Document:

exv10w6

 

Fifth Amended and Restated

Cowtown Gas Facilities

Gas Gathering and Processing Agreement

Between

QUICKSILVER RESOURCES INC.,

COWTOWN PIPELINE PARTNERS L.P.

and

COWTOWN GAS PROCESSING PARTNERS L.P.

Hood County, Texas

August 10, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I — DEFINITIONS
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II — COMMITMENT OF PROCESSING RIGHTS
	 	 	8	 
	 
	 	 	 	 
	ARTICLE III — RESERVATIONS OF PARTIES
	 	 	9	 
	 
	 	 	 	 
	ARTICLE IV — GATHERING SYSTEM DELIVERY POINT(S), PLANT DELIVERY POINT(S)
AND PRESSURE
	 	 	10	 
	 
	 	 	 	 
	ARTICLE V — REGULATION OF PRODUCTION
	 	 	12	 
	 
	 	 	 	 
	ARTICLE VI — QUANTITY
	 	 	13	 
	 
	 	 	 	 
	ARTICLE VII — QUALITY
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VIII — TESTS
	 	 	17	 
	 
	 	 	 	 
	ARTICLE IX — MEASUREMENT AND METER TESTING
	 	 	18	 
	 
	 	 	 	 
	ARTICLE X — ALLOCATION PROCEDURE
	 	 	22	 
	 
	 	 	 	 
	ARTICLE XI — DISPOSITION OF PRODUCER’S PORTION OF PLANT PRODUCTS
	 	 	24	 
	 
	 	 	 	 
	ARTICLE XII — GATHERING AND PROCESSING FEES
	 	 	25	 
	 
	 	 	 	 
	ARTICLE XIII — DISPOSITION OF PRODUCER’S PORTION OF RESIDUE GAS
	 	 	25	 
	 
	 	 	 	 
	ARTICLE XIV — ACCOUNTING, PAYMENTS AND CREDIT ASSURANCES
	 	 	25	 
	 
	 	 	 	 
	ARTICLE XV — WARRANTY
	 	 	29	 
	 
	 	 	 	 
	ARTICLE XVI — TAXES
	 	 	30	 
	 
	 	 	 	 
	ARTICLE XVII — INDEMNITY
	 	 	31	 
	 
	 	 	 	 
	ARTICLE XVIII — FORCE MAJEURE
	 	 	35	 
	 
	 	 	 	 
	ARTICLE XIX — UNPROFITABLE OPERATIONS AND RIGHTS OF TERMINATION
	 	 	36	 
	 
	 	 	 	 
	ARTICLE XX — TERM
	 	 	38	 
	 
	 	 	 	 
	ARTICLE XXI — REGULATORY BODIES
	 	 	38	 
	 
	 	 	 	 
	ARTICLE XXII — ARBITRATION
	 	 	39	 
	 
	 	 	 	 
	ARTICLE XXIII — DISPUTES
	 	 	40	 

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	 	 	Page	 
	ARTICLE XXIV — NOTICES AND PAYMENTS
	 	 	41	 
	 
	 	 	 	 
	ARTICLE XXV — ASSIGNMENT
	 	 	43	 
	 
	 	 	 	 
	ARTICLE XXVI — MISCELLANEOUS
	 	 	43	 

EXHIBITS

EXHIBIT A

EXHIBIT B

EXHIBIT C

ii 

 

Fifth Amended and Restated

Cowtown Gas Facilities

Gas Gathering and Processing Agreement

     THIS FIFTH AMENDED AND RESTATED GAS GATHERING AND PROCESSING AGREEMENT (the “Agreement”) is
made and entered into as of the 10th day of August, 2007 (the “Effective Date”), by and among COWTOWN
PIPELINE PARTNERS L.P., a Texas limited partnership (“Gatherer”), COWTOWN GAS PROCESSING PARTNERS
L.P., a Texas limited partnership, (“Processor”), and QUICKSILVER RESOURCES INC., a Delaware
corporation, (“Producer”). Gatherer, Processor and Producer are sometimes collectively referred to
herein as the “Parties”.

WITNESSETH, THAT:

     WHEREAS, the Parties entered into that certain Fourth Amended and Restated Gas Gathering and
Processing Agreement dated effective January 1, 2007 (the “Fourth Restatement”);

     WHEREAS, Producer has previously formed Quicksilver Gas Services LP, a Delaware limited
partnership (“MLP”), and has, as of the Effective Date, contributed certain assets and interests to
the MLP pursuant to that certain Contribution, Conveyance and Assumption Agreement, dated as of the
Effective Date, by and among Producer, MLP and the other parties thereto;

WHEREAS, the Parties desire to amend certain terms in the Fourth Restatement;

     NOW, THEREFORE, for good and valuable consideration the adequacy, receipt and sufficiency of
which are hereby set forth and acknowledged, and for all of the

 

 

representations, warranties and mutual covenants set forth herein, Gatherer, Processor and
Producer agree to amend the Fourth Restatement as follows:

ARTICLE I -

DEFINITIONS

     1.1 For the purpose of this Agreement, the following terms and expressions used herein are
defined as follows:

	 	a.	 	“Btu” shall mean one British thermal unit, which is the
quantity of heat required to raise one pound avoirdupois of pure water from
58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure of
14.73 pounds per square inch absolute.
	 
	 	b.	 	“Component” shall mean those hydrocarbon and non-hydrocarbon
molecular constituents which are definable by industry standards and
procedures. Such Components as used in this Agreement shall be:

N2  — Nitrogen

CO2 — Carbon Dioxide

H2S — Hydrogen Sulfide

C1  — Methane

C2  — Ethane

C3  — Propane

iC4 — Iso-butane

nC4 — Normal Butane

iC5 — Iso-pentane

nC5 — Normal Pentane

C6+ — Hexanes and Heavier Compounds

	 	c.	 	“Contract Area” shall mean that area as outlined on Exhibit “A”
which is attached hereto and made a part hereof for all purposes.
	 
	 	d.	 	“CPI Adjustment” shall mean that percentage equal to the
percentage increase between:

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	 	 	 	(i) the seasonally unadjusted Consumer Price Index for All Urban Consumers
(all items), U.S. city Average (1982-84 =100), as published by the U.S.
Department of Labor, Bureau of Labor Statistics (“CPI-U”) for the month of
December of the second year prior to the Escalation Date; and
	 
	 	 	 	(ii) the seasonally unadjusted CPI-U for the month of December
immediately preceding the Escalation Date.

	 	e.	 	“Day” shall mean a period of twenty-four (24) consecutive hours
beginning and ending at seven o’clock a.m. Central Time.
	 
	 	f.	 	“Escalation Date” shall mean the January 1st
following the Effective Date and each January 1st thereafter.
	 
	 	g.	 	“Facilities” shall mean the Plant and the Gathering System.
	 
	 	h.	 	“Gas” shall mean natural gas which is owned or controlled by
Producer or its successors and assigns and produced from wells drilled on lands
within the Contract Area, including casinghead gas produced with crude oil, gas
from gas wells produced in association with crude oil (associated gas), and gas
from condensate wells (non-associated gas), and shall include any inerts or
impurities contained therein.
	 
	 	i.	 	“Gathering Fee” shall have the meaning set forth in Section
12.1 of the Agreement.
	 
	 	j.	 	“Gathering System” shall mean, but shall in no way be limited
to, the Gas gathering pipelines, fuel gas pipelines, dehydration facilities,

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	 	 	 	compression facilities, junctions, heaters, meters, separators, electric
power lines, communications cables, roads, and other related facilities and
equipment, including all easements located thereon, from the inlet flange of
the pipeline metering facility installed up to the inlet flange of the
separation facilities installed upstream of the Plant inlet meter, necessary
to gather and transport Gas from the Gathering System Delivery Point(s) to
the Plant Delivery Point(s) and shall include any expansion of the Gathering
System as provided in Section 4.4.

	 	k.	 	“Gathering System Delivery Point(s)” shall mean the inlet
flange of Gatherer’s metering facilities located at or near each of Producer’s
wells located within the Contract Area or such other point as may be mutually
agreed upon by the Parties. The Gathering System Delivery Point(s) are listed
on Exhibit “B” to this Agreement which is attached hereto and made a part
hereof for all purposes and which may be amended from time to time to reflect
the addition or deletion of a Gathering System Delivery Point.
	 
	 	l.	 	“Liquefiable Hydrocarbons” shall mean ethane, propane,
iso-butanes, normal butanes, iso-pentanes, normal pentanes, hexanes and heavier
hydrocarbons, and incidental methane, or any mixtures thereof, which can be
recovered or extracted in the Gathering System or the Plant and sold as Plant
Products.
	 
	 	m.	 	“MCF” shall mean 1,000 standard cubic feet of gas.
	 
	 	n.	 	“MMBtu” shall mean 1,000,000 Btu’s.

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	 	o.	 	“MMCF” shall mean 1,000,000 standard cubic feet of gas.
	 
	 	p.	 	“MMCFD” shall mean 1,000,000 standard cubic feet of gas per
day.
	 
	 	q.	 	“Month,” “billing month,” “period,” and “accounting period”
shall mean the period beginning at seven o’clock a.m. on the first day of a
calendar month and ending at seven o’clock a.m. on the first day of the next
succeeding calendar month.
	 
	 	r.	 	“Plant” shall mean, but shall in no way be limited to, all
tanks, machinery, equipment, buildings, structures, fixtures, appliances, pipe,
valves, fittings, and materials of any nature or kind whatsoever located on the
site at which the processing, compression, and recompression facilities of
Processor are currently located, or any other site where such facilities may
later be located due to an expansion or new development of the Plant; including
appropriate storage, compression, metering, shipping, dehydration, and delivery
facilities for Plant Products; all easements pertaining to rights-of-way, the
site or sites, and the operation of the Plant; and any and all other facilities
and appurtenances located, or to be located, on or away from such site or sites
deemed by Processor to be necessary for the successful operation of the Plant,
including inlet compression, if any, but not including the Residue Gas Delivery
Facility.
	 
	 	s.	 	“Plant Delivery Point(s)” shall mean the point(s) of
interconnect between the Gathering System and the Plant which point(s) are

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	 	 	 	shown on Exhibit “B” which is attached hereto and made a part hereof for all
purposes.
	 
	 	t.	 	“Plant Fuel” shall mean the MMBTU’s of Gas consumed at the
Plant for fuel which shall include, but shall in no way be limited to, fuel
used for Gas compression, conditioning and treating; recovery, extraction, and
removal of Plant Products; and the recompression of the Residue Gas.
	 
	 	u.	 	“Plant Products” shall mean all Liquefiable Hydrocarbons
recovered, extracted, or otherwise removed from the Gas after the Plant
Delivery Point(s), including, but not limited to, plant condensate (sometimes
referred to as pentanes plus, heavier than butanes, or natural gasoline), and
all commercial non-hydrocarbon substances recovered, extracted, or otherwise
removed from the Gas in the Gathering System or the Plant.
	 
	 	v.	 	“Plant Products Delivery Point” shall mean either (a) the
point(s) of interconnect between that certain 8” liquids pipeline owned and
operated by Gatherer, and the facilities of third party pipeline(s) to which
the Plant Products are delivered and which point(s) are shown on Exhibit “C”
which is attached hereto and made a part hereof for all purposes or (b) the
truck loading facilities of the Plant.
	 
	 	w.	 	“Plant Tailgate” shall mean the point of interconnect between
the Plant and the Residue Gas Delivery Facility located at the downstream

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	 	 	 	flange of the block valve which is downstream of the Plant
residue meter and emergency shutdown valve.
	 
	 	x.	 	“Process Flare” shall mean any MMBTU’s of Gas dispersed or lost
at the Plant as flare which shall include, but shall in no way be limited to,
flare dispersed or lost in the compression, conditioning and treating of Gas;
recovery, extraction, and removal of Plant Products; and the recompression of
Residue Gas.
	 
	 	y.	 	“Processing Fee” shall have the meaning set forth in Section
12.2 of the Agreement.
	 
	 	z.	 	“Psia” shall mean pounds per square inch absolute.

	 
	 	aa.	 	“Psig” shall mean pounds per square inch gauge.
	 
	 	bb.	 	“Residue Gas” shall mean that hydrocarbon and non-hydrocarbon
stream of Gas remaining after the recovery, extraction, and removal of Plant
Products, and after reduction for Gas used for Plant Fuel, Process Flare, and
other incidental losses.
	 
	 	cc.	 	“Residue Gas Delivery Facility” shall mean the residue gas
pipeline and associated equipment operated by Gatherer that are located at the
Plant Tailgate and are used to deliver residue gas to the Residue Gas Delivery
Point(s).
	 
	 	dd.	 	“Residue Gas Delivery Point(s)” shall mean the point(s) of
interconnect between the Residue Gas Delivery Facility and the facilities of
third party pipeline(s) to which the Residue Gas is

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	 	 	 	delivered and which point(s) are shown on Exhibit “C” which is attached
hereto and made a part hereof for all purposes.
	 
	 	ee.	 	“SCF” or “standard cubic foot of gas” shall mean the amount of
Gas necessary to fill a cubic foot of space when the Gas is at a pressure of
14.65 pounds per square inch absolute and a temperature of sixty (60) degrees
Fahrenheit.

ARTICLE II -

COMMITMENT OF PROCESSING RIGHTS

     2.1 Subject to the terms and provisions hereof, Producer dedicates and agrees to deliver for
processing to Processor at the Gathering System Delivery Point(s) the total volume of Gas owned or
controlled by Producer or its successors and assigns lawfully produced from wells now or hereafter
drilled on the lands within the Contract Area or lands pooled therewith excluding Gas reserved or
utilized by Producer or its successors and assigns in accordance with the terms of Article III.
Any transfer by Producer of its right, title, or interest in the Gas to a third party, whether by
farmout, contract, or otherwise, shall be made specifically subject to this Agreement. Producer
will notify any person to whom Producer transfers all or a portion of its right, title, or interest
in the Gas that such Gas is dedicated pursuant to the terms of this Agreement to be gathered and
processed in the Facilities, and Producer shall obtain such third party’s agreement to continue
delivering such Gas to Processor during the term of and in accordance with this Agreement.
Producer will notify Gatherer and Processor of any such transfer within ten (10) days of the
effective date. Failure of Producer to so notify Gatherer and Processor will not impair Gatherer’s
and Processor’s rights under this Agreement.

8

 

     2.2 Gas shall be delivered to the Gathering System Delivery Point(s) after mechanical
separation by Producer for the removal of free water and free liquid hydrocarbons, but shall not
otherwise be processed by Producer for the removal of Liquefiable Hydrocarbons.

     2.3 Gatherer agrees that subject to the provisions hereof, it will take and gather Gas from
the Gathering System Delivery Point(s) and will cause such Gas to be delivered to the Plant
Delivery Point(s) for processing.

     2.4 Processor agrees that subject to the provisions hereof, it will receive the Gas at the
Plant Delivery Point(s) and will cause such Gas to be processed in the Plant for the recovery and
delivery of Plant Products. Processor also agrees to deliver at the Residue Gas Delivery Point(s)
to Producer or Producer’s nominee the Residue Gas as determined under the provisions of Section
10.6.

ARTICLE III -

RESERVATIONS OF PARTIES

     3.1 Producer reserves all liquid hydrocarbons, oil, or condensate removed by Producer by means
of mechanical gas-liquid separators (including heater-treaters), drips, and/or lines from the Gas
prior to delivery to Gatherer. If mechanical cooling is performed by Producer to meet the
temperature specifications of this Agreement, Producer shall not reduce the temperature of the Gas
below one hundred and twenty (120) degrees Fahrenheit.

     3.2 Producer reserves all Gas that may be required for cycling, repressuring, pressure
maintenance, and gas lift operations with respect to gas reservoirs on the premises committed
hereunder; provided, however, that the Gas used in such operations

9

 

shall be subject to the terms of this Agreement (to the extent that such Gas can be
economically saved) and delivered to Processor following the cessation of such operations.

     3.3 Producer reserves that amount of Gas which is required for above ground development and
operation within the Contract Area.

     3.4 Producer expressly reserves the right to deliver or furnish to Producer’s lessor Gas as
required to satisfy the terms of Producer’s oil and gas leases.

ARTICLE IV -

GATHERING SYSTEM DELIVERY POINT(S),

PLANT DELIVERY POINT(S) AND PRESSURE

     4.1 Producer, at its own expense, shall construct, equip, maintain, and operate all facilities
(including, but not limited to, all necessary separation, dehydration, and/or compression
equipment) necessary to deliver the Gas to Gatherer at the Gathering System Delivery Point(s) at
such pressure as is required and sufficient to enter the Gathering System, but not to exceed one
thousand two-hundred (1,200) psig.

