Document:

Exhibit
10.(a)

 

[Sutherland Asbill and Brennan LLP Letterhead]

 

STEPHEN E. ROTH

DIRECT LINE: 202.383.0158

Internet:
steve.roth@sutherland.com

 

April 26, 2010

 

Board of Directors

Protective Life and Annuity Insurance Company

2801 Highway 201 South

Birmingham, Alabama 35223

 

Directors:

 

We hereby consent to the reference to our
name under the caption “Legal Matters” in the statement of additional
information filed as part of post-effective amendment number 8 to the
registration statement on Form N-4 (File No. 333-145621) filed by Protective Life Insurance Company and Protective Variable Annuity Separate Account with
the Securities and Exchange Commission. 
In giving this consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  SUTHERLAND ASBILL & BRENNAN LLP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Stephen E.
  Roth

  
	
   

  	
   

  	
  Stephen E. RothExhibit 10.(b)

CONSENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the
use in this Registration Statement on Form N-4 (File No. 333-145621)
of our report dated March 31, 2010, relating to the consolidated financial
statements and financial statement schedules of Protective Life Insurance
Company and subsidiaries, which appears in such Registration Statement.  We also consent to the use in this
Registration Statement on Form N-4 (File No. 333-145621) of our
report dated April 23, 2010, relating to the financial statements of
Protective Variable Annuity Separate Account, which appears in such
Registration Statement.  We also consent
to the reference to us under the heading “Experts” in such Registration
Statement.

 

 

/s/ PricewaterhouseCoopers
LLP

 

PricewaterhouseCoopers
LLP

Birmingham, Alabama

April 28, 2010Exhibit 10 (a)

 

[Sutherland Asbill and
Brennan LLP letterhead]

 

STEPHEN E. ROTH

DIRECT LINE: 202.383.0158

Internet:
steve.roth@sutherland.com

 

April 26, 2010

 

Board of Directors

Protective Life Insurance Company

2801 Highway 201 South

Birmingham, Alabama 35223

 

Directors:

 

We hereby consent to the reference to our
name under the caption “Legal Matters” in the statement of additional
information filed as part of post-effective amendment number 13 to the
registration statement on Form N-4 (File No. 333-112892) filed by
Protective Life Insurance Company and Protective Variable Annuity Separate
Account with the Securities and Exchange Commission.  In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933.

 

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  SUTHERLAND ASBILL & BRENNAN LLP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen E. Roth

  
	
   

  	
   

  	
  Stephen E. RothExhibit
10 (b)

 

CONSENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the
use in this Registration Statement on Form N-4 (File No. 333-112892)
of our report dated March 31, 2010, relating to the consolidated financial
statements and financial statement schedules of Protective Life Insurance
Company and subsidiaries, which appears in such Registration Statement.  We also consent to the use in this
Registration Statement on Form N-4 (File No. 333-112892) of our
report dated April 23, 2010, relating to the financial statements of
Protective Variable Annuity Separate Account, which appears in such
Registration Statement.  We also consent
to the reference to us under the heading “Experts” in such Registration
Statement.

 

/s/ PricewaterhouseCoopers
LLP

PricewaterhouseCoopers
LLP

Birmingham, Alabama

April 28, 2010Exhibit 10.1

 

 

	
  Kari Heerdt

  16612 Green Dolphin Lane

  Cornelius, NC 28031

  	
   

  	
   

  	
  P.O. Box 110526

  4101 Research Commons

  79 TW Alexander Drive

  Research Triangle Park

  North Carolina 27709

  
	
   

  	
   

  	
   

  	
   

  
	
  February 24, 2010

  	
   

  	
   

  	
  Lawrence D. Stern

  Chairman & Chief Executive Officer

  Tel 919.316.6668

  Fax 919.316.6669

  lawrence.stern@talecris.com

  

 

Dear
Kari:

 

Your
employment agreement, entered January 21, 2008, and amended and restated
on November 26, 2008, between you and Talecris Biotherapeutics Holdings
Corp. (“Agreement”) expires on April 1, 2010.

 

The
Compensation Committee of the Board of Directors has authorized me to give you
notice of renewal pursuant to Section 2 of the Agreement to extend the
Agreement through April 1, 2011 on the same terms as contained in the
Agreement, except as follows:

 

(1)     The second sentence of Section 4.2 of the Agreement shall
be amended to read as follows:

 

“The Executive’s target bonus shall be 65% of base
salary (the “Target Bonus”), with the actual amount of each Bonus being
determined under the Bonus Plan in effect at that time as approved by the
Board.”

