Document:

Exhibit 10.3

 

HILLENBRAND, INC. STOCK INCENTIVE PLAN
  PERFORMANCE BASED UNIT AWARD AGREEMENT

Relative Total Shareholder Return

 

This Performance Based Unit Award Agreement (this “Agreement”) is effective as of the        day of                   , 20    , between Hillenbrand, Inc. (the “Company”) and                                    (the “Employee”).  The Award evidences the grant by the Company of Restricted Stock Units subject to the attainment of certain performance measures as described herein (hereinafter, “Performance Based Units” or “Units”), all in accordance with the provisions of the Hillenbrand, Inc. Stock Incentive Plan, as amended from time-to-time (the “Plan”).  The number of Units that will ultimately be earned under this Agreement, as well as the number of shares of Common Stock that will be distributed in settling those earned Units, which will not be determined until the end of the Measurement Period, will depend on the Company’s Total Shareholder Return (as defined below) relative to that of the current members of the Company’s compensation peer group.

 

The Units are subject to the terms and conditions set forth in the Plan (which is incorporated herein by reference), any rules and regulations adopted by the Board of Directors of the Company or the committee of the Board which administers the Plan (collectively, the “Committee”), and this Agreement.  In the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the terms, conditions, and provisions of the Plan shall control, and this Agreement shall be deemed to be modified accordingly.  This grant becomes effective only if Employee affirmatively accepts it and evidences Employee’s understanding of the terms and conditions of the Award, in accordance with applicable procedures established by the Company.  Any terms used in this Agreement as capitalized defined terms that are not defined herein shall have the meanings set forth in the Plan.  For purposes of this Agreement, “Employer” means the entity (i.e., the Company or the Subsidiary) that employs the Employee.

 

AWARD INFORMATION

 

	
Target Performance Based Unit Award
    	
 
    	
         Units
    
	
Maximum Performance Based Unit Award
    	
 
    	
         Units
    
	
Measurement Period (three fiscal years)
    	
 
    	
October 1,   20     through September 30, 20    
    

 

AWARD DETERMINATION

 

The number of Units that will be earned at the end of the Measurement Period is a function of the Company’s Total Shareholder Return, compared and ranked against the Total Shareholder Return of the current members of the Company’s compensation peer group.  For purposes of this Agreement, the term “Total Shareholder Return” (TSR), as applied to the Company or any member of its compensation peer group, shall mean stock price appreciation from the beginning to the end of the Measurement Period, plus dividends and distributions made or declared during the Measurement Period (it shall be assumed that such dividends or distributions are reinvested in the common stock of the Company or the applicable member of

 

 

the peer group), expressed as a percentage return.  To the extent that the Employee is a “covered employee” within the meaning of Code Section 162(m), the Agreement will be administered in accordance with performance-based compensation exception under Code Section 162(m) to the maximum extent possible.

 

Except as otherwise provided below in the Terms and Conditions, at the end of the Measurement Period, the Units earned will be the number of whole Units (rounded down) equal to the product of (a) the number of Units constituting the Target Performance Based Unit Award set forth above, and (b) a multiplier, as provided in the table set forth below.  This multiplier is determined following the Measurement Period, based on the ranking (expressed as a percentage) of the Company’s TSR during the Measurement Period against the TSR of its peer companies, as follows:

 

	
Ranking of Company TSR against peer group
   members, expressed as a percentage
    	
 
    	
Multiplier
    
	
Equal to or less than 24.99% of peer   group
    	
 
    	
zero (no Units earned)
    
	
Equal to 25% up to 29.99% of peer   group
    	
 
    	
.4
    
	
Equal to 30% up to 34.99% of peer   group
    	
 
    	
.55
    
	
Equal to 35% up to 39.99% of peer   group
    	
 
    	
.7
    
	
Equal to 40% up to 44.99% of peer   group
    	
 
    	
.85
    
	
Equal to 45% up to 54.99% of peer   group
    	
 
    	
1.0 (target number of Units earned)
    
	
Equal to 55% up to 59.99% of peer   group
    	
 
    	
1.15
    
	
Equal to 60% up to 64.99% of peer   group
    	
 
    	
1.3
    
	
Equal to 65% up to 69.99% of peer   group
    	
 
    	
1.45
    
	
Equal to 70% up to 74.99% of peer   group
    	
 
    	
1.6
    
	
Equal to or greater than 75% of peer   group
    	
 
    	
1.75 (maximum Units earned)
    

 

For purposes hereof, the Company’s peer group consists of the companies identified below.  In the event any such company is not publicly traded at the conclusion of the Measurement Period, it will not be included in the TSR ranking calculated following the Measurement Period; provided, however, that in the event any such company is not publicly traded by reason of bankruptcy, liquidation, or similar proceeding, it shall be included in the TSR ranking with an applicable TSR equal to negative one hundred percent (-100%).

 

2

 

	
Acuity Brands, Inc. (AYI)
    	
 
    	
John Bean Technologies Corporation (JBT)
    
	
Bruker Corporation (BRKR)
    	
 
    	
Matthews International Corporation (MATW)
    
	
Clarcor, Inc. (CLC)
    	
 
    	
Middleby Corp. (MIDD)
    
	
EnPro Industries, Inc. (NPO)
    	
 
    	
Herman Miller Inc. (MLHR)
    
	
Graco, Inc. (GGG)
    	
 
    	
Rexnord Corporation (RXN)
    
	
HNI Corp. (HNI)
    	
 
    	
Steelcase Inc. (SCS)
    
	
Idex Corporation (IEX)
    	
 
    	
Tempur Sealy International Inc. (TPX)
    
	
Itron, Inc. (ITRI)
    	
 
    	
Waters Corporation (WAT)
    

 

TERMS AND CONDITIONS

 

Note:  If this Award is granted to an Employee who is employed by a Subsidiary in Canada, Mexico, or a country in Europe or Asia, or is a resident of such a country, the terms and conditions of the Appendix A (and the applicable addenda attached to Appendix A) are hereby incorporated into and shall become part of the Terms and Conditions of this Agreement.

 

1.             Grant of Performance Based Units.  Pursuant to and subject to the terms and conditions of the Plan, the Company hereby awards to the Employee, who is an employee of the Company or one of its Subsidiaries, the opportunity to earn the number of Units that will be determined at the end of the Measurement Period under the Award Determination section above, up to but not exceeding the number of Units specified above as the Maximum Performance Based Unit Award.  Each Unit represents the conditional right to receive one share of the Company’s common stock, without par value (“Common Stock”).  Upon settlement at the end of the Measurement Period, the earned Units will be settled by the distribution to the Employee of one share of Common Stock for each Unit being settled, as provided in Paragraph 7 and subject to withholding as provided in Paragraph 11.

 

2.             Acceptance; Transfer Restrictions.  The Employee hereby accepts the award of Units described in this Agreement and agrees that the Units will be held by the Employee and the Employee’s successors subject to (and will not be disposed of except in accordance with) all of the restrictions, terms, and conditions contained in this Agreement and the Plan.  Except as otherwise provided in this Agreement or the Plan, the Employee may not sell, assign, transfer, pledge, or otherwise dispose of or encumber any of the Units, any shares of Common Stock underlying the Units, or any interest in the Units or underlying shares of Common Stock, until the Measurement Period expires, at which time the Employee’s rights in the Units will be earned and settled to the extent provided in this Agreement.  Any purported sale, assignment, transfer, pledge, or other disposition or encumbrance in violation of this Agreement or the Plan will be void and of no effect.

 

3.             Earning/Measurement Period.  If the Employee remains employed by the Company or a Subsidiary through the end of the Measurement Period, then at the end of the Measurement Period the Units will become fully earned, to the extent determined under the Award Determination section above.  If the Employee does not remain employed through the end of the Measurement Period, the provisions of Paragraph 8 below will apply in determining the number of Units, if any, which will become earned at the end of the Measurement Period.

 

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All Units not earned at the end of the Measurement Period will be forfeited, and the Employee will have no rights or interest in or to those forfeited Units.

 

4.             Unfunded Obligations.  The Company will reflect the Employee’s interests in the Units and the underlying shares of Common Stock by means of bookkeeping entries on the financial records of the Company, and this Agreement will not create in the Employee or any successors any right to, or claim against any, specific assets of the Company or result in the creation of any trust or escrow account for the Employee or any successors.  With respect to their interests under this Agreement, the Employee and any successors will be general creditors of the Company.

 

5.             Voting Rights.  The Employee will not have any rights of a shareholder to vote the shares of Common Stock underlying the Units until the Units are earned and settled after the end of the Measurement Period.  Once the Units are settled by distribution of shares of Common Stock, the Employee will have all shareholder voting rights with respect to those shares of Common Stock.

 

6.             Dividends and Other Distributions.  During the Measurement Period, the Employee will not have any rights of a shareholder to receive dividends or other distributions with respect to the shares of Common Stock underlying the Units (i.e., the Units will not accrue dividends).  Once the Units are settled by distribution of shares of Common Stock, the Employee will have all shareholder rights to dividends and other distributions with respect to those shares of Common Stock.

 

7.             Actions after Earning is Determined.  As soon after the end of the Measurement Period as is practicable, and in any event on or before the end of the calendar year during which the Measurement Period ends, the Company will settle the earned Units by distributing to the Employee one share of Common Stock for each Unit earned under this Agreement.  To distribute those shares of Common Stock, the Company will, in its discretion, either deliver to the Employee stock certificates representing, or shall instruct the Company’s transfer agent to recognize in book entry form that the Employee is the registered holder of, the number of shares of Common Stock attributable to the earned Units as of the end of the Measurement Period, free from any restrictions or other terms and conditions of this Agreement.  At that same time, the Company shall take such actions as it shall deem appropriate to cancel the forfeited Units and to cause them to no longer be recognized as outstanding awards under the Plan.  The Employee (or his or her successors) shall execute and deliver such instruments and take such other actions as the Company shall reasonably request with respect to the actions to be taken pursuant to this Paragraph.

 

8.             Termination of Employment.  If the Employee’s employment with the Company and/or a Subsidiary terminates during the Measurement Period (a transfer of employment among the Company and its Subsidiaries will not be treated as a termination of employment), then all or some portion of the Units that would otherwise have become earned Units (based on the actual performance for the Measurement Period) had the Employee remained employed throughout the entire Measurement Period, if any (the “Full Period Units”), will be earned or be forfeited as follows:

 

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(a)           if the Employee’s employment terminates due to death, Disability or Retirement, then at the end of the Measurement Period the number of Units that then become earned Units will be equal to the product (rounded down to the nearest whole Unit) of (i) the number of Full Period Units, and (ii) a fraction, the numerator of which is the sum (to a maximum of 156) of 52 plus the number of full weeks in the Measurement Period during which the Employee was employed by the Company or a Subsidiary, and the denominator of which is 156;

 

(b)           if the Employee’s employment terminates due to involuntary termination without Cause, then at the end of the Measurement Period the number of Units that then become earned Units will be equal to the product (rounded down to the nearest whole Unit) of (i) the number of Full Period Units, and (ii) a fraction, the numerator of which is the number of full weeks in the Measurement Period during which the Employee was employed by the Company or a Subsidiary, and the denominator of which is 156;

 

(c)           if the Employee, at termination of employment, is a party to a written employment agreement with the Company or a Subsidiary that provides for the voluntary termination of employment by the Employee for Good Reason, and if the Employee terminates employment voluntarily for Good Reason, then at the end of the Measurement Period the number of Units that then become earned Units will be the same portion of the Full Period Units as if the Employee’s employment had been involuntarily terminated without Cause, as determined under subparagraph (b) of this Paragraph; and

 

(d)           upon termination of the Employee’s employment for any reason other than those described in subparagraphs (a), (b), or (c) of this Paragraph, all of the Units will be forfeited immediately upon the termination of the Employee’s employment.

