Document:

SECURED
PROMISSORY NOTE

 

$25,000.00August
6, 2019

 

 

FOR
VALUE RECEIVED, iGambit, Inc., a Delaware corporation (the “Maker”) hereby unconditionally promises to pay
to the order of Clinigence Holdings, Inc., a Delaware corporation (the “Payee”), in such amounts and at such
times as set forth herein, the aggregate principal sum of $25,000.00 plus all accrued and unpaid interest, fees and other costs
or such amount as may be outstanding under this Secured Promissory Note (the “Note”).

NOW
THEREFORE, in consideration thereof and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

 

		1.	Interest;
                                         Net Payments; Additional Warrants. 

(a)       The
outstanding obligations under this Note shall bear interest at a rate equal to 6.00% per annum (the “Interest Rate”).
Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed.

(b)       Until
the Note is fully repaid, and unless paid earlier by pre-payment, acceleration or otherwise, all accrued and unpaid interest,
and all unpaid costs fees and expenses of Payee, as allowed herein, together with the principal shall be due and payable upon
the earlier of (i) December 24, 2019, (ii) the date that that certain Letter of Intent, dated as of even date herewith, by and
between Maker and Payee (the “Letter of Intent”) is terminated pursuant to its terms, or (iii) on the occurrence
of a Change of Control (the “Maturity Date”).

For
the purposes of this clause (b), “Change of Control” shall mean (A) the closing of the sale, lease, transfer,
exclusive license or other disposition of all or substantially all of the Maker’s assets, (B) the consummation of the
merger or consolidation of the Maker with or into another entity, excluding Payee (except a merger or consolidation in which the
holders of capital stock of the Maker outstanding immediately prior to such merger or consolidation continue to hold at least
fifty percent (50%) of the voting power of the capital stock of the Maker or the surviving or acquiring entity), or (C) the
closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions,
to a person or group of affiliated persons, excluding Payee (other than an underwriter of this corporation’s securities),
of the Maker’s securities if, after such closing, such person or group of affiliated persons would hold fifty percent (50%)
or more of the outstanding voting stock of the Maker (or the surviving or acquiring entity).

(c)       This
Note may be prepaid at the option of Maker at any time in whole or in part, provided, however, concurrently with making any pre-payments,
Maker shall pay to Payee all then accrued and unpaid interest and expenses. All prepayments shall be applied first, to any unreimbursed
Payee costs and expenses; second, to the payment of accrued but unpaid interest on the Note; and third, to the principal payments
required to be made pursuant to Section 1(b), in reverse order of maturity.

(d)       Immediately
upon the occurrence and during the continuance of an Event of Default, the interest rate applicable to the outstanding obligations
shall be increased to 8.00% per annum, but in any event shall not exceed the maximum amount permitted by law (the “Default
Rate”), and such interest will be payable on demand. Fees and expenses which are required to be paid by Maker pursuant
to this Note (including, without limitation, all audit fees and expenses, costs, and expenses (including reasonable attorneys’
fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing this Note or otherwise incurred
with respect to Maker) but are not paid when due shall bear interest until paid at a rate equal to the Default Rate. Payment or
acceptance of the increased rates of interest provided for in this Section 1(c) is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Payee.

(e)       All
payments (including prepayments) hereunder shall be made to the account specified by Payee to Maker in immediately available funds
in United States Dollars without setoff, defense or counterclaim or withholding on account of taxes, levies, duties or any other
deduction whatsoever, before 12:00 p.m. Eastern time on the date when due. Payments of principal and/or interest received after
12:00 p.m. Eastern time are considered received at the opening of business on the next business day. When a payment is due on
a day that is not a business day, the payment shall be due the next business day, and additional fees or interest, as applicable,
shall continue to accrue until paid.

(f)       Payee’s
records of all payments made hereunder shall, absent manifest error, be binding on Maker for all purposes.

(g)
       Principal Amounts repaid or prepaid hereunder may not be reborrowed.

		2.	Representations
                                         and Warranties; Covenants.

Maker
hereby represents, warrants and covenants that:

(a)       it
is a Delaware corporation duly organized, validly existing and in good standing;

(b)       the
execution, delivery and performance by Maker of the Note have been duly authorized, and do not (i) conflict with Maker’s
organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material requirement of law,
(iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any
governmental authority by which Maker or any of its property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or governmental approval from, any governmental authority, or (v) constitute an event of
default under any material agreement by which Maker is bound;

(c)       Maker
is not in default under any agreement to which it is a party or by which it may be bound in which the default could reasonably
be expected to have a material adverse effect on Maker’s business;

(d)       Maker’s
obligations under this Note are legal, valid and binding and enforceable against Maker in accordance with their terms, except
as such enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditor’s
rights in general;

(e)
       As of the date hereof, and after giving effect to this Note, (i) the amount of the “present
fair saleable value of the assets” of Maker exceeds the amount of all “liabilities of Maker, contingent or otherwise,”
as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency
of debtors, (ii) Maker does not have an unreasonably small amount of capital with which to conduct its business, and (iii)
Maker will be able to pay its debts as they mature;

(f)       without
the prior written consent of Payee, Maker shall not directly or indirectly incur any other indebtedness for borrowed money (or
similar liability) other than (i) the obligations hereunder or any other note in favor of Payee, (ii) unsecured indebtedness to
the extent that such indebtedness is expressly subordinated to all obligations owing to Payee by Maker pursuant to an agreement
in form and substance acceptable to Payee in its reasonable discretion and (iii) secured indebtedness arising under Permitted
Liens;

