate” means the prime        rate on corporate loans at large U.S. money center commercial banks as set forth        in the Wall Street Journal “Money Rates” table under the heading “Prime Rate,”        or any successor thereto, on the first date of publication for the month in which        payment is due.          D.    In addition, in the event Shipper fails to pay any undisputed charges owed to        Gatherer, whether under this tariff, a COGA, or any other agreement, when due,        Gatherer shall have the right, until such payments, including interest thereon, are        paid in full, to: (i) refuse to provide Shipper access to the Gathering System or        provide services pursuant to this tariff, including delivery of any of Shipper’s        Crude Oil in Gatherer’s possession to Shipper, (ii) offset the current and future        amounts owed by Shipper under this tariff or a COGA against any amounts        Gatherer owes to Shipper or against any of Shipper’s Crude Oil in the Gathering        System, and (iii) exercise any other rights and remedies granted under this tariff         or existing under Applicable Law.          E.    Gatherer shall have a lien on all Crude Oil delivered to and in the possession of        Gatherer to secure the payment of any and all charges and fees owed to Gatherer        by Shipper, whether under this tariff, a COGA if applicable, or any other        agreement, including but not limited to, transportation fees, deficiency payments,        penalties, interest and late payment charges. Such lien shall extend to all Crude        Oil in Gatherer’s possession beginning with Shipper’s first receipt of        transportation or other services from Gatherer. Shipper agrees to execute such        additional documents as may be reasonably necessary to perfect or evidence such        lien. If a bill of lading is required under Applicable Law for such a lien to arise,        acceptance of the Nomination will be deemed to be the bill of lading for all Crude        Oil subject to such Nomination. The lien provided herein shall be in addition to        any lien or security interest provided by this tariff or Applicable Law.          F.    If Shipper fails to pay any undisputed charges owed to Gatherer by the due date,        Gatherer will notify Shipper of the failure, and if Shipper has not remedied the        failure within ten (10) days following receipt of notice from Gatherer, in addition                                   17 

 

                                                                 [COGA – EXECUTION]                      to any other remedies under this tariff or under Applicable Law, Gatherer shall              have the right, either directly or through an agent, to sell any Crude Oil of such              Shipper in Gatherer’s custody, including Shipper’s Line Fill, at public auction, on              any day not a legal holiday, not less than forty-eight (48) hours after publication              of notice of such sale in a daily newspaper of general circulation published in the              town, city, or general area where the sale is to be held, stating the time and place              of sale and the quantity and location of the Crude Oil to be sold. At said sale,              Gatherer shall have the right to bid, and, if it is the highest bidder, to become the              purchaser. The proceeds of any sale shall be applied in the following order: (i) to              the reasonable expenses of holding, preparing for sale, selling, and transporting              the Crude Oil and to the extent allowed by Applicable Law reasonable attorneys’              fees and legal expenses incurred by Gatherer; and (ii) to the satisfaction of              Shipper’s indebtedness including interest herein provided from the date payment              is due. The balance of the proceeds of the sale remaining, if any, shall be paid to              Shipper or, if there is a dispute or claim as to entitlement, held for whoever may              be lawfully entitled thereto. Gatherer will have a claim for and against Shipper              with respect to any deficiency arising from the debt due to Gatherer from Shipper              and the proceeds of any sale after reduction as set forth above.          18.  FINANCIAL ASSURANCES                A.    Thirty (30) days prior to making its first Nomination, each prospective Shipper              shall provide information to Gatherer that will allow Gatherer to determine the              prospective Shipper’s ability to pay any financial obligations that could arise from              the transportation of the prospective Shipper’s Crude Oil under the terms of this              tariff. The type of information Gatherer may request from a prospective Shipper              includes, but is not limited to, most recent year-end financials, Form 10-K reports              or other filings with regulatory agencies, and bank references. Except as               otherwise provided for in a COGA, if, in the reasonable opinion of Gatherer, such              prospective Shipper is not creditworthy, Gatherer shall require such Shipper to              prepay all transportation and other fees and lawful charges accruing on Crude Oil              delivered and accepted by Gatherer or supply an irrevocable letter of credit from a              bank acceptable to Gatherer, with terms in a form acceptable to Gatherer and such              prepayment must be received within five (5) days of Shipper’s first Nomination.                B.    In the event Gatherer determines, in a manner not unreasonably discriminatory,              that a Shipper’s creditworthiness is at any time unsatisfactory to Gatherer,              Gatherer may require, except as otherwise provided for in a COGA, Shipper to              provide adequate assurance of performance. As adequate assurance, Gatherer               may require Shipper to provide one of the following (at Gatherer’s election): (i)              cash (in U.S. dollars), as collateral held for security, (ii) a Guarantee (as defined              below), (iii) a prepayment, and/or (iv) an irrevocable standby letter of credit              issued by a Qualified Institution, with the amount of such security to be the              amount estimated in good faith for the next sixty (60) days of performance              hereunder. For purposes of this Item 18(B), a “Guarantee” means a guarantee of             the payment obligations of Shipper which is provided by Shipper’s credit support                                          18 

 

                                                                 [COGA – EXECUTION]                      provider in favor of Gatherer with such form of guarantee being acceptable to              Gatherer in its reasonable discretion.                C.    In the event a prospective Shipper fails to comply with any obligation in Item              18(A) or a Shipper fails to comply with any obligation in Item 18(B), Gatherer              shall not be obligated to provide such prospective Shipper with access to the              Gathering System or to provide transportation services pursuant to this tariff or a              COGA, as applicable, until such requirement is fully met.          19.  CHARGE FOR FUND COMPENSATION          In addition to all other charges to Shipper accruing on Crude Oil accepted for transportation and  subject to any provision in a COGA, a per Barrel charge will be assessed and collected by  Gatherer in the amount of any tax, fee, or other charge levied against Gatherer in connection with  such Crude Oil by any Governmental Authority for the purpose of creating a fund for the  prevention, containment, clean up, and/or removal of spills and/or the reimbursement of Persons  sustaining a loss therefrom or any program where Gatherer is acting as a collecting agent. Such  charge will be included in the appropriate tariff filed with the Federal Energy Regulatory  Commission.          20.  LIABILITY OF SHIPPER          As a condition to Gatherer’s acceptance of Crude Oil for transportation on the Gathering System,  each Shipper agrees to protect and indemnify Gatherer against claims or actions for injury and/or  death of any and all Persons whomever and for damage to property of or any other loss sustained  by Gatherer, Shipper, Consignor, Consignee and/or any third party, resulting from or arising out  of (i) any breach of or failure to adhere to any provision of Gatherer’s tariff(s) or a COGA (if  applicable) by such Shipper or any of its Consignors, Consignees, or any of their agents,  employees or representatives and (ii) the negligent act(s) or failure(s) to act of such Shipper or  any of its Consignors, Consignees or any of their agents, employees or representatives in  connection with delivery or receipt of Crude Oil, except to the extent such claims or actions are  due to the breach by Gatherer of this tariff or a COGA (if applicable), or negligence or willful  misconduct of Gatherer.          21.  LIABILITY OF GATHERER                A.    Gatherer, while in possession of Crude Oil herein described, shall not be liable              for, and Shipper hereby waives any claims against Gatherer for, any loss thereof,              damage thereto, or delay caused by Force Majeure, the act of Shipper itself, a              Governmental Authority, the nature of the goods, or resulting from any other              causes, unless such loss, damage, or delay is due to the breach by Gatherer of this              tariff or a COGA (if applicable), or negligence or willful misconduct of Gatherer.              Gatherer agrees to protect and indemnify Shipper against any claims, losses or              damages arising from any breach, negligence or willful misconduct by Gatherer.              Gatherer shall not be liable for, and Shipper hereby waives any claims against              Gatherer for, any loss or damage to Crude Oil prior to the delivery of Crude Oil to              Gatherer at the Receipt Points and after delivery of Crude Oil at the Delivery              Points.                                         19 

 

                                                                 [COGA – EXECUTION]                B.    In case of loss or damage of any Crude Oil from any such causes that are not due              to the breach, negligence or willful misconduct of Gatherer, after it has been              received for transportation at the Receipt Point and before the same has been              delivered to Shipper at the Delivery Point, such loss will be charged              proportionately to each Shipper in the ratio that its Crude Oil, or portion thereof,              received and undelivered at the time the loss occurs, bears to the total of all Crude              Oil then in the custody of Gatherer for transportation via the lines or other              facilities in which the loss occurs. Gatherer will be obligated to deliver only that              portion of such Crude Oil remaining after deducting Shipper’s portion of such              loss determined as aforesaid. In the aforementioned instance, transportation              charges will be assessed only on the quantity delivered.                C.    Gatherer will not be liable for discoloration, contamination, or deterioration of the              Crude Oil transported hereunder unless and to the extent such discoloration,              contamination, or deterioration of Crude Oil transported results from the breach,              negligence or willful misconduct of Gatherer.                D.    NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS TARIFF,              IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER              PARTY OR ITS AFFILIATES, ANY SUCCESSORS IN INTEREST OR ANY              BENEFICIARY OR ASSIGNEE OF A COGA FOR ANY CONSEQUENTIAL,              INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES,              INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS OR              REVENUES THAT CONSTITUTE SUCH DAMAGES, THAT ARISE OUT OF              OR RELATE TO THIS TARIFF OR ANY BREACH HEREOF; PROVIDED,              HOWEVER, THE FOREGOING SHALL NOT             BE CONSTRUED AS              LIMITING AN OBLIGATION OF A PARTY HEREUNDER TO INDEMNIFY,              DEFEND AND HOLD HARMLESS PERSONS ENTITLED TO              INDEMNIFICATION HEREUNDER AGAINST CLAIMS ASSERTED BY              UNAFFILIATED THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO,              THIRD PARTY CLAIMS FOR SPECIAL, INDIRECT, CONSEQUENTIAL,             PUNITIVE OR EXEMPLARY DAMAGES.                E.    Gatherer operates under this tariff solely as a common carrier and not as an              owner, manufacturer, or seller of the Crude Oil transported or stored hereunder,              and Gatherer expressly disclaims any liability for any express or implied warranty              for Crude Oil transported hereunder including any warranties of merchantability              or fitness for intended use.          22.  CLAIMS, SUITS, AND TIME FOR FILING          As a condition precedent to recovery by Shipper against Gatherer for loss, damage, or delay in  receipt or delivery of Shipper’s Crude Oil for which Gatherer may be responsible, Shipper’s  claim must be filed in writing with Gatherer within nine (9) months after delivery of the affected  Crude Oil, or in case of Gatherer’s failure to make delivery of Shipper’s Crude Oil, then within  nine (9) months after a reasonable time for delivery has elapsed; and suits shall be instituted  against Gatherer only within two (2) years and one (1) day from the day when notice in writing is  given by Gatherer to Shipper that Gatherer has disallowed the claim or any part or parts thereof                                         20 

 

                                                                  [COGA – EXECUTION]           specified in the notice. Where claims are not filed or suits are not instituted by Shipper on such   claims in accordance with the foregoing provisions, such claims will not be paid and Gatherer   will not be liable. Nothing in this Item 22 shall limit Shipper’s right to receive indemnification   with respect to any loss, claim or damage for which Gatherer is obligated to indemnify Shipper,   other than claims by Shipper or its Affiliates for loss, damage or delay in receipt or delivery of   Shipper’s Crude Oil by Gatherer, regardless of when such loss, claim or damage arose.           23.  CONNECTIONS           Subject to any provision contained in a Priority Shipper’s COGA, including any provision   requiring the connection of Receipt Points, connections to the Gathering System will only be   considered if made by formal written application to Gatherer in accordance with Gatherer’s   connection policy. All connections will be subject to design requirements necessary to protect   the safety, security, integrity and efficient operation of the Gathering System in accordance with   generally accepted industry standards and Gatherer’s connection policies. Acceptance of any   application for connection will be within the sole discretion of Gatherer and will be subject to   compliance with Governmental Authorities and industry regulations.           24.  GATHERER DISCRETION           Gatherer will operate the Gathering System and implement the rules and regulations contained in   this tariff, including those provisions providing for Gatherer’s discretion, in a manner that is not   unduly discriminatory or unduly preferential           25.  LOSS ALLOWANCE           Except as otherwise set forth in Section II of this tariff, Gatherer shall deduct the actual losses of   Crude Oil on a pro rata basis to cover losses inherent in the transportation of Crude Oil on the   Gathering System, provided that such loss allowance shall not exceed (i) two-tenths of one  percent (0.20%) of the volumes of Shipper’s Crude Oil received into the Gathering System, with  respect to Shipper’s Crude Oil having an API Gravity of 49.9 degrees or less, or (ii) four-tenths  of one percent (0.40%) of the volumes of Shipper’s Crude Oil received in the Gathering System,  with respect to Shipper’s Crude Oil having an API Gravity of 49.9 degrees to 60 degrees  (Gatherer will not accept for transportation Crude Oil with API Gravity above 60 degrees). The  volumes delivered to Shipper or its designee from Gatherer’s facilities shall be net of such  deduction.                                           21 

 

                                                                             [COGA – EXECUTION]                                                    SECTION II                                              RATES                                                      TABLE 1        COMMITTED RATES APPLICABLE TO PRIORITY SHIPPERS1 AND UNCOMMITTED                                               RATES                                              Rates in Dollars per Barrel                                         Volume        10 Year Term    12 Year Term     Uncommitted  Tier     Origin      Destination    (Barrels/Day)    Priority Rate2  Priority Rate3       Rate4                                                                                                                               >25,000    1                                                                                                  Tank                        >20,000 and    2      Batteries                                         <= 25,000          located in                                               Winkler    Interconnect at                                                                                                  County,                                                        10,000 and    3       Texas,       Pipeline,                                         <= 20,000           Loving       [Winkler]                                               County,    County, Texas                                                                                                 Texas and                                          >=2,000 and    4    Lea County,                                         <= 10,000         New Mexico                                                                                          5                                     < 2,000            Truck     Interconnect at                                                           Station(s)                         Pipeline,                        [Winkler]                      County, Texas                                                   22 

 

                                                                            [COGA – EXECUTION]                                              TABLE 2          COMMITTED RATES APPLICABLE TO PRIORITY SHIPPERS WITH ACREAGE             DEDICATION OF AT LEAST 2,000 ACRES AND UNCOMMITTED RATES                                      Rates in Dollars per Barrel                                     12 Year Term                                                5,9,  Uncommitted  Tier    Origin       Destination   Priority Rate          6, 9, 10                                           10           Rate       [     ] Tank                                          Batteries                                          located in                                           Winkler    Interconnect at                                              County,                   1       Texas,       Pipeline,        $0.75            $0.74          Loving        [Winkler]          County,     County, Texas         Texas and        Lea County,        New Mexico          [     ]    Interconnect at                                               Truck                    1     Station(s)     Pipeline,                        [Winkler]                      County, Texas                                                  23 

 

                                                                     [COGA – EXECUTION]                                                 TABLE 3          COMMITTED RATES APPLICABLE TO PRIORITY SHIPPERS WITH ACREAGE            DEDICATION OF AT LEAST 2,000 ACRES AND UNCOMMITTED RATES                                          Rates in Dollars per Barrel                                    Volume     10 Year Term   Uncommitted  Tier   Origin7     Destination                                 (Barrels/Day) Priority Rate8     Rate6   1    [   ] Tank  Interconnect at >20,000        $1.18          $1.17         Batteries                >10,000 and      $0.98   2                                                              $0.97         located in                <= 20,000                        Pipeline,       Eddy and Lea                                                              [Winkler]     <=10,000        $0.78   3     Counties,                                                $0.77                    County, Texas        New Mexico         [     ]    Interconnect at                                                     Truck                        Station(s)   Pipeline,                     [Winkler]                    County, Texas                       Effective as of 9:00 a.m., Central Clock Time, on the first January 1st that occurs two years after      the Commencement Date, and each January 1st occurring thereafter, the Priority Rates and      Uncommitted Rates noted above shall be adjusted upwards or downwards following FERC’s      indexing adjustment, as set out in 18 CFR § 342.3, including future amendments or      modifications thereof, provided, however, that such indexing adjustment shall not result in an      increase or decrease in the Priority Rates and/or Uncommitted Rates that exceeds two percent      (2%) or a decrease in the Priority Rates and/or Uncommitted Rates that would result in a rate less      than the rates set out in Gatherer’s initial FERC tariff, F.E.R.C. No. 1.0.0. In the event that      Gatherer is unable to make a tariff filing pursuant to 18 CFR § 342.4(c) to adjust the      Uncommitted Rates, then Gatherer will make a tariff filing to adjust the Uncommitted Rates      effective as of the subsequent July 1 pursuant to 18 CFR § 342.3. However, if the FERC      indexing adjustment is eliminated, Gatherer may increase or decrease the Priority Rates and      Uncommitted Rates to reflect any positive changes or negative changes in the Producer Price      Index for Finished Goods, on a year-over-year basis, subject to the above-noted increase and     decrease limitations.                                                TRUCK UNLOAD CHARGE           Shipments unloaded from tank truck facilities into the Gathering System at           Receipt Points are subject to a charge of 7.25 cents ($0.0725) per Barrel, except           as otherwise provided in a COGA.                                              24 

 

                                                                 [COGA – EXECUTION]          Notes Applicable to Tables 1, 2 and 3             1. Priority Shippers that have committed to deliver a specified volume of Crude Oil to the        Gathering System.     2. In order to qualify for this 10 Year Term Committed Rate, a Priority Shipper must have        entered into a COGA with a minimum term of 10 years and a commitment to deliver a        specified volume of Crude Oil on the Gathering System of at least [2,000] Barrels per        day.     3. In order to qualify for this 12 Year Term Committed Rate, a Priority Shipper must have        entered into a COGA with a minimum term of 12 years and a commitment to deliver a        specified volume of Crude Oil on the Gathering System of at least [2,000] Barrels per        day.     4. An Uncommitted Shipper’s Uncommitted Rate will be based on the volume of Crude Oil        it ships each month on the Gathering System, which shall then determine the volume tier        applicable to such Uncommitted Shipper.     5. In order to qualify for this 12 Year Term Committed Rate, a Priority Shipper must have        entered into a COGA with a minimum term of 12 years and made an acreage dedication        covering at least [2,000] acres of lands located in Winkler County, Texas, Loving        County, Texas and/or Lea County, New Mexico.     6. In order to qualify for the Uncommitted Rate based on an acreage dedication, an        Uncommitted Shipper must have an effective dedication agreement with Gatherer        pursuant to which such Uncommitted Shipper has agreed to deliver crude petroleum        produced from the dedicated acreage for transportation on the Gathering System.     7. In lieu of the provisions stated in Item 25 of the tariff, the following will apply for Crude        Oil Tendered at these Receipt Points:            . The volumes delivered to        Shipper from Gatherer’s facilities shall be net of such deduction.     8. In order to qualify for this 10 Year Term Committed Rate, a Priority Shipper must have        entered into a COGA with a minimum term of 10 years and made an acreage dedication        covering at least [2,000] acres of lands located in Winkler County, Texas, Loving        County, Texas and/or Lea County, New Mexico.     9. If  the Commencement Date does not  occur by          , 201 (the “Project        Deadline”), then upon the Commencement Date, Gatherer shall temporarily reduce this        Priority Rate to $0.375 per Barrel and this Uncommitted Rate to $0.370 per Barrel for        only a period of time equal to the amount of days from the Project Deadline until the        Commencement Date (“Delay Period”); provided, however, on the first day after the        expiration of the period of time after the Commencement Date equal to the Delay Period,        such Priority Rate and Uncommitted Rate will be increased to such rates, respectively, set        out in Table 2. By way of example, if the Delay Period is equal to thirty (30) days, then        such Priority Rate and Uncommitted Rate will be $0.375 per Barrel and $0.370 per        Barrel, respectively, for only the first 30 days after the Commencement Date and on the        31st day after the Commencement Period, the Priority Rate and Uncommitted Rate shall        be as set out in Table 2. Notwithstanding anything herein to the contrary, if the Project        Deadline is delayed due to a properly noticed event of Force Majeure, then the Project        Deadline shall be extended for each day of any such delay.     10. If Gatherer fails or is unable to connect an additional Receipt Point as requested by a        Priority Shipper as provided for in the applicable COGA by the date that is thirty (30)        days beyond the applicable Target RP In-Service Date (as such term is defined in the                                         25 

 

                                                            [COGA – EXECUTION]           applicable COGA) for any reason other than Force Majeure, then, for each day of   unexcused delay until Gatherer connects such additional Receipt Point beyond the Target   RP In-Service Date, Gatherer shall temporarily reduce this Priority Rate to $0.375 per   Barrel and this Uncommitted Rate to $0.370 per Barrel for Shipper’s Crude Oil delivered   to such additional Receipt Point for only a period of time equal to the amount of days   from the deadline set forth in the COGA until the date such additional Receipt Point is   connected; provided, however, on the first day after the expiration of such period of time,   the Priority Rate and Uncommitted Rate will be increased to such rates, respectively, set   out in Table 2. By means of example, if Gatherer connects a requested Receipt Point    fifty (50) days after the Target In-Service Date for such additional Receipt Point, and  such delay is not due to an event of Force Majeure, then the reduction in the Priority Rate  and Uncommitted Rate described in the preceding sentence would apply to such Priority  Shipper’s Crude Oil received at such additional Receipt Point for the first twenty (20)  days after such additional Receipt Point is connected.                                     26 

 

               EXHIBIT G   PRIOR DEDICATIONS          NONE.exhibit1030llex10k201912

                             OPTION AGREEMENT           This OPTION AGREEMENT (this “Agreement”) is entered into effective as of the 21st   day of May, 2018 (the “Effective Date”), by and between SALT CREEK MIDSTREAM, LLC, a   Delaware limited liability company (“SCM”), and LILIS ENERGY, INC., a Nevada corporation   (“Lilis”). SCM and Lilis are sometimes referred to collectively as the “Parties” and individually   as a “Party.”                                      RECITALS           WHEREAS, Lilis has or contemplates having a supply of owned or controlled Gas from   present and future Interest(s) of Lilis and its Affiliates located within the lands being more  particularly described on Exhibit A (the “AMI”); and           WHEREAS, SCM owns and operates, or plans to own and operate, gathering and   processing facilities capable of receiving deliveries of Gas within the AMI;           WHEREAS, Lilis desires to grant to SCM a right of first refusal to provide midstream   services with respect to certain owned or controlled Gas produced from the present and future   Interest(s) of Lilis and its Affiliates within the AMI, on the terms and conditions set forth in this   Agreement;           WHEREAS, Lilis, as seller, and Lucid Energy Delaware LLC, a Delaware limited   liability company currently (“Lucid”), as buyer, are parties to that certain Gas Gathering,   Processing and Purchase Agreement dated August 10, 2017, as amended (the “Lucid   Agreement”); and           WHEREAS, Lilis desires to grant to SCM an option for SCM to cause Lilis to terminate   the Lucid Agreement and enter into a new Gas Purchase Agreement covering the Interest(s)   dedicated under the Lucid Agreement and certain other Interest(s) more particularly described   therein upon the termination of such Lucid Agreement, on the terms and conditions set forth in   this Agreement.                                     AGREEMENT           NOW THEREFORE, in consideration of the foregoing and Ten Dollars ($10.00) and   other good and valuable consideration paid by SCM to Lilis on the Effective Date, the receipt   and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:           1. Defined Terms. Unless otherwise required by the content, the terms defined in this            Section 1 shall have, for all purposes of this Agreement, the respective meanings set            forth in this Section 1.              (a) “Affiliate” shall mean any Person that directly or indirectly through one or more               intermediaries, controls or is controlled by or is under common control with               another Person. The term “control” (including its derivatives and similar terms)               shall mean possessing the power to direct or cause the direction of the               management and policies of a Person, whether through ownership, by contract, or                                          1   6645116v1 