 

9.             Change in Control.  Except as otherwise required under the terms and conditions of any applicable change in control agreement between the Employee and the Company or a Subsidiary, upon the occurrence of a Change in Control during the Measurement Period, the number of Units that then become earned Units will be equal to the product (rounded down to the nearest whole Unit) of (i) the number of Units equal to the Target Performance Based Unit Award, and (ii) a fraction, the numerator of which is the number of full weeks in the Measurement Period prior to the Change in Control, and the denominator of which is 156, and all other shares will be forfeited.

 

10.          Potential Repayment Obligation.  This Paragraph 10 is applicable only if the Employee holds the office of Vice President, or a higher office, with the Company or one of its significant Subsidiaries as of the effective date of this Agreement.  Notwithstanding any other provision of this Agreement to the contrary, any Units granted or shares of Common Stock issued in connection with this Agreement, and/or any amount received with respect to any sale of any such shares, shall be subject to potential cancellation, recoupment, rescission, payback, or other action in accordance with the terms of the Company’s clawback policy, as it may be amended from time to time (the “Policy”).  The Employee agrees and consents to the Company’s application, implementation, and enforcement of (a) the Policy or any similar policy established by the Company or its Subsidiaries that may apply to the Employee, and (b) any provision of applicable law relating to cancellation, rescission, payback, or recoupment of compensation, and

 

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expressly agrees that the Company may take such actions as are necessary to effectuate the Policy, any similar policy (as applicable to the Employee) or applicable law without further consent or action being required by the Employee.  To the extent that the terms of this Agreement and the Policy or any similar policy conflict, the terms of such policy shall prevail.

 

11.          Withholding.  At the time of the settlement of Units by distribution of any shares of Common Stock pursuant to Paragraph 7 of this Agreement, the Company has the right and power to deduct or withhold, or require the Employee to remit to the Company, an amount sufficient to satisfy all applicable tax withholding requirements with respect to such distributed shares.  The Company may permit or require the Employee to satisfy all or part of the tax withholding obligations in connection with this Agreement by (a) having the Company withhold otherwise distributable shares, or (b) delivering to the Company shares of Company Common Stock already owned for a period of at least six months (or such longer or shorter period as may be required to avoid a charge to earnings for financial accounting purposes), in each case having a value equal to the amount to be withheld, which shall not exceed the amount determined by the applicable minimum statutory tax withholding rate (or such other rate as will not result in a negative accounting impact).  For these purposes, the value of the shares of Common Stock to be withheld or delivered will be equal to the Fair Market Value as of the date that the taxes are required to be withheld.

 

12.          Deferral of Distribution; Code Section 409A Compliance.  To the extent that the Employee is a U.S. tax resident, the Employee may make a one-time, irrevocable election to defer distribution of shares of Common Stock issued in settlement of earned Units by completing and submitting a written election to the Company on such forms and following such procedures as are required by the Company for effecting such elections.  To be effective, the election must be delivered to the Company by the date that is six months before the last day of the Measurement Period and must specify an event or date for distribution of shares of Common Stock from among the following: (a) separation of service, (b) Disability, (c) death, (d) a fixed date, or (e) a Change in Control.  The Employee’s right to defer, as well as all other provisions of this Agreement, shall be interpreted and applied in a manner consistent with the applicable standards for nonqualified deferred compensation plans established by Code Section 409A and its interpretive regulations and other regulatory guidance.  To the extent that any terms of this Agreement would subject the Employee to gross income inclusion, interest, or additional tax pursuant to Code Section 409A, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy, the applicable Code Section 409A standards.

 

13.          Notices.  All notices and other communications required or permitted under this Agreement shall be written and delivered personally or sent by registered or certified first-class mail, postage prepaid and return receipt required, addressed as follows: if to the Company, to the Company’s executive offices in Batesville, Indiana, and if to the Employee or his or her successor, to the address last furnished by the Employee to the Company.  The Company may, however, authorize notice by any other means it deems desirable or efficient at a given time, such as notice by facsimile or electronic mail.

 

14.          No Employment Rights.  Neither the Plan nor this Agreement confers upon the Employee any right to continue in the employ of the Employer or limits in any way the right of

 

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the Employer to terminate the Employee’s employment at any time.  The Employee shall have no rights as a shareholder of the Company with respect to any shares of Common Stock issuable upon the earning of the Units until the date of issuance of such shares of Common Stock in settlement of the award.

 

15.          Plan Controlling.  The terms and conditions set forth in this Agreement are subject in all respects to the terms and conditions of the Plan, which are controlling.  All determinations and interpretations of the Company or the Committee are binding and conclusive upon the Employee and his or her legal representatives.  The Employee agrees to be bound by the terms and provisions of the Plan.

 

16.          Discretionary Nature of Grant; No Vested Rights.  The Employee acknowledges and agrees that the Plan is discretionary in nature and may be amended, cancelled, or terminated by the Company, in its sole discretion, at any time.  The grant of the Units under the Plan is a one-time benefit and does not create any contractual or other right to receive a grant of Units or benefits in lieu of Units in the future.  Future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of any grant, the number of shares of Common Stock subject to the grant, and the vesting provisions.  Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Employee’s employment with the Employer.

 

17.          Electronic Delivery.  The Company may, in its sole discretion, decide to deliver any documents related to the Units or other awards granted to the Employee under the Plan by electronic means.  The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

 

18.          Additional Requirements.  The Company reserves the right to impose other requirements on the Units, any shares of Common Stock acquired pursuant to the Units, and the Employee’s participation in the Plan, to the extent the Company determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local law or to facilitate the administration of the Plan.  Such requirements may include (but are not limited to) requiring the Employee to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

 

19.          Defined Terms.  For purposes of this Agreement, the following terms have the meanings provided in this Paragraph.  The terms included in the Award Information section of this Agreement have the values specified in that section.

 

(a)           “Cause” means:

 

(i)            if the Employee is a party to a written employment agreement with the Company or a Subsidiary that defines “cause” or a comparable term, the definition in that employment agreement, and

 

(ii)           if not, the Company’s good faith determination that the Employee has:

 

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(1)           failed or refused to comply fully and timely with any reasonable instruction or order of the Company or applicable Subsidiary, provided that such noncompliance is not based primarily on the Employee’s compliance with applicable legal or ethical standards;

 

(2)           acquiesced or participated in any conduct that is dishonest, fraudulent, illegal (at the felony level), unethical, involves moral turpitude, or is otherwise illegal and involves conduct that has the potential to cause the Company or a Subsidiary or any of their respective officers or directors embarrassment or ridicule;

 

(3)           violated any applicable Company or Subsidiary policy or procedure, including the Company’s Code of Ethical Business Conduct; or

 

(4)           engaged in any act that is contrary to the best interests of or would expose the Company, a Subsidiary, their related businesses, or any of their respective officers or directors to probable civil or criminal liability, excluding the Employee’s actions in accordance with applicable legal or ethical standards.

 

(b)           “Disability” means:

 

(i)            if the Employee, at termination of employment, is a party to a written employment agreement with the Company or a Subsidiary that defines “disability” or a comparable term, the definition in such employment agreement, and

 

(ii)           if not, the Company’s good faith determination that the Employee is eligible (except for the waiting period) for permanent disability benefits under Title II of the Federal Social Security Act or, as it relates to Employees residing outside the United States, applicable local law.

 

(c)           “Good Reason” means, if the Employee, at termination of employment, is a party to a written employment agreement with the Company or a Subsidiary, the definition given to that term or a comparable term in that agreement, if any.

 

(d)           “Retirement” means termination of employment after having:

 

(i)            completed at least five years of service in the aggregate with the Company, Hill-Rom Holdings, Inc. (formerly known as Hillenbrand Industries, Inc.), or any Subsidiaries of either of them, and

 

(ii)           reached age fifty-five (55).

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF the Company and the Employee have executed this Agreement as of the date first above written.

 

 

	
 
    	
 
    
	
 
    	
[EMPLOYEE   SIGNATURE]
    
	
 
    	
 
    
	
 
    	
Print   Name:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HILLENBRAND, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Print   Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:Exhibit 10.1

 

Portions of this Exhibit have been redacted pursuant to a request for confidential treatment under Rule 24b-2 of the General Rules and Regulations under the Securities Exchange Act.  Omitted information marked “[***]” in this Exhibit has been filed with the Securities and Exchange Commission together with such request for confidential treatment.

 

Execution Copy

 

	
 
    
	
 
    

 

CONSTRUCTION AND FIELD GATHERING AGREEMENT

 

by and between

 

HPIP LAVACA, LLC

 

(“Gatherer”)

 

and

 

PENN VIRGINIA OIL & GAS, L.P.

