Document:

Exhibit 10.1

 

 

 

 

SECURITIES PURCHASE AGREEMENT

 

 

By and between:

 

 

MACKINAC FINANCIAL CORPORATION,

a Michigan corporation

 

 

and

 

 

STEINHARDT CAPITAL INVESTORS, LLLP,

a Delaware limited liability limited partnership

 

 

 

Dated as of March 27, 2012

 

 

 

 

 

TABLE OF CONTENTS

 

	
ARTICLE I. PURCHASE; CLOSINGS
    	
1
    
	
 
    	
 
    	
 
    
	
1.1
    	
Purchase
    	
1
    
	
1.2
    	
Closing
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II. REPRESENTATIONS AND WARRANTIES
    	
6
    
	
 
    	
 
    	
 
    
	
2.1
    	
Disclosure
    	
6
    
	
2.2
    	
Representations   and Warranties of the Company
    	
7
    
	
2.3
    	
Representations   and Warranties of the Investor
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE III. COVENANTS
    	
26
    
	
 
    	
 
    	
 
    
	
3.1
    	
Filings;   Other Actions
    	
26
    
	
3.2
    	
Use   of Proceeds; Expenses
    	
28
    
	
3.3
    	
Access, Information   and Confidentiality
    	
28
    
	
3.4
    	
Transfer
    	
29
    
	
3.5
    	
Reasonable   Efforts
    	
29
    
	
3.6
    	
Shareholder   Litigation
    	
29
    
	
3.7
    	
Most   Favored Nation
    	
30
    
	
3.8
    	
Notice   of Certain Events
    	
30
    
	
3.9
    	
Conduct   of the Business
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE IV. TERMINATION
    	
31
    
	
 
    	
 
    	
 
    
	
4.1
    	
Termination
    	
31
    
	
4.2
    	
Effects   of Termination
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE V. ADDITIONAL AGREEMENTS
    	
32
    
	
 
    	
 
    	
 
    
	
5.1
    	
No   Rights Agreement
    	
32
    
	
5.2
    	
Investor   Standstill Agreements
    	
33
    
	
5.3
    	
Compliance   with Laws
    	
35
    
	
5.4
    	
Legend
    	
36
    
	
5.5
    	
Certain   Transactions
    	
37
    
	
5.6
    	
Indemnity
    	
39
    
	
5.7
    	
Registration   Rights
    	
39
    
	
5.8
    	
Governance   Matters
    	
49
    
	
5.9
    	
Anti-Takeover   Matters
    	
51
    
	
5.10
    	
Additional   Regulatory Matters
    	
51
    
	
5.11
    	
Form D   and Blue Sky
    	
52
    
	
5.12
    	
Securities   Laws Disclosure; Publicity
    	
52
    
	
5.13
    	
No   Additional Issuances
    	
53
    
	
5.14
    	
Rights   Offering
    	
53
    
	
5.15
    	
Exchange   of Series B Preferred
    	
54
    

 

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ARTICLE VI. MISCELLANEOUS
    	
55
    
	
 
    	
 
    
	
6.1
    	
Survival
    	
55
    
	
6.2
    	
Amendment
    	
55
    
	
6.3
    	
Waivers
    	
55
    
	
6.4
    	
Counterparts   and Facsimile
    	
55
    
	
6.5
    	
Governing   Law
    	
55
    
	
6.6
    	
Waiver   of Jury Trial
    	
55
    
	
6.7
    	
Notices
    	
55
    
	
6.8
    	
Entire   Agreement, etc.
    	
56
    
	
6.9
    	
Other   Definitions
    	
57
    
	
6.10
    	
Captions
    	
58
    
	
6.11
    	
Severability
    	
58
    
	
6.12
    	
No   Third-Party Beneficiaries
    	
58
    
	
6.13
    	
Time   of Essence
    	
58
    
	
6.14
    	
Public   Announcements
    	
58
    
	
6.15
    	
Specific   Performance
    	
58
    
	
 
    	
 
    	
 
    
	
LIST OF EXHIBITS
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit A:
    	
Form of   Senior Promissory Note
    	
 
    
	
Exhibit B:
    	
Form of   Opinion of Company Counsel
    	
 
    
	
Exhibit C:
    	
Form of   Officer’s Certificate of the Company
    	
 
    
	
Exhibit D:
    	
Form of   Secretary’s Certificate of the Company
    	
 
    
	
Exhibit E:
    	
Form of   Passivity Commitment
    	
 
    
	
Exhibit F:
    	
Form of   Certificate of Designations
    	
 
    
	
Exhibit G:
    	
Form of   Officer’s Certificate of Investor
    	
 
    

 

ii

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 27, 2012, is made by and between MACKINAC FINANCIAL CORPORATION, a Michigan corporation, with its principal offices at 130 South Cedar Street, Manistique, MI 49854 (the “Company”) and STEINHARDT CAPITAL INVESTORS, LLLP, a Delaware limited liability limited partnership, with its principal offices at 650 Madison Avenue, 17th Floor, New York, NY 10022 (the “Investor”).

 

RECITALS:

 

The Company intends to sell to the Investor, and the Investor intends to purchase from the Company, as an investment in the Company, the securities as described herein.

 

The securities to be purchased at the Closing (as defined below) are (i) shares of the Company’s common stock (the “Common Stock” or the “Common Shares”); (ii) a senior promissory note in a principal amount to be determined based upon the amount of the Unsubscribed Shares after the issuance to the Investor of the Purchased Common Stock (as defined below); and (iii) in the event that the Investor has not received the Federal Reserve Approval on the date that the Rights Offering closes, shares of the Company’s Mandatorily Convertible Cumulative Participating Series B Preferred Stock (the “Series B Preferred Stock” or the “Series B Preferred Shares”) which will be automatically converted into Common Shares upon the Investor’s receipt of the Regulatory Approvals.

 

The Company has engaged River Branch Capital, LLC as its financial advisor (the “Financial Advisor”) in connection with the offering and sale of securities pursuant to this Agreement.

 

As promptly as reasonably practicable following the date of this Agreement, the Company will commence the Rights Offering to the holders of record of Common Stock on the date of this Agreement, in which the Company will distribute to such shareholders, at no charge, non-transferable subscription rights to purchase shares of Common Stock as set forth in Section 5.14.

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

 

ARTICLE I.
  PURCHASE; CLOSINGS

 

1.1          PURCHASE.

 

On the terms and subject to the conditions set forth herein, the Investor will purchase from the Company, and the Company will sell to the Investor, a number of shares of Common Stock, and, if applicable after completion of the Rights Offering, shares of Series B Preferred Stock.

 

1.2          CLOSING.

 

(a)           Purchased Shares; Note.

 

(1)           Unless this Agreement has been terminated pursuant to Article IV, and subject to the satisfaction of the conditions to the closing set forth in Section 1.2(b), the closing shall take place, on the date that is six (6) business days following the day on which the conditions set forth in Section 1.2(b) (other than those that by their nature are to be satisfied at closing, but subject to the fulfillment or waiver of those conditions) are satisfied or waived, with a target date of May 17, 2012, at

 

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the offices of the Company located at 260 East Brown Street, Suite 300, Birmingham, MI 48009, or such other location as agreed by the parties in writing (the “Closing”).  The date of the Closing is referred to as the “Closing Date”.

 

(2)           Subject to the satisfaction of the conditions described in Section 1.2(b), at the Closing, the Company will deliver to the Investor:

 

(i)            one or more certificates representing such number of shares of Common Stock (the “Purchased Common Stock”) that the Investor may purchase on the Closing Date (including the Investor’s purchase of a portion of the Unsubscribed Shares) without the Investor owning more than nineteen and nine-tenths percent (19.9%) of the total number of shares of the Common Stock then issued and outstanding, at five dollars and seventy-five cents ($5.75) per share (the “Per Share Common Stock Purchase Price” and, as multiplied by the number of Purchased Common Stock, the “Common Stock Purchase Price”), rounded down to the nearest whole share; and

 

(ii)           a senior promissory note in the form attached hereto as EXHIBIT A (the “Note”) in a principal amount to be determined based upon the amount of the Unsubscribed Shares after the issuance to the Investor of the Purchased Common Stock (the “Principal Amount” and, together with the Common Stock Purchase Price, the “Purchase Price”), against payment by the Investor of the Purchase Price by wire transfer of immediately available United States funds to a bank account designated by the Company.

 

(3)           In the event that the Investor has not received the Federal Reserve Approval as of the Closing Date and all other conditions set forth in Section 1.2(b) have been satisfied or waived by the applicable party, the Company will deliver to the Investor:

 

(i)            one or more certificates representing such number of shares of Common Stock (the “Pre-Approval Shares”) that the Investor may purchase on the Closing Date without the Investor owning more than nine and nine-tenths percent (9.9%) of the total number of shares of the Common Stock then issued and outstanding (the “Non-Approval Limit”) at the Per Share Common Stock Purchase Price (the “Non-Approval Limit Purchase Price”), rounded down to the nearest whole share;

 

(ii)           one or more certificates representing such number of shares of Series B Preferred Stock (together with the Purchased Common Stock and the Pre-Approval Shares, the  “Purchased Shares”) determined by dividing the Common Stock Purchase Price which the Investor would have purchased under Section 1.2(a)(2) above had the Investor received the Regulatory Approvals minus the Non-Approval Limit (the “Preferred Purchase Price”) by one thousand dollars ($1,000) per share, rounded down to the nearest whole share; and

 

(iii)         the Note in a principal amount to be determined based upon the amount of the Unsubscribed Shares after the issuance to the Investor of the Purchased Shares,  against payment by the Investor of the sum of the Non-Approval Limit Purchase Price, the Preferred Purchase Price and the principal amount of the Note issued to the Investor under this Section 1.2(a)(3) by wire transfer of immediately available United States funds to a bank account designated by the Company.

 

(4)           The Purchased Shares, when taken together with the Note and any shares of Common Stock issuable pursuant to Section 5.14, are referred to herein as the “Securities”.

 

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(b)           Closing Conditions.

 

(1)           The obligation of the Investor to consummate the Closing is subject to the fulfillment (or written waiver by the Investor) prior to or contemporaneously with the Closing of each of the following conditions:

 

(i)            (A) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the Closing or shall prohibit or restrict the Investor or its Affiliates from owning or voting any securities of the Company in accordance with the terms thereof, and (B) no lawsuit shall have been commenced by any court, administrative agency or commission or other governmental authority or instrumentality, whether federal, state, local or foreign, or any applicable industry self-regulatory organization (each, a “Governmental Entity”) seeking to effect any of the foregoing;

 

(ii)           the representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing (except to the extent such representations and warranties are made as of a specified date, in which case, such representations and warranties shall be true and correct in all material respects as of such date);

 

(iii)         since the date hereof, there shall not have occurred any circumstance, event, change, development or effect that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on the Company or mBank, its wholly-owned banking subsidiary (the “Bank”);

 

(iv)          the Company shall have performed in all respects all obligations required to be performed by it at or prior to or contemporaneously with the Closing under this Agreement (except that with respect to obligations that are qualified by materiality, the Company shall have performed such obligations, as so qualified, in all respects);

 

(v)            each of the persons identified on Schedule 1.2(b)(v) shall have entered into amended and restated employment agreements in forms reasonably acceptable to the Investor and the Board of Directors;

 

(vi)          the Board of Directors shall have adopted, approved and recommended to the Company’s shareholders for approval at the Company’s 2012 annual meeting of shareholders, a new equity incentive plan in a form reasonably acceptable to the Investor and the Board of Directors;

 

(vii)         Honigman Miller Schwartz and Cohn LLP, counsel for the Company, shall have delivered to the Investor a written opinion, dated as of the Closing Date, as to the matters set forth on EXHIBIT B attached hereto, and otherwise in form and substance reasonably satisfactory to the Investor;

 

(viii)        the Company and the Investor shall have obtained all third-party consents and approvals necessary to consummate the transactions contemplated by this Agreement and the Exhibits to this Agreement (collectively, the “Transaction Documents”);

 

(ix)          (A) the Investor shall have received: (I) a written non-objection, from the Board of Governors of the Federal Reserve System (the “Federal Reserve”), to the notice it filed in connection with its purchase of Common Shares, the Note and, if applicable, the Series B Preferred Shares, pursuant to the Change in Bank Control Act of 1978, as amended (the “CBCA”); and (II) written confirmation, satisfactory in its reasonable good faith judgment, from the Federal Reserve; in either case, to the effect that the purchase of the Common Shares, the Note and, if applicable, the Series B Preferred

 

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Shares and the consummation of the Closing and the transactions contemplated by the Transaction Documents will not result in the Investor or any of its Affiliates (a) being deemed in control of the Company for purposes of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), or (b) otherwise being regulated as a bank holding company within the meaning of the BHC Act (collectively, the “Federal Reserve Approval”); and (B) either: (I) the Investor shall have received written confirmation, satisfactory in its reasonable good faith judgment, from the Michigan Office of Financial and Insurance Regulation (“OFIR”) to the effect that the purchase of the Common Shares, the Note and, if applicable, the Series B Preferred Shares, and the consummation of the Closing and the transactions contemplated by the Transaction Documents will not result in the Investor or any of its Affiliates (other than the Company and the Company Subsidiaries) being required to file an acquisition of control application or become a bank holding company under the Michigan Banking Code (the “Michigan Banking Code”); or (II) an acquisition of control application shall have been approved by OFIR (the “OFIR Approval”); and (C) the Company shall have received (I) approval of the Federal Reserve of the appointment of the Board Representative to the Board of Directors of the Company and (II) approval of the Federal Deposit Insurance Corporation (the “FDIC”) of the appointment of the Board Representative to the board of directors of the Bank (together with the Federal Reserve Approval and the OFIR Approval, the “Regulatory Approvals”); and (D) otherwise the Company and the Investor shall have obtained all applicable governmental or regulatory approvals or authorizations of or, to the extent required by applicable law or regulation, consents, approvals or exemptions from bank regulatory authorities required in connection with the transactions contemplated by the Transaction Documents;

 

(x)           following the date hereof, the Company shall not have agreed to enter into a transaction that resulted in, or would result in if consummated, a Change in Control of the Company;

 

(xi)          the Company shall have delivered to the Investor a duly executed Officer’s Certificate in the form attached hereto as EXHIBIT C;

 

(xii)         the Company shall have delivered to the Investor a certificate of the Secretary of the Company, in the form attached hereto as EXHIBIT D, dated as of the Closing Date, (A) certifying the resolutions adopted by the Board of Directors approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Purchased Shares and the Note, (B) certifying the current versions of the Articles of Incorporation and Bylaws of the Company and (C) certifying as to the signatures and authority of persons signing the Transaction Documents and any related documents on behalf of the Company;

 

(xiii)       the Company shall have delivered to the Investor a Certificate of Good Standing for the Company from the Michigan Department of Licensing and Regulatory Affairs (“LARA”) as of the date immediately preceding the Closing Date;

 

(xiv)        the Company shall have implemented, effective subject to the occurrence of the Closing, the governance matters contemplated in Section 5.8 (to the extent applicable) with respect to the appointment of the Board Representative;

 

(xv)          the Company shall have caused the Common Shares issued to the Investor under this Agreement to be approved for listing on the NASDAQ Stock Market, subject to official notice of issuance;

 

(xvi)        the Investor shall have received such other documents and certificates as it may reasonably request or as may be required pursuant to this Agreement;

 

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(xvii)       the Company shall have closed the Rights Offering or the Rights Offering shall have expired;

 

(xviii)      since the date hereof, there shall not have been any action taken, or any law enacted, entered, enforced or deemed applicable, by any Governmental Entity, whether in connection with the consents of any Governmental Entity specified in Section 1.2(b)(1)(ix) or otherwise, which imposes any new restriction or condition on the Company or the Company Subsidiaries or the Investor or any of its Affiliates (other than such restrictions as are described in the passivity or anti-association commitments, if any, required to be entered into by the Investor and/or any such Affiliate in connection with the transaction contemplated hereby, provided that such commitments are not more restrictive in any material respect than those contained in the form attached hereto as EXHIBIT E (the “Passivity Commitments”)) which is materially and unreasonably burdensome on the Company’s business following the Closing or on the Investor (or any of its Affiliates) related to its investment in the Securities, as applicable and as determined in the discretion of the party upon which such restriction or condition is imposed, or would reduce the economic benefits of the transactions contemplated by this Agreement to the Investor to such a degree that the Investor would not have entered into this Agreement had such condition or restriction been known to it on the date hereof (any such condition or restriction, a “Burdensome Condition”);

 

(xix)        the Company shall have filed with LARA (and LARA shall have accepted) the Certificate of Designations, substantially in the form attached hereto as EXHIBIT F (the “Certificate of Designations”), setting forth the terms of the Series B Preferred Stock; and

 

(xx)         the Company shall have entered into a definitive agreement with the U.S. Treasury to redeem all of the Company’s outstanding Fixed Rate Cumulative Perpetual Preferred Stock and the related warrant issued to the U.S. Treasury (the “TARP Securities”) as part of the Capital Purchase Program (the “CPP”) under the Troubled Asset Relief Program (“TARP”).

 

(2)           The obligation of the Company to consummate the Closing is subject to the fulfillment prior to the Closing of each of the following conditions:

 

(i)            the representations and warranties of the Investor set forth in this Agreement shall be true and correct in all material respects (except to the extent such representations and warranties are qualified by materiality, in which case they shall be true and correct in all respects) as of the date hereof and as of the Closing (except to the extent such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct, in all material respects, as applicable, as of such date);

 

(ii)           no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the Closing and no lawsuit shall have been commenced by any Governmental Entity seeking to effect the foregoing;

 

(iii)         the Investor shall have obtained all third party consents and approvals necessary to consummate the transactions contemplated by the Transaction Documents (except for such consents and approvals, the absence of which would not reasonably be expected to have a Material Adverse Effect on the Investor);

 

(iv)          the Investor shall have performed in all material respects all obligations required to be performed by it at or prior to or contemporaneously with the Closing under this Agreement (except that with respect to obligations that are qualified by materiality, the Investor shall have performed such obligations, as so qualified, in all respects);

 

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(v)            the Investor shall have delivered to the Company a duly executed General Partner’s Certificate in the form attached hereto as EXHIBIT G; and

 

(vi)          LARA shall have accepted the filing of the Certificate of Designations.

 

ARTICLE II.
  REPRESENTATIONS AND WARRANTIES

 

2.1          DISCLOSURE.

 

(a)           On or prior to the date of this Agreement, the Company delivered to the Investor a schedule (the “Disclosure Schedule”) setting forth, among other things, certain items, the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Section 2.2 or the covenants contained in Section 3.9; provided, however, that notwithstanding anything in this Agreement to the contrary, the mere inclusion of an item in the Disclosure Schedule shall not be deemed an admission that such item represents a material exception or material fact, event, or circumstance or that such item has had or would reasonably be expected to have a Material Adverse Effect on the Company.

 

(b)           “Material Adverse Effect” means, with respect to the Investor, only clause (z) that follows, or, with respect to the Company, both clauses (y) and (z) that follow, any circumstance, event, change, development or effect that, individually or in the aggregate (y) is or would reasonably be expected to be material and adverse to the financial position, results of operations, business or condition (financial or otherwise) of the Company and its subsidiaries taken as a whole, or (z) would materially impair the ability of either the Investor or the Company, to perform their respective obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the transactions contemplated by this Agreement; provided, however, that in determining whether a Material Adverse Effect has occurred, there shall be excluded any effect to the extent resulting from the following:

 

(1)           changes, after the date hereof, in U.S. generally accepted accounting principles (“GAAP”) or regulatory accounting principles;

 

(2)           changes, after the date hereof, in applicable laws, rules and regulations or interpretations thereof by any Governmental Entity;

 

(3)           actions or omissions of the Company expressly required by the terms of this Agreement or taken with the prior written consent of the Investor;

 

(4)           general changes, after the date hereof, in the economy or the industries in which the Company and the Company Subsidiaries operate;

 

(5)           changes, after the date hereof, in the market price or trading volume of the Common Stock (but not excluding the underlying causes of such changes, except to the extent related to the other exclusions in this definition); and

 

(6)           changes, after the date hereof, in global or national political conditions, including the outbreak or escalation of war or acts of terrorism;

 

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except, with respect to clauses (1), (2), (4) and (6), to the extent that the effects of such changes have a disproportionate effect on the Company and the Company Subsidiaries, taken as a whole, relative to other banks, savings associations and their holding companies generally.

 

(c)           “Previously Disclosed” means information set forth on the Disclosure Schedule corresponding to the provision of this Agreement to which such information relates; provided that when it is reasonably apparent that information set forth on the Disclosure Schedule relates to another provision of this Agreement, such information will also be deemed to be Previously Disclosed with respect to such other provision and includes information publicly disclosed by the Company in the Company Reports filed by the Company with, or furnished to, the Securities and Exchange Commission (the “SEC”) from January 1, 2010, through the date of this Agreement, and publicly available as of the date of this Agreement, excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosures of risks included in any “forward looking statements” disclaimer or other statements that are similarly non-specific and are predictive or forward-looking in nature.

 

2.2          REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  Except as Previously Disclosed, the Company represents and warrants as of the date of this Agreement and as of the Closing Date (except to the extent made only as of a different specified date, in which case, as of such date) to the Investor that:

 

(a)           Organization and Authority.  The Company is a corporation duly organized and validly existing under the laws of the State of Michigan, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified would reasonably be expected to have a Material Adverse Effect on the Company.  The Company has corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted.  The Company is duly registered as a bank holding company under the BHC Act.  The Company has filed with the SEC true, correct and complete copies of the Amended and Restated Articles of Incorporation of the Company, as amended through the date of this Agreement (the “Articles of Incorporation”), and the Bylaws of the Company, as amended through the date of this Agreement (the “Bylaws”).  The Company is not in violation of any of the provisions of the Articles of Incorporation or the Bylaws.

 

(b)           Company’s Subsidiaries.  The Company has Previously Disclosed a true, complete and correct list of all of its subsidiaries as of the date of this Agreement (each, a “Company Subsidiary” and, collectively, the “Company Subsidiaries”), all shares of the outstanding capital stock of each of which are owned directly or indirectly by the Company.  No equity security of any Company Subsidiary is or may be required to be issued by reason of any option, warrant, scrip, preemptive right, right to subscribe to, gross-up right, call or commitment of any character whatsoever relating to, or security or right convertible into, shares of any capital stock of such Company Subsidiary, and there are no contracts, commitments, understandings or arrangements by which any Company Subsidiary is bound to issue additional shares of its capital stock, or any bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the shareholders of the Company Subsidiary may vote (“Subsidiary Voting Debt”) of such Company Subsidiary, or any option, warrant or right to purchase or acquire any additional shares of its capital stock or any Subsidiary Voting Debt of such Company Subsidiary.  All of such shares so owned by the Company are duly authorized and validly issued, fully paid and nonassessable and are owned by it free and clear of any lien, adverse right or claim, charge, option, pledge, covenant, title defect, security interest or other encumbrances of any kind (“Liens”) with respect thereto.  Each Company Subsidiary is an entity duly organized, validly existing, duly qualified to do business and in good standing under the laws of its jurisdiction of organization and in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified would reasonably be expected to have a Material Adverse Effect.  Each

 

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Company Subsidiary has corporate or other appropriate organizational power and authority to own or lease its properties and assets and to carry on its business as it is now being conducted.  Except in respect of the Company Subsidiaries, the Company does not own beneficially, directly or indirectly, more than five percent (5%) of any class of equity securities or similar interests of any corporation, bank, business trust, association or similar organization, and is not, directly or indirectly, a partner in any partnership or party to any joint venture.  The Company’s principal depository institution subsidiary, the Bank, is duly organized and validly existing as a Michigan state-chartered commercial bank, and its deposit accounts are insured by the FDIC to the fullest extent permitted by the Federal Deposit Insurance Act and the rules and regulations of the FDIC thereunder, and all premiums and assessments required to be paid in connection therewith have been paid when due, and no proceedings for the termination of such insurance are pending or threatened.  The Company has furnished or made available to the Investor, prior to the date hereof, true, correct and complete copies of the charter and bylaws of the Bank, each as amended through the date of this Agreement.  No Company Subsidiary is in violation of any of the provisions of its articles of incorporation or bylaws.

 

(c)                                  Capitalization.

 

(1)                                 The authorized capital stock of the Company consists of eighteen million (18,000,000) shares of Common Stock and five hundred thousand (500,000) shares of preferred stock, no par value per share (the “Company Preferred Stock”).  As of the date hereof, there are three million, four hundred nineteen thousand, seven hundred thirty-six (3,419,736) shares of Common Stock outstanding, and eleven thousand (11,000) shares of Company Preferred Stock outstanding, all of which were issued to the U.S. Treasury as part of the CPP under TARP.

 

(2)                                 From the date hereof through the Closing Date, except in connection with the Transaction Documents and the transactions contemplated hereby and thereby, including the Company’s redemption of the TARP Securities, the Company shall not have (i) issued or authorized the issuance of any shares of Common Stock or Company Preferred Stock, or any securities convertible into or exchangeable or exercisable for shares of Common Stock or Company Preferred Stock (other than shares issued upon the exercise of Company Stock Options outstanding on the date hereof), (ii) reserved for issuance any shares of Common Stock or Company Preferred Stock or (iii) repurchased or redeemed, or authorized the repurchase or redemption of, any shares of Common Stock or Company Preferred Stock.

 

(3)                                 As of the date hereof, there are (i) outstanding stock options (each, a “Company Stock Option”) to purchase an aggregate of three hundred ninety-two thousand, one hundred fifty-two (392,152)  shares of the Common Stock issued under the Company’s 2000 Stock Incentive Plan or the Company’s Amended and Restated Director Stock Plan, in each case as amended or supplemented (collectively, the “Company Stock Plans”), (ii) no  shares of restricted stock outstanding under the Company Stock Plans and (iii) no shares of the Common Stock reserved for issuance under the Company Stock Plans, the Company Stock Plans having expired.

 

(4)                                 Other than in respect of awards outstanding under or pursuant to the Company Stock Plans, and three hundred seventy-nine thousand, three hundred ten (379,310) shares of Common Stock reserved for potential issuance under the Warrant dated April 24, 2009, issued to the U.S. Treasury under the CPP (the “Treasury Warrant”), no shares of Common Stock or Company Preferred Stock are reserved for issuance.  All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof.

 

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(5)                                 The Series B Preferred Shares (upon filing of the related Certificate of Designations with LARA) will be duly authorized by all necessary corporate action, and when issued and sold against receipt of the consideration therefor as provided in this Agreement, such Series B Preferred Shares will be validly issued, fully paid and nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof.  The Common Shares issuable upon the conversion of the Series B Preferred Shares will, upon receipt of the Regulatory Approvals, have been duly authorized by all necessary corporate action, and when so issued upon such conversion or exercise, will be validly issued, fully paid and nonassessable, and free of preemptive rights, with no personal liability attaching to the ownership thereof.

 

(6)                                 Neither the Company nor any of its officers, directors, or employees is a party to any right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement, or shareholders agreement with respect to the sale or voting of any securities of the Company.  No bond, debenture, note or other indebtedness having the right to vote on any matters on which the shareholders of the Company may vote (“Voting Debt”) is issued and outstanding.  Except as set forth elsewhere in this Section 2.2(c), the Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls, repurchase rights, commitments or agreements of any character calling for the purchase or issuance of, or securities or rights convertible into or exchangeable or exercisable for, any shares of Common Stock or Company Preferred Stock or any other equity securities of the Company or Voting Debt or any securities representing the right to purchase or otherwise receive any shares of capital stock of the Company (including any rights plan or agreement).  The Company has Previously Disclosed all shares of Company capital stock that have been purchased, redeemed or otherwise acquired, directly or indirectly, by the Company or any Company Subsidiary since December 30, 2010, and through the date hereof, and all dividends or other distributions that have been declared, set aside, made or paid to the shareholders of the Company since that date and through the date hereof.

 

(d)                                 Authorization.

 

(1)                                 The Company has the corporate power and authority to enter into or issue this Agreement and the other Transaction Documents and to carry out its obligations hereunder and thereunder.  The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby, including the issuance of the Common Stock, the Series B Preferred Stock and the Note in accordance with the terms of this Agreement and the issuance of the Common Stock upon the conversion of the Series B Preferred Stock, have been duly authorized by the affirmative vote of at least a majority of the Company’s Board of Directors (the “Board of Directors”).  This Agreement and the other Transaction Documents have been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by the Investor, are valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganizations, fraudulent transfer or similar laws relating to or affecting creditors generally or by general equitable principles (whether applied in equity or at law).  No other corporate proceedings or shareholder actions are necessary for the execution and delivery by the Company of this Agreement and the other Transaction Documents, the performance by the Company of its obligations hereunder and thereunder or the consummation by the Company of the transactions contemplated hereby and thereby.

 

(2)                                 When issued and sold against receipt of the consideration therefor as provided in this Agreement and the other Transaction Documents, the Common Shares, the Series B Preferred Shares and the Note to be issued pursuant to this Agreement will be validly issued, fully paid and nonassessable, and such issuance will not subject the holders thereof to personal liability and will not

 

9

 

be subject to preemptive rights of any other shareholder of the Company.  When issued upon the conversion of the Series B Preferred Shares as provided in the Certificate of Designations, the Common Shares will be validly issued, fully paid and nonassessable, and such issuance will not subject the holders thereof to personal liability and will not be subject to preemptive rights of any other shareholder of the Company.

 

(3)                                 Neither the execution, delivery and performance by the Company of this Agreement or the other Transaction Documents, nor the consummation of the transactions contemplated hereby and thereby, nor compliance by the Company with any of the provisions of any of the foregoing, will:

 

(i)                                    violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any Lien, upon any of the properties or assets of the Company or any Company Subsidiary under any of the terms, conditions or provisions of: (A) subject to the filing of the Certificate of Designations with LARA, the Company’s Articles of Incorporation or Bylaws (or similar governing documents); or (B) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which it may be bound, or to which the Company or any Company Subsidiary or any of the properties or assets of the Company or any Company Subsidiary may be subject; or

 

(ii)                                subject to compliance with the statutes and regulations referred to in the next paragraph, violate any ordinance, permit, concession, grant, franchise, law, statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree applicable to the Company or any Company Subsidiary or any of their respective properties.

 

(4)                                 Other than the securities or blue sky laws of the various states, and except as otherwise provided in this Agreement, no material notice to, registration, declaration or filing with, exemption or review by, or authorization, order, consent or approval of, any Governmental Entity, or expiration or termination of any statutory waiting period, is necessary for the consummation by the Company of the transactions contemplated by this Agreement or the other Transaction Documents.

 

(e)                                  Knowledge as to Conditions.  As of the date of this Agreement, the Company knows of no reason why any Regulatory Approvals and, to the extent necessary, any other approvals, authorizations, filings, registrations and notices required or otherwise a condition to the consummation of the transactions contemplated by the Transaction Documents will not be obtained.

 

(f)                                   Financial Statements.  The (i) consolidated balance sheets of the Company as of December 31, 2010, and 2009 and related consolidated statements of income, shareholders’ equity and cash flows for the three (3) years ended December 31, 2010, together with the notes thereto, audited by Plante & Moran, PLLC and included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC (the “Audited Financial Statements”) and (ii) (x) the unaudited consolidated balance sheets of the Company as of March 31, 2011, June 30, 2011, and September 30, 2011, and related consolidated statements of income, shareholders’ equity and cash flows for the three (3), six (6) and nine (9) month periods then ended, together with the notes thereto, and included in the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, June 30, 2011, and September 30, 2011, as filed with the SEC and (y) the pro forma unaudited consolidated balance sheet of the Company as of December 31, 2011, and related consolidated statements of income, shareholders’ equity and cash flows for the year then ended, together with the notes thereto (the “Unaudited Financial Statements” and, together with the Audited Financial Statements, the “Company

 

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Financial Statements”), (1) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries, (2) complied, as of their respective dates of filing with the SEC, with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, (3) have been prepared in accordance with GAAP applied on a consistent basis and (4) present fairly the consolidated financial positions of the Company and the Company Subsidiaries at the dates set forth therein and the consolidated results of operations, changes in shareholders’ equity and cash flows of the Company and the Company Subsidiaries for the periods stated therein (subject to the absence of notes and normal year-end audit adjustments in the case of interim unaudited statements).

 

(g)                                 Reports.

 

(1)                                 Since December 31, 2008, the Company and each Company Subsidiary have filed all reports, registrations, documents, filings, statements and submissions, together with any required amendments thereto, that the Company and each Company Subsidiary was required to file with any Governmental Entity (the foregoing, collectively, the “Company Reports”), and have paid all fees and assessments due and payable in connection therewith.  As of their respective filing dates, the Company Reports complied with all statutes and applicable rules and regulations of the applicable Governmental Entities, as the case may be.  To the knowledge of the Company, as of the date of this Agreement, there are no outstanding comments from the SEC or any other Governmental Entity with respect to any Company Report.  Each Company Report, including the documents incorporated by reference therein, contained all of the information required to be included in such Company Report and, when such Company Report was filed, and as of the date such Company Report was filed with or furnished to the SEC, such Company Report did not, as of its date or if amended prior to the date of this Agreement, as of the date of such amendment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in such Company Report, in light of the circumstances under which they were made, not misleading and complied with the applicable requirements of the Securities Act of 1933, as amended, or any successor statute (the “Securities Act”), and the Securities Exchange Act of 1934, as amended, or any successor statute (the “Exchange Act”).  No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.  To the knowledge of the Company, there are no facts or circumstances that would prevent the Company’s principal executive officer and principal financial officer from giving the certifications and attestations required pursuant to Rules 13a-14 and 15d-14 under the Exchange Act, without qualification, when next due.

 

(2)                                 The records, systems, controls, data and information of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or their accountants (including all means of access thereto and therefrom), except for any nonexclusive ownership and nondirect control that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 2.2(g).  The Company:

 

(i)                                    has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the principal executive officer and the principal financial officer of the Company by others within those entities;

 

(ii)                                has implemented and maintains internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act); and

 

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(iii)                            has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors, (y) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (z) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

The Company has no knowledge of any reason that its outside auditors and its principal executive officer and principal financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when next due.  Since December 31, 2008, (aa) neither the Company nor any Company Subsidiary nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any Company Subsidiary has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices, and (bb) no attorney representing the Company or any Company Subsidiary, whether or not employed by the Company or any Company Subsidiary, has reported evidence of a violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company.

 

(h)                                 Properties and Leases.  Except for any Permitted Liens, the Company and each Company Subsidiary have good title free and clear of any Liens to all the real and personal property reflected in the Company’s Financial Statements, and all real and personal property acquired since September 30, 2011, except such real and personal property as has been disposed of in the ordinary course of business.  For purposes of this Agreement, “Permitted Liens” means (1) Liens for taxes and other governmental charges and assessments arising in the ordinary course of business which are not yet due and payable, (2) Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen and other like Liens arising in the ordinary course of business for sums not yet due and payable and that would not have a Material Adverse Effect and (3) other Liens or imperfections on property which are not material in amount or do not materially detract from the value of or materially impair the existing use of the property affected by such Lien or imperfection.  All leases of real property and all other leases pursuant to which the Company or any Company Subsidiary, as lessee, leases real or personal property are valid and effective in accordance with their respective terms and there is not, under any such lease, any existing default by the Company or any such Company Subsidiary or any event which, with notice or lapse of time or both, would constitute such a default.

 

(i)                                    Taxes.  Each of the Company and the Company Subsidiaries has timely filed (including pursuant to applicable extensions granted without penalty) all federal, state, county, local and foreign Tax Returns, including information Tax Returns, required to be filed by it, and all such filed Tax Returns are true, complete and correct in all respects, and paid all Taxes owed by it and no Taxes owed by it or assessments received by it are delinquent.  With respect to Taxes not yet due, the Company has made adequate provision in the financial statements of the Company (in accordance with GAAP).  The federal income Tax Returns of the Company and the Company Subsidiaries for the fiscal year ended December 31, 2006, and for all fiscal years prior thereto, are, for the purposes of routine audit by the Internal Revenue Service (the “IRS”), closed because of the statute of limitations, and no claims by the IRS for additional Taxes for such fiscal years are pending.  Neither the Company nor any Company Subsidiary has waived any statute of limitations with respect to Taxes or agreed to any extension of time

 

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with respect to a Tax assessment or deficiency, in each case that is still in effect, or has pending a request for any such extension or waiver.  Neither the Company nor any Company Subsidiary is a party to any pending action or proceeding, nor to the Company’s knowledge is any such action or proceeding threatened by any Governmental Entity for the assessment or collection of Taxes, interest, penalties, assessments or deficiencies, and no issue has been raised by any federal, state, local or foreign taxing authority in connection with an audit or examination of the Tax Returns, business or properties of the Company or any Company Subsidiary which has not been settled, resolved and fully satisfied, or adequately reserved for in accordance with GAAP.  Each of the Company and the Company Subsidiaries has withheld and paid all Taxes that it is required to withhold from amounts owing to employees, creditors or other third parties.  Neither the Company nor any Company Subsidiary is a party to, is bound by or has any obligation under, any Tax sharing or Tax indemnity agreement or similar contract or arrangement other than any contract or agreement between or among the Company and any Company Subsidiary.  Neither the Company nor any Company Subsidiary has participated in any “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4, or any other transaction requiring disclosure under analogous provisions of state, local or foreign law.  Neither the Company nor any Company Subsidiary has liability for the Taxes of any person other than the Company or any Company Subsidiary under Treasury Regulations Section 1.1502-6 (or any similar provision of applicable state, local or foreign law).  The Company has not been a “distributing corporation” or a “controlled corporation” in any distribution in which the parties to such distribution treated the distribution as one to which Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”), is applicable.  The Company has not been a United States real property holding corporation within the meaning of Section 897 of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.  Neither the Company nor any Company Subsidiary is a party to any agreement, contract or plan that has resulted, or could result from the transactions contemplated by the Transaction Documents, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of applicable state, local or foreign Tax law), and (ii) any amount that will not be fully deductible as a result of Section 162(m) of the Code (or any corresponding provision of applicable state, local or foreign Tax law).  For the purpose of this Agreement, the term “Tax” (including, with correlative meaning, the term “Taxes”) shall mean any and all domestic or foreign, federal, state, local or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers’ compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added or similar taxes, and the term “Tax Return” means any return, report, information return or other document (including any related or supporting information and attachments and exhibits) required to be filed with respect to Taxes, including all information returns relating to Taxes of third parties, any claims for refunds of Taxes and any amendment or supplements to any of the foregoing.

 

(j)                                    Absence of Certain Changes.  Since December 31, 2010, (1) there have been no events, occurrences or developments that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on the Company; (2) the Company has not incurred any liabilities (contingent or otherwise) other than (i) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (ii) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC; (3) the Company has not altered its method of accounting or the manner in which it keeps its accounting books and records; (4) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (other than in connection with repurchases of unvested stock issued to employees of the Company); (5) the Company has not issued any equity securities to any officer, director or Affiliate, except Common Stock issued pursuant to existing

 

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Company stock options or stock purchase plans or executive and director arrangements disclosed in the Company Reports; (6) there has not been any material change or amendment to, or any waiver of any material right by the Company under, any material contract under which the Company or any Company Subsidiary is bound or subject; (7)  there has not been an increase in the aggregate dollar amount of (i) the Bank’s nonperforming loans (including nonaccrual loans and loans ninety (90) days or more past due and still accruing interest) or (ii) the reserves or allowances established on the Company’s or the Bank’s financial statements with respect thereto; and (8) neither the Company nor any Company Subsidiary has committed to any of the foregoing.  Except for the transactions contemplated by this Agreement, no event, liability or development has occurred or exists with respect to the Company or any Company Subsidiary or their respective business, properties, operations or financial condition that would be required to be disclosed by the Company under applicable securities laws as of the time this representation is made that has not been publicly disclosed at least one (1) trading day prior to the date as of which this representation is made.

 

(k)                                 Commitments and Contracts.  The Company has Previously Disclosed or made available to the Investor or its representatives, prior to the date hereof, true, correct and complete copies of, and listed on Section 2.2(k) of the Disclosure Schedule, each of the following, to which the Company or any Company Subsidiary is a party or subject (whether written or oral, express or implied) (each, a “Company Significant Agreement”):

 

(1)                                 any contract containing covenants that limit the ability of the Company or any Company Subsidiary to compete in any line of business or with any person or which involve any restriction of the geographical area in which, or method by which or with whom, the Company or any Company Subsidiary may carry on its business (other than as may be required by law or applicable regulatory authorities), and any contract that could require the disposition of any assets or line of business of the Company or any Company Subsidiary;

 

(2)                                 any joint venture, partnership, strategic alliance or other similar contract (including any franchising agreement, but excluding introducing broker agreements), and any contract relating to the acquisition or disposition of any business or assets (whether by merger, sale of stock or assets or otherwise), which acquisition or disposition is not yet complete or where such contract contains continuing obligations or contains continuing indemnity obligations of the Company or any of the Company Subsidiaries;

 

(3)                                 any real property lease and any other lease with aggregate annual rental payments of fifty thousand dollars ($50,000) or more;

 

(4)                                 other than with respect to loans, any contract providing for, or reasonably likely to result in, the receipt or expenditure of more than fifty thousand dollars ($50,000) on an annual basis, including the payment or receipt of royalties or other amounts calculated based upon revenues or income;

 

(5)                                 any contract or arrangement under which the Company or any of the Company Subsidiaries is licensed or otherwise permitted by a third party to use any Intellectual Property that is material to its business (except for any “shrinkwrap” or “click through” license agreements or other agreements for software that is generally available to the public and has not been customized for the Company or the Company Subsidiaries) or under which a third party is licensed or otherwise permitted to use any Intellectual Property owned by the Company or any of the Company Subsidiaries;

 

(6)                                 any contract that by its terms limits the payment of dividends or other distributions by the Company or any Company Subsidiary;

 

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(7)                                 any standstill or similar agreement pursuant to which any party has agreed not to acquire assets or securities of another person;

 

(8)                                 any contract that would reasonably be expected to prevent, delay or impede the Company’s ability to consummate the transactions contemplated by this Agreement and the other Transaction Documents;

 

(9)                                 any contract providing for indemnification by the Company or any Company Subsidiary of any person, except for immaterial contracts entered into in the ordinary course of business consistent with past practice;

 

(10)                          any contract that contains a put, call or similar right pursuant to which the Company or any Company Subsidiary could be required to purchase or sell, as applicable, any equity interests or assets that have a fair market value or purchase price of more than fifty thousand dollars ($50,000); and

 

(11)                          any other contract or agreement which is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K.

 

Each of the Company Significant Agreements is valid and binding on the Company and the Company Subsidiaries, as applicable, and in full force and effect.  The Company and each of the Company Subsidiaries, as applicable, are in compliance with and have performed all obligations required to be performed by them to date under each Company Significant Agreement, except where the failure to be in compliance or perform would not reasonably be expected to result in a Material Adverse Effect on the Company.  Neither the Company nor any of the Company Subsidiaries knows of, or has received notice of, any violation or default (or any condition which with the passage of time or the giving of notice would cause such a violation of or a default) by any party under any Company Significant Agreement.  No party to a Company Significant Agreement has provided notice to the Company or any Company Subsidiary that it intends to terminate a Company Significant Agreement or not renew such agreement at the expiration of the current term.  Consummation of the transactions contemplated by this Agreement and the other Transaction Documents will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, any such agreement of the Company or any Company Subsidiary.  To the Company’s knowledge, other than those contemplated hereby, there are no material transactions or series of related transactions, agreements, arrangements or understandings, nor are there any currently proposed material transactions, or series of related transactions between the Company or any Company Subsidiaries, on the one hand, and the Company, any current or former director or executive officer of the Company or any Company Subsidiaries or any person who Beneficially Owns five percent (5%) or more of the Common Shares (or any of such person’s immediate family members or Affiliates) (other than Company Subsidiaries), on the other hand.

 

(l)                                    Offering of Securities.  Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Securities to be issued pursuant to this Agreement or any other Transaction Document under the Securities Act and the rules and regulations of the SEC promulgated thereunder) which would subject the offering, issuance or sale of any of such Securities to be issued pursuant to the registration requirements of the Securities Act.  Neither the Company nor any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Securities.  Assuming the accuracy of the Investor’s

 

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representations and warranties set forth in Section 2.3, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Investor under this Agreement.

 

(m)                             Litigation and Other Proceedings; No Undisclosed Liabilities.

 

(1)                                 There is no pending or, to the knowledge of the Company, threatened, claim, action, suit, arbitration, mediation, demand, hearing, investigation or proceeding against the Company or any Company Subsidiary, nor is the Company or any Company Subsidiary subject to any order, judgment or decree.

 

(2)                                 Neither the Company nor any of the Company Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not appropriately reflected or reserved against in the Company Financial Statements to the extent required to be so reflected or reserved against in accordance with GAAP, except for liabilities that have arisen since December 31, 2010, in the ordinary course of business consistent with past practice.

 

(n)                                 Compliance with Laws and Other Matters; Insurance.  The Company and each Company Subsidiary:

 

(1)                                 in the conduct of its business is in compliance with all, and the condition and use of its properties does not violate or infringe in any respect any, applicable domestic (federal, state or local) or foreign laws, statutes, ordinances, licenses, rules, regulations, judgments, demands, writs, injunctions, orders or decrees applicable thereto or to employees conducting its business, including TARP, the Sarbanes-Oxley Act of 2002, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, all other applicable fair lending laws or other laws relating to discrimination, the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) and its implementing regulations (collectively, the “Bank Secrecy Act”) and the applicable privacy and customer information requirements contained in any federal and state privacy law or regulations;

 

(2)                                 has all permits, licenses, franchises, authorizations, orders and approvals of, and has made all filings, applications and registrations with, Governmental Entities that are required in order to permit it to own or lease its properties and assets and to carry on its business as presently conducted; and all such permits, licenses, certificates of authority, orders and approvals are in full force and effect, and all such filings, applications and registrations are current, and, to the knowledge of the Company, no suspension or cancellation of any of them is threatened;

 

(3)                                 currently is complying with and, to the knowledge of the Company, is not under investigation with respect to, and has not received any written notification or written communication from any Governmental Entity and otherwise, to the knowledge of the Company, has not been threatened by any Governmental Entity indicating it will be charged with or given notice of, any violation of all applicable federal, state, local or foreign laws, regulations, rules, judgments, injunctions or decrees;

 

(4)                                 has, except for statutory or regulatory restrictions of general application, not been placed under any restriction by a Governmental Entity on its business or properties, and except for routine examinations by applicable Governmental Entities, as of the date of this Agreement, received no notification or communication from any Governmental Entity that an investigation by any Governmental Entity with respect to the Company or any of the Company Subsidiaries is pending or threatened;

 

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(5)                                 has not, since January 1, 2008, nor to its knowledge has any other person on behalf of the Company or any Company Subsidiary that qualifies as a “financial institution” under the U.S. anti-money laundering laws, knowingly acted, by itself or in conjunction with another, in any act in connection with the concealment of any currency, securities or other proprietary interest that is the result of a felony as defined in the U.S. anti-money laundering laws (“Unlawful Gains”), nor knowingly accepted, transported, stored, dealt in or brokered any sale, purchase or any transaction of other nature for Unlawful Gains;

 

(6)                                 to the extent it qualifies as a “financial institution” under the U.S. anti-money laundering laws, has implemented such anti-money laundering mechanisms and kept and filed all reports and other necessary documents as required by, and otherwise complied in all respects with, the U.S. anti-money laundering laws and the rules and regulations thereunder; and

 

(7)                                 is presently insured, and during each of the past two (2) calendar years (or during such lesser period of time as the Company has owned such Company Subsidiary) has been insured, for reasonable amounts with, to the knowledge of the Company, financially sound and reputable insurance companies against such risks as companies engaged in a similar business would, in accordance with industry practice, customarily be insured; and neither the Company nor any Company Subsidiary has received any notice of cancellation of any such insurance, nor, to the Company’s knowledge, will it or any Company Subsidiary be unable to renew its respective existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(o)                                 Labor.  Employees of the Company and the Company Subsidiaries are not and have never been represented by any labor union nor are any collective bargaining agreements otherwise in effect with respect to such employees.  No labor organization or group of employees of the Company or any Company Subsidiary has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Company’s knowledge, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority.  There are no organizing activities, strikes, work stoppages, slowdowns, lockouts, material arbitrations or grievances, or other labor disputes pending or, to the knowledge of the Company, threatened against or involving the Company or any Company Subsidiary.  The Company and the Company Subsidiaries are in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours.  To the Company’s knowledge, no executive officer is, or is now expected to be, in violation of any term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement or any other contract or agreement or any restrictive covenant in favor of a third party, and, to the Company’s knowledge, the continued employment of each such executive officer does not subject the Company or any Company Subsidiary to any liability with respect to any of the foregoing matters.

 

(p)                                 Company Benefit Plans.

 

(1)                                 “Benefit Plan” means all employee benefit plans, programs, agreements, contracts, policies, practices or other arrangements providing benefits to any current or former employee, officer, director or consultant of the Company or any Company Subsidiary or any beneficiary or dependent thereof that is sponsored or maintained by the Company or any Company Subsidiary or to which the Company or any Company Subsidiary contributes or is obligated to contribute or is party, whether or not written, including any “employee welfare benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), any “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to

 

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ERISA) and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option or equity award, equity-based severance, employment, change of control, consulting or fringe benefit plan, program, agreement or policy.  Each Benefit Plan is listed on Section 2.2(p)(1) of the Company’s Disclosure Schedule.  True and complete copies of all Benefit Plans listed on Section 2.2(p)(1) of the Company’s Disclosure Schedule have been made available to the Investor prior to the date hereof or have been filed with a Company Report.