 

             otherwise. Any Person shall be deemed to be an Affiliate of any specified Person               if such Person owns fifty percent (50%) or more of the voting securities of the               specified Person, or if the specified Person owns fifty percent (50%) or more of               the voting securities of such Person, or if fifty percent (50%) or more of the               voting securities of the specified Person and such Person are under common               control.              (b) “Business Day” shall mean any calendar day other than Saturdays and Sundays               that commercial banks in Houston, Texas are open for business.              (c) “Gas” means natural gas produced in its original state from a gas well and/or an               oil well.              (d) “Governmental Authority” shall mean (i) the United States of America, (ii) any               state, county, parish, municipality or other governmental subdivision within the               United States of America, and (iii) any court or any governmental department,               commission, board, bureau, agency or other instrumentality of the United States               of America or of any state, county, municipality or other governmental               subdivision within the United States of America.              (e) “Interests” shall mean any right, title, or interest in lands, Wells, or leases with               the right to produce oil and/or gas therefrom whether arising from fee ownership,               working interest ownership, mineral ownership, leasehold ownership, or arising               from any pooling, unitization or communitization of any of the foregoing rights.              (f) “Person” shall mean any individual, firm, corporation, trust, partnership, limited               liability company, association, joint venture, other business enterprise or               Governmental Authority.              (g) “Third Party” shall mean means any Person other than a Party or an Affiliate of a               Party.              (h) “Well” shall mean a well for the production of gas and/or liquid hydrocarbons,               including Gas.           2.    Right of First Refusal for Midstream Services. Commencing on the Effective   Date, in the event that Lilis receives an offer from a Third Party during the Term of this   Agreement to provide Gas gathering, processing and/or related midstream services with respect  to any Gas attributable to Lilis’ and its Affiliates’ non-dedicated Interest(s) within the AMI that  Lilis intends to accept, including, without limitation, any Interests of Lilis and its Affiliates  owned as of the Effective Date or subsequently acquired within the AMI, Lilis shall, prior to  entering into any agreement for such Gas midstream services with the applicable Third Party,  notify SCM in writing and offer the right to provide such Gas midstream services with respect to  the applicable Gas on identical terms and conditions relating to rates, fees, deductions, cost  recoveries and other economic terms, offered by the applicable Third Party. Such notice shall  provide true and complete information about the proposed midstream services, including the                                          2   6645116v1 

 

 name and address of the Third Party (to the extent that Lilis is not prohibited from disclosing   such name and address pursuant to any confidentiality agreement with such Third Party) and the   terms and conditions of the relevant agreement. SCM shall have the right for fifteen (15)   Business Days after receipt of Lilis’ notice to determine whether it will provide midstream   services for such Gas on such identical terms and conditions contained in Lilis’ notice. Failure    by SCM to respond within such fifteen (15) Business Day period shall be deemed a rejection of  such offer without any further action by the Parties. If SCM elects to provide such midstream  services, then the Parties shall either enter into a new agreement memorializing the terms  contained in Lilis’ notice.           3.    Option for GGPA Execution. The Parties acknowledge that, as of the Effective   Date, Lilis is a party to the Lucid Agreement, pursuant to which Lilis has dedicated Gas from   certain Interest(s) within the AMI for Gas gathering, processing and related midstream services   by Lucid, which dedication Lilis shall have the opportunity to terminate effective August 10,   2027 (the “Lucid Agreement Termination Date”). On or before 5:00 p.m. central time on  January 1, 2027 (the “Option Election Deadline”), SCM shall have a one-time option to give   Lilis written notice of SCM’s election to have Lilis terminate the Lucid Agreement as of the   Lucid Agreement Termination Date and enter into the Gas Purchase Agreement attached hereto   as Exhibit B, to be effective as of August 11, 2027 (the “SCM Gas Purchase Agreement”),   pursuant to which Lilis shall dedicate the Interest(s) dedicated under the Lucid Agreement and   certain other Interest(s) described therein on the terms and conditions set forth therein; provided,   however, SCM shall only have the right to exercise such option to the extent that SCM shall have   installed all infrastructure necessary to receive, gather, process and provide all related midstream   services under the Gas Purchase Agreement with respect to all Gas dedicated thereunder   (including all Gas previously dedicated under the Lucid Agreement), and is ready and able to   provide in full such services with respect to such Gas pursuant to the SCM Gas Purchase   Agreement. To the extent that SCM fails to exercise in writing its option under this Section 3 on   or before the Option Election Deadline, SCM’s right to exercise such option shall be deemed to   have been waived without any further action by the Parties.           4.    Term. This Agreement shall commence as of the Effective Date written above   and shall terminate on the Option Election Deadline (the “Term”); provided, however, any   obligations of the Parties arising under this Agreement prior to the Option Election Deadline,   including any obligation to enter into any Gas midstream agreement or execute the SCM Gas   Purchase Agreement, shall survive the termination of this Agreement.           5.    Assignment. Neither Party may assign this Agreement without the prior written   consent of the non-assigning Party, such consent not to be unreasonably withheld, conditioned or  delayed; provided, however, and notwithstanding the foregoing, (A) Lilis may assign its rights  and obligations under this Agreement to any Person to whom Lilis assigns or transfers an interest  in any of the Interest(s), insofar and only insofar as, this Agreement relates to such Interest(s),  without the consent of SCM; provided that (i) such Person assumes in writing the obligations of  Lilis under this Agreement insofar as it relates to such Interest(s), and (ii) if such transfer or   assignment is to a Person that is not an Affiliate of Lilis, Lilis shall be released from its   obligations under this Agreement with respect to such Interest(s) so assigned or transferred,   except for its obligations arising prior to the date of assignment, and (B) SCM may assign its   rights and obligations under this Agreement to any Person to whom SCM assigns or transfers all                                          3   6645116v1 

 

or substantially all of its Gas gathering and processing facilities within the AMI without the  consent of Lilis; provided that (i) such Person assumes in writing the obligations of SCM under  this Agreement, and (ii) if such transfer or assignment is to a Person that is not an Affiliate of  SCM, SCM shall be released from its obligations under this Agreement, except for its obligations  arising prior to the date of assignment. For the avoidance of doubt, no assignee or transferee of  Lilis shall assume the AMI of this Agreement in its entirety, but shall only be subject to, and  assume, such AMI insofar and only insofar as the Interest(s) assigned or transferred to such  assignee or transferee.                      6.    Covenants Running with the Land; Successors and Assigns. The terms,  covenants, and conditions of this Agreement shall be deemed to be covenants running with the  Interest(s) of Lilis and its Affiliates and lands within the AMI and with each transfer of any  interest affected thereby, such terms, covenants, and conditions shall extend to, bind, and inure to  the benefit of the Parties and to their respective successors and assigns.                      7.    Third Party Beneficiaries. This Agreement is exclusively for the benefit of  Parties named herein. No party other than the Parties shall be entitled to enforce any provision  herein or to be substituted for either Party, except as explicitly provided herein.                      8.    No Partnership. No partnership, commercial partnership, joint venture or similar  relationship is intended or shall result or be construed to exist as a result of the execution or  performance of any of the obligations or exercise of any rights or remedies by the Parties of or  pursuant to this Agreement, and no act by a Party shall create such a relationship, nor shall any  of the provisions hereof be construed or implied as creating such a relationship for any purpose  whatsoever.                      9.    Notices. All notices and communications required or permitted under this  Agreement shall be in writing addressed as indicated below, and any communication or delivery  hereunder shall be deemed to have been duly delivered upon the earliest of: (a) actual receipt by  the Party to be notified; (b) if by facsimile or electronic mail, upon confirmation by the recipient  of receipt, provided that a copy of such notice has also been sent by Federal Express overnight  delivery (or other reputable overnight delivery service); or (c) if by Federal Express overnight  delivery (or other reputable overnight delivery service), two (2) days after deposited with such  service. Addresses for all such notices and communication shall be as follows:                           SCM:             Salt Creek Midstream, LLC                              200329 State Highway 249                              Floor 4                              Houston, TX 77070                              Attn: Paul Williams                              Email: paul.williams@armenergy.com                                          4  6645116v1 

 

                            With a copy to:                                            Salt Creek Midstream, LLC                              20329 State Highway 249                              Floor 4                              Houston, TX 77070                              Attn: Contract Administration                              Email: contracts@armenergy.com                                         Lilis:           NOTICES AND CORRESPONDENCE:                                            Lilis Energy, Inc.                              300 E. Sonterra Blvd, Suite 1220                              San Antonio, TX 78258                              Attention: Accounting and Operations                              Telephone: 210-999-5400                              Facsimile  210-999-5401                                                          With a copy to:                                            RDP Producer Services, LLC                              10300n Town Park, Suite SE1000                              Houston, TX 77072                              Attn: David Lipp                              Fax: 281-849-8911                              Email: dlipp@republicpartnersllc.com                                    Any Party may, upon written notice to the other Parties, change the address and person to  whom such communications are to be directed.                      10.   Waiver; Rights Cumulative. Any of the terms, covenants, or conditions hereof  may be waived only by a written instrument executed by or on behalf of the Party waiving  compliance. No course of dealing on the part of a Party, or their respective officers, employees,  agents, or representatives, nor any failure by a Party to exercise any of its rights under this  Agreement shall operate as a waiver thereof or affect in any way the right of such Party at a later  time to enforce the performance of such provision. No waiver by any Party of any condition, or  any breach of any term, covenant, representation, or warranty contained in this Agreement, in  any one or more instances, shall be deemed to be or construed as a further or continuing waiver  of any such condition or breach or a waiver of any other condition or of any breach of any other  term, covenant, representation, or warranty. The rights of each Party under this Agreement shall  be cumulative, and the exercise or partial exercise of any such right shall not preclude the  exercise of any other right.                                          5  6645116v1 

 

      11.   Amendments. This Agreement may be amended only by an instrument in writing  executed by the Parties.                      12.   Severability. If any term or other provision of this Agreement is invalid, illegal,   or incapable of being enforced by any rule of law or public policy, all other conditions and  provisions of this Agreement shall nevertheless remain in full force and effect so long as the  economic or legal substance of the transactions contemplated hereby is not affected in any  adverse manner to any Party. Upon such determination that any term or other provision is  invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify  this Agreement so as to effect the original intent of the Parties as closely as possible in an  acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent  possible.                      13.   Governing Law. This Agreement will be interpreted, construed, and enforced in  accordance with the laws of the State of Texas, without giving effect to any rules or principles of  conflicts of law that might otherwise refer to the laws of another jurisdiction. The Parties hereby  irrevocably consent to the exclusive jurisdiction of the state or federal courts located in Houston,  Harris County, Texas and irrevocably and unconditionally waive, to the fullest extent they may  legally and effectively do so, any objection which they may now or hereafter have to the laying  of venue of any suit, action or proceeding arising out of or relating to this Agreement or the  transactions contemplated hereby in any federal or state court located in Houston, Harris County,  Texas. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES  ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY  LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.                      14.   Exhibits. The Exhibits referred to herein are attached hereto and incorporated  herein by this reference, and unless the context expressly requires otherwise, the exhibits and  schedules are incorporated in the definition of “Agreement.”                      15.   Interpretation. It is expressly agreed by the Parties that this Agreement shall not  be construed against any Party, and no consideration shall be given or presumption made, on the  basis of who drafted this Agreement or any provision hereof or who supplied the form of this  Agreement. Each Party agrees that this Agreement has been purposefully drawn and correctly  reflects its understanding of the transactions contemplated by this Agreement and, therefore,  waives the application of any law or rule of construction providing that ambiguities in an  agreement or other document will be construed against the Party drafting such agreement or  document.                      16.   Entire Agreement. This Agreement and any other documents delivered in  connection with this Agreement contain the entire agreement of the Parties with respect to the  subject matter hereof and supersede all previous agreements or communications between the  Parties, verbal or written, with respect to the subject matter hereof. Each Party agrees that no  other Party (including its agents and representatives) has made any representation, warranty,  covenant or agreement to or with such Party relating to this Agreement or the transactions  contemplated hereby, other than those expressly set forth in this Agreement.                                         6  6645116v1 

 

         17.   Further Assurances. The Parties shall provide to each other such information   with respect to the transactions contemplated hereby as may be reasonably requested and shall   execute and deliver to each other such further documents and take such further action as may be   reasonably requested by any Party to document, complete or give full effect to the terms and   provisions of this Agreement and the transactions contemplated herein.           18.   Disclaimer of Certain Damages. NOTWITHSTANDING ANYTHING TO  THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY  BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES, ANY SUCCESSORS IN  INTEREST OR ANY BENEFICIARY OR ASSIGNEE OF THIS AGREEMENT FOR  ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE  DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS OR  REVENUES THAT CONSTITUTE SUCH DAMAGES, THAT ARISE OUT OF OR   RELATE TO THIS AGREEMENT OR ANY BREACH HEREOF.           19.   Memorandum. As of the Effective Date, the Parties shall execute and deliver a   mutually agreeable recordable form of memorandum of this Agreement in the form attached as   Exhibit C.           20.   Headings. All captions, numbering sequences, and headings used in this   Agreement are inserted for convenience only and do not define, limit, or describe the scope or   intent of this Agreement, nor do they have any legal effect other than to aid a reasonable   interpretation of this Agreement.           21.   Attorney’s Fees. If any Party institutes an action or proceeding against any other   Party relating to the provisions of this Agreement, including arbitration, the Party to such action   or proceeding which does not prevail will reimburse the prevailing Party therein (regardless of   whether the prevailing Party is the plaintiff or the defendant in such action or proceeding) for the   reasonable expenses of attorneys’ fees and disbursements incurred by the prevailing Party.           22.   Counterparts. This Agreement may be executed in counterparts by facsimile,   portable document format (PDF), and other electronic means, and when each Party has signed   and delivered at least one such counterpart to each of the other Parties, each counterpart shall be   deemed an original, and all counterparts taken together shall constitute one and the same   Agreement, which shall be deemed binding and effective as to all Parties.                            [Signatures are on the following page.]                                           7   6645116v1 

 

           IN WITNESS WHEREOF, the Parties hereto have executed and   delivered this  Agreement as of the Effective Date.                                                        SCM:                                                       SALT CREEK MIDSTREAM, LLC                                                                  By: /s/ Michael S. Christopher                                                  Name: Michael Christopher                                            Title: Chief Financial Officer                                               LILIS:                                                       LILIS ENERGY, INC.                                                                  By: /s/ Joseph C. Daches                                                        Name: Joseph C. Daches                                            Title: CFO                                                                                                                 [Signature Page to Option Agreement]     

 

                                 EXHIBIT A                               DESCRIPTION OF AMI                                   [ATTACHED]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               EXHIBIT A  6645116v1                 

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 AX                                        A24                                                                                                                                                                                                                                                                                                                                                      G A I N E                                              A25                                                                                                                                                                                                                                                                                                                                                                  2                                         A27                                                   2 2 E                 2 29E                      2 3 E                       2 31E                      2 32E                       2 33E                      2 34E                       2 35E                      2 36E                       2 37E                       2 3 E                                                                                                                                 A22                 C45                                                                                                                                                                                                                                                                                                      39E            A2                                                                                                                                                                                                                                                                                                                                                                                                                                                                             A23                                                                                                                                                                                                                                                                                                                                 A24                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            A26                                          A2                                                                                                                                                                                                                                                                                                                                                                             A26                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            A3               A31                                    A44                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A34                                                                                                                                                                                                                                                                                                                                                                                                                                                21 27E              21 2 E                     21 29E                      21 3 E                     21 31E                      21 32E                     21 33E                      21 34E                     21 35E                     21 36E                      21   37E           21 3  E            A29                                                                                 A33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       A36                                                                                                                                                                                                                                                                                                                                                                                  A32                                                       A34                                                                                                                                                                                                                                                                                                                                                                                                        A43                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   A35                                                                                                                                                                                                                                                                                                                                                            A37                                                           A34                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                A3                                                                                                                                                                                                                                                                                                                      A39                                                                                                       A36   22 27E              22 2 E                     22 29E                      22 3 E                     22 31E                      22 32E                     22 33E                      22 34E                     22 35E                     22 36E                      22 37E             22 3 E                                                             A3                                                                                                                                                                                                                                                                                                                                                                                                                                                              13                                                                                                                                                                                                                                                                                                                                                                                                                                                               14                     A45                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A39                                                       A4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              A49                                                                                                                                                                                                                                                                                                                                A4                                                                                                                                                                                                                                                                                                                          L E A                                                                                                                                                                                                              A46                                                                                                                                                                                                                                                                                                                                                                                                                                           23 27E                                                                                                                                                                                                                                                                                                                              A5                            A N D R E W                                                             A44                      23 2 E                      23 29E                      23 3 E                     23 31E                      23 32E                     23 33E                      23 34E                     23 35E                     23 36E                      23 37E             23 3 E                                                                                                                                                      Y                                                                  Y                                                                                                                                                                                                                                                                                                                                                                                        A47                                                                   D                                                                  D                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  D                                                                  D                                                                                                                                                                                                                                                                                                                                                                                                                                  A43                                                                   E                                                                  E                                                                                                                                                                                                                                                 A51                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      A42                                                                                                                                                                                                                                                                                                                                                                            12                                                                                                                                                                                                                                                                                                                                                                                                                                                         A41                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           24 2 E                      24 29E                      24 3 E                                                                            24 33E                                                                                                                                                                  A53                                                                  24 27E                                                                                                 24 31E                      24 32E                                                 24 34E                     24 35E                     24 36E                      24 37E             24 3 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              A52                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   9                                                                                                                                                                                                                                                                                                                                                  A54                                                                                                                                                                                                                                                                                                                                                                                                                1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         25 2 E                      25 29E                      25 3 E                     25 31E                      25   32E                   25  33E                     25 34E                     25 35E                     25 36E                      25 37E                                                                                                                                                  25 27E                                                                                                                                                                                                                                                                                         25 3 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      A55                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         73                                                     44 T2N                                                                                                                                                                                                                                                                                                                                                A22 A41                                                                                                                                                                                                                                                                                                                                                                                                                           A26                43 T1N                                                                                                                                                                                                                                                                                                                                    A 54                                               45 T2N                                                                                                                                                                                                                                                                                                                                                                                                                     44 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           26 27E             26 2 E                      26 29E                      26 3 E                     26 31E                      26 32E                     26 33E                      26 34E                     26 35E                     26 36E                      26 37E             26 3 E                                                                                                                                                                                                                                                                                                                    A56                    A57   A 57                                                                        A                                                                                                                                                                                                                                                                                                                                                               46                                                                                                                                                                                                                                                                                                                                                                              46                                                             43                                                                                                                                                                                                                                                                                                                                                                                                                                                                            N E W M E X I C O                                                                                                                                                                                                                                                                                        45 TIN       45 T1N                                          T1N                                                                                                   56T1       55T1                                                                                                                                                                                                       A 57     B57                                                                                      44 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 C22                                                                                                                                                                                                          T E X A S                                                                                                                                                                                                                                     A57                                         46                                                                                                                                                                                                                                                                                     C23                                                                                                                                                                            43 T1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            C                                                                                                                                                                                                                                                                                                               C24                                                                         77                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              C25                                                                                                                                                            46 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        5 T1          57 T1          57 T1                     56 T1                       55 T1                      54 T1                        76                                                                                                                                                                                                                                                      59 T1                                                                                                                                                                                                                                                                                                                                        B1                                                                                                                                                                                                                                                                                                                  74                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            44 T1                                                                                                                                                                                                                                                                                                                             B2                                                                                                                                                                                                                                                                                        WF                                                                                                                                1                            46 TI                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               B3                                                       7                                                                                                                                                                                                            C26                          75                                                                     B2                                                                                                   45 T1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          46 T1                                                                                                                                                                                                                                                                                                                                                                                      B7                                 E C T O R                                                                                                                                                                                         29                                                                                      26                   W                                                 4                     46 TI                                                                                                                                                                                                    L O V I N G                                                                                                                                 WW I N K L E R                                                                                                                                                                                                                                                                                                                                                          B27                                                                                                                                                                                                                                                                                                                                     B6                                                                                                                                                                                                                                                                                                                                             27                                                                                                                                                                                                  5 T2          57 T2          57 T2                     56 T2                      55 T2                       54 T2                      53 T2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     59 T2 5 T7                                                                                                                                                                                                                                                                                                                                   B4             B4                                                                                                                                                                                                                                                                                                                                                                                                                                      44 T2                                                                                                                                                                                                                              2                                                                                                                                                                                     45 T2                                                                                                                                                                                                                                                                                                     B5                                                B4                                                                                                                                                                                                                                                                                                                              5                                                                              B                               5 T6                                                                                                                                                                  29                                                                                                                                                                                                                                 C U L B E R O N                                                                                                                                                                                                                                                                                                                    B1                       B9                                                                                                                                                                                         2                                                                       112           56 T3           57 T3              56 T3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    2                         C27                                                                                                                                                                                                                               C29                                                                                                                                                                                                       B15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     1                                                                                                                                                                                                      B11                                                                                                             44 T3           113                                                                                                                                                                                                                                                                                B12                                                                                                                                                                                                                                                                  21                                                                                                                                     45/113                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   56 T3                   C2                                                                                                                                                                                                                                                                                 B14                                                     57 T3                                                                2                                                                                                             2                                                                                                                                                                                                   35                                                                                           VV                                                                                                                   19                                                                                                                                                             B13                                  45                                               R E   E V E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            \ LILIS_ACREAGE.mxdLilis                                                                                                                                                                                                                                                                                                                                                                                                                           B16                    \                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  1                                                                                                                                                           A          111                                                                                                                                             33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 46 T3 16                                                                                                      55 T3                                                                                                                                                                                                          2                                                                                                                                                                                                                                                                                                                                                                                                                                                                AMI                                                                                                                               3                                                                                                                                                                15                                                                                                                                                                                       C21                                                                                                                                                                                                                                                                                                                                                                                                           13                                                                                                                                                                                                                                             46                                      \ Energy  Companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   F                                                                                                                                  B23                                                                                    5                                                                      53 T4                                                                                                                                                                                                                                                                                                                                      3                                                                                                                                                                                                                                                                                                                                                                                                                                                                         B22                                                                                                                                                           52 T4                                                                                                                                                                                                                                                                                                                                                                                                                      B19                                                                              \ SALT_CREEK                                                                                                             55 T4                                      53 T4                                                                                      1                     17                                                                                                                                                                                                                                                                                                                                                                                                                 R  A  N  E                                                                                       57                                                                                                                                                                                                                                                                                                                                                         Projects                                                                                                                                                                                                                                                                                                                                                                                                                   R A  N  E                        \                                                                                                                                          54 T4             52 T4                                                                                                               W A R D                                                                                           B1 B2               B17     C R A N E             52                      53                         56                                                                                                                                                                                                                                                                                                                                                                                   \ GIS                                                                                                                                                             C19                                                        34                                                                                                                                                                                                                                                                                                                                                      N                       63                                                        ‘                                                                                                                                                                                                                                                                                                                                                    B26             53                                                                                                                                                                                                                                                                                                                     O      1                   5                                                                                                                                                                                                                                                                                                                                       Miles                                                                                                                        4                                                                                                                                    16                                                                                             B21                                                                                                                                    54 T5                                                                                                                                                                                                                                                   B2                                                      Document  Path:  M:                                                                                                               55 T5       54 T4                                                                                                                                          34                                  34                                                     B19           

 

                                 EXHIBIT B                                   FORM OF SCM GAS PURCHASE AGREEMENT                                                [ATTACHED]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            EXHIBIT B  6645116v1                 

 

                                             Execution – Option Agreement                                                                                                                                                                                           GAS PURCHASE AGREEMENT                                         BETWEEN                                 Lilis Energy, Inc. (“Customer”)                                            AND                              Salt Creek Midstream, LLC (“SCM”)                               Dated Effective as of August 11, 2027                 

 

                                                                   Execution – Option Agreement                               TABLE OF CONTENTS    ARTICLE I  SCOPE OF THIS AGREEMENT .............................................................................. 1    1.1 Scope of this Agreement ....................................................................................................... 1    1.2 General Terms and Conditions and Exhibits Incorporated by Reference ............................. 2  ARTICLE II  COMMITMENT AND QUANTITIES ..................................................................... 3    2.1 Dedication ............................................................................................................................. 3    2.2 Reservations of Customer ..................................................................................................... 3    2.3 Prior Dedications as of the Effective Date and Subsequently Acquired Leases ................... 4    2.4 Covenant Running With the Land ........................................................................................ 5    2.5 No Upstream Processing ....................................................................................................... 5    2.6 Receipt Points; Drilling Plans ............................................................................................... 6    2.7 Non-Dedicated Gas ............................................................................................................... 8  ARTICLE III FEES ........................................................................................................................ 8    3.1 Service Fees .......................................................................................................................... 8    3.2 Treating Fuel ......................................................................................................................... 9    3.3 Escalation .............................................................................................................................. 9  ARTICLE IV  PROCESSING SETTLEMENT; ADDITIONAL CONSIDERATION .................. 9    4.1 Products Purchase ................................................................................................................. 9    4.2 Processing Mode Election .................................................................................................. 10  ARTICLE V  NOTICES ................................................................................................................ 11    5.1 Addresses ............................................................................................................................ 11  ARTICLE VI TERM; TERMINATION .......................................................................................12    6.1 Term .................................................................................................................................... 12    6.2 Default; Termination for Cause .......................................................................................... 12    6.3 Bankruptcy Savings ............................................................................................................ 13  ARTICLE VII CONFIDENTIALITY .......................................................................................... 13    7.1 Confidential Information .................................................................................................... 14                              GENERAL TERMS AND CONDITIONS   EXHIBITS:         Exhibit A-1       Dedicated Area        Exhibit A-2       Map of Dedicated Area        Exhibit B-1       Receipt Points        Exhibit C         Form of Memorandum of Agreement                 