 

(“Shipper”)

 

Dated January 31, 2014

 

	
 
    
	
 
    

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINITIONS
    	
1
    
	
ARTICLE II
    	
DEDICATION AND COMMITMENT
    	
7
    
	
ARTICLE III
    	
CONSTRUCTION AND OWNERSHIP OF THE GATHERING SYSTEM;   CONSTRUCTION SCHEDULE
    	
8
    
	
ARTICLE IV
    	
QUANTITY, NOMINATION AND IMBALANCE PROCEDURES
    	
10
    
	
ARTICLE V
    	
GAS PROCESSING RIGHTS
    	
11
    
	
ARTICLE VI
    	
CONTROL OF GAS AND PRESSURE
    	
11
    
	
ARTICLE VII
    	
MEASUREMENT AND TESTING
    	
12
    
	
ARTICLE VIII
    	
QUALITY
    	
12
    
	
ARTICLE IX
    	
FEES
    	
12
    
	
ARTICLE X
    	
TERM
    	
13
    
	
ARTICLE XI
    	
STATEMENTS AND PAYMENTS
    	
13
    
	
ARTICLE XII
    	
REGULATION
    	
14
    
	
ARTICLE XIII
    	
TAXES AND ROYALTIES
    	
14
    
	
ARTICLE XIV
    	
REPRESENTATIONS AND WARRANTIES
    	
14
    
	
ARTICLE XV
    	
EASEMENTS
    	
15
    
	
ARTICLE XVI
    	
INDEMNITY
    	
16
    
	
ARTICLE XVII
    	
NOTICES AND STATEMENTS
    	
17
    
	
ARTICLE XVIII
    	
FORCE MAJEURE
    	
18
    
	
ARTICLE XIX
    	
CONFIDENTIAL INFORMATION
    	
18
    
	
ARTICLE XX
    	
SALE OF GATHERING SYSTEM
    	
19
    
	
ARTICLE XXI
    	
MISCELLANEOUS
    	
19
    

 

	
EXHIBITS
    	
 
    
	
 
    	
 
    
	
EXHIBIT A
    	
DEDICATION AREA
    
	
EXHIBIT B
    	
DELIVERY POINTS
    
	
EXHIBIT C
    	
CONNECTION POINTS
    
	
EXHIBIT D
    	
NOMINATION PROCEDURES
    
	
EXHIBIT E
    	
MEASUREMENT AND TESTING
    
	
EXHIBIT F
    	
REQUIRED INSURANCE
    

 

 

CONSTRUCTION AND FIELD GATHERING AGREEMENT

 

THIS CONSTRUCTION AND FIELD GATHERING AGREEMENT (this “Agreement”) is made and entered into this 31st day of January, 2014 (the “Effective Date”) by and between HPIP Lavaca, LLC, a Delaware limited liability company (“Gatherer”), and Penn Virginia Oil & Gas, L.P., a Texas limited partnership (“Shipper”).  Gatherer and Shipper may hereinafter be referred to singularly as a “Party” and, together, as the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, Gatherer and Shipper are contemporaneously herewith entering into that certain Purchase and Sale Agreement whereby Shipper has agreed to sell to Gatherer, and Gatherer has agreed to purchase from Shipper, certain of Shipper’s field gathering assets located in Gonzales and Lavaca Counties, Texas;

 

WHEREAS, Shipper and ETC Texas Pipeline, Ltd. (“ETC”) are parties to certain agreements whereby ETC has agreed to provide Shipper certain gathering and processing services;

 

WHEREAS, Gatherer desires to construct, own and operate certain gas gathering lines to gather the natural gas of Shipper within the Dedication Area (as defined in Article I) and to deliver such natural gas to the Delivery Points (as defined in Article I) or redeliver such natural gas to Shipper for use in Shipper’s Gas Lift Operations (as defined in Article I); and

 

WHEREAS, Shipper desires to have its natural gas within the Dedication Area gathered by Gatherer and delivered to the Delivery Points or redelivered to Shipper for use in Shipper’s Gas Lift Operations;

 

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions herein contained, and intending to be legally bound hereby, the Parties, for themselves and for their successors and assigns, do hereby mutually covenant and agree as follows:

 

ARTICLE I
 DEFINITIONS

 

For the purposes of this Agreement, the following terms are defined as follows:

 

“Affiliate” means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person.  For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person.

 

“AMID” has the meaning set forth in Article XX.

 

“Applicable Law” means, with respect to any Person, all laws, statutes, codes, acts, treaties, ordinances, orders, judgments, writs, decrees, injunctions, rules, regulations, governmental approvals, licenses and permits, directives and requirements of all Governmental Authorities, including all official interpretations thereof by any such Governmental Authorities, as in effect at any time or from time to time and, in each case, applicable to or binding upon such Person and, in the case of Gatherer, Gatherer’s ownership, use and operation of the Gathering System.

 

“BTU” means the amount of energy required to raise the temperature of one pound of pure water

 

 

one degree Fahrenheit (1°F) from fifty-nine degrees Fahrenheit (59°F) to sixty degrees Fahrenheit (60°F).

 

“Change in Law” means any change to any Applicable Law in effect on the Effective Date.

 

“Claim” means any demand, claim, action, suit, legal proceeding (whether at law or in equity) or arbitration.

 

“Completion Date” has the meaning given such term in Section 3.5.

 

“Confidential Information” means (i) the terms and conditions of this Agreement, (ii) the terms and conditions of Shipper’s gathering and processing agreements with ETC and/or its Affiliates and (iii) all information and data (including all copies thereof) that is furnished or submitted by any Party or its Affiliates, whether oral, written or electronic, to the other Party or its Affiliates in connection with the operation of the Gathering System or the services rendered by Gatherer hereunder, including customer, pricing and nomination information and the terms and conditions of any contracts to which such furnishing Party is a party.  Notwithstanding the foregoing, the term “Confidential Information” shall not include any information that a claiming Party proves:

 

(a)           is in the public domain at the time of its disclosure, other than as a result of a breach of this Agreement;

 

(b)           was in the possession of any Party or any of its Affiliates prior to being furnished such information; or

 

(c)           has been independently acquired or developed by a Party or any of its Affiliates without breaching this Agreement.

 

“Connection Notice” has the meaning given such term in Section 3.3(d).

 

“Connection Points” means (a) each interconnection point identified on Exhibit C attached hereto and (b) each additional interconnection point installed pursuant to Article III.

 

“Construction Notice” has the meaning given such term in Section 3.3(a).

 

“Construction Plan” has the meaning given such term in Section 3.2.

 

“Day” means a period of twenty-four (24) consecutive hours beginning at 9:00 a.m., Central Time, on each calendar day and ending at 9:00 a.m., Central Time, on the next succeeding calendar day or such other time period that any market and/or pipeline downstream of the Gathering System uses as the definition of “Day” for its operations if such time period is inconsistent with the preceding time period.

 

“Dedication Area” means the Initial Dedication Area and the New Lines Dedication Area.

 

“Delivery Failure” has the meaning given such term in Section 3.5.

 

“Delivery Points” means those delivery points identified on Exhibit B attached hereto or such other point(s) of interconnection as may be mutually agreed by Gatherer and Shipper.

 

“Drip” means liquids, including water and liquid hydrocarbons, whether or not of commercial value, which are separated from Gas in the Gathering System as a result of standard gathering system operations, including the compression of gas and pigging of pipelines.

 

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“[***]” means [***].

 

“[***]” means [***].

 

“Easements” has the meaning given such term in Section 3.8.

 

“Effective Date” has the meaning given such term in the introductory paragraph hereto.

 

“Emissions” means any gaseous, liquid, solid or other substance emitted by the Gathering System, including carbon dioxide (“CO2”), sulfur dioxide (“SO2”), nitrogen oxides (“NOx”), mercury (“Hg”), volatile organic compounds (“VOC”) and volatile organic material (“VOM”).

 

“ETC” has the meaning given such term in the Recitals hereto.

 

“Excluded Wells” means any wells located in the New Lines Dedication Area which are connected to the Poly Line prior to the Operating Date or which have been drilled and completed prior to the Operating Date.

 

“Expected Production Date” has the meaning given such term in Section 3.3(a).

 

“Fees” means the fees payable to Gatherer hereunder as described in Article IX.

 

“Force Majeure” means any circumstance beyond the reasonable control of the Person experiencing such inability to perform, whether of the kind enumerated herein or not, including acts of God, strikes, lockouts or other industrial disturbances, curtailments or shutdowns, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, storms, floods, washouts, arrests and restraints of governments and people, civil disturbances, fires, explosions, breakage or accidents to machinery or lines of pipe, modification or maintenance of machinery or lines of pipe, freezing of lines of pipe, inability to obtain at reasonable cost servitudes, right-of-way grants, permits, governmental approvals or licenses and inability to obtain at reasonable cost materials or supplies for constructing or maintaining facilities, and which by the exercise of due diligence such Person is unable to prevent or overcome; provided, however, that “Force Majeure” shall not include any circumstance beyond the reasonable control of such Person where the circumstance is a direct result of the willful misconduct of such Person.

 

“Gas” means gas in its natural state, and all elements and compounds and mixtures thereof, as produced from oil or gas wells, whether from the same strata from which oil is produced, or from other strata, as well as gas vaporized from oil after production.

 

“Gas Lift Operations” means the artificial lift technique of raising oil out of a well through the injection of Gas in the annulus of the well.

 

“Gas Lift Point” means the outlet flange of each gas lift meter located at a Connection Point.

 

“Gatherer” has the meaning given such term in the introductory paragraph hereto.

 

“Gatherer Indemnitees” has the meaning given such term in Section 16.1.

 

“Gathering L&U” means the total Lost Gas and Shrinkage on the Gathering System during each Month.  Shipper’s proportionate share of Gathering L&U shall be stated in MMBtus and shall be equal to (x) Shipper’s proportionate share of Lost Gas plus (y) Shipper’s proportionate share of Shrinkage.

 

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“Gathering System” means the Gathering System Segments collectively.

 

“Gathering System Segment” means the Gas gathering pipelines and other related facilities and equipment located in the Dedication Area necessary to gather and transport Gas from a Receipt Point to any existing portion of the Gathering System and to redeliver Gas to Shipper at the Gas Lift Point associated with such Receipt Point.  For purposes of clarity, (i) “Gathering System Segment” shall not include the Poly Line and (ii) “Gathering System Segment” shall not include the New Gathering Lines until the Operating Date.

 

“Governmental Authority” means any government, court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or any state, county, city, tribal or other political subdivision or similar governing entity, and including any governmental, quasi-governmental or non-governmental body administering, regulating or having general oversight over Gas, electricity, power or other markets.

 

“Gross Heating Value” means the number of BTUs produced by the combustion, at a constant pressure, of the amount of the Gas which would occupy a volume of one (1) cubic foot at a temperature of sixty degrees (60o) Fahrenheit, under a pressure of fourteen and sixty-five hundredths (14.65) 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.

 

“Initial Dedication Area” means that area located in portions of Gonzales, Lavaca and Fayette Counties, Texas as depicted on map attached hereto as Exhibit A.

 

“Initial Production Date” means the date of first production of Gas from a well pad connected to an additional Connection Point described in a Construction Notice.

 

“Interests” means all interests that Shipper (or any of its Affiliates) now or hereinafter owns, controls, acquires or has the right to market (as such marketing rights may change from time to time) in natural gas reserves of all formations in, under or attributable to the Dedication Area, together with any pool, communitized area or unit, and all interests in any wells, whether now existing or drilled hereafter, on or completed within the Dedication Area, or within any such pool, communitized area or unit, even though such interests may be incorrectly or incompletely stated, all as the same shall be enlarged by the discharge of any burdens or by the removal of any charges or encumbrances to which any of same maybe subject as of the Effective Date, and any and all replacements, renewals and extensions or amendments of any of the same; provided, however, that “Interests” shall not include (a) any Excluded Wells or (b) any interest of Shipper or any of its Affiliates that must be offered to a working interest partner pursuant to any applicable agreement with such partner in effect on the Effective Date.

 

“Losses” means any and all judgments, losses, liabilities, amounts paid in settlement, damages, fines, penalties, deficiencies, costs and expenses (including pre- and post-judgment interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses related to any Claim).

 

“Lost Gas” means the decrease in Gross Heating Value (expressed in MMBtus) which results from lost and unaccounted for Gas on the Gathering System.  Shipper’s proportionate share of Lost Gas shall be stated in MMBtus and shall be determined in accordance with Gatherer’s standard allocation procedures on a proportional basis; provided, however, that, Shipper’s average proportionate share of Lost Gas for each 12 Month period ending on an anniversary of the Effective Date (an “Annual Period”) shall not exceed three and one-half percent (3.5%) of the Gas tendered by Shipper at the Receipt Points during

 

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such 12 Month period; provided, further, that Gatherer shall use commercially reasonable efforts to minimize Lost Gas.