 

(2)                                 With respect to each Benefit Plan, (i) the Company and the Company Subsidiaries have complied, and are now in compliance with, the applicable provisions of ERISA and the Code and all other laws and regulations applicable to such Benefit Plan and (ii) each Benefit Plan has been maintained, funded and administered in accordance with its terms.  None of the Company or the Company Subsidiaries or any of their respective ERISA Affiliates has incurred any withdrawal liability as a result of a complete or partial withdrawal from a multiemployer plan, as those terms are defined in Part I of Subtitle E of Title IV of ERISA, that has not been satisfied in full.  “ERISA Affiliate” means any entity, trade or business, whether or not incorporated, which, together with the Company and the Company Subsidiaries, would be deemed a “single employer” within the meaning of Section 4001 of ERISA or Sections 414(b), (c), (m) or (o) of the Code.

 

(3)                                 With respect to each Benefit Plan, all required reports and descriptions (including Form 5500 annual reports, summary annual reports and summary plan descriptions) have been timely filed and distributed in accordance with the applicable requirements of ERISA and the Code with respect to each such Benefit Plan. The requirements of COBRA have been met with respect to each such Benefit Plan and each Benefit Plan maintained by an ERISA Affiliate that is an employee welfare benefit plan subject to COBRA.

 

(4)                                 With respect to each Benefit Plan, all contributions (including all employer contributions and employee salary reduction contributions) that are due have been made within the time periods prescribed by ERISA and the Code to each such Benefit Plan that is an employee pension benefit plan, and all contributions for any period ending on or before the Closing Date that are not yet due have been made to each such employee pension benefit plan or accrued in accordance with the past custom and practice of the Company. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Benefit Plan that is an employee welfare benefit plan.

 

(5)                                 Each Benefit Plan that is intended to meet the requirements of a “qualified plan” under Section 401(a) of the Code has received a determination from the Internal Revenue Service that such Employee Benefit Plan is so qualified, and nothing has occurred since the date of such determination that could adversely affect the qualified status of any such Benefit Plan.

 

(6)                                 Neither the Company nor any of the Company Subsidiaries, nor any ERISA Affiliate contributes to, has any obligation to contribute to, or has any liability under or with respect to, any employee pension benefit plan that is a “defined benefit plan” (as defined in Section 3(35) of ERISA). No asset of the Company or any of the Company Subsidiaries is subject to any Lien under ERISA or the Code.

 

(q)                                 Investment Company.  Neither the Company nor any of the Company Subsidiaries is an “investment company” as defined under the Investment Company Act of 1940, as amended, and neither the Company nor any of the Company Subsidiaries sponsors any person that is such an investment company.

 

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(r)                                  Risk Management; Derivatives.

 

(1)                                 The Company and the Company Subsidiaries have in place risk management policies and procedures sufficient in scope and operation to protect against risks of the type and in amounts reasonably expected to be incurred by companies of similar size and in similar lines of business as the Company and the Company Subsidiaries.

 

(2)                                 All derivative instruments, including swaps, caps, floors and option agreements, whether entered into for the Company’s own account, or for the account of one or more of the Company Subsidiaries or their customers, were entered into (i) only for purposes of mitigating identified risk and in the ordinary course of business, (ii) in accordance with prudent practices and in material compliance with all applicable laws, rules, regulations and regulatory policies and (iii) with counterparties believed by the Company to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or one of the Company Subsidiaries, enforceable in accordance with its terms.  Neither the Company, nor the Company Subsidiaries, nor, to the knowledge of the Company, any other party thereto is in breach of any of its obligations under any such agreement or arrangement.

 

(s)                                   Environmental Liability.  Neither the Company nor any Company Subsidiary (1) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (2) owns or operates any real property contaminated with any substance that is in violation of any Environmental Laws, (3) is liable for any off-site disposal or contamination pursuant to any Environmental Laws or (4) is subject to any legal, administrative or other proceeding, claim or action of any nature relating to any Environmental Laws and, to the Company’s knowledge, there is no pending or threatened investigation that might lead to such a proceeding, claim or action or any reasonable basis for any such proceeding, claim or action.

 

(t)                                    Anti-Takeover Provisions.

 

(1)                                 The Company has not adopted any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.  The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement), any other similar “moratorium,” “control share,” “fair price,” “takeover” or “interested stockholder” law (each a “Takeover Law”) or other similar anti-takeover provision under the Company’s articles of incorporation or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to the Investor solely as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and the Investor’s ownership of the Securities.

 

(2)                                 The Board of Directors has duly adopted an irrevocable resolution as follows (the “Business Combination Exemption Resolution”):

 

“RESOLVED, that pursuant to Section 782 of the Michigan Business Corporation Act, as amended (the “MBCA”), the Board of Directors of the Corporation, for the specific purpose of establishing an irrevocable exemption from Section 780 of the MBCA, hereby approves thereunder (i) the entering into, and all of the transactions relating to and contemplated or permitted by, that certain securities purchase agreement (the “Securities Purchase Agreement”), between the Corporation and Steinhardt Capital

 

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Investors, LLLP, including, without limitation, (A) the assignment of any rights thereunder, (B) any person or entity becoming an “interested shareholder” as defined in Section 778 of the MBCA including, without limitation, Steinhardt Capital Investors, LLLP, Michael Steinhardt, David R. Steinhardt, the estate of Michael Steinhardt or David R. Steinhardt, any trust Michael Steinhardt or David R. Steinhardt has or may establish and/or any of their affiliates (whether individually or in another capacity) (collectively, the “Covered Persons”), and (C) the transfer of any shares of common stock or other securities of the Corporation in accordance with the terms and conditions of the Securities Purchase Agreement; (ii) any transaction in which any Covered Person becomes an “interested shareholder” as defined in Section 778 of the MBCA or acquires additional shares of common stock or other securities of the Corporation thereafter; and (iii) any “business combination” as defined in Section 776 of the MBCA involving any Covered Person.”

 

(3)                                 The Business Combination Exemption Resolution adopted by the Company is a valid action of the Board of Directors, binding on the Company, and constitutes a valid and irrevocable exemption by the Company from Section 780 of the Michigan Business Corporation Act as to any transaction, person or entity described in such resolution.

 

(u)                                 Intellectual Property.  (1) The Company and the Company Subsidiaries own (free and clear of any claims, Liens, encumbrances, exclusive licenses or non-exclusive licenses not granted in the ordinary course of business) or have a valid license to use all Intellectual Property used in or necessary to carry on their business as currently conducted and (2) such Intellectual Property referenced in clause (1) above is valid, subsisting and enforceable and is not subject to any outstanding order, judgment, decree or agreement adversely affecting the Company’s or the Company Subsidiaries’ use of, or rights to, such Intellectual Property.  The Company and the Company Subsidiaries have sufficient rights to use all Intellectual Property used in their business as presently conducted, all of which rights shall survive unchanged the consummation of the transactions contemplated by this Agreement and the other Transaction Documents.  Neither the Company nor any Company Subsidiary has received any notice of infringement or misappropriation of, or any conflict with, the rights of others with respect to any Intellectual Property, and no reasonable basis exists for any such claim.  To the Company’s knowledge, no third party has infringed, misappropriated or otherwise violated the Intellectual Property rights of the Company or the Company Subsidiaries.  There is no litigation, opposition, cancellation, proceeding, objection or claim pending, asserted or, to the Company’s knowledge, threatened against the Company or any Company Subsidiary concerning the ownership, validity, registerability, enforceability, infringement or use of, or licensed right to use, any Intellectual Property.  None of the Company or any of the Company Subsidiaries is using or enforcing any Intellectual Property owned by or licensed to the Company or any of the Company Subsidiaries in a manner that would be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property.  The Company and each of the Company Subsidiaries have taken all reasonable measures to protect the Intellectual Property owned by or licensed to the Company or any of the Company Subsidiaries.  For the purpose of this Agreement, “Intellectual Property” shall mean: trademarks, service marks, brand names, domain names, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction; patents, applications for patents (including divisions, continuations, continuations in part and renewal applications) and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic information, trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not, in any jurisdiction; and registrations or applications for registration of copyrights in

 

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any jurisdiction, and any renewals or extensions thereof; and any similar intellectual property or proprietary rights.

 

(v)                                 Agreements with Regulatory Agencies.  Neither the Company nor any Company Subsidiary is subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since December 31, 2010, has adopted any board resolutions at the request of, any Governmental Entity that currently restricts in any material respect the conduct of its business or that in any material respect relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a “Regulatory Agreement”) nor has the Company or any Company Subsidiary been advised since December 31, 2010, by any Governmental Entity that it is considering issuing, initiating, ordering or requesting any such Regulatory Agreement.  The Company and each Company Subsidiary is in compliance with each Regulatory Agreement to which it is party or subject, and neither the Company nor any Company Subsidiary has received any notice from any Governmental Entity indicating that either the Company or any Company Subsidiary is not in compliance with any such Regulatory Agreement.

 

(w)                               Loan Portfolio.

 

(1)                                 The Company and each Company Subsidiary has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any loan, lease or other extension of credit or commitment to extend credit (“Loans”) originated, purchased or serviced by the Company or any Company Subsidiary has satisfied, (i) all applicable laws with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing or filing of claims in connection with Loans, including all laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (ii) the responsibilities and obligations relating to Loans set forth in any contract between the Company or any Company Subsidiary and any Agency, Loan Investor or Insurer, (iii) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer and (iv) the terms and provisions of any mortgage or other collateral documents and other Loan documents with respect to each Loan.

 

(2)                                 No Agency, Loan Investor or Insurer has (i) claimed in writing that the Company or any Company Subsidiary has violated or has not complied with the applicable underwriting standards with respect to Loans sold by the Company or any Company Subsidiary to a Loan Investor or Agency, or with respect to any sale of Loan servicing rights to a Loan Investor, (ii) imposed in writing restrictions on the activities (including commitment authority) of the Company or any Company Subsidiary or (iii) indicated in writing to the Company or any Company Subsidiary that it has terminated or intends to terminate its relationship with the Company or any Company Subsidiary for poor performance, poor Loan quality or concern with respect to the Company’s or any Company Subsidiary’s compliance with laws.

 

(3)                                 To the knowledge of the Company, the characteristics of the loan portfolio of the Company have not changed from the characteristics of the loan portfolio of the Company as of December 31, 2010, in a manner that could reasonably be expected to result in a Material Adverse Effect with respect to the Company.

 

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(4)                                 For purposes of this Section 2.2(w):

 

(i)                                    “Agency” means the Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community Development Services), the Federal National Mortgage Association, the United States Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture or any other federal or state agency with authority to (A) determine any investment, origination, lending or servicing requirements with regard to Loans originated, purchased or serviced by the Company or any Company Subsidiary or (B) originate, purchase or service Loans, or otherwise promote lending, including state and local housing finance authorities;

 

(ii)                                “Loan Investor” means any person (including an Agency) having a beneficial interest in any Loan originated, purchased or serviced by the Company or any Company Subsidiary or a security backed by or representing an interest in any such Loan; and

 

(iii)                            “Insurer” means a person who insures or guarantees for the benefit of the Loan holder all or any portion of the risk of loss upon borrower default on any of the Loans originated, purchased or serviced by the Company or any Company Subsidiary, including the Federal Housing Administration, the United States Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture and any private mortgage insurer and providers of hazard, title or other insurance with respect to such Loans or the related collateral.

 

(x)                                 Directors’ and Officers’ Insurance.  The Company (1) maintains directors’ and officers’ liability insurance and fiduciary liability insurance with, to the knowledge of the Company, financially sound and reputable insurance companies with benefits and levels of coverage that have been Previously Disclosed, (2) has timely paid all premiums on such policies and (3) there has been no lapse in coverage during the term of such policies.

 

(y)                                 Section 16.  The Board of Directors has approved the issuance and sale of the Common Stock, the Series B Preferred Stock and the Note to be issued under this Agreement and the other Transaction Documents, including any acquisition pursuant to the conversion of the Series B Preferred Shares into Common Shares, as the case may be, as exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder.

 

(z)                                  Adequate Capitalization.  As of December 31, 2011, the Bank met or exceeded the standards necessary to be considered “well capitalized” under the FDIC’s regulatory framework for prompt corrective action.

 

(aa)                          Change in Control.  The consummation of the transactions contemplated by this Agreement and the other Transaction Documents will not trigger any rights under any “change of control” provision in any of the agreements to which the Company or any Company Subsidiary is a party, including any employment, “change in control,” severance or other compensatory agreements and any benefit plan which results in payments to the counterparty or the acceleration of vesting of benefits.

 

(bb)                          Brokers and Finders.  Except for the Financial Advisor (the fees of which are disclosed in Section 2.2(bb) of the Disclosure Schedule), neither the Company, nor any Company Subsidiary, nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Company or any Company Subsidiary in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby.

 

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2.3                               REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.  The Investor hereby represents and warrants as of the date of this Agreement (except to the extent made only as of a different specified date, in which case, as of such date), solely with respect to itself and, where expressly indicated, its Affiliates, to the Company that:

 

(a)                                 Organization and Authority.  The Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and failure to be so qualified would have a Material Adverse Effect on the Investor, and has the requisite corporate, partnership, limited liability company or other power and authority to own its properties and assets and to carry on its business as it is now being conducted.

 

(b)                                 Authorization.

 

(1)                                 The Investor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement and to carry out its obligations hereunder.  The execution, delivery and performance of this Agreement by the Investor and the consummation of the transactions contemplated hereby have been duly authorized by the Investor’s board of directors, general partner, managing members, investment committee or other authorized persons, as the case may be (if such authorization is required), and no further approval or authorization by any of such persons, as the case may be, is required.  Subject to such approvals of Governmental Entities as may be required by statute or regulation, this Agreement is a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganizations, fraudulent transfer or similar laws affecting creditors generally or by general equitable principles (whether applied in equity or at law).  No other corporate, partnership, limited liability company or other proceedings are necessary for the execution and delivery by the Investor of this Agreement, the performance by the Investor of its obligations hereunder or the consummation by the Investor of the transactions contemplated hereby.

 

(2)                                 Neither the execution, delivery and performance by the Investor of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by the Investor with any of the provisions hereof, will:

 

(i)                                    violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any Lien upon any of the properties or assets of such Investor under any of the terms, conditions or provisions of (A) its applicable governing documents, or (B) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Investor is a party or by which it may be bound, or to which the Investor or any of the properties or assets of the Investor may be subject; or

 

(ii)                                subject to compliance with the statutes and regulations referred to in the next paragraph, violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree applicable to the Investor or any of its respective properties or assets, except in the case of clauses (i)(B) and this clause (ii) for such violations, conflicts and breaches as would not reasonably be expected to have a Material Adverse Effect on the Investor.

 

(3)                                 Other than the securities or blue sky laws of the various states and except as otherwise provided in this Agreement, and assuming the accuracy of the representations and warranties of the Company and the performance of the covenants and agreements of the Company contained herein,

 

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no material notice to, registration, declaration or filing with, exemption or review by, or authorization, order, consent or approval of, any Governmental Entity, or expiration or termination of any statutory waiting period, is necessary for the consummation by the Investor of the transactions set forth in this Agreement.

 

(c)                                  Purchase for Investment.  The Investor acknowledges that the Securities have not been registered under the Securities Act or under any state securities laws.  The Investor:

 

(1)                                 is acquiring the Securities pursuant to an exemption from registration under the Securities Act for its own account solely for investment with no present intention or plan to distribute any of the Securities to any person, nor with a view to or for sale in connection with any distribution thereof;

 

(2)                                 will not sell or otherwise dispose of any of the Securities, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws;

 

(3)                                 has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Securities and of making an informed investment decision and has so evaluated the merits and risks of such investment;

 

(4)                                 is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment; and

 

(5)                                 is an “accredited investor” (as that term is defined by Rule 501 under the Securities Act);

 

provided, however, that by making the representations herein, the Investor does not agree to hold any of the Securities for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act or under an exemption from such registration in compliance with applicable federal and state securities laws.  Without limiting any of the foregoing, neither the Investor nor any of its Affiliates has taken, and the Investor will not, and will cause its Affiliates not to, take any action that would otherwise cause the Securities to be subject to the registration requirements of the Securities Act.

 

(d)                                 Access to Information.  The Investor acknowledges that it has been afforded (1) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (2) access to information about the Company and the Company Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (3) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.

 

(e)                                  Independent Investment Decision.  The Investor has independently evaluated the merits of its decision to purchase the Securities pursuant to this Agreement.  The Investor understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Investor in connection with the purchase of the Securities constitutes legal, tax or investment advice.  The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities.

 

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(f)                                   Reliance on Exemptions.  The Investor understands and acknowledges that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgements and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.

 

(g)                                 No Governmental Review.  The Investor understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(h)                                 Residency.  The Investor’s office in which its investment decision with respect to the Purchased Shares was made (if an entity) is located at the address set forth for the Investor in Section 6.7.

 

(i)                                    Financial Capability.  The Investor has immediately available funds necessary to consummate the Closing, as of the date of the Closing, on the terms and conditions contemplated by this Agreement.

 

(j)                                    Knowledge as to Conditions.  As of the date of this Agreement, the Investor knows of no reason why any Regulatory Approvals and, to the extent necessary, any other approvals, authorizations, filings, registrations and notices required or otherwise a condition to the consummation of the transactions contemplated by this Agreement and the other Transaction Documents cannot, or should not, be obtained.

 

(k)                                 No General Solicitation.  The Investor acknowledges that the Securities were not offered to the Investor by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (1) any advertisement, article, notice or other communication published in any newspaper, magazine, website or similar media, or broadcast over television or radio, or (2) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communication.

 

(l)                                    The Company is a Bank Holding Company. The Investor understands and acknowledges that: (1) the Company is a registered bank holding company under the BHC Act, and as such the Company is subject to regulation by the Federal Reserve; (2) acquisitions of interests in bank holding companies are subject to the BHC Act and the CBCA and may be reviewed by the Federal Reserve to determine the circumstances under which such acquisitions of interests will result in the Investor becoming subject to the BHC Act or subject to the notice filing requirements of the CBCA; and (3) the Federal Reserve may require extensive commitments from the Investor including the Passivity Commitments that are designed to ensure that the Investor will not exercise a controlling influence over the Company. In the event the Investor is required by the Federal Reserve to make the Passivity Commitments for such purpose, the Investor agrees to make any such additional commitments to the Federal Reserve that it may reasonably require, including commitments of the type referred to as passivity commitments and, if required to seek an affirmative written determination from the Federal Reserve that neither the Investor nor any of its Affiliates will be deemed to “control” the Company, as “control” is defined in 12 C.F.R. Part 303, Subpart E, or 12 C.F.R. Section 225.2 or 225.41 (for all purposes under this Agreement, “Control”).

 

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(m)                             No Prohibited Purchaser.  To the knowledge of the Investor, none of (i) the Investor or any person or entity controlling, controlled by or under common control with the Investor, (ii) any person or entity having a beneficial interest in the Investor or (iii) any other person or entity on whose behalf the Investor is acting: (1) is a person or entity listed in the annex to Executive Order No. 13224 (2001) issued by the President of the United States (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism); (2) is named on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (3) is a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515; (4) is a non-U.S. shell bank or is providing banking services indirectly to a non-U.S. shell bank; (5) is a senior non-U.S. political figure or an immediate family member or close associate of such figure or an entity owned or controlled by such a figure; or (6) is otherwise prohibited from investing in the Company pursuant to applicable U.S. anti-money laundering, antiterrorist and asset control laws, regulations, rules or orders (a person in any such category being referred to herein as a “Prohibited Purchaser”). The Investor agrees to provide the Company, promptly upon request, all information that the Company reasonably deems necessary or appropriate to comply with applicable U.S. anti-money laundering, antiterrorist and asset control laws, regulations, rules and orders. The Investor hereby consents to the disclosure to regulators and law enforcement authorities by the Company and its Affiliates and agents of such information about the Investor as the Company reasonably deems necessary or appropriate to comply with applicable U.S. anti-money laundering, antiterrorist and asset control laws, regulations, rules and orders. If a Purchaser is a financial institution that is subject to the Bank Secrecy Act, the Investor represents that the Investor has met and will continue to meet all of its obligations under the Bank Secrecy Act. The Investor acknowledges that if, following the investment in the Securities by the Investor, the Company reasonably believes that the Investor is a Prohibited Purchaser or is otherwise engaged in illegal activity or refuses to provide promptly information that the Company requests to dispel such beliefs, the Company has the right or may be obligated to prohibit additional investments, segregate the assets constituting and/or withhold or suspend distributions to the Investor in respect of, the investment in accordance with applicable regulations or immediately require the Investor to transfer the Securities. The Investor further acknowledges that the Investor will not have any claim against the Company or any of its Affiliates or agents for any form of damages as a result of any of the foregoing actions taken in good faith and in accordance with applicable laws and regulations by the Company or any of its Affiliates or agents.

 

(n)                                 No Intent to Control.  The Investor: (1) has no present intention of acquiring control of the Company and (2) will not acquire control in the future without the prior approval of all applicable federal, state and/or local government entities.

 

(o)                                 Brokers and Finders.  Neither the Investor or its Affiliates, nor any of their respective officers, directors or employees, has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Investor in connection with the Transaction Documents or the transactions contemplated hereby and thereby.  The Investor acknowledges that it is purchasing the Securities directly from the Company and not from the Financial Advisor.

 

ARTICLE III.
  COVENANTS

 

3.1                               FILINGS; OTHER ACTIONS.

 

(a)                                 The Investor and the Company will cooperate and consult with each other and use commercially reasonable efforts to prepare and file all necessary and customary documentation, to

 

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effect all necessary and customary applications, notices, petitions, filings and other documents and to obtain all necessary and customary permits, consents, orders, approvals and authorizations of, or any exemption by, all third parties and Governmental Entities, and to comply with any expiration or termination requirements of any applicable waiting periods, (1) necessary or advisable to consummate the transactions contemplated by this Agreement, and to perform the covenants contemplated by this Agreement, and (2) with respect to the Investor, to the extent typically provided by the Investor to such third parties or Governmental Entities, as applicable, under the Investor’s policies consistently applied and subject to such confidentiality requests as the Investor may reasonably seek.  Each party shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as the other party may reasonably request to consummate or implement such transactions or to evidence such events or matters, subject, in each case, to clauses (1) and (2) of the first sentence of this Section 3.1(a).  In particular, the Company will use its commercially reasonable efforts to help the Investor promptly obtain or submit, as the case may be, as promptly as practicable, the approvals and authorizations of, filings and registrations with, and notifications to, or expiration or termination of any applicable waiting period, all notices to and, to the extent required by applicable law or regulation, consents, approvals or exemptions from bank regulatory authorities, for the transactions contemplated by this Agreement.  The Investor shall use, and cause its Affiliates to use, commercially reasonable efforts to obtain regulatory non-objection to the change in control notice as promptly as reasonably possible, including responding fully to all requests for additional information from the Federal Reserve and entering into one or more passivity agreements not more restrictive in any material respect than the Passivity Commitments.  The Company shall use, and cause its Affiliates to use, commercially reasonable efforts to obtain all approvals required to be obtained by the Company in connection with the transactions contemplated by the Transaction Documents, including responding fully to all requests for additional information from the Federal Reserve, the FDIC and OFIR.  The Investor and the Company will each have the right to review in advance, and to the extent practicable, each will consult with the other, in each case subject to applicable laws relating to the exchange of information, all the information (other than confidential information) relating to such other party, and any of their respective Affiliates, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement.  In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable.  Each party hereto agrees to keep the other party apprised of the status of matters relating to completion of the transactions contemplated hereby.  The Investor and the Company shall promptly furnish each other to the extent permitted by applicable laws with copies of written communications received by them or their subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated by this Agreement.  Notwithstanding anything in this Section 3.1 or elsewhere in this Agreement to the contrary, the Investor shall not be required to provide to the Company any of its, its Affiliates’, its or their investment advisors’ or its or their control persons’ or equity holders’ nonpublic, proprietary, personal or otherwise confidential information, including the identities of limited partners, shareholders or members of the Investor or its Affiliates or their investment advisors (collectively, the “Investor Confidential Information”).

 

(b)                                 Each party agrees, upon request, to furnish the other party with all information (other than Investor Confidential Information) concerning itself, its subsidiaries, Affiliates, directors, officers, partners and shareholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of such other party or any of its subsidiaries to any Governmental Entity in connection with this Agreement.  Notwithstanding anything in this Section 3.1 or elsewhere in this Agreement to the contrary, (1) the Investor shall not be required to provide any materials to the Company that it deems private or confidential and (2) the Investor shall provide information only to the extent typically provided by the Investor to such Governmental Entities under the Investor’s policies consistently applied and subject to such confidentiality requests as the Investor may reasonably seek.

 

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(c)                                  From the date of this Agreement until the Closing, the Company shall not, directly or indirectly, amend, modify or waive, and the Board of Directors shall not recommend approval of, any proposal to the Company’s shareholders having the effect of amending, modifying or waiving any provision in the Articles of Incorporation or Bylaws of the Company in any manner adverse to the Investor.

 

(d)                                 The Company shall take all actions necessary to ensure that neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute a “change in control” or “change of control” within the meaning of any Benefit Plan.

 

3.2                               USE OF PROCEEDS; EXPENSES.

 

(a)                                 The proceeds from the sale of the Securities and the Rights Offering will be used to redeem in full all of the outstanding shares of Company Preferred Stock issued to the U.S. Treasury under the CPP (which is expected to occur concurrently with the Closing or within thirty (30) days of the Closing, subject to regulatory approval) and repurchase the related Treasury Warrant on terms that are reasonably acceptable to the Investor. The Company will so repay TARP and repurchase the related Treasury Warrant at the Closing.  As mutually agreed upon by and between the Company and the Investor, the remaining net proceeds of the capital raised through the transactions contemplated by this Agreement shall be contributed to the Bank in the form of a cash contribution or purchase of additional common equity.

 

(b)                                 The Company shall pay (1) the reasonable legal fees and expenses of the Investor’s counsel and (2) all other reasonable and documented costs and expenses incurred by the Investor (other than any legal fees) in connection with the transactions contemplated by this Agreement and the other Transaction Documents; provided, however, in no event shall such fees, costs and expenses exceed seventy-five thousand dollars ($75,000) in the aggregate.  Other than as set forth in the preceding sentence and in Section 5.7(b), each of the Company and the Investor will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated under this Agreement.

 

3.3                               ACCESS, INFORMATION AND CONFIDENTIALITY.

 

(a)                                 From the date of this Agreement until the date when the Common Shares owned by the Investor and its Affiliates in the aggregate represent less than two percent (2%) of all of the outstanding Common Shares (provided that, in making such calculation, all shares of Common Stock into or for which shares of any securities owned by the Investor are directly or indirectly convertible, which, for the avoidance of doubt, shall include those Common Shares issuable upon conversion of the Series B Preferred Shares to be issued hereunder, shall be included in both the numerator and denominator, and all Securities issued by the Company after the Closing Date other than in connection with an issuance in which the Investor (or a permitted assignee under Section 6.8) was offered the right to purchase the Unsubscribed Shares in accordance with Section 5.14 and 1.2(a) shall be excluded from the denominator), the Company will ensure that upon reasonable notice, and in such a manner as not to interfere unreasonably with the conduct of the business of the Company, the Company and its subsidiaries will afford to the Investor and its representatives (including employees of the Investor and counsel, accountants, financial and investment banking advisors and other professionals retained by the Investor) (1) such access during normal business hours to its books, records, properties and personnel and to such other information as the Investor may reasonably request and (2) reasonable opportunities to routinely consult with the management of the Company and its subsidiaries, which shall not be more frequently than once per calendar quarter, on matters relating to the operation of the Company.  The Company agrees to consider, in good faith, the recommendations of the Investor or its designated representative in

 

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connection with the matters on which it is consulted as described above, recognizing that the ultimate discretion with respect to all such matters shall be retained by the Company.  Notwithstanding anything in this Agreement to the contrary, at no time will the Company provide to the Investor any material non-public information (other than as disclosed to the Board Representative or the Board Observer, as the case may be and as applicable) unless the Investor shall have specifically requested such disclosure in writing from the Company.

 

(b)                                 Each party to this Agreement will hold, and will cause its respective subsidiaries and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a Governmental Entity is necessary or appropriate in connection with any necessary regulatory approval or request for information or similar process, or unless compelled to disclose by judicial or administrative process or, in the written opinion of its counsel, by other requirement of law or the applicable requirements of any Governmental Entity (in which case, the party permitted to disclose such information shall, to the extent legally permissible and reasonably practicable, provide the other party with prior written notice of such permitted disclosure), all nonpublic records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement, including but not limited to as set forth in Section 3.3(a) (except to the extent that such information can be shown to have been (1) previously known by such party on a nonconfidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, other consultants and advisors with the express understanding that such parties will maintain the confidentiality of the Information and, to the extent permitted above, to bank regulatory authorities.

 

3.4                               TRANSFER.  The Company shall cooperate, in accordance with reasonable and customary business practices, with any and all transfers, whether by direct or indirect sale, assignment, award, confirmation, distribution, bequest, donation, trust, pledge, encumbrance, hypothecation or other transfer or disposition, for consideration or otherwise, whether voluntarily or involuntarily, by operation of law or otherwise, by the Investor or any of its successors and assigns of the Securities and other shares of Common Stock such party may beneficially own prior to or subsequent to the date hereof.

 

3.5                               REASONABLE BEST EFFORTS.  The Company agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the Investor in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement and the other Transaction Documents, including using reasonable best efforts to accomplish the following: (a) the doing of all acts necessary to cause the conditions to Closing to be satisfied; (b) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings and the taking of all steps necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity; (c) the obtaining of all necessary consents, approvals or waivers from third parties; and (d) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement and the other Transaction Documents.

 

3.6                               SHAREHOLDER LITIGATION.  The Company shall promptly inform Investor of any claim, action, suit, arbitration, mediation, demand, hearing, investigation or proceeding (“Shareholder Litigation”) against the Company, any Company Subsidiary or any of the past or present executive officers or directors of the Company or any Company Subsidiary that is threatened or initiated by or on behalf of any shareholder of the Company in connection with or relating to the transactions contemplated

 

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hereby or by the other Transaction Documents.  The Company shall consult with the Investor and keep the Investor informed of all filings and developments relating to any such Shareholder Litigation.

 

3.7                               MOST FAVORED NATION.  During the period from the date hereof though the Closing, neither the Company nor any of the Company Subsidiaries shall enter into any additional, or modify any existing, agreements with any existing or future investors in the Company or any of the Company Subsidiaries that have the effect of establishing rights or otherwise benefiting such investor in a manner more favorable in any respect to such investor than the rights and benefits established in favor of the Investor by the Transaction Documents, unless, in any such case, the Investor has been offered such rights and benefits.

 

3.8                               NOTICE OF CERTAIN EVENTS.  Each party hereto shall promptly notify the other party hereto of (a) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware prior to the Closing that would constitute a violation or breach of this Agreement or the other Transaction Documents (or a breach of any representation or warranty contained herein or therein) or, if the same were to continue to exist as of the Closing Date, would constitute the non-satisfaction of any of the conditions set forth in Section 1.2, and (b) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware which would have been required to have been disclosed pursuant to the terms of this Agreement or the other Transaction Documents had such event, condition, fact, circumstance, occurrence, transaction or other item existed as of the date hereof.  Notwithstanding the foregoing, neither party shall be required to take any action that would jeopardize such party’s attorney-client privilege.

 

3.9                               CONDUCT OF THE BUSINESS.  Prior to the earlier of the Closing Date and the termination of this Agreement pursuant to Article IV, the Company shall, and shall cause each Company Subsidiary to:

 

(a)                                 carry on its business in the ordinary course of business and maintain and preserve its and such Company Subsidiary’s business (including its organization, assets, properties, goodwill and insurance coverage) and preserve business relationships with customers, vendors, strategic partners and others having business dealings with it; provided that nothing in this clause (a) shall limit or require any actions that the Board of Directors may, in good faith, determine to be inconsistent with their duties or the Company’s obligations under applicable law or imposed by any Governmental Entity;

 

(b)                                 unless otherwise contemplated by this Agreement, refrain from:

 

(1)                                 declaring, setting aside or paying any distributions or dividends on, or making any other distributions (whether in cash, securities or other property) in respect of, any of its capital stock;

 

(2)                                 splitting, combining or reclassifying any of its capital stock or issuing or authorizing the issuance of any other securities in respect of, in lieu of or in substitution for capital stock or any of its other securities;

 

(3)                                 purchasing, redeeming or otherwise acquiring any capital stock or any of its other securities or any rights, warrants or options to acquire any such capital stock or other securities;

 

(4)                                 issuing, delivering, selling, granting, pledging or otherwise disposing of or encumbering any capital stock, any other Voting Securities or any securities convertible into or exchangeable for, or any rights, warrants or options to acquire, any such capital stock, Voting Securities

 

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or convertible or exchangeable securities, other than any issuance of Common Stock on exercise of any compensatory stock options outstanding on the date of this Agreement; or

 

(5)                                 entering into any contract with respect to, or otherwise agreeing or committing to do, any for the foregoing; and

 

(c)                                  to the extent reasonably practicable, shall consult with the Investor prior to taking any actions outside of the ordinary course of business; provided that the Company shall not consult with the Investor with respect to such actions or provide any material non-public information to the Investor unless the Company first seeks and obtains the Investor’s prior consent to be so consulted or to receive such information.

 

Additionally, except as required pursuant to existing written, binding agreements in effect prior to the date hereof and set forth in Section 3.9 of the Disclosure Schedule, and with respect to clauses (u) and (v) except in the ordinary course of business consistent with past practice related to employees who are not executive officers of the Company, the Company shall and shall cause the Company Subsidiaries not to take any of the following actions: (u) grant or provide any severance or termination payments or benefits to any director, officer or employee of the Company or any of the Company Subsidiaries; (v) increase the compensation, bonus or pension, welfare, severance or other benefits of, pay any bonus to or make any new equity awards to any director, officer or employee of the Company or any of the Company Subsidiaries; (w) establish, adopt, amend or terminate any Benefit Plan or amend the terms of any outstanding equity-based awards; (x) take any action to accelerate the vesting or payment of or fund or in any other way secure the payment of compensation or benefits under any Benefit Plan, to the extent not already provided in any such Benefit Plan; (y) change any actuarial or other assumptions used to calculate funding obligations with respect to any Benefit Plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP; or (z) forgive any loans to directors, officers or employees of the Company or any of the Company Subsidiaries;  provided that in no event shall any increase of any payment in the ordinary course of business under clause (v) increase such person’s compensation by more than five percent (5%) in the aggregate except as set forth in Section 3.9 of the Disclosure Schedule.

 

ARTICLE IV.
  TERMINATION

 

4.1                               TERMINATION.  This Agreement may be terminated prior to the Closing:

 

(a)                                 by mutual written agreement of the Company and the Investor;

 

(b)                                 by any party, upon written notice to the other party, in the event that the Closing does not occur on or before June 30, 2012;  provided, however, that the right to terminate this Agreement pursuant to this Section 4.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

 

(c)                                  by the Investor, upon written notice to the Company, if (1) there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 1.2(b)(1)(ii) or Section 1.2(b)(1)(iv) would not be satisfied and (2) such breach or condition is not curable or, if curable, is not cured prior to the date that would otherwise be the Closing Date in the absence of such breach or condition; provided that this Section 4.1(c) shall only apply if the Investor is not in material breach of any of the terms of this Agreement;

 

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(d)                                 by the Company, upon written notice to the Investor, if (1) there has been a breach of any representation, warranty, covenant or agreement made by the Investor in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 1.2(b)(2)(i) or Section 1.2(b)(2)(iv) would not be satisfied and (2) such breach or condition is not curable or, if curable, is not cured prior to the date that would otherwise be the Closing Date in the absence of such breach or condition; provided that this Section 4.1(d) shall only apply if the Company is not in material breach of any of the terms of this Agreement;

 

(e)                                  by any party, upon written notice to the other party, in the event that any Governmental Entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable;

 

(f)                                   by the Investor, upon written notice to the Company, if the Investor or any of its Affiliates receives written notice from or is otherwise advised by, the Federal Reserve, OFIR or the FDIC that the Federal Reserve, OFIR or the FDIC, as applicable, will not grant (or intends to rescind or revoke if previously granted) any of the written confirmations or determinations referred to in Section 1.2(b)(1)(ix); or

 

(g)                                 by the Company, upon written notice to the Investor, if the Company receives written notice from or is otherwise advised by the Federal Reserve, OFIR or the FDIC that the Federal Reserve, OFIR or the FDIC, as applicable, will not grant (or intends to rescind or revoke if previously granted) any approvals required to be obtained to consummate the transactions contemplated by this Agreement and the other Transaction Documents.

 

4.2                               EFFECTS OF TERMINATION.  In the event of any termination of this Agreement as provided in Section 4.1, this Agreement (other than Section 3.2(b), Section 3.3(b) (except, in respect of any party, in connection with litigation against it by the other party or its Affiliates), this Section 4.2, Section 5.6 and Article VI, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided that nothing herein shall relieve any party from liability for willful breach of this Agreement.

 

ARTICLE V.
  ADDITIONAL AGREEMENTS

 

5.1                               NO RIGHTS AGREEMENT.  From the date hereof through such time during which the Investor, together with its Affiliates, and, for purposes of this Section 5.1, persons who share a common discretionary investment advisor with the Investor, in the aggregate own five percent (5%) or more of all of the outstanding Common Shares (provided that, in making such calculation, all Common Shares into or for which shares of any securities owned by the Investor are directly or indirectly convertible or exercisable, which, for the avoidance of doubt, shall include those Common Shares issuable upon conversion of the Series B Preferred Shares to be issued hereunder, shall be included in both the numerator and denominator, and all Common Shares issued by the Company after the Closing Date other than in connection with an issuance in which the Investor (or a permitted assignee under Section 6.8) was offered the right to purchase the Unsubscribed Shares in accordance with Section 5.14 shall be excluded from the denominator) (the “Qualifying Ownership Interest”), the Company shall not enter into any poison pill agreement, shareholders’ rights plan or similar agreement that shall limit the rights of the Investor and its Affiliates and associates to hold any shares of Common Stock or acquire additional securities of the Company unless such poison pill agreement, shareholders’ rights plan or similar agreement grants an exemption or waiver to the Investor and its Affiliates and associates and any group in

 

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which the Investor may become a member, immediately effective upon execution of such plan or agreement, that would allow the Investor and its Affiliates and associates to acquire such additional securities of the Company.

 

5.2                               INVESTOR STANDSTILL AGREEMENTS.  The Investor agrees that until the earlier of the fourth (4th) anniversary of the Closing Date and such time as the Investor and its Affiliates no longer own a Qualifying Ownership Interest, without the prior written consent of the Company, neither it nor any of its controlled Affiliates, or any Affiliate owned, controlled or influenced by David R. Steinhardt or Michael Steinhardt (each, a “Standstill Affiliate”) will, directly or indirectly:

 

(a)                                 in any way acquire, offer or propose to acquire or agree to acquire, other than as specifically contemplated in this Agreement or the other Transaction Documents, Beneficial Ownership of any Voting Securities if such acquisition would result in the Investor or its Affiliates having Beneficial Ownership of more than twenty-four and nine-tenths percent (24.9%) (if the Investor receives the Federal Reserve Approval prior to the Closing), or nine and nine-tenths percent (9.9%) (if the Investor does not receive the Federal Reserve Approval prior to the Closing) of the outstanding shares of a class of voting securities (within the meaning of the BHC Act and Regulation Y promulgated thereunder) or Common Stock of the Company (for the avoidance of doubt, for purposes of calculating the Beneficial Ownership of the Investor and its Affiliates hereunder, (x) any security that is convertible into, or exercisable for, any such voting securities or Common Stock that is Beneficially Owned by the Investor or its Affiliates (other than any shares of Series B Preferred Stock) shall be treated as fully converted or exercised in accordance with its terms, as the case may be, into the underlying voting securities or Common Stock, and (y) any security convertible into, or exercisable for, the Common Stock that is Beneficially Owned by any person other than the Investor or any of its Affiliates shall not be taken into account);

 

(b)                                 make, or in any way participate in, any “solicitation” of “proxies” (as such terms are defined under Regulation 14A under the Exchange Act, disregarding clause (iv) of Rule 14a-1(l)(2) and including any otherwise exempt solicitation pursuant to Rule 14a-2(b)) to vote, or seek to advise or influence any person or entity with respect to the voting of, any Voting Securities of the Company (except as may be permitted under the terms of any passivity or anti-association commitment, as such commitment may be amended from time to time, given by the Investor to the Federal Reserve in connection with the Investor’s purchase of the Common Shares);

 

(c)                                  call or seek to call a meeting of the shareholders of the Company or initiate any shareholder proposal for action by shareholders of the Company, form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated thereunder) with respect to any Voting Securities, or seek, propose or otherwise act alone or in concert with others, to influence or control the management, Board of Directors or policies of the Company (except as may be permitted under the terms of any passivity or anti-association commitment, as such commitment may be amended from time to time, given by the Investor to the Federal Reserve in connection with the Investor’s purchase of the Common Shares); provided that the Investor and its Standstill Affiliates shall not be considered a “group” for the purposes of this Section 5.2(c);

 

(d)                                 bring any action or otherwise act to contest the validity of this Section 5.2 (provided that neither the Investor nor any of its Standstill Affiliates shall be restricted from contesting the applicability of this Section 5.2 to the Investor or any of its Standstill Affiliates under any particular circumstance) or seek a release of the restrictions contained herein or make a request to amend or waive any provision of this Section 5.2;

 

(e)                                  enter into or agree, offer, propose or seek (whether publicly or otherwise) to enter into any acquisition transaction, merger or other business combination relating to all or part of the

 

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Company or any of the Company Subsidiaries or any acquisition transaction for all or part of the assets of the Company or any Company Subsidiary or any of their respective businesses; or

 

(f)                                   publicly disclose any intention, plan or arrangement inconsistent with any of the foregoing or take any action that would reasonably be expected to require the Company to make a public announcement regarding the possibility of any of the events described in clauses (a) through (e) above;

 

provided nothing in this Section 5.2 shall prevent the Investor or its Standstill Affiliates from (y) voting any Voting Securities then Beneficially Owned by the Investor or its Standstill Affiliates in any manner or (z) having private conversations with members of management or the Board of Directors of the Company regarding the policies, affairs or strategy of the Company or any Company Subsidiary; provided, further, that nothing in clauses (b), (c) or (e) of this Section 5.2 shall apply to the Board Representative or the Board Observer solely in his or her capacity as a director or observer (as applicable) of the Company or the Bank.

 

For purposes of this Agreement, “Voting Securities” shall mean at any time shares of any class of capital stock of the Company that are then entitled to vote generally in the election of directors.

 

Notwithstanding the foregoing, the parties hereto agree that nothing in this Section 5.2 shall apply to any portfolio company with respect to which the Investor is not the party exercising control over the decision to purchase Voting Securities or to vote such Voting Securities; provided that the Investor does not provide to such entity any nonpublic information concerning the Company or any Company Subsidiary and such portfolio company is not acting at the request or direction of or in coordination with the Investor; and  provided, further, that ownership of such shares is not attributed to the Investor under the BHC Act and the rules and regulations promulgated thereunder or any written interpretation of the foregoing by the staff of the Federal Reserve that has not been rescinded.

 

Notwithstanding the foregoing restrictions, if, at any time, there occurs a Change in Control or any person (other than an Investor or any of its Standstill Affiliates) shall have commenced and not withdrawn a bona fide public tender or exchange offer which if consummated would result in a Change in Control, then the limitations set forth in this Section 5.2 (other than in Section 5.2(a)) shall not be applicable to the Investor for so long as the conditions described in this paragraph continue.

 

For purposes of this Agreement, “Change in Control” means, with respect to the Company, the occurrence of any one of the following events:

 

(1)                                 any person is or becomes a Beneficial Owner (other than the Investor and its Affiliates), directly or indirectly, of fifty percent (50%) or more of the aggregate number of the Voting Securities;  provided, however, that the event described in this clause (1) will not be deemed a Change in Control by virtue of any holdings or acquisitions: (i) by the Company or any Company Subsidiary, (ii) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Company Subsidiary; provided that such holdings or acquisitions by any such plan (other than any plan maintained under 401(k) of the Code) do not exceed fifty percent (50%) of the then outstanding Voting Securities, (iii) by any underwriter temporarily holding securities pursuant to an offering of such securities or (iv) pursuant to a Non-Qualifying Transaction;

 

(2)                                 the event described in clause (1) above in this definition of “Change in Control” (substituting all references to fifty percent (50%) in such clause with “twenty-four and nine-tenths percent (24.9%)”), and in connection with such event, individuals who, on the date of this Agreement, constitute the Board of Directors (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board of Directors; provided, that any person becoming a director

 

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subsequent to the date of this Agreement whose election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Incumbent Directors then on the Board of Directors (either by a specific vote or by approval of the proxy statement of the relevant party in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director (except that no individuals who were not directors at the time any agreement or understanding with respect to any Business Combination or contested election is reached shall be treated as Incumbent Directors for the purposes of clause (3) below with respect to such Business Combination or this paragraph in the case of a contested election);  provided, further, that each Board Representative appointed under any of the Transaction Documents will be treated as an Incumbent Director even if the person designated to be such Board Representative should change;

 

(3)                                 the consummation of a merger, consolidation, statutory share exchange or similar transaction that requires adoption by the Company’s shareholders (a “Business Combination”), unless immediately following such Business Combination: (i) more than fifty percent (50%) of the total voting power of the corporation resulting from such Business Combination (the “Surviving Corporation”), or, if applicable, the ultimate parent corporation that directly or indirectly has Beneficial Ownership of one hundred percent (100%) of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Voting Securities that were outstanding immediately before such Business Combination (or, if applicable, is represented by shares into which such Voting Securities were converted pursuant to such Business Combination), and (ii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time the Board of Directors approved the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (i) and (ii) above will be deemed a “Non-Qualifying Transaction”);

 

(4)                                 the shareholders of the Company approve a plan of liquidation or dissolution of the Company or a sale of all or substantially all of the Company’s assets; or

 

(5)                                 the Company has entered into a definitive agreement, the consummation of which would result in the occurrence of any of the events described in clauses (1) through (4) of this definition above.

 

5.3                               COMPLIANCE WITH LAWS.  Notwithstanding any other provision of this Article V, the Investor covenants that the Securities may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state, federal or foreign securities laws.  In connection with any transfer of the Purchased Shares other than (a) pursuant to an effective registration statement, (b) to the Company or (c) pursuant to Rule 144 promulgated under the Securities Act (provided that the transferor provides the Company with reasonable assurances (in the form of a customary seller representation letter and, if applicable, a customary broker representation letter) that such securities may be sold pursuant to such rule), the Company may require the transferor thereof to provide to the Company and the Company’s transfer agent, at the transferor’s expense, an opinion of counsel selected by the transferor and reasonably acceptable to the Company and the Company’s transfer agent, the form and substance of which opinion shall be reasonably satisfactory to the Company and such transfer agent, to the effect that such transfer does not require registration of such Securities under the Securities Act.  As a condition of transfer (other than pursuant to clauses (a), (b) or (c) of the preceding sentence), any such transferee shall agree in writing to be bound by the terms of this Agreement and, except as otherwise set forth in this Agreement, shall have the rights of the Investor under this Agreement with respect to such transferred Securities.

 

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5.4                               LEGEND.

 

(a)                                 The Investor agrees that all certificates or other instruments representing the Securities will bear a legend substantially to the following effect:

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”

 

(b)                                 The legend set forth in Section 5.4(a) above shall be removed and the Company shall issue to the Investor a certificate without such legend or any other legend, or by electronic delivery at the applicable balance account at the Depository Trust Company (“DTC”), if (1) such Securities are registered for resale under the Securities Act (provided that, if the Investor is selling pursuant to an effective registration statement filed by the Company in accordance with Section 5.7, the Investor agrees to sell such Securities only during such time that such registration statement is effective and not withdrawn or suspended, and only as permitted by such registration statement), (2) such Securities are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the Company) or (3) such Securities are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such Securities and without volume or manner-of-sale restrictions.  Following the earlier of (y) the effective date of the Shelf Registration Statement (the “Effective Date”) or (z) Rule 144 becoming available for the resale of Securities, without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such Securities and without volume or manner-of-sale restrictions, the Company shall deliver to its transfer agent irrevocable instructions that such transfer agent shall reissue a certificate representing the applicable Securities without legend upon receipt by such transfer agent of the legended certificates for such Securities.  Any fees (with respect to the transfer agent or otherwise) associated with the removal of such legend shall be borne by the Company.  Following the Effective Date, or at such earlier time as a legend is no longer required for any Securities, the Company will, no later than three (3) trading days following the delivery by the Investor to the Company or its transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed and otherwise in form necessary to effect the reissuance and/or transfer) and a representation letter to the extent required by Section 5.3 (such third (3rd) trading day, the “Legend Removal Date”), deliver or cause to be delivered to the Investor a certificate representing such Securities that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the transfer agent that enlarge the restrictions on transfer set forth in this Section.

