Document:

Exhibit 10.6

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

GAS GATHERING CONTRACT

 

BETWEEN

 

DEVON GAS SERVICES, L.L.C.

 

AS “SHIPPER”

 

AND

 

SWG PIPELINE, L.L.C

 

AS “GATHERER”

 

                     1, 2014

 

East Johnson County System

 

Johnson County, Texas

 

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

GAS GATHERING CONTRACT

 

This Gas Gathering Contract is made and entered into this 1st Day of                   , 2014 (the “Effective Date”), by and between Devon Gas Services, L.L.C., a Texas limited liability company (“Shipper”), and SWG Pipeline, L.L.C., a Texas limited liability company (“Gatherer”).

 

WITNESSETH

 

WHEREAS, Shipper has available a supply of Committed Gas and desires for Gatherer to perform the services described herein with respect to said Committed Gas; and

 

WHEREAS, Gatherer or Gatherer’s Agents operates a pipeline system which is capable of receiving deliveries of Committed Gas and redelivering the Committed Gas; and

 

WHEREAS, Shipper desires to deliver to Gatherer the Committed Gas for Gathering and Gatherer desires to receive from Shipper such Committed Gas for those purposes, all subject to and in accordance with the terms and conditions contained in this Contract.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained in this Contract, Shipper and Gatherer (individually, a “Party” and collectively, the “Parties”) agree with each other as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1                               Each of the following terms enclosed by quotation marks in this ARTICLE 1.1 shall be a defined term, and each term enclosed by parentheses and quotation marks in the preamble or body of this Contract, or otherwise defined in this Contract, shall also be a defined term, and wherever used in this Contract, each such defined term shall have the meaning provided for it in this Contract:

 

1.1.1                     “Appendix” shall mean that certain “Appendix — General Terms and Conditions to Gas Gathering and Processing Contract”, which is attached hereto.

 

1.1.2                     “Btu” shall mean British Thermal Unit.

 

1.1.3                     “Committed Gas” shall mean all Natural gas produced from the Dedicated Area and attributable to Contractually Dedicated Area Interests, except for all Natural gas (including all constituents and components thereof, and all products derived therefrom) expressly excluded or reserved by Shipper hereunder, including but not limited to, ITEM 1.1 of this Contract.

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

1.1.4                     “Condensate” shall mean the liquid hydrocarbons, condensates, and/or distillates that are recovered from gas in typical oil and gas separators or pipeline drips, compressor discharge, or suction scrubbers, usually from changes in ambient or ground temperature and/or pressure, but not from processing.

 

1.1.5                     “Contract” shall mean this Gas Gathering Contract, including the Appendix and Exhibits attached hereto and any future amendments and/or exhibits.

 

1.1.6                     “Contractually Dedicated Area Interests” shall mean the following interests and rights (insofar only as those interests and rights cover or pertain to any lands located in the Dedicated Area) that are now or hereafter subject to a legally binding agreement or arrangement by virtue of which Shipper has or will have the right to market and/or Gather Natural gas and provide other services attendant thereto that is produced from those lands and/or lands spaced, pooled, or communitized therewith and is attributable to those interests and rights: (i) any fee or term mineral or royalty interest; (ii) any interest or right in or derived or carved from any oil and gas lease; (iii) any interest or right derived from any pooling or unitization order; and (iv) any interest or right in or derived from any agreement (including any farmout, operating, communitization, marketing, purchase and sales, pooling, or unit agreement) pertaining to any right or interest identified or referenced in clause or item (i), (ii) or (iii) of this definition of Contractually Dedicated Area Interests; and (v) any option or contractual right to acquire or earn any interest or right identified or referenced in clause or item (i), (ii), (iii) or (iv) of this definition of Contractually Dedicated Area Interests.

 

1.1.7                     “Cubic Foot of gas” shall mean the volume of gas necessary to fully fill one (1) cubic foot of unfilled space at a pressure base of 14.65 pounds per square inch absolute at a temperature of sixty degrees Fahrenheit (60°F).

 

1.1.8                     “Day” or “day” shall mean a period of 24 consecutive hours beginning and ending at 7:00 a.m., Central Clock Time.

 

1.1.9                     “Dedicated Area” shall mean all the lands included or enclosed in the bold outlined area depicted in Exhibit “A.” With respect to Tarrant County, Texas, the “Dedicated Area” shall only apply to those Contractually Dedicated Area Interests that are located entirely within Abstract A-931 of the Abner Lee Survey.

 

1.1.10              “Delivery Point(s)” shall be the locations as identified in ARTICLE 5.1, where Shipper delivers the Committed Gas to Gatherer.

 

1.1.11              “Firm Basis” shall mean the highest level of Gathering services then offered by Gatherer on Gatherer’s Pipeline System where Gatherer may interrupt its

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

performance without liability only to the extent such performance is prevented by reasons of Force Majeure or any other agreed upon event.

 

1.1.12              “Gathered Volume” shall mean the sum of Shipper’s volume of Committed Gas (in MMBtu) delivered at each Delivery Point less (i) Shipper’s compression fuel as described in ARTICLE 3.2.3, (ii) Shipper’s pro-rata share of fuel on Gatherer’s Pipeline System, (iii) loss and unaccounted for gas on Gatherer’s Pipeline System (including gains or losses), and (iv) gas used by Shipper for gas lift operations on Wells associated herewith.

 

1.1.13              “Gatherer’s Agent” shall mean any person or entity with which Gatherer has contracted to provide, on occasion, certain post-production services, including transmission, Gathering, treating, compression, measurement, accounting, or testing services, on behalf of Gatherer with respect to the Committed Gas.

 

1.1.14              “Gatherer’s Metering Facilities” shall mean Gatherer’s or Gatherer’s Agent’s meter and related facilities located at the Delivery Points and/or the Redelivery Points.

 

1.1.15              “Gatherer’s Pipeline System” shall mean Gatherer’s and/or Gatherer’s Agent’s pipeline system which is utilized to Gather the Committed Gas hereunder.

 

1.1.16              “Gathering” shall mean the receipt of gas at the Delivery Points by Gatherer or Gatherer’s Agent and the compression, treating, dehydration, and redelivery of said gas by Gatherer or Gatherer’s Agent at the Redelivery Points. Wherever the term “Gather” or “Gathered” is used with initial capitalization in this Contract, such term shall have the same meaning as Gathering.

 

1.1.17              “GPM” shall mean gallons per Mcf.

 

1.1.18              “Gross Heating Value” shall mean the number of Btus produced by the combustion at constant pressure of an amount of gas which would fully fill one (1) Cubic Foot of gas.

 

1.1.19              “Law” shall mean any and all constitutional provisions, rules, codes, regulations, statutes, ordinances, enactments, judicial and administrative orders, decrees, standards, decisions and rulings that are adopted, enacted, promulgated or issued by any federal, state, municipal, parish or tribal governmental authority, including the common law.

 

1.1.20              “Losses” shall mean any actual loss, cost, claim, penalty, liability, damage, demand, suit, sanction, cause of action of every kind of character (including damage to property, personal injury, or death), judgment, lien, encumbrance, fine,

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

or expense, including reasonable attorneys’ fees, investigation expenses, and court costs.

 

1.1.21              “Maximum Delivery Pressure” shall have the meaning set forth in ARTICLE 5.1.

 

1.1.22              “Natural gas” or “gas” shall mean natural gas produced from gas wells and gas produced in association with oil, including all hydrocarbon and non-hydrocarbon components, casinghead gas produced from oil wells, gas well gas and stock tank vapors.

 

1.1.23              “Mcf” shall mean one thousand (1,000) Cubic Feet of gas.

 

1.1.24              “MMBtu” shall mean one million (1,000,000) Btus.

 

1.1.25              “Month” or “month” shall mean the period of time beginning at 7:00 a.m. Central Clock Time on the first day of the calendar month and ending at 7:00 a.m. on the first day of the next succeeding calendar month.

 

1.1.26              “Psig” or “psig” shall mean pounds per square inch gauge.

 

1.1.27              “Redelivery Point(s)” shall have the meaning as set forth in ARTICLE 5.2.

 

1.1.28 “Third Party” shall mean any person or entity other than Gatherer, Gatherer’s Agent, or Shipper.

 

1.1.29              “Wells” shall mean any well classified by any governmental authority or under any applicable Law as a gas well or oil well in which gas produced therefrom and attributable to a Contractually Dedicated Area Interest subject to this Contract has been dedicated to Shipper, whether such well now exists or is hereafter drilled.

 

1.2                               The headings and titles in this Contract are for guidance and convenience of reference only and do not limit or otherwise affect or interpret the provisions of this Contract.  Each reference made in this Contract to an article or item (as used in the Appendix) is to the applicable article or item in this Contract unless the context clearly indicates otherwise.

 

1.3                               The words “this Contract”, “herein”, “hereby”, “hereunder”, “hereof”, and words of similar import refer to this Contract as a whole and not to any particular part of this Contract, unless the context clearly indicates otherwise.

 

1.4                               Each reference made in this Contract to an exhibit is to the applicable exhibit attached hereto, unless the context clearly indicates otherwise.  The Appendix and each exhibit attached hereto are made a part hereof.

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

1.5                               As used in this Contract, (i) any pronoun in masculine, feminine or neuter gender shall be construed to include all other genders, (ii) the term “including” shall be construed to be expansive rather than limiting in nature and to mean “including without limitation”, except where the context clearly otherwise requires, (iii) each term that is defined in this Contract in the singular shall include the plural of such term, and each term that is defined in this Contract in the plural shall include the singular of such term, and (iv) the words, phrases, and terms used herein shall have their ordinary meaning unless it is clearly indicated otherwise in this Contract or unless such word, phrase or term is defined in this Contract.

 

1.6                               Both Parties participated in the drafting of this Contract.  If any ambiguity is contained herein, no weight shall be given in favor of or against a Party in resolving that ambiguity on account of that Party’s drafting of this Contract.

 

1.7                               Any reference to any time or period of time is to the applicable time or period of time in the Dedicated Area.

 

ARTICLE 2

DEDICATION AND PROPERTIES COVERED

 

2.1                               Subject to the terms and conditions of this Contract and except as otherwise provided in this Contract, Shipper hereby commits and dedicates exclusively to Gatherer all of the Committed Gas attributable to the Contractually Dedicated Area Interests for the term of this Contract for the purposes provided in this Contract. The commitment and dedication set forth in this Section 2.1 shall be deemed a covenant running with the Dedicated Area and shall be binding on the successors and assigns of Shipper.

 

2.2                               Shipper represents and warrants to Gatherer that when Shipper delivers the Committed Gas to Gatherer during the term hereof, Shipper will have the right to Gather and/or market the Committed Gas produced from the Contractually Dedicated Area Interests, free from liens and adverse claims of every kind and, subject to the reservation of rights described in ITEM 1.1(c), will not waive or consent to any release, termination, or early expiration of any said Contractually Dedicated Area Interests during the term hereof without the express prior written consent of Gatherer, which shall not be unreasonably withheld. Shipper further represents and warrants that when the Committed Gas is delivered to Gatherer at the Delivery Points that such Committed Gas will be owned or controlled by Shipper and will not be subject to any prior unreleased dedication as of the Effective Date. If after the Effective Date Shipper obtains the right to market and/or Gather gas within the Dedicated Area, then that gas shall become Committed Gas hereunder when Shipper obtains that right except as otherwise provided herein; provided, however, if said gas is subject to prior unreleased written dedication or commitment for the type of services provided for herein, then such interests shall be excluded from dedication hereunder unless and until all such contractual commitments and dedications have expired or are terminated, or have been assigned to Shipper or released.  Shipper

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

shall indemnify, protect, defend, and hold Gatherer harmless from all Losses incurred or suffered by Gatherer arising from and out of claims of any Third Party with respect to the representations and warranties in this ARTICLE 2.2.

 

2.3                               Subject to the terms of this Contract, at the Delivery Points, Shipper will deliver to Gatherer, and Gatherer will receive from Shipper, all of the Committed Gas produced from the Wells insofar as that Committed Gas is attributable to the Contractually Dedicated Area Interest in the Wells.

 

2.4                               Contemporaneously with the execution of this Contract, the Parties shall execute, acknowledge, deliver, and record a “short form” memorandum of this Contract in the form of Exhibit “C” which shall be placed of record in the counties in which the Dedicated Area is located. All preparation to, filing of, and costs associated with any subsequent amendment to said “short form” memorandum shall be the sole responsibility of and borne solely by Gatherer.

 

2.5                               Promptly after Gatherer’s receipt of each written request for same by Shipper, Gatherer shall deliver to Shipper a written release in recordable form of the dedication and commitment provided in ARTICLE 2.1 regarding any Natural gas (including any Committed Gas) released by Gatherer under ITEM 2.4 or ITEM 3.2.

 

ARTICLE 3

FEES AND ALLOCATION

 

3.1                               Subject to all other applicable provisions of this Contract and as full consideration for the quantity of Committed Gas Gathered hereunder by Gatherer each month, Shipper shall pay and Gatherer shall accept from Shipper an amount equal to sum of the applicable fees and payments as described in this ARTICLE 3.

 

3.2.1                     The fee for Gathering, compressing, treating, and dehydrating the Committed Gas from the Delivery Point to the Redelivery Point (“Gathering Fee”) shall equal $** per MMBtu multiplied by the Gathered Volume.

 

3.2.2                     Beginning January 1, 2015 and each January 1st thereafter during the term hereof, the Gathering Fee shall be automatically adjusted by the percentage increase or decrease in the Consumer Price Index, All Urban Consumers (“CPI”) as published by the U.S. Department of Labor Bureau of Labor Statistics calculated for the twelve (12) Months immediately preceding the date of escalation; provided, however, the fee shall never be decreased below its initial amount.  The Parties shall use the negotiation procedure described in ITEM 11.1 to attempt to resolve any dispute between them regarding any change or adjustment to the CPI.  If the Parties fail to fully resolve the dispute, either Party may invoke the binding arbitration procedure described in ITEM 11.6 to resolve it.  The Gathering Fee for the immediately preceding calendar year shall remain in effect

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

until a new Gathering Fee (as well as the effective dates thereof) is agreed upon by the Parties or determined by arbitration, and such agreed upon or determined fee shall be retroactively applied for the applicable new calendar year.

 

3.2.3                     Each Month during the term of this Contract, Gatherer is authorized to utilize a portion of the Committed Gas received from Shipper at each Delivery Point as compression fuel for the operation of Gatherer’s compression equipment hereunder.