 

                                                             Execution – Option Agreement   Exhibit D-1      Residue Gas Delivery Points  Exhibit D-2      Plant Products Delivery Points  Exhibit E        Prior Dedications  Exhibit F        Take In Kind Scheduling, Nomination and Balancing Procedures  Exhibit G        Form of New Receipt Point Notification                 

 

                                                                   Execution – Option Agreement                           GAS PURCHASE AGREEMENT                      THIS GAS PURCHASE AGREEMENT (this “Agreement”) is made and entered into  effective as of this 11th day of August, 2027 (the “Effective Date”) by and between Lilis  Energy, Inc., a Nevada corporation (“Customer”), and Salt Creek Midstream, LLC, a Delaware  limited liability company (“SCM”). Customer and SCM are sometimes referred to  collectively  as the “Parties” or singularly as a “Party.”                                             W I T N E S S E T H:                      WHEREAS, Customer owns and/or controls Gas be produced, and Gas produced, from  Wells operated by Customer or its Affiliates located in the Dedicated Area and desires SCM,  subject to the terms and conditions hereof, to receive, gather and process Dedicated Gas, and to  purchase Residue Gas and Plant Products from (or to deliver in-kind, at Customer’s direction,  such Residue Gas to) Customer;                      NOW, THEREFORE, for and in consideration of the premises and the mutual benefits  and covenants herein contained, the Parties hereby agree as follows:                                                 ARTICLE I                          SCOPE OF THIS AGREEMENT                1.1   Scope of this Agreement.                      Subject to the terms of this Agreement:                      (a)   Customer agrees to:                                  (i)   make the Dedication, subject to Section 2.2 of this Agreement; and                                  (ii)  deliver, and shall cause its Affiliates to deliver to SCM, at the                          Receipt Points, the Dedicated Gas.                      (b)   SCM agrees to provide the following (the “Services”), on a Level Two Service              basis:                                  (i)   receive Dedicated Gas meeting the Specifications at the Receipt                          Points;                                  (ii)  gather, compress, dehydrate and treat such Dedicated Gas and                          deliver such Dedicated Gas to the Plant;                                  (iii) process such Dedicated Gas for the recovery of Plant Products;                                  (iv)  purchase Residue Gas from Customer at the Receipt Point, subject                          to Customer’s option to take delivery of Residue Gas in-kind in                          accordance with Section 4.1(c), and deliver such Residue Gas for                          third party sales at the Residue Gas Delivery Points;                                         1 

 

                                                                   Execution – Option Agreement                     (v)   to the extent that Customer has elected its option to take delivery                          of Residue Gas in-kind in accordance with Section 4.1(c), deliver                          such Residue Gas to Customer at the Residue Gas Delivery Points;                          and                                  (vi)  purchase Plant Products from Customer at the Receipt Point and                         deliver such Plant Products for third party sales at the Plant                         Products Delivery Points.                1.2  General Terms and Conditions and Exhibits Incorporated by Reference.                      (a)   The General Terms and Conditions and the Exhibits attached to this Agreement              are incorporated in and made a part of this Agreement for all purposes. Any              reference in this Agreement to “this Agreement” shall include the General Terms              and Conditions and the Exhibits attached hereto, and all amendments,              restatements, supplements or other modifications thereto, as the same may be in              effect at any and all times such reference becomes operative. In the event of any              inconsistency the order of precedence shall be as follows: (i) the terms of the main              body of this Agreement, (ii) the General Terms and Conditions, and (iii) the              Exhibits.                      (b)   All references to Sections or Articles of this Agreement shall refer to Sections and              Articles in the main body of this Agreement, unless the context specifically              reflects that the reference is to an Article or Section of the General Terms and             Conditions of this Agreement.                      (c)   As used in this Agreement, (i) any pronoun in masculine, feminine or neutral              gender shall be construed to include all other genders, (ii) the term “including”              shall be construed to be expansive rather than limiting in nature and to mean              “including without limitation”, except where the context clearly otherwise              requires, (iii) each term that is defined in this Agreement in the singular shall              include the plural of such term, and each term that is defined in this Agreement in             the plural shall include the singular of such term, and (iv) the words, phrases, and             terms used herein shall have their ordinary meaning unless it is clearly indicated             otherwise in this Agreement or unless such word, phrase or term is defined in this             Agreement.                      (d)   Both Parties participated in the drafting of this Agreement. If any ambiguity is              contained herein, no weight shall be given in favor of or against a Party in              resolving that ambiguity on account of that Party’s drafting of this Agreement.                      (e)   Capitalized terms used in this Agreement and not otherwise defined in the main              body of this Agreement shall have the meanings ascribed to them in the General              Terms and Conditions.                                          2 

 

                                                                   Execution – Option Agreement                                    ARTICLE II                        COMMITMENT AND QUANTITIES                2.1   Dedication.                      Subject to the other terms and conditions hereof, Customer hereby (i) dedicates for  Services with respect to Dedicated Gas under this Agreement to SCM all Leases now owned or  hereafter acquired by Customer and/or its Affiliates and their respective successors and assigns  that cover lands located within the Dedicated Area, and (ii) dedicates for Services under this  Agreement and shall deliver, or cause to be delivered, hereunder to SCM, at the Receipt Points,  the following (the “Dedication,” and the Gas that is the subject of the Dedication being herein  referred to as “Dedicated Gas”):                            (a)   all Gas produced and saved on or after the Effective Date for the  remainder of the Term from those Wells for which Customer and/or any of its Affiliates is the  operator now or hereafter located within the Dedicated Area or on lands pooled or unitized  therewith, to the extent such Gas is attributable to the Leases within the Dedicated Area now  owned or hereafter acquired by Customer and/or its Affiliates and their respective successors and  assigns; and                            (b)   with respect to those Wells for which Customer and/or any of its Affiliates  is the operator, Gas produced on or after the Effective Date for the remainder of the Term from  such Wells which is attributable to the Leases in such Wells owned by other working interest  owners and royalty owners which is not taken “in-kind” by such working interest owners and  royalty owners and for which Customer and/or its Affiliates has the right or obligation to deliver  such Gas and only for the period that Customer and/or its Affiliates has such right or obligation.                      For the avoidance of doubt, Customer shall not be required to deliver Gas from any well  operated by an operator other than Customer or its Affiliates, including any well where Customer  would be required to install split stream connection facilities or similar facilities to take such Gas  in kind, and such Gas shall not be Dedicated Gas subject to the Dedication hereunder.                2.2   Reservations of Customer.                      Customer reserves the following rights under this Agreement:                      (a)   to operate the Well(s) and Leases in its sole discretion, including, without              limitation, the right, but never the obligation, to drill new Well(s), to repair and              rework old Well(s), renew or extend, in whole or in part, any oil and gas lease              covering any of lands within the Dedicated Area, and to cease production from or              abandon any Well or surrender any such oil and gas lease, in whole or in part, in              Customer’s discretion;                      (b)   to use Dedicated Gas for operations (including, without limitation, for gas lift,              cycling, and Well production enhancement) relating to the Leases and Wells, for              fueling of any facilities upstream of the Receipt Point(s) installed for purposes of              delivering Gas to SCM in accordance with this Agreement, and for any other                                         3 

 

                                                                   Execution – Option Agreement               purposes reasonably necessary for the development of the lands within the              Dedicated Area;                      (c)   to deliver or furnish to Customer’s and its Affiliates’ lessors and holders of other              existing burdens on production such Dedicated Gas as is required to satisfy the              terms of the applicable oil and gas leases and other applicable instrument creating              the burdens;                      (d)   to flare or temporarily use or deliver Dedicated Gas to the facilities of third parties              to gather, process and provide related services for Dedicated Gas from a Well              prior to the time that the Facilities required to gather such Dedicated Gas have              been completed and placed in-service;                      (e)   to pool, communitize, or unitize the lands covered by the Leases of Customer and              its Affiliates’, including with lands not covered by such Leases; provided that              Customer’s and/or its Affiliates’ share of Gas produced from such pooled,              communitized, or unitized interests shall be dedicated and committed to this              Agreement to the extent that such Gas would constitute Dedicated Gas hereunder;                      (f)   to construct, install, maintain, own and operate any treating and/or conditioning              facilities upstream of the SCM GGP System as reasonably necessary to (i) comply              with any environmental, legal, or Lease requirements, or (ii) meet the quality              specifications of the SCM GGP System set forth in this Agreement and/or the              quality specification of any downstream pipeline;                      (g)   to deliver or furnish to Customer’s and its Affiliates’ non-operators or other             Persons all Gas that such non-operators or Persons elect to separately take in kind             and market;                      (h)   to retain the condensate and other liquid hydrocarbons separated from Dedicated              Gas prior to delivery to SCM hereunder by conventional mechanical wellhead             separators at ambient temperature pursuant to Section 2.5;                      (i)   to construct, install, maintain, own and operate compression facilities and other              methods of uplift upstream of the SCM GGP System; and                      (j)  to retain any and all Gas that is not Dedicated Gas.                2.3  Prior Dedications as of the Effective Date and Subsequently Acquired Leases.                      (a)   Subsequently Acquired Leases. In the event that after the Effective Date hereof              Customer and/or any of its Affiliates acquire Leases within the Dedicated Area,              then the Dedicated Gas produced and saved from such Leases shall automatically              be included within the Dedication; provided, however, if any of the Dedicated              Gas produced from such Leases is subject to a Prior Dedication, then such              Dedicated Gas shall be excluded from the Dedication, to the extent and only to               the extent of such Prior Dedication, until such Prior Dedication expires or              terminates. In the event that any such Prior Dedication expires or terminates, then                                         4 

 

                                                        Execution – Option Agreement                the Dedicated Gas subject to such Prior Dedication shall, to the extent not already               subject to the Dedication, automatically be included within the Dedication and               subject to this Agreement without any further actions by the Parties.           (b)   Existing Prior Dedications. Customer represents and warrants to SCM that, as of               the Effective Date, except as set forth on Exhibit E attached hereto, none of the               Leases owned by Customer and/or its Affiliates within the Dedicated Area are               subject to a Prior Dedication. With respect to any such Leases which are subject               to a Prior Dedication, Customer shall have the right to comply with such Prior               Dedication and the Dedicated Gas produced from such Leases shall be excluded               from the Dedication, to the extent and only to the extent of such Prior Dedication,              until such Prior Dedication expires or terminates. In the event that any such Prior              Dedication expires or terminates, then the Dedicated Gas subject to such Prior              Dedication shall, to the extent not already subject to the Dedication, automatically              be included within the Dedication and subject to this Agreement without any              further actions by the Parties.     2.4  Covenant Running With the Land.           So long as this Agreement is in effect, this Agreement shall (i) be a covenant running   with the Leases now owned or hereafter acquired by Customer and/or its Affiliates within the   Dedicated Area (including, without limitation, all Wells operated by Customer or its Affiliates)   and (ii) be binding on and enforceable by SCM and its successors and assigns against Customer,   its Affiliates and their respective successors and assigns. Notwithstanding this Section 2.4, to the   extent all or a portion of such Leases within the Dedicated Area are sold to a non-Affiliated  Person, such acquiring Person shall only be required to dedicate for delivery hereunder that Gas  that is produced from such Leases within the Dedicated Area acquired by such non-Affiliated  Person from Customer. The acquiring Person shall not be required to dedicate Gas produced  from Leases already held by or acquired after such date by such acquiring Person.  Notwithstanding the foregoing, with prior written notice to SCM, Customer and its Affiliates  shall each be permitted to convey, sell, assign, or otherwise transfer its interest in the Leases that  are not connected to or in the process of being connected to the SCM GGP System free of the  Dedication hereunder in an “acreage swap” or exchange transaction in which such undeveloped  Leases within the Dedicated Area are exchanged for other properties or Leases of approximately  equal net acreage and projected production located in the Dedicated Area that are not subject to a  Prior Dedication and would become subject to the Dedication hereunder. SCM and Customer  shall prepare, execute, acknowledge, deliver, and record any such instruments and other  documents reasonably necessary to effectuate such release and memorialize such acquired  Leases subject to the Dedication.     2.5  No Upstream Processing.           Customer shall not remove or permit to be removed any Plant Products from the   Dedicated Gas prior to delivery to SCM; provided that Customer may cause or allow the   Dedicated Gas to be separated by means of a conventional ambient mechanical wellhead gas-oil   separator prior to its delivery to SCM and the liquid constituents separated from such Dedicated   Gas therefrom shall not be subject to this Agreement. SCM has agreed to receive and gather                                          5 

 

                                                        Execution – Option Agreement    Dedicated Gas hereunder for the principal purpose of extracting from such Dedicated Gas Plant   Products that may be extracted at the Plant, and accordingly, as part of the Dedication, Customer   grants to SCM the exclusive right to process Customer’s Dedicated Gas received at the Receipt   Points.     2.6  Receipt Points; Drilling Plans                (a)    In order to assist SCM in planning for future facilities which SCM may   install under this Agreement following the Effective Date, every six (6) Months during the   Term, Customer shall provide to SCM copies of its current drilling plan(s) with respect to the   Dedicated Area. Customer shall provide SCM with an update to its drilling plan(s) promptly   following any material change to a plan previously provided to SCM. Each drilling plan and    any associated updates provided to SCM by Customer of the drilling plan(s) shall include (i) the   name and location of any new potential Receipt Point, (ii) Customer’s estimate of the spud date,   completion date and date of first production with respect to each new Well(s) associated with   such new potential Receipt Point, and (iii) Customer’s good faith estimate of the average daily   volume from such new potential Receipt Point.                 (b)   If, at any time after the Effective Date, Customer desires that a new   Receipt Point for any Well(s) located within the Dedicated Area be connected to the SCM GGP   System, Customer shall provide written notice to SCM for new Receipt Points associated with   Dedicated Gas setting forth the expected date of first flow to SCM (the “Notification Date”),  location and volume profile for such Receipt Point in the form attached hereto as Exhibit G (a   “New Receipt Point Notification”). Following SCM’s receipt of a New Receipt Point   Notification, SCM shall promptly commence and diligently conduct all reasonable operations at   SCM’s sole cost and expense necessary to extend the existing SCM GGP System to each such   new Receipt Point described in such New Receipt Point Notification that Customer desires to be   connected to the SCM GGP System by the later of (i)(A) for a new Receipt Point that is within   two (2) miles of the existing SCM GGP System and does not require BLM approval to be   connected to the SCM GGP System, one hundred twenty (120) Days after SCM’s receipt of the   applicable New Receipt Point Notification, or (B) for a new Receipt Point that is either more   than two (2) miles from the existing SCM GGP System and/or requires BLM approval to be   connected to the SCM GGP System, one hundred eighty (180) Days after SCM’s receipt of the   applicable New Receipt Point Notification, and (ii) the Notification Date (each such date, a   “Target RP In-Service Date”).                 (c)   If SCM fails or is unable to connect any such additional Receipt Point by   the applicable Target RP In-Service Date for any reason, then the Dedicated Gas associated with   such Receipt Point and the affected Well(s) and Lease(s) to which such Dedicated Gas is   attributable shall be temporarily released from the Dedication until such time as such Receipt   Point is connected.                 (d)   In addition to Customer’s release rights set forth in Section 2.6(c) above, if   SCM fails or is unable to connect any such additional Receipt Point by the date that is thirty (30)   Days beyond the applicable Target RP In-Service Date for any reason other than Force Majeure,   then, for each Day of unexcused delay until SCM connects such additional Receipt Point beyond   the Target RP In-Service Date, SCM shall temporarily reduce the Service Fees payable in                                          6 

 

                                                        Execution – Option Agreement    Section 3.1 by fifty percent (50%) for Dedicated Gas delivered to such additional Receipt Point   for only a period of time equal to the amount of Days from the deadline set forth in the first   sentence of this Section 2.6(d) until the date such additional Receipt Point is connected;   provided, however, on the first Day after the expiration of such period of time, Customer’s   Service Fees will be increased to the Service Fees set forth in Section 3.1. By means of example,   if SCM connects a requested Receipt Point fifty (50) Days after the Target In-Service Date for  such additional Receipt Point, and such delay is not due to an event of Force Majeure, then the  reduction in Customer’s Service Fees described in the preceding sentence would apply to  Dedicated Gas received at such additional Receipt Point for the first twenty (20) Days after such  additional Receipt Point is connected.                 (e)   Notwithstanding anything in this Section 2.6 to the contrary, if SCM fails   or is unable to connect any such additional Receipt Point by the date that is (i) ninety (180) Days   beyond the applicable Target RP In-Service Date for any reason other than Force Majeure or (ii)   two hundred seventy (270) Days beyond the applicable Target RP In-Service Date due to Force   Majeure, then Customer shall have the right, immediately following such period, to request and   receive a permanent release from SCM of the affected Lease(s) and Well(s) delivering to such   additional Receipt Point (including the volumes of Gas associated therewith). Customer   acknowledges that the rights and remedies set forth in this Section 2.6 shall be its sole and   exclusive remedies in the event of SCM’s failure to timely connect a requested additional   Receipt Point.                 (f)   In the event that SCM completes an interconnection requested by   Customer and paid for by SCM for any new Receipt Point, and after one hundred eighty (180)   Days following the date of completion of any such Receipt Point, Customer has not used the   additional Receipt Point for any reason other than Force Majeure, then Customer shall reimburse   any and all reasonable and documented out-of-pocket costs, expenses or fees incurred by SCM  related to the connection of such Receipt Point to the SCM GGP System (but excluding  trunklines, compressors or other facilities located downstream of the lateral gathering lines  constructed to connect such Receipt Point); provided that (i) Customer shall not be required to  reimburse such costs, expenses or fees in the event SCM is otherwise utilizing the installed  pipelines and related equipment in a manner that is not reasonably expected to result in lost  profits or additional costs beyond the amounts anticipated for connecting the applicable  additional Receipt Point to the SCM GGP System, (ii) SCM shall prepare and deliver to  Customer an itemized invoice of such costs, fees and expenses, which total amount shall be   reimbursed by Customer in equal Monthly installments over a five (5) year period, with the first   such installment due within thirty (30) Days of receipt of SCM’s invoice, and (iii) in the event   Customer reimburses SCM for all or a portion of such costs, fees and expenses and,   subsequently, such additional Receipt Point is later used by Customer to deliver Dedicated Gas   hereunder, then Customer shall receive a credit, equal to the total or partial amount of such costs,   fees and expenses so reimbursed by Customer, towards the payment of the amounts that would   be due from Customer to SCM hereunder for the delivery of such Dedicated Gas at such new   Receipt Point.                                           7 

 

                                                                   Execution – Option Agreement   2.7   Non-Dedicated Gas.                      Subject to the terms and conditions of this Agreement, SCM shall provide Services for  Customer’s Non-Dedicated Gas on an interruptible basis for the fees described in Article III of  this Agreement.                                                 ARTICLE III                                      FEES                3.1   Service Fees.                      Customer shall pay the following fees to SCM each Month (the fees set forth in this  Section 3.1, collectively, as adjusted as provided herein, the “Service Fees”):                      (a)   Low Pressure Gathering Fee: for all Gas delivered at the Low Pressure Receipt              Points, a gathering fee of fifteen cents ($0.15) per MMbtu (the “Low Pressure              Gathering Fee”).                      (b)   Compression Fee: for all Gas delivered at the Low Pressure Receipt Points, a              compression fee of seven cents ($0.07) per Mcf for each stage of compression              (the “Compression Fee”).                      (c)   High Pressure Gathering Fee: for all Gas delivered at the High Pressure Receipt              Points, a gathering fee of ten cents ($0.10) per MMbtu (the “High Pressure              Gathering Fee”).                      (d)   Processing Fee: for all Gas delivered at the Receipt Points, a processing fee of              twenty seven cents ($0.27) per MMbtu (the “Processing Fee”).                      (e)   H2S Treating: Should Gas contain the levels of hydrogen sulfide (H2S) content set              forth below, then Customer shall pay the following treating fee (the “H2S              Treating Fee”:                                  (i)   If the H2S content of any Gas delivered at a Receipt Point contains                          in excess of 4 and up to 50 ppm of H2S, then the H2S Treating Fee                          for all Gas delivered to such Receipt Point during the applicable                          Month of measurement shall be five cents ($0.05) per Mcf.                                  (ii)  If the H2S content of any Gas delivered at a Receipt Point contains                          in excess of 50 and up to 250 ppm of H2S, then the H2S Treating                          Fee for all Gas delivered to such Receipt Point during the                          applicable Month of measurement shall be ten cents ($0.10) per                          Mcf.                                  (iii) If the H2S content of any Gas delivered at a Receipt Point contains                          in excess of 250 and up to 1,000 ppm of H2S, then the H2S                          Treating Fee for all delivered to such Receipt Point during the                                          8 

 

                                                                   Execution – Option Agreement                           applicable Month of measurement shall be fifteen cents ($0.15) per                          Mcf.                                  (iv)  If the H2S content of any Gas delivered at a Receipt Point contains                          in excess of 1,000 ppm of H2S, then the H2S Treating Fee for all                          delivered to such Receipt Point during the applicable Month of                          measurement shall be seventeen cents ($0.17) per Mcf.                      (f)   CO2 Treating: Should SCM accept Gas hereunder that exceeds the maximum              carbon dioxide (CO2) content in the Specifications, then Customer shall pay a              treating fee (the “CO2 Treating Fee”) equal $0.04 per Mcf for each one (1.00)              mole % of CO2 that such Gas exceeds the CO2 specification; provided, however,              the CO2 Treating Fee Customer will pay SCM in this Section 3.1(f) will not be              less than $0.04 per Mcf and no greater than $0.14 per Mcf. For example, if              Customer’s CO2 Mole % at the Receipt Point was 4.60% and the CO2              specification was 3.00 mole %, the Gas would exceed the specification by 1.60%              and the fee would be $.064 per Mcf.                3.2   Treating Fuel.                      In the event SCM operates an amine treater or such other facilities as may be necessary or  desirable for purposes of treating Customer’s Gas in accordance with Section 3.1(e) or 3.1(f),  then any fuel utilized by SCM for such purposes shall be allocated to Customer based on actual  usage (such quantity, the “Treating Fuel Amount”).                3.3   Escalation.                      Beginning on the first January 1st following two (2) years after the “Effective Date” as  defined in the Option Agreement, each of the Service Fees and the T&F Deduction shall be  adjusted upward or downward each year by the change in the PPI for the prior year.  For  purposes of this Section 3.3, the PPI shall be calculated as a fraction, the numerator of which is  the PPI for the then current year, and the denominator of which is the PPI for the previous year.  Notwithstanding the foregoing, in no event shall the foregoing PPI adjustment result in any of  the Service Fees or the T&F Deduction being (i) increased or decreased more than two percent  (2%) in any calendar year or (ii) reduced to an amount less than the original amount set forth in  this Agreement as of the Effective Date.                                                 ARTICLE IV           PROCESSING SETTLEMENT; ADDITIONAL CONSIDERATION                4.1   Products Purchase.                      (a)   Subject to the exercise of the Residue Gas In-Kind Option under Section 4.1(c)              and the other terms and conditions of this Agreement, SCM shall acquire and take              title to the Residue Gas at the Receipt Point. As consideration for the acquisition              of Residue Gas that is not taken in-kind pursuant to Section 4.1(c), SCM shall pay              Customer an amount equal to the quantity of Customer’s Residue Gas, multiplied              by the applicable Residue Gas Price.                                         9 

 