 

Certificates for Securities subject to legend removal hereunder may be transmitted by the transfer agent to the Investor by crediting the account of the Investor’s prime broker with DTC as directed by the Investor.

 

(c)                                  If the Company shall fail for any reason or for no reason to issue to the Investor unlegended certificates by the Legend Removal Date, then, in addition to all other remedies available to the Investor, if on or after the trading day immediately following such three (3) trading day period, the Investor purchases, or a broker through whom the Investor has sold Common Shares (a “Buy-In Broker”) purchases (in an open market transaction or otherwise) Common Shares to deliver in satisfaction of such sale in lieu of Common Shares the Investor anticipated receiving from the Company without any restrictive legend (a “Buy-In”), then the Company shall, within three (3) business days after the Investor’s request, honor its obligation to deliver to the Investor a certificate or certificates without

 

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restrictive legends representing such Common Shares and pay cash to the Investor in an amount equal to the excess (if any) of the Investor’s or Buy-In Broker’s total purchase price (including brokerage commissions, if any) for the Common Shares so purchased over the product of (1) such number of Common Shares times (2) the closing bid price on the Legend Removal Date.

 

5.5                               CERTAIN TRANSACTIONS.

 

(a)                                 Prior to the Closing, notwithstanding anything in this Agreement to the contrary, the Company shall not directly or indirectly effect or cause to be effected any transaction with a third party that would reasonably be expected to result in a Change in Control unless such third party shall have provided prior assurance in writing to the Company (in a form that is reasonably satisfactory to the Company) that the terms of this Agreement shall be fully performed (1) by the Company or (2) by such third party if it is the successor of the Company or if the Company is its direct or indirect subsidiary, and the Company agrees to promptly provide copies of such assurances to the Investor.  For the avoidance of doubt, it is understood and agreed that, in the event that a Change in Control occurs on or prior to the Closing, the Investor shall maintain the right under this Agreement to acquire, pursuant to the terms and conditions of this Agreement, the Securities (or such other securities or property (including cash) into which the Securities may have become exchangeable as a result of such Change in Control), as if the Closing had occurred immediately prior to such Change in Control.  For the avoidance of doubt, nothing in this Section 5.5(a) is intended to or shall limit in any way the Investor closing conditions contained in Section 1.2(b).

 

(b)                                 In the event that, at or prior to Closing, (1) the number of Common Shares or securities convertible or exchangeable into or exercisable for Common Shares issued and outstanding is changed as a result of any reclassification, stock split (including reverse split), stock dividend or distribution (including any dividend or distribution of securities convertible or exchangeable into or exercisable for Common Shares), merger, tender or exchange offer or other similar transaction, or (2) the Company fixes a record date that is at or prior to the applicable Closing Date for the payment of any non-stock dividend or distribution on the Common Stock, then the number of Common Shares and Series B Preferred Shares to be issued to the Investor at the Closing under this Agreement, together with the applicable implied per share price and the Common Shares and the Series B Preferred Shares to be issued to Investor at the Closing under this Agreement shall be equitably substituted with shares of other stock or securities or property (including cash), in each case to provide the Investor with substantially the same economic benefit from this Agreement as the Investor had prior to the applicable transaction.  Notwithstanding anything in this Agreement to the contrary, in no event shall the Purchase Price or any component thereof, or the aggregate percentage of shares to be purchased by the Investor or any other person be changed by the foregoing.

 

(c)                                  Notwithstanding anything in the foregoing Sections 5.5(a) and (b), the provisions of Section 5.5(b) shall not be triggered by the transactions contemplated by this Agreement or the other Transaction Documents.

 

5.6                               INDEMNITY.

 

(a)                                 The Company agrees to indemnify and hold harmless the Investor and its Affiliates and each of their respective officers, directors, direct or indirect partners or members, employees and agents and each person who controls the Investor within the meaning of the Exchange Act and the rules and regulations promulgated thereunder, to the fullest extent lawful, from and against any and all actions, suits, claims, proceedings, costs, losses, liabilities, damages, expenses (including attorneys’ fees and disbursements), amounts paid in settlement and other costs (collectively, “Losses”) arising out of or resulting from (1) any inaccuracy in or breach of the Company’s representations or

 

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warranties contained in this Agreement, (2) the Company’s breach of agreements or covenants made by the Company in this Agreement or (3) any Losses arising out of or resulting from any legal, administrative or other proceedings instituted by any Governmental Entity, shareholder of the Company or any other person (other than the Investor and its Affiliates and the Company and the Company Subsidiaries) arising out of the transactions contemplated by this Agreement and the terms of the Securities (other than any Losses attributable to any negligent acts or omissions on the part of the Investor).

 

(b)                                 A party entitled to indemnification hereunder (each, an “Indemnified Party”) shall give written notice to the party indemnifying it (the “Indemnifying Party”) of any claim with respect to which it seeks indemnification promptly after the discovery by such Indemnified Party of any matters giving rise to a claim for indemnification; provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 5.6 unless and to the extent that the Indemnifying Party shall have been actually prejudiced by the failure of such Indemnified Party to so notify such party.  Such notice shall describe in reasonable detail such claim to the extent known by the Indemnified Party.  In case any such action, suit, claim or proceeding is brought against an Indemnified Party, the Indemnified Party shall be entitled to hire counsel, at the cost and expense of the Indemnifying Party, and to conduct the defense thereof; provided, however, that the Indemnifying Party shall only be liable for the legal fees and expenses of one (1) law firm for all Indemnified Parties, taken together with regard to any single action or group of related actions, upon agreement by the Indemnified Parties and the Indemnifying Parties.  If the Indemnifying Party assumes the defense of any claim, all Indemnified Parties shall thereafter deliver to the Indemnifying Party copies of all notices and documents (including court papers) received by the Indemnified Parties relating to the claim, and any Indemnified Party shall cooperate in the defense or prosecution of such claim.  Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such claim, making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  The Indemnifying Party shall not be liable for any settlement of any action, suit, claim or proceeding effected without its written consent;  provided, however, that the Indemnifying Party shall not unreasonably withhold, delay or condition its consent.  The Indemnifying Party further agrees that it will not, without the Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof in any pending or threatened action, suit, claim or proceeding in respect of which indemnification has been sought hereunder unless such settlement or compromise (1) includes an unconditional release of such Indemnified Party from all liability arising out of such action, suit, claim or proceeding, (2) provides solely for the payment of money damages and not any injunctive or equitable relief or criminal penalties and (3) does not create any financial or other obligation on the part of an Indemnified Party which would not be indemnified in full by the Indemnifying Party.

 

(c)                                  Subject to Section 5.6(d), the Company shall not be liable for any Losses with respect to claims asserted pursuant to Section 5.6(a)(1) unless and until the aggregate amount of all such Losses exceeds three-quarters of one percent (0.75%) of the Purchase Price (the “Threshold Amount”), at which point the Company shall be liable for the total amount of such Losses incurred without regard to the Threshold Amount.  For further clarity, the Threshold Amount shall not be applicable to any Losses with respect to claims asserted pursuant to Sections 5.6(a)(2) or (3).

 

(d)                                 Notwithstanding anything to the contrary in Section 5.6(c), the Threshold Amount shall not apply to claims arising out of or relating to the representations and warranties set forth in the following subsections of Section 2.2:  (a) (Organization and Authority); (b) (Subsidiaries); (c) (Capitalization); (d) (Authorization); (i) (Taxes); (o) (Labor); (p) (Company Benefit Plans); (s)

 

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(Environmental Liability); (t) (Anti-Takeover Provisions); and (bb) (Brokers and Finders) (collectively, the  “Special Representations and Warranties”).

 

(e)                                  The indemnity provided for in this Section 5.6 shall be the sole and exclusive monetary remedy of the Indemnified Parties after the Closing for any inaccuracy of any of the representations and warranties contained in this Agreement or any other breach of any covenant or agreement contained in this Agreement; provided that nothing herein shall limit in any way any such parties’ remedies in respect of fraud, intentional misrepresentation or omission or intentional misconduct by the other party in connection with the transactions contemplated hereby.  No party to this Agreement (or any of its Affiliates) shall, in any event, be liable or otherwise responsible to any other party (or any of its Affiliates) for any consequential or punitive damages of such other party (or any of its Affiliates) arising out of or relating to this Agreement or the performance or breach hereof.  The indemnification rights contained in this Section 5.6 are not limited or deemed waived by any investigation or knowledge by the Indemnified Party prior to or after the date hereof.

 

(f)                                   Any indemnification payments pursuant to this Section 5.6 shall be treated as an adjustment to the Purchase Price for the Securities for U.S. federal income and applicable state and local Tax purposes, unless a different treatment is required by applicable law.

 

5.7                               REGISTRATION RIGHTS.

 

(a)                                 Registration.  Subject to the terms and conditions of this Agreement, the Company covenants and agrees that as promptly as practicable after the Closing Date (and in any event no later than the Registration Deadline), the Company shall have prepared and filed with the SEC a Shelf Registration Statement covering the resale of all Registrable Securities (or, if permitted by the rules of the SEC, otherwise designated an existing Shelf Registration Statement filed with the SEC to cover the Registrable Securities), and, to the extent the Shelf Registration Statement has not theretofore been declared effective, the Company shall use commercially reasonable efforts to cause such Shelf Registration Statement to be declared or become effective not later than the Effectiveness Deadline and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for a period from the date of its initial effectiveness until such time as there are no Registrable Securities remaining (including by re-filing such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires) (the “Effectiveness Period”).  Notwithstanding the registration obligations set forth in this Section 5.7(a), in the event that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (1) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the initial Shelf Registration Statement as required by the SEC and/or (2) withdraw the initial Shelf Registration Statement and file a new Shelf Registration Statement, in either case covering the maximum number of Registrable Securities permitted to be registered by the SEC, on such form available to the Company to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or new Shelf Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including Compliance and Disclosure Interpretation 612.09.  Notwithstanding any other provision of this Agreement and subject to the payment of Liquidated Damages in Section 5.7(k), if any SEC Guidance sets forth a limitation of the number of Registrable Securities or other securities permitted to be registered on a particular Shelf Registration Statement as a secondary offering (and notwithstanding that the Company used commercially reasonable efforts to advocate with the SEC for the registration of all or a greater number of Registrable Securities), the number of Registrable Securities or securities to be registered on such Shelf Registration Statement will be reduced as follows: first, the Company shall

 

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reduce or eliminate the securities to be included by any person other than a Holder; second, the Company shall reduce or eliminate any securities to be included by any Affiliate (which shall not include the Investor or its Affiliates) of the Company; and third, the Company shall reduce the number of Registrable Securities to be included by all Holders on a pro rata basis based on the total number of unregistered Registrable Securities held by such Holders, subject to a determination by the SEC that certain Holders must be reduced before other Holders based on the number of Registrable Securities held by such Holders.  In the event the Company amends the initial Shelf Registration Statement or files a new Shelf Registration Statement, as the case may be, under clauses (1) or (2) above, the Company will use its commercially reasonable efforts to file with the SEC, as promptly as allowed by the SEC or SEC Guidance provided to the Company or to registrants of securities in general, one (1) or more registration statements on such form available to the Company to register for resale those Registrable Securities that were not registered for resale on the initial Shelf Registration Statement, as amended, or the new Shelf Registration Statement.

 

No Holder shall be named as an “underwriter” in any Registration Statement without such Holder’s prior written consent.

 

(1)                                 Any registration pursuant to this Section 5.7(a) shall be effected by means of a shelf registration under the Securities Act on Form S-1 (or, if the Company is then eligible, on Form S-3) (a “Shelf Registration Statement”) in accordance with the methods and distribution set forth in the Shelf Registration Statement and Rule 415.  If the Investor or any other Holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with this Agreement intends to distribute any Registrable Securities by means of an underwritten offering, it shall promptly so advise the Company, and the Company shall take all reasonable steps to facilitate such distribution, including the actions required pursuant to Section 5.7(c);  provided that the Company shall not be required to facilitate an underwritten offering of Registrable Securities unless the expected gross proceeds from such offering exceed one million dollars ($1,000,000).  The lead underwriters in any such distribution shall be selected by the holders of a majority of the Registrable Securities to be distributed and shall be reasonably acceptable to the Company.

 

(2)                                 The Company shall not be required to effect a registration (including a resale of Registrable Securities from an effective Shelf Registration Statement) or an underwritten offering pursuant to this Section 5.7(a):

 

(i)                                    with respect to securities that are not Registrable Securities;

 

(ii)                                during any Scheduled Black-out Period, with respect to any resale of Registrable Securities from an effective Shelf Registration Statement by the Investor who, at such time, has appointed a Board Representative or Board Observer pursuant to Section 5.8; or

 

(iii)                            if the Company has notified the Investor and all other Holders that in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company or its security holders for such registration or underwritten offering to be effected at such time, in which event the Company shall have the right to defer such registration or underwritten offering for a period of not more than forty-five (45) days after receipt of the request of the Investor or any other Holder; provided that such right to delay a registration or underwritten offering shall be exercised by the Company (A) only if the Company has generally exercised (or is concurrently exercising) similar black-out rights against all holders of similar securities that have registration rights, (B) not more than once in any twelve (12) month period and (C) so long as the total number of days of any delays hereunder and the total number of days of any suspension under Section 5.7(d) do not exceed, in the aggregate, sixty (60) days in any twelve (12) month period.

 

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The Company shall provide the Investor written notice of any Scheduled Black-out Period, if applicable to such Investor, no later than seven (7) business days prior to the commencement of such Scheduled Black-out Period.

 

(3)                                 After the Closing Date, whenever the Company proposes to register any of its equity securities, other than a registration pursuant to Section 5.7(a)(1), a Special Registration or securities registered pursuant to Section 5.14, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to the Investor and all other Holders of its intention to effect such a registration (but in no event less than fifteen (15) days prior to the anticipated filing date) and (subject to clause (5) below) will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) business days after the date of the Company’s notice (a “Piggyback Registration”).  Any such person that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth (5th) day prior to the planned effective date of such Piggyback Registration.  The Company may terminate or withdraw any registration under this Section 5.7(a)(3) prior to the effectiveness of such registration, whether or not the Investor or any other Holders have elected to include Registrable Securities in such registration.  “Special Registration” means the registration of (i) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or any successor form) or (ii) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants, customers, lenders or vendors of the Company or Company Subsidiaries or in connection with dividend reinvestment plans.

 

(4)                                 If the registration referred to in Section 5.7(a)(3) is proposed to be underwritten, the Company will so advise the Investor and all other Holders as a part of the written notice given pursuant to Section 5.7(a)(3).  In such event, the right of the Investor and all other Holders to registration pursuant to this Section 5.7(a) will be conditioned upon such persons’ participation in such underwriting and the inclusion of such persons’ Registrable Securities in the underwriting, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company.  If any participating person disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Investor.

 

(5)                                 Except for certain registration rights granted to the U.S. Treasury in connection with the Treasury’s investment in the Company under the CPP, the Company represents and warrants that it has not granted to any holder of its securities and agrees that it shall not grant “piggyback” registration rights to one or more third parties to include their securities in the Shelf Registration Statement or in an underwritten offering under the Shelf Registration Statement pursuant to Section 5.7(a)(1).  If a Piggyback Registration under Section 5.7(a)(3) relates to an underwritten primary offering on behalf of the Company, and in either case the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such registration or prospectus only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (i) first, in the case of a Piggyback Registration under Section 5.7(a)(3), the securities the Company proposes to sell; (ii) second, Registrable Securities of the Investor and all other Holders who have requested registration of Registrable Securities pursuant to Section 5.7(a)(1) or 5.7(a)(3), as applicable, pro rata on the basis of the

 

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aggregate number of such securities or shares owned by each such person; and (iii) third, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement.

 

(6)                                 In the event that Form S-3 is not available for the registration of the resale of Registrable Securities under Section 5.7(a)(1), the Company shall (i) register the resale of the Registrable Securities on another appropriate form, including Form S-1 and (ii) undertake to register the Registrable Securities on Form S-3 promptly after such form is available, provided that the Company shall maintain the effectiveness of the Shelf Registration Statement then in effect until such time as a Shelf Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

 

(b)                                 Expenses of Registration.  All Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company.  Without limiting the foregoing, the Company shall bear its internal expenses (including all salaries and expenses of its officers and employees performing legal, accounting or other duties) and expenses of any person, including special experts, retained by the Company.  The Company shall also reimburse the Investor for the reasonable fees and disbursements of Holders’ Counsel in an amount not to exceed thirty thousand dollars ($30,000) per registration.  All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the Holders of the securities so registered pro rata on the basis of the aggregate offering or sale price of the securities so registered.

 

(c)                                  Obligations of the Company.  In addition, whenever required to effect the registration of any Registrable Securities or facilitate the distribution of Registrable Securities pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as reasonably practicable:

 

(1)                                 By 9:30 a.m., New York City time, on the first (1st) business day after the Effective Date of a Shelf Registration Statement, file a final prospectus with the SEC as required by Rule 424(b) under the Securities Act.

 

(2)                                 Provide to each Holder a copy of any disclosure regarding the plan of distribution or the selling Holder, in each case, with respect to such Holder, at least three (3) business days in advance of any filing with the SEC of any registration statement or any amendment or supplement thereto that amends such information.

 

(3)                                 Prepare and file with the SEC a prospectus supplement with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement, subject to this Section 5.7(c), and keep such registration statement effective or such prospectus supplement current until the securities described therein are no longer Registrable Securities.

 

(4)                                 Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

 

(5)                                 Furnish to the Holders and any underwriters such number of copies of the applicable registration statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned or to be distributed by them.

 

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(6)                                 Use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders or any managing underwriter(s), to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other action which may be reasonably necessary to enable any such Holder to consummate the disposition in such jurisdictions of the securities owned by such Holder; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

 

(7)                                 Notify each Holder of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event which causes the applicable prospectus, as then in effect, to include an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing (which notice shall not contain any material non-public information).

 

(8)                                 Within three (3) business days after any of the following events, give written notice to the Holders (which notice shall not contain any material non-public information):

 

(i)                                    when any registration statement filed pursuant to Section 5.7(a) or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

 

(ii)                                upon notification of any request by the SEC for amendments or supplements to any registration statement or the prospectus included therein or for additional information;

 

(iii)                            upon notification of the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose;

 

(iv)                             upon receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Common Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

(v)                                 upon notification of the happening of any event that requires the Company to make changes in any effective registration statement or the prospectus related to the registration statement in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made).

 

(9)                                 Use its commercially reasonable efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 5.7(c)(8)(iii) at the earliest practicable time.

 

(10)                          Upon the occurrence of any event contemplated by Section 5.7(c)(7) or 5.7(c)(8)(v), promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the Holders and any underwriters, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

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(11)                          Use commercially reasonable efforts to procure the cooperation of the Company’s transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical stock certificates into book-entry form in accordance with any procedures reasonably requested by the Holders or any managing underwriter(s).

 

(d)                                 Suspension of Sales.  During any Scheduled Black-out Period (other than with respect to any resale of Registrable Securities from an effective Shelf Registration Statement if the Investor, at such time, has not appointed a Board Representative or Board Observer pursuant to this Agreement) and upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that circumstances exist that make inadvisable use of such registration statement, prospectus or prospectus supplement, each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities until termination of such Scheduled Black-out Period (if applicable) or until such Holder has received copies of a supplemented or amended prospectus or prospectus supplement, or until such Holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.  Excluding, to the extent applicable to the Investor, Scheduled Black-out Periods, the total number of days of any delays under Section 5.7(a)(2) and the total number of days of any suspensions under this Section 5.7(d) shall not exceed, in the aggregate, sixty (60) days in any twelve (12) month period (an “Allowable Suspension Period”).

 

(e)                                  Termination of Registration Rights.  A Holder’s registration rights as to any securities held by such Holder (and its Affiliates, partners, members and former members) shall not be available unless such securities are Registrable Securities.

 

(f)                                   Free Writing Prospectuses; Furnishing Information.

 

(1)                                 The Investor shall not use any “free writing prospectus” (as defined in Rule 405) in connection with the sale of Registrable Securities without the prior written consent of the Company.

 

(2)                                 It shall be a condition precedent to the obligations of the Company with respect to the Investor and/or the selling Holders to take any action pursuant to Section 5.7(c) that the Investor and/or the selling Holders and the underwriters, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registered offering of their Registrable Securities.

 

(g)                                 Indemnification.

 

(1)                                 The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, partners, employees, agents, representatives and Affiliates, and each person, if any, that controls a Holder within the meaning of the Securities Act (each, a “Holder Indemnitee”), against any and all Losses, joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in

 

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any “free writing prospectus” (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto); or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;  provided that the Company shall not be liable to such Holder Indemnitee in any such case to the extent that any such Loss arises out of or is based upon (i) an untrue statement or omission of material fact made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any “free writing prospectus” (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder Indemnitee (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Holder Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Holder Indemnitee expressly for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (ii) offers or sales effected by or on behalf of such Holder Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company.

 

(2)                                 In connection with any registration statement in which the Investor (or a Holder who assumes the obligations of the Investor in accordance with Section 5.7(h)) is participating, such Investor (or such Holder) agrees to indemnify the Company and its officers, directors, employees, agents, representatives and Affiliates (each, a “Company Indemnitee”), against any and all Losses, joint or several, arising out of or based upon (i) an untrue statement or omission of a material fact made in any registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by the Investor or such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding the Investor or such Holder or its plan of distribution or ownership interests which was furnished in writing to the Company by the Investor or such Holder expressly for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (ii) offers or sales effected by or on behalf of the Investor or such Holder “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company; provided that the obligation to indemnify shall be individual, not joint and several, for the Investor and each such Holder and shall be limited to the net amount of proceeds received by the Investor or such Holder from the sale of Registrable Securities pursuant to such registration statement.

 

(3)                                 If the indemnification provided for in Section 5.7(g) is unavailable to a Holder Indemnitee or Company Indemnitee (each, an “Indemnitee”), respectively, with respect to any Losses or is insufficient to hold the Indemnitee harmless as contemplated therein, then the indemnifying party, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the indemnifying party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of the indemnifying party, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the indemnifying party or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 5.7(g)(3) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 5.7(g)(1) and 5.7(g)(2).  Notwithstanding the provisions of this

 

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Section 5.7(g), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the indemnifying party if the indemnifying party was not guilty of such fraudulent misrepresentation.

 

(4)                                 The indemnity and contribution agreements contained in this Section 5.7(g) are in addition to any liability that the Company may have to the Indemnitees and are not in diminution or limitation of the indemnification provisions under Section 5.6 of this Agreement.

 

(h)                                 Assignment of Registration Rights.  The rights of the Investor to registration of Registrable Securities pursuant to Section 5.7(a) may be assigned by the Investor to a transferee or assignee of Registrable Securities to which (1) there is transferred no less than the lesser of (i) one million dollars ($1,000,000) in Registrable Securities and (ii) all Registrable Securities held by the Investor, and (2) such transfer or assignment is permitted under the terms hereof;  provided, however, that the transferee shall have agreed in writing for the benefit of the Company to be bound by all of the obligations of the Investor under Section 5.7 of this Agreement with respect to the transferred or assigned Registrable Securities, and provided further, that the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being transferred or assigned.

 

(i)                                    Rule 144; Rule 144A Reporting.  With a view to making available to the Investor and each Holder the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

 

(1)                                 make and keep adequate and current public information available, as those terms are understood and defined in Rule 144(c)(1) or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of this Agreement;

 

(2)                                 file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act, and if at any time the Company is not required to file such reports, make available, upon the request of any Holder, such information necessary to permit sales pursuant to Rule 144A (including the information required by Rule 144A(d)(4) and the Securities Act);

 

(3)                                 so long as the Investor or a Holder owns any Registrable Securities, furnish to the Investor or such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act; a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as the Investor or such Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration; and

 

(4)                                 take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act.

 

(j)                                    As used in this Section 5.7, the following terms shall have the following respective meanings:

 

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(1)                                 “Effectiveness Deadline” means, with respect to the initial Shelf Registration Statement required to be filed pursuant to Section 5.7(a), the earlier of (i) the one hundred thirty-fifth (135th) calendar day following the Closing Date (or, if the Registration Deadline is extended a number of days beyond sixty (60) days by clause (ii) of the definition of “Registration Deadline” below, then a number of days after the Closing Date equal to one hundred thirty-five (135) plus such number of days by which the Registration Deadline was extended beyond sixty (60)) and (ii) the fifth (5th) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Shelf Registration Statement will not be “reviewed” or will not be subject to further review; provided that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Effectiveness Deadline shall be extended to the next business day on which the SEC is open for business.

 

(2)                                 “Holder” means the Investor and any other holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 5.7(h) hereof.

 

(3)                                 “Holders’ Counsel” means one (1) counsel for the selling Holders chosen by those Holders holding a majority interest in the Registrable Securities being registered.

 

(4)                                 “Register”, “registered”, and “registration” shall refer to a registration effected by preparing and (i) filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such registration statement or (ii) filing a prospectus and/or prospectus supplement in respect of an appropriate effective registration statement pursuant to Rule 415 under the Securities Act.

 

(5)                                 “Registrable Securities” means (i) all Securities acquired by the Investor hereunder and (ii) any equity securities issued or issuable directly or indirectly with respect to the Securities referred to in the foregoing clause (i) by way of conversion, exercise or exchange thereof or stock dividend or stock split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization, provided that, once issued, such securities will not be Registrable Securities when (A) they are sold pursuant to an effective registration statement under the Securities Act; (B) they shall have ceased to be outstanding; (C) with respect to any transferee of the Registrable Securities who is not an Affiliate of the Investor or a Holder, they shall be freely transferable pursuant to Rule 144 under the Securities Act in the hand of such transferee without any volume, holding period or other limitations (including no requirement for the Company to be in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable); or (D) they have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities.  No Registrable Securities may be registered under more than one registration statement at one time.

 

(6)                                 “Registration Deadline” means, with respect to the initial Shelf Registration Statement required to be filed pursuant to Section 5.7(a), the later of (i) sixty (60) days after the Closing Date and (ii) if audited financial statements for the year ended December 31, 2011, are required to be included in the initial filing of the initial Shelf Registration Statement pursuant to Rule 3-12 of Regulation S-X of the SEC, then two (2) business days after such audited financial statements are first available.

 

(7)                                 “Registration Expenses” means all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Section 5.7, including all registration, filing and listing fees (including filings made with the Financial Industry Regulatory

 

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Authority), printing expenses (including printing of prospectuses and certificates for the Registrable Securities), the Company’s expenses for messenger and delivery services and telephone, fees and disbursements of counsel for the Company, blue sky fees and expenses, expenses incurred by the Company in connection with any “road show,” and expenses of the Company’s independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration, but shall not include the compensation of regular employees of the Company, which shall be paid in any event by the Company, or Selling Expenses.

 

(8)                                 “Rule 144,” “Rule 144A,” “Rule 158,” “Rule 159A,” “Rule 405” and “Rule 415” mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.

 

(9)                                 “Scheduled Black-out Period” means the period from and including the last day of a fiscal quarter of the Company to and including the business day after the day on which the Company publicly releases its earnings for such fiscal quarter.

 

(10)                          “SEC Guidance” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the SEC staff and (ii) the Securities Act.

 

(11)                          “Selling Expenses” means all discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder, other than up to thirty thousand dollars ($30,000) of fees and disbursements of Holders’ Counsel, which shall be reimbursed by the Company pursuant to Section 5.7(b).

 

(k)                                If:

 

(1)                                 the initial Shelf Registration Statement is not filed with the SEC on or prior to the Registration Deadline;

 

(2)                                 the initial Shelf Registration Statement or any new Shelf Registration Statement required under Section 5.7(a) is not declared effective by the SEC (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline;

 

(3)                                 after its Effective Date, (i) such Shelf Registration Statement ceases for any reason (including by reason of a stop order or the Company’s failure to update the Shelf Registration Statement), to remain continuously effective as to all Registrable Securities for which it is required to be effective or (ii) the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities (in each case of (i) and (ii), other than during an Allowable Suspension Period);

 

(4)                                 a suspension period exceeds the length of an Allowable Suspension Period; or

 

(5)                                 after the date six (6) months following the Closing Date, and only in the event a Registration Statement is not effective or available to sell all Registrable Securities, the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as a result of which the Holders who are not affiliates are unable to sell Registrable Securities without restriction under Rule 144 (any such failure or breach in clauses (1) through (5) above being referred to as an “Event”, and, for purposes of clauses (1), (2), (3) or (5) the date on which such Event occurs, or for purposes of clause (4) the date on which such Allowable Suspension Period is exceeded, being referred to as an “Event Date” for purposes of this Section 5.7(k)), then in addition to any other rights the Investor or any other

 

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Holder may have hereunder or under applicable law, on each such Event Date the Company shall pay to the Investor and each other Holder an amount in cash, as partial liquidated damages and not as a penalty (“Liquidated Damages”), equal to thirty-seven thousand, five hundred dollars ($37,500).  The parties hereto agree that notwithstanding anything to the contrary in this Agreement, no Liquidated Damages shall be payable to the Investor if as of the relevant Event Date (x) the Investor has not appointed a Board Representative or Board Observer, (y) the Registrable Securities may be sold by the Investor without volume or manner of sale restrictions under Rule 144 under the Securities Act and (z) the Company is in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as reasonably determined by counsel to the Company.  The Effectiveness Deadline for a Shelf Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company’s failure to obtain the effectiveness of the Shelf Registration Statement on a timely basis results from the failure of the Investor to timely provide the Company with information requested by the Company and necessary to complete the Shelf Registration Statement in accordance with the requirements of the Securities Act (in which case the Effectiveness Deadline would be extended with respect to Registrable Securities held by the Investor or such other Holder, as applicable).

 

5.8                               GOVERNANCE MATTERS.

 

(a)                                  The Company shall cause the Board Representative to be elected or appointed, as the case may be, subject to all legal and governance requirements and approvals regarding service and election or appointment as a director of the Company (including any required approvals of the Federal Reserve), and to the approval of the Company’s Nominating/Corporate Governance Committee (the “Governance Committee”) (such approval not to be unreasonably withheld, delayed or conditioned), to the Board of Directors, as well as the board of directors of the Bank (the “Bank Board”) for as long as the Investor, together with its Affiliates, has a Qualifying Ownership Interest.  The Company will recommend the election of the Board Representative to the Board of Directors and the Bank Board to its shareholders at the Company’s annual meeting of shareholders, subject to satisfaction of all legal and governance requirements regarding service as a director of the Company (including those of the Federal Reserve) and to the approval of the Governance Committee (such approval not to be unreasonably withheld, delayed or conditioned).  If the Investor no longer has a Qualifying Ownership Interest, the Investor will have no further rights under Sections 5.8(a) through 5.8(c) and, at the written request of the Board of Directors, shall use all commercially reasonable efforts to cause its Board Representative to resign from the Board of Directors and the Bank Board as promptly as possible thereafter.  The Investor shall promptly inform the Company if and when it ceases to hold a Qualifying Ownership Interest in the Company.

 

(b)                                  The Board Representative shall, subject to applicable law, be one of the Company’s and the Governance Committee’s nominees to serve on the Board of Directors.  The Company shall use its commercially reasonable efforts to have the Board Representative elected as a director of the Company by the shareholders of the Company, and the Company shall solicit proxies for the Board Representative to the same extent as it does for any of its other Company nominees to the Board of Directors.  At the option of the Board Representative, the Board of Directors shall cause such Board Representative to be appointed to any of two (2) of the following three (3) committees of the Board of Directors, and/or any equivalent committees of the Bank, as agreed by the Company and the Investor prior to the Closing: the Compensation Committee, the Governance Committee and the Risk Management Committee, in each case so long as the Board Representative qualifies to serve on such committees under the Company’s or the Bank’s corporate governance guidelines and committee charters currently in effect, as applicable, and rules applicable to the Company by any exchange on which the Common Shares are then listed.  The Company shall ensure, and shall cause the Bank to ensure, that each committee of the Board of Directors and any equivalent committees of the Bank shall have at least four (4) members for so long as the Investor shall have the right to appoint a Board Representative.  The Board Representative

 

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shall have the right to attend, as a nonvoting observer, each meeting of each committee of the Board of Directors and the Bank Board of which the Board Representative is not then a member.  The Investor covenants and agrees to hold all such information obtained from its Board Representative in confidence pursuant to the confidentiality and non-disclosure provisions of Section 3.3(b) above.

 

(c)                                  Subject to Section 5.8(a), upon the death, resignation, retirement, disqualification or removal from office as a member of the Board of Directors or the Bank Board of the Board Representative, the Investor shall have the right to designate the replacement for such Board Representative, which replacement shall satisfy all legal and governance requirements regarding service as a director of the Company and shall be reasonably acceptable to the Company.  The Board of Directors and the Bank Board shall use their respective commercially reasonable efforts to take all action required to fill the vacancy resulting therefrom with such person (including such person, subject to applicable law, being one of the Company’s and the Governance Committee’s nominees to serve on the Board of Directors and the Bank Board, using all commercially reasonable efforts to have such person elected as director of the Company by the shareholders of the Company and the Company soliciting proxies for such person to the same extent as it does for any of its other nominees to the Board of Directors or the Bank Board, as the case may be).

 

(d)                                  The Company hereby agrees that, from and after the Closing Date, for so long as the Investor and its Affiliates in the aggregate have a Qualifying Ownership Interest and do not have a Board Representative currently serving on the Board of Directors and the Bank Board (or have a Board Representative whose appointment is subject to receipt of regulatory approvals), the Company shall, subject to applicable law, invite a person designated by the Investor and reasonably acceptable to the Company (the “Board Observer”) to attend meetings of the Board of Directors and the Bank Board (including any meetings of committees thereof) in a nonvoting observer capacity.  The Board Observer shall be entitled to attend such meetings only in the event the Investor does not have a Board Representative on the Board of Directors and the Bank Board.  The Board Observer shall not have any right to vote on any matter presented to the Board of Directors or the Bank Board or any committee thereof.  The Company shall give the Board Observer written notice of each meeting of the Board of Directors and the Bank Board at the same time and in the same manner as the members of the Board of Directors or the Bank Board (as the case may be), shall provide the Board Observer with all written materials and other information given to members of the Board of Directors or the Bank Board (as the case may be) at the same time such materials and information are given to such members and shall permit the Board Observer to attend as an observer at all meetings thereof, and in the event the Company proposes to take any action by written consent in lieu of a meeting, the Company shall give written notice thereof to the Board Observer prior to the effective date of such consent describing the nature and substance of such action and including the proposed text of such written consents;  provided, however, that: (1) the Board Observer may be excluded, from executive sessions comprised solely of independent directors, by the Chairman of the Board (or, if applicable, the lead or presiding independent director) if, in the written advice of counsel, such exclusion is necessary in order for the Company to comply with applicable law, regulation or stock exchange listing standards (it being understood that it is not expected that the Board Observer would be excluded from routine executive sessions); (2) the Company, the Board of Directors, the Bank and the Bank Board shall have the right to withhold any information and to exclude the Board Observer from any meeting or portion thereof if doing so is, in the written advice of counsel, (i) necessary to protect the attorney-client privilege between such party and counsel or (ii) necessary to avoid a violation of fiduciary requirements under applicable law; and (3) the Investor shall cause the Board Observer to agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information provided to the Board Observer.  The Investor covenants and agrees to hold all such information obtained from the Board Observer as provided in the prior sentence in confidence pursuant to the confidentiality and non-disclosure provisions of Section 3.3(b) above.  If the

 

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Investor and its Affiliates in the aggregate no longer have a Qualifying Ownership Interest, the Investor will have no further rights under this Section 5.8(d).

 

(e)                                  The Board Representative shall be entitled to compensation and indemnification in connection with his or her role as a director to the same extent as other directors on the Board of Directors or the Bank Board, as applicable, and the Board Representative shall be entitled to reimbursement for reasonable documented, out-of-pocket expenses incurred in attending meetings of the Board of Directors and the Bank Board or any committee thereof in accordance with Company policy.  The Company shall notify the Board Representative or the Board Observer, as the case may be, of all regular meetings and special meetings of the Board of Directors or the Bank Board and of all regular and special meetings of any committee of the Board of Directors and any committee of the Bank Board.  The Company shall provide the Board Representative or the Board Observer, as the case may be, with copies of all notices, minutes, consents and other material that it provides to all other members of the Board of Directors or the Bank Board (as applicable) concurrently as such materials are provided to the other members.

 

(f)                                    For purposes of this Agreement, “Board Representative” means such person designated by the Investor to be elected or appointed to the Board of Directors and the Bank Board in accordance with all legal and governance requirements regarding service and election or appointment as a director of the Company or any individual designated as a replacement Board Representative pursuant to Section 5.8(c) hereof.

 

5.9                               ANTI-TAKEOVER MATTERS.  If any Takeover Law may become, or may purport to be, applicable to the transactions contemplated or permitted by this Agreement or the other Transaction Documents, the Company and the Board of Directors shall grant such approvals and take such actions as are necessary so that the transactions contemplated or permitted by this Agreement and the other Transaction Documents may be consummated, as promptly as practicable, on the terms contemplated by this Agreement and the other Transaction Documents, as the case may be, and otherwise act to eliminate or minimize the effects of any Takeover Law on any of the transactions contemplated or permitted by this Agreement and the other Transaction Documents.

 

5.10                        ADDITIONAL REGULATORY MATTERS.

 

(a)                                  Each of the Company and the Investor agrees to cooperate and use its commercially reasonable efforts to ensure, including by communicating with each other with respect to the Investor’s purchases of the Common Shares, the Series B Preferred Shares and the Note, that neither the Investor nor any of the Investor’s Affiliates will become or control a “bank holding company” within the meaning of the BHC Act and the CBCA.

 

(b)                                  Notwithstanding anything to the contrary in this Agreement, neither the Company nor any Company Subsidiary shall knowingly take any action (including any redemption, repurchase or recapitalization of Common Stock or Series B Preferred Stock or securities or rights, options or warrants to purchase Common Stock or Series B Preferred Stock or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Common Stock or Series B Preferred Stock, in each case, where the Investor is not given the right to participate in such redemption, repurchase or recapitalization to the extent of the Investor’s pro rata proportion), that would reasonably be expected to pose a substantial risk that (1) the Investor’s equity of the Company (together with equity of the Company owned by the Investor’s affiliates (as such term is used under the BHC Act)) would exceed thirty-three and three-tenths percent (33.3%) of the Company’s total equity or (2) the Investor’s ownership of any class of Voting Securities of the Company (together with the ownership by the Investor’s affiliates (as such term is used under the BHC Act) of Voting Securities of

 

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the Company) would exceed twenty-four and nine-tenths percent (24.9%) of such class, in each case without the prior written consent of the Investor or such person, or to increase to an amount that would constitute “control” under the BHC Act, the CBCA or any rules or regulations promulgated thereunder (or any successor provisions) or otherwise cause the Investor to “control” the Company under and for purposes of the BHC Act, the CBCA or any rules or regulations promulgated thereunder (or any successor provisions).

 

(c)                                  Notwithstanding anything in this Agreement, in no event will the Investor or any of its Affiliates be obligated to:

 

(1)                                 without limiting clause (2) below, (i) propose or accept any divestiture of any of the Investor’s or any of its Affiliates’ assets, (ii) accept any operational restriction on the Investor’s or any of its Affiliates’ business or agree to take any action that limits the Investor’s or its Affiliates’ commercial practices in any way (except as they relate to the Company and the Company Subsidiaries) including by requiring the modification of governance, fee or carried interest arrangements with respect to, or otherwise by imposing any capital or other requirements on, the Investor or any of its Affiliates, (iii) agree to provide capital to, or otherwise maintain or contribute, directly or indirectly, to the capital of, the Company or any Company Subsidiary (including the Bank) other than the aggregate amount of the Purchase Price or (iv) register as a bank holding company, in each case in order to obtain any consent, acceptance or approval of any Governmental Entity to consummate the transactions contemplated by this Agreement and the other Transaction Documents; or

 

(2)                                 propose or agree to accept any term or condition or otherwise modify the terms of this Agreement or any other Transaction Document, including, for the avoidance of doubt, the terms or the amount of the Securities to be delivered by the Company under this Agreement, to obtain any consent, acceptance or approval of any Governmental Entity to the consummation of the transactions contemplated by this Agreement and the other Transaction Documents if such term, condition, modification or confirmation would (i) materially adversely affect (with respect to the Investor or its Affiliates) any material term of the transactions or (ii) reasonably be expected to adversely affect (with respect to the Investor or its Affiliates) any material financial term of the transactions contemplated by this Agreement and the other Transaction Documents or the anticipated benefits to the Investor and its Affiliates hereunder.

 

(d)                                  So long as the Investor holds any Securities, the Company will not, without the consent of the Investor, take any action, directly or indirectly through its subsidiaries or otherwise, that the Board of Directors of the Company believes in good faith would reasonably be expected to cause the Investor to be subject to transfer restrictions or other covenants of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions as in effect at the time of taking such action.

 

5.11                        FORM D AND BLUE SKY.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D.  The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Investor pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification).  The Company shall make all filings and reports relating to the offer and sale of the Purchased Shares required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

 

5.12                        SECURITIES LAWS DISCLOSURE; PUBLICITY.  By 9:00 a.m., New York City time, on the first (1st) business day after the date of this Agreement, the Company shall issue one or more press releases or Current Reports on Form 8-K (collectively, the “Press Release”) reasonably acceptable to the

 

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Investor disclosing all material terms of the transactions contemplated hereby and by the other Transaction Documents and any other material non-public information that the Company may have provided to the Investor at any time prior to the filing of the Press Release.  On or before 9:00 a.m., New York City time, on the fourth (4th) trading day immediately following the execution of this Agreement, the Company will file a Current Report on Form 8-K with the SEC describing the material terms of this Agreement and the other Transaction Documents (and including as exhibits to such Current Report on Form 8-K the material Transaction Documents).  If this Agreement terminates prior to Closing, by the end of the first (1st) business day following the date of such termination, the Company shall issue a press release disclosing such termination.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor or any Affiliate or investment adviser of the Investor or include the name of the Investor or any Affiliate or investment adviser of the Investor in any press release or in any filing with the SEC (other than a registration statement) or any regulatory agency or trading market, without the prior written consent of the Investor, except (i) as required by the federal securities laws in connection with (A) any registration statement contemplated by Section 5.7 and (B) the filing of final Transaction Documents with the SEC and (ii) to the extent such disclosure is required by law, at the request of the staff of the SEC or regulatory agency or under trading market regulations, in which case the Company shall provide the Investor with prior written notice of such disclosure permitted under this subclause (ii).  Whenever any party determines, based upon the advice of such party’s counsel, that a public announcement or other disclosure is required by or advisable with respect to any applicable law or regulation, the parties shall discuss the same with each other in good faith prior to the making of such public announcement or other disclosure.

 

5.13                        NO ADDITIONAL ISSUANCES.  Between the date of this Agreement and the Closing Date, except for the issuance of Common Shares issuable as of the date hereof as set forth in Section 2.2(c), the Common Shares issued in connection with the Rights Offering and the Securities being issued pursuant to this Agreement and the other Transaction Documents, the Company shall not issue and agree to issue any additional Common Shares, Series B Preferred Shares or other securities which provide the holder thereof the right to convert such securities into Common Shares.

 

5.14                        RIGHTS OFFERING.

 

(a)                                  As promptly as practicable following the execution of this Agreement, and subject to compliance with all applicable laws and regulations, including the Securities Act, the Company shall distribute to each holder of record of Common Stock as of the ten (10) calendar days following the close of business on the date this Agreement is executed by the parties (each, a “Legacy Shareholder”), non-transferable rights (the “Rights”) to purchase from the Company an amount of Common Shares calculated pursuant to Section 5.14(b) at a purchase price of five dollars and seventy-five cents ($5.75) per share (the “Rights Purchase Price”).  The transactions described in this Section 5.14, including the purchase and sale of Common Shares upon the exercise of Rights and the commitment to purchase Unsubscribed Shares pursuant to Section 5.14(d) shall be referred to in this Agreement as the “Rights Offering”.  The registration statement relating to the Rights Offering shall be filed with the SEC within twelve (12) calendar days of the execution of this Agreement; provided, however, if audited financial statements for the year ended December 31, 2011, are required to be included in the initial filing of the registration statement relating to the Rights Offering pursuant to Rule 3-12 of Regulation S-X of the SEC, then the registration statement related to the Rights Offering shall be filed with the SEC within two (2) business days after such audited financial statements are first available.  The Company shall use commercially reasonable efforts to cause the registration statement relating to the Rights Offering to be declared effective as promptly as practicable following the date of this Agreement, but in no event shall effectiveness of the registration statement and distribution of the Rights be delayed more than thirty (30) days following the date the Company is notified (orally or in writing, whichever is earlier) by the SEC

 

53

 

that the registration statement relating to the Rights Offering will not be “reviewed” or will not be subject to further review.

 

(b)                                  Each Right shall entitle a Legacy Shareholder to purchase any whole number of Common Shares (including, for the avoidance of doubt, pursuant to customary over-subscription privileges), provided that: (1) no Legacy Shareholder shall thereby exceed, together with any other person with whom such Legacy Shareholder may be aggregated under applicable law, nine and nine-tenths percent (9.9%) Beneficial Ownership of the Company’s Common Shares; and (2) the aggregate purchase price of all Common Shares purchased in the Rights Offering shall not exceed seven million dollars ($7,000,000).

 

(c)                                  In the event the Rights Offering is over-subscribed, subscriptions by Legacy Shareholders shall be reduced proportionally based on their pro rata ownership of the Common Stock outstanding as of the close of business on the trading day immediately preceding the Closing Date.

 

(d)                                  In the event the Company does not sell an aggregate amount of Common Shares to the Legacy Shareholders equal to the maximum number permitted by Section 5.14(b), the Investor hereby agrees to purchase the Unsubscribed Shares in accordance with the terms and conditions set forth in Section 1.2(a).  For purposes of this Agreement, “Unsubscribed Shares” means that number of Common Shares determined as follows: (1) the maximum number of Common Shares permitted to be sold under Section 5.14(b), minus (2) the number of Common Shares actually subscribed for by the Legacy Shareholders.  The obligation of the Investor described in this Section 5.14(d) shall be personal to the Investor and the transfer, assignment and/or conveyance of said obligation from the Investor to any other person and/or entity, other than to an Affiliate of the Investor or a person that shares a common discretionary investment advisor with the Investor, but only if such transferee agrees in writing for the benefit of the Company to be bound by the terms of this Agreement to the same extent as the Investor (with a copy thereof to be furnished to the Company) (any such transferee shall be included in the term “Investor”), is prohibited and shall be void and of no force or effect.

 

5.15                        EXCHANGE OF SERIES B PREFERRED.   Upon the date on which the Federal Reserve informs the Investor that the Federal Reserve will not provide the Federal Reserve Approval until the date that the Series B Preferred Shares no longer remain issued and outstanding, the Investor may from time to time request that the Company exchange the Series B Preferred Shares for one (1) or more promissory notes to be issued by the Company to the Investor in a principal amount that reflects the face value of the Series B Preferred Shares that the Investor desires to exchange and otherwise includes such additional terms and conditions that are consistent with the terms and conditions of the Note (each, an “Exchange Note”).  Upon the Company’s receipt of the Investor’s written request that the Company issue an Exchange Note, the Company shall negotiate in good faith with the Investor regarding the terms of an appropriate exchange agreement (the “Exchange Agreement”) and issue the Exchange Note to the Investor upon the Company’s receipt of all necessary consents, approvals or exemptions from the appropriate bank regulatory authorities, including the Federal Reserve and OFIR, required in connection with the transactions contemplated by the Exchange Agreement and the Exchange Note.  Upon the Investor’s tender of Series B Preferred Shares and the Company’s issuance of an Exchange Note, each such Exchange Note shall be deemed Purchased Shares and Registrable Securities for all purposes of this Agreement.

 

54

 

ARTICLE VI.
  MISCELLANEOUS

 

6.1                               SURVIVAL.  Each of the representations and warranties set forth in this Agreement shall survive the Closing under this Agreement but only for a period of eighteen (18) months following the Closing Date (or until final resolution of any claim or action arising from the breach of any such representation and warranty, if notice of such breach was provided prior to the end of such period) and thereafter shall expire and have no further force and effect, except that the Special Representations and Warranties shall survive until expiration of the statute of limitations applicable to the underlying claim (or until final resolution of any claim or action arising from the breach of any such Special Representations and Warranties, if notice of such breach was provided prior to the end of such period).  Except as otherwise provided herein, all covenants and agreements contained herein shall survive for the duration of any statutes of limitations applicable thereto or until, by their respective terms, they are no longer operative.

 

6.2                               AMENDMENT.  No amendment or waiver of this Agreement will be effective with respect to any party unless made in writing and signed by an officer of a duly authorized representative of such party.

 

6.3                               WAIVERS.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The conditions to each party’s obligation to consummate the Closing are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law.  No waiver of any party to this Agreement will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

6.4                               COUNTERPARTS AND FACSIMILE.  For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.  Executed signature pages to this Agreement may be delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file and such signatures will be deemed as sufficient as if actual signature pages had been delivered.

 

6.5                               GOVERNING LAW.  This Agreement will be governed by and construed in accordance with the laws of the State of Michigan applicable to contracts made and to be performed entirely within the State of Michigan.  The parties hereto irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state and federal courts located in the State of Michigan for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby.