 

(2)     Section 4.8 shall be amended to read in its entirety as
follows:

 

“The Executive may commute from a primary residence
located in Charlotte NC metro area or other location as approved by the CEO.
The Executive will be permitted to travel back and forth weekly, and the
Company shall reimburse the cost. From time to time, the Executive shall be
expected to attend employee and/or community events over the weekend in the
greater Raleigh area. The Company will provide temporary housing or reasonable
reimbursement for temporary housing. The expenses described in Section 4.8
will be grossed up to cover Executive’s federal and state income tax liability.
Reimbursement of relevant items, housing costs or reimbursement and gross-ups
of federal and state income tax liability shall all be in accordance with
relevant items of the Company’s Commuter Policy during the Term. The Executive
is expected to pay for all local living expenses not covered by the Company’s
Commuter Policy. The Executive shall apply for all reimbursements hereunder for
a particular calendar year not later than forty-five (45) days after it ends,
and payment shall occur not later than two and one-half months after the end of
the calendar year to which the reimbursable expenses relate.

 

If you agree with the terms of this renewal, please
sign both copies of this letter in the space provided below and return one copy
to me.

 

 

	
  Very truly
  yours,

  	
   

  	
  AGREED:

  
	
   

  	
   

  	
   

  
	
  /s/ Lawrence
  Stern

  	
   

  	
   

  
	
  Lawrence Stern

  	
   

  	
  /s/ Kari Heerdt

  
	
  Chairman and Chief Executive Officer

  	
   

  	
  Kari Heerdt

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3/3/10

  
	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  www.talecris.comExhibit 10.1

 

 

 

DRILLING AND OPERATING AGREEMENT

This Agreement is entered
into by and between PDC 2003-C Limited Partnership, hereinafter designated and
referred to as the
"Partnership", and Petroleum Development Corporation, hereinafter
referred to and designated as "PDC".

Whereas, the parties to this
agreement desire to enter into an agreement to explore and develop certain
Prospects for the production of oil and gas as hereinafter provided,

It is agreed as follows:

ARTICLE I

DEFINITIONS

As used in this agreement, the following words and
terms shall be defined as follows:

 

A.           The term
"oil and gas" shall mean oil, gas, casinghead gas, gas condensate,
and all other liquid or gaseous hydrocarbons
and other marketable substances produced therewith, unless an intent to limit the
inclusiveness of this term is specifically stated.

B.            The term
"Prospect" shall mean a spacing unit established according to state
regulatory guidelines and industry practice on which the Partnership proposes to drill a well.
Generally spacing units for Appalachian gas wells cover approximately 25-40 acres, and spacing units for
Michigan Basin gas wells cover approximately 80-100 acres.

C.             "Royalty" shall mean
a payment from gross revenues made to the owner of the oil and gas mineral
rights of a Prospect.

D.             "Overriding
royalty" shall mean a payment from gross revenues to a party other than
the owner of oil and gas mineral
rights of a Prospect.

E.              "Proportionate Working
Interest" shall mean an interest in a well or Prospect of less than 100%
which bears that same percentage of costs of
development and production as it receives in production revenues after
deducting for royalty and overriding royalties.

F.               "Non-operators"
shall mean all parties holding a proportionate working interest in a Prospect,
including the Additional General Partners and the Limited Partners, but
excluding PDC if it is also serving as Operator.

ARTICLE II

EXHIBITS

The following exhibits are incorporated in and
made a part of this agreement:

A.           Exhibit "A", Prospects.

1.         Identification of each Prospect to
be drilled.

2.        Target formation.

3.        The Partnership fractional
interest therein.

B.            Exhibit "B", Insurance.

C.            Exhibit "C", Additional
Prospects.

1.              Identification of additional
Prospects added or substituted after the original date of this agreement,
and if substituted, identification of the Prospect which is replaced.

 

 

 

	

 

 

 

 

 

2.               Target formation.

3.               The Partnership fractional
interest therein.

4.               Approval by the Partnership and
PDC.

ARTICLE III 

OPERATOR

A.            Designation and
Responsibilities of Operator:

PDC shall be the Operator of
the Prospects, and shall conduct and direct and have full control of all
operations on
the Prospects as permitted and required by, and within the limits of this
agreement. It shall conduct all such operations in a good workmanlike manner, but
it shall have no liability as Operator to the Partnership for losses sustained
or liabilities incurred, except such as may result from negligence or misconduct. The Managing
General Partner may subcontract with another operator or operators to perform some of all of the duties of the
operator, on Terms and conditions substantially the same as those discussed herein. The Managing General
Partner will supervise operations by other non-affiliated drilling contractors
and subcontractors.