 

Lost Gas shall be calculated as an amount equal to the sum of all System Receipts minus the sum of all System Deliveries stated in MMBtus.  System Receipts shall consist of all Gas delivered to at all receipt points (including the Receipt Points) on the Gathering System.  System Deliveries shall consist of all Gas delivered to all delivery points on the Gathering System (including the Delivery Points), all Gas delivered to producers connected to the Gathering System (including Shipper) to support Gas Lift Operations, Gas flared on the Gathering System, fuel used in the operation of the Gathering System and Drip collected on the Gathering System.  The percentage of Lost Gas shall be calculated as the sum of all System Receipts minus all System Deliveries divided by the sum of all System Receipts.

 

Each Month, Gatherer shall report to Shipper the total Lost Gas on the Gathering System and Shipper’s proportionate share of Lost Gas.  At the end of each Annual Period, if Shipper’s average proportionate share of Lost Gas for such Annual Period exceeds three and one-half (3.5%), then Gatherer shall pay Shipper an amount equal to the amount of Lost Gas for such Annual Period in excess of 3.5% multiplied by the average of the index prices as reported in Inside FERC’s Gas Market Report first issue published during each of the Months in such Annual Period, under the heading “Prices of Spot Gas Delivered to Pipelines (per MMBTU) using the Houston Ship Channel Index.”

 

“Mcf” means one thousand (1,000) cubic feet of Gas measured at a base temperature of sixty degrees (60o) Fahrenheit and at a base pressure of fourteen and sixty-five hundredths (14.65) psia.

 

“Minimum Fees” has the meaning given such term in Section 9.2.

 

“MMBtu” means one million (1,000,000) BTUs.

 

“Month” means the period commencing at 9:00 a.m., Central Time, on the first day of a calendar month and ending at 9:00 a.m., Central Time, on the first day of the next succeeding calendar month or such other time period that any market and/or pipeline downstream of the Gathering System uses as the definition of “Month” for its operations if such time period is inconsistent with the preceding time period.

 

“New Gathering Lines” means the new low pressure gathering pipelines and high pressure gathering pipelines and other related facilities and equipment, which will be constructed by Gatherer pursuant to Article III and which are necessary to gather and transport Gas from wells located in the New Lines Dedication Area to the Delivery Points.

 

“New Lines Dedication Area” means that area located in portions of Gonzales, Lavaca and Fayette Counties, Texas as depicted on the map attached hereto as Exhibit A.

 

“NGLs” means natural gas liquids.

 

“Non-Operated Interest” has the meaning given such term in Section 2.2(a).

 

“Operating Date” has the meaning given such term in Section 3.2.

 

“Party” and “Parties” have the meanings given such terms in the introductory paragraph hereto.

 

“Permissible Interruptions” has the meaning given such term in Section 4.5.

 

“Person” means any natural person, limited liability company, corporation, general or limited partnership, group, union, association, trust or Governmental Authority.

 

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“Poly Line” means the gathering pipelines and other related facilities and equipment which were acquired by Shipper in April 2013 and which currently gather and transport Gas from Shipper’s wells located in the New Lines Dedication Area.

 

“Prime Rate” means the per annum rate of interest announced as the “prime rate” for commercial loans posted from time to time by Wells Fargo Bank, N.A. or its successor or other bank on which the Parties agree.

 

“Prior Dedicated Interest” has the meaning given such term in Section 2.2(b).

 

“Projected Volumes” has the meaning given such term in Section 3.3(a).

 

“Psia” means pounds per square inch absolute.

 

“Psig” means pounds per square inch gauge.

 

“Reasonable and Prudent Operator” has the meaning set forth in Article XX.

 

“Receipt Points” means the inlet flange of each Gathering System receipt meter located at a Connection Point.

 

“Required Date” has the meaning given such term in Section 3.3(d).

 

“Reservations” has the meaning given such term in Section 6.5.

 

“Shipper” has the meaning given such term in the introductory paragraph hereto.

 

“Shipper Indemnitees” has the meaning given such term in Section 16.2.

 

“[***]” means [***].

 

“Shipper’s Allocated Gas” means Shipper’s proportionate share of the Gas measured at the Delivery Points during any Month, determined by multiplying the total MMBtus measured at all delivery points from the Gathering System, including the Delivery Points, during such Month by a fraction, the numerator of which is the total MMBtus measured at the Receipt Points during such Month and the denominator of which is the total MMBtus measured at all receipt points into the Gathering System, including the Receipt Points, during such Month.

 

“Shipper’s Delivery Facilities” has the meaning given such term in Section 6.1.

 

“Shipper’s Gas” means all Gas that Shipper owns and/or controls within the Dedication Area.

 

“Shrinkage” means the decrease in Gross Heating Value (expressed in MMBtus) which results from the collection or removal of Drip from Gas prior to the applicable Delivery Point.  Shipper’s proportionate share of Shrinkage shall be stated in MMBtus and shall be determined in accordance with Gatherer’s standard allocation procedures on a proportional basis.

 

“Specifications” has the meaning given such term in Section 8.2.

 

“Tax” means any tax or fee imposed by any Governmental Authority.

 

“Term” has the meaning given such term in Article X.

 

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“Thermally Equivalent Sales Volume” means a volume of Gas having a Gross Heating Value equal to (x) the Gross Heating Value of Shipper’s Gas received by Gatherer at the Receipt Points, minus (y) the Gross Heating Value of Shipper’s Gas redelivered to Shipper at the Gas Lift Points, minus (z) Shipper’s proportionate share of Gathering L&U.

 

ARTICLE II
 DEDICATION AND COMMITMENT

 

2.1          Subject to Section 2.2, Shipper hereby dedicates and commits to the gathering and delivery services to be provided by Gatherer hereunder all of the Interests.

 

2.2          Shipper’s dedication and commitment of the Interests shall be subject to the Reservations as well as the following limitations:

 

(a)           Any Interest which is, at any time during the Term, operated by an operator other than Shipper (a “Non-Operated Interest”) shall not be subject to the dedication and commitment provided for in Section 2.1.

 

(b)           If Shipper acquires, after the Effective Date, any Interest which is subject to a prior dedication (a “Prior Dedicated Interest”), then such Prior Dedicated Interest shall not be subject to the dedication and commitment provided for in Section 2.1; provided, however, that, if any Prior Dedicated Interest is released from such prior dedication during the Term, then such Prior Dedicated Interest shall, effective upon such release, become subject to the dedication and commitment provided for in Section 2.1.

 

(c)           Any Interest which is located in the New Lines Dedication Area shall not be subject to the dedication and commitment provided for in Section 2.1 until the Operating Date.

 

2.3          Commencing on the Effective Date, Shipper shall deliver all of Shipper’s Gas produced from wells located in the Initial Dedication Area to Gatherer at the Receipt Points.

 

2.4          Commencing on the Effective Date, Gatherer shall provide gathering and compression services for and accept and receive the volume of Gas (measured in Mcfs) tendered by Shipper each Day at the Receipt Points and use commercially reasonable efforts to (a) deliver a Thermally Equivalent Sales Volume to the Delivery Points and (b) redeliver to Shipper at the Gas Lift Points a sufficient amount of Gas for Shipper to conduct its Gas Lift Operations.  Subject to Section 4.4, Shipper acknowledges that Shipper’s Gas may be commingled with other Gas streams and that, due to normal operational factors, Gatherer may not physically deliver Shipper’s Gas to the Delivery Points.  [***].

 

2.5          Commencing on the Initial Production Date, Shipper shall deliver all of Shipper’s Gas to Gatherer at the Receipt Points connected to the Connection Point described in the applicable Construction Notice.

 

2.6          Commencing on the Initial Production Date, Gatherer shall provide gathering and compression services for and accept and receive the volume of Gas (measured in Mcfs) tendered by Shipper each Day at the Receipt Points connected to the Connection Point described in the applicable Construction Notice and to use commercially reasonable efforts to (a) deliver a Thermally Equivalent Sales Volume to the Delivery Points and (b) redeliver to Shipper at the Gas Lift Points a sufficient amount of Gas for Shipper to conduct its Gas Lift Operations.

 

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ARTICLE III

CONSTRUCTION AND OWNERSHIP OF THE GATHERING SYSTEM;

CONSTRUCTION SCHEDULE

 

3.1                               Gatherer shall, at its sole cost and expense, design, acquire right-of-way for, obtain all permits from Governmental Authorities for, procure materials for, construct, operate and maintain the Gathering System, including the New Gathering Lines.

 

3.2                               By not later than January 15, 2014, Gatherer shall prepare and deliver to Shipper a detailed construction plan (a “Construction Plan”) for the completion of the New Gathering Lines and shall review the design for constructing the New Gathering Lines with Shipper.  Subject to Force Majeure, Gatherer shall complete construction of the New Gathering Lines so that they are operational by not later than May 31, 2014 (such completion date, the “Operating Date”).

 

3.3                               Gatherer shall expand or extend, add or remove components and operate the Gathering System as necessary to connect Shipper’s wells within the Dedication Area as follows:

 

(a)                                 If Shipper desires for Gatherer to install an additional Connection Point within the Dedication Area, Shipper shall notify Gatherer of such desire (a “Construction Notice”) at least 120 Days prior to the date on which the first well on the first well pad to be connected to such additional Connection Point is expected to be spud.  Each Construction Notice delivered by Shipper shall describe in reasonable detail (i) the expected date of first production of Gas from the first well pad to be connected to such additional Connection Point (the “Expected Production Date”), (ii) the desired location for such additional Connection Point, (iii) Shipper’s good faith projection of the daily volumes of Gas to be gathered during the initial two (2) years of production from the first well pad to be connected to such additional Connection Point (“Projected Volumes”), (iv) the pressure of Gas to be delivered at such additional Connection Point and (v) the anticipated compositional analysis of the Gas to be produced from the first well pad to be connected to such additional Connection Point.  Notwithstanding the foregoing, Gatherer shall not have any obligation to install an additional Connection Point if Shipper’s desired location for such additional Connection Point is within 640 acres of an existing Connection Point; provided, however, that notwithstanding the foregoing, unless otherwise consented to by Shipper in writing, Gatherer shall be required to install at least one (1) Connection Point within each of Shipper’s lease units.

 

(b)                                 Within 30 Days following the receipt of a Construction Notice, Gatherer shall prepare and deliver to Shipper a detailed Construction Plan for the installation of the additional Connection Point requested by such Construction Notice and the completion of the related Gathering System Segment (including the installation of any additional Receipt Points and Gas Lift Points) and shall review with Shipper the design for constructing and/or modifying and operating such Gathering System Segment.