 

6.6                               WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

6.7                               NOTICES.  Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by telecopy, facsimile or e-mail, upon confirmation of receipt, (b) on

 

55

 

the first (1st) business day following the date of dispatch if delivered by a recognized next-day courier service or (c) on the third (3rd) business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.  All notices hereunder shall be delivered as set forth below or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

 

	
If to the   Investor:
    
	
 
    
	
Steinhardt Capital   Management, LLC
    
	
650 Madison   Avenue, 17th Floor
    
	
New York, NY 10022
    
	
Attn: David R.   Steinhardt
    
	
Telephone: (212)   610-2101
    
	
Facsimile: (646)   304-9686
    
	
Email:   davids@woostercapital.com
    
	
 
    
	
with a copy to   (which copy alone shall not constitute notice):
    
	
 
    
	
Bodman PLC
    
	
6th Floor at Ford Field
    
	
1901 St. Antoine   Street
    
	
Detroit, MI 48226
    
	
Attn: Edwin J.   Lukas
    
	
Telephone: (313)   393-7523
    
	
Facsimile: (313)   393-7579
    
	
Email:   elukas@bodmanlaw.com
    
	
 
    
	
If to the Company:
    
	
 
    
	
Mackinac Financial   Corporation
    
	
130 South Cedar   Street
    
	
Manistique, MI   49854
    
	
Attn: Paul D.   Tobias, Chief Executive Officer
    
	
Telephone: (248)   290-5901
    
	
Facsimile: (248)   290-5913
    
	
Email:   ptobias@bankmbank.com
    
	
 
    
	
with a copy to   (which copy alone shall not constitute notice):
    
	
 
    
	
Honigman Miller   Schwartz and Cohn LLP
    
	
350 East Michigan   Avenue, Suite 300
    
	
Kalamazoo, MI   49007
    
	
Attn: Phillip D.   Torrence, Esq.
    
	
Telephone: (269)   337-7702
    
	
Facsimile: (269)   337-7703
    
	
Email:   ptorrence@honigman.com
    

 

6.8                               ENTIRE AGREEMENT, ETC.  This Agreement (including the Exhibits, Schedules and Disclosure Schedules hereto) constitutes the entire agreement and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the parties with respect to the subject matter hereof; the terms and conditions of this Agreement shall inure to the benefit of and be

 

56

 

binding upon the parties hereto and their respective successors and, with respect to the Investor, its permitted assigns; and this Agreement will not be assignable by operation of law or otherwise (any attempted assignment in contravention hereof being null and void), except that the Investor shall be permitted to assign its rights or obligations hereunder (a) to any Affiliate entity or person that shares a common discretionary investment advisor, but only if the transferee agrees in writing for the benefit of the Company to be bound by the terms of this Agreement to the same extent as the Investor (with a copy thereof to be furnished to the Company) (any such transferee shall be included in the term “Investor”); provided, further, that no such assignment shall relieve the Investor of any of its obligations under this Agreement and (b) as and to the extent provided in Section 5.6.

 

6.9                               OTHER DEFINITIONS.  Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa, and references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time.  All article, section, paragraph or clause references not attributed to a particular document shall be references to such parts of this Agreement, and all exhibit, annex and schedule references not attributed to a particular document shall be references to such exhibits, annexes and schedules to this Agreement.  When used herein:

 

(a)                                 the term “subsidiary” means those corporations, banks, savings banks, associations and other persons of which such person owns or controls fifty-one percent (51%) or more of the outstanding equity securities either directly or indirectly through an unbroken chain of entities as to each of which fifty-one percent (51%) or more of the outstanding equity securities is owned directly or indirectly by its parent;  provided, however, that there shall not be included any such entity to the extent that the equity securities of such entity were acquired in satisfaction of a debt previously contracted in good faith or are owned or controlled in a bona fide fiduciary capacity;

 

(b)                                 the term “Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities, by contract or otherwise;

 

(c)                                  the word “or” is not exclusive;

 

(d)                                 the words “including”, “includes”, “included” and “include” are deemed to be followed by the words “without limitation”;

 

(e)                                  the terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;

 

(f)                                   “business day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York or the State of Michigan generally are authorized or required by law or other governmental actions to close;

 

(g)                                 “person” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;

 

(h)                                 “Beneficially Own”, “Beneficial Owner” and “Beneficial Ownership” are defined in Rules 13d-3 and 13d-5 of the Exchange Act;

 

57

 

(i)                                    “knowledge of the Company” or “Company’s knowledge” means the actual knowledge of the following officers of the Company: Paul D. Tobias, Kelly W. George and Ernie R. Krueger; and

 

(j)                                    “knowledge of the Investor” or “Investor’s knowledge” means the actual knowledge of David R. Steinhardt.

 

6.10                        CAPTIONS.  The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

 

6.11                        SEVERABILITY.  If any provision of this Agreement or the application thereof to any person (including the officers and directors of the Investor and the Company) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

 

6.12                        NO THIRD-PARTY BENEFICIARIES.  Nothing contained in this Agreement, expressed or implied, is intended to confer or shall confer upon any person other than the express parties hereto and the Financial Advisor, any benefit, right or remedy, except that the provisions of Sections 3.4, 5.4, 5.6 and 5.7 shall inure to the benefit of the persons referred to in those Sections, including any Holders.  The representations and warranties set forth in Article II and the covenants set forth in Articles III and V have been made solely for the benefit of the parties to this Agreement and (a) may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate, (b) have been qualified by reference to the Disclosure Schedules, each of which contains certain disclosures that are not reflected in the text of this Agreement and (c) may apply standards of materiality in a way that is different from what may be viewed as material by shareholders of, or other investors in, the Company.

 

6.13                        TIME OF ESSENCE.  Time is of the essence in the performance of each and every term of this Agreement.

 

6.14                        PUBLIC ANNOUNCEMENTS.  Subject to each party’s disclosure obligations imposed by law or regulation, each of the parties hereto will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement and any of the transactions contemplated by this Agreement or the other Transaction Documents, and no party hereto will make any such news release or public disclosure without first consulting with the other party hereto and receiving its consent (which shall not be unreasonably withheld, conditioned or delayed), and each party shall coordinate with the other with respect to any such news release or public disclosure.

 

6.15                        SPECIFIC PERFORMANCE.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled to seek specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

 

SIGNATURES ON THE FOLLOWING PAGE

 

58

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.

 

	
THE COMPANY:
    	
 
    
	
 
    	
 
    
	
MACKINAC FINANCIAL   CORPORATION
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ Paul D. Tobias
    	
 
    
	
Name:
    	
Paul D. Tobias
    	
 
    
	
Title:
    	
Chairman and Chief   Executive Officer
    	
 
    
	
 
    	
 
    
	
THE   INVESTOR:
    	
 
    
	
 
    	
 
    
	
STEINHARDT CAPITAL   INVESTORS, LLLP
    	
 
    
	
 
    	
 
    
	
BY:
    	
STEINHARDT CAPITAL   MANAGEMENT, LLC
    	
 
    
	
ITS:
    	
GENERAL PARTNER
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David R.   Steinhardt
    	
 
    
	
 
    	
Name: 
    	
David R.   Steinhardt
    	
 
    
	
 
    	
Title:
    	
Manager
    	
 
    
						

 

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENTExhibit 10.1

 

AMENDED AND RESTATED 

GAS GATHERING AND PROCESSING AGREEMENT

 

THIS AMENDED AND RESTATED GAS GATHERING AND PROCESSING AGREEMENT (this “Agreement”), effective March 22, 2012 (the “Effective Date”), is by and between Monarch Natural Gas, LLC, a Delaware Limited Liability Company whose address is 5613 DTC Parkway, Suite 200, Greenwood Village, Colorado 80111 (“Gatherer”), and Gasco Production Company, a Delaware Corporation whose address is 8 Inverness Drive East, Suite 100, Englewood, Colorado 80112 (“Producer”).  Gatherer and Producer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

Recitals:

 

A.            Gatherer owns and operates a natural gas gathering system and related facilities in Uintah and Duchesne Counties, Utah.

 

B.            Producer has an interest in certain oil and gas leases and lands located in Uintah and Duchesne Counties, Utah, as described in Schedule 3 (the “Leases”), and owns, controls or otherwise has the right to deliver to Gatherer’s gathering system, natural gas produced and saved from wells located on the Leases and more particularly described in Schedule 2 (the “Wells”).

 

C.            The Parties have entered into a Gas Gathering and Processing Agreement dated effective March 1, 2010, as subsequently amended, including by that certain Letter Agreement dated September 20, 2011 (the “Existing Gathering Agreement”) pursuant to which Gatherer agreed to gather, compress and process Producer’s Gas and Producer agreed to exclusively dedicate the Dedicated Reserves to Gatherer under the terms of the Existing Gathering Agreement.

 

D.            The Parties desire to amend, restate and replace the Existing Gathering Agreement with this Agreement.

 

Agreements:

 

NOW, THEREFORE, for good and valuable consideration, Gatherer and Producer agree as follows:

 

Article 1

Definitions

 

1.1           Definitions.           The following capitalized terms used in this Agreement and the attached exhibits and schedules shall have the meanings set forth below:

 

“Agreement” is defined in the preamble.

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Person, whether by contract, voting power, or otherwise.  As used in

 

 

this definition, the term “control,” including the correlative terms “controlling,” “controlled by,” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through ownership of voting securities, by contract, or otherwise.

 

“AMI” means the geographic area described in Schedule 1.

 

“Applicable Law” means any applicable law, statute, rule, regulation, ordinance, order, or other pronouncement, action, or requirement of any Governmental Authority.

 

“Bcf” means one million Mcf’s.

 

“Btu” means the amount of heat energy needed to raise the temperature of one pound of water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure of 14.65 pounds per square inch absolute.

 

“Business Day” means any day except Saturday, Sunday, or Federal Reserve Bank holidays.

 

“Chipeta” means Chipeta Processing LLC.

 

“Chipeta Plant” means the processing plant owned by Chipeta located in Uintah County, Utah.

 

“Chipeta Plant Products” means the raw mix of liquefiable hydrocarbons, including without limitation, ethane, propane, butane, and natural gasoline, extracted and saved at the Chipeta Plant from all of Producer’s Gas delivered to and processed by Chipeta.

 

“Chipeta Processing Agreement” means the Gas Processing Agreement dated September 21, 2011, between Chipeta and Gasco Energy, Inc. attached hereto as Exhibit B.

 

“Chipeta Residue Gas” means that portion of Producer’s Gas remaining after processing at the Chipeta Plant.

 

“Day” means a period of 24 consecutive hours, coextensive with a “day” as defined by the Receiving Transporter.

 

“Dedicated Reserves” means the interest of Producer in all Gas reserves in and under, and all Gas owned by Producer and produced or delivered from (i) the Leases and (ii) other lands within the AMI, whether now owned or hereafter acquired, along with the processing rights, subject to certain volume exclusions as described herein, and any and all additional right, title, interest, or claim of every kind and character of Producer or its Affiliates in (x) the Leases or (y) lands within the AMI, and Gas production therefrom, and all interests in any wells, whether now existing or drilled hereafter, on, or completed on, lands covered by a Lease or within the AMI.  Dedicated Reserves shall include Gas under contract with Producer from or otherwise attributable to (i) NFR Uinta Basin LLC

 

2

 

under the Agreement dated July 25, 2007, and (ii) Halliburton Energy Services, Inc. under the Agreement dated May 1, 2005, and (iii) MBG Trust under the Agreement dated August 1, 2008, as they currently exist.  Dedicated Reserves shall not include Gas that Producer comes into control of, but not ownership of, after the Effective Date of this Agreement as a result of marketing arrangements, joint operating agreements or other similar arrangements.

 

“Delivery Points” means (i) the points identified in Schedule 2 at which Gas is delivered to a Receiving Transporter by Gatherer and (ii) any additional delivery point that, from time to time, may be added by Gatherer to the Gathering System after the Effective Date to permit delivery of Gas to other Receiving Transporters.

 

“Drip Liquid” means that portion of the Gas that condenses in, and is removed from, the Gathering System as a liquid by Gatherer.

 

“Equivalent Quantity” means, on any Day, a quantity of Gas (in MMBtu’s) that is thermally equivalent to the quantity of Producer’s Gas received from Producer at the Receipt Points on the Gathering System on that Day.

 

“Effective Date” is defined in the preamble.

 

“Excluded Production” is defined in Section 3.3(a).

 

“Force Majeure” is defined in Article 10.2.

 

“FL&U” shall mean the combination of Fuel Gas and Lost and Unaccounted for Gas.

 

“Fuel Gas” means Gas used by Gatherer to operate compressors, processing plants, dehydrators, and related equipment and facilities on the Gathering System.

 

“Gas” means any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane.

 

“Gatherer” is defined in the preamble.

 

“Gathering and Processing Fees” means the fees pursuant to Sections 4.1, 4.2, and 4.3.

 

“Gathering System” means the gas gathering facilities of Gatherer extending generally from the Receipt Points to the Delivery Points, including any facilities for compression, treating, and processing, and all modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time.

 

“Governmental Authority” means any court, government (federal, state, local, or foreign), department, political subdivision, commission, board, bureau, agency, official, or other regulatory, administrative, or governmental authority.

 

3

 

“Gross Heating Value” means the total calorific value (expressed in Btu’s) obtained by the complete combustion, at constant pressure, of the amount of Gas which would occupy a volume of one cubic foot at a temperature of 60o F, if saturated with water vapor and under a pressure equivalent to 14.65 psia and under standard gravitational force (980.665 cm per second per second) with air of the same temperature and pressure as the Gas, when the products of combustion are cooled to the initial temperature of the Gas and air and when the water formed by combustion is condensed to the liquid state.

 

“High Pressure Line” is defined in Section 5.13(a).

 

“Leases” is defined in the Recitals.

 

“Losses” means all losses, liabilities, damages, claims, fines, penalties, costs, or expenses, including reasonable attorneys’ fees and court costs.

 

“Lost and Unaccounted for Gas” means the volumetric gains or losses in Gas that occur on the Gathering System, including any system blowdowns for maintenance, emergency, or repair, and losses through the emergency shutdown system and flare stack, other than Gas used for Fuel Gas.

 

“Market Price” shall mean, in the case of Riverbend Residue Gas and Chipeta Residue Gas, the weighted average commodity price per MMBtu of such Riverbend Residue Gas or Chipeta Residue Gas, as the case may be, received by Producer for the amounts of such Riverbend Residue Gas or Chipeta Residue Gas (in each case, excluding any storage amounts) sold and otherwise accounted for on substantially the same terms as Producer sells its Gas and other Third Party Gas.  “Market Price” shall mean, in the case of Riverbend Plant Products, the weighted average commodity price per gallon received by Gatherer for the amounts of Plant Product (excluding any storage amounts) sold under arm’s-length agreements at the best price then obtainable in Gatherer’s reasonable judgment and discretion, less any allocated transportation, handling and storage fees incurred and paid by Producer in association therewith.

 

“Maximum Operating Pressure” is defined in Section 5.13(a).

 

“Mcf” means one thousand cubic feet of Gas at a temperature of 60 (o)F and a pressure of 14.65 pounds per square inch absolute.

 

“Mcf/d” means Mcf’s per Day.

 

“Minimum Volume Period” means the period beginning on the Effective Date and ending on March 1, 2017, as such date may be adjusted pursuant to Section 5.2(a).

 

“MMBtu” means one million Btu’s, which is equivalent to one dekatherm.

 

“Month” means the period beginning on the first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar month.

 

4

 

“New Compression” is defined in Section 5.11(a).

 

“New Compression Expenditure” is defined in Section 5.11(b).

 

“New Well Connection Expenditure” is defined in Section 5.11(b).

 

“Net Uplift” means (a) the payment received from Chipeta or a third party for the sale of Chipeta Plant Products or plant products recovered by such third party from the Excluded Production less, without duplication, (b) (i) reservation charges, usage charges, fuel costs and any supplemental charges pursuant to the transportation service agreement to be entered into pursuant to the Questar Wet Line agreement, attached hereto as Exhibit C, for transportation of the Excluded Production on the Questar Wet Line, (ii) the processing fee, electric compression, and fuel costs related to the Excluded Production paid by Producer to Chipeta pursuant to the Chipeta Processing Agreement; except where such fees, costs or charges were offset from the amount paid to Producer by Chipeta described in (a) above, and (iii) any deficiency payment paid by Producer to Chipeta under the Chipeta Processing Agreement to the extent caused, in whole or in part, by Gatherer, including, but not limited to, Gatherer’s failure to perform its obligations under this Agreement; except that, with respect to (iii) above, Net Uplift shall not include any deficiency payment paid by Producer to Chipeta under the Chipeta Processing Agreement to the extent caused by the routine maintenance of Gatherer’s Gathering System in accordance with Section 10.5 of this Agreement or a Gathering System Force Majeure event.

 

“Notice” is defined in Section 13.1.

 

“Other Delay” is defined in Section 10.2.

 

“Party” and “Parties” are defined in the preamble.

 

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association (whether incorporated or unincorporated), joint-stock company, trust, Governmental Authority, unincorporated organization, or other entity.

 

“Plant” means the Riverbend Gas Processing Plant, Section 36, Township 9 South, Range 18 East, Uintah County, Utah, together with any facilities connecting the Plant to Questar.

 

“Plant Shrinkage” means the thermal content of Riverbend Plant Products removed from Gas as a result of processing at the Plant.

 

“Producer” is defined in the preamble.

 

“Producer’s Gas” means the Dedicated Reserves committed hereunder by Producer.

 

5

 

“Producer Price Index” means the index covering intermediate materials, supplies and components; as determined and published by the United States Bureau of Labor Statistics (“BLS”) or any successor agency thereto.

 

“Producer’s Reservations” is defined in Section 3.6.

 

“Quarterly Minimum Volume” means, (i) for each calendar quarter or portion thereof from the Effective Date until December 31, 2012, a minimum volume of Producer’s Gas equal to 22,800 Mcf per Day multiplied by the number of Days in each such calendar quarter, and (ii) for each calendar quarter or portion thereof from January 1, 2013 through the end of the Minimum Volume Period, a minimum volume of Producer’s Gas equal to 25,000 Mcf per Day multiplied by the number of Days in each such calendar quarter.

 

“Questar” means Questar Pipeline Company and any successor thereto.

 

“Receipt Points” means (i) the outlet flange of the metering facilities described on Schedule 2 and (ii) the inlet flange of the metering facilities for any new points that may, from time to time, be added by Gatherer to the Gathering System after the Effective Date to permit Producer to deliver Producer’s Gas to the Gathering System.

 

“Receiving Transporter” means the intrastate or interstate pipeline company, local distribution company, or other party taking delivery or custody of Producer’s Gas at, or immediately downstream of, the Delivery Points.

 

“Riverbend Plant Products” means the raw mix of liquefiable hydrocarbons, including without limitation, ethane, propane, butane, and natural gasoline, extracted and saved at the Plant from all of Producer’s Gas delivered to and processed by Gatherer.

 

“Riverbend Residue Gas” means that portion of Producer’s Gas remaining after processing at the Plant, and of Producer’s Gas bypassed around the Plant.

 

“Scheduled Gas” means, for a specified period of time, the quantity of Producer’s Gas scheduled by Producer and confirmed by Gatherer for delivery and gathering on the Gathering System.

 

“Services” is defined in Section 3.1.

 

“Term” is defined in Section 2.1.

 

“Third Party Gas” means all Gas under contract with Gatherer from or otherwise attributable to the Leases, other than Producer’s Gas.

 

“Train III In-Service Date” means the commencement date of Train III, which is defined in the Chipeta Processing Agreement as a 300 MMcf/d cryogenic processing facility to be located at the Chipeta Plant.

 

“Wells” is defined in the Recitals.

 

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“Year” means the period of time beginning on one Day and ending on the same Day the following year.

 

1.2           Attachments.  Each exhibit, schedule, or other attachment to this Agreement is a part of this Agreement and incorporated herein for all purposes.  When the term “Agreement” is used herein, it means this Agreement and all of the exhibits, schedules, and other attachments hereto. A list of the exhibits, schedules, and other attachments to this Agreement is attached behind the signature page.

 

Article 2

Term

 

2.1           Term.  The term of this Agreement (“Term”) shall commence on March 1, 2010 and continue in effect until February 28, 2025.  For Wells already connected to the Gathering System on February 28, 2025, the Term as to those Wells shall continue in effect for so long as Producer’s Gas can be produced in commercial quantities from such Wells.

 

Article 3

Gathering and Processing of Producer’s Gas

 

3.1           The Services.  Gatherer shall provide gathering, compression and processing services as further detailed in this Agreement and as can be provided by the existing Gathering System (the “Services”) for Producer’s Gas delivered by Producer to the Receipt Point(s) for receipt into the Gathering System.  Gatherer shall redeliver Producer’s Gas to Producer at the Delivery Point(s) and, subject to Article 3 of Exhibit A hereto, Producer’s Gas so delivered will meet the dew point and other quality specifications of the Downstream Transporter, as those quality specifications may change from time to time.

 

3.2           Gate Canyon Gas.  The Parties hereto acknowledge that Producer’s Gas produced in the Gate Canyon area does not currently require processing, and is gathered in a separate gathering system that has no processing facilities.  Should processing be required in the future for such Gas, Gatherer may first choose to process such Producer’s Gas pursuant to this Agreement.  If Gatherer chooses to not process such Producer’s Gas pursuant to this Agreement, the Parties agree to work in good faith to evaluate the alternatives available to Gatherer, including construction of a new processing plant, connection of the Gate Canyon system to the Plant, or a short-term processing arrangement on Questar.  After evaluation, if Gatherer elects not to provide processing, Producer may process Producer’s Gas, and Gatherer shall continue to waive the fees under Section 4.1(ii) and (iii) for that Gas.

 

3.3           Release of Processing Rights to Certain Gas Volumes.

 

(a)           Subject to Section 3.3(b) below, from the Effective Date until ten years after the first Day of the first accounting period following the Train III In-Service Date, Gatherer agrees to release and waive its rights to process Gas on the first 50,000 MMBtu/day of Producer’s Gas delivered to the Gathering System pursuant to this Agreement (the “Excluded Production”).  Gatherer shall retain all processing rights for all Gas volumes from the Dedicated Reserves in

 

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excess of the Excluded Production.  Producer shall not amend the term of any processing agreement downstream of the Delivery Point without Gatherer’s written consent.

 

(b)           Producer agrees to commit or cause to be committed $50,000,000 (gross) for drilling and completing new wells in the AMI (“Drilling Commitment”).  If, on the third anniversary of the Train III In-Service Date, Producer has not meet its Drilling Commitment, then the Excluded Production shall be reduced in an amount up to 20,000 MMBtu/day, such reduction to be proportionate to the positive difference between the Drilling Commitment and the amount actually spent.  By way of example, if Producer invests or causes to be invested $25,000,000 on or before the third anniversary of the Train III In-Service Date, then the amount of the Excluded Production would be reduced by fifty percent to 10,000 MMBtu/day (20,000 x ($25,000,000 / $50,000,000).

 

3.4           Dedicated Reserves.  Subject to Producer’s Reservations and to the other terms and conditions of this Agreement, including Section 3.3 above, Producer (i) exclusively dedicates and commits to the performance of this Agreement the Dedicated Reserves, (ii) represents that the Dedicated Reserves are not otherwise subject to any other gas gathering agreement or commitment and (iii) agrees not to deliver any Gas produced from the Dedicated Reserves and owned by Producer to any other gas gatherer, processor, or gas gathering system. Producer possesses the right to deliver the Dedicated Reserves to the Gathering System. Producer agrees to cause any existing or future Affiliates of Producer holding Dedicated Reserves to be bound by, and to execute and join as a party, this Agreement.  The dedication and commitment made by Producer under this Agreement is a covenant running with the land.

 

3.5           Producer shall not tender for gathering any Gas other than Producer’s Gas without first obtaining Gatherer’s written approval.

 

3.6           Producer’s Reservations.  Producer reserves the following rights (and reasonable quantities of Gas to satisfy same) (“Producer’s Reservations”): (i) to operate Wells producing from the Dedicated Reserves as a reasonably prudent operator, (ii) to separate or process Gas using only mechanical, ambient temperature equipment located at surface production facilities on or near Wells producing from the Dedicated Reserves, (iii) to use Gas produced from the Dedicated Reserves for lease operations, and (iv) to pool, communitize, or unitize Producer’s interests in the Dedicated Reserves.  If Producer should commence Gas flow from any new Well or if Producer repairs, reworks, curtails, or plugs and abandons any existing Well, written Notice thereof shall be given to Gatherer no later than 5 Business Days prior to delivering or curtailing deliveries of Gas from such Well to a Receipt Point.

 

3.7           Prudent Operator.  Producer and Gatherer shall each perform their obligations under this Agreement in a good, efficient and workmanlike manner, in their best judgment as prudent operators, in conformity with the best practices of the industry and in accordance with all valid and applicable laws, rules, and regulations of Governmental Authorities.

 

3.8           Memorandum of Agreement.  The Parties agree to execute a Memorandum of Amended and Restated Gas Gathering and Processing Agreement in the form of Schedule 6 contemporaneously with the execution of this Agreement and that Gatherer may record such memorandum in the county or counties in which the Dedicated Lands are located.

 

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Article 4

Gathering and Processing Fees

 

4.1           Gathering and Processing Fees.  As consideration for the Services provided hereunder by Gatherer, Producer shall pay Gatherer:

 

(i)            $0.465 per MMBtu for Producer’s Gas received at the Receipt Points each Month, as provided herein.  Of the $0.465 per MMBtu fee, $0.28 shall represent consideration for gathering service and $0.185 shall represent consideration for the current two stages of compression service, however, in no event shall the fee for Producer’s Gas received at the Receipt Points be less than $0.465 per MMBtu, as adjusted in Section 4.3 herein;

 

(ii)           5% of the Riverbend Residue Gas revenues and 5% of the Chipeta Residue Gas revenues attributable to Producer’s Gas.  Producer shall market, at no fee to Gatherer, all Riverbend Residue Gas and Chipeta Residue Gas, and shall make all arrangements, on a timely basis, for the further transportation, marketing and disposition of such Riverbend Residue Gas and Chipeta Residue Gas, which shall be done and accounted for on substantially the same terms as Producer transports, markets and disposes of its Gas and Third Party Gas;

 

(iii)          5% of the Riverbend Plant Products’ revenues attributable to Producer’s Gas.  Gatherer shall market, at no fee to Producer, all Riverbend Plant Products, and shall make all arrangements, on a timely basis, for the further transportation, marketing and disposition of such Riverbend Plant Products.

 

(iv)          $250 per active meter per Month on the Gathering System; and

 

(v)           100% of the Drip Liquids attributable to Producer’s Gas.

 

4.2           High-Volume Fee Discount.  In any Month in which Gatherer receives an aggregate volume of Producer’s Gas that exceeds a daily average rate of 35,000 Mcf, the fee charged for Producer’s Gas pursuant to Section 4.1(i) above shall be reduced to $0.30 per MMbtu for each Mcf of Producer’s Gas gathered in excess of 35,000 Mcf per Day during such Month.  Of the $0.30 per MMBtu fee in this Section 4.2, $0.17 shall represent consideration for gathering service and $0.13 shall represent consideration for compression service.  The Gathering and Processing Fees described in Sections 4.1(ii), (iii), (iv) and (v) shall remain unchanged.

 

4.3           Adjustment of Fees.  On each January 1 during the Term, the Gathering and Processing Fees then in effect in Sections 4.1(i) and (iv), and Section 4.2of this Agreement, shall be increased by multiplying the fees then in effect by the percentage increase in the Producer Price Index as published by the U.S. Department of Labor for the prior 12-Month period.  If the change in the Producer Price Index shows a percentage decrease, the Gathering and Processing Fees then in effect shall be reduced by such percentage change in the Producer Price Index, but in no event shall the Gathering and Processing Fees drop below the fees in effect as of the Effective Date.  In no event shall the Gathering Fee in Section 4.1(i) be adjusted, up or down, by greater than 5% in any single Year, or exceed $0.65 per MMBtu during the Term.  In no event shall the metering fee be adjusted, up or down, by greater than 5% in any single Year, or exceed $375 during the Term.  If

 

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the Producer Price Index ceases publication, the parties hereto shall negotiate in good faith a replacement index.  For purposes of splitting out the gathering and compression components of the Gathering and Processing Fees, any fee adjustment carried out pursuant to this Section 4.3 or Section 5.13(b)(ii) will automatically establish a proportional adjustment of the underlying gathering and compression components of the Gathering and Processing Fees.

 

4.4           Process Sharing Fee.  Producer agrees to pay Gatherer a process sharing fee equal to one-third of the Net Uplift realized downstream of the Delivery Points (“Process Sharing Fee”).

 

4.5           Payment.  Payment of the Gathering and Processing Fees shall be made in accordance with the procedures set forth in Article 9.

 

Article 5

Gas Delivery

 

5.1           Receipt and Delivery.  Producer agrees to tender, or cause to be tendered, to the Receipt Points, Producer’s Gas, each Day, and Gatherer agrees to accept Producer’s Gas at the Receipt Points and redeliver Producer’s Gas, to the Delivery Points, subject to the terms hereof.  Producer shall endeavor to deliver the daily quantities of Gas at each Receipt Point at a reasonably constant rate.

 

5.2           Minimum Volume Commitment.

 

(a)           Producer’s Obligation.  Producer commits to deliver to Gatherer for gathering on the Gathering System in each calendar quarter during the Minimum Volume Period no less than the Quarterly Minimum Volume for each such calendar quarter.  Such commitment shall be suspended by events of Force Majeure (but not by events of Other Delay) and prorated during periods of high pipeline pressure pursuant to Section 5.13.  The Parties shall act in good faith such that the Gathering System can be operated in a manner that will not unduly hinder Producer’s ability to so tender such Quarterly Minimum Volumes to Gatherer, which good faith practices shall include prudent maintenance and repair of the Gathering System, compliance with Gatherer’s Maximum Operating Pressure obligations, and avoidance of free liquids being introduced into the Gathering System as set out in Section 3(a)(1) of Exhibit A hereunder.  To the extent that Producer tenders, in accordance with the terms of this Agreement, Producer’s Gas at a Receipt Point during any calendar quarter of the Minimum Volume Period, and Producer is unable to effect delivery of such Gas due to Gatherer’s failure to comply with its Maximum Operating Pressure obligation, the Minimum Volume Commitment applicable to each such calendar quarter shall be reduced by an amount equivalent to the volume shortfall so caused.

 

(b)           Deficit Volumes.  If the total aggregate volume of 1) Producer’s Gas, 2) Third Party Gas, and 3) Gas from any Dedicated Reserves caused to be drilled by Producer either through acreage farm-out or non-consent Wells, delivered to the Gathering System in a calendar quarter of the Minimum Volume Period is less than the Quarterly Minimum Volume, then Producer shall pay Gatherer in cash, no later than 30 Days following the end of such calendar quarter, an amount equal to the shortfall quantity for such calendar quarter (in Mcf’s) multiplied by the then-current Gathering and Processing Fees, as applicable (including any possible adjustment under Section 5.13(b)(ii)), for such calendar quarter, as liquidated and agreed

 

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damages for Producer’s failure to deliver the Quarterly Minimum Volume in such calendar quarter.

 

(c)           Excess Volumes.  If the volume of (i) Producer’s Gas, (ii) Third-Party Gas, and (iii) Gas from any Dedicated Reserves caused to be drilled by Producer either through acreage farm-out or non-consent Wells, delivered to the Gathering System in a calendar quarter of the Minimum Volume Period is greater than the Quarterly Minimum Volume, then such excess volume will be credited to the last volumes due during the Minimum Volume Period.  Such crediting shall thereby shorten the Minimum Volume Period by one Day for each 22,800 Mcf or 25,000 Mcf, as applicable, of excess volumes so credited.

 

5.3           Ratable Takes.  Producer acknowledges and understands that Gatherer may be providing gathering, processing, and other services to third parties.  In the event of a capacity restriction, Gatherer shall treat each party ratably in its Gathering System, or any portion thereof, and shall not grant to any third party a higher priority to capacity on the Gathering System than the priority granted hereunder to Producer.  In the event and to the extent that Gatherer’s ratable takes prevent Producer from delivering its full Quarterly Minimum Volume obligation in such calendar quarter, then the Quarterly Minimum Volume for that calendar quarter shall be reduced by the amount of such shortfall.

 

5.4           Scheduling.  Producer shall notify Gatherer not less than 5 Business Days before the last Day of each Month of the total volume of Gas (in Mcf/d and MMBtu) that Producer expects to deliver in the following Month, specifying the volumes to be delivered to or by Gatherer at each of the Receipt Points and the Delivery Points.  Producer may modify its nominations at any time upon at least 24 hours advance Notice.  The Parties shall coordinate their nomination activities, giving sufficient time to meet the deadlines of the receiving transporter.  Each Party shall give the other Party timely prior Notice, sufficient to meet the requirements of the Receiving Transporter involved in the transaction, of the quantities of Producer’s Gas to be delivered to the Delivery Points each Day.  If either Party becomes aware that actual deliveries at the Receipt Points or Delivery Points are greater or lesser than the quantities of Scheduled Gas, then such Party shall promptly notify the other Party.  Throughout the term of this Agreement, the Parties agree to work together to refine and improve the scheduling, nominating, and balancing procedures applicable to Producer’s Gas to accommodate the Receiving Transporter’s nomination procedures (or changes to such procedures) and the operational requirements of both Gatherer and Producer.  If Gatherer incurs any liabilities, costs, or expenses as a result of Producer not scheduling deliveries of Producer’s Gas at the Delivery Points in accordance with the receiving transporter’s requirements, then Producer shall promptly reimburse Gatherer for such liabilities, costs, or expenses, including all imbalance charges assessed in respect of the delivery of Producer’s Gas to the receiving transporter.

 

5.5           Thermally Equivalent Quantity.  Subject to this Agreement, Gatherer shall, as nearly as practicable each Day, receive at the Receipt Points and deliver for Producer’s account, at the Delivery Points, an Equivalent Quantity of Producer’s Gas, less FL&U, Plant Shrinkage (as applicable) and Drip Liquid shrinkage.  Producer’s allocated share of Fuel Gas shall be rendered to Gatherer by Producer for Gatherer’s use at no cost to Gatherer.  All receipts and deliveries of Producer’s Gas hereunder shall be balanced on an MMBtu basis, less Producer’s allocated share of FL&U, Plant Shrinkage (as applicable) and Drip Liquid shrinkage.

 

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5.6           Equal Receipt and Delivery.  The Parties intend that Producer’s Gas will be received and delivered hereunder at the same rates, and Producer shall not, in any manner, use the Gathering System for storage or peaking purposes.  If, on any Day, Producer delivers a quantity of Producer’s Gas in excess of the quantity of Producer’s Gas being concurrently redelivered by Gatherer at the Delivery Points, Gatherer shall have the right to reduce or discontinue its receipts of Producer’s Gas at the Receipt Points until such time as arrangements have been made by Producer to balance such excess.  If on any Day Producer delivers a quantity of Producer’s Gas less than the quantity of Producer’s Gas being concurrently redelivered by Gatherer at the Delivery Points, then Gatherer shall have the right to reduce or discontinue deliveries of Producer’s Gas to the Receiving Transporter until arrangements have been made by Producer to balance such under delivery.  An exact daily balancing of receipts and deliveries may not be possible due to the inability of the Parties to control precisely such receipts and deliveries.  However, Gatherer, to the extent reasonably practicable, will deliver each Day an Equivalent Quantity, less FL&U, Plant Shrinkage (as applicable) and Drip Liquids shrinkage, to the Delivery Points.

 

5.7           Information.  Each Party will furnish or cause to be furnished to the other Party hereto all data required to accurately account for all Producer’s Gas received and delivered hereunder.

 

5.8           Third Party Arrangements.  Producer shall make, or cause to be made, all necessary arrangements with other pipelines or third parties at or upstream of the Receipt Points and at or downstream of the Delivery Points to effect Gatherer’s receipt and delivery of Producer’s Gas.  Such arrangements affecting Receipt and Delivery shall be coordinated between Producer and Gatherer.

 

5.9           Commingling.  Although Producer shall retain title to Producer’s Gas delivered to Gatherer at the Receipt Points hereunder, Producer’s Gas received by Gatherer shall constitute part of the supply of Gas from all sources in the Gathering System, and as such Gatherer shall, subject to its obligation to deliver an Equivalent Quantity, less FL&U, Plant Shrinkage (as applicable), and Drip Liquids shrinkage, as provided in Section 5.5, have the absolute and unqualified right to commingle Producer’s Gas and to deliver molecules different from those received and to handle the molecules received in any manner.

 

5.10         Lost and Unaccounted for Gas and Fuel Gas.  Gatherer agrees to use ordinary care in gathering Producer’s Gas from the Receipt Points to the Delivery Points.  However, Producer acknowledges that certain volumetric gains and losses in Producer’s Gas will occur, and such gains and losses attributable to Lost and Unaccounted For Gas and Fuel Gas shall be shared and allocated among the Producer and other third parties whose Gas is gathered on the Gathering System, on a Btu basis, in the proportion that each party delivers Gas to the Gathering System and, consistent with Gatherer’s facilities, in proportion to the Services provided.

 

5.11         New Well Connections and Compression.

 

(a)           Notice of New Well or Compression.  Producer shall provide Gatherer with written Notice of any additional Well located in Area “A” on Schedule 1 dedicated to this Agreement to be connected to the Gathering System hereunder, including Producer’s working interest, Well name, Well location, and Producer’s best estimate of Well deliverability, and of any

 

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proposed new compression facilities or the relocation of existing compression facilities (in each case, “New Compression”).

 

(b)           Cost Estimate.  Within 10 Days of receipt of such Notice, Gatherer shall provide Producer with a written estimate of the cost of (1) connecting such new Well to the Gathering System, which shall include any necessary facilities to accommodate the Gas in the Gathering System (“New Well Connection Expenditure”), or (2) constructing or complying with a New Compression request (a “New Compression Expenditure”), which shall include the incremental gathering fee (the “Incremental Fee”) to be applicable to all volumes of Producer’s Gas delivered to the Gathering System until such time as Gatherer recoups 130% of such cost.  Gatherer shall proceed with connection of such new Well or installation of New Compression 10 Days after the estimate is received by Producer, unless advised otherwise pursuant to this Section 5.11(c) below.  Such New Well Connection Expenditure and New Compression Expenditure shall be subject to the Indemnity in Section 5.11(d).

 

(c)           Producer’s Option.  If Producer’s estimate for the cost of the new Well Connection Expenditure is less than Gatherer’s, Producer may, within 10 Days of receipt of Gatherer’s estimate, give Notice to Gatherer to not proceed with such connection, which Notice shall include Producer’s estimate of the New Well Connection Expenditure, and Producer shall proceed with such construction.  All facilities constructed shall comply with Gatherer’s specifications.  Upon completion of the construction by Producer, Producer shall invoice Gatherer for the actual cost of the New Well Connection, not to exceed 110% of Producer’s estimated cost, along with the transfer of title of the newly-constructed facilities.  Gatherer shall pay the invoice within 30 Days of receipt and concurrently obtain title.  Such reimbursed actual cost shall be subject to the Indemnity in Section 5.11(d).

 

(d)           Indemnity.

 

(i)            New Well.  For the first 2 Years after construction of a New Well Connection and the other necessary facilities, the Producer shall guarantee adequate volume from each new Well according to the following procedure: during each 3-Month period, if the Gathering and Processing Fees derived from the all Gas contracted and received from the new Well does not equal 1/8 of 130% of the actual cost of the New Well Connection, then Gatherer shall invoice Producer for the deficiency on its next regular Monthly invoice.  Excess volume in any 3-Month period shall apply to any subsequent 3-Month period(s).

 

(ii)           New Compression.  During each Month following completion of the New Compression, the Incremental Fee shall be applied to all Producer’s Gas delivered to and received by Gatherer into the Gathering System.  Producer shall guarantee that the increased revenue received by Gatherer each Month as a result will be at least equal to 1/24th of 130% of the actual cost of the new Compression and related facilities (the “Monthly Compression Guarantee”). In any Month in which such revenue does not equal at least the Monthly Compression Guarantee, Gatherer shall invoice Producer for any deficiency on its next regular Monthly invoice and payment shall be due in accordance therewith.  In any Month in which such revenue exceeds the Monthly Compression Guarantee, such excess shall be credited to Producer toward subsequent Months’ Monthly Compression Guarantee.  For the avoidance of

 

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doubt, at such time as Gatherer has recouped 130% of the actual cost of the new Compression and related facilities, the Incremental Fee shall expire and no longer be charged against Producer’s Gas delivered to and received by Gatherer in the Gathering System.

 

5.12         For any Well or compression facility located in Area “B” on Schedule 1, Producer shall provide Gatherer with written notice of any additional Well dedicated to this Agreement that is to be gathered hereunder, including Producer’s working interest, Well name, and Well location and of any proposed New Compression.  Within 10 Days of receipt of such notice, Gatherer shall provide written notice to Producer whether Gatherer will provide gathering services hereunder for such Well on install such New Compression.  If Gatherer elects to provide such gathering service, the costs of connecting the Well to Gatherer’s central point of the Area “B” acreage and installation of New Compression will be indemnified by Producer under Section 5.11(d) above; however, any costs incurred by Gatherer in connecting Gatherer’s central point of the Area “B” acreage to the Riverbend system, in the event Gatherer elects to construct such a connection, shall not be indemnified by Producer under Section 5.11(d).  The Maximum Operating Pressure for the system in Area “B” shall be 125 psig as measured at Gatherer’s central point in Area “B;” provided, however, that all other terms and conditions related to Section 5.13 shall apply.  The location of the central point in the Area “B” acreage shall be determined by the Parties in a manner that fairly apportions cost responsibility between the Parties and best serves the objectives of each Party under this Agreement.  If Gatherer elects not to provide gathering services for that Well, that Well shall be released from dedication hereunder.

 

5.13         Pressures.

 

(a)        Pressure Obligation.  Producer’s Gas shall be delivered at the Receipt Points at pressures sufficient to effect delivery into the Gathering System at the Receipt Points, but not to exceed the maximum allowable operating pressure of the Gathering System from time to time.  Gatherer shall provide a maximum operating pressure of 125 psig at the suction of the compression located at the Plant site (“Maximum Operating Pressure”). The Parties acknowledge that a portion of Gatherer’s pipeline facilities upstream of the Plant inlet is designated by Gatherer as a high pressure line and is operated by Gatherer without compression at pressures consistently higher than 125 psig (the “High Pressure Line”).  At its option, Producer may request the connection, to such High Pressure Line, of Wells that are capable of delivering Producer’s Gas at pressures sufficient to effect delivery into the High Pressure Line, and Gatherer agrees to provide such connection; provided, however, that upon 60 Day’s Notice to Gatherer, Producer may request that such Wells be disconnected from Gatherer’s High Pressure Line and, instead, be connected to a lower pressure portion of the Gathering System.  Adequate time will be allowed Gatherer to accommodate these volumes, pursuant to this Agreement, into its lower pressure system.  Such Gas shall be excluded from the provisions of Section 5.13(b) during the period that such Gas is connected to the High Pressure Line.  Gatherer agrees to provide such disconnection and reconnection with as little disruption to Gas flow as reasonably practicable.

 

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(b)        Excess Pressure.

 

(i)            If Gatherer’s operating pressures exceed 110% of the Maximum Operating Pressure, as measured as the daily operating pressure averaged over each Month, excluding events of Force Majeure and Other Delay, Producer shall have the right, within 30 Days following that Month, to notify Gatherer in writing of such occurrence.  Upon receipt of such Notice, Gatherer shall immediately take steps to reduce the operating pressure to meet the Maximum Operating Pressure.

 

(ii)           If, after notification by Producer pursuant to Section 5.13(b)(i), Gatherer fails to reduce the operating pressure within 90 Days following the 30-Day period referenced in Section 5.13(b)(i) (such period to be extended for delivery of needed equipment, rights-of-way, permitting, and the like, and for Force Majeure and Other Delay), then for those volumes of Producer’s Gas that, despite Gatherer’s failure to meet its Maximum Operating Pressure obligation, Gatherer is nonetheless able to deliver into the Gathering System, Producer shall receive a reduction in rate under Section 4.1(i) to $0.25 per MMBtu, unadjusted pursuant to Section 4.2, until such time as Gatherer has reduced its operating pressure to meet its Maximum Operating Pressure obligation.

 

Article 6
 Taxes and Warranties

 

6.1           Taxes.  Producer shall pay or cause to be paid, and agrees to indemnify and hold harmless Gatherer from and against the payment of, all excise, gross production, severance, sales, occupation, and all other taxes, charges, or impositions of every kind and character required by statute or by any Governmental Authority with respect to Producer’s Gas and the handling thereof prior to receipt thereof by Gatherer at the Receipt Points.  Gatherer shall pay or cause to be paid all taxes and assessments, if any, imposed upon Gatherer for the activity of gathering of Producer’s Gas after receipt and prior to redelivery thereof by Gatherer at the Delivery Points.  Neither Party shall be responsible or liable for any taxes or other statutory charges levied or assessed against the facilities of the other Party used for the purpose of carrying out the provisions of this Agreement.

 

6.2           Title and No Liens.  Producer warrants to Gatherer good title to Producer’s Gas delivered to the Receipt Points, free from all liens, charges, and other adverse claims or encumbrances.  Producer shall indemnify, defend, and hold harmless Gatherer from and against all Losses arising from all such liens, charges, and adverse claims and encumbrances, including Losses arising from claims (i) by co-working interest owners, royalty or overriding royalty owners, or other purported owners of interests or rights in Producer’s Gas or in the Dedicated Reserves or (ii) by Persons from whom Producer purchased or otherwise acquired Producer’s Gas prior to the Receipt Points.

 

6.3           Other Warranties.  EXCEPT AS SET FORTH IN THIS ARTICLE 6 AND THE OTHER PROVISIONS OF THIS AGREEMENT AND ITS ATTACHMENTS, NEITHER PARTY MAKES ANY OTHER WARRANTIES, EXPRESSED OR IMPLIED, AND SPECIFICALLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE GAS DELIVERED AND REDELIVERED HEREUNDER.

 

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Article 7

Control, Possession, and Waiver

 

7.1           Control and Possession.  As between the Parties, Producer shall be deemed to be in exclusive control and possession of Producer’s Gas delivered hereunder and responsible for any damage or injury caused thereby prior to the time Producer’s Gas shall have been delivered to Gatherer at the Receipt Points and after Producer’s Gas is redelivered to or on behalf of Producer at the Delivery Points.  After delivery of Producer’s Gas to Gatherer at the Receipt Points, Gatherer shall be deemed to be in exclusive control and possession thereof and responsible for any injury or damage caused thereby until redelivered to or on behalf of Producer at the Delivery Points.

 

7.2           Indemnity.  Producer agrees to indemnify, defend, and hold harmless Gatherer and its Affiliates from any and all Losses arising from or out of (i) personal injury or property damage attributable to Producer’s Gas when Producer shall be deemed to be in control and possession of Producer’s Gas as provided in Section 7.1 and (ii) the delivery by Producer of Producer’s Gas that does not meet the quality specifications set forth in this Agreement.  Except to the extent a Loss (or Losses) is covered by the indemnity in the preceding sentence, Gatherer agrees to indemnify, defend, and hold harmless Producer and their Affiliates from all Losses arising from or out of personal injury or property damage attributable to Producer’s Gas when Gatherer shall be deemed to be in control and possession of Producer’s Gas as provided in Section 7.1.  THE INDEMNITIES SET FORTH IN THIS SECTION 7.2 ARE TO BE CONSTRUED WITHOUT REGARD TO THE CAUSES THEREOF, INCLUDING THE NEGLIGENCE OF ANY INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE, OR THE STRICT LIABILITY OF ANY INDEMNIFIED PARTY OR OTHER PERSON.

 

7.3           Waiver of Damages.A PARTY’S LIABILITY HEREUNDER SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY.  SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION OR SIMILAR DAMAGES, BY STATUTE, IN TORT, OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE STRICT LIABILITY OR NEGLIGENCE OF ANY PARTY, WHETHER SUCH STRICT LIABILITY OR NEGLIGENCE BE SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE.  TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

 

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Article 8

Allocation of Residue Gas, Plant Product, and Drip Liquids Revenue

 

8.1           Measurement Allocation.

 

(a)           Residue Gas.  The Riverbend Residue Gas volume and Chipeta Residue Gas volume attributable to a particular Receipt Point for an Accounting Period shall be determined by subtracting from the measured volume at each Receipt Point the allocated FL&U and also subtracting the allocated thermal equivalent of Riverbend Plant Products or Chipeta Plant Products, as applicable, and other shrinkage, if any, attributed to a particular Receipt Point for each Accounting Period.

 

(b)           Riverbend Plant Products.  The quantity of Riverbend Plant Products (in gallons) of a particular Component Plant Product recovered and attributable to a particular Receipt Point shall be determined by multiplying the Component Plant Product recovered by a fraction, the numerator of which is the theoretical test gallons of the particular Component Plant Product contained in the Gas delivered at such Receipt Point and the denominator of which is the total quantity of theoretical test gallons of the particular Component Plant Product contained in all of the Gas delivered at the receipts points on the Gathering System, excluding transportation-only Gas.

 

(c)           Drip Liquids.  The Drip Liquids attributable to Producer’s Gas shall be owned by Gatherer.