 

3.3                               Volume Commitment. Subject to the terms and conditions hereof, the Parties agree upon the following:

 

(a)         Gathering Volume Commitment. Shipper shall deliver to Gatherer a quantity, in aggregate, of Committed Gas not less than 125,000 Mcf per Day as averaged for each quarter during each calendar year for the first five (5) years of the Initial Term (“Gathering Volume Commitment”). Subject to ARTICLE 3.3(b) and ARTICLE 3.3(c), in the event Shipper fails to deliver the Gathering Volume Commitment for any applicable calendar quarter, Shipper shall pay Gatherer an amount equal to the product of the (i) Gathering Fee and (ii) positive difference between the Gathering Volume Commitment and the Gathered Volume for such calendar quarter (“Gathering Volume Commitment Deficiency Payment”). Any Gathering Volume Commitment Deficiency Payment made by Shipper to Gatherer hereunder shall be considered liquidated damages and Gatherer’s sole and exclusively remedy regarding the delivery deficiency of the Gathering Volume Commitment.

 

(b)         Relief from Volume Commitment. Shipper shall be excused from delivering any portion of the Gathering Volume Commitment and making payment of any corresponding deficiency payment related thereto only under the following circumstances:

 

(i)                                     If Gatherer fails to Gather any of the Committed Gas and such failure is not expressly excused hereunder; or

 

(ii)                                  If, due to an event of Force Majeure, Gatherer is unable to Gather any portion of the Committed Gas for a period greater than ten (10) consecutive days, then for each day beyond said 10-day period, the applicable corresponding deficiency payment shall not apply to the extent of the affected volumes of Committed Gas.

 

(c)          Over/Under Deliveries of Gathering Volume Commitment. If Shipper, during any quarter of a calendar year in which the Gathering Volume Commitment is in effect, delivers to Gatherer an amount of Committed Gas: (i) in excess of the Gathering Volume Commitment for such quarter (“Excess Gathered Amount”), then Shipper shall have the right to credit said Excess Gathered Amount against its Gathering

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

Volume Commitment for the succeeding calendar quarter; or (ii) that is less than the Gathering Volume Commitment for such quarter (“Deficient Gathered Amount”), then Shipper shall have the right to make-up its Gathering Volume Commitment for such calendar quarter by delivering to Gatherer the Deficient Gathered Amount in excess of the Gathering Volume Commitment for the succeeding calendar quarter. In the event Shipper fails to deliver the Deficient Gathered Amount to Gatherer during said succeeding calendar quarter, then Shipper shall pay Gathering Volume Commitment Deficiency Payment in accordance with ARTICLE 3.3(a).

 

ARTICLE 4

TERM AND TERMINATION

 

4.1                               This Contract shall be effective from the Effective Date and shall continue and remain in full force and effect for a primary term of ten (10) years (the “Initial Term”) and year-to-year thereafter until terminated by Gatherer or Shipper (i) upon the giving of notice to the other Party of its intention to terminate this Contract at least one hundred eighty (180) days prior to the end of the Initial term or any extension term or (ii) as otherwise provided in this ARTICLE 4.

 

4.2                               Prior to the termination or expiration of this Contract, each Party shall use its best efforts to negotiate in good faith mutually agreeable services and associated rates in order to extend the term of this Contract. If the Parties are unable to agree upon a certain service, what may or may not be included in said service, or the rate for said service, then such dispute shall be resolved in accordance with ITEM ELEVEN.

 

4.3                               The termination of this Contract in accordance with this ARTICLE 4 shall not impair, impede or otherwise adversely affect any right, claim or cause of action that a Party may have arising prior to or as a result of that termination, including the right to obtain and receive any payment owing under this Contract.

 

4.4                               This ARTICLE 4.4, ARTICLE 4.3, ARTICLE 4.2, ARTICLE 7.2, and ITEMs 10.7, 10.13, 10.14, and ELEVEN of the Appendix shall survive the termination of this Contract.

 

ARTICLE 5

DELIVERY/REDELIVERY POINTS AND PRESSURE

 

5.1                               The Delivery Point(s) for the Committed Gas shall be at the inlet flange of Gatherer’s Metering Facilities located near the site of production facilities for each Well, or at other mutually agreeable locations on Gatherer’s Pipeline System. Shipper shall cause the Committed Gas to be delivered at a pressure sufficient to allow the Committed Gas to flow into Gatherer’s Pipeline System at each Delivery Point against the prevailing line pressure at such point but not in excess of the maximum allowable operating pressure

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

(“MAOP”) of Gatherer’s Pipeline System at such Delivery Point. Gatherer retains the right to set a maximum delivery pressure, relative to Shipper’s deliveries of Committed Gas, so that the system can be operated in an efficient manner (“Maximum Delivery Pressure”); provided, however, it is the Parties’ intent for Gatherer to operate Gatherer’s Pipeline System in a manner that maximizes the amount of Committed Gas to be delivered into the system while allowing Gatherer to optimize the efficiency thereof. If Shipper elects to install compression facilities and Gatherer reasonably determines that there is a pulsation problem because of those compression facilities, then Shipper will install a pulsation dampener (which shall have a design reasonably acceptable to Gatherer) at Shipper’s sole cost and expense, between such compression facilities and Gatherer’s Metering Facilities at the Delivery Point(s).

 

5.2                               The Redelivery Point(s) for the Committed Gas shall be at the inlet to each downstream pipeline’s metering facilities located at mutually agreeable points as further described on Exhibit “B.” Gatherer shall cause the Committed Gas to be delivered at a pressure sufficient to allow the Committed Gas to flow into each downstream pipeline at the Redelivery Point(s) against the prevailing pressure but not in excess of the MAOP of the downstream pipeline at the Redelivery Point(s).

 

5.3                               Shipper shall not be required to provide Gatherer with nominations of the Committed Gas at the Delivery Points. Shipper shall be solely responsible for all nominations and scheduling for the Committed Gas at the Redelivery Points and shall be solely responsible for any costs, penalties, and expenses associated therewith including any imbalances. If Shipper fails for any reason to take or otherwise dispose of all or any part of the Committed Gas for any month during the term hereof, then Gatherer shall have the right, but not the obligation, to market said Committed Gas in a commercially reasonable manner; provided, however, that Gatherer shall account to and timely pay Shipper for the proceeds received by Gatherer from the disposition thereof.

 

ARTICLE 6

NOTICES

 

6.1                               All notices provided for herein shall be in writing and may be sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service, first class mail, or hand delivered to a Party at its applicable address listed below.  Notice shall be considered given on the first business day after its receipt by the addressee.  In the absence of proof of the actual receipt date, the following presumptions will apply:  (i) notices sent by facsimile will be deemed to have been received upon the sending Party’s receipt of its facsimile machine’s confirmation of successful transmission; (ii) notice by overnight mail or courier will be deemed to have been received on the next business day after it was sent or such earlier time as is confirmed by the receiving Party; and (iii) notice via first class mail will be considered delivered five (5) business days after

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

mailing.  Each Party will promptly notify to the other Party upon any change in its address.

 

GATHERER’S ADDRESS:

SWG Pipeline, L.L.C.

 

 

	
SHIPPER’S ADDRESS:
    	
 
    	
 
    
	
NOTICES & CORRESPONDENCE
    	
 
    	
STATEMENTS & PAYMENTS
    
	
Devon Gas Services, L.L.C.
    	
 
    	
Devon Gas Services, L.L.C.
    
	
 
    	
 
    	
 
    
	
Attn: Contract Administration - Marketing
    	
 
    	
Attn: Midstream Accounting
    
	
333 West Sheridan Avenue
    	
 
    	
333 West Sheridan Avenue
    
	
Oklahoma City, OK 73102-5015
    	
 
    	
Oklahoma City, OK 73102-5015
    
	
Fax: (405) 234-2737
    	
 
    	
Fax: (405) 552-1520
    

 

ARTICLE 7

FINANCIAL RESPONSIBILITY

 

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

 

7.2                               In the event (each an “Event of Default”) either Party or, if applicable, its credit support provider (the “Defaulting Party”) shall: (i) make an assignment or any general arrangement for the benefit of creditors; (ii) file a petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding or case under any bankruptcy or similar Law for the protection of creditors or have such petition filed or

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

proceeding commenced against it; (iii) otherwise become bankrupt or insolvent (however evidenced); (iv) be unable to pay its debts as they fall due; (v) have a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of its assets; (vi) fail to perform any material obligation to the other Party with respect to any credit support obligations relating to this Contract; (vii) fail to give Adequate Assurance of Performance hereunder within 48 hours but at least one business day of a written request by the other Party; (viii) not have paid any material amount due the other Party hereunder on or before the second business day following written notice that such payment is due; or (ix) fail to promptly take and diligently prosecute appropriate actions to remedy a material default or breach of a material covenant or provision hereunder after receiving written notice thereof from the other Party and to remedy such default or breach within thirty (30) days (or longer if such default or breach reasonably requires a longer cure period); then the other Party (the “Non-Defaulting Party”) shall have the right, at its sole election, to immediately withhold and/or suspend deliveries or payments upon notice, in addition to any and all other remedies available hereunder.

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

IN WITNESS WHEREOF, the Parties have caused this Contract to be executed in multiple originals by the proper representatives thereunto duly authorized, as of the date first hereinabove written, but this Contract shall be effective as of the Effective Date.

 

	
GATHERER:
    	
 
    	
SHIPPER:
    
	
SWG PIPELINE, L.L.C.
    	
 
    	
DEVON GAS SERVICES, L.L.C
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
Name: Susan E. Alberti
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
Title:     Senior Vice President
    
					

 

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TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

APPENDIX - GENERAL TERMS AND CONDITIONS

 

TO GAS GATHERING CONTRACT

BETWEEN

DEVON GAS SERVICES, L.L.C., “SHIPPER”

AND

SWG PIPELINE, L.L.C., “GATHERER”

 

DATED EFFECTIVE:                 1, 2014

 

For the consideration stated in this Contract, the Parties further agree as follows:

 

ITEM ONE

RESERVATIONS BY SHIPPER

 

1.1                               The following rights, which are vested in Third Parties owning the Contractually Dedicated Area Interests, are and shall be excepted and excluded from the purview of this Contract and are not and shall not be subject to the dedication and commitment provided in ARTICLE 2.1, and each such Third Party may exercise the following rights free and clear of any claim of Gatherer:

 

(a)                                 The right to use, but not to sell to others, sufficient gas for the development and operation of the Wells and appurtenant facilities (in conjunction therewith) in which that Third Party has an ownership interest, including use of gas for drilling, workovers, completions, operations, treating, gas lift, pressure maintenance, and fuel.

 

(b)                                 The right to space, pool, communitize, and unitize any of the Contractually Dedicated Area Interests with other lands, leases, interests, and properties of that Third Party or others located in the field in which those Contractually Dedicated Area Interests are located, and all Committed Gas attributable to those Contractually Dedicated Area Interests produced therefrom shall be covered by this Contract, except as otherwise provided in this Contract; provided, that the exercise of such right by that Third Party shall not diminish Gatherer’s right or increase its obligations in any material respect with respect to the Committed Gas produced from the Contractually Dedicated Area Interests covered hereby.

 

(c)                                  The right to exploit, use, maintain, and operate the Contractually Dedicated Area Interests covered by this Contract and all Wells, properties, facilities, and equipment incidental, related or appurtenant thereto in which that Third Party has an interest in such manner as that Third Party deems advisable, in the Third Party’s sole discretion, including the right to drill or complete new Wells, to repair, recomplete, or rework any Wells, to reduce, suspend or shut-in the

 

APPENDIX - 1

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

production from any Wells, to acquire new or additional Contractually Dedicated Area Interests, to renew, extend or amend in whole or in part any of the Contractually Dedicated Area Interests covered by this Contract, to abandon any Well, and to release or terminate all or any portion of Contractually Dedicated Area Interests in order to avoid or resolve any pending or threatened litigation concerning the validity of those Contractually Dedicated Area Interests, or that are not deemed by that Third Party as being capable of producing oil or gas in commercial quantities or as having been perpetuated beyond their respective stated terms in accordance with the terms of the respective instruments creating those Contractually Dedicated Area Interests.

 

(d)                                 The right to provide Natural gas which such Third Party is obligated to provide to a lessor, an owner of an overriding royalty or other owner of a non-cost bearing interest, or a surface owner under the terms of an oil and gas lease or other agreement, contract or conveying instrument.

 

(e)                                  The right to market and/or Gather all of such Third Party’s share of Natural gas attributable to (1) any Contractually Dedicated Area Interests that are subject on the date hereof to a prior dedication in favor of another Third Party (whether under a gas purchase, Gathering and/or processing contract, call on production, or similar agreement or arrangement) or (2) any Contractually Dedicated Area Interests that are acquired after the date hereof by such Third Party and are subject, when acquired, to a pre-existing prior sales, Gathering and/or processing dedication made by another Third Party in favor of a purchaser, gatherer or processor other than Gatherer or Shipper.

 

(f)                                   The right to market and/or Gather all of such Third Party’s share of Natural Gas from any Well not operated by it during any period in which such Third Party does not own a majority working interest in such Well and such Third Party has elected to market its share of production from that Well to another Third Party in accordance with applicable Law, or the applicable operating, unit or other agreement between such Third Party and the operator of that Well.

 

1.2                               It is agreed that Shipper may cause or allow the Committed Gas to be separated by means of a conventional ambient mechanical wellhead gas-oil separator prior to its delivery to Gatherer.

 

ITEM TWO

QUALITY

 

2.1                               Gatherer shall not be obligated to take any Committed Gas tendered hereunder unless the same meets the following requirements as to quality:

 

APPENDIX - 2

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

Hydrogen Sulfide:  The Committed Gas shall not contain more than four parts per million (4 ppm) of hydrogen sulfide as determined by a quantitative test generally accepted in the natural gas industry for such purpose.

 

Total Sulphur:  The Committed Gas shall not contain more than twenty (20) grains of total sulphur per one hundred (100) cubic feet of gas as determined by a quantitative test generally accepted in the natural gas industry for such purpose.

 

Temperature:  The Committed Gas shall not have a temperature of less than forty degrees Fahrenheit (40°F) nor more than one hundred twenty degrees Fahrenheit (120°F).

 

Carbon Dioxide:  The Committed Gas shall not contain carbon dioxide in excess of two percent (2%) by volume.

 

Oxygen:  The Committed Gas shall contain no oxygen.

 

Nitrogen:  The Committed Gas shall not contain nitrogen in excess of two percent (2%) by volume.

 

Total Inert Gases:  The Committed Gas shall not contain total inert gases in excess of four percent (4%) by volume.

 

Objectionable Liquids and Solids and Dilution:  The Committed Gas shall (i) be free of objectionable liquids and solids, as determined by Gatherer in good faith, (ii) be commercially free from dust, salts, soaps, foam-forming constituents, gums, gum-forming constituents, paraffins, or other similar liquid or solid matter which become separated from the Committed Gas in the course of gathering through Gatherer’s Pipeline System, and (iii) any other impurities, including microbiologically corrosive agents.

 

Heating Value:  The Committed Gas shall not have a Gross Heating Value of less than 950 Btu per Cubic Foot of gas under the conditions of measurement contained herein.

 

In the event that the quality specifications of any pipeline receiving gas from Gatherer’s Pipeline System is more stringent than the applicable quality specification set forth in this ITEM 2.1, then notwithstanding any reasonableness standard agreed to by Gatherer regarding said quality specifications, all Committed Gas delivered by Shipper to Gatherer shall meet the quality specifications of that pipeline.