                                                                   Execution – Option Agreement         (b)   Subject to the terms and conditions of this Agreement, SCM shall acquire and              take title to the Plant Products at the Receipt Point. As consideration for the              acquisition of Plant Products, SCM shall pay Customer an amount equal to the              Settled Gallons of each Plant Product, multiplied by the applicable Plant Products              Index Price, less T&F Deduction.                      (c)   Notwithstanding Section 4.1(a), Customer shall have the option, exercisable upon              at least sixty (60) Days’ prior written notice, to take delivery of its Residue Gas              in-kind at the Residue Gas Delivery Points (or at such other delivery point as may              be mutually agreed by the Parties) for a six (6) Month period commencing on the              earlier of April 1st or October 1st of any calendar year (the “Residue Gas In-Kind              Option”). During any such six (6) Month period that the Residue Gas In-Kind              Option is in effect, SCM shall deliver Residue Gas to Customer at the Residue              Gas Delivery Points, and, in connection therewith: (i) Customer shall make (or              cause to be made) all necessary arrangements for the transportation and marketing              of such Residue Gas downstream of the Residue Gas Delivery Points, (ii)              Customer shall take (or cause to be taken) Residue Gas ratably seven (7) Days a              week by pipeline; (iii) SCM shall not be obligated to provide any storage to              Customer or to construct or install any other facilities that Customer may require              to take in-kind, (iv) title to such Residue Gas shall remain in Customer or its              Affiliates, (v) SCM shall have no obligation other than supplying Residue Gas to              the Residue Gas Delivery Points for delivery to Customer or for Customer’s             account, (vii) Customer shall pay SCM for all actual applicable third-party             transport tariffs incurred by SCM for Residue Gas taken in kind, and (v)             Customer shall be subject to the nomination and balancing procedures pursuant to             Article VII of the General Terms and Conditions. SCM shall continue to deliver              such Residue Gas for each successive six (6) Month period thereafter, until such              time as Customer elects for SCM to purchase such Residue Gas pursuant to              Section 4.1(a) by providing written notice to SCM at least sixty (60) Days prior to              the end of the then-current six (6) Month period that the Residue Gas In-Kind             Option is in effect, provided that transportation is available at that  time.              Customer acknowledges that capacity may not be available based on market             conditions. Customer acknowledges and agrees that it shall be solely responsible             for all royalty payments, Taxes, severance payments, and production payments             and any other payments due or owing on Residue Gas taken in-kind.                4.2  Processing Mode Election.                      At least thirty (30) Days’ prior to (i) the first Month in which Customer’s Dedicated Gas  is to be delivered hereunder, and (ii) the first Day of each successive six (6) consecutive Month  period, Customer shall notify SCM in writing of Customer’s election to have Customer’s Settled  Gallons determined using either Full Recovery Mode or Ethane Rejection Mode. Such election  shall remain in effect for a period of six (6) Months. Should Customer fail to make a timely  election, Customer shall be deemed to have elected to continue the mode that is in place for the  immediately preceding six (6) Month period. Notwithstanding Customer’s election pursuant to  this Section 4.2, SCM shall not be required to operate its facilities in any particular recovery  mode; however, if SCM operates in a recovery mode other than the mode elected by Customer,                                         10 

 

                                                                   Execution – Option Agreement   Customer shall be paid based on the recovery mode elected or deemed elected by Customer for  the applicable six (6) Month period.                                                 ARTICLE V                                    NOTICES                5.1   Addresses.                      All notices provided for herein shall be in writing at the addresses listed below or to such  other address either Party shall designate by written notice. Such notices shall be sent by certified  U.S. mail, return receipt requested, postage prepaid, by electronic mail, or by courier. Notices  sent by certified mail or courier shall be deemed provided upon delivery as evidenced by the  receipt of delivery. Notices sent by electronic mail shall be deemed to have been provided upon  the sending Party’s receipt of a non-automated response from the recipient or automatic read  receipt generated from the recipient’s electronic mail provider.                To Customer:                                  Notices and Correspondence:                                  Lilis Energy, Inc.                    300 E. Sonterra Blvd, Suite 1220                    San Antonio, TX 78258                    Attention: Accounting and Operations                    Telephone: 210-999-5400                    Facsimile 210-999-5401                     With a copy to:                     RDP Producer Services, LLC                    10300n Town Park, Suite SE1000                    Houston, TX 77072                    Attn: David Lipp                    Fax: 281-849-8911                    Email: dlipp@republicpartnersllc.com                     Billing:                     Lilis Energy, Inc.                    300 E. Sonterra Blvd, Suite 1220                    San Antonio, TX 78258                    Attention: Patrick Tumer                    Telephone: 817-502-1635                    Facsimile: 210-999-5401                    Email: AP@Lilisenergy.com                                          11 

 

                                                                   Execution – Option Agreement                 For Payments:                                  Bank Name: Wells Fargo Bank                    Account Name: Lilis Energy, Inc.                    Account Number: 3932368149                    ABA: 121000248                To SCM:           Salt Creek Midstream, LLC                    20329 State Highway 249                    Floor 4                    Houston, TX 77070                    Attn: Paul Williams                    Email: paul.williams@armenergy.com                                  With a copy to:                    Salt Creek Midstream, LLC                    20329 State Highway 249                    Floor 4                    Houston, TX 77070                    Attn: Contract Administration                    Email: contracts@armenergy.com                                  For Payments:                    Bank Name: Iberia Bank                    ABA No.: 265270413                    Account No.: 20001242180                                                 ARTICLE VI                              TERM; TERMINATION                6.1   Term.                      Subject to the terms and conditions contained herein, this Agreement shall be in full force  and effect as of the Effective Date and shall continue in full force and effect for a period of  twelve (12) years thereafter (the “Primary Term”), unless terminated in accordance with  Section 6.2 of the Agreement or as otherwise provided herein, and for successive one (1) year  periods thereafter until terminated by either Party as of the end of the Primary Term or any  subsequent renewal by giving the other Party at least sixty (60) Days’ prior written notice (the  Primary Term, including any such extension, the “Term”). However, such termination shall not  extinguish any obligations incurred prior to the effective date of termination, including payment  for services rendered or for Gas and/or Plant Products purchased hereunder.                      Notwithstanding anything in this Agreement to the contrary, the obligations of Customer  hereunder, including, without limitation, the obligation to deliver Dedicated Gas, shall be subject  to the satisfaction, or waiver by Customer, of the following condition precedent: SCM shall have  as of the Effective Date installed all infrastructure necessary to receive and provide Services with                                         12 

 

                                                        Execution – Option Agreement    respect to all Dedicated Gas (including the connection of all necessary Receipt Point(s)) being   produced from Well(s) existing as of the Effective Date, and is ready and able to provide in full   such Services with respect to such Dedicated Gas. To the extent that such condition precedent is   not satisfied as of the Effective Date, Customer shall have the right, without any liability to  Customer, to terminate this Agreement.     6.2  Default; Termination for Cause.           Subject to the terms and conditions contained herein, if either Party shall (a) make an   assignment or any general arrangement for the benefit of creditors; (b) fail to make, when due,   any payment required herein (which failure is not cured within five (5) Days after the defaulting   Party’s receipt of written notice thereof); (c) otherwise fail to perform any material covenant   herein when such performance is due (which failure is not excused by Force Majeure or   remedied within sixty (60) Days after the defaulting Party’s receipt of written notice thereof); (d)   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; (e) otherwise become bankrupt or   insolvent (however evidenced); or (f) be unable to pay its debts as they fall due, then in addition   to any and all other remedies available hereunder, at law, and in equity, the non-defaulting Party   shall have the right to suspend performance and/or terminate this Agreement, (1) immediately   and without notice in the case of a default described in clause (a), clause (d), clause (e), or clause   (f), or (2) upon the expiration of the applicable cure period in the case of a default described in   clause (b), clause (c), or clause (g), and pursue such other remedy or remedies as may be   available to it under this Agreement (including, without limitation, exercising the rights of   recoupment, setoff, offset, deduction, liquidation, and/or enforcement or realization of any   security held pursuant to this Agreement, or the drawing on of any letter of credit held pursuant   to this Agreement), at Law or in equity.     6.3  Bankruptcy Savings.           Without limiting the applicability of any other provision of the Bankruptcy Code   (including without limitation Sections 362, 546, 553, 556, 560, 561 and 562 thereof and the   applicable definitions in Section 101 thereof), the Parties acknowledge and agree that: (i) this   Agreement and all transactions entered into hereunder constitute “forward contracts” and/or   “swap agreements” and this Agreement constitutes a “master netting agreement” as defined in   Section 101 of the Bankruptcy Code; (ii) each Party is a “master netting agreement participant,”   a “forward contract merchant” and/or a “swap participant” as defined in the Bankruptcy Code;   (iii) the rights of the Parties under Section 6.2 of this Agreement constitute “contractual rights”   to liquidate, terminate or accelerate, as applicable, this Agreement and the transactions entered   into hereunder; (iv) any margin or collateral provided hereunder, or under any margin, collateral,   security, or similar agreement related hereto and all payment obligations of any Party to the other   hereunder constitute a “margin payment” or a “settlement payment” as defined in Section 101 of   the Bankruptcy Code; and (v) the Parties are entitled to the rights under, and protections afforded   by, Sections 362, 546, 553, 556, 560, 561 and 562 of the Bankruptcy Code.                                           13 

 

                                                                   Execution – Option Agreement                                   ARTICLE VII                               CONFIDENTIALITY                7.1   Confidential Information.                      (a)   From and after the Effective Date, each Party shall hold, and shall cause its              Representatives to hold all Confidential Information of the other Party in strict              confidence, with at least the same degree of care that it applies to such Party’s              confidential and proprietary information and shall not use such Confidential              Information except in connection with its performance or acceptance of services              hereunder and shall not release or disclose such Confidential Information to any              other Person, except its Representatives. Each Party shall be responsible for any              breach of this Section 7.1 by any of its Representatives. For purposes of this              Agreement, “Representatives” means each Party’s Affiliates and its and their              respective directors, managers, officers, employees, agents, consultants, legal              advisors and accountants who (i) need to know such information, (ii) are informed              of the existence of this Agreement and its restrictions on the disclosure and use of              Confidential Information, and (iii) are bound by employment, consulting or              similar agreements restricting the disclosure and use of such information              comparable to and no less restrictive than those set forth herein or otherwise agree              to be bound by the confidentiality terms of this Agreement to the same extent as if              they were parties hereto.                      (b)   If a Party receives a subpoena or other demand for disclosure of Confidential              Information received from any other Party or must disclose to a governmental              authority any Confidential Information received from such other Party in order to              obtain or maintain any required governmental approval, the receiving Party shall,              to the extent legally permissible, provide notice to the providing Party before              disclosing such Confidential Information. Upon receipt of such notice, the              providing Party shall promptly either seek an appropriate protective order, waive              the receiving Party’s confidentiality obligations hereunder to the extent necessary              to permit the receiving Party to respond to the demand, or otherwise fully satisfy              the subpoena or demand or the requirements of the applicable governmental              authority. If the receiving Party is legally compelled to disclose such Confidential              Information or if the providing Party does not promptly respond as contemplated              by this Section 7.1, the receiving Party may disclose that portion of Confidential              Information covered by the notice or demand.                      (c)   Notwithstanding anything in this Section 7.1 to the contrary, either Party may              disclose Confidential Information to any bona fide potential purchaser, investor,              partner, lender or source of financing and their directors, managers, officers,              employees, agents, consultants, legal advisors and accountants; provided that              they: (i) need to know such information, (ii) are informed of the existence of this              Agreement and its restrictions on the disclosure and use of Confidential              Information, and (iii) are bound by an agreement restricting the disclosure and use              of such information comparable to and no less restrictive than those set forth                                          14 

 

                                                       Execution – Option Agreement   herein or otherwise agree to be bound by the confidentiality terms of this  Agreement to the same extent as if they were parties hereto.                                [Signature page follows]                              15 

 

                                                                   Execution – Option Agreement         IN WITNESS WHEREOF, this Agreement is executed by the duly authorized  representatives of the Parties as of the Effective Date.                                                                  Lilis Energy, Inc.                                                                  By:                                                                       Name:                                                                           Title:                                                                                                                                                Salt Creek Midstream, LLC                                                                  By:                                                                       Name:                                                                           Title:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                [Signature Page to Gas Purchase Agreement]                 

 

                                              Execution – Option Agreement   GENERAL TERMS AND CONDITIONS                 TO THE                    GAS PURCHASE AGREEMENT                                          BETWEEN                                  Lilis Energy, Inc. (“Customer”)                                             AND                               Salt Creek Midstream, LLC (“SCM”)                                Dated Effective as of August 11, 2027                 

 

                                                                   Execution – Option Agreement                               TABLE OF CONTENTS    ARTICLE I DEFINITIONS .......................................................................................................... 1        1.1 Defined Words and Terms ........................................................................................... 1        1.2 Other Definitional Provisions ...................................................................................... 8  ARTICLE II  OPERATION OF THE SYSTEM ............................................................................ 9        2.1 Curtailment .................................................................................................................. 9        2.2 Identity of Gas ............................................................................................................ 11        2.3 Operation of Facilities. ................................................................................................ 11        2.4 Rights of Way .............................................................................................................12  ARTICLE III TAXES .................................................................................................................. 12        3.1 General ....................................................................................................................... 12        3.2 Royalties and Taxes ....................................................................................................13  ARTICLE IV  TITLE AND CUSTODY TRANSFER AND RESPONSIBILITY ...................... 13        4.1 Title, Custody and Risk of Loss ..................................................................................13        4.2 Indemnity ................................................................................................................... 13  ARTICLE V  MEASUREMENT ................................................................................................. 14        5.1 Unit of Volume .......................................................................................................... 14        5.2 Adjustment for Supercompressibility ........................................................................ 14        5.3 Determination of Heating Value, Gas Composition and GPM ...................................14  ARTICLE VI  MEASURING EQUIPMENT AND TESTING ....................................................15       6.1 Equipment .................................................................................................................. 15        6.2 Calibration and Tests of Meters ..................................................................................15        6.3 Access to Meters and Records ....................................................................................15        6.4 Correction of Metering Errors .................................................................................... 16        6.5 Low Volume Meter Fee ............................................................................................. 16        6.6 Failure of Meters ........................................................................................................ 16        6.7 Modifications to Measurement Procedures ................................................................. 17        6.8 Measurement Disputes ............................................................................................... 17  ARTICLE VII  TAKE-IN-KIND SCHEDULING; NOMINATION; IMBALANCES ................17  ARTICLE VIII GAS QUALITY ................................................................................................. 17        8.1 Specifications ............................................................................................................. 17        8.2 Failure to Meet Specifications; Blending and Conditioning ...................................... 18  ARTICLE IX  PRESSURE ........................................................................................................... 20  ARTICLE X  ACCOUNTING ..................................................................................................... 20        10.1 Payment.................................................................................................................... 20        10.2 Information .............................................................................................................. 21                                         i 

 

                                                        Execution – Option Agreement          10.3 Audits ........................................................................................................................21         10.4 Certain Pricing ......................................................................................................... 21         10.5 Setoff ........................................................................................................................ 21         10.6 Adequate Assurances ................................................................................................22  ARTICLE XI  WARRANTY AND INDEMNIFICATION ......................................................... 22         11.1 Warranty of Title; Indemnity ................................................................................... 22         11.2 Limitation of Liability ............................................................................................. 23   ARTICLE XII FORCE MAJEURE ............................................................................................. 23         12.1 Definition ................................................................................................................. 23         12.2 Strikes and Lockouts .................................................................................................24   ARTICLE XIII  SUCCESSORS AND ASSIGNS ....................................................................... 24         13.1 Successors and Assigns .............................................................................................24         13.2 Assignments ..............................................................................................................24   ARTICLE XIV  MISCELLANEOUS .......................................................................................... 25         14.1 Federal Jurisdiction ...................................................................................................25         14.2 No Waiver of Defaults ..............................................................................................26         14.3 Joint Preparation of This Agreement ....................................................................... 26         14.4 Headings .................................................................................................................. 26         14.5 Governing Law; Venue; Waiver of Jury Trial ......................................................... 26         14.6 Use of Third Party Processing Facilities ...................................................................26         14.7 Survival .....................................................................................................................26         14.8 Counterparts ............................................................................................................. 27         14.9 Entire Agreement ..................................................................................................... 27         14.10 Modifications in Writing .........................................................................................27         14.11 No Third Party Beneficiaries ................................................................................. 27         14.12 Liquidated Damages .............................................................................................. 27                                           ii 

 

                                                                   Execution – Option Agreement                        GENERAL TERMS AND CONDITIONS                                                 ARTICLE I                                  DEFINITIONS                All references to Sections or Articles of this Agreement shall refer to Sections and Articles in the  main body of the Agreement unless the context specifically reflects that the reference is to an  Article or Section of these General Terms and Conditions.   1.1  Defined Words and Terms.                      Except where the context otherwise indicates another or different meaning or intent, the  following words and terms as used herein shall be construed to have the meaning indicated:                      “Affiliate” means, with respect to a specified Person, another Person that directly, or        indirectly through one or more intermediaries, Controls or is Controlled by or is under        common Control with the Person specified.                      “Agreement” means that certain Gas Purchase Agreement dated effective as of August        11, 2027, by and between Customer and SCM.                      “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101, et seq.,        as amended.                      “Base Conditions” shall mean a standard pressure of 14.73 psia and a standard        temperature of 60° F.                      “BLM” shall mean the Bureau of Land Management and any lawful successor agency       thereto.                      “Btu” means British thermal unit.                      “Business Day” means any Day other than Saturday, Sunday, or legal holiday for        commercial banks under the Laws applicable to national banking associations.                      “Central Time” means Central Standard Time as adjusted for daylight savings time.         “CO2 Treating Fee” has the meaning set forth in Section 3.1(f) of the Agreement.         “Compression Fee” has the meaning set forth in Section 3.1(b) of the Agreement.         “Confidential Information” means all terms and conditions of this Agreement, and all        information disclosed to it by the other Party or obtained by it in the performance of this        Agreement and relating to the other Party’s business. Confidential Information shall not,        however, include any information which: (a) was publicly known and made generally        available in the public domain prior to the time of disclosure by the disclosing Party; (b)        becomes publicly known and made generally available after disclosure by the disclosing        Party through no action or inaction of the receiving Party; (c) is already in the possession        of the receiving Party at the time of disclosure by the disclosing Party; (d) is obtained by                                         1 

 

                                                              Execution – Option Agreement    the receiving Party from a third party without a breach of such third party’s obligations of   confidentiality; (e) the receiving Party can demonstrate was independently developed by   the receiving Party without use of or reference to the disclosing Party’s Confidential   Information.                 “Confirmed Nominations” has the meaning set forth in Exhibit F.                 “Control” means the possession, directly or indirectly, of the power to direct or cause the   direction of the management or policies of a Person, whether through the ability to   exercise voting power, by contract (or otherwise). “Controlling” or “Controlled” have   meanings correlative thereto.                 “Cubic Foot of Gas” means the volume of Gas contained in one cubic foot of space at   Base Conditions.                 “Customer” has the meaning set forth in the preamble of the Agreement.                 “Customer Indemnified Parties” means Customer, its successors and assigns, and their   respective Affiliates, subsidiaries, shareholders, members, partners, officers, directors,   employees, and agents.                 “Day” or “Daily” means a 24-hour period beginning at 9:00 a.m. Central Time on a  calendar day and ending at 9:00 a.m. Central Time on the next succeeding calendar day.                 “Dedicated Area” means the dedicated area depicted as the “AMI” on the map attached   hereto as Exhibit A-1, excluding any interests expressly excluded or released from this   Agreement.                 “Dedicated Gas” has the meaning set forth in Section 2.1 of the Agreement.    “Dedication” has the meaning set forth in Section 2.1 of the Agreement.    “Effective Date” has the meaning set forth in the preamble of the Agreement.    “Ethane Rejection Fixed Recovery Percentages” means the contractual fixed recovery   percentage for Plant Product components during Ethane Rejection Mode set forth as  follows:                       Ethane:           20%          Propane:          88%          Iso-Butane:       98%          Normal Butane:    99%          Iso Pentane:      99%                                     2 

 

                                                              Execution – Option Agreement    “Ethane Rejection Mode” means the operation of the Plant in a mode, whether actual or   deemed, that minimizes the recovery of ethane as a component of Plant Products.                 “Facilities” means the Plant and the SCM GGP System collectively.                 “FERC” means the Federal Energy Regulatory Commission, and any successor agency   having jurisdiction over the services provided by SCM hereunder.                 “Field FL&U” means the quantity of field fuel utilized for Services plus lost and   unaccounted for Gas upstream of the Plant and shall be fixed at five and one-half percent   (5.50%) of the quantity, in MMbtu, of Customer’s Gas received and accepted at the   Receipt Points.                 “Fixed Recovery Percentages” means, as applicable, the Full Recovery Fixed Recovery   Percentages and the Ethane Rejection Fixed Recovery Percentages.                 “Force Majeure” is defined in Section 12.1 of these General Terms and Conditions.                 “Full Recovery Fixed Recovery Percentages” means the contractual fixed recovery   percentage for Plant Product components during Full Recovery Mode set forth as   follows:          Ethane:           90%          Propane:          92%          Iso-Butane:       98%          Normal Butane:    98%          Iso Pentane:      99%                 “Full Recovery Mode” means the operation of the Plant for the maximum recovery of   Plant Products.                 “Gallon” means one (1) U.S. gallon.                 “Gas” means natural gas produced in its original state from a gas well and/or an oil well.                 “General Terms and Conditions” has the meaning set forth in Section 1.2 of the   Agreement.                 “GPM”  means the quantity of Gallons of theoretically recoverable Plant Products   contained in one Mcf of Gas, as calculated from chromatographic analysis and as   measured at the Receipt Points.                 “Gross Heating Value” means the gross number of Btus that would be contained in a  volume of one Cubic Foot of Gas as further defined by GPA standard 2172 dry basis at  Base Conditions.                                    3 

 

                                                              Execution – Option Agreement    “High Pressure Gathering Fee” has the meaning set forth in Section 3.1(c) of the   Agreement.                 “High Pressure Receipt Point” means those Receipt Point(s) delivering into the high   pressure portion of the SCM GGP System.                 “H2S Treating Fee” has the meaning set forth in Section 3.1(e) of the Agreement.    “Impaired Party” has the meaning set forth in Section 10.6 of the General Terms and   Conditions.                 “Inferior Liquids” means mixed crude oil, slop oil, salt water, nuisance liquids, and   other liquids recovered by SCM in the SCM GGP System.                 “Insecure Party” has the meaning set forth in Section 10.6 of the General Terms and   Conditions.                 “Inert Constituents” means non-hydrocarbon constituents contained in Gas, including   carbon dioxide, oxygen, nitrogen, hydrogen sulfide, water vapor, ozone, nitrous oxide,   and mercury.                 “Law” shall mean any and all constitutional provisions, rules, codes, regulations,  statutes, ordinances, enactments, judicial and administrative orders, decrees, standards,  decisions and rulings that are adopted, enacted, promulgated or issued by any federal,  state, municipal, parish or tribal governmental authority, including the common law.                 “Leases” means any lease, mineral interest, working interest, net profit interest, royalty   or overriding royalty, fee right, mineral servitude, license, concession or other right   covering Gas and related hydrocarbons or an undivided interest therein or portion thereof   within the Dedication Area, along with rights to drill for, produce and dispose of Gas and   liquid hydrocarbons or other substances, in and under the lands covered thereby.                 “Level One Service” has the meaning set forth in Section 2.1(b) of the General Terms   and Conditions.                 “Level Two Service” has the meaning set forth in Section 2.1(b) of the General Terms   and Conditions.                 “Losses” means any actual losses, costs, expenses, liabilities, damages, demands, suits,   sanctions, causes of action, claims, judgments, liens, fines or penalties, including court   costs and reasonable attorneys’ fees.                 “Low Pressure Gathering Fee” has the meaning set forth in Section 3.1(a) of the   Agreement.                 “Low Pressure Receipt Point” means those Receipt Point(s) delivering into the high   pressure portion of the SCM GGP System, where SCM is providing compression   services.                                    4 

 

                                                              Execution – Option Agreement    “Low Volume Meter Fee” has the meaning set forth in Section 6.5 of the General Terms   and Conditions.                 “MAOP” means the maximum allowable operating pressure in psig at the Receipt Points  in effect from time to time, as set forth in notices from SCM to Customer, which shall be  1440 psig initially.                 “Mcf” means one thousand cubic feet of Gas at Base Conditions.                 “Measurement Expert” has the meaning set forth in Section 6.8 of the General Terms   and Conditions.                 “MMBtu” means one million British thermal units.                 “Mont Belvieu OPIS Index” means for each Plant Product the Monthly average of the   daily average of the high and low prices per gallon for such Plant Product, for such   Month, as quoted by the Oil Price Information Service in the OPIS-North America LPG   Report for “Any Current Month” under “OPIS Mont Belvieu Spot Gas Liquids Prices”   using (i) the Non-TET prices for propane, iso-butane, normal butane, and natural   gasoline; and (ii) the purity ethane price for ethane.                 “Month” means a period beginning at 9:00 a.m. Central Time on the first Day of a   calendar month and ending at 9:00 a.m. Central Time on the first Day of the next   succeeding calendar month.                 “New Receipt Point Notification” has the meaning set forth in Section 2.6(b) of the   Agreement.                 “Non-Dedicated Gas” means Gas that is not subject to the Dedication.    “Notification Date” has the meaning set forth in Section 2.6(b) of the Agreement.    “OBA” has the meaning set forth in Exhibit F.    “Option Agreement” means that certain Option Agreement by and between SCM, as   “SCM,” and Customer, as “Lilis,” dated as of May 21, 2018.                 “Parties” or “Party” has the meaning set forth in the preamble of the Agreement.                 “Permitted Curtailment” has the meaning set forth in Section 2.1(a) of the General   Terms and Conditions.                 “Person” means any individual, corporation, partnership, limited liability company, joint  venture, association, joint-stock company, trust, enterprise, unincorporated organization,   governmental entity or other entity having legal capacity.                 “Plant” means any Gas processing plant currently owned or subsequently installed by   SCM, Plant Products interconnection, any Residue Gas interconnection that is                                    5 