(g)       subject
to the prior written consent of Payee, Maker may issue unsecured subordinated debt securities on terms and conditions reasonably
satisfactory to Payee, which shall include, without limitation, a subordination agreement among Payee, the holder of such debt
securities and Maker;

(h)       without
the prior written consent of Payee, Maker shall not directly or indirectly encumber, pledge, hypothecate or charge any of its
assets or properties, except for any prior lien in favor of Payee or Permitted Liens;

(i)       Maker
shall not increase the principal amount of any other indebtedness of Maker existing at the date hereof (the “Prior Indebtedness”);

(j)
       Maker shall maintain its legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material
adverse effect on Maker’s business or operations;

(k)       Maker
shall comply with the binding terms of the Letter of Intent and merger agreement described in the Letter of Intent. Maker shall
also comply with all laws, ordinances and regulations to which it is subject, noncompliance with which would reasonably be expected
to have a material adverse effect on Maker’s business;

(l)       Maker
shall deliver to Payee such financial information concerning Maker and its business and operations as Payee may from time to time
reasonably request;

(m)       Maker
shall deliver to Payee such financial information concerning Maker and its business and operations as Payee may from time to time
reasonably request; and

(n)       Maker
shall: (i) do all acts that may be reasonably necessary to maintain, preserve and protect the Collateral (as defined below); (ii)
not use any Collateral unlawfully or in violation of any provision of this Note or any applicable statute, regulation or ordinance
or any policy of insurance covering any Collateral; (iii) pay promptly when due all taxes, assessments, charges, encumbrances
and liens now or hereafter imposed on or affecting any Collateral; (iv) notify Payee promptly of any change in Maker’s name,
trade name(s) or style(s) or principal place of business; (v) appear in and defend any action or proceeding which may materially
and adversely affect its title to or Payee’s interest in the Collateral; (vi) if Payee gives value to enable Maker to acquire
rights in or the use of any Collateral, use such value for such purpose; (vii) keep separate, accurate and complete records of
the Collateral and, during normal business hours, provide Payee with access to such records and such other reports and information
prepared from time to time by Maker relating to the Collateral as Payee may reasonably request from time to time; (viii) not surrender
or lose possession of, sell, encumber, lease, rent, or otherwise dispose of or transfer any Collateral or right or interest therein,
and keep the Collateral free of all levies and security interests or other liens or charges except those created hereby; (ix)
following and during the continuance of an Event of Default, account fully for and promptly deliver to Payee, in the form received,
all proceeds of the Collateral received, endorsed to Payee as appropriate, and until so delivered hold all proceeds in trust for
Payee, separate from all other property of Maker and identified as the property of Payee; (x) keep the Collateral in good condition
and repair (normal wear and tear excepted); (xi) not cause or permit any waste or unusual or unreasonable depreciation of the
Collateral; (xii) at any reasonable time, on demand by Payee, exhibit to and allow inspection by Payee (or persons designated
by Payee) of the Collateral; (xiii) keep the Collateral at Maker’s principal place of business and not remove the Collateral
from such location except in the ordinary course of business without the prior written consent of Payee; and (xiv) comply in all
material respects with all laws, regulations and ordinances relating to the possession, operation, maintenance and control of
the Collateral.

For
the purposes of this Section 2, “Permitted Liens” shall mean (a) purchase money security interests in specific
items of equipment, provided that such lien attaches solely to the equipment acquired and that the principal amount of such indebtedness
does not exceed one hundred percent (100%) of the cost of such equipment; (b) liens for taxes, fees, assessments, or other governmental
charges or levies, either not delinquent or being contested in good faith by appropriate proceedings for which adequate reserves
are being maintained; (c) liens of materialmen, mechanics, carriers, or other similar liens arising in the ordinary course
of business and securing obligations which are not delinquent or are being contested in good faith by appropriate proceedings
for which adequate reserves are being maintained; (d) liens of warehousemen, arising in the ordinary course of business and securing
obligations which are not delinquent or are being contested in good faith by appropriate proceedings for which adequate reserves
are being maintained; (e) liens which constitute banker’s liens, rights of set-off, or similar rights as to deposit accounts
or other funds maintained with a bank or other financial institution arising in the ordinary course of business; (f) cash
deposits or pledges to secure the payment of worker’s compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or performance bonds, or other obligations of a like
nature incurred in the ordinary course of business; and (g) non-exclusive licenses or sublicenses of intellectual property.

3.                 
Grant of Security. As security for the obligations of Maker to Payee arising under this Note, Maker hereby grants to
Payee a continuing security interest in all its currently existing and hereafter acquired Accounts, books, Deposit Accounts, Equipment,
General Intangibles, intellectual property, Inventory, Investment Property, negotiable collateral, real property, money, or other
tangible or intangible property, the proceeds and products, whether tangible or intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the foregoing (the “Collateral”). Payee’s liens in and to
the Collateral shall attach to all Collateral without further act on the part of Payee. Maker shall from time to time execute
and deliver to Payee, at the reasonable request of Payee, all financing statements and other documents and records that Payee
may reasonably request, in form and substance reasonably satisfactory to Payee and its counsel, to perfect and continue to perfect
Payee’s security interests in the Collateral and in order to fully consummate all of the transactions contemplated hereunder.
Maker authorizes Payee to file any financing statement necessary or desirable to perfect the security interest granted hereunder
and any continuation statement or amendment with respect thereto, in any appropriate filing office without the signature of Maker
including, without limitation, any financing statement containing a description of Collateral as “all assets” or “all
personal property, whether now owned or hereafter acquired.