 

8.2           Revenue Allocation.

 

(a)           Residue Gas.  The Riverbend Residue Gas Revenue and Chipeta Residue Gas Revenue attributable to Producer’s Gas for each Accounting Period shall be calculated by multiplying the quantity of Riverbend Residue Gas or Chipeta Residue Gas, as applicable, (in MMBtu’s) during such Accounting Period that is attributable to Producer’s Gas delivered to Gatherer during such Accounting Period by the Market Price per MMBtu of Riverbend Residue Gas and Chipeta Residue Gas, as applicable, realized by Producer during such Accounting Period for such Riverbend Residue Gas and Chipeta Residue Gas.

 

(b)           Riverbend Plant Products.  The Riverbend Plant Products Revenue attributable to Producer’s Gas for each Accounting Period shall be the sum of the products obtained by multiplying the volume of each Component Plant Product recovered during such Accounting Period that is attributable to Producer’s Gas delivered to Gatherer during such Accounting Period by the Market Price realized by Gatherer at the tailgate of the Plant during such Accounting Period for such Component Plant Product.

 

(c)           Drip Liquids.  Any revenue derived by Gatherer from the sale of such Drip Liquids shall be kept by Gatherer for Gatherer’s own account.

 

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Article 9

Billing and Payments

 

9.1           Billing.  As soon as practicable each Month, Gatherer shall invoice Producer for volumes of Producer’s Gas received, gathered and/or processed hereunder in the preceding Month, including any other applicable charges, and provide a statement setting forth (i) the volumes and quantities (in Mcf’s and MMBtu’s) of Producer’s Gas received at each Receipt Point and redelivered to each Delivery Points, (ii) any adjustments for prior periods, (iii) all allocations made pursuant to Article 8 and (iv) all amounts due hereunder.  In the event Producer receives, pursuant to Section 4.2 or Section 5.2(c), one or more adjustments in the Gathering and Processing Fees set forth in Section 4.1(i), the statement will reflect a single, blended Section 4.1(i) Gathering and Processing Fee which prorates all fees and discounts accorded Producer during the relevant Month across all volumes of Producer’s Gas assessed Gathering and Processing Fees in such Month.  If actual measurements of volumes of Producer’s Gas are not available in any Month, Gatherer may prepare and submit its invoice based on estimated volumes, which estimated volumes shall be corrected to actual volumes in the following Month or Months.

 

9.2           Payment.

 

(a)           Gathering.  Subject to the Letter Agreement dated February 26, 2010, which is hereby incorporated by reference and attached as Schedule 5, Producer shall otherwise remit to Gatherer the remaining amount due under Section 9.1, in immediately available funds, by the 25th Day of each Month or 10 Days from the date of Gatherer’s invoice, whichever is later.  If such due date is not a Business Day, payment is due on the next Business Day following such date.

 

(b)           Residue Gas and Riverbend Plant Products.  Producer shall remit to Gatherer the amount due for Riverbend Residue Gas and Chipeta Residue Gas under Section 4.1(ii), and Gatherer shall remit to Producer the amount due for Riverbend Plant Products under Section 4.1(iii), as applicable, in immediately available funds, by the 25th of each Month.

 

(c)           Netting.  Producer agrees that it shall direct that proceeds from the sale of (i) Riverbend Plant Products attributable to Producer’s Gas processed by Gatherer, (ii) Chipeta Plant Products attributable to Producer’s Gas processed at the Chipeta Plant, or (iii) plant products attributable to Producer’s Gas processed by a third party to be paid directly to Gatherer, and Gatherer will deduct any processing fees owed to it by Producer or its share of the Net Uplift, as the case may be, and thereafter remit the remainder of the proceeds to Producer.

 

9.3           Dispute.  If Producer, in good faith, disputes the amount of any such invoice or any part thereof, Producer will pay such amount as it concedes to be correct. If Producer disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount disputed within 20 Days of the date of such invoice.  If the Parties are unable to resolve such dispute, either Party may pursue any remedy available at law or in equity to enforce its rights under this Agreement.

 

9.4           Late Payments.If either Party fails to pay the amount of any invoice rendered by the other Party hereunder when such amount is due, interest thereon shall accrue from, but

 

18

 

excluding, the due date to, and including, the date payment thereof is actually made at the lesser of the “Prime Rate” plus 12%, computed on an annualized basis and compounded Monthly, or the maximum rate of interest permitted by Applicable Law, not to exceed the maximum legal rate.  “Prime Rate” means the prime rate on corporate loans at large U.S. money center commercial banks as set forth in the Wall Street Journal “Money Rates” table under the Heading “Prime Rate,” or any successor thereto, on the first date of publication for the Month in which payment is due.  The Party which is due payment shall render a late payment charge invoice and payment shall be due within 10 Days of the date of such invoice.

 

9.5           Audit.  A Party shall have the right, at its own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the books, records, and telephone recordings of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under this Agreement.  This right to examine, audit, and to obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Agreement.  All invoices and billings shall be conclusively presumed final and accurate and all associated claims for underpayments or overpayments shall be deemed waived unless such invoices or billings are objected to in writing, with adequate explanation and/or documentation, within 2 Years after the Month of Gas delivery.  All retroactive adjustments under this Section 9.5 shall be paid in full by the Party owing payment within 30 Days of Notice and substantiation of such inaccuracy.

 

9.6           Minor Adjustments.  No adjustments, retroactive or prospective, shall be made to volumes for prior periods, whether the result of volume allocation errors or any other reason other than meter calibration error, that involve changes that would be less than 50 Mcf’s per Month.

 

9.7           Financial Responsibility.  If Producer fails to pay any amounts when due under this Agreement, then Gatherer, at its option and without limiting any other rights available to it under this Agreement or otherwise, may, by giving Notice to Producer, (i) suspend gathering services hereunder, (ii) require Producer to pay for the gathering of Producer’s Gas hereunder in cash in advance of Gatherer performing such gathering services, or (iii) require Producer’s to provide other security satisfactory to Gatherer.

 

Article 10

Force Majeure

 

10.1         Non-Performance.If a Party is rendered unable, wholly or in part, by reason of Force Majeure to perform its obligations under this Agreement (other than the obligation to make payments when due hereunder), then such Party’s obligations shall be suspended to the extent affected by Force Majeure or by Other Delay.

 

10.2         “Force Majeure” means any cause or event not reasonably within the control of the Party whose performance is sought to be excused thereby; including acts of God, strikes, lockouts, or other industrial disputes or disturbances, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, tornadoes, hurricanes, storms, and warnings for any of the foregoing which may necessitate the precautionary shut-down of wells, plants, pipelines, gathering systems, or other related facilities, floods, washouts, arrests and restraints of governments and people, civil disturbances, explosions, sabotage, breakage or

 

19

 

accidents to equipment, machinery, gathering systems, plants, facilities or lines of pipe, the making of repairs or alterations to lines of pipe, gathering systems, plants or equipment, freezing of wells or lines of pipe, electric power shortages, necessity for compliance with any court order, or any law, statute, ordinance, regulation or order promulgated by a Governmental Authority having or asserting jurisdiction, inclement weather that necessitates extraordinary measures and expense to construct facilities or maintain operations and any other causes, whether of the kind enumerated herein or otherwise, not reasonably within the control of the Party claiming suspension.  “Other Delay” shall include Producer’s inability to comply with the quality specifications herein, the inability to secure labor or materials, the inability to obtain servitudes, rights-of-way, grants, permits, or licenses to enable such Party to fulfill its obligations hereunder, the inability of such Party to acquire, or delays on the part of such Party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such servitudes, rights-of-way, grants, permits or licenses, and in those instances where either Party hereto is required to furnish materials and supplies for the purpose of constructing or maintaining facilities or is required to secure permits or permissions from any Governmental Authority to enable such Party to fulfill its obligations hereunder, the inability of such Party to acquire, or delays on the part of such Party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such materials, supplies, permits, and permissions. “Force Majeure Event” also includes any event of force majeure occurring with respect to the facilities or services of either Party’s Affiliates or service providers providing a service or providing any equipment, goods, supplies or other items necessary to the performance of such Party’s obligations hereunder.

 

10.3         Strikes.  The settlement of strikes or lockouts shall be entirely within the discretion of the Party having the difficulty, and any obligation hereunder to remedy a Force Majeure Event or Other Delay 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.

 

10.4         Notice.  The Party whose performance is affected by a Force Majeure or Other Delay Event must provide Notice to the other Party.  Initial notice may be given orally, but written Notice with reasonably full particulars of the Force Majeure or Other Delay Event is required as soon as reasonably possible after the occurrence of the Force Majeure or Other Delay Event.

 

10.5         Maintenance and Other Operations.  Gatherer may interrupt its performance hereunder for the purpose of making necessary or desirable inspections, alterations, and repairs and Gatherer shall give to Producer reasonable Notice of its intention to suspend its performance hereunder, except in cases of emergency where such Notice is impracticable or in cases where the operations of Producer will not be affected.  Gatherer shall endeavor to arrange such interruptions so as to inconvenience Producer as little as possible.  Service interruptions on the part of either Party that are covered by this provision are included within the definition of “Force Majeure or Other Delay Event” for the purpose of this Agreement.

 

Article 11

Assignment

 

11.1         Restriction on Assignment.  Except as provided below, neither Party may assign or delegate any of its rights or obligations under this Agreement, by operation of law, change of

 

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control, or otherwise, without the prior written consent of the other Party, which consent shall not be unreasonably withheld.

 

11.2         Inurement.  Subject to Section 11.1, this Agreement binds and inures to the benefit of the Parties and their respective successors and assigns.

 

Article 12
 Jurisdiction

 

This Agreement is subject to, and each Party will comply with, all Applicable Laws of any Governmental Authority now or hereafter having jurisdiction over either or both Parties or their facilities.

 

Article 13
 Notices

 

13.1         Notice.  All notices, invoices, payments, and other communications made under this Agreement (“Notice”) shall be in writing and sent to:

 

To Producer:

 

Gasco Production Company

 

8 Inverness Drive East, Suite 100

Englewood, Colorado 80112

Attention: Mr. Michael K. Decker

Telephone: 303-483-0044

Facsimile: 303-483-0011

 

To Gatherer:

 

Monarch Natural Gas, LLC

 

5613 DTC Parkway, Suite 200

Greenwood Village, Colorado 80111

Attention: Mr. Judson Williams

Telephone: 303-

Facsimile: 303-

 

13.2         Method.  All Notices required hereunder may be sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service, first class mail, or hand delivered.

 

13.3         Delivery.  Notice shall be given when received on a Business Day by the addressee.  In the absence of proof of the actual receipt date, the following presumptions will apply.  Notices sent by facsimile shall be deemed to have been received upon the sending Party’s receipt of its facsimile machine’s confirmation of successful transmission.  If the Day on which such facsimile is received is not a Business Day or is after five p.m. on a Business Day, then such

 

21

 

facsimile shall be deemed to have been received on the next following Business Day.  Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving Party.  Notice by first class mail shall be considered delivered 5 Business Days after mailing.

 

Article 14
 Other Provisions

 

14.1         Additional Terms.  The measurement terms and conditions set forth in Exhibit A are incorporated herein by reference.

 

14.2         Governing Law.  This Agreement shall be construed, enforced, and interpreted according to the laws of the State of Colorado, without regard to the conflicts of law rules thereof.  Each Party hereby irrevocably submits to the jurisdiction of the courts of the State of Colorado and the federal courts of the United States of America located in Arapahoe County, Colorado over any dispute or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each Party irrevocably agrees that all claims in respect of such dispute or proceeding shall be heard and determined in such courts.  Each Party hereby irrevocably waives, to the fullest extent permitted by Applicable Law, any objection which it may now or hereafter have to the venue of any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby brought in such court or any defense of inconvenient forum for the maintenance of such dispute or action.  Each Party agrees that a judgment in any dispute heard in the venue specified by this section may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law.

 

14.3         WAIVER OF JURY TRIAL.  EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT.

 

14.4         Representations.  Each Party represents to the other Party during the term hereof as follows:  (i) there are no suits, proceedings, judgments, or orders by or before any governmental authority that materially adversely affect its ability to perform this Agreement or the rights of the other Parties hereunder, (ii) it is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation, and it has the legal right, power and authority and is qualified to conduct its business, and to execute and deliver this Agreement and perform its obligations hereunder, (iii) the making and performance by it of this Agreement is within its powers, and has been duly authorized by all necessary action on its part, (iv) this Agreement constitutes a legal, valid, and binding act and obligation of it, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws affecting creditor’s rights generally, and with regard to equitable remedies, to the discretion of the court before which proceedings to obtain same may be pending, and (v) there are no bankruptcy, insolvency, reorganization, receivership or other arrangement proceedings pending or being contemplated by it.

 

14.5         Waiver.  No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

 

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14.6         Rules of Construction.  In construing this Agreement, the following principles shall be followed:

 

(i)                                     no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Agreement;

 

(ii)                                  examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

 

(iii)                               the word “includes” and its syntactical variants mean “includes, but is not limited to” and corresponding syntactical variant expressions;

 

(iv)                              a defined term has its defined meaning throughout this Agreement, regardless of whether it appears before or after the place in this Agreement where it is defined;

 

(v)                                 the plural shall be deemed to include the singular, and vice versa; and

 

(vi)                              each gender shall be deemed to include the other genders.

 

14.7         No Third Party Beneficiaries.  There is no third party beneficiary to this Agreement.

 

14.8         Headings.  The headings and subheadings contained in this Agreement are used solely for convenience and do not constitute a part of this Agreement between the Parties and shall not be used to construe or interpret the provisions of this Agreement.

 

[Remainder of page intentionally left blank]

 

23

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

 

	
 
    	
Producer:
    
	
 
    	
 
    
	
 
    	
GASCO   PRODUCTION COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   W. King Grant
    
	
 
    	
Name:
    	
W.   King Grant
    
	
 
    	
Title:
    	
President   and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Gatherer:
    
	
 
    	
 
    
	
 
    	
MONARCH   NATURAL GAS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   C. Judson Williams
    
	
 
    	
Name:
    	
C.   Judson Williams
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
					

 

SIGNATURE PAGE TO AMENDED AND RESTATED GAS GATHERING & PROCESSING AGREEMENT

 

 

List of Exhibits and Schedules

 

Exhibit A              Additional Terms and Conditions

Exhibit B              Chipeta Processing Agreement

Exhibit C              Questar Wet Line Agreement

Exhibit D              Form of Recording Memorandum

 

Schedule 1           Description of AMI

Schedule 2           Receipt Points, Well Names and Locations, and Delivery Points

Schedule 3           Leases

Schedule 4           Purchase Option

Schedule 5           Letter Agreement Regarding Payment

 

 

Exhibit A

ADDITIONAL TERMS AND CONDITIONS

 

The following terms and conditions shall apply to the gathering of Producer’s Gas on the Gathering System.

 

1.             Measurement and Testing.

 

(a)           Receiving Transporters.  The ultimate custody transfer point for Producer’s Gas will be at the interconnection between the facilities of Gatherer and the Receiving Transporter and therefore the volume attributable to Producer will be an allocated volume based on Producer’s pro rata portion of all Gas delivered to the Receiving Transporter less Producer’s allocated share of FL&U, Plant Shrinkage, Drip Liquids shrinkage, and any other adjustments hereunder.

 

(b)           Meters.  Producer shall own, maintain and operate custody transfer meters at each Receipt Point installed as of the Effective Date.  Electronic data from those meters shall be provided to Gatherer at no cost, and shall be the basis for custody transfer at those Receipt Points.  Such electronic data shall be available to Gatherer on a real time basis, but in no event shall the necessary production information be provided to Gatherer later than 5 Days after the end of each Month.  For meters installed after the Effective Date, Gatherer, or its designee, shall own, maintain and operate those receipt meters, when installed, and also the measuring stations at the Delivery Points. Either Gatherer or Producer may install, maintain, and operate, at their own expense, such check measuring equipment as desired and where appropriate.  Such equipment shall be installed so as not to interfere with the operation of the other Party’s measuring equipment.  At any time during the Term hereof, Gatherer shall have the right to install its own meters at any of the Receipt Points existing as of the Effective Date.  In that event, for those Receipt Points, (i) Gatherer’s meters will become the custody transfer meters, and (ii) the Receipt Point location will transfer from the outlet flange to the inlet flange of the meter run.

 

(c)           Practices.  All meters, whether owned and operated by Producer or Gatherer, shall be constructed, installed, and operated in accordance with the following standards depending on the type of meters used.

 

(1)           Orifice Meters - In accordance with American Gas Association Report Number 3, dated 2000 or the most recent edition as agreed to by Gatherer and Producer.  If Gas pulsation problems occur upstream of the Receipt Points or downstream of the Delivery Points, Producer, or their designee, shall take whatever steps necessary to mitigate such pulsation.

 

(2)           Positive Meters - In accordance with American National Standards Institute B109.2, dated 2000 or the most recent edition as agreed to by Gatherer and Producer.

 

(3)           Turbine Meters - In accordance with American Gas Association Report Number 7, dated 1996 or the most recent edition as agreed to by Gatherer and Producer.

 

 

(4)           Electronic Transducers and Flow Computers (solar and otherwise) - in accordance with the applicable American Gas Association standards, including but not limited to American Gas Association Measurement Committee Report Nos. 3, 5, 6 and 7 and any subsequent amendments, revisions, or modification thereof.

 

(5)           Ultrasonic Meters - In accordance with American Gas Association Report Number 9, dated 2003 or the most recent edition as agreed to by Gatherer and Producer.

 

Notwithstanding anything contained in this Section 1(c) to the contrary, neither Party shall be required to replace or make any alterations to its measuring equipment as a result of any subsequent amendments, revisions, or modifications of the American Gas Association Reports cited in Subparagraphs (1) through (5) of this Section 1(c), unless the Parties mutually agree to such replacement or alteration.

 

(d)           Testing.  Either Party shall give reasonable Notice to the other Party of any cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting of its receipt meters or the measuring equipment at the Delivery Points to permit both Parties to have a representative present.  The official records from the measuring equipment shall remain the property of Gatherer.  Upon request, Gatherer will submit its records, together with calculations therefrom, to Producer for inspection and verification, subject to return to Gatherer or its designee within 30 Days after receipt thereof.

 

(e)           Accuracy of Meters.  All meters shall be verified (and calibrated) by its owner at the following intervals: (i) if the deliveries of Gas through the meter average less than 100 Mcf/d, at least once each Year, (ii) if the deliveries of Gas through the meter average between 100 Mcf/d and 500 Mcf/d, at least once every 6 Months, (iii) if the deliveries of Gas through the meter average between 500 Mcf/d and 5,000 Mcf/d, at least once every 3 Months, or (iv) if the deliveries of Gas through the meter average more than 5,000 Mcf/d, at least once each Month.  If, upon any test, the measuring equipment is found to be inaccurate by 2% or less, previous readings of such equipment will be considered correct in computing the deliveries of Producer’s Gas hereunder, but such equipment shall immediately be adjusted to record accurately.  If, upon any test, the measuring equipment is found to be inaccurate by more than 2% of the average flow rate since the last test, then any previous recordings of such equipment shall be corrected to zero (0) error for any period which is known definitely or agreed upon, using the procedure set forth in Section 1(g).  If such period is not known or agreed upon, such correction shall be made for a period covering 1/2 of the time elapsed since the date of the latest test, but not to exceed 16 Days when the equipment is tested every Month and not to exceed 45 Days when the equipment is tested every 3 Months.  If either Party desires a special test of any measuring equipment, at least 72 hours advance Notice shall be given to the other Party, and both Parties shall cooperate to secure a prompt test of the accuracy of such equipment.  If the measuring equipment so tested is found to be inaccurate by 2% or less, the testing Party shall have the right to bill the requesting Party for the costs incurred due to such special test, including any labor and transportation cost, and Producer shall pay such costs promptly upon invoice thereof.

 

(f)            Questar Measurement.  Beginning on April 1, 2012, the Parties agree to use the volume of Producer’s Gas measured at the Questar Delivery Point, plus (i) metered volumes of Producer’s Gas used by Producer off-lease for oil well operations; (ii) metered volumes of

 

 

Producer’s Gas sold to third-parties upstream of the Questar Delivery Point; (iii) compressor Fuel Gas; (iv) Drip Liquids shrinkage; and (v) Riverbend Plant Products shrinkage, and allocate such volume back to each Well.  Notwithstanding any other provision in this Agreement, the Parties agree to use the measurement procedure set forth in this subsection (f) until such time as the parties mutually agree in writing otherwise.

 

(g)           Adjustments.  When Gas is being measured at the Receipt Points, if any measurement equipment is out of adjustment, out of service, or out of repair and the total calculated hourly flow rate through each meter run is found to be in error by an amount of the magnitude described in Section 1(e), the total quantity of Producer’s Gas delivered shall be redetermined in accordance with the first of the following methods which is feasible:

 

(1)           by using the registration of any check meters, if installed and accurately registering (subject to testing as described in Section 1(e)), or

 

(2)           where parallel multiple meter runs exist, by calculation using the registration of such parallel meter runs; provided that they are measuring Producer’s Gas from upstream headers in common with the faulty metering equipment, are not controlled by separate regulators, and are accurately registering; or

 

(3)           by correcting the error by straightforward application of a correcting factor to the quantities recorded for the period (if the net percentage of error is ascertainable by calibration, tests, or mathematical calculation); or

 

(4)           by estimating the quantity, based upon deliveries made during periods of similar conditions when the meter was registering accurately.

 

(h)           Meter Records Retention.  Gatherer shall retain and preserve for a period of at least 2 Years all measurement results, test data and other similar records.

 

2.             Measurement Specifications.

 

(a)           Units.  The unit of volume for measurement shall be 1 cubic foot.  Such measured volumes shall be multiplied by their Gross Heating Value per cubic foot and divided by 1,000,000 to determine MMBtu’s delivered hereunder.

 

(b)           Practices.  Computations for Gas measurement shall be made in accordance with the following depending on the type of meters used:

 

(1)           Orifice Meters - In accordance with American Gas Association Report Number 3, dated 2000 or the most recent edition as agreed to by Gatherer and Producer.

 

(2)           Positive Meters - In accordance with American National Standards Institute B109.2, dated 2000 or the most recent edition as agreed to by Gatherer and Producer.

 

(3)           Turbine Meters - In accordance with American Gas Association Report Number 7, dated 1996 or the most recent edition as agreed to by Gatherer and Producer.

 

 

(4)           Electronic Transducers and Flow Computers (solar and otherwise) - in accordance with the applicable American Gas Association standards, including but not limited to American Gas Association Measurement Committee Report Nos. 3, 5, 6 and 7 and any subsequent amendments, revisions, or modification thereof.

 

(5)           Ultrasonic Meters - In accordance with American Gas Association Report Number 9, dated 2003 or the most recent edition as agreed to by Gatherer and Producer.

 

(c)           Temperature.  The temperature of Producer’s Gas typically shall be determined by a temperature measurement device installed as part of the selected meter and flow computer combination, or such other means of recording temperature as may be mutually agreed upon by the Parties.  The temperature so recorded, obtained while Producer’s Gas is being delivered, shall be the applicable flowing Gas temperature for purposes of calculating the actual gas flow.

 

(d)           Product Composition of Producer’s Gas.  Gatherer shall obtain a continuous flow monthly composite sample or a monthly spot sample of the Gas delivered by Producer hereunder while the Gas is being produced under normal operating conditions.  Analysis of such sample shall be made by Gatherer, at Gatherer’s election, by gas chromatography or other industry approved method, and the results reported as mol percent along with other composition parameters.

 

(e)           Pressure.  For purposes of measurement and meter calibration, the atmospheric pressure for each of the Receipt Points and Delivery Points shall be assumed to be the pressure value determined by Gatherer, or its designee, for the county elevation in which such point is located pursuant to generally accepted industry practices irrespective of the actual atmospheric pressure at such points from time to time.  For the purposes herein, such atmospheric pressure will be assumed to be 14.65 pounds per square inch absolute.

 

(f)            Gross Heating Value, Specific Gravity, and Compressibility.  The Gross Heating Value, Specific Gravity, and Compressibility of the Gas delivered at the Receipt Points and Delivery Points shall be determined from compositional analysis as described in Section 2(d) above as outlined in Gas Processors Association Standard 2172 Calculation of Gross Heating Value, Relative Density, and Compressibility of Natural Gas Mixtures from Compositional Analysis.

 

(g)           Other Contaminants.  Other tests to determine water content, sulfur, hydrogen sulfide, inert gases, and other impurities in Producer’s Gas shall be conducted whenever requested by either Party and shall be conducted in accordance with standard industry testing procedures.

 

3.             Quality Specifications.

 

(a)           Producer’s Gas.  Producer’s Gas delivered at each Receipt Point shall meet the quality specifications imposed by the Receiving Transporter, but in no event shall exceed the specifications as follows (except for hydrocarbon dewpoint specifications for Producer’s Gas connected to the Plant):

 

(1)           Water:  No free water.

 

 

(2)           Hydrogen Sulfide:  Producer’s Gas shall not contain more than 1⁄4 grain of hydrogen sulfide per 100 cubic feet of Gas at the Receipt Points, as determined by quantitative tests.  Gatherer is not generally waiving the hydrogen sulfide specification; however, the Parties acknowledge that: 1) Producer and Gatherer have existing hydrogen sulfide treating capabilities on their respective systems, and 2) Producer’s Gas may occasionally and from time-to-time exceed this specification at the Receipt Point.  Gatherer agrees to operate and maintain the existing treating facilities on its Gathering System, and to cooperate with the downstream transporter, to minimize the affect of hydrogen sulfide.

 

(3)           Total Sulfur:  Producer’s Gas shall not contain more than 5 grains of total sulfur per 100 cubic feet of Gas at the Receipt Points.

 

(4)           Temperature:  Producer’s Gas shall not have a temperature less than 40oF or more than 120 oF.

 

(5)           Carbon Dioxide:  Producer’s Gas shall not contain more than 2% by volume of carbon dioxide.

 

(6)           Oxygen:  Producer’s Gas shall contain no oxygen.

 

(7)           Nitrogen:  Producer’s Gas shall not contain more than 2% by volume of nitrogen.

 

(8)           Total Inert Gas: Producer’s Gas shall not contain more than 3% by volume of total inert gases.

 

(9)           Objectionable Liquids and Solids and Dilution:  Producer’s Gas shall be free of all objectionable liquids and solids, including any free liquids at the Receipt Point, and shall not contain any hydrocarbons which might condense to free liquids in the pipeline under normal pipeline conditions and shall be commercially free from dust, gums, gum-forming constituents, and other liquids or solid matter which might become separated from Producer’s Gas in the course of transportation through pipelines.

 

(10)         Gross Heating Value:  Producer’s Gas shall not have a Gross Heating Value less than 950 Btu’s per cubic foot of Gas.

 

(b)           Change in Receiving Transporter’s Specifications.  Notwithstanding the Gas specifications above, if a Receiving Transporter notifies Gatherer or Producer of different or additional quality specifications required at the Delivery Points and different from those outlined in Section 3(a) or (b) above, Gatherer will notify Producer of any such different or additional specifications as soon as practicable after being notified of such specifications.  Such revised specifications will be considered as the quality specifications for Producer’s Gas under this Agreement for as long as required by the Receiving Transporter.

 

(c)           Failure to Meet Specifications.  If Producer’s Gas delivered hereunder fails to meet any of the quality specifications stated in Section 3(a) or (b) above, Gatherer (i) may install equipment, at Producer’s expense, on the Gathering System to treat such nonconforming

 

 

Producer’s Gas or (ii) may refuse to accept such Producer’s Gas for so long as Producer is unable to deliver Producer’s Gas conforming to such specifications.  If Gatherer, in its sole discretion, accepts Producer’s Gas that fails to meet any of the quality specifications stated above, Gatherer shall not be deemed to have waived Gatherer’s right to refuse to accept non-specification Gas at a subsequent time.  In addition, if Producer continues to flow any Gas that fails to meet the quality specifications under this Section 3, Producer shall be responsible for (i) any fees charged by any Receiving Transporter and (ii) any costs, expenses, damages incurred by Gatherer or caused by such non-specification Producer’s Gas.

 

4.             Easements.

 

(a)           Access.  To the extent that Producer may contractually or lawfully do so under its leasehold interests and other property rights in the Leases, Producer hereby grants, convey, assign, and transfer to Gatherer a right of way and easement across the Leases, and across adjoining lands in which Producer may have an interest, for the purposes of installing, using, inspecting, repairing, operating, replacing, and removing Gatherer’s facilities (including installation of new custody transfer meters and other equipment) used or useful in the performance of this Agreement.  Any property of Gatherer placed in or on any of such land shall remain the property of Gatherer, subject to removal by Gatherer when necessary or desirable, in Gatherer’s sole judgment, or upon the expiration or termination of this Agreement.  Gatherer shall have a reasonable time after the expiration or termination of this Agreement to remove its property.

 

Gatherer and Producer shall cooperate to establish separate rights-of-way in Gatherer’s name for its facilities.

 

(b)           Further Assurances.  Producer shall execute and deliver such additional instruments and other documents, and shall take such further actions as may be reasonably necessary or appropriate, to effectuate, carry out, and comply with the terms of this Section 4.

 

5.             Uneconomic Segments.  At any time, Gatherer shall have the right to declare, acting reasonably and in good faith, that the operation of all or part of any segment or segments of the Gathering System has become uneconomic by giving Notice to Producer.  Upon receipt of such Notice by Producer, Gatherer and Producer shall negotiate in good faith to reach agreement on additional gathering fees to be paid by Producer for Producer’s Gas gathered on such segment or segments that would cause the operation of that segment or segments of the Gathering System to become economic to Gatherer.  If the Parties fail to reach agreement on such additional gathering fees within a reasonable period of time, then Gatherer will have the right, upon no less than 90 Days advance Notice to Producer, to discontinue gathering Producer’s Gas on such segment or segments of the Gathering System.  As to such discontinued services on those segment or segments of the Gathering System, there shall be no further obligation to Producer under this Agreement, and that portion of Producer’s Gas so affected shall be released. To the extent that any of Producer’s Gas is so released, there shall be a corresponding proportional decrease in the Quarterly Minimum Volume obligation for the remainder of the Term.

 

 

Exhibit B

 

Chipeta Processing Agreement

 

 

 

GAS PROCESSING AGREEMENT

 

This GAS PROCESSING AGREEMENT (“Agreement”) is made and entered into this 21st day of September, 2011, by and between  CHIPETA PROCESSING LLC, a Delaware limited liability company (“Processor”), and GASCO ENERGY, INC., (“Processing Customer”).  Processor and Processing Customer may be referred to individually as “Party,” and collectively as the “Parties.”

 

SECTION 1.        SCOPE OF AGREEMENT AND DEFINITIONS.

 

(a)           Scope of Agreement.  Processing Customer agrees to deliver Gas, and Processor agrees to receive and process Gas and redeliver Residue Gas, in accordance with this Agreement.  Subject to the terms of this Agreement, Processor shall have the exclusive right to receive into its Processing Plant and process all Gas owned or controlled by Processing Customer within the Dedication Area, or which is delivered at the Plant Receipt Point by Questar and with respect to which Processing Customer has the right to process.

 

(b)           General Terms and Conditions.  This Agreement incorporates, and is subject to, the General Terms and Conditions attached hereto, together with the Exhibits attached hereto.  In the event of a conflict between the provisions of this Agreement and the General Terms and Conditions or the Exhibits, the provisions of this Agreement shall prevail.

 

(c)           Defined Terms.  For purposes of this Agreement, the General Terms and Conditions and the Exhibits attached hereto, the following definitions shall apply:

 

(1)           Chipeta Plant.  The term “Chipeta Plant” means Processor’s primary Processing Plant for the services provided hereunder located in Section 15, Township 9 South, Range 22 East, Uintah County, Utah.  The Chipeta Plant includes all facilities within the “Chipeta Plant Complex” and appurtenant facilities.

 

(2)           Chipeta Plant Complex.  The term “Chipeta Plant Complex” has the meaning given to such term in the Declaratory Order issued by the Federal Energy Regulatory Commission in FERC Docket No. CP09-48-000 (128 FERC ¶ 61,122).

 

(3)           Contracted Cryogenic Capacity.  The Term “Contracted Cryogenic Capacity” means the daily quantity of cryogenic processing capacity specified in Section 5(a)(2) (Option 1), by a Contracted Cryogenic Customer.

 

(4)           Contracted Cryogenic Customer.  The term “Contracted Cryogenic Customer” means a Processing Customer which has selected Option 1 under Section 5(a)(2) of this Agreement and specified a Contracted Cryogenic Capacity equal to or greater than 15,000 Mcf/d.

 

(5)           Contracted Cryogenic Customer Overrun Quantity.  The term “Contracted Cryogenic Customer Overrun Quantity” means the Net Delivered Volume of Gas tendered for processing under this Agreement by a Contracted Cryogenic Customer in excess of the Contracted Cryogenic Capacity reserved by such Customer pursuant to Section 5(a)(2) of this Agreement.

 

(6)           Effective Date.  The term “Effective Date” means the date when processing service through the Processing Plant commences.

 

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(7)           FERC.  The term “FERC” means the Federal Energy Regulatory Commission.

 

(8)           Gas.  The term “Gas” means all hydrocarbon and non-hydrocarbon substances produced from natural gas and/or oil wells and remaining in a gaseous state at the Plant Receipt Point.

 

(9)           Historic Capacity.  The term “Historic Capacity” means the quantity of processing capacity at the Processing Plant expressly or impliedly reserved by Processor to satisfy its contractual obligations under Processor’s Gas Processing Agreements with each Historic Customer for processing of such Customer’s Gas.

 

(10)         Historic Customer.  The term “Historic Customer” means any entity which, prior to March 1, 2011, entered into a contract with Processor for processing capacity and processing services at the Processing Plant.

 

(11)         Interruptible Cryogenic Customer.  The term “Interruptible Cryogenic Customer” means a Processing Customer which has selected Option 2 under Section 5(a)(2) of this Agreement.

 

(12)         Keep Whole Gas.  The term “Keep Whole Gas” means the fraction, if any, of Processing Customer’s Gas to which neither cryogenic processing or refrigeration processing capacity is allocated under Section 5(b)(3) and (4) of this Agreement, including Gas with respect to which Processor exercises it right under Section 8.2(iii) of the General Terms and Conditions to cease processing for the reasons set forth in such Section.

 

(13)         ML 104.  The term “ML 104” means Questar’s Main Line 104 facilities.

 

(14)         ML 40.  The term “ML 40” means collectively the portion of Questar’s Main Line 40 and laterals JL 45, 46 and 47 described in Section 3(a)(1)(B) of this Agreement.

 

(15)         Nameplate Capacity.  The term “Nameplate Capacity” means the stated design capacity of the cryogenic processing facilities at the Chipeta Plant, which capacity shall be deemed to be 600 MMcf/day on and after the in-service date of Train III.

 

(16)         Net Delivered Volume.  The term “Net Delivered Volume” means the aggregate volume of Processing Customer’s Gas delivered at the Questar Receipt Points, adjusted to reflect the proportionately allocated change, if any, between the aggregate volume measured at all Questar Receipt Point(s) and the volume measured at the Plant Receipt Point, minus two-tenths of one percent (0.20%) Processing Plant Fuel.

 

(17)         Processing Plant.  The term “Processing Plant” means the Chipeta Plant as well as any other plant or third party arrangement that Processor enters into to process all of Processing Customer’s Gas committed for processing pursuant to this Agreement.  Such term includes the Natural Buttes Plant.

 

(18)         Plant Products.  The term “Plant Products” means commercial sulfur, carbon dioxide, nitrogen, helium, argon, other inert gases, ethane, propane, iso-butane, normal butane, iso-pentane, normal pentane, pentanes plus, hexanes plus, any other liquid hydrocarbon product except for a liquefied methane product, or any mixtures thereof, and any incidental methane included in any of the aforementioned products, which are separated, extracted, or condensed from Gas processed in the Processing Plant.

 

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(19)         Plant Receipt Point.  The term “Plant Receipt Point” means the inlet flange of the custody transfer meter where Gas is delivered by Questar to the Processing Plant.

 

(20)         Questar.  The term “Questar” means Questar Pipeline Company.

 

(21)         Questar Receipt Point.  The term “Questar Receipt Point” means the point on ML 40 at which Processing Customer’s Gas is delivered to Questar for transportation and delivery to the Plant Receipt Point.

 

(22)         Receipt Point Thermal Content.  The term “Receipt Point Thermal Content” means the Thermal Content, based on the data provided by Questar pursuant to Section 4(b)(1) of this Agreement, of the Net Delivered Volume of Processing Customer’s Gas delivered to Processor at the Plant Receipt Point.

 

(23)         Redelivery Point.  The term “Redelivery Point” means the point(s) at which Residue Gas is redelivered by Processor to Processing Customer, or to Processing Customer’s designee, or to others entitled thereto, as designated on Exhibit B.

 

(24)         Refrigeration Processing Customer.  The term “Refrigeration Processing Customer” means a Processing Customer which has selected Option 3 under Section 5(a)(2) of this Agreement.

 

(25)         Residue Gas.  The term “Residue Gas” means Gas which is redelivered by Processor to, or for the account of, Processing Customer at the Redelivery Point(s), as required under the terms of this Agreement.

 

(26)         Thermal Content.  The term “Thermal Content” means,

 

(A)          in the case of Gas, the product of the measured volume in Mcf multiplied by the Gross Heating Value per Mcf, adjusted to the same pressure base and expressed in MMBtus; and

 

(B)           in the case of Plant Products, the product of the measured volume in gallons multiplied by the Gross Heating Value per gallon.

 

The determination of Thermal Content shall be based upon, inter alia, data provided by Questar pursuant to Section 4(b)(1) of this Agreement.

 

(27)         Train III.  The term “Train III” means a 300 MMcf/d cryogenic processing facility to be located at the Chipeta Plant.

 

(28)         In addition to the definitions set forth in this subsection, capitalized terms not defined in this subsection are given the meaning given to such terms under the relevant provision of this  Agreement or the General Terms and Conditions attached hereto.  In the event of a conflict between any definition in the General Terms and Conditions and a definition in this Agreement, the definition in this Agreement shall prevail.

 

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SECTION 2.        EFFECTIVE DATE AND TERM.

 

(a)           Effective Date.

 

(1)           Not less than three (3) days prior to the date when processing service through the Processing Plant is scheduled to commence, Processor shall provide Processing Customer written notice of such scheduled date.  Processor shall thereafter notify Processing Customer on a timely basis of any delays in such scheduled date.

 

(2)           The obligations and duties of the Parties under Sections 4 through 7 of this Agreement shall become effective on the Effective Date following the notice provided to Processing Customer by Processor in accordance with paragraph (1) of this subsection.

 

(3)           Processor shall provide written notice to the Processing Customer of the in-service date of Train III.

 

(b)           Primary Term.

 

(1)           Unless extended pursuant to paragraph (2) of this subsection, this Agreement shall remain in full force and effect for a “Primary Term” of ten (10) years following the first day of the first Accounting Period commencing on or after the in-service date of Train III.

 

(2)           Upon expiration of the Primary Term or any extension thereof under this paragraph, the term of this Agreement shall be extended for a period of one (1) year unless terminated by either Party giving written notice to the other Party not less than one hundred eighty (180) days prior to the expiration of the then-current term.

 

SECTION 3.        CONDITIONS PRECEDENT.

 

(a)           For Processing Customer.  The obligations of Processing Customer are contingent upon the following conditions precedent, all of which must have occurred (or been waived by Processing Customer) on or before December 31, 2012.  If any of the conditions precedent have not been satisfied, or waived by Processing Customer, on or before December 31, 2012, the obligations of the Parties under this Agreement shall thereafter be void and of no further force and effect.

 

(1)           On or before December 31, 2012, Questar shall have —

 

(A)          completed construction and placed into service the extension of ML 104 approved in FERC Docket No. CP11-25-000; and

 

(B)           established a separate chricondentherm hydrocarbon dew point (“CHDP”) standard for a portion of Questar’s Main Line 40 and laterals JL 45, 46 and 47, and completed construction of any ancillary facilities, converting this segment of Main Line 40 to a high CHDP Gas line for delivery of Gas to the Processing Plant.

 

(2)           On or before December 31, 2012, Processor shall have completed construction of Train III and discharge pipeline facilities to connect the Processing Plant to Questar’s interstate natural gas transportation facilities.

 

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(3)           On or before December 31, 2012, Processor shall have provided written notice to Processing Customer of the date when processing service through the Processing Plant shall commence.

 

(b)           For Processor.  The obligations of Processor are contingent upon the following conditions precedent, all of which must have occurred (or been waived by Processor) on or before the date specified herein.  If all of the conditions precedent have not been satisfied, or waived by Processor, on or before December 31, 2012, the obligations of the Parties under this Agreement shall thereafter be void and of no further force and effect.

 

(1)           On or before December 31, 2012, Questar shall have obtained all required regulatory approvals from the FERC, in form and substance satisfactory to Questar and to Processor, authorizing Questar to construct and operate the extension of ML 104.

 

(2)           On or before December 31, 2012, Questar shall have completed construction and placed into service the extension of ML 104 approved in FERC Docket No. CP11-25-000;

 

(3)           On or before December 31, 2012, Processor shall have obtained a clarification, in form and substance satisfactory to Processor, from the FERC of the Declaratory Order issued in FERC Docket No. CP09-48-000 (128 FERC ¶ 61,122) that, following modifications necessary to facilitate receipt of  Gas from ML 40, the “Plant Interconnect Line” (as described in such Order) will retain its non-jurisdictional status, exempt from regulation under the Natural Gas Act; and

 

(4)           On or before December 31, 2012, Processor shall have obtained (i) all necessary right-of-way easements for construction of certain plant pipeline facilities across federal, state and/or tribal lands, and (ii) consent from the Ute Indian Tribe of the Uintah and Ouray Reservation (the “Tribe”) pursuant to the Surface Use and Access Agreement (“SU&A Agreement”) between Kerr-McGee Oil and Gas Onshore LP and the Tribe, dated November 15, 2006, and waiver by the Tribe of the fee specified in Section 1(b)(v) of the SU&A Agreement.

 

SECTION 4.        PROCESSING CUSTOMER OBLIGATIONS.

 

(a)           Delivery of Gas.  Commencing on the Effective Date —

 

(1)           Processing Customer shall discontinue all processing operations upstream from the Processing Plant, other than those on-lease facilities required to comply with Questar’s CHDP standard for ML 40 or for use in on-lease field operations.

 

(2)           Processing Customer shall meet its obligation to deliver Processing Customer’s Gas to Processor by utilizing services provided under an agreement with Questar to deliver Processing Customer’s Gas connected to ML 40 to the Plant Receipt Point for processing.

 

(b)           Authorization To Provide Data.  On or before the Effective Date, Processing Customer shall execute and deliver to Processor written authorization, in form and substance satisfactory to Questar, authorizing Questar to determine the quantity and composition of the Gas delivered by Processing Customer to Questar at each Questar Receipt Point, and to provide to Processor information respecting the volume, Btu content, and composition of the Gas delivered by Processing Customer to Questar at each such Questar Receipt Point.

 

5

 

(1)           The determination of the composition of Processing Customer’s Gas at the Questar Receipt Point(s), the measurement of volume and the measurement of Thermal Content by Questar shall be in accordance with Article 14 of Questar’s Gas Tariff on file with the FERC.  The measurement of volume and Thermal Content by Processor shall be in accordance with Article 6 of the General Terms and Conditions.

 

(2)           Processor agrees to treat the information provided to Processor by Questar under this subsection as confidential and to utilize such information solely for purposes of administering this Agreement.

 

(c)           Disposition of Residue Gas.  With respect to Residue Gas redelivered by Processor to Processing Customer or for Processing Customer’s account, Processing Customer shall dispose of such Residue Gas in accordance with Exhibit C.

 

SECTION 5.        RESERVATION AND ALLOCATION OF PROCESSING PLANT CAPACITY.

 

(a)           Designation Of Contracted Service.

 

(1)           Processing Customer shall have the option to select from the following services under this Agreement:

 

(A)          Option 1:               To reserve, effective on the commencement of operation of Train III, a specified amount of capacity in the Processing Plant for cryogenic processing, within the Nameplate capacity, of Processing Customer’s Gas, provided that such Customer’s Contracted Cryogenic Capacity is at least equal to 15,000 Mcf/d.  To the extent that cryogenic processing capacity is not allocated to Contracted Cryogenic Customer’s Gas pursuant to subsection (b)(4) or (5) of this Section, Option 1 includes refrigeration processing service and compression service.

 

(B)           Option 2:               To contract effective on the commencement of operation of Train III, for cryogenic processing of Processing Customer’s Gas to the extent that cryogenic processing capacity within the Nameplate Capacity is available, without reserving any specified Contracted Cryogenic Capacity.   To the extent that cryogenic processing capacity is not allocated to Interruptible Cryogenic Customer’s Gas pursuant to subsection (b)(4) or (5) of this Section, Option 2 includes refrigeration processing service and compression service.

 

(C)           Option 3:               To contract for refrigeration processing service at the Processing Plant.  To the extent that refrigeration processing capacity is not allocated to Refrigeration Processing Customer’s Gas pursuant to subsection (b)(4) or (5) of this Section, Option 3 includes compression service.

 

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(2)           Processing Customer hereby elects (check one and initial):

 

	
o
    	
Option   1
    	
Contracted   Cryogenic Capacity: 25,000 Mcf/d
    	
/s/MKD
    
	
 
    	
 
    	
 
    	
(Initial)
    
	
 
    	
 
    	
 
    	
 
    
	
o
    	
Option   2
    	
Interruptible   Cryogenic Processing
    	
 
    
	
 
    	
 
    	
 
    	
(Initial)
    
	
 
    	
 
    	
 
    	
 
    
	
o
    	
Option   3
    	
Refrigeration   Processing
    	
 
    
	
 
    	
 
    	
 
    	
(Initial)
    

 

(3)           If Processing Customer has elected service under Option 1 —

 

(A)          commencing the first Accounting Period following the in-service date of Train III, Processing Customer shall deliver at the Plant Receipt Point an average daily Net Delivered Volume equal to at least Ninety percent (90%) of the Contracted Cryogenic Capacity specified in paragraph (2) (Option 1) of this subsection (the “Minimum Daily Quantity”) during each subsequent Accounting Period.

 

(B)           following the first twelve Accounting Periods commencing after the in-service date of Train III, and annually thereafter, Processor shall determine whether Processing Customer failed to deliver to Processor during the immediately preceding twelve Accounting Periods (“Annual Accounting Period”) a quantity of Gas equal to or greater than the product of the Minimum Daily Quantity times the aggregate number of days in the Annual Accounting Period (“Minimum Annual Quantity”).

 

(i)            If Processing Customer fails to deliver to Processor the Minimum Annual Quantity in any Annual Accounting Period, Processor shall determine the deficient Gas quantity for such Period and Processing Customer agrees to pay Processor an amount  (“Deficiency Payment”) determined by multiplying —

 

(I)            the Cryogenic Processing Fee set forth in Section 6(a)(1)(B) of this Agreement (as adjusted pursuant to Section 6(e))

by

(II)           such deficient Gas quantity.

 

(ii)           Processing Customer shall not be obligated to make a Deficiency Payment with respect to any volumes which Processing Customer attempted to deliver to Processor during such Annual Accounting Period and Processor was unable to receive and process.

 

(iii)          Processing Customer shall pay the Deficiency Payment within thirty (30) days after receipt of an invoice from Processor for the Deficiency Payment amount, setting forth the basis on which such Deficiency Payment was calculated in sufficient detail to enable Processing Customer to verify such amount.

 

(b)           Allocation of Processing Plant Capacity.

 

(1)           Processing Customer shall be entitled to receive cryogenic processing service or refrigeration processing service in accordance with the capacity allocation methodology set forth in this subsection.

 

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(2)           Capacity constraints may exist from time to time requiring curtailment or interruption of cryogenic processing service and/or refrigeration processing service, and curtailment or interruption of cryogenic processing service and/or refrigeration processing service may also be necessary for other reasons.  Processor may decline to schedule and/or may curtail cryogenic processing service and/or refrigeration processing service:

 

(A)          due to Force Majeure;

 

(B)           due to routine repair and maintenance reasonably determined necessary or prudent by Processor;

 

(C)           to rectify imbalances or to conform physical flows to nominations;

 

(D)          to maintain plant integrity;

 

(E)           if there is a dispute over title, ownership or right to tender or to receive Gas; or

 

(F)           to fulfill Processor’s contractual obligations with respect to Historic Capacity.

 

(3)           For the purposes of scheduling and curtailing processing of Gas at the Processing Plant prior to the in-service date of Train III, and in the case of cryogenic processing capacity, within the Nameplate Capacity, processing capacity at the Processing Plant shall be allocated in accordance with the following schedule —

 

(A)          first, to the Net Delivered Volume of each Historic Customer, pro rata based on the ratio of each such Customer’s Historic Capacity to the sum of the aggregate Historic Capacity of all such Customers;

 

(B)           second, to the Net Delivered Volume of Contracted Cryogenic Customers, pro-rata based on the ratio of the Contracted Cryogenic Customer’s Contracted Cryogenic Capacity to the aggregate Contracted Cryogenic Capacity of all such Customers;

 

(C)           third, pro rata, to the Net Delivered Volume of Interruptible Cryogenic Customers;

 

(D)          fourth, pro rata, to the Net Delivered Volume of Gas of Refrigeration Processing Customers; and

 

(E)           thereafter to the Net Delivered Volume of all other Gas.