 

                                                              Execution – Option Agreement    subsequently installed, and all related storage facilities, owned and operated by SCM, for   the Services hereunder.                 “Plant FL&U” means the quantity of Gas in Mcf utilized as fuel in the operation of the   Plant and shall include any lost and unaccounted for and flared gas, and shall be fixed at   two and one-quarter percent (2.25%) of the quantity, in MMbtu, of Customer’s Gas   received and accepted at the Receipt Points.                 “Plant Inlet Volume” means the volume in Mcf of Customer’s Gas received and   accepted at the Receipt Points less Field FL&U, Treating Shrinkage and any Treating   Fuel Amount.                 “Plant Products” means the liquefiable hydrocarbons that SCM removes and recovers   from Gas, including ethane, propane, normal butane, iso-butane and natural gasoline,   and/or any mixture thereof.                 “Plant Products Delivery Points” means those points of delivery for third party sales of  Plant Products set forth on Exhibit D-2, as the Parties may mutually agree to modify from   time to time.                 “Plant Products Index Price” means one hundred percent (100%) of the Monthly   average of the applicable Mont Belvieu OPIS Index price(s) received by SCM for each   component of Plant Product.                 “Plant Shrinkage” means the decrease in Customer’s Gas volume as adjusted for   heating content that results from the conversion of liquefiable hydrocarbons in the Gas   into Plant Products utilizing the standards set forth in Article V of the General Terms and   Conditions, and shall be based on the applicable Fixed Recovery Percentages.                 “PPI” means the Producer Price Index by Commodity for Final Demand: Finished   Goods, Seasonally Adjusted (Series Id: WPSFD49207), as published by the United States   Department of Labor, Bureau of Labor Statistics; provided, however, (i) if the Bureau of   Labor Statistics ceases to publish such index, the PPI shall mean a comparable index   selected by SCM and reasonably acceptable to Customer, and (ii) if the applicable   governmental agency or other entity that publishes or issues such index changes the base   year for such index or the manner in which such index is calculated, then determination   of adjustments pursuant to this Agreement that are based on comparative values of such   index shall be made using values for such index that are calculated using the same base   year and the same methodology for each index value used in such comparison.                 “Primary Term” has the meaning set forth in Section 6.1 of the Agreement.                 “Prior Dedication” means any gathering or processing agreement or any commitment or   arrangement (including any volume commitment) that would require or necessitate   Dedicated Gas to be gathered on any gathering system or similar system other than the   SCM GGP System or for Dedicated Gas to be processed anywhere other than at the Plant.                 “Processing Fee” has the meaning set forth in Section 3.1(d) of the Agreement.                                    6 

 

                                                              Execution – Option Agreement    “psia” means pounds per square inch absolute.                 “psig” means pounds per square inch gauge.                 “Qualified Institution” means the domestic office of a commercial bank or trust   company that is not an Affiliate of either Party and that has assets of at least $10 billion   and an investment-grade credit rating as established by Standard and Poor’s and   Moody’s.                 “Receipt Points” means the furthest upstream flange on the SCM GGP System where   Customer delivers Dedicated Gas to SCM and where SCM receives Customer’s Gas in   accordance with the terms of this Agreement, which shall be described on Exhibit B   following such agreement. The Parties shall update Exhibit B from time to time to reflect   the addition of new Receipt Points.                 “Representatives” has the meaning set forth in Section 7.1(a) of the Agreement.                 “Residue Gas” means the total quantity of Customer’s Gas measured, received and   accepted each Month at the Receipt Point, less Plant Shrinkage, Field FL&U and Plant   FL&U.                 “Residue Gas Delivery Points” means those points of delivery for third party sales of   Residue Gas set forth on Exhibit D-1, as the Parties may mutually agree to modify from   time to time.                 “Residue Gas Price” means, with respect to any Month, the Monthly average of   applicable “Midpoint” price of Gas, for such Day, in dollars per MMBtu, as reported in   the applicable issue of Gas Daily (an S&P Global Platts publication), in the table entitled   “Daily Price Survey ($/MMBtu),” in the section entitled “Southwest,” on the row entitled   “Waha” (IGBAD21), less Customer’s pro-rata share of any transportation fees, retention  of fuel or other fees incurred by SCM under arms-length transactions with un-Affiliated  third parties to deliver Customer’s Residue Gas to its ultimate sales point at or near the  Waha hub.                 “Residue Gas In-Kind Option” has the meaning set forth in Section 4.1(c) of the   Agreement.                 “SCM” has the meaning set forth in the preamble of the Agreement.                 “SCM GGP System” means the pipelines, compressor stations, gas processing plant and   related facilities owned by SCM, or any other pipelines and facilities that SCM uses in   performing SCM’s gathering and processing obligations hereunder, including any   expansions to those systems during the term of this Agreement.                 “SCM Indemnified Parties” means SCM, its successors and permitted assigns, and their  respective Affiliates, subsidiaries, shareholders, managers, members, partners, officers,  directors, employees, representatives, and agents.                                     7 

 

                                                                   Execution – Option Agreement         “Services” has the meaning set forth in Section 1.1(b) of the Agreement.         “Service Fees” has the meaning set forth in Section 3.1 of the Agreement.         “Settled Gallons” means the quantity of Plant Products in Gallons recovered in Full        Recovery Mode or Ethane Rejection Mode, as applicable, which shall be determined for        each Plant Product component by multiplying (x) the Plant Inlet Volume, by (y) the GPM        of such Plant Product component contained in the quantities of Customer’s Gas processed        hereunder; by (z) the corresponding Fixed Recovery Percentage of such Plant Product.                      “Specifications” has the meaning set forth in Section 8.1 of the General Terms and        Conditions.                      “Target RP In-Service Date” has the meaning set forth in Section 2.6(b) of the        Agreement.                      “Taxes” means all gross production, severance, conservation, ad valorem and similar or        other taxes measured by or based upon production, together with all taxes on the right or        privilege of ownership of Gas, or upon the services rendered herein, including gathering,        transportation, handling, transmission, dehydration, compression, processing, treating,        conditioning, distribution, sale, use, receipt, delivery or redelivery of Gas, including all of        the foregoing now existing or in the future imposed or promulgated.                      “Term” has the meaning set forth in Section 6.1 of the Agreement.                      “T&F Deduction” means the amount Customer is charged for transportation,        fractionation, and marketing deduction, which amount shall be twelve and one-half cents        ($0.125) per Gallon of Plant Products, as adjusted as provided herein.                      “Treating Fuel Amount” has the meaning set forth in Section 3.2 of the Agreement.                      “Treating Shrinkage” means the decrease in Customer’s Gas volume attributable to the        removal of CO2 and H2S in the treating of Customer’s Gas by SCM after the Receipt        Points.                      “Wells” means any well operated by Customer or its Affiliates in which Gas produced        therefrom has been dedicated to SCM under this Agreement, whether such well now        exists or is hereafter drilled.                1.2  Other Definitional Provisions.                      In construing this Agreement, the following principles shall be followed:                      (a)   Words that have a well-known technical, trade or industry meaning shall be given             that meaning, unless it would conflict with an express provision of this             Agreement, in which case the express provision of this Agreement shall control.             The section headings in this Agreement have been inserted for the convenience of                                          8 

 

                                                                   Execution – Option Agreement               the Parties and shall not define, limit or extend interpretation of the corresponding              Section, Exhibit or this Agreement.                      (b)   All references to a given agreement, instrument or other document shall be a              reference to that agreement, instrument or other document as modified, amended,              supplemented and restated through the date as of which such reference is made.                      (c)  All references to any law include any amendment or modification thereof.                      (d)   A reference to a Person includes its successors and permitted assigns. The              singular shall include the plural and the masculine shall include the feminine, and             vice versa.                      (e)   No consideration shall be given to the fact or presumption that one Party had a              greater or lesser hand in drafting this Agreement, and interpretation of this              Agreement shall not be construed against either Party.                      (f)   Examples shall not be construed to limit, expressly or by implication, the matter              they illustrate.                      The plural shall be deemed to include the singular and vice versa, as applicable.                                                 ARTICLE II                          OPERATION OF THE SYSTEM                2.1  Curtailment.                      (a)   SCM may, without liability for damages to Customer (but subject to Customer’s              release rights hereunder and remedies under this Section 2.1), curtail or interrupt              deliveries of Customer’s Dedicated Gas from time to time for (i) safe operation of              the Facilities, (ii) events of Force Majeure, (iii) the inability of one or more non-              Affiliated downstream carriers to receive Plant Products or Residue Gas, (iv)              maintenance or repair to the Facilities with reasonable prior written notice              delivered to Customer in accordance with Section 5.1 of the Agreement, or (v) the              issuance of an order by a government authority. SCM shall have no liability of              any kind to Customer or its Affiliates (but subject to Customer’s release rights              hereunder and remedies under this Section 2.1) for any curtailment or interruption              of service as provided in this Section 2.1 (each, a “Permitted Curtailment”).              SCM shall give Customer at least thirty (30) Days’ advance written notice, except              in case of emergency, of its intention to interrupt operations and of the estimated              time thereof.                      (b)   For the purposes of services provided by SCM under this Agreement and the              curtailment thereof by and on the Facilities, SCM shall offer only two levels of              service with dedicated capacity: (1) that level of service that has the highest              priority call on capacity of all or any relevant portion of the Facilities (“Level             Two  Service”), and (2) the service level curtailed prior to Level Two Service             (“Level One Service”). The Parties acknowledge that (i) Customer’s volumes of                                         9 

 

                                                             Execution – Option Agreement         Dedicated Gas delivered to the Receipt Points are subject to Level Two Service        and Customer’s volumes of Non-Dedicated Gas delivered to the Receipt Points        are subject to interruptible service, and (ii) all Gas delivered on an interruptible        basis is subject to interruption or curtailment at any time, and SCM is        contractually entitled to interrupt its performance with respect to any such Gas for        any reason and in SCM’s sole discretion. In the event of a Permitted Curtailment        or any other curtailment that occurs on the Facilities, SCM shall curtail capacity        on the Facilities in accordance with the following: (i) interruptible capacity shall        be curtailed in its entirety prior to Level One Service and Level Two Service; (ii)        after curtailing interruptible volumes in their entirety, Level One Service shall be        curtailed in its entirety prior to curtailing Level Two Service and all capacity at        Level One Service shall be curtailed pro rata in accordance with the average,        actual quantities of Gas delivered to the Facilities subject to such curtailment        during the thirty (30) Days immediately prior to such curtailment; and (iii) all        capacity at Level Two Service shall be curtailed pro rata in accordance with the       average, actual quantities of Gas delivered to the Facilities subject to such       curtailment during the thirty (30) Days immediately prior to such curtailment. To       protect Customer’s Level Two Service rights hereunder, SCM agrees that SCM’s       total Level Two Service commitments under all contracts with all producers and        customers shall not exceed the total capacity of the Facilities. SCM warrants and        represents to Customer that Customer’s Priority Two Service is the highest level        of service on the Facilities. SCM agrees that during the term of this Agreement,        SCM shall neither create a higher level than Priority Two Service nor contract for        Priority Two Service gathering and processing in excess of the total capacity of        the Facilities during the term of this Agreement.                (c)   Notwithstanding anything to the contrary set forth herein, if at any time during the        Term, SCM suspends, curtails, is unable or fails to receive all volumes of        Dedicated Gas hereunder, for more than twenty-four (24) consecutive hours for        any reason, including an event of Force Majeure, the affected Well(s) (including        the volumes of Gas associated therewith) delivering to the affected Receipt        Point(s) where all such volumes of Dedicated Gas are not received shall        automatically be temporarily released from this Agreement. This temporary        release shall cease, and Customer shall resume deliveries of such temporarily        released Dedicated Gas, as soon as Customer, exercising commercially reasonable        efforts, can terminate all alternative gathering and/or marketing arrangements        without penalty, but in no event later than the first Day of the Month commencing        after the passage of ninety (90) Days after SCM has provided Customer written        notice that SCM is ready, willing and able to resume receiving the affected        volumes of Dedicated Gas.                (d)   Notwithstanding anything to the contrary set forth herein, if at any time during the        Term, SCM suspends, curtails, is unable or fails to receive all volumes of        Dedicated Gas (i) for any reason other than an event of Force Majeure, for one        hundred twenty (120) consecutive Days or one hundred twenty (120) or more        cumulative Days during any consecutive one hundred eighty (180) Day period        following the Commencement Date, or (ii) as a result of an event of Force                                   10 

 

                                                                   Execution – Option Agreement               Majeure, for two hundred seventy (270) consecutive Days or two hundred seventy              (270) Days or more cumulative Days during any consecutive three hundred sixty-              five (365) Day period following the Effective Date, then Customer shall have the              right, immediately following such period, to request and receive a permanent              release from SCM of the affected Well(s) and Lease(s) delivering to the affected              Receipt Point(s) where all such volumes of Dedicated Gas are not received              (including the volumes of Gas associated therewith).                      (e)   Notwithstanding anything to the contrary set forth herein, without limiting any              other remedies available to Customer, including temporary or permanent releases,              in the event that receipts of Dedicated Gas are curtailed in whole or part or              Services hereunder are curtailed for any reason other than a Permitted Curtailment              (including as a result of SCM’s failure to  maintain  pressures  pursuant  to               Article IX), for a period of at least sixty (60) consecutive Days or for sixty (60)              Days out of a consecutive one hundred twenty (120) Day period, then for a period              equal to one times the number of Days of curtailment, the Service Fee(s) payable              by Customer shall be reduced by 50% at the affected Receipt Point(s).                      (f)   Notwithstanding anything to the contrary set forth herein, without limiting any              other remedies available to Customer, including temporary or permanent releases,              commencing on the first Day of the first Month after Effective Date, in the event              that during any six (6) Month period, the downtime period (excluding any              downtime attributable to Force Majeure or emergency conditions existing on the              Facilities) for all or any portion of Facilities when receipts of Dedicated Gas are              curtailed in whole or part or Services hereunder are curtailed during such six (6)              Month period is in excess of six and one-half percent (6.5%), then the Service              Fee(s) payable by Customer shall be reduced by 50% for the three (3) Month              period immediately following such six (6) Month period.                2.2  Identity of Gas.                      Customer recognizes Customer’s Gas in SCM’s custody may be commingled with third  party Gas and that no segregated services are provided, hereunder provided, however, any such  commingling of the Customer’s Gas shall not adversely affect the quality of such Customer’s  Gas or merchantability of such Customer’s Gas, or limit or reduce SCM’s redelivery obligations  hereunder with respect to such Customer’s Gas.                2.3  Operation of Facilities.                      (a)   Except as otherwise expressly provided in this Agreement, SCM shall, at its sole              risk, cost and expense, design, construct, maintain and operate SCM’s Facilities,              including any and all facilities required to connect each Well to SCM’s Facilities             at the Receipt Point(s), as necessary to perform the Services and all its obligations             under this Agreement in a good and workmanlike manner in accordance with             standards customary in the industry. SCM will design and shall expand, and may             add or remove components of SCM’s Facilities, as it determines to be best in its                                          11 

 

                                                                   Execution – Option Agreement               capacity as a prudent operator, provided that such design and structure are              consistent with the full performance of SCM’s obligations and Services hereunder                      (b)   SCM shall at all times be entitled to full and complete operational control of the             Facilities, to the extent consistent with SCM’s obligations under this Agreement.             SCM shall at all times be entitled to manage, operate and reconfigure the             Facilities in its commercially reasonable discretion, to the extent consistent with             SCM’s obligations under this Agreement.                      (c)   SCM reserves the right to own, retain, and have the sole right to the proceeds              from any sale of all Inferior Liquids and Inert Constituents collected in the              Facilities downstream of any Receipt Points, and shall be responsible for paying              all costs and expenses with respect to handling and disposing of the same.                2.4  Rights of Way.                      (a)   SCM is responsible, at its sole cost, for the acquisition of rights-of-way, crossing             permits, use agreements, licenses, access agreements, leases, fee parcels, and              other rights in land necessary to construct, install, own, and operate the Facilities              and perform the services contemplated hereunder.                      (b)   Notwithstanding the foregoing, upon SCM’s written request, to the extent that              Customer is legally and contractually entitled to do so without the incurrence of              cost or expense, Customer shall grant to SCM for purposes of constructing,              owning, operating, repairing, replacing and maintaining any portion of the SCM              GGP System, a non-exclusive license and right-of-use (including, without             limitation, such license or right-of-use encompassed in Customer’s or its             Affiliates’ oil and gas leases or other agreements with third parties) over, across             and under Customer’s or its Affiliates, Leases as are reasonably necessary for             such purposes. Customer shall have no obligation to execute any easements,             rights-of-way, and/or other conveyances of real property in connection with the             foregoing license and right-of-use. All facilities and other equipment acquired,             placed, or installed by SCM for the purposes of this Agreement pursuant to the             provisions of this Section 2.4(b), will remain the property of SCM. In the event              Customer identifies any issue with such SCM’s facilities on Customer’s or its              Affiliates’ Leases, Customer will notify SCM of such issue and SCM and              Customer will work collaboratively to remedy the same. SCM shall be              responsible for and release, defend, indemnify, and hold the Customer              Indemnified Parties harmless from and against any and all Claims and Losses,              arising from or relating to SCM’s use of, or operations on, any such non-exclusive              license and right-of-use granted by Customer, except to the extent such Claims or              Losses are caused by or attributable to the negligence, gross negligence or willful              misconduct of any of the Customer Indemnified Parties. Customer shall be              responsible for and release, defend, indemnify, and hold the SCM Indemnified              Parties harmless from and against any and all Claims and Losses, arising from or              relating to Customer’s use of, or operations on, any fee lands, easements, right-of-              way, or similar surface access rights owned or maintained by SCM, except to the                                         12 

 

                                                        Execution – Option Agreement                extent such Claims or Losses are caused by or attributable to the negligence, gross               negligence or willful misconduct of any of the SCM Indemnified Parties.                                      ARTICLE III                                      TAXES     3.1  General.           Except with respect to any Taxes assessed against SCM based on the services provided   by SCM under this Agreement or SCM’s income, revenues, gross receipts or net worth   (including any gas utility Taxes), Customer shall pay and be responsible for all Taxes levied   against or with respect to the Customer’s Gas (including all constituents and products thereof)   delivered or services provided under this Agreement (excluding all income taxes, franchise   Taxes, ad valorem Taxes, and property Taxes of SCM, or other similar Taxes, fees, or   assessments imposed by any governmental authority with respect to the Facilities and ownership   and operation thereof, the payment of such Taxes being the sole responsibility of SCM). SCM   shall not become liable for such Taxes, unless designated to remit those Taxes on behalf of   Customer by any duly constituted jurisdictional agency having authority to impose such   obligations on SCM, including the Texas Comptroller, in which event the amount of such Taxes   remitted on Customer’s behalf shall be (i) reimbursed by Customer upon receipt of invoice, with   corresponding documentation from SCM setting forth such payments, or (ii) deducted from   amounts otherwise due Customer under this Agreement.     3.2  Royalties and Taxes.           As between SCM and Customer, Customer shall at all times have the obligation to   account for and pay or cause to be paid all royalties, overriding royalties, Taxes levied against or   with respect to Customer’s Gas and other sums due on production and to make settlement with   all other Persons having an interest in Customer’s Gas delivered to SCM hereunder. CUSTOMER  SHALL INDEMNIFY, DEFEND AND HOLD SCM INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST   ALL LOSSES INCURRED BY THE SCM INDEMNIFIED PARTIES ARISING OUT OF OR RELATED TO ANY   ROYALTIES, TAXES, PAYMENTS, OR OTHER CHARGES ATTRIBUTABLE TO GAS DELIVERED TO SCM   HEREUNDER.                                      ARTICLE IV              TITLE AND CUSTODY TRANSFER AND RESPONSIBILITY     4.1  Title, Custody and Risk of Loss.           (a)   Customer shall have and retain title, custody and risk of loss to all Customer’s               Gas and any hydrocarbons attributable thereto, including Plant Products and               Residue Gas, upstream of the Receipt Points. SCM shall take title, custody and               risk of loss to all such Customer’s Gas and any hydrocarbons attributable thereto,               including Plant Products and Residue Gas, at and downstream of the applicable               Receipt Points, subject to Customer’s Residue Gas In-Kind Option. To the extent               that Customer elects its Residue Gas In-Kind Option, Customer shall retain title to               Customer’s Residue Gas and be deemed to be in care, custody and control of                                          13 

 

                                                        Execution – Option Agreement                Residue Gas from and after SCM’s redelivery of such Residue Gas at the Residue               Gas Delivery Points.     4.2  Indemnity.           AS BETWEEN CUSTOMER AND SCM, CUSTOMER SHALL RELEASE, INDEMNIFY, DEFEND AND   HOLD HARMLESS THE SCM INDEMNIFIED PARTIES FROM AND AGAINST ALL LOSSES RELATING TO   OR ARISING OUT OF (I) THE OPERATIONS OF CUSTOMER, AND (II) THE HANDLING OR DELIVERY OF   GAS, RESIDUE GAS AND PLANT PRODUCTS WHILE SUCH GAS IS IN THE CUSTODY AND CONTROL OF   CUSTOMER. SUBJECT TO THE TERMS OF THIS AGREEMENT, SCM SHALL RELEASE, INDEMNIFY,   DEFEND AND HOLD HARMLESS THE CUSTOMER  INDEMNIFIED PARTIES FROM AND AGAINST ALL   LOSSES RELATING TO OR ARISING OUT OF (I) THE OPERATIONS OF SCM, AND (II) THE HANDLING OR  DELIVERY OF GAS, RESIDUE GAS AND PLANT PRODUCTS WHILE SAME IS IN THE CUSTODY AND   CONTROL OF SCM. NOTWITHSTANDING THE FOREGOING, NO  PARTY SHALL BE OBLIGATED TO   RELEASE, INDEMNIFY, DEFEND OR HOLD THE OTHER PARTY HARMLESS FROM AND AGAINST LOSSES  TO THE EXTENT SUCH LOSSES RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF  THE OTHER PARTY.                                      ARTICLE V                                  MEASUREMENT     5.1  Unit of Volume.           The unit of volume for measurement of Gas for all purposes shall be one Cubic Foot of   Gas at Base Conditions. Where measurement is by orifice meter, all fundamental constants,   observations, records and procedures involved in the determination and/or verification of the   quantity and other characteristics of Gas delivered hereunder shall be made according to the   latest revision of ANSI/API 2530-92 Chapter 14.3, Part 1-4 (AGA Report No. 3), with any   revisions, amendments or supplements as may be acceptable to SCM, unless otherwise specified   herein. Measurement by ultrasonic meter shall be in accordance with the latest edition of A.G.A.   Report No. 9. Where measurement is by other than orifice or ultrasonic meters, standards   commonly acceptable in the natural gas industry shall be used in the determination of all factors   involved in the computation of Gas volumes.     5.2  Adjustment for Supercompressibility.           Adjustment to measured Gas volumes for the effects of supercompressibility shall be   made according to accepted AGA standards. Equations for the calculation of   supercompressibility will be taken from the latest revision of AGA Report No. 8,   Compressibility for Natural Gas and Other Hydrocarbon Gases.     5.3  Determination of Heating Value, Gas Composition and GPM.           The Gross Heating Value and Gas composition of the Gas and the GPM of the liquefiable   hydrocarbon components shall be determined by the use of a chromatograph or a continuous Gas   sampler. The arithmetical average of the hourly Gross Heating Value, Gas composition and   GPM, if applicable, recorded by a recording instrument during periods of flow each Day shall be   considered as the Gross Heating Value, Gas composition and GPM of the Gas delivered                                          14 

 