The
security interest created pursuant to this Section 3 shall terminate upon the payment of all indebtedness under this Note
and payment of all fees and expenses incurred by the Payee in connection with enforcing its rights under this Note. Upon such
termination, the Payee shall, at Maker’s expense, file a termination statement terminating any UCC financing statements,
filings or recording documents with respect to the Collateral filed in connection herewith.

 

When
used herein, the terms Account, Deposit Account, Equipment, General Intangibles, Inventory, and Investment Property have the respective
meanings assigned thereto in the Uniform Commercial Code as in effect in the State of California on the date of this Note, as
it may be amended or modified from time to time hereafter.

 

4.                 
Use of Proceeds. Maker shall cause the proceeds of the principal to be used solely to
pay and/or discharge in full all indebtedness under the agreements set forth on Schedule A and terminate any security interests
associated with such indebtedness. After completing the obligations set forth in the prior sentence, Maker shall cause the proceeds
of the remaining amount of the principal, if any, to be used solely as working capital to fund Maker’s general business
requirements, in accordance with Maker’s organizational documents, and not for personal, family, household or agricultural
purposes.

5.                 
Power of Attorney. Maker does hereby irrevocably constitute and appoint Payee its true
and lawful attorney with full power of substitution, for it and in its name, place and stead, to execute, deliver and file such
agreements, documents, notices, statements and records, to include, without limitation, financing statements, and to do or undertake
such other acts as Payee, in its sole discretion, deems necessary or advisable to effect the terms and conditions of this Note
and related documents and to otherwise preserve, protect and perfect the security of the security interest in the Collateral.
The foregoing appointment is and the same shall be coupled with an interest in favor of Payee. Notwithstanding the foregoing present
grant of a power of attorney by Maker to Payee, except as otherwise provided in this Note and except with respect to filing of
financing statements and other actions Payee deems necessary or appropriate to perfect, preserve or protect its perfection or
continue the perfection of its security interests in the Collateral, Payee shall not exercise the rights granted to it under this
Section 5 except after the occurrence of and during the continuance of an Event of Default.

6.                 
Events of Default. In the event of any of the following (each, an “Event of Default”):

(a)
       Maker fails to pay any principal, interest or any other amount due hereunder;

(b)
Maker shall have made a material misrepresentation herein;

(c)
       Maker enters into an agreement for a Change of Control or fails to perform in any material
respect any agreement or covenant contained herein including, without limitation, the validity, perfection, and priority of the
security interest purported to be granted hereunder;

(d)
       (i) Maker voluntarily commences a case or proceeding seeking liquidation, reorganization
or other relief with respect to Maker or any of its debts under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property
(hereinafter, a “Proceeding”), or (ii) an involuntary Proceeding is commenced against Maker, and such involuntary
Proceeding shall remain undismissed and unstayed for a period of thirty (30) days, or (iii) an order for relief shall be entered
against Maker with respect to the disposition of any of its respective property under the bankruptcy laws as now or hereafter
in effect, or (iv) Maker makes an assignment for the benefit of its creditors or admits in writing its inability to pay its debts;

(e)
       Maker becomes unable, admits in writing its inability to or fails to pay its debts as
they come due;

(f)       One
or more judgments or arbitral decisions for the payment of money in an aggregate amount in excess of $100,000 shall be rendered
against Maker and the same shall remain undischarged for a period of forty-five (45) consecutive days during which execution shall
not be effectively stayed; or

(g)       Maker
fails to make any payment (whether of principal or interest and regardless of amount) in respect of any of the Prior Indebtedness
when and as the same shall become due and payable (after the expiration of any cure period) or otherwise breaches any material
covenant, term or other provision of the Prior Indebtedness,

then
if such Event of Default continues unremedied for a period of more than five (5) business days (and, with respect to clause (g),
after Maker has received notice of such Event of Default from Payee), except Events of Default pursuant to clause (d), (e) or
(f) which shall have no grace period, (i) the obligations hereunder shall immediately and automatically become due and payable
in full without presentment, demand, protest or notice of any kind (all of which are expressly waived by Maker, (ii) the interest
rate applicable to all outstanding obligations shall be increased to the Default Rate, and (iii) Payee shall be entitled to exercise
all of its rights and remedies under this Note and as otherwise provided under applicable law. Maker agrees to pay Payee its attorneys’
fees and disbursements in connection with the enforcement of any of Payee’s rights hereunder or in connection with the collection
of amounts due hereunder following a default or an Event of Default under this Note.

7.                 
Presentment; etc. Maker hereby irrevocably waives, to the fullest extent permitted by applicable law, presentment,
demand, notice of dishonor, protest or notice of any other kind in connection with this Note.

8.                 
Maximum Rate. It is the express intention of Payee and Maker that nothing contained in this Note shall require Maker
(before or after default) to pay interest at a rate exceeding the maximum rate permitted by applicable law. If Maker should pay
or Payee should collect or receive any interest in excess of such permissible rate, such payment shall be deemed to be the property
of Maker, and shall be held in trust by Payee, and repaid to Maker.