B.            Resignation or Removal of Operator
and Selection of Successor:

1.                   
Resignation
or Removal of Operator: PDC may resign as Operator at any time by giving
written notice thereof to the
Partnership. If PDC terminates its legal existence, no longer owns an interest
in the Prospects, has filed a petition
under the Federal bankruptcy laws or any state insolvency law or a receiver,
fiscal agent, or similar officer has been appointed by a court for the business or property of PDC, or is
otherwise no longer capable of serving as Operator, PDC shall be deemed to have resigned without any action by the
Partnership, except the selection of a successor. PDC may be removed by the affirmative vote of Non-Operators owning a
majority working interest in each Prospect after excluding the voting interest
of Operator. Such resignation or
removal shall not become effective until 7:00 o'clock A.M., Eastern time, on
the first day of calendar month following the expiration of ninety (90) days
after the giving of notice of resignation of PDC or action by the Non-Operators to remove PDC as Operator, unless a
successor Operator has been selected and assumes the duties of PDC at an earlier date. PDC, after effective date of
resignation or removal, shall be bound by the terms hereof as a Non-Operator. A
change of a corporate name or structure of PDC or transfer of PDC's
interest to any single subsidiary, parent or successor corporation shall not be
the basis for removal of PDC as Operator.

2.                   
Selection
of Successor Operator: Upon the resignation or removal of PDC, a successor
Operator shall
be selected by the parties. The successor Operator shall be selected by the
affirmative vote of parties owning a majority working interest in each Prospect; provided, however, if an Operator
which has been removed fails to vote or votes only to succeed itself, the successor Operator shall be selected by the
affirmative vote of parties owning a majority interest after excluding
the voting interest of the Operator that was removed.

C.            Employees:

The number of employees used
by PDC in conducting operations hereunder, their selection, and the hours of labor and the compensation for services performed shall be determined by PDC.

ARTICLE IV

DRILLING PROSPECTS

A.            Prospects:

Exhibit "A" lists
Prospects initially to be acquired by the Partnership, and its proportionate
working interest in each Prospect. Most wells to be drilled by the Partnerships will be
offsets to producing wells. Therefore, it is unlikely that a well drilled on a Prospect will prove up any additional
acreage outside the Prospect. If a Partnership well does prove up additional acreage, PDC will assign the
Partnership a proportionate interest in such spacing units.

 

	

 

 

B.           Cost:

              The Partnership shall reimburse PDC for its
proportionate share of the lesser of:

1.              The fair market value of the
Prospect, or

2.              The
"Cost" of acquisition of the Prospect including: (a) the price paid
by PDC for such property; (b) title examination, abstracting, brokers commissions,
filing fees, recording costs, transfer taxes, and other charges incurred in
connection with the acquisition of the property; (e) bonuses, rentals and ad valorem taxes paid by PDC with
respect to the Prospect to the date of its transfer to the Partnership, interest on funds used to
acquire or maintain such property, and such portion of PDC's expenses for geological, drafting,
accounting, legal and other like services allocated to the Prospect in
accordance with
generally accepted accounting principles, not including for expenses incurred
in the prior drilling
of wells, and provided such expenses shall have been incurred not more than 36
months prior to the purchase by the
program.

C.            Substitution:

As drilling progresses other,
more desirable Prospects may become may become less desirable as a result of additional information not
available as of the date of this agreement. For any undrilled Prospect, the
Partnership may request that PDC substitute another Prospect, in which case the entire
acquisition cost paid for the Prospect or a substitute thereof will be applied against the cost of the substituted
Prospect, and against other costs of this contract if and to the extent the
cost of the substitute Prospect is less than the cost of the original Prospect
it replaces. An amendment to this agreement in the form of Exhibit
"C" shall be used for the addition or substitution of a Prospect.

D.            Title Examination and
Opinion:

Title
examination shall be made by outside attorneys on the drillsite of any proposed
well prior to commencement
of drilling operations. The opinion will include ownership of the working
interest, mineral, royalty, overriding royalty,
and production payments under the applicable leases. A copy of the opinion will
be furnished to the Partnership.

PDC shall take such steps as
are necessary in its best judgment to render title to the leases assigned to
the Partnership
acceptable for the purposes of the Partnership. No operation shall be commenced
on leases acquired by the Partnership unless the Partnership Manager is satisfied that necessary
title requirements have been satisfied by PDC and that the undertaking of such operation would be in the
interest of the Partnership. PDC shall be free, however, to use their own best judgment in waiving title requirements and shall
not be liable to the Partnership, or Participants for any mistakes of judgment;
nor shall PDC be deemed to be making
any warranties or representations, express or implied, as to the validity or merchantability
of the title to any lease assigned to the Partnership or the extent of the
interest covered thereby.

 

 

 

 

 

	

 

 

 

ARTICLE V

INTEREST IN COSTS AND
PRODUCTION

A.            Royalties
and Overriding Royalties:

The Partnership interest in
production from drilling Prospects will be subject to the payment to
non-affiliated parties of royalties
and overriding royalties, provided the weighted average for all Partnership
Prospects drilled shall not exceed 20% of gross revenues. No such royalty or
overriding royalty will be paid to PDC or its affiliates.

B.            Proportionate Working
Interest:

The Partnership may acquire
100% of the working interest in a Prospect or a proportionate interest of less
than 100%. In the event the
Partnership acquires a proportionate interest, the respective obligations and
benefits acquired by the Partnership will be
proportionately the same as the working interest acquired. PDC and its
affiliates may not retain any overrides
or other burdens on the interest conveyed to the Partnership. The Partnership
will pay a proportionate share of the total of lease, development, and
operating costs, and will be entitled to receive a proportionate share of production
subject only to royalties and overriding royalties discussed in Article
V, A.