     4.2 Following receipt of the Gas at the Gathering System Delivery Point(s), if Gatherer
provides compression for the Gas (other than Plant recompression which shall be provided by
Processor), Gatherer shall provide or cause to be provided each stage of compression for an
initial fee of $.065 per MMBTU per stage, and Producer will provide its pro rata share of
fuel required for operating such compressor(s), in order that Gas dedicated hereunder will
meet the pressure requirements at the Plant Delivery Point(s). Producer’s pro rata share of
such fuel shall equal the product of the total fuel utilized by the compressor(s) multiplied
by the fraction the numerator of which is the Gas metered into 

10

 

the Gathering System upstream of the compressor(s) and the denominator of which is gas
metered into the Gathering System upstream of the compressor(s). Commencing on the
Escalation Date, the compression fee set forth herein will be adjusted by the CPI
Adjustment.

     4.3 Gatherer, at Producer’s expense, shall install, construct and equip all meters and
facilities necessary to measure the Gas at the Gathering System Delivery Point(s). Gatherer, at
its own expense, shall maintain and operate such meters throughout the term of this Agreement.

     4.4 Gatherer, in its sole and absolute discretion, may decline to construct a Gathering System
expansion if it determines that it would not be profitable to do so. In such event, Producer may
construct a Gathering System expansion at its sole cost and expense. The Gathering System
expansion must meet all of Gatherer’s specifications, and Gatherer will be responsible for the
meter station and connection to the existing Gathering System. Gatherer may, at its election, but
within two years (2) of the initial delivery of production from the Gathering System expansion
acquire the ownership of the Gathering System expansion installed by the Producer by reimbursing
Producer for the actual cost of the Gathering System expansion with no allowance for inflation or
depreciation. In such event, Producer agrees to execute all assignments or contracts deemed
necessary to accomplish the transfer to Gatherer of title to the Gathering System expansion,
including rights-of-way and easements. In the event neither Gatherer nor Producer elect to
construct the necessary Gathering System expansion to connect the Gathering System Delivery Point
to the existing Gathering System, then this Agreement shall terminate as to the Gas from the well
or wells to be connected to that Gathering System Delivery Point.

11

 

     4.5 Gatherer hereby agrees to deliver the Gas to the Processor at the Plant Delivery Point(s)
at a pressure sufficient to enter the Plant, but in no way greater than five hundred (500) psig
unless Gatherer is providing compression pursuant to Section 4.2.

ARTICLE V -

REGULATION OF PRODUCTION

     It is understood and agreed by the Parties that in order for Gatherer and Processor to
maintain maximum efficiency in the Facilities, and in order to prevent flaring and/or bypassing of
Gas, it will be necessary to maintain a uniform rate of flow of Gas to the Facilities from all
sources during each twenty-four (24) hour period. Therefore, Producer agrees that it will
cooperate with Gatherer and Processor in regulating the flow rate of the Gas and in establishing a
producing schedule to deliver on a best efforts basis the Gas at a uniform and continuous flow
rate. In the event that Gatherer enters into an operational balancing agreement with a third party
pipeline, Producer hereby agrees to be bound by the terms set forth therein.

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ARTICLE VI -

QUANTITY

     6.1 Subject to Gathering System and Plant capacity, Gatherer shall gather and Processor shall
process that volume of Gas legally allowed to be produced which is attributable to the interest
owned or controlled by Producer or its successors and assigns in wells drilled on lands within the
Contract Area or lands pooled therewith; provided, after processing, Producer or Producer’s nominee
will accept the Residue Gas. Processor shall regulate the flow of gas at the Plant in the
quantities and at the times desired by Processor to prudently operate the Plant and/or to meet the
fluctuating condition of Processor’s and Producer’s markets. Gatherer or Processor may, from time
to time, find it necessary to shut off entirely or restrict the flow of gas to the Gathering System
or Plant, respectively; notwithstanding anything herein to the contrary, in such event, neither
Gatherer nor Processor shall be liable to Producer for the resulting effect thereof. Gatherer and
Processor shall provide Producer prior notice of any shut down due to routine maintenance and shall
prudently work to minimize the amount of such downtime.

     6.2 Producer shall nominate to Gatherer in writing, not less than three (3) business Days
prior to the first day of each Month during the term of the Agreement, the daily quantity of Gas
(expressed in MCF’s and MMBTU’s) that Producer shall deliver to Gatherer at the Gathering System
Delivery Point(s) for gathering during such Month. Producer shall also nominate to Processor in
writing, not less than three (3) business Days prior to the first day of each Month during the term
of the Agreement, the daily quantity of Residue Gas (expressed in MCF’s and MMBTU’s) that Producer
or Producer’s nominee shall receive at the Residue Gas Delivery Point(s) following processing at
the Plant.

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     6.3 Gatherer, Processor, and Producer shall designate a dispatcher(s) who shall be
continuously on call for nomination purposes, and shall notify each other in writing of such
dispatcher(s) and their telephone number(s).

     6.4 Producer’s dispatcher shall notify Gatherer’s and Processor’s dispatchers in advance of
any anticipated decrease in delivery rate below the daily nominated quantity. Producer’s
dispatcher must obtain the prior written approval from Gatherer’s and Processor’s dispatchers for
any delivery rate in excess of the daily quantity rate. Gatherer’s and Processor’s dispatcher
shall notify Producer’s dispatcher of any anticipated inability to receive the Gas at a delivery
rate less than (a) the daily nominated quantity rate; or (b) a previously orally authorized
delivery rate in excess of the daily nominated quantity rate.

     6.5 If insufficient Plant or pipeline capacity exists to process all the Gas, the Plant
processing capacity will be prorated for all gas dedicated to the Plant , without undue
discrimination, and the Gas unable to be processed will be bypassed ratably, if allowed.

     6.6 Processor shall have the right, but not the obligation, to expand the Plant or build a new
gas processing plant at a different location, and in such event, the Gas, or a portion thereof, may
be processed by Processor in the expanded Plant or the new gas processing plant in accordance with
the terms of this Agreement.

ARTICLE VII -

QUALITY

     7.1 Gatherer and Processor shall not be obligated to receive, gather and process (as the case
may be) Gas delivered hereunder that fails to meet the following specifications:

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	 	a.	 	The Gas must be commercial in quality and free from any foreign
materials such as dirt, dust, iron particles, crude oil, dark condensate, free
water, and other impurities; and substances which may be injurious to pipelines
or which may interfere with the gathering, processing, transmission, or
commercial utilization of said Gas;
	 
	 	b.	 	The Gas shall contain no free water;
	 
	 	c.	 	The Gas delivered hereunder shall not exceed a temperature of
one hundred forty (140) degrees Fahrenheit at the Gathering System Delivery
Point(s), as well as the Plant Delivery Point(s);
	 
	 	d.	 	The Gas delivered hereunder shall not contain more than:

	 	(i)	 	One-fourth grain of hydrogen sulfide, or five
grains of total sulfur, or one grain mercaptan per one hundred (100)
cubic feet;
	 
	 	(ii)	 	one part per million by volume of oxygen;
	 
	 	(iii)	 	two percent by volume of carbon dioxide;
	 
	 	(iv)	 	two percent by volume of nitrogen; or
	 
	 	(v)	 	three percent by volume of a combined total of
inerts, including, but not limited to, carbon dioxide and nitrogen
Components;

	 	e.	 	No diluents such as carbon dioxide, air, or nitrogen shall be
added to the Gas;

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	 	f.	 	The Gas shall contain no carbon monoxide, halogens, or
unsaturated hydrocarbons, and no more than 0.1 parts per million of hydrogen;
and
	 
	 	g.	 	The Gas shall contain no less than 1,100 Btu and 2 GPM ethane
and heavier hydrocarbons.

     7.2 If any of the Gas delivered by Producer hereunder should fail to meet the quality
specifications set forth in this Article VII, Gatherer and Processor may elect to either (i) accept
and process such Gas, (ii) accept, but treat and/or condition such Gas prior to gathering or
processing at an additional cost, or (iii) refuse to accept such Gas. The acceptance of Gas not
meeting the quality specifications set forth in Article VII shall not be deemed a waiver of
Gatherer’s and Processor’s right to reject such Gas at any later time, and Gatherer and Processor
shall be entitled, at any time and from time to time, to decline to accept proffered deliveries of
Gas not meeting the quality specifications set forth herein.

     7.3 If Gatherer and Processor elect to
accept but treat and/or condition the non-conforming Gas prior to gathering and processing,
Gatherer and Processor shall advise the Producer of such election and associated fees. Producer
shall then have a maximum of thirty (30) days to advise Gatherer and Processor if it will treat
and/or condition such non-conforming Gas and the cost associated with such treatment. If Producer
does not elect to treat and/or condition such non-conforming Gas or fails to make such election
within the specified time period, then the Gatherer and Processor shall have the right to (a)
proceed with gathering and processing such non-conforming Gas and Producer shall pay to Gatherer
and Processor all costs associated with such actions or (b) reject and release such non-conforming
Gas from the terms of the Agreement.

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ARTICLE VIII -

TESTS

     8.1 Producer, Gatherer and Processor do hereby agree as follows:

	 	a.	 	Gatherer shall procure or cause to be procured a sample of Gas
at each Gathering System Delivery Point and Plant Delivery Point, respectively,
and analyze the samples by chromatographic analysis to determine the Component
content (mole percent), specific gravity, the BTU content, and the Plant
Product content (expressed in gallons per MCF) thereof.
	 
	 	b.	 	The individual Plant Products contained in the commingled
stream of plant products delivered from the Plant each month shall be
determined from a chromatographic analysis of either (a) a spot sample or a
sample taken from a continuous sampling device or (b) from an online
chromatograph. The results of the chromatographic analysis shall be applied to
the commingled stream of plant products to determine the volume of each
individual Plant Product delivered from the Plant.
	 
	 	c.	 	Tests provided for in Subparagraphs (a) and (b) of this Section
8.1 shall be made by Gatherer and Processor using their own equipment or by an
independent testing service at least once in each six month period, or more
frequently in their sole discretion. All such tests shall be made in
accordance with approved engineering practices. Representatives of Producer
shall be entitled to witness such tests,

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	 	 	 	and Producer shall give advance written notice to Gatherer and Processor in
the event that it exercises such right.

     8.2 Physical constants required for making calculations hereunder shall be taken from the Gas
Processors Association Physical Constants Publication No. 2145-03 (as amended from time to time).
Physical constants for the hexanes and heavier hydrocarbons portion of hydrocarbon mixtures shall
be assumed to be the same as the physical constants for hexane. The heat content per gallon of
each liquid hydrocarbon Component shall be determined by multiplying the cubic feet per gallon of
such liquid hydrocarbon Component by the heat content per cubic foot thereof.

ARTICLE IX -

MEASUREMENT AND METER TESTING

     9.1 The unit of volume for measurement of Gas delivered hereunder shall be one thousand
(1,000) cubic feet of Gas at a base temperature of sixty (60) degrees Fahrenheit and at an absolute
pressure of 14.65 psia and saturated with water vapor. All fundamental constants, observations,
records, and procedures involved in determining the quantity of Gas delivered hereunder shall be in
accordance with the standards prescribed in Report Nos. 3 and 8, of the American Gas Association,
as amended or supplemented from time to time, respectively. It is agreed that for the purpose of
measurement and computations hereunder, the atmospheric pressure shall be assumed to be 14.7 psia
regardless of the atmospheric pressure at which the Gas is measured and that the Gas obeys the
Ideal Gas Laws as to variations of volume with pressure and specific gravity, including the
deviation from Boyle’s law, shall all be made by Gatherer and Processor in accordance with
applicable rules, regulations, and orders. It is also agreed that the Gatherer and
Processor

18

 

may apply a uniform correction factor for water vapor if they deem necessary in
their sole and absolute discretion.

     9.2 Gatherer shall install, maintain, and operate, or cause to be maintained and operated, a
measuring station located at each Gathering System Delivery Point, the Residue Gas Delivery
Point(s) and the Plant Products Delivery Point. Processor shall install, maintain, and operate a
measuring station located downstream of the separation facilities at each Plant Delivery Point.
Said measuring station(s) shall be so equipped with orifice meters, recording gauges, or other
types of meter or meters of standard make and design commonly acceptable in the industry, and of
suitable size and design, as to accomplish the accurate measurement of Gas delivered hereunder.
The changing and integration of the charts (if utilized for measurement purposes hereunder) and
calibrating and adjusting of meters shall be done by Gatherer or Processor, as appropriate.
Gatherer and Processor shall have the right to utilize electronic gas measuring equipment should
they so desire.

     9.3 Processor shall measure or cause to be measured the volume of Plant Products in gallons.

     9.4 Producer may, at its option and expense, install check meters for checking Gatherer’s
metering equipment at each Gathering System Delivery Point; and the same shall be so installed as
not to interfere with the operation of the Facilities.

     9.5 The temperature of the Gas flowing through the meter shall be determined by the continuous
use of a recording thermometer or device installed by Gatherer or Processor, as the case may be, so
that it will properly record the temperature of the Gas flowing through the meter.

19

 

     9.6 The specific gravity of the Gas flowing through the meter shall be determined by methods
commonly accepted in the industry. Specific gravities so determined will be used in calculating
Gas deliveries until the next specific gravity test is made.

     9.7 Each Party shall have the right to be present at the time of any installing, reading,
sampling, cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting done in
connection with the other’s measuring equipment used in measuring deliveries hereunder. The
records from such measuring equipment shall remain the property of their owner, but upon request,
each will submit to the other its records and charts, together with calculations therefrom subject
to return within thirty (30) days after receipt thereof. If meters utilizing charts are used to
measure Gas hereunder, then the charts shall be kept on file for a period of two (2) years, or such
longer period as may be required by law. In addition, any other measurement data shall also be
kept for the same time period. Each Party, during each of the first three production months, and
after that at least semi-annually, or more often if necessary, shall calibrate the meters and
instruments installed by it or cause the same to be calibrated. Gatherer shall give Producer ten
(10) days notice in advance of such tests so that the latter may, at its election, be present in
person or by its representative to observe adjustments, if any are made.

     9.8 If the metering equipment is found to be inaccurate by two percent (2%) or more,
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 definitely known or agreed upon, or if not
known or agreed upon, then for a period extending back one-half of the time elapsed since the last
day of the calibration. Unless conclusively determined that either Gatherer’s or Processor’s
measurement equipment is inaccurate by two percent (2%)

20

 

or more, Gatherer’s or Processor’s, as the case may be, measurement shall be
deemed to be correct for all purposes hereunder, and no adjustment shall be made to the previous
volumes. Following any test, any metering equipment found to be inaccurate to any degree shall be
adjusted immediately to measure accurately. If for any reason any meter is out of service or out
of repair so that the quantity of Gas delivered through such meter cannot be ascertained or
computed from the readings thereof, the quantity of Gas so delivered during such period shall be
estimated and agreed upon by the Parties hereto upon the basis of the best available data using the
first of the following methods which is feasible:

	 	a.	 	By using the registration of any check measuring equipment of
Producer, if installed and registering accurately;
	 
	 	b.	 	By correcting the error if the percentage of error is
ascertainable by calibration, test, or mathematical calculation; or
	 
	 	c.	 	By estimating the quantity of deliveries during preceding
periods under similar conditions when the meter was registering accurately.

     9.9 If Producer shall notify Gatherer, or if Gatherer shall notify Producer, at any time that
a special test of any Gathering System Delivery Point meter is desired, the Parties shall cooperate
to secure an immediate verification of the accuracy of such meter and joint observation of any
adjustments. All tests of Gatherer’s measuring equipment at any Gathering System Delivery Point
shall be made at Gatherer’s expense, except that the Producer shall bear the expense of tests made
at its request if the inaccuracy found is less than two percent (2%). Expense as used in this
Section 9.9 shall be limited to actual costs
of Gatherer as the result of testing and shall not include any costs incurred by Producer as
the result of witnessing said testing.

21

 

     9.10 If during any month less than 1,000 MCF of Gas is delivered to a Gathering System
Delivery Point, (except for reasons of Force Majeure), then Gatherer shall charge a meter fee
applicable to any such Gathering System Delivery Point equal to four hundred dollars ($400.00).
Such fee shall be deducted from the compensation otherwise due Producer under this Agreement; or,
at Gatherer’s election, Producer may be invoiced for such amount payable thirty (30) days after
receipt.

     9.11 The Parties hereto recognize and acknowledge that technological advances may occur over
the term of this Agreement which may render certain measurement devices obsolete, or less accurate,
or less efficient than that which may be available. In such event, Gatherer or Processor may, with
Producer’s approval, substitute or utilize such available measurement equipment in lieu of any
measurement equipment described above in this Article IX.

     9.12 If for any reason the Gas is delivered to Gatherer at a Gathering System Delivery Point,
with pulsations that affect the accuracy of the measurement, Producer shall be responsible for
installing necessary pulsation dampeners, or other devices, to eliminate or reduce the pulsations
to an acceptable level determined by Gatherer.