 

(4)           For the purposes of scheduling and curtailing processing of Gas at the Processing Plant on and after the in-service date of Train III, and in the case of cryogenic processing capacity, within the Nameplate Capacity, processing capacity at the Processing Plant shall be allocated in accordance with the following schedule —

 

(A)          first, to the Net Delivered Volume of each Historic Customer and each Contracted Cryogenic Customer up to such Customer’s Historic Capacity (in the case of

 

8

 

Historic Customers) and Contracted Cryogenic Capacity (in the case of Contracted Cryogenic Customers), pro rata based on the ratio of each such Customer’s Historic Capacity or Contracted Cryogenic Capacity (as the case may be) to the sum of the aggregate Historic Capacity and the aggregate Contracted Cryogenic Capacity of all such Customers;

 

(B)           second, to the Net Delivered Volume of Historic Customers in excess of such Customer’s Historic Capacity and to Contracted Cryogenic Customer Overrun Quantities pro rata based on the ratio of each such Customer’s Historic Capacity (in the case of Historic Customers) or Contracted Cryogenic Capacity (in the case of Contracted Cryogenic Customers) to the sum of the aggregate Historic Capacity and the aggregate Contracted Cryogenic Capacity of all such Customers;

 

(C)           third, pro rata, to the Net Delivered Volume of Interruptible Cryogenic Customers;

 

(D)          fourth, pro rata, to the Net Delivered Volume of Refrigeration Processing Customers; and

 

(E)           thereafter to the Net Delivered Volume of all other Gas.

 

(5)           Gas shall be allocated in accordance with the service contracted under Section 5(a)(2) and the priorities set forth in paragraphs (3) and (4) of this subsection (b) first to cryogenic processing to the extent that such capacity is available within the Nameplate Capacity and, thereafter, to refrigeration processing to the extent that such capacity is available.

 

SECTION 6.         PROCESSING FEES AND CONSIDERATION.

 

(a)           Processing Fees.  As full consideration for the processing of Gas delivered hereunder —

 

(1)           Processing Customer shall pay Processor the applicable Processing Fee listed below, plus Processing Customer’s pro rata share of all applicable electric compression costs —

 

(A)          for Refrigeration Processing Service contracted under Section 5(a)(2), a Processing Fee equal to $0.12 (as adjusted pursuant to subsection (e)) multiplied by the fraction of the Receipt Point Thermal Content of such Customer’s Gas to which refrigeration processing capacity is allocated under Section 5(b)(3) or (4); and

 

(B)           for Cryogenic Processing Service contracted under Section 5(a)(2), a Processing Fee equal to $0.33 (as adjusted pursuant to subsection (e)) multiplied by the fraction of the Receipt Point Thermal Content of  such Customer’s Gas to which cryogenic processing capacity is allocated under Section 5(b)(3) or (4).

 

(2)           Processor shall —

 

(A)          pay Processing Customer a sum equal to 100% of the Net Sales Price, determined pursuant to Section 7 of this Agreement, for each gallon of Processing Customer’s allocated Plant Products determined in accordance with subsection (c) of this Section; and

 

9

 

(B)           redeliver to Processing Customer or for Processing Customer’s account, at the Redelivery Point(s), 100% of the quantity of Processing Customer’s Residue Gas determined in accordance with subsection (d) of this Section;

 

except that, with respect to the fraction of the Receipt Point Thermal Content of Processing Customer’s Gas to which neither cryogenic nor refrigeration processing capacity is allocated under Section 5(b)(3) or (4), Processor shall not be obligated to pay such Customer for any Plant Products which may have been entrained in the Gas at the Plant Receipt Point, and Processor shall redeliver to Processing Customer or for Processing Customer’s account, at the Redelivery Point(s), a quantity of Residue Gas equal to the Receipt Point Thermal Content.

 

(3)           Payment by Processor to Processing Customer of the proceeds specified in paragraph (2)(A) and delivery by Processor to Processing Customer or for Processing Customer’s account of the quantity of Processing Customer’s Residue Gas specified in paragraph (2) shall entitle Processor to own and retain for its own account and benefit, all portions of Processing Customer’s Gas not redelivered under paragraph (2), including all Plant Products, together with all components thereof, which are recovered by Processor in the Processing Plant.

 

(b)           Keep Whole Gas.  With respect to Keep Whole Gas —

 

(1)           Processing Customer shall pay its pro rata share of all applicable electric compression costs;

 

(2)           Processor shall not be obligated to pay for Plant Products which may have been entrained in Keep Whole Gas at the Plant Receipt Point;

 

(3)           Processor shall redeliver at the Redelivery Point a quantity of Residue Gas equal to the Receipt Point Thermal Content of Keep Whole Gas received at the Plant Receipt Point; and

 

(4)           redelivery by Processor of the quantity of Residue Gas specified in paragraph (3) shall entitle Processor to own and retain for its own account and benefit, all portions of such Keep Whole Gas not redelivered under paragraph (3), including all Plant Products entrained in such Keep Whole Gas at the Plant Receipt Point.

 

(c)           Determination of Processing Customer’s Allocated Plant Products.  For purposes of subsections (a)(2) and (3) of this Section, the total quantity of each Plant Product allocated to Processing Customer’s Gas shall be determined in accordance with the following formula:

 

(1)                                  Quantity of applicable Plant Product = [A * B * C * D]

 

Where:

 

A              =     the gallons of the respective Plant Products per Mcf,

 

(i)          except during periods described in clause (ii), as determined from the Questar Receipt Point chromatographic analysis specified in paragraph 6.2 f. of the General Terms and Conditions, and

 

(ii)         during any period when Questar delivers Gas from ML 40 to another processor or to any delivery point other than the Plant Receipt Point, as determined from the chromatographic analysis specified in

 

10

 

paragraph 6.2 f. of the General Terms and Conditions performed by Processor at the Plant Receipt Point on the commingled Gas delivered by Questar;

 

B                =      the Net Delivered Volume in Mcf of Processing Customer’s Gas;

 

C                =      the Online Plant Performance Percentage (stated as a decimal fraction) for the applicable period; and

 

D               =      the Fixed Recovery Percentage (stated as a decimal fraction) for the respective Plant Product.

 

(2)           For purposes of the formula set forth in paragraph (1) of this subsection —

 

(A)          The Fixed Recovery Percentage for purposes of factor “D” shall be determined in accordance with the following tables:

 

(i)            During periods in which and to the extent that refrigeration processing capacity is allocated to such Gas under Section 5(b)(3) and (4):

 

REFRIGERATION PROCESSING

 

	
PLANT PRODUCT
    	
 
    	
FIXED RECOVERY
   PERCENTAGE
    	
 
    
	
Propane
    	
 
    	
16
    	
%
    
	
Iso-butane
    	
 
    	
35
    	
%
    
	
Normal butane
    	
 
    	
38
    	
%
    
	
Natural gasoline
    	
 
    	
72
    	
%
    

 

(ii)           During periods, other than periods described in subparagraph (iii), in which and to the extent that cryogenic processing capacity is allocated to such Gas under Section 5(b)(3) and (4):

 

CRYOGENIC PROCESSING

 

	
PLANT PRODUCT
    	
 
    	
FIXED RECOVERY
   PERCENTAGE
    	
 
    
	
Ethane
    	
 
    	
80
    	
%
    
	
Propane
    	
 
    	
94
    	
%
    
	
Iso-butane
    	
 
    	
95
    	
%
    
	
Normal butane
    	
 
    	
95
    	
%
    
	
Natural gasoline
    	
 
    	
95
    	
%
    

 

(iii)          During any period in which cryogenic processing is performed and Processor rejects ethane at the Processing Plant, to the extent that cryogenic (ethane rejection) processing capacity is allocated to such Gas under Section 5(b)(3) and (4):

 

11

 

CRYOGENIC PROCESSING

(ETHANE REJECTION)

 

	
PLANT PRODUCT
    	
 
    	
FIXED RECOVERY
   PERCENTAGE
    	
 
    
	
Ethane
    	
 
    	
20
    	
%
    
	
Propane
    	
 
    	
80
    	
%
    
	
Iso-butane
    	
 
    	
92
    	
%
    
	
Normal butane
    	
 
    	
92
    	
%
    
	
Natural gasoline
    	
 
    	
95
    	
%
    

 

(B)           The Online Plant Performance Percentage (stated as a decimal fraction) for purposes of factor “C” shall be determined separately with respect to cryogenic processing capacity and refrigeration processing capacity in accordance with the following:

 

	
(Days in Accounting Period X 24) — Downtime
    
	
Total Accounting Period Hours
    

 

Where:

 

Downtime equals the total Processing Plant downtime during the Accounting Period as recorded by the Processing Plant operating logs (or reports).

 

Total Accounting Period Hours equals the number of days in the applicable Accounting Period times 24.

 

(i)            Where 100% of the Net Delivered Volume of Gas is allocated exclusively to cryogenic processing or exclusively to refrigeration processing during an Accounting Period, the Online Performance Percentage shall be the applicable percentage for the type of processing capacity allocated to such Gas.

 

(ii)           Where a portion of the Net Delivered Volume of Gas is allocated cryogenic processing capacity during the Accounting Period and a portion is allocated refrigeration processing capacity during the Accounting Period, the Online Performance for each processing service shall be the applicable percentage for the type of processing allocated during the period in which such service was provided.  The aggregate Plant Products allocated to Processing Customer for such Accounting Period shall be the sum of the Plant Products computed for each form of processing capacity allocated to such Net Delivered Volume during each applicable period.

 

(3)           The Plant Products Thermal Content shall be the product of —

 

(i)            the allocated volume of each Plant Product (in gallons), multiplied by

 

(ii)           the Gross Heating Value per gallon for such Plant Product.

 

12

 

(4)           The per gallon Gross Heating Value for each Plant Product shall be as published in the Standard Table of Physical Constants of Paraffin Hydrocarbons in GPA Publication 2145-95, “fuel as ideal Gas,” as the same might be revised from time to time.

 

(d)           Determination of Processing Customer’s Residue Gas.

 

Processing Customer’s share of Residue Gas (“Processing Customer’s Residue Gas”) shall equal the Receipt Point Thermal Content of Processing Customer’s Gas minus the aggregate Plant Products Thermal Content allocated to Processing Customer’s Gas.

 

(e)           CPI-U Index Adjustment.

 

(1)           Except as provided in paragraph (2), all Processing Fees and the $0.0125 per gallon fee for transportation of Plant Products described in Section 7(a)(2) and 7(b)(2) of this Agreement will be adjusted on an annual basis in proportion to the percentage change, from the preceding calendar year, in the Consumer Price Index — All Urban Consumers (“CPI-U Index”) as published by the U.S. Department of Labor, Bureau of Labor Statistics.  The foregoing adjustment shall be made effective January 1, 2013 and each January 1 thereafter during the Term of this Agreement (including any extension(s) thereof), and shall reflect the percentage change in the CPI-U Index during the immediately preceding calendar year.

 

(2)           In no event shall the adjustment set forth in paragraph (1) result in a decrease of either such Processing Fee or such per-gallon transportation fee from the amount of the respective Processing Fee or per-gallon transportation fee in effect during the calendar year immediately preceding the effective date of the adjustment.

 

SECTION 7.         PLANT PRODUCT PRICING.  For purposes of Section 6(a)(2)(A) of this Agreement, the “Net Sale Price” of each component of individual Plant Products allocated to Processing Customer’s Gas shall be determined in accordance with this Section.

 

(a)                                  Quantity Up To Commitment Volume.

 

(1)           Contracted Cryogenic Customer commits to deliver at the Questar Receipt Points during each Accounting Period Gas containing an average of 1,158 Barrels per day of Plant Products (“Plant Product Commitment Volume”).

 

(2)           If the Plant Product Commitment Volume is greater than zero, the “Net Sales Price” of each component of individual Plant Products allocated to Contracted Cryogenic Customer’s Gas, up to an aggregate quantity equivalent to the Monthly Aggregate Plant Product Commitment Volume, shall equal the FOB plant price based on the net price per gallon received by Processor, from its marketing affiliate in a market based transaction, at Mt. Belvieu, by component, less Processor’s direct or indirect sales costs and expenses (which shall include a $0.0125 per gallon fee (as adjusted pursuant to Section 6(e)) for transportation of Plant Products from the Processing Plant to the MAPL pipeline), fractionation charges, tank car rentals, Taxes (excluding income taxes), Processor’s actual costs incurred in transporting Plant Products to the point of sale, and similar marketing costs and expenses incurred by Processor, to determine a net price FOB the Plant.

 

(A)          Where the aggregate quantity of Plant Products sold during any Accounting Period exceeds the quantity equivalent to the Monthly Aggregate Plant Product Commitment Volume,

 

13

 

(i)            Plant Products equivalent to the Monthly Aggregate Plant Product Commitment Volume shall be allocated proportionately among the individual Plant Products in the same ratio as the quantity of each individual Plant Product sold during such Accounting Period bears to the aggregate quantity of Plant Products sold during such Period; and

 

(ii)           the Net Sales Price established under subsection (b) of this Section shall apply to the quantity of Plant Products in excess of the quantity allocated under clause (i) of this subparagraph.

 

(3)           If, during any Accounting Period, Contracted Cryogenic Customer fails to deliver Gas containing an average daily quantity of Plant Products equal to or greater than the Plant Product Commitment Volume, Contracted Cryogenic Customer shall incur a deficiency payment obligation of $0.08 per gallon multiplied by the deficient number of Plant Product gallons in the applicable Accounting Period (“Plant Product Deficiency Payment”).  Contracted Cryogenic Customer shall pay the Plant Product Deficiency Payment to Processor within thirty (30) days after receipt by such Customer of an invoice from Processor for such Plant Product Deficiency Payment, setting forth the basis on which such Plant Product Deficiency Payment was calculated in sufficient detail to enable such Customer to verify such amount.

 

(4)           For purposes of this Section, the term “Monthly Aggregate Plant Product Commitment Volume” means the Plant Product Commitment Volume specified in subsection (a)(1) of this Section multiplied by the number of days in the Accounting Period.

 

(b)           Quantity In Excess Of Commitment Volume; Zero Commitment Volume.

 

(1)           During each Accounting Period, the Net Sales Price shall be determined in accordance with paragraph (2) of this subsection —

 

(A)          for 100% of the Plant Products allocated to Interruptible Cryogenic Customer’s and Refrigeration Processing Customer’s Gas, and

 

(B)           for the quantity of Plant Products allocated to Contracted Cryogenic Customer’s Gas in excess of the aggregate quantity equivalent to the Monthly Aggregate Plant Product Commitment Volume.

 

(2)           The Net Sales Price of each component of individual Plant Products allocated to Processing Customer’s Gas shall equal the FOB plant price based on the net price per gallon received by Processor, from its marketing affiliate in a market based transaction,  by component for the total volume of each individual Plant Product sold at the Processing Plant during the relevant Accounting Period, less Processor’s direct or indirect sales costs and expenses (which shall include a $0.0125 per gallon fee (as adjusted pursuant to Section 6(e)) for transportation of Plant Products from the Processing Plant to the MAPL pipeline), fractionation charges, tank car rentals, Taxes (excluding income taxes), Processor’s actual costs incurred in transporting Plant Products to the point of sale, and similar marketing costs and expenses incurred by Processor, to determine a net price FOB the Plant.

 

SECTION 8.         NOTICES.  Except as otherwise provided in this section, all notices, statements, invoices or other communications required or permitted between the Parties shall be in writing and shall be considered as having been given if delivered by mail, courier, hand delivery, or facsimile or electronic means

 

14

 

(e-mail) to the other Party at the designated address or facsimile numbers, provided that any communication by e-mail shall be effective only if acknowledged by an electronic notice of receipt.  Normal operating instructions can be delivered by telephone or other agreed means.  Notice of events of Force Majeure may be made by telephone and confirmed in writing within a reasonable time after the telephonic notice.  Monthly statements, invoices, payments and other communications shall be deemed delivered when actually received.  Either Party may change its address, e-mail or facsimile and telephone numbers upon written notice to the other Party:

 

	
Processing   Customer:
    	
 
    	
GASCO   Energy, Inc.
    
	
Address:
    	
 
    	
8   Inverness Drive East, Suite 100
    
	
 
    	
 
    	
Englewood,   CO 80112
    
	
 
    	
 
    	
Attention: Mr. W. King Grant
    
	
Telephone:
    	
 
    	
(303)   483-0044
    
	
Facsimile:
    	
 
    	
(303)   483-0011
    
	
E-mail
    	
 
    	
kgrant@gascoenergy.com
    
	
 
    	
 
    	
 
    
	
Processor:
    	
 
    	
Chipeta   Processing LLC
    
	
Address:
    	
 
    	
P.O. Box   137779
    
	
 
    	
 
    	
Denver,   CO 80217-3779
    
	
 
    	
 
    	
Attention:   Contract Administration
    
	
Telephone:
    	
 
    	
(720)   929-6000
    
	
Facsimile:
    	
 
    	
(720) 929-3906
    
	
E-mail:
    	
 
    	
marian.kleinbach@anadarko.com
    

 

SECTION 9.         EXECUTION.  This Agreement may be executed in any number of counterparts, each of which shall be considered an original, and all of which shall be considered one instrument.  Facsimile, PDF and other similar signatures shall be treated for all purposes as if they are originals.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first set forth above.

 

	
GASCO   ENERGY INC.
    	
 
    	
CHIPETA   PROCESSING LLC
    
	
 
    	
 
    	
By WGR Operating, LP
    
	
 
    	
 
    	
Its Managing Partner
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Michael Decker
    	
 
    	
By:
    	
/s/   Donald R. Sinclair
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Michael   Decker
    	
 
    	
Name:
    	
Donald   R. Sinclair
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
EVP/COO
    	
 
    	
Title:
    	
President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ANADARKO   UINTAH MIDSTREAM
    
	
 
    	
 
    	
(With respect to Exhibit C only)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Danny Rea
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Danny   Rea
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
Vice   President, Midstream
    

 

15

 

GENERAL TERMS AND CONDITIONS

Attached to and made a part of that certain

Gas Processing Agreement

between

GASCO ENERGY INC., as “Processing Customer”

and

Chipeta Processing LLC, as “Processor”

 

Dated:  September 21, 2011

 

ARTICLE 1:  DEFINITIONS

 

Accounting Period.  With respect to the calendar month in which the Effective Date occurs, the period commencing on commencement of processing service hereunder and ending at 12:00 am, Mountain Time, on the first day of the next succeeding calendar month, and thereafter, the period commencing at 12:00 a.m., Mountain Time, on the first day of such succeeding calendar month and ending at 12:00 a.m., Mountain Time, on the first day of each succeeding calendar month.

 

Affiliate.  As to the Person specified, any person controlling, controlled by or under common control with such Person, with the concept of control meaning the possession, directly or indirectly, of a beneficial or economic ownership of at least 50 percent of another.

 

Barrels.  Forty-Two U.S. Gallons measured at 60°F.

 

Btu.  The amount of heat required to raise the temperature of 1 pound of water from 59°F to 60°F.

 

Cubic Foot.  The volume of Gas contained in one Cubic Foot of space at a standard pressure base of 14.73 pounds per square inch absolute (psia) and a standard temperature base of 60° F.

 

Dedication Area.  The lands, wells and/or leaseholds described on Exhibit A.

 

Force Majeure.  Any cause or condition not within the commercially reasonable control of the Party claiming suspension and which by the exercise of commercially reasonable diligence, such Party is unable to prevent or overcome.

 

Gross Heating Value.  The number of Btus produced by the combustion, on a dry basis and at a constant pressure, of the amount of the Gas which would occupy a volume of 1 Cubic Foot at a temperature of 60°F and at a pressure of 14.73 psia, with air of the same temperature and pressure as the Gas, when the products of combustion are cooled to the initial temperature of the Gas and air and when the water formed by combustion is condensed to the liquid state.  Hydrogen sulfide shall be deemed to have no heating value.

 

Indemnifying Party and Indemnified Party.  As defined in Article 10, below.

 

Interest(s).  Any right, title, or interest in lands and the right to produce oil and/or Gas therefrom whether arising from fee ownership, working interest ownership, mineral ownership, deed, lease, assignment, or otherwise, or arising from any pooling, unitization or communitization of any of the foregoing rights.

 

Losses.  Any actual loss, cost, expense, liability, damage, demand, suit, sanction, claim, judgment, lien, fine or penalty asserted by a third party unaffiliated with the Party incurring such, and which are incurred by the applicable Indemnified Party on account of injuries (including death) to any person or damage to or destruction of any property, sustained in connection with or arising out of the matters for which the Indemnifying Party has indemnified the applicable Indemnified Party.

 

1

 

Mcf.  1,000 Cubic Feet.

 

MMBtu.  1,000,000 Btus.

 

MMcf.  1,000,000 Cubic Feet.

 

Processing Plant Fuel.  Gas utilized as fuel or power in the Processing Plant, including lost and unaccounted for Gas (L&U), which is deducted in determining Net Delivered Volume.

 

Taxes.  All gross production, severance, conservation, ad valorem and similar or other taxes measured by or based upon production, together with all taxes on the right or privilege of ownership of the Gas, or upon the handling, transmission, compression, processing, treating, conditioning, distribution, sale, delivery or redelivery of the Gas, including all of the foregoing now existing or in the future imposed or promulgated.

 

ARTICLE 2:  PROCESSING CUSTOMER COMMITMENTS

 

2.1.          Processing Customer hereby commits and agrees to deliver at the Receipt Point(s) Gas attributable to Interests now owned, controlled or hereafter acquired by Processing Customer in the Dedicated Area, including all Gas from the Dedicated Area which Processing Customer has the right to process.

 

2.2.          Processing Customer shall keep Processor timely informed with respect to Processing Customer’s volume forecasts and shall provide reasonable advance notice to Processor of any scheduled adjustments.

 

ARTICLE 3:  OPERATION OF PROCESSOR’S FACILITIES

 

3.1.          Subject to the other provisions of this Agreement, Processor shall receive into the Processing Plant all Gas, when tendered in accordance with this Agreement, that Processing Customer commits and agrees to deliver under the provisions of Section 1(a) of the Agreement and that meets the otherwise applicable conditions under this Agreement.

 

ARTICLE 4:  RECEIPT POINTS AND CONDITIONS — INTENTIONALLY OMITTED

 

ARTICLE 5:  GAS QUALITY

 

5.1.          Gas delivered by Processing Customer to the Questar Receipt Point(s) shall:

 

a.             be commercially free from dust, gum, gum-forming constituents, liquid hydrocarbons, free water, diluent, and other liquids and solids;

 

b.             contain not more than 10 parts per million by volume of oxygen, and Processing Customer shall make every effort to keep Gas free from oxygen;

 

c.             contain not more than 1⁄4 grain(s) of hydrogen sulfide per 100 Cubic Feet of Gas;

 

d.             contain not more than one grain(s) of total sulfur, including, but not limited to, sulfur in hydrogen sulfide and mercaptans, per 100 Cubic Feet of Gas;

 

e.             contain not more than 3% by volume total inerts, including but not limited to nitrogen and carbon dioxide;

 

f.              contains not more than 2% by volume carbon dioxide;

 

g.             have a temperature not greater than 120°F, nor less than 40°F;

 

h.             contain not more than 7 pounds per Mcf of water vapor;

 

i.              not contain measurable quantities of mercury;

 

j.              have a Gross Heating Value of not less than 1080 BTU per Cubic Foot;

 

k.             with the exception of Btu content and CHDP specifications, not exceed any of the specifications of the downstream pipelines at the Redelivery Points as they may exist from time to time.

 

2

 

l.              not contain other objectionable substances, including, but not limited to, polychlorinated biphenyls, which may be injurious to pipelines, people, property, or the environment which may interfere with its transportation or makes the Gas unmarketable or unacceptable at any Redelivery Point.

 

5.2.          If Gas tendered by Processing Customer should fail to meet any one or more of the above specifications from time to time, then:

 

a.             Processor may accept delivery of the non-conforming Gas from Questar at the Plant Receipt Point, and such receipt shall not be construed as a waiver or change of standards for future Gas volumes; or

 

b.             Processor may, at its sole discretion, direct Questar to cease receiving the non-conforming Gas from Processing Customer, and notify Processing Customer that Questar has, or will, cease receiving the non-conforming Gas at the Questar Receipt Point.

 

5.3.          If the Gas as delivered at the Questar Receipt Point contains contaminants not in conformance with the specifications in Section 5.1., Processing Customer shall be responsible for, and shall reimburse Processor for all actual expenses, damages and costs resulting from Delivery of such Gas by Questar at the Plant Receipt Point without regard to whether the Gas so delivered conforms with the specifications in Section 5.1.

 

ARTICLE 6:  MEASUREMENT EQUIPMENT AND PROCEDURES

 

6.1.          The volume of Gas will be measured by a primary and secondary measurement device that is accepted by industry, state, and federal regulatory agencies.  The most common primary devices are orifice or ultrasonic meter tubes.  These devices shall comply with the American Petroleum Institute - Manual of Petroleum Measurement Standards, 14.3, American Gas Association Report No. 3, and Report No. 9, (Latest Revisions) where applicable.  The secondary measurement device shall be an electronic flow meter (“EFM”) that includes a temperature recording system.  The EFM shall meet and be capable of performing volume calculations according to the current standards prescribed in the American Gas Association Report No. 3, Orifice Metering of Natural Gas and Other Hydrocarbon Fluids, Parts 1-4, and shall comply with the American Petroleum Institute — Manual of Petroleum Measurement Standards, Chapter 21, Section 1 — Electronic Gas Measurement, (Latest Revisions).

 

6.2.          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 degrees Fahrenheit (60°F) and at an absolute pressure base of 14.73 psia.

 

6.3.          For purposes of measurement hereunder, the atmospheric (barometric) pressure shall be the average actual atmospheric pressure for the geographical area as determined by the Processor.  If the pressure transmitter being used is capable of measuring actual atmospheric pressure, then actual atmospheric pressure may be used.

 

6.4.          Processor shall determine the Gas stream composition, specific gravity, and gross Heating Values based on any of the following:  spot samples, composite samples, on-line Gas chromatograph analysis or portable Gas chromatograph analysis.  The component analysis of the Gas shall be performed by Gas chromatography in accordance with GPA 2261 and 2172 or any pertinent revisions thereto or replacements thereof.  Gas samples shall be obtained in accordance with the procedures set forth in the Gas Processor’s Association Standard 2166 (Latest Revision) “Obtaining Natural Gas Samples for Analysis by Gas Chromatography” and American Petroleum Institute 14.1 Section 1 (Latest Revision).

 

6.5.          The sampling frequency will be no less than semi-annually or more often if deemed necessary by Processor.

 

6.6.          Tests for oxygen, carbon dioxide, sulphur, and hydrogen sulfide content of the Gas delivered hereunder shall be made as often as

 

3

 

deemed necessary by Processor, by means commonly used and accepted in the industry.

 

6.7.          Deviation from Boyle’s Law at the pressure, specific gravities and temperatures upon delivery shall be calculated by the NX-19 as outlined or described in the American Gas Association Report “Manual for the Determination of Super Compressibility” or AGA 8, Gross or Detail methods as outlined or described in the AGA Report No. 8 entitled “Compressibility Factors of Natural Gas and Other Related Hydrocarbon Gases”.

 

6.8.          All measuring equipment, housing, devices, and materials shall be of standard manufacture and will, with all related equipment, appliances, and buildings, be maintained and operated by Processor at Processor’s expense.  All testing equipment shall be provided by Processor at Processor’s expense.

 

6.9.          Processing Customer may, at its option and expense, install and operate check meters to monitor Processor’s meters.  Such meters shall be for check purposes only and shall not be used in the measurement of Gas for the purposes of this Agreement except as provided for in this Agreement.  The installation and operation thereof shall be done entirely by Processing Customer and shall not interfere in any way with the operation of Processor’s meter.  The use of a share bar tubing system shall not be permitted.  Processing Customer shall also have the right to access, for monitoring purposes, data at Processor’s Receipt Point(s) meters by way of a Supervisory Control and Data Acquisition system, so long as the same does not interfere with Processor’s System.

 

6.10.        Processor’s custody meters shall be tested and calibrated by Processor semi-annually or more often if deemed necessary by Processor.  If Processing Customer desires to witness any of the tests provided for herein, Processing Customer shall so advise Processor in writing.  If Processing Customer has so advised Processor, then Processor shall give Processing Customer sufficient notice in advance of such tests so that Processing Customer may have its representative present to observe adjustments, if any, which are made.

 

6.11.        When any test shows an error of more than two percent (2%) in measurement, correction shall be made for the period during which the measurement instruments were in error first by correcting the error if the percentage of error is ascertainable by calibration, test or mathematical calculations or second by using the registration of Processing Customer’s check meter, if installed and registering accurately.  If neither such method is feasible, correction shall be made by estimating the quantity and quality delivered, based upon deliveries under similar conditions during a period of time when the equipment was registering accurately.  If the period during which the measurement was in error cannot be ascertained, correction shall be made for one-half (1/2) of the period elapsed since the last date of test, and the measuring instrument shall be adjusted immediately to measure accurately.

 

6.12.        Production equipment upstream of the Receipt Point(s) shall be designed and operated in a manner that will not interfere with acceptable measurement standards.  If such interference is detected, Processor shall notify Processing Customer and Processing Customer shall have sixty (60) Days to correct or cause to be corrected the problems causing measurement errors due to pulsation, vibration, or harmonic wave distortion caused by compressors, pumps, or other production equipment upstream of the Receipt Point(s).  Volume inaccuracies greater than or equal to one half of one percent (1/2%) that are found to be the result of pulsation, vibration, or harmonic wave distortion caused by compressors, pumps, or other production equipment upstream of the Receipt Point(s) will be corrected and adjustments made back to the point in time when the inaccuracies first occurred.

 

6.13.        With respect to the measurement of Gas under this Agreement, Processor and Processing Customer shall have the right to inspect equipment installed or furnished by the other, and the charts and other measurement or testing data of the other, at all times during business

 

4

 

hours, but the reading, calibration, and adjustment of such equipment and changing of charts shall be done only by the Party owning such equipment.  Each Party shall preserve all original test data, charts and other similar records in such Party’s possession, for a period of at least two (2) years or the time required by any governmental agency, whichever is greater.  Upon written request by either Party, all such data, charts, and other similar records will be made available to the requesting Party, subject to return within sixty (60) Days after receipt thereof.

 

ARTICLE 7:  ALLOCATIONS — INTENTIONALLY OMITTED

 

ARTICLE 8:  PAYMENTS

 

8.1.          Processor shall provide Processing Customer with a statement explaining fully how all consideration due (including deductions) under the terms of this Agreement was determined not later than the last day of the Accounting Period following the Accounting Period for which the consideration is due.

 

8.2.          Any sums due Processor under this Agreement shall be paid no later than 15 days following the date of the statement furnished under 8.1., above.  Late payments shall accrue interest at the rate of 1.5% per month until paid.  If Processing Customer is more than 10 days late in making any payment or if Processor has reasonable grounds for insecurity regarding the performance of any obligation under this Agreement (whether or not then due) by Processing Customer (including, without limitation, a material change in the creditworthiness of Processing Customer), then in addition to all other rights and remedies of Processor, Processor may (i) sell for Processing Customer’s account Residue Gas otherwise deliverable to Processing Customer pursuant to this Agreement and apply amounts received against Processing Customer’s account, (ii) setoff amounts owing by Processor or its Affiliates to Processing Customer pursuant to this Agreement or any other agreement against amounts owing by Processing Customer to Processor pursuant to this Agreement; or (iii) cease processing Processing Customer’s Gas until Processing Customer’s account is brought current, with interest.

 

8.3.          Any sums due Processing Customer under this Agreement shall be paid no later than the last day of the Accounting Period following the Accounting Period for which the payment is due.  During any Accounting Period, if Processing Customer owes any amounts to Processor under this Agreement, Processor may deduct those amounts from the amounts otherwise due Processing Customer hereunder before making payment to Processing Customer.

 

8.4.          Either Party, on 60 days prior written notice, shall have the right at its expense, at reasonable times during business hours, to audit the books and records of the other Party to the extent necessary to verify the accuracy of any statement, allocation, measurement, computation, charge, or payment made under or pursuant to this Agreement.  The scope of any audit shall be limited to transactions affecting the Gas hereunder within the immediate geographic region of the Dedication Area and the Processing Plant, and shall be limited to the 24-month period immediately prior to the month in which the audit is requested. However, no audit may include any time period for which a prior audit hereunder was conducted, and no audit may occur more frequently than once each 12 months.  All statements, allocations, measurements, computations, charges, or payments made in any period prior to the 24 month period immediately prior to the month in which the audit is requested, or made in any 24 month period for which the audit is requested but for which a written claim for adjustments is not made within 90 days after the audit is requested, shall be conclusively deemed true and correct and shall be final for all purposes.  To the extent that the foregoing varies from any applicable statute of limitations, the Parties expressly waive all such applicable statutes of limitations.

 

8.5.          If Processor has reasonable grounds for insecurity regarding the performance of any obligation under this Agreement (whether or not then due) by Processing Customer (including,

 

5

 

without limitation, the occurrence of a material change in the creditworthiness of Processing Customer), Processor may demand Adequate Assurance of Performance, which shall be furnished within five (5) Days of such demand. “Adequate Assurance of Performance” shall mean sufficient security in the form, amount and for the term reasonably acceptable to Processor, including, but not limited to, a standby irrevocable letter of credit, a prepayment, or a performance bond or guaranty (from an issuer of such security acceptable to Processor).

 

ARTICLE 9:  FORCE MAJEURE

 

9.1.          In the event a Party is rendered unable, wholly or in part, by Force Majeure, to carry out its obligations under this Agreement, other than the obligation to make any payments due hereunder, the obligations of that Party, so far as they are affected by Force Majeure, shall be suspended from the inception and during the continuance of the inability, and the cause of the Force Majeure, as far as possible, shall be remedied with commercially reasonable diligence.  The Party affected by Force Majeure shall provide the other Party with written notice of the Force Majeure event, with reasonably full detail of the Force Majeure within a reasonable time after the affected Party learns of the occurrence of the Force Majeure event.  The settlement of strikes, lockouts, and other labor difficulty shall be entirely within the discretion of the Party having the difficulty and nothing herein shall require the settlement of strikes, lockouts, or other labor difficulty.

 

ARTICLE 10:  LIABILITY AND INDEMNIFICATION

 

10.1.        As among the Parties hereto, Processing Customer and any of its designees shall be in custody, control and possession of the Gas hereunder, including any portion thereof which accumulates as liquids, until that Gas is delivered to the Receipt Point, and after any portion of the Residue Gas is redelivered to or for the account of Processing Customer at the Redelivery Point.

 

10.2.        As among the Parties hereto, Processor and any of its designees shall be in custody, control and possession of the Gas hereunder, including any portion thereof which accumulates as liquids, after that Gas is delivered at the Plant Receipt Point and until any portion of the Residue Gas is redelivered to or for the account of Processing Customer at the Redelivery Point.

 

10.3.        Each Party (“Indemnifying Party”) hereby covenants and agrees with the other Party, and its Affiliates, and each of their directors, officers and employees (“Indemnified Parties”), that except to the extent caused by the Indemnified Parties’ gross negligence or willful conduct, the Indemnifying Party shall protect, defend, indemnify and hold harmless the Indemnified Parties from, against and in respect of any and all Losses incurred by the Indemnified Parties to the extent those Losses arise from or are related to:  (a) the Indemnifying Party’s facilities; or (b) the Indemnifying Party’s possession and control of the Gas.

 

ARTICLE 11:  TITLE

 

11.1.        Processing Customer represents and warrants that it owns, or has the right to commit, all Gas committed under this Agreement and to deliver that Gas to the Plant Receipt Points for the purposes of this Agreement, free and clear of all liens, encumbrances and adverse claims.  Processing Customer hereby indemnifies Processor against and holds Processor harmless from any and all Losses arising out of or related to any breach of the foregoing representation and warranty.

 

11.2.        Title to all Gas, including all constituents thereof, shall remain with Processing Customer at all times; provided, however, that title to all Gas retained by Processor and not redelivered to Processing Customer hereunder (including all Plant Products entrained in such Gas and recovered in the Processing Plant) shall pass to Processor at the Plant Receipt Point.

 

6

 

ARTICLE 12:  UNPROFITABLE GAS OR OPERATIONS

 

12.1.        In the event it has become unprofitable for Processor to (A) continue to receive Processing Customer’s Gas at the Plant Receipt Point, or (B) continue to operate its Processing Plant (or any portion thereof), in each case for a period of at least 2 consecutive Accounting Periods, and Processor reasonably determines that the unprofitable receipt of Gas or operation of its Processing Plant will likely continue, Processor shall have the right to give Processing Customer a written notice of unprofitability, which notice shall include sufficient documentation to substantiate the claim of unprofitability.

 

12.2.        The Parties shall attempt in good faith to negotiate mutually acceptable terms to provide for continued delivery of Gas at the Plant Receipt Point.  If the Parties cannot agree on those terms within 30 days following the notice of unprofitability, then either Party may terminate this Agreement.  If the unprofitable circumstances affect the operation of the Processing Plant, Processor may terminate this Agreement upon the expiration of 30 days following the written notice of unprofitable operations.

 

12.3.        If Processor determines in good faith that the aggregate quantity of Gas tendered for processing in any period is less than the minimum rate at which the processing equipment to which such Gas would be allocated capacity under Section 5(b)(3) and (4) of the Agreement may be operated economically, Processor may decline to operate such processing equipment until the rate at which Gas is tendered for processing by such equipment exceeds such minimum economic rate.

 

12.4.        If, following the conversion of ML 40 to a high CHDP Gas line, FERC orders or approves a further change to Questar’s minimum Btu or CHDP standards applicable to ML 40, and Processor determines in good faith that such change could result in a decrease in the quantity or composition of entrained natural gas liquids, or in an increase in inert gases or contaminants, in the Gas delivered to the Plant Receipt Point, Processor shall have the right to terminate this Agreement.  Processor shall provide thirty (30) days notice to Processing Customer prior to termination of this Agreement.

 

ARTICLE 13:  ROYALTY AND TAXES

 

13.1.        Processing Customer shall have the sole and exclusive obligation and liability for the payment of all persons due any proceeds derived from the Gas delivered under this Agreement, including royalties, overriding royalties, and similar interests, in accordance with the provisions of the leases or agreements creating those rights to proceeds.  In no event will Processor have any obligation to those persons due any of those proceeds of production attributable to the Gas under this Agreement.

 

13.2.        Processing Customer shall pay and be responsible for all Taxes levied against or with respect to Gas delivered or services provided under this Agreement which apply to the Gas prior to delivery of the Gas to Processor.  Processor shall under no circumstances become liable for those Taxes.

 

13.3.        Processing Customer hereby agrees to defend and indemnify and hold Processor harmless from and against any and all Losses, arising from the payments made by Processing Customer in accordance with Sections 13.1. and 13.2., above, including, without limitation, Losses arising from claims for the nonpayment, mispayment, or wrongful calculation of those payments.

 

ARTICLE 14:  RIGHTS-OF-WAY. — INTENTIONALLY OMITTED

 

ARTICLE 15:  MISCELLANEOUS

 

15.1.        The failure of any Party hereto to exercise any right granted hereunder shall not impair nor be deemed a waiver of that Party’s privilege of exercising that right at any subsequent time or times.

 

15.2.        THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, AND

 

7

 

ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES.  This Agreement shall (except for the covenants running with the land set forth above) further be construed in accordance with the Uniform Commercial Code as from time to time in effect in that State; provided, if any provisions of this Agreement contradict, vary or are inconsistent with the applicable provisions of the Uniform Commercial Code or other applicable law, then, to the extent permitted by law, the applicable provisions of this Agreement shall constitute a waiver of the those provisions of the Uniform Commercial Code or other applicable law.

 

15.3.        This Agreement shall extend to and inure to the benefit of and be binding upon the Parties, and their respective successors and assigns, including any assigns of Processing Customer’s Interests covered by this Agreement.  No assignment of this Agreement shall be binding on either of the Parties until the first day of the Accounting Period following the date a certified copy of the instrument evidencing that sale, transfer, assignment or conveyance has been delivered to the other Party.  Further, if Processing Customer is the assigning or transferring Party, Processing Customer shall notify its assignee of the existence of this Agreement and obtain the ratification required above, prior to such assignment.  No assignment by either Party shall relieve that Party of its continuing obligations and duties hereunder without the express consent of the other Party.

 

15.4.        The Parties agree to keep the terms of this Agreement confidential and not disclose the same to any other persons, firms or entities without the prior written consent of the other Party; provided, the foregoing shall not apply to disclosures compelled by law or court order; or to disclosures to a Party’s financial advisors, consultants, attorneys, banks, institutional investors and prospective purchasers of property provided those persons, firms or entities likewise agree to keep this Agreement confidential.

 

15.5.        In the event any published price index referred to in this Agreement ceases to be published, the Parties shall mutually agree to an alternative published price index representative of the published price index referred to in this Agreement.

 

15.6.        Any change, modification, amendment or alteration of this Agreement shall be in writing, signed by the Parties; and, no course of dealing between the Parties shall be construed to alter the terms of this Agreement.

 

15.7.        This Agreement, including all exhibits and appendices, contains the entire agreement between the Parties with respect to the subject matter hereof, and there are no oral or other promises, agreements, warranties, obligations, assurances, or conditions precedent, affecting it.

 

15.8.       NO BREACH OF THIS AGREEMENT OR CLAIM FOR LOSSES UNDER ANY INDEMNITY OBLIGATION CONTAINED IN THIS AGREEMENT SHALL CAUSE ANY PARTY TO BE LIABLE FOR, NOR SHALL LOSSES INCLUDE, ANY DAMAGES OTHER THAN ACTUAL AND DIRECT DAMAGES, AND EACH PARTY EXPRESSLY WAIVES ANY RIGHT TO CLAIM ANY OTHER DAMAGES, INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL, INCIDENTAL SPECIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES.

 

8

 

LIST OF EXHIBITS

 

	
EXHIBIT A
    	
 
    	
RECEIPT   POINTS AND DEDICATION AREA
    
	
 
    	
 
    	
 
    
	
EXHIBIT B
    	
 
    	
REDELIVERY   POINTS
    
	
 
    	
 
    	
 
    
	
EXHIBIT C
    	
 
    	
NOMINATION   AND BALANCING PROCEDURES
    

 

 

EXHIBIT A

Attached to and Made a Part of that Certain

Gas Processing Agreement

between

GASCO ENERGY INC., as “Processing Customer”

and

Chipeta Processing LLC, as “Processor”

 

Dated:  September 21, 2011

 

RECEIPT POINTS AND DEDICATION AREA

 

Receipt Points:

 

Processing Plant inlet meter.

 

Dedication Area:

 

The Lands covered by this Agreement shall include all Producer’s interest in the following:

 

	
QUARTER
    	
 
    	
SECTION
    	
 
    	
TOWNSHIP
    	
 
    	
RANGE
    	
 
    	
COUNTY/STATE
    
	
All
    	
 
    	
24
    	
 
    	
10   South
    	
 
    	
14   East
    	
 
    	
Duchesne/Utah
    
	
N2,   N2S2
    	
 
    	
25
    	
 
    	
10   South
    	
 
    	
14   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
26
    	
 
    	
10   South
    	
 
    	
14   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
36
    	
 
    	
10   South
    	
 
    	
14   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
2
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
SE,   S2NE
    	
 
    	
3
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
E2
    	
 
    	
10
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
S2
    	
 
    	
11
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
12
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
13
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
14
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
E2
    	
 
    	
15
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
16
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
NENE
    	
 
    	
19
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
21
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
W2   excluding W2NW
    	
 
    	
22
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
E2NE,   E2SE
    	
 
    	
23
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
24
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
25
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
S2   excluding E2NW, NE
    	
 
    	
27
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
28
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
W2SW
    	
 
    	
30
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All   excluding E2SE
    	
 
    	
31
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
32
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
N2,   N2S2
    	
 
    	
33
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
N2   excluding NWNE, N2S2
    	
 
    	
34
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    

 

1

 

	
QUARTER
    	
 
    	
SECTION
    	
 
    	
TOWNSHIP
    	
 
    	
RANGE
    	
 
    	
COUNTY/STATE
    
	
All
    	
 
    	
36
    	
 
    	
10   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
2
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
SE
    	
 
    	
3
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
5
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
6
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
7
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
8
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
9
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
10
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
NW
    	
 
    	
11
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
13
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
14
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
W2
    	
 
    	
15
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
16
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
17
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
18
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
19
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
20
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
21
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All   excluding W2SW
    	
 
    	
22
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
23
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
24
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
25
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
26
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
27
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
N2,   S2 excluding SWSE, NESE
    	
 
    	
28
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
29
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
30
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
N2,   N2SE
    	
 
    	
31
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
N2,   N2S2 excluding NESE
    	
 
    	
32
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
34
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
35
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
36
    	
 
    	
11   South
    	
 
    	
15   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
1
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
3
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    

 

2

 

	
QUARTER
    	
 
    	
SECTION
    	
 
    	
TOWNSHIP
    	
 
    	
RANGE
    	
 
    	
COUNTY/STATE
    
	
All
    	
 
    	
4
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
5
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
S2,   N2 excluding SENE, SENW
    	
 
    	
6
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All   excluding NE
    	
 
    	
8
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All   excluding NE
    	
 
    	
9
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
10
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
W2
    	
 
    	
12
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
SW
    	
 
    	
13
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
S2
    	
 
    	
14
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
S2
    	
 
    	
15
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
16
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
17
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
18
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
19
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
20
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
21
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
22
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
23
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
24
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
27
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
28
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
29
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
30
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
31
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
32
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All   excluding N2SE, SWSE
    	
 
    	
36
    	
 
    	
11   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
SW   excluding SESW
    	
 
    	
25
    	
 
    	
9   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
All   excluding SENE, N2NE, and SWSW
    	
 
    	
26
    	
 
    	
9   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
NESE,   NE Excluding SWNE
    	
 
    	
35
    	
 
    	
9   South
    	
 
    	
16   East
    	
 
    	
Duchesne/Utah
    
	
SW   excluding SESW, N2, N2SE
    	
 
    	
1
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
3
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    

 

3

 

	
QUARTER
    	
 
    	
SECTION
    	
 
    	
TOWNSHIP
    	
 
    	
RANGE
    	
 
    	
COUNTY/STATE
    
	
All
    	
 
    	
4
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
5
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
6
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
7
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
8
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
9
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
10
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
NE,   SW, S2SE
    	
 
    	
12
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
13
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
S2
    	
 
    	
14
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
S2
    	
 
    	
15
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
16
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
17
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
18
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
19
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
20
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
21
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
22
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
23
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
24
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
25
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
26
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
27
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
28
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
29
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
30
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
31
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
32
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
33
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
34
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
35
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
36
    	
 
    	
10   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
1
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
2
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
3
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
4
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
5
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
S2
    	
 
    	
6
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    

 

4

 

	
QUARTER
    	
 
    	
SECTION
    	
 
    	
TOWNSHIP
    	
 
    	
RANGE
    	
 
    	
COUNTY/STATE
    
	
All
    	
 
    	
7
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
8
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
9
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
W2
    	
 
    	
10
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
11
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
N2,   SW
    	
 
    	
12
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
NW,   W2SW
    	
 
    	
13
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
14
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
15
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
16
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
17
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
N2
    	
 
    	
18
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
N2N2
    	
 
    	
19
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
N2   excluding SWNW
    	
 
    	
21
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
22
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
N2,   N2S2
    	
 
    	
23
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
N2S2,   NW, S2NE
    	
 
    	
24
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
32
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
36
    	
 
    	
11   South
    	
 
    	
17   East
    	
 
    	
Duchesne/Utah
    
	
All
    	
 
    	
2
    	
 
    	
12   South
    	
 
    	
17   East
    	
 
    	
Carbon/Utah
    
	
W2W2
    	
 
    	
3
    	
 
    	
12   South
    	
 
    	
17   East
    	
 
    	
Carbon/Utah
    
	
E2
    	
 
    	
4
    	
 
    	
12   South
    	
 
    	
17   East
    	
 
    	
Carbon/Utah
    
	
E2,   E2W2
    	
 
    	
8
    	
 
    	
12   South
    	
 
    	
17   East
    	
 
    	
Carbon/Utah
    
	
N2
    	
 
    	
9
    	
 
    	
12   South
    	
 
    	
17   East
    	
 
    	
Carbon/Utah
    
	
W2W2
    	
 
    	
10
    	
 
    	
12   South
    	
 
    	
17   East
    	
 
    	
Carbon/Utah
    
	
S2,   SENE
    	
 
    	
21
    	
 
    	
11   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
32
    	
 
    	
11   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
25
    	
 
    	
9   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
26
    	
 
    	
9   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
27
    	
 
    	
9   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
S2
    	
 
    	
33
    	
 
    	
9   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
36
    	
 
    	
9   South
    	
 
    	
18   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
16
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
E2,   NW, S2SE
    	
 
    	
17
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
SW,   SE excluding SESE
    	
 
    	
18
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All   excluding
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

5

 

	
QUARTER
    	
 
    	
SECTION
    	
 
    	
TOWNSHIP
    	
 
    	
RANGE
    	
 
    	
COUNTY/STATE
    
	
SESE
    	
 
    	
19
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
20
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
21
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
22
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
23
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
27
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
28
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
29
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All   excluding NWNW
    	
 
    	
30
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
31
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
32
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
33
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
34
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
35
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
36
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
SE,   NWNW
    	
 
    	
3
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
W2
    	
 
    	
4
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
5
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
6
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
7
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
8
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
9
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
NW
    	
 
    	
10
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
15
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
16
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
E2
    	
 
    	
17
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
21
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
23
    	
 
    	
10   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
12
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
All
    	
 
    	
13
    	
 
    	
9   South
    	
 
    	
19   East
    	
 
    	
Uintah/Utah
    
	
W2SE,   E2SW
    	
 
    	
8
    	
 
    	
9   South
    	
 
    	
20   East
    	
 
    	
Uintah/Utah
    

 

6

 

EXHIBIT B

Attached to and made a part of that certain

Gas Processing Agreement

between

GASCO ENERGY INC., as “Processing Customer”

and

Chipeta Processing LLC, as “Processor”

 

Dated:  September 21, 2011

 

REDELIVERY POINTS

 

Point of interconnect with Colorado Interstate Gas Company (CIG).