9.                 
Waivers; Remedies. No failure or delay on the part of Payee or the holder of this Note in exercising any right, power
or privilege hereunder and no course of dealing between Maker and Payee or the holder of this Note shall operate as a waiver therefor;
nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof
or the exercise of any rights or remedies which Payee or any subsequent holder of this Note would otherwise have.

10.             
Amendment; Assignment. This Note may only be amended or modified in a writing signed by Payee and Maker. Payee may
assign this note to any person, except as provided in any applicable subordination agreement, provided that such assignee is not
a competitor of Maker (for the avoidance of doubt it being expressly agreed and understood that any assignee that is tax exempt
under Section 501(c)(3) of the Internal Revenue Code shall be deemed not to be a competitor). This Note shall be binding on and
inure to the benefit of Maker and Payee and their respective successors and assigns; provided, however, that Maker
may not, without the prior written consent of Payee, delegate, transfer or assign any of its rights or obligations under this
Note without the prior written consent of Payee.

11.             
Notices. All notices, consents, requests, approvals, demands, or other communication by any party to this Note must
be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) business days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail; (c) one (1) business day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or email address indicated below. Payee or Maker may change its
mailing or electronic mail address by giving the other party written notice thereof in accordance with the terms of this Section
11.

If
to Maker:

 

iGambit,
Inc.

1050
W. Jericho Tpke. Ste A

Smithtown,
NY 11787

Attn:
Elisa Luqman

Email:
elisa@igambit.com

 

with
a copy, which shall not constitute notice, to:

 

Dickison
Wright

350
East Las Olas Blvd

Suite
1750

Ft.
Lauderdale FL 33301

Phone954-991-5426

Fax844-670-6009

Attn:
Joel D. Mayersohn

Email:
JMayersohn@dickinsonwright.com

 

If
to Payee:

 

Clinigence
Holdings, Inc.

1100
Spring St. NW Suite 830

Atlanta,
GA 30309

Attn:
Jacob Margolin

Email:
kobi.margolin@clinigence.com

 

with
a copy, which shall not constitute notice, to:

 

Shartsis
Friese LLP

One
Maritime Plaza, 18th Floor

San
Francisco, CA 94111

Attn:
P. Rupert Russell, Esq.

Email:
rrussell@sflaw.com

 

12.             
Governing Law; Jurisdiction. This Note shall be governed by and construed in accordance with the laws of the State
of Delaware. Maker and Payee hereby irrevocably submit to the non-exclusive jurisdiction of the courts of the State of Delaware
for the purpose of any action or proceeding relating to this Note. EACH OF MAKER AND PAYEE HEREBY IRREVOCABLY WAIVES TRIAL BY
JURY AND ANY OBJECTION, INCLUDING WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION.

--SIGNATURE
PAGE FOLLOWS--

    	 	1	 

     

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Secured Promissory Note to be executed by their duly authorized officers
as of the date and year first above written.

	MAKER:
	 
	IGAMBIT, INC.
	 
	By:	/s/ John Salerno
	Name:	John Salerno
	Title:	Chief Executive Officer
	 
	 
	PAYEE:
	 
	CLINIGENCE HOLDINGS, INC.
	 
	By:	/s/ Jacob Margolin
	Name:	Jacob Margolin
	Title:	President
	 
	 
	By:	/s/ Warren Hosseinion
	Name:	Warren Hosseinion
	Title:	Chairman of the Board of Directors

 

    	 	2arex-ex109_83.htm

Exhibit 10.9

 

THE SYMBOL “[****]” DENOTES PLACES WHERE CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL, AND (ii) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

 

 

AMENDMENT TO GAS PURCHASE CONTRACT

 

This Amendment dated and effective as of May 1, 2019 (the “Effective Date”) is between APPROACH RESOURCES I, LP and APPROACH OIL & GAS INC. (collectively “Seller”) and DCP OPERATING COMPANY, LP  (“Buyer”), formerly known as DCP Midstream, LP.

 

In consideration of the promises and of the mutual covenants contained herein, the parties agree to amend the Gas Purchase Contact dated January 1, 2011 between the parties or their predecessors, Buyer’s File No. PRR0029000 (together with any previous amendments, the “Contract”) covering properties in Crockett and Schleicher Counties, Texas, as follows: 

 

1.Price.  The parties amend Section 5.2, Residue Gas Value, by deleting it and replacing it with the following:

 

5.2Residue Gas Value.  The Residue Gas value will be the weighted average of the prices per MMBtu received by Buyer f.o.b. Buyer’s Facilities for Residue Gas sold during the month, plus [****] per MMBtu up to a maximum of [****].  For Residue Gas in excess of [****], the Residue Gas value will be the weighted average of the prices per MMBtu received by Buyer f.o.b. Buyer’s Facilities for Residue Gas sold during the month.  Seller recognizes that Affiliates of Buyer may be involved in the handling, purchasing, marketing or sales of Residue Gas and acknowledges and agrees that the reasonable good faith, fair market prices so established will nevertheless control.