 

(c)                                  Gatherer shall complete the construction and/or modification of the additional Connection Point described in such Construction Notice and the related Gathering System Segment (including the installation of any additional Receipt Points and Gas Lift Points) so that such Gathering System Segment is operational by not later than the Expected Production Date, subject to Force Majeure.

 

(d)                                 If Shipper desires for Gatherer to install an additional Receipt Point or Gas Lift Point at a Connection Point, which such additional Receipt Point or Gas Lift Point shall be installed immediately adjacent to the existing Receipt Points or Gas Lift Points at such Connection Point, Shipper shall notify Gatherer of such desire (a “Connection Notice”) at least

 

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30 Days prior to the anticipated date first production of Gas from the well to be connected to such additional Receipt Point or the anticipated date of commencement of Gas Lift Operations, as applicable (the “Required Date”).  Gatherer shall promptly install and connect the Receipts Points and Gas Lift Points requested in the applicable Connection Notice as promptly as practicable, but in any event, no later than the Required Date, subject to Force Majeure.

 

3.4                               Gatherer shall design and construct the New Gathering Lines and each Gathering System Segment substantially as described in the applicable Construction Plan, as agreed by Gatherer and Shipper.  All pipelines to be constructed pursuant to a Construction Plan (whether as part of the New Gathering Lines or as part of a Gathering System Segment) shall be constructed of steel and shall have a minimum of one (1) future side valve per 5000 feet of length in addition to the applicable Receipt Point connection.  The high pressure lines are to be built as 1440 psi working pressure lines (2160 psi tested) with full opening 600 series valves with RF flanges (1440 psi working pressure) on the future side valves.  The low pressure lines are to be built as 740 psi working pressure lines (1110 psi tested) with full opening 300 series valves with RF flanges (740 psi working pressure) on the future side valves.  Each Construction Plan shall be reasonably satisfactory to Shipper.  Gatherer shall construct the New Gathering Lines and each Gathering System Segment with due diligence at its sole cost and expense.  Gatherer shall either provide a written report or schedule a conference call with Shipper regarding construction progress on a weekly basis while the New Gathering Lines and each Gathering System Segment are being constructed.  Gatherer and Shipper shall work together to ensure completion of the New Gathering Lines and each Gathering System Segment in a timely manner.

 

3.5                               Gatherer shall notify Shipper of the date on which each Gathering System Segment constructed or modified by Gatherer hereunder has been completed and is operational (the “Completion Date”).  Except as otherwise set forth herein, by not later than 120 Days after the later of the Completion Date or the Expected Production Date, Shipper shall (a) commence and thereafter continue on an uninterrupted basis (except for interruptions caused by Force Majeure, Permissible Interruptions or Gatherer) delivery of Shipper’s Gas into such Gathering System Segment from the first well pad connected to the additional Connection Point described in the applicable Construction Notice and (b) commence to pay all Fees required to be paid hereunder in connection with the gathering of such Gas.  If Shipper does not commence such delivery within such 120-Day period, or thereafter ceases such delivery (in either case, a “Delivery Failure”), then Shipper shall, commencing on the first Day after such Delivery Failure, and continuing until Shipper has commenced or recommenced such delivery, pay all Fees that would be have been required to be paid hereunder if all of the Projected Volumes described in the applicable Construction Notice were, in fact, delivered.

 

3.6                               In the event that Shipper makes any payment of Fees on account of a Delivery Failure pursuant to Section 3.5, all Projected Volumes used in the calculation of such payment shall be deemed to have been actually delivered for the purpose of satisfying the Minimum Fees.

 

3.7                               Gatherer and Shipper shall collaborate to ensure that each Gathering System Segment is configured in such a manner as to have reasonable ingress and egress to access roads and wells within the Dedication Area.  With respect to any access roads constructed or to be constructed within the Dedication Area by a Party, such Party shall grant the other Party access to and use thereof.  Each Party shall be responsible, and shall reimburse the other Party, for any damage caused by such Party to the other Party’s roads within the Dedication Area, ordinary wear and tear excepted.

 

3.8                               In the event that Gatherer requires additional easements, rights-of-way, surface leases and/or easement rights under oil and gas leases (collectively, “Easements”), as applicable, in connection with the construction and/or modification of the New Gathering Lines or any Gathering System Segment, Gatherer shall include such requirements in the applicable Construction Plan delivered to Shipper.  Upon approval

 

9

 

of the applicable Construction Plan, the Parties shall cooperate and Shipper shall use commercially reasonable efforts to promptly acquire the Easements described in such Construction Plan; provided, however, that Shipper shall not acquire any such Easement if, in Gatherer’s reasonable discretion, such acquisition is uneconomic; provided, further, that, if such acquisition is deemed uneconomic, the Parties shall cooperate to determine reasonable alternatives including, but not limited to, modifications to the Construction Plan or agreed upon cost sharing.  Upon such acquisition by Shipper, (a) Shipper shall promptly assign to Gatherer an interest in such Easements insofar as such Easements relate to the New Gathering Lines or Gathering System Segment described in the applicable Construction Plan and (b) Gatherer shall promptly pay to Shipper an amount equal to 100% of Shipper’s total costs and expenses incurred in connection with the acquisition of such Easements.

 

3.9                               Ownership and operation of the Gathering System shall be solely vested in Gatherer, and Shipper shall have no rights to the same.  Gatherer shall operate the Gathering System in accordance with the terms of this Agreement and in accordance with prevailing industry standards.

 

ARTICLE IV

QUANTITY, NOMINATION AND IMBALANCE PROCEDURES

 

4.1                               During the Term, Gatherer shall take and receive 100% of Shipper’s Gas produced from wells located in the Dedication Area (other than Excluded Wells), subject to the Reservations and the limitations described in Section 2.2.

 

4.2                               Shipper shall provide nominations to Gatherer with respect to the quantity of Shipper’s Gas to be delivered at each Delivery Point, which nominations shall be made in accordance with the nomination procedures described on Exhibit D attached hereto.

 

4.3                               Shipper shall provide to Gatherer, by not later than the 25th Day of each Month, a written estimate of the amount of Gas Shipper expects to use for its Gas Lift Operations during the following Month.  Shipper shall also notify Gatherer in writing, from time to time, of the date on which Shipper requires that Gatherer open any meter(s) necessary for Gas Lift Operations.  Promptly upon receipt of such notice, Gatherer shall open such meter(s) and such meter(s) shall remain open until Shipper notifies Gatherer in writing to close such meter(s).  Shipper will employ gas lift as the principal means of artificial lift for new wells completed between 2014 and 2018 in the Dedication Area.

 

4.4                               Gatherer shall not allow any third party Gas to be commingled with Shipper’s Gas on any Gathering System Segment unless such third party Gas has a Gross Heating Value of not less than 1,100.

 

4.5                               Notwithstanding anything herein to the contrary and without liability hereunder, Gatherer may interrupt or reduce its receipt, gathering and delivery of Shipper’s Gas for reasons of Force Majeure, maintenance, construction, other causes beyond Gatherer’s reasonable control that restrict or curtail capacity in the Gathering System or the failure or inability of the operator of the Delivery Points to receive Gas thereat (collectively, “Permissible Interruptions”).  Gatherer shall (a) provide to Shipper reasonably prompt notice of any such event, specifying the anticipated duration thereof, (b) proceed with due diligence to restore service as promptly as practical under the circumstances and (c) take so much of Shipper’s Gas as may be physically gathered on the Gathering System given such event as a first priority and in preference to all other volumes of Gas that Gatherer may otherwise receive into the Gathering System.

 

4.6                               Shipper shall be solely responsible for any and all Gas imbalances it may have with the pipelines downstream of the Gathering System and Gatherer shall have no liability whatsoever, financial or otherwise, for any such Gas imbalances.  Gatherer shall work in good faith in conjunction with Shipper in administering and resolving any imbalance statements that may be issued by the downstream pipelines.

 

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4.7                               The Parties shall meet by not later than two months after the Effective Date, and then at least every three months thereafter, to discuss Shipper’s Projected Volumes for the next six fiscal quarters.

 

ARTICLE V

GAS PROCESSING RIGHTS

 

Shipper retains the right to process Shipper’s Gas for NGLs and other valuable components.  Gatherer acknowledges that ETC currently has the right to process Shipper’s Gas for NGLs and other valuable components.  Accordingly, Gatherer shall not process or allow others to process the Gas delivered by Shipper hereunder between the Receipt Points and the Delivery Points and shall not otherwise remove NGLs or other valuable components from Shipper’s Gas delivered hereunder.

 

ARTICLE VI

CONTROL OF GAS AND PRESSURE

 

6.1                               Shipper, at its sole cost and expense, shall own, construct, equip, maintain and operate, or contract for, all lines and other necessary facilities to deliver Shipper’s Gas to Gatherer at the Receipt Points at the operating pressure prevailing from time to time at the Receipt Points (“Shipper’s Delivery Facilities”); provided, however, that Shipper shall not be required to deliver Shipper’s Gas at the Receipt Points at a pressure greater than 150 psig.

 

6.2                               To help keep the Gathering System free of Drip and solids that could impede the free flow of Gas, Gatherer may install Drip stations, slug catchers and other equipment on the Gathering System.  Gatherer shall be responsible for the disposal of the Drip and solids so collected. [***].

 

6.3                               As between Gatherer and Shipper, Shipper shall be in control and possession of the Gas (and all components thereof) gathered and delivered hereunder and responsible for any Losses incurred by any Person in connection with the Gas (a) until the Gas shall have been delivered to Gatherer at the Receipt Points hereunder and (b) after the Gas has been redelivered by Gatherer for the account of Shipper at the Delivery Points or the Gas Lift Points.

 

6.4                               As between Gatherer and Shipper, Gatherer shall be in control and possession of the Gas (and all components thereof) gathered and delivered hereunder and responsible for any Losses incurred by any Person in connection with the Gas (a) after the Gas shall have been delivered to Gatherer at the Receipt Points and (b) until the Gas is redelivered for the account of Shipper at the Delivery Points or the Gas Lift Points.

 

6.5                               Notwithstanding anything stated to the contrary herein, Shipper reserves the following rights (the Reservations”):

 

(a)                                 The right to operate the Interests free from control by Gatherer and in such a manner as Shipper, in Shipper’s sole discretion, may deem advisable, including without limitation, the right, but never the obligation, to drill new wells, to repair and rework old wells, to renew or extend in whole or in part any leases and to abandon any well or surrender any lease in whole or in part.

 

(b)                                 The right to use Gas, as a reasonably prudent operator, prior to delivery to Gatherer for the following purposes:

 

(1)                                 For fuel used above ground in the development and operation of the Interests, including for compression, drilling, normal pumping, heater or treater operations and other miscellaneous uses incidental to the operation of the Interests;

 

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(2)                                 For delivery to the “lessors” of any leases that Gas which such lessors are entitled to receive in kind from the Interests under the terms of such leases; and

 

(3)                                 For fuel used in the operation of Shipper’s Delivery Facilities, including in connection with the use of refrigeration or JT plants.