 

Point of interconnect with the Wyoming Interstate Company (WIC) Kanda Lateral.

 

Point of interconnect with Questar Pipeline Company.

 

1

 

EXHIBIT C

Attached to and made a part of that certain

Gas Processing Agreement

between

GASCO ENERGY INC., as “Processing Customer”

and

Chipeta Processing LLC, as “Processor”

 

(Anadarko Uintah Midstream “AUM” will perform all

Nomination and Balancing Procedures for Processor.)

 

Dated:  September 21, 2011

 

NOMINATION AND BALANCING PROCEDURES

 

Capitalized terms in this Exhibit have the meaning given to them under the Gas Processing Agreement.

 

1.                                      PROCESSING CUSTOMER’S OBLIGATION TO TAKE IN-KIND

 

1.1.                              Processing Customer shall at all times have the obligation for receiving its share of Residue Gas at the Redelivery Point and arranging for the transportation, marketing or further disposition of that Residue Gas on a daily basis.

 

2.                                      NOMINATION PROCEDURES

 

2.1.                              Pursuant to the terms of this Agreement, the Nomination Procedures detailed in this Exhibit will be utilized to cover all nominations made by Processing Customer in respect of the Processing Plant.  All nominations must be made by either Processing Customer or the authorized agent of Processing Customer.  The objective of the Parties is to minimize imbalances affecting Processing Customer’s Residue Gas and sustain the flow of Gas through the Plant.  Should transporters receiving Processing Customer’s Residue Gas revise nomination requirements in a manner that conflicts with the nomination procedures herein, the Parties agree to negotiate changes to the nomination procedures herein as are reasonably required.

 

3.                                      MONTHLY SCHEDULING OF GAS

 

3.1.                              By 1:00 p.m. Mountain Time (MT), at least five (5) business days prior to the start of each Accounting Period or initial delivery of Gas, Processing Customer will inform the Gas Control Department (GCD) of the amount of Gas to be delivered by Processing Customer at the Plant Receipt Point and of Processing Customer’s nomination for Residue Gas to be delivered at the Redelivery Point.  Such nomination shall be submitted to AUM in a form available upon request from AUM.  AUM nomination forms may include other information required by AUM to confirm the nomination(s) of Processing Customer.  Incomplete nominations will not be accepted.

 

3.2.                              By 1:00 p.m. MT, four (4) business days prior to the start of each Accounting Period or initial delivery of Gas, AUM will notify Processing Customer if the nomination from Processing Customer specified above is different from the volume that AUM will confirm at the Redelivery Point on behalf of Processing Customer.  AUM will use its best efforts to work closely with Processing Customer

 

1

 

to arrive at a confirmed nomination that best estimates Processing Customer’s current production adjusted for relief of existing imbalance, if any.  Imbalance adjustments may be limited by the downstream pipeline’s acceptance of such adjustments.

 

3.3.                              If, following the initial nomination, AUM determines, using the best information available, including, but not limited to, measurement charts, electronically transmitted data from EFMs, and pipeline confirmations, that Processing Customer should adjust its nominations, then AUM will not be required to confirm any nomination that is greater or less than AUM’s estimate of Processing Customer’s Residue Gas availability, and AUM will notify Processing Customer and Processing Customer will be required to adjust nominations in accordance with AUM’s request.  Failure by Processing Customer to adjust said nominations may result in AUM reducing Processing Customer’s nominations with the downstream pipeline or a rejection of receipts of Processing Customer’s Gas from Questar at the Plant Receipt Point in order to balance Gas flow with nominations.  The Parties will use their best efforts to keep Processing Customer’s Residue Gas position in balance while maintaining Gas flow, including without limitation, such periodic reporting of relevant data as may be required to timely adjust nominations.

 

4.                                      DAILY SCHEDULING OF GAS

 

4.1.                              Daily nomination changes must be conveyed by facsimile to the GCD on a completed nomination form, or such other form acceptable to AUM, by 6:00 a.m. Mountain Standard Time on the business day prior to the effective date of that nomination.  All nominations are subject to confirmation by AUM.

 

4.2.                              If, following any daily nomination, AUM determines, using the best information available, including, but not limited to, measurement charts, electronically transmitted data from EFMs, and pipeline confirmations, that Processing Customer should adjust its nomination, then AUM will not be required to confirm any nomination that is greater or less than AUM’s estimate of Processing Customer’s Gas availability, except as may be necessary to correct any imbalance which may be determined to exist at that time, and AUM will notify Processing Customer and Processing Customer will be required to adjust its nomination in accordance with AUM’s request.  The Parties will use their best efforts to keep Processing Customer’s Residue Gas position in balance while maintaining Gas flow, including without limitation, such periodic reporting of relevant data as may be required to timely adjust a nomination.

 

4.3.                              Processing Customer will promptly advise AUM when Processing Customer’s market(s) or other dispositions of Processing Customer’s Residue Gas are interrupted or curtailed and Processing Customer shall change its nominations accordingly.

 

5.                                      BALANCING PROCEDURES

 

5.1.                              Processing Customer will inform AUM of the amount of Gas to be delivered by Processing Customer at the Plant Receipt Point and of Processing Customer’s nomination for Residue Gas to be delivered at the Redelivery Point, in accordance with the nomination procedures described above, as same may be amended from time to time.  In the event that Processing Customer does not, on a daily basis, arrange for the transportation and disposition of its Residue Gas at the Redelivery Point, or if Processing Customer nominates Residue Gas volumes in a greater or lesser amount than Processing Customer’s Residue Gas at the Redelivery Point, then a condition of imbalance shall exist.  A “Positive Imbalance” is the volume by which Processing Customer’s Residue Gas exceeds the confirmed nominated pipeline Residue Gas volume disposed of by Processing Customer or the authorized agent of Processing Customer.  A “Negative Imbalance” is the volume by which Processing Customer’s Residue Gas is less than the confirmed nominated pipeline Residue Gas volume disposed of by Processing Customer or the authorized agent of Processing Customer.  AUM and

 

2

 

Processing Customer shall work to minimize any imbalance and agree to exchange pertinent information in writing in good faith in an attempt to minimize the imbalance. As soon as practicable AUM shall provide Processing Customer written notice that Processing Customer has a condition of imbalance during any Accounting Period, and Processing Customer shall take immediate corrective action to conform Processing Customer’s nominations to Processing Customer’s physical flows adjusted for relief of existing imbalance, if requested by AUM.  Imbalance adjustments may be limited by the downstream pipeline’s acceptance of such adjustments.

 

5.2.                              In the event a Positive Imbalance exists at any time during any Accounting Period which is not reasonably within the control of AUM (provided, in no event will AUM have any obligation to secure markets for Processing Customer’s Residue Gas in order to eliminate or reduce an imbalance), and that is greater than 5% of Processing Customer’s current nomination for that Accounting Period, at any time during the Accounting Period and after 2 days notice and opportunity for Processing Customer to correct same, AUM, at its sole discretion may sell Processing Customer’s Positive Imbalance at a price commensurate with prices generally available at the time of the sale, and remit the proceeds, if any, to Processing Customer, less any transportation, compression, or storage charges assessed AUM, and less a $0.10/MMBtu marketing fee charged to Processing Customer by AUM.

 

5.3.                              AUM shall have the option to “cash out” any Positive Imbalance or Negative Imbalance existing at the end of any Accounting Period, which is not reasonably within the control of AUM, and which is a result of Processing Customer’s failure to fulfill obligations described in this Exhibit “C”, and adjust the imbalance to zero.  If AUM elects to exercise such option, AUM will purchase from Processing Customer the Positive Imbalance, and AUM will sell to Processing Customer the Negative Imbalance, for a price determined from the following schedule:

 

	
Tier
    	
 
    	
Positive Imbalance Level
    	
 
    	
Price
    
	
1
    	
 
    	
Imbalance   up to 5% of Processing Customer’s Residue Gas
    	
 
    	
100%   of Index Price
    
	
2
    	
 
    	
Incremental   Imbalance greater than 5% of Processing Customer’s Residue Gas
    	
 
    	
70%   of Index Price
    

 

	
 
    	
 
    	
Negative Imbalance Level
    	
 
    	
Price
    
	
1
    	
 
    	
Imbalance   up to 5% of Processing Customer’s Residue Gas
    	
 
    	
100%   of Index Price
    
	
2
    	
 
    	
Incremental   Imbalance greater than 5% of Processing Customer’s Residue Gas
    	
 
    	
130%   of Index Price
    

 

Where the “Index Price” is the “Inside FERC’s GAS MARKET REPORT, Prices of Spot Gas Delivered to Pipelines” index for Colorado Interstate Gas Company, Rocky Mountains minus eighteen cents ($0.18) per MMBtu, in the first publication of the applicable month; provided, however, the Price to “cash out” that portion of Processing Customer’s imbalance that results from an act or omission by AUM, or from a Force Majeure event, regardless of the imbalance level, shall be the Tier 1 prices from the above schedule, and, after subtracting that portion of Processing Customer’s imbalance that results from an act or omission by AUM, or from a Force Majeure event, the Price to “cash out” any remaining imbalance shall be determined in accordance with the above schedule.

 

5.4.                              AUM shall invoice Processing Customer for Processing Customer’s proportional share of any or all imbalance or variance penalties, which are caused in total or in part by Processing Customer or the authorized agent of Processing Customer, that may be imposed or levied by the residue pipelines at the Redelivery Point.

 

3

 

5.5.                              Should transporters receiving Processing Customer’s Residue Gas revise their balancing requirements in a manner that conflicts with the balancing procedures herein, the Parties agree to negotiate changes to the balancing procedures herein as are reasonably required.

 

6.                                       COMMUNICATION WITH GAS CONTROL DEPARTMENT

 

6.1.                              Communication with the GCD should be directed as follows:

 

Anadarko Uintah Midstream

Attention:  Northern Region Gas Control Department

1099 18th Street, Suite 1800

Denver, CO  80202-1955

Telephone:  (720) 929-6204

8:00 a.m. to 5:00 p.m. MT

Facsimile:  (720) 929-7204

 

4

 

Exhibit C

 

Questar Wet Line Agreement

 

 

FIRST REVISED PRECEDENT AGREEMENT FOR

FIRM TRANSPORTATION SERVICE

ON

QUESTAR PIPELINE COMPANY’S

UINTA BASIN TRANSPORTATION PROJECT

 

This Precedent Agreement for Firm Transportation Service (Agreement) is made and entered on this date September 20, 2011, by and between Questar Pipeline Company (Questar) and Gasco Production Company, (Shipper).  Questar and Shipper may be referred to as the “Parties” or individually as a “Party.”

 

The Parties Represent as follows:

 

A.                       Questar owns and operates an interstate natural gas transmission system subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC); and

 

B.                        Questar  initiated an open season on January 20, 2011 (Open Season) for Shippers desiring firm transportation service on Questar’s Uinta Basin Transportation Project (Project) to provide transportation to third party processing plants, and

 

C.                               Shipper requested firm transportation during Questar’s Open Season.

 

D.                             Questar and Shipper are willing to execute a transportation service agreement (TSA) for firm transportation service subject to the terms and conditions of this Agreement.

 

The Parties Agree as Follows:

 

ARTICLE 1

FIRM TRANSPORTATION SERVICE COMMITMENT

 

1.1                                    In response to the Open Season, Shipper has requested a TSA for the transportation service described on Exhibit A.

 

1.2                                    Questar shall use reasonable efforts to construct the facilities necessary to provide the transportation service requested by Shipper and have them placed into service by April  1, 2012.  The commencement date under the TSA shall be the date that the service becomes available.

 

1.3                                    Questar’s obligation to provide the requested service is subject to: (i) Questar’s receipt of FERC approval for any  tariff modifications necessary to provide the requested service,  (ii) Questar management’s ongoing consent and approval to proceed with the project, in its sole discretion, (iii) Questar’s receipt of all necessary governmental, private and regulatory approvals, permits and rights-of-way required to construct the facilities necessary to provide the services contemplated by this Agreement.   All of the foregoing approvals, permits and rights-of-way must be in a form 

 

1

 

acceptable to Questar in its sole discretion.

 

1.4                                    By January 1, 2012, Questar shall notify Gasco in writing whether or not Questar, in its sole discretion, intends to proceed with the Project and provide the service contemplated by this Agreement. If Questar elects not to proceed, this Agreement will terminate effective thirty (30) days from such notice, unless such notice is rescinded by Questar within thirty (30) days. If Questar elects to proceed with the Project and provide the services contemplated by this Agreement, but the in-service date will occur after September 1, 2012, Questar will provide Shipper with an alternate projected in-service date. If the alternate in-service date is later than October 12, 2012, and the alternate in-service date is unacceptable to Gasco, then Gasco may terminate this Agreement by providing written notice to Questar not later than January 31, 2012. If either Party exercises its rights under Section 1.3, then neither Party shall have any liabilities or further obligations to the other Party.

 

1.5                                    Questar agrees to use commercially reasonable efforts to receive all required approvals, permits and rights-of-way to construct the facilities necessary to provide the service contemplated by this Agreement.  However, Questar will not be liable to Shipper for any damages for its inability or failure to construct the facilities or provide the services contemplated by this Agreement.

 

1.6                                    Prior to the service becoming available, Questar will tender  to Shipper a TSA in substantially the same form as Exhibit B attached hereto and made a part hereof.  The TSA will reflect the service provisions set forth on Exhibit A.  Shipper agrees to execute and return the TSA within fifteen days of being tendered by Questar for execution.

 

ARTICLE 2

TERMINATION

 

Unless terminated by Questar pursuant to Section 1.4, this Agreement will terminate on the effective in-service date of  the TSA  and thereafter Questar’s and Shipper’s rights and obligations related to firm transportation service on Questar’s interstate natural gas transmission system shall in all respects be subject to the terms and conditions of such TSA and Questar’s  Tariff.

 

ARTICLE 3

CREDITWORTHINESS

 

As a condition precedent to Questar’s performance of any of its obligations under this Agreement, Shipper must comply with Questar’s creditworthiness requirements as defined in Section 8 of Part 1 of Questar’s FERC Gas Tariff and Questar’s credit requirements for the construction of the project facilities to provide the firm transportation service.

 

2

 

ARTICLE 4

SUCCESSION AND ASSIGNMENT

 

4.1                                 Any entity which shall become a successor to this Agreement by purchase, merger or consolidation shall be entitled to the rights and shall be subject to the obligations of its predecessor in interest under this Agreement.

 

4.2                                 Either Questar or Shipper may, without relieving itself of its obligations under this Agreement, assign this Agreement to any entity or entities, with which it is affiliated, including without limitation any wholly owned subsidiary subject to satisfying Questar’s creditworthiness standards.  Otherwise, no assignment of this Agreement nor of any of the rights or obligations hereunder shall be effective without the express prior written consent of the other Party, which shall not be unreasonably withheld.  Shipper acknowledges and agrees that Questar may decline to consent to an assignment by Shipper to a party that does not or cannot demonstrate satisfaction of Questar’s creditworthiness tariff provisions.

 

4.3                                 Questar shall have the right to pledge this Agreement, or any and all of Questar’s rights there under, as security for any indebtedness incurred by Questar in connection with the financing or refinancing of Questar and to assign this Agreement in accordance with the terms and conditions of any agreement with third parties pertaining to any such indebtedness.

 

ARTICLE 5

NO THIRD PARTY BENEFICIARIES

 

This Agreement shall not create any rights in any third parties, and no provision shall be construed as creating any obligations for the benefit of, or right in favor of, any person or entity other than Questar or Shipper.

 

ARTICLE 6

NOTIFICATIONS AND COMMUNICATIONS

 

Except as otherwise provided herein, any notice contemplated or required by this Agreement shall be in writing, and shall be considered duly delivered when sent by registered or certified mail, or by telefacsimile, to the appropriate address set forth below, or at such other address as Questar or Shipper may from time to time designate by express written notice.

 

	
Questar Pipeline Company
    	
Gasco   Production Company
    
	
Attn:    Director Business Development
    	
Attn:  David Burnett
    
	
180 East 100 South
    	
8   Inverness East, Suite 100
    
	
Salt Lake City, Utah 84111
    	
Englewood,   Colorado  80112
    
	
P.O. Box 45360
    	
Phone:        (303) 483-0044
    
	
Salt Lake City, Utah  84145-0360
    	
Fax:     (303)483-0011                                           
    
	
Phone:    (801) 324-5349
    	
 
    
	
Fax:  (801)   324-2578
    	
 
    

 

3

 

ARTICLE 7

ENTIRE AGREEMENT

 

7.1                                 This Agreement contains the entire agreement between Questar and Shipper with respect to the subject matter hereof, and supersedes any and all prior agreements, understandings and commitments, whether oral or written, concerning the subject matter hereof, and any and all such prior agreements, understandings and commitments are hereby deemed to be void and of no effect.

 

7.2                                 No amendments to or modifications of this Agreement shall be effective unless agreed upon in a written instrument executed by Questar and Shipper, which expressly refers to this Agreement.

 

ARTICLE 8

GOVERNING LAW

 

The construction, interpretation, and enforcement of this Agreement shall be governed by the laws of Utah, excluding any conflict of law rule, which would refer any matter to the laws of a jurisdiction other than Utah.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the day and year first above written.

 

 

	
GASCO PRODUCTION COMPANY:
    	
 
    	
QUESTAR   PIPELINE COMPANY:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By   
    	
/s/   Michael Decker
    	
 
    	
By
    	
/s/   Shelley A. Wright
    
	
Name   
    	
Michael   Decker
    	
 
    	
Shelley   A. Wright
    
	
Title   
    	
EVP/COO
    	
 
    	
General   Manager Marketing and
    
	
 
    	
(Please   type name and Title)
    	
 
    	
Business   Development
    

 

4

 

EXHIBIT A

To

First Revised Precedent Agreement

Between

Questar Pipeline Company and Gasco Production Company

For

Uinta Basin Transportation Project

 

	
New Agreement
    	
 
    
	
 
    	
 
    
	
Reserved Daily Capacity (RDC)
    	
25,000   Dth/d
    
	
 
    	
 
    
	
Rate:(1)  $3.65/Dth/Month
    	
 
    

 

Minimum contract term: 10 years from the date capacity is made available

 

	
Primary Receipt Point (2)
    	
 
    	
Maximum Receipt Point Quantity(3)
    
	
Green   River M&R — MAP 359
    	
 
    	
25,000
    

 

	
Primary Delivery Point(3)
    	
 
    	
Maximum Delivery Point Quantity
    
	
Chipeta   Processing Plant
    	
 
    	
25,000
    

 

(1) This rate does not include usage charges, fuel reimbursement charges and ACA, and other FERC-approved surcharges.

 

(2) The parties may negotiate revisions to the listed primary points and quantities if necessary to match capacity availability.

 

(3) Total Receipt Point RDC must equal Total Delivery Point RDC.

 

5

 

EXHIBIT B

To

First Revised Precedent Agreement

Between

Questar Pipeline Company and Gasco Production Company

For

Uinta Basin Transportation Project

 

Contract No.          

 

FIRM TRANSPORTATION SERVICE AGREEMENT

Rate Schedule T-1

 

1.                           SHIPPER’S NAME AND ADDRESS:

 

Gasco Energy Company

 

2.                           SHIPPER’S STATUS:

 

o            Local Distribution Company (LDC)

o            Intrastate Pipeline Company

o            Interstate Pipeline Company

o            End User

x          Producer

o            Marketer

o            Pipeline Sales Operating Unit

 

3.                           TRANSPORTATION AUTHORITY:

 

x          18 C.F.R. § 284 Subpart G

o            18 C.F.R. § 284 Subpart B (NGPA § 311)

Transportation on Behalf of: (only applicable to § 311)

o            LDC or Intrastate Pipeline Company

o            Interstate Pipeline Company or Shipper

 

4.                           RATE SCHEDULE T-1 RDC:

 

	
25,000
    	
Dth/day
    	
 
    	
Term
    	
 
    	
through
    
	
 
    	
Dth/day
    	
 
    	
Term
    	
 
    	
through
    

 

5.                           PRIMARY RECEIPT POINTS:

 

	
MAP No.
    	
 
    	
-
    	
 
    	
Description
    	
 
    	
Capacity
    	
 
    	
Term
    
	
359
    	
 
    	
-
    	
 
    	
Green   River M&R
    	
 
    	
25,000   Dth/day
    	
 
    	
 
    
	
 
    	
 
    	
-
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

6

 

6.                           PRIMARY DELIVERY POINTS:

 

	
MAP No.
    	
 
    	
-
    	
 
    	
Description
    	
 
    	
Capacity
    	
 
    	
Term
    
	
 
    	
 
    	
-
    	
 
    	
Chipeta   Processing Plant
    	
 
    	
25,000   Dth/day
    	
 
    	
 
    
	
 
    	
 
    	
-
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

7.                           SEGMENTED CAPACITY:

 

	
Capacity
    	
 
    	
-
    	
 
    	
Rec. Pt. MAP No. - Desc.
    	
 
    	
Del. Pt. MAP No. - Desc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

8.                           RATES:

Reservation Charge:

 

Primary Points

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Rate
    
	
Rec. Location
    	
 
    	
Del.   Location
    	
 
    	
Type of   Charge
    	
 
    	
($/Dth/mo.)
    
	
Green   River M&R
    	
 
    	
Chipeta
    	
 
    	
T-1
    	
 
    	
$3.65/Dth/mo.
    

 

Alternate Points

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Rate
    
	
Rec. Location
    	
 
    	
Del. Location
    	
 
    	
Type of Charge
    	
 
    	
($/Dth/mo.)
    
	
All
    	
 
    	
All
    	
 
    	
T-1
    	
 
    	
maximum
    

 

Usage Charges:

x          The rate on Questar’s Statement of Rates.

o            See Additional Terms

 

Volumetric Rate:

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Rate
    
	
Rec. Location
    	
 
    	
Del. Location
    	
 
    	
Type of Charge
    	
 
    	
($/Dth/d)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

9.                           ADDITIONAL FACILITIES CHARGES:

x          None

o            Lump sum payment of

o            Monthly fee of

o            See additional terms

 

10.                     TERM OF AGREEMENT:

 

A 10 year term beginning on the date the service becomes available.

 

11.                     RENEWAL TERM:

o            None

x          Month to month

o            Year to year

o            Other:

This Agreement may be terminated by either party by giving written notice:

90            days before the expiration of its primary term.

90            days before the expiration of any renewal term.

 

7

 

12.                     ADDITIONAL TERMS:

 

13.                     This Agreement includes all the terms and conditions of Part 1 of Questar’s FERC Gas Tariff, Second Revised Volume No. 1 and the terms, conditions and signatures of Shipper’s access agreement with Questar.

 

	
GASCO   PRODUCTION COMPANY:
    	
 
    	
QUESTAR   PIPELINE COMPANY:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By   
    	
/s/   Michael Decker
    	
 
    	
By
    	
/s/   Shelley A. Wright
    
	
Name
    	
Michael   Decker
    	
 
    	
Shelley   A. Wright
    
	
Title
    	
EVP/COO
    	
 
    	
General   Manager Marketing and
    
	
 
    	
(Please   type name and Title)
    	
 
    	
Business   Development
    

 

8

 

Exhibit D

 

Form of Recording Memorandum

 

Uintah County, Utah

Duchesne County, Utah

 

MEMORANDUM OF AMENDED AND RESTATED GAS GATHERING AND PROCESSING AGREEMENT

 

This MEMORANDUM OF AMENDED AN RESTATED GAS GATHERING AND PROCESSING AGREEMENT (this “Memorandum”) is to impart notice to all persons of the Amended and Restated Gas Gathering and Processing Agreement dated                  , 2012 (the “Agreement”) between Monarch Natural Gas, LLC, whose address is 5613 DTC Parkway, Suite 200, Greenwood Village, CO 80111 (“Gatherer”), and Gasco Production Company, whose address is 8 Inverness Drive East, Suite 100, Englewood, CO 80112 (“Producer”).

 

1.             Producer has agreed on an exclusive basis (the “Dedication”) to make physical delivery to Gatherer of the entirety of gas and associated hydrocarbons (the “Hydrocarbons”) produced or delivered by Producer and its Affiliates (as such term is defined in the Agreement) from (i) the leases described on Schedule A (the “Leases”), and (ii) any other lands located within the geographic area described on Schedule B (the “AMI”), whether now owned or hereafter acquired, along with the processing rights, subject to certain volume exclusions as described herein, and any and all additional right, title, interest, or claim of every kind and character of Producer or its Affiliates in (x) the Leases or (y) lands within the AMI, and Gas (as such term is defined in the Agreement) production therefrom, and all interests in any wells, whether now existing or drilled hereafter, on, or completed on, lands covered by a Lease or within the AMI.

 

2.             The Dedication includes Gas under contract with Producer from or otherwise attributable to (i) NFR Uinta Basin LLC under the Agreement dated July 25, 2007, and (ii) Halliburton Energy Services, Inc. under the Agreement dated May 1, 2005, and (iii) MBG Trust under the Agreement dated August 1, 2008, as they currently exist.  The Dedication shall not include Gas acquired after the Effective Date of this Agreement by Producer through other means including, but not limited to, marketing arrangements or joint operating agreements.

 

3.             The Dedication herein constitutes merely an exclusive obligation to make physical delivery of the Hydrocarbons to Gatherer, and shall not in any manner whatsoever constitute a conveyance, assignment, transfer, or sale of any form of ownership interest in the Hydrocarbons or the mineral estate underlying the Leases.  Ownership, custody, and risk of loss with respect to the Hydrocarbons shall be determined exclusively pursuant to the terms and condition of the Agreement.

 

4.             The Dedication herein shall terminate, in part or in its entirety, pursuant to the terms and conditions of the Agreement.

 

 

5.             Subject to the written approval of both parties in their sole discretion, the Agreement is available for review during regular business hours at the offices of Gatherer and Producer.

 

6.             This Memorandum and all rights and covenants in connection herewith shall run with the underlying Leases and associated lands and shall be binding upon the parties hereto and their respective successors and assigns.

 

7.             This Memorandum may be executed in multiple counterparts, each of which shall constitute an original and all of which, when construed together, shall constitute one and the same instrument.

 

[Execution Page Follows.]

 

 

This MEMORANDUM OF GAS GATHERING AND PROCESSING AGREEMENT is executed and delivered to be effective as of March 1, 2010.

 

 

	
MONARCH   NATURAL GAS, LLC
    	
GASCO   PRODUCTION COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
Name:
    	
 
    	
Name:
    	
 
    
	
Title:   
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
STATE   OF
    	
)
    	
 
    
	
 
    	
)   ss.
    	
 
    
	
COUNTY   OF
    	
)
    	
 
    

 

The foregoing MEMORANDUM OF GAS GATHERING AGREEMENT was acknowledged before me on                         , 2012, by C. Judson Williams, in his capacity as Chief Financial Officer of Monarch Natural Gas, LLC, on behalf of said limited liability company.

 

	
 
    	
 
    
	
 
    	
Notary   Public
    
	
 
    	
 
    
	
 
    	
My   Commission Expires:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
STATE   OF
    	
)
    	
 
    
	
 
    	
)   ss.
    	
 
    
	
COUNTY   OF
    	
)
    	
 
    
					

 

The foregoing MEMORANDUM OF GAS GATHERING AGREEMENT was acknowledged before me on                   , 2012, by                       , in his/her capacity as                      of Gasco Production Company, on behalf of said corporation.

 

	
 
    	
 
    
	
 
    	
Notary   Public
    
	
 
    	
 
    
	
 
    	
My   Commission Expires:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
				

 

 

Schedule 1

 

Description of AMI

 

 

 

 

Schedule 2

 

Receipt Points, Well Names and Locations, and Delivery Points

 

 

SCHEDULE 2

 

Well Names-Receipt Points

 

	
Well Name
    	
 
    	
Qtr/Qtr
    	
 
    	
Sec
    	
 
    	
Twn
    	
 
    	
Rge
    	
 
    	
County
    
	
Desert   Spring Federal 21-1-10-18
    	
 
    	
NE NW
    	
 
    	
1
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring Federal 41-1-10-18
    	
 
    	
NE NE
    	
 
    	
1
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 12-36-9-18
    	
 
    	
SW NW
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 21-36-9-18
    	
 
    	
NE NW
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 23-36-9-18
    	
 
    	
NE SW
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 33-36-9-18
    	
 
    	
NW SE
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 34-36-9-18
    	
 
    	
SW SE
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 41-36-9-18
    	
 
    	
NE NE
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Desert   Spring State 43-36-9-18
    	
 
    	
NE SE
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   11-19-9-19
    	
 
    	
NWNW
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   11-21-9-19
    	
 
    	
NW NW
    	
 
    	
21
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   11-22-9-19
    	
 
    	
NW NW
    	
 
    	
22
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   11-22-10-18
    	
 
    	
NW NW
    	
 
    	
22
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   12-1-10-18
    	
 
    	
SW NW
    	
 
    	
1
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   12-19-9-19
    	
 
    	
SW NW
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   12-20-9-19
    	
 
    	
SW NW
    	
 
    	
20
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   12-29-9-19
    	
 
    	
SW NW
    	
 
    	
29
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   12-30-9-19
    	
 
    	
SW NW
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   12-31-9-19
    	
 
    	
SW NW
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   13-30B
    	
 
    	
SW SW
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   14-17-9-19
    	
 
    	
SW SW
    	
 
    	
17
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   14-18-2 #1
    	
 
    	
SW SW
    	
 
    	
18
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   14-18-9-19
    	
 
    	
SW SW
    	
 
    	
18
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   14-19-9-19
    	
 
    	
SW SW
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   14-31-9-19
    	
 
    	
SW SW
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   16-26A
    	
 
    	
SE SE
    	
 
    	
26
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   21-19-9-19
    	
 
    	
NE NW
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   21-30-9-19
    	
 
    	
NE NW
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   21-31-9-19
    	
 
    	
NE NW
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   21-6-10-19
    	
 
    	
NE NW
    	
 
    	
6
    	
 
    	
10
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   22-30-10-18
    	
 
    	
SE NW
    	
 
    	
30
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   23-12 #1 (Pete’s Wash)
    	
 
    	
NE SW
    	
 
    	
12
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Uintah
    
	
Federal   23-18-9-19
    	
 
    	
NE SW
    	
 
    	
18
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   23-19-9-19
    	
 
    	
NE SW
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    

 

 

	
Federal   23-21-9-19
    	
 
    	
NE SW
    	
 
    	
21
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   23-29 #1
    	
 
    	
NE SW
    	
 
    	
29
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   23-30-9-19
    	
 
    	
NE SW
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   23-31-9-19
    	
 
    	
NE SW
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   24-20-9-19
    	
 
    	
SE SW
    	
 
    	
20
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   24-31-9-19
    	
 
    	
SE SW
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   24-7 #1
    	
 
    	
SE SW
    	
 
    	
7
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Federal   31-21-9-19
    	
 
    	
NW NE
    	
 
    	
21
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   31-29 #1
    	
 
    	
NW NE
    	
 
    	
29
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   32-19X-9-19
    	
 
    	
SW NE
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   32-20-9-19
    	
 
    	
SW NE
    	
 
    	
20
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   32-30-9-19
    	
 
    	
SW NE
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   32-31-9-19
    	
 
    	
SW NE
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   34-18-9-19
    	
 
    	
SW SE
    	
 
    	
18
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   34-19-9-19
    	
 
    	
SW SE
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   34-29 #1
    	
 
    	
SW SE
    	
 
    	
29
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   34-30-9-19
    	
 
    	
SW SE
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   41-19-9-19
    	
 
    	
NE NE
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   41-30-9-19
    	
 
    	
NE NE
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   41-31-9-19
    	
 
    	
NE NE
    	
 
    	
31
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   42-21-9-19
    	
 
    	
SE NE
    	
 
    	
21
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   42-29-9-19
    	
 
    	
SE NE
    	
 
    	
29
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   43-19-9-19
    	
 
    	
NE SE
    	
 
    	
19
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   43-24-3 #1
    	
 
    	
NE SE
    	
 
    	
24
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Uintah
    
	
Federal   43-30-9-19
    	
 
    	
NE SE
    	
 
    	
30
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Federal   44-20-9-19
    	
 
    	
SE SE
    	
 
    	
20
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Gate   Canyon Federal 41-19-11-16
    	
 
    	
NE NE
    	
 
    	
19
    	
 
    	
11
    	
 
    	
16
    	
 
    	
Duchesne
    
	
Gate   Canyon State 23-16-11-15
    	
 
    	
NESW
    	
 
    	
16
    	
 
    	
11
    	
 
    	
15
    	
 
    	
Duchesne
    
	
Gate   Canyon State 23-16-11-16
    	
 
    	
NE SW
    	
 
    	
16
    	
 
    	
11
    	
 
    	
16
    	
 
    	
Duchesne
    
	
Gate   Canyon State 31-21-11-15
    	
 
    	
NW NE
    	
 
    	
21
    	
 
    	
11
    	
 
    	
15
    	
 
    	
Duchesne
    
	
Gate   Canyon State 41-20-11-15
    	
 
    	
NE NE
    	
 
    	
20
    	
 
    	
11
    	
 
    	
15
    	
 
    	
Duchesne
    
	
Lamb   Trust 14-14-9-19
    	
 
    	
SW SW
    	
 
    	
14
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Lamb   Trust 24-14-9-19
    	
 
    	
SE SW
    	
 
    	
14
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Lamb   Trust 24-22-9-19
    	
 
    	
SE SW
    	
 
    	
22
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Lamb   Trust 34-22-9-19
    	
 
    	
SW SE
    	
 
    	
22
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Lamb   Trust 34-22A-9-19
    	
 
    	
SW SE
    	
 
    	
22
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Lytham   Federal 22-22-9-19
    	
 
    	
SE NW
    	
 
    	
22
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
RBU   01-10D
    	
 
    	
NENE
    	
 
    	
10
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
RBU   03-12D
    	
 
    	
NENW
    	
 
    	
12
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
RBU   03-15D
    	
 
    	
NENW
    	
 
    	
15
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 11-25-9-18
    	
 
    	
NW NW
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 12-25-9-18
    	
 
    	
SW NW
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 14-25-9-18
    	
 
    	
SW SW
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 21-25-9-18
    	
 
    	
NE NW
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 23-25-9-18
    	
 
    	
NE SW
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 23-26-9-18
    	
 
    	
NE SW
    	
 
    	
26
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 31-25-9-18
    	
 
    	
NW NE
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    

 

 

	
Sheep   Wash Federal 32-25-9-18
    	
 
    	
SW NE
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 34-25-9-18
    	
 
    	
SW SE
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 34-26-9-18
    	
 
    	
SW SE
    	
 
    	
26
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 41-25-9-18
    	
 
    	
NE NE
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 41-26-9-18
    	
 
    	
NE NE
    	
 
    	
26
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
Sheep   Wash Federal 43-25-9-18
    	
 
    	
NE SE
    	
 
    	
25
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
State   02-32B
    	
 
    	
NW NE
    	
 
    	
32
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
State   04-32B
    	
 
    	
NW NW
    	
 
    	
32
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
State   07-36A
    	
 
    	
SW NE
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
State   12-32-9-19
    	
 
    	
SW NW
    	
 
    	
32
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
State   13-36A
    	
 
    	
SW S
    	
 
    	
36
    	
 
    	
9
    	
 
    	
18
    	
 
    	
Uintah
    
	
State   21-32A-9-19
    	
 
    	
NE NW
    	
 
    	
32
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
State   21-32B-9-19
    	
 
    	
NE NW
    	
 
    	
32
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
State   22-32A-9-19
    	
 
    	
NE NW
    	
 
    	
32
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
State   24-16-9-19
    	
 
    	
SE SW
    	
 
    	
16
    	
 
    	
9
    	
 
    	
19
    	
 
    	
Uintah
    
	
Uteland   Federal 42-11-10-18
    	
 
    	
SE NE
    	
 
    	
11
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Uteland   State 12-2-10-18
    	
 
    	
SW NW
    	
 
    	
2
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Uteland   State 21-2-10-18
    	
 
    	
NE NW
    	
 
    	
2
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Uteland   State 34-2-10-18
    	
 
    	
SW SE
    	
 
    	
2
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Uteland   State 41-2-10-18
    	
 
    	
NE NE
    	
 
    	
2
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Uteland   State 43-2-10-18
    	
 
    	
NE SE
    	
 
    	
2
    	
 
    	
10
    	
 
    	
18
    	
 
    	
Uintah
    
	
Wilkin   Ridge Federal 12-4-11-17
    	
 
    	
SW NW
    	
 
    	
4
    	
 
    	
11
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge Federal 14-4-11-17
    	
 
    	
SW SW
    	
 
    	
4
    	
 
    	
11
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge Federal 23-29-10-17
    	
 
    	
NE SW
    	
 
    	
29
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge Federal 24-20-10-17
    	
 
    	
SE SW
    	
 
    	
20
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge Federal 31-29-10-17
    	
 
    	
NW NE
    	
 
    	
29
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge Federal 32-20-10-17
    	
 
    	
SW NE
    	
 
    	
20
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge Federal 34-17-10-17
    	
 
    	
SW SE
    	
 
    	
17
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge State 12-32-10-17
    	
 
    	
SW NW
    	
 
    	
32
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge State 24-32-10-17
    	
 
    	
SE SW
    	
 
    	
32
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge State 31-32-10-17
    	
 
    	
NW NE
    	
 
    	
32
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge State 34-16-10-17
    	
 
    	
SW SE
    	
 
    	
16
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    
	
Wilkin   Ridge State 44-32-10-17
    	
 
    	
SE SE
    	
 
    	
32
    	
 
    	
10
    	
 
    	
17
    	
 
    	
Duchesne
    

 

Delivery Points

Riverbend — Map Point 359 on the Questar Pipeline Map

Gate Canyon — Map Point 349 on the Questar Pipeline Map

 

 

 

 

Schedule 3

 

Leases

 

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under   Declaration & Agreement of Trust, dated November 1, 1965, from   Floyd E. Lamb,Trustors and under Extension of Declaration &   Agreement of Trust dated June 26, 1982, from Janet C. Lamb, et al,   beneficiaries of Trust, PO Box 374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
14
    	
 
    	
S2S2,   EXC RIVER
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under   Declaration & Agreement of Trust, dated November 1, 1965, from   Floyd E. Lamb,Trustors and under Extension of Declaration &   Agreement of Trust dated June 26, 1982, from Janet C. Lamb, et al,   beneficiaries of Trust, PO Box 374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
SESE
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under   Declaration & Agreement of Trust, dated November 1, 1965, from   Floyd E. Lamb,Trustors and under Extension of Declaration &   Agreement of Trust dated June 26, 1982, from Janet C. Lamb, et al,   beneficiaries of Trust, PO Box 374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
23
    	
 
    	
S2NW,   N2SW, S2SWSW, EXC RIVER
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under   Declaration & Agreement of Trust, dated November 1, 1965, from   Floyd E. Lamb,Trustors and under Extension of Declaration &   Agreement of Trust dated June 26, 1982, from Janet C. Lamb, et al,   beneficiaries of Trust, PO Box 374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
27
    	
 
    	
NENE,   SE, EXC RIVER
    

 

1

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under   Declaration & Agreement of Trust, dated November 1, 1965, from   Floyd E. Lamb,Trustors and under Extension of Declaration &   Agreement of Trust dated June 26, 1982, from Janet C. Lamb, et al,   beneficiaries of Trust, PO Box 374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
SESW
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under   Declaration & Agreement of Trust, dated November 1, 1965, from   Floyd E. Lamb,Trustors and under Extension of Declaration &   Agreement of Trust dated June 26, 1982, from Janet C. Lamb, et al,   beneficiaries of Trust, PO Box 374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
14
    	
 
    	
SESW
    
	
LUT-0002
    	
 
    	
Karl Lamb, Successor Trustee for the beneficiaries under Declaration &   Agreement of Trust, dated November 1, 1965, from Floyd E. Lamb,Trustors   and under Extension of Declaration & Agreement of Trust dated   June 26, 1982, from Janet C. Lamb, et al, beneficiaries of Trust, PO Box   374, Myton, Utah 84052-0374
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
SWSE
    
	
LUT-0003-01
    	
 
    	
DOROTHY M. NORSETH FAMILY TRUST DATED APRIL 16, 1992
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
12
    	
 
    	
N2SE,   SWSE, E2SW, EXC RIVER
    
	
LUT-0003-01
    	
 
    	
DOROTHY M. NORSETH FAMILY TRUST DATED APRIL 16, 1992
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
13
    	
 
    	
NENW,   E2SW, SWNW, E2NWNW, EXC RIVER
    
	
LUT-0003-02
    	
 
    	
Merle G. Hyer Company, Inc.
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
12
    	
 
    	
N2SE,   SWSE, E2SW, EXC RIVER
    
	
LUT-0003-02
    	
 
    	
Merle G. Hyer Company, Inc.
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
13
    	
 
    	
NENW,   E2SW, SWNW, E2NWNW, EXC RIVER
    
	
LUT-1002
    	
 
    	
State of Utah ML-45171
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
36
    	
 
    	
NWSW
    
	
LUT-1002
    	
 
    	
State of Utah ML-45171
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
36
    	
 
    	
SENE,   NWNE, SENW, NWNW, SESW
    
	
LUT-1002
    	
 
    	
State of Utah ML-45171
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
36
    	
 
    	
SWNE
    
	
LUT-1002
    	
 
    	
State of Utah ML-45171
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
36
    	
 
    	
NENE, NENW, SWNW, NESE, NESW
    
	
LUT-1002
    	
 
    	
State of Utah ML-45171
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
36
    	
 
    	
S2SE,   NWSE, SWSW
    
	
LUT-1003
    	
 
    	
State of Utah ML-45172
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
32
    	
 
    	
Lots   1 (24.17), 2 ( (30.30) 3 (41.11). 5 (20.65), E2NE, SWNE
    
	
LUT-1003
    	
 
    	
State of Utah ML-45172
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
32
    	
 
    	
Lot   4 (40.00) aka NWSE
    
	
LUT-1003
    	
 
    	
State of Utah ML-45172
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
32
    	
 
    	
NWNE
    
	
LUT-1003
    	
 
    	
State of Utah ML-45172
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
32
    	
 
    	
NWNW,   SWNW
    

 

2

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-1003
    	
 
    	
State of Utah ML-45172
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
32
    	
 
    	
NENW
    
	
LUT-1003
    	
 
    	
State of Utah ML-45172
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
32
    	
 
    	
SENW
    
	
LUT-1004
    	
 
    	
State of Utah ML-45175
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
16
    	
 
    	
N2
    
	
LUT-1012
    	
 
    	
State of Utah ML-46300
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
36
    	
 
    	
ALL
    
	
LUT-1013
    	
 
    	
State of Utah ML-46301
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
16
    	
 
    	
N2
    
	
LUT-1013
    	
 
    	
State of Utah ML-46301
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
16
    	
 
    	
S2S2,   NWSW, N2SE
    
	
LUT-1013
    	
 
    	
State of Utah ML-46301
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
16
    	
 
    	
NESW
    
	
LUT-1014
    	
 
    	
State of Utah ML-46302
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
32
    	
 
    	
ALL
    
	
LUT-1025
    	
 
    	
State of Utah ML-46910
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
32
    	
 
    	
N2,   N2SW, NWSE
    
	
LUT-1026
    	
 
    	
State of Utah ML-47057
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
36
    	
 
    	
ALL
    
	
LUT-1028
    	
 
    	
State of Utah ML-47067
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
16
    	
 
    	
ALL
    
	
LUT-1029
    	
 
    	
State of Utah ML-47069
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
36
    	
 
    	
N2
    
	
LUT-1030
    	
 
    	
State of Utah ML-47070
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
2
    	
 
    	
ALL
    
	
LUT-1031
    	
 
    	
State of Utah ML-47071
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
16
    	
 
    	
ALL
    
	
LUT-1032
    	
 
    	
State of Utah ML-47072
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
32
    	
 
    	
ALL
    
	
LUT-1033
    	
 
    	
State of Utah ML-47073
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
36
    	
 
    	
ALL
    
	
LUT-1034
    	
 
    	
State of Utah ML-47074
    	
 
    	
11S
    	
 
    	
18E
    	
 
    	
32
    	
 
    	
ALL
    
	
LUT-1037
    	
 
    	
State of Utah ML-47824
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
2
    	
 
    	
ALL
    
	
LUT-1039
    	
 
    	
State of Utah ML-48266
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
16
    	
 
    	
N2,   SE
    
	
LUT-1039
    	
 
    	
State of Utah ML-48266
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
16
    	
 
    	
SWSW,   N2SW
    
	
LUT-1039
    	
 
    	
State of Utah ML-48266
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
16
    	
 
    	
SESW
    
	
LUT-1040
    	
 
    	
State of Utah ML-48650
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
16
    	
 
    	
NENE
    
	
LUT-1041
    	
 
    	
State of Utah ML-48928
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
16
    	
 
    	
N2S2,   SESE, S2SW, SENE, W2NE, NW
    
	
LUT-1041
    	
 
    	
State of Utah ML-48928
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
16
    	
 
    	
NENW
    
	
LUT-1042
    	
 
    	
State of Utah ML-49308
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
21
    	
 
    	
W2,   SE, E2NE, SWNE
    
	
LUT-1042
    	
 
    	
State of Utah ML-49308
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
28
    	
 
    	
N2,   SW, NWSE
    
	
LUT-1042
    	
 
    	
State of Utah ML-49308
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
29
    	
 
    	
E2,   E2SW
    
	
LUT-1042
    	
 
    	
State of Utah ML-49308
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
21
    	
 
    	
NWNE
    
	
LUT-1045
    	
 
    	
State of Utah ML-13214
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
16
    	
 
    	
ALL
    
	
LUT-1046
    	
 
    	
State of Utah ML-13215-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
W2SE
    
	
LUT-1046
    	
 
    	
State of Utah ML-13215-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
SESE
    
	
LUT-1046
    	
 
    	
State of Utah ML-13215-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
NESE,   Drilliste for the Uteland St. 43-2-10-18
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
NWNE,   SWNE, N2SW, SESW
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
NWNW
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
SENE
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
SENW,   SWSW
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
NENE
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
SWNW
    
	
LUT-1047
    	
 
    	
State of Utah ML-26968
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
2
    	
 
    	
NENW
    

 

3

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-1048
    	
 
    	
State of Utah ML-47056
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
32
    	
 
    	
N2NW,   SENW
    
	
LUT-1048
    	
 
    	
State of Utah ML-47056
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
32
    	
 
    	
N2S2,   SWSW, SWSE, S2NE, NENE
    
	
LUT-1048
    	
 
    	
State of Utah ML-47056
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
32
    	
 
    	
SWNW
    
	
LUT-1048
    	
 
    	
State of Utah ML-47056
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
32
    	
 
    	
NWNE,   SESW, SESE
    
	
LUT-1055
    	
 
    	
State of Utah ML-49945
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
19
    	
 
    	
ALL
    
	
LUT-1055
    	
 
    	
State of Utah ML-49945
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
20
    	
 
    	
S2,   NW, S2NE, NWNE (IRREGULAR SECTION)
    
	
LUT-1055
    	
 
    	
State of Utah ML-49945
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
29
    	
 
    	
NW,   W2SW
    
	
LUT-1055
    	
 
    	
State of Utah ML-49945
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
30
    	
 
    	
ALL
    
	
LUT-1055
    	
 
    	
State of Utah ML-49945
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
31
    	
 
    	
N2,   N2SE
    
	
LUT-1055
    	
 
    	
State of Utah ML-49945
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
20
    	
 
    	
NENE
    
	
LUT-1056
    	
 
    	
State of Utah ML-50512
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
32
    	
 
    	
SWSW
    
	
LUT-1057
    	
 
    	
State of Utah ML-50966
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
36
    	
 
    	
All
    
	
LUT-3001
    	
 
    	
Bureau of Land Management UTU-0147541
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
33
    	
 
    	
SWSE,   NWNW, E2W2NE, E2NWSE, EXC RIVER
    
	
LUT-3002
    	
 
    	
Bureau of Land Management UTU-0147541-A
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
33
    	
 
    	
SESE
    
	
LUT-3003
    	
 
    	
Bureau of Land Management UTU-017991
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
17
    	
 
    	
N2
    
	
LUT-3003
    	
 
    	
Bureau of Land Management UTU-017991
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
18
    	
 
    	
S2N2,   NWNW
    
	
LUT-3004
    	
 
    	
Bureau of Land Management UTU-018260-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
22
    	
 
    	
NE,   SE
    
	
LUT-3004
    	
 
    	
Bureau of Land Management UTU-018260-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
23
    	
 
    	