 

2.Price.  The parties amend Section 5.4(a), NGL Value, by deleting it and replacing it with the following:  

 

5.4 (a)NGL Value.  The net value of NGLs attributable to Seller will be the simple average of the midpoint of the daily high/low spot price for (i) purity ethane, (ii) non-TET propane, (iii) non-TET isobutane, (iv) non-TET normal butane, and (v) non-TET natural gasoline (pentanes and heavier) during the month as reported for Mont Belvieu, Texas published by the Oil Price Information Service (or in its absence, a comparable successor publication designated by Buyer and agreed by Seller) less the actual reasonable TF&S costs that Buyer incurs for the movement and disposition of NGLs using transportation on the Sand Hills Pipeline and other NGL lines for deliveries to Sweeny, Texas, Mont Belvieu, Texas, or other similarly-priced fractionator market centers mutually agreed by both parties, and less a $0.0025/gallon NGL marketing fee; provided, however, that with respect to calculating TF&S costs for [****]. [****]. If a change in downstream NGL pipeline specifications causes a failure to meet the revised NGLs quality specifications and Buyer incurs NGL off quality fees as a result, Buyer will so notify Seller, and the 

D-1

 

parties shall then negotiate an equitable solution of the problem; provided, however, that the terms of Section F of the General Terms and Conditions will continue to apply.  [****].  Seller recognizes that Affiliates of Buyer may be involved in the handling of NGLs downstream from the Plant, and acknowledges that the reasonable good faith, fair market prices or fees so established will nevertheless control.

 

3.Price.  The parties amend Subsection 5.6(c) and 5.6(f), by deleting them and replacing them with the following:

 

(c)Determination of NGL Volumes.  Buyer will determine the quantity of each NGL component attributable to Seller’s gas by multiplying Seller’s Plant Inlet Volume in Mcf by the gallons of each component contained in the gas delivered by Seller at each Delivery Point by the fixed recovery percentage that Seller elects in accordance with Section 5.6(f) below.

 

(f)Ethane Rejection.  At least six (6) business days before the first of each month, Seller shall notify Buyer of its election to be paid for NGLs based on either the Ethane Recovery Option or the Ethane Rejection Option as follows:

 

	
Ethane Recovery
	
 

	
Ethane
	
80%

	
Propane
	
95%

	
Iso & Normal Butanes
	
97%

	
Pentanes and Heavier
	
97%

	
 
	
 

	
Ethane Rejection
	
 

	
Ethane
	
[****]%

	
Propane
	
[****]%

	
Iso & Normal Butanes
	
[****]%

	
Pentanes and Heavier
	
[****]%

 

If Buyer fails to timely notify Seller of its election, then the fixed Ethane Recovery or Ethane Rejection percentages shall continue from the prior month.  Notwithstanding the foregoing in this Section 3, Seller shall make no election for the months of May 2019, June 2019, and July 2019, but instead the Ethane Recovery Option shall apply to each of those three months. 

 

 

2

 

4.Price.  The parties add the following new Section 5.8, Residue Take-In-Kind Option: 

 

5.8Residue Gas Take in Kind Option.  (a)  In lieu of sale to Buyer and payment to Seller for Seller’s allocable Residue Gas as contemplated in this Contract, Seller may, in its sole discretion, make an election to take the Residue Gas allocable to Seller in kind at the Redelivery Points listed in Exhibit D by providing [****] advance written notice to Buyer of its election to take the Residue Gas allocable to Seller in kind, to be effective on a date that is either the first day of April or the first day of November (and no other date), following the [****] advance written notice during the Term of the Contract.  Any such election by Seller shall last for a period of [****], unless Seller provides Buyer [****] advance written notice prior to the end of the [****] period that Seller elects to take the Residue Gas allocable to Seller in kind for an additional [****] period commencing again consecutively from the next April 1 or November 1.  During periods when Seller is taking its Residue Gas in kind, title to the Seller’s allocable Residue Gas will remain with Seller.  Whenever Seller is taking Residue Gas in kind, Buyer will pay no Residue Gas compensation under Sections 5.1 or 5.2, and the nominations, scheduling, balancing and other provisions of Exhibit C to this Contract will apply.  

 

(b)During periods when the Residue Gas take in kind option is in effect, Seller shall take its Residue Gas in kind timely at the Redelivery Points.  The parties recognize that Buyer has no Residue Gas storage.  Buyer agrees to deliver Seller’s Residue Gas to or for the account of Seller.  Seller must receive and transport or cause to be received and transported when produced and available all of Seller’s Residue Gas.  Buyer is not required to install any additional facilities to accommodate Seller’s redelivered gas disposition.  Seller is solely responsible for all arrangements for receipt and transportation of its in kind Residue Gas, including any bypassed gas.  Consistently with Exhibit C, Seller shall make or cause its sales customers to make all arrangements with the downstream gas pipelines, and shall ensure that its desired nominations for downstream transportation are properly and timely placed with the downstream pipelines in accordance with their nomination and confirmation procedures.  Each party will endeavor to provide the other party prompt notice of scheduled maintenance, construction, and other operational events that will affect volumes materially, including but not limited to facility outages and operational changes.

 

(c)If Seller fails, for any reason, to take in kind or otherwise dispose of all or any part of Seller’s Residue Gas, Buyer shall have the option, but not the obligation, to sell or otherwise dispose in any manner necessary Seller’s Residue Gas not timely taken in kind or otherwise disposed of by Seller; provided that Buyer shall account to and timely pay Seller for any proceeds received by Buyer from a sale or disposition less transportation, storage, and other charges and marketing fees paid by Buyer to Affiliates or third parties.  Seller recognizes these sales may be distress sales at below market prices and that fees paid by Buyer for transportation, storage, marketing or handling may be higher for such disposition than when Buyer purchases Residue Gas under Sections 5.1 and 5.2, and Seller agrees to pay such fees.  