                                                        Execution – Option Agreement    hereunder during such Day. In the event Gas samples are taken or a continuous Gas sampler is   installed, the samples shall be run on a chromatograph at another location. The result of a sample   shall be applied to Gas deliveries on the first Day of the Month the sample is removed and for all   succeeding Months until a new sample is taken. All Gross Heating Value determinations made   with a chromatograph shall use physical Gas constants for Gas compounds as outlined in the   latest revision of GPA 2145 or revisions to related reports to which the Parties may mutually   agree. Gross Heating Value shall be determined to the nearest whole Btu dry basis at Base   Conditions according to GPA Standard 2172.                                      ARTICLE VI                      MEASURING EQUIPMENT AND TESTING     6.1  Equipment.           (a)   SCM shall, at its expense, operate, and maintain, or cause to be operated and               maintained, in accurate working order, the meters, instruments and equipment of               standard type necessary to measure the Gas to be delivered and redelivered               hereunder. The metering and other equipment installed, together with any               buildings erected for such equipment, shall be and remain the property of SCM.           (b)   As specified by SCM, all measuring stations provided hereunder shall be               equipped with orifice meter runs, orifice meter gauges, recording gauges or other               types of meter or meters of standard make and design commonly accepted in the               natural gas industry in order to accurately measure the Gas delivered hereunder. A               computer, transducers and other associated sensing devices may be installed to               accurately measure the Gas delivered hereunder in accordance with A.G.A.               Report Nos. 3, 5, 6, 7 and 9, as appropriate, in lieu of mechanical devices with               charts. If a computer and associated devices are installed, the values for Gross               Heating Value and, specific gravity may be entered either manually (but not more               frequently than once per Month) or as real time data if such data is available.               Values for the Gas composition, including carbon dioxide and nitrogen used in               supercompressibility correction determinations shall be entered as real time data if               such data is available or shall be entered manually at intervals mutually agreed               upon, but at least once each Month.           (c)   Gas quality samples shall be taken as may be reasonably required by SCM in its               sole discretion.     6.2  Calibration and Tests of Meters.           SCM shall calibrate chromatographs, if used, at least once each Month against a standard  Gas sample. All meters and other measuring equipment shall be calibrated and adjusted by SCM  as deemed necessary. Customer may, at its option, be present for such calibration and  adjustment. SCM shall give Customer notice of the time of all tests sufficiently in advance of  conducting same so that the Parties may conveniently have their representatives present.  Following any test, any measuring equipment found to be inaccurate to any degree shall be  adjusted immediately to measure accurately. Each Party shall have the right, at any time, to                                          15 

 

                                                        Execution – Option Agreement    challenge the accuracy of any measuring equipment used hereunder and may request additional   tests. If, upon testing, the challenged equipment is found to be in error, then it shall be repaired   and calibrated. The cost of any such special testing, repair and calibration shall be borne by the   requesting Party if the percentage of inaccuracy is found to be two percent (2%) or less.  Otherwise, the cost shall be borne by SCM.     6.3  Access to Meters and Records.           Customer shall have access at all reasonable times to the measuring equipment and all   other instruments used by SCM in determining the measurement and quality of the Gas delivered   hereunder, but the reading, calibrating, and adjusting thereof shall be done only by employees,   agents or representatives of SCM. SCM shall keep on file copies of original records for a period   of two (2) years for mutual use of SCM and Customer and for such longer period as any dispute   may be pending between the Parties. Upon request, SCM shall submit to Customer copies of   original records from such equipment, subject to return by the Party within sixty (60) Days after   receipt thereof.     6.4  Correction of Metering Errors.           If, upon any test, the measuring equipment, in the aggregate for any  measurement   facility, is found to be inaccurate by more than two percent (2%), registration thereof and any   payments based upon such registration shall be corrected at the rate of such inaccuracy for any  period of inaccuracy that is definitely known or agreed upon; provided, however, if such period  is not definitely known or agreed upon, then such registration and payment shall be corrected for  a period extending back one-half (1/2) of the time elapsed since the last Day of calibration.     6.5  Low Volume Meter Fee.           A fee every Month of two hundred fifty dollars ($250.00) will be assessed by SCM for   each Receipt Point meter that flows, on average, less than 2500 Mcf per Day for the prior Month,   unless otherwise agreed by the Parties in writing (“Low Volume Meter Fee”).     6.6  Failure of Meters.           If, for any reason, the measuring equipment is out of service or out of repair so that the   quantity of Gas delivered hereunder through such measuring equipment cannot be ascertained or   computed from the readings thereof, the quantity of Gas so delivered during the period such   equipment is out of service or out of repair shall be estimated and agreed upon by SCM and   Customer upon the basis of the best available data, using the first of the following methods that   is feasible:           (a)  By using the registration of any duplicate measuring equipment installed by SCM,               if installed and registering correctly;           (b)  By using the registration of any check measuring equipment of Customer, if               installed and registering accurately;                                           16 

 

                                                        Execution – Option Agreement          (c)   By correcting the error if the percentage of error is ascertainable by calibration,               test or mathematical calculation; or           (d)   By estimating the quantity of deliveries by using the volumes delivered under               similar conditions during preceding periods when the measuring equipment was               registering accurately.           Customer may install, maintain, and operate at their own expense, at or near the Receipt   Points or Residue Gas Delivery Points, such check measuring equipment as desired; provided,  however, that such equipment shall be installed so as not to interfere with the operation of any  other measuring equipment. SCM shall have access to such check measuring equipment at all   reasonable times, but the reading, calibration and adjusting thereof and the changing of charts   shall be done only by Customer.     6.7  Modifications to Measurement Procedures.           SCM reserves the right to modify the measurement procedures from time to time in order   to conform with the general measurement procedures prevailing for the SCM GGP System   and/or to remove any inequities which may be found to exist, and it is agreed that any such other   method adopted will be applicable to this Agreement; provided, however:           (a)   SCM shall give Customer at least thirty (30) Days written notice prior to any               change or modification to such measurement procedures; and           (b)   Any change or modification to such measurement procedures shall be consistently               applied to all customers.     6.8  Measurement Disputes.           Any measurement dispute, controversy, or claim arising out of or in connection with this   Article VI, which the Parties are unable to resolve within 90-Days following the resolution   methods in this Article VI, shall be referred to and determined by a mutually agreeable   measurement expert (the “Measurement Expert”), as the sole and exclusive remedy of the   Parties as to the measurement dispute. The decision of the Measurement Expert shall be final and   binding upon the Parties. The cost of any such Measurement Expert shall be borne by the Party   against whom such dispute is decided by the Measurement Expert.                                     ARTICLE VII             TAKE-IN-KIND SCHEDULING; NOMINATION; IMBALANCES           In the event Customer elects to take its Residue Gas, Customer will be responsible for   nominations (including nomination adjustments) required each Month to the applicable Residue   Gas Delivery Point(s). The scheduling, nomination and imbalance procedures applicable if   Customer elects to take its Residue Gas in kind are set forth in Exhibit F.                                     ARTICLE VIII                                   GAS QUALITY                                           17 

 

                                                                   Execution – Option Agreement   8.1  Specifications.                      Customer shall cause to be delivered at the Receipt Points merchantable pipeline quality  Gas that conforms to the more stringent of (a) the following quality specifications, subject to  modification by SCM in its sole discretion or (b) the downstream pipeline specifications as  modified from time to time (the “Specifications”).                      (a)  The Gas shall not contain any oxygen (O2);                      (b)   The Gas shall not contain in excess of two percent (2.0%) by volume of carbon              dioxide (CO2);                      (c)   The Gas shall not contain in excess of two percent (2.0%) by volume of nitrogen              (N2);                      (d)   The Gas shall not contain in excess of three percent (3.0%) by volume of total              inerts;                      (e)   The Gas shall not exceed one-quarter (1/4) grain of hydrogen sulfide per 100              Cubic Feet of Gas;                      (f)   The Gas shall not exceed one-quarter (1/4) grain of mercaptan sulfur per 100              Cubic Feet of Gas;                      (g)   The Dedicated Gas shall not exceed five (5) grains of total sulfur per 100 Cubic              Feet of Gas;                      (h)   The Gas shall be free of condensed water and other objectionable liquids at the              temperature and pressure at which the Dedicated Gas is delivered to SCM at the              Receipt Points;                      (i)   The Gas shall have a Gross Heating Value that is no less than one thousand two              hundred (1200) Btu per Cubic Foot of Gas; and                      (j)   The Gas shall have a maximum temperature of one hundred twenty degrees              Fahrenheit (120° F).                8.2  Failure to Meet Specifications; Blending and Conditioning.                      (a)   If any of Customer’s Gas fails to meet any of the Specifications, SCM shall have              the right to refuse to receive such Gas or waive such failure and to continue to              receive such Gas. If SCM refuses to receive such Gas and if Customer does not              elect to treat the Gas so as to cause the same to meet the Specifications, or if SCM              is unable to blend the Gas pursuant to Section 8.2(b) hereunder, then Customer              shall stop the delivery of the Gas that fails to meet the Specifications. Customer’s              failure to conform to such Gas qualities (and SCM’s refusal to take Gas that does              not meet any of the Specifications) does not relieve Customer of any obligations              hereunder. Acceptance by SCM of Customer’s Gas that does not conform to                                         18 

 

                                                                   Execution – Option Agreement               applicable quality specifications shall not constitute a waiver thereof by SCM in              regard to such Gas delivered under this Agreement in the future. To the  extent               that SCM refuses to accept non-conforming Gas that fails to meet the             Specifications set forth above in Sections 8.1(b) and/or 8.1(e), but otherwise              meets all other Specifications, such non-conforming Gas shall be temporarily              released from the Dedication of this Agreement until received by SCM hereunder.                      (b)   If Customer’s Gas delivered at the Receipt Points should fail to meet any one or              more of the Specifications set forth in Section 8.1 above, then SCM shall use              commercially reasonable efforts to blend and commingle Customer’s Gas with              other Gas delivered to the Plant for processing to the extent reasonably             practicable, and without any additional payment from Customer, so that the             average Gas composition at the Plant meets the applicable Specification(s),             provided that SCM shall not be required to blend or commingle such Gas to the             extent that SCM determines, in SCM’s sole but good faith discretion, that the             blending or commingling of such Gas is reasonably likely to (i) adversely affect              (x) the safety, integrity or operation of the gathering system, any trunk line(s)              connecting to the Plant for purposes of transporting Customer’s Gas, or the Plant              itself, (y) the delivery of Residue Gas to the Residue Gas Delivery Point(s) or              Plant Products to the Plant Products Delivery Point(s), or (z) the Gas of one or              more third parties; or (ii) otherwise result in economic harm to one or more third              parties using the gathering system, any trunk lines or the Plant itself.                      (c)   Customer shall defend, indemnify and hold the SCM Indemnified Parties              harmless from and against all Losses arising out of, resulting from or caused by              the delivery of Gas which does not conform to the Specifications unless SCM has              agreed in writing to accept Customer’s Gas that fails to meet any of the              Specifications and expressly waives its claims for damages resulting therefrom.              The provisions of this Section 8.2(c) will not apply if SCM knowingly accepts              Customer’s non-conforming Gas, or if SCM continues to accept such non-              conforming Gas after a thirty (30) Day period following the commencement of              deliveries of such non-conforming gas. Notwithstanding anything to the contrary              set forth herein, in the event that SCM either knowingly accepts such non-              conforming Gas or continues to accept such non-conforming gas for thirty (30)              Days following the commencement of deliveries of such non-conforming gas,              Customer shall not be liable for any Losses or other damages caused by or              resulting from such non-conforming Gas, and SCM hereby waives its claims              against Customer with respect to any such Losses or damages.                      (d)   If Customer delivers Gas to SCM at the Receipt Points that meets the              Specifications of this Agreement, or with respect to non-conforming Gas that              SCM accepts for which it has waived Claims pursuant to Section 8.2(c), then              SCM shall redeliver Gas and Plant Products that meets the most restrictive quality              specifications required from time to time at the Residue Gas Delivery Points or              Plant Product Delivery Points by SCM’s downstream transporters.                8.3  Hazardous Substances.                                         19 

 

                                                        Execution – Option Agreement          Customer’s Gas shall not contain any substance that is determined to be a contaminant or   a hazardous waste or substance under the Resource Conservation and Recovery Act, 42 U.S.C.   Section 1857, et seq., as amended from time to time, the Comprehensive Environmental   Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., as amended from   time to time, and the regulations issued thereunder, including 40 C.F.R. Parts 302 and 355,   together with any other applicable environmental, health, or safety statutes (other than   hydrocarbons and/or the natural constituent elements thereof).                                      ARTICLE IX                                    PRESSURE           Customer shall deliver, or cause to be delivered, to SCM the Gas to be gathered and/or   processed at the line pressures existing in the SCM GGP System as such pressure may exist from   time to time at the Receipt Point(s), but not in excess of the MAOP. Customer shall install,   operate, and maintain, at their sole expense, such pressure regulating devices as may be   necessary to regulate the pressure of gas prior to delivery to SCM so as not to exceed the MAOP   upstream of the Receipt Point. If a Customer fails to regulate such pressure at any time during   the term of this Agreement, then SCM may install shut-in or other pressure relieving devices at   the Receipt Point(s) upstream of the measurement device.              SCM shall maintain, under normal operating conditions, all Low Pressure Receipt   Point pressures at approximately 100 psig, and all High Pressure Receipt Points pressures at   approximately 1100 psig. Notwithstanding anything to the contrary set forth in this Article IX,   other than in the event of a Permitted Curtailment, (i) in no event shall Customer be required to   deliver Gas hereunder at a pressure exceeding 100 psig at the Low Pressure Receipt Points and   1100 psig at the High Pressure Receipt Points, and (ii) if the average operating pressure of the   SCM GGP System for any Month at any Low Pressure Receipt Point exceeds 100 psig or at    High Pressure Receipt Point exceeds 1100 psig, then those volumes of the affected Customer’s   Gas shall be subject to Customer’s rights under Section 2.1(c). Additionally, if, other than in the   event of a Permitted Curtailment, the average operating pressure of the SCM GGP System at any   Low Pressure Receipt Point exceeds 100 psig or at High Pressure Receipt Point exceeds 1100   psig for a period of at least sixty (60) consecutive Days or for sixty (60) Days out of a   consecutive one hundred twenty (120) Day period, then at Customer’s option and upon written   notice to SCM, Customer shall be granted a permanent release from Dedication to this  Agreement of such Receipt Point(s), the affected Leases and all existing and future wells behind  such Receipt Point(s), and all of such Customer’s Gas produced or producible therefrom. For  purposes of this Article IX, the Parties acknowledge and agree that any deviation in pressure   levels that are of no fault of Customer and that average in excess of the levels prescribed in the   foregoing sentence over a measurement Day shall be deemed to be a deviation lasting for a   period of one (1) Day.                                        ARTICLE X                                   ACCOUNTING     10.1 Payment.                                           20 

 

                                                        Execution – Option Agreement          SCM shall render to Customer, on or before the last Business Day of each Month, a   statement setting forth the amount due hereunder, the total quantity in Mcf and Btu content of   Gas received during the preceding Month at the Receipt Points, the net value for Plant Products   and Residue Gas attributable to Customer’s Gas and the amount of Service Fees and other   charges payable to SCM for the preceding Month. SCM shall pay Customer in accordance with   such statement on or before the first (1st) Business Day of the next Month. If the net amount is  due SCM, Customer shall pay SCM within thirty (30) Days after Customer’s receipt of such  statement. SCM shall preserve all original data in possession utilized by SCM in preparing the  statement for a period of two (2) years from the date of such statement. SCM shall render to  Customer a statement for any other fees or amounts payable by Customer that are not Monthly  fees within sixty (60) Days after such fees or amounts are incurred by SCM and Customer shall  pay SCM in accordance with such statement on or before thirty (30) Days after Customer’s  receipt of such statement. Either Party shall be entitled to withhold any amounts otherwise  payable to the other Party under any statement (and either Party shall not exercise any right of set  off with respect thereto) which the Party disputes in good faith upon written notice to the other  Party detailing the nature of the dispute. Any withheld amounts shall be promptly paid by the  Party to the other Party upon any substantiation or other determination that such amounts are  properly payable to the other Party.     10.2 Information.           Upon receipt of a written request by SCM, Customer will furnish to SCM copies of any   and all forms filed by Customer and/or its operators with any state or federal regulatory agency   covering Gas subject to this Agreement. Additionally, SCM and Customer shall  each preserve   all records applicable to this Agreement, including all test and measurement data and charts, for    a period of at least twenty four (24) Months following the end of each calendar year, or such   longer periods as shall be required under law or regulation or during the pendency of  any    dispute.     10.3 Audits.           Either Party, upon notice in writing to the other Party, may during normal business hours   audit the accounts and records relating to any invoice under this Agreement within the twenty   four (24) Month period following the end of the calendar year in which an invoice was rendered;   provided, however, that the auditing Party must make a claim in writing upon the other Party for   all discrepancies disclosed by said audit within said twenty four (24) Months. Any audit shall be   conducted by the auditing Party or its Representative at the auditing Party’s expense. Any   invoices or settlement statements shall be final as to all Parties unless questioned within said   twenty four (24) Months.     10.4 Certain Pricing.           If any periodical or publication used to determine any payment under this Agreement   does not report a price under the relevant subheading for the relevant Day or Month or such   periodical or the reporting of any such index is discontinued, the Parties will immediately and in   good faith enter into negotiations to select a replacement index or other pricing methodology                                           21 

 

                                                                   Execution – Option Agreement   reflecting equivalent market prices, such replacement index or other pricing methodology to be  effective as of the date the prior index or trade publication ceased.                10.5 Setoff.                      Each Party reserves to itself all rights, setoffs, counterclaims, and other remedies and  defenses  that  such  Party  has  or  may  be  entitled  to  arising  from  or  out  of   this  Agreement. Upon the occurrence of an uncured material default by a Party under this   Agreement following written notice of such default to the defaulting Party and the expiration of  the cure period under this Agreement applicable thereto, all outstanding transactions between the  Parties  and  the  obligations  to  make  payment  in  connection therewith,  whether  arising  under this Agreement or any other agreement  between  the  Parties,  may  be  offset  against  each other, set off, or recouped therefrom upon notice to the defaulting Party detailing the  amounts set off and the obligations for which such setoff has occurred.                10.6 Adequate Assurances.                      When reasonable grounds for insecurity of payment or performance arise with respect to  a Party (the “Impaired Party”), including, without limitation, as a result of the occurrence of a  material change in the creditworthiness of the Impaired Party or the Impaired Party’s failure to  timely pay any amounts due hereunder other than amounts subject to a good-faith dispute, the  other Party (the “Insecure Party”) may demand adequate assurance of performance, and in the  absence of the provision of such assurance from the Impaired Party within three (3) Business  Days of request, suspend further performance and/or exercise its rights under Section 6.2 of this  Agreement, including the right to terminate this Agreement. Adequate assurance shall mean  security in the form, amount and for the term reasonably specified by the Insecure Party,  including, but not limited to, a standby irrevocable letter of credit issued by a Qualified  Institution, a prepayment or a guarantee by an entity deemed creditworthy at the sole discretion  of the Insecure Party, advance cash payment or other satisfactory security reasonably acceptable  to the Insecure Party.                                                               ARTICLE XI                       WARRANTY AND INDEMNIFICATION                11.1 Warranty of Title; Indemnity.                      (a)   Customer warrants that it will have, at the time of its delivery of Gas at the              Receipt Points, control of and good title to and/or the full right and authority to              deliver such Gas and any liquefiable hydrocarbons therein to SCM for gathering              and processing hereunder. Customer warrants that the Gas delivered to SCM              hereunder shall be free and clear of all liens, encumbrances, and claims              whatsoever (other than with respect to any lien held by any lender under any              credit facility for borrowed money of Customer or its Affiliates), and that it will              have at such time of delivery good right and title to the Gas or the right to gather              such Gas hereunder. If any claim is made challenging a Customer’s right to              deliver such Gas to SCM, SCM has the right to suspend receipt or deliveries of                                         22 

 

                                                        Execution – Option Agreement                such challenged Gas hereunder until such issue is finally resolved to the               reasonable satisfaction of SCM.           (b)   Customer shall indemnify, defend and hold the SCM Indemnified Parties               harmless from and against all Losses incurred by the SCM Indemnified Parties               arising out of or related to any breach of the foregoing title warranty, including               any adverse claims pertaining to Gas delivered hereunder.           (c)   SCM represents and warrants that Customer’s Gas from the time of receipt               hereunder at the Receipts Point(s) until the time of redelivery of Customer’s               Residue Gas at the Residue Gas Delivery Point(s) (to the extent that Customer has               elected to take in-kind) or the time of purchase by SCM of Customer’s Residue               Gas and Plant Products, shall be free and clear of all liens, encumbrances and               claims arising by, through or under SCM, and SCM agrees to indemnify, defend               and hold the Customer Indemnified Parties harmless from and against any and all               Losses to the extent incurred by Customer on account of any such liens,               encumbrances and claims arising by, through or under SCM.     11.2 Limitation of Liability.           NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,  IN NO EVENT   SHALL EITHER PARTY (OR ANY CUSTOMER INDEMNIFIED PARTY OR SCM INDEMNIFIED PARTY) BE  LIABLE TO THE OTHER PARTY (OR ANY CUSTOMER INDEMNIFIED PARTY OR SCM INDEMNIFIED   PARTY, AS THE CASE MAY BE), ANY SUCCESSORS IN INTEREST OR ANY BENEFICIARY OR ASSIGNEE   OF THIS AGREEMENT FOR ANY EXEMPLARY OR PUNITIVE DAMAGES OR ANY SPECIAL, INDIRECT,   INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING LOSS OF USE, LOST   PROFITS OR REVENUES, OR COST OF CAPITAL, ARISING OUT OF OR IN CONNECTION WITH THIS  AGREEMENT OR ANY BREACH THEREOF, IRRESPECTIVE OF WHETHER CLAIMS FOR SUCH DAMAGES  ARE BASED UPON CONTRACT,   WARRANTY,  NEGLIGENCE, STRICT LIABILITY OR OTHERWISE;   PROVIDED, HOWEVER, THE FOREGOING SHALL NOT BE CONSTRUED AS LIMITING AN OBLIGATION OF   A PARTY HEREUNDER TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE OTHER PARTY AGAINST  CLAIMS ASSERTED BY UNAFFILIATED THIRD PARTIES, INCLUDING BUT NOT LIMITED TO THIRD PARTY  CLAIMS FOR EXEMPLARY,   PUNITIVE, SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL   DAMAGES. .                                     ARTICLE XII                                 FORCE MAJEURE     12.1 Definition.           Subject to the other provisions of this Agreement, if either Party is rendered unable,   wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than   to make payments when due hereunder, it is agreed that, on such Party’s giving notice of such   Force Majeure to the other Party within a reasonable time after the occurrence of the cause relied   on, the obligations of the Party giving such notice, so far as they are affected by 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 all reasonable dispatch, if economically                                          23 

 

                                                                   Execution – Option Agreement   justifiable. The term “Force Majeure” shall mean any cause or causes not reasonably within the  control of the Party claiming suspension and which, by the exercise of reasonable diligence, such  Party is unable to prevent or overcome, including acts of God, acts of Governmental Authorities,  compliance with rules, regulations or orders of any governmental authority, strikes, lockouts or  other industrial disturbances, acts of the public enemy, acts of terrorism, wars, blockades,  insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, extreme cold, storms,  hurricanes, floods, or other adverse weather conditions, washouts, arrests and restraint of rulers  and people, civil disturbances, explosions, breakage or accident to machinery, equipment or  pipelines, freezing of wells, pipelines or equipment, requisitions, directives, diversions,  embargoes, priorities or expropriations of government or Governmental Authorities, legal or de  facto, whether purporting to act under some constitution, decree, law or otherwise, failure of  pipelines or other gatherers to gather or furnish facilities for transportation, failures, disruptions,  or breakdowns of machinery or of facilities for production, manufacture, transportation,  distribution, processing or consumption (including, but not by way of limitation, the SCM GGP  System), allocation or curtailment by third parties of downstream capacity, inability to secure or  delays in securing permits from Governmental Authorities, transportation embargoes or failures  or delays in transportation or poor road conditions, partial or entire failure of Gas supply and  downstream pipeline market constraints. “Force Majeure” shall expressly exclude (i) delays in  permitting that are not extraordinary or unusual for the Dedicated Area and the development of  the Permian Basin and other relevant basins, or (ii) any matters within the reasonable control of  SCM (such as easement, right-of-way, fee land and surface right acquisition, the availability of  labor, materials and supplies, and other similar matters). Further, notwithstanding anything to   the contrary set forth in this Agreement, none of the following shall, under any circumstance,  constitute a Force Majeure event: (i) the lack of financial resources, or the inability of a Party to  secure funds or make payments as required by this Agreement absent the other Party’s breach of  this Agreement which has a material adverse effect on such Party; (ii) adverse market, financial  or other economic conditions including changes in market conditions that either directly or  indirectly affect the demand for or price of Gas or Plant Products; or (iii) availability of more  attractive markets or gathering, transportation or processing services for Gas or Plant Products.                12.2 Strikes and Lockouts.                      The settlement of strikes or lockouts 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 strikes or lockouts by acceding to  the demands of an opposing Party when such course is inadvisable in the discretion of the Party  having the difficulty.                                                ARTICLE XIII                           SUCCESSORS AND ASSIGNS                13.1 Successors and Assigns.                      All the terms and conditions of this Agreement shall extend to and be binding upon the  respective successors and assigns of the Parties.                13.2 Assignments.                                         24 

 