 

2.2                               Gatherer’s acceptance of any quantities of Committed Gas which fail to conform to any of the applicable quality specifications provided in ITEM 2.1 shall not constitute a

 

APPENDIX - 3

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

waiver by Gatherer of the quality specifications with regard to future deliveries of Committed Gas.

 

2.3                               In the event Shipper delivers Committed Gas which fails to meet the quality specifications described in ITEM 2.1:  (a) Shipper shall be responsible for any and all Losses suffered by Gatherer to Gatherer’s Pipeline System or the gas within Gatherer’s Pipeline System arising from or relating to the delivery of the Committed Gas not meeting those quality specifications including, without limitation, corrosion or damage to Gatherer’s Pipeline System, the loss of line pack due to contamination, and loss of business while purging and re-packing Gatherer’s Pipeline System and (b) in the event gas which is committed to Gatherer’s Pipeline System is commingled with the Committed Gas from Shipper which fails to meet the quality specifications provided herein, Shipper shall also be responsible for any and all Losses suffered or incurred by Gatherer due to claims from any other shipper on Gatherer’s Pipeline System who can demonstrate to Gatherer’s reasonable satisfaction that such shipper’s gas was rejected or rendered “non-conforming” due to it being commingled with the Committed Gas that did not meet the specifications described in ITEM 2.1.

 

2.4                               If Gatherer notifies Shipper at any time that the Committed Gas tendered at any Delivery Points does not conform with the quality specifications described in ITEM 2.1 (excluding the specifications for hydrogen sulfide), then Shipper may bring such Committed Gas into conformity with such specifications within a reasonable period of time (immediately in those situations in which Gatherer notifies Shipper that such Committed Gas threatens the integrity of Gatherer’s Pipeline System or adversely affects Gatherer’s ability to deliver into downstream pipelines), including the right to pare the gas specifications of Delivery Points, so long as Shipper’s actions do not adversely affect Gatherer’s ability to operate Gatherer’s Pipeline System. If Shipper fails to do so promptly after its receipt of such notification, Gatherer may, at its option and without limitation, (i) continue to accept the Committed Gas as delivered by Shipper without charging Shipper any type of fee, cost or expense for such off-spec Committed Gas, (ii) refuse to accept delivery of such Committed Gas pending the correction of the deficiency by Shipper, or (iii) take any action reasonably necessary to conform the Committed Gas with the quality specifications provided in ITEM 2.1, the cost of which shall be charged to Shipper hereunder.  Absent exigent circumstance, before Gatherer takes any action under the immediately preceding sentence to conform the Committed Gas to the quality specifications provided in ITEM 2.1, Gatherer shall notify Shipper of such intended action and the estimated cost thereof. After receiving Shipper’s notification, Shipper shall immediately inform Gatherer whether Shipper authorizes Gatherer to conform the Committed Gas to those quality specifications.  If Shipper elects not to treat the Committed Gas itself or does not allow Gatherer to treat the Committed Gas, or if Gatherer elects not to treat or blend the Committed Gas to conform the Committed Gas to the quality specifications provided in ITEM 2.1, Gatherer shall, upon the written request of Shipper, permanently release from this Contract all non-conforming Natural gas.

 

APPENDIX - 4

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

Notwithstanding this ITEM 2.4, Gatherer shall have the ongoing right to immediately shut off any Committed Gas if Gatherer determines that such Committed Gas threatens the integrity of Gatherer’s Pipeline System or adversely affects downstream facilities or markets.

 

ITEM THREE

PIPELINE CONNECTION

 

3.1                               It is understood and agreed that Gatherer and Shipper, in accordance with ARTICLE 5.1, have decided, or will at a subsequent point in time decide, upon the location of the Delivery Point for each Well committed hereunder.

 

3.2                               Promptly after Shipper has informed Gatherer that the Committed Gas is or will be ready for delivery to Gatherer from a Well committed to or dedicated to Gatherer under this Contract and such Well is located within three (3) miles of Gatherer’s Pipeline System,  Gatherer shall, at its own expense, connect such Well to Gatherer’s Pipeline System. If said Well is greater than three (3) miles from Gatherer’s Pipeline System, then Gatherer shall have the right, but not the obligation, to connect said Well at its sole expense. If Gatherer declines to connect said Well to Gatherer’s Pipeline System, Shipper shall have the right, but not the obligation, to construct the line from that Well to a mutually agreeable point on Gatherer’s Pipeline System where Gatherer’s Metering Facilities shall be provided by Gatherer at Shipper’s sole expense.  If neither Gatherer nor Shipper elects to connect any such Well to Gatherer’s Pipeline System, then Gatherer shall promptly provide Shipper, upon Shipper’s written request, with a written release from this Contract insofar as it covers such Well, the Contractually Dedicated Area Interests covering such Well, and the Natural gas produced therefrom or attributable thereto.

 

ITEM FOUR

FIELD EQUIPMENT

 

4.1                               Subject to the terms of this Contract, with respect to any Well which has been connected to Gatherer’s Pipeline System pursuant to this Contract, Shipper shall contractually require that one or more owners of the Contractually Dedicated Area Interests in the Well (“Contracted Parties”) furnish, install and maintain, or use their respective reasonable efforts to cause the operator of such Well to furnish, install and maintain such post-production equipment at the well site of such Well (such as a separator or a treater) between the wellhead of such Well and the first pipe connection to Gatherer’s Pipeline System as is reasonably necessary for the proper, safe and efficient operation of such Well, as reasonably determined by such Contracted Parties in their sole discretion, and to enable Shipper to make delivery, or cause delivery to be made, of Committed Gas to such pipe connection to the Delivery Points.

 

(a)                                 Promptly after receiving a written request from Gatherer, Shipper shall require the applicable Contracted Parties to install a high-low shut-in device on those

 

APPENDIX - 5

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

Contracted Parties’ applicable facilities covered by this Contract which will shut off deliveries of Committed Gas in the event those Contracted Parties’ delivery pressure reaches or exceeds the Maximum Delivery Pressure, which may be reestablished by the Parties from time to time, or in the event Gatherer has, or the Contracted Parties have,  a sudden drop in line pressure.  Shipper shall contractually require all applicable Contracted Parties to annually test their respective high-low shut-in devices through which the Committed Gas flows.

 

(b)                                 Shipper shall furnish any information reasonably requested by Gatherer regarding any Contracted Parties’ high-low shut-in equipment, or delivery lines through which the Committed Gas flows.  Shipper shall contractually require Contracted Parties to maintain their respective production equipment at or in the vicinity of the Wells in good condition (ordinary wear and tear excepted) at all times in accordance with generally accepted prudent industry practices when producing Wells are connected to Gatherer’s Pipeline System at any Delivery Point.

 

(c)                                  Upon reasonable notice to Shipper, Gatherer or Gatherer’s Agent, at their respective sole risk and expense, shall have the right at all reasonable times to inspect and witness any test on any Contracted Parties’ high-low pressure shut-in production equipment at or tied to any Well.  In the event of an emergency or the failure of Shipper to regulate the deliveries of Committed Gas when reasonably requested by Gatherer, Gatherer or Gatherer’s Agent shall have the right to require Shipper to require the applicable Contracted Parties to shut-off the flow of Committed Gas into Gatherer’s Pipeline System until such emergency no longer exists or Gatherer begins such resumption of deliveries, as applicable, and Gatherer shall not be liable to Shipper for any damage that may result to the Wells or the Contracted Parties’ equipment.  If reasonably possible under the circumstances, Gatherer will notify Shipper of any action that Gatherer or Gatherer’s Agent intends to take pursuant to the immediately preceding sentence before any such action is taken by Gatherer or Gatherer’s Agent.  If it is not reasonably possible for Gatherer to notify Shipper before Gatherer or Gatherer’s Agent takes any such action, then Gatherer shall notify Shipper of such action promptly after taking such action.

 

4.2                               All Condensate and drip liquids attributable to the Committed Gas accumulating in the drips, separators and/or lines from the respective Wells upstream or downstream of a Delivery Point shall belong to and be owned by Shipper. Gatherer and Shipper shall determine a mutually agreeable location(s) for the delivery of such Condensate and drip liquids and Shipper shall be solely responsible for the disposition of such Condensate and drip liquids from said location(s).

 

4.3                               In the event the oxygen content of the Committed Gas tendered at any Delivery Point does not conform with the quality specifications set forth in ITEM 2.1 above, Shipper

 

APPENDIX - 6

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

shall, at the request of Gatherer, procure and install (or cause to be procured and installed), at Shipper’s expense, an oxygen analyzer and control device on Shipper’s facilities covered by this Contract that will shut off deliveries of Committed Gas in the event the oxygen content of the Committed Gas tendered at any Delivery Points does not conform with the quality specifications set forth in ITEM 2.1.  Shipper shall annually test, or cause the owner of such facilities to annually test, such analyzer and control device to confirm its proper operation.

 

ITEM FIVE

QUANTITY

 

5.1                               Gatherer shall provide Gathering services to Shipper on a Firm Basis up to the physical and operational capacity of Gatherer’s Pipeline System as exists as of the Effective Date. During the time hereof and as to the physical and operational capacity of Gatherer’s Pipeline System as exists as of the Effective Date, Shipper shall have the highest priority of any shipper on Gatherer’s Pipeline System and Shipper’s capacity on Gatherer’s Pipeline System shall not be prorated with respect to any other shipper unless required by applicable Law.

 

5.2                               Subject to the other provisions of this Contract, Shipper shall deliver to Gatherer at the Delivery Points, and Gatherer shall receive from Shipper at the Delivery Points, all of the Committed Gas produced from the Dedicated Area attributable to the Contractually Dedicated Area Interests.  Upon receipt of the Committed Gas at the Delivery Points, Gatherer shall Gather the Committed Gas and redeliver to Shipper at the Redelivery Points all of the Committed Gas.

 

5.3                               During any period when the capacity of Gatherer’s Pipeline System is constrained to Gather, transport, compress and/or treat all of the gas connected thereto, the volumes of Committed Gas subject to ARTICLE 3.3 shall not be reduced by Gatherer prior to the reduction of other shippers’ gas volumes unless required by applicable Law. Gatherer’s failure to take said constrained volumes of Committed Gas shall not be deemed a breach of Gatherer’s obligations hereunder.

 

5.4                               In the event Gatherer, in its sole discretion, agrees to allow Shipper to deliver the Committed Gas hereunder “full wellstream,” then in addition to the provisions set forth above in ITEM 5.1 and notwithstanding the provisions of ITEM 4.2, Shipper may also deliver to Gatherer at the Delivery Points all liquids and any produced saltwater (or any similar nuisance liquids) attributable to Shipper from such Wells.  Gatherer shall receive and handle all volumes of liquids and saltwater (or any similar nuisance liquids) attributable to Shipper pursuant to the terms herein and then redeliver to Shipper equivalent volumes of liquids and saltwater (and any similar nuisance liquids) at a mutually agreeable facility.  Shipper shall then dispose of the liquids and saltwater at its sole cost and risk.

 

APPENDIX - 7

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

5.5                               The Parties recognize that certain quantities of gas and/or electricity will be used to fuel or power compression equipment and for operational purposes, and that gas may be lost, gained, and/or unaccounted for on Gatherer’s Pipeline System.  Shipper shall provide Gatherer with its pro rata volumetric share of such fuel and gas lost, gained, and/or unaccounted for in-kind relative to all sources of gas into Gatherer’s Pipeline System and Shipper shall reimburse Gatherer with its pro rata volumetric share of electrical power costs relative to all sources of gas into Gatherer’s Pipeline System.

 

5.6                               If at any time Gatherer is unable or fails for any reason to receive any quantity of Committed Gas available by Shipper under this Contract (absent Shipper’s failure to deliver the Committed Gas to Gatherer), the affected quantity of Committed Gas made available by Shipper and not taken by Gatherer shall be temporarily released from this Contract.  Shipper may, at its sole option and in addition to any other rights and remedies Shipper may have hereunder, at law or in equity, deliver all or any portion of the Committed Gas temporarily released from this Contract to an alternative pipeline or purchaser. This temporary release shall cease and Shipper shall resume delivery of the affected Committed Gas to Gatherer when Gatherer has notified Shipper that the cause of Gatherer’s inability or failure to receive has been completely alleviated and Gatherer is ready, willing, and able to begin receiving the Committed Gas again. Upon the earlier of Shipper’s receipt of Gatherer’s notice or at such time when Shipper is legally or contractually able to do so (but in no event greater than 90 Days), Shipper shall resume deliveries to Gatherer.

 

5.7                               Provided that Gatherer is able to meet its obligations to Shipper under the terms of this Contract, this Contract shall not preclude Gatherer from providing Gathering services to Third Parties.

 

ITEM SIX

MEASUREMENT

 

6.1                               The unit of volume for the measurement of Committed Gas shall be one (1) Cubic Foot of gas.  All fundamental constants, observations, records and procedures involved in determining and/or verifying the quantity and other characteristics of Committed Gas delivered hereunder, unless otherwise specified herein, shall be in accordance with the standards prescribed in the American Petroleum Institute Manuel of Petroleum Measurement Standards, Chapter 14, Section 3 (Latest Revision).

 

6.2                               Gatherer or Gatherer’s Agent shall, install, maintain and operate a Gatherer’s Metering Facility located on Gatherer’s Pipeline System at each Delivery Point and the Redelivery Point. At each such Gatherer’s Metering Facility, Gatherer or Gatherer’s Agent will install, maintain and operate orifice meters or other measuring devices that meet accepted standards prescribed in the American Petroleum Institute Manual of Petroleum

 

APPENDIX - 8

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

Measurement Standards, Chapter 14, Section 3 (Latest Revision). Gatherer or Gatherer’s Agent may also install Electronic Flow Meters (EFM), which if installed, will be designed, install, and operated in accordance with generally accepted prudent natural gas industry standards. Each such Gatherer’s Metering Facility shall be so equipped with orifice meters, recording gauge, or other types of pneumatic or electronic meters or measuring devices of standard make and design commonly utilized in the natural gas industry in order to accomplish the accurate measurement of gas flowing through such equipment. Gatherer shall maintain all such meters, devices, gauges, and equipment in good operating condition in accordance with generally accepted prudent natural gas industry standards. Shipper will have access to Gatherer’s metering equipment and information received from such metering equipment at reasonable hours. Each Contracted Party will have access to any such equipment and information if that Contracted Party’s Committed Gas flows through said equipment. If a meter station is set up with a chart recorder, the changing of charts shall be done by Gatherer or Gatherer’s Agent and Gatherer shall provide Shipper with a copy thereof upon reasonable request. The maintaining, calibrating and adjusting of all meters and related measurement facilities shall be done by Gatherer or Gatherer’s Agent in accordance with generally accepted prudent natural gas industry standards and practices. The measuring stations located at any Redelivery Point may be installed, maintained and operated by a Third Party in conformity with the requirements provided in this ARTICLE 6.2 and the Parties agree that the volume, quality, Gross Heating Value, and specific gravity determined by such Third Party in accordance with this Contract shall be utilized in this Contract as if determined by Gatherer or Gatherer’s Agent hereunder.