 

 

3

 

5.Exhibit A.  The parties amend the General Terms and Conditions, Section O.9, by deleting and replacing it with the following:

 

O.9Dispute Resolution. The parties desire to resolve any disputes that may arise informally, if possible.  All disputes arising out of or relating to this Contract that are not resolved by agreement of the parties must be resolved using the provisions of this Section.  If a dispute or disputes arise out of or relating to this Contract, a party shall give written notice of the disputes to the other involved parties, and each party will appoint an employee to negotiate with the other party concerning the disputes.  If the disputes have not been resolved by negotiation within 30 Days of the initial dispute notice, or if the complaining party fails to send an initial dispute notice, the parties shall resolve their disputes by arbitration in accordance with the then current International Institute for Conflict Prevention and Resolution, Inc. (“CPR”) Rules for Non-Administered Arbitration and related commentary (“Rules”) and this Section.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq., and the Rules, to the exclusion of any provision of state law inconsistent with them.  The party seeking resolution shall initiate arbitration by written notice sent to the other party or parties to be involved.  The parties shall promptly select one disinterested arbitrator with at least ten years’ experience in the natural gas industry or with natural gas law, and not previously employed by either party or its Affiliates, and, if possible, selected by agreement between the parties.  If the parties cannot select an arbitrator by agreement within 30 Days of the date of the notice of arbitration, they will cause CPR to select a qualified arbitrator in accordance with the Rules.  If the disputes involve more than $1,000,000, a panel of three arbitrators with the above qualifications will decide them, one selected by each party, and the third selected by the party-appointed arbitrators, or in the absence of their agreement, pursuant to the Rules.  The arbitrator(s) shall resolve the disputes and render a final award in accordance with the substantive law of the state referenced in Section O.1, “Governing Law.”  The arbitration award will be limited by Sections O.7, “Fees and Costs; Damages” and O.8 above, “Mutual Waiver of Certain Remedies.”  The parties intend case specific dispute resolution; either party may opt out of any attempted class action for all claims of any party related to this Contract.  The arbitrator(s) shall state the reasons for the award in writing, and either party may enter judgment on the arbitration award in any court having jurisdiction.

 

6.Exhibit C.  The parties amend the Contract to add the new attached Exhibit C: Residue Nominations, Scheduling, and Imbalances. 

 

7.Exhibit D.  The parties amend the Contract to add the new attached Exhibit D: Redelivery Points. 

 

8.Scope.  The parties amend the Contract to the extent provided above.  In all other respects, they confirm it, and it shall continue in full force and effect.

 

 

4

 

9.Confidentiality.  The parties acknowledge that this Amendment is subject to the Confidentiality provisions of Section 8 of the Contract.

 

10.Counterparts.  The parties may sign this Amendment in any number of counterparts, all of which constitute one instrument.  This Amendment is binding upon all parties signing it, whether or not all parties owning interests in the properties committed under the Contract as amended sign this Amendment.

 

Signature page to follow.

 

5

 

The parties have signed this Amendment by their duly authorized representatives as of the date stated above.

 

	
 
	
APPROACH RESOURCES I, LP
	
 
	
DCP OPERATING COMPANY, LP

	
By:
	
APPROACH OPERATING, LLC
	
 
	
 

	
 
	
General Partner
	
 
	
 

	
By:
	
APPROACH RESOURCES INC.
	
 
	
 

	
 
	
Sole Member
	
 
	
 

	
 
	
 
	
 
	
 

 

	
By:
	
/s/ Sergei Krylov
	
 
	
By:
	
/s/ Don Baldridge

	
 
	
 
	
 
	
 
	
Don Baldridge

	
Title:
	
Chief Executive Officer
	
 
	
 
	
President, Commercial

	
 
	
 
	
 
	
 
	
 

	
Signed on: July 15, 2019
	
 
	
Signed on: July 19, 2019

 

	
APPROACH OIL & GAS INC.
	
 

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Sergei Krylov
	
 

	
 
	
 
	
 

	
Title:
	
Chief Executive Officer
	
 

	
 
	
 
	
 

	
Signed on: July 15, 2019
	
 

 

Signature Page for Amendment dated May 1, 2019

to Gas Purchase Contract

 

 

 

6

 

EXHIBIT C 

To January 1, 2011, GAS PURCHASE CONTRACT

Between APPROACH RESOURCES I, LP and APPROACH OIL & GAS INC. as Seller 

and DCP OPERATING COMPANY, LP as Buyer,

 

Amendment Dated as of May 1, 2019

 

RESIDUE NOMINATIONS, SCHEDULING, AND IMBALANCES

 

 

1.   REDELIVERY POINTS

 

Subject to the downstream pipelines’ capacity allocation rules, and to the extent pipeline capacity is available, the Redelivery Points for Seller’s redelivered gas shall be the pipeline interconnects designated by Buyer.  Buyer will use reasonable efforts to deliver Seller’s allocated share of Residue Gas at the required pipeline inlet pressure and quality specifications of the applicable pipelines used as Redelivery Points.  Buyer has no duty to install any additional Facilities to accommodate Seller’s redelivered gas dispositions.