C.             Joint Venture Activities:

PDC may retain an interest or
convey interests in undrilled Prospects to other Joint Venturers, retaining for
its own account
a profit or promotional interest on the interest conveyed. PDC shall require
any party acquiring such an interest to acquire a proportionate working interest and to assume
and bear alone all obligation associated with such an interest, and to bear alone and hold the Partnership
and other Joint Venturers harmless from all costs, claims, and burdens
associated with the interest acquired. At the discretion of the Managing General
Partner, the Partnership may enter into joint ventures which allow a functional allocation of tangible,
intangible and lease costs, where each joint venturer is responsible for its
overhead costs, provided
the Partnerships interest in the revenues and income of such a joint venture is
proportional to its contribution to the total
cost of such venture.

D.            Adjustments:

Payment of any bill shall not
prejudice the right of Partnership to protest or question the correctness
thereof: provided, however, all bills
and statements rendered to Partnership by PDC during any calendar year shall
conclusively be presumed to be true and
correct after a twenty-four (24) month period unless the Partnership takes
written exception thereto and makes
claim on PDC for adjustment. No adjustment favorable to PDC shall be made
unless it is made within the same prescribed
period. The provisions of this paragraph shall not prevent adjustments
resulting from a physical inventory of controllable material.

E.              Audits:

The Partnership, upon notice
in writing to PDC and all other Non-Operators, shall have the right to audit PDC's accounts and records
relating to the Partnership wells for any calendar year within the twenty-four
(24) month period following the end
of such calendar year; provided, however the making of an audit shall not
extend the time for the taking of written
exception to and the adjustments of account Where there are two or more
Non-Operators, the Non-Operators shall make every reasonable effort to conduct
a joint audit in a manner which will result in a minimum of inconvenience to
PDC. PDC shall bear no portion of the Non-Operators audit cost incurred
under this paragraph unless agreed to by PDC. The audits shall not be conducted
more than once each year without prior approval of PDC, except upon the
resignation or removal of PDC as operator, and shall be made at the expense of
those Non-Operators requesting such audit.

PDC shall reply in writing to an audit report
within 75 days after receipt of such report.

 

 

 

 

	

 

 

 

ARTICLE VI

DRILLING AND DEVELOPMENT

A.          Agreement To Drill and
Complete:

PDC shall commence drilling
of a well or wells on each Prospect within 180 days of the date of the initial formation of the
Partnerships, but in no case later than March 30, 2004 and shall continue
drilling thereafter with due diligence to the Target formation unless a
condition which renders further drilling impractical is encountered at a lesser
depth, or unless the Partnership
agrees to complete or abandon the well at a lesser depth.

PDC shall make
reasonable tests of all formations encountered during drilling which give
indication of containing
economic quantities of oil and/or gas. If such tests indicate the presence of
economic quantities of oil and/or gas, PDC shall complete the well and install such surface and
well equipment, gathering pipelines, heaters, separators, etc., as are necessary and normal in the
area in which the Prospect is located. If it is determined that the well is not
likely to produce oil and/or gas in
commercial quantities PDC shall plug and abandon the well in accordance with
applicable regulations.

B.           Cost of Drilling and
Completion:

The Partnership shall bear its
proportionate share of the cost of drilling and completing or drilling and abandoning each Partnership well, where the
Managing General Partner serves as operator as follows:

1.           The Cost of the Prospect, as
defined; and

2.           For intangible well Costs:

a.             For each well completed and
placed in production, an amount equal to the depth of the well in feet at its
deepest penetration as recorded by the drilling contractor multiplied by the "intangible drilling and completion
cost" in the following table, plus the actual extra completion costs for work required by state law in
the event an intermediate or third string of surface casing is run; plus
the actual cost for directional drilling services, if required, or

b.             For each
well in which the Partnership elects not to complete, an amount equal to the "intangible dry hole
cost" in the following table, plus actual additional cost for work required by state law in the
event an intermediate or third string of surface casing is run, plus the actual costs for directional drilling
services, if required; and

3.           The
tangible Costs of drilling and completing the Partnership wells and of
gathering pipelines
necessary to connect the well to the nearest appropriate sales point or
delivery point.

To the extent that a
Partnership acquires less than 100% of a Prospect, its Drilling and Completion
Costs of that Prospect will
proportionately decrease.