ARTICLE X -

ALLOCATION PROCEDURE

     10.1 With regard to the allocation of Plant Products, for each accounting period, the actual
Plant Products will be allocated to each Gathering System Delivery Point based on the “Theoretical
Plant Product Content of each Gathering System Delivery Point”. The
Component attributable to the Plant Products will be determined by analysis at the Plant
Products Delivery Point. The Theoretical Plant Product Content of each Gathering System Delivery
Point will equal the product of the Gathering System Delivery Point’s share of plant

22

 

inlet MCF
multiplied by the GPM (Gallons per MCF) as determined by the chromatograph analysis of a sample of
the Gathering System Delivery Point. The actual recovered liquids of each Plant Product during the
accounting period shall be allocated to each Gathering System Delivery Point in the ratio that the
theoretical content of each product in the Gas processed in the Plant from each Gathering System
Delivery Point bears to the total theoretical content of each product in all the gas processed in
the Plant during the accounting period. For purposes of allocation, the terms set forth below
shall have the following meanings:

GSDP = Gathering System Delivery Point

PIDP = Plant Inlet Delivery Point by lease Products Delivery Point

TCPP = Theoretical Component Plant Product

GPM = Gallons Per Thousand Cubic Feet

COMP = NGL Product Component (Ethane, Propane, Iso-Butane,
N-Butane, Iso-Pentane and N-Pentane)

	 	a.	 	The Plant Products allocation formula shall be as follows:

	 	1.	 	PIDP X COMP GPM = Lease TCPP

	 	b.	 	The tank condensate and liquids allocation shall be based upon
GSDP Hexane+ gas analysis and the formula shall be as follows:

     10.2 With regard to the allocation of Residue Gas, for each accounting period, the
actual metered residue gas at each Residue Gas Delivery Point shall be allocated to each
Gathering System Delivery Point based on the calculated Theoretical Residue Remaining at the
Plant Tailgate. “The Calculated Theoretical Residue Remaining” shall be determined as follows:

23

 

     Each Gathering System Delivery Point’s share of plant inlet volume MCF\MMBTU, minus each
Gathering System Delivery Point Plant Product shrinkage (product shrinkage factors based on GPA
2145-03 bulletin), minus the allocated Plant Fuel, minus the line loss or plus the line gain. For
purposes of allocation, the terms set forth below shall have the following meanings:

GSDP = Gathering System Delivery Point

PIV = PLANT INLET VOLUME

MUV = MAKEUP GAS VOLUME

PPS = PLANT PRODUCT SHRINKAGE

PPG = PLANT PRODUCT GALLONS

PF = PLANT FUEL

MRV = METERED RESIDUE VOLUME

The Residue Gas allocation formula shall be as follows:

	 	 	 	 	 	 	 
	 

	 	PIV =
	 	GSDP — MUV
 

	 	 
	 

	 	 	 	total metered PIV	 	 

PPS = PPG X the product shrinkage factor.

THEO RESIDUE = (PIV - PPS) - PF.

MRV is allocated based on the THEO RESIDUE.

ARTICLE XI -

DISPOSITION OF PRODUCER’S PORTION OF PLANT PRODUCTS

     On behalf of Producer, Processor shall have the right to sell all Plant Products removed or
extracted from the Facilities after Gas is delivered at the Plant Delivery Point(s). Processor
shall sell the Plant Products at the Plant Products Delivery Point, and Producer shall have no
right to take the Plant Products in kind at the Plant Products Delivery Point. Processor shall
remit to Producer its share of the net proceeds received by Processor at the Plant Product Delivery
Point.

24

 

ARTICLE XII -

GATHERING AND PROCESSING FEES

     12.1 Producer shall pay to Gatherer forty cents ($0.40) per MMBTU of Gas gathered pursuant to
this Agreement (the “Gathering Fee”).

     12.2 Producer shall pay to Processor fifty cents ($0.50) per MMBTU of Gas processed pursuant
to this Agreement (the “Processing Fee”).

     12.3 On the Escalation Date, both the Gathering Fee and Processing Fee will increase by a
percentage equal to the CPI Adjustment.

     12.4 At any time during the term of this Agreement, Producer may request that the Parties
enter into negotiations to reduce either the Gathering Fee or Processing Fee, or both, and Gatherer
and Processor agree to participate fully and reasonably in such negotiations.

ARTICLE XIII -

DISPOSITION OF PRODUCER’S PORTION OF RESIDUE GAS

     Processor will deliver the Residue Gas to the Residue Gas Delivery Point(s). Processor agrees
to deliver Producer’s Residue Gas at a pressure sufficient to enter the
third party natural gas pipeline(s), but in no event shall Processor be obligated to deliver
Residue Gas at a pressure which exceeds the Plant discharge pressure of one thousand and sixty
(1,060) psig. Producer will separately contract with a third party regarding the transportation
and sale of their Residue Gas.

ARTICLE XIV -

ACCOUNTING, PAYMENTS AND CREDIT ASSURANCES

     14.1 Gatherer and Processor shall furnish to Producer on or before the twenty-fifth (25th) day
of each month a report or statement disclosing information necessary to enable Producer to make
reasonable and accurate statistical and accounting entries upon its

25

 

books concerning all phases of
this Agreement related to the preceding month, including an allocation statement of Residue Gas
delivered for Producer’s account to its Residue Gas purchaser and the amounts due Gatherer and
Processor for the services provided hereunder. Producer shall remit the amounts due Gatherer and
Processor within thirty (30) days after the receipt of Gatherer’s and Processor’s statement.
PRODUCER SHALL INDEMNIFY AND HOLD GATHERER AND PROCESSOR HARMLESS FROM ANY ALL CHARGES, PENALTIES,
COSTS AND EXPENSES OF WHATEVER KIND OR NATURE ARISING FROM PRODUCER’S FAILURE TO PAY SUCH PAYMENTS,
INCLUDING COSTS AND EXPENSES OF ANY LITIGATION AND REASONABLE ATTORNEYS’ FEES ASSOCIATED THEREWITH.
Unpaid amounts due shall accrue interest at the lesser of a rate equal to one and one half percent
(1.5%) per Month or the maximum rate permitted by law, until the balance is paid in full.

     14.2 Each Party shall have the right during reasonable hours to examine books, records,
charts, and original test data of the other party to the extent necessary to verify
the accuracy of any statement, charge, credit, computation, test, or delivery made pursuant to
any provision hereof. If any such examination reveals any inaccuracy in any such statement,
charge, credit, computation, test, or delivery, the necessary adjustment shall be promptly made
without interest or penalty. Neither party will have any right to recoup or recover prior
overpayments or under payments that result from error that occur in spite of good faith performance
if the amounts involved do not exceed one thousand dollars ($1,000.00).

     14.3 Processor shall pay to Producer monthly, on or before the sixtieth (60th) day after the
end of the production month, but in no case sooner than Processor receives

26

 

payment from its
purchaser, the sums due under Article XI for Producer’s Plant Products marketed by Processor during
the preceding month less the amount of any taxes actually paid by Processor which are applicable to
such quantities. This payment shall be made irrespective of the interest, title, or lien of any
royalty or mineral owner or any third party or parties in and to the Gas delivered by Producer to
Processor hereunder, the Plant Products, or Residue Gas derived therefrom, or proceeds accruing
from the sale thereof.

     14.4 Producer shall be responsible for the payment of all royalties due on the Gas. PRODUCER
SHALL INDEMNIFY AND HOLD GATHERER AND PROCESSOR HARMLESS FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES
OF ACTION, DAMAGES, LIABILITY, OR OBLIGATIONS ARISING OUT OF OR IN ANY WAY RELATED TO THE PAYMENT
OF THE LESSOR’S ROYALTY OR ANY OTHER BURDEN OR ENCUMBRANCE AFFECTING THE GAS.

     14.5 Notwithstanding any change in ownership of Producer’s properties, Gatherer and Processor
shall never be required to make payments or to give notices required under
the provisions of this Agreement to more than one party, and, in the event that the properties
subject to this Agreement shall ever be owned by more than one party, Gatherer and Processor may
withhold (without interest) further payments and notices until all of the owners of such properties
have designated one party to act for them in all respects relating to said properties and this
Agreement, including the rendering of bills, the submission of charts, and the receipt of payments
and notices hereunder.

     14.6 Processor, at its election, may deduct from its payment to Producer sums, if any, due to
Gatherer or Processor under the terms of this Agreement.

27

 

     14.7 All accounting records and documents directly related to this Agreement prepared by any
Party hereto shall be retained for a period of not less than two (2) years following the end of the
calendar year of their origination. The Parties further agree that all matters relating to the
accounting hereunder for any calendar year shall be considered correct and not subject to further
audit or legal challenge after two years following the end of the calendar year.

     14.8 Producer must maintain such creditworthiness as Gatherer and Processor shall reasonably
require. Gatherer and Processor’s creditworthiness requirements shall be substantially similar to
the requirements set forth below:

	 	a.	 	Producer will be deemed creditworthy if its long-term unsecured
debt securities are rated at least BB- by Standard & Poor’s Corporation (“S&P”)
and at least Ba3 by Moody’s Investor Service (“Moody’s”); provided, however,
that if the Producer’s rating is at BB- or Ba3 and the short-term or long-term
outlook is negative, Gatherer and Processor may require further analysis.
	 
	 	b.	 	If Producer does not meet the criteria described above, then
Producer may request that Gatherer and Processor evaluate its creditworthiness
based upon the level of service requested relative to the Producer’s current
and future ability to meet its obligations. Further, if Producer’s
creditworthiness does not meet any of the foregoing criteria, Producer will be
considered creditworthy if Producer maintains and delivers to Gatherer and
Processor an irrevocable guaranty of payment in form acceptable to Gatherer and
Processor, or

28

 

	 	 	 	an irrevocable letter of credit from a financial institution
rated at least A- by S&P or at least A3 by Moody’s, in a form acceptable to
Gatherer and Processor, in either case of the guaranty or the letter of credit
in an amount satisfactory to Gatherer and Processor. The obligation to
maintain such credit assurance shall extend until such time as Producer is
deemed creditworthy as defined herein. Producer shall provide the guaranty or
the letter of credit within twenty (20) days of written notice by Gatherer and
Processor that such financial assurance is required.
	 
	 	c.	 	The creditworthiness requirements set forth in this Section
14.8 shall apply to any permitted assignment (in whole or in part), and to any
permitted permanent release, as applicable, of this Agreement. Gatherer and
Processor shall apply consistent evaluation practices to all similarly situated
producers to determine the Producer’s financial
ability to perform the payment obligations due to Gatherer and Processor.

ARTICLE XV -

WARRANTY

     15.1 Producer warrants the title to all Gas and all Components thereof which shall be
delivered by Producer to Gatherer and Processor hereunder, the right to enter into this Agreement
with reference to such Gas, and that such Gas is free from all liens and adverse claims; AND
AGREES, IF NOTIFIED THEREOF BY GATHERER OR PROCESSOR, TO INDEMNIFY, DEFEND AND HOLD GATHERER AND
PROCESSOR HARMLESS FROM AND AGAINST ANY AND ALL SUITS, ACTIONS, LOSSES, DEBTS, ACCOUNTS,

29

 

DAMAGES, COSTS, AND EXPENSES ARISING FROM OR OUT OF ANY ADVERSE CLAIM AS TO PRODUCER’S TITLE, INCLUDING, BUT
NOT LIMITED TO, ANY ADVERSE CLAIM BROUGHT BY OR THROUGH A MINERAL INTEREST OR ROYALTY OWNER, TO OR
AGAINST THE GAS AND AGAINST THE PLANT PRODUCTS DERIVED THEREFROM. Producer agrees to make
settlement for all royalties, overriding royalty interests, and/or production payments due and
payable on the Gas delivered to Gatherer and Processor hereunder, the Plant Products extracted and
saved therefrom, and the sale and disposition of the Residue Gas thereof, all in accordance with
the terms of the leases from which Gas processed hereunder is produced, applicable instruments of
title, and all amendments thereto.

     15.2 If Producer’s title to the Gas, Plant Products derived therefrom, or Residue Gas is
questioned, Processor may withhold payments of proceeds due hereunder without interest up to the
amount of the claim until title is free from such questions or until
Producer furnishes a bond satisfactory to Processor conditioned to save Gatherer and Processor
harmless, or other surety satisfactory to Gatherer or Processor.

     15.3 Producer also represents and warrants that it has full authority to receive payment for
the sum of all Gas delivered hereunder.

ARTICLE XVI -

TAXES

     16.1 Producer shall pay or cause to be paid all production, severance and ad valorem taxes,
assessments, and other charges levied or assessed against the Gas delivered by Producer hereunder,
and against Producer’s portion of the Plant Products, against Producer’s Residue Gas, and against
the sale thereof, and all taxes and statutory charges levied or assessed against any of Producer’s
properties, facilities, or operations.

30

 

     16.2 Processor shall pay all taxes and statutory charges levied or assessed against the Plant
and operations concerning such plant.

     16.3 Gatherer shall pay all taxes and statutory charges levied or assessed against the
Gathering System and operations concerning such system.

     16.4 The price paid under Article XII of this Agreement includes reimbursement for state
severance taxes paid by Producer and Processor under this Article XVI of the Agreement.

ARTICLE XVII -

INDEMNITY

     17.1 As between the Parties, and as to liability, if any, accruing to either Party hereto, or
to any third party, Producer shall be solely liable for and in control and possession of the Gas
deliverable hereunder until the Gas is delivered to Gatherer at the Gathering System Delivery
Point(s). Gatherer shall be solely liable for and in control and
possession of the Gas deliverable hereunder until the Gas is delivered to Processor at the
Plant Delivery Point(s). Processor shall be solely liable for and in control and possession of the
Gas and the Plant Products until Processor has delivered Residue Gas to Producer at the Residue Gas
Delivery Point(s) whereupon Producer shall again be in control and possession thereof and bear the
risk of loss of the Residue Gas.

     17.2 PRODUCER SHALL BE AFFORDED ACCESS TO GATHERER’S AND PROCESSOR’S PROPERTY AND THE
FACILITIES TO THE EXTENT NECESSARY TO CARRY OUT ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT,
AND PRODUCER SHALL FULLY OBSERVE AND COMPLY WITH ALL OF GATHERER’S AND PROCESSOR’S SAFETY PRACTICES
AND PROCEDURES WHILE ON THE PREMISES. PRODUCER HEREBY AGREES TO INDEMNIFY, HOLD HARMLESS,

31

 

PROTECT,
DEFEND, AND DISCHARGE GATHERER AND PROCESSOR AND THEIR AFFILIATED COMPANIES, PARTNERS, SUCCESSORS,
ASSIGNS, OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS FOR, FROM AND AGAINST ANY AND ALL
JUDGMENTS, EXECUTIONS, CAUSES OF ACTION, DEMANDS, RIGHTS, SUITS, DEBTS AND SUMS OF MONEY,
ACCOUNTINGS, DUES, PENALTIES, FINES, CLAIMS (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR
CONTRIBUTION), LIABILITIES, LOSSES, COSTS, DAMAGES AND EXPENSES (INCLUDING COURT COSTS, REASONABLE
COSTS OF INVESTIGATION, DEFENSE AND ATTORNEY’S FEES) FOR THE INJURY TO OR DEATH OF ANY PERSON
(INCLUDING, WITHOUT LIMITATION, EACH OF PRODUCER’S, GATHERER’S AND PROCESSOR’S EMPLOYEES, AGENTS
AND CONTRACTORS) OR PROPERTY
DAMAGE OF ANY NATURE, KIND OR DESCRIPTION OR ANY OTHER CLAIM OF ANY NATURE, KIND OR
DESCRIPTION BROUGHT BY ANY PERSON OR ENTITY, WHETHER LEGAL OR EQUITABLE, WHICH ARISES OUT OF,
RESULTS FROM OR IS IN ANY WAY RELATED TO (i) PRODUCER’S OWNERSHIP AND CONTROL OF THE GAS PRIOR TO
THE TIME THAT THE GAS PASSES THROUGH THE GATHERING SYSTEM DELIVERY POINT(S) AND AFTER THE RESIDUE
GAS PASSES THROUGH THE RESIDUE GAS REDELIVERY POINT(S), (ii) PRODUCER’S OWNERSHIP AND OPERATION OF
THE WELLS LOCATED WITHIN THE CONTRACT AREA AND ANY FACILITIES OR EQUIPMENT INSTALLED OR MAINTAINED
BY PRODUCER UPSTREAM OF THE GATHERING SYSTEM DELIVERY POINT, REGARDLESS OF WHETHER SUCH WAS
REQUIRED BY THE TERMS OF THIS AGREEMENT, (iii) THE PERFORMANCE OF ANY OBLIGATIONS, RIGHTS OR DUTIES
HEREUNDER,

32

 