 

2.   NOMINATION PROCESS

(a)Definition; Information.  “Nominations” means Seller’s notifications to Buyer of the relevant details of Seller’s gathering service requests and related gas transportation and sales, including but not limited to:

Contract number

Beginning date

Ending Date

Delivery Points, 

Redelivery Points,

Delivery and redelivery quantities, 

Downstream transportation Contract number

and all other details required for proper and timely Nominations and confirmations in accordance with customary industry practice.  Seller Nominations must be for volumes that reflect expected reductions for applicable fuel and loss quantities.  Seller or its sales customer will be responsible for all Nomination and other transportation arrangements at and beyond the Redelivery Points.  Seller shall make or cause its sales customer to make all arrangements with the downstream pipeline and shall ensure that its desired Nominations for downstream pipeline transportation are properly and timely placed with the downstream pipeline in accordance with that pipeline’s Nomination and confirmation procedures.  

(b)Initial Estimate.  For initial deliveries at each Delivery Point, Seller and Buyer will agree on an estimated daily quantity reasonably in advance of the Nomination deadlines preceding the commencement of deliveries.

 

 

(c)Nomination Deadlines.

(i)For each Day of deliveries, Seller shall give written notice of Seller’s Nominations to Buyer stating the quantity of gas that Seller requests under this Contract for each Day of the month for each Redelivery Point.  The Nomination will also include any imbalance correction quantities and any scheduled daily variations.  Seller’s Nominations shall be based in good faith upon the producing ability of Seller’s wells for the upcoming month, adjusted as necessary to bring cumulative receipts into line with cumulative redeliveries, and adjusted to cover in kind fuel and losses, in kind Buyer fuel retentions, any in kind fees, and expected NGLs recoveries.  Seller shall enter into a separate data access agreement with Buyer to furnish Seller a confidential user ID and password allowing Seller to furnish Nominations information directly into Buyer’s designated web-based gas management application.  Seller shall also furnish the information Buyer reasonably determines is necessary to perform the deliveries requested by Seller.

(ii)Seller will deliver its initial monthly Redelivery Point Nomination for the first Day of a month by 7:30 a.m. Central Clock Time to Buyer on the fourth business Day prior to the last Day of the previous month, or sooner if required by the confirming interconnected pipeline.

(iii)On or after the first Day of the month, Seller may submit a new Nomination or revise its existing Nomination for any Day during the month by delivering the new Nomination to Buyer before 7:30 a.m. Central Clock Time on the business day prior to the Day that Seller requests that the new or revised service commence.  The new or revised Nomination shall state Seller’s anticipated service requirements for the remainder of the month.  Buyer shall schedule and implement new or revised Nominations on a prospective basis, and only to the extent that Buyer is able to confirm the delivery of gas with the operator of the Redelivery Points.  

(d)Late Nominations.  Buyer may in its sole reasonable discretion accept or decline Seller’s new or revised Nominations after 7:30 a.m. Central Clock Time on the business day prior to the Day that Seller requests that the new or revised service commence.  These new or revised Nominations shall also specify Seller’s anticipated quantities for the remainder of the month.  These late revised Nominations will not “bump” any previously scheduled deliveries.

C-1

 

(e)Confirmation of Nominations.  Seller shall cause the operator of  each Redelivery Point designated in any Nomination or revised Nomination to confirm the Nominations or changes to them in writing prior to Buyer’s scheduling of the nominated volumes.  If a conflict arises between Seller’s new or revised Nominations and the operators’ confirmations, or if the operator at the Redelivery Point does not provide a confirmation to Buyer, Buyer may elect to use either the lower of Seller’s Nominations or the previously scheduled and confirmed quantities.

(f)Buyer Nomination Changes.  Seller and Buyer will assist each other in adjusting Nominations to reflect actual flows, adjustments required by downstream pipeline recipients of the gas, and the efficient operations of Buyer’s Facilities.  Buyer may at any time adjust Seller’s Nominations quantity as necessary to conform to the above requirements and to maintain balance.  Buyer will endeavor to notify Seller timely of these adjustments.  Buyer has no obligation to accommodate any imbalances caused by Seller’s inability or failure to match actual performance with Nominations, or to provide gas storage for Seller.

(g)Balancing.  Seller will adjust Nominations to conform to all significant production changes to minimize imbalances and to meet the delivery tolerances of the downstream pipeline at each active Redelivery Point. 

(h)Deadline Changes.  Buyer reserves the right to adjust Nomination deadlines reasonably in response to Buyer’s needs and changes in the practices of the downstream pipelines at the Redelivery Points.

(i)Volume Verification.  Buyer is not obligated to assist Seller in resolving payment or transportation disputes with downstream pipelines or Seller’s customers other than to confirm the volumes delivered at the Redelivery Points for Seller’s account.

 (j)Hazardous Situations.  Nothing in this Contract limits any party’s right to take any action whatsoever to correct or remedy any potentially hazardous situation or condition on the party’s facilities.  That party shall promptly give notice of the action to the other.

 

3.   IMBALANCES

(a)Continuous Balancing.  Buyer will make all reasonable efforts to deliver to or for the account of Seller each Day at the Redelivery Points a volume of gas equal to Seller’s Nominated gas quantities, as adjusted hereunder, so long as Seller’s deliveries remain reasonably in balance with Seller’s Nominations.  Seller will make all reasonable efforts to balance delivery quantities daily with its current Nominated gas quantity at each Delivery Point plus Seller’s applicable in kind fuel, NGLs shrinkage, and loss reduction quantities.  Seller will separately state and Nominate any imbalance makeup quantities.

(b)Changes in Procedures.  Buyer reserves the right to change Nominations, allocations, and imbalance penalties and procedures from time to time upon notice to Seller as Buyer’s policies change or in response to changes in the practices or requirements of the downstream pipelines at the Redelivery Points.