 

(c)                                  The right to pool or unitize any leases (or any portion thereof) with other lands and leases.  In the event of pooling or unitization, this Agreement shall cover Shipper’s Interest in the pool or unit and the Gas attributable thereto.

 

ARTICLE VII

MEASUREMENT AND TESTING

 

For purposes of this Agreement, (a) measurement of all volumes of Gas and determination of the BTU content of all Gas shall be undertaken on an “as delivered basis” and (b) determination of the compositional analysis of the liquid hydrocarbon content of all Gas shall be undertaken in accordance with the procedures and requirements described on Exhibit E attached hereto.  Each Month, Gatherer shall provide Shipper with all Receipt Point, Gas Lift Point and Delivery Point Gas volumes in a computer file that may be uploaded by Shipper.  At least once every six (6) Months, Gatherer shall determine the compositional analysis of the liquid hydrocarbon content of all Gas received at a particular Receipt Point and provide such compositional analysis to Shipper.

 

ARTICLE VIII

QUALITY

 

8.1                               The Gas delivered by Shipper hereunder (as measured at the actual temperature and pressure of the Gathering System at the Receipt Points) shall be commercially free of solids, dust, paraffin and paraffin forming constituents, gum and gum-forming constituents, free water and other solid and/or liquid matter which may interfere with the delivery thereof or become separated from the Gas during transmission thereof (except liquid hydrocarbons contained in Drip).

 

8.2                               The Gas delivered by Shipper hereunder (as measured at the actual temperature and pressure of the Gathering System at the Receipt Points) shall, in the aggregate, conform to the specifications, as may be amended or enforced from time to time, of ETC or other downstream pipelines receiving Shipper’s Gas (the “Specifications”).

 

8.3                               Should Gas delivered by Shipper fail at any time to conform to any and/or all of the Specifications, Gatherer may (without prior notice to Shipper) immediately suspend receipt of any off-specification Gas; provided, however, that Gatherer shall give notice to Shipper as promptly as is reasonably possible after Gatherer obtains knowledge of such nonconformance to allow Shipper to correct such condition(s).  Gatherer shall not be obligated to accept Shipper’s Gas for delivery unless and until Shipper’s Gas conforms to the Specifications.

 

8.4                               The receipt by Gatherer of Shipper’s Gas which fails to meet any one of the Specifications shall not be held to be a waiver of Gatherer’s right to refuse future delivery of Shipper’s Gas or relieve Shipper of any indemnity obligation under Article XVI.

 

ARTICLE IX

FEES

 

9.1                               As consideration of the services rendered by Gatherer under this Agreement, Shipper shall pay to Gatherer the following fees (the “Fees”):

 

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(a)                                 A Gas Gathering Fee equal to [***] per MMBtu on all of Shipper’s Gas delivered at the Delivery Points; and

 

(b)                                 A Gas Compression Fee (including dehydration services on the Low Pressure Lines) on all Gas (i) delivered at the Delivery Points or (ii) redelivered to Shipper at the Gas Lift Points in the following amounts during the following times:

 

[***]

 

9.2                               The aggregate amount of Gas Gathering Fees and Gas Compression Fees paid by Shipper, Ted Collins, Jr. and Plein Sud Holdings, LLC to Gatherer on account of Gas delivered to the Delivery Points [***] shall not be less than the following (the “Minimum Fees”):

 

	
[***]
    	
 
    

 

The Minimum Fees payable with respect to [***] shall be decreased by that amount if any, by which the Fees paid [***] exceeded the Minimum Fee due with respect to [***].

 

9.3                               By not later than [***], Shipper shall pay to Gatherer that amount, if any, by which the Minimum Fee due with respect to the [***] exceeded the Fees actually paid [***].

 

ARTICLE X

TERM

 

The term of this Agreement shall commence on the Effective Date and shall terminate on the twenty-fifth (25th) anniversary of the Effective Date (the “Term”); provided, however, that if Gatherer has received no Gas from Shipper for any period of 12 consecutive months, Gatherer may terminate this Agreement upon written notice to Shipper.

 

ARTICLE XI

STATEMENTS AND PAYMENTS

 

11.1                        On or before the 25th day of each Month, Gatherer shall render to Shipper a statement showing, for the immediately preceding Month, the volume and composition of Gas received from Shipper at each Receipt Point and delivered to Shipper at each Delivery Point or redelivered to Shipper at each Gas Lift Point.  In such statement, Gatherer shall include:  (a) a calculation of the Fees determined in accordance with Article IX and (b) [***].  All amounts due hereunder and remaining unpaid when due shall bear interest at the Prime Rate plus two percent per annum until paid, except amounts disputed in good faith.

 

11.2                        Either Party or its agent shall have the right, at reasonable times during business hours and at its sole cost and expense, to examine the books and records of the other to the extent necessary to audit and verify the accuracy of any statement made pursuant to this Agreement.

 

11.3                        In the event an error is discovered in any such statement, such error shall be adjusted without interest or penalty as soon as reasonably possible, but in any event, within two (2) months from the date that such error is discovered; provided however, that any such statement is hereby deemed final as to both Parties unless disputed in writing within two (2) years from the date of such statement.

 

13

 

ARTICLE XII
 REGULATION

 

12.1        This Agreement shall be governed by and shall be construed in accordance with the laws of the State of Texas.  This Agreement and each provision hereof shall be subject to all Applicable Laws.  Should either of the Parties, by force of any such Applicable Law, at any time during the term of this Agreement be ordered or required to do any act inconsistent with the provisions hereof, then for that period during which the requirements of such Applicable Law are applicable to this Agreement, this Agreement shall be deemed modified to conform with the requirement of such Applicable Law; provided, however, that nothing herein shall alter, modify or otherwise affect the respective rights of the Parties to cancel or terminate this Agreement under the terms and conditions hereof.  Further, either Party shall have the right to contest the validity of any such Applicable Law and neither acquiescence thereto nor compliance therewith for any period of time, nor any other provision contained herein, shall be construed as a waiver of such right.

 

12.2        As a principal condition to, and in consideration for, the execution of this Agreement by Gatherer, Shipper represents and warrants that none of the Gas delivered hereunder has been dedicated to or delivered in interstate commerce.  In the event that Shipper breaches its representation and warranty contained in this Section 12.2, Gatherer, in addition to all other remedies at law or in equity, shall have the right, upon delivery of written notice to Shipper, to refuse receipt of the Gas which has caused a breach of such representation and warranty.  Gatherer’s election to refuse receipt of any Gas pursuant to this Section 12.2 shall not release Shipper from any obligation to indemnify Gatherer for such breach under Article XVI.

 

ARTICLE XIII
 TAXES AND ROYALTIES

 

13.1        Shipper shall be obligated to pay all Taxes levied, assessed or collected with respect to production Shipper’s Gas or the delivery thereof to the Receipt Points, including any Tax levied, assessed or collected as a result of any Change in Law.  In addition, Shipper shall be obligated to pay all Taxes levied, assessed or collected with respect to the services rendered hereunder to the extent that any such Tax is levied, assessed or collected as a result of any Change in Law.  To the extent any such Taxes are not assessed directly with respect to Shipper’s Gas or the services rendered hereunder, Gatherer shall calculate and assess any such Taxes on a pro rata basis (calculated on a per BTU basis based on the volume of Gas on the Gathering System at the time such calculation is made).  Notwithstanding the foregoing, any Tax that may be based on the gross revenues, operating income or net income of Gatherer shall be borne by Gatherer.

 

13.2        Shipper shall timely pay all Taxes described in Section 13.1.  In the event that Shipper fails to timely pay any such Taxes, Gatherer may, upon two (2) days’ notice, pay them and deduct the amount so paid from any sums owned by Gatherer to Shipper hereunder.

 

13.3        In addition to the Taxes described in Section 13.1, Shipper shall be responsible for the payment of all royalties, overriding royalties, production payments, fees, charges or other payments attributable to Shipper’s Gas (including any such royalties, overriding royalties, production payments, fees, charges or payments with respect to liquefiable hydrocarbons or other constituents contained therein or removed therefrom).

 

ARTICLE XIV
 REPRESENTATIONS AND WARRANTIES

 

14.1        Each Party hereby represents and warrants to the other Party that:

 

14

 

(a)           Such Party is a limited partnership or limited liability company, as applicable, duly formed, validly existing and in good standing under the laws of the State of Texas (in the case of Shipper) or the State of Delaware (in the case of Gatherer), with full limited partnership or limited liability company, as applicable, power, right and authority to own and lease the assets and properties it currently owns and leases, and to carry on its business as such business is currently being conducted.

 

(b)           Such Party has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery by such Party of this Agreement and the performance by each Party of its obligations hereunder have been duly and validly authorized by all necessary limited partnership or limited liability company, as applicable, proceedings on the part of such Party.  This Agreement has been duly and validly executed and delivered by such Party and constitutes the legal, valid and binding obligation of such Party enforceable against such Party in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally or by general equitable principles regardless of whether considered in a proceeding at law or in equity.

 

(c)           The execution and delivery by such Party of this Agreement does not, and the performance by such Party of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not (i) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the organizational documents of such Party, (ii) violate or result in a default (or give rise to any right of termination, cancellation or acceleration) under any contract or agreement to which such Party is a party, or require any notice under any contract or agreement to which such Party is a party or by which it is bound, (iii) violate or breach any Applicable Law or (iv) require the consent, approval or authorization of, filing with or notice to any Person, which, if not obtained, would prevent such Party from performing its obligations hereunder.

 

14.2        In addition to its representations and warranty in Section 12.2, Shipper represents and warrants, for itself, its successors and assigns, to Gatherer that Shipper has good title to (or otherwise has the right to deliver) the Gas delivered hereunder and the Gas delivered hereunder is free and clear of any and all liens and encumbrances.

 

14.3        Gatherer represents and warrants, for itself, its successors and assigns, to Shipper that from the time of receipt at the Receipt Points to the time of delivery at the Delivery Points the Gas delivered hereunder shall be free and clear of any and all liens and encumbrances.

 

ARTICLE XV
 EASEMENTS

 

To the extent that it may contractually or lawfully do so under its Easements, each Party hereby grants, assigns and transfers to the other Party or its designee an easement across the granting Party’s Easements, together with the right of ingress and egress, for the purpose of installing, using, inspecting, repairing, operating, replacing and/or removing pipe, meters, lines and other equipment used or useful in the performance of this Agreement.  It is intended that any personal property of the Parties or their designees placed in or upon any of such real property shall remain the personal property of the respective Party or its designee, subject to removal by it within a reasonable time after the expiration or termination of this Agreement.

 

15

 

ARTICLE XVI
 INDEMNITY

 

16.1        Shipper hereby agrees to indemnify, protect, defend and hold harmless Gatherer, its Affiliates and each of its and their respective officers, directors, employees, agents, partners, representatives, subcontractors, consultants and advisors (collectively, “Gatherer Indemnitees”) from and against any and all Losses arising out of or resulting from (a) Shipper’s Gas, except to the extent such Losses arise in connection with any action or failure to act by Gatherer while such Gas is in the possession and control of Gatherer, (b) the breach of any representation or warranty of Shipper contained in this Agreement, (c) the breach of any other agreement, covenant or obligation of Shipper in this Agreement and (d) Shipper’s business operations, including all noise, odors, Emissions, pollution or other contamination whatsoever occurring in connection with such operations.