(iv) PRODUCER’S BREACH OF THIS AGREEMENT, OR (v) ANY VIOLATION OF THE LAW, REGARDLESS OF
EITHER GATHERER’S OR PROCESSOR’S SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE. GATHERER HEREBY
AGREES TO INDEMNIFY, HOLD HARMLESS, PROTECT, DEFEND AND DISCHARGE PROCESSOR AND PRODUCER AND THEIR
AFFILIATED COMPANIES, PARTNERS, SUCCESSORS, ASSIGNS, OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES
AND AGENTS, FOR, FROM AND AGAINST ANY AND ALL JUDGMENTS, EXECUTIONS, CAUSES OF ACTION, DEMANDS,
RIGHTS, SUITS, DEBTS AND SUMS OF MONEY, ACCOUNTINGS, DUES, PENALTIES, FINES, CLAIMS (INCLUDING,
WITHOUT LIMITATION, CLAIMS FOR CONTRIBUTION), LIABILITIES, LOSSES, COSTS,
DAMAGES AND EXPENSES (INCLUDING COURT COSTS, REASONABLE COSTS OR INVESTIGATION, DEFENSE AND
ATTORNEY’S FEES) OF ANY NATURE, KIND OR DESCRIPTION BROUGHT BY ANY PERSON OR ENTITY, WHETHER LEGAL
OR EQUITABLE, WHICH ARISE OUT OF, RESULT FROM OR ARE IN ANY WAY RELATED TO (i) GATHERER’S OWNERSHIP
AND CONTROL OF THE GAS AFTER THE GAS PASSES THROUGH THE GATHERING SYSTEM DELIVERY POINT(S) AND
PRIOR TO THE TIME THAT THE GAS IS PASSES THROUGH THE PLANT DELIVERY POINT(S), (ii) GATHERER’S
OWNERSHIP AND OPERATION OF THE GATHERING SYSTEM, (iii) THE SERVICES PROVIDED BY GATHERER PURSUANT
TO THIS AGREEMENT, (iv) GATHERER’S BREACH OF THIS AGREEMENT, OR (v) ANY VIOLATION OF THE LAW,
REGARDLESS OF PRODUCER’S OR PROCESSOR’S SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE. PROCESSOR
HEREBY AGREES TO INDEMNIFY, HOLD HARMLESS, PROTECT, DEFEND AND DISCHARGE GATHERER AND

33

 

PRODUCER AND
THEIR AFFILIATED COMPANIES, PARTNERS, SUCCESSORS, ASSIGNS, OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES AND AGENTS, FOR, FROM AND AGAINST ANY AND ALL JUDGMENTS, EXECUTIONS, CAUSES OF ACTION,
DEMANDS, RIGHTS, SUITS, DEBTS AND SUMS OF MONEY, ACCOUNTINGS, DUES, PENALTIES, FINES, CLAIMS
(INCLUDING, WITHOUT LIMITATION, CLAIMS FOR CONTRIBUTION), LIABILITIES, LOSSES, COSTS, DAMAGES AND
EXPENSES (INCLUDING COURT COSTS, REASONABLE COSTS OR INVESTIGATION, DEFENSE AND ATTORNEY’S FEES) OF
ANY NATURE, KIND OR DESCRIPTION BROUGHT BY ANY PERSON OR ENTITY, WHETHER LEGAL OR
EQUITABLE, WHICH ARISE OUT OF, RESULT FROM OR ARE IN ANY WAY RELATED TO (i) PROCESSOR’S
OWNERSHIP AND CONTROL OF THE GAS AFTER THE GAS PASSES THROUGH THE PLANT DELIVERY POINT(S) AND PRIOR
TO THE TIME THAT THE RESIDUE GAS PASSES THROUGH THE RESIDUE GAS DELIVERY POINT(S) AND THE PLANT
PRODUCTS PASS THROUGH THE PLANT PRODUCTS DELIVERY POINT , (ii) PROCESSOR’S OWNERSHIP AND OPERATION
OF THE PLANT, (iii) THE SERVICES PROVIDED BY PROCESSOR PURSUANT TO THIS AGREEMENT, (iv) PROCESSOR’S
BREACH OF THIS AGREEMENT, OR (v) ANY VIOLATION OF THE LAW, REGARDLESS OF GATHERER’S OR PRODUCER’S
SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE. THE INDEMNIFICATION RIGHTS HEREIN SHALL BE CUMULATIVE
OF, AND IN ADDITION TO, ANY AND ALL OTHER RIGHTS, REMEDIES OR RECOURSE OF THE PARTIES AND SHALL
SURVIVE ANY EXPIRATION OR TERMINATION OF THIS AGREEMENT. TO THE EXTENT AND ONLY TO THE EXTENT THE
FOREGOING INDEMNIFICATION RIGHTS ARE BY LAW,

34

 

EITHER INAPPLICABLE OR NOT ENFORCEABLE, PRODUCER,
GATHERER AND PROCESSOR SHALL EACH BE RESPONSIBLE FOR THE RESULTS OF ITS OWN ACTIONS AND FOR THE
ACTIONS OF THOSE PERSONS AND ENTITIES OVER WHICH IT EXERCISES CONTROL.

ARTICLE XVIII -

FORCE MAJEURE

     In the event any Party is rendered unable, either wholly or in part, by force majeure to carry
out its obligations under this Agreement, other than the obligation to make payments due hereunder,
it is agreed that on such Party giving notice and full particulars
of such inability by telephone and in writing to the other Parties as soon as possible 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, shall be suspended during the continuance of any
inability so caused, but for no longer period, and such cause shall, as far as possible, be
remedied with all reasonable dispatch. The term “force majeure” as employed herein shall mean any
act or event which wholly or partially prevents or delays the performance of obligations arising
under this Agreement if such act or event is not reasonably within the control of and not caused by
the fault or negligence of the Party claiming force majeure and which by the exercise of due
diligence such Party is unable to prevent or overcome, including, without limitation, by the
following enumeration: acts of God; strikes; lockouts; or other industrial disturbances; acts of
the public enemy; wars; blockades; insurrections; riots; epidemics; landslides; lightning;
earthquakes; fires; storms; floods; washouts; arrests and restraints of governments and people;
civil disturbances; explosion, breakage, or accidents to machinery, plant facilities, or lines of
pipe; the necessity for making repairs to or alterations of machinery, plant facilities, or lines
of pipe;

35

 

freezing of wells or lines of pipe; partial or entire failure of wells; and the inability
of either Producer, Gatherer or Processor to acquire, or the delays on the part of either Producer,
Gatherer or Processor in acquiring, at reasonable cost and after the exercise of reasonable
diligence: (a) any servitude, rights-of-way grants, permits, or licenses; (b) any materials or
supplies for the construction or maintenance of facilities; and (c) any permits or permissions from
any governmental agency if such are required. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having the difficulty and
that the above requirements that any force majeure shall be
remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts
by acceding to the demands of the opposing party when such course is inadvisable in the sole
discretion of the Party having the difficulty.

ARTICLE XIX -

UNPROFITABLE OPERATIONS AND RIGHTS OF TERMINATION

     19.1 If, in the sole and absolute opinion of Gatherer, the gathering of Gas from any well or
wells, or any Gathering System Delivery Point, under this Agreement, is or becomes uneconomical due
to its volume, government regulations, or any cause other than force majeure, Gatherer shall not be
obligated to gather or may cease gathering the Gas therefrom so long as such condition exists.
Gatherer agrees that in its determination of uneconomical gathering, the same criteria shall be
used for the Gas as for all other gas being gathered through the Gathering System. In the event
that Gatherer refuses to gather the Gas, Producer may dispose of the Gas not gathered as it sees
fit; provided that Gatherer at any time thereafter shall have the right to gather all of the Gas
refused, if refused for reason or reasons resulting from an act of Producer or lack of action on
the part of Producer, conditioned upon Gatherer giving Producer at least two (2) months’ notice of

36

 

its election so to do. In the event that Gatherer refuses to gather the Gas for a period of sixty
(60) consecutive days causing Producer’s well(s) to be shut-in, Producer shall have the option,
exercised solely at its discretion, to terminate the Agreement in its entirety insofar and only
insofar as it pertains to Gas produced from the affected well(s) by providing to Gatherer a thirty
(30) days’ advance written notice of such termination.

     19.2 If, in the sole and absolute opinion of Processor, the processing of Gas from any well or
wells, or any Gathering System Delivery Point, under this Agreement, is or
becomes uneconomical due to its volume, Plant Product content, government regulations, or any
cause other than force majeure, Processor shall not be obligated to process or may cease processing
the Gas therefrom so long as such condition exists. Processor agrees that in its determination of
uneconomical processing, the same criteria shall be used for the Gas as for all other gas being
processed through the Plant. In the event that Processor refuses to process the Gas, Producer may
dispose of the Gas not processed as it sees fit; provided that Processor at any time thereafter
shall have the right to process all of the Gas refused, if refused for reason or reasons resulting
from an act of Producer or lack of action on the part of Producer, conditioned upon Processor
giving Producer at least two (2) months’ notice of its election so to do. In the event that
Processor refuses to process the Gas for a period of sixty (60) consecutive days and Gatherer is
unable to by-pass the Plant in order to deliver Producer’s gas to an alternative pipeline willing
to accept Producer’s unprocessed Gas causing Producer’s well(s) to be shut-in, Producer shall have
the option, exercised solely at its discretion, to terminate this Agreement insofar as it pertains
to Gas produced from the affected well(s) by providing to Processor a thirty (30) days’ advance
written notice of such termination.

37

 

     19.3 In the event Processor should at any time hereafter elect to permanently discontinue the
operation of the Plant, Gatherer, Processor and Producer shall each have the option, exercised
solely at its discretion, of terminating this Agreement in its entirety upon one hundred twenty
(120) days advance written notice of such termination notice to the other Parties.

     19.4 Nothing herein shall be construed to require Producer to drill any well or to continue to
operate any well which a prudent operator would not in like circumstances drill or continue to
operate.

     19.5 It is agreed that neither Gatherer nor Processor shall be obligated to expand the
Facilities in order to provide capacity hereunder.

ARTICLE XX -

TERM

     This Agreement shall be effective from the date hereof and, subject to the other provisions
hereof, shall continue in full force and effect for a primary term of ten (10) years and shall be
automatically renewed for one (1) year periods thereafter unless on or before ninety (90) days
prior to the expiration of the primary term or the expiration of a one (1) year renewal period a
Party hereto provides written notice of termination.

ARTICLE XXI -

REGULATORY BODIES

     This Agreement and the provisions hereof shall be subject to all valid applicable federal,
state, and local laws, order, rules, and regulations. Producer, Gatherer and Processor have
entered into this Agreement with the understanding, and in reliance on the fact, that this
Agreement and/or performance of this Agreement are not and will not be subject to the jurisdiction
or regulation of the Federal Energy Regulatory Commission (“FERC”). If this Agreement and/or
performance of this Agreement becomes subject to

38

 

such jurisdiction and/or regulation, this
Agreement shall automatically terminate unless Producer, Gatherer and Processor agree, in writing,
within thirty (30) days of the effective date of the attachment of any such jurisdiction and/or
regulation, that this Agreement shall continue after such effective date.

ARTICLE XXII -

ARBITRATION

     Any controversy between the Parties arising under Article X of this Agreement and not resolved
by agreement shall be determined by a board of arbitration upon notice of submission given either
by Processor, Gatherer or Producer, which request shall also name one arbitrator. The Parties
receiving such notice shall, within ten (10) days thereafter, by notice to the others, jointly name
the second arbitrator, or failing so to do, the Party giving notice of submission shall name the
second. The two arbitrators so appointed shall name the third, or failing so to do within ten (10)
days, then upon the written application of any Party, such third arbitrator may be appointed by the
American Arbitration Association. The arbitrators selected to act hereunder shall be qualified by
education, experience, and training to pass upon the particular question in dispute. The
jurisdiction of the arbitrators will be limited to the single issue referred to arbitration, and
the arbitration shall be conducted pursuant to the guidelines set forth by the American Arbitration
Association; provided, however, that should there be any conflict between the guidelines and the
procedures set forth in this Agreement, the terms of this Agreement shall control. Within fifteen
(15) days following selection of the third arbitrator, each Party shall furnish the arbitrators in
writing its position regarding the issue being arbitrated. The arbitrators may, if they deem
necessary, convene a hearing regarding the issue being arbitrated. The arbitrators shall render
their decision in writing within thirty (30) days after the appointment

39

 

of the third arbitrator or
the conclusion of the hearing, if one is held. If within said period a decision is not rendered by
the arbitrators, new arbitrators may be named and shall act hereunder at the election of any of
Processor, Gatherer or Producer in like manner as if
none has been previously named. The arbitrators’ decision shall be final and binding upon the
Parties as to the issue submitted and the Parties will abide by and comply with such decision. The
expenses of arbitration shall be borne equally by the Parties, except that each Party shall bear
the compensation and expenses of its counsel, witnesses, and employees.

ARTICLE XXIII -

DISPUTES

     23.1 Subject to the terms as set forth in Article 22 of this Agreement, should a dispute arise
between the Parties, the Parties shall promptly seek to resolve any such dispute by negotiations
among the senior executives of the Parties who have the authority to settle such dispute (“Senior
Executives”) prior to the initiation of any lawsuit. The Senior Executives shall meet at a
mutually acceptable time and place within fifteen (15) days and thereafter as often as they
reasonably deem necessary to exchange relevant information and to attempt to resolve the dispute.
All negotiations and communications pursuant to this Section 12(b) shall be treated and maintained
by the Parties as confidential information and shall be treated as compromise and settlement
negotiations for purposes of the federal and state Rules of Evidence. If the matter has not been
resolved within thirty (30) days after the initial meeting of the Senior Executives, or such longer
period as may be mutually agreed upon, either Party may initiate a lawsuit.

     23.2 THIS AGREEMENT, AND ALL QUESTIONS RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE
AND ENFORCEMENT (INCLUDING, WITHOUT

40

 

LIMITATION, PROVISIONS CONCERNING LIMITATIONS OF ACTIONS) SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, NOTWITHSTANDING ANY CONFLICT-OF-LAWS DOCTRINES OF SUCH STATE OR OTHER
JURISDICTION TO THE CONTRARY. ALL MATTERS LITIGATED BY OR BETWEEN THE PARTIES THAT INVOLVE THIS
AGREEMENT, THE RELATIONSHIP OF THE PARTIES, OR ANY RELATED DOCUMENTS OR MATTERS HEREUNDER SHALL BE
BROUGHT ONLY IN FORT WORTH, TARRANT COUNTY, TEXAS.

     23.3 In any suit filed by a Party hereto to resolve a dispute arising under this Agreement or
related to the services provided hereunder, each Party hereby covenants and agrees to take all
steps necessary to waive a trial by jury.

ARTICLE XXIV -

NOTICES AND PAYMENTS

     Any notice, request, demand, statement, or bill provided for in this Agreement shall be in
writing and delivered by hand, mail, or facsimile. All such written communications shall be
effective upon receipt by the other party at the address of the parties hereto as follow:

     Producer

	 	 	 
	Statements:

	 	Quicksilver Resources Inc.
	 

	 	777 West Rosedale Street
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Revenue Accounting
	 
	 	 
	Payments:

	 	Quicksilver Resources Inc.
	 

	 	777 West Rosedale Street
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Accounting
	 
	 	 
	Contractual:

	 	Quicksilver Resources Inc.

41

 

	 	 	 
	 

	 	777 West Rosedale Street
	 

	 	Fort Worth, TX 76104

Attn: Marketing

      Gatherer

	 	 	 
	Statements:

	 	Cowtown Pipeline Partners L.P.
	 

	 	777 West Rosedale Street
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Revenue Accounting
	 
	 	 
	Payments:

	 	Cowtown Pipeline Partners L.P.
	 

	 	777 West Rosedale
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Accounting
	 
	 	 
	Contractual:

	 	Cowtown Pipeline Partners L.P.
	 

	 	777 West Rosedale
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Marketing

     Processor

	 	 	 
	Statements:

	 	Cowtown Gas Processing Partners L.P.
	 

	 	777 West Rosedale
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Revenue Accounting
	 
	 	 
	Payments:

	 	Cowtown Gas Processing Partners L.P.
	 

	 	777 West Rosedale
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Accounting
	 
	 	 
	Contractual:

	 	Cowtown Gas Processing Partners L.P.
	 

	 	777 West Rosedale
	 

	 	Fort Worth, TX 76104
	 

	 	Attn: Marketing

     Any of the Parties may designate a further or different address by giving written notice to
the other Parties.

42

 

ARTICLE XXV -

ASSIGNMENT

     This Agreement (and a Party’s rights and obligations hereunder) is assignable in whole or in
part. This Agreement shall be binding upon and inure to the benefit of the
heirs, executors, administrators, successors, and assigns of the respective Parties hereto;
provided that no transfer of or succession to the interest of any Party hereunder, either wholly or
partially, shall affect or bind the other Parties until it shall have been furnished with the
original instrument or with the proper proof that the claimant is legally entitled to such
interest.

ARTICLE XXVI -

MISCELLANEOUS

     26.1 No waiver by any Party of any one or more defaults in the performance of any provision of
this Agreement shall operate or be construed as a waiver of any default or future defaults,
whether of a like or different character.

     26.2 This Agreement contains the entire agreement between the Parties and there are no oral
promises, agreements, or warranties affecting it. This Agreement may be amended or modified from
time to time only by the written agreement of all the Parties hereto; provided, however, that the
Parties may not, without the prior approval of the Conflicts Committee (as such term is defined in
MLP’s partnership agreement), agree to any amendment or modification of this Agreement that the
general partner of MLP determines will adversely affect the holders of common units of MLP.