Footage Based Rate

 

	Location	     	Target 

		Formation	     	Approximate
Well Depth	     	Intangible Drilling
		

		and Completion 
Cost*	     	Intangible Dry
		

		Hole
 Cost*
	 	 	 	 	 	 	 	 	 
	Northern West Virginia and Pennsylvania	 	Upper Devonian and Mississippian	 	2,000 - 5,000'	 	$60 per foot for first 2,200 feet plus $16 per foot
		for each additional foot below 2,200 feet	 	$33 per foot for the first
		2,200 feet plus $9 per foot for each additional foot below 2, 200 feet

 

 

	

 

 

	Location	     	Target 

		Formation	     	Approximate
Well Depth	     	Intangible Drilling
		

		and Completion 
Cost*	     	Intangible Dry
		

		Hole 
Cost*
	 	 	 	 	 	 	 	 	 
	Michigan	 	Antrim Shale	 	800-1,200'	 	$138 per foot for the first 1,000 feet plus $22 per
		foot for each additional foot below 1,000 feet	 	$60 per foot for the first 1,000 feet
		plus $12 for each additional foot below 1,000
	 	 	 	 	 	 	 	 	 
	Wattenberg Field	 	Cretaceous
		Codell	 	6.500-7,800'	 	$60 per foot	 	$20 per foot
	 	 	 	 	 	 	 	 	 
	Wattenberg Field	 	Cretaceous J Sandstone	 	7,000-8,000'	 	$72 per foot	 	$23 per foot
	 	 	 	 	 	 	 	 	 
	Piceance Basin	 	Cretaceous	 	7,000-10,000'	 	$150 per foot	 	$85 per foot
	 	 	 	 	 	 	 	 	 
	North Dakota	 	Mesaverde
		Mississippian
		Through
		Ordovician
		Carbonates Uinta	 	8,000-15,000'	 	$150 per foot	 	$100 per foot
	 	 	 	 	 	 	 	 	 
	Utah	 	Green River
		Wsatch
		Mesaverde
		Ferron	 	5.000-14,000'	 	$150 per foot	 	$85 per foot
	 	 	 	 	 	 	 	 	 
	Wyoming	 	Mesaverde
		Lewis
		Almond	 	7,000-14,000'	 	$150 per foot	 	$85 per foot

 

 

*
The depth used for determination well charges will be the deepest penetration
by the drilling bit.

In the event the foregoing
rates exceed competitive rates available from other non-affiliated persons in
the area
engaged in the business of rendering or providing comparable services or
equipment, the foregoing rates will adjust to an amount equal to that competitive rate.

It is anticipated that the
Partnerships, PDC, and other third party joint venturers will share the cost of
the Michigan
Antrim projects. The Partnerships will be allocated the well cost with the
additional project costs for multiple flow lines, saltwater injection well, equipment for
the central production facility and Leases allocated to the other joint venture
partners through the use of tax
partnership. In return for contribution of the well costs to an Antrim project,
the Partnerships will acquire 55% Working
Interest in the project. Remaining Working Interests will be allocated to the
parties bearing the project costs
for multiple flowlines, leases, salt water injection well, and equipment for
the central production facility. Michigan Antrim project Leases are unitized for the purpose of payment of royalties,
distribution of working interest revenue and allocation of project production expenses. Project working
interest revenue and project production expenses are allocated to working
interest owners based on the number
of net wells drilled, completed and placed into production, expressed as a
percentage of the total number of
wells in a project. To the extent that a Partnership drills and pays for less
than the total number of wells in a project, its overal Working Interest in the project will be proportionally
reduced. Each Partnership will be responsible only for its obligtions and will be liable only for its
proportionate share of the costs of developing and operating the Prospects;
and, in the event of the default of another party, the Managing General
Partner has agreed to indemnify the Partnership and its Partners for the obligations of such party. If any party fails
or is unable to pay its share of expense within 60 days after rendition of a statement therefor by the Managing General
Partner, the Managing General Partner will pay the unpaid amount in the
proportion that the interest of each such party bears to the interest of
all such parties.

 

 

 

 

 

	

 

 

 

In the event the foregoing
rates exceed competitive rates available from other persons in the area engaged
in the business of rendering
comparable services or equipment, the foregoing rates will be adjusted to an
amount equal to that competitive rate, but not less than the cost of providing
such services or equipment.

C.            Completion By Less Than All
Parties:

In the event not all Participants in a well wish
to participate in a completion attempt, the parties desiring to do so may pay all costs of the completion attempt
including the cost of necessary well equipment and a gathering pipeline, and
such parties shall receive all income
and pay all operating costs from the well until they have received an amount
equal to 300% of the completion and connection costs, after which time
the non-consenting parties shall have the right to receive their original
interest in further revenues and expenses.

D.            Prepayment:

The Partnership agrees to pay PDC the Prospect
cost for each planned well prior to the spud date. The Partnership shall pay drilling and completion costs of the Operator as
incurred. Notwithstanding the foregoing, PDC may require full prepayment by
December 31, 2003 with respect to partnership designated "PDC 2003-D
Limited Partnership" in order to assure the Partnership of the
rates quoted in Article VI, B, to arrange for the drilling equipment for the
wells through subcontractors and to provide PDC with working capital for the
drilling of the wells.