 

6.3                               Shipper or any applicable Contracted Party may, at its option and expense, install a check meter or meters at any or all Delivery Points for the purpose of checking Gatherer’s or Gatherer’s Agent’s metering equipment.  Any such check meter shall be installed in such a way so as not to interfere with the operations of Gatherer’s Pipeline System. The operating, maintaining, calibrating and adjusting of such check meters and related measurement equipment shall be performed or caused to be performed by Shipper or such Contracted Party in accordance with generally accepted prudent natural gas industry standards and practices.

 

6.4                               When chart measurement is used, the temperature of the Committed Gas shall be the arithmetical average of the hourly temperatures accurately recorded during each day by Gatherer or Gatherer’s Agent.  The temperature of the Committed Gas flowing through the meter shall be determined by the use of a temperature measuring device operated in accordance with generally accepted prudent natural gas industry standards and installed immediately downstream of the meter so that it will accurately record the temperature of the Committed Gas flowing through the meter. If a temperature measuring device is not available at any Delivery Point, the average temperature from other temperature measuring devices in the Gatherer’s Pipeline System, which are in reasonably close vicinity to such Delivery Point will be used.

 

APPENDIX - 9

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

6.5                               Gatherer or Gatherer’s Agent shall, at each Delivery Point, Redelivery Point, or any other measurement point where such measured quantities are used in the allocation of system fuel and/or losses, calibrate the meters and instruments, in accordance with generally accepted prudent natural gas industry practices, and obtain a representative spot or composite sample on a frequency to be reasonably determined by Gatherer in accordance with generally accepted prudent natural gas industry practices, but not less often than twice each year or more frequently as required under applicable Law.

 

6.6                               The computation from fractional analysis of samples of Committed Gas, as provided for in ITEM 6.5, will be used to determine the composition, specific gravity, GPMs, and Gross Heating Value of the hydrocarbon components of the Committed Gas samples. The computations so determined will be used for quality tests and in calculating Committed Gas deliveries as described in ITEM 6.7 below with the first day of the month following the date the sample is taken.

 

6.7                               The Gross Heating Value of the Committed Gas will be determined by Gatherer or Gatherer’s Agent by taking samples, as provided for in ITEM 6.5, at Gatherer’s Metering Facilities. Gatherer will obtain a representative spot or composite sample of Committed Gas delivered at each Delivery Point or Redelivery Point. Gatherer will determine the composition, specific gravity, GPMs, and Gross Heating Value of the hydrocarbon components of the Committed Gas to conform to Gas Gatherers Association Standards GPA 2166, GPA 2261, and GPA 2172, and any supplements and revisions thereto.  For all purposes hereunder, including, pricing and payment, the Gross Heating Value of and the number of Btus contained in the Committed Gas shall mean, and be measured in terms of, the gross number of Btus that would be contained in the volume of such Committed Gas when saturated with water at the pressure and temperature as defined in the Cubic Foot of gas herein; provided, however, in the event the Committed Gas contains less than seven (7) pounds per million cubic feet of water, then any such Committed Gas shall be deemed to be dry and measured on a dry basis. The Btus contained in hydrogen sulfide or other non-hydrocarbon components shall be excluded in any calculation of the number of Btus contained in the Committed Gas under this Contract.

 

6.8                               Each Party shall have the right to be present at the time of any installation, reading, cleaning, changing, repairing, inspecting, testing, calibrating, or adjustment performed in connection with the other Party’s measuring equipment. The records involving measuring equipment shall remain the property of their owner, but upon request each Party agrees to submit to the other its records and charts, together with calculations made therefrom subject to return within fifteen (15) days after receipt thereof by the Party owning them.  EFM data and charts shall be kept on file for a period of at least two (2) years.

 

APPENDIX - 10

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

6.9                               Samples shall be taken, as provided for in ITEM 6.5, by Gatherer or Gatherer’s Agent to determine compliance with the gas specifications in ITEM 2.1.  Each Party as well as any applicable Contracted Party shall have the right to be present at the time such samples are taken. Gatherer or Gatherer’s Agent shall give Shipper no less than five (5) days prior notice of such tests.

 

6.10                        As provided for in ITEM 6.5, each Party (at its sole expense) shall calibrate the meter and instruments installed by it or cause the same to be calibrated, all in accordance with generally accepted prudent natural gas industry standards and practices.  Each Party shall give the other Party no less than five (5) days prior notice of such tests so that the latter may, at its election, be present in person or by its representative to observe adjustments (if any) which are made.  For the purpose of measurement and meter calibration, the atmospheric pressure shall be assumed to be 14.4 pounds per square inch.

 

6.11                        Each Party shall have the right at any time and from time to time to challenge the accuracy of any measurement equipment used by the other Party in connection with this Contract.  If the percentage of inaccuracy upon any test of the measurement equipment is greater than two percent (2%) of the corrected quantity, the registration thereof and any payment based upon such registration shall be corrected at the rate of such inaccuracy for any period of inaccuracy which is reasonably determinable or agreed upon.  If the period is not reasonably determinable or agreed to, then for a period extending back one-half (1/2) of the time elapsed since the date of the last calibration, not to exceed ninety (90) days.  Following any test, any measurement equipment found to be inaccurate shall be adjusted or repaired to measure accurately, or replaced if such adjustment is not successful.  If for any reason any meter is out of service or out of repair so that the quantity of Committed Gas delivered through such meter cannot be accurately ascertained or computed from the readings thereof, the quantity of Committed Gas so delivered during such period shall be estimated and agreed upon by the Parties upon the basis of the best available data, using the first of the following methods which, under the circumstances, is most feasible:

 

(a)                                 by using the registration of any check measuring equipment of Shipper or the applicable Contracted Party, if installed and registering accurately;

 

(b)                                 by correcting the error if the percentage of error is ascertainable by calibration, test or mathematical calculation;

 

(c)                                  by estimating the quantity of deliveries by deliveries during preceding periods under similar conditions when the equipment was registering accurately.

 

APPENDIX - 11

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

ITEM SEVEN

PAYMENT

 

7.1                               As soon as is reasonably practicable, but no later than the twenty-fifth (25th) Day following the end of each month, Gatherer or Gatherer’s Agent shall furnish Shipper a statement for the preceding month accurately and completely depicting the Gathered Volume and all information necessary for the calculation thereof; the quantities of Committed Gas (in Mcf and MMBtu) received; any amounts due pursuant to ARTICLE 3.3 and all information necessary for the calculation thereof (provided, however, that any payment and related information pertaining to ARTICLE 3.3 shall be due the month following the applicable calendar quarter in which the calculation was made taking into consideration any period of time for make-up volumes of Committed Gas); any applicable fees, taxes, and/or payments; and the total amount due Gatherer for such production Month. Shipper shall pay Gatherer the amount on said statement on or before the last Day of the Month following the applicable production Month. If a Party fails to pay any undisputed amount due hereunder on or before such payment become delinquent, then interest shall accrue at a per annum rate of interest equal to the lower of: (i) the maximum lawful rate or (ii) the then effective London Inter/Bank Offering Rate (LIBOR) rate plus six (6) percent.

 

7.2                               As between Shipper and Gatherer, Shipper shall make proper settlement and accounting to the applicable Contracted Party or all the owners of interest in the proceeds from the sale of Committed Gas, including royalty, overriding royalty and production payment interest owners, to which Shipper is contractually or otherwise legally obligated to make.

 

7.3                               In the event an error is discovered by either Gatherer or Shipper in any statement, invoice, or payment, such error shall be adjusted within thirty (30) days of the determination thereof; provided that a written claim therefore shall have been received and made within twenty-four (24) months from the date of such statement or payment in error.

 

7.4                               Gatherer and Shipper shall each have the right to examine at all reasonable times and locations the books, records, ledgers, and charts of the other to the extent necessary to verify or audit the accuracy of any payment, statement, invoice, bill, chart, or computation made under or pursuant to this Contract but only for such purposes.

 

7.5                               Gatherer and Shipper shall preserve for a period of at least two (2) years all test data, meter records, charts and other similar records generated or made under this Contract.

 

ITEM EIGHT

FORCE MAJEURE

 

8.1                               In the event either Party is unable wholly or in part by “Force Majeure” as defined in ITEM 8.2, to carry out its obligations under this Contract, other than financial obligations, it is agreed that on such Party giving notice and full particulars of such Force Majeure by telephone (as soon as reasonably possible) and confirmed in writing to the

 

APPENDIX - 12

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

other Party after the occurrence of the cause relied on, then the obligations of the Party giving such notice, so far as they are affected by such Force Majeure, from its inception, shall be suspended during the continuance of any inability so caused, but for no longer period.  Said cause shall be, as far as reasonably possible, remedied with all reasonable dispatch.

 

8.2                               The term “Force Majeure” as used herein shall mean acts of God, strikes, lockouts, or other material industrial disturbances, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, arrests and restraints of the government, either federal, state or tribal, inability of any Party to obtain necessary materials, supplies, or permits due to existing or future Laws, interruption or curtailment of transportation or storage by Third Parties, scheduled maintenance, interruptions by government or court orders, present and future orders of any regulatory body having proper jurisdiction, civil disturbances, explosions, sabotage, breakage or accident to machinery or lines of pipe, the necessity for making repairs or alterations or the performance of tests to machinery or lines of pipe, freezing of lines of pipe, partial or entire failure of Wells, irrespective of whether such Wells or machinery or lines of pipe are operated by either of the Parties, and any other causes whether of the kind herein enumerated or otherwise not within the control of the Party claiming suspension and which by the exercise of due diligence such Party could not have prevented or is unable to overcome.  The term Force Majeure shall also include the inability to acquire, or the delays in acquiring, necessary permits, right-of-way, easements or licenses required to enable a Party to fulfill its obligation hereunder if such Party exercised its commercially reasonable and diligent efforts to acquire same.

 

8.3.1                     The settlement of strikes or lockouts shall be entirely within the discretion of the Party having the difficulty, and the above-requirement of the use of diligence in restoring normal operating conditions shall not require the settlement of strikes or lockouts by acceding to the terms of the opposing Party when such course is inadvisable in the discretion of the Party having the difficulty.

 

ITEM NINE

TAXES

 

9.1                               Shipper shall pay, or cause to be paid, all taxes and assessments levied and imposed under applicable Law upon the Committed Gas except as otherwise specifically provided in this ITEM NINE.  Subject to ITEM 9.3 below, neither Party shall be responsible nor liable for any taxes or other statutory charges levied or assessed against any of the facilities of the other Party used for the purpose of carrying out the provisions of this Contract.

 

APPENDIX - 13

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

9.2                               Shipper shall make, or cause to be made, all reports required by applicable Law with respect to gross production or severance taxes applicable to the Committed Gas, unless Gatherer has such obligation under applicable Law.

 

9.3                               (a)   Notwithstanding anything contained in this Contract, if any regulatory body having proper jurisdiction over the Gatherer’s Pipeline System imposes any new Laws (“Regulatory Change(s)”) which requires Gatherer to pay any fee, tax, assessment, charge, or other cost on the carbon, greenhouse gases, or Btu content of the Committed Gas or the constituents associated therewith (collectively, “Carbon Fee”) and such Regulatory Changes do not require any modification or alteration to Gatherer’s Pipeline System, then Gatherer shall have the right to recover from Shipper the actual Carbon Fee attributable to the Committed Gas and the constituents associated therewith resulting from such Regulatory Changes. Gatherer may invoice Shipper monthly for the Carbon Fee that Gatherer reasonably believes that it will incur associated with the Regulatory Changes. If Gatherer invoices Shipper for such costs, Shipper shall pay Gatherer the amount invoiced within thirty (30) days from receipt thereof.  Gatherer shall adjust the estimated costs of the Carbon Fee to the actual costs of the Carbon Fee when such actual costs are available and shall adjust its invoicing (or netted amounts as the case may be) to Shipper to reflect the actual costs of the Carbon Fee incurred by Gatherer.  The difference between the estimated costs invoiced by Gatherer and the actual costs associated with the Regulatory Changes will bear interest at the rate described in ITEM 11.6(j) herein and will accrue interest from the dates billed or withheld and such difference and accrued interest will be payable to the party to whom it is owed within ten (10) business days following receipt of an invoice for such amounts from such Party.

 

(b)         In the event Gatherer is required by applicable Law to pay any Carbon Fee as a result of any Regulatory Changes and if any of those Regulatory Changes require a modification, change, or alteration of Gatherer’s Pipeline System in order to comply therewith, then Gatherer and Shipper shall amend this Contract to permit Gatherer to recover the actual costs incurred by Gatherer to comply with those Regulatory Changes insofar as attributable to the Committed Gas and the constituents associated therewith.  The Parties shall negotiate in good faith to agree upon such amendment to this Contract that will permit recovery by Gatherer for all such costs.  In the event the Parties cannot agree upon such an amendment incorporating the foregoing within sixty (60) days from the date Gatherer becomes obligated to make payment, then all disputed issues associated with the proposed amendment shall be subject to resolution in accordance with the provisions of ITEM 11 herein.  Upon reaching a resolution, whether by mutual agreement or ITEM 11, such resolution will retroactively apply to the Contract as of the date those Regulatory Changes became effective without the necessity of a formal written amendment to this Contract.

 

APPENDIX - 14

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

ITEM TEN

MISCELLANEOUS

 

10.1                        LIMITATION OF LIABILITY:  EXCEPT FOR THOSE MATTERS DESCRIBED IN ITEM 2 HEREIN, NO PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY RESULTING FROM OR ARISING OUT OF THIS CONTRACT OR THE BREACH THEREOF UNDER ANY OTHER THEORY OF LIABILITY, WHETHER TORT, NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT, WARRANTY, INDEMNITY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, LOSS OF USE, INCREASED COST OF OPERATIONS, LOSS OF PROFIT OR REVENUE, OR BUSINESS INTERRUPTIONS.  IN FURTHERANCE OF THE FOREGOING, EACH PARTY RELEASES EACH OTHER AND WAIVES ANY RIGHT OF RECOVERY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY REGARDLESS OF WHETHER ANY SUCH DAMAGES ARE CAUSED BY THE OTHER PARTY’S NEGLIGENCE (AND REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, CONCURRENT, ACTIVE, OR PASSIVE), FAULT, OR LIABILITY WITHOUT FAULT.