(c)Buyer’s Right to Purchase and Sell Imbalance Gas.  Seller authorizes Buyer to purchase and sell gas at Redelivery Points to manage imbalance quantities.

(d)Monthly Imbalance Quantity.  Buyer will account for any imbalances between Seller’s deliveries to Buyer at the Delivery Points and Buyer’s redeliveries to Seller at the Redelivery Points, less the applicable in kind fuel, NGLs shrinkage, and loss reduction.  Buyer will calculate Seller’s Monthly Imbalance Quantity for gas in MMBtus as follows:

 

	
 
	
•
	
Total monthly Delivery Point MMBtus

	
 
	
•
	
Less applicable NGLs and in kind fuel and loss reduction MMBtus.

	
 
	
•
	
Less total Monthly Redelivery Point MMBtus.

(e)Monthly Imbalance Percentage.  Buyer will calculate Seller’s Monthly Imbalance Percentage for gas as the Monthly Imbalance Quantity divided by Seller’s total actual Redelivery Point MMBtus.

(f)Mandatory Cash Out of Monthly Imbalances.  Each month Seller’s Monthly Imbalances must be cashed out using the following principles.

(i)Daily Price Index.  The price used to value Seller’s Monthly Imbalance will be the daily index price for Waha – West Tx as reported in the “Daily Price Survey” section of Platts Gas Daily (“Daily Price Index”).  If Gas Daily publishes a range of prices for any Day, the midpoint of the range will be that Day’s price.  If for any reason Gas Daily ceases to be available, Buyer will determine the Daily Price Index for the month using price quotations for the general location indicated above as reported by another generally accepted industry publication.

(ii)Incremental Imbalance Values.  (1)  Buyer will use the monthly average of the Daily Price Index to determine the cash value for monthly imbalances for that portion of Residue Gas redelivered up to and including 5%, whether due Buyer or Seller. 

(2)  For Monthly Imbalances for that portion of Residue Gas redelivered in excess of 5%, whether due to Seller or to Buyer, Buyer shall determine the cash value of that portion using the following two-step process:

	
 
	
•
	
First, each Month will have four weekly average prices, which Buyer will determine by (i) calculating the average of the daily mid-point Daily Price Index  for each week of the Month and (ii) the last week will consist of the fourth seven Day period in the Month plus all remaining Days of that Month;

C-1

 

	
 
	
•
	
Second, when the Monthly Imbalance is negative (due to Buyer), Buyer will determine this portion of the Daily Price Index using only the highest one of the four average weekly prices for the applicable Month; and when the Monthly Imbalance is positive (due to Seller), Buyer will determine this portion of the Daily Price Index using only the lowest of the four average weekly prices for the applicable Month.

(iii)Monthly Imbalance Cash Out Due Seller.  If Seller’s Monthly Imbalance Quantity is positive (i.e., deliveries exceed redeliveries and are owed to Seller), Buyer will calculate the cash out amount using the applicable Cash Value Percentages set out in the table below as follows:  Buyer will value the portion of Seller’s monthly imbalance that falls within each range below as the product of (X) the Monthly Imbalance Quantity that falls within each range, (Y) the corresponding Cash Value Percentage, and (Z) the applicable average Daily Price Index specified in Subsection 3(f)(ii) above.

 

		
	
Monthly Imbalance Percentage
	
Cash Value Percentage

	
0% to 5%
	
100%

	
> 5% to 10%
	
90%

	
> 10% to 15%
	
80%

	
> 15% to 20%
	
70%

	
> 20% 
	
50%

 

(iv)Monthly Imbalance Cash Out Due Buyer. If Seller’s Monthly Imbalance Quantity is negative (i.e., redeliveries exceed deliveries, and are owed to Buyer), Buyer will calculate the cash out amount using the applicable Cash Value Percentages set out in the table below as follows:  Buyer will value the portion of Seller’s monthly imbalance that falls within each range below as the product of (X) the Monthly Imbalance Quantity that falls within each range, (Y) the corresponding Cash Value Percentage, and (Z) the applicable average Daily Price Index as specified in Subsection 3(f)(ii) above.

 

		
	
Monthly Imbalance Percentage
	
Cash Value Percentage

	
0% to  5%
	
100%

	
> 5% to  10%
	
110%

	
>  10% to  15%
	
120%

	
>  15% to  20%
	
130%

	
>  20%
	
150%

 

(g)Pipeline Penalties.  Seller will pay or reimburse Buyer for any imbalance penalties, interest, and related costs imposed upon Buyer by pipelines attributable to Seller’s over or under deliveries or other actions or omissions.

 

 

END OF EXHIBIT C TO GAS PURCHASE CONTRACT

C-2

Exhibit 10.9

 

EXHIBIT D

To GAS PURCHASE CONTRACT

Between APPROACH RESOURCES I, LP and APPROACH OIL & GAS INC.  as Seller and 

DCP OPERATING COMPANY, LP as Buyer

Dated as of May 1, 2019

 

  REDELIVERY POINTS 

 

Crockett County, Texas

 

				
	
No.
	
Meter No.
	
Pipeline
	
Plant, Location

	
1.
	
6632
	
Oasis
	
Ozona Plant, Crockett and Schleicher Counties, Texas

	
2.
	
3348-10
	
Oasis
	
Sonora Plant, Crockett and Schleicher Counties, Texas

 

D-1

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