                                                        Execution – Option Agreement          The Parties have entered into this Agreement in anticipation of continued performance   hereunder, and, accordingly, the rights and obligations of a Party hereunder shall not be assigned   without the prior written consent of SCM or Customer, as applicable, which shall not be   unreasonably withheld, conditioned, denied or delayed. Notwithstanding the above, (i) the   Parties shall have the right to assign this Agreement to a purchaser or other successor of   substantially all of the assets involved provided that the purchaser or other successor assumes in   writing the obligations of the assigning Party, and (ii) Customer may only assign its rights and   obligations hereunder to a Person acquiring all or any of the Leases, Wells, and Dedicated Gas   that Customer or its Affiliates own in the Dedicated Area. Without the consent of the other Party   hereto, either Party hereto may assign its rights hereunder to its Affiliate, provided that the   assigning party shall remain liable for its obligations hereunder. Nothing in this Section 13.2   shall in any way prevent either Party from pledging or mortgaging its rights hereunder as   security for indebtedness. Further and notwithstanding anything in this Section 13.2 to the   contrary, Customer may assign its rights and obligations under this Agreement to any Person to   whom Customer assigns or transfers an interest in any of the Lease(s) or Well(s), insofar and   only insofar as, this Agreement relates to such Lease(s) or Well(s), without the consent of SCM;   provided that (i) such Person is at least as creditworthy as Customer is as of the Effective Date   and at the time of such assignment, (ii) such Person assumes in writing the obligations of   Customer under this Agreement insofar as it relates to such Lease(s) or Well(s), and (ii) if such   transfer or assignment is to a Person that is not an Affiliate of Customer, Customer shall be   released from its obligations under this Agreement with respect to such Lease(s) or Well(s) so   assigned or transferred, except for its obligations arising prior to the date of assignment. For the   avoidance of doubt, (i) no assignee or transferee of Customer shall assume the Dedication of this   Agreement in its entirety, but shall only be subject to, and assume, such Dedication insofar and   only insofar as the Lease(s) or Well(s) assigned or transferred to such assignee or transferee and   (ii) SCM shall not be required to install supplemental meters or other facilities at existing   Receipt Points, or undertake additional obligations or incur additional expenses as a result of   such assignment (provided the Parties shall reasonably cooperate to establish a procedure for the   allocation of Gas delivered at existing Receipt Points between Customer and such transferee or   assignee, if applicable).                                     ARTICLE XIV                                 MISCELLANEOUS     14.1 Federal Jurisdiction.           This Agreement is subject to all valid present and future laws, regulations, rules, and   orders of governmental authorities now or hereafter having jurisdiction over the Parties, this   Agreement, or the Services performed or the Facilities utilized under this Agreement. It is the   intent of the Parties that SCM provide Services to Customer on a negotiated-contract basis only,   and the Parties hereby agree that, in the event that (i) SCM’s Facilities, or any part thereof,   become subject to regulation by FERC, or any other governmental body or agency of the rates,   terms, and conditions for service, (ii) SCM becomes obligated by FERC or any other   governmental body or agency to provide Services or any portion thereof on an open access,   nondiscriminatory basis as a result of SCM’s execution, performance, or continued performance   of this Agreement, or (iii) FERC or any other governmental body or agency seeks to modify any   rates under, or terms or conditions of, this Agreement, then:                                          25 

 

                                                        Execution – Option Agreement          (a)   to the maximum extent permitted by law, it is the intent of the Parties that the               rates and terms and conditions established by the FERC or governmental body or               agency having jurisdiction will not alter the rates or terms and conditions set forth               in this Agreement, and the Parties shall vigorously defend and support in good               faith the enforceability of the rates and terms and conditions of this Agreement; or           (b)   if FERC or the governmental body or agency having jurisdiction modifies the               rates or terms and conditions set forth in this Agreement, then the Parties hereby               agree to negotiate in good faith to enter into such amendments to this Agreement               and or enter into a separate arrangement in order to give effect, to the greatest               extent permitted by law, to the rates and other provisions of this Agreement;               provided however if SCM and Customer cannot arrive at such agreement               following such negotiations, either Party may terminate this Agreement by               delivering written notice thereof to the other Party, with such termination to be               effective 90 Days after the delivery of such notice.     14.2 No Waiver of Defaults.           No waiver by either Party of any default of the other Party under this Agreement shall   operate as a waiver of any subsequent default, whether of a like or a different character.     14.3 Joint Preparation of This Agreement.           This Agreement will be deemed and considered for all purposes as prepared through the   joint effort of the Parties and will not be construed against one Party or the other as a result of the   preparation, submittal or other event of negotiation, drafting or execution hereof.     14.4 Headings.           The headings contained in this Agreement are used solely for convenience and do not   constitute part of the agreement between the Parties, and they should not be used to aid in any   manner in construing this Agreement.     14.5 Governing Law; Venue; Waiver of Jury Trial.           THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE  LAWS OF THE STATE OF TEXAS, WITHOUT REGARD ITS CONFLICT OF LAWS PRINCIPLES. SUBJECT TO   SECTION 6.8 OF THESE GENERAL TERMS AND CONDITIONS, THE PARTIES IRREVOCABLY SUBMIT TO   THE EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL COURTS LOCATED IN HOUSTON, HARRIS   COUNTY, TEXAS IN RESPECT OF ANY DISPUTE ARISING PURSUANT TO OR IN CONNECTION WITH THIS   AGREEMENT, AND EACH PARTY WAIVES ANY OBJECTION THAT SUCH PARTY MAY NOW OR  HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH ACTION, SUIT OR PROCEEDING.  EACH PARTY WAIVES ITS RIGHTS TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM RELATING TO THIS   AGREEMENT.     14.6 Use of Third Party Processing Facilities.                                           26 

 

                                                                   Execution – Option Agreement         SCM shall have the right to use the processing facilities of a third party in lieu of a Plant  owned or operated by SCM; provided that any Gas processed at such third party facility would  be processed in accordance with the terms and conditions of this Agreement.                14.7 Survival.                      The provisions of Article VIII, Sections 10.3, 11.2, and Article XIV of these General  Terms and Conditions shall survive the expiration or termination of this Agreement. In addition,  the Parties payment and indemnification obligations shall likewise survive the expiration or  termination of this Agreement.                14.8 Counterparts.                      This Agreement may be executed in any number of counterparts, each of which shall be  considered an original, and all of which shall be considered one instrument.                14.9 Entire Agreement.                      This Agreement constitutes the entire agreement between the Parties covering the subject  matter hereof, and there are no agreements, modifications, conditions, or understandings, written  or oral, expressed or implied, pertaining to the subject matter hereof that are not contained  herein. This Agreement supersedes and replaces all prior agreements pertaining to the subject  matter of this Agreement. The Parties hereto have voluntarily agreed to define their rights,  liabilities and obligations relative to subject matter of this Agreement exclusively in contract  pursuant to the express terms and provisions of this Agreement. Neither Party hereto shall have  any remedies or cause of action (whether in contract or tort) for any statements, communications,  disclosures, failures to disclose, or representations or warranties not expressly set forth in this  Agreement.                14.10 Modifications in Writing.                      Modifications of this Agreement will be or become effective only upon the due and  mutual execution of appropriate supplemental agreements or amendments hereto by duly  authorized representatives of the respective Parties.                14.11 No Third Party Beneficiaries.                      Except as expressly set forth herein, the provisions of this Agreement will not impart  rights enforceable by any Person that is not a Party.                14.12 Liquidated Damages.                      The circumstances of this Agreement are such that a Party will be exposed to substantial  injury if the other Party does not timely perform under this Agreement, and the injuries that may  occur to such Party could take a variety of forms. Where this Agreement imposes on a Party an  obligation to pay to the other Party certain monetary sums, or provide other value to the other  Party, as a result of certain non-performance or delayed performance under this Agreement, such  sums or other value are intended to serve as liquidated damages for certain of the injuries to such                                         27 

 

                                                                   Execution – Option Agreement   other Party. The Parties stipulate and agree that (a) the injury that would be caused to a Party as   a result of the other Party’s non-performance or delayed performance would be difficult to  estimate accurately, (b) the sums or other value to be provided to such Party under this  Agreement in such circumstances are intended to serve as a liquidated damages and not as a  penalty, and (c) such sums or other value represent the Parties’ reasonable estimate at this time   of the probable damages that would be suffered by a Party in the various scenarios addressed in  this Agreement.                                          28 

 

                                         Execution – Option Agreement      EXHIBIT A-1        Dedicated Area     [ATTACHED]      

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     AX                                        A24                                                                                                                                                                                                                                                                                                                                                      G A I N E                                              A25                                                                                                                                                                                                                                                                                                                                                                  2                                         A27                                                   2 2 E                 2 29E                      2 3 E                       2 31E                      2 32E                       2 33E                      2 34E                       2 35E                      2 36E                       2 37E                       2 3 E                                                                                                                                 A22                 C45                                                                                                                                                                                                                                                                                                      39E            A2                                                                                                                                                                                                                                                                                                                                                                                                                                                                             A23                                                                                                                                                                                                                                                                                                                                 A24                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            A26                                          A2                                                                                                                                                                                                                                                                                                                                                                             A26                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            A3               A31                                    A44                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A34                                                                                                                                                                                                                                                                                                                                                                                                                                                21 27E              21 2 E                     21 29E                      21 3 E                     21 31E                      21 32E                     21 33E                      21 34E                     21 35E                     21 36E                      21   37E           21 3  E            A29                                                                                 A33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       A36                                                                                                                                                                                                                                                                                                                                                                                  A32                                                       A34                                                                                                                                                                                                                                                                                                                                                                                                        A43                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   A35                                                                                                                                                                                                                                                                                                                                                            A37                                                           A34                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                A3                                                                                                                                                                                                                                                                                                                      A39                                                                                                       A36   22 27E              22 2 E                     22 29E                      22 3 E                     22 31E                      22 32E                     22 33E                      22 34E                     22 35E                     22 36E                      22 37E             22 3 E                                                             A3                                                                                                                                                                                                                                                                                                                                                                                                                                                              13                                                                                                                                                                                                                                                                                                                                                                                                                                                               14                     A45                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A39                                                       A4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              A49                                                                                                                                                                                                                                                                                                                                A4                                                                                                                                                                                                                                                                                                                          L E A                                                                                                                                                                                                              A46                                                                                                                                                                                                                                                                                                                                                                                                                                           23 27E                                                                                                                                                                                                                                                                                                                              A5                            A N D R E W                                                             A44                      23 2 E                      23 29E                      23 3 E                     23 31E                      23 32E                     23 33E                      23 34E                     23 35E                     23 36E                      23 37E             23 3 E                                                                                                                                                      Y                                                                  Y                                                                                                                                                                                                                                                                                                                                                                                        A47                                                                   D                                                                  D                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  D                                                                  D                                                                                                                                                                                                                                                                                                                                                                                                                                  A43                                                                   E                                                                  E                                                                                                                                                                                                                                                 A51                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      A42                                                                                                                                                                                                                                                                                                                                                                            12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         A41                                                                                                                                                                                                                                                                                                                                                                                                                                                      24 2 E                      24 29E                      24 3 E                     24 31E                      24 32E                     24 33E                      24 34E                     24 35E                     24 36E                                                                                A53  24 27E                                                                                                                                                                                                                                                                      24 37E             24 3 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              A52                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   9                                                                                                                                                                                                                                                                                                                                                  A54                                                                                                                                                                                                                                                                                                                                                                                                                1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         25 2 E                      25 29E                      25 3 E                     25 31E                      25   32E                   25  33E                     25 34E                     25 35E                     25 36E                      25 37E                                                                                                                                                  25 27E                                                                                                                                                                                                                                                                                         25 3 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      A55                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         73                                                     44 T2N                                                                                                                                                                                                                                                                                                                                                A22 A41                                                                                                                                                                                                                                                                                                                                                                                                                           A26                43 T1N                                                                                                                                                                                                                                                                                                                                    A 54                                               45 T2N                                                                                                                                                                                                                                                                                                                                                                                                                     44 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           26 27E             26 2 E                      26 29E                      26 3 E                     26 31E                      26 32E                     26 33E                      26 34E                     26 35E                     26 36E                      26 37E             26 3 E                                                                                                                                                                                                                                                                                                                    A56                    A57   A 57                                                                        A                                                                                                                                                                                                                                                                                                                                                               46                                                                                                                                                                                                                                                                                                                                                                              46                                                             43                                                                                                                                                                                                                                                                                                                                                                                                                                                                            N E W M E X I C O                                                                                                                                                                                                                                                                                        45 TIN       45 T1N                                          T1N                                                                                                   56T1       55T1                                                                                                                                                                                                       A 57     B57                                                                                      44 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 C22                                                                                                                                                                                                          T E X A S                                                                                                                                                                                                                                     A57                                         46                                                                                                                                                                                                                                                                                     C23                                                                                                                                                                            43 T1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            C                                                                                                                                                                                                                                                                                                               C24                                                                         77                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              C25                                                                                                                                                            46 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        5 T1          57 T1          57 T1                     56 T1                       55 T1                      54 T1                        76                                                                                                                                                                                                                                                      59 T1                                                                                                                                                                                                                                                                                                                                        B1                                                                                                                                                                                                                                                                                                                  74                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            44 T1                                                                                                                                                                                                                                                                                                                             B2                                                                                                                                                                                                                                                                                        WF                                                                                                                                1                            46 TI                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               B3                                                       7                                                                                                                                                                                                            C26                          75                                                                     B2                                                                                                   45 T1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          46 T1                                                                                                                                                                                                                                                                                                                                                                                      B7                                 E C T O R                                                                                                                                                                                         29                                                                                      26                   W                                                 4                     46 TI                                                                                                                                                                                                    L O V I N G                                                                                                                                 WW I N K L E R                                                                                                                                                                                                                                                                                                                                                          B27                                                                                                                                                                                                                                                                                                                                     B6                                                                                                                                                                                                                                                                                                                                             27                                                                                                                                                                                                  5 T2          57 T2          57 T2                     56 T2                      55 T2                       54 T2                      53 T2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     59 T2 5 T7                                                                                                                                                                                                                                                                                                                                   B4             B4                                                                                                                                                                                                                                                                                                                                                                                                                                      44 T2                                                                                                                                                                                                                              2                                                                                                                                                                                     45 T2                                                                                                                                                                                                                                                                                                     B5                                                B4                                                                                                                                                                                                                                                                                                                              5                                                                              B                               5 T6                                                                                                                                                                  29                                                                                                                                                                                                                                 C U L B E R O N                                                                                                                                                                                                                                                                                                                    B1                       B9                                                                                                                                                                                         2                                                                       112           56 T3           57 T3              56 T3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    2                         C27                                                                                                                                                                                                                               C29                                                                                                                                                                                                       B15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      1                                                                                                                                                                                                      B11                                                                                                             44 T3           113                                                                                                                                                                                                                                                                                B12                                                                                                                                                                                                                                                                  21                                                                                                                                     45/113                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   56 T3                   C2                                                                                                                                                                                                                                                                                 B14                                                     57 T3                                                                2                                                                                                             2                                                                                                                                                                                                                                                                                   VV                                                                                                                                                                                                                                                                                  B13                                                          35                                  45                                               R E   E V E                                                                                                                  19                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        \ LILIS_ACREAGE.mxdLilis                                                                                                                                                                                                                                                                                                                                                                                                                           B16                    \                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  1                                                                                                                                                           A          111                                                                                                                                             33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 46 T3 16                                                                                                      55 T3                                                                                                                                                                                                          2                                                                                                                                                                                                                                                                                                                                                                                                                                                                AMI                                                                                                                               3                                                                                                                                                                15                                                                                                                                                                                       C21                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 13                                                                                                                                                                                                                                             46                                      \ Energy  Companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   F                                                                                                                                  B23                                                                                    5                                                                      53 T4                                                                                                                                                                                                                                                                                                                                      3                                                                                                                                                                                                                                                                                                                                                                                                                                                                         B22                                                                                                                                                           52 T4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       \ SALT_CREEK                                                                                                                                                                                                                                                                                                                                                                 B19                                                                                                              55 T4                                      53 T4                                                                                      1                     17                                                                                                                                                                                                                                                                                                                                                                                                                 R  A  N  E                                                                                       57                                                                                                                                                                                                                                                                                                                        R A  N  E                        Projects                                                                                                                                          54 T4             52 T4                                                                                                               W A R D                                                                                           B1 B2               B17     C R A N E                           \            52                      53                         56                                                                                                                                                                                                                                                                                                                                                                                   \ GIS                                                                                                                                                             C19                                                        34                                                                                                                                                                                                                                                                                                                                                      N                       63                                                        ‘                                                                                                                                                                                                                                                                                                                                                    B26             53                                                                                                                                                                                                                                                                                                                     O      1                   5                                                                                                                                                                                                                                                                                                                                       Miles                                                                                                                        4                                                                                                                                    16                                                                                             B21                                                                                                                                    54 T5                                                                                                                                                                                                                                                   B2                                                      Document  Path:  M:                                                                                                               55 T5       54 T4                                                                                                                                          34                                  34                                                     B19           

 

                                                                   Execution – Option Agreement                                    EXHIBIT B-1                                                              Receipt Points                The Receipt Points are to be agreed upon and updated in writing from time to time. [The initial  Receipt Points (if any) are described below]:                              Well Name                          Surface Location                              [NOTE: Describe Receipt Point(s) as of the Effective Date.]                 

 

                                                        Execution – Option Agreement                                     EXHIBIT C                            Form of Memorandum of Agreement      STATE OF [              ]          §                                       §                                                      COUNTIES OF [               ]      §             This Memorandum of Gas Purchase Agreement (this "Memorandum") is made and   entered  into  this  [      ] day of [  ], 20 , by and between Lilis Energy, Inc., a   Nevada corporation (“Customer”), located at [_  ], Attn: [      ], and Salt Creek   Midstream LLC, a Delaware limited liability company located at 20329 State Highway 249,   Suite 450, Houston, TX 77070, Attn: Paul Williams (“SCM”).           WHEREAS, Customer and SCM have entered into a Gas Purchase Agreement (the   “Agreement”) dated effective August 11, 2027 (the “Effective Date”); and           WHEREAS, Customer and SCM desire to file this Memorandum to provide record   notice of the Agreement.           1.   Dedication.           Subject to the other terms and conditions of the Agreement, Customer hereby (i)  dedicates for Services with respect to Dedicated Gas under the Agreement to SCM all Leases  now owned or hereafter acquired by Customer and/or its Affiliates and their respective  successors and assigns that cover lands located within the Dedicated Area, and (ii) dedicates for  Services under the Agreement and shall deliver, or cause to be delivered, hereunder to SCM, at  the Receipt Points, the following (the “Dedication,” and the Gas that is the subject of the  Dedication being herein referred to as “Dedicated Gas”):                (a)    all Gas produced and saved on or after the Effective Date for the   remainder of the Term from those Wells for which Customer and/or any of its Affiliates is the   operator now or hereafter located within the Dedicated Area or on lands pooled or unitized   therewith, to the extent such Gas is attributable to the Leases within the Dedicated Area now   owned or hereafter acquired by Customer and/or its Affiliates and their respective successors   and assigns; and                 (b)   with respect to those Wells for which Customer and/or any of its Affiliates   is the operator, Gas produced on or after the Effective Date for the remainder of the Term from   such Wells which is attributable to the Leases in such Wells owned by other working interest   owners and royalty owners which is not taken “in-kind” by such working interest owners and   royalty owners and for which Customer and/or its Affiliates has the right or obligation to deliver   such Gas and only for the period that Customer and/or its Affiliates has such right or obligation.        For the avoidance of doubt, Customer shall not be required to deliver Gas from  any well   operated by an operator other than Customer or its Affiliates, including any well where Customer     

 

                                                                   Execution – Option Agreement   would be required to install split stream connection facilities or similar facilities to take such Gas  in kind, and such Gas shall not be Dedicated Gas subject to the Dedication hereunder.                      2.    Term. Subject to the terms and conditions contained in the Agreement, the  Agreement shall be in full force and effect as of the Effective Date and shall continue in full  force and effect for a period of twelve (12) years thereafter (the “Primary Term”), unless  terminated in accordance with Section 6.2 of the Agreement or as otherwise provided in the  Agreement, and for successive one (1) year periods thereafter until terminated by either Party as  of the end of the Primary Term or any subsequent renewal by giving the other Party at least sixty  (60) Days’ prior written notice (the Primary Term, including any such extension, the “Term”).  However, such termination shall not extinguish any obligations incurred prior to the effective  date of termination, including payment for services rendered or Gas and/or Plant Products  purchased hereunder.                      3.    Covenant Running With the Land. So long as the Agreement is in effect, the  Agreement shall (i) be a covenant running with the Leases now owned or hereafter acquired by  Customer and/or its Affiliates within the Dedicated Area (including, without limitation, all Wells  operated by Customer or its Affiliates) and (ii) be binding on and enforceable by SCM and its  successors and assigns against Customer, its Affiliates and their respective successors and  assigns. Notwithstanding Section 2.4 of the Agreement, to the extent all or a portion of such  Leases within the Dedicated Area are sold to a non-Affiliated Person, such acquiring Person   shall only be required to dedicate for delivery hereunder that Gas that is produced from such  Leases within the Dedicated Area acquired by such non-Affiliated Person from Customer. The  acquiring Person shall not be required to dedicate Gas produced from Leases already held by or  acquired after such date by such acquiring Person. Notwithstanding the foregoing, with prior  written notice to SCM, Customer and its Affiliates shall each be permitted to convey, sell,   assign, or otherwise transfer its interest in the Leases that are not connected to or in the process  of being connected to the SCM GGP System free of the Dedication hereunder in an “acreage  swap” or exchange transaction in which such undeveloped Leases within the Dedicated Area are  exchanged for other properties or Leases of approximately equal net acreage and projected  production located in the Dedicated Area that are not subject to a Prior Dedication and would  become subject to the Dedication hereunder. SCM and Customer shall prepare, execute,  acknowledge, deliver, and record any such instruments and other documents reasonably  necessary to effectuate such release and memorialize such acquired Leases subject to the  Dedication.                      4.    Incorporation of Agreement and Effect of Memorandum. The sole purpose of  this Memorandum is to give notice of the existence of the Agreement. This Memorandum shall  not modify in any manner any of the terms and conditions of the Agreement, and nothing in this  Memorandum is intended to and shall not be used to interpret the Agreement. The provisions of  the Agreement are hereby incorporated into this Memorandum as if set out fully herein. In the  event of any conflict between the terms of this Memorandum and the terms of the Agreement,  the terms of the Agreement shall govern and control for all purposes.                      5.    Defined Terms. All capitalized terms not defined herein shall have the same  meaning assigned such terms in the Agreement.                 