 

10.2                        RIGHT OF WAY:  Gatherer shall be solely responsible for all costs and expense regarding the acquisition of land rights, easements, and rights-of-way necessary to perform its obligations hereunder. If Gatherer has used commercially reasonable efforts to acquire but failed to secure said land rights and Shipper is able to do so, then to the extent it may contractually or lawfully do so under any of the Contractually Dedicated Area Interest without impairing its own similar rights, Shipper will grant to Gatherer the right of ingress and egress, and the right to lay and maintain pipeline and communication lines and to install any other necessary equipment on and across the lands covered by each Contractually Dedicated Area Interest subject to this Contract when such pipeline, communication line, and other equipment is necessary in the performance of this Contract. Gatherer shall notify Shipper (who will promptly notify the applicable Contracted Party) before laying or installing any pipeline, line or equipment to enable the Parties to determine the extent of Gatherer’s rights, if any, to perform such activity or operation.  Gatherer shall comply with all applicable terms and provisions of the instruments creating or granting the Contractually Dedicated Area Interest, and applicable Law insofar as pertaining to the rights granted to and exercised by Gatherer in this ITEM 10.2.  All lines and other equipment placed by Gatherer on said lands shall remain the personal property or fixtures, as classified by applicable Law, of Gatherer, and, subject to the terms of this Contract, the instruments creating or granting the Contractually Dedicated Area Interest and applicable Law, may be removed by Gatherer at any time with at least five (5) days prior written notice to Shipper (who will promptly notify the applicable Contracted Party).

 

10.3                        TITLE, POSSESSION, AND INDEMNITY:  As between the Parties, Shipper shall be in control and in possession of the Committed Gas delivered hereunder and responsible for any damages or injuries caused thereby until the same shall have been delivered to Gatherer at the Delivery Points and received from Gatherer at the Redelivery Points,

 

APPENDIX - 15

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

except injuries and damages which shall be occasioned by the negligence or willful misconduct of Gatherer.  After receipt of the Committed Gas at the Delivery Points and until redelivery of same to Shipper at the Redelivery Points, Gatherer shall be deemed to be in exclusive control and possession thereof and responsible for any damages or injuries caused thereby, except injuries and damages (i) which shall be occasioned by the negligence or willful misconduct of Shipper or (ii) as described in ITEM 2.3. Title to the Committed Gas and the constituents associated therewith shall remain with Shipper. In the event of any dispute, question, or litigation at any time regarding Shipper’s right to Gather or market any of the Committed Gas hereunder, Gatherer shall be entitled to suspend its performance hereunder until such dispute, defect, or question is corrected or removed to Gatherer’s reasonable satisfaction or Shipper furnishes Gatherer with a corporate undertaking designed to hold Gatherer harmless.

 

10.4                        WAIVER OF BREACH:  The waiver by either Party of any of its rights or any breach of the provisions of this Contract shall not constitute a continuing waiver of those rights or other breaches of the same or other provisions of this Contract.

 

10.5                        REGULATORY BODIES:  This Contract and all operations hereunder are subject to all applicable Laws; provided, however, nothing contained herein shall be construed as a waiver of any right of any Party to question or contest any such Law.

 

10.6                        INTRASTATE:  Shipper represents and warrants that the Committed Gas hereunder is deregulated pursuant to the Natural Gas Wellhead Decontrol Act of 1989.  Each Party represents and warrants to the other that the Committed Gas delivered hereunder will not have been and will not be sold or resold, transported, commingled, used or consumed in interstate commerce in such a manner that would subject the Committed Gas, this Contract, either Party, their designees, or the facilities of either Party or their designees to the jurisdiction or regulation under the Natural Gas Act of 1938, as amended.  If either Party breaches or threatens to breach this representation and warranty, the other Party shall have the right to terminate this Contract immediately in addition to any other rights and remedies it may have under the provisions hereof or at law or in equity.

 

10.7                        CHOICE OF LAW AND INTERPRETATION:  This Contract shall be governed by and interpreted in accordance with the Laws of the State of Texas without regard to the conflicts of law.  The captions or headings preceding the various parts of this Contract are inserted and included solely for conveniences and shall never be considered or given any effect in construing this Contract or any part of this Contract, or in connection with the intent, duties, obligation, or liabilities of the Parties. This Contract was prepared the Parties and not by any Party to the exclusion of one or the other.

 

10.8                        ASSIGNMENT:  This Contract and the rights and obligations under it may be assigned and delegated by a Party only with the prior written consent of the other Party where such consent shall not be unreasonably withheld. All covenants, stipulations, terms,

 

APPENDIX - 16

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

conditions, and provisions of this Contract shall extend to, inure to the benefit of and be binding upon the respective successors, assigns, and representatives in bankruptcy of the Parties. Any complete or partial assignment of by Shipper of any of its Contractually Dedicated Area Interests shall contain a provision obligating Shipper’s assignee to recognize and perform its respective obligations under this Contract. No conveyance or transfer of any Contractually Dedicated Area Interests by Shipper or the transfer by any owners of any royalty, overriding royalty or production payments shall be binding upon Gatherer until Gatherer has been furnished notice thereof, including such conveyance or transfer, and letter in lieu or transfer order signed by the grantor or assignor, or an acceptable division order signed by the grantor or assignor, all to the reasonable satisfaction of Gatherer.

 

10.9                        FINALITY OF PAYMENT: Notwithstanding any other provision of this Contract, any statement and payment thereunder shall be deemed final as to both Gatherer and Shipper unless the information contained on the statement is questioned in writing within two (2) years after payment thereof has been received.

 

10.10                 ENTIRE AGREEMENT:  This Contract constitutes the entire agreement between the Parties, and there is no other agreement between the Parties, either oral or written, concerning the Dedicated Area. This Contract supersedes and replaces, in entirety, any and all prior agreements, if any, between the Parties or their predecessors in interest for the transportation, Gathering, compression, and/or handling of the Committed Gas from or attributable to the Contractually Dedicated Area Interests including that certain Natural Gas Gathering Agreement dated January 1, 2007 between the Parties.

 

10.11                 COUNTERPART EXECUTION:  This Contract may be signed in counterparts and shall be fully effective regardless of whether both the Parties signed the same counterpart, provided that each Party signs at least one (1) or more such counterparts.

 

10.12                 AMENDMENT:  Any amendment to this Contract shall not be valid unless it is agreed to in writing and signed by a duly authorized officer or agent of each Party.

 

10.13                 CONFIDENTIALITY: Each Party agrees that it will maintain the terms and provisions of this Contract (“Confidential Information”) in strictest confidence and that it will not cause or permit disclosure of those terms to any Third Party without the express written consent of the other Party.  Disclosures otherwise prohibited by this ITEM 10.13 may be made by either Party to the extent: (1) necessary for a Party to enforce its rights hereunder against the other Party, (2) a Party is contractually or legally bound to disclose Confidential Information hereunder to a Third Party, (3) a Party is required to disclose all or part hereof by applicable Law, including by a court, agency, or other governmental body exercising jurisdiction over the subject matter hereof, by order, by regulation or by other compulsory process (including, but not limited to, deposition, subpoena, interrogatory, or request for production of documents), (4) necessary to effectuate the

 

APPENDIX - 17

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

transportation of the Committed Gas, (5) any prospective purchaser of either Party and/or the assets and facilities utilized by either Party in performing their respective obligations hereunder, or (6) its affiliates and the directors, officers, employees, partners, members, managers, owners, attorneys, agents, lenders, advisors, consultants and contractors of such Party and its affiliates who have a “need to know” (“Representative”). Notwithstanding the foregoing, a Party disclosing Confidential Information hereunder to Third Parties or Representatives pursuant to any one of the aforementioned exceptions shall instruct such Third Parties and Representatives of its confidential nature and of the obligation to keep the Confidential Information secret and confidential.  Such Party disclosing Confidential Information to Third Parties or Representatives shall be liable to the other Party for any breach by such Third Parties and Representatives of these confidentiality obligations. IN COMPLIANCE WITH SECTION 81.060, TEXAS NATURAL RESOURCES CODE, THIS PROVISION WILL NOT BE EFFECTIVE UNLESS BOTH PARTIES INITIAL IN THE SPACE PROVIDED AT THE END OF THIS PROVISION.

 

	
SHIPPER
    	
GATHERER
    

 

10.14                 INDEMNITY: EXCEPT FOR THOSE MATTERS DESCRIBED IN ITEM 2.3, GATHERER SHALL INDEMNIFY, PROTECT, DEFEND, AND HOLD SHIPPER HARMLESS FROM AND AGAINST ALL LOSSES INCURRED BY GATHERER RELATED TO, OR ARISING OUT OF (I) THE OPERATIONS OF GATHERER, (II) THE HANDLING, DELIVERY, OR RE-DELIVERY OF THE COMMITTED GAS WHILE THE SAME IS IN THE CUSTODY AND/OR CONTROL OF GATHERER, AND (III) GATHERER’S EXERCISE OF ITS RIGHTS OF ACCESS TO AND/OR USE OF SHIPPER’S FACILITIES DURING THE TERM HEREOF.  SHIPPER SHALL INDEMNIFY, PROTECT, DEFEND, AND HOLD GATHERER HARMLESS FROM AND AGAINST ALL LOSSES INCURRED BY GATHERER RELATED TO, OR ARISING OUT OF (I) THE OPERATIONS OF SHIPPER, (II) THE HANDLING, DELIVERY, OR RE-DELIVERY OF THE COMMITTED GAS WHILE THE SAME IS IN CUSTODY AND/OR CONTROL OF SHIPPER, (III) SHIPPER’S FAILURE TO MEET THE GAS QUALITY SPECIFICATIONS IN ITEM 2, AND (IV) SHIPPER’S EXERCISE OF ITS RIGHTS OF ACCESS TO AND/OR USE OF GATHERER’S FACILITIES DURING THE TERM HEREOF. NOTWITHSTANDING THE FOREGOING, NEITHER PARTY SHALL BE OBLIGATED TO INDEMNIFY, PROTECT, DEFEND, OR HOLD THE OTHER PARTY HARMLESS FROM AND AGAINST LOSSES TO THE EXTENT SUCH LOSSES RESULT FROM THE NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF ANY INDEMNIFIED PARTY.

 

10.15                 PAYMENTS: As between Shipper and Gatherer, Shipper shall have the sole and exclusive obligation and liability for the payment of all persons due any proceeds derived from the Committed Gas (including all constituents and products thereof) delivered under this Contract. In no event shall Gatherer have any obligation to those persons due any of those proceeds of production attributable to any such gas (including all constituents and products thereof) delivered under this Contract. Shipper shall indemnify, defend, and 

 

APPENDIX - 18

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

save Gatherer harmless from all Losses arising from and out of claims of any or all Third Parties with respect to those payments described in this ITEM 10.15.

 

ITEM ELEVEN

DISPUTE RESOLUTION PROCEDURES

 

11.1                        Negotiation –– In the event that any dispute arises related to this Contract including any alleged non-performance or breach of any provision of this Contract by a Party, or any disagreement concerning the meaning of any provision of this Contract or any disagreement concerning any action taken or failed to be taken under this Contract (a “Dispute”), the Parties shall first seek to resolve any Disputes by negotiation between managers of each who have authority to settle the controversy.

 

11.2                        Notification.  When a Party believes there is a Dispute relating to the Contract, the Party will give the other Party notice of the Dispute providing sufficient detail for the recipient to understand the provider’s position and the legal and contractual basis for it.

 

11.3                        Meeting Among Managers.  The managers shall meet at a mutually acceptable time and place within thirty (30) days after the receipt of the notice to exchange relevant information and to attempt to resolve the Dispute.  The managers may involve a third-party mediator, if they so choose.  If a manager intends to be accompanied at a meeting by legal counsel, the other Party’s manager shall be given at least three (3) business days’ notice of such intention and may also be accompanied by legal counsel.

 

11.4                        Confidentiality.  All negotiations concerning the Dispute shall be confidential and shall be treated as compromise and settlement negotiations under the United States Federal Rules of Evidence.

 

11.5                        Tolling.  A Party’s receipt of any notice of the Dispute shall immediately toll the running of all statutes of limitation relating to the matters in Dispute, which statutes shall remain suspended for forty-five (45) days from and after the recipient’s receipt of that notice.

 

11.6                        Arbitration.  If a Dispute has not been resolved within the period described in ITEM 11.5, then either Party may provide the other Party with notice to initiate arbitration proceedings, which proceedings shall be conducted as provided in this ITEM 11.6.

 

(a)                                 Scope/Final and Binding –– Any Dispute (including any controversy or claim) of any and every kind or type, whether based on contract, tort, statute, regulations, or otherwise, arising out of, connected with, or relating in any way to this Contract, the relationship of the Parties, the obligations of the Parties or the operations carried out under this Contract, including any Dispute as to the existence, validity, construction, interpretation, negotiations, performance, non-performance, breach, termination, or enforceability of this Contract including the applicability and 

 

APPENDIX - 19

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

enforceability of this ITEM 11, shall be settled through final and binding arbitration, it being the intention of the Parties that this is a broad form arbitration agreement designed to encompass all possible Disputes between the Parties relating to the Contract.  Initiation of arbitration shall toll the running of all statutes of limitation relating to the matters in Dispute.

 

(b)                                 Institutional Arbitration –– The arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) as in effect on the date of commencement of the arbitration proceeding, except as modified herein.

 

(c)                                  Number of Arbitrators –– If the amount in Dispute involves less than $2 million, exclusive of interest and costs, then the arbitration shall be conducted and finally settled by a sole arbitrator.  If the amount in Dispute, exclusive of interest and costs, is $2 million or more, if the amount in Dispute is unknown, or if relief other than damages is sought, then the arbitration shall be conducted and finally settled by the majority vote of three (3) arbitrators.

 

(d)                                 Method of Selecting Arbitrators –– If the arbitration is to be conducted by a sole arbitrator, then the arbitrator will be jointly selected by the Parties.  If the Parties fail to agree on the arbitrator within thirty (30) days after the initiation of the arbitration, then the AAA shall appoint the arbitrator.  If the arbitration is to be conducted by three (3) arbitrators, each Party shall within fifteen (15) days after initiation of the arbitration select one (1) arbitrator, and these two (2) arbitrators shall select a third (3rd) presiding arbitrator.  If the two (2) Party-appointed arbitrators fail to agree on the third (3rd) arbitrator within fifteen (15) days after the appointment of the later of the two, then the third (3rd) arbitrator shall be appointed by the AAA.

 

(e)                                  Place of Arbitration –– Unless otherwise agreed by the Parties, the situs of the arbitration under this Contract shall be Oklahoma City, Oklahoma.

 

(f)                                   Qualifications and Conduct of the Arbitrators –– All arbitrators, no matter how selected, shall be and remain at all times wholly independent, unbiased and impartial and shall provide the Parties with a statement that they shall decide the case impartially.