ALL
    
	
LUT-3004
    	
 
    	
Bureau of Land Management UTU-018260-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
22
    	
 
    	
NENW,   S2NW
    
	
LUT-3004
    	
 
    	
Bureau of Land Management UTU-018260-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
22
    	
 
    	
NWNW
    
	
LUT-3005
    	
 
    	
Bureau of Land Management UTU-058148
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
24
    	
 
    	
NW,   NWNE, NWSW
    
	
LUT-3006
    	
 
    	
Bureau of Land Management UTU-16544
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
17
    	
 
    	
SESW,   SE
    
	
LUT-3006
    	
 
    	
Bureau of Land Management UTU-16544
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
18
    	
 
    	
SESW,   NWSW , SESE
    
	
LUT-3006
    	
 
    	
Bureau of Land Management UTU-16544
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
18
    	
 
    	
NWSE
    
	
LUT-3006
    	
 
    	
Bureau of Land Management UTU-16544
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
18
    	
 
    	
SWSW,   NESW, SWSE
    
	
LUT-3006
    	
 
    	
Bureau of Land Management UTU-16544
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
17
    	
 
    	
SWSW
    
	
LUT-3007
    	
 
    	
Bureau of Land Management UTU-19266
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
26
    	
 
    	
NW,   S2NE, NWNE
    
	
LUT-3007
    	
 
    	
Bureau of Land Management UTU-19266
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
26
    	
 
    	
NWSW,   S2SW
    
	
LUT-3007
    	
 
    	
Bureau of Land Management UTU-19266
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
26
    	
 
    	
N2SE
    
	
LUT-3007
    	
 
    	
Bureau of Land Management UTU-19266
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
26
    	
 
    	
S2SE
    
	
LUT-3007
    	
 
    	
Bureau of Land Management UTU-19266
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
26
    	
 
    	
NENE
    
	
LUT-3007
    	
 
    	
Bureau of Land Management UTU-19266
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
26
    	
 
    	
NWSW
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
SENE,   SESE, SESW
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
NWNE,   SENW, NWSE, NWSW
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
NENE,   NENW, NESE, NESW
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
SWSW
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
SWNE
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
SWSE
    
	
LUT-3009
    	
 
    	
Bureau of Land Management UTU-37246
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
30
    	
 
    	
SWNW
    

 

4

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3013
    	
 
    	
Bureau of Land Management UTU-62159
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
7
    	
 
    	
W2,   W2E2, SENE, E2SE
    
	
LUT-3013
    	
 
    	
Bureau of Land Management UTU-62159
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
8
    	
 
    	
S2
    
	
LUT-3013
    	
 
    	
Bureau of Land Management UTU-62159
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
18
    	
 
    	
ALL
    
	
LUT-3015
    	
 
    	
Bureau of Land Management UTU-65319
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
34
    	
 
    	
W2
    
	
LUT-3017
    	
 
    	
Bureau of Land Management UTU-65324
    	
 
    	
11S
    	
 
    	
18E
    	
 
    	
28
    	
 
    	
LOTS   1-3, S2NW, all of the bed of the Green River (see lease for metes &   bounds description)
    
	
LUT-3021
    	
 
    	
Bureau of Land Management UTU-65779
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
31
    	
 
    	
S2
    
	
LUT-3022
    	
 
    	
Bureau of Land Management UTU-65782
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
3
    	
 
    	
W2W2
    
	
LUT-3022
    	
 
    	
Bureau of Land Management UTU-65782
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
E2
    
	
LUT-3022
    	
 
    	
Bureau of Land Management UTU-65782
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
8
    	
 
    	
E2,   E2W2
    
	
LUT-3022
    	
 
    	
Bureau of Land Management UTU-65782
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
9
    	
 
    	
N2
    
	
LUT-3022
    	
 
    	
Bureau of Land Management UTU-65782
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
10
    	
 
    	
W2W2
    
	
LUT-3023
    	
 
    	
Bureau of Land Management UTU-65783
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
20
    	
 
    	
N2,   N2SW, SE
    
	
LUT-3023
    	
 
    	
Bureau of Land Management UTU-65783
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
21
    	
 
    	
N2SE
    
	
LUT-3023
    	
 
    	
Bureau of Land Management UTU-65783
    	
 
    	
12S
    	
 
    	
17E
    	
 
    	
22
    	
 
    	
S2NW,   NWSW
    
	
LUT-3025
    	
 
    	
Bureau of Land Management UTU-66798
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
24
    	
 
    	
N2,   N2SW, SESW, SE
    
	
LUT-3025
    	
 
    	
Bureau of Land Management UTU-66798
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
25
    	
 
    	
NE,   E2NW
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
18
    	
 
    	
W2SE
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
13
    	
 
    	
SW
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
14
    	
 
    	
S2
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
15
    	
 
    	
S2
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
18
    	
 
    	
W2,   NE
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
24
    	
 
    	
N2,   N2SW, SWSW, SE
    
	
LUT-3026
    	
 
    	
Bureau of Land Management UTU-66800
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
18
    	
 
    	
E2SE
    
	
LUT-3027
    	
 
    	
Bureau of Land Management UTU-67253
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
23
    	
 
    	
S2
    
	
LUT-3027
    	
 
    	
Bureau of Land Management UTU-67253
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
24
    	
 
    	
SESW
    
	
LUT-3028
    	
 
    	
Bureau of Land Management UTU-68387
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
7
    	
 
    	
SESW
    
	
LUT-3029
    	
 
    	
Bureau of Land Management UTU-68620
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
4
    	
 
    	
W2
    
	
LUT-3029
    	
 
    	
Bureau of Land Management UTU-68620
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
9
    	
 
    	
ALL
    
	
LUT-3029
    	
 
    	
Bureau of Land Management UTU-68620
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
3
    	
 
    	
W2
    
	
LUT-3043
    	
 
    	
Bureau of Land Management UTU-73165
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
15
    	
 
    	
NW
    
	
LUT-3043
    	
 
    	
Bureau of Land Management UTU-73165
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
17
    	
 
    	
W2
    
	
LUT-3044
    	
 
    	
Bureau of Land Management UTU-73425
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
31
    	
 
    	
N2
    
	
LUT-3048
    	
 
    	
Bureau of Land Management UTU-74387
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
5
    	
 
    	
E2
    
	
LUT-3048
    	
 
    	
Bureau of Land Management UTU-74387
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
9
    	
 
    	
W2
    
	
LUT-3048
    	
 
    	
Bureau of Land Management UTU-74387
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
15
    	
 
    	
SW
    
	
LUT-3050
    	
 
    	
Bureau of Land Management UTU-74396
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
21
    	
 
    	
ALL
    
	
LUT-3050
    	
 
    	
Bureau of Land Management UTU-74396
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
22
    	
 
    	
ALL
    
	
LUT-3050
    	
 
    	
Bureau of Land Management UTU-74396
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
23
    	
 
    	
N2
    

 

5

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3052
    	
 
    	
Bureau of Land Management UTU-74401
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
24
    	
 
    	
S2NE,   SW, NWSE, SWSE
    
	
LUT-3052
    	
 
    	
Bureau of Land Management UTU-74401
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
23
    	
 
    	
NE,   NENW, SW, W2SE, SESE
    
	
LUT-3052
    	
 
    	
Bureau of Land Management UTU-74401
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
25
    	
 
    	
NENE,   S2NE, W2,SE
    
	
LUT-3052
    	
 
    	
Bureau of Land Management UTU-74401
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
24
    	
 
    	
NESE
    
	
LUT-3053
    	
 
    	
Bureau of Land Management UTU-74403
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
9
    	
 
    	
ALL
    
	
LUT-3054
    	
 
    	
Bureau of Land Management UTU-74407
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
17
    	
 
    	
S2
    
	
LUT-3055
    	
 
    	
Bureau of Land Management UTU-74968
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
13
    	
 
    	
ALL
    
	
LUT-3055
    	
 
    	
Bureau of Land Management UTU-74968
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
24
    	
 
    	
N2NE,   NW, SESE
    
	
LUT-3055
    	
 
    	
Bureau of Land Management UTU-74968
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
23
    	
 
    	
W2NW,   SENW
    
	
LUT-3056
    	
 
    	
Bureau of Land Management UTU-74971
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
6
    	
 
    	
W2NW,   S2
    
	
LUT-3056
    	
 
    	
Bureau of Land Management UTU-74971
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
18
    	
 
    	
N2,   E2SW, SE
    
	
LUT-3056
    	
 
    	
Bureau of Land Management UTU-74971
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
18
    	
 
    	
NWSW
    
	
LUT-3056
    	
 
    	
Bureau of Land Management UTU-74971
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
18
    	
 
    	
SWSW
    
	
LUT-3057
    	
 
    	
Bureau of Land Management UTU-75079
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
1
    	
 
    	
NWSW,   S2S2
    
	
LUT-3057
    	
 
    	
Bureau of Land Management UTU-75079
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
14
    	
 
    	
S2
    
	
LUT-3057
    	
 
    	
Bureau of Land Management UTU-75079
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
15
    	
 
    	
S2
    
	
LUT-3057
    	
 
    	
Bureau of Land Management UTU-75079
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
12
    	
 
    	
S2S2
    
	
LUT-3058
    	
 
    	
Bureau of Land Management UTU-75084
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
22
    	
 
    	
ALL
    
	
LUT-3058
    	
 
    	
Bureau of Land Management UTU-75084
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
23
    	
 
    	
NESE
    
	
LUT-3059
    	
 
    	
Bureau of Land Management UTU-75088
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
5
    	
 
    	
NWSW,   NWSE
    
	
LUT-3059
    	
 
    	
Bureau of Land Management UTU-75088
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
7
    	
 
    	
S2NW,   N2SW, SWSW, SE
    
	
LUT-3059
    	
 
    	
Bureau of Land Management UTU-75088
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
19
    	
 
    	
SWSW
    
	
LUT-3059
    	
 
    	
Bureau of Land Management UTU-75088
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
21
    	
 
    	
W2SW
    
	
LUT-3059
    	
 
    	
Bureau of Land Management UTU-75088
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
29
    	
 
    	
N2NE,   SW
    
	
LUT-3059
    	
 
    	
Bureau of Land Management UTU-75088
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
31
    	
 
    	
N2SE,   SWSE
    
	
LUT-3060
    	
 
    	
Bureau of Land Management UTU-75231
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
17
    	
 
    	
E2SW
    
	
LUT-3060
    	
 
    	
Bureau of Land Management UTU-75231
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
17
    	
 
    	
N2,   SE
    
	
LUT-3060
    	
 
    	
Bureau of Land Management UTU-75231
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
17
    	
 
    	
W2SW
    
	
LUT-3061
    	
 
    	
Bureau of Land Management UTU-75232
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
12
    	
 
    	
W2
    
	
LUT-3062
    	
 
    	
Bureau of Land Management UTU-75233
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
27
    	
 
    	
ALL
    
	
LUT-3062
    	
 
    	
Bureau of Land Management UTU-75233
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
28
    	
 
    	
ALL
    
	
LUT-3062
    	
 
    	
Bureau of Land Management UTU-75233
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
29
    	
 
    	
ALL
    
	
LUT-3062
    	
 
    	
Bureau of Land Management UTU-75233
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
30
    	
 
    	
ALL
    
	
LUT-3063
    	
 
    	
Bureau of Land Management UTU-75235
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
N2,   SE
    
	
LUT-3063
    	
 
    	
Bureau of Land Management UTU-75235
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
10
    	
 
    	
W2
    
	
LUT-3063
    	
 
    	
Bureau of Land Management UTU-75235
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
NWNW
    
	
LUT-3063
    	
 
    	
Bureau of Land Management UTU-75235
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
SWNW
    
	
LUT-3064
    	
 
    	
Bureau of Land Management UTU-75236
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
12
    	
 
    	
W2
    
	
LUT-3064
    	
 
    	
Bureau of Land Management UTU-75236
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
24
    	
 
    	
S2NE,   NW, N2S2
    

 

6

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3065
    	
 
    	
Bureau of Land Management UTU-75514
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
6
    	
 
    	
E2SW,   SE
    
	
LUT-3065
    	
 
    	
Bureau of Land Management UTU-75514
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
18
    	
 
    	
W2NW,   N2NE, NENW
    
	
LUT-3065
    	
 
    	
Bureau of Land Management UTU-75514
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
19
    	
 
    	
NWNW,   N2NE, NENW
    
	
LUT-3066
    	
 
    	
Bureau of Land Management UTU-75515
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
15
    	
 
    	
ALL
    
	
LUT-3066
    	
 
    	
Bureau of Land Management UTU-75515
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
22
    	
 
    	
ALL
    
	
LUT-3067
    	
 
    	
Bureau of Land Management UTU-75670
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
10
    	
 
    	
NE
    
	
LUT-3068
    	
 
    	
Bureau of Land Management UTU-75672
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
3
    	
 
    	
ALL
    
	
LUT-3068
    	
 
    	
Bureau of Land Management UTU-75672
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
5
    	
 
    	
ALL
    
	
LUT-3068
    	
 
    	
Bureau of Land Management UTU-75672
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
7
    	
 
    	
ALL
    
	
LUT-3068
    	
 
    	
Bureau of Land Management UTU-75672
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
8
    	
 
    	
ALL   less SWNE
    
	
LUT-3068
    	
 
    	
Bureau of Land Management UTU-75672
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
8
    	
 
    	
SWNE
    
	
LUT-3069
    	
 
    	
Bureau of Land Management UTU-76031
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
30
    	
 
    	
SWSW
    
	
LUT-3069
    	
 
    	
Bureau of Land Management UTU-76031
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
31
    	
 
    	
W2
    
	
LUT-3070
    	
 
    	
Bureau of Land Management UTU-76032
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
SESW,   N2SW
    
	
LUT-3070
    	
 
    	
Bureau of Land Management UTU-76032
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
6
    	
 
    	
W2SW
    
	
LUT-3070
    	
 
    	
Bureau of Land Management UTU-76032
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
12
    	
 
    	
NE
    
	
LUT-3070
    	
 
    	
Bureau of Land Management UTU-76032
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
14
    	
 
    	
ALL
    
	
LUT-3070
    	
 
    	
Bureau of Land Management UTU-76032
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
23
    	
 
    	
N2,   N2S2
    
	
LUT-3070
    	
 
    	
Bureau of Land Management UTU-76032
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
SWSW
    
	
LUT-3071
    	
 
    	
Bureau of Land Management UTU-76033
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
19
    	
 
    	
NWNE,   SENW, SENE, NWSW, NWSE, SESW
    
	
LUT-3071
    	
 
    	
Bureau of Land Management UTU-76033
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
19
    	
 
    	
NESW
    
	
LUT-3071
    	
 
    	
Bureau of Land Management UTU-76033
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
19
    	
 
    	
NESE
    
	
LUT-3071
    	
 
    	
Bureau of Land Management UTU-76033
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
19
    	
 
    	
NENW,   NENE, SWNW, SWNE, SWSW, SWSE
    
	
LUT-3071
    	
 
    	
Bureau of Land Management UTU-76033
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
19
    	
 
    	
NWNW
    
	
LUT-3072
    	
 
    	
Bureau of Land Management UTU-76034
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
SWNE,   E2NW, SESE, N2SE
    
	
LUT-3072
    	
 
    	
Bureau of Land Management UTU-76034
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
SWSE
    
	
LUT-3074
    	
 
    	
Bureau of Land Management UTU-76256
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
17
    	
 
    	
ALL
    
	
LUT-3074
    	
 
    	
Bureau of Land Management UTU-76256
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
21
    	
 
    	
NE,   N2NW, SENW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
SWSW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
NWNW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
28
    	
 
    	
S2S2,   E2W2NW, NWNENW, EXC RIVER
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
SESW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
NENE
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
NESW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
SENE
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
NWNE
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
SWNW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
29
    	
 
    	
NWSW,   SWSW
    
	
LUT-3075
    	
 
    	
Bureau of Land Management UTU-76262
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
S2S2,   EXC RIVER
    

 

7

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3077
    	
 
    	
Bureau of Land Management UTU-76478
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
10
    	
 
    	
W2,   SE
    
	
LUT-3077
    	
 
    	
Bureau of Land Management UTU-76478
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
23
    	
 
    	
N2,   N2SW, SWSW, SE
    
	
LUT-3078
    	
 
    	
Bureau of Land Management UTU-76489
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
27
    	
 
    	
S2,   S2SWNW
    
	
LUT-3078
    	
 
    	
Bureau of Land Management UTU-76489
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
33
    	
 
    	
E2NESW,   S2NWSW, SWNE, NWNW, EXC RIVER
    
	
LUT-3078
    	
 
    	
Bureau of Land Management UTU-76489
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
35
    	
 
    	
NENE
    
	
LUT-3078
    	
 
    	
Bureau of Land Management UTU-76489
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
31
    	
 
    	
NWNE,   SENE, SE, NWNW, SENW, NWSW
    
	
LUT-3078
    	
 
    	
Bureau of Land Management UTU-76489
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
31
    	
 
    	
SWNW,   SWSW, NENW, NESW, SESW, SWNE, NENE
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
4
    	
 
    	
S2SW
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
5
    	
 
    	
S2S2,   NWSW, S2NESW
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
6
    	
 
    	
S2SW
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
7
    	
 
    	
W2W2,   EXC RIVER
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
8
    	
 
    	
N2,   EXC RIVER
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
9
    	
 
    	
N2NW,   S2NE, EXC RIVER
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
6
    	
 
    	
NWNW,   S2NW, SW
    
	
LUT-3079
    	
 
    	
Bureau of Land Management UTU-76490
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
6
    	
 
    	
NENW
    
	
LUT-3080
    	
 
    	
Bureau of Land Management UTU-76760
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
19
    	
 
    	
NENE
    
	
LUT-3080
    	
 
    	
Bureau of Land Management UTU-76760
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
21
    	
 
    	
SE
    
	
LUT-3080
    	
 
    	
Bureau of Land Management UTU-76760
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
28
    	
 
    	
NENE,   SW, W2SE, SESE
    
	
LUT-3080
    	
 
    	
Bureau of Land Management UTU-76760
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
31
    	
 
    	
N2,   NESW, NWSE
    
	
LUT-3081
    	
 
    	
Bureau of Land Management UTU-76761
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
22
    	
 
    	
E2NW,   SW
    
	
LUT-3081
    	
 
    	
Bureau of Land Management UTU-76761
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
27
    	
 
    	
W2NW,   S2
    
	
LUT-3081
    	
 
    	
Bureau of Land Management UTU-76761
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
33
    	
 
    	
N2,   N2S2
    
	
LUT-3081
    	
 
    	
Bureau of Land Management UTU-76761
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
34
    	
 
    	
NENE,   S2NE, N2NW, SWNW, N2S2
    
	
LUT-3083
    	
 
    	
Bureau of Land Management UTU-76810
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
5
    	
 
    	
W2
    
	
LUT-3083
    	
 
    	
Bureau of Land Management UTU-76810
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
6
    	
 
    	
ALL
    
	
LUT-3083
    	
 
    	
Bureau of Land Management UTU-76810
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
7
    	
 
    	
NENE
    
	
LUT-3083
    	
 
    	
Bureau of Land Management UTU-76810
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
8
    	
 
    	
N2
    
	
LUT-3083
    	
 
    	
Bureau of Land Management UTU-76810
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
9
    	
 
    	
NE,   N2SE, SWSE
    
	
LUT-3083
    	
 
    	
Bureau of Land Management UTU-76810
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
17
    	
 
    	
E2
    
	
LUT-3084
    	
 
    	
Bureau of Land Management UTU-76811
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
13
    	
 
    	
W2
    
	
LUT-3084
    	
 
    	
Bureau of Land Management UTU-76811
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
14
    	
 
    	
ALL
    
	
LUT-3084
    	
 
    	
Bureau of Land Management UTU-76811
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
22
    	
 
    	
NENE, W2E2, E2W2, W2NW, SESE
    
	
LUT-3085
    	
 
    	
Bureau of Land Management UTU-76812
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
25
    	
 
    	
SW,   N2SE, SESE
    
	
LUT-3085
    	
 
    	
Bureau of Land Management UTU-76812
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
26
    	
 
    	
ALL
    
	
LUT-3085
    	
 
    	
Bureau of Land Management UTU-76812
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
27
    	
 
    	
ALL
    
	
LUT-3085
    	
 
    	
Bureau of Land Management UTU-76812
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
34
    	
 
    	
E2
    
	
LUT-3085
    	
 
    	
Bureau of Land Management UTU-76812
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
35
    	
 
    	
W2NE,   SENE, W2, SE
    
	
LUT-3086
    	
 
    	
Bureau of Land Management UTU-76814
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
1
    	
 
    	
ALL
    
	
LUT-3086
    	
 
    	
Bureau of Land Management UTU-76814
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
3
    	
 
    	
ALL
    

 

8

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3086
    	
 
    	
Bureau of Land Management UTU-76814
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
4
    	
 
    	
ALL
    
	
LUT-3086
    	
 
    	
Bureau of Land Management UTU-76814
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
10
    	
 
    	
ALL
    
	
LUT-3087
    	
 
    	
Bureau of Land Management UTU-76818
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
33
    	
 
    	
S2
    
	
LUT-3088
    	
 
    	
Bureau of Land Management UTU-77063
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
12
    	
 
    	
NWSW
    
	
LUT-3088
    	
 
    	
Bureau of Land Management UTU-77063
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
12
    	
 
    	
NE
    
	
LUT-3088
    	
 
    	
Bureau of Land Management UTU-77063
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
12
    	
 
    	
NESW   (Drillsite Fed 23-12 #1)
    
	
LUT-3090
    	
 
    	
Bureau of Land Management UTU-78214
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
3
    	
 
    	
ALL
    
	
LUT-3090
    	
 
    	
Bureau of Land Management UTU-78214
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
10
    	
 
    	
ALL
    
	
LUT-3091
    	
 
    	
Bureau of Land Management UTU-78215
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
25
    	
 
    	
NWNE
    
	
LUT-3091
    	
 
    	
Bureau of Land Management UTU-78215
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
26
    	
 
    	
ALL
    
	
LUT-3091
    	
 
    	
Bureau of Land Management UTU-78215
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
27
    	
 
    	
ALL
    
	
LUT-3092
    	
 
    	
Bureau of Land Management UTU-78216
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
34
    	
 
    	
ALL
    
	
LUT-3092
    	
 
    	
Bureau of Land Management UTU-78216
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
35
    	
 
    	
ALL
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
S2NW,   SWNE, NWSW, N2SE
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
NENW,   SWNW, N2SW, NWSE, SWNE
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
NENW,   NENE
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
NESE,   N2NE, SENE
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
27
    	
 
    	
N2NENW,   N2NWNE
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
NESW
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
NWNW
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
SENE
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
22
    	
 
    	
SENW,   NWNW
    
	
LUT-3093
    	
 
    	
Bureau of Land Management UTU-78433
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
NWNE
    
	
LUT-3094
    	
 
    	
Bureau of Land Management UTU-79784
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
6
    	
 
    	
E2SW,   SE
    
	
LUT-3097
    	
 
    	
Bureau of Land Management UTU-80679
    	
 
    	
10S
    	
 
    	
16E
    	
 
    	
33
    	
 
    	
SE
    
	
LUT-3098
    	
 
    	
Bureau of Land Management UTU-009803
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
25
    	
 
    	
NWNE,   SENE, SENW, W2NW, NWSE, SESE, SESW, NWSW
    
	
LUT-3098
    	
 
    	
Bureau of Land Management UTU-009803
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
27
    	
 
    	
ALL
    
	
LUT-3098
    	
 
    	
Bureau of Land Management UTU-009803
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
1
    	
 
    	
 
    
	
LUT-3098
    	
 
    	
Bureau of Land Management UTU-009803
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
25
    	
 
    	
SWNE
    
	
LUT-3098
    	
 
    	
Bureau of Land Management UTU-009803
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
25
    	
 
    	
NENW,   NESW, NENE, NESE
    
	
LUT-3098
    	
 
    	
Bureau of Land Management UTU-009803
    	
 
    	
09S
    	
 
    	
18E
    	
 
    	
25
    	
 
    	
SWSW,   SWSE
    
	
LUT-3099
    	
 
    	
Bureau of Land Management UTU-013766
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
15
    	
 
    	
ALL
    
	
LUT-3099
    	
 
    	
Bureau of Land Management UTU-013766
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
17
    	
 
    	
E2
    
	
LUT-3099
    	
 
    	
Bureau of Land Management UTU-013766
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
21
    	
 
    	
ALL
    
	
LUT-3099
    	
 
    	
Bureau of Land Management UTU-013766
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
23
    	
 
    	
ALL
    
	
LUT-3100
    	
 
    	
Bureau of Land Management UTU-8344
    	
 
    	
11S
    	
 
    	
21E
    	
 
    	
13
    	
 
    	
ALL
    
	
LUT-3101
    	
 
    	
Bureau of Land Management UTU-013820
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
1
    	
 
    	
SE,   NWNE, SENE
    
	
LUT-3101
    	
 
    	
Bureau of Land Management UTU-013820
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
3
    	
 
    	
E2
    
	
LUT-3101
    	
 
    	
Bureau of Land Management UTU-013820
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
3
    	
 
    	
S2SE
    

 

9

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3101
    	
 
    	
Bureau of Land Management UTU-013820
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
1
    	
 
    	
NENE
    
	
LUT-3102
    	
 
    	
Bureau of Land Management UTU-0125822
    	
 
    	
09S
    	
 
    	
20E
    	
 
    	
8
    	
 
    	
W2SE
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
10
    	
 
    	
NWNE
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
11
    	
 
    	
NWNE,   SWNE, E2SE
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
15
    	
 
    	
SW,   S2NW, NWNW
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
10
    	
 
    	
NENE,   SENE, NWNE
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
11
    	
 
    	
NWSE,   NENE
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
15
    	
 
    	
NENW
    
	
LUT-3103
    	
 
    	
Bureau of Land Management UTU-013429-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
11
    	
 
    	
SENE
    
	
LUT-3104
    	
 
    	
Bureau of Land Management UTU-017713
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
34
    	
 
    	
ALL
    
	
LUT-3104
    	
 
    	
Bureau of Land Management UTU-017713
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
35
    	
 
    	
S2,NW,S2NE,NWNE
    
	
LUT-3105
    	
 
    	
Bureau of Land Management UTU-013818-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
10
    	
 
    	
W2
    
	
LUT-3105
    	
 
    	
Bureau of Land Management UTU-013818-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
11
    	
 
    	
NENW
    
	
LUT-3105
    	
 
    	
Bureau of Land Management UTU-013818-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
15
    	
 
    	
W2SE
    
	
LUT-3105
    	
 
    	
Bureau of Land Management UTU-013818-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
11
    	
 
    	
S2NW,   NWNW
    
	
LUT-3106
    	
 
    	
Bureau of Land Management UTU-035316
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
3
    	
 
    	
NWNW,   SE
    
	
LUT-3106
    	
 
    	
Bureau of Land Management UTU-035316
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
10
    	
 
    	
NW
    
	
LUT-3107
    	
 
    	
Bureau of Land Management UTU-013821-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
12
    	
 
    	
All
    
	
LUT-3107
    	
 
    	
Bureau of Land Management UTU-013821-A
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
12
    	
 
    	
NENW,   NWSW
    
	
LUT-3108
    	
 
    	
Bureau of Land Management UTU-01562-B
    	
 
    	
09S
    	
 
    	
20E
    	
 
    	
8
    	
 
    	
SESW
    
	
LUT-3109
    	
 
    	
Bureau of Land Management UTU-016869-A
    	
 
    	
09S
    	
 
    	
20E
    	
 
    	
8
    	
 
    	
NESW
    
	
LUT-3110
    	
 
    	
Bureau of Land Management UTU-03576
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
4
    	
 
    	
W2,   NWNE, EXC RIVER
    
	
LUT-3110
    	
 
    	
Bureau of Land Management UTU-03576
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
5
    	
 
    	
N2SE,   NE, E2NW, EXC RIVER
    
	
LUT-3110
    	
 
    	
Bureau of Land Management UTU-03576
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
7
    	
 
    	
E2,   SENW, NESW, EXC RIVER
    
	
LUT-3110
    	
 
    	
Bureau of Land Management UTU-03576
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
18
    	
 
    	
E2,   NESW, NENW, EXC RIVER
    
	
LUT-3111
    	
 
    	
Bureau of Land Management UTU-8346
    	
 
    	
11S
    	
 
    	
21E
    	
 
    	
24
    	
 
    	
ALL
    
	
LUT-3111
    	
 
    	
Bureau of Land Management UTU-8346
    	
 
    	
11S
    	
 
    	
21E
    	
 
    	
25
    	
 
    	
ALL
    
	
LUT-3112
    	
 
    	
Bureau of Land Management UTU-8348
    	
 
    	
11S
    	
 
    	
21E
    	
 
    	
12
    	
 
    	
ALL
    
	
LUT-3112
    	
 
    	
Bureau of Land Management UTU-8348
    	
 
    	
11S
    	
 
    	
22E
    	
 
    	
7
    	
 
    	
ALL
    
	
LUT-3112
    	
 
    	
Bureau of Land Management UTU-8348
    	
 
    	
11S
    	
 
    	
22E
    	
 
    	
18
    	
 
    	
ALL
    
	
LUT-3112
    	
 
    	
Bureau of Land Management UTU-8348
    	
 
    	
11S
    	
 
    	
22E
    	
 
    	
19
    	
 
    	
ALL
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
SWNW,   W2SW, SE
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
30
    	
 
    	
ALL
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
NWNW
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
NENW
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
S2NE
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
SENW
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
SESW
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
NENE
    

 

10

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
NESW
    
	
LUT-3114
    	
 
    	
Bureau of Land Management UTU-65632
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
29
    	
 
    	
NWNE
    
	
LUT-3115
    	
 
    	
Bureau of Land Management UTU-74402
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
31
    	
 
    	
SE
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
19
    	
 
    	
ALL
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
20
    	
 
    	
NW,   SE
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
21
    	
 
    	
ALL
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
20
    	
 
    	
N2SW,   SWSW
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
20
    	
 
    	
SESW
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
20
    	
 
    	
SWNE
    
	
LUT-3116
    	
 
    	
Bureau of Land Management UTU-75083
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
20
    	
 
    	
N2NE,   SENE
    
	
LUT-3117
    	
 
    	
Bureau of Land Management UTU-75085
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
28
    	
 
    	
ALL
    
	
LUT-3118
    	
 
    	
Bureau of Land Management UTU-75086
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
31
    	
 
    	
NE
    
	
LUT-3118
    	
 
    	
Bureau of Land Management UTU-75086
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
33
    	
 
    	
ALL
    
	
LUT-3119
    	
 
    	
Bureau of Land Management UTU-74836
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
20
    	
 
    	
W2
    
	
LUT-3119
    	
 
    	
Bureau of Land Management UTU-74836
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
29
    	
 
    	
NW
    
	
LUT-3120
    	
 
    	
Bureau of Land Management UTU-74408
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
19
    	
 
    	
E2
    
	
LUT-3120
    	
 
    	
Bureau of Land Management UTU-74408
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
30
    	
 
    	
NE
    
	
LUT-3121
    	
 
    	
Bureau of Land Management UTU-56947
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
8
    	
 
    	
E2SE, SWSE, S2NE, E2SW, SENW
    
	
LUT-3121
    	
 
    	
Bureau of Land Management UTU-56947
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
8
    	
 
    	
NWSE
    
	
LUT-3122
    	
 
    	
Bureau of Land Management UTU-75080
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
4
    	
 
    	
LOTS   1 - 4, S2N2, S2 (ALL)
    
	
LUT-3122
    	
 
    	
Bureau of Land Management UTU-75080
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
9
    	
 
    	
ALL
    
	
LUT-3123
    	
 
    	
Bureau of Land Management UTU-75081
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
5
    	
 
    	
LOTS   1-4, S2N2, S2 (ALL)
    
	
LUT-3123
    	
 
    	
Bureau of Land Management UTU-75081
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
6
    	
 
    	
LOTS   1-7, SENW, E2SW, SE, S2NE (ALL)
    
	
LUT-3123
    	
 
    	
Bureau of Land Management UTU-75081
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
7
    	
 
    	
LOTS   1-4, E2W2, E2 (ALL)
    
	
LUT-3123
    	
 
    	
Bureau of Land Management UTU-75081
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
8
    	
 
    	
N2N2,   SWNW, W2SW
    
	
LUT-3124
    	
 
    	
Bureau of Land Management UTU-75082
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
17
    	
 
    	
N2,   SW, N2SE, SESE
    
	
LUT-3124
    	
 
    	
Bureau of Land Management UTU-75082
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
18
    	
 
    	
ALL
    
	
LUT-3124
    	
 
    	
Bureau of Land Management UTU-75082
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
17
    	
 
    	
SESE
    
	
LUT-3124
    	
 
    	
Bureau of Land Management UTU-75082
    	
 
    	
10S
    	
 
    	
17E
    	
 
    	
17
    	
 
    	
SWSE
    
	
LUT-3125
    	
 
    	
Bureau of Land Management UTU-75087
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
1
    	
 
    	
ALL
    
	
LUT-3125
    	
 
    	
Bureau of Land Management UTU-75087
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
11
    	
 
    	
ALL
    
	
LUT-3125
    	
 
    	
Bureau of Land Management UTU-75087
    	
 
    	
11S
    	
 
    	
17E
    	
 
    	
13
    	
 
    	
NW,   W2SW
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
3
    	
 
    	
S2NE,   SE
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
10
    	
 
    	
E2
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
11
    	
 
    	
S2
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
12
    	
 
    	
ALL
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
13
    	
 
    	
ALL
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
14
    	
 
    	
ALL
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
23
    	
 
    	
E2E2
    

 

11

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
24
    	
 
    	
ALL
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
25
    	
 
    	
N2,   SE, E2SW, NWSW
    
	
LUT-3126
    	
 
    	
Bureau of Land Management UTU-63150
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
25
    	
 
    	
SWSW
    
	
LUT-3127
    	
 
    	
Bureau of Land Management UTU-67844
    	
 
    	
09S
    	
 
    	
16E
    	
 
    	
25
    	
 
    	
W2SW,   SESW
    
	
LUT-3127
    	
 
    	
Bureau of Land Management UTU-67844
    	
 
    	
09S
    	
 
    	
16E
    	
 
    	
26
    	
 
    	
SWNE,   NW, N2SW, SESW, SE
    
	
LUT-3127
    	
 
    	
Bureau of Land Management UTU-67844
    	
 
    	
09S
    	
 
    	
16E
    	
 
    	
35
    	
 
    	
N2NE,   SENE, NESE
    
	
LUT-3128
    	
 
    	
Bureau of Land Management UTU-74457
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
15
    	
 
    	
E2
    
	
LUT-3129
    	
 
    	
Bureau of Land Management UTU-76482
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
1
    	
 
    	
NWNW,   SWNE, SW
    
	
LUT-3129
    	
 
    	
Bureau of Land Management UTU-76482
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
1
    	
 
    	
SENW
    
	
LUT-3129
    	
 
    	
Bureau of Land Management UTU-76482
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
1
    	
 
    	
NENW,   SWNW
    
	
LUT-3133
    	
 
    	
Bureau of Land Management UTU-79820
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
21
    	
 
    	
N2,   SW
    
	
LUT-3133
    	
 
    	
Bureau of Land Management UTU-79820
    	
 
    	
10S
    	
 
    	
15E
    	
 
    	
28
    	
 
    	
W2NE
    
	
LUT-3134
    	
 
    	
Bureau of Land Management UTU-81769
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
9
    	
 
    	
SESE
    
	
LUT-3134
    	
 
    	
Bureau of Land Management UTU-81769
    	
 
    	
11S
    	
 
    	
15E
    	
 
    	
13
    	
 
    	
E2
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
N2S2,   SWSW, SWSE
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
N2NE,   SENE
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
SENW,   N2NW
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
SWNW
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
SESE
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
SESW
    
	
LUT-3135
    	
 
    	
Bureau of Land Management UTU-75090
    	
 
    	
09S
    	
 
    	
19E
    	
 
    	
20
    	
 
    	
SWNE
    
	
LUT-3136
    	
 
    	
Bureau of Land Management UTU-76717
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
7
    	
 
    	
NENW
    
	
LUT-3137
    	
 
    	
Bureau of Land Management UTU-76718
    	
 
    	
10S
    	
 
    	
19E
    	
 
    	
6
    	
 
    	
NE,   N/2SE
    
	
LUT-3138
    	
 
    	
Bureau of Land Management UTU-82694
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
6
    	
 
    	
W2W2,   NENW, N2NE
    
	
LUT-3141
    	
 
    	
Bureau of Land Management UTU-82470
    	
 
    	
12S
    	
 
    	
14E
    	
 
    	
4
    	
 
    	
E2SE,   S2SW
    
	
LUT-3141
    	
 
    	
Bureau of Land Management UTU-82470
    	
 
    	
12S
    	
 
    	
14E
    	
 
    	
5
    	
 
    	
S2SE
    
	
LUT-3141
    	
 
    	
Bureau of Land Management UTU-82470
    	
 
    	
12S
    	
 
    	
14E
    	
 
    	
6
    	
 
    	
ALL
    
	
LUT-3141
    	
 
    	
Bureau of Land Management UTU-82470
    	
 
    	
12S
    	
 
    	
14E
    	
 
    	
8
    	
 
    	
ALL
    
	
LUT-3141
    	
 
    	
Bureau of Land Management UTU-82470
    	
 
    	
12S
    	
 
    	
14E
    	
 
    	
9
    	
 
    	
ALL
    
	
LUT-3142
    	
 
    	
Bureau of Land Management UTU-82699
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
5
    	
 
    	
ALL
    
	
LUT-3142
    	
 
    	
Bureau of Land Management UTU-82699
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
8
    	
 
    	
W2,   SE
    
	
LUT-3142
    	
 
    	
Bureau of Land Management UTU-82699
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
9
    	
 
    	
W2,   SE
    
	
LUT-3143
    	
 
    	
Bureau of Land Management UTU-82705
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
20
    	
 
    	
NE
    
	
LUT-3144
    	
 
    	
Bureau of Land Management UTU-82706
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
13
    	
 
    	
NE,   N2NW
    
	
LUT-3145
    	
 
    	
Bureau of Land Management UTU-82704
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
4
    	
 
    	
E2
    
	
LUT-3146
    	
 
    	
Bureau of Land Management UTU-84265
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
21
    	
 
    	
N2
    
	
LUT-3147
    	
 
    	
Bureau of Land Management UTU-84262
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
17
    	
 
    	
N2
    
	
LUT-3147
    	
 
    	
Bureau of Land Management UTU-84262
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
6
    	
 
    	
LOTS   1-3 (N2NE, NENW), S2NE, SENW
    
	
LUT-3147
    	
 
    	
Bureau of Land Management UTU-84262
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
7
    	
 
    	
NWNW
    

 

12

 

	
Gasco Lease
   No.
    	
 
    	
Lessor
    	
 
    	
TWP
    	
 
    	
RNG
    	
 
    	
SEC
    	
 
    	
Description
    
	
LUT-3149
    	
 
    	
Bureau of Land Management UTU-84263
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
19
    	
 
    	
NW,   N2SW, SESW
    
	
LUT-3149
    	
 
    	
Bureau of Land Management UTU-84263
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
30
    	
 
    	
SW,   N2NW, SWNW, SE
    
	
LUT-3149
    	
 
    	
Bureau of Land Management UTU-84263
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
31
    	
 
    	
N2,   SW
    
	
LUT-3149
    	
 
    	
Bureau of Land Management UTU-84263
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
30
    	
 
    	
SENW
    
	
LUT-3150
    	
 
    	
Bureau of Land Management UTU-84264
    	
 
    	
10S
    	
 
    	
18E
    	
 
    	
20
    	
 
    	
SE
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
19
    	
 
    	
W2,   SE
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
20
    	
 
    	
SW,   E2
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
19
    	
 
    	
SENE
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
20
    	
 
    	
W2NW
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
19
    	
 
    	
W2NE
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
20
    	
 
    	
E2NW
    
	
LUT-3151
    	
 
    	
Bureau of Land Management UTU-74395
    	
 
    	
11S
    	
 
    	
16E
    	
 
    	
19
    	
 
    	
NENE
    

 

13

 

Schedule 4

 

Purchase Option

 

X.1          In consideration of the mutual covenants and restrictions granted in this Agreement and consummation of the transactions contemplated by the Asset Purchase Agreement by and among Gasco Energy, Inc., a Nevada corporation (“Gasco”),  Riverbend Gas Gathering, LLC, a Nevada limited liability company and a wholly owned subsidiary of Gasco (“Seller”) and Gatherer dated January 29, 2010, Producer hereby grants to Gatherer for a period beginning on March 1, 2010 and terminating at 11:59 p.m. on January 29, 2025, the exclusive and irrevocable right and option (the “Option”) to purchase fee ownership of a parcel consisting of 50 acres of land contiguous to certain property owned by the Gatherer (the “Option Property”) out of the 110 Acre parcel described on the attached plat (the “Land”).  The Option shall be exercised by the giving of notice to Producer of the election by Gatherer to exercise the Option (the “Option Exercise Notice”).

 

X.2          Upon receipt of the Option Exercise Notice, Producer agrees within thirty (30) days to give Gatherer a notice consisting of the legal description of the Producer’s proposed Option Property (the “Property Determination Notice”), as determined by Producer in the exercise of its reasonable discretion taking into account the needs and requirements of Gatherer in its intended use of the Option Property as auxiliary to its business operations and Producer in its use of the remainder of the Land.  Gatherer shall notify Producer in writing whether such Option Property is acceptable in the exercise of its reasonable discretion within thirty (30) days after receipt of the Property Determination Notice.  If the proposed Option Property is not acceptable to Gatherer, then the parties shall negotiate in good faith to determine the legal description of the Option Property. If the parties are unable to reach agreement on such description, then Gatherer shall submit to Producer the name of a qualified member in good standing of the Utah Society of Professional Engineers whose expertise is in civil engineering or who otherwise has experience in designing relevant disposal facilities (the “Engineer”), Producer shall submit to Gatherer the name of a qualified member in good standing of he Utah Council of Land Surveyors (the “Surveyor”), and the Engineer and Surveyor shall cooperate to choose an attorney who is a qualified member of the Utah State Bar and whose expertise is in oil and gas matters (the “Attorney”, together with the Engineer and Surveyor, the “Arbiters”).  None of the Arbiters appointed shall have worked for either Producer or Gatherer during the previous three (3) years.  The parties agree that the Arbiters shall work together to divide the Land and delineate the Option Property as a parcel contiguous to Gatherer’s land and otherwise taking into account the needs and requirements of both Gatherer and Producer, and that such determination shall be considered final and binding on both parties.  Any dispute between the Arbiters regarding the division of the Land shall be settled by a majority vote of the Arbiters. Producer and Gatherer shall share equally in all costs associated with the Arbiters.

 

X.3          Upon final determination of the Option Property (the “Determination Date”) as set forth above, Producer agrees within thirty (30) days thereafter and upon payment of the Purchase Price (as hereafter defined) to deliver unto Gatherer or its designee a general warranty deed conveying good and marketable title to the Option Property, free and clear from all liens and encumbrances other than (a) building and zoning regulations, (b) conditions, agreements, restrictions and easements now of record, (c) any state of facts an inspection or survey of the

 

 

Option Property may show so long as such state of facts do not materially impair the value and intended use of the Option Property; and (d) unpaid assessments payable after the date of the transfer of title.

 

X.4                             Possession of the property shall be delivered to Gatherer upon delivery of the deed and payment of the Purchase Price (the date of such delivery, the “Closing Date”).  Producer shall pay all transfer taxes, if any.  Gatherer shall be responsible for all ad valorem real estate taxes for period from and after the Closing Date, and Producer shall pay gatherer for all ad valorem real estate taxes for the period prior to the Closing Date.  If on such date the amount of taxes is undetermined, proration shall be based on the prior years taxes and if the real estate is part of a larger tract for tax purposes, on an equitable basis as well. Producer and Gatherer also agree to apportion pro rata, as of the Closing Date, the cost of any utilities allocable to the Option Property.

 

X.5                             Gatherer shall pay as the purchase price for the Option Property an amount of $108,300 (the “Purchase Price”).

 

X.6                             This Option shall apply to and bind the distributees, executors, administrators, successors and assigns of Producer and Gatherer.

 

 

Schedule 5

 

Letter Agreement regarding Payment

 

X.1.                          Gasco Production Company (“Gasco”) and Monarch Natural Gas, LLC (“Monarch”) are Parties to that certain Gas Gathering and Processing Agreement of even date herewith (the “GGA”).  Under the further terms and conditions of the GGA, Monarch has agreed to provide certain gathering and processing services, for which services Gasco has agreed, on a monthly basis, to pay designated Gathering and Processing Fees as invoiced by Monarch pursuant to Article 9 of the GGA. As referenced at Section 9.2 of the GGA, the Parties have agreed to additional terms and conditions in this letter (the “Letter Agreement”) related to monthly billing, all as set forth in this Letter Agreement.

 

X.2.                          Gasco acknowledges Monarch’s preference to spread a portion of the credit risk associated with payment of the monthly Gathering Fee to an additional payer during the Minimum Volume Period.  To accommodate this preference, the Parties have entered into a Shared Allocation Escrow Agreement (the “Escrow Agreement”) of even date herewith with JPMorgan Chase Bank, National Association as escrow agent (the “Escrow Agent”), pursuant to which the Parties have established a non-interest bearing escrow account (the “Fund”) into which amounts that may be payable (“Purchase Payments”) to Gasco by certain material purchasers of Gas from Gasco (each a “Purchaser”), including Anadarko Energy Services Company (“Anadarko”), shall be directly deposited and the Escrow Agent shall disburse the proceeds of the Fund to the Parties in accordance with the terms and conditions of the Escrow Agreement.

 

X.3.                          Gasco will make a one-time payment to Monarch of $500,000 on the date hereof, as a prepayment for the first Month of services that Monarch will provide.

 

X.4.                          Anadarko purchases Gas from Gasco pursuant to the Base Contract for Sale and Purchase of Natural Gas, between Gasco (d/b/a Riverbend Gas Gathering, LLC) and Anadarko, dated December 1, 2007, as amended by the Natural Gas Purchase/Sale Confirmation between those parties, dated April 16, 2009 (the “Anadarko Purchase Agreement”). In accordance with paragraph 3 herein, Gasco has instructed Anadarko to pay directly to the Fund each Month the Purchase Payment payable in such Month under the Anadarko Purchase Agreement (the “Anadarko Monthly Payment”).

 

X.5.                          During each Month of the Minimum Volume Period in which the Anadarko Purchase Agreement is in effect, and in which Gasco’s payment instruction is still being followed by Anadarko, the Anadarko Monthly Payment will be delivered by Anadarko to the Fund, by the payment date specified in the Anadarko Purchase Agreement.

 

X.6.                          Each such Month, pursuant to the terms of the Escrow Agreement, the Escrow Agent shall disburse from the Fund the cleared deposit received from the Purchasers to the Parties. For clarity and the avoidance of doubt, and unless otherwise specified in the Escrow Agreement, Monarch shall receive a disbursement each Month from the Fund in the amount of

 

 

$500,000 as payment for the amount that may be owed by Gasco to Monarch under the GGA, and the remaining balance of the proceeds of the Fund shall be disbursed to Gasco.

 

X.7.                          This Letter Agreement is not intended to enlarge or alter the Parties’ rights and obligations under the GGA beyond the terms specifically articulated herein, including the manner in which Market Price is to be calculated and any adjustments that might otherwise be applicable in a given calendar quarter to the Quarterly Minimum Volume.

 

X.8.                          Gasco acknowledges that notwithstanding Gasco’s payment instruction to any Purchaser, Gasco remains responsible for full payment, each Month, of the applicable Gathering Fee pursuant to the further terms and conditions of the GGA.  To the extent that, in any Month, the Purchase Payments are insufficient to pay the full Gathering Fee, Gasco will remain responsible for the full Gathering and Processing Fees owed for such Month pursuant to the GGA, and Monarch shall have no remedies or recourse against any Purchaser.  All contact with the Purchasers regarding late or non-payment of any Purchase Payment is, and shall remain during the term hereof, the exclusive responsibility of Gasco.

 

X.9.                          Monarch will promptly notify Gasco regarding any failure to timely receive the full $500,000 Monthly disbursement from the Fund. Upon such notification, Gasco will, within three Business Days, pay to Monarch any unpaid portion of amounts due for that Month.

 

X.10.                   Monarch acknowledges that the payment arrangement described in this letter may be subject to termination, in whole or in part, by any Purchaser, including by way of termination or expiration of any applicable purchase agreement, or pursuant to any Purchaser’s decision to pay all amounts directly to Gasco.

 

X.11.                   The term of this Letter Agreement shall be five years unless otherwise terminated as allowed herein.

 

X.12.                   By agreeing to this billing and payment arrangement, Gasco does not grant, assign, sell, transfer or otherwise convey any right or interest in any other agreement, instrument or document, including the Anadarko Purchase Agreement, to Monarch or to Monarch’s Affiliates or Assignees.  Gasco reserves to itself all rights, setoffs, counterclaims and other defenses, if any, to payment that it otherwise possesses under the GGA.

 

X.13.                   There are no third-party beneficiaries to the agreement expressed by the Parties in this letter.

 

X.14.                   This letter shall be governed by the laws of the State of Colorado pursuant to the further terms of Section 14 of the GGA.

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