E.            Refunds:

In no event shall PDC be obligated to refund any
moneys paid to it by the Partnership under this Agreement. In the event any
amounts paid under Article VI, D exceed costs due under Article VI, B, such
excess shall be credited to the Partnership and shall be expended for
additional drilling.

ARTICLE VII

PRODUCTION AND SUBSEQUENT
OPERATIONS

A.          Commencement
of Production:

For purposes of this agreement, production will
commence:

1.                    In the case of gas wells when
gas is first delivered from the well through a pipeline or other delivery
system to a purchaser;

2.                    In the case of oil wells when
the well has produced 100 barrels; or

3,                    In the case of combination
wells when either of criteria have been satisfied.

A well will be deemed to be "in
production" in any month thereafter in which oil or gas are produced in
commercial quantities.

B.              Production
Operations:

PDC shall provide all
necessary labor, vehicles, supervision, management, accounting, and overhead
services for normal production
operations, and lease accounting, and shall be entitled to deduct from
Partnership revenues a monthly operating charge
of $225 per well and a monthly accounting and management charge of $75 per
well. Nonroutine operations will be billed to the Partnership at their
proportionate cost. Any nonroutine operation with an estimated cost exceeding
$2,000 will be authorized for
expenditure ("AFE" or "AFE'd") and submitted to the
Non-Operators for approval. Approval of a majority of the working interest owners will be required to authorize
such operations. If the Partnership authorized such operations PDC shall
have the right to deduct payment for the cost from Partnership revenues.

 

 

 

 

	

 

 

 

C.           Abandonment of Wells That Have
Produced:

Any well which has been completed as a producer
shall not be plugged and abandoned without the consent of all Non-operators. If
all parties consent to such abandonment, the well shall be plugged and
abandoned in accordance with applicable
regulations and at the cost, risk of expense of all owners. If, within (30)
days after receipt of the notice of the proposed abandonment of any
well, all parties do not agree to the abandonment of such well, those wishing
to continue its operations from the interval(s) of the formation(s) then open
to production shall tender to each of the other parties its proportionate shale
of the value of the wells salvageable material and equipment, less the
estimated cost of salvaging and assign the
non-abandoning parties, without warranty, express or implied, as to title or as
to quantity, or fitness for use of the equipment and material, all of
its interest in the well and related equipment, together with its interest in
leasehold estate as to, but only as to, the interval or intervals of the
formation or formations then open to production.

D.          Marketing of Production:

The Partnership shall have the
right to take in kind and separately dispose of its share of all oil and gas produced from the Prospects, excluding its
proportionate share of production required for lease operations and production unavoidably lost. Initially the Partnership
designates PDC as its agent to market such production and authorizes PDC to
enter into and bind the Partnership
in such agreements as it deems in the best interest of the Partnership for the
sale of such oil and/or gas. The Partnership may rescind the designation
of PDC as its agent with regard to all subsequent marketing agreements by written notice at any time, but agrees to be bound
by such agreements as may then be in effect during their terms. The Partnership
shall bear its proportionate share of all marketing costs, if any. In the event
PDC provides marketing services, its charge
shall be no greater than those charges made by unaffiliated marketers. If
pipelines which have been built by PDC are used in the delivery of natural gas to market, PDC may charge a
gathering fee not to exceed that which would be charged by a nonaffiliated
third party for a similar service.

E.           Escalation
in the Event of Rising Costs:

The production and accounting
charges provided in Article VII, B, may be adjusted annually beginning January 1, 2002, to an amount equal to the rates from
Article VII, B, multiplied by the ratio of the then current average weekly earnings of Crude Petroleum and Gas Production
workers to the average weekly earnings of Crude Petroleum and Gas Production
workers for 1991, as published by the United States Department of Labor, Bureau
of Labor Statistics, provided that the charge may not exceed the rate which
would be charged by other comparable operators in the area of operations.

ARTICLE VIII

LIABILITY OF PARTIES

A.          Liability
of Parties:

If the Partnership participates in a well with
third parties the liability of the parties shall be several, not joint or collective. The Partnership shall be responsible
only for its obligations, and shall be liable only for its proportionate share
of the costs of developing and
operating the Prospects. It is not the intention of the parties to create, nor
shall this agreement be construed as creating, a mining or other
partnership or association, or to render the parties liable as partners.

B.           Liens and Payment Defaults:

The Partnership grants to PDC a lien upon its oil
and gas rights in the Contract Area, and a security interest in its share of
oil and/or gas when extracted and its interest in all equipment, to secure
payment of its share of expense, together with interest thereon. To the extent
that PDC has a security interest under the Uniform Commercial code of the
state, PDC shall be entitled to exercise the rights and remedies of a secured
party under the Code, The bringing of a suit and the obtaining of judgment by
PDC for the secured indebtedness shall not be deemed an election of remedies or
otherwise affect the lien rights or security
interest as security for the payment thereof. In addition, upon default by the
Partnership in the payment of its share of expense, PDC shall have the right, without prejudice to other rights or
remedies, to collect from the purchaser the proceeds from the sale of
the Partnership's share of oil and/or gas until the amount owed by the
Partnership, plus interest, has been paid. Each purchaser shall be entitled to rely upon PDC's written statement
concerning the amount of any default. PDC grants a Like lien and
security interest to the Partnership to secure payment of PDC's proportionate
share of expenses.