 

(g)                                  Interim Measures –– The arbitrators, or in an emergency the presiding arbitrator acting alone in the event one or more of the other arbitrators are unable to be involved in a timely fashion, may grant interim measures including injunctions, attachments and conservation orders in appropriate circumstances, which measures the Parties agree may be immediately enforced by the arbitrators or by a court of competent jurisdiction.  Notwithstanding the requirement for negotiation, 

 

APPENDIX - 20

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

prior to the constitution of the arbitration tribunal and thereafter as necessary to enforce the arbitrators’ rulings or in the absence of the jurisdiction of the arbitrators to rule on interim measures in a given jurisdiction, any Party may apply to a court of competent jurisdiction for interim measure, and the Parties agree that seeking and obtaining such measures shall not waive the right to arbitration.  Furthermore, notwithstanding the above provisions regarding negotiation, if either Party deems that time is of the essence in resolving the dispute, it may initiate arbitration and seek interim measures, as provided herein, and then comply with the requirements for negotiations as long as they are fully completed before the commencement of the final hearing on the merits in the arbitration proceeding.

 

(h)                                 Waiver of Appeals –– To the extent permitted by applicable Law, any right to appeal from or to cause a review of any arbitral award by any court is hereby waived by the Parties.

 

(i)                                     Costs and Attorneys’ Fees –– The arbitral tribunal is authorized to award costs and attorneys’ fees or allocate them between the Parties, and the costs of the arbitration proceedings, including attorneys’ fees, shall be borne in the manner determined by the arbitral tribunal.

 

(j)                                    Interest –– Any award may include interest from the date of any breach or violation of this Contract, as determined by the arbitral award, and from the date of the award until paid in full.  Interest shall be awarded at the rate stated in ITEM 7.1.

 

(k)                                 Punitive Damages –– Penal, punitive, treble, multiple, consequential, incidental or similar damages may not be recovered or awarded in connection with any Dispute.

 

APPENDIX - 21

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

EXHIBIT “A”

 

TO GAS GATHERING CONTRACT

BETWEEN

DEVON GAS SERVICES, L.L.C., “SHIPPER”

AND

SWG PIPELINE, L.L.C., “GATHERER”

 

DATED:                 1, 2014

PLAT OF DEDICATED AREA

 

 

With respect to Tarrant County, Texas, the “Dedicated Area” shall only apply to those Contractually Dedicated Area Interests that are located entirely within Abstract A-931 of the Abner Lee Survey.

 

1

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

2

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

EXHIBIT “B”

 

TO GAS GATHERING CONTRACT

BETWEEN

DEVON GAS SERVICES, L.L.C., “SHIPPER”

AND

SWG PIPELINE, L.L.C., “GATHERER”

 

DATED:                  1, 2014

 

REDELIVERY POINTS

 

1.              Existing and future interconnect points between Gatherer’s Pipeline System and Third Party pipelines.

2.              Any other mutually agreeable point(s) between Shipper and Gatherer.

 

1

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

EXHIBIT “C”

 

TO GAS GATHERING CONTRACT

BETWEEN

DEVON GAS SERVICES, L.L.C., “SHIPPER”

AND

SWG PIPELINE, L.L.C., “GATHERER”

 

DATED:                    1, 2014

 

SHORT FORM MEMORANDUM

 

MEMORANDUM OF GAS GATHERING CONTRACT

 

THIS MEMORANDUM OF GAS GATHERING CONTRACT (this “Memorandum”) is entered into this            day of                   , 2014 (“Effective Date”) by and between DEVON GAS SERVICES, L.L.C (“Shipper”), with an address of 333 West Sheridan Avenue, Oklahoma City, Oklahoma 73102-5015, and SWG PIPELINE, L.L.C., with an address of                                      (“Gatherer”).  Shipper and Gatherer are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

 

WHEREAS, Shipper and Gatherer entered into that certain Gas Gathering Contract dated                1, 2014 (the “Contract”) but made effective as of the Effective Date, pursuant to which Gatherer will provide certain gas Gathering services as therein set forth;

 

WHEREAS, any capitalized term used, but not defined, in this Memorandum shall have the meaning ascribed to such term in the Contract; and

 

WHEREAS, the Parties desire to file this Memorandum of record in the real property records of various counties located in the State of Texas, to give notice of the existence of the Contract and certain provisions contained therein.

 

NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.             Notice.  Notice is hereby given of the existence of the Contract and all of its terms, covenants and conditions to the same extent as if the Contract was fully set forth herein.  Certain provisions of the Contract are summarized in Sections 2 through 5 below.

 

2.             Term.  The Contract shall be effective from the Effective Date and shall continue and remain in full force and effect for a primary term of ten (10) years (the “Initial Term”) and year-to-year thereafter or as otherwise provided for in the Contract until terminated by either Gatherer

 

1

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

or Shipper (i) upon the giving of notice to the other Party of its intention to terminate the Contract at least 180 Days prior to the end of the Initial Term or any subsequent extension term or (ii) as otherwise provided for in the Contract.

 

3.             Dedication.  Subject to the exceptions, exclusions, and reservations set forth in the Contract and the other terms and conditions of the Contract, Shipper has exclusively dedicated and committed for Gathering, and has agreed to deliver, or cause to be delivered, to Gatherer all of the Committed Gas attributable to its Contractually Dedicated Area Interests located within the area described in Schedule 1 attached hereto and incorporated herein (the “Dedicated Area”).

 

4.             Covenant Running with the Contractually Dedicated Area Interests.  So long as the Contract is in effect, the dedication in the Contract shall be a covenant running with the Contractually Dedicated Area Interests and, subject to the exceptions and reservations set forth in the Contract, any complete or partial assignment of by Shipper of its Contractually Dedicated Area Interests shall contain a provision obligating Shipper’s assignee to recognize and perform its respective obligations under the Contract.

 

5.             No Amendment to Contract.  This Memorandum is executed and recorded solely for the purpose of giving notice and shall not amend nor modify the Contract in any way.

 

IN WITNESS WHEREOF, this Memorandum has been signed by or on behalf of each of the Parties as of the day first above written.

 

 

	
 
    	
SWG PIPELINE, L.L.C.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
DEVON GAS SERVICES, L.L.C.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Susan E. Alberti
    
	
 
    	
Title:
    	
Senior Vice President
    

 

2

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

ACKNOWLEDGEMENTS

 

	
STATE OF
    	
§
    
	
 
    	
§
    
	
COUNTY OF
    	
§
    

 

This instrument was acknowledged before me on          day of           , 201  by                     ,                              of SWG PIPELINE, L.L.C., a Texas limited liability company, on behalf of such limited liability.

 

	
 
    	
 
    
	
 
    	
Notary Public in and for
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Printed or Typed Name of Notary
    

 

	
STATE OF OKLAHOMA
    	
§
    
	
 
    	
§
    
	
COUNTY OF OKLAHOMA
    	
§
    

 

This instrument was acknowledged before me on the              day of               , 201 , by Susan E. Alberti, Senior Vice President of DEVON GAS SERVICES, L.L.C, a Texas limited liability company, on behalf of said entity.

 

	
 
    	
 
    
	
 
    	
Notary Public in and for Oklahoma
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Printed or Typed Name of Notary
    

 

3

 

TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED.  THE REDACTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

 

Schedule 1 to 
 Memorandum of Gas Gathering Contract

 

PLAT OF DEDICATED AREA

 

 

With respect to Tarrant County, Texas, the “Dedicated Area” shall only apply to those Contractually Dedicated Area Interests that are located entirely within Abstract A-931 of the Abner Lee Survey.

 

4Enertopia Corp.: Exhibit 10.1 - Filed by newsfilecorp.com

NOTE REGARDING FORWARD LOOKING STATEMENTS 

Certain information in this Offering Memorandum is “forward
looking information” within the meaning of applicable securities laws. Forward
looking information is frequently characterized by words such as “plan”,
“expect”, “project”, “intend”, “believe”, “anticipate”, “estimate” or other
similar words, or statements that certain events or conditions “may” or “will”
occur. Forward looking information involves significant known and unknown risks
and uncertainties. A number of factors, many of which are beyond the control of
the Issuer, could cause actual results to differ materially from the results
discussed in the forward looking information. Although the forward looking
information contained in this Offering Memorandum is based upon assumptions
which management of the Issuer believes to be reasonable, the Issuer cannot
assure investors that actual results will be consistent with this forward
looking information. Because of the risks, uncertainties and assumptions
inherent in forward looking information, prospective investors in the Issuer’s
securities should not place undue reliance on this forward looking information.

In particular, this Offering Memorandum contains forward
looking information pertaining to business development plans, mineral
exploration and other expectations, beliefs, plans, goals, objectives,
assumptions, information. Undue reliance should not be placed on forward-looking
information. Forward-looking information is based on current expectations,
estimates and projections that involve a number of risks which could cause
actual results to vary and, in some instances to differ materially from those
anticipated by the Issuer and described in the forward-looking information
contained in this Offering Memorandum.

Some but not all of the factors affecting forward-looking
statements include: the speculative nature of mining exploration, production and
development activities; changes in reserve estimates; the productivity of the
Issuer's proposed properties; changes in the operating costs; changes in
economic conditions and conditions in the resource, foreign exchange and other
financial markets; changes of the interest rates on borrowings; hedging
activities; changes in commodity prices; changes in the investments and
exploration expenditure levels; litigation; legislation; environmental,
judicial, regulatory, political and competitive developments in areas in which
the Issuer operates; technological, and mechanical and operational difficulties
encountered in connection with the Issuer's exploration and development
activities. The foregoing list of risk factors is not exhaustive. Prospective
investors should refer to the risk disclosures set out in the periodic reports
and other disclosure documents filed by the Issuer from time to time with
regulatory authorities. 

Forward-looking information is based on the estimates and
opinions of the Issuer at the time the information is presented. The Issuer
assumes no obligation to update forward-looking information should circumstances
or the Issuer’s estimates or opinions change, except as required by law. 

PROSPECTIVE INVESTORS SHOULD THOROUGHLY REVIEW THIS OFFERING
MEMORANDUM AND ARE ADVISED TO CONSULT WITH THEIR OWN LEGAL AND TAX ADVISORS
CONCERNING THIS INVESTMENT. 

2

ENERTOPIA CORPORATION 

 

OFFERING MEMORANDUM 
Form 45-106F3 

 

December 6, 2013

Form 45-106F3 – Offering Memorandum for Qualifying Issuers

	
      Date: 
	
      December 6, 2013. 

	
      The Issuer: 
	     
	
                 Name:
    
	
      Enertopia Corp. (the "Issuer" or the “Company”)

	
                 Head
      Office: 

	
      950 – 1130 West Pender Street 
Vancouver, British
      Columbia 
Canada, V6E 4A4 

	
                 Issuer’s
      Solicitors: 

	
      Macdonald Tuskey, Corporate and Securities Lawyers
      
4th Floor - 570 Granville Street, 
Vancouver BC V6C 3P1 

	
                 Phone Number:
      
	
      604-602-1675 

	
                 E-mail
      address: 
	
      mcallister@enertopia.com
      

	
                 Fax Number:
      
	
      604-685-1602 

	
                 Current
      Listing
      and/or
          
      Quotation: 
	
      The Issuer is quoted for trading on the Over-the-Counter
      Bulletin Board and listed for trading on the Canadian National Stock
      Exchange. 

	
                 Reporting
      Jurisdictions: 
	
      The Issuer is reporting in the Provinces of British
      Columbia and Ontario and in the United States. 

	
      The Offering: 

	
      

	
                 Securities
      Offered: 

	
      Up to 8,000,000 units (the "Units"), each Unit to consist
      of one common share of the Issuer (each, a “Share”) and one Share purchase
      warrant (each, a “Warrant”). Each Warrant will be exercisable into one
      further Share (a “Warrant Share”) at a price of US$0.10 per Warrant Share
      for a period of thirty-six (36) months following closing. See Item 5.
      

	
                 Price per
      Security: 
	
      US$0.05 per Equity Unit 

	
      Maximum Offering 
	
      The offering of Equity Units is subject to a maximum
      overall subscription of 8,000,000 Units for gross proceeds of US$400,000
      (the “Maximum Subscription”). There is no minimum. You may be
      the only purchaser. Funds available under the offering may not be
      sufficient to accomplish our proposed objectives. 

	
                 Minimum
      Subscription 
           Amount:
      

	
      Each investor must invest a minimum of US$1,000.
      

	
                 Payment
      terms: 
	
      The subscription proceeds must accompany the form of
      subscription agreement attached to and forming a part of this Offering
      Memorandum, and shall be paid by immediately available good funds in
      either Canadian or US currency, drawn on a Canadian, or other chartered
      bank reasonably acceptable to the Issuer, made payable by certified cheque
      and/or bank draft and made payable and delivered to the Issuer, at Suite
      950 - 1130 West Pender Street, Vancouver BC V6E 4A4. Alternatively,
      payment of the subscription proceeds can be made by wire transfer of funds
      to a bank account of the Issuer, the particulars of which will be provided
      to investors. 

	
                 Proposed
      Closing Date: 
	
      Closings will occur periodically on a "first come, first
      served" basis. See Item 5. 

	
                 Income
      Tax 
           Consequences:
      
	
      There are important tax consequences to these securities.
      See item 6. 

	
                 Selling
      Agent: 
	
      Yes. See item 7. 

	
      Resale Restrictions: 

	
      You will be restricted from selling your securities for 4
      months and a day. See item 10. 

There are also United States resale
      restrictions on the securities. 

2

	
      Purchaser’s Rights: 
	
      You have two business days to cancel your agreement to
      purchase these securities. If there is a misrepresentation in this
      Offering Memorandum, you have the right to sue either for damages or to
      cancel the agreement. See item 11. 

No securities regulatory authority or regulator has assessed
the merits of these securities or reviewed this Offering Memorandum. Any
representation to the contrary is an offence. This is a risky investment. See
item 8. 

Currency 

In this Offering Memorandum, unless otherwise noted, all dollar
amounts are expressed in US dollars. An exchange rate of 1.00 is used in this
Offering Memorandum when discussing the conversion of United States dollars to
Canadian dollars and an exchange rate of 1.00 is used for conversion of Canadian
dollars to United States dollars. 

ITEM 1: USE OF AVAILABLE FUNDS 

Available Funds 

Upon completion of the Offering, the Issuer anticipates that
the following funds will be available to it for the next twelve mon1th period:

	
	
	Assuming max.
      
Offering 
	A 	Amount to be raised by this offering 	$400,000 
	B 	Selling commissions and fees 	$40,000 
	C 	Estimated offering costs (e.g., legal,
      accounting, audit) 	$20,000 
	D 	Available funds: D = A – (B + C) 	$340,000 
	E 	Additional sources of funding required 	$0 
	F 	Working capital deficiency (Aug 31, 2013) 	($471,449) 
	G 	Total: G = (D + E) – F 	$(131,449)
  

Use of Available Funds 

The Issuer anticipates that up to $340,000 will be available to
it upon conclusion of the Maximum Subscription. No funds will be applied towards
the Issuer’s working capital deficiency. The principal purposes for which
these funds will be used over the next twelve months are as follows: 

	Description 	Amount 
	Maximum 

      PP
  
	(US $340,000) (1) 	$340,000 
	Medical Marihuana Definitive Agreement Closing 
	$175,000 

	General and Administrative Expenses 	$165,000 
	Total: 	$340,000 

Note:

(1)      Based upon an
exchange rate of 1.0 

Reallocation 

We intend to spend the available funds as stated. We will
reallocate funds only for sound business reasons. 