     26.3 The provisions of this Agreement are enforceable by the Parties hereto and MLP, which is
an intended third party beneficiary hereof. Except as described in the immediately preceding
sentence, nothing in this Agreement, express or implied, is intended to confer upon any person
other than the Parties hereto and MLP and their respective

43

 

successors and assigns, any rights,
benefits or obligations hereunder. No limited partner of the MLP shall have the right, separate
and apart from MLP, to enforce
any provision of this Agreement or to compel any Party to this Agreement to comply with the
terms of this Agreement.

     26.4 The descriptive headings of the provisions of these general provisions are formulated and
used for convenience only and shall not be deemed to affect the meaning or construction of any such
provisions.

     26.5 This Agreement supersedes and replaces any other contract(s) or agreements(s) which may
exist between the Parties covering the processing of the Gas dedicated hereunder.

     26.6 Nothing in this Agreement is intended to create a partnership or joint venture under
state law or to render the Parties hereto jointly and severally liable to any third party. Each of
the Parties elects to be excluded from the provisions of Subchapter K, Chapter 1 of Subtitle A, of
the Internal Revenue Code of 1986 pursuant to the provisions of Article 761(a) of such code and
from any similar provisions of state law. Processor shall timely file such evidence of this
election as may be required under applicable law.

     26.7 Should any section, paragraph, subparagraph, or other portion of this Agreement be found
invalid as a matter of law in a duly authorized court, or by a duly authorized government agency,
then only that portion of the Agreement shall be invalid. The remainder of the Agreement which
shall not have been found invalid shall remain in full force and effect.

     26.8 This Agreement was prepared jointly by the Parties hereunder and not by any Party to the
exclusion of the other.

44

 

     26.9 Producer recognizes and acknowledges Gatherer’s and Processor’s proprietary interest in
this Agreement, and Producer agrees not to divulge any of the
contents hereof to any other person, firm, corporation, or other entity. Producer agrees to
be responsible for enforcing the confidentiality of this Agreement and agrees to take such action
as necessary to prevent any disclosure by any of its agents or employees.

(SIGNATURE PAGE FOLLOWS)

45 

 

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in several originals to be
effective as of the Effective Date.

	 	 	 	 	 	 	 	 	 
	 	 	PRODUCER	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Quicksilver Resources Inc., a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	/s/ William S. Buckler       	 	 
	 	 	William S. Buckler
	 	 
	 	 	Vice President-US Operations
	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	GATHERER	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Cowtown Pipeline Partners L.P., a Texas limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Cowtown Pipeline L.P., a Texas limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Cowtown Pipeline Management Inc., a Texas corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	/s/ Philip W. Cook         	 	 
	 

	 	 	 	 	 	Philip W. Cook

Senior Vice President-Chief Financial Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	PROCESSOR	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Cowtown Gas Processing Partners L.P., a Texas limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Cowtown Gas Processing L.P., a Texas
limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Cowtown Pipeline Management Inc., a Texas corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	/s/ Philip W. Cook         	 	 
	 

	 	 	 	 	 	Philip W. Cook

Senior Vice President-Chief Financial Officer	 	 

 

 

EXHIBIT A TO THE

FIFTH AMENDED AND RESTATED COWTOWN GAS FACILITIES

GAS GATHERING AND PROCESSING AGREEMENT

     This Exhibit A is attached the Fifth Amended and Restated Cowtown Gas Facilities Gas Gathering
and Processing Agreement (the “Agreement”) dated [•], 2007 by and among Quicksilver Resources
Inc., Cowtown Pipeline Partners L.P., and Cowtown Gas Processing Partners L.P. and made a part
thereof for all purposes. All defined terms used herein shall have the same meaning as set forth
in the Agreement.

Contract Area

Bosque County, Texas

Erath County, Texas

Hill County, Texas

Hood County, Texas

Johnson County, Texas

Parker County, Texas

Somervell County, Texas

Tarrant County, Texas

Exhibit A

 

 

EXHIBIT B TO THE

FIFTH AMENDED AND RESTATED COWTOWN GAS FACILITIES

GAS GATHERING AND PROCESSING AGREEMENT

     This Exhibit B is attached the Fifth Amended and Restated Cowtown Gas Facilities Gas Gathering
and Processing Agreement (the “Agreement”) dated [•], 2007 by and among Quicksilver Resources Inc.,
Cowtown Pipeline Partners L.P., and Cowtown Gas Processing Partners L.P. and made a part thereof
for all purposes. All defined terms used herein shall have the same meaning as set forth in the
Agreement.

Gathering System Delivery Point(s)

	 	 	 	 	 
	Gathering System Delivery Point	 	Survey	 	API #
	See Attached
	 	 	 	 

Plant Delivery Point(s)

	 	 	 	 	 
	Plant Delivery Point	 	Survey	 	Meter #
	Cowtown Gas Processing Partners L.P.

	 	 	 	TXSA004

Exhibit B

 

 

EXHIBIT C TO THE

FIFTH AMENDED AND RESTATED COWTOWN GAS FACILITIES

GAS GATHERING AND PROCESSING AGREEMENT

     This Exhibit C is attached the Fifth Amended and Restated Cowtown Gas Facilities Gas Gathering
and Processing Agreement (the “Agreement”) dated effective [•], 2007 by and among Quicksilver
Resources Inc., Cowtown Pipeline Partners L.P., and Cowtown Gas Processing Partners L.P. and made a
part thereof for all purposes. All defined terms used herein shall have the same meaning as set
forth in the Agreement.

Residue Gas Delivery Point(s)

	 	 	 	 	 
	Residue Gas Delivery Point	 	Survey	 	Meter #
	Energy Transfer Fuel L.P.

	 	 	 	4“-533295
	Energy Transfer Fuel L.P.

	 	 	 	8“-533296

Plant Products Delivery Point

	 	 	 	 	 	 	 
	Plant Products Delivery Point	 	Survey	 	Meter #
	Chevron West Texas LPG Pipeline

	 	 	 	 	38010	 
	Louis Dreyfus
	 	 	 	 	 	 

Exhibit C<PAGE>
                                                                    Exhibit 10.2

                               ADVISORY AGREEMENT

     THIS ADVISORY AGREEMENT (this "Agreement"), dated as of, ____________ 2007,
is entered into between Shopoff Properties Trust, Inc., a Maryland corporation
(the "Company"), Shopoff Partners, L.P., a Delaware limited partnership (the
"Operating Partnership"), and Shopoff Advisors, L.P., a Delaware limited
partnership (the "Advisor").

                              W I T N E S S E T H:

     WHEREAS, the Company has filed a registration statement with the U. S.
Securities and Exchange Commission relating to its proposed offering of shares
of its common stock, par value $.01 per share ("Common Stock"), to the public
(the "Offering");

     WHEREAS, the Company intends to qualify as a REIT (as defined below), and
to invest, directly and indirectly, in investments in accordance with investment
guidelines adopted by its Board of Directors (the "Board") and Sections 856
through 860 of the Code (as defined below);

     WHEREAS, the Company and the Operating Partnership desire to avail
themselves of the experience, sources of information, advice and assistance of,
and certain facilities available to, the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth on behalf of,
and subject to the supervision of, the Board, all as provided herein; and

     WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board, on the terms and conditions hereinafter
set forth.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

     1.   Definitions. As used in this Agreement, the following terms have the
definitions hereinafter indicated:

     Acquisition Expenses means any and all expenses incurred by the Company,
the Advisor, the Operating Partnership, or any Affiliate thereof in connection
with the sourcing, selection, evaluation and acquisition of, and investment in,
any Real Estate Asset, whether or not acquired or made, including but not
limited to legal fees and expenses, travel and communications expenses, cost of
appraisals, nonrefundable option payments on Real Estate Assets not acquired,
accounting fees and expenses, title insurance, and other closing and
miscellaneous expenses related to the selection and acquisition of Real Estate
Assets.

     Acquisition Fee means any and all fees and commissions, exclusive of
Acquisition Expenses, paid by any Person to any other Person (including any fees
or commissions paid by or to any Affiliate of the Company or the Advisor) in
connection with the making or investing in mortgage loans or the purchase,
development or construction of any property or other Real Estate Asset,
including, without limitation, real estate commissions, Development Fees and
Construction Fees (except as provided in the following sentence), selection
fees, nonrecurring management fees, loan fees, points, or any other fees or
commissions of a similar nature. Excluded shall be all Development Fees or
Construction Fees paid to any Person or entity not affiliated with the Sponsor
or Advisor in connection with the actual development and construction of any
property or other Real Estate Asset.

    Advisor means Shopoff Advisors, L.P., a Delaware limited partnership, any
successor advisor to the Company, or any person or entity to which Shopoff
Advisors, L.P. or any successor advisor subcontracts substantially all of its
functions.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE

<S>                                                                                                           <C>
1.   DEFINITIONS............................................................................................    1

2.   APPOINTMENT............................................................................................    9

3.   AUTHORITY OF THE ADVISOR...............................................................................    9

     (a)  General...........................................................................................    9

     (b)  Powers of the Advisor.............................................................................    9

     (c)  Approval by Directors.............................................................................    9

     (d)  Modification or Revocation of Authority of Advisor................................................    9

4.   DUTIES AND AUTHORITY OF THE ADVISOR....................................................................   10

     (a)  Organizational and Offering Services..............................................................   10

     (b)  Real Estate Asset Acquisition and Disposition, Asset Management and Operational Services..........   10

5.   BANK ACCOUNTS..........................................................................................   15

6.   RECORDS; ACCESS........................................................................................   15

7.   LIMITATIONS ON ACTIVITIES..............................................................................   15

8.   RELATIONSHIP WITH DIRECTORS............................................................................   15

9.   FEES...................................................................................................   16

     (a)  Acquisition and Advisory Fees.....................................................................   16

     (b)  Asset Management Fee..............................................................................   16

     (c)  Disposition Fee...................................................................................   16

     (d)  Subordinated Participation in Net Sale Proceeds...................................................   16

     (e)  Subordinated Incentive Fee Due Upon Listing.......................................................   17

     (f)  Debt Financing Fee................................................................................   17

     (g)  Subordinated Performance Fee Due Upon Termination.................................................   17

     (h)  Changes to Fee Structure..........................................................................   17

10.  EXPENSES...............................................................................................   17

     (a)  Reimbursable Expenses.............................................................................   17

     (b)  Other Services....................................................................................   19

     (c)  Timing of and Limitations on Reimbursements.......................................................   19

11.  OTHER ACTIVITIES OF THE ADVISOR........................................................................   20

     (a)  General...........................................................................................   20
</TABLE>

                                      -i-
<PAGE>

                               TABLE OF CONTENTS
                                  (continued)

<TABLE>
<CAPTION>
                                                                                                              PAGE
<S>                                                                                                           <C>

12.  RELATIONSHIP OF ADVISOR AND COMPANY....................................................................   20

13.  REPRESENTATIONS AND WARRANTIES.........................................................................   20

     (a)  Of the Company....................................................................................   21

     (b)  Of the Advisor....................................................................................   21

14.  TERM; TERMINATION OF AGREEMENT.........................................................................   22

15.  TERMINATION............................................................................................   22

     (a)  Termination by Either Party.......................................................................   22

     (b)  Termination by the Advisor........................................................................   22

16.  PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.....................................................   22

17.  ASSIGNMENT TO AN AFFILIATE.............................................................................   23

18.  INDEMNIFICATION BY THE COMPANY.........................................................................   23

19.  INDEMNIFICATION BY ADVISOR.............................................................................   24

20.  ADVISOR'S LIABILITY....................................................................................   24

21.  NOTICES................................................................................................   24

22.  MODIFICATION...........................................................................................   25

23.  SEVERABILITY...........................................................................................   25

24.  CONSTRUCTION...........................................................................................   25

25.  ENTIRE AGREEMENT.......................................................................................   25

26.  INDULGENCES, NOT WAIVERS...............................................................................   25

27.  GENDER.................................................................................................   26

28.  TITLES NOT TO AFFECT INTERPRETATION....................................................................   26

29.  EXECUTION IN COUNTERPARTS..............................................................................   26
</TABLE>

                                      -ii-
<PAGE>

     Affiliate or Affiliated means, (A) any Person directly or indirectly
owning, controlling, or holding, with power to vote, ten percent or more of the
outstanding voting securities of such other Person, (B) any ten percent or more
of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with the power to vote, by such other Person, (C) any
Person, directly or indirectly, controlling, controlled by, or under common
control with such other Person, (D) any executive officer, director, trustee,
general partner or manager of such other person, or (E) any legal entity for
which such Person acts as an executive officer, director, trustee, general
partner or manager.

     Appraised Value means value according to an appraisal made by an
Independent Appraiser.

     Average Invested Assets means, for a specified period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by real estate before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.

     Asset Management Fee means the fee paid to the Advisor for directing or
performing the day-to-day business affairs of the Company in the amount
established pursuant to Section 9(b).

     Board of Directors or Board means the individuals holding such office, as
of any particular time, under the Charter of the Company, whether they be the
Directors named therein or additional or successor Directors.

     Broker-Dealer means Shopoff Securities, Inc., an Affiliate of the Advisor,
or such other Person or entity selected by the Board to act as the broker-dealer
for the Offering. Shopoff Securities, Inc. is a member of the National
Association of Securities Dealers.

     Bylaws means the Bylaws of the Company, as the same may be amended from
time to time.

     Charter means the charter of the Company, including the Articles of
Incorporation and all Articles of Amendment, Articles Supplementary and other
modifications thereto as filed with the SDAT.

     Code means the Internal Revenue Code of 1986, as amended from time to time,
or any successor statute thereto. Reference to any provision of the Code shall
mean such provision as in effect from time to time, as the same may be amended,
and any successor provision thereto, as interpreted by any applicable
regulations as in effect from time to time.

     Common Stock means the Common Stock as defined in the Recitals to this
Agreement.

     Company means Shopoff Properties Trust, Inc., a corporation organized under
the laws of the State of Maryland.

                                       2
<PAGE>

     Competitive Real Estate Commission means a real estate or brokerage
commission paid for the purchase or sale of a Real Estate Asset that is
reasonable, customary and competitive in light of the size, type and location of
the Real Estate Asset.

     Construction Fee means a fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise and
coordinate projects or to provide major repairs or rehabilitation for a Real
Estate Asset.

     Contract Price means the amount actually paid for a Real Estate Asset or
allocated to the purchase, development, construction or improvement of a Real
Estate Asset, exclusive of Acquisition Fees and Acquisition Expenses.

     Development Fee means a fee for the packaging of a Real Estate Asset,
including negotiating and approving plans, and undertaking to assist in
obtaining zoning and necessary variances and financing for the specific Real
Estate Asset, either initially or at a later date.

     Director means an individual who is a member of the Board of Directors.

     Disposition Fee means the Disposition Fee as defined in Section 9(d) of
this Agreement.

     Dividends means any dividends or other distributions of money or other
property paid by the Company to the Stockholders, including dividends that may
constitute a return of capital for federal income tax purposes.

     Excess Expense Guidelines means the Excess Expense Guidelines as defined in
Section 10(c)(iii) of this Agreement.

     Excess Market Value means the amount by which (i) the Market Value, plus
the total of all Dividends paid to Stockholders from the Company's inception
until the date that Market Value is determined, exceeds (ii) an amount equal to
100% of the Invested Capital, plus a 10% cumulative, non-compounded per annum
return on the Invested Capital from the date of investment through the date
Market Value is determined.

     Excess Net Appraised Value means the amount by which the Net Appraised
Value exceeds the sum of 100% of Invested Capital, plus an amount equal to a 10%
cumulative, non-compounded per annum return on Invested Capital, calculated on a
weighted average daily basis, less all prior Dividends.

     Expense Year means the Expense Year as defined in Section 10(c)(iii)
hereof.

     GAAP means generally accepted accounting principles consistently applied as
used in the United States of America.

     Gross Proceeds means the aggregate purchase price of all Common Stock sold
for the account of the Company.

     Independent Appraiser means a person or entity, with no material current or
prior business or personal relationship with the Advisor or the Directors, who
is engaged to a

                                       3
<PAGE>

substantial extent in the business of rendering opinions regarding the value of
assets of the type intended to be acquired by the Company through the Operating
Partnership, and who is a qualified appraiser of real estate as determined by
the Board. Membership in a nationally recognized appraisal society such as the
American Institute of Real Estate Appraisers or the Society of Real Estate
Appraisers shall be conclusive evidence of such qualification.

     Independent Director means a Director of the Company who is not, and within
the last two years has not been, directly or indirectly associated with the
Sponsor or Advisor by virtue of (i) ownership of an interest in the Sponsor,
Advisor or its Affiliates, (ii) employment by the Sponsor, Advisor or any of
their Affiliates, (iii) service as an officer or director of the Sponsor,
Advisor or any of their Affiliates, (iv) performance of services, other than as
a Director, for the Company, (v) service as a director or trustee of more than
three real estate investment trusts organized by the Sponsor or advised by the
Advisor, or (vi) maintenance of a material business or professional relationship
with the Sponsor, Advisor or any of their Affiliates. A business or professional
relationship is considered material if the gross revenue derived by the Director
from the Advisor and Affiliates exceeds five percent of either the Director's
annual gross revenue derived from all sources during either of the last two
years, or the Director's net worth on a fair market value basis. An indirect
relationship shall include circumstances in which a Director's spouse, parents,
children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law or
brothers- or sisters-in-law are or have been associated with the Sponsor,
Advisor, any of their Affiliates or the Company.