 

 

 

 

	

 

 

 

If any party fails or is
unable to pay its share of expense within sixty (60) days after rendition of a
statement therefor by PDC, PDC shall
pay the unpaid amount in the proportion that the interest of each such party
bears to the interest of all such parties.

C.            Payments and Accounting:

Except as herein otherwise
specifically provided, PDC shall promptly pay and discharge expenses incurred
in the development and operation of the Contract Area pursuant to this
agreement. PDC shall keep an accurate record of the account hereunder, showing expenses incurred and
charges and credits made and received.

Regardless of which party has
contributed the lease(s) and/or oil and gas interest(s) hereto on which royalty
is due and payable, PDC shall pay or deliver
or cause to be paid or delivered the royalty and overriding royalty payments
due under the terms associated with the acquisition of each Prospect,
and shall deduct such payments from the revenue of the Partnership.

D.            Taxes:

Unless Partnership elects to
take production in kind, PDC shall pay or cause to be paid all production, severance, excise, gathering and other taxes
imposed upon or with respect to the production or handling of such party's
share of oil and/or gas produced under the
terms of this agreement, and shall be entitled to reimbursement for such taxes
from partnership revenue.

E.             Insurance:

At all times while operations
are conducted hereunder, PDC shall comply with the workmen's compensation laws of the state of West Virginia. PDC shall also
carry or provide insurance as outlined in Exhibit "B", attached to
and made a part hereof. PDC shall require all contractors engaged in work on or
for the Contract Area to comply with the workmen's compensation law of the state where the operations are being conducted
and to maintain such other insurance as PDC may require.

No additional charge will be made for
such insurance during drilling and completion operations. When wells have been placed in production PDC may bill for
the cost of providing such insurance, allocated among wells and operations in accordance
with generally accepted accounting principles.

ARTICLE IX

INTERNAL REVENUE CODE ELECTION

This agreement is not intended to create, and
shall not be construed to create, a relationship of partnership or an association for profit between or among the
parties hereto. Notwithstanding any provision herein that the rights and
liabilities hereunder are several and
not joint or collective, or that this agreement and operations hereunder shall
not constitute a partnership, if,
for federal income tax purposes, this agreement and the operations hereunder
are regarded as a partnership, each party hereby affected elects to be
excluded from the application of all of the provisions of Subchapter
"K", Chapter 1, Subtitle "A", of the Internal Revenue Code
of 1986, as amended (the"Code") as permitted and authorized by Code
Section 761 and the regulations promulgated
thereunder. PDC is authorized and directed to execute on behalf of the
Partnership such evidence of this
election as may be required by the Secretary of the Treasury of the United
States or the Federal Internal Revenue Service, including specifically,
but not by way of limitation, all of the returns, statements, and the data
required by Regulations 1.761. Should there
be any requirement that each party hereby affected to give further evidence of
this election, each such party shall execute such documents and furnish
such other evidence as may be required by the Federal Internal Revenue Service
or as may be necessary to evidence this
election. No such party shall give any notices or take any other action
inconsistent with the election made
hereby. If any present or future income tax laws of the state or states in
which the Contract Area is located or any Enure income tax laws of the
United States contain provisions similar to those in Subchapter "I(",
Chapter 1, Subtitle "A", of the Code,
under which an election similar to that provided by Section 761 of the Code is
permitted, each party hereby affected shall make such election as may be
permitted or required by such laws. In making the foregoing election, each such
party states that the income derived by such party from operations hereunder
can be adequately determined without the computation of partnership taxable income.

 

 

 

 

 

	

 

 

ARTICLE X

CLAIMS AND LAWSUITS

 

PDC may settle any single
uninsured third party damage claim or suit arising from operations hereunder if
the expenditure
does not exceed One Thousand Dollars ($1,000.00) and if the payment is in
complete settlement of such claim or suit.
If the amount required for settlement exceeds the above amount, the Partnership
shall assume and take over the further handling
of its interest in the claim suit, unless such authority is delegated to PDC.
All costs and expenses of handling, settling, or otherwise discharging
such claim or suit shall be at the joint expenses of the parties participating
in the operation from which the claim or
suit arises. If a claim is made against any party or if any party is sued on
account of any matter arising from operations hereunder over which such
individual has no control because of the rights given Operator by this
agreement, such party shall immediately
notify all other parties, and the claim or suit shall be treated as any other
claim or suit involving operations
hereunder all claims and suits involving title to any interest subject to this
Agreement shall be treated as a claim or suit against all parties
participating in the Prospect so affected.