Insufficient Funds 

The funds available as a result of the Offering may not be
sufficient to accomplish the Issuer’s proposed objectives and there is no
assurance that alternative financing will be available. 

ITEM 2: INFORMATION ABOUT THE ISSUER 

General 

The Issuer is a mineral resource and renewable energy company
that is pursuing business opportunities in the Canadian Medical Marihuana sector
and clean technology sectors. 

Reference is made to Item 1. (Business) in the Issuer’s Form
10-K (Annual Information Form), filed on SEDAR on December 6, 2013, for
disclosure relating to the Issuer’s business history and current business.

Canadian Medical Marihuana Division 

The Issuer’s Canadian medical marihuana facility which is under
a current Letter of Intent (LOI) with 0786521 B.C. LTD and is currently being
prepared for an inspection by health Canada under the new Canadian Medical Marihuana Regulations Purposes (MMRP) program
for the issuance of an Licensed Producer (LP). The Issuer holds the option to
acquire up to a 51% equity and net revenue interest in the medical marihuana
producer. There can be no assurance that the new LP license will be granted to
0786521 B.C. Ltd. 

Project Description and Location: 

The following information with respect to the Medical Marihuana
Production facility is derived from the Company’s website, securities filings
and press releases. 

Property Description and Location 

Location

The medical marihuana property is located in the district of
Mission, British Columbia, approximately 10km north of Maple Ridge, BC. The
property consists of a 3.9 acre parcel of land that the production facility is
located at 33420 Cardinal St Mission BC.

Proposed Terms of Definitive Agreement

The Issuer has entered into a Letter of Intent (LOI) on
November 1, 2013, for the entering into of a definitive agreement respecting an
option to earn a 51% Net equity and net revenue interest in 0786521 B.C. Ltd.,
the proposed Medical Marihuana Producer, from 0984329 B.C. Ltd., the owner of
0786521 B.C. Ltd. 

In order to earn the 51% interest in 0786521 B.C. Ltd, the
Issuer is required to make aggregate cash payments of $1,375,000 over a four
year period and issue an aggregate of 20,000,000 shares of its common stock over
a four year period to the vendor, 0984329 B.C. Ltd. As of November 29, 2013, the
Issuer has issued 10,000,000 shares to 0984329 B.C. Ltd. These securities are
also restricted for securities laws purposes and are subject to the applicable
hold periods for Canada and the United States. 

TERMS OF DEFINITIVE AGREEMENT 

The Issuer shall issue to 0984329 B.C. LTD 20,000,000 shares of
restricted common stock in the Issuer and pay $1,375,000.00 by certified cheque,
bank draft or solicitor’s trust cheque as follows: 

	 	1. 	
      10,000,000 shares to 0984329 B.C. LTD on signing the LOI,
      (the “Initial Payment”) (PAID),

	 	2. 	
      5,000,000 shares to 0984329 B.C. LTD on the Closing Date
      and $175,000 cash to 0786521 B.C. LTD,

	 	3. 	
      1,000,000 shares to 0984329 B.C. LTD. and $200,000 cash
      to 0786521 B.C. LTD on six months from Closing Date,

	 	4. 	
      1,000,000 shares and $200,000 cash to 0984329 B.C. LTD on
      one year anniversary,

	 	5. 	
      1,000,000 shares and $200,000 cash to 0984329 B.C. LTD on
      second year anniversary,

	 	6. 	
      1,000,000 shares and $300,000 cash to 0984329 B.C. LTD on
      third year anniversary,

	 	7. 	
      1,000,000 shares and $300,000 cash to 0984329 B.C. LTD on
      fourth year anniversary

0786521 B.C. LTD shall transfer the shares to the Purchaser as
follows: 30% of 100% on the Closing Date; 

	 	1. 	
      A further 1% of 100% on the Six month anniversary date
      and 0786521 B.C. LTD. agrees to remit quarterly to the Issuer 31% of net profits after the six
  month anniversary payment;

	 	2. 	
      A further 2% of 100% on the one year anniversary date;
      and 0786521 B.C. LTD. agrees to remit quarterly to the Issuer a total of
      33% of net profits after the one year anniversary payment.

	 	3. 	
      A further 6% of 100% on the two year anniversary date;
      and 0786521 B.C. LTD agrees to remit quarterly to the Issuer a total of
      39% of net profits after the two year anniversary payment.

	 	4. 	
      A further 6% of 100% on the three year anniversary date;
      and the 0786521 B.C. LTD agrees to remit quarterly to the Issuer a total
      of 45% of net profits after the three year anniversary payment.

	 	5. 	
      A further 6% of 100% on the four year anniversary date;
      and the 0786521 B.C. LTD agrees to remit quarterly to the Issuer a total
      of 51% of 100% of net profits after the four year anniversary
    payment.

Canadian Medical Marihuana Sector 

In Canada patients can currently access medical marihuana under
the Marihuana Medical Access Program (MMAP) until March 31, 2014 after this date
patients will only be able to buy under the new system announced on October 1,
2013 called Marihuana for Medical Purposes Regulations (MMPR) which comes into
effect April 1, 2014 

Under the MMAP system producers could grow for up to four (4)
medical marijuana patients. Producers could be patients and grow for themselves
or grow for licensed patients. The production facilities were not strictly
controlled and tracking the exact production and use of marijuana was hard to
substantiate. 

Under the new MMPR system the production and selling of
marijuana is strictly controlled. Health Canada has published a 132 page
document for current and new producers to follow the new guidelines to becoming
Licensed Producer (LP) under the new system that takes effect April 1, 2014
which can be found at http://www.hc-sc.gc.ca/dhp-mps/marihuana/info/app-demande-eng.php

Reference is made to Item 1. (Business) in the Issuer’s Form
10-K (Annual Information Form), filed on SEDAR on December 6, 2013, for
disclosure relating to the LOI agreement for the 0786521 B.C. Ltd. agreement.

Oil & Gas Division

On September 17, 2013 the Issuer signed an AMI for the option
to drill up to 100 light oil wells in Venango and Warren Co, PA. 

Terms of the AMI: 

Issued to Downhole Energy LLC the 100,000 common shares in the
capital stock of the Issuer as soon as practicable following the execution of
the Agreement (PAID),

Drilling up to 10 wells in year one and issuing 10,000 common
shares per producing well after 60 days of commercial production on or before
the first anniversary of this Agreement,

Drilling up to 20 wells in year two and issuing 10,000 common
shares per producing well after 60 days of commercial production on or before
the second anniversary of this Agreement,

Drilling up to 30 wells in year three and issuing 10,000 common shares per producing well after 60 days of commercial production on or before the third anniversary of this Agreement, and 

Drilling up to 40 wells in year four and issuing 10,000 common shares per producing well after 60 days of commercial production on or before the fourth anniversary of this Agreement. 

Oil Field History 

The oil field was first developed for commercial production by Quaker State Oil in the 1970’s. 

Well spacing was conducted on 600 foot spacing with the Red Valley and 2nd Sands formations being the main formations that were targeted and exploited. Formation depth was from 680’ to 980’ in depth. Recent work by the vendor
has resulted in the successful exploitation for the deeper 3rd and 4th sands to depths of 1,300’ 

Proven and Probable Oil Reserves

None attributable to the Company today 

Current Oil Production

42 currently producing oil wells on the leases under the AMI but excluded from the AMI agreement. 

Oil Development Proposal 

Downhole Energy LLC. hereby grants to the Issuer the Participation right to acquire up to an undivided 100% gross, 75% net revenue interest to Downhole Energy, LLC right, title and interest in and to the 100 wells the Issuer funds, free and clear of
all charges, encumbrances, claims, liabilities and adverse interests of any nature or kind. 

Reference is made to Item 1. (Business) in the Issuer’s Form 10-K (Annual Information Form), filed on SEDAR on December 6, 2013, for disclosure relating to the AMI property agreement for the Downhole Energy LLC agreement. 

Clean Technology Division 

The Issuer is currently involved in the following clean technology sectors, Solar Thermal (Hot Water), Energy Retrofits and Recovery and Solar powered Filtered Drinking Water.

The Issuer’s involvement in the clean technology sector is indirect through equity holdings in companies that are involved in each respective sector. 

The Issuer, as of August 31, 2013, held an 8.14% interest in Global Solar Water Power Systems Inc., (“GSWPS”) a private company beneficially owned by Mark Snyder, our company’s former Chief Technical Officer and now our clean
energy advisor.  GSWPS owns certain technology invented and developed by Mark Snyder for the design and manufacture of certain water filtration equipment, and is pursuing other clean energy opportunities. Current products
offered by GSWPS include a portable solar powered trailer mounted water
purification unit that can be delivered and operated nearly anywhere in the
world and can provide a village, resort, or remote work-camps with all their
drinking water and domestic water requirements. 

Note: On December 2, 2013 the Issuer sold its equity interest
in Pro Eco Energy Ltd. as per disclosure on both EDGAR and SEDAR, and is listed
in the Description of Document table below. 

Reference is made to Item 1. (Business) in the Issuer’s Form
10-K (Annual Information Form), filed on SEDAR on December 6, 2013, for
disclosure relating to the Issuer’s clean technology division. 

Existing Documents Incorporated by Reference 

Information has been incorporated by reference into this
Offering Memorandum from documents listed in the table below, which have been
filed with securities regulatory authorities or regulators in Canada. The
documents incorporated by reference are available for viewing on the SEDAR
website at www.sedar.com. In addition copies
of the documents may be obtained on request without charge from the Issuer at
Suite 950, 1130 West Pender St, Vancouver, BC V6E-4A4 or from our Solicitors
Macdonald Tuskey, Corporate and Securities Lawyers at 4th Floor - 570 Granville
Street, Vancouver BC V6C 3P1

Documents listed in the table and information provided in those
documents are not incorporated by reference to the extent that their contents
are modified or superseded by a statement in this Offering Memorandum or in any
other subsequently filed document that is also incorporated by reference in this
Offering Memorandum. 

	

      
Description of Document 	Date of 

      Document and/or 
SEDAR Filing
      
	Annual Financial Statements (Form 10-K) (includes August 31,
      2013 Financial Statements and MD&A) 	December 6, 2013 
	Material Change Report announcing sale of Pro Eco Energy 	December 2, 2013 
	Material Change Report of the Issuer, announcing First Tranche
      Closing 	November 26, 2013 
	Material Change Report announcing IR Coal Harbor Communications
    	November 18, 2012 
	News Release of the Issuer, announcing terms of the Offering
	November 12, 2013 
	Press Release relating to Medical Marijuana Update 	November 7, 2013 
	Material Change Report for Medical Marijuana intent of
      Acquisition 	November 4, 2013 
	Material Change Report announcing the signing of Olibri
      Consulting for acquisitions 	October 4, 2013 
	Material Change Report relating to the dissemination of news
      regarding proposed financing for $1,070,000 for oil field development 	September 24, 2013

	

Description of Document 	Date of 
Document and/or 
SEDAR
      Filing 
	
Material
      Change Report relating to AMI Participation Agreement 	
September 19, 2013 

Existing Documents Not Incorporated by Reference 

Other documents available on the SEDAR website (for example,
most press releases, take-over bid circulars, prospectuses and rights offering
circulars) are not incorporated by reference into this Offering Memorandum
unless they are specifically referenced in the table above. Your rights as
described in Item 11 of this Offering Memorandum apply only in respect of
information contained in this Offering Memorandum and documents or information
incorporated by reference. 

Future Documents Not Incorporated by Reference 

Documents filed after the date of this Offering Memorandum are
not deemed to be incorporated into this Offering Memorandum. However, if you
subscribe for securities and an event occurs, or there is a change in the
Issuer's business or affairs, that makes the Certificate to this Offering
Memorandum no longer true, the Issuer will provide you with an update of this
Offering Memorandum, including a newly dated and signed Certificate, and will
not accept your subscription until you have re-signed the subscription
agreement. 

ITEM 3: INTERESTS OF DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND PRINCIPAL HOLDERS 

To the knowledge of the Issuer, the following persons or
company beneficially owns, directly or indirectly, or exercises control or
direction over, Common Shares carrying more than 10% of the voting rights
attached to the outstanding Common Shares of the Issuer as at November 20, 2013.

	
Name and Address of Beneficial
      Owner 	Position with the 
Issuer
	Amount and Nature
      of 
Beneficial Ownership 	Percentage 
of Class 
	Robert McAllister 
Kelowna, British
      Columbia, Canada 	President, CEO 
and Director 	4,195,000(1) 
	8.40% 

	Bal Bhullar 
Vancouver, British Columbia,
      Canada 	Chief Financial 
Officer 	751,000(2) 
	1.50% 

	Donald Findlay 
Calgary, Alberta, Canada
    	Director 
	252,000(3) 
	0.50% 

	Greg Dawson 
Vancouver, British Columbia,
      Canada 	Director 
	300,000(4) 
	0.60% 

	John Thomas 
Vancouver, British Columbia,
      Canada 	Director 
	300,000(5) 
	0.60% 

	0984329 B.C. LTD 	MMJ Partner 	10,000,000(6) 	20.02% 

Notes: (1) Consists of beneficial ownership of an
aggregate of 4,195,000 shares of common stock of the Issuer broken down as
follows: (i) 3,210,000 shares of common stock held directly by Mr. McAllister,
and (ii) 280,000 shares of common stock acquirable on exercise of outstanding
warrants, and (iii) 805,000 shares of common stock acquirable on exercise of
outstanding stock options within 60 days of the date hereof. 

(2) Consists of beneficial ownership of an aggregate
of 751,000 shares of common stock of the Issuer broken down as follows: (i)
1,000 shares of common stock held directly by Ms. Bhullar, and (ii) 750,000
shares of common stock acquirable on exercise of outstanding stock options
within 60 days of the date hereof. 

(3) Consists of beneficial ownership of an aggregate
of 252,000 shares of common stock of the Issuer broken down as follows: (i)
2,000 shares of common stock held directly by Mr. Findlay, and (ii) 250,000
shares of common stock acquirable on exercise of outstanding stock options
within 60 days hereof. 

(4) Consists of beneficial ownership of an aggregate
of 300,000 shares of common stock of the Issuer broken down as follows: (i)
300,000 shares of common stock acquirable on exercise of outstanding stock
options within 60 days hereof by Mr. Greg Dawson. 

(5) Consists of beneficial ownership of an aggregate
of 300,000 shares of common stock of the Issuer broken down as follows: (i)
300,000 shares of common stock acquirable on exercise of outstanding stock
options within 60 days hereof by Mr. John Thomas. 

(6) Consists of beneficial ownership of an aggregate
of 10,000,000 shares of common stock of the Issuer broken down as follows: (i)
10,000,000 shares of common stock held directly by 0984329 B.C. Ltd.