 

16.2        Gatherer hereby agrees to indemnify, protect, defend and hold harmless Shipper, its Affiliates and each of its and their respective officers, directors, employees, agents, partners, representatives, subcontractors, consultants and advisors (collectively, “Shipper Indemnitees”) from and against any and all Losses arising out of or resulting from (a) Shipper’s Gas if such Losses arise in connection with any action or failure to act of Gatherer while such Gas is in the possession and control of Gatherer, (b) the breach of any representation or warranty of Gatherer contained in in this Agreement, (c) the breach of any other agreement, covenant or obligation of Gatherer in this Agreement and (d) Gatherer’s business operations, including all noise, odors, Emissions, pollution or other contamination whatsoever occurring in connection with such operations.

 

16.3        GATHERER HEREBY RELEASES SHIPPER FROM ANY LIABILITY FOR, AND HEREBY AGREES TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS EACH SHIPPER INDEMNITEE FROM AND AGAINST, ALL LOSSES, WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF OR THE NEGLIGENCE OF ANY SHIPPER INDEMNITEE, ARISING IN CONNECTION HEREWITH IN FAVOR OF ANY EMPLOYEE OR CONSULTANT OF ANY GATHERER INDEMNITEE ON ACCOUNT OF BODILY INJURY, DEATH OR DAMAGE TO PROPERTY OF SUCH EMPLOYEE OR CONSULTANT.

 

16.4        SHIPPER HEREBY RELEASES GATHERER FROM ANY LIABILITY FOR, AND HEREBY AGREES TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS EACH GATHERER INDEMNITEE, FROM AND AGAINST, ALL LOSSES, WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF OR THE NEGLIGENCE OF ANY GATHERER INDEMNITEE, ARISING IN CONNECTION HEREWITH IN FAVOR OF ANY EMPLOYEE OR CONSULTANT OF ANY SHIPPER INDEMNITEE ON ACCOUNT OF BODILY INJURY, DEATH OR DAMAGE TO PROPERTY OF SUCH EMPLOYEE OR CONSULTANT.

 

16.5        All indemnity obligations and liabilities assumed by the Parties under terms of this Agreement shall be without limit, and shall survive until the second (2nd) anniversary of the termination of this Agreement.

 

16.6        Each Party shall procure and maintain during the entire Term, at its own expense, with an insurance company or companies authorized to do business in the State of Texas or through a self-insurance program, insurance coverages of the kind and in the specified minimum amounts set forth on Exhibit F attached hereto.

 

16

 

ARTICLE XVII
 NOTICES AND STATEMENTS

 

17.1        All notices, statements, payments and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been effectively given when deposited in the United States mail or with an overnight courier service, or when sent via email or facsimile, as the case may be, addressed to:

 

Notices:

 

	
If   to Gatherer:
    	
 
    	
If   to Shipper:
    
	
 
    	
 
    	
 
    
	
HPIP   Lavaca, LLC

1400   16th Street, Suite 310

Denver,   CO 80202

Attn:   William B. Mathews

Email:   bmathews@americanmidstream.com

Facsimile:   (720) 457-6040
    	
 
    	
Penn   Virginia Oil & Gas, L.P.

840   Gessner, Suite 800

Houston,   TX 77024

Attn:   Vice President, Oil and Gas Marketing

Email:   jill.zivley@pennvirginia.com

Facsimile:   (713) 722-6601
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
With   a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Penn   Virginia Corporation

Four   Radnor Corporate Center, Suite 200

100   Matsonford Road

Radnor,   PA 19087-4564

Attn:   General Counsel

Email:   nancy.snyder@pennvirginia.com

Facsimile:   (610) 687-3688
    

 

Statements:

 

	
Penn   Virginia Oil & Gas, L.P.

840   Gessner, Suite 800

Houston,   TX 77024

Attn:   Vice President, Oil and Gas Marketing

Email:   jill.zivley@pennvirginia.com

Facsimile:   (713) 722-6601
    	
 
    

 

Payments:

 

	
HPIP   Lavaca, LLC

ABA:   111000753

Acct:   1881708794

Name:         HPIP Lavaca Llc Commercial Checking
    	
 
    

 

17.2        Notices of change of address of either Party shall be given in writing to the other in the manner aforesaid and shall be observed in the giving of all future notices, statements or other communications required or permitted to be given hereunder.

 

17

 

ARTICLE XVIII
 FORCE MAJEURE

 

18.1        Upon occurrence of an event of Force Majeure, Shipper’s or Gatherer’s obligation to perform, wholly or in part, any commitment or undertaking set forth in this Agreement, other than the obligation to make payments of amounts due hereunder, shall be suspended to the extent and for the period of such Force Majeure condition; provided, however, that the Party whose obligations are so affected shall promptly give written notice to the other Party describing the event of Force Majeure in reasonable detail.

 

18.2        Should there be an event of Force Majeure affecting performance hereunder, such events shall be remedied with all reasonable dispatch to ensure resumption of normal performance.

 

18.3        Notwithstanding Section 18.2, settlement of strikes and lockouts shall be entirely within the discretion of the Party affected, and the requirement in Section 18.2 that any event of Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes and lockouts by acceding to the demands of the third parties directly or indirectly involved in such strikes or lockouts when such course is inadvisable in the discretion of the Party having such difficulty.

 

ARTICLE XIX
 CONFIDENTIAL INFORMATION

 

19.1        Except as permitted by Section 19.2, (i) each Party shall keep confidential all Confidential Information and shall not disclose any Confidential Information to any Person, including any of its Affiliates, and (ii) each Party shall use the Confidential Information only in connection with the operation of the Gathering System.

 

19.2        Notwithstanding Section 19.1, but subject to the other provisions of this Article XIX, a Party may make the following disclosures and uses of Confidential Information:

 

(a)           disclosures required for such Party to perform its duties under this Agreement;

 

(b)           disclosures to an Affiliate of such Party, including the representatives of such Affiliate, if such Affiliate has a “need to know” such Confidential Information in furtherance of the operation of the Gathering System and has agreed to abide by the terms of this Article XIX;

 

(c)           disclosures to a Person that is not a Party or an Affiliate of a Party, if such Person has been retained by Gatherer to provide services in connection with the operation of the Gathering System and has agreed to abide by the terms of this Article XIX;

 

(d)           disclosures to a bona-fide potential direct or indirect purchaser of the Gathering System and the advisors or representatives of such potential purchaser, if such potential purchaser has agreed to abide by the terms of this Article XIX;

 

(e)           disclosures to working interest or joint venture partners with respect to leases or wells in the Dedication Area;

 

(f)            disclosures required by Applicable Law or the rules of any national securities exchange or automated quotation system;

 

(g)           disclosures to financial institutions requiring such disclosure as a condition precedent to making or renewing a loan or in connection with any covenant made in connection with such loan(s) or any existing loan of such Party or its Affiliates; and

 

18

 

(h)           disclosures to the legal advisors, financial advisors or independent certified public accountants for such Party or its Affiliates.

 

19.3        Each Party shall take such precautionary measures as may be required to ensure (and such Party shall be responsible for) compliance with this Article XIX by any of its representatives and other Persons to which it may disclose Confidential Information in accordance with this Article XIX.

 

19.4        The Parties agree that no adequate remedy at law exists for a breach or threatened breach of any of the provisions of this Article XIX, the continuation of which, if not remedied, shall cause the non-breaching Party to suffer irreparable harm.  Accordingly, the Parties agree that each Party shall be entitled, in addition to other remedies that may be available to such Party, to immediate injunctive relief from any breach of any of the provisions of this Article XIX and to specific performance of its rights hereunder, as well as to any other remedies available at law or in equity.

 

19.5        The obligations of the Parties under this Article XIX shall terminate on the second anniversary of the termination of this Agreement.

 

ARTICLE XX
 SALE OF GATHERING SYSTEM

 

Gatherer may not sell, assign or transfer any of its rights or obligations under this Agreement, or any of its right, title and interests in or to the Gatherer System, without the prior written consent of Shipper.  Notwithstanding the foregoing, Gatherer may, without Shipper’s consent, sell, assign or transfer all, but not less than all, of the Gathering System, and the associated rights and obligations under this Agreement, to (i) American Midstream Partners, L.P. (“AMID”), or an entity wholly owned by AMID, or (ii) a Reputable and Prudent Operator.  As used herein, a “Reputable and Prudent Operator” shall mean any entity that:  (i) is a pipeline operator which, in Shipper’s reasonable opinion, is experienced in operating gathering and pipelines systems similar to the Gathering System; (ii) has not filed a voluntary bankruptcy proceeding or been declared a bankrupt involuntarily; (iii) has not been blocked by any Governmental Authority from holding any permits, licenses or approvals necessary to operate the Gathering System as contemplated by this Agreement; (iv) has a health, safety and environmental compliance record reasonably satisfactory to Shipper; and (v) has a net worth of $100 million or more on a consolidated basis.

 

ARTICLE XXI
 MISCELLANEOUS

 

21.1        All Article, Section and Exhibit references used in this Agreement are to Articles, Sections and Exhibits to this Agreement unless otherwise specified.  The Exhibits attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.

 

21.2        If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa.  The words “includes” or “including” shall mean “includes without limitation” or “including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular Section or Article in which such words appear and any reference to an Applicable Law shall include any amendment thereof or any successor thereto and any rules and regulations promulgated thereunder.  Currency amounts referenced herein are in U.S. Dollars.

 

19

 

21.3        This Agreement may be executed in as many counterparts as deemed necessary.  When so executed, the aggregate counterparts shall constitute one Agreement and shall have the same effect as if both Parties signing counterparts had executed the same instrument.

 

21.4        This Agreement may not be amended or modified except pursuant to a written instrument signed by both of the Parties.  Either Party may waive on its own behalf compliance by the other Party with any term or provision hereof; provided, however, that any such waiver shall be in writing and shall not bind the non-waiving Party.  The waiver by either Party of a breach of any term or provision shall not be construed as a waiver of any subsequent breach of the same or any other provision.

 

21.5        This Agreement is binding upon and shall inure to the benefit of the successors and permitted assigns of the Parties.

 

21.6        The Parties agree and confirm that this Agreement was prepared jointly by both Parties and not by any one Party to the exclusion of the other.

 

21.7        Except as provided in Article XVI, this Agreement is not intended to confer upon any Person not a party hereto any rights or remedies hereunder, and no Person other than the Parties is entitled to rely on or enforce any provision hereof.

 

21.8        This Agreement (including the Exhibits attached hereto) contain the entire agreement between the Parties with respect to the subject matter hereof, and there are no prior agreements, understandings, representations or warranties between the Parties, other than those set forth or referred to herein or therein.