ARTICLE XI

FORCE MAJEURE

 

If either party is rendered unable, wholly or in
part, by force majeure to carry out its obligations under this agreement, other
than the obligation to make money payments, that party shall give to the other
party prompt written notice of the force majeure
with reasonably full particulars concerning its; thereupon, the obligations of
the party giving the notice, so far as they are affected by the force majeure, shall be suspended during, but no
longer than, the continuance of the force majeure. The affected party
shall use all reasonable diligence to remove the force majeure situation as
quickly as practicable.

The requirement that any
force majeure shall be remedied with all reasonable dispatch shall not require
the settlement of
strikes, lockouts, or other labor difficulty by the party involved, contrary to
its wishes; how all such difficulties shall be handled shall be entirely within the discretion of the party
concerned.

The term
"force majeure", as here employed, shall mean act of God, strike,
lockout, or other industrial disturbance act of the public enemy, war, blockade, public riot,
lightning, fire, storm, flood, explosion, governmental action, governmental delay, restraint or inaction,
unavailability of equipment or market for oil and/or gas, and any other cause,
whether of the kind specifically
enumerated above or otherwise, which is not reasonably within the control of
the party claiming suspension.

ARTICLE XII

NOTICES

All notices required by this agreement shall be
given in writing addressed to the parties as follows:

1.             For the Partnership:

Petroleum Development Corporation, Managing General
Partner PDC 2003- Limited Partnership P.O. Box 26 Bridgeport, WV 26330

2.             For PDC:

Petroleum Development Corporation

P.O. Box 26

Bridgeport, WV 26330

Each party shall have the right to change its
address at any time, by giving written notice to all other parties.

 

 

 

 

	

 

 

 

ARTICLE XIII

 

TERM OF AGREEMENT

 

In the event a well drilled under any provision of
this agreement, results in production of oil and/or gas in paying quantities,
this agreement shall continue in force so long as any such well or wells
produce, or are capable of production, and for an additional period of 180 days from cessation of all production;
provided, however, if, prior to the expiration of such additional period, one or more of the parties
hereto are engaged in drilling, reworking, deepening, plugging back, testing or
attempting to complete a well or
wells hereunder, this agreement shall continue in force until such operations
have been completed and if production results therefrom, this agreement
shall continue in force as provided herein.

It is agreed, however, that the termination of
this agreement shall not relieve any party hereto from any liability which has
accrued or attached prior to the date of such termination.

ARTICLE XIV

COMPLIANCE WITH LAWS AND
REGULATIONS 

A.            Laws, Regulations
and Order:

 

This agreement shall be
subject to the conservation laws of the state in which the Prospects are
located, to the valid rules,
regulations, and orders of any duly constituted regulatory body of said state;
and to all other applicable federal, state, and local laws, ordinances, rules,
regulations, and orders.

B.            Governing
Law:

This agreement and all matters
pertaining hereto, including, but not limited to, matters of performance,
non-performance, breach, remedies, procedures, rights, duties and
interpretation or construction, shall be governed and determined by the law of the state in which the
Prospect is located.

C.            Regulatory
Agencies:

Nothing herein contained shall grant, or be
construed to grant, PDC the right or authority to waive or release any rights, privileges, or obligations which
Partnership may have federal or state laws or under rules, regulations or
orders promulgated under such laws
in reference to oil, gas and mineral operations, including the location,
operation, or production of wells, on tracts offsetting or adjacent to
the Contract Area.

With respect to operations
hereunder, the Partnership agrees to release PDC from any and all losses,
damages, injuries,
claims and causes of action arising out of, incident to or resulting directly
or indirectly from Operator's interpretation or application of rules, rulings, regulations, or
orders of the Department of Energy or predecessor or successor agencies to the
extent such interpretation or
application was made in good faith. The Partnership further agrees to reimburse
PDC for any amounts applicable to
Partnerships share of production that PDC may be required to refund, rebate or
pay as a result of such an incorrect interpretation or application.

 

 

 

 

	

 

 

 

 

 

ARTICLE XV

 

MISCELLANEOUS

 

This agreement shall be
binding upon and shall inure to the benefit of the parties hereto and to their
respective heirs,
devisees, legal representative, successors and assigns.

This instrument may be
executed in any number of counterparts, each of which shall be considered an
original

for all purposes.

IN WITNESS WHEREOF, this agreement shall be
effective as of  6 day of Nov.  , 2003.

 

 

 

 

 

 

 

 

 

                                                 
/s/ James N. Ryan

Dale. G. Rettinger                 
James N. Ryan
Executive V.P.                       
Chairman
Petroleum Development Corporation

 

 

 

 

 

/s/ Steven R. Williams

Steven R. Williams, President

Petroleum Development Corp., 
Managing General Partner 
PDC 2003- Limited
Partnership

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