     Invested Capital means, with respect to the Stockholders, as of any
relevant date, an amount equal to the excess of (i) the aggregate amount of cash
contributed or deemed contributed by the Company to the Operating Partnership
from the gross proceeds of the issuance by the Company of Common Stock to the
Stockholders, over (ii) the cumulative Dividends made by the Operating
Partnership to the Company as of such date and distributed to the Stockholders.

     Joint Venture means any joint venture, limited liability company or other
Affiliate of the Company (other than the Operating Partnership and the
Subsidiary Limited Liability Companies).

     Listed means approved for trading on the NYSE, AMEX, or the Nasdaq Stock
Market, any successor to such entities or on any national securities exchange
that has listing standards that the U. S. Securities and Exchange Commission
determines by rule are substantially similar to the listing standards of the
NYSE, AMEX or the Nasdaq Stock Market. The term "Listing" shall have the
correlative meaning.

     Market Value means the market value of the outstanding stock of the
Company, measured by taking the average closing price or average of the bid and
asked price, as the case may be, during the consecutive 30-day period commencing
twelve (12) months following Listing and ending eighteen (18) months following
Listing during which the average closing price or average of the bid and asked
price of the stock is the highest.

     Nasdaq means The Nasdaq Stock Market.

     NASAA means the North American Securities Administrators Association, Inc.

                                       4
<PAGE>

     NASAA REIT Guidelines means the Statement of Policy Regarding Real Estate
Investment Trusts published by the North American Securities Administrators
Association.

     Net Appraised Value means the Appraised Value of the Company's assets at
the Termination Date, less amounts of all indebtedness secured by the Real
Estate Assets.

     Net Income means for any period, the total revenues applicable to such
period, less the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash reserves;
provided, however, Net Income for purposes of calculating total allowable
Operating Expenses shall exclude the gain from the sale of the Company's assets.

     Net Sale Proceeds means in the case of a transaction described in clause
(A) of the definition of Sale, the net proceeds of any such transaction less the
amount of all real estate commissions and closing costs paid by the Operating
Partnership. In the case of a transaction described in clause (B) of such
definition, Net Sale Proceeds means the net proceeds of any such transaction
less the amount of any legal and other selling expenses incurred by the
Operating Partnership in connection with such transaction. In the case of a
transaction described in clause (C) of such definition, Net Sale Proceeds means
the net proceeds of any such transaction actually distributed to the Operating
Partnership from the Joint Venture less any expenses incurred by the Operating
Partnership in connection with such transaction. In the case of a transaction or
series of transactions described in clause (D) of the definition of Sale, Net
Sale Proceeds means the net proceeds of any such transaction less the amount of
all commissions and closing costs paid by the Operating Partnership. In the case
of a transaction described in clause (E) of such definition, Net Sale Proceeds
means the net proceeds of any such transaction less the amount of all selling
costs and other expenses incurred by the Operating Partnership in connection
with such transaction. Net Sale Proceeds shall also include, in the case of any
lease of a Real Estate Asset consisting of a building only, any amounts from
received tenants, borrowers or lessees that the Company determines, in its
discretion, to be economically equivalent to the proceeds of a Sale. Net Sale
Proceeds shall not include any amounts used to repay outstanding indebtedness
secured by the asset disposed of in the sale.

     NYSE means the New York Stock Exchange.

     Market Value means, upon Listing, the market value of our outstanding
Common Stock measured by taking the average closing price or average of bid and
asked price, as the case may be, over a period of 30 days during which the
Common Stock is traded, with such period beginning at least 12 months after the
date of Listing.

     Offering means the Offering defined in the Recitals to this Agreement.

     Operating Expenses means all direct and indirect costs and expenses
incurred by the Company, the Operating Partnership, the Advisor, or any of their
respective Affiliates, as determined under GAAP, which in any way are related to
the operation of the Company or to Company business, including advisory fees,
but excluding (i) the expenses of raising capital such as Organizational and
Offering Expenses, legal, audit, accounting, underwriting, brokerage,

                                       5
<PAGE>

listing, registration, and other fees, printing and other such expenses and
taxes incurred in connection with the issuance, distribution, transfer,
registration and Listing of the Common Stock, (ii) interest payments, (iii)
taxes, (iv) non-cash expenditures such as depreciation, amortization and bad
debt reserves, (v) Acquisition Fees and Acquisition Expenses, (vi) real estate
commissions on the Sale of property, and other expenses connected with the
acquisition and ownership of real estate interests, mortgage loans, or other
property (such as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair, and improvement of property) and (vii) any incentive fees
which may be paid in compliance with the NASAA REIT Guidelines. The definition
of "Operating Expenses" set forth above is intended to encompass only those
expenses which are required to be treated as Operating Expenses under the NASAA
REIT guidelines. As a result, and notwithstanding the definition set forth
above, any expense of the Company which is not an Operating Expense under the
NASAA REIT Guidelines shall not be treated as an Operating Expense for purposes
hereof.

     Operating Partnership means Shopoff Partners, L.P. , or any successor
thereof, which is the partnership through which the Company may own Real Estate
Assets. References herein to the Company's assets refers to the Real Estate
Assets held by the Operating Partnership.

     Operating Partnership Agreement means the limited partnership agreement of
the Operating Partnership, as amended and restated from time to time.

     Organizational and Offering Expenses means any and all costs and expenses,
other than selling commissions and fees, incurred by the Company, the Advisor or
any Affiliate of either in connection with and in preparing the Company for
registration of and subsequently offering and distributing its Common Stock to
the public, which may include but are not limited to legal, accounting and
escrow fees, expenses for printing, engraving, amending, supplementing and
mailing, distribution costs, compensation to employees while engaged in
registering, telephone costs, all advertising and marketing expenses, charges of
transfer agents, registrars, trustees, escrow holders, depositories, experts,
and fees, expenses and taxes related to the filing, registration and
qualification of the sale of the securities under federal and state laws,
including accountants' and attorneys' fees and other accountable offering
expenses. Organization and Offering Expenses may include, but are not limited
to: (i) amounts to reimburse the Advisor for all marketing related costs and
expenses such as compensation to and direct expenses of the Advisor's employees
or employees of the Advisor's Affiliates in connection with registering and
marketing the Common Stock; (ii) direct expenses of the employees of the
Broker-Dealer while preparing for the offering and marketing of the Common
Stock; (iii) travel and entertainment expenses related to the offering and
marketing of the Common Stock; (iv) facilities and technology costs and other
costs and expenses associated with the offering and to facilitate the marketing
of the Common Stock including web site design and management.

     Person means any natural person, partnership, corporation, association,
trust, limited liability company, or other legal entity.

     Prospectus means any document, notice, or other communication satisfying
the standards set forth in Section 10 of the Securities Act, and contained in a
currently effective registration statement filed by the Company with, and
declared effective by, the U. S. Securities and

                                       6
<PAGE>

Exchange Commission, or if no registration statement is currently effective,
then the Prospectus contained in the most recently effective registration
statement.

     Real Estate Assets means unimproved and improved real property and Real
Estate Related Investments or any direct and/or indirect interest therein
(including, without limitation, fee or leasehold interests, options, leases,
partnership and joint venture interests, equity and debt securities of entities
that own real property, first or second mortgages on real property, mezzanine
loans directly or indirectly secured by real property, and other contractual
rights in real estate).

     Real Estate Related Investments means mortgage loans secured by, or
preferred equity investments in entities that own, real property (including
first or second mortgages on real property and mezzanine loans directly or
indirectly secured by real property).

     REIT means a corporation, trust or association which is engaged in
investing in equity interests in real estate (including fee ownership and
leasehold interests and interests in limited liability companies, limited
liability companies, partnerships and joint ventures holding real estate) or in
loans secured by mortgages on real estate or both and that qualifies as a real
estate investment trust under the REIT Provisions of the Code.

     REIT Provisions of the Code means Sections 856 through 860 of the Code and
any successor or other provisions of the Code relating to real estate investment
trusts (including provisions as to the attribution of ownership of beneficial
interests therein) and the regulations promulgated thereunder.

     Sale or Sales means any transaction or series of transactions whereby: (A)
the Operating Partnership sells, grants, transfers, conveys or relinquishes its
ownership of any Real Estate Asset or portion thereof, including the lease of
any Real Estate Asset consisting of the building only, and including any event
with respect to any Real Estate Asset which gives rise to a significant amount
of insurance proceeds (to the extent such insurance proceeds are not used to
repair the damage for which the insurance proceeds were paid) or condemnation
awards; (B) the Operating Partnership sells, grants, transfers, conveys or
relinquishes its ownership of all or substantially all of the interest of the
Operating Partnership in any Joint Venture in which it is a co-venturer or
partner; (C) any Joint Venture in which the Operating Partnership is a
co-venturer or partner sells, grants, transfers, conveys or relinquishes its
ownership of any Real Estate Asset or portion thereof, including any event with
respect to any Real Estate Asset which gives rise to insurance claims or
condemnation awards; (D) the Operating Partnership sells or otherwise disposes
of its interests in the Subsidiary Limited Liability Companies; or (E) the
Operating Partnership sells or otherwise disposes of or distributes all of its
assets in liquidation of the Operating Partnership.

     SDAT means the State Department of Assessments and Taxation of the State of
Maryland.

     Securities Act means the Securities Act of 1933, as amended.

          (a) Sponsor means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Company or any Person who will control,
manage or

                                       7
<PAGE>

participate in the management of the Company, and any Affiliate of such Person.
Not included is any Person whose only relationship with the Company is as that
of an independent property manager of the Company's assets and whose only
compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services.

     Stockholders means the registered holders of the Company's Common Stock.

     Subordinated Incentive Fee Due Upon Listing means the fee payable to the
Advisor under certain circumstances if the Common Stock is listed on a national
securities exchange, in an amount equal to 50% of the Excess Market Value if
Stockholders have received cumulative Dividends equal to 100% of the Invested
Capital plus a 10% cumulative, non-compounded per annum return on the Invested
Capital, calculated on an aggregate weighted average daily basis. The Company
shall have the option to pay such fee in the form of cash, Common Stock, a
promissory note or any combination of the foregoing. The form of payment shall
be as approved by the Board of Directors. In the event the Advisor Subordinated
Incentive Fee Due Upon Listing is paid to the Advisor, thereafter, the Advisor
will not be entitled to receive any payments of Subordinated Performance Fee
Upon Termination or Subordinated Participation in Net Sale Proceeds.

     Subordinated Performance Fee Due Upon Termination means, upon termination
of this Agreement, a performance fee equal to 50% of the Excess Market Value or
50% of the Excess Net Appraised Value, whichever is greater, if Stockholders
have received cumulative Dividends equal to 100% of the Invested Capital plus a
10% cumulative, non-compounded per annum return on the Invested Capital,
calculated on an aggregate weighted average daily basis.

     Subordinated Participation in Net Sale Proceeds means a fee equal to 50% of
the balance of Net Sale Proceeds, if any, remaining after Stockholders have
received cumulative Dividends equal to 100% of the Invested Capital, plus an
amount equal to a 10% cumulative, non-compounded per annum return on the
Invested Capital, calculated on an aggregate weighted average daily basis.

     Subsidiary Limited Liability Companies means the limited liability
companies formed from time to time by the Operating Partnership for the purpose
of holding title to one or more Real Estate Assets.

     Termination Date means the date of termination of this Agreement.

     2.   Appointment. The Company, through the powers vested in the Board of
Directors, including a majority of all Independent Directors, hereby appoints
the Advisor to serve as its advisor and asset manager on the terms and
conditions set forth in this Agreement, and the Advisor hereby accepts such
appointment.

     3.   Authority of the Advisor.

          (a)  General. All rights and powers to manage and control the
day-to-day business and affairs of the Company shall be vested in the Advisor.
The Advisor shall have the power to delegate all or any part of its rights and
powers to manage and control the business and

                                       8
<PAGE>

affairs of the Company to such officers, employees, Affiliates, agents and
representatives of the Advisor or the Company as it may from time to time deem
appropriate. Any authority delegated by the Advisor to any other Person shall be
subject to the limitations on the rights and powers of the Advisor specifically
set forth in this Agreement and the Charter.

          (b)  Powers of the Advisor. Subject to the express limitations set
forth in this Agreement and subject to the supervision of the Board, the power
to direct the management, operation and policies of the Company shall be vested
in the Advisor, which shall have the power by itself and shall be authorized and
empowered on behalf and in the name of the Company to carry out any and all of
the objectives and purposes of the Company and to perform all acts and enter
into and perform all contracts and other undertakings that it may in its sole
discretion deem necessary, advisable or incidental thereto to perform its
obligations under this Agreement.

          (c)  Approval by Directors. Notwithstanding the foregoing, any
investment in Real Estate Assets, including any acquisition of a Real Estate
Asset by the Company or any investment by the Company in a Joint Venture,
limited liability company, limited partnership or similar entity owning real
properties, will require the prior approval of the Board of Directors and the
Independent Directors. The Advisor will deliver to the Board of Directors all
documents required by it to properly evaluate the proposed investment.

          (d)  Modification or Revocation of Authority of Advisor. The Board
may, at any time upon the giving of notice to the Advisor, modify or revoke the
authority or approvals set forth in Sections 3 and 4, provided however, that
such modification or revocation shall be effective upon receipt by the Advisor
and shall not be applicable to investment transactions to which the Advisor has
committed the Company prior to the date of receipt by the Advisor of such
notification. For such previously committed investment transactions, the Advisor
shall have the full rights and authorizations under Section 3 and 4 as are
necessary to complete the previously committed investment transactions.

     4.   Duties and Authority of the Advisor.

          (a)  Organizational and Offering Services. The Advisor shall manage
and supervise:

               (i) development of the Offering, including the determination of
the specific terms of the Common Stock to be offered by the Company;

               (ii) the organization of the Company, preparation of all Offering
and related documents, and obtaining of all required regulatory approvals of
such documents;

               (iii) coordination of the due diligence process of the
Broker-Dealer and its review of the Prospectus and other Offering and Company
documents;

               (iv) preparation and approval of all marketing materials
contemplated to be used by the Broker-Dealer or others in the Offering;

                                       9
<PAGE>

               (v) along with the Broker-Dealer, negotiation and coordination
with the escrow agent for the receipt, collection, processing and acceptance of
subscription agreements, and other administrative support functions;

               (vi) creation and implementation of various technology and
electronic communications related to the Offering; and

               (vii) all other services related to organization of the Company
or the Offering, whether performed and incurred by the Advisor or its
Affiliates.