You can obtain further information about directors and
executive officers from the Issuer’s Form 10-K (Annual Information Form) filed
on SEDAR on December 6, 2013. 

Current information regarding the securities held by directors,
executive officers and principal holders can be obtained from the SEDI website
at www.sedi.ca and from the U.S. Securities
and Exchange Commission’s EDGAR system at www.sec.gov. The Issuer cannot
guarantee the accuracy of this information. 

Loans 

A loan exists in the form of a CDN $50,000 non secured loan
bearing 10%, repayable at any time by the Company and currently on a month to
month basis. The lender is President and a Director of the Company. 

ITEM 4: CAPITAL STRUCTURE 

	

Description 
of security 	

Number 
authorized
      
to be issued 	

Price per
      
security 	Number 
outstanding as at
      
November 20, 
2013 	
Number 
outstanding
      after 
max. offering 
	Common Shares 	200,000,000 	N/A(1) 	41,364,415 	49,364,415 
	Offering Warrants(2) 	8,800,000 	US$0.10 		8,800,000 
	Warrants(3) 	5,429,800 	US$0.10 - $0.20 	5,429,800 	5,429,800 
	Options(4) 	3,155,000 	US$0.06 – US$0.25 	3,155,000 	3,155,000 
	TOTAL 	  	  	49,949,215 	66,749,215 

Notes: 

	(1) 	
      Common shares of the Issuer have been issued from
      treasury at prices ranging from US$0.02 per share to US$0.50 per
      Share.

	 	 
	(2) 	
      Represents the Warrants to be issued under this
      Offering (including broker warrants), exercisable to acquire common shares
      at an exercise price of US $0.10 per common share for a period of 36
      months from the date of issuance.

	 	 
	(3) 	
      Represents an aggregate of 5,429,800 warrants
      exercisable at the price of US $0.20 until April 16, 2014, July 27, 2015,
      August 24, 2015, September 28, 2015, and November 15, 2015.

	 	 
	(4) 	
      Represents incentive stock options granted pursuant to
      the Issuer’s former and current equity compensation and stock option
      plans.

ITEM 5: SECURITIES OFFERED 

Terms of Securities 

The Issuer is offering for sale by way of private placement (the "Offering") up to 8,000,000 units (the "Units"), each Unit to consist of one common share (each, a “Share”) of the Issuer and one Share purchase warrant (each, a
“Warrant”).  Each Warrant will be exercisable into one further Share (a “Warrant Share”) at a price of US$0.10 per Warrant Share for a period of thirty-six (36) months following closing.

In the event that the Company’s common shares, at any time after 4 months and 1 day have elapsed from the Issue Date, as listed on a Principal Canadian Market – currently the CNSX with symbol TOP has been at or above CDN$0.20 for a
period of 20 consecutive trading days, the Company may, within five (5) days thereafter issue to the Subscribers a written notice advising of the accelerated expiry of the Warrants. Such written notice shall identify in reasonable detail the
particulars of the acceleration event and identify the date (the "Warrant Accelerated Expiry Date") set for accelerated expiry, which in no event shall be less than 30 days after the mailing date of the written notice. For greater certainty, all
Warrants shall expire and be of no further force or effect as of 4:30 pm (Pacific Time) on the Warrant Accelerated Expiry Date. 

The holders of common shares are entitled to one vote at meetings of shareholders for each share held and all common shares rank equally with respect to the payment of dividends and on any distribution of the assets of the Issuer on dissolution or
winding up. 

Reference is also made to Item 7 (Compensation Paid to Sellers and Finders) below for particulars with respect to commissions and finders' fees payable in connection with the Offering. 

Subscription Procedure 

In order to subscribe for the Units, purchasers will be required to complete and deliver the following documents to the Issuer or its legal counsel on or before December 16 2013, or such other date as the Issuer may determine. 

	
1. 		
a completed subscription agreement in the form attached hereto as Schedule "A", with such subscription agreement containing, among other things, representations by the subscriber that it is duly authorized to purchase the Units,
that it is purchasing the Units for investment and not with a view for resale, and as to its status to purchase the Units on a private placement basis;

	
	 	 
	
2. 		
a completed copy of a Risk Acknowledgment (Form 45-106F4) in the form attached hereto as Schedule "B"; and

	
	 	 
	
3. 		
cash, solicitor's trust cheque, certified cheque, bank draft, money order in the amount of your investment payable to "Enertopia Corporation".

	

Your subscription funds will be held in trust until midnight on the second business day after the day on which the Issuer or its legal counsel received your signed subscription agreement and if the closing is after this time, the Issuer and/or its
legal counsel will hold the funds in trust pending closing. We expect to close this Offering on or before December 20 2013. 

The Issuer reserves the right to accept or reject subscriptions in whole or in part at its discretion and to close the subscription books at any time without notice. Any subscription funds or subscriptions that the Issuer does not accept will be
returned promptly after it has been determined not to accept the funds. 

At the closing of the Offering, or as soon as practicable thereafter, you will receive certificates representing the Shares and certificates representing the Warrants, provided that the subscription price has been paid in full. 

ITEM 6: INCOME TAX CONSEQUENCES AND RRSP ELIGIBILITY 

The Issuer has not undertaken a study of potential income tax consequences to investors. 

You should consult your own professional advisers to obtain advice on the income tax consequences that apply to you. 

Not all securities are eligible for investment in a registered retirement savings plan (“RRSP”) . You should consult your own professional advisers to obtain advice on the RRSP eligibility of these securities. 

ITEM 7: COMPENSATION PAID TO SELLERS AND FINDERS 

The Issuer may pay finder's fees to certain arm's length parties (the "Finders") in connection with the completion of the Offering equal to 10% of the aggregate subscription proceeds realized from the sale of the Units by the respective Finder,
payable in cash or Shares, and Broker’s Warrants equal to 10% of the aggregate subscription units sold. Each Broker’s Warrant will be exercisable into one further Share (a “Warrant Share”) at a price of US$0.10 per
Warrant Share for a period of thirty-six (36) months following closing.

ITEM 8: RISK FACTORS 

Investment in the Units should only be made after consulting with independent and qualified sources of investment and tax advice. Investment in the Units at this time is highly speculative due to the stage of the Issuer’s development and
requirement to raise additional financing to carry out the long-term business objectives of the Issuer. Any investment in the Issuer at this stage involves a high degree of risk. 

Reference is made to Item 1A. (Risk Factors) in the Issuer’s Form 10-K (Annual Information Form), filed on SEDAR on December 6, 2013, for a discussion of the risks and uncertainties that the Issuer believes to be material. 

Additional risk factors relating to the Offering include: 

	
1. 		
Purchasers of the Units will not have the benefit of a review of this Offering Memorandum by any regulatory authority.

	
	 	 
	
2. 		
Purchasers of Units have no individual legal representation in connection with the Offering. Accordingly, purchasers should consult with their own counsel prior to purchasing Units.

	
	 	 
	
3. 		
Purchasers of the Units offered hereby will experience an immediate and substantial dilution in the net tangible book value of the Units from the Offering Price of this Offering.

	
	 	 
	
4. 		
Purchasers of the Units must be aware of the long-term nature of their investment and be able to bear the economic risks of their investment. The right of any purchaser to sell, transfer, pledge or otherwise dispose of the Shares or the Warrant Shares will be limited by applicable legislation, including a number of resale restrictions, including a restriction on trading. Until the restriction on trading expires, you will not
be able to trade the Securities unless you comply with an exemption from prospectus and registration requirements under applicable securities legislation. The restriction on trading may be indefinite depending on the holder's jurisdiction of
residence. Consequently, a holder of the Units may not be able to readily liquidate his/her/its investment. Prospective purchasers should be able to afford the entire loss of their investment in the Issuer.

	

	
5. 		
Publicly quoted securities are subject to a relatively high degree of price volatility. It may be anticipated that the quoted market for the Shares of the Issuer will be subject to market trends generally, notwithstanding any
potential success of the Issuer in creating revenue.
	
	 	 
	
6. 		
Shareholders of the Issuer may be unable to sell significant quantities of Shares into the public trading markets without a significant reduction in the price of their Shares, if at all. There can be no assurance that the Issuer
will continue to meet the listing requirements of the Canadian National Stock Exchange, the Over-The-Counter Bulletin Board or achieve listing on any other public listing exchange.
	

ITEM 9: REPORTING OBLIGATIONS 

Other than notices of annual and special meetings of the shareholders, and related information circulars, form of proxies, and financial statement request forms, the Issuer does not provide documents to its shareholders on an annual or ongoing
basis. 

The Issuer is a reporting issuer (or equivalent) in British Columbia, Ontario and in the United States. You can obtain corporate and securities information about the Issuer from the SEDAR website at www.sedar.com, the SEDI website at www.sedi.ca,
and from the U.S. Securities and Exchange Commission’s EDGAR system at www.sec.gov. The Issuer cannot guarantee the accuracy of this information. Additionally, you can obtain quotations for the Issuer’s shares of common stock, under the
symbol TOP, from the Canadian National Stock Exchange and/or under the symbol ENRT, from OTC Markets at www.otcmarkets.com.

ITEM 10: RESALE RESTRICTIONS 

Canadian Resale Restrictions 

These securities will be subject to a number of resale restrictions, including a restriction on trading. Until the restriction on trading expires, you will not be able to trade the securities unless you comply with an exemption from the prospectus
and registration requirements under securities legislation. 

Unless permitted under securities legislation, you cannot trade the securities before the date that is 4 months and a day after the distribution date. 

United States Resale Restrictions 

The Shares and Warrants to be issued to security holders will not be registered under the U.S. Securities Act or applicable state securities laws. Such securities will be issued in reliance upon the exemption from registration provided by Regulation
S of the U.S. Securities Act of 1933, as amended.

Likewise, the Warrant Shares will not be registered under the U.S. Securities Act or applicable states securities laws, and accordingly may not be issued to U.S. Persons as defined in Regulation S or persons
in the United States, unless an exemption from registration under the U.S. Securities Act and applicable states securities laws is available.

In addition, the Shares, the Warrants and the Warrant Shares issuable upon the exercise of the Warrants will be "restricted securities" within the meaning of Rule 144 under the U.S. Securities Act, certificates representing such securities will bear
a legend to that effect, and such securities may be resold only pursuant to an exemption from the registration requirements of the U.S. Securities Act and all applicable state securities laws. Subject to certain limitations, such securities may be
resold outside the United States without registration under the U.S. Securities Act pursuant to Regulation S under the U.S. Securities Act. 

Moreover, the Warrants may be exercised only pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. As a result, the Warrants may only be exercised by a holder who represents
that, at the time of exercise, the holder is not then located in the United States, is not a "U.S. person", as defined in Rule 902 of Regulation S under the U.S. Securities Act (a "U.S. Person"), and is not exercising the Warrants for the account or
benefit of a U.S. Person or a person in the United States, unless the holder provides a legal opinion or other evidence reasonably satisfactory to the Company to the effect that the exercise of the Warrants does not require registration under the
U.S. Securities Act or applicable state securities laws, or any other such documents that the Company may deem necessary. 

The foregoing discussion is only a general overview of certain requirements of United States securities laws applicable to the securities received upon completion of the Private Placement. All holders of such securities are urged to consult
with counsel to ensure that the resale of their securities complies with applicable securities legislation. 

ITEM 11: PURCHASERS’ RIGHTS 

If you purchase these securities you will have certain rights, some of which are described below. For information about your rights you should consult a lawyer. 

Two-Day Cancellation Right 

You can cancel your agreement to purchase these securities. To do so, you must send a notice to the Issuer by midnight on the 2nd business day after you sign the subscription agreement to buy the securities. 

Statutory Rights of Action in the Event of a Misrepresentation 

If there is a misrepresentation in this Offering Memorandum, you have a statutory right to sue: 

	
(a) 		
the Issuer to cancel your agreement to buy these securities, or

	
	 	 
	
(b) 		
for damages against the Issuer, every person who was a director of the Issuer at the date of this Offering Memorandum, and every other person who signed this Offering Memorandum.

	

This statutory right to sue is available to you whether or not you relied on the misrepresentation. However, there are various defences available to the persons or companies that you have a right to sue. In particular, they have a defence if you
knew of the misrepresentation when you purchased the securities.

 If you intend to rely on the rights described in (a) or (b) above, you must do so within strict time limitations. You must commence your action to cancel the agreement within180 days after you signed the subscription agreement to purchase the securities.  You must commence your action for damages within the earlier of 180 days after learning of the misrepresentation and three years after you signed the subscription agreement to purchase the
  securities. 

ITEM 12: DATE AND CERTIFICATE 

Dated this 6th day of December, 2013. 

This Offering Memorandum does not contain a
misrepresentation. 

ENERTOPIA CORP. 

 

	 	 	 
	Robert McAllister 	 	Bal Bhullar 
	President, CEO 	 	Chief Financial Officer 

ON BEHALF OF THE BOARD OF DIRECTORS 

 

	 	 	 
	  	 	Donald Findlay 
	  	 	  Director 
	  	 	  
	  	 	  
	  	 	  
	  	 	
	Greg Dawson 	 	John Thomas 
	Director 	 	Director 

Form 45-106F4 

You have 2 business days to cancel your purchase. To do
so, send a notice to Enertopia Corporation stating that you want to cancel your
purchase. You must send the notice before midnight on the 2nd
business day after you sign the agreement to purchase the securities. You can
send the notice by fax or email or deliver it in person to Enertopia Corporation
at its business address. Keep a copy of the notice for your records. 

Issuer Name and Address: 

Enertopia Corporation. 
Suite 950, 1130 West Pender

Vancouver, British Columbia 
Canada, V6E 4A4 
Phone: 604-602-1675

Fax: 604-685-1602 
E-mail: bbspa@hotmail.com 

You are buying Exempt Market Securities 

They are called exempt market securities because two
parts of securities law do not apply to them. If an issuer wants to sell
exempt market securities to you: 

	. 	
      the issuer does not have to give you a prospectus (a
      document that describes the investment in detail and gives you some legal
      protections), and 

	 	     
	. 	
      the securities do not have to be sold by an investment
      dealer registered with a securities regulatory authority or regulator.
    

There are restrictions on your ability to resell exempt
market securities. Exempt market securities are more risky than other
securities. 

You will receive an offering memorandum. Read the
offering memorandum carefully because it has important information about the
issuer and its securities. Keep the offering memorandum because you have rights
based on it. Talk to a lawyer for details about these rights. 

For more information on the exempt market, call your local
securities regulatory authority or regulator.

British Columbia Securities Commission
P.O. Box
10142, Pacific Centre 
701 West Georgia Street 
Vancouver, British
Columbia V7Y 1L2
Telephone: (604) 899-6500
Toll free in British Columbia
and Alberta 1-800-373-6393 
Facsimile: (604) 899-6506 

Alberta Securities Commission 
4th Floor, 300 – 5th
Avenue SW 
Calgary, Alberta T2P 3C4 
Telephone: (403) 297-6454

Facsimile: (403) 297-6156

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