 

21.9        NO PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE FOR SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR EXEMPLARY DAMAGES, WHETHER BY STATUTE, IN TORT OR BY CONTRACT OR OTHERWISE, EXCEPT WHERE SUCH DAMAGES WERE CAUSED BY THE WILLFUL MISCONDUCT OR FRAUD OF SUCH PARTY.  THE PROVISIONS OF THIS SECTION 21.9 SHALL BE ENFORCEABLE ONLY TO THE EXTENT ALLOWED BY, AND SHALL BE SUBJECT TO, ANY APPLICABLE REQUIREMENTS AND PROCEDURES SET FORTH IN, APPLICABLE LAW.

 

21.10      In the event of litigation arising with respect to this Agreement, either Party may offer into evidence an electronic image of the signed Agreement, any amendment hereto or any correspondence exchanged in connection herewith and shall not be required to maintain or produce an original paper copy of any such document.  Any such electronic copy shall be deemed an original and may be admitted into evidence for all purposes, notwithstanding the “best evidence” rule or any other rule of evidence that would prohibit or restrict its admissibility.

 

[Signature Page Follows]

 

20

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year hereinabove first written.

 

 

	
 
    	
HPIP   LAVACA, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 /s/ Daniel C. Campbell
    
	
 
    	
 
    	
Name:
    	
Daniel   C. Campbell
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President and
    
	
 
    	
 
    	
Chief   Financial Officer
    
					

 

 

	
 
    	
PENN   VIRGINIA OIL & GAS, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Penn   Virginia Oil & Gas GP LLC,
    
	
 
    	
 
    	
its   general partner
    
				

 

 

	
 
    	
By:
    	
 /s/ Nancy M. Snyder
    
	
 
    	
 
    	
Name:
    	
Nancy   M. Snyder
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and
    
	
 
    	
 
    	
 
    	
Chief   Administrative Officer
    

 

Signature Page to Construction and Field Gathering Agreement

 

 

EXHIBIT A

 

DEDICATION AREA

 

[MAP TO COME]

 

A-1

 

EXHIBIT B

 

DELIVERY POINTS

 

The initial Delivery Points will be the following connections with ETC’s pipelines:

 

	
1)
    	
Bozka   CDP
    	
Meter   #0969005
    
	
2)
    	
Gardner   CDP
    	
Meter   #0969009
    
	
3)
    	
Cannonade   Ranch #1H
    	
Meter   #0969014
    
	
4)
    	
Cannonade   Ranch South CDP
    	
Meter   #0969015
    
	
5)
    	
Rock   Creek Ranch CDP
    	
Meter   #0969016
    
	
6)
    	
PVA   Shiner CDP
    	
Meter   #0969059
    
	
7)
    	
Wellhausen   CDP
    	
Meter   #0969076
    

 

Additional Delivery Points may be established upon the mutual agreement of Shipper and Gatherer.

 

B-1

 

EXHIBIT C

 

CONNECTION POINTS

 

The initial Connection Points will be as follows:

 

	
Arledge   Ranch #1H Well
    	
Kleihege   #1H Well
    
	
Barraza   #1H Well
    	
Kosmo   #1H, Porter #1H Wells
    
	
Blonde   #1H, Bock #1H Wells
    	
Kusak   #1H Well
    
	
Bozka   #1H Well (Direct Connect to ETC)
    	
Leal   #1H Well
    
	
Cannonade   Ranch #1H Well (Direct Connect to ETC)
    	
Martinsen   #1H Well
    
	
Cannonade   Ranch #2 Well
    	
Matias   #1H Well
    
	
Cannonade   Ranch #3H Well
    	
McCreary   #1H Well
    
	
Cannonade   Ranch #50H Well
    	
Miller   #1H Well
    
	
Cannonade   Ranch #17H, #18H, #19H Wells
    	
Munson   Ranch #1H, #3H Wells
    
	
D.   Foreman #1H Well
    	
Munson   Ranch #2H Well
    
	
Dickson   Allen #1H, Hawn Holt #7H Wells
    	
Munson   Ranch #4H, #8H Wells
    
	
Dickson   Allen #2H, Hawn Holt #8H Wells
    	
Munson   Ranch #5H, #7H Wells
    
	
Douglas   Raab #1H Well
    	
Munson   Ranch #6H, #9H Wells
    
	
Dubose   #1H Well
    	
Netardus   #1H Well
    
	
Dubose   #2H Well
    	
Neuse   #1H Well
    
	
Effenberger   #1H Well
    	
Othold   #1H Well
    
	
Effenberger   #4H, #5H Wells
    	
Pavlicek   #1H, #2H, #5H Wells
    
	
Effenberger-Schacherl   #4H Well
    	
Pilsner   Hunter #2H, #3H Wells
    
	
Fojtik#1H   Well
    	
Pilsner   Hunter #4H, #5H Wells
    
	
Freytag   #1H Well
    	
R.   Washington #1H Well
    
	
Gardner   #1H Well
    	
R.L.   Schaefer #1H, #2H, #3H Wells
    
	
Gardner   #2H Well
    	
Raab   #1H Well
    
	
Garza-Kodack   #1H Well
    	
RCR   Hinton #1H, #2H, #3H Wells
    
	
Hawn   Dickson #1H Well
    	
Rhino   Hunter #6H, #7H Wells
    
	
Hawn   Holt #1H, #4H Wells
    	
Rock   Creek Ranch #1H, #2H, #3H, #4H Wells
    
	
Hawn   Holt #2H, #6H Wells
    	
Rock   Creek Ranch #5H, #6H, #7H, #8H Wells
    
	
Hawn   Holt #3H, #5 Wells
    	
Rock   Creek Ranch #9H, #10H Wells
    
	
Hawn   Holt #9H Well
    	
Rock   Creek Ranch #11H Well
    
	
Hawn   Holt #10H Well
    	
Schacherl   #1H Well
    
	
Hawn   Holt #11H Well
    	
Schacherl   #2H Well
    
	
Hawn   Holt #12H Well
    	
Schacherl-Vana   #1H Well
    
	
Hawn   Holt #13H- Well
    	
Smith   #1H Well
    
	
Hawn   Holt #15H Well
    	
Sralla   #1H Well
    
	
Hefe   Hunter #1H, Pilsner Hunter #1H Wells
    	
Technik   #1H Well
    
	
Henning   #1H Well
    	
Targac   #1H Well
    
	
Henning   #2H Well
    	
Vana   #1H Well
    
	
Hinze   #1H Well
    	
Vana   #3H, #4H Well
    
	
Hunt-Hill   #1H JV, #2H JV Wells
    	
Washington   #1H (Not in service)
    
	
Joseph   Simper #1H Well
    	
Wellhausen   #1H Well
    
	
 
    	
Zebra   Hunter #3H, #2H Wells
    

 

Additional Connection Points may be established in accordance with Article III.

 

C-1

 

EXHIBIT D

 

NOMINATION PROCEDURES

 

Shipper will submit monthly nomination quantities stated in MMBtus for each Month not later than the 25th Day of the prior Month.  All nominations shall be made to American Midstream’s electronic bulletin board, unless otherwise mutually agreed.  Nominations must designate the Receipt Points and Delivery Points to be used and the estimated monthly quantities to be received at each Receipt Point and delivered at each Delivery Point.

 

Once nominated by Shipper for the Month, Shipper may change the nomination quantity at any Receipt Point or Delivery Point by submitting a revised nomination quantity no later than 11:30 a.m., Central Time, on the business day prior to the Day such revised quantity is to be effective.

 

D-1

 

EXHIBIT E

 

MEASUREMENT AND TESTING

 

1.                                      Gas shall be measured by electronic flow recording and computing devices (unless mutually agreed) installed, maintained and operated by Gatherer or its designee and computations made in accordance with accepted industry practice.  Such devices shall be within appropriate differential and static pressure range for existing operating conditions.  Chart integration and volume computations shall be made as accurately as possible and within the accuracy prescribed by the manufacturer of the recording and computing equipment used.

 

2.                                      The unit of volume for purposes of measurement shall be one (1) cubic foot of gas at a temperature base of sixty degrees Fahrenheit (60°F) and at a pressure base of fourteen and sixty-five hundredths (14.65) psia.  Corrections shall be made for deviations from Boyle’s Law and the Ideal Gas Laws.

 

3.                                      Temperature shall be determined by a recording thermometer or, in the absence of such working device, the temperature of the Gas shall be assumed to be sixty degrees Fahrenheit (60°F) until a working thermometer is installed.  Specific Gravity shall be determined by taking samples of the Gas at such times as determined by Gatherer, but at least semi-annually.  The atmospheric pressure shall be the atmospheric pressure determined and used by the ultimate downstream pipeline.  Gross Heating Value of the Gas shall be determined by compositional analysis of samples of the Gas taken at the Receipt Points at least semi-annually or at more frequent times as may be determined by Gatherer.  The Gross Heating Value shall be converted to a temperature base of sixty degrees Fahrenheit (60°F), a pressure base of fourteen and sixty-five hundredths (14.65) psia and adjusted for compressibility.

 

4.                                      Shipper may install, maintain and operate, at its own expense, pressure regulators and check measuring equipment, provided that such equipment shall not interfere with the operation of Gatherer’s equipment.  Shipper may access electronic readings remotely and may download electronic readings to its SCADA system.

 

5.                                      The accuracy of Gatherer’s measuring equipment shall be verified by Gatherer or its designee at reasonable intervals as determined by Buyer, but not less often than once every six (6) months.  Upon request by Shipper, notice of the date and time of the testing of such equipment or for the quality of the Gas shall be given by Gatherer to Shipper sufficiently in advance to permit convenient arrangement for Shipper’s representative to be present.  If after proper notice, Shipper fails to have a representative present, the results of the test shall nevertheless be considered accurate.  All tests shall be made at Gatherer’s expense, except that Shipper shall bear the expense of tests made at its request if any inaccuracy is found to be two percent (2%) or less.

 

6.                                      If at any time the measuring or testing equipment is found to be out of service or registering inaccurately in any percentage, it shall be adjusted at once to read accurately within the limits prescribed by the manufacturer.  If such equipment shall be found to be out of service or inaccurate by an amount exceeding two percent (2%) at a reading corresponding to the average hourly rate of flow for the period since the preceding test, then any previous recordings of such. equipment shall be corrected to zero (0) error for any period which is definitely known or agreed upon.  The quantity of Gas delivered during that period shall be determined by the first of the following methods which is available:

 

E-1

 

i)                               using the data recorded by any check measuring equipment if installed and registering accurately;

 

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

 

iii)                         by estimating the quantity or quality delivered based on deliveries under similar conditions during a period when the equipment was registering accurately.

 

No correction shall be made for recorded inaccuracies of two percent (2%) or less.

 

7.                                      Gatherer and Shipper 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 regular business hours but the reading, calibration and adjustment of such equipment shall be done only by the Party with the responsibility for operating such equipment.  Gatherer shall preserve all test data, charts and other similar records for a period of at least two (2) years.

 

E-2

 

EXHIBIT F

 

REQUIRED INSURANCE

 

[ATTACHMENT TO COME]

 

F-1

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