          (b)  Real Estate Asset Acquisition and Disposition, Asset Management
and Operational Services. The Advisor undertakes to use commercially reasonable
efforts to:

               (i) (1) present to the Company potential investment opportunities
to provide a continuing and suitable investment program consistent with the
investment objectives and policies of the Company as determined and adopted in
the Charter, and (2) to manage, administer, promote, maintain, and improve, when
applicable, the Real Estate Assets on an overall portfolio basis in a diligent
manner. The services of the Advisor are to be of scope and quality not less than
those generally performed by professional asset managers of other similar
property portfolios. The Advisor shall make available the full benefit of the
judgment, experience and advice of the members of the Advisor's organization and
staff with respect to the duties it will perform under this Agreement. The
Advisor shall also obtain the services of developers, contractors, property
managers and leasing agents, which may include the Advisor or its Affiliates, to
manage, promote, and lease the Real Estate Assets. To facilitate the Advisor's
performance of these undertakings, but subject to the restrictions included in
Sections 3 and 7 and to the continuing and exclusive authority of the Board over
the management of the Company and the Operating Partnership, the Company hereby
delegates to the Advisor the authority to, and the Advisor hereby agrees to,
either directly or by engaging an Affiliate of the Advisor or an unrelated third
party;

               (ii) manage, and perform and supervise the various administrative
functions reasonably necessary for the management of the day-to-day operations
of the Company;

               (iii) subject to the provisions of Section 3(c) and 4 hereof, (A)
locate, analyze and select potential investments in Real Estate Assets, (B)
structure and negotiate the terms and conditions of transactions pursuant to
which investment in Real Estate Assets will be made, (C) perform due diligence
on prospective investments and summarize the results of such work, (D) make
investments in Real Estate Assets on behalf of the Company or the Operating
Partnership in compliance with the investment objectives and policies of the
Company, (E) if necessary, arrange for financing and refinancing and make other
changes in the asset or capital structure of Real Estate Assets, (F) dispose of,
reinvest or distribute the proceeds from the sale of, or otherwise deal with the
investments in, Real Estate Assets; (G) obtain all entitlements for the Real
Estate Assets, (H) enter into construction contracts and other contracts for the
development of Real Estate Assets, (I) enter into leases and service contracts
for Real Estate Assets, including oversight of Affiliated companies that perform
property management services for the Company, if any, (J) oversee non-affiliated
property managers and other non-affiliated

                                       10
<PAGE>

Persons who perform services for the Company, and (K) to the extent necessary,
perform all other operational functions for the development, maintenance, and
administration of Real Estate Assets;

               (iv) consult with the officers and the Board of Directors of the
Company and assist the Board of Directors in the formulation and implementation
of the Company's financial policies, and, as necessary, furnish the Board of
Directors with advice and recommendations with respect to the making of
investments consistent with the investment objectives and policies of the
Company and in connection with borrowings proposed to be undertaken by the
Company, if any;

               (v) provide the Board of Directors with periodic reports
regarding prospective investments which include recommendations and supporting
documentation required by them to properly evaluate the proposed investment;

               (vi) obtain the prior approval of the Board of Directors
(including a majority of all Independent Directors) for any and all investments
in Real Estate Assets (as well as any financing acquired by the Company or the
Operating Partnership in connection with such investment);

               (vii) notify the Board of all proposed material transactions
before they are completed;

               (viii) serve as the Company's investment and financial advisor
and provide the Board with relevant market research and economic and statistical
data in connection with the Company's assets and investment objectives and
policies;

               (ix) obtain reports (which may be prepared by unrelated third
parties, the Advisor, or its Affiliates), where appropriate, concerning the
value of investments or contemplated investments of the Company in Real Estate
Assets;

               (x) formulate and oversee the implementation of strategies for
the administration, promotion, management, operation, maintenance, improvement,
financing and refinancing, marketing, leasing, and disposition of Real Estate
Assets on an overall portfolio basis;

               (xi) monitor applicable markets and obtain reports (which may be
prepared by unrelated third parties, the Advisor or Affiliates) where
appropriate, concerning the values of existing or prospective investments of the
Company and monitor and evaluate the performance of the investments of the
Company;

               (xii) conduct periodic on-site property visits to some or all (as
the Advisor deems reasonably necessary) of the Real Estate Assets to inspect the
physical condition of the Real Estate Assets and to evaluate the performance of
the related property managers and leasing agents of their duties;

                                       11
<PAGE>

               (xiii) oversee the performance by the property managers of their
duties, including collection and proper deposits of rental payments and payment
of Real Estate Asset expenses and maintenance;

               (xiv) review, analyze and comment upon the operating budgets,
capital budgets and leasing plans prepared and submitted by any property
managers and leasing agents and aggregate these property budgets into the
Company's overall budget and financial reports;

               (xv) review and analyze on-going financial information pertaining
to each Real Estate Asset and the overall portfolio of Real Estate Assets;

               (xvi) deliver to the Board or maintain on behalf of the Company
copies of all appraisals obtained in connection with the investments in Real
Estate Assets;

               (xvii) obtain and maintain, with respect to any Real Estate Asset
and to the extent available, title insurance or other assurance of title and
customary fire, casualty and public liability insurance;

               (xviii) consult with the officers and Directors and assist the
Directors in evaluating and obtaining adequate insurance coverage based upon
risk management determinations;

               (xix) perform and supervise the various management and
operational functions related to the Company's investments in Real Estate
Assets;

               (xx) coordinate and manage relationships between the Company and
any Joint Venture partners;

               (xxi) undertake and perform all services or other activities
necessary and proper to carry out the investment objectives of the Company;

               (xxii) as reasonably necessary, act, or obtain the services of
others to act, as attorney-in-fact or agent of the Company in making, acquiring
and disposing of investments, disbursing, and collecting the funds, paying the
debts and fulfilling the obligations of the Company and handling, prosecuting
and settling any claims of the Company, including foreclosing and otherwise
enforcing mortgage and other liens and security interests securing investments;

               (xxiii) assist in negotiations on behalf of the Company with
investment banking firms and other institutions or investors for public or
private sales of securities or for other financing on behalf of the Company, but
in no event in such a way that the Advisor shall be acting as a broker, dealer,
underwriter or investment advisor in securities of or for the Company;

               (xxiv) negotiate on behalf of the Company with banks or lenders
for loans to be made to the Company if necessary, and negotiate on behalf of the
Company with investment banking firms and broker-dealers or negotiate private
sales of securities or obtain loans for the Company if necessary, but in no
event in such a way so that the Advisor shall be acting as broker-dealer or
underwriter; and provided, further, that any fees and costs payable to

                                       12
<PAGE>

third parties incurred by the Advisor in connection with the foregoing shall be
the responsibility of the Company;

               (xxv) provide the Company with all necessary cash management
services;

               (xxvi) upon request of the Board of Directors, invest and
reinvest any money of the Company;

               (xxvii) perform all reporting, record keeping, internal controls
and similar matters in a manner to allow the Company to comply with applicable
law, including the Sarbanes-Oxley Act of 2002, as applicable;

               (xxviii) from time to time, or at any time reasonably requested
by the Board, provide information or make reports to the Board related to its
performance of services to the Company under this Agreement;

               (xxix) coordinate with the Company's independent accountants and
auditors the preparation and delivery to the Board of Directors of a report not
less than annually concerning the Advisor's compliance with certain material
aspects of this Agreement and as otherwise requested by the Board of Directors;

               (xxx) provide the officers and Directors with timely updates
related to the overall regulatory environment affecting the Company, as well as
managing compliance with such matters, including but not limited to compliance
with the Sarbanes-Oxley Act of 2002;

               (xxxi) consult with the Board of Directors relating to the
corporate governance structure and appropriate policies and procedures related
thereto;

               (xxxii) supervise the preparation on behalf of the Company of all
reports and returns required by the U. S. Securities and Exchange Commission,
Internal Revenue Service and other state or federal governmental agencies;

               (xxxiii) maintain and preserve the books and records of the
Company and maintain the accounting and other record-keeping functions at the
Real Estate Asset, Company, and Operating Partnership levels;

               (xxxiv) undertake communications with Stockholders in accordance
with applicable law and the Charter, provided, however, that Affiliates of the
Advisor have no obligations to the Company other than as expressly stated
herein, and the Advisor and its Affiliates have no obligations to present to the
Company any specific investment opportunity except as set forth in the Charter
and described in the Prospectus;

               (xxxv) manage communications with Stockholders, including
answering phone calls, preparing and sending written and electronic reports and
other communications;

               (xxxvi) establish technology infrastructure to assist in
providing Stockholder support and service;

                                       13
<PAGE>

               (xxxvii) appoint and supervise the Company's transfer agent in
the maintenance of a stock ledger reflecting a record of the Stockholders and
their ownership of Common Stock;

               (xxxviii) manage and coordinate with the transfer agent the
periodic dividend process and the payments to Stockholders;

               (xxxix) investigate, select, and, on behalf of the Company,
engage and conduct business with such Persons as the Advisor deems necessary to
the proper performance of its obligations hereunder, including but not limited
to consultants, accountants, lenders, technical advisors, attorneys, brokers,
underwriters, corporate fiduciaries, escrow agents, depositaries, custodians,
agents for collection, insurers, insurance agents, banks, builders, developers,
construction companies, property owners, mortgagors, and any and all agents for
any of the foregoing, including Affiliates of the Advisor, and Persons acting in
any other capacity deemed by the Advisor necessary or desirable for the
performance of any of the foregoing services, including but not limited to
entering into contracts in the name of the Company with any of the foregoing;
and

               (xl) do all things necessary to assure its ability to render the
services described in this Agreement. The Advisor has a fiduciary responsibility
to the Company and to the Stockholders in carrying out its duties under this
Agreement. In providing advice and services hereunder, the Advisor shall not (i)
engage in any activity which would require it to be registered as an "Investment
Advisor," as that term is defined in the Investment Advisors Act of 1940 or in
any state securities law or (ii) cause the Company to make such investments as
would cause the Company to become an "Investment Company," as that term is
defined in the Investment Company Act of 1940.

     5.   Bank Accounts. The Advisor may establish and maintain one or more bank
accounts in its own name for the account of the Company or in the name of the
Company and may collect and deposit into any such account or accounts, and
disburse from any such account or accounts, any money on behalf of the Company,
under such terms and conditions as the Board may approve, provided that no funds
shall be commingled with the funds of the Advisor; and the Advisor shall from
time to time render appropriate accountings of such collections and payments to
the Board and to the auditors of the Company.

     6.   Records; Access. The Advisor shall maintain appropriate records of all
its activities hereunder and make such records available for inspection by the
Board and by counsel, auditors and authorized agents of the Company, at any time
or from time to time during normal business hours. The Advisor, in the conduct
of its responsibilities to the Company, shall maintain adequate and separate
books and records for the Company's operations in accordance with United States
GAAP, which shall be supported by sufficient documentation to ascertain that
such books and records are properly and accurately recorded. Such books and
records shall be the property of the Company. Such books and records shall
include all information necessary to calculate and audit the fees or
reimbursements paid under this Agreement. The Advisor shall utilize procedures
to attempt to ensure such control over accounting and financial transactions as
is reasonably required to protect the Company's assets from theft, error or
fraudulent activity. All financial statements that the Advisor delivers to the
Company shall be prepared on an accrual

                                       14
<PAGE>

basis in accordance with GAAP, except for special financial reports which by
their nature require a deviation from GAAP. The Advisor shall maintain necessary
liaison with the Company's independent accountants and shall provide such
accountants with such reports and other information as the Company shall
request. The Advisor shall at all reasonable times have access to the books and
records of the Company.

     7.   Limitations on Activities. Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would (a) adversely affect the
status of the Company as a REIT, (b) subject the Company to regulation under the
Investment Company Act of 1940, as amended, (c) violate any law, rule,
regulation or statement of policy of any governmental body or agency having
jurisdiction over the Company, its Common Stock or its other securities, or (d)
violate the Charter or Bylaws, except if such action shall be ordered by the
Board, in which case the Advisor shall notify promptly the Board of the
Advisor's judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from
the Board. In such event the Advisor shall have no liability for acting in
accordance with the specific instructions of the Board so given. Notwithstanding
the foregoing, the Advisor, its directors, officers, employees and stockholders,
and stockholders, directors and officers of the Advisor's Affiliates shall not
be liable to the Company or to the Board or Stockholders for any act or omission
by the Advisor, its directors, officers or employees, or stockholders, directors
or officers of the Advisor's Affiliates except as provided in this Agreement.

     8.   Relationship With Directors. Subject to Section 7 of this Agreement
and to restrictions set forth in the Charter or deemed advisable with respect to
the qualification of the Company as a REIT, directors, officers and employees of
the Advisor or an Affiliate of the Advisor or any corporate parents of an
Affiliate, or directors, officers or stockholders of any director, officer or
corporate parent of an Affiliate may serve as a Director and as officers of the
Company, except that no officer or employee of the Advisor or its Affiliates who
also is a Director or officer of the Company shall receive any compensation from
the Company for serving as a Director or officer other than reasonable
reimbursement for travel and related expenses incurred in attending meetings of
the Directors.

     9.   Fees.

          (a)  Acquisition Fees. Subject to the following sentence, the Company
shall pay to the Advisor, as compensation for services rendered by the Advisor
in connection with the investigation, selection and acquisition (by purchase,
investment or exchange) of Real Estate Assets, a fee in an amount equal to 3%
of, (i) with respect to any Real Estate Asset acquired by the Company directly
or indirectly other than a Real Estate Related Investment, the Contract Price of
the underlying property, and (ii) with respect to any Real Estate Related
Investment acquired by the Company directly or indirectly, the Contract Price of
the underlying property.

          (b)  Debt Financing Fee. The Company shall pay the Advisor 1% of the
amount available under any loan or line of credit made available to the Company
upon the Company's receipt of the proceeds from such loan or line of credit.

                                       15
<PAGE>

          (c)  Asset Management Fee. On the last day of each month, the Company
shall pay the Advisor an "Asset Management Fee" in an amount equal to
one-twelfth of 2% of (i) the aggregate assets value for operating assets and
(ii) the total Contract Price plus capitalized entitlement and project related
costs for Real Estate Assets held for less than or equal to one year by us,
directly or indirectly, as of the last day of the preceding month other than a
Real Estate-Related Investment and (iii) the appraised value as determined from
time to time for Real Estate Assets held for greater than one year by us,
directly or indirectly, as of the last day of the preceding month other than a
Real Estate-Related Investment and (iv) the appraised value of the underlying
property, for any Real Estate-Related Investment held by, us directly or
indirectly, as of the last day of the preceding month, in the case of subsection
(iv) not to exceed one-twelfth of 2% of the funds advanced by us for the
purchase of the Real Estate-Related Investment.

          (d)  Disposition Fee. If the Advisor or an Affiliate provides a
substantial amount of the services (as determined by a majority of the
Directors, including a majority of the Independent Directors), the Advisor shall
receive at the closing a Disposition Fee equal to, (1) in the case of the sale
of any Real Estate Asset, other than Real Estate-Related Investments, the lesser
of: (a) one-half of the Competitive Real Estate Commission paid up to 3% of the
Contract Price or, if none is paid, the amount that customarily would be paid,
or (b) 3% of the Contract Price of each Real Estate Asset sold, and (2) in the
case of the sale of any Real Estate-Related Investments, 3% of the sales price
of such Real Estate-Related Investments. Any Disposition Fee payable under this
section may be paid in addition to real estate commissions paid to
non-Affiliates, provided that the total real estate commissions (including such
Disposition Fee) paid to all Persons by the Company for each Real Estate Asset,
upon disposition thereof, shall not exceed an amount equal to the lesser of (i)
6% of the aggregate Contract Price of each Real Estate Asset or (ii) the
Competitive Real Estate Commission for each Real Estate Asset. The Company will
pay the Disposition Fees for a property at the time the property is sold.

          (e)  Subordinated Participation in Net Sale Proceeds. The Subordinated
Participation in Net Sale Proceeds shall be payable to the Advisor at the time
or times that the Company determines that the Subordinated Participation in Net
Sale Proceeds has been earned by the Advisor.

          (f)  Subordinated Incentive Fee Due Upon Listing. Upon Listing, the
Advisor shall be entitled to the Subordinated Incentive Fee Upon Listing. The
Subordinated Incentive Fee Due Upon Listing shall be payable to the Advisor
following twelve (12) months after Listing. The Company shall have the option to
pay such fee in the form of cash, Common Stock, a promissory note with interest
accrued as of the date of Listing, or any combination of the foregoing, as
determined by the Board of Directors. In the event the Subordinated Incentive
Fee Due Upon Listing is paid to the Advisor following Listing, the Advisor will
not be entitled to receive any payments of Subordinated Performance Fee Upon
Termination or Subordinated Participation in Net Sale Proceeds following receipt
of the Subordinated Incentive Fee Due Upon Listing.

          (g)  Subordinated Performance Fee Due Upon Termination. Upon
termination of this Agreement, the Advisor shall be entitled to the Subordinated
Performance Fee Due Upon Termination as set forth in Section 16(a)(ii) of this
Agreement.

                                       16
<PAGE>

          (h)  Changes to Fee Structure. In the event of Listing, the Company
and the Advisor shall negotiate in good faith to establish a fee structure
appropriate for a perpetual-life entity. A majority of the Independent Directors
must approve the new fee structure negotiated with the Advisor. In negotiating a
new fee structure, the Independent Directors shall consider all of the factors
they deem relevant, including, but not limited to: (i) the amount of the
advisory fee in relation to the asset value, composition and profitability of
the Company's portfolio; (ii) the success of the Advisor in generating
opportunities that meet the investment objectives of the Company; (iii) the
rates charged to other REITs and to investors other than REITs by advisors
performing the same or similar services; (iv) additional revenues realized by
the Advisor and its Affiliates through their relationship with the Company,
including loan administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by the REIT or by others
with whom the REIT does business; (v) the quality and extent of service and
advice furnished by the Advisor; (vi) the performance of the investment
portfolio of the REIT, including income, conversion or appreciation of capital,
and number and frequency of problem investments; and (vii) the quality of the
Real Estate Asset portfolio of the Company in relationship to the investments
generated by the Advisor for its own account. The new fee structure can be no
more favorable to the Advisor than the current fee structure.