 

                                      Execution – Option Agreement                 [Signature pages follow]                 

 

                                                        Execution – Option Agreement          IN WITNESS WHEREOF, this Memorandum is executed by Customer and SCM as of   the date of acknowledgement of their signatures, but is effective for all purposes as of the   Effective Date stated above.      CUSTOMER:    LILIS ENERGY, INC.     By:                                     Name:                                   Title:                                    STATE OF TEXAS                     §                                      §   COUNTY OF             -            §     This instrument was acknowledged before me this  day of    , 20    by                 , the              of Lilis Energy, Inc., a Nevada corporation, on behalf of said   corporation.     In witness whereof I hereunto set my hand and official seal.       NOTARIAL SEAL:                                                                                                         Notary Public in and for the                                         State of Texas                                         My Commission Expires:                                                           Commission No.:                          

 

                                                        Execution – Option Agreement    SCM:     SALT CREEK MIDSTREAM, LLC     By:                                   Name:                                 Title:                                    STATE OF TEXAS                     §                                      §  COUNTY OF HARRIS                    §           This instrument was acknowledged before me this  day of    , 20    by                 , the              of Salt Creek Midstream, LLC, a Delaware limited liability   company, on behalf of said limited liability company.      In witness whereof I hereunto set my hand and official seal.       NOTARIAL SEAL:                                                                                                         Notary Public in and for the                                         State of Texas                                         My Commission Expires:                                                           Commission No.:                          

 

                                                     Execution – Option Agreement                    SCHEDULE 1 TO  MEMORANDUM OF GAS PURCHASE AGREEMENT                                   [To Be Attached]                 

 

                                                                   Execution – Option Agreement                                   EXHIBIT D-1                                          Residue Gas Delivery Points                SCM interconnect of El Paso 1600 Pipeline (EP 1600)  SCM interconnect of Roadrunner Gas Transmission Pipeline (upon the applicable in-service  date)  SCM interconnect of Comanche Trail Pipeline (upon the applicable in-service date)                 

 

                                                                   Execution – Option Agreement                                   EXHIBIT D-2                                         Plant Products Delivery Points                Salt Creek Midstream Plant interconnect of the Epic NGL Pipeline                 

 

                                                                   Execution – Option Agreement                                    EXHIBIT E                                               Prior Dedications                [NOTE: Customer to list all Prior Dedications as of the Effective Date]                 

 

                                      EXHIBIT F               Take In Kind Scheduling, Nomination and Balancing Procedures                                       Article A                                    Nominations     1. Nominations. For each Month when Customer takes Residue Gas in kind, Customer shall   nominate to SCM the quantity of Residue Gas per Day, as applicable, that Customer will receive   at the Residue Gas Delivery Points for that Month. Such nomination shall be made no later than   11:30 a.m. Central Time three (3) Business Days prior to the beginning of such Month, and in   any event no later than the nomination deadline for such Month for the applicable downstream   pipeline receiving such Residue Gas, in accordance with SCM’s nomination procedures (which   procedures have been provided to Customer prior to the first delivery of Residue Gas to   Customer hereunder) and shall be subject to confirmation by SCM and such downstream    pipeline (“Confirmed Nomination”). When Customer has submitted its nomination consistent   with the requirements herein, SCM shall coordinate with the downstream pipeline so that   Customer’s nomination becomes a Confirmed Nomination (except when capacity or other issues   on the downstream pipeline prevents such confirmation). SCM, in its reasonable discretion, may   accept nominations at such later time as operating conditions permit, and may waive any   nomination requirement. Customer may change its nominations by providing intra-day or intra-   Month nominations made in accordance with SCM’s nomination procedures. SCM reserves the   right, from time to time and following written notice to Customer, to revise its nomination   procedures; provided that SCM’s nomination procedures shall not be more stringent than the   nomination procedures of the applicable downstream pipeline. If Customer fails to provide SCM   with a timely nomination, SCM shall use Customer’s most recent nomination as a default   nomination which shall be subject to confirmation by SCM and such downstream pipeline   Confirmed Nomination process. Customer shall make all necessary arrangements with   downstream pipelines or other applicable third persons downstream of the Residue Gas Delivery   Points to receive Customer’s Residue Gas, and such arrangements shall be coordinated with   SCM and such downstream pipelines or other applicable third persons. SCM and Customer    agree that scheduling and commencement of service shall be consistent with the applicable   downstream pipeline’s nomination requirements. Whenever Customer’s Residue Gas are to be   scheduled or nominated hereunder, each Party shall provide to the other Party all information   required for such nominations and confirmations with upstream and downstream pipelines or   transporters. Customer shall use reasonable efforts to make nomination changes as necessary at   the applicable Residue Gas Delivery Points to minimize imbalances.     2. Right to Balance; Nomination Adjustments. The Parties agree that SCM shall operate SCM’s   Facilities so as to accept and deliver Gas hereunder in such a manner as to balance, as closely as   possible, receipts of Customer’s Gas and deliveries of Customer’s Residue Gas owed to   Customer under this Agreement. SCM may provide notice to Customer requiring Customer to   adjust Customer’s nominations if Customer’s Residue Gas delivery nominations at the Residue   Gas Delivery Point exceed or are less than the quantity of Customer’s Residue Gas available at  the Residue Gas Delivery Points; provided, however, that SCM shall provide Customer  reasonable flexibility in adjusting its nominations if such flexibility exists under SCM’s  operational balancing agreement (“OBA”) with the applicable downstream pipeline.                                          3 

 

     3. Unanticipated Changes in Deliveries. SCM and Customer shall inform each other of any   discovered unanticipated changes in deliveries at a Receipt Point or Residue Gas Delivery Point.   SCM shall use reasonable efforts to provide timely notification to Customer by telephone, with   subsequent e-mail notification, of the potential size and duration of any unscheduled capacity   disruption. Subject to Article A, paragraph 1 of this Exhibit F above, if Customer does not adjust   its nomination within two (2) hours after receiving notification from SCM, then SCM may adjust   Customer’s nomination and/or not confirm the nominations requested by Customer in the next   nomination cycle, and notify Customer of such nomination changes.     4. Requirements of Interconnecting Pipeline. All provisions contained in this Article A of this   Exhibit F shall be subject to the requirements of the applicable downstream pipeline(s).                                        ARTICLE B                       TAKE IN KIND TERMS; IMBALANCES     1. Designated Redelivery Points. When Customer takes its Residue Gas in kind, Customer may   designate the Residue Gas Delivery Point(s) at which such Residue Gas will be delivered to   Customer or for Customer’s account. SCM will use commercially reasonable efforts to deliver   Customer’s Residue Gas at the delivery point(s) designated by Customer, in the percentages  designated by Customer, subject to (i) available capacity at such designated delivery point(s), (ii)  the availability of Residue Gas, as applicable, at such designated delivery point(s), and (iii)  confirmation by SCM and the downstream pipelines at such designated delivery point(s).  Customer acknowledges and agrees that SCM does not guaranty that Customer’s Gas will be  processed at any specific Plant and although Customer may designate the delivery point(s) at  which Customer’s Residue Gas will be delivered to Customer or for Customer’s account, SCM’s  ability to deliver a specified volume of Customer’s Residue Gas to a designated delivery point at  the tailgate of a Plant will be contingent upon a corresponding volume of Customer’s Gas being  processed at such Plant. If SCM cannot for any reason deliver Customer’s Residue Gas during a  Month to a designated delivery point in the designated percentage, SCM will give notice of such  inability as soon as commercially reasonable so that Customer can adjust its pipeline  nominations. If it becomes necessary to limit the Residue Gas delivered at any delivery point,  SCM will make such delivery point available to Customer and all third persons ratably in  accordance with all Confirmed Nominations of Residue Gas (including Customer’s Residue  Gas), as applicable for delivery at such delivery point.     2. Disposition. Customer shall use commercially reasonable efforts to secure adequate   transportation capacity or make appropriate arrangements to market downstream of the   designated delivery points all Customer’s Residue Gas that it takes in kind. If during any Month   SCM delivers Residue Gas for Customer’s account at Customer’s designated delivery point(s),   but Customer fails to provide for the disposition of any such Residue Gas for any reason other   than the unavailability of or a disruption in (x) downstream facilities to further deliver such   Residue Gas downstream of the Plant or (y) the markets for such Residue Gas, then for such   Residue Gas not taken by Customer, if SCM can arrange for the disposition thereof under its   downstream transportation and marketing arrangements, SCM will do so and pay Customer for   such Residue Gas at the actual price SCM can dispose of such Residue Gas, plus a marketing fee  of $0.015/MMBtu for Residue Gas.                                          4 

 

                3. Reporting to Downstream Pipelines. SCM will, as soon as possible each Month, provide to  each applicable downstream pipeline, with copies to Customer, the actual MMBtus of Residue  Gas components delivered during the previous Month to the downstream pipeline for Customer’s  account.                4. Imbalances. Each Month that Customer takes its Residue Gas in kind, SCM will deliver to  Customer or for Customer’s account at the designated Residue Gas Delivery Point(s) an  aggregate quantity of Residue Gas that is equal to Customer’s allocated share of Residue Gas for  such Month. In the event imbalances accrue to either Party on a downstream pipeline, each Party  will use commercially reasonable efforts to coordinate with the other Party when scheduling Gas  volumes as imbalance payback on the downstream pipeline.                            (a)   OBA in Effect. When SCM has an OBA in place with the applicable        downstream pipeline and Customer is kept whole on its nominations with the        downstream pipeline, Customer shall reimburse SCM for any costs incurred by SCM        under such OBA associated with Residue Gas imbalances resulting from Customer’s        failure to adjust its nomination as required under this Agreement. Customer shall use        commercially reasonable efforts to adjust its nomination in order to minimize any        imbalance Customer may incur with SCM and/or which SCM may incur for the account        of Customer with the downstream pipeline. Additionally, (i) SCM and the downstream        pipeline shall administer any imbalances and cash-outs pursuant to the terms of the OBA,        (ii) SCM shall provide Customer a copy of the cash-out mechanism under the OBA,        which shall be the same cash-out mechanism as imposed by the downstream pipeline at       the applicable delivery point, and (iii) SCM shall invoice Customer and provide       supporting documentation for Customer’s share of any charges incurred under such OBA.                            (b)   No OBA in Effect. In the event SCM and a downstream pipeline do not        have an OBA in place, Customer and such downstream pipeline shall administer any        imbalances and cash-out obligations that accrue to Customer on the downstream pipeline,        and SCM and such downstream pipeline shall administer any imbalances and cash-out        obligations that accrue to SCM on the downstream pipeline. Each Party, to the extent its        actions or inactions cause the other Party to accrue an imbalance on a downstream        pipeline, shall reimburse the other Party for any costs incurred by the other Party as a        result of such imbalance.                            (c)   Residue Gas Imbalance Cash-Out. Any Residue Gas imbalance remaining        at the end of a Month shall be reflected on the Monthly statement provided by SCM to        Customer and shall be eliminated by cashing out the entire amount of the Residue Gas        imbalance at the Residue Gas Cash-Out Price, in accordance with the following: (i) over-        deliveries of Residue Gas by SCM to Customer (or for Customer’s account) at a        designated Residue Gas Delivery Point will be purchased by Customer from SCM at the       relevant Residue Gas Cash-Out Price, and (ii) under-deliveries of Residue Gas by SCM       to Customer (or for Customer’s account) at a designated Residue Gas Delivery Point will       be purchased by SCM from Customer at the relevant Residue Gas Cash-Out Price. SCM       shall account for, and settle, Residue Gas imbalances for a Month on the same payment       date that other payments are owed for such Month pursuant to the Agreement.                                          5 

 

     Residue Gas Cash-Out Price means, for any Month, (A) for over-deliveries of Residue Gas, the   applicable cash out percentage set forth below multiplied by the weighted average price received   by SCM for Residue Gas sold during such Month from the Plant:     Imbalance Percentage Cash Out Percentage   >0% but <= 10%         100%   >10% but <=15%         105%   >15%                   110%     and (B) for under-deliveries of Residue Gas, the applicable cash out percentage set forth below   multiplied by the weighted average price received by SCM for Residue Gas sold during such   Month from the Plant:     Imbalance Percentage Cash Out Percentage   >0% but <= 10%         100%   >10% but <=15%          95%   >15%                   90%             (e) CUSTOMER SHALL RELEASE, PROTECT, DEFEND, INDEMNIFY  AND   HOLD  SCM HARMLESS FROM AND AGAINST ANY PENALTIES, FINES, FEES,   LOSSES, CLAIMS, CAUSES OF ACTION (WHETHER IN TORT, CONTRACT OR   OTHERWISE), OR JUDGMENTS OBTAINED (INCLUDING THE PAYMENT OF   REASONABLE ATTORNEYS’ FEES AND COURT COSTS) AGAINST SCM BY ANY   PERSON ARISING OUT OF OR CAUSED BY CUSTOMER’S FAILURE TO TIMELY  BALANCE RECEIPTS AND DELIVERIES OF CUSTOMER’S RESIDUE GAS ON SCM’S  FACILITIES.     5. Other Imbalance Issues. In the event an imbalance issue arises that is not otherwise addressed   in this Article B of this Exhibit F, the administration and resolution of such imbalance issue shall   be handled reasonably and consistent with generally accepted industry methodology.     6. No Intentional Imbalances. Each Party agrees, subject to its other rights and obligations set   forth in this Agreement, that in no event shall such Party intentionally create an imbalance.                                           6 

 

                                                 EXHIBIT G                                            New Receipt Point Notification                                 1. Operator Contact Name                                                                      2. Phone Numbers                                                                              3. E-Mail                                                                                     4. Notification Date                                                                          5. Receipt Point/New Well                                                                     6. County/Township/Range/Section                                                                            7. Expected Date of First Flow                                   8. Projected Volume (Mcfd)                              Receipt Point (circle)            ’     ” -_         ’     ”                   9. Surface site provided by Customer0  or SCM  0                                              10. Expected gas composition                            Attach sample analysis                   11. H2S Expected (Y / N) and quantity in ppm                   12. Gas lift Meter Requested (Y / N)                                                                     [Customer]                                                                     By:                                                                                         Name:                                                                                       Title:                                                                                      Date:                                                                          7 

 

                               SCM Acknowledgement                               By:                                                   Name:                                                 Title:                                                Date:                                    8 

 

                                                      EXHIBIT C                                              FORM OF MEMORANDUM                                                     [ATTACHED]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    EXHIBIT C  6645116v1                  

 

                            MEMORANDUM OF OPTION AGREEMENT       STATE OF NEW MEXICO                §                                       §   COUNTY OF LEA                      §           STATE OF TEXAS                     §                                       §                                                       COUNTIES OF LOVING AND WINKLER §           KNOW ALL MEN BY THESE PRESENTS, that Salt Creek Midstream, LLC, a   Delaware limited liability company (“SCM”), whose address is 200329 State Highway 249,   Floor 4, Houston, Texas 77070, and Lilis Energy, Inc., a Nevada corporation (“Lilis” and,   collectively with SCM, the “Parties” and individually, each a “Party”), whose address is 300 E.   Sonterra Boulevard, Suite 1220, San Antonio, Texas 78258, hereby acknowledge and give notice   that the Parties have executed and delivered to each other, effective as of the 21st day of May,  2018 (the “Effective Date”), that certain Option Agreement (the “Agreement”) covering lands  located in Lea County, New Mexico and Loving and Winkler Counties, Texas, as more  particularly described on Exhibit A attached hereto and made a part hereof for all purposes (the   “AMI”), which sets forth certain rights and obligations of the Parties with respect to certain   interests located within the AMI, including, without limitation, (i) an ongoing right of first   refusal in favor of SCM to match offers made by Third Parties to provide certain Gas midstream   services to Lilis, and (ii) an option in favor of SCM to enter into a certain agreement with Lilis to   provide certain Gas midstream services as of a date set forth therein. Capitalized terms used   herein but not defined herein shall have the meanings given them in the Agreement. The   Agreement shall be effective until August 11, 2027 unless sooner terminated by earlier   agreement; provided, however, any obligations of the Parties arising under this Agreement prior   to such date shall survive the termination of the Agreement.           The purpose of this Memorandum of Option Agreement (this “Memorandum”) is to   evidence the existence of the Agreement, and nothing herein is intended to limit, or may be   construed to limit, the terms and provisions of the Agreement or the rights and obligations of the   parties thereunder. This Memorandum shall be recorded in lieu of filing the Agreement of    record in the official public records of Lea County, New Mexico and Loving and Winkler   Counties, Texas. A full and complete copy of the Agreement, including any amendments   thereto, is available for inspection in the offices of the Parties during normal business hours at  the address given above.     America:0028724/00008:68904660v2 

 

                      This Memorandum may be executed in any number of counterparts, each of which shall  be considered an original for all purposes.                      [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]    America:0028724/00008:68904660v2 

 

                      IN WITNESS WHEREOF, this Memorandum has been executed to be effective as of the  Effective Date.                                                                  Lilis Energy, Inc.                                                                  By:                                                                             Name:                                                                           Title:                                                                                                                                                Salt Creek Midstream, LLC                                                                  By:                                                                             Name:                                                                           Title:                                                                                                                                                                                                                                                                                                                                                                                                                                                              [Signature Page to Memorandum of Option Agreement]   America:0028724/00008:68904660v2 

 

                STATE OF TEXAS               §                                §  COUNTY OF                    §                      This  instrument  was  acknowledged before me on the  day of May, 2018, by                         ,                         of Lilis Energy, Inc., a Nevada  corporation, on behalf of said corporation.                                                                                Notary Public, State of Texas                                      My Commission Expires:                                                                STATE OF TEXAS               §                                §  COUNTY OF                    §                      This  instrument  was  acknowledged before me on the  day of May, 2018, by                         ,                        of Salt Creek Midstream, LLC, a  Delaware limited liability company, on behalf of said limited liability company.                                                                                Notary Public, State of Texas                                      My Commission Expires:                                                                                                                                                                                                                                                                                                                                                        [Acknowledgement Page to Memorandum of Option Agreement]    America:0028724/00008:68904660v2 

 

                                                  Exhibit A                                       To Memorandum of Option Agreement                                        AMI                                    [See Attached]    America:0028724/00008:68904660v2 

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     AX                                        A24                                                                                                                                                                                                                                                                                                                                                      G A I N E                                              A25                                                                                                                                                                                                                                                                                                                                                                  2                                         A27                                                   2 2 E                 2 29E                      2 3 E                       2 31E                      2 32E                       2 33E                      2 34E                       2 35E                      2 36E                       2 37E                       2 3 E                                                                                                                                 A22                 C45                                                                                                                                                                                                                                                                                                      39E            A2                                                                                                                                                                                                                                                                                                                                                                                                                                                                             A23                                                                                                                                                                                                                                                                                                                                 A24                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            A26                                          A2                                                                                                                                                                                                                                                                                                                                                                             A26                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            A3               A31                                    A44                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A34                                                                                                                                                                                                                                                                                                                                                                                                                                                21 27E              21 2 E                     21 29E                      21 3 E                     21 31E                      21 32E                     21 33E                      21 34E                     21 35E                     21 36E                      21   37E           21 3  E            A29                                                                                 A33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       A36                                                                                                                                                                                                                                                                                                                                                                                  A32                                                       A34                                                                                                                                                                                                                                                                                                                                                                                                        A43                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   A35                                                                                                                                                                                                                                                                                                                                                            A37                                                           A34                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                A3                                                                                                                                                                                                                                                                                                                      A39                                                                                                       A36   22 27E              22 2 E                     22 29E                      22 3 E                     22 31E                      22 32E                     22 33E                      22 34E                     22 35E                     22 36E                      22 37E             22 3 E                                                             A3                                                                                                                                                                                                                                                                                                                                                                                                                                                              13                                                                                                                                                                                                                                                                                                                                                                                                                                                               14                     A45                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A39                                                       A4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              A49                                                                                                                                                                                                                                                                                                                                A4                                                                                                                                                                                                                                                                                                                          L E A                                                                                                                                                                                                              A46                                                                                                                                                                                                                                                                                                                                                                                                                                           23 27E                                                                                                                                                                                                                                                                                                                              A5                            A N D R E W                                                             A44                      23 2 E                      23 29E                      23 3 E                     23 31E                      23 32E                     23 33E                      23 34E                     23 35E                     23 36E                      23 37E             23 3 E                                                                                                                                                      Y                                                                  Y                                                                                                                                                                                                                                                                                                                                                                                        A47                                                                   D                                                                  D                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  D                                                                  D                                                                                                                                                                                                                                                                                                                                                                                                                                  A43                                                                   E                                                                  E                                                                                                                                                                                                                                                 A51                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      A42                                                                                                                                                                                                                                                                                                                                                                            12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         A41                                                                                                                                                                                                                                                                                                                                                                                                                                                      24 2 E                      24 29E                      24 3 E                     24 31E                      24 32E                     24 33E                      24 34E                     24 35E                     24 36E                                                                                A53  24 27E                                                                                                                                                                                                                                                                      24 37E             24 3 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              A52                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   9                                                                                                                                                                                                                                                                                                                                                  A54                                                                                                                                                                                                                                                                                                                                                                                                                1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         25 2 E                      25 29E                      25 3 E                     25 31E                      25   32E                   25  33E                     25 34E                     25 35E                     25 36E                      25 37E                                                                                                                                                  25 27E                                                                                                                                                                                                                                                                                         25 3 E                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      A55                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         73                                                     44 T2N                                                                                                                                                                                                                                                                                                                                                A22 A41                                                                                                                                                                                                                                                                                                                                                                                                                           A26                43 T1N                                                                                                                                                                                                                                                                                                                                    A 54                                               45 T2N                                                                                                                                                                                                                                                                                                                                                                                                                     44 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           26 27E             26 2 E                      26 29E                      26 3 E                     26 31E                      26 32E                     26 33E                      26 34E                     26 35E                     26 36E                      26 37E             26 3 E                                                                                                                                                                                                                                                                                                                    A56                    A57   A 57                                                                        A                                                                                                                                                                                                                                                                                                                                                               46                                                                                                                                                                                                                                                                                                                                                                              46                                                             43                                                                                                                                                                                                                                                                                                                                                                                                                                                                            N E W M E X I C O                                                                                                                                                                                                                                                                                        45 TIN       45 T1N                                          T1N                                                                                                   56T1       55T1                                                                                                                                                                                                       A 57     B57                                                                                      44 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 C22                                                                                                                                                                                                          T E X A S                                                                                                                                                                                                                                     A57                                         46                                                                                                                                                                                                                                                                                     C23                                                                                                                                                                            43 T1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            C                                                                                                                                                                                                                                                                                                               C24                                                                         77                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              C25                                                                                                                                                            46 T1N                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        5 T1          57 T1          57 T1                     56 T1                       55 T1                      54 T1                        76                                                                                                                                                                                                                                                      59 T1                                                                                                                                                                                                                                                                                                                                        B1                                                                                                                                                                                                                                                                                                                  74                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            44 T1                                                                                                                                                                                                                                                                                                                             B2                                                                                                                                                                                                                                                                                        WF                                                                                                                                1                            46 TI                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               B3                                                       7                                                                                                                                                                                                            C26                          75                                                                     B2                                                                                                   45 T1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          46 T1                                                                                                                                                                                                                                                                                                                                                                                      B7                                 E C T O R                                                                                                                                                                                         29                                                                                      26                   W                                                 4                     46 TI                                                                                                                                                                                                    L O V I N G                                                                                                                                 WW I N K L E R                                                                                                                                                                                                                                                                                                                                                          B27                                                                                                                                                                                                                                                                                                                                     B6                                                                                                                                                                                                                                                                                                                                             27                                                                                                                                                                                                  5 T2          57 T2          57 T2                     56 T2                      55 T2                       54 T2                      53 T2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     59 T2 5 T7                                                                                                                                                                                                                                                                                                                                   B4             B4                                                                                                                                                                                                                                                                                                                                                                                                                                      44 T2                                                                                                                                                                                                                              2                                                                                                                                                                                     45 T2                                                                                                                                                                                                                                                                                                     B5                                                B4                                                                                                                                                                                                                                                                                                                              5                                                                              B                               5 T6                                                                                                                                                                  29                                                                                                                                                                                                                                 C U L B E R O N                                                                                                                                                                                                                                                                                                                    B1                       B9                                                                                                                                                                                         2                                                                       112           56 T3           57 T3              56 T3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    2                         C27                                                                                                                                                                                                                               C29                                                                                                                                                                                                       B15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      1                                                                                                                                                                                                      B11                                                                                                             44 T3           113                                                                                                                                                                                                                                                                                B12                                                                                                                                                                                                                                                                  21                                                                                                                                     45/113                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   56 T3                   C2                                                                                                                                                                                                                                                                                 B14                                                     57 T3                                                                2                                                                                                             2                                                                                                                                                                                                                                                                                   VV                                                                                                                                                                                                                                                                                  B13                                                          35                                  45                                               R E   E V E                                                                                                                  19                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        \ LILIS_ACREAGE.mxdLilis                                                                                                                                                                                                                                                                                                                                                                                                                           B16                    \                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  1                                                                                                                                                           A          111                                                                                                                                             33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 46 T3 16                                                                                                      55 T3                                                                                                                                                                                                          2                                                                                                                                                                                                                                                                                                                                                                                                                                                                AMI                                                                                                                               3                                                                                                                                                                15                                                                                                                                                                                       C21                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 13                                                                                                                                                                                                                                             46                                      \ Energy  Companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   F                                                                                                                                  B23                                                                                    5                                                                      53 T4                                                                                                                                                                                                                                                                                                                                      3                                                                                                                                                                                                                                                                                                                                                                                                                                                                         B22                                                                                                                                                           52 T4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       \ SALT_CREEK                                                                                                                                                                                                                                                                                                                                                                 B19                                                                                                              55 T4                                      53 T4                                                                                      1                     17                                                                                                                                                                                                                                                                                                                                                                                                                 R  A  N  E                                                                                       57                                                                                                                                                                                                                                                                                                                        R A  N  E                        Projects                                                                                                                                          54 T4             52 T4                                                                                                               W A R D                                                                                           B1 B2               B17     C R A N E                           \            52                      53                         56                                                                                                                                                                                                                                                                                                                                                                                   \ GIS                                                                                                                                                             C19                                                        34                                                                                                                                                                                                                                                                                                                                                      N                       63                                                        ‘                                                                                                                                                                                                                                                                                                                                                    B26             53                                                                                                                                                                                                                                                                                                                     O      1                   5                                                                                                                                                                                                                                                                                                                                       Miles                                                                                                                        4                                                                                                                                    16                                                                                             B21                                                                                                                                    54 T5                                                                                                                                                                                                                                                   B2                                                      Document  Path:  M:                                                                                                               55 T5       54 T4                                                                                                                                          34                                  34                                                     B19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00308-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00308-of-00352.parquet"}]]