     10.  Expenses.

          (a)  Reimbursable Expenses. In addition to the compensation paid to
the Advisor pursuant to Section 9 hereof, the Company shall pay directly or
reimburse the Advisor for all of the expenses paid or incurred by the Advisor
(to the extent not reimbursable by another party, such as the Broker-Dealer or
the Sponsor) in connection with the services it provides to the Company pursuant
to this Agreement, including, but not limited to:

               (i) the Organization and Offering Expenses; provided, however,
that within 60 days after the end of the month in which an Offering terminates,
the Advisor shall reimburse the Company for any Organization and Offering
Expenses reimbursement received by the Advisor pursuant to this Section 10 to
the extent that such reimbursement of expenses associated with the Offering
exceeds 5% of the Gross Proceeds (including all reimbursements paid to other
Affiliates of the Company). The Advisor shall be responsible for the payment of
all such Organization and Offering Expenses in excess of 15% of the Gross
Proceeds;

               (ii) subject to Section 9(a), all Acquisition Expenses incurred
in connection with the investigation, selection and acquisition of a Real Estate
Asset in an amount equal to up to 0.5% of (A) for any Real Estate Asset acquired
by the Fund directly or through a Joint Venture, other than a Real Estate
Related Investment, the Contract Price of the underlying property, and (B) for
any Real Estate Related Investment acquired by the Fund directly or indirectly,
the Contract Price of the underlying property, in the case of this subsection
(B), not to exceed 1.0% of the funds advanced by the Fund for the acquisition of
the Real Estate Asset; the actual out-of-pocket cost of goods and services used
by the Company and obtained from entities not affiliated with the Advisor
including brokerage and other fees paid in connection with the purchase,
operation and sale of Real Estate Assets;

               (iii) interest and other costs for borrowed money, including
discounts, points and other similar fees;

                                       17
<PAGE>

               (iv) taxes and assessments on income or Real Estate Asset and
taxes as an expense of doing business and any taxes otherwise imposed on the
Company, the Operating Partnership, its business or income;

               (v) costs associated with insurance required in connection with
the business of the Company, the Operating Partnership, or by the Board;

               (vi) expenses of managing and operating Real Estate Assets owned
by the Company through the Operating Partnership, whether payable to an
Affiliate of the Company or a non-affiliated Person;

               (vii) all expenses in connection with payments to Directors and
meetings of the Directors and Stockholders;

               (viii) expenses associated with Listing or with the issuance and
distribution of securities other than the Common Stock issued in the Offering,
such as fees, advertising expenses, taxes, legal and accounting fees, listing
and registration fees;

               (ix) expenses connected with payments of Dividends in cash or
otherwise made or caused to be made by the Company to the Stockholders;

               (x) expenses of organizing, converting, modifying, merging,
liquidating or dissolving the Company or of amending the Charter or the Bylaws;

               (xi) expenses of maintaining communications with Stockholders,
including the cost of preparation, printing, and mailing annual reports and
other Stockholder reports, proxy statements and other reports required by
governmental entities;

               (xii) audit, accounting and legal fees, and other fees for
professional services relating to the operations of the Company and the
Operating Partnership and all such fees incurred at the request, or on behalf
of, the Independent Directors or any committee of the Board of Directors;

               (xiii) out-of-pocket expenses of maintaining communications with
Shareholders, including the cost of preparation, printing, and mailing annual
reports and other Shareholder reports, proxy statements and other reports
required by governmental entities;

                                       18
<PAGE>
               (xiv) out-of-pocket costs for the Company and the Operating
Partnership to comply with all applicable laws, regulation and ordinances; and

               (xv) all other out-of-pocket costs necessary for the operation
of the Company and the Operating Partnership and its Real Estate Assets incurred
by the Advisor in performing its duties hereunder. The Company shall also
reimburse the Advisor or Affiliates of the Advisor for all direct and indirect
costs and expenses incurred on behalf of the Company prior to the execution of
this Agreement. In the event the Company does not raise $16,150,000 in its
Offering, the Advisor will not be reimbursed for Organizational and Offering
Expenses. The total of all Acquisition Fees and Acquisition Expenses paid by the
Company in connection with the purchase of a Real Estate Asset by the Company
shall be reasonable, and shall in no event exceed an amount equal to 6% of the
Contract Price, or in the case of a mortgage loan, 6% of the funds advanced;
provided, however, that a majority of the Directors (including the majority of
the Independent Directors) not otherwise interested in the transaction may
approve fees and expenses in excess of these limits if they determine the
transaction to be commercially competitive, fair and reasonable to the Company.

     (b)  Other Services. Should the Directors request that the Advisor or any
director, officer or employee thereof render services for the Company other than
set forth in Section 4, such services shall be separately compensated at such
rates and in such amounts as are agreed by the Advisor and a majority of the
Independent Directors, subject to the limitations contained in the Charter, and
shall not be deemed to be services pursuant to the terms of this Agreement.

     (c)  Timing of and Limitations on Reimbursements.

          (i) Expenses incurred by the Advisor on behalf of the Company and
payable pursuant to this Section 10 shall be reimbursed no less frequently than
monthly to the Advisor. The Advisor shall prepare a statement documenting the
expenses of the Company and the Operating Partnership during each quarter, and
shall deliver such statement to the Company within 45 days after the end of each
quarter. Subject to the Excess Expense Guidelines, the Company may advance funds
to the Advisor for expenses the Advisor anticipates will be incurred by the
Advisor within the current month and any such advances shall be deducted from
the amounts reimbursed by the Company to the Advisor.

          (ii) Notwithstanding anything else in this Section 10 to the contrary,
the expenses enumerated in this Section 10 shall not become reimbursable to the
Advisor unless and until the Company has raised $16,150,000 in the Offering.

          (iii) The Company shall not reimburse the Advisor at the end of any
fiscal quarter Operating Expenses that, in the four consecutive fiscal quarters
then ended (the "Expense Year") exceed (the "Excess Amount") the greater of 2%
of Average Invested Assets or 25% of Net Income (the "Excess Expense
Guidelines") for such year unless a majority of the Independent Directors
determines that such excess was justified, based on unusual and nonrecurring
factors which they deem sufficient. If a majority of the Independent Directors
does not approve such excess as being so justified, any Excess Amount paid to
the Advisor during a fiscal quarter shall be repaid to the Company. If a
majority of the Independent Directors

                                       19
<PAGE>

determines such excess was justified, then within 60 days after the end of any
fiscal quarter of the Company for which total reimbursed Operating Expenses for
the Expense Year exceed the Excess Expense Guidelines, the Advisor, at the
direction of the a majority of the Independent Directors, shall send to the
stockholders a written disclosure of such fact, together with an explanation of
the factors the a majority of the Independent Directors considered in
determining that such excess expenses were justified. The Company will ensure
that such determination will be reflected in the minutes of the meetings of the
Board of Directors. All figures used in the foregoing computation shall be
determined in accordance with GAAP.

     11.  Other Activities of the Advisor.

          (a)  General. The Advisor shall not render advice to other Persons
(including other REITs) nor manage other programs advised, sponsored or
organized by the Advisor or its Affiliates. The Advisor shall report to the
Board the existence of any condition or circumstance, existing or anticipated,
of which it has knowledge, which creates or could create a conflict of interest
between the Advisor's obligations to the Company and its obligations to or its
interest in any other partnership, corporation, firm, individual, trust or
association.

          (b)  Nothing contained herein shall limit or restrict the right of any
director, officer, employee, or stockholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association.

     12.  Relationship of Advisor and Company. The Company and the Advisor are
not partners or joint venturers with each other, and nothing in this Agreement
shall be construed to make them such partners or joint venturers or impose any
liability as such on either of them.

     13.  Representations and Warranties.

          (a)  Of the Company. To induce the Advisor to enter into this
Agreement, the Company hereby represents and warrants that:

               (i) The Company is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland with all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to carry out the transactions contemplated by this
Agreement.

               (ii) The Company's execution, delivery and performance of this
Agreement has been duly authorized by the Board of Directors including a
majority of all Independent Directors of the Company. This Agreement constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms. The Company's execution and delivery of this
Agreement and its fulfillment of and compliance with the respective terms hereof
do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest, charge or encumbrance upon the
assets of the Company pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a violation
of or (vi) require any authorization, consent, approval, exception or other
action by or notice to any court or administrative or governmental body pursuant
to, the Charter or Bylaws or

                                       20
<PAGE>

any law, statute, rule or regulation to which the Company is subject, or any
agreement, instrument, order, judgment or decree by which the Company is bound,
in any such case in a manner that would have a material adverse effect on the
ability of the Company to perform any of its obligations under this Agreement.

          (b)  Of the Advisor. To induce the Company to enter into this
Agreement, the Advisor represents and warrants that:

               (i) The Advisor is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of California
with all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to carry out the transactions contemplated
by this Agreement.

               (ii) The Advisor's execution, delivery and performance of this
Agreement has been duly authorized by its general partner. This Agreement
constitutes a valid and binding obligation of the Advisor, enforceable against
the Advisor in accordance with its terms. The Advisor's execution and delivery
of this Agreement and its fulfillment of and compliance with the respective
terms hereof do not and will not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Advisor's assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under,

               (iii) result in a violation of or (vi) require any authorization,
consent, approval, exemption or other action by or notice to any court or
administrative or governmental body pursuant to, the Advisor's articles of
incorporation or bylaws, or any law, statute, rule or regulation to which the
Advisor is subject, or any agreement, instrument, order, judgment or decree by
which the Advisor is bound, in any such case in a manner that would have a
material adverse effect on the ability of the Advisor to perform any of its
obligations under this Agreement.

               (iv) The Advisor has received copies of the Charter, the Bylaws,
and the Registration Statement and of the Operating Partnership's limited
partnership agreement and is familiar with the terms thereof, including without
limitation the investment limitations included therein. The Advisor warrants
that it will use reasonable care to avoid any act or omission that would
conflict with the terms of the Charter, the Bylaws, the Registration Statement,
or the Operating Partnership's limited partnership agreement in the absence of
the express direction of a majority of the Independent Directors.

     14.  Term; Termination of Agreement. This Agreement shall continue in force
until the first anniversary of the date hereof, subject to an unlimited number
of successive one-year renewals upon mutual consent of the parties. The Company,
acting through the Board, will evaluate the performance of the Advisor annually
before renewing the Agreement, and each such renewal shall be for a term of no
more than one year.

     15.  Termination.

          (a)  Termination by Either Party. This Agreement may be terminated
upon 60 days written notice without cause or penalty, by either party (by a
majority of the Independent

                                       21
<PAGE>

Directors or a majority of the board of directors of the Advisor or its managing
member, as the case may be).

          (b)  Termination by the Advisor. This Agreement may be terminated
immediately by the Advisor in the event of (i) the bankruptcy of the Company or
commencement of any bankruptcy or similar insolvency proceedings of the Company,
or (ii) any material breach of this Agreement by the Company not cured by the
Company within 30 days after written notice thereof.

     16.  Payments to and Duties of Advisor upon Termination. Payments to the
Advisor pursuant to this Section 16 shall be subject to the Excess Expenses
Guidelines to the extent applicable.

          (a)  After the Termination Date, the Advisor shall not be entitled to
compensation for further services hereunder except it shall be entitled to
receive from the Company within 30 days after the effective date of such
termination the following:

               (i)  all unpaid reimbursable expenses and all earned but unpaid
fees payable to the Advisor prior to termination of this Agreement; and

               (ii) the Subordinated Performance Fee Due Upon Termination,
provided that no Subordinated Performance Fee Due Upon Termination will be paid
if the Company has paid or is obligated to pay the Subordinated Incentive Fee
Due Upon Listing.

          (b)  In the event this Agreement expires without the consent of the
Advisor, or is terminated for any reason other than by the Advisor pursuant to
Section 15, the Company shall, at the election of the Advisor or any of its
Affiliates and at any time (and from time to time) after the effective date of
such expiration or termination, purchase all or a portion of the partnership
interests held by the Advisor and its Affiliates in the Operating Partnership,
subject to Board approval and applicable law. The purchase price shall be paid
in cash or, at the election of the seller, Common Stock, and shall be payable
within 120 days after the Advisor or its Affiliates (as applicable) gives the
Company written notice of its desire to sell all or a portion of the partnership
interests of the Operating Partnership held by such Person to the Company. The
Company agrees to keep a sufficient number of authorized but unissued shares of
Common Stock available for issuance pursuant to this Section 16(b) and shall
issue shares of Common Stock as may be required hereunder. The purchase price of
the partnership interests in the Operating Partnership sold to the Company
pursuant to this Section 16(b) shall be (i) in the event the seller elects to
receive cash, the amount the seller would receive under a redemption of such
interests under the Operating Partnership Agreement assuming the Company paid
cash for such redemption, or (ii) in the event the seller elects to receive
Common Stock, the amount of Common Stock the seller would receive under a
redemption of such interests under the Operating Partnership Agreement assuming
the Company paid Common Stock for such redemption.

          (c)  The Advisor shall promptly upon termination:

                                       22
<PAGE>

               (i) pay over to the Company all money collected and held for the
account of the Company pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;

               (ii) deliver to the Board a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Board;

               (iii) deliver to the Board all assets, including Real Estate
Assets, and documents of the Company then in the custody of the Advisor; and

               (iv) cooperate with the Company to provide an orderly management
transition.

     17.  Assignment to an Affiliate. This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Independent
Directors. The Advisor may assign any rights to receive fees or other payments
under this Agreement without obtaining the approval of the Directors. This
Agreement shall not be assigned by the Company without the consent of the
Advisor, except in the case of an assignment by the Company to a corporation or
other organization which is a successor to all of the assets, rights and
obligations of the Company, in which case such successor organization shall be
bound hereunder and by the terms of said assignment in the same manner as the
Company is bound by this Agreement.

     18.  Indemnification by the Company. The Company shall indemnify and hold
harmless the Advisor and its Affiliates, including their respective officers,
directors, partners and employees, from all liability, claims, damages or
losses arising in the performance of their duties hereunder, and related
expenses, including reasonable attorneys' fees, to the extent such liability,
claims, damages or losses and related expenses are not fully reimbursed by
insurance, subject to any limitations imposed by the laws of the State of
Maryland or the Charter. Notwithstanding the foregoing, (i) the Company will
not indemnify nor hold harmless the Advisor and its Affiliates unless: (A) the
Advisor or its Affiliate has determined in good faith that the course of
conduct which caused the loss, liability or expenses was in the best interests
of the Company; (B) the Advisor or its Affiliate was acting on behalf of the
Company or performing services for the Company; (C) such claim was not the
result of the gross negligence or willful misconduct of the Advisor or its
Affiliate; and (D) such indemnification or agreement to hold harmless is
recoverable only out of the net assets of the Company, including insurance
proceeds, and not from the shareholders of the Company, and (ii) the Advisor
shall not be entitled to indemnification or be held harmless pursuant to this
Section 18 for any activity which the Advisor shall be required to indemnify or
hold harmless the Company pursuant to Section 19.

     19.  Indemnification by Advisor. The Advisor shall indemnify and hold
harmless the Company from contract or other liability, claims, damages, taxes or
losses and related expenses including attorneys' fees, to the extent that such
liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor's bad faith,
fraud, willful misfeasance, misconduct, or reckless disregard of its duties, but
Advisor shall not be held responsible for any action of the Directors in
declining to follow any advice or recommendation given by the Advisor.

     20.  Advisor's Liability.

          (a)  Notwithstanding any other provisions of this Agreement, in no
event shall the Company make any claim against the Advisor, or its Affiliates,
on account of any good faith interpretation by Advisor of the provisions of this
Agreement (even if such interpretation is later

                                       23
<PAGE>

determined to be legally incorrect) or any alleged errors in judgment made in
good faith and in accordance with this Agreement in connection with the
operations of the Company hereunder by the Advisor or the performance of any
advisory or technical services provided by or arranged by the Advisor. The
provisions of this Section 20(a) shall not be deemed to release the Advisor from
liability for its gross negligence or reckless disregard of its duties.

          (b)  The Company shall not object to any expenditures made by the
Advisor in good faith in the course of its performance of its obligations under
this Agreement or in settlement of any claim arising out of the operation of the
Company unless such expenditure is specifically prohibited by this Agreement or
the Charter. The provisions of this Section 20(b) shall not be deemed to release
the Advisor from liability for its gross negligence of its duties.

          (c)  In no event will either party be liable for damages based on loss
of income, profit or savings or indirect, incidental, consequential, exemplary,
punitive or special damages of the other party or person, including third
parties, even if such party has been advised of the possibility of such damages
in advance, and all such damages are expressly disclaimed. In no event will the
Advisor's aggregate liability under this Agreement ever exceed the total amount
of fees it actually receives from the Company pursuant to Section 9.

     21.  Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is required by the Charter,
the Bylaws, or accepted by the party to whom it is given, and shall be given by
being delivered by hand or by overnight mail or other overnight delivery service
to the addresses set forth herein:

To the Board and to the Company:              Shopoff Properties Trust, Inc.
                                              8951 Research Drive
                                              Irvine, California  92618
                                              Attention:  William A. Shopoff

To the Advisor:                               Shopoff Advisors, L.P.
                                              8951 Research Drive
                                              Irvine, California  92618
                                              Attention:  William A. Shopoff

To the Operating Partnership                  Shopoff Partners, L.P.
                                              8951 Research Drive
                                              Irvine, California  92618
                                              Attention: William A. Shopoff

Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Section 21.

     22.  Modification. This Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assignees.

                                       24
<PAGE>

     23.  Severability. The provisions of this Agreement are independent of and
severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.

     24.  Construction. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of California.

     25.  Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.

     26.  Indulgences, Not Waivers. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

     27.  Gender. Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.

     28.  Titles Not to Affect Interpretation. The titles of paragraphs and
subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

     29.  Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when the counterparts hereof, taken together, bear the signatures of all
of the parties reflected hereon as the signatories.

                                       25
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

SHOPOFF PROPERTIES TRUST, INC.

By:
    ------------------------------------
Name:
      ----------------------------------
Title:
       ---------------------------------

SHOPOFF ADVISORS, L.P.

By:
    ------------------------------------
Name:
      ----------------------------------
Title:
       ---------------------------------

SHOPOFF PARTNERS, L.P.

By:
    ------------------------------------
Name:
      ----------------------------------
Title:
       ---------------------------------

